Announcer: Please welcome President and CEO
of the Ohio Bankers League, Mike Addelman.
(cheerful music)
-: I am honored to be here today to introduce
our next speaker, my fellow Ohio native,
Senator Sherrod Brown.
Now in his third term, Senator Brown is the chair
of the Senate Banking, Housing and Urban Affairs Committee,
and a key voice on banking issues on Capitol Hill.
For a little insight on Senator Brown, he frequently reaches
out to Ohio bankers to get the local pulse.
We weren't surprised that during the vetting
of the CARES Act, he personally called
numerous OBL bankers to understand critical nuances
so that policymaking dialed in on meaningful solutions
to protect the most vulnerable.
Again, as news broke on a potential banking crisis
11 days ago, Senator Brown was working the phones
to get a frontline perspective of what this meant
in urban centers and small county seats alike.
Additionally, we are grateful
that Senator Brown empowers his staff.
They are highly attentive, hardworking, and accessible.
Of all the advocates in the ballroom today,
you all understand you win with people,
and great staff on the hill are crucial.
Senator Brown will deliver some opening remarks,
and then Rob Nichols will join
him on stage for a conversation.
Please join me in welcoming Senator Brown.
(cheerful music)
-: Mike, thank you, good to see Mike again,
and appreciate the input from bankers in my state,
of banks of all size,
and especially Mike and the work he does.
Thank you everyone from ABA for being here,
especially thank bankers from Ohio,
and thank the hotel waitstaff,
who doesn't get the recognition for the hard work they do.
I want to start with a story.
This is a true story, it happened not that long ago.
I was going to a new dentist, and true story, and I walk in,
and this was five miles from my house,
maybe in Cleveland where I live,
and she says, what's your name, and I said, Sherrod Brown.
And she said, spell it.
And I said, S-H-E-R-R-O-D Brown.
And she said, where do you live, I gave her my address.
and then she said where do you work?
And I said the federal government.
And she said what do you do,
And I said, I'm your United States Senator.
And she stopped and she looked up
and she said is that full-time?
(audience laughs) So this was, so,
I tell that story partly 'cause it's really happened.
It's funny, but more than that, it tells you about,
in many ways, about the fragility of democracy.
That 40, I mean, you are activists,
you are here, you come to Washington to do this.
You are, particularly the community bankers here.
You are engaged, I mean, all bankers.
You are engaged in your community,
whether it's a chamber of commerce,
whether it's a social service group,
you're out and about and you are very much
part of your community, you're voters, you're all that.
But 40% of the people in this country
don't even bother voting in presidential years.
So we all have work to do to protect this democracy,
especially in the year 2023.
And that really was the point of the story.
This is the first time we've been back in person in a while.
We've talked many times.
The Ohio banks here today know how regularly,
they come in regularly, we talk,
I meet with maybe 100, 150 of them.
I meet regularly at the credit unions
as chair of the banking committee.
And we also, I spend time
in their communities with these banks.
My priority has always been the same,
creating an economy where hard work pays off.
My job is to focus on what matters
to the people who make this country work.
We want to build a strong economy
with a growing middle class.
You and I share that, that all workers in all communities
and regions of the country have an opportunity to join.
We want to give people the power to grow their paychecks
and grow their savings, to build wealth they can
pass on to their children and grandchildren.
We want to make sure that hard work pays off from everyone,
no matter who you are, where you live,
what kind of work you do.
I look forward to working with Senator Scott.
I think he's coming later today, I'm not sure,
but he's the ranking member Republican from South Carolina,
and the rest of my colleagues, to address the most
pressing issues the country is facing.
When I took over this committee as chair
in February of 2021, this committee was just referred
to as the banking committee, or senate banking.
It was really a Wall Street committee far too much.
It didn't pay attention to community banks.
It didn't pay attention to the mid-size regionals
the way it should, like the three in my state,
Huntington, Fifth Third and Key,
because it had been about Wall Street.
I began to call the committee its full name,
Banking, Housing, and Urban Affairs.
We knew that there was not enough emphasis
on housing coming out of that committee,
coming out of our government,
and in communities we know the importance of housing.
It's probably the most important issue faced,
certainly the most expensive investment
for so many families in this country.
Housing determines so much about your life,
how long it takes to get to work,
whether you have access to fresh fruits and vegetables,
or whether you have access to a local bank,
whether you worry about your kids
getting sick from lead, paint or mold.
It determines your access
and your kids' access to opportunity.
And for too many people, safe, affordable housing
and the opportunities it provides is,
in 2023 America, just too hard to find.
We need nearly four million,
four million more homes to keep up with demand.
In my state of 12 million people,
we are short some 50,000 homes.
And because there aren't enough homes,
renters and homeowners are stuck paying more every month.
They're living with peeling lead paint or leaks,
if they can find a home at all.
It's not just a problem in big cities
or rural areas or suburbia.
It's not a Democrat problem or Republican problem.
It hits every community, rural, urban,
suburban, tribal communities in every state in the country.
It will take all of us, Tim, Scott, and I,
and others working together to solve it.
The committee's working to find common ground.
I'm hopeful about that.
One area where I think many of us can come together
on a lot of issues is the idea that everyone
ought to play by the same rules.
Banks, crypto, fintechs, ILCs, all these new entities.
In December, I introduced the close the shadow banking
loophole with Senators Casey from Pennsylvania
and Van Holland of Maryland.
Many of you know how traditional banks,
with their regulatory safeguards, are at a competitive
disadvantage with industrial loan companies
that try to operate like banks.
We need to close the ILC loophole.
Letting big tech and commercial companies operate banks
without oversight will only lead to more
predatory lending, more invasions of privacy,
more financial instability.
I've been concerned that when banks
get involved with crypto, it potentially spreads
across the financial system.
We know who ends up paying the price for that risk.
It's taxpayers, it's consumers, it's workers.
We're all watching the ongoing effects of FTX's collapse
and seeing what can happen when a bank relies too much
on a risky, volatile sector like cryptocurrencies.
We need to establish strong safeguards
for our financial system from the risk of crypto
and level the playing field overall,
we must consider how to protect consumers
from unregulated digital assets and ultimately
whom we want our financial system to serve,
all Americans, not just those at the very top.
As we consider a regulatory framework
for digital assets that puts consumers first
and keeps it keeps our financial system safe,
we can start with common sense principles
like clear disclosures and transparency,
internal governance and risk management,
oversight and supervision.
We know why crypto and fintechs are appealing to people.
And it's something we should think about and address.
Millions of Americans are underbanked or unbanked.
People are fed up with fees on everything,
overdraft fees, low balance fees, transfer fees.
They not only drain bank accounts,
they also push consumers in too many cases
out of the banking system
and into the arms of shady lenders all too willing
to overcharge them for similar services,
whether it's a check casher in a strip mall
or a new fintech app.
That's why it's disappointing banks are attempting to take
away one of the consumer's best allies, best resources
to get their money back when they fall victim
to financial scams and unfair fees.
The Consumer Financial Protection Bureau has returned
more than $16 billion directly to consumers.
Maybe that's the problem here.
Banks and other financial institutions
want to keep that money, and if the Supreme Court rules
that CFP'S funding structure is unconstitutional,
it's unclear what happens to the money
that CFP has returned to consumers,
will banks ask their customers for that money back.
And not to mention if the court decides that way,
what that potentially can do to the Federal Reserve
and other entities that serve this country.
There's the impact on the economy.
We just witnessed how one economic wrench can quickly
escalate and potentially destabilize the community.
The CFPB has written many rules, including important
mortgage rules that the industry
relies on to set the rules of the road.
The last thing we need to do right now is more instability,
to sow more misgivings about traditional banks
and about the banking system.
Too often, traditional banks don't
seem interested in many potential customers.
Every year we see bank branch closures
in middle class and working class communities
in my state and across the country.
Banks serve, as you know, an unique role
in the functioning of our financial system and economy.
You must serve the needs of all members of your community.
You know that, you need to serve
all communities across the country.
I've urged the OCC to hold public meetings in response
to community requests to evaluate
the closure of a bank in a LMI community.
I expect bank regulators to strengthen
the bank merger process and ensure that banks are meeting
all requirements before a branch is permitted to close.
Ultimately, so much of this comes back to trust as you know.
Americans were reminded over the past
week or two how the stability
of our whole banking system is built on trust,
and when I talked to the community banks in Ohio,
talked to dozens of them over the last couple weeks,
when I talked to the three major regional banks in Ohio,
I hear that term over and over.
Here's the part I'm guessing most
of you were interested in hearing
or maybe the part you were most dreading.
Of course, we need to talk for a moment
about the Silicon Valley Bank.
When it failed, I talked to so many small businesses in Ohio
that were worried about making payroll come Monday
because their money was stuck at SVB.
I was intrigued and a bit surprised, talking to Mitt Romney
in Utah, talking to businesses in my state,
how many of them, I mean, not in hundreds,
but a couple dozen were banking with SVB,
and were concerned about making their payroll.
A woman named Lindsey Mikolites had a startup business owner
in tears about talking to me over that weekend,
I believe Sunday, about her, would she be able to make
payroll and what the future of her business
and the future and her employees would be.
She trusted her bank with her hard-earned money.
In return, we expect those banks to put those dollars
to use as something productive, financing home ownership,
funding small businesses, investing in American talent.
We need that trust in our financial system more than ever.
But crisis after crisis over and over
makes it pretty hard to believe that.
Does decades of watching our financial system
reward executives at the direct
expense of everyone else, does that build trust?
Does suing the only federal agency dedicated
to protecting consumers, does that build trust?
Does Wall Street funneling much of its capital
to wealthy executives in the form of stock buybacks,
does that build trust?
Does lobbying to weaken rules meant to protect the public,
does that build trust?
When I first heard about, this will surprise you a bit,
I think, when I first heard about SVB's collapse,
we knew about it, obviously, what began to happen
on that Thursday, my mind immediately
went to something else, and immediately went
to another crisis in my state, that's the derailing,
the train derailment in East Palestine, Ohio,
you know these trains now, this was 150 car train.
These trains sometimes only have
one or two at the most engineers.
And we know what happened in that community
where life will not in the next five years
be the same for those people.
But the SVB collapse and the East Palestine
Norfolk Southern derailing had one thing in common,
corporate lobbyists pushing for weaker
rules and less oversight.
Companies cut costs, fail to invest in safety,
perhaps in the case of SVB, were too incompetent
to realize that they should care about safety,
and working people always pay the price.
That's why I talk so much in my state
and elsewhere about the dignity of work.
The banks and the railroads perhaps
are the two most powerful, go back 150 years.
I've written books about history.
I'm very interested in history of this country,
and particularly of our self-government.
Go back 100, 150 years.
The two most powerful entities in this country
were the banks and the railroads and they were for decades,
the railroads blocked any effort
to increase safety standards.
They resisted any attempt to stop their cost cutting.
Norfolk Southern dutifully followed
the Wall Street business model, lay people off,
a third of the workforce was laid off.
Stock prices go up.
And executives spent 3.4 billion on stock buybacks.
Then they were about to spend another four or 5 billion
when the accident happened.
Instead of investing in workers, investing in safety,
where do they cut costs, where do they cut corners?
They cut it in safety.
The new Republican senator in my state, JD Vance,
and I have teamed up on a bipartisan bill
to finally pass real safety standards.
The railroads are resisting it.
At the hearing with the Norfolk Southern CEO two weeks ago,
he tried to skate around the issue.
He said his company, quote, is committed to the legislative
intent to make the rails safer.
That's impressive PR obfuscation.
They claim they like the idea, so why put them into law?
Just trust us, trust us,
trust the railroads to do it on their own.
Even though they've had 150 years
of not really doing it on their own.
Don't saddle us with regulatory burden,
they say we can police ourselves.
That didn't work for Norfolk Southern.
It didn't work for the Silicon Valley Bank.
SVB spent hundreds of thousands of dollars
pushing for exemptions for banks like theirs.
The CEO came to Washington, said they shouldn't be subject
to, quote, strong guardrails because of, quote,
low risk profile of our activities and business model.
Low risk profile, his words, not mine.
We know how that turned out.
I know many of you think that critique is unfair.
Most of you get unfairly targeted because the big banks,
or in this case the most incompetent banks, screw up.
The more we learn about SVB,
the worse the management of this bank looks.
Most of you want to do, almost all of you want
to do the right thing by your customers and communities.
Most of you are good managers.
I know the banks in Ohio are major
positive players in our communities.
This past week, I spoke to many of them.
I spoke to banks and credit unions, big and small,
who understand how important it is to have
confidence in our banking system.
Virtually everyone I talk to understands
how quick actions by regulators were crucial
to restore any semblance of trust.
It's gonna take a lot more than that.
High standards build trust.
No industry, whether it's banks or railroads,
has ever shown that they can hold
themselves to those standards entirely
on their own without strong rules.
That's the nature of our system, the nature of our country,
the nature of doing business.
Beginning next week, our hearing, let's see,
our committee will hold hearings
on Tuesday and conduct oversight.
We'll hear from regulators.
We hope the executives of those two banks will show up.
Not clear yet.
We'll hold them accountable.
We'll examine deposit insurance coverage issues.
We'll look at the role of social media.
We'll consider legislation to strengthen guardrails.
And I'll continue pressing regulators
to do a full review of those two bank failures
and what is happening across the country.
I hope the bank industry won't be an obstacle.
We ought to share the same goal,
to make sure this doesn't happen again.
It's nobody's interest for more banks to fail.
If you see bad actors, you should speak up,
push them to do better.
And we should all be able to come together
to look at ways to strengthen trust
in our banking system and in our larger economy.
Americans are never going to have faith in our economy
as long as we have a system where Americans
feel pretty legitimately that whenever
a big company screws up working people pay the price.
I'll keep fighting for Main Street over Wall Street,
for families over corporate profits
because when you love this country,
you fight for the people who make it work.
Thank you and I think we will be doing questions.
Thank you so much. (audience applauds)
You're there, I'm here. -: Yes. Thank you Mr. Chairman.
We appreciate you being here.
A lot to unpack there.
Not every part of your thesis I adhere to.
That said, we're incredibly, incredibly grateful
for you to take time today.
I'd like to start with current events,
and I like how you ended your remarks about how
you're gonna approach this hearings.
And so let's go, let's just dive
right into the current events.
Obviously there's been massive and appropriate attention
on the failures of these two banks.
And you and the other chair Patrick McKinney
are gonna jump into some hearings.
How are you gonna balance the needs of trying to make sure
we get all the right answers, taking time to understand
the failures from what happened versus the instinct
understandably to act, you know, as quickly as you can.
How are you gonna balance that?
-: Yeah, I've had conversation with a number
of the regulators, Rob, well,
starting on that Friday, Saturday, Sunday,
like Patrick McKenna, we were on the phone
a lot during those times, and talking to large banks,
small banks, executives, regulators.
I know we're bringing in Michael Barr, from the Fed,
we're bringing in, I'm just forgetting her name, Nelly Lang.
from Treasury and her bringing
in Mr. Gruberg from, from FDIC.
I'm hopeful that we see some agreement coming out of there,
in terms of what we do with the FDIC.
I've had a number of conversations both with Rob
and a number of other bank executives
about where we might come to some common ground.
We don't rule out doing some things legislatively.
We know that the banks, that the regulators,
especially Michael Barr, are looking at what do you do with,
what do you do with stress tests?
What do you do with liquidity?
What do you do with capital standards?
I think that's where most of the action will be.
But my job is to do oversight and not to rush this,
but not to delay it either.
I know that sometimes when, I mean,
I know what the railroads, not to bring it back to that,
I know what the railroads want to do.
They want to delay investigating what happens,
hoping the public will lose interest,
and then not much will happen.
I don't expect that to happen with banking.
I trust the way that you and the ABA are doing things,
but we're not gonna slow walk,
but we're not gonna rush into it either.
-: Gotcha, it seems to me, I don't want
to put words in your mouth, so I'll ask you that,
the actions that the regulators took,
that chair Gruenberg took, director Gruenberg,
the treasury secretary, together that those have brought
some stability to the banking marketplace.
Is that, do you agree with that?
-: Yeah, I think it did, I think they, I mean, I remember,
well, that weekend they, they had an announcement
planned for five o'clock.
The last time I talked to chair Powell,
I believe was that Sunday morning on that day,
and they were planning five o'clock,
they pushed it back to six.
They were looking at a private bank and still are,
as we've seen, and I think they handled it well.
They knew that, that by the opening of business
in the Asian markets on Monday morning,
we had to have at least a temporary solution,
and I think, and there were a lot of, you know,
there were a lot of outside forces working on them,
but I think they mostly did it right.
-: We've also been, we spent a lot of yesterday,
Mr. Chairman, talking about the overall sector,
that it's safe, sound, resilient,
and that the actions of these, you know, these two banks
are not representative of the entire US banking sector.
And that's the case of the banks in Ohio too, I take it.
-: Yeah, I mean, I keep coming back to the three regionals,
and Gorman and Spence and Steiner, all three,
I don't know Spence quite as well, he's newer,
but all three have been responsible citizens.
Those are good banks.
I don't mean to advertise for those three.
-: They are good banks. -: They are good banks.
And I don't have any, the banking system is safe.
The more we know about Silicon Valley Bank,
that they were mismanaged, they didn't even have
a chief risk officer for almost a year.
Their narrowness of, you know,
they were all about Silicon Valley.
I don't know a bank that's that narrow in its customer base.
I also don't know a bank that has 93,
4% of their deposits uninsured.
When I asked the three regionals in Ohio, they have about
50 to 60% of their deposits insured.
I don't know if that's the ideal number, it works for them.
But 7% or 8% insured is surely not the right number.
-: No, that's important.
We definitely talked yesterday about
the risk management failures there for sure.
You said something in your prepared remarks
that I wanted to follow up on, 'cause I think it's a really
important subject, and that's the role of social media.
This is the first time we've had a bank run
in the United States where social media was a contributor
or potentially an accelerator of it, you know how,
and you mentioned that'll be part of the review.
Can you expand on that?
-: Yeah, I don't think we know what to do with that.
We did a little historical look and I don't know
if this is precise, but the panic of 1857
came not long after the invention of the telegraph,
and perhaps that contributed to that panic.
There's no question that, I mean, I guess in the year 2023,
social media's gonna continue to play a big role.
It certainly played a big role at this bank,
and those were all people that, you know, some of them had
invented some of the social media components.
So that's something we're gonna have to deal with.
I don't think we know yet what makes
the most sense in dealing with social media,
but the thing that makes the most sense
is that we have a safe banking system, which we do,
that we have stability, that we have capital standards,
and we have liquidity and stress tests,
that even with the accelerating speed
of social media will protect us,
protect the banking system from any of that.
If they had been broader in their customer base
and maybe their investor base,
if they had been a bank that had insured
more of their deposits, even with the speed of social media,
it really wouldn't have caused this.
So you've gotta have the other components in place.
Negative components, if you will,
and that bank wasn't well run.
And it's important that regulators be more aggressive,
and one of the things that we talked
about on the phone last, I guess last week
is the role the ABA can play.
And I think, I mean you don't have any legal obligation
or charge, if you will, to talk to those banks,
to move the bank, your member banks
that are maybe being less responsible
than most of your banks.
But the association might be able to play some role
in counseling those banks and warning those banks,
and peer pressure and all that.
I'd like you to at least think about that.
But in the end, my biggest message is please don't use
this crisis to come and lobby Congress for weaker standards.
That's typical behavior from associations.
It's not just you, it's the railroads, it's broadly that.
But I don't think it serves stability
in the banking sector's purpose to come
and lobby us for weaker standards.
I think we continue to pay the price when that happens.
I would hope we'd be more cooperative than that,
and less confrontational that way.
'Cause that's what I want too.
-: I Think that's what we want as well.
I think we may have different interpretations
of what various rules do in terms of safety
and soundness and consumer protection, but I think
the end goal is one we agree.
We're running outta time.
One last question on SVB, and then I want
to talk about safe banking.
Do you think these hearings, and I'm gonna ask Chair McHenry
in an hour of the same question, can it remain bipartisan?
-: Mostly, yes.
I think we can find some bipartisan solutions
perhaps around FDIC changes.
However, there were five or six, as we've talked,
five or six different routes there to go.
There will, I know that Republicans will mostly
blame the regulators for all problems
when they're not talking about woke capitalism.
I don't think that will be helpful from my view.
But I think there are ways we can,
and Scott and I have a good relationship as Toomi
and I did, and I'm hopeful we can get there.
-: Good, all right, running outta time.
But this is an important subject.
I grew up in Seattle, the first state
to legalize marijuana, Washington state.
So been grappling with this issue.
You know, the SAFE Act has passed the House
multiple times by big bipartisan margins.
We have not had the same degree of traction in the Senate.
We think this is important.
Roughly 80% of the United States is legalized.
What's your plan, your prognosis, how you plan
to bring it up and where you think that goes?
-: Yeah, prognosis is positive.
I'm hopeful, hopeful we can do it relatively soon.
We were about to move on it.
I've work with Leader Schumer.
I'm not as clear where Leader McConnell wants to go.
I think the White House wants this fixed.
And I think most members of the Senate do.
The problem right now is this is way more important,
dealing with the financial crisis.
So we were about, we were very close to moving on something.
I know one of your previous speakers
is one of the leaders on this.
There's good bipartisan support on this,
especially depending on what states members are from.
But I'm very hopeful on this.
It's something we need to do and we need to do it this year.
-: We'll leave it there, Mr. Chairman, you have a busy day.
We appreciate your time.
Ladies and gentlemen, please join me in thanking
Chairman Brown. (audience applauds)
-: Thank you all.