Full text of Nominations of Edward W. Kelley, Jr. and Carl D. Covitz : Hearing Before the Committee on Banking, Housing, and Urban Affairs, United States Senate, One Hundredth Congress, First Session, May 5, 1987

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S. Hao. 100-60

NOMINATIONS OF EDWARD W. KEIJ.EV, JR.
AND CARL D. COVITZ

HEARING
BEFORE THE

COMMITTEE ON
BANKING, HOUSING, AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDREDTH CONGRESS
FIRST SESSION
ON

THE NOMINATIONS OF
EDWARD W. KELLEY, JR., OF TEXAS, TO BE A MEMBER OF THE BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM FOR THE UNEXPIRED TERM OF FOURTEEN YEARS FROM FEBRUARY · 1, 1976, VICE
EMMETT JOHN RICE, RESIGNED
AND

CARL D. COVITZ, OF CALIFORNIA, TO BE UNDER SECRETARY OF
HOUSING AND URBAN DEVELOPMENT, VICE LEE L. VERSTANDIG
MAY 5, 1987

Printed for the use of the Committee on Banking, Housing, and Urban Affairs

U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1987

73- 506

For aale by the Superintendent of Documenta, eon,r-ional Selee Office
U.S. Government Printing Office, Waahington, DC 20402

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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
WILLIAM PROXMIRE, Wisconsin, Chairman
JAKE GARN, Utah
ALAN CRANSTON, California
DONALD W. RIEGLE, JR., Michigan
JOHN HEINZ, Pennsylvania
PAULS. SARBANES, Maryland
WILLIAM L. ARMSTRONG, Colorado
ALFONSE M. D'AMATO, New York
CHRISTOPHER J. DODD, Connecticut
ALAN J. DIXON, Illinois
CHIC HECHT, Nevada
JIM SASSER, Tennessee
PHIL GRAMM, Texas
TERRY SANFORD, North Carolina
CHRISTOPHER S. BOND, Missouri
RICHARD SHELBY, Alabama
JOHN H. CHAFEE, Rhode Island
BOB GRAHAM, Florida
KENNETH A. McLEAN, Staff Director
M. DANNY WALL, Republican Staff Director
(II)

CONTENTS
TUESDAY, MAY 5, 1987
Page

Opening statement of Chairman Proxmire.................................................................
Opening statements of:
Senator Garn.............................................................................................................
Senator Wilson..........................................................................................................
Senator Dixon ...........................................................................................................

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5
8
22

NOMINEES
Edward W. Kelley, Jr., nominated to be a member of the Board of Governors,
Federal Reserve System, biographical sketch ........................................................
Carl D. Covitz, nominated to be Under Secretary of Housing and Urban
Development:
Prepared statement ................................ ,................................................................
Biographical sketch..................................................................................................

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25
37

ADDmONAL MATERIAL SUPPLIED FOR THE RECORD

National Association of Home Builders, letter of support for Carl Covitz...........
(Ill)

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NOMINATIONS OF EDWARD W~ KELLEY, JR., OF
TEXAS, TO BE A MEMBER OF THE BOARD OF
GOVERNORS OF THE FEDERAL RESERVE
SYSTEM
AND
CARL D. COVITZ, OF CALIFORNIA, TO BE
UNDER SECRETARY OF HOUSING AND URBAN
DEVELOPMENT
TUESDAY, MAY 5, 1987
U.S. SENATE,
CoMMITl'EE ON BANKING, HOUSING, AND URBAN AFFAIRS,

Washington, DC.
The committee met at 10:05 a.m., in room SD-538 of the Dirksen
Senate Office Building, Senator William Proxmire (chairman of the
committee) presiding.
Present: Senators Proxmire, Garn, Gramm, Shelby, Hecht,
Dixon, Graham, and Cranston.
Also present: Senator Wilson.
OPENING STATEMENT OF CHAIRMAN PROXMIRE

The CHAIRMAN. The committee will come to order.
Gentlemen, will you both please rise.
[Witnesses sworn.]
The CHAIRMAN. Welcome to this hearing on the nomination of
Edward Kelley to serve as one of the 7 Governors of the Federal
Reserve Board and of Carl Covitz to serve as Under Secretary of
the Department of Housing and Urban Development.
All these offices are extraordinarily important. If the operation
of the central bank and the management of national housing policy
are to be successful, it is crucial that we attract the best-qualified
men and women in their field.
Over the years, Presidential administrations have recruited outstanding leaders for the Federal Reserve and the Senate Banking
Committee have come to accept this and opposes nominees who do
not meet these high standards.
Today we begin with Edward "Mike" Kelley.
Senator Gramm has asked that he introduce. the nominee. Of
course, we are delighted and very honored to have Senator Gramm,
who is a brilliant Member of the Senate and a very effective
member of this committee.
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I will yield to Senator Gramm.
Senator GRAMM. Thank you, Mr. Chairman.
I would like to first say to Mike Kelley, welcome to the committee. We are very proud in Texas that the President has chosen you
as the nominee for this very high post. It is an important post to
the future of the Nation and its prosperity. I would like to say, Mr.
Chairman, Mike Kelley is well known and respected by the people
in his community and State and has been a business and civic
leader. I think he brings a broad background of work as an entrepreneur, a businessman, a civic leader, a banker. I think it is a perspective that the Federal Reserve Bank needs. So I am very proud
of this nomination. I am very supportive of Mike Kelley. I commend him to this committee.
I recommend that the committee and the Senate confirm him, so
that he can get to work o:r:i the job that we all know needs to be
done, in terms of providing a business climate where we can have
more entrepreneurs, more businesses, more jobs, more growth and
more opportunity for our people.
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you very much, Senator Gramm.
Gentlemen, I would like to ask each of you in turn, first, Mr.
Kelley. If you are confirmed, Mr. Kelley, will you agree to appear
before this and other committees of Congress to testify?
Mr. KELLEY. Yes, sir.
The CHAIRMAN. Mr. Covitz?
Mr. CovITZ. Yes, sir, I do.
The CHAIRMAN. Mr. Kelley, did the general counsel of the Federal Reserve conduct a review of your financial holdings to determine
whether there would be any conflict, and if there are any such
holdings, would you be ready to divest them?
Mr. KELLEY. Yes, sir. He has conducted such a review, and I believe we are completely together, he and I. Those things that I
have agreed to do will eliminate any conceivable conflict of interest
perceived or real.
The CHAIRMAN. Could you summarize what those things are and
when you expect to take action on them?
Mr. KELLEY. I own a number of publicly traded securities, a few
of which the general counsel thought could conceivably present a
conflict of interest with matters that could come before the Federal
Reserve. He has made such a list, which I believe has been submitted to the committee, and I have agreed to divest myself of each
one of those securities.
The CHAIRMAN. Can you tell us within what time frame you
expect that?
Mr. KELLEY. I have agreed to do it within 3 months of confirmation. My expectation is that I will do it a great deal more quickly
than that.
The CHAIRMAN. Mr. Covitz, has the general counsel reviewed
your financial holdings to determine if there would be any conflict?
Mr. CovITZ. Yes, sir, he has. There's been a determination that
there is no conflict.
The CHAIRMAN. Senator Gramm.
Senator GRAMM. Thank you, Mr. Chairman.

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I would like to ask just a couple of questions of Mr. Kelley, basically related to our international trade problems and to the value
of the dollar. I would like to begin, Mr. Kelley, by asking you what
role do you see for the Federal Reserve Bank in any effort to try
either to peg the value of the dollar relative to foreign currencies
or to offset swings in the value of the dollar relative to foreign currencies.
Mr. KELLEY. Well, sir, basically, the currency exchange market is
a speculative market. In years past these markets were much more
closely attuned to real transactions than were taking place in
international trade. Today, there are some $200 billion a day that
is traded in the currency markets, and the biggest part of that is
speculative activity. As a consequence, having taken on a speculative tone, it's behaving, in many respects, like other specultative
markets do.
It will go along trendlessly for a time, then a trend will set in
and that trend is going to run its course, unless something is done
to try to ameliorate it. Ideally, I think one should allow those
trends to run their course; however, in this case, I think that governments and central banks have to be sensitive to the fact that
too rapid a decline, too steep a decline, or in the opposite case, an
ascendancy in the currency is going to cause a wide variety of real
economic disruptions, and at some point, when that kind of a trend
is running, there is a point where an intervention is appropriate.
I think that determination, as I read in the press, was made recently, and I accept that as having been necessary at that time.
It seems to me that the dollar value, which is now about back to
where it was in 1980, when things were going pretty well, is at an
appropriate level, and I would hope that it would settle out around
where it is now, which as I understand it, is the objective of the
industrialized countries and the central banks.
Senator GRAMM. Let me ask you a second and final question.
As you know, there is an age-old debate in banking circles, generally. People that are at the policy level in banking are no longer
worried about people paying off the loans they made them, so they
have to do something. And they debate these issues. And the ageold debate of what the policy objectives of the Federal Reserve
Bank should be continue to occur.
I know you are new at this, and what you are basically doing is
bringing your broad background and business experience to the
Fed, but I would like to at least ask your initial views concerning
the degree to which the Federal Reserve Bank ought to be trying to
control interest rates versus the degree to which it ought to be
trying to control the money supply.
Mr. KELLEY. I'm not sure that I can see that as an either/or. I
think they are complementary and interactive activities. I think
that one of the main objectives of an agency like the Federal Reserve System is to try to, in every way it can, promote an atmosphere and environment of stability, predictability, and dependability.
In that regard, I think that it is appropriate to try to even out
swings the best that the Fed can do that. It does not control interest rates, as you well know. It influences them, and it is a major

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player, but the market sets interest rates and interest rates fluctuate.
So I would hope that the Fed would act as a force in the direction of stability, dependability, and predicability.
Senator GRAMM. Thank you, Mr. Chairman. Thank you, Mr.
Kelley.
The CHAIRMAN. Thank you very much, Senator Gramm.
Mr. Kelley, as you know, many bank executives are bristling for
new authority, expanded powers and the like. We've considered
that over the years on the committee, and it is very urgent to pass
legislation out of the Senate. We don't know what the fate of that
legislation will be. It depends upon what the House does, and so
forth. But we have provided in that legislation for a moratorium on
the Federal Reserve Board providing those powers for a year, at
least until March 1, 1988.
Before I ask you about whether you think the Federal Reserve
Board should proceed as they seem to have proceeded with a divided decision just the other day, I would like to ask you whether you
believe that the banks should be granted greater authority to compete, for example, in underwriting mortgage-backed securities,
commercial paper, and revenue bonds, selling mutual funds, et
cetera.
Mr. KELLEY. Let me begin, sir, by saying that as a general principle, I believe in deregulation. I think that the deregulation that's
taken place in our economy over the 1980's, basically, has been a
positive thing, both in economic and social terms. I would hope
that that can be extended further into the financial services industry.

Having said that, I think that there is a special public interest
consideration in the financial services industry, and that is that we
simply must at all times maintain a strong, vigorous, and dependable system. As we think about deregulation, we must do it within
the framework of maintaining the integrity of the public safety net
that has been put under depository institutions. The integrity of
that safety net has got to be maintained.
So I favor moving forward expeditiously with concern that we
maintain a sound and thoroughly-I've got the wrong tense of the
verb here-integrity of the· system that is maintained and maintained in a paramount way at all times.
So I favor granting those powers, but I favor doing it in such a
way that we insure, at all times, that the integrity of the depository institutions and the safety net that is underneath them is intact
and is not endangered.
The CHAIRMAN. As you know, some 50 years ago, the Congress
passed the Glass-Steagall Act. One of the clear provisions of that
act is that there should be limits on underwriting by banks. That
act has not been repealed. Nevertheless, an interpretation of that
act by the Federal Reserve, which decided by a 3 to 2 vote last
Thursday, with Chairman Volcker and Governor Angell dissenting,
that bank holding companies could start underwriting to a considerable extent in some of these areas that I have discussed.
The hesitation that some of us have on that is that we think we
should be given an opportunity to decide whether or not Congress
should amend the Glass-Steagall Act. And as I say, the Senate has

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already acted on that legislation, and it may or may not become
law.
But under those circumstances, how would you have voted on
that 3 to 2 decision? [Laughter.]
Mr. KELLEY. Well, sir, as you know, there was a hearing on that
point, back in February. A great deal of documentation was submitted to the Board members. I am very sure they must have had
consultation in private amongst themselves, and without having
had the benefit of all of that, I can't say how I would have voted. I
do note in the press, and I assume that it is an accurate report,
that the dissents by Governor Angell and Chairman Volcker were
more in the area of whether or not the Board had the power to
make the decision rather than on the basis of the substance of the
desirability of granting those powers.
The CHAIRMAN. I think I would agree with that.
Now how would you have voted? [Laughter.]
Mr. KELLEY. I really cannot say, sir, without having had the benefit of that.
The CHAIRMAN. Senator Garn has arrived. Go ahead, Senator.
Senator GARN. Thank you, Mr. Chairman. I apologize for being
late. For 6 years, as chairman, I was always right on time. So when
you lose the responsibility, you become irresponsible. [Laughter.]
No, the traffic on the 14th Street Bridge was a little bit bad this
morning. There was an accident. And I had a press conference with
the Utah media on a flap that occurred there. So I apologize for
being late. And I apologize for having to leave early. It is just one
of those days that happens around here, occasionally.
I won't take the time of the committee. I would simply ask unanimous consent that my statement be placed in the record.
Mr. Kelley and Mr. Covitz, I am pleased with both of your
nominations. I do not however, have any questions for you at this
time.
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you very much, Senator Garn.
[The complete prepared statement of Senator Garn follows:]
STATEMENT OF SENATOR GARN

Senator GARN. I welcome Mr. Carl Covitz who is here before us
today as nominee for Under Secretary of the Department of Housing and Urban Development.
Mr. Covitz brings with him over 25 years of experience in business, building, and development. He is recognized as a dedicated
public servant in his hometown of Los Angeles, CA.
HUD has been too long without an Under Secretary. Mr. Covitz
is well-qualified for the job. I look forward to hear his statement,
and trust that his confirmation by the Senate as a whole will be
swift.
I would also like to welcome Mr. Kelley to the committee this
morning and wish him the best of luck in his confirmation and, as
I assume it will move quickly through the Senate, in his future role
as a member of the Board of Governors of the Federal Reserve
System.

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I want to say first of all, that I think Mr. Kelley is an excellent
candidate and should do a fine job at the Federal Reserve. I know
for myself, and many other members of this committee, that it is
important for the Board of Governors to represent fully the wide
range of interests that make up this Nation. Mr. Kelley will bring
to the job an extraordinary base of expertise, which he has gathered over the course of his career in manufacturing, commerce,
transportation, and investments. Mr. Kelley's hands on experience
in a number of private sector corporations will be a valuable asset
to the Board.
It is refreshing also to see another candidate for the Federal Reserve Board who can understand the problems of the small and
medium size banker in this country. The Board of Governors will
benefit a great deal from the experience Mr. Kelley has gained in
the process of founding two small banks in Texas, and serving on
the board of directors of a third.
I commend the President for nominating such a well-qualified
candidate and look forward to his statement and rapid confirmation.
Senator Shelby?
Senator SHELBY. Mr. Chairman, I have no opening statement. I
just commend you for the timeliness of the hearing and look forward to the testimony and the questions of these two fine gentlemen.
The CHAIRMAN. Thank you very much.
Mr. Kelley, some of us have been disturbed at the very rapid rate
of increase in the money supply over the last 18 months or so. In
1986, the increase in Ml but also the increase in M2 and M3 was
very great, particularly in view of the nominal increase in the
GNP, which should have measured, to some extent the requirement for this. The feeling is that, although we had a marvelous inflation experience in 1986, the inflation was the best we have had
in many, many years, that this is storing up trouble in the future
and liquidity is going to be spent, and then we are going to be in
real inflation trouble.
What is your view? I think that the main responsibility, as I see
it, of the Federal Reserve Board is with respect to monetary policy.
It has enormous powers, very, very important to our economy. It
can offset or aggravate the deficit problems which Congress creates. And I would be very interested in knowing how you feel about
that, because you are going to be one of the people who are going
to be determining that policy.
Mr. KELLEY. Yes, sir. As you very well know, Ml is really the
one that kind of went off the page, if you will. I forget what the
number was in 1986, but it was a very high number. Ml seems to
have changed its characteristics, since the deregulation of interest
rates began back in 1980.
As a consequence, as near as I can tell, it's not become the dependable indicator that it was before. M2 and M3 have behaved
much more predictably. Their rates of change have been much
more stable, and I think that the rate in M2 and M3 was more on
the order of 8 or 9 percent last year.
Nominal GNP was between 5 and 6, if I'm not mistaken. So that
leaves you, perhaps with a 3-percent gap there. My hope would be

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that we would not have to pay a price, if there is not a long period
where there is a substantial gap between nominal GNP and those
broader indicators, M2 and M3.
If we are looking at a bubble, I hope that we will not have to pay
a price, but I think I would share the concern that I think you
have, if I've read you properly in the press, that if that kind of a
gap goes on for too long, you are running some risk that you could
have some monetarily created inflation.
The CHAIRMAN. Chairman Volcker has indicated that he is concerned about the freedom that the Federal Reserve Board has in
monetary policy, if Congress continues to have these colossal deficits. As you know, the deficits have been around $200 billion a
year.
Meanwhile, when you combine with that a monetary policy
which is expansive, it seems especially threatening. You say that
M2 and M3 increased about a third faster, a third again faster
than the increase in nominal GNP, and of course, Ml was 17 percent instead of 5 or 6 percent. That seems to me to be laying the
groundwork for very serious inflation.
I wonder under those circumstances, if we shouldn't do what we
can to hold down the rate of increase in the money supply as of
now.
Mr. KELLEY. Well, sir, as I am sure you are aware, it has, indeed,
slowed down in the first quarter. I think that while all those monetary aggregates are obviously very important, we also have to keep
in mind what is going on in the real economy. In the real economy,
I don't presently see things going on that would indicate that we
are in danger of setting off a new spiral.
The CHAIRMAN. There has been a substantial increase in the inflation rate over the last few months.
Mr. KELLEY. Yes, sir, there has. And we will have to watch that
very closely. It is the first time that inflation has raised its head
since it began to drop precipitously back in the early 1980's. The
point that I was making was a limited point, but I think an important one, that some of those economic factors that can really set off
an inflation rate, such as capacity constraints, shortages of commodities, rapidly rising unit labor costs, and so forth; those things
seem to be under control so far and seem to me to have a reasonable prospect of staying under control.
I think that the inflation that we've had so far has been of the
type that we are going to have to see whether or not it's going to
be rising or it turns out to be a one-shot sort of an event. Energy
prices have been very important in increasing inflation here in the
last couple months. They are very volatile, as you know. I am concerned about the fact that import prices have begun to rise, and I
hope we watch very closely to determine whether or not that turns
out to be a passing phenomenon or whether that's going to set in
as a strong, long-term trend.
The CHAIRMAN. Is there any effect the sharp drop in the value of
the dollar is going to have on the inflationary effect?
Mr. KELLEY. Yes, sir.
The CHAIRMAN. Of course, we are buying an enormous amount
from abroad.
Mr. KELLEY. Yes, sir.

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The CHAIRMAN. Also, the competition of imports will be less.
Therefore, domestic prices will begin to rise.
Mr. KELLEY. I think we see some of that happening.
The CHAIRMAN. We very much want to promote employment.
But the price we pay for that is probably an increase in the cost of
living.
Mr. KELLEY. It's a balancing act, as you well know. My hope
would be that producers in the United States will attempt to be
very competitive on prices and will not simply take advantage of
the lower dollar that we now have, in order to raise their own domestic prices.
The CHAIRMAN. Would it be unfair to say that you sound to me
like a fine tuner? [Laughter.]
Do you think we can fine tune the economy with the monetary
policy? You are referring to the fact that there are many elements
now that indicate that the economy is not inflationary, because we
have the surplus of labor commodities, a glut of energy, and so
forth.
Mr. KELLEY. I doubt very seriously that fine tuning would beeffective. And I would suspect that it would probably run the risk of
being counterproductive. I think there are many forces that play
about the economy, one of which certainly is Federal Reserve monetary policy. And I think that an attempt to fine tune the overall
picture with that one tool would probably, (a) not work and, (b)
probably would be long-term counterproductive. I am more concerned with trying to do what can be done in the area of the Fed's
responsibility to promote dependability and stability and predictability, which are the things that the American community and
the American economy, in general, find to be most important.
The CHAIRMAN. The committee has been joined by the distinguished Senator from California, Senator Wilson. We are glad to
have you here, Senator Wilson. You have a constituent, Mr. Covitz.
We would like to have you introduce Mr. Covitz.
Senator WILSON. Thank you very much, Mr. Chairman. It is a
privilege for me to have the honor of appearing before the committee for the purpose of introducing Carl Covitz.
I will state at the outset, Mr. Chairman, that I don't pretend to
be dispassionate about the candidate. He is a friend and a good
friend. He is also expertly qualified for the responsibility for which
he has been nominated. The committee has the record of Mr.
Covitz.
I will only touch on some of the points contained in it. He is
coming to a responsibility on behalf of the people of the United
States to exercise on their behalf the kind of business judgment
and knowledge of the housing industry that has made him a great
success in the private sector.
Mr. Chairman, I apologize for this voice. You may not have to
suffer for even as long as I have intended.
The CHAIRMAN. If you are going to submit yourself to that California climate, you can expect that. [Laughter.]
Senator WILSON. That's true. I should be there all the time.
[Laughter.]
He is a graduate of the Wharton School of Finance, where he
took his bachelor of science degree. He went on to get an MBA

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from Columbia University's Graduate School of Business. He serves
today as one of the board of directors of the Columbia Graduate
School of Business, in addition to holding a number of other responsibilities. He has been a member of the Young Presidents' Organization. He has been a good citizen serving on the board of directors and actually served as chairman of the Los Angeles County
Delinquency and Crime Commission. He has been a supporter of
Coro Associates, an organization that I think is well known to the
Chairman and to members.
His business background is extensive, and it is varied. He has
been a product manager with Bristol-Myers. He was a director of
marketing for Rheingold Breweries, a national manager for
Canada Dry. He was with the ITI Corp., Levitt & Sons, as their
vice president and director of corporate development, before
coming to the position at Landmark, where he has been a very,
very successful chief executive officer. He has owned his own real
estate company since 1972.
It is clear that he understands financing. He understands construction. He understands development. He understands the kind
of concerns that have necessarily made the developers' apprehension and the realities of the marketplace forces to be concerned
with, if you are directing the fortunes of HUD.
He has been knowledgeable about not only residential but commercial properties. He has fully understood the relationships between developers and the Department of Housing and Urban Development. He has worked nationally in real estate and is familiar
with the market in all the major cities of the United States.
As his educational background and his business background have
indicated, he has a thorough knowledge of financing, and as such,
was asked by the President to serve as a member of the President's
Private Sector Survey on Cost Control. He has been a member of
the Budget and Expenditure Committee in Subcommittee on Financial Controls for civic organizations too numerous to mention.
I will not take more of the committee's time, Mr. Chairman,
than to add what I think is something that you won't find in the
record except, implicitly.
Of all the people who have known Carl Covitz, who have had the
privilege of doing business with him over the years either in a professional way on a business basis or who have been involved with
him civically-he has earned their respect. He is thorough. He is
conscientious. He is a man of the highest integrity. In fact, I have
never known anybody say an unkind word about him, which
having served in the Senate for 4 years, makes me a little suspicious. [Laughter.]
But he is, I think, truly a superb candidate for this responsibility. He has been sufficiently successful, so that he is able to give
back to his community and to his Nation, in a different role than
even the extensive public service in which he has engaged in the
past.
And he has told me repeatedly that he would like to be able to
come to Washington, in order to translate some of his own expertise into an advantage for the country, in terms of some of the
more challenging policies.

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The CHAIRMAN. Thank you very much, Senator Wilson, for a
very fulsome and persuasive endorsement of your colleague from
California.
I would like to call on Senator Hecht. Before I do that, Senator
Hecht, would you permit Senator Cranston, who has arrived, he is,
of course, the other California Senator and a distinguished member
of this committee. I am going to call on Senator Cranston to introduce Mr. Covitz also.
Senator CRANSTON. Thank you very much, Mr. Chairman. Thank
you, Chic.
I thank you, Mr. Chairman, for calling today's hearing in a
timely manner, very swiftly.
The position of Under Secretary of Housing and Urban Development is a very important one. It profoundly affects the management of the programs that are vital to our Nation's communities,
neighborhoods, and housing system.
Since the administration has left the position unfilled for the
past 18 months, action on this in a timely way will contribute.
I am pleased to welcome the President's nominee to the Banking
Committee this morning. Carl Covitz is a longtime resident of my
State of California. He brings the kind of managerial experience
and skill that this high office requires.
Carl Covitz has a strong background of public service in local
government. He served as Commissioner of the city of Los Angeles
and as chairman of the Los Angeles County Delinquency and
Crime Commission. He has also contributed to national policy as a
member of the Executive Committee of the President's Private
Sector Survey on Cost Control, the Grace Commission.
Carl Covitz has been a successful businessman and cofounder and
president of Landmark Communities, Inc. He has had direct experience working in the Nation's housing system.
He has earned a bachelor of science from the University of Pennsylvania and a master's of business administration degree from Columbia University.
He is the kind of responsible businessman and leader that the
Department will need over the next months.
His administrative skills and experience should be a particularly
important asset for HUD at this particular time.
And both Pete Wilson and I join in supporting him for this nomination.
Mr. Chairman, this committee has taken an important legislative
initiative already this year. We have demonstrated our determination to work cooperatively and on a bipartisan basis with the administration. I look forward to working with you, Carl, on the important housing issues facing all of us and our country. I trust the
Senate will confirm this nomination very promptly.
Senator W11$0N. Mr. Chairman, let me join in the thanks which
Senator Cranston has extended to you. I neglected to do so in my
remarks, but it has been a matter of great concern to me, and I
know to Mr. Covitz, that the confirmation occur as early as possible. So I thank you very deeply for the promptness with which you
have moved on this.
The CHAIRMAN. We have a first here this morning, you know.
We have both Senators from the 2 sunshine States-Florida and

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California-here at the same time. That doesn't happen very often.
In fact, it's never happened before. [Laughter.]
That ought to take care of the catch in your throat. [Laughter.]
Senator WILSON. It should.
The CHAIRMAN. Now I call on Senator Hecht.
Senator HECHT. Thank you, Mr. Chairman. I am happy to see the
two individuals seated before me are from the business world and
can bring some good business common sense to Government.
If I might, just one moment, since I have to leave because of time
constraints, ask Mr. Covitz one question just to get a yes or no
answer from him.
Did you ever realize that in June 1982-this is from what you
have presented on the documentation-June 1982 when you gave
Rick Fore a check for $1,000, the man he was running against was
Chic Hecht, and he might one day be sitting in judgment on you?
[Laughter.]
Mr. COVITZ. No, sir, I did not. [Laughter.]
Senator HECHT. In spite of that, I support you.
Mr. COVITZ. Senator, I recently saw Mr. Fore, and he reminded
me of that situation.
Senator CRANSTON. I think I have to acknowledge the fact that I
know that Mr. Covitz contributed to my opponent last year, leading
me to question one thing about him, his political judgment! [Laughter.]
But on the other hand, maybe his political judgment is wiser,
maybe he wouldn't be seated where he is right now. So that is no
inhibiting influence on me, as it is not on Chic. I am delighted still to
support the nomination.
The CHAIRMAN. Mr. Covitz, I hope you'll keep your cotton-pickin'
contributions out of Wisconsin! [Laughter.]
Mr. Kelley, in a few short years, the United States will owe as
much as $900 billion to foreigners. The interest burden alone will
be staggering.
What policies do you recommend to reverse that sorry state of
affairs and bringing our international accounts into balance?
Mr. KELLEY. Well, sir, I think that the condition that has caused
those immense debts need to be reversed, and that is the deficit
that we continue to incur. I know the Congress is struggling mightily with that, and I hope the Congress will be able to get on with it
and be successful with it. That is the best thing that can be done to
begin to reduce the debt. It took us a long time to get into this
state of affairs, and I think it is going to take a while to get back
out.
I share your concern that as these massive amounts of debt pile
up, servicing makes the system increasingly fragile, because those
costs have to be met, and I would certainly hope that that continuing enlargement of the debt will rapidly slow down.
The CHAIRMAN. What linkage do you see between the budget and
trade deficit?
Mr. KELLEY. The numbers are pretty close. They clearly have a
relationship with one another. I am not sure just how tight a relationship there is. I would certainly like to see both of them come
down together. I think that would be the most orderly thing, and it
is desirable that both of them come down. I think probably it's pos-

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sible for them to move independently of one another. So I think
that while they are linked at least indirectly, I am not sure just
how tight that relationship is.
The CHAIRMAN. In your judgment, has the budget deficit caused
or contributed to the trade deficit? And if so, how?
Mr. KELLEY. I'm not sure how that would have been. I'm not sure
that the conditions that have caused the trade deficit are directly
related to the budget deficit.
The trade deficit has, in many senses, arisen out of our own
strength rather than our weakness. This country has been the
engine for the world in the last few years. Some of our major trading partners have had more sluggish economies than the United
States, and the United States has been growing over several years
at an average of about 4 percent.
It's been slower, of course, more recently. But, a large part of
that trade deficit arises from the fact that we have a very vigorous
economy here. And, as a consequence, a very attractive market.
The CHAIRMAN. One of the reasons we have a vigorous economy
over the last 4 or 5 years is because we've been running an enormous Federal deficit.
Mr. KELLEY. That is right.
The CHAIRMAN. We're contributors in that sense. We consume
more as a result of consuming more from abroad. We're doing our
best to try to persuade other countries to adopt a more expansive
policy-Germany and Japan particularly.
They have been reluctant. Isn't that one of the reasons why we
have to establish a balance?
Mr. KELLEY. I think, as our budget deficit comes down, it. will release those sources in the private sector that will keep our economy going on a much more sustainable, long-term basis.
I agree with you, of course, that the fiscal stimulus from the
large deficit has been one of the reasons that the economy has
moved forward. But I think it's got sufficient strength so that it
can actually improve its performance at a much lower level of deficit.
The CHAIRMAN. Senator Graham.
Senator GRAHAM. Thank you, Mr. Chairman.
This committee, after having passed out to the Senate and adopted legislation dealing with some immediate concerns of the banking and thrift industries, is now undertaking what we hope will be
a long-term look at where we need to be going in our financial
services industry.
We are going to be anticipating substantial assistance in that
from the Federal Reserve Board. From your background to date,
what would you see as the outline of what America's financial services industry should be by the end of the term that you are now
seeking confirmation, sir?
Mr. KELLEY. Well, Senator Graham, as I outlined a few minutes
ago, I believe in deregulation as a principle. I think it's been a very
efficacious policy where it's been carried forward in the 1980's in
our economy.
In the area of financial services I would like to see as much deregulation and a broadening of powers as is consistent, but only as
is consistent, with maintaining the integrity and strength of our fi-

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nancial institutions; most particularly those who have depository
powers and who enjoy the protection of the Federal safety net both
in terms of the Federal Deposit Insurance Corporation and the
FSLIC, and also access to the Fed discount window.
Maintaining the strength of those institutions is paramount. And
while I would like to see financial powers broadened as much as
possible, entry simplified as much as possible, it has to be done
within the framework of the integrity of those institutions.
Senator GRAHAM. That caveat is really where the tough policy
issues are.
How would you approach the question of balancing safety and
soundness in a deregulated financial services industry?
Mr. KELLEY. It's very difficult to answer that question. I think
.one would have to look at it issue by issue over time and as each
part related to each other part. I think it has to be done very carefully and with the safety and integrity of the system paramount in
mind, and see what you can do within the framework of that concept.
That's not a very definite answer, but I don't know how to give
you a very definite answer. I think that it's going to take a lot of
thought and careful work.
Senator GRAHAM. What influence in resolving that question do
you believe should be given to the advent and increasing presence
of non-United States controlled financial institutions in the United
States domestic economy?
Mr. KELLEY. I think, so far, we have been pursuing a national
treatment policy whereby we have entertained the presence of financial institutions from other countries within the framework of
the same regulatory and legal structure that our own institutions
have.
I think that's appropriate. I support that.
Senator GRAHAM. No further questions.
The CHAIRMAN. Thank you, Senator Graham.
Mr. Kelley, as you know, the Federal Reserve is a collegial body.
They agree and they disagree.
I doubt if you'll always be in the majority. So, as you look back
on the conduct of monetary policy over the last 10 years, what are
the one or two major issues over which you would have dissented
from the actions taken by the majority of the Fed.
Mr. KELLEY. I have not made a study of the actions of the Federal Reserve period by period over that time as it related to the specifics of the situation.
So it really is quite impossible for me to categorically state what
and when I might have disagreed with.
I feel very sure that, if confirmed by the Senate and seated on
the Federal Reserve Board, as time goes on, there will be occasions
when I will differ from my then colleagues.
Retrospectively, it's very difficult for me to comment on that.
The CHAIRMAN. Take the policy that they pursued and you and I
discusse~ a little earlier, over the last year and a half. Would you
have gone along on increases in the money supply, which they did?
Or would you have dissented?
Mr. KELLEY. Yes, sir, I think I would have been comfortable with
the policy that the Fed has followed over the last 18 months.

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The CHAIRMAN. The monetary policy in 1981 some people believe
brought on the terrific recession we had in 1982. Would you have
dissented from that policy?
Mr. KELLEY. Sir, I just don't have sufficient depth of knowledge
to make a judgment on that. I don't know.
The CHAIRMAN. Well, then let me put it another way.
Do you think the Federal Reserve Board overall is correct in following a policy that broke the back of inflation, in the judgment of
some people, even though the policy was certainly a factor in precipitating a very deep recession in which unemployment exceeded
10 percent.
Mr. KELLEY. Yes, sir, that is correct. I think it was absolutely essential that the inflationary spiral that we were in at that time be
stopped. I am unaware of any alternative ways that could have
been followed to achieve that end.
Perhaps they existed and perhaps they could or should have been
followed. But I think that was the approach that was best understood, perhaps is best understood today. When you get into a situation like that, perhaps there could have been some differences that
would have ameliorated the recession.
But, basically, the inflation was runaway at that time and had to
be stopped. As a matter of fact, I think the Fed did a very courageous job of doing that.
The CHAIRMAN. Mr. Covitz, Federal housing programs are primarily directed toward assisting low and moderate income families.
Have you in your private real estate business participated in any
of the HUD housing programs?
Mr. CovITz. No, sir.
The CHAIRMAN. Have you been involved in any of the HUD-assisted community development programs, such as UDAG or
HODAG.
Mr. Cov1TZ. Since the creation of my own firm, Senator, in the
early 1970's, I have not participated in any of the HUD programs.
Prior to that, as a part of the Levitt organization, we were involved in some of the programs. That was more than 15 years ago.
The CHAIRMAN. Have you been involved in any activity that
would help people secure better housing, and who have low incomes?
Mr. COVITZ. Sir, we have in my own organization, since it was
created in the early seventies, we have been concentrating on the
high end of the housing range; having started in California, at that
point, representing the greatest opportunity.
My involvement with other programs was more in the area of
civic responsibilities as a Los Angeles City Commissioner and, at
times, for the Los Angeles County Crime and Delinquency Commission.
The CHAIRMAN. That's fine. Then, in that particular function as
a Commissioner, can you tell us what your attitude is with respect
to providing housing for low income people?
Of course, as we all know, the Federal Government, in my view
and the view of most people, should play a minimal or no role at
all in providing housing for well-to-do people. They can take care of
themselves.

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On the other hand, housing is enormously expensive and it's a
real problem-not just for the homeless. We're all aware of that
heart-breaking situation-but also for low income people generally.
And what should be the function of the Federal Government?
Mr. Cov1TZ. It's my opinion that the focus of the Federal Government and the Department has to concentrate on the poor and the
needy. I expect that, if confirmed by the Senate, in my managerial
and administrative capacities in the Department, we will be focusing in that area.
The CHAIRMAN. Now, the Department of Housing and Urban Development has a budget of $15 billion annually to carry out a
number of housing and community development programs, and employs some 12,000 workers in some 75 locations in the United
States.
As Under Secretary, you would be the chief operating officer responsible for administering the agency.
What, from your work experience would you cite as your best
qualification for that demanding position? And would you tell us
about both the nature and size of the business operations between
the budget and the number of employees that you believe need to
be provided for you to meet the qualifications?
Mr. Cov1TZ. Yes, sir. My background, since graduating from business school, has been varied. It has included large organizations,
principally Bristol-Myers Co., a division of IIT; most recently, my
own company, created in 1970, which has been involved in real
estate activities around the country in various cities, with employees up to 150 people at various times.
I think that the expertise and experience that I can bring to this
position as Under Secretary of Housing and Urban Development is
one of primarily managerial and administrative skills.
I look to the success that I've been able to achieve over these
years as being a factor of being able to bring these people together,
motivate them and create objectives and opportunities, allowing
them to achieve the results.
The CHAIRMAN. Now, the Grace Commission recommended user
fees for Ginnie Mae be increased, and that Fannie Mae and Freddie Mac be privatized.
Did you, as a member of the Grace Commission-and do you
now-support those recommendations?
Mr. CovITZ. Senator Proxmire, my responsibilities on the Grace
Commission were in the area of cochairman for the task force that
evaluated the Department of Defense.
I have not had an opportunity to evaluate the programs that
were suggested for revision in the HUD Grace Commission task
force.
So, frankly, I can't answer that.
The CHAIRMAN. Can you answer this?
What role do you think Fannie Mae and Freddie Mac should
play in the housing finance market?
Mr. COVITZ. I think that Fannie Mae, Ginnie Mae have played an
important role to date. I think it should continue in an area that
allows the private sector to compete in a fashion that is on equal
ground and footing.

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The CHAIRMAN. Do you believe that the present mortgage limits
on Fannie Mae and Freddie Mac, mortgages are appropriate, or
should they be cut, reduced?
Mr. COVITZ. I haven't had the opportunity to decide that, Senator.
The CHAIRMAN. In the next few years, thousands of low income
families will lose their rent assistance and their rental accommodations unless HUD takes steps to maintain the supply of assisted
housing, and the administration and Congress provide adequate
funding.
Although the problem was identified several years ago, the administration has failed to deal with it in its annual budget request.
What are your views regarding that very serious problem?
Mr. Cov1Tz. Without getting into the specific programs, Senator,
and the policies which I haven't yet had a chance to evaluate, I do
know that the Department has been investigating, searching for
ways of making more efficient and productive use of the resources
it has available.
I do know there is the Voucher Program, section 8 program. It
seems to allow for the ability to provide more assistance for less
money than might be used for new construction.
That's a program whose evaluation is continuing. I fully expect
to become involved in and a part of that evaluation.
The CHAIRMAN. Does that mean you would answer affirmatively
to this question? And let me ask the question:
Will you press the administration to develop the necessary policies for maintaining an adequate supply of housing and rent assistance beyond the life of the present administration?
Mr. CovITz. Yes, I think that the administration has a responsibility for providing for the poor and needy in the area of housing.
The CHAIRMAN. Members of Congress have expressed serious concern that a number of HUD appointees have lacked both experience and appropriate ethical sensitivity.
The results have been a high turnover in the political and career
managers at HUD, and reduced program efficiency.
Are you aware of this criticism, and have you plans to deal with
it?
Mr. Cov1Tz. I'm aware that there has been criticism in the past. I
expect, based on my own experience, the proven success that I have
had in the world of business, that I will be able to attract, motivate, and create the objectives for the Department so that it can
become more efficient and productive.
The CHAIRMAN. The General Accounting Office, a few years
back, made the recommendation for HUD administrative improvements. Have you read those GAO reports?
Mr. Cov1Tz. No, sir.
The CHAIRMAN. Have you been brought up to date on the actions
HUD has taken to carry out those recommendations?
Mr. COVITZ. No, sir.
The CHAIRMAN. Would you expect to get into that and study
those reports?
Mr. COVITZ. Yes, sir. I believe that the direction of my responsibilities as suggested by Secretary Pierce is for the management of
the Department.

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I think, to the extent that there are historic data analysis surveys that will assist in evaluating the Department to make it more
productive and efficient, I will take full advantage of them.
The CHAIRMAN. I think you made that clear. And your background certainly qualifies you to do that.
Can you tell us what administrative areas will you focus on to
make further improvements in HUD operations?
Mr. CovITz. No, sir. I don't have the specific issues yet defined.
The CHAIRMAN. Mr. Kelley, some economists have argued that
the Federal Reserve should concentrate more on the monetary base
as a policy guide rather than monetary aggregates as represented
by Ml, M2, and M3.
What are the pros and cons of using the monetary base as a
measure of monetary policy?
Mr. KELLEY. Senator, I would not feel that I am sufficiently wellgrounded in that to expound on that point.
The CHAIRMAN. It's a pretty fundamental choice for a policy
basis for the Federal Reserve Board, is it not?
The monetary base has been discussed as a far better measure.
Mr. KELLEY. Yes. I just don't have an opinion on that, sir. I
would expect that that is an issue in an area that I would study in
great detail at an early date.
The CHAIRMAN. Let me ask you a question that has really bothered this committee. It's bothered, I'm sure, Senator Graham, Senator Shelby and myself and we're very concerned about it. It's not
a partisan matter. The Republican members of the committee in
the Senate have also been very disturbed about it.
I believe that the success and stability of American banking rests
on a centuries old tradition of separating banking from general
commerce.
As you know, we're pitted in a battle now against the so-called
nonbank banks. To date, the Federal Reserve has staunchly joined
us in this battle. Chairman Volcker has made very strong statements about how important it is for us to limit nonbank banks.
As the man who helped found two banks and who also served on
a third, what's your opinion of nonbanks?
Mr. KELLEY. As I stated earlier;· sir, I would support as much
ease of entry, as broad a set of powers for banks and other financial institutions and, for that matter, commercial institutions as it
is consistent with maintaining a sound and dependable and strong
at all times financial services system.
Within this framework, I would hope that, over time, the Congress would settle this issue one way or the other. The phrase
"nonbank bank" would simply disappear from our vocabulary.
The CHAIRMAN. Well, that's an interesting answer, but what
would you do about a situation like Sear's Greenwood Trust Company which grew in 1986 from $27 million to $1.48 billion-thirtyeightfold in 1 year.
American Express also has a much bigger nonbank bank than
that. Chrysler and Ford are getting them. Other conglomerates.
Obviously, these are firms up to their eyebrows in commerce and a
nonbank is performing banking functions.
Isn't that a violation of the principle of that law?

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Isn't that also something that would, by its very nature, make it
extremely hard for regulators, such as you will be as a Governor of
the Federal Reserve Board, to control?
Mr. KELLEY. I think the key to the matter is to maintain the integrity of the depository system and the Federal safety net that undergirds that. As I read statements by Chairman Volcker, for instance, I think the concern is that you cannot build a structure
whereby you can ensure that the integrity of the institution that
enjoys those protections and those powers is, in fact, insulated from
a parent or from a sister company that may possibly have either
difficulties or designs on some of the capital, or whatever it might
be inside a larger corporation.
I think there is some disagreement as to whether or not it is possible to build that so-called Chinese wall.
The CHAIRMAN. How do you feel about it?
Mr. KELLEY. I don't know. If I were to ascertain that it was not
possible to build a satisfactory wall that would protect that institution that had the depository powers, and the protection of the Federal safety net, then I would oppose allowing a system to evolve,
that was not completely, clearly protecting one sister company
from another, so that the depository institution had assured safety.
The CHAIRMAN. Haven't we had a long, long experience with Chinese walls constantly in financial institutions separating one activity from another? And haven't we had a long succession of failures
in making them effective?
Mr. KELLEY. I'm not sure whether the answer to that question is
yes or no, but I think that whatever evolves or is on the table as a
potential evolution in this area would have to be looked at uniquely because it would be a unique circumstance that has not existed
before. And it would have to be examined very carefully and very
critically.
And we would have to ensure ourselves.
The CHAIRMAN. The surest kind of a Chinese wall is to say that
one firm, one corporation cannot do both activities; cannot engage
in commerce in the one hand and banking on the other.
That's been a principle that we've tried to establish. It has a
good, clean, clear administrative policy that you follow in order to
prevent it. Just say they can't do both.
Mr. KELLEY. I think the conditions of both commerce and finance-and I think we're in a worldwide market now, where different countries have different configurations-they should have the
ability to engage themselves wherever they want to and properly
can, and compete.
Banks certainly need to have broader powers in order to be-an
effective competitor today. And I think our society would benefit
from having an open as possible system for entry into many of the
different parts of the financial services industry.
Again, I always want to add the caveat that we have to look to
the integrity and safety of the system first and foremost. But we
also have to see if we don't need to move with the times in order to
allow these institutions to maintain competitive viability.
The CHAIRMAN. Senator Shelby.
Senator SHELBY. Thank you, Mr. Chairman.

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Mr. Kelley, how do you overall view your basic responsibility of
going in, assuming you're confirmed by the Senate, as a member of
the Board of Governors of the Federal Reserve?
Mr. KELLEY. Well, sir, I think that there are probably 3 distinctive areas that the Federal Reserve Board has to work in. And I
believe that all of the Governors are involved in all 3 of these activities.
The first would be what I would call the nuts and bolts of central
banking, particularly as it would relate to international relationships.
The second is policy setting, monetary policy primarily, which is
obviously vital and which we've been talking about in large part
here this morning.
The third set of responsibilities that consume a lot of the Board's
time and attention are in the area of governance and business
management.
The Federal Reserve System is a good-sized business and it has to
be run. There are a large number of regulatory matters that come
before the Board, both within the framework of operating the 12
district banks and also regulatory authorities that have been granted to the Board by Congress that might come under the heading of
governance.
So I think all three of those areas are critical to the day to day
work of the Board.
Senator SHELBY. Speaking of your regulatory matters, and I recognize that you do have some responsibility there, do you believe
that the Federal Reserve Board should make legislative decisions,
such as whether a bank should be in the real estate business or in
the insurance business, and so forth, like that?
Or do you believe that should be left up to Congress to make
public policy in those regards?
Mr. KELLEY. I certainly think that the Congress should make
public Policy, and the Fed operates within the framework of whatever the law of the land is at any given time.
Senator SHELBY. But they also interpret the law, or try to, do
they not? And, sometimes, on a 3/2 decision or a different type?
Mr. KELLEY. In fact, they recently did, as you know. I think the
Board does have to interpret the law very often. It's unavoidable to
do that. And I think they do it in good conscience.
As we said a few moments ago-perhaps you weren't here-that
3/2 vote the other day was on just such a point.
There was no disagreement on the substance of the issue among
all five of the Governors, as I read in· the press. The dissent by the
Chairman and Governor Angell was largely in the area of the fine
legal point as to whether or not the Board had the power to make
the decision.
Senator SHELBY. l want to touch on something that Chairman
Proxmire got into-the nonbank banks. At the rate they're growing, which is by leaps and bounds, and they have tremendous financial clout behind them, is it going to be that they're de facto
1
out there?
In just a year or two they're going to be everywhere?

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It reminds me of a country overrunning another one with a big
army and saying, well, do you want to talk peace and let's negotiate. What type legislation we're going to see.
Because, if they keep going, they're going to be everywhere.
They're going to be into everything. And then there will be, as
there always has been in a political body, political accommodation
of various interests, because everybody has a constituency.
Do you care to comment on that?
Mr. KELLEY. I think what's going on today is that we have a very
undesirable type of deregulation that's creeping along through lawsuit and loophole. And I think that is unfair and unwise and dangerous.
Senator SHELBY. Do you believe we're paralyzed legislatively regarding making public policy regarding the banks?
Mr. KELLEY. I would certainly hope not. And I look forward to
the Congress settling that issue.
Senator SHELBY. One last question, if the Chairman ·will permit
me here.
You mentioned that one of your responsibilities is dealing, as you
well know, with the monetary situation, the interests of this Country in monetary policy and trade, and so forth.
One, does it trouble you as a banker? You've been involved in a
lot of businesses and have been very successful. Does it trouble you
that now, in the United States of America, that we don't possess
the largest banks in the world? That we are not an exporter of capital? That we are not going to be a big player in the world market
if something is not done as far as commercial banks are concerned?
Mr. KELLEY. I think it's unlikely that we will get to the point
where we're not a major player. I think an economy of the strength
and vitality and sheer size of this one-Senator SHELBY. But we're not dominant any more, are we?
Mr. KELLEY. We're not totally dominant, and I think that's probably healthy. We live in a world where there are other peoples and
other sovereign nations. And they have their own financial systems, and I think that's fine.
I think we ought to be a very strong and effective competitor. I
think we ought to be a leader. I would not expect that it would be
necessarily desirable that we'd be overall dominant..
Senator SHELBY. Are you concerned with the dollars value and
the way it has fallen so far?
Mr. KELLEY. Yes, sir, I'm concerned that it has been somewhat
disorderly and, in that sense, disruptive. I think that it clearly got
too high and needed to come back.
I think that the administration is probably correct that it's now
around the area where it should be now. I think, if we're shooting
for a level playing field here in international trade, we had gotten
to a situation where there was an unfair place in the playing field
in the sense of a too high dollar.
I think that's largely been corrected. However, I hope that the
dollar will stabilize now, which would be the best thing that could
happen in the direction of having a level playing field, and allow
us to concentrate on some other matters.

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Senator SHELBY. As a future member of the Board-I trust you
will be-don't you think you would play a part in the stabilization
of that dollar?
Mr. KELLEY. As I read in the press, the Fed has been playing a
role in that.
Senator SHELBY. Do you plan to help play that role?
Mr. KELLEY. As appropriate, I would hope so, yes, sir.
Senator SHELBY. Thank you.
The CHAIRMAN. Senator Gramm.
Senator GRAMM. Mr. Covitz, I'm impressed that you have had extensive business activities in most of the growth States in the country. Those are States such as mine and your home State, that have
had particularly serious problems in meeting the needs of low and
moderate income families because of that rapid growth, which, in
turn, has driven up real estate construction prices.
From your experience in Los Angeles County or elsewhere, what
have you seen to be some of the more successful programs to deal
with the needs of low to moderate income families that might be
susceptible to replication elsewhere in the country?
Mr. COVITZ. Senator Gramm, I don't have personal involvement
in any of the low and moderate income programs currently.
On the other hand, I do know that the Department has been
working for a number of years on the Voucher Program, which
does allow for freedom of choice for the assisted family, as opposed
to new construction, which is not as efficient and is certainly more
costly.
I think, to the extent that the Department can continue to
search for ways to make the existing funds more efficient, more
productive, I think the extension of the Voucher Program, or perhaps even more concentration on rehabilitation of existing housing
stock as opposed to new construction-which is exceedingly more
expensive-that that appears to be a way to be more efficient and
productive.
Senator GRAMM. In growth areas such as California and Florida,
do you believe those programs can meet the need? That is, is there
a sufficient housing stock in the context of the additional population that has to be served, that is available to be rehabilitated to
meet the needs?
Mr. COVITZ. Senator, I do believe for the most part there are existing housing inventories available for utilization or rehabilitation.
I also believe, based on the experience I've had, that the partnership between the private sector and government agencies could go
a long way toward creating the availability of housing in terms of
expediting the process of building, which has become more cumbersome and certainly much more expensive.
Senator GRAMM. That's all.
The CHAIRMAN. Thank you, Senator Gramm.
I have just a few more questions. I'd like to ask a unanimous
consent, however, that a statement by Senator Alan Dixon be
placed at the beginning of the hearing before we start the questioning.
That's a statement both on the Edward Kelley nomination and on
the Carl Covitz nomination.

73-506 - 87 - 3

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22
STATEMENT OF SENATOR ALAN DIXON

Senator DIXON. Mr. Chairman, I am pleased to be here this
morning as the committee holds this hearing on the nomination of
Edward Kelley, Jr. of Texas, to be a member of the Board of Governors at the Federal Reserve. I hope no one underestimates the importance of this hearing and of the position to be filled by this
nominee.
This hearing comes at an uncertain time for the U.S. economy.
Federal Reserve policy must move this Nation on a path toward
sustained economic growth. Although some economic indicators
have shown improvement, the trade deficit continues to grow while
we do not seem to be using all of our industrial capability. Although the dollar has declined dramatically, our trade deficit has,
to date, failed to respond as expected. I believe it clear that we are
entering a difficult period in monetary policy as Chairman Volcker
himself alluded in his testimony before this committee a month
ago.
The first quarter of this year saw GNP surge ahead at 4.3 percent while consumer spending fell. If this growth is sustained I believe it could be very good news for the Nation's unemployed. However, the continued drop of the dollar seems to be driving interest
rates higher and could result in renewed inflation, thereby jeopardizing economic growth.
I look forward to hearing Mr. Kelley on the issues I have mentioned, and on other issues related to the conduct of monetary
policy by the Federal Reserve.
Mr. Chairman, I am also pleased that this morning the committee will consider the nomination of Carl D. Covitz to be Under Secretary of Housing and Urban Development.
I think it is appropriate to bring a matter of particular concern
to Mr. Covitz' attention relating to low-income housing projects.
As Mr. Covitz may know, the Federal Government provides aid
to public housing agencies (PHA's) as follows:
(1) To remedy unsafe and unsanitary housing conditions and the
acute shortage of decent, safe and sanitary housing for low-income
families;
(2) For project operations; and
(3) To finance capital improvements in public housing projects.
While I realize that some PHA's have not lived up to their responsibilities and have chronic operating budget deficits caused in
part by inefficient management, I express particular concern here
today because I fear that HUD has been negligent in fulfilling its
obligations to PHA's.
Public housing in most cities is plagued with vandalism, maintenance problems, and unsafe and unsanitary conditions. There are
many vacant and deteriorating housing units and the problems
keep mounting.
I have a particular concern because just some 19 months ago,
with no other reasonable alternative, HUD assumed control of the
troubled PHA in my own State of Illinois in East St. Louis. Just
recently, the second largest housing authority in this country, the
Chicago Housing Authority, announced that it is facing the worst
financial crisis of its 50-year history.

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These are problems that if confirmed, I encourage Mr. Covitz to
immediately investigate and to work with this committee to find
short-term financial and management assistance and long-term recommendations.
The CHAIRMAN. Mr. Kelley, the Community Reinvestment Act
requires the release of the Community Investment Record of any
bank that seeks to form a bank holding company.
Of course, that means that the bank should have an incentive to
invest in its own community. Banks have a tendency-it's true in
the District of Columbia, as it was in some other places, of taking
deposits in their community, especially low income people, and
then making their investments outside the community.
And of course that's something we try to correct. On October 17
of last year, the case of Advanced Bank Corp., the Board granted
the holding company application involving a bank that had never
received a satisfactory community reinvestment rating.
According to Governor Rice's cogent dissent, the bank was, and I
quote, "one of only a handful of financial institutions in the country with such a consistently poor record."
Decisions like that make me wonder whether the Board gives a
lip service to the Community Reinvestment Act and makes no real
effort to enforce it.
My question is will you take a bank's community reinvestment
record into account?
Mr. KELLEY. Yes, sir. I think that's an important responsibility.
The CHAIRMAN. I appreciate that. And I hope that you'll be successful in persuading your colleagues to recognize that, too.
Mr. Kelley, ever since adjustable rate mortgages became popular
in finance, there have been concerns about improving disclosure.
The Federal Financial Institutions Examination Council considered
the problem as early as 1984. Yet, it is now 1987 and I'm unaware
that a disclosure requirement has been proposed.
What do you think about strengthening adjustable rate mortgage
disclosures?
Mr. KELLEY. Sir, I'm not familiar with exactly what that disclosure looks like at this time. If it would require strengthening or
could be strengthened, I would certainly support that.
I think that one problem, and this is a generality-I don't address that particular disclosure because I'm not familiar with it.
But, as a generality, I think that Government regulations tend to
be a little difficult for the average person on the street to understand.
And I think that one thing we need to strive for to the best of
our ability is to try to write those disclosures in plain English so
people can understand and still achieve disclosure.
The CHAIRMAN. This committee is responsible for the Truth in
Lending Act. As you know, that went into effect in 1969. The Federal Reserve Board made a study of it and found, to me, an astonishing understanding now of what the true annual rate is, the financial cost, and so forth.
I think that was an enormously constructive action because now
you have effective competition, competition that the consumer understands when he goes to borrow money.

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As a matter of fact, it's helped banks because banks are our most
efficient lenders anyway. But, whether it helps or hurts banks, it's
good for the consumer and good for the country.
So I think disclosure is something that people can understand, as
you say, if it's done in simple, understandable English. And people
are told what the facts are.
Mr. KELLEY. I think it's very important to do that. And to the
extent that the Fed has a responsibility in that area, think it's a
very important responsibility for the Fed.
The CHAIRMAN. Thank you, Mr. Kelley.
Thank you, Mr. Covitz.
You are certainly excellent witnesses. You've responded fully to
my questions, and we appreciate that very much.
The committee will stand adjourned.
[Whereupon, at 11:20 a.m., the committee adjourned, subject to
the call of the chair.]
[The prepared statement of Carl D. Covitz, biographical sketch of
nominees, and additional material for the record follow:]

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STATEMENT OF UNDER SECRETARY-DESIGNATE
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
CARL D. COVITZ

MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE, IT IS A PRIVILEGE

FOR ME TO APPEAR BEFORE YOU THIS MORNING AS PRESIDENT REAGAN'S
NOMINEE TO BE UNDER SECRETARY OF THE DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT

I AM DEEPLY HONORED THAT THE PRESIDENT HAS ASKED ME TO SERVE
IN THIS CAPACITY AND, IF I AM CONFIRMED BY THE SENATE, I WILL
COMMIT MY EFFORTS UNSTINTINGLY TO CARRYING OUT THE DEPARTMENT'S
MISSION AND ACHIEVING THE PRESIDENT'S GOALS,

I AM GRATEFUL FOR THE CONFIDENCE AND SUPPORT OF SECRETARY
PIERCE, AND AS UNDER SECRETARY, IT WOULD BE MY INTENTION TO ASSIST
HIM IN BUILDING ON THE SIGNIFICANT ACCOMPLISHMENTS OF THE PAST
SIX AND ONE HALF YEARS,

SECRETARY PIERCE AND THE DEDICATED PEOPLE

AT THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT HAVE MOVED
SUCCESSFULLY TO REDUCE /HE SIZE AND ,,SCOPE OF THE DEPARTMENT WHILE
MAINTAINING A FIRM COMMITMENT TO/ASSIST/AMERICANS, ESPECIALLY THE
I

POOR AND NEEDY, TO MEET THEIR HOUSING NE~DS WHILE ALSO FOCUSING ON
THE REVITALIZATION OF OUR CITIES AND TOWNS,

HR.

I

CHAIRMAN, THE MAJORITY OF MY WORKING CAREER HAS BEEN

DEVOTED TO THE DEVELOPMENT OF HOUSING IN THE PRIVATE SECTOR,
THE PAST

14

FOR

YEARS, I HAVE BEEN OWNER AND PRESIDENT OF A NATIONAL

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REAL ESTATE AND INVESTMENT COMPANY WHOSE ACTIVITIES INCLUDE
CONSTRUCTION, FINANCING, MANAGEMENT AND SALE OF RESIDENTIAL AND
COMMERCIAL PROPERTIES.

) HAVE ALSO SERVED AS A COMMISSIONER OF

THE CITY OF Los ANGELES, AND AS CHAIRMAN OF THE Los ANGELES COUNTY
DELINQUENCY AND CRIME COMMISSION.
A

THESE EXPERIENCES HAVE GIVEN ME

FIRST-HAND UNDERSTANDING OF SOME OF THE CHALLENGES FACING OUR CITIES.
HAVE ALSO SEEN THE TREMENDOUS CONTRIBUTIONS WHICH COORDINATED EFFORTS

AMONG LOCAL COMMUNITY LEADERS FROM THE PRIVATE SECTOR AND ALL LEVELS OF
GOVERNMENT CAN MAKE IN MEETING HUMAN NEEDS.

) THUS BRING TO THIS POSITION A KEEN APPRECIATION OF THE
AMERICAN FREE ENTERPRISE SYSTEM AND WHAT IT CAN ACCOMPLISH, AS
WELL AS THE VITAL ROLE GOVERNMENT PLAYS IN THE LIVES OF OUR PEOPLE.

WHILE ) HAVE NOT HAD DIRECT INVOLVEMENT WITH

HUD

IN RECENT

YEARS, ) AM AWARE OF THE VARIETY AND SCOPE OF ITS PROGRAMS, AND
AM COMMITTED TO IMPROVING THEIR EFFICIENCY AND EFFECTIVENESS.

) BELIEVE ) BRING TO THIS ASSIGNMENT STRONG MANAGERIAL
TALENTS WHICH CAN BE USEFULLY EMPLOYED AT

HUD.

IN THIS DAY OF

LIMITED FEDERAL RESOURCES, THERE CAN BE NO GREATER CHALLENGE
THAN THAT CONFRONTING

HUD:

HOW TO DO MORE WITH LESS.

As A MEMBER

OF THE EXECUTIVE COMMITTEE OF THE PRESIDENT'S GRACE COMMISSION,
) LEARNED THAT THERE IS ALWAYS ROOM FOR IMPROVING EFFICIENCY

AND PRODUCTIVITY IN GOVERNMENT WITHOUT ENDANGERING THE PUBLIC
MISSION OF THE AGENCY.

I WELCOME THE CHALLENGE OF WORKING WITH

CONGRESS AND THE ADMINISTRATION TO IMPROVE HOUSING OPPORTUNITIES
FOR ALL AMERICANS AND TO PROMOTE THE ECONOMIC GROWTH OF OUR
COMMUNITIES.

MR. CHAIRMAN A.ND MEMBERS OF THE COMMITTEE, I SINCERELY
APPRECIATE THE HONOR WHICH PRESIDENT REAGAN HAS BESTOWED UPON ME
BY NOMINATING ME TO BE UNDER SECRETARY OF THE DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT.

To

BUILD UPON THE ACCOMPLISHMENTS

WHICH HAVE BEEN ACHIEVED AT HUD TO DATE WILL DEPEND UPON ALL OF US
COOPERATING TOGETHER AS PARTNERS.

I LOOK FORWARD TO WORKING WITH THIS COMMITTEE AND ITS STAFF
AND WITH MY COLLEAGUES IN THE EXECUTIVE BRANCH TO ADVANCE THE
VITAL MISSION OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT.

28

.:A::i~R
l'olltlantDwhlcll
nominated:

O..ofbl1111:

Marftal ltatus:

c o ~..: PRESJDoo::MINEES

eoyernor,

~

O..of
nomlnatlan:,_..,4_-2"'7'--.:8.a.7_ _ __

Federal Ruerve Board

.J. wi1

PIKe of bl1111:

Eugene, Oregon

Fun nameofspouae:

Married

.

.

Ellen Louiae !liurdi ltelle7

Nameanclaaa
of chlldrwi: 11:inaloe 11:e lley Queen (3;;.O;.;);......_ _ _ _ _ __
Jame ■ Micajah Jtelley (2,..7._.)_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __

Michael Mc:Iycr Jelley c,. 2.,.5.,_)_ _ _ _ _ _ __
Dll■I

Institution

Education:

attended

· ·1inkaid
Woodberry

Rice

Fore ■ t

Uniycr ■ ity

1942-1947

N/A

1947-1950

Highachool

1950

B.A.

1954

M.B.A.

1959

1950-1954

Harvard Bu•ine•• School 1957-1959

Honors and awards: Ust below all scholarships, fellowships, honorary del,..., mllltary medals. honorary society
mambershlps, and any alher spacial r■cocnltlonl for outltandlnc MIYlca or achl■--lt.

I

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29
LIit below all l!llfflbenhlps and offices held In pnifeulonal, fratamal, bullneu, ICholarly,

·t+cMc. cllarllable and oe-orpnlutianl.

"!_l\•

fii

-- (lfl,W

See Attecbment

6

Employment - , I : Ust below all positions held since coll1p, lncludln1 the title or description of Job, name of
employment. location of work, end dat• of lnclullve employment.

9/2,/11 to preeent

Houston,

Inveetment

♦ dui ■ ore

Inc

Cbeinnen

Texa ■

6/30/81 to present -The Shoreline Companies, Inc., Chairman
Houston

Texaa

2/1/73 to 6/30/81 -Jelley Jndu1trie1, Inc •• President 104 CED
Houston, Texaa

7/1/56 to 6/30/81 ,Kelley Mamtfectnrinc Company, President & Chairman,
Houston, Texea

I

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30
Oovlmr...t
W1'1 uperlence In or dll'Kt aaoclatlon wllll Fedenl, Stata, or local ..,..mmenta, 111cludlnc an, aclvilOIY, -ltatlve. honorary or Oilier part-time IMVlce or positloM.

uperiencc

.

Published
wrltlnp:

List the tltl•, publishers and dat• ol boob, artlclea, llj)Drtl or other publllhld m■terlala
,oil ..... wrlttan.
!lone

Political
affiliations
and actlvltla:

Ust all memberships and offices held In and HIVlces rendered to all political partial or
alectlan commltt- durtn1 the last 10 yun.

Director of HOlJPAC,

Inactive.

I

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31
l'Cllftlcll
antributlanl:

f:=ln

an political c:onlrlbullonl of $500 or more lo an, Individual, eampallfl orpnlllllan. polltlc:al party, political IICtlon committee or llmillr entity durin1 the last el&ht
,-rs and identlfy the apeclfic - n l l . data, and of the recipients.
See attached

Qualiftcatlons:

I

Stata fully your qualificatlona to ..,... in the position to whic:11 yoil have been named.
(_.._
See attached

C

future employment
I. Indicate whethar you will - r all connections with your present employer, bush1e11
relationships:
firm, a.sociation or orpnizatlon if you are confirmed by Iha Senate.
Yea
2. Id far as can be ' - • 1t1ta whether you haw an, plans after c:cmpletin1 aovwnment Hrvlca to resume amployment, affillltion or prectlca with your previous ployer, business firm, auociatlon or orpnizatlon.

3. Has anybody mada you • commitment to a job after you leaw aowmmant7
Ro

4. Do you expect to serve the full term for which you haw bean appointed?
Yea

4

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Potential conlllc:la
ol lnleNII:
,c~Dllcrlbe MY llnanclal arranpmenta or def91'Nd compenutlon q - i s or OIiier
~.·•:1~ contlnulnc deallnp with business •l;OClat-. clients or customers who will be a,.
~ ~ l e i • which you will lnllulllce In the poaltlon to which you haw been

2. Lisi any Investments, obllptlons, llabllltles, or other 1'91atlonlhlps which ml1ht lnwlve
potential conflicts of Interest with the position to which you have been nominated.

3. Describe any business relationship, dealln1 or llnanclal transaction (other than tu•
paylnl) which you have had durln1 the last 10 years with the Federal Government,
whether for yourself, on behalf of a client. or actln1 as an apnt, that mllht in any
way constitute or r.ult In a poulble conflict of Interest with the posltlon to which you
have been nominated.
·

I

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33
4. List any lobbyln1 activity durln1 the put 10 ,ears In which you have lflllpd for the
. _. .• _ purpose of directly or Indirectly lntluencln1 the passap, defeat or modification ol
~-~_..., anr fealsl1tlon at the netlonal i...... ol aovernrnent or affect1n1 the administration and
~ ! . eacutlon ol national IIW or public policy•

. --~;'-.

Ii, Explain ' - you will mohM 8IIJ' potential conflict of lntenst that 11111 be discloHCI by
your responsa to the 1bcM It-.

I vill Nke any dive1tment, •• required; and alter or sever

IDY
Civil, criminal 11111
lnvestiptory
ICtionl:

rclation ■hiPI, a■ required.

1. Give the full details of any cMI or criminal proceedln1 In which you were I defendant
or any Inquiry or lnVl$tllallon by I Federal, State, or local 1pncy In which you wera
the subject of the Inquiry or lnvestlptlon.
·

2. Ghia the full details of any proceedln1, Inquiry or lnvestlptlon br anr professional
11socl1tlon lncluclln1 any bar 1ssociltlon In which you were the subject ol the proceedln1, inquiry or lnvestlptlon.

I

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34
Attachment A

Membership ■:

Organization
Inve ■ t-nt

Adviaora, Inc.
Companie ■ ,

The Shoreline

Inc.

Rally Club of Rice University
Young

President' ■

World

Bu■ ine ■■

Bou ■ ton

Organization

Tex■■ Indu ■ trie ■,

Chairman

1981-to present

Chairman

1981-to

Vice President

1953-1954

Chapter Chairman

1962-1982

Sy■ tema,

KI

Inc.

Indu ■ triea,

pre ■ ent

1982-to present

Inc.

Distribution

Kelley

Date ■

Council

Club

Bolding■,

Office held
(if any)

Inc.

Inc.

Board of

Director■

1960-to

pre ■ent

Board of

Director■

1976-to

pre ■ ent

Board of

Director■

1977-1984

Board of

Director■

1981-1983

President & CEO

1973-1981

Kelley Manufacturing Company

President & Chairman

1956-1981

Westwood Commerce Bank

Board of

Director ■

1974-1982

Board of

Director ■

1982-1984

Southern National Bank

Board of

Director ■

1961-1972

Rice University

Trustee & Governor

National A■■ ociation of
Independent School ■

Tru ■ tee

St.

Chairman, Bd. of Trustees 1972-1981

We ■ t

Belt National Bank

John' ■

School

C011111ittee

1977-to

pre ■ ent

1977-1982

Metropolitan YMCA

Board of

Barri■

County United Fund

Agency

Better

Bu ■ ine ■■

Bureau

Executive C011111ittee
Vice Chairman

1978-1981
1980-1981

Girl Scout ■ of America
San Jacinto Chapter

Director, Treasurer

1964-1970

The Forum Club of

Director■

Operation■

Bou ■ ton

Harvard Busine ■■ School Club
of Houston

Luke' ■

Coma.

1966-1969

1981-to present
Board of

Director■

Houaton Philosophical Society
St.

1970-1971

Methodist Church Foundation Vice Chairman

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1959-to present
1971-to

pre ■ ent

1978-to

pre ■ ent

Google

35
Attachment B
Political contribution•:
1979
2/13/79
9/19/79

George Buah for Preaident
George Buah for President

$ 1,000

250

1980
9/22/80
10/27/80

Fields for Congre••
Barria County Republican Party

500
500

Ji■

500

1981
11/6/81

Greenwood c-paign Fund

1982
5/28/82

HOUPAC

1,000

HOUPAC

1,000

HOUPAC
Friends of Phil Gr._
Victory '84 (Reagan)

1,000
2,000
1,000

HOUP.AC
Fund For America's Future (George Bush)

1, 000
500

Fund For America's Future (George Bush)
HOUPAC

500
1,0('.)

1983
3/4/83
1984
2/84
2/24/84
8/8/84
1985
5/23/85
10/31/85
1986
4/7/86
4/11/86

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Attachment C
Qualifications:
The duties of the Governor of the Federal Reserve System can fairly·be
divided into three categories: technical central banking activity, policy
setting based on macro and micro economic judgments, and institutional
governance and management. In passing the various statutes that created
and now control the System, Congress foresaw this broad variety of activity
that would confront the Board, and instructed the President to nominate
Governors with "due regard to a fair representation of the financial,
agricultural, industrial and conmercial interests."
Continually from 1959 to date, I have had primary profit and loH
responsibility for corporation ■ in (successively) distribution, manufacturing, and financial service. I have been a founder of two banks, and
joined the Board of a third within several months of its opening.
Additionally, I have been an active Director in other companies involved in
aggregates, cement and concrete, distribution, real estate development,
steel, terminaling, and trucking. These are among the most competitive and
entrepreneurial industries in our economy. Most of these involvement ■
have been in corporations with under $100 million in sales, the size
category that includes virtually all of the net growth in employment that
has occurred in our country in recent years.
As a manager of financial asset portfolios over the past five years, I have
continuously studied and monitored the U.S. economy.
In the not-for-profit sector, I have served actively in nine institutions
variously as Chairman, Trustee, Director or other officer.
In sum, it is my belief that experience in activities related to those in
which the Board must act, and insight into areas in which the Board must
make judgments, will enable me to make a useful contribution to the nation
as a Governor of the Federal Reserve System.

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STATEMENT FOR COMPLETION BY PRESIDENTIAL NOMINEES
IW!l

Position to which
Under Secretary/HUD
nominated:
Dateofbirth: 3/31/39
(DAY)

Marital status:

CIIONtlQ

CTI.AJQ

Married

D.

Carl

Name: ___c_o_v_i_t_z==-----

Ptaceolblrth:

""'"'

..n, ...

Daleo!
nomination: _ _ _ _ _ _ _ __

Boston, Mass.

---~--------------

Full name of spouse: Aviva Habert Covitz

Nameandages
Philip,
Marc,
of children: _ _
_ _ _ 14
_______
_ _ 10
_ _ _ _ __

Education:

Institution
Univ. of Pennsylvania

Dates
attended

Degrees
received

Dates of
degrees

1956-1960

B.S.

1960

1961-1962

M.B.A.

1962

Columbia Univ. Graduate
School of Business

Honors and awards: list below all scholarships, fellowships, honorary degrees, mllltary medals, honorary society
memberships, and any other special recognitions for outstanding service or achievemenl·

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Memberships:

List below all memberships and offices held In professional, fraternal, business, scholarly,
civic, charitable and other organizations.
Office held •

Ora;anlzatlon

Dotes

(II any)

Current

Young Presidents' Org.

Executive Comm.

Los Angeles Museum of

Chairman-Operations 1979-1982

Contemporary Art

Phi Epsilon Pi

1957--1960

Regency Club

Current

Balboa Bay Club

Current

Employment record: List below all positions held since college, Including the title or description of Job, name of
employment, location of work, and dates of inclusive employment.

1972-present: Landmark Communities, Inc., Owner; 9595 Wilshire
Blvd., Ste. 301, Beverly Hills, CA; President.
1970-1972: Levitt

&

Sons, a Division of ITT; Battle Creek,

MI, Vice President Sales and Marketing.

1968-1970: Canada Dry Corp., 100 Park Ave., New York, N.Y.;
Marketing Manager.
1966-1968: Rheingold Breweries, Brooklyn, N.Y.1 Marketing
Manager.

1962-1968: Bristol-Myers Products Division, 630 Fifth Ave.,
New York, N.Y.; Bufferin Product Manager.

2

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39
Government
experience:

Ust any experience In or direct association with Federal, State, or local ..,..mments, In•
eluding any advisory, consultative, honorary or other part-time service or positions.

President's Private Sector Survey on Cost Contr61 (Grace
Commission)·, Washington,

o.c.,

Executive Committee.

City of Los Angeles Convention Center Commission,
Commissioner.
Los Angeles County Delinquency and Crime Commission,
Chairman.

Published
writings:

Political
affiliations
and activities:

Ust the titles, publishers and dates of books, articles, reports or other published materials
you have written.

Ust all memberships and offices held In and services rendered to all political parties or
election committees during the last 10 years.

California Fepnhlican Party

Past Member·

State Central

Committee, Budget and Expenditures €ommittee, Financial
Controls Subcommittee, Audit Committee.

ll

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40
Polillcal
contributions:

Itemize all political contributions of $500 or more to any Individual, campaign organization, political perty, political action committee or similar entity during the last eight
years and Identify the specific amounts, dates, and names of the recipients.

See attached list.

Qualifications:

State fully your qualifications to serve in the position to which you have been named.
(attach sheet)

Future employment
1. Indicate whether you will sever all connections with your present employer, business
relationships:
firm, association or organization if you are confirmed by the Senate.

I will take a leave of absence from my existing companies

and operating partnerships.
2. As far as can be foreseen, state whether you have any plans after completing government service to resume employment, affiliation or practice with your previous em•
ployer, business firm, association or organization.

Yes.

3. Has anybody made you

a commitment to a Job after you leave government!

No.
4. Do you expect to serve the full term for which you have been appointed!

Yes.

4

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41
Carl D. Covitz
Political Contributions

Date

. Nam~

0ct-86
Aug-86
Aug-a6
Aug-86
Jul-86
Moy-86
Moy-86
Moy-86
Apr-86
Apr-86
Nov-85
Jul-85
Jun-85
Apr-85
0ct-84
Jul-84
Jul-84
0cl-83
Jun-82
Apr-82
Apr-82
Nov-81

Conway Collis
Ed Zchau
Yes on 65
John McCain
John McCoin
Conway Co11is
Ed Zchau
Mike Curb
Wolverton
Bobbi Fiedler
John Von· de Kamp
Conway Collis
Art Loffer
Pete Wilson
Reogon Generol
Pete Wilson
Reagan Primary
Bill Cohen
Rick Fore
Mike Curb
John McCoin
Pete Wilson

-------

Amount

-------

-------

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$1,000
$1,000
$1,000
$1,000
$1,000
$600
$1,000
$1,000
$500
$500
$500
$500
$1,000
$1,000
$1,000
$1,000
$1,000
$1,000
$1,000
$2,000
$1,000
$1,000

Google

42
CARL D. COVITZ
Job Qualifications

I am the cofounder, owner and president of Landmark Communities,
Inc., a national real estate development and investment company
with offices in Los Angeles, New York, Florida, Ohio and Arizona,
whose activities include residential properties as well as
commercial and industrial.

In addition to having had seventeen

years of experience in the building and real estate industry,
I have had considerable success as a manager and administrator
in both large organizations and small companies.

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Potential conflicts
of Interest:

1. Describe any financial arrangements or deferred compensation agreements or other
continuing dealings with business associates, clients or customers who will be al•
fected by policies which you will Influence In the position to which you have been
nominated.

2. List any Investments, obligations, liabilities, or other relationships which m!ght Involve
potential conOicts of interest with the position to which you have been nominated.

None.

3. Describe any business relationship, dealing or financial transaction (other than taxpaying) whi~h you have had during the last 10 years with the !'ederal Government,
whether for yourself, on behalf of a client, or acting as an agent, that might in any
way constitute or result In a possible conflict of Interest with the position to which you
have been nominated.

None.

I

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4. List any lobbying activity during the past 10 years in which you have engaged for the
purpose of directly or Indirectly influencing the passage, defeat or modification of
any legislation at the national level of government or affecting the administration and
execution of national law or public policy.

None.

5. Explain how you will resolve any potential conflict of interest that may be disclosed by
YoUr responses to the above items.

Not applicable.

Civil, criminal and
Investigatory_
actions:

1. Give the full -details of any civil or criminal proceeding 1n which pu were a defendant
or any Inquiry or Investigation by a Federal, State, or local agency in which you were ·
the subject of the inquiry or Investigation.
I was one of many

defendaDts

jp a lawsuit filed by a

homeo~ner's association against all parties inuoJued
in the development, construction

of a condominium project.

financing

and operation

The lawsuit was settled out

of court and I did not contribute to the settJeroeot

2. Give the full details of any proceeding, inquiry or investigation by any professional
association including any bar association In which you were the subject of the proceeding, inquiry or Investigation.
·

None.

II

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National Association of Home Builders
15th and M Streets, N.W., Washington, D.C. 20005
(202) 822-0400
(800) 368-5242

Telex 89-2600
llunee M.

Placher, Jr.

11111-.,

May 5, 1987

Honorable William Proxmire, Chairman
Committee on Banking, Housing and Urban Affairs
U.S. Senate
Washington, D.C.
20510
Dear Mr. Chairman:
On behalf of the 145,000 memhers of the National Association
of Home Builders, I would like to recommend that Carl Covitz of
Beverly qills, California be confirmed as the Under Secretary of
the U.S. Department of Housing and Urban Development.
Mr. Covitz is a commercial and residential builder who has
been active in local government.
I am proud to endorse Carl without reservation. His loyalty
and political support to the Administration are well known.

0

73-506 (52)

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