Expanding Choice and Increasing Supply: Housing Innovation in America

1[House Hearing, 119 Congress]2[From the U.S. Government Publishing Office]34                  ENHANCING COMPETITION: SHAPING THE FUTURE5                  OF BANK MERGERS AND DE NOVO FORMATION67=======================================================================89                                HEARING1011                               BEFORE THE1213                        SUBCOMMITTEE ON FINANCIAL14                               INSTITUTIONS1516                                 OF THE1718                    COMMITTEE ON FINANCIAL SERVICES19                     U.S. HOUSE OF REPRESENTATIVES2021                    ONE HUNDRED NINETEENTH CONGRESS2223                             FIRST SESSION2425                               __________2627                              MAY 14, 20252829                               __________3031                           Serial No. 119-233233       Printed for the use of the Committee on Financial Services3435[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]3637                           www.govinfo.gov3839                                __________4041                   U.S. GOVERNMENT PUBLISHING OFFICE4260-552 PDF                  WASHINGTON : 20254344-----------------------------------------------------------------------------------4546                 HOUSE COMMITTEE ON FINANCIAL SERVICES4748                    FRENCH HILL, Arkansas, Chairman4950BILL HUIZENGA, Michigan, Vice        MAXINE WATERS, California, Ranking51    Chairman                             Member52FRANK D. LUCAS, Oklahoma             SYLVIA R. GARCIA, Texas, Vice53PETE SESSIONS, Texas                     Ranking Member54ANN WAGNER, Missouri                 NYDIA M. VELAZQUEZ, New York55ANDY BARR, Kentucky                  BRAD SHERMAN, California56ROGER WILLIAMS, Texas                GREGORY W. MEEKS, New York57TOM EMMER, Minnesota                 DAVID SCOTT, Georgia58BARRY LOUDERMILK, Georgia            STEPHEN F. LYNCH, Massachusetts59WARREN DAVIDSON, Ohio                AL GREEN, Texas60JOHN W. ROSE, Tennessee              EMANUEL CLEAVER, Missouri61BRYAN STEIL, Wisconsin               JAMES A. HIMES, Connecticut62WILLIAM R. TIMMONS, IV, South        BILL FOSTER, Illinois63    Carolina                         JOYCE BEATTY, Ohio64MARLIN STUTZMAN, Indiana             JUAN VARGAS, California65RALPH NORMAN, South Carolina         JOSH GOTTHEIMER, New Jersey66DANIEL MEUSER, Pennsylvania          VICENTE GONZALEZ, Texas67YOUNG KIM, California                SEAN CASTEN, Illinois68BYRON DONALDS, Florida               AYANNA PRESSLEY, Massachusetts69ANDREW R. GARBARINO, New York        RASHIDA TLAIB, Michigan70SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York71MIKE FLOOD, Nebraska                 NIKEMA WILLIAMS, Georgia72MICHAEL LAWLER, New York             BRITTANY PETTERSEN, Colorado73MONICA DE LA CRUZ, Texas             CLEO FIELDS, Louisiana74ANDREW OGLES, Tennessee              JANELLE BYNUM, Oregon75ZACHARY NUNN, Iowa                   SAM LICCARDO, California76LISA McCLAIN, Michigan77MARIA SALAZAR, Florida78TROY DOWNING, Montana79MIKE HARIDOPOLOS, Florida80TIM MOORE, North Carolina8182                      Ben Johnson, Staff Director8384                                 ------8586                 SUBCOMMITTEE ON FINANCIAL INSTITUTIONS8788                     ANDY BARR, Kentucky, Chairman8990BARRY LOUDERMILK, Georgia,           BILL FOSTER, Illinois, Ranking91    Vice Chairman                        Member92BILL HUIZENGA, Michigan              NYDIA M. VELAZQUEZ, New York93ROGER WILLIAMS, Texas                GREGORY W. MEEKS, New York94JOHN W. ROSE, Tennessee              DAVID SCOTT, Georgia95WILLIAM R. TIMMONS IV, South         BRAD SHERMAN, California96    Carolina                         AL GREEN, Texas97RALPH NORMAN, South Carolina         JUAN VARGAS, California98DANIEL MEUSER, Pennsylvania          SEAN CASTEN, Illinois99YOUNG KIM, California                STEPHEN F. LYNCH, Massachusetts100BYRON DONALDS, Florida               JOYCE BEATTY, Ohio101SCOTT FITZGERALD, Wisconsin          CLEO FIELDS, Louisiana102MIKE FLOOD, Nebraska103MONICA DE LA CRUZ, Texas104TIM MOORE, North Carolina105106                         C  O  N  T  E  N  T  S107108                              ----------109110                        Wednesday, May 14, 2025111                           OPENING STATEMENTS112113                                                                   Page114Hon. Andy Barr, Chairman of the Subcommittee on Financial115  Institutions, a U.S. Representative from Kentucky..............     1116Hon. Bill Foster, Ranking Member of the Subcommittee on Financial117  Institutions, a U.S. Representative from Illinois..............     3118119                               STATEMENTS120121Hon. French Hill, Chairman of the Committee on Financial122  Services, a U.S. Representative from Arkansas..................     4123Hon. Maxine Waters, Ranking Member of the Committee on Financial124  Services, a U.S. Representative from California................     4125126                               WITNESSES127128Mr. Keith Costello, President and CEO, Locality Bank.............     5129    Prepared statement...........................................     7130Ms. Mary Usategui, President and CEO, BankMiami..................    13131    Prepared statement...........................................    15132Ms. Amanda K. Allexon, Partner, Simpson Thacher & Barlett LLP....    22133    Prepared statement...........................................    24134Mr. John Berlau, Senior Fellow and Director of Finance Policy,135  Competitive Enterprise Institute (CEI).........................    34136    Prepared statement...........................................    36137Mrs. ReShonda Young, Founder, Jabez, Inc.........................    42138    Prepared statement...........................................    44139140                                APPENDIX141                 RESPONSES TO QUESTIONS FOR THE RECORD142143Written responses to questions for the record from Representative144  Maxine Waters145    Mr. Keith Costello...........................................    72146    Ms. Mary Usategui............................................    73147    Mr. John Berlau..............................................    74148149                              LEGISLATION150151H.R. ----, the Bank Failure Prevention Act of 2025...............    75152H.J.Res. 92, Providing for congressional disapproval under153  chapter 8 of title 5, United States Code, of the rule submitted154  by the Office of the Comptroller of the Currency of the155  Department of the Treasury relating to the review of156  applications under the Bank Merger Act.........................    84157H.R. ----, the Financial Institution Regulatory Tailoring158  Enhancement Act................................................    86159H.R. ----, the Stress Testing Accountability and Transparency Act    88160H.R. ----, the Bringing the Discount Window into the 21st Century161  Act............................................................    91162H.R. ----, a bill to require the Comptroller of the Currency to163  study how bank-fintech partnerships can support new bank164  formation......................................................    98165H.R. ----, a bill to require the Federal prudential regulators to166  study improving the growth, capital adequacy, and profitability167  of rural depository institutions...............................   100168H.R. ----, a bill to require annual reports on Federal depository169  institution charter applications, bank holding company170  applications, Federal deposit insurance applications, and State171  depository institution charter applications....................   102172H.R. ----, a bill to require the Comptroller General of the173  United States to study the consideration of insured depository174  institution merger applications by Federal prudential175  regulators to ensure they align with statutory requirements and176  are not in any way influenced by political issues or177  considerations.................................................   106178H.R. ----, a bill to require the Inspector General of each179  Federal prudential regulator to carry out a review of every 3180  years of the regulator's handling of insured depository181  institution merger applications................................   109182183           ENHANCING COMPETITION: SHAPING THE FUTURE OF BANK184                     MERGERS AND DE NOVO FORMATION185186                              ----------187188                        Wednesday, May 14, 2025189190             U.S. House of Representatives,191            Subcommittee on Financial Institutions,192                           Committee on Financial Services,193                                                    Washington, DC.194195    The subcommittee met, pursuant to notice, at 2:15 p.m., in196room 2128, Rayburn House Office Building, Hon. Andy Barr197[chairman of the subcommittee] presiding.198    Present: Representatives Barr, Huizenga, Williams of Texas,199Rose, Timmons, Norman, Meuser, Kim, Fitzgerald, Flood, De La200Cruz, Moore, Foster, Waters, Velazquez, Sherman, Green, Vargas,201Casten, Lynch, Beatty, and Fields.202    Chairman Barr. The committee will come to order.203    Without objection, the chair is authorized to declare a204recess of the committee at any time.205    This hearing is titled, ``Enhancing Competition: Shaping206the Future of Bank Mergers and De Novo Formation.''207    Without objection, all members will have 5 legislative days208within which to submit extraneous materials to the chair for209inclusion in the record.210    I now recognize myself for 4 minutes for an opening211statement.212213     OPENING STATEMENT OF HON. ANDY BARR, CHAIRMAN OF THE214 SUBCOMMITTEE ON FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE215                         FROM KENTUCKY216217    First, let me thank our witnesses for joining us today and218lending their expertise to such an important discussion. This219subcommittee is focused on how we in Congress can strengthen220competition and encourage innovation in the banking sector,221particularly by improving the bank merger process and creating222a regulatory environment that supports the formation of new223banks. Despite what my colleagues on the other side of the224aisle like to attest, mergers and acquisitions are not225inherently bad. In fact, they are an essential part of a226dynamic and evolving financial system. They allow community and227regional banks to grow into new markets, reach more customers,228diversify their services, and achieve economies of scale, all229of which can translate into lower costs and better access to230banking services for families and small businesses across the231country.232    In reality, mergers are pro-competition, something that all233capitalists in this room should promote, but today, the merger234process is broken. The current system for reviewing bank235mergers is too slow, too uncertain, and too costly. Delays and236unpredictable agency reviews discourage applications, drain237bank resources, and lead to employee attrition, all while238deterring the kind of strategic consolidation that could239benefit consumers. That is why I have introduced the Bank240Failure Prevention Act, a bill to bring more certainty and241efficiency to the merger review process. This bill would put a242shot clock on merger applications--this is a term that we like243in basketball in Kentucky--requiring Federal banking agencies244to complete their merger reviews within a specific timeframe,245which will provide clarity to applicant banks and reduce246unnecessary, costly delays.247    I have also introduced a Congressional Review Act248resolution to overturn the political and harmful merger rule249issued under the prior administration, a rule that has250thankfully been rescinded by acting comptroller, Rodney Hood.251We must prevent future leadership from reinstating those252misguided policies, and I intend to see that resolution253through. This Congressional Review Act (CRA) has passed the254Senate, and I urge House leadership to bring it to the floor255for a vote.256    On a separate front, I remain deeply concerned about the257decline in de novo bank formation, which has all but dried up258since Dodd-Frank. In the past 10 years, only 60 new banks have259been chartered in this country. That is not a sign of260stability. It is a sign of stagnation. That is why I have261introduced the Promoting New Bank Formation Act, which recently262passed this committee with bipartisan support. This bill would263give new banks the breathing room they need by phasing in264capital requirements and lowering the community bank leverage265ratio in their early years. We need to remove barriers, not266build them higher, if we want to revitalize community banking.267As consolidation occurs in the midsize and regional banking268segment of the market, we need to backfill that with more de269novo charters to preserve the diversity and heterogeneity of270the banking sector because the truth is this: a banking system271with no new entrants and stifled growth is not safe. It is272fragile.273    The last decade has proven that excessive regulation is274choking innovation, driving consolidation, and leaving too many275communities without access to basic banking services. We need a276course correction. Today's hearing is an important step in that277direction, and it is a step in terms of preserving a dynamic278banking system where healthy mergers, healthy consolidation,279can occur to provide better services and more competition to280the big, largest too-big-to-fail banks, and also provide those281new entrants and that dynamism so that we preserve those282relationship lenders and the new business formation, the283entrepreneurship, on main street, USA. I look forward to284hearing from our panel and engaging in a thoughtful discussion,285and with that, I yield back.286    The chair now recognizes the ranking member of the287subcommittee, Dr. Foster, for 4 minutes for an opening288statement.289290 OPENING STATEMENT OF HON. BILL FOSTER, RANKING MEMBER OF THE291 SUBCOMMITTEE ON FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE292                         FROM ILLINOIS293294    Mr. Foster. Thank you, Chairman Barr, and to our witnesses.295    Since the 1980s, there has been a steady consolidation296within the U.S. banking system. Mergers of community banks, a297drought of de novo bank formation, and the low-interest rate298environment of the early 2000s contributed to a reduction in299the total number of commercial banks from around 14,000 in the3001980s to around 4,500 today. When I was a business owner301starting and growing my small business, I saw the value of302having a diverse banking system with a wide distribution of303institutions by size firsthand. Having multiple banks in the304community strengthened the negotiating power of our small305businesses and the many others in our area by forcing financial306institutions to compete with one another for our business.307    Strong competition in the banking system has been shown to308lead to better terms, better interest rates, and services for309American communities. I do not think there is a single member310of this committee that does not believe that we should use our311positions here to support small community banks and credit312unions. To do so, we should enact policies that support those313institutions, as well as the community development financial314institutions and minority depository institutions that step in315to fill the gaps left by other firms. Today, these institutions316also face unprecedented economic and regulatory uncertainty317brought on by the Trump Administration's new policies.318    The President has doubled down on the market-wrenching319tariff policies from his first term that directly impact the320farmers and the rural communities that many members, including321myself, represent, as well as paralyzed manufacturers and small322businesses who work with our community banks. Examiners of323these institutions are being laid off in the name of efficiency324when staff shortages at the prudential regulators have been325cited by the inspector generals as an area of concern. We see a326move to cutoff funding for the Community Development Financial327Institutions (CDFI) Fund, which has provided more than $12328billion of support access to support access to credit in329unbanked and underbanked communities. Meanwhile, the Consumer330Financial Protection Bureau has effectively been shut down,331meaning that small community banks are being supervised for332compliance with consumer protection laws, while the biggest333banks have no oversight at all in this area.334    It is easy to say deregulation is the solution to the335challenges that community banks and credit unions face, but336that sentiment ignores other reforms that would provide337benefits to community banks without risking their safety and338soundness. One area that is ripe for reform is deposit339insurance. Following the collapse of Silicon Valley Bank, there340was a flight of nearly $120 billion of deposits from community341banks and two large banks that were seen as too big to fail.342Reforms to the discount window, restoration of National Credit343Union Association's (NCUA's) emergency Central Liquidity Fund344authorities, and efforts to address the high cost of technology345for small banks and credit unions are other areas that I feel346we could find bipartisan solutions for. We have an experienced347panel before us that has firsthand experience with the merger348and de novo processes, and I look forward to your testimony349today. Thank you, Chairman. I yield back.350    Chairman Barr. The gentleman yields back. The chair now351recognizes the chairman of the full committee, Mr. Hill, for 1352minute.353354  STATEMENT OF HON. FRENCH HILL, CHAIRMAN OF THE COMMITTEE ON355    FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM ARKANSAS356357    Mr. Hill. Thank you, Chairman Barr. Today's hearing will358continue advancing our Making Community Banking Great Again set359of proposals. Our financial institutions need consistent and360timely guidance during the bank merger review process. They361need the tools at their disposal to make informed decisions362about pursuing or withdrawing applications without wasting time363and money navigating changing and opaque standards. We must364reform the regulatory framework in a way that encourages new365bank entrants to enter the market. We can accomplish this by366lowering unnecessary barriers, modernizing capital and367compliance expectations, and restoring a pipeline for community368financial institutions that fuel our economic growth. Legacy369rules from Dodd-Frank and recent regulatory trends have370discouraged market entry, reduced banking access, and favored371consolidation over competition. This is all at the expense of372consumers, particularly consumer choice and those in rural and373underserved areas. I appreciate Chairman Barr's leadership, and374I look forward to our panel discussion. I yield back.375    Chairman Barr. The gentleman yields. The chair now376recognizes the ranking member of the full committee, Ms.377Waters, for 1 minute.378379    STATEMENT OF HON. MAXINE WATERS, RANKING MEMBER OF THE380  COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM381                           CALIFORNIA382383    Ms. Waters. Thank you very much, Mr. Chairman. Good384afternoon, everyone. Republicans want faster bank mergers,385which will wipe out community banks and credit unions and leave386just a few megabanks to serve our constituents. Trump's387regulators just rubber-stamped the Capital One and Discover388merger, which will lead to more consumer harm. Democrats389support the formation of new or de novo banks, and I am pleased390Mrs. Young is testifying. Mrs. Young bravely responded to391lending discrimination by suing the Consumer Financial392Protection Bureau, I do believe, and so I would just like to393say that I am very pleased that Mrs. Young is here today. I394have been paying attention to what the gentleman, the chairman,395has been trying to do, but because this protection bureau, the396Consumer Financial Protection Bureau (CFPB), was basically397challenged by Mrs. Young, we are finding----398    Chairman Barr. The gentlelady's time has expired. The399gentlelady's time has expired.400    Ms. Waters. Thank you very much. I will listen, and I look401forward to hearing from the witnesses today.402    Chairman Barr. Today, we welcome the testimony of Mr. Keith403Costello, President and CEO of Locality Bank; Ms. Mary404Usategui, President and CEO of BankMiami; Ms. Amanda Allexon,405Partner of Simpson Thatcher & Bartlett LLP; Mr. John Berlau,406Senior Fellow and Director of Finance Policy, Competitive407Enterprise Institute; and Mrs. ReShonda Young, Founder of408Jabez, Inc. We thank you for taking the time to be here. You409each will be recognized for 5 minutes to give an oral410presentation of your testimony. Without objection, your written411statements will be made part of the record.412    Mr. Costello, you are now recognized for 5 minutes.413414 STATEMENT OF KEITH COSTELLO, PRESIDENT AND CEO, LOCALITY BANK415416    Mr. Costello. Chairman Barr, Ranking Member Foster, members417of the committee, thank you for the opportunity to speak with418you today. I am honored to share my perspective on the value419that de novo banks bring to our economy and our communities.420    I spent nearly 40 years in banking, and I am currently the421Chairman, President, and CEO of Locality Bank. We launched it422in Fort Lauderdale, Florida in 2022, recently exiting de novo.423It was the first new bank opened in South Florida since 2009,424when I also Co-Founded Broward Bank of Commerce. What drove me425to start both banks was simple. I was inspired by426entrepreneurial bankers who had the courage to leave safe,427comfortable corporate roles to build something local,428meaningful, and community focused. I saw firsthand how much429more responsive and impactful a bank can be when headquartered430in the community it serves, not just a branch of a larger, out-431of-market institution. Community banks are small businesses432that serve other small businesses. Starting and running one433gives you a deep appreciation for the challenges entrepreneurs434face daily, something that cannot be replicated by working in a435large corporate financial institution.436    So, why are there not more de novo banks? The answer is437largely economic. Starting a new bank today is not financially438viable for most entrepreneurs or investors, and the return on439investment is not competitive with other options. Since the440Dodd-Frank Act, regulatory burden has increased dramatically.441Capital requirements are higher, approval timelines longer,442compliance costs are steep, and these burdens fall hardest on443the very banks, community banks, that did not cause the444financial crisis. As a result, we have seen lending shifts445outside of heavily regulated banks to financial technologys446(fintechs), private money lenders, and merchant cash advance447firms. These players do not offer the relationship-based,448community-focused service that small businesses need.449    My motivation to launch Locality Bank was reinforced during450the pandemic when I was on the sidelines due to a noncompete. I451received call after call from local business owners who could452not access Paycheck Protection Program (PPP) loans or even get453a call back from their bank. That was a wake-up call. I began454to look for reasons by studying the local banking market. In4552015, there were 11 banks headquartered in Broward County. By4562020, there were only three. Community bank assets had dropped457from $11 billion to just 600 million. The same thing had458happened in many other communities across the country. We459responded by raising $38 million from local citizens and460business owners to launch Locality Bank. In 3 years, we have461grown to $300 million in assets, but it was not easy. Our462capital requirement was double what it was to open a similar463bank 13 years earlier, and because of regulatory costs, we464cannot profitably offer consumer banking or residential465mortgages, services that should be part of a full service466community bank.467    H.R. 478, the Promoting New Bank Formation Act, would468alleviate the capital and regulatory obstacles I have469identified. I thank Chairman Barr for introducing this bill and470the committee for passing it. H.R. 478 proposes curing capital471requirements for de novo banks, addressing the very real472challenges I laid out in raising capital. It proposes a more473reasoned approach by regulators in responding to changing474business plans, giving the many appropriate reasons a bank475would need to deviate from the plan.476    In closing, if we want more de novo banks and all the477community value that they bring, we must make the economics478viable. Let's unleash the power of free enterprise, the same479force that built this country. If that happens, we will not480need congressional hearings to discuss why new banks are not481forming. They will already be open for business. Thank you for482your time and your leadership, and I look forward to your483questions.484485    [Prepared statement of Mr. Costello follows:]486    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]487488    Chairman Barr. Chairman Barr. Thank you, Mr. Costello. Ms.489Usategui, you are now recognized for 5 minutes.490491    STATEMENT OF MARY USATEGUI, PRESIDENT AND CEO, BANKMIAMI492493    Ms. Usategui. Chairman Barr, Ranking Member Foster, and494distinguished members of the committee, thank you for the495opportunity to appear before you today to talk about my496experiences as a community banker.497    I am the Founder, President, and CEO of BankMiami, a newly498formed de novo bank headquartered in Miami, Florida. With over49920 years of banking experience, I have seen and been involved500with both de novo formation and been both the acquirer and501acquiree in a merger and acquisition deal. I am passionate502about the pivotal role bankers play in supporting the needs of503our communities and the dreams of our clients. I am sharing my504story in the hope that it will pave an easier path for others505to do the same in their communities.506    BankMiami opened its doors almost 2 months ago on March 17,507a formation process that took twice as long as we initially508thought it would, with a number of challenges along the way. I509will outline a few in a moment to showcase how some small510changes can go a long way in de novo bank reform. When we began511making the business case for BankMiami, the need for more512banking services in our market was clear. From 2008 to 2023,513the number of banks headquartered in Miami-Dade dropped from 42514to just 18, even as the population and economy exploded.515Florida's population grew nearly 15 percent between 2010 and5162020, and Miami saw billions of new business wages, yet there517had not been any de novo banks since 2008.518    In addition, Miami is a unique market with both domestic519and international influence. Standardized banking does not520typically work for much of the county's population, yet the521majority of the banks that offered bespoke banking solutions522were acquired during that time. It was the result of mass523consolidation in our market that led me to realize there was a524real opportunity for a community bank that focused on custom-525tailored banking solutions. Community banks are the heartbeat526of our banking system, and without them, small businesses will527be gravely affected. Mergers and acquisitions are healthy for528markets, but without new banks forming, communities are left529underserved. There are many different barriers of entry.530However, I think the biggest challenge is raising capital for a531de novo bank under the current rules.532    We had to raise over $32 million to receive our charter. We533hit about 75 percent of our goal rather quickly, then took534about another 6 months to finalize and complete our raise. Only535after we cleared the minimum threshold did many new potential536investors come forward, and even more so since we opened our537doors. That is why a capital phase-in period, as proposed in538Chairman Barr's bill, would be an excellent solution for banks539that have the clear need in the community, yet may need more540time to finalize their capital raise. It would allow banks to541open sooner, meet market needs faster, and bring in investors542more efficiently.543    Another challenge for de novo banks is that we cannot544accept capital until the charter application is accepted by our545regulators. Since there is no clock on how long regulators have546to accept an application, we cannot give potential investors547certainty on timing. Many investors who give verbal commitments548end up putting their capital to work in other investments due549to the wait time, causing de novo banks to have to find550additional investors and delaying the capital raise process.551Moreover, since founders cannot count on a timeline for552acceptance of an application, much less approval, it can be553difficult to estimate and manage costs. To apply for the554charter, we must fund significant expenses, particularly when555it comes to building the right team and have to pay them to sit556on the sidelines waiting for approval to begin operating. That557goes on for months. This delay causes the initial558organizational expense to be significantly higher as each month559goes on, requiring more and more capital in the process to560offset the higher organizational costs.561    I support the efforts of the sponsors in this committee in562passing H.R. 478. The bill would provide more regulatory563capital and lending flexibility to facilitate de novo bank564creation, encourage investment in these banks, and promote565their viability. In particular, the provision directing Federal566banking agencies to issue rules that provide for a 3-year567phase-in of capital standards would lower one of the primary568barriers I outlined in my statement, raising capital.569    The bill would also allow de novo banks to request570permission from the Federal Deposit Insurance Corporation571(FDIC) to deviate from the approved business plan. While that572has not been a problem for BankMiami yet, it certainly would573provide flexibility for us through the 3 years of de novo574status that remain ahead. Local economic circumstances change,575and we must have the ability to adapt so that we can succeed.576Today, there are 4,487 banks in the United States, nearly 50577percent lower than that in 2005. Of the banks active today,578only 85 were established after 2010. I am proud to be one of579those 85, but there should be more of us.580    I am grateful to the committee for your sincere interest in581a robust, competitive banking industry that serves our582customers and communities. I am hopeful that the necessary583reforms will be made by Congress and Federal and State584regulators to support that outcome. Thank you for your time and585attention, and I look forward to your questions. Thank you.586587    [Prepared statement of Ms. Usategui follows:]588   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]589590    Chairman Barr. Ms. Allexon, you are now recognized for 5591minutes.592593  STATEMENT OF AMANDA K. ALLEXON, PARTNER, SIMPSON THACHER &594                          BARLETT LLP595596    Ms. Allexon. Chairman Barr, Ranking Member Foster,597honorable members of the subcommittee, thank you for having me598here today. I appreciate the appreciate the committee's599leadership on this issue and giving me the opportunity to share600my thoughts and perspectives as someone who has helped guide601parties through the bank applications process----602    Chairman Barr. Could you pull your microphone----603    Ms. Allexon. Yes.604    Chairman Barr [continuing]. a little closer? Thank you.605    Ms. Allexon. Through the bank applications process for over60620 years. I am a Partner at Simpson Thatcher, where I represent607banks of all sizes on regulatory matters, including mergers and608acquisitions. I am here today in my individual capacity, and my609views do not necessarily represent those of my firm or my610clients.611    My perspective on bank mergers in de novo formations is612somewhat unique because of my background. In addition to my613years in private practice, I began my career almost 25 years614ago today working for Chairman Jim Leach in this very room. I615also spent almost 10 years in the legal division of the Federal616Reserve reviewing applications, including through the financial617crisis. I have submitted a full statement for the record and618want to focus these remarks on a couple key topics.619    First, the diversity of the business models that we have in620our banking system is one of its great strengths. In 2025,621customers have more choices than ever with respect to where and622how they bank. Another feature of our banking system is that it623is in constant transition. Keeping up with this changing624environment and maintaining diversity within our market625requires continuous streams of new market entrants, as well as626the ability for parties to engage in business combinations that627enhance their competitive impact. Although many straightforward628merger transactions are processed in the normal course within a629few months, too many transactions are languishing well beyond630the normal processing periods. These delays expose both parties631to escalating risk. As someone who has spent material times on632both sides of applications processing, I can tell you that633there are a few key reasons why applications are delayed. I634would opine that most all of these can be readily addressed635through thoughtful combination of action by the Federal banking636agencies and targeted legislative actions.637    A number of otherwise straightforward transactions are held638up by outmoded or misused agency procedures. This committee has639already correctly identified that flexibility within these640procedures renders the statutory and regulatory time periods641practically moot. Without any sense of urgency, it is easy for642the applications process to drag on or just to simply take a643back seat to other, more pressing agency matters. Actions such644as the proposed shot clock legislation, automatic agency645escalation of applications when they have been pending for a646certain period of time, similar to what the FDIC enacted last647year, and perhaps set calendars for decisionmakers to act on648applications, could make a material difference in processing649times.650    Next, the agencies must find ways to ways to expedite the651review of public comments. This is one of the biggest culprits652for long processing periods. While it is important to consider653timely and substantive comments, the receipt of a public654comment should not add months to processing or immediately655trigger heightened agency actions. Simply adjusting agency656rules to allow staff to make decisions with respect to which657comments can be handled in the normal course and which deserve658more detailed consideration would dramatically reduce659processing times.660    Third, the Federal banking agencies must work to right size661information expectations. Applications have never been662lengthier or more detailed. At some point, one has to ask, who663is reviewing all of this information? Is this information nice664to know or need to know, and against what functional measure is665the information evaluated? Lastly, the agency leadership and666application staff must take action to avoid duplicating the667supervisory process. Routine supervisory matters, whether668existing or new, should not be roadblocks to transactions669unless those matters directly and materially implicate the670proposal or management's ability to safely effectuate the671transaction.672    The commonsense suggestions that I have discussed here and673in my written testimony could help rationalize the applications674process and support a more dynamic industry that can better675serve the needs of all Americans. I appreciate this opportunity676and look forward to any questions?677678    [Prepared statement of Ms. Allexon follows:]679    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]680681    Chairman Barr. Thank you. Mr. Berlau, you are now682recognized for 5 minutes.683684STATEMENT OF JOHN BERLAU SENIOR FELLOW AND DIRECTOR OF FINANCE685            POLICY, COMPETITIVE ENTEPRISE INSTITUTE686687    Mr. Berlau. Chairman Barr, Ranking Member Foster, and688honorable members of this subcommittee and this committee,689thank you for this opportunity to present testimony on behalf690of my organization, the Competitive Enterprise Institute. This691is a hearing on the critically important topics of de novo692banks and bank mergers that are both vital parts of reaching693consumers and small businesses in our financial system.694    Competitive Enterprise Institute (CEI) is a Washington-695based free market think tank, founded in 1984, that studies the696effects of regulations on job growth and economic well-being.697At CEI, we have long championed private sector innovation that698serves all Americans and have warned about government red tape699that contributes to the problems facing the Nation's unbanked700and underbanked population in both rural and urban areas. We701are concerned about the burdensome regulatory barriers that702have been erected since the financial crisis of 2008 to the703formation of new or de novo banks and more recent barriers704erected, and now, thankfully, being knocked down, to bank705mergers that would benefit consumers and entrepreneurs.706    Let me start with de novo banks. In every business sector,707new entrants are essential to the functioning of a competitive708free market economy. In this hearing, I look forward to709learning from my fellow witnesses, who are recent founders of710de novo banks, about their innovative financial products and711services they are providing to their communities. Previously to712this committee and in my writings, I have pointed to the713example of the Bank of Bird-in-Hand in the heart of the Amish714country of Pennsylvania as an example of new banks providing715practical, if not what many would consider the most716technologically sophisticated, innovations to serve their717communities, including drive-thru lanes for horses and buggies718that the Amish use. That bank grew from $17 million to more719than $1 billion in less than 10 years in assets.720    While the Bank of Bird-in-Hand and the two banks of my721fellow witnesses are certainly success stories to be722celebrated, they are three of only a handful of new banks723approved by the Federal Deposit Insurance Corporation since the7242008 financial crisis. In 2023 and 2024, just six de novo banks725were approved each year. In some of the years following the726financial crisis, no new banks were approved. By contrast, in727the 4 decades before the crisis, the FDIC approved more than728100 new banks in most years. This was the case even in the late7291980s and early 1990s, at the height of the savings and loan730crisis.731    There may be multiple causes for the decline of new banks,732including the increase in general regulatory compliant costs733from the Dodd-Frank law. Still, we know from the testimony734here, from de novo bank founders and an aspiring de novo bank735founder, that the FDIC is imposing unreasonable burdens, both736in the process and upfront capital of de novo applications.737That is why legislative efforts such as Chairman Barr's738Promoting New Bank Formation Act, which passed the committee739recently with bipartisan support, are so needed. The Chairman's740bill would move Federal banking agencies toward a system of741phased-in capital that would allow de novo banks to build742capital as they gain customers, rather than having to meet a743nearly impossible burden for massive amounts of capital744upfront.745    Both Congress and the regulatory agencies also need to746remove unnecessary red tape that hampers beneficial mergers of747existing banks. Changes in policies on mergers pushed through748last year at the FDIC and Office of the Comptroller of the749Currency, both of which thankfully have begun to be reversed,750would have made mergers of banks much more difficult and time751consuming. Mergers and acquisitions are most often a healthy752part of capitalism's competitive process that brings innovation753and dynamism to industries, and in the banking sector are754necessary, according to former regulators such as Sheila Bair755and Tom Hoenig, to help prevent failures and to allow regional756banks to better compete against megabanks. Both mergers of757existing businesses and the creation of new businesses are758essential parts of a competitive market and a competitive759financial system in which a variety of entrepreneurs create760products and services for a variety of consumers, enabling a761financial system and an economy that is resilient and762beneficial to all Americans.763    Thank you again for inviting me to testify, and I look764forward to your questions.765766    [Prepared statement of Mr. Berlau follows:]767    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]768769    Chairman Barr. Thank you. Mrs. Young, you are now770recognized.771772       STATEMENT OF RESHONDA YOUNG, FOUNDER, JABEZ, INC.773774    Mrs. Young. Chairman Barr, Ranking Member Foster, and775distinguished members of the committee, thank you for allowing776me allowing me the opportunity to speak with you today. Again,777my name is ReShonda Young. I am the Founder of the proposed778Bank of Jabez in Iowa, which would be a State-chartered de novo779bank designed to address the systemic inequalities and780discrimination that I have witnessed and personally experienced781in banking over more than 20 years. I am a landlord, a real782estate developer, and business consultant with the Small783Business Development Center. Through those roles, I have seen784firsthand how deeply unjust lending practices impact minority785women and immigrant-owned business owners, not just786financially, but emotionally and physically due to the amount787of stress that these situations add to their lives.788    My personal experience that got me to the point of, really,789praying for a solution to the banking problems that I was790having involved a multi-billion-dollar local community bank791that held all of my real estate assets. When I started working792with the bank, a good friend of mine was the Vice President at793the bank. He knew the problems that both my dad and I were794having with obtaining access to capital to grow our businesses.795He introduced me to the commercial loan officer at the bank,796and we embarked on a great relationship for the next 6 years. I797had been with the bank 7 years in 2019 when I called for a798simple request. My friend and loan officer had both left the799bank, and I was told by the new loan officer that they did not800want me at their bank, and if I decided not to move my801accounts, that they would foreclose on me and take everything I802own. This new loan officer did not just threaten me. He also803began filing legal documents to try and make good on his804threat.805    For 16 months, the commercial loan officer and others at806the bank, including the CEO, tried to illegally steal my807properties that I had worked so hard for. It was only after808involving the media and exposing documentation of the bank's809misconduct that a settlement was reached. After enduring those81016 months of intense and unnecessary stress, I prayed about811what I needed to do to make sure that this does not happen to812others. I heard very clearly that I needed to start a bank that813treats all people with dignity and respect.814    I did not accept the task of starting a bank lightly. I815immediately reached out to a banking professional, who became816my cofounder. We downloaded the FDIC guide to starting a de817novo bank, engaged banking consultants to help guide us through818the process, and received a checklist involving 74 items that819we needed to complete in order to actually charter a bank. That820alone can be daunting. Pair that with average pre-opening821expenses of $800,000 to $1.5 million and post-charter capital822needs of at least $20 million, and most people would abort the823mission.824    We initiated engagement with the FDIC in January 2021. Our825overall experience has been favorable. They have been826responsive to our questions and willing to meet with us to help827keep us moving along with the process. We also began our828engagement with the Iowa Division of Banking in 2021. We829quickly learned that de novo banks are rare. Iowa's last in de830novo bank charters were issued in 1997. No one who is currently831at the Iowa Division of Banking has ever gone through the de832novo charter issuance before. As kind as the Iowa regulators833are, there are many things that they are learning right along834with me and my team. That is a bit unsettling for us. Our835banking attorney has been called on to give guidance to the836Iowa banking attorneys.837    Another challenge is also opening as an Minority Depository838Institution (MDI). MDIs are rare, representing roughly 3839percent of banks in the United States. MDIs meet critical needs840in low-and moderate-income communities, yet few regulators have841deep experience with them and there are limited resources to842support the process. We need greater technical assistance for843both banks and regulators to make MDI formations a more viable844process. Starting a de novo is very expensive, and it is an845arduous process. The guidelines around how capital can be846raised and who it can be raised from, generally accredited847investors, poses a barrier to entry. These requirements need to848be adjusted.849    Finally, I just want to address the ongoing need for strong850banking regulations. Not all banks act ethically, and it is not851just the big ones. Smaller community banks and credit unions852also engage in discriminatory practices. That is why I joined853the lawsuit against the CFPB to enforce Section 1071 and854require data transparency on lending to women and minority-855owned businesses. Collecting and reporting this data may cost856banks a little bit more, but it protects consumers from857potentially devastating financial harm. Thank you.858859    [Prepared statement of Mrs. Young follows:]860    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]861862    Chairman Barr. Chairman Barr. Thank you for your testimony,863all, and we will now turn to member questioning. The chair now864recognizes himself for 5 minutes.865    Let me start with Ms. Allexon and your important testimony866that the receipt of a public comment should not add months to867processing or immediately trigger heightened agency action. It868is an important comment, I think, because we hear from banks a869lot about pressure in connection with their merger applications870to enter into pledges with community groups on meeting specific871investment and lending goals. Some have even used the word,872``extortion,'' in describing these tactics. They fear community873groups will file negative comments on the merger, thereby874slowing down or even jeopardizing the transaction.875    Ms. Allexon, do you agree that agencies should approve bank876mergers promptly, solely based on whether an application is877complete and meets the key statutory criteria? When you answer878that question, keep in mind that one of the things that we hear879a lot is that these negative comments filed by community groups880after a merger is merely announced should not be a cause for a881public hearing or be relevant to a regulator approving a deal,882especially when they have already been rated as having an883outstanding or satisfactory Community Reinvestment Act (CRA)884rating?885    Ms. Allexon. Thank you for that question. Public comments886are one of the main holdups in applications processing. I do887not see these things as being mutually exclusive. I think the888banking agencies can give due consideration to public comments889and still process them in a timely manner. The statutes, each890of the statutes--the Bank Merger Act, the Bank Holding Company891Act, Change in Control--allow for public comments. That is892built into the statute, but it is in the discretion of the893agencies how they are considered and under what processes. I894think, as I said in my testimony, there are some really, like,895easy things that they can do to streamline that process and896make sure that comments that are substantive and are relevant897are given due consideration and that other ones can be898expedited?899    Chairman Barr. Thank you. Yes, and again, I would view, and900I would hope the agencies would view, with great skepticism901comments from community groups that are pejorative about an902institution that has an outstanding CRA rating. Mr. Berlau, I903thought your testimony was very important when you said904acquisitions by strong banks of weaker ones can prevent905failures while protecting communities from the disruption of906banking services that inevitably comes with liquidation of a907failed bank. Frankly, that is exactly why I named my908legislation the Bank Failure Prevention Act. Can you expand on909why a shot clock and avoiding a long, drawn-out merger review910process is important for financial stability and preventing911failures?912    Mr. Berlau. Thank you for the question, Chairman Barr. I913think the shot clock is important both with de novo banks and914bank mergers. Obviously, just like a business, you do not want915a government agency to take forever. Who knows what could916happen with the financial stability in the community? The shot917clock does not require a yes or a no, but it requires an918explanation from the agency and, and say, in the case of a de919novo or a merger application, of what they can do better. That920provides more certainty to entrepreneurs and to communities.921    Chairman Barr. Thanks. To the extent we saw some922instability in the sector after the Silicon Valley Bank, I923think, if we want to protect the Deposit Insurance Fund,924allowing for healthy mergers to happen and not let those925applications languish is very, very important for safety and926soundness of the system.927    Ms. Allexon, one more question. Last year, the Office of928the Comptroller of the Currency (OCC) finalized new policies929that revised the criteria used to evaluate the bank merger930applications, including eliminating the OCC's expedited review931process and streamlined application procedures. Additionally,932the Department of Justice under the Biden Administration933announced that it was formally withdrawing from the 1995 joint934Bank Merger Guidelines. Can you discuss how these moves935discouraged healthy merger activity that would have promoted936competition in the banking sector, and do you think that937preventing the OCC from promulgating a similar rule in the938future would best ensure that the merger review process will939continue to allow healthy mergers?940    Ms. Allexon. Yes. As someone who works at an agency, it is941very difficult drafting any sort of guidance or rulemaking.942Every word means something, and so when you are putting943together a proposal like that in the hopes of creating944transparency or expediting the process, there can be unintended945consequences. Those particular pieces of guidance created some946presumptions that bank merger transactions were negative. Like,947you are creating a presumption that you are starting out948behind. Like, instead of starting in a neutral position, you949are starting behind the eight-ball. So, every applicant has the950obligation to satisfy the statutory factors, but it makes a big951difference if you are starting behind or not.952    Chairman Barr. Thank you very much for your testimony. The953gentleman from Illinois, the ranking member of the954subcommittee, Dr. Foster, is now recognized.955    Mr. Foster. Thank you, Mr. Chairman. Mrs. Young, I would956first like to thank you and the rest of our witnesses for being957here and for sharing your stories. I found Mrs. Young's story958particularly compelling. The obstacles that you faced during959your time as a small business owner have clearly influenced960your decision to enter the banking industry. You have961experienced instances of blatant racism and discrimination that962no business and no person should have to endure in any963situation, let alone when trying to just finance your business.964After those experiences, not only did you push the CFPB to965implement Section 1071 of the Dodd-Frank Act to increase966transparency for small business lending practices, you also967went a step further and decided to start your own bank. Now,968could you talk a little bit about how these experiences969influenced your decision to form your own bank and how they970influence the business plan for your bank?971    Mrs. Young. Yes. Thank you for your question. What I972realized early on was that, because of the illegal things that973were tried to be done to me or that were done to me, you cannot974always legislate a person's heart, so, legislations may be put975forth, and I think they are very necessary. You are still going976to find people who are going to try and circumvent the system.977We do not want to circumvent the system. We want to follow the978system. We want to follow the rules. We want to make sure that979every person, no matter what their race, creed, color, anything980    --it does not matter--we want to make sure that they are981treated with dignity and respect. As much as, like I say, I982believe that regulations are very necessary, there are people983who will circumvent the system.984    With our business plan, we are highly focused on making985sure that each person, individual business--it does not986matter--that they are able to evolve their selves financially987as a result of working with us. We do not want it to be just a988numbers game. We want it to actually have impact for the people989in the communities that we serve.990    Mr. Foster. Yes, thank you. I am a scientist, and it is991really very difficult to fix a problem if you do not have the992data to understand it. Do you believe the 1071 rule would help993to prevent others from experiencing the same sort of994discrimination that you faced?995    Mrs. Young. I do believe that the 1071 rule is very996necessary in helping to prevent others from enduring what I997did. So. having that enforcement, not just having it on the998books, but having it enforced. It more than just puts a slap on999somebody's wrist in terms of the bank. It really is going to1000make them do the things that they are supposed to do for fear1001that they are going to be fined or that they are going to have1002negative consequences.1003    Mr. Foster. Yes. Yes. One of the things--it is tough to1004design a law that might prevent that--is in things like, I will1005say, realtors steering people on the basis of race. There are1006thousands, millions of realtor customers, so it is easy to set1007up a testing program to find out if out if there is a systemic1008problem here. The number of customers for even small banks and1009large banks is just not that large, so you do not have the1010statistics to set up that sort of system, so I do not think1011there is an alternative to do pretty broad-based information1012collection on the front end. It would be nice if someone came1013up with a better system, but I was very disappointed that1014President Trump and the Republicans have really worked as hard1015as they can to overturn that rule. It would be nice to live in1016a world where we did not need it, but I think we are going to1017need to get that information to know how to fix it.1018    Let us see. Actually, this is to, I guess, all of our1019witnesses. Small community banks and new institutions face many1020challenges, especially when it comes to competing with the1021larger peers. One area that I believe is critical for small1022banks and credit unions to compete relates to technology. I1023think that a lot of what is driving the consolidation of1024banking is simply the difficulty of you do not have the scale1025to compete on the technological front with the bigger players.1026Consumers have come to expect things like mobile banking apps,1027online banking services, that can take significant resources to1028stand them up. If you have to do it yourself, it is typical to1029turn to third-party vendors, but the cost of setting up a new1030account with a third-party vendor, getting all the training for1031your employees, is not small.1032    I had mentioned, when we were talking earlier, the1033possibility that there could be a useful way of sort of safely1034subsidizing your technology costs for de novo startups. I am1035nearly out of time, but I will be asking, for the record, if1036there is some sort of voucher program or something that we1037might come up with that would really take a big burden off of1038this and not be abusable, which is the danger with any subsidy?1039    Chairman Barr. The gentleman's time has expired. The1040Chairman of the House Small Business Committee, the gentleman1041from Texas, Mr. Williams, is now recognized.1042    Mr. Williams of Texas. Thank you, Mr. Chairman. Mr.1043Costello, in your testimony, you mentioned significant hurdles1044that you faced when starting a bank. From capital challenges to1045navigating a consistently changing regulatory environment,1046starting a new bank has only become more and more difficult to1047do, so de novo banks play an important role in our financial1048system. They serve as lifelines for small businesses, provide1049relationship-based lending to rural areas, and ensure that1050local economies are not left behind. Yet without meaningful1051reform, we risk losing the community-driven lenders that many1052of my constituents, and myself included. In Texas, we rely on1053that. Mr. Costello, can you expand on the challenges you faced1054when starting the bank and how those barriers impacted your1055ability to raise capital and serve the needs of your local1056community?1057    Mr. Costello. I started a bank in 2009 and then just1058started one recently in 2022. The difference when I started1059that first bank in 2009, I was required to raise $12.5 million1060of capital. This second bank in 2022, the capital requirement1061was double, in the same city, in Fort Lauderdale, Florida. Just1062prior to my opening in 2022, there had been another gentleman1063who tried to start a bank in the community and could not get1064the capital to raise it and had to abandon the charter attempt.1065    Mr. Williams of Texas. So, for many community and regional1066banks, mergers are a way to stay viable in a complex and costly1067regulatory environment. We saw a lot of that in this past1068administration. These banks often look to combine resources in1069order to invest in technology, expand product offerings, and1070better serve their customers. When done responsibly, bank1071mergers can enhance competition by allowing smaller1072institutions to grow and support more diverse and resilient1073banking ecosystems. As we have heard today, the current review1074process is slow, opaque, and unpredictable. Regulatory agencies1075have the ability to still stall mergers without issuing formal1076details, leaving the banks in limbo and discouraging future1077transactions. You have talked about that, and this uncertainty1078narrows strategic options for banks in all sizes and further1079contributes to market concentration.1080    Ms. Allexon, could you elaborate on how a transparent and1081timely merger review process would enhance the competition in1082the banking industry?1083    Ms. Allexon. There are a number of reasons why people want1084to engage in a merger or acquisition transaction, and you guys1085have mentioned a number of them. Economies of scale is1086important. Expanding products and service is important.1087Expanding your geographic footprint is important. So, having a1088timely process is important to those things because you enter1089into a purchase agreement, and you have staff. You have money1090that you are laying out, and the longer the process goes on,1091the more those banks become at risk, right? You lose employees,1092you lose money, and it creates uncertainty. Also, during that1093time period, it can create a situation where who knows what1094supervisory situation or economic changes might develop, and so1095a deal that made sense a year ago might not make sense today.1096So, having that process be timely so that they can execute1097their strategic vision and have more competitive impact in1098their market, I think, is critical to a healthy system.1099    Mr. Williams of Texas. Good. Over the past several decades,1100the U.S. banking landscape has changed dramatically. In 1984,1101there were 14,000 banks, and today, that number has fallen1102below 4,000. Now, while some degree of consolidation is1103natural, the pace and scale of this decline raises serious1104concerns about the long-term health of our financial system. A1105lot of these have been community banks, right? People like me,1106we need that, and it hurts the ability to borrow, and1107particularly when it comes to access, competition, and choice1108in local communities. Now regional and community bank numbers1109are falling. At the same time, there is a lack of banks1110entering the market. Ms. Usategui, what do you see as the most1111significant factors contributing to long-term decline in the1112number of banks in the United States, which gives opportunity1113to a small business to grow and thrive?1114    Ms. Usategui. I think, back before the financial crisis,1115there was probably the same amount of mergers and acquisitions1116occurring, but you had de novo banks replacing them. After the1117financial crisis, only 85 banks, since 2010, have been formed.1118The overabundance of capital requirements is significant, I1119think, at least in our story. We had to raise over $32 million1120to get our doors open, and I think that is the biggest1121challenge today. Having that ramp-up period of allowing1122potentially 6 percent to start and get to 8 percent by the end1123of the 3-year period is a lot more achievable to many to be1124able to achieve more de novo bank formation.1125    Mr. Williams of Texas. Thank you. I yield back, but I also1126want to thank all of you for lending to Main Street America,1127the greatest system we have. Thank you very much, and I yield1128my time back.1129    Chairman Barr. The gentleman yields.1130    The gentlewoman from California, Ms. Waters, is now1131recognized.1132    Ms. Waters. Thank you very much, Mr. Chairman. Mrs. Young,1133it is good to see you again. I remember when we last spoke, and1134I have a great appreciation that you have taken time out one1135more time to travel to Washington, DC. to share your story with1136our committee.1137    Too many entrepreneurs face discrimination when they seek1138to get a loan from a bank, which is unlawful and not right. I1139appreciate that you responded by filing a lawsuit with the1140Consumer Financial Protection Bureau to compel them to finish1141their work on Section 1071 of Dodd-Frank. A provision that Ms.1142Velazquez and I fought to include so that small-business1143lending has the same transparency, fairness, and competition as1144mortgage lending. When you kept pressing forward to launch your1145own bank so that you could provide a fair service for your1146neighbors that you yourself and your neighbors did not get.1147    Now, I want to ask a question, or some questions, about1148your bank application process, as I would like to introduce1149what I believe should be a bipartisan legislation to address1150your challenges. Mrs. Young, in your testimony, you referenced1151that the FDIC new bank or de novo bank list involves 74 items.1152While I imagine there were good intentions along the way to add1153more items, it seems like no one has one has taken a fresh look1154at that checklist to know what is helpful or necessary to1155approve in a bank. Would it be helpful if Congress required our1156banking agencies to review and streamline some of those1157requirements?1158    Mrs. Young. It would be very helpful if they had to review1159and streamline those requirements.1160    Ms. Waters. Thank you. I think we got this from you. Okay.1161I want to thank you, Mrs. Young. You also raised concerns about1162communication and lack of expertise with the de novo process1163since none of the staff was around when the last new bank was1164chartered in 1997. Would it be helpful if Congress required1165Federal agencies to set up a de novo advisory panel where1166applicants and new approved banks can regularly meet with1167Federal and State banking regulators to give them feedback on1168ways to improve the application process?1169    Mrs. Young. That would also be very helpful, yes.1170    Ms. Waters. Thank you very much. Okay. You mentioned1171challenges you faced as a new minority depository institution1172and eligibility criteria you must meet. Would it be helpful if1173Congress required the creation of a de novo mentor protege1174program where any de novo applicant could be paired with a1175similarly situated bank that recently went through the de novo1176process and could share advice, even if they were in a1177different State?1178    Mrs. Young. That would also be very helpful.1179    Ms. Waters. Thank you again for sharing your story. There1180are other concerns you have raised. Now, I plan to address all1181of what you have advised us in legislation, and I hope that1182Republicans will work with Democrats to support the creation of1183a variety of new depository institutions in a safe and sound1184way, including rural banks, MDIs, credit unions, and community1185development financial institutions all across the country.1186Thank you so very much.1187    I want to say something to Mr. Berlau. It is good to see1188you once again. You testified before our committee in 2021 and1189endorsed my bill that was expanding financial access for1190``underserved communities,'' which allows credit unions to1191expand their field of membership to banking deserts where banks1192have closed branches. Do you still support my bill, and do you1193think this committee should mark it up?1194    Mr. Berlau. I do indeed. We need all types of financial1195institutions--banks, credit unions--all of the above, so yes,1196very, very much. The bill is still needed for a variety of1197choices for consumers and competition.1198    Ms. Waters. I want you to know, between you and Mrs.1199Young's presence here today, I am beginning to like this1200committee a little better. Thank you very much.1201    Mr. Berlau. Thank you.1202    Ms. Waters. I yield back.1203    Chairman Barr. The gentlelady yields back. The gentleman1204from Georgia, Mr. Loudermilk, is now recognized.1205    Mr. Loudermilk. Thank you, Mr. Chairman. Thank you all for1206attending today. Very important subject, especially in my home1207State of Georgia, which has suffered greatly since the 20081208financial crisis with very, very few new banks coming in,1209leaving a lot of the areas of our State underbanked or some1210without even a local small bank branch in the area.1211    First, let me start off asking a question about the Office1212of Comptroller of the Currency. Under Acting Director Rodney1213Hood, he recently reversed a Uniformed Services Employment and1214Reemployment Rights Act (USERRA) policy that delayed the1215approval of bank merger applications. While the rule was only1216in effect for a few months, we heard a great deal of concern1217from the banking industry. Mr. Berlau, what were tangible1218effects of the OCC's 2024 final rule on bank mergers, and why1219is it so important that banks have clarity on merger policies1220and processes?1221    Mr. Berlau. It was a chilling effect--that banks had an1222uncertainty about whether--it shifted the burden to banks,1223including small community banks, as far as that they would have1224to justify the merger to the OCC rather than the previous1225policy of letting this merger go through unless the OCC found1226significant problems, and it is good now that it has been1227rescinded after the Senate passed the CRA resolution. As1228Chairman Barr said, you need to prevent a future OCC from1229having that comeback, so it is vital that the House finish the1230work and pass that CRA resolution to stop the rule.1231    Mr. Loudermilk. Thank you. Ms. Allexon, do you concur or do1232you have anything you would like to add to that?1233    Ms. Allexon. Yes. I agree that it created a chilling1234effect, but I also want to add that we do have to be careful1235with these wild swings in policy.1236    Mr. Loudermilk. Right.1237    Ms. Allexon. Certainty in policy is really important in1238banking. It is true on applications processing. It is true in1239supervision. I think everybody agrees that they want banks to1240operate in a safe and sound way and they want mergers to be1241reviewed in a thoughtful manner, but we just cannot keep1242swinging one way or the other. Like, we need to stay in the1243middle of the road.1244    Mr. Loudermilk. That is what I am hearing, even from other1245businesses, that say if you are going to regulate me, just let1246me know how are you going to regulate me and stick with it. Mr.1247Costello, on the de novo formation side, we have all heard how1248difficult it is to form a new bank in 2025. This has real1249impact on access to affordable credit. In Georgia, nationwide1250consumers are turning to less tangible forms of credit for1251their business needs, even if they might qualify for credit at1252a community bank. Is this something that you have seen in your1253own communities?1254    Mr. Costello. Yes, we have seen that and, I think, due1255primarily to the fact that there just are not as many community1256banks in our community.1257    Mr. Loudermilk. Right.1258    Mr. Costello. We have seen these lightly regulated, let us1259say, not regulated like we are, become more prevalent, and I1260think the businesses that utilize them find the costs are1261higher.1262    Mr. Loudermilk. Right.1263    Mr. Costello. You do not have that relationship that you1264have at a community bank. I think most would prefer in the1265businesses that I talk to, when they find out that we have a1266community bank in Fort Lauderdale, are happy to deal with us.1267    Mr. Loudermilk. Do you see that not having these community1268banks, the lack of de novo banks, impacts consumers in the1269small-dollar-loan arena?1270    Mr. Costello. Absolutely, yes. Those same people, local1271citizens, they would come together, and actually, many times, a1272lot of those people would form banks previously, right, or a1273family would start a bank----1274    Mr. Loudermilk. Right. Right.1275    Mr. Costello [continuing]. when the capital requirements1276were not so high. I think the thing that I like the most about1277H.R. 478 is the requirement to study it, because I think all of1278the procedures are so outdated and really need to be addressed1279and brought current.1280    Mr. Loudermilk. Since we are talking about especially rural1281areas, especially in Georgia, the agricultural areas are way1282underbanked, and some of the counties, it may be one bank1283branch in the whole county. How important are fintech1284partnerships in terms of competitiveness for small banks?1285    Mr. Costello. They are very important, and we still have to1286compete with the largest banks no matter where you are located.1287In order to do that, that is a requirement, really. You have to1288create these fintech partnerships in order to have a viable1289technology base, which more and more people, especially younger1290people, really, that is their main way that they access1291financial services.1292    Mr. Loudermilk. Okay. Thank you. I yield back.1293    Chairman Barr. The gentleman yields. The gentlewoman from1294New York, Ms. Velazquez, is now recognized.1295    Ms. Velazquez. Thank you, Mr. Chairman and Ranking Member,1296and I want to thank all the witnesses for being here today.1297Mrs. Young, as you know, Ranking Member Maxine Waters and I1298were the authors of Section 1071, and I want to thank you for1299sharing your story. Mrs. Young, some of the arguments we have1300heard against Section 1071 were the same arguments that were1301made when the Home Mortgage Disclosure Act (HMDA) was1302implemented. Is that not correct?1303    Mrs. Young. That is correct.1304    Ms. Velazquez. Now, banks implement HMDA every day,1305correct?1306    Mrs. Young. Correct?1307    Ms. Velazquez. Mrs. Young, could you explain now--Section13081071--how could it actually increase lending in underserved1309markets?1310    Mrs. Young. Absolutely. One of the jobs that I have is as a1311Small Business Development Center (SBDC) Consultant for small1312business owners. I work with a high number of immigrant1313business owners, and what I am finding is they will be very1314qualified. I help them with their plans, with their financials,1315and a lot of times, it may be language barriers or just a bias1316with the lending officer. I will get phone calls from the1317office when they are with the lender, and the lender will say,1318well, I cannot understand them, and so then I will start to1319help translate, and then I will get a phone call from the1320lender denying them. There has not been one case where the1321applicant has gotten a phone call, a letter, or anything1322letting them know that they have been denied and by not even1323having to prove you are meeting with these people--you are not1324even proving that you are meeting with them. You are sending1325them nothing to say that they have been denied. Section 10711326and enforcing that would help a whole lot because----1327    Ms. Velasquez. Thank you for that----1328    Mrs. Young [continuing]. access to capital.1329    Ms. Velasquez [continuing]. for that answer. Now, you are1330on the other side. You own a bank. Do you think the Section13311071 disclosure requirements are difficult to comply with?1332    Mrs. Young. We are still in the process of chartering the1333bank. However, as we talk with compliance officers and other1334bank mentors that I have now, it is something that is1335difficult, but it is necessary. Even though it is difficult, my1336team and I do not mind, having to comply.1337    Ms. Velasquez. Thank you. Mrs. Young, while President Trump1338campaigned on lower prices, he has advanced massive tariffs,1339not only on China, but practically every country on earth.1340Despite what some may try to argue, these tariffs are paid by1341U.S. consumers and businesses. In 2018, as a small business1342owner, you raised concerns with the relatively smaller tariffs1343that Trump imposed back then. Do you have any concerns about1344these much larger tariffs being imposed on other countries and1345what it means for small businesses and farmers across the1346country?1347    Mrs. Young. Absolutely. I do have concerns with that.1348    Ms. Velasquez. Last week, the Trump Administration1349announced a trade deal with the U.K. with little detail and a135090-day pause on tariffs with China. They have also imposed and1351lifted or created exemptions to tariffs with Canada and Mexico1352multiple times. You have been a small business owner. Would not1353you agree that small businesses need certainty, and the1354erratic, on-again-off-again tariff policy from the Trump1355Administration is making it difficult for small businesses to1356negotiate with suppliers, set costs and production targets, and1357forecast for the future?1358    Mrs. Young. Yes, that is something that I am experiencing1359with the business owners that I work with.1360    Ms. Velasquez. Thank you.1361    Mrs. Young. You are welcome.1362    Ms. Velasquez. I yield back.1363    Chairman Barr. The gentleman from Tennessee, Mr. Rose, is1364now recognized for 5 minutes.1365    Mr. Rose. Thank you, and I want to thank Chairman Barr and1366Ranking Member Foster for holding this important hearing, and1367thank you to our to our witnesses for taking time to be with us1368today.1369    I shifted gears a little from what I had planned to do1370because of a call I got from a constituent this morning, and so1371I am going to launch in. I am concerned that ongoing financial1372institution mergers and consolidation are having an adverse1373impact regarding access to cash, which, despite the rise in1374digital payments, remains a vital component and driver of our1375consumer-spending-based national economy. This concern is1376especially acute in the face of the persistent and widespread1377wrongful denial of banking services for our Nation's1378independent ATM operators. These mostly small-to medium-sized1379businesses are a prime example of America's hardworking1380entrepreneurs, who now account for the majority of ATMs1381deployed throughout the country, often the only ones serving1382smaller rural communities most dependent upon cash access.1383Unfortunately, my understanding is that virtually all the1384largest national banks and most of the regional and community1385banks and credit unions across the country continue to1386categorically deny ATM businesses access to essential banking1387services based upon the wholly inaccurate misimpression and1388historic regulatory misguided direction that these entities1389present an elevated risk of money laundering or other illicit1390activities.1391    I know firsthand from the intensive work done on this1392subject previously with the financial regulators and my former1393colleagues, Blaine Luetkemeyer and Carolyn Maloney, that there1394is zero evidence of any illicit activities by this industry1395sector that would justify the wholesale categorical denial of1396banking services to which they continue to be subject. Just1397today, as I foreshadowed earlier, I learned that ServisFirst1398Bank in Nashville is closing one of my constituent's--Powell1399Group USA, LLC's--accounts after almost a decade simply because1400they that constituent an ATM operator. Beyond competition,1401Federal banking agencies are also required to evaluate other1402statutory factors under the Bank Merger Act, such as1403convenience and needs. It is my strong belief that Federal1404banking agencies, when reviewing a bank merger, should review1405whether banks provide services to independent ATM operators. It1406is also imperative that when Federal banking agencies are1407examining a merger for anti-money-laundering compliance, that1408no bank suffers adverse consequences simply for serving1409independent ATM operators.1410    Mr. Costello, you have worked at a number of banks1411throughout your career. Did any of the financial institutions1412you worked at provide banking services to independent ATM1413operators?1414    Mr. Costello. My experience has been that we view every1415business as a business. As long as it is a legal business, we1416are happy to talk to them about banking them.1417    Mr. Rose. That is good to hear. Mr. Costello, thinking1418about the financial institutions you have worked at, was the1419decision whether to provide banking services--I think you have1420answered this--to independent ATM operators based upon1421individual account-by-account analysis, as required by1422regulations, and did you ever get pressure from Federal1423regulators to unbank a customer simply because they might be1424involved in a business like that?1425    Mr. Costello. No, I never was pressured by a regulator.1426    Mr. Rose. Unfortunately, in a prior Congress, Mr.1427Luetkemeyer and Mrs. Maloney, and I learned that the regulators1428were, in fact, applying that pressure systematically, in fact,1429had it in the examiners guide that these categories of1430customers were considered to be higher risks. I hope that we1431are not seeing a continuation of that with the current1432activities of the regulators.1433    Ms. Allexon, as someone with experience with complex1434mergers and acquisitions, do you believe that it is appropriate1435for Federal banking agencies to examine whether banks provide1436services to independent ATMs as a part of the Bank Merger Act1437review process?1438    Ms. Allexon. The convenience and needs of the community is1439already a statutory factor that they can take into1440consideration a wide variety of topics. I have not specifically1441seen that specific thing be considered in connection with an1442application, but it is something that they can do if that is a1443material issue in connection with that particular transaction1444or particular issue in that market.1445    Mr. Rose. Have you ever seen other maybe categorical issues1446like this, where the bank regulators have maybe not served1447community needs and interest with respect to the way in which1448they review bank mergers?1449    Chairman Barr. The gentleman's time has expired. Could you1450respond for the record?1451    Mr. Rose. Thank you. I yield back.1452    Chairman Barr. The gentleman from California, Mr. Vargas,1453is now recognized for 5 minutes.1454    Mr. Vargas. I thank the chairman very much, and I very much1455thank the witnesses for being here. Thank you very much.1456    I read that the hearing today is called, ``Enhancing1457Competition: Shaping the Future of Bank Mergers and De Novo1458Formation.'' One of the things we seldom talk about are credit1459unions. Credit unions are interesting because they seem to1460serve the community. They seem to be in areas that are banking1461deserts. Anyway, I throw that out there because when we talk1462about the formation of banks, it is very important. I agree we1463need more of that. At the same time, it seems like there is1464this whole segment of financial institutions that we do not1465talk about. I know the conflict between the banks and the1466credit unions. Nobody likes each other, but the truth is that1467they are there, and I think they are very important. Second, I1468do want to talk about a little bit of the dissonance that I1469hear here. When the hearing started, I wrote down some of the1470comments that the chairman made saying that mergers were good,1471very good, and reasons why he believed that they were good, and1472gave some, I think, some important reasons. Then I heard most1473of the testimony here, and the testimony was not about bank1474mergers or acquisitions. It really was the value of small1475banks, small community lending, being close to the community,1476which seems different than having a bank become bigger and1477bigger and bigger until it gets ultimately bought by the1478biggest banks. Is there not some dissonance here?1479    Mr. Costello, I read your background. You successfully1480created or founded two banks, my understanding, both as CEO.1481You were able to exit those banks, I assume, by acquisition or1482by merger, I am not sure. Then you did talk about, at some1483point, there was a noncompete clause, so it gave you more1484emphasis to work on this banking situation. So, why do you not1485comment on that because, again, there seems to be some1486disconnect here.1487    Mr. Costello. Sure, I would be happy to. I guess in my1488comments also, I talked about the value of the free enterprise1489system, so the value to create a business, start a business, be1490able to lend money in a local community, but also grow that1491business and then eventually maybe sell that business and make1492money for your investors and for your people that work at the1493bank. I did it twice, so then I went out and I started another1494de novo. I think that dynamic process needs to occur to keep1495the system----1496    Mr. Vargas. I understand that, but if you take it to its1497logical conclusion, I mean, you start one bank, it is1498successful, you start a second one, successful. You are on your1499third one, and I hope it is successful for you and for the1500people you represent. Would it not then be more efficient just1501to allow the big, giant bank to bank all these groups, Just1502allow them to swallow up all the small banks, the community1503banks? Would there not be efficiency there? They talk about1504technology. I do not think so, personally. I think everyone has1505a place, but it seems like the logical conclusion. If you1506believe in this sort of unbridled capitalism that you just1507talked about, we will just keep growing it and selling it to1508the bigger guy until the biggest guy owns everything.1509    Mr. Costello. That is not what I advocate at all. That is1510not what not what I said at all. What I am talking about is----1511    Mr. Vargas. No, but I mean, that is the logical conclusion1512of growing a business and selling it----1513    Mr. Costello. You may think that is a logical conclusion. I1514would----1515    Mr. Vargas. I do. I do, if you keep being effective and1516efficient. I am a car guy. I can tell you, way back when, in1517the 1910s or so, you had a whole bunch of different car makers.1518You had, like, 20 of them in the United States. Now we are down1519to about four. Why? Because the big ones bought everything up.1520As they got bigger and bigger, they got more effective and1521efficient at building cars. So, the Packards are gone. You do1522not have Duesenbergs. You do not have Cords. You do not have a1523whole bunch of cars that used to exist. There is no Franklin,1524no Morgan, no Stanley Steamer. None of these cars exist anymore1525because the natural conclusion was that they kept growing1526bigger and bigger and bigger. Now you have Tesla competing, but1527again, it took so many decades.1528    I am going to go to somebody else now because I do want to1529talk about CDFIs. CDFIs are proposed to take a big hit. Now,1530Mrs. Young, could you comment on that because I think that is1531problematic.1532    Mrs. Young. Yes, definitely. The CDFIs play a critical1533role, especially when it comes to microlending. With the cuts1534that are being proposed for CDFIs, it will put additional needs1535on banks and credit unions to serve populations that CDFIs----1536    Mr. Vargas. My time is up. I just wanted to say again, I1537believe in small banks, I believe in community banks, I believe1538in credit unions, but there is some dissonance in some of the1539comments that were made here, in my opinion. Thank you.1540    Chairman Barr. The gentleman from Pennsylvania, Mr. Meuser,1541is now recognized for 5 minutes.1542    Mr. Meuser. Thank you, Chairman. Thank you to all of you1543very much.1544    Thanks to some very strong appointments to the Federal1545Reserve System (Fed), OCC, the FDIC, we finally have an1546opportunity to reshape banking regulations that promote1547competition, reduce costs, and expand access to access to1548capital. Drawn-out bank merger reviews by regulators and the1549lack of de novo charters have stifled entry, shrinking new bank1550formations from 132 per year from 2000 to 2009 to fewer than1551six per year since 2010. Today, we can build on the Trump1552Administration's push for better and more competitive banking.1553This starts by creating hard deadlines and application reviews,1554the return of expedited approval pathways, clear rules, and1555incentives for new mutual banks, and checking your ideology at1556the door. Ms. Usategui, there has been only one mutual bank1557formed in the last 50 years. Can you explain why de novo mutual1558banks are so rare and how can we fix this problem?1559    Ms. Usategui. Thank you for the question. I am not quite1560sure why those folks would choose not to go that path. I know1561there was a huge crisis in the 1980s, and so many folks now, I1562think, want to be part of either a State-regulated bank or the1563OCC just based on familiarity. I mean, that is the banks that1564most of us have been a part of. Going through this process, it1565is tedious enough that you want to make sure that you are1566aligning yourselves with regulators that understand your1567business plan and will be supportive of the application1568process. It took us over 19 months from the time that we had1569decided to start BankMiami to opening, and so being very1570closely aligned with regulators that have that same opinion and1571understanding of the process to make it all the faster is quite1572significant and important?1573    Mr. Meuser. All right. Thank you. Ms. Allexon, why are1574other models for bank formation preferred under current rules,1575and what tools should Congress give mutuals if we would like1576them to be formed successfully?1577    Ms. Allexon. Just to clarify, you are talking about a1578mutual charter?1579    Mr. Meuser. Yes.1580    Ms. Allexon. Okay. That is a specialty type of charter that1581is very common in the Massachusetts area. Those are charters1582that are owned by, like, individuals.1583    Mr. Meuser. Right.1584    Ms. Allexon. It is different than a normal commercial bank1585charter.1586    Mr. Meuser. Yes.1587    Ms. Allexon. They are difficult to organize because of the1588disclosure obligations and the reporting that comes along with1589that, so it is a little bit clunky. Those rules have not been1590updated in a very long time. They used to be supervised by the1591Office of Thrift Supervision, which obviously was eliminated1592during Dodd-Frank. They have been decreasing in size over time,1593so I think that they are just not a priority for either the OCC1594or the Federal Reserve?1595    Mr. Meuser. All right. Thank you. Mr. Costello, how and why1596do regulators stall merger applications indefinitely without1597issuing formal denials?1598    Mr. Costello. That can be very problematic for any bank.1599Obviously, when you are operating in that period of time1600between the approval and when everybody knows that there is a1601merger occurring, that there is talks occurring, it is very1602hard to operate your business in that environment when there is1603that much uncertainty, hold on to your employees, rumors, all1604these things. It is really a difficult situation for any bank1605to go through.1606    Mr. Meuser. So, why do they do it, just for the purpose of1607keeping it from happening?1608    Mr. Costello. I cannot tell you. I have no idea.1609    Mr. Meuser. Okay. Hopefully, we can change that. Can you1610describe the single biggest cost a bank faces--I guess it is1611obvious--when a regulator lets a merger sit in limbo for 901612days?1613    Mr. Costello. Yes, it is definitely going to impact the1614situation, and I think anything----1615    Mr. Meuser. General activity, yes.1616    Mr. Costello. Yes.1617    Mr. Meuser. Everything in general.1618    Mr. Costello. I think the hardest thing is being able to1619hang on to your employees during a period like that----1620    Mr. Meuser. Yes.1621    Mr. Costello [continuing]. and customers.1622    Mr. Meuser. Yes. Okay. That certainly makes sense for all1623businesses. Mr. Berlau, can you describe the describe the Trump1624Administration's/OCC's 15-day deemed-approved pathway?1625    Mr. Berlau. This is involving mergers and acquisitions. To1626tell you the truth, I am not that familiar with it, but I like1627the fact that Chairman Hood rescinded the policy of the Biden1628Administration against mergers, and I am interested in learning1629more about that. I think, generally, it is good to relax the1630red tape around mergers and acquisitions so that you can have1631regional banks be able to compete with megabanks, and for1632safety and soundness reasons, as I said.1633    Mr. Meuser. Yes. The Biden Administration removed the1634pathway, but we will move on, which kept mergers from taking1635place. Mr. Chairman, my time has expired. I yield back.1636    Chairman Barr. The gentleman from Illinois, Mr. Casten, is1637now recognized for 5 minutes.1638    Mr. Casten. Thank you, and I appreciate the chairman1639calling this hearing. I think this is the second one. I forget1640if it was this term or last, but the last time we had a hearing1641on this topic was with regulators, so I appreciate having1642practitioners on the other side of this.1643    When we had the regulators here before, one of the pieces1644that struck me as interesting was this tension between bank1645stability and antitrust enforcement, and I guess I would love1646to start with you, Ms. Allexon. When you were at the Federal1647Reserve, when you were reviewing a bank merger, was there a1648standard protocol? You have the bank stability jurisdiction.1649The Department of Justice (DOJ) has the antitrust. Was there a1650standard protocol that you guys worked together? Was it1651situation-specific? Without getting into the details, like, how1652do the two separate regulators balance that tension?1653    Ms. Allexon. On the competition factor?1654    Mr. Casten. Yes.1655    Ms. Allexon. Yes. Under Federal law, there is dual1656jurisdiction over the competition factor on bank merger1657transactions, so the Federal Reserve or the other primary1658regulator that is handling the bank-level merger transaction1659reviews the competitive implications of it, and the Department1660of Justice reviews it separately. They have slightly different1661approaches to it, but in the end, they usually come out close1662enough together.1663    Mr. Casten. I have two questions that I struggle with, and1664maybe Mr. Costello is the best for this, but if you have one,1665chime in, as well. Let us imagine that you have a town with two1666regional banks in it, two small local banks. They want to merge1667together, right?1668    Ms. Allexon. Yes.1669    Mr. Casten. Locally, that is an antitrust concern.1670    Ms. Allexon. Yes.1671    Mr. Casten. On the other hand, if that growing bank needs1672capital and says, well, if I merge with a bigger out-of-town1673bank, it is not an antitrust issue, but now, I have one fewer1674community bank, right?1675    Ms. Allexon. Yes.1676    Mr. Casten. Mr. Costello, I am not asking you asking you1677to, like, divulge your long-term plans, but if you were to1678grow, would you not have a bias to look for an out-of-town1679buyer?1680    Mr. Costello. I do not think so, necessarily. Fort1681Lauderdale, Florida, in Broward County----1682    Mr. Casten. Okay. Maybe you are in a big enough community--1683--1684    Mr. Costello. Yes, it is a pretty urban----1685    Mr. Casten. I guess then, Ms. Allexon, like, how do the1686regulators think about that tradeoff, because is that not going1687to hurt----1688    Ms. Allexon. Yes. Yes, so----1689    Mr. Casten [continuing]. like, the smaller communities and,1690therefore, the small community banks?1691    Ms. Allexon. It is. This is actually an issue that was1692debated in the original Bank Merger Act in 1960, so this issue1693was isolated a long time ago. Right now, the way that they are1694reviewed for competitive purposes is through their local1695market, so if there is a concentration there, it triggers a1696heightened scrutiny.1697    Mr. Casten. That is going to bias in favor of the out-of-1698town bank?1699    Ms. Allexon. Yes, yes. There is a bias against an out-of-1700town buyer, but it does not rule it out completely if there are1701reasons for it. If that smaller institution is having some1702trouble, or if there is, like, some really legitimate reasons1703for it, they can overcome that.1704    Mr. Casten. No, and I do not mean to be so short, but I am1705watching this clock.1706    Ms. Allexon. Yes.1707    Mr. Casten. Let me get to the bigger one. Whether it was JP1708Morgan buying First Republic, USB buying Credit Suisse, when a1709bank is about to fail and there is a bank run, we seem to1710ignore all antitrust concerns because we need to get this1711quickly into a bank that has the capitalization, has the1712sophistication to move quickly, and I am not saying that is1713wrong, right? I mean, goodness knows that all of us who have1714been through a banking crisis have appreciated that. Has there1715ever been a time in history when we have said we need the1716global systemically important bank (GSIB) to buy this, but then1717we need to have some kind of a disgorgement process on the back1718end so as not to concentrate?1719    Ms. Allexon. So, divestitures are a remedy that are often1720used in bank merger transactions.1721    Mr. Casten. As stapled to the deal, right?1722    Ms. Allexon. Yes.1723    Mr. Casten. If we are sitting there saying, we need you to1724do this right now----1725    Ms. Allexon. Yes.1726    Mr. Casten. Lehman Brothers is failing, we need you to take1727over Lehman Brothers, but we need you to disgorge yourselves of1728those assets and get down to the asset level----1729    Ms. Allexon. Right then? Off the top of my head, I cannot1730think of that situation, but in just regular merger-and-1731acquisition transactions, divestitures are a solution that are1732frequently used when there is concentrations and you are trying1733to preserve local----1734    Mr. Casten. Then you have to have, like, after the fact,1735right?1736    Ms. Allexon. You have to have a signed purchase agreement1737before the agencies will act on it.1738    Mr. Casten. Okay. I would welcome, and we are tight on1739time, you or either Mr. Berlau because it feels to me to be1740inherently anticompetitive if we are providing essentially a1741one-way arbitrage risk that the big banks are the only ones who1742can buy in a merger. Like, if we could have some protocol to1743say that when we do that, as necessary, it would be good to1744have some kind of a mandate.1745    The last thing, and I was going to ask you, Mr. Berlau, but1746maybe I will just make the statement for the record and you can1747write in if you feel differently. Having spent a long time in1748the electric industry, I would be very cautious around some of1749these shot-clock rules. We have had a lot of public utility1750commissions that have been mandated that they have to approve1751rates within a finite period, and what it ends up doing is1752giving a huge advantage to the person who can file the most1753complicated, hard-to-digest hearing, which gives a big1754incumbency advantage and hurts smaller players, unless we1755staple that to significantly expanded funding for the1756regulators to do the enforcement.1757    Chairman Barr. The gentleman's time has expired. You can1758respond for the record. For the written record, yes. Time has1759expired.1760    Chairman Barr. The gentlewoman from California, Mrs. Kim,1761is now recognized----1762    Mr. Casten. Welcome your thoughts in writing.1763    Chairman Barr [continuing]. for 5 minutes.1764    Mrs. Kim. Thank you, Chairman and Ranking Member, for1765hosting this hearing, and I want to thank all the witnesses for1766joining us today.1767    As I have said before, I am gravely concerned with the1768decline of community banks across our country and specifically1769in California. Over the last few hearings on this topic, we1770have learned that a reduction in banking services can result in1771decline in small business lending and increased costs that are1772forced upon the consumers. Unfortunately, the current banking1773regulatory climate has disincentivized mergers that would1774preserve banking services and the formation of new banks. Mr.1775Costello, I know that you have founded not one, but two banks1776over the last 20 years, so I want to ask you, what were the1777biggest differences in the regulatory regime that you1778experienced when you founded your bank, Locality Bank, in 2022?1779    Mr. Costello. First, let me say, instead of going the de1780novo route in 2022, we were trying to buy a bank because it1781would have been easier to go out and buy a bank than go through1782that whole process, but we could not, and so we decided to do1783the de novo route. The biggest issue for me was the capital1784requirement was double what it was just a few years earlier, 131785years earlier. I would also say it was interesting because the1786bank in 2009, the de novo period became 7 years at that time,1787after the great financial crisis, and then fortunately, it was1788reduced back to 3 years, which is what we just went through,1789but I also questioned, who determines that 3 years? Who1790determines 7 years?1791    Mrs. Kim. Uh-huh.1792    Mr. Costello. Where do they come up with these de novo1793periods? I think that is a thing that should be looked at, as1794well, along with capital.1795    Mrs. Kim. Yes, let me focus on that, the business plan that1796you are required to submit for a new bank formation. I1797understand that these plans are expected to endure from1798submission to 3 years of operation. Mr. Castello, through your1799experience, how often does there arise a time when a leadership1800team may need to refine a business plan?1801    Mr. Costello. I think we all know in business that nothing1802is static. Things are constantly changing. During the time1803since we operated, we went through the Silicon Valley Bank1804(SVB) failure and the deposit crisis. I think you are1805constantly having to, in any business, update your business1806plan, so I think the faster we can have regulators react to1807those changes would be a lot easier for us.1808    Mrs. Kim. How do regulators react when you inform them that1809you need to make a change?1810    Mr. Costello. I think it depends on the change, obviously.1811We did not have any real structural changes. We did not enter1812any new businesses.1813    Mrs. Kim. Uh-huh.1814    Mr. Costello. Most of our changes revolved around modifying1815our budget, and I would say that, other than for the length of1816time it took, they were responsive.1817    Mrs. Kim. Ms. Usategui, are you hesitant to change your1818business plan at BankMiami because of the concerns that we are1819discussing?1820    Ms. Usategui. We are only 2 months old, so I have not had1821to have been presented with that problem just yet, but as Keith1822mentioned, markets change, and not to say I am hesitant. I have1823a great relationship with the regulators, but how quickly they1824respond is a concern because sometimes, on a whim, we will get1825presented with a new opportunity that we want to have an answer1826to be able to act quicker, that may actually help strengthen1827the community bank. Without having a clear timeline on1828response, and, honestly, having to recreate a whole new1829business plan in some cases, depending on how big of a change1830it is, it could be, I do not want to say detrimental to the1831bank, but it could significantly impact the potential of new1832earnings and gathering more capital through that process.1833    Mrs. Kim. Thank you. As someone who founded and operated my1834own small business, changing my business plan was not a sign of1835increased risk, but a testimony to my adaptability and desire1836to succeed. It is disappointing to hear that some of the1837regulators may not see it the same way.1838    Now, I want to shift gear and highlight the importance of1839diversity in banking business models for consumers. Mrs.1840Allexon--sorry--when a consumer has access to large, midsize,1841and community banks and credit unions, how do these options1842benefit a consumer?1843    Ms. Allexon. It is just variety of choices. Each of those1844institutions offers different sets of products and services.1845Some are competitive with each other, but you can just pick and1846choose for yourself. It is not one-stop shopping, but you can1847choose between different parties for different financial needs.1848Also, I think we have to consider other nonbanking fintech1849providers or just nonbanking providers, too. All of these1850provide different financial services options that people can1851pick and choose for all of their different needs.1852    Chairman Barr. The gentlewoman's time has expired.1853    Mrs. Kim. Thank you.1854    Chairman Barr. The gentleman from Texas, Mr. Green, is now1855recognized for 5 minutes.1856    Mr. Green. Thank you, Mr. Chairman. I thank the witnesses1857for appearing, and having been a litigator for some point in my1858life, we engaged in a process known as voir dire, or voir dire,1859depending on where you are from. I am told it is a French term1860that means to speak the truth. Hence, this will become a truth-1861telling moment for you, members of the panel. If you believe1862that invidious discrimination in banking exists--meaning that1863some people get discriminated against simply because of the way1864they look, color of skin--if you believe that it exists, kindly1865extend a hand into the air?1866    [Hand raised.]1867    Mr. Green. Take a photograph of that, please, sir. Keep1868your hand up, please, ma'am. I have in my office a series of1869pictures and I have under these pictures, ask me about this1870picuture. I was interviewed yesterday, and I had to go through1871about a dozen of them to explain the pictures. Let the record1872reflect that but one person, Mrs. Young, believes that1873invidious discrimination exists in banking. I would challenge1874my colleagues across the aisle to engage in a testing process1875to get the latest empirical evidence of what Mrs. Young has1876experienced, what I have experienced.1877    As a brief vignette, some years ago, when I was a neophyte1878lawyer, went in, received a loan. Paid it back early, never1879late with a payment. Went back to get a second loan. The loan1880officer at that time denied us the loan. Four lawyers, denied1881the loan. Paid a loan back early, never late. The query was1882why, and the answer was because you should not have received1883the first loan. Invidious discrimination in banking. Can any of1884you on the panel recall or recount a time in the history of1885this country when we had sufficient number of minority banks?1886    [No response.]1887    Mr. Green. Would you get the shot, please? Let the record1888reflect that no one can recall or recount a time. Can anyone1889explain to me how this legislation that we are currently1890considering as it relates to de novo banks, how it can improve1891and help us with minority banks, banks in Black neighborhoods1892and Latino neighborhoods? Yes, it will probably help us with1893rural and others, but can you give me some rationale as to how1894it is going to help us get more Black banks, please?1895    Mr. Berlau. Congressman Green, yes, I believe I can.1896    Mr. Green. I welcome your word, sir. Just be terse and1897laconic, pithy, and concise.1898    Mr. Berlau. Thank you. Yes, I am not familiar with the1899specifics of all of Mrs. Young's application, but I think she1900was talking about some of the same things as rural banks face,1901requiring too much upfront capital----1902    Mr. Green. I understand, but if I may, please.1903    Mr. Berlau. Yes.1904    Mr. Green. If I may intercede, and you are being very kind1905to me, so I do not mean to be rude, crude, and unrefined, but1906that will not help with the problem that Black people have with1907starting banks. It really is a money problem. How does that1908help us get more people who can raise this large sum of money1909necessary to start a de novo bank?1910    Mr. Berlau. I do not know that it would solve all the1911problems.1912    Mr. Green. I am not talking about all. Let's talk about one1913in particular that we all seem to have who are of color, and1914that is money.1915    Mr. Berlau. If you need less money in front and you have1916phased-in capital, I think that would help----1917    Mr. Green. If you have what?1918    Mr. Berlau. If you have phased-in capital, like the bill1919does, rather than having to put, like, I think the gentleman1920here mentioned, like, say, $4 million, and then it was twice as1921much, the others. I think all of the sort of entrepreneurs1922outside the system who have trouble raising that kind of money,1923this would be a benefit, too.1924    Mr. Green. I have 22 seconds, and I concur with you that1925phased-in is better. I prognosticate that, with phased-in, you1926will not phase in very many banks that will be owned by African1927Americans. It looks good on paper, but when you are talking1928about millions, it does not benefit people who do not have1929millions, and this has been a problem for us since our arrival1930here. We have integrated things, but we have not integrated the1931money.1932    Chairman Barr. The gentleman's time has expired.1933    Mr. Green. I am for integrating everything, and that1934includes the money.1935    Chairman Barr. The gentleman's time has expired.1936    Mr. Green. Thank you, Mr. Chairman.1937    Chairman Barr. The gentleman from North Carolina, Mr.1938Moore, is now recognized for 5 minutes.1939    Mr. Moore. Thank you, Mr. Chairman. For decades, America's1940community banks and credit unions have served, really, as a1941critical lifeline for small businesses, for rural communities,1942and for working families, but one thing that struck me is that1943the ability to form new banks has nearly vanished. Some1944interesting statistics: from 2000 to 2009, over 1,300 new banks1945were chartered in the United States. That is an average of 1321946per year, but get this: since 2010, only 88 new banks have been1947formed. Some States have not even seen a new bank chartered in1948years, but that is not because there is less demand or anything1949like that. It is the need for community-oriented banking1950remains high.1951    What the problem is, from what I understand, is the current1952regulatory framework, that instead of promoting competition, it1953actually entrenches incumbency and discourages innovation and1954natural and organic growth. My understanding is it is now1955prohibitively difficult for new entrants to navigate the1956process, to raise sufficient capital and achieve long-term1957viability. Questions just a moment ago had to do with about1958different banks, about folks who maybe have been either1959underserved or underrepresented being able to have banks and so1960forth. What it looks like to me is that part of the regulatory1961framework that is in there actually is part of the problem that1962is reducing the incentive for new banks to form and for banks1963to grow.1964    My first question would be to Ms. Usategui, and I apologize1965if I mispronounced your name--I am sorry--but you have helped1966build new banks from the ground up. What are the most1967burdensome or outdated regulatory barriers that you faced in1968securing a charter?1969    Ms. Usategui. Thank you for the question. I still believe1970that capital is the number one challenge of de novo banks. The1971high amount of capital that is required nowadays is much larger1972than many of people can put to work. Back before the financial1973crisis, as Mr. Costello has attested, in my prior organization,1974we only had to raise about one-third that, and so I think the1975biggest barrier of entry right now is the capital component.1976    I think the second one, in terms of regulatory scrutiny,1977like, we have had a great relationship with our regulators. I1978do believe the process is burdensome. The application process1979in some ways is duplicative between both agencies. I think1980streamlining that could be very efficient in producing, I1981think, more opportunity for people to form new banks, but the1982cost, too, is significant because we do not have a set1983timeline. Usually, you need to identify a CEO, a CFO, your1984chief banking officer, along those lines, and you need to pay1985them to be part of this. So, the longer the application process1986is drawn out, the more expensive the organizational expenses1987become, which then, in turn, requires more capital to hit those1988minimal capital requirements. I think streamlining the process1989and making sure there are set deadlines of when a regulator1990needs to accept an application or at least respond to the1991acceptance of an application, could be very beneficial in new1992bank formation.1993    Mr. Moore. Let me ask you this. Do you think that a1994requirement that Federal agencies publish annual public reports1995detailing the number, the status, and the processing timelines1996of depository charter applications, holding company approvals1997and deposit insurance requests, help bring transparency to the1998current process and identify where the reforms are needed?1999    Ms. Usategui. I think it could help, but I think the2000biggest challenge is really that period of time from when an2001application is submitted to when it is accepted. There are2002timelines already in place once an application is accepted to2003once it needs to be responded to on an approval process, but2004that initial timeframe is really the biggest challenge on the2005unknown.2006    Mr. Moore. As I understand, even after a bank secures the2007approval, the regulatory environment really remains2008challenging. For the first 3 years, for example, new banks are2009subjected to heightened scrutiny. I believe they have to seek2010prior approval for any changes in senior management, subject to2011the enhanced reporting obligations, and often required to2012maintain capital levels that are significantly above regulatory2013minimums. This level of regulatory micromanagement really2014crushes innovation and makes entrepreneurship and banking an2015uphill battle. Mr. Costello, you were involved in one of the2016last banks chartered in Florida. In your experience, how do2017these post-charter rules affect your ability to grow, attract2018talent, or adapt to market demands?2019    Mr. Costello. Yes, that is a great question. I will say,2020when you become a new bank, you are subject to an exam every 62021months, and then on top of that, you have internal audits,2022external audits. We would go from one exam, and we would exit2023one exam and we would start another one. I would also like to2024echo what Mary said. The regulators we dealt with have been2025great. It is the regulations that need to be changed.2026    Chairman Barr. The gentleman's time has expired.2027    Mr. Moore. Thank you.2028    Chairman Barr. The gentleman from South Carolina, Mr.2029Timmons, is now recognized for 5 minutes.2030    Mr. Timmons. Thank you, Mr. Chairman, and thank you to each2031of the witnesses for joining us today.2032    Today's hearing is important as Congress and regulators2033consider how current rules impact mergers and acquisitions in2034the banking sector, especially for midsized banks. Complex,2035overlapping regulations make the merger and aquisition (M&A)2036process costly and time-consuming, often discouraging midsize2037banks from pursuing strategic mergers. To ensure a competitive2038and resilient banking sector, we need to reassess these2039regulations and create a more streamlined process that allows2040midsize banks to grow and better serve their communities. A2041barbell banking system, dominated by very large and very small2042banks, could reduce competition, threaten financial stability,2043and harm consumers and businesses. Last year, the U.S. Chamber2044of Commerce published a white paper titled, ``Antimerger2045Regulatory Proposals Threaten U.S. Financial Markets,'' which2046underscores the importance of bank M&A for the stability and2047growth of our financial system.2048    Ms. Allexon, given the current competitive landscape, can2049you elaborate on how bank mergers and acquisitions contribute2050to financial stability and consumer choice? Specifically, how2051might the Biden-era M&A guidelines disproportionately affect2052midsize banks, potentially leading to a barbell banking system2053dominated by large national banks and small community banks?2054    Ms. Allexon. Yes. Strategic combinations diversify banks'2055product offerings and the geographic reach of banks. This2056allows banks to provide more products and services to a wider2057array of people, and that creates a more stable and diversified2058funding base and an asset mix, and that leads to a more safe2059and sound bank. It also enables particularly midsize banks to,2060while simultaneously being able to continue to compete in the2061local market that they grew up in, be more viable competitors2062to larger institutions.2063    Mr. Timmons. Thank you for that. If midsize banks continue2064to face disproportionate regulatory hurdles in the merger2065process, what are the potential long-term consequences for2066access to credit?2067    Ms. Allexon. It stifles business growth, right, and it also2068forces more borrowers and more customers to financial products2069that are outside of the regulatory system. Like, we see the2070growth in private credit is one of those places, and while2071those are all viable financial services, we have to think, in2072the future, like, what direction is our bank regulatory system2073going? As more and more things get outside of the system and2074our banking system becomes smaller and smaller, our ability to2075make sure that it operates in a safe and sound way collectively2076decreases.2077    Mr. Timmons. Thank you for that. As we consider rolling2078back many of the overbearing regulations from the Biden2079Administration, it is crucial that we focus not just on2080identifying the issues, but also on finding practical solutions2081to address them. By doing so, we can create a regulatory2082environment that supports growth and innovation while ensuring2083that consumer protections remain intact. The OCC's 2024 merger2084guidance document is a key place to start. By eliminating the2085expedited merger approval process, the Biden Administration2086removed important efficiencies that were already built into the2087system. I could easily spend my entire 5 minutes outlining the2088numerous provisions in this guidance that slow down the merger2089process and place unnecessary burdens on institutions seeking2090to grow or consolidate responsibly, but I want to ask you, Mr.2091Costello, regarding the OCC specifically, which other2092rulemakings do you believe are most negatively impacting the2093bank merger process, and what practical solutions would you2094recommend to help this space thrive?2095    Mr. Costello. I would defer to Ms. Allexon on that2096question, really. I do not have a lot of experience with the2097OCC and mergers.2098    Mr. Timmons. Sure. Great. Thanks.2099    Ms. Allexon. I can answer that. There are a couple2100different things, and it is true across the different banking2101agencies. They need to think a little bit harder about their2102internal processes and the types of information that they get2103on applications and how it is considered and their decision2104making chain throughout their organization. There is some2105really easy things that they could do to streamline that. Like,2106the shot-clock legislation is a good step in that direction,2107but internally, they could create more expedited processes,2108dedicated applications, calendars, and change their delegation2109criteria to speed up processing.2110    Mr. Timmons. Thank you for that. Finally, I am glad to see2111Chairman Barr's bill, the Financial Institution Regulatory2112Tailoring Enhancement Act, included in today's hearing. This2113bill rightly acknowledges that a one-size-fits-all regulatory2114approach does not work for our diverse financial system. By2115raising the asset threshold from $10 billion to $50 billion, it2116ensures that smaller and regional financial institutions are2117not burdened with the same complex regulations designed for the2118largest systemically important institutions. This targeted2119relief will allow community banks and credit unions to focus on2120what they do best serving families, small businesses and local2121economies, while still maintaining strong oversight where it is2122truly needed. With that, thank you, Mr. Chairman. I yield back.2123    Chairman Barr. The gentleman yields The gentleman from2124Wisconsin, Mr. Fitzgerald is now recognized for 5 minutes?2125    Mr. Fitzgerald. Thank you, Chair. Ms. Allexon, as2126consolidated trends continue in the banking sector, we should2127be supporting mergers that enable regional banks to grow and2128better serve their communities in the face of regulatory and2129market pressures. As Congress considers reforms, can you2130explain how bank mergers, especially those involving kind of2131the midsize regional banks, help promote a healthier, more2132competitive banking system?2133    Ms. Allexon. Sure. Sure. There are a number of reasons why2134midsize banks enter into combinations, but those strategic2135mergers can create economies of scale that offset regulatory2136and compliance costs, and this creates space for more2137innovation and investment in systems and technologies that we2138all know are essential moving forward. As I just noted before,2139it also diversifies their product offerings and their2140geographic markets, and that creates a more stable, diversified2141funding base and asset mix that just creates a more stable,2142strong financial institution. That in turn allows them to be2143more competitive against large banks with national footprints,2144but it also simultaneously allows them to stay competitive2145within the local geography that they grew up in.2146    Mr. Fitzgerald. In your role, as you advise financial2147institutions, do you think it is time we modernize how2148competition is evaluated in the bank mergers to reflect a2149broader range of financial service providers in the market, so2150decisions are based on real-world dynamics?2151    Ms. Allexon. Yes, I believe that there is a general2152consensus that the current analysis used to review the2153competitive factors should be modernized. I talked about this a2154little bit in my written testimony, but we have clearly2155transitioned away from a very competitively isolated banking2156market into something that is totally different, and the2157historic approach that the agencies used, including the2158Department of Justice, to evaluate mergers is completely2159dependent on market deposits. We need to look at a wider array2160of competitors, nonbank competitors and online deposits in2161order to get a true, accurate picture of what the competitive2162market looks like.2163    Mr. Fitzgerald. Chairman, this is the point in the hearing2164where I promote my own piece of legislation, and that is why I2165plan to introduce the Bank Competition Modernization Act, which2166would categorize credit unions, fintechs, farm credit companies2167for the purposes of concentration analysis and bank mergers.2168The Bank Competition Modernization Act brings much-needed2169reform to how bank mergers are reviewed by making sure2170regulators consider the full scope of today's competitive2171financial landscape. Right now, community and regional banks2172are being evaluated as if they are the only complete piece in2173these regions, ignoring the massive growth of credit unions,2174fintech, and farm credit institutions that offer similar2175products. The bill ensures that all major players are accounted2176for in merger reviews, creating a fairer, more accurate2177process. By modernizing these outdated standards, we can reduce2178unnecessary regulatory roadblocks and support local banks and2179promote financial systems.2180    I will just ask a final question of Ms. Allexon. Can you2181discuss some of the implications of the OCC and the FDIC's 20242182guidance and what effect would it have had on bank merger2183application reviews if it had not been for Trump's2184administrators, the rescissions that now are happening?2185    Ms. Allexon. So, those policy statements created a chilling2186effect on bank mergers. It is not the only factor that led to a2187decrease in bank consolidation over the last number of years.2188There has been economic factors that have supported that as2189well, but having inconsistency in policies with respect to bank2190mergers only created more insecurity with whether or not to2191proceed with the transaction. They are costly. They hey are2192time consuming. If you are not going to get favorable2193treatment, then it is nerve wracking for institutions to2194proceed.2195    I think the other thing that those policy statements did is2196they kind of created a presumption that parties were starting2197from a negative position. If you are filing an application, and2198everybody is starting from a neutral position, and you have to2199justify your factors, that is how the system has always worked.2200If you are starting from behind, if there is an assumption that2201the transaction is bad to begin with, it is just the further2202you have to travel. It is very difficult to draft guidance.2203Every word means something. It is like legislation, every word2204means something, and so I think just guidance has to be very2205careful that you are not inadvertently creating presumptions2206like that?2207    Mr. Fitzgerald. Thank you very much. I yield back.2208    Chairman Barr. The gentleman yields. First, I would like to2209thank all of our witnesses for your testimony today and taking2210time to come and be before the committee.2211    Without objection, all members will have 5 legislative days2212to submit additional written questions for the witnesses to the2213chair. The questions will be forwarded to the witnesses for2214their response, and, witnesses, please respond no later than2215June 20, 2025.22162217    [The information referred to can be found in the appendix.]22182219    Chairman Barr. With that, this hearing is adjourned.22202221    [Whereupon, at 4:17 p.m., the subcommittee was adjourned.]22222223                               APPENDIX22242225                              ----------22262227                   MATERIALS SUBMITTED FOR THE RECORD2228[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]22292230                                 [all]