Announcer: Please welcome President and CEO
of the South Carolina Bankers Association, Fred Green.
(upbeat music)
-: Good morning.
I am very honored to introduce
my senator, my friend, Tim Scott.
I've known the senator since he first ran for U.S. Congress,
but in thinking about the introduction this morning,
I was looking for some background information, dates,
positions, et cetera, from his website.
Now, most bios have a chronological
listing of accomplishments,
but that was not in the case of Senator Scott.
It was different.
It was not about what he's done, but about who he is.
So, I just wanna paraphrase some of it.
Growing up in a poor single parent household
in North Charleston, South Carolina,
a young Tim Scott grew accustomed to moving
every few years as well as the long hours
his mom worked to keep a roof over their head.
He wasn't the best student, but he had a mom
who stuck with him and met a mentor that showed him
the wisdom of conservative principals.
Through their belief and his own determination,
Tim got back on track,
graduated from Charleston Southern University,
and eventually built a successful insurance agency.
At a very young age, Tim developed the mission statement
to positively affect the lives of a billion people.
A billion people.
How do you do that?
That led him to public service where
he was elected to Charleston County Council,
the South Carolina House of Representatives,
the United States House of Representatives,
and the United States Senate.
Recently, I was invited to join the senator at the closing
bell ceremony of the New York Stock Exchange.
We arrived early, went on a tour and bumped into a group,
also on a tour, of overachieving,
underprivileged high school students
from an economically depressed area of New York.
I watched as Senator Scott went over and introduced himself.
He asked each one what they aspired to do.
He offered them advice when they asked,
and it was a great time for me to watch.
After, as we got closer to the four o'clock hour,
the folks from the stock exchange came over,
interrupted his dialogue, and told the senator
it was time for he and his guest to go down to the floor.
He turned around, we all started walking to the floor,
he turned around to that group of high school kids
and invited them to also join him.
So, how does anyone affect the lives of a billion people?
It's exactly what I saw Tim Scott do.
Some of those young folks will probably now aspire
to ring the bell themselves one day, and some will.
Please welcome from the great state of South Carolina,
the ranking member of Senate Banking,
my friend, my senator, Tim Scott.
Joining us also will be Rob Nichols,
President and CEO of the ABA.
Senator.
(upbeat music)
Tim: Morning.
Morning.
Rob: Good morning, Senator, how are you?
Tim: Doing great, how are you doing?
Rob: Doing great.
Thank you so much for being here.
I know it's an incredibly busy time in Washington.
And so, we deeply appreciate you taking time
to visit with us here at the Washington Summit.
So, before we get into kind of current events
and your agenda for the committee,
since you're the newest leader, you know,
of the House Financial Services Senate Banking Committee,
top roles, I thought let's talk first a little bit
about you so the folks that wanna work so closely with you
get a sense of what Senator Scott's all about.
So, if you could tell our group a little bit
about your background and growing up,
and then, ultimately, what led you
to Washington and running for Congress.
-: Absolutely.
Good morning to everyone.
I would say, for me, being raised in a single parent
household, mired in poverty, was a challenging situation.
My parents got divorced when I was seven years old.
And, from that point until I was a freshman in high school,
I didn't see any reasons to be hopeful, to be optimistic.
I was more angry, disillusioned, and challenged.
And my freshman year, as Fred talked about,
my grades reflected that person and, unfortunately,
it reflected positively on that person,
which means they were negative grades.
And so, my freshman year, I failed four subjects.
I failed world geography, I failed civics,
which of course is a study of politics,
tells you God has a sense of humor.
-: Just don't say math.
-: Yes, yes, yes.
Well, I didn't fail math.
I did really well in math,
but I did fail English and Spanish.
So, when you fail Spanish and English,
no one calls you bilingual.
(group laughing)
They all call you bi-ignorant
because you can't speak in any language.
And that's where I found my unhappy self.
The good news was I had a mother who believed
that prayer was the key and faith unlocked the door.
And so, she kind of prayed for me all the time
and she always told me that, baby,
if you just shoot for the moon,
even if you miss, you'll be among the stars.
And she was the most encouraging, positive, and still is,
the most encouraging positive person in my life.
And I met a mentor who was a Chick-fil-A operator
who started teaching me that anyone from anywhere
at any time could think their way out of poverty.
Not to suggest that those who are in poverty
aren't thinking, but to suggest that the kid that just
almost failed out of high school wasn't using his brain.
And the combination of those two really helped a lot.
And the lessons that John taught me was more
about becoming a small business owner.
He said having a job is a good thing,
but creating jobs is a better thing.
One day you'll wanna know the difference
between an income and a profit.
And, when you do, the profit will
allow you to change your community.
And so, his words echoed for the rest of my life.
I met him at 15, by the time I was 19 years old,
unfortunately, he had passed away.
He died at 38 years young.
-: Oh my.
-: And his mission statement was to positively
impact the lives of a million people.
I took his mission statement at 19 and decided that
I would live much of the rest of my life
in pursuit of making both of our dreams come true
and changed the mission statement to positively
impacting the lives of a billion people
with a message of hope and opportunity,
hoping with my faith and the good Lord
opportunity was the lessons of financial
literacy taught to me by John Moniz.
That combination led me into public service
then from the local level to the state level
to Congress and to the U.S. Senate,
frankly, focusing on banking and finance
because, ultimately, I saw that it as a real opportunity,
or vehicle, to change lives permanently.
And so, I think about that hope
is the reason why I'm in public service.
And, in the banking community,
hope means H is for home ownership.
If you're looking for equity in America,
no one can give it to you, you have to earn it.
And home ownership is one of the ways to do that.
Opportunity is one of the ways that
we should focus on financial literacy
and expanding the footprint that more people in a country
as amazing as ours have access to real opportunity.
The P is for profit.
Having a healthy, strong market driven by equity
so that you have a stake in the game yourself.
And then, the E is for entrepreneurship.
Entrepreneurship took me from being a really poor kid
to being able to buy my mom a house.
And I want people to have that experience.
And I think the banking and finance communities
are the two ways that I can serve the country.
-: So, thank you, Senator, for that background.
That's fantastic.
So, we'll segue now to the Senate Banking Committee.
You're the ranking member, incredibly important role,
and you've partially answered this,
but I'll put it forward just a little bit.
So, in terms of the priorities that you see on the committee
and how they've been influenced from your upbringing
and then the opportunity economy,
I know you talk about that quite a bit.
I've heard you speak about that, but I'm guessing that,
of the thousand or so bankers here,
they may not have heard about it.
So, let's talk about kind of your agenda for the committee.
And then, also, the opportunity economy.
-: Yes, I guess I'd break my agenda
for the committee down into two areas.
Number one is oversight.
I think our regulators and our three letter,
and frankly, four letter agencies have
sometimes lost their minds, from my perspective.
The SEC, the CFPB, we need a lot of oversight
over these agencies, number one.
Number two, on the second side,
it is really about creating access to opportunities.
And so, whether that's financial inclusion,
financial literacy, whether that's looking at the way
that we score credit is a big, big part of our agenda.
And then, frankly, there are only three ways to create
wealth in America and we try to tackle those.
Real estate equity, position in the marketplace,
and business ownership.
So, if you look at those three things,
you'll see that my agenda is focused on those areas.
-: Gotcha, that's great.
Talk a little bit about, and I asked Chairman Brown
this question not too long ago,
about his relationship with you,
and he said quite positive things.
You're brand new to the position as ranking member,
but how's your relationship with Chairman Brown
and might there be opportunities for bipartisanship?
-: What did you say he said again?
-: He said nice things about you.
-: Okay.
Can y'all roll that video real quick?
(group laughing)
I wanna hear it with my own ears.
-: There are cameras in the room,
Senator, so it was picked up.
-: I'm just joking.
Yeah, Brown and I, we have a good relationship.
We are probably, ideologically,
as opposite on many issues as you would imagine,
but we do see very similar problems to be solved.
We just see different solutions on how to solve them.
I think we both have serious concerns
about access to credit, access to capital.
I think we both want to have a serious conversation
about the banking committee and its footprint,
including housing and urban development
and how we look at that.
We have serious conversations around transit
and getting people to and from work and to their families.
The question really is, is the government
the best vehicle to deliver on that promise
that we both feel like should be delivered on?
My answer is, not really.
The answer, I believe,
is the private sector does a much better job.
And so, my theory is you don't punish the private sector,
that you have to reward them,
and you have to have carrots and sticks.
But, frankly, most people, most of the time,
want to do the right thing.
And if we understand that, then we should
set the rules of the road in the freest,
fairest land on God's green earth in such a way
that encourages participation and it doesn't,
literally, push people out of the marketplace.
-: And how about a quick follow up on that?
And I understand that philosophy
and I think it's quite sound.
On the opportunities for bipartisanship
within the committee, and I'll get
to the current events here in just a minute,
so putting aside current events,
there's some other issues the committee's been tackling.
So, I'll see if there's one here.
The Safe Banking Act, for example,
which now, roughly, 40 states,
roughly, out of 50, have legalized.
In the House, it's passed a number of times,
been very, very bipartisan.
I asked Chairman Brown the same question.
Is there a chance that might be bipartisan
in the committee and might it move?
And I know you haven't taken a position on it quite yet.
But now, as the ranking member,
it's something that will probably be posed to you.
So, wondering how you're thinking about it.
-: Yes, from my perspective, one of the areas
of agreement between myself and Chairman Brown
is that we both have concluded that
the Safe Act should go through regular order.
I think that's an important decision
as opposed to rushing it to the floor,
where many of us will then stand
strongly against the process before we
even address the underlying legislation.
So, the good news is we've both agreed that
the regular order is very important for the Safe Act.
There are Republicans who have come
out very positively on behalf of the Safe Act.
I'm not one of those Republicans,
but there is a bipartisan coalition
who wants to have a serious conversation
about the challenges that it would solve.
And the question is, does that legislation actually
solve more of the challenges than it creates harm?
The underlying question, as relates to legality
of the project itself, is something that
we'll have to wrestle with as a nation
and as a Congress and get to an answer there.
But there is a bipartisan coalition
who wants to have that conversation.
So, I think that's good news.
Both sides want to go through regular order.
That's better news.
And I think we'll come to a conclusion,
likely, in this Congress.
-: That's great and I hope that occurs.
It's been a tricky issue.
-: Absolutely.
-: When I started at the ABA at just seven or so years ago,
only about 12 states had legalized.
It's quadrupled, roughly, in seven years.
But I really appreciate your comment
about going through regular order
and it's, again, it's a tricky one to lobby,
putting aside the societal, cultural and moral
implications of what these states have done.
40 or so states, the voters of the 40 states
have made the judgements and banks are just caught
in the middle of the state federal inconsistency.
So, we're gonna do our best to fix that
and I appreciate the role that you'll play there.
Let me segue to access to credit.
And you mentioned the CFPB a moment ago.
So, I guess kind of a two-part question.
One, do you think the CFPB, some of their actions
and rulemaking, rulemakings, pardon me,
have impacted access to credit?
So, I'd be interested in your lens there.
And then, I'll have a follow up about this Supreme Court
case and kind of how that's moving through the process.
And, perhaps, you might have a view on that.
-: Yeah, the answer is yes,
they certainly have impacted the access to credit.
One of the things I struggled with as a kid,
as I said earlier, growing up in poverty,
was the people who wanted to do good for us,
those of us living in poverty,
typically came from the government or nonprofits.
Having been in the same neighborhood for many decades,
I will tell you that the state of the affairs
are about the same, if not a little worse.
So, government coming in as the only
viable option isn't a very good option.
And so, the more good the government wants to do,
the more rules of the road it sets, the more complex
and complicated and layered the systems are,
the more the private sector and institutions like banks
have to take a step back and reevaluate
what it means to be credit worthy.
And so, the more money parked on the sideline,
the more money spent in the regulatory environment,
the less likely a small business owner
like I used to be, will find their first start.
I remember the first time I went to a bank trying to get
a loan to start my first Allstate insurance agency.
It was a difficult prospect.
I remember the banker said, tell me about your assets.
And I said, well, does the apartment
that I'm living in count?
(group laughing)
That's what he did.
These are bankers out here, so exactly.
And then, I said, well, I do have a vehicle.
And then, and he looked at me like,
do you understand the definition of an asset?
(group laughing)
And my vehicle was a nine year old car
with 253,000 miles on it.
-: Sure.
-: He said, you're gonna need what
we call a different situation.
(group laughing)
And, back in those days, you could literally
make a decision on the character of the person,
how much time they've been in the community.
-: Sure.
-: And make a loan.
The regulatory environment today makes that nearly
impossible for the vast majority of our institutions.
That means that kids like me growing
up looking at the American dream,
we have a less access because somebody
at a four letter or three letter agency
believes that they are gonna make it safer
to do business in the communities where I come from.
And what they actually have done is they have
created a new red line based on their regulatory
framework that carves me out, not me in.
And I don't know that, I hope they don't
really understand and appreciate
when you're bringing more rules or have a conversation
about junk fees or whatever it is
that reduces the fee structure somewhere,
it typically leads to an interest rate increase somewhere
else or a new fee structure somewhere else,
and those typically disadvantage
the folks who are coming into a system,
not those who have been there for a long time.
-: So, we really agree with the point on fees.
You know, every other industrial sector in the United States
is allowed to charge fees for services.
We think we should be able to as well.
And we took exception to the president's comments
in the State of the Union calling our fees, junk fees.
And so, we're gonna litigate that another day,
but appreciate your comments there.
Yesterday, so the follow-up question on the CFPB
is about this Supreme Court case around its funding.
Is that appropriate or not?
You mentioned oversight being important for you.
Yesterday, we had a panel specifically
just on the role of the CFPB
and some of these legal challenges and, specifically,
the funding structure has been called into place.
The constitutionality has been called into question.
What's your take on kind of that
legal conversation around the CFPB?
And I know that Senate republicans
have talked about this quite a bit.
-: Sure.
-: Now as ranking member on banking,
you have, arguably, the loudest voice.
-: Yeah, we are excited about the Supreme Court case.
We are excited about having common sense folks
on the Supreme Court who, I believe,
will rule in favor of common sense, number one.
So, we can't wait for it to happen.
I think the precursor to that
was the EPA versus West Virginia.
I think the more Supreme Court rulings
that rein in the bureaucracy,
the better off the American people will be
and the better off first time entrepreneurs will be as well.
So, I'm excited about the case and I certainly hope
that it moves expeditiously through the process
and we get a ruling later on.
And I believe it will be a positive ruling.
-: Thank you.
So, now we'll turn to current events, of course,
which has consumed Washington for the last several days.
Your committee has announced hearings
to examine the failures at Silicon Valley Bank
and Signature Bank next Tuesday, I think.
-: Yes.
-: If we have that right.
You know, what's top of your mind going into these hearings?
Who are those you're most interested in hearing from?
-: I think top of the mind is to make sure that we don't
whitewash and play a political game of point the finger.
Unfortunately, in Washington, that often is what occurs.
That those on the committee on the left will talk
about Dodd-Frank and the reforms that were done in 2018.
Nothing could be a clearer red herring than that.
The truth of the matter is if you just read it,
and I had my staff take out the sections
and share it with all the Republican committee members,
and it's very clear that the regulators
had the authority to do their jobs, to supervise.
They just didn't.
What I hope to hear, who I hope to hear from,
would be the Fed, certainly without any question.
Treasury, of course, should be there as well, FDIC,
and then, the bank execs as well.
My perspective, there's basically three legs to the stool.
Number one, you have to take responsibility
as bank managers, the board and the executives.
There's no doubt that this was a failure
when we were seeing what eight increases in the rates,
they were still betting on rates going down at some point.
-: Yeah, failure of interest rate management, for sure.
-: You have to wake up to the reality
of the marketplace that you're in.
Second, I see it as a failure
of the regulators, without any question.
Talking with some of the folks in charge,
they had the bank on their radar
for several months, if not a year.
If it's on your radar and you have concerns,
but you don't pull the trigger on any type
of supervised reaction, that's a problem.
And the third failure, really, was and still is,
the Biden economy is a challenge.
When you go to a 40 year high in inflation
hitting 9.1 in one month and 13 1/2% percent
since he's taken office, the truth of the matter
is that when inflation's that high,
you should expect immediate hard action from the Fed.
And the Fed does not have a scalpel.
They only have a hammer.
And when they use a hammer, it hurts.
And that's part of the challenge that we're seeing today.
And so, I think that contributes
to the failure of the institution.
The final thing I'd say is we are in a new environment
where social media matters more than it ever has before.
We're no longer in the social media phase
where they're toddlers, you know,
trying to figure out what to do.
Now we have adults that know how to use it as a weapon,
weaponizing social media.
And I think there was a Twitter run
as much as there was any other type of run.
And I think we have not embraced
that reality and solved for it.
We have to figure out that part of the dynamic as well.
-: We talked about that yesterday
and we were in heated agreement on that.
The role, this is the first time that we've had a bank run
where social media has been a contributor.
Not the foundational reason.
-: Yes.
-: Certainly, that was mismanagement of the bank,
but that was absolutely a contributor and an accelerator.
And so, to the extent your committee, sir,
also thinks about how to oversee or investigate
or do hearings on that we would welcome
and I think, quite important.
Another theme we talked about yesterday,
and you've kind of surfaced it a little,
is, you know, the overall sector,
the overall U.S. banking sector,
including banks in South Carolina,
conversation Fred and I have had repeatedly
over the last 10 days, is safe, sound, resilient.
-: Yes.
-: Lots of capital, lots of liquidity.
And so, that's a message we're trying carefully,
but deliberately, to share with the American people
that, you know, there's this this news coverage that says
everything is bad, but that's really not the case.
And, in your home state, sir, I don't think it is either.
-: Now, one of the things I did
was call the smart folks in banking.
So, I started with Fred to understand and appreciate
what in the world was going on in the banking system,
especially regional bankers.
Things are good, they're really good.
The outlier gets so much attention
that it colors the entire picture.
But the truth of the matter is we're living
in a time of serious soundness in our banks.
They're very resilient.
And I wish we would spend more time understanding
why the outlier is the outlier
from a public consumption perspective.
In this room, we don't need an explanation.
But, in the general public, we do need the explanation.
We need every elected official who serves
anywhere in the financial footprint to say,
repeatedly, safe, sound, liquid.
Our banking system is very well capitalized,
but it's also liquid except for those outliers
that we saw through SVB.
And, frankly, you look at the complexity
of their situation at SVB, it alone
merited more attention from regulators.
And the more they looked,
the more they had cautionary flags.
They just didn't have action
to go with the cautionary flags.
But I asked Fred, the percentage of deposits
that are insured in the South Carolina banking system,
I think it's between 60 and 70%.
At SVB, four to 6%.
-: Right.
-: So, nothing could be clearer.
And VC, Venture Capitalists, being bailed
out by an average person with an average account balance
of around $5,300 should raise your eyebrows a little bit.
-: I think these are important questions
that are gonna be considered by the public policy community
and the ABA in the days and weeks
and months ahead, for sure.
One last question on just the hearings
that you are establishing and organizing.
How are you kind of balancing
the need to get answers quickly,
because everyone's so interested in what happened,
versus to make sure we have a full deep dive
on kind of what happened at the bank?
-: Yeah, if you wait too late.
-: It's always tough.
-: Yeah, I think if you wait 'til a hearing,
you've waited too late.
And so, I've been on the phone with a number
of the CEOs of the G-SIB's South Carolina bankers
and regional bankers as well around the country.
And so, you need to have the information at the top
of the mind and the tip of your fingers immediately.
One of the CEO's referenced the fact
that the difference between Friday and Sunday
of the bank failure of SVB could have been
the difference between major waves and ripples.
-: Right.
-: And the private sector option that just did not get,
really, any attention over the weekend,
in my opinion, was problematic.
And so, we could have done something as early as Friday
that could have calmed the waters.
But the longer you wait when there
seems to be a crisis that is systemic,
the more you put fuel in that fire.
And then, what you have to do to put
the fire out, is a bigger response.
That's a problem.
-: Gotcha.
Before we segue to kind of some of my final lines
of inquiry, which will be fun,
is there anything else you want to say
on the Silicon Valley Bank hearings or state of affairs?
-: You know, I think, I do think we should realize
that the Fed with direct supervision
and the California state regulators,
those were double whammies from a failure perspective.
I think we do need to dig in a little bit deeper
into why the regulators, two different sets,
did so little, even with months to see
what was happening and the direction.
I do think we should have a little
bit more of a conversation there.
And I'd throw in a little ESG.
When you spend the five billion dollars
in your balance sheet for ESG,
I think that's not necessarily the biggest indicator,
but every time a regulator or an institution
goes the way of ESG and they lose their focus
on safety and soundness, I think we all pay a higher price.
-: Thank you.
So now, again, new to the top job on the committee
on the Republican side, we have a huge packed room
full of bank executives from all across the country,
some of which are here for the very first time,
their first kind of Washington visit
or fly in to go meet with their elected officials
-: Yes.
-: So, and this'll be, Kirsten Sutton and I spent
a little time yesterday morning talking
about just some, so what makes for a good
meeting with an important U.S. senator?
I have an important U.S. senator next to me.
How would you answer that question
in terms of constructing a good visit
with your elected official that represents you?
-: Yeah, mine is three basic simple thoughts.
Number one, have something good to say.
Number two, say it well.
And, number three, know your audience.
Talking to me and Maxine Waters, you probably want
to use different perspectives on the same issue,
but always be consistently clear
and consistent on the objective.
I do think knowing your audience is really important
to defining having something good to say.
And, very often, people come
in with the same talking points.
But if you listen to Fred's introduction,
Fred, thank you for the very kind introduction,
to me, the why is as powerful as the what.
And so, when you're meeting with me or my staff,
my staff is gonna reflect the same perspective
that the why is as important as the what,
sometimes even more important than the what,
which makes the how easier.
So, if you understand the why of the person
you're meeting with, the what you want to tell them
is gonna be a lot easier, and how they should react
to it or respond to it will become clear.
So, if you understand that, I think that works really well.
And then, finally, when I was in sales
through the agencies that I owned, four steps.
First is rapport, second is credibility,
then you have permission to state the problem
and present solutions and then overcome the obstacles.
-: Thank you, that's good counsel.
And one of the things we've talked about with this group
is when you're going in and talking about the impact
of a law or a regulation is don't talk
about how it impacts the bank.
No one cares about the bank.
-: Customers, customers, customers.
-: Customers, clients and communities, the three C's.
-: Absolutely, I love that.
-: I always try to keep up here.
Before we exit, any last words for this group?
We've appreciated your time, your expertise, your story,
and then how you're approaching the, you know,
the hearings over the next several weeks.
I'll give you, Senator Scott, the last word.
-: Well, thank you.
Well, thank you all for what you do.
I think it really matters a lot.
Honestly, more and more institutions
are interested in financial literacy.
I think that's fantastic.
To watch the banking community come together
and present solutions for kids living
in the poorest communities, I think, goes a long way.
Number two, I'd say that most people
in most places who are living in poverty
as I grew up, we don't need a handout.
I think the non-profit wing is a wonderful
concept and it does some good.
But the truth of the matter is that understanding
the importance of investing and investment is important.
And so, as your business systems, I know CRA,
to me, is the one of the ways that you do good.
But the other way you do good is by having classes
and educating and informing people on how to become
an entrepreneur out of financially illiterate.
What the cost of an education is.
Whatever the goals within your community.
I know that there's a young man today who has
three branches, 130 million worth of assets
to the G-SIB's that are part of the organization.
So, if you're nimble and small,
make sure that you're always engaged in the community.
In small businesses I had four
different banking relationships.
'Cause I had a concern about how
much you wanted to have in one account.
And so, diversification, diversification, diversification.
So, the more folks are in this space
of the small business owner,
the more you knock on those doors,
the more relationships you have,
the stronger and healthier the community is.
And, frankly, it's all about community.
-: Well, building on two things you said,
just to promote the ABA for one second,
Lindsay did a great job talking about our foundation
and the programs that speak
to exactly what you're addressing.
Teaching kids to save, learning about credit,
understanding entrepreneurship and budgeting,
all those life skills that are so foundational.
We do that and we do it well.
And Lindsay's doing a great job leading that foundation.
And then, secondly, with regard to the un-banked
and bringing people into the banking system,
I'm really proud of the women and men in this room.
The number of un-banked Americans
plummeted 17% over the last couple of years.
And that's in part because of the banks here
and across the country, operating bank on accounts
and things similar to bring folks in who are un-banked
and get them off that hamster wheel
of check cashers and payday lenders.
-: Yes.
-: Where they'll never have a chance at a financial future.
So, we're working hard on both of those efforts
and for all the noble reasons behind them.
Sir, thank you for your time today,
for your leadership in Washington.
Ladies and gentlemen, please join me
in thanking Senator Scott.
(group applauding)
-: Thank you, appreciate it.
Thank you. -: Thank you.
-: Absolutely.