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Edward M. Gramlich, of Virginia,to be a Member of the Board of Governors
of the Federal Reserve System - Continued
Prepared statement - Continued
Background
The Federal Reserve
Biographical sketch of nominee
Curriculum Vitae
Response to written questions of:
Senator Enzi
Senator Dodd
Roger W. Ferguson, Jr., of Massachusetts, to be a Member of the Board
of Governorsof the Federal Reserve System
Prepared statement
Biographical sketch of nominee
Response to written questions of:
Senator Enzi
Senator Dodd
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N O M I N A T I O N S
O F :
L A U R A S. U N G E R , O F N E W Y O R K , T O B E A
C O M M I S S I O N E R O F T H E S E C U R I T I E S A N D
E X C H A N G E C O M M I S S I O N
P A U L R. C A R E Y , O F N E W Y O R K , T O B E A
C O M M I S S I O N E R O F T H E S E C U R Í T I E S A N D
E X C H A N G E C O M M I S S I O N
D E N N I S D O L L A R , O F M I S S I S S I P P I, T O B E A
M E M B E R O F
T H E N A T I O N A L C R E D I T U N I O N
A D M I N I S T R A T I O N
B O A R D
E D W A R D M. G R A M L I C H , O F VIRGINIA , T O B E
A M E M B E R O F T H E B O A R D O F G O V E R N O R S
O F T H E F E D E R A L R E S E R V E S Y S T E M
O F
R O G E R W.
M A S S A C H U S E T T
T H E B O A R D O F
F E D E R A L R
E L L E N
F E R G U S O
S , T O B E
G O V E R N O
E S E R V E S
S E I D M A N , O F
T H E
N
A
R
Y
, JR .
M E M B E R
S O F T H E
S T E M
D I S T R I C T
O F
O F
C O L U M B I A , T O B E T H E
D I R E C T O R O F T H E
O F F I C E O F T H R I F T S U P E R V I S I O N
T U E S D A Y , S E P T E M B E R 30 , 1997
U.S. S EN A TE ,
C O M M I T T E E O N B A N K I N G , H O U S I N G , A N D U R B A N AFFAIRS,
Washington , D C .
T h e Co m mi tt ee m e t at 9:40 a.m. , in r o o m S D - 538 of the Dirksen
Senate Office Building, Senator Alfonse M. D ' A m a t o (C h a i r m a n of
the C omm itt ee ) presiding.
O P E N I N G S T A T E M E N T O F C H A I R M A N A L F O N S E M. D ' A M A T O
T h e C H A I R MA N . G o o d m or n in g. Today , the Co mmi tte e is holding
a hearing on six important nominations. O n our first panel, w e will
hear from two nom inees w h o I k n o w very well, a n d it's m y great
pleasure to w o r k with both of them , La ur a U n g e r a n d Paul Carey.
(1)
2
T h e y have been nominated to be Commissioners of the Securities
an d Ex ch an g e Co mm iss io n . I a m pleased to note the presence of
S E C C h a i r m a n Arthur Levitt as well . I think his presence indi
cates his deep appreciation , support, an d concern with respect not
only to the Commission , but with respect to these two nominees
w h o m he's h a d an opportunity to w o r k with .
O n our second panel, w e will hear from E d w a r d Gramlich a n d
Roger Ferguson , w h o h a v e been nominate d t o be M e m b e r s of the
Board of Governors of the Federal Reserve System .
O n our third panel, w e have Dennis Dollar, w h o has been n o m i
nated to be a M e m b e r of the National Credit U n io n Administration
Board , an d Ellen Seidman , w h o has been nominated to be the D i
rector of the Office of Thrift Supervision .
Iw a n t to take this opportunity to welcom e each of our n o m i n e e s.
N o w w e will begin with our first panel, the nominees for the S e
curities and E xch an ge Commission , Lau ra U n g e r a n d Paul Carey.
Before swearing in our nominees , I would like to m a k e several r e
m a r k s about L a u r a U n g e r and P a u l Carey . I n m y opinion , the
President could not have chosen t wo m o r e qualified people to serve
on the S E C .
La ura U n g e r has done a very outstanding job a s the Securities
Counsel o n t h e B a n k i n g C om mit te e since 1992. L a ur a actually
started working for the Co mm it t ee a n d for m y office in 1990 , w h e n
she c a m e ov er from the S E C as a Congressional Fellow . Before
that, she served as a staff attorney in the S E C Division of Enforce
m e n t from 1988 to 1990. L aur a is a native of N e w York . Sh e r e
ceived her undergraduate degree from U . C . Berkeley an d her law
degree from N e w Y o r k L a w School . Hav ing wor ked with Laura
over the last 7 years, I k n o w from firsthand experience that she
will be an excellent Commissioner . S he has the expertise an d the
experience in this area that will be a tremendous asset to the S E C .
S he is also the proud mo ther of S i m o n e, w h o is here with us today .
Let's see , S i m o n e is 9 m o n t h s old. Is that right?
Ms. U N G E R . Yes .
T h e C H A I R M A N . Beautiful, beautiful girl, an d she's married to
Peter U n g e r , this youthful, h a n d s o m e, debonair gentleman in the
first r o w .
[Laughter.]
Iw i s h to extend a special w elco me to Si m on e a n d to Peter .
N o w , with respect t o Paul Carey . W h a t can you say about a
Carey that hasn't been said by his father already?
[Laughter .)
I have k n o w n the Carey family for m a n y , m a n y years. I've k n o w n
t h e m w h e n w e haven't been on the s a m e side, I've k n o w n t h e m
w h e n we've h a d differences, I've k n o w n t h e m w h e n we've been on
the s a m e side, a nd I would m u c h rather have t h e m on m y side.
There are m a n y of them . T h e y are formidable . T h e y are dedi
cated . T h e y are a great family, and they have m a d e N e w Y o r k the
E m pi r e State .
W e are indeed fortunate today to have the former Governor of
the State of N e w Y o r k with us , and I k n o w this m u s t be a very
proud d ay for Governor Carey to w at ch his son , Paul, go through
the process of becoming a Securities a n d Ex ch an ge Commissi oner
because I k n o w it will be a reality.
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Gov erno r Carey , would you stand so w e can recognize you and
t h a n k you for being here?
[Applause .
)
T o say that the Irish Tribe is alive, well, a nd thriving wou ld be
a n understatement . Three of Paul's brothers are also here; Brian ,
T h o m a s , and Kevin . W e w e l c o m e all of y ou .
Paul h a s been working in the W hite H o u s e as a Special Assistant
to the President since February 1993. H e is a native N e w Yorker
a n d a graduate of Colgate University. Th rou gh his job in the White
H o u s e , Paul an d I, as well as m a n y M e m b e r s of the Com mit tee ,
ha v e h a d the opportunity to w o r k together on a wide range of legis
lative issues . H e is a m a n of utmost integrity and competence , a
true professional, an d a dedicated and courageous public servant.
H e ha s served the President a nd the country well , and h a s earned
the confidence a nd respect of everyone he has wo rk ed with .
I w a n t to wel co me Paul a nd his family and friends w h o are in
attendance a n d look forward to watching his w or k for m a n y years
to c o m e .
N o w , at this point, I will swear in our two witnesses.
I see w e have been joined by Senator Reed . D o you have a state
m e n t , Senator ?
OPENING C OM M E NT S OF SENATOR JACK REED
Senator R E E D . Mr. Chairman , I too w a n t to c o m m e n d the n o m i
nees a nd I wish t h e m well .
I ha ve h a d a chance to w o r k very closely with Paul over the last
several years , and I'm disappointed that L aura is leaving us to join
the S E C , but to both of t h e m best wishes .
T h e C H A I R M A N . T h a n k you , Senator .
W o u l d you please rise for the oath ?
[Witnesses sworn .)
S W O R N T E S T I M O N Y O F L A U R A S. U N G E R
O F N E W Y O R K ,T O B E A C O M M I S S I O N E R O F T H E
SECURITIES A N D E X C H A N G E C O M M I S S I O N
Ms. U N G E R . C h a i r m a n D 'A mat o , Senator Sarbanes, and M e m b e r s
of the C omm itt ee , as a m e m b e r of the C om mi tte e staff, it is a n es
pecially great ho nor to a p pe a r before you today to testify on m y
nomination by the President to be Commissioner of the Securities
a n d Ex ch an ge C omm iss ion .
A s you noted earlier, I w a nt e d to mention m y beautiful h usb an d
a n d daughter sitting behind m e , a nd th ank m y h u s b a n d in particu
lar for his support a n d for extricating m e from N e w Yo rk City to
c o m e to Washington - which I did kicking a nd screaming only to
h a v e a wonderful time here. I also w a n t to thank m y beautiful
daughter Simone's wonderful n a n n y , w h o m a k e s it possible for m e
to go to w o r k every day an d not have to worry about m y daughter
having a good time.
I a m also pleased to share the table today with m y able col
league, Paul Carey, the President's choice for the other vac ant S e
curities a nd E xc ha ng e Commissioner seat, a fellow N e w Yorker ,
a nd an individual with w h o m I have ha d the pleasure of working.
If confirmed , I look forward to sharing a table at the C om mis si on
with Mr. Carey .
4
A s the C h a i r m a n mentioned earlier, I joined his staff as a C o n
gressional Fellow from the S E C almost exactly 7 years ago. O v e r
the last 7 y e ar s ,I have h a d the pleasure a n d privilege to w o r k
closely with the C h a i r m a n a nd Co mm it te e M e m b e r s on a variety
of issues. It has never been dull. I have h a d the opportunity to
w o r k on a n u m b e r of important pieces of legislation a n d h a v e e n
joyed every m o m e n t of m y tenure o n the Co mm it te e staff.
W o r k i n g for the C h a i r m a n a nd the C o mm it te e at this challeng
ing time in our financial history has afforded m e the opportunity
toh e l p shape the securities laws a n d to participate in important
policydecisions concerning the efficiency a n d fairness of the capital
markets a nd the protection of investors. Should the Senate confirm
m y nomination , I look forward to continuing m y w o r k in this area
as a Securities a nd E xcha nge Commissioner .
The Commission's mission is to administer and enforce the s e c u
rities laws to protect investors an d to maintain fair, honest, and e f
ficient markets. T o fulfill this mission , the S E C m u s t consider the
delicate balance between investors and the marketplace . Wit ho ut
investor confidence, the capital markets will not flourish . H o w e v e r ,
too m u c h regulation will m a k e the markets a n unattractive source
of financing t o companies. If confirmed , I will w o r k to ensure that
the Commission's programs strike the appropriate balance .
I feel extraordinarily honored to h a v e been the President's choice
for a seat on the C o mm is s io n . A s the Co mm is s io n heads toward the
21st century, it will face a myriad of challenges, including issues
involving ma rke t structure, technology , internationalization , c o n
tinued growth in the m utua l fund industry , as well as financial
modernization. If confirmed , I wel com e the opportunity to w o r k on
these issues a n d to be a M e m b e r of the C o mm is s io n as it prepares
for the n e w millennium .
W h e n I left the S E C 7 years ago to c o m e to Capitol Hill and w o r k
for Senator D' Am at o , I promised Iwould return to the Commission .
At that time , I h a d no idea in w h a t capacity. A s hard as it will be
to leave the C om m it t ee, the Committee M e m b e r s , an d all of m y col
leagues on the staff, should the Senate confirm m y nomination , it
is with great enthusiasm a nd anticipation that Iwill return to the
C om mis si on to serve as a C om mi ss io ne r. If confirmed , I look for
w a r d to continuing to w o r k with this C om mi tt ee an d staff in m y
n e w capacity .
T h a n k you , Mr. Chairman , for everything. It has been a w o n d e r
ful experience. I look forward to answering a n y questions.
T h e C H A I R M A N . T h a n k y o u , L aura . It'sgreat having you on that
side of the table not testifying as an expert witness .
Before I call u po n Paul C a r e y for his remark s , I w ould like to a c
knowledge his dear friend w h o d o es h i m honor, h i s family h o n o r,
and the process honor , former President of the E x -I m B a n k , K e n
Brody and Mrs. Brody.
Ken , th ank you for being here with us today .
I would also like to a d d into the record two very strong state
ment s of support on behalf of both nominees from the Senior S e n
ator from N e w York , Senator Moy nihan , w h o unfortunately is not
feeling well , which precludes h i m from being here.
H e aske d m e to p a y special tribute to P au l. H e said that he is
going to miss working with you , but he certainly looks forward to
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5
w o r k i n g with you in your n e w position , and he has asked m e to e x
t end personally his best wishe s to the Governor .
I a m going to ask that both of these statements be placed in the
record as if read in their entirety.
M r . Carey .
S W O R N T E S T I M O N Y O F P A U L R. C A R E Y
O F N E W Y O R K ,T O B E A C O M M I S S I O N E R O F T H E
SECURITIES A N D E X C H A N G E C O M M I S S I O N
M r . C A R E Y . T h a n k you , M r . C h a i r m a n , Senator Sarbanes, a nd
M e m b e r s of the Co mm it te e . I a m grateful to the President for
n omina ting m e to the Securities a n d E xcha nge C o mm is s io n . I a m
also honored to appear before you today and appreciate the C o m
mittee's scheduling the hearing in such a n expedited fashion . I a m
especially pleased to b e e mba rki ng on this endeavor at the s a m e
time as L a u r a Unger . I have h a d the good fortune to w o r k with
L a u r a on m a n y issues. If confirmed , I a m enthusiastic about the
contribution w e can both m a k e to this C o mm is s io n by our ability
to w o r k together.
Before his elevation to the S u p r e m e Court by President Franklin
D. Roosevelt , William O. Douglas served as the third C h a i r m a n of
the S E C — from 1937 to 1939. H e described the mission of the S E C
in very simple but compelling words . "W e are the investor's a d v o
cate .” T h a t remains true to this da y , and I believe it has been p a r
ticularly evident during the tenure of C h a i r m a n Arthur Levitt. I
am proud to note that m y relationship with the C h a i r m a n dates
b a c k to the 1970's w h e n our fathers served together as Governor
a n d Comptroller of N e w Y or k State . If confirmed , I look forward to
extending into this generation the s ha r ed h o n o r of public service of
our t w o families b y joining the S E C with Ch ai rm an Levitt.
I believe the S E C , in recent years , has been a model for the rela
tionship that should exist b e t w e e n the regulators a n d the r e g u
lated . This relationship requires both a healthy tension and a level
of cooperation on a variety of issues. W e have i m p r o v e d th e w a y
our markets function and preserved the United States capital m a r
kets' exemplary standing throughout the world . A s a result, the
fairness an d transparency in our markets have been enhanced , to
the e no r mo u s benefit of investors.
M a n y of the challenges that lie ahead are in the relationship b e
tw e e n o u r markets an d those of other nations. O ngoi ng efforts to
arrive at international accounting standards as well as cooperation
on enforcement matters s ho ul d permit us to ac c om m o da t e the
growth of across-the-border transactions without diminishing inves
tor protection . T h e integrity of our markets and the confidence that
has p r o du c e d is owed in large m ea su re to the vigorous enforcement
efforts of the S E C . M a r k e t s are dramatically affected by the rapid
development of technology, w h i c h presents both opportunities an d
risks t ha t m u s t b e carefully monitored . Investors will also benefit
from the SEC's "plain English " effort to m a k e disclosure docu ments
clearer an d easier to understand, as well as the Investor Education
a n d Assistance P r o g r a m which gives investors a foru m in whic h
they can get objective information.
It takes vigilance a nd j u dg m en t to encourage capital formation
a n d vigorously maintain investor protection. This will be m y p rin
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cipal concern if I a m confirmed by this C omm itt ee a nd the full S e n
ate as a Securities a nd Ex chan ge Commissioner . I hope that I can
look forward to working with this Com mit tee and its staff on the
m a n y issues w e will face together .
T h a n k you . I look forward to taking any questions that you m a y
have .
T h e C H A I R M A N . W e have been joined by the F o r m e r C h a i r m a n
and R ank in g M e m b e r of the Co mmi tte e , Senator Sarbanes .
Senator Sarbanes .
O P E N I N G S T A T E M E N T O F S E N A T O R P A U L S. S A R B A N E S
Senator S A R B A N E S. Mr. C h a i r m a n , thank you very m u c h . I'll be
very brief. Unfortunately, I a m not going to be able to stay this
mo rning .I regret that because I w a s looking forward to exchanging
views with the various nominees that are before us . I w a n t to
thank you for scheduling this very important hearing :
I wou ld like to m a k e the observation that all six of the nominees
that will be before the Co mm i tt ee today have very important r e g u
latory responsibilities . W e often think of the Federal Reserve s i m
ply in terms of its monetary policy responsibilities, but it has very
significant regulatory responsibilities and it will fall on all six of
these nominees to ensure that the f ram ewo rk within which the e c o
nomic system is functioning is one that maintains the honesty an d
the integrity of the markets and the honesty a nd integrity of finan
cial activity.
This is a heavy responsibility and one which I believe, if not
properly discharged, can un der min e the workings of our economic
system . I just w a n t to underscore that .
I intend to support all of the people that are here before us . I
k n o w Paul Carey a n d L aura U ng e r well from their w o r k either for
or with this C omm itt ee . T h e y have both been very m u c h involved
in securities legislation which has been enacted in recent years ,
and n o w they're going to have an opportunity to imp lement t hose
statutes and enforce t h e Federal securities laws . While they are
both y ou ng , or younger than us , at least, I guess might be the w a y
to put it,w e ' r e looking forward to their tenure in this important
position. I wish t h e m well , but underscore the important burdens
they will be assuming .
I have h a d the opportunity to m ee t w i t h the two n o m i n e e s for
the Federal Reserve B o a r d . În any event, they will be coming u p
in a later panel , but I'm afraid I won't b e able to get back for that
panel. While I have underscored their responsibilities an d regula
tion in terms of assuring the viability of the financial structure,
they also have important responsibilities in formulating monetary
policy.
T h e Ame rica n ec o n om y is n o w working extremely well . W e have
brought the deficit d o w n . I believe the latest estimate is that it is
expected to b e under $ 30 billion at the e nd of this fiscal year. It
w a s $290 billion in fiscal 1992 , so w e have h a d a constrained fiscal
policy which has helped to bring the deficit d o w n . At the s a m e
time , w e have needed an a ccommo dating m on eta ry policy in order
to ensure that economic activity stays at h ig h levels.
W e have m a n a g e d to achieve that, and w e have the lowest u n e m
ployment in 25 years and the lowest inflation in 30 years. That's
7
a n enviable record, an d both Professor Gramlich and Mr. Ferguson
will h av e a hea vy burden in carrying that through .
I am very glad w e are at last going to get a Director at the Office
of Thrift Supervision , especially som eo ne of the caliber of Ellen
S e i d m a n . It has been s o m e time since that position has been filled.
I think this C om mi tt ee has consistently, in the past , urged A d m i n
istrations to fill that post. Often people e n d up doing double duty
in that office and , as Director of t h e Office of Thrift Supervision ,
it's not a desirable situation .
Finally, Mr. Chairman , I have h a d an opportunity to meet with
De nni s Dollar, an d I m u s t say I think he will bring to the Board
of the N C U A a good understanding of the credit union m o v e m e n t .
H e has been involved in it personally, he's done a very good job,
a n d h e understands the important role that it has played in our
e c o n o m y. In our discussions, he outlined his full appreciation of the
N C U A ' s responsibility to protect the safety a nd soundness of the
credit u nion industry. I a m pleased to support his nomination as
well .
I apologize to all of the nominees that I'm not going to be able
to stay through this.
T h a n k you very m u c h .
T h e C H A I RM A N . T h a n k you , Senator .
Let m e ask , Ms. Un g e r, just one question .
H a v e you adequately prepared the staff a nd Mr. Menell for your
n e w successor?
(Laughter .]
H a v e you m a d e an y recommendations ?
Ms . U N G E R . I'm not sure Mr. Menell has accepted the fact that
I m ig h t be departing.
(Laughter .]
T h e C H A I R M A N . I w a n t to ask the s a m e question of Mr. Carey.
H a v e you adequately prepped your successor ? D o you k n o w w h o
it is?
Mr. C A R E Y . I don't know w h o m y successor is.
T h e C H A I R M A N . W e m a y have to hold this until w e determine
that.
(Laughter .)
Mr. C A R E Y . B u t I'm sure that he or she will carry on the tradi
tion of working in a cooperative fashion with this Co m mi t te e .
T h e C H A I R M A N . I think I woul d be wasting the Committee's time
w e re this Senator to put forth questions to the nominees regarding
w h a t they considered t o be the greatest problem , et cetera.
I k n o w they are going to be looking at all of the issues as they
c o m e u p on the radar screen, a nd will be of very valuable assist
ance to C h a i r m a n Levitt.
Senator R ee d , do you have a n y questions ?
Senator R E E D . T h a n k you , Mr. Chairma n .
I wou ld just like to raise a couple of issues for your thoughts.
First is that shortly the S E C will be issuing regulations with r e
spect to Rule 14 (a)(8 ), which is the proxy rule whic h wou ld limit
their oversight of the process . I wo n de r if both nominees could c o m
m e n t u p o n their views with respect to the regulation of the S E C
in this n e w 14 (a)(8) proposal.
8
Ms. U N G E R . Senator, I have h a d the opportunity to be briefed on
the SEC's Rule proposal in m y capacity as a staff m e m b e r of this
C o m mi t t ee. I k n o w the Commission's goal w a s to balance s h a r e
holder access to the corporation and to have input in certain a s
pects of the corporation's activities without unduly constraining the
corporation's ability to conduct its day -to -day activities. It is m y u n
derstanding that the proposal w a s a n attempt to balance the share
holders'interest in participating in the corporation's activities with
that of the corporation in conducting its activities.
I h a v e heard since the proposal has been released that people
might b e of the opinion that it's not a balanced proposal. I w o u l d
need to look at it further . I do believe that shareholders should
have a say, w h e n appropriate, in the activities and conduct of the
c o m p a n y in which they invest.
B u t I do understand the company's need t o keep s o m e control
over those activities or input b y the shareholders.
Senator R E E D . Paul , do you have any thoughts ? I realize L a ur a
has h a d m o r e proximate exposure to s o m e of these issues of the
C omm itt ee .
Mr. C A R E Y. Senator Reed , th ank you .
I do believe the issue is o n e w h er e the S E C is trying to strike
the best balance between the n e e d s a n d rights of shareholders to
submit proposals , an d to be able to have access to proxy informa
tion that would enable t h e m to do so.
I have not ha d the opportunity to be briefed on the Commission's
n e w proposal, but l o o k forward to having a mo re informed perspec
tive on it. I would like to give you a m o r e thoughtful response in
the future a n d tow o r k with you a nd your staff o n this issue .
Senator R E E D .I appreciate that.
O n e concern that's been raised is that without s o m e type of for
m a l review of these proposals by the S E C , it might give too m u c h
leverage to corporations to discard appropriate proposals by their
shareholders, a n d if you could look att ha t, I w o u l d appreciate it.
Another area of s o m e concern is with the Small Order Execution
Sy ste m . There has been discussion that this system w a s designed
really to help small investors an d that professional investors are
entering into these trades with m o r e speculative motives, whi ch is
something that could be detrimental to the interests of those small
investors.
Again , your thoughts or c o m m e n t s or at least an indication of
your interest wo uld b e appreciated.
La ur a, wo uld you like to respond to that ?
Ms. U N G E R . Senator, again, as a C o m m i t t e e staffer, I ha ve h a d
the opportunity to speak to people about the S O E S issue , the Small
Order Execution System .
T h e intent o f the system w a s , following the mar ket break in
1987 , to enable small investors to get out o f their position. A s you
know , there were problems with s o m e of the orders being executed
at that ti me. It enabled small investors to go into the marketplace
a n d basically execute an order at a quoted price.
T h e problem is that there are s o m e abuses apparently or there
have been abuses that have been described with this sy ste m in
that professional traders also take advantage of this system to e x e
cute orders .
9
I think it's important that small investors be able to access the
m a r k e t , but it's important to do it in such a w a y so as not to u n
duly burden those brokers w h o are trying to conduct their business
in a n orderly fashion .
I k n o w the N A S D has been trying to c o m e u p with a system that
will take these two competing interests into account a nd I believe
they are working on a n e w proposal n o w . I wou ld be h ap p y to w o r k
w it h the C om mi ss io n in order to strike the appropriate balance in
that area .
Senator R E E D . T h a n k you .
Paul , are there any c o m m e n t s that you would like to m a k e ?
Mr. C A R E Y . I would like to c o m m e n t that the system is designed
a n d the n e w rules are designed to give the greatest possible trans
parency to investors w h e n they are m a k i n g their trades and to give
t h e m the most timely and reliable information to ensure liquidity
a n d orderly execution .
I believe that m a n y of the rules have been an i mpr ove men t on
the current system , but w e need to w or k closely with the m ark et
m a k e r s to m a k e sure that no unintended impediments to orderly
trading have been created .
Senator R E E D . T h a n k you .
O n e final point w hi ch I believe requires n o c o m m e n t.I w ould like
to simply mention a critical issue which is facing all the financial
service industries, and that's preparing for the year 2000 , dealing
with the technological shift a nd the computer problems . Since the
securities industry is heavily dependent up on technology and c o m
puterization, I w ould h o p e that both of you, i n your tenure on the
Com mi ssi on , would almost immediately begin to look at an y po s
sible difficulties and consequences an d w h a t the response of the
industry mig ht be , so that they're fully prepared for the potential
difficulties at the y e a r 2000 because of technology. Tha t woul d be
something I w o u l d appreciate.
Mr. C ha ir ma n , these are eminently qualified nominees a n d I b e
lieve w e all look forward with m u c h enthusiasm to supporting their
nominations.
T h e C H A I R M A N . T h a n k you very m u c h ,Senator .
I wou ld like to say that I think Mr. Carey w a s very incisive in
expressing a concern that I've heard from others . W e m u s t see to
it that the liquidity of the marketplace is not diminished to a point
w h e r e w e actually w i n d up costing the c onsu mer m o r e m o n e y .
I w ould hope this issue is something that w e will address in the
future . I k n o w it's easier said than done , but it is very important.
Before I call u p o n the third panel ahead of the second panel, b e
cause w e h a v e been joined by the Senate Majority Leader , a n d
r an k does have its privileges ,
(Laughter .)
- a n d I like being C h a i r m a n of this Co m mi tt ee
(Laughter .)
- I might a dd that w e have been joined by another luminary w h o
is here to loan his strong support to Mr. Carey, a n d that is Jud ge
Richard Eaton .
J udg e , it is good to have yo u here with us today. I would not
w a n t your presence to go unnoticed.
10
I w a n t to than k bot h of the S E C no minees , a n d I look forward
to mo vi ng this to the floor speedily, particularly since we're going
to get the Senate Majority Leader u p here right n o w .
T h a n k you very m u c h .
O n o u r third panel, w e will be hearing from Dennis Dollar, w h o
has been nominated to be a M e m b e r of the National Credit U n io n
Administration Board .
Let m e ask that Dennis Dollar co m e forward at this time .
(Pause .)
T h a n k you very m u c h .
At this point , Iw o u l d like torecognize an d call u p o n the Senate
Majority Leader, Senator Lott. Indeed, it's a great privilege to h av e
y ou c o m e before the Com mitte e , Senator, and to have you loan your
support to Mr. Dollar.
Senator Lott .
OPENING STATEMENT OF TRENT LOTT
A U.S. S E N A T O R F R O M T H E S T A T E O F MI S S I S SI P P I
Senator L O T T . T h a n k you , Mr. Ch a i rm a n . It's a great pleasure to
see you here chairing this Co mmi tte e , an d I thank you for allowing
m e to go out of order. I also than k you for your support on a n u m
ber ofissues over the years , but most especially w h e n I've been
running for leadership positions. I k n o w h o w important your s u p
port has been .
I thank you for this opportunity a nd I'm delighted to be here this
mo rn in g in support of this no min ee and in support of the other
nominees that you're holding this hearing on . I'm sure they will r e
ceive, wit h your support, expeditious consideration w h e n reported
from the C o m m i t t e e a n d w h e n they reach the floor.
I believe the Senior Senator from Mississippi will b e joining us
momentarily , an d it will s h o w the great respect whic h w e ha ve for
this nom inee, D e n n i s Dollar,w h o is President of the Gulfport ,M i s
sissippi V A Federal Credit U nion, nominated to serve on the Board
of t he National Credit U ni o n Administration .
M r . C h a i r m an , I hate to admit this, but as far back a s 1972 ,
w h e n I w a s just 3 0 years old and running for Congress m y first
time, in a district w he re most people h a d never s e e n a live R e p u b
lican before, I w e n t to a c o m m u n i t y college c a m p u s there in the
Gulfport, Biloxi, Mississippi area t o debate m y o p po n e n t, a n d m y
student chairman on the c a m p u s for that c a m p a i g n w a s none other
than Dennis Dollar.
Dennis did not h a v e a n y gray hair then . H e has gotten ahea d of
m e o n the gray hair, b u t he did a great job , a nd w e n t on to lead
a distinguished career. After his education at the c o m m u n i t y col
lege a n d the University of Mississippi, h e, himself, joined the politi
cal arena a n d w a s elected at 22 yea rs of age to the Mississippi
H o u s e of Representatives. H e w a s a leader in legislation to open
u p the government a n d let the sunshine c o m e in .
H e w a s elected, by the w a y , as a Dem ocr at, Mr. C h a i r m a n , a n d
he served in magnificent fashion in the legislature an d developed
quite a reputation for being a reformer and a genuine leader .H e
ran statewide for office and c a m e within, I believe, 1 pe rcent age
point of being elected to Secretary of State there in the State o f
Mississippi.
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Den nis Dollar has been a leader in his c o m m u n i t y . If you look
at his r e su m e , you will see he is a m a n that gets involved in his
c o m m u n i t y , in his State, in his church , and with charity, all the
w a y from the M a r c h of D i m e s to the Gulfport Job Corps, Kids V o t
ing, the Mississippi Arts Fair for the Handicapped . H e really does
w h a t a citizen is supp ose d to do , all the while, being a leader in
the business world .
H e has been the president of a junior college that focused pri
marily on business courses an d has also been in the real estate
business. H e has the kind of background that certainly qualifies
h i m for this position, but the o n e thing that qualifies h i m m o s t is
the fact that h e currently heads a Federal credit union a nd w a s s e
lected as one of the five most outstanding credit union CE O' s in the
United States by the Credit Union Tim es.
Mr. Dollar has been properly educated . H e has been in the b u si
ness world ,the academic world, the legislature, h e w a s m y ardent
supporter the last time I ran for the Senate, and he's been a real
leader in credit union activities.
I'm very proud of his nomination a nd pleased that the President
ha s submitted his n a m e for this nomination . O n c e he is reported
out by the Com mi tt ee , I hope expeditiously, then w e will be able
to m o v e his n a m e along with one that's been on the calendar for
s o m e time, to fill the two vacant slots on the National Credit U n io n
Administration Board .
I wholeheartedly endorse this n omi ne e , m y friend, a n d I k n o w he
will d o a great job for the State, the country, a nd for credit unions.
I will not filibuster an y longer, Mr. C h a i r m a n , because I see the
Senior Senator from Mississippi has arrived to provide his endorse
m e n t also.
T h a n k you very m u c h , Mr. Ch ai rm an , for allowing m e to go out
of ord er an d for having this hearing.
T h e C H A I R M A N . Senator, tha nk you. I k n o w that Mr. Dollar m u s t
feel v e r y proud a nd very honored that you and Senator Cochra n
w o u l d take t h e time to be here in support of his nomination .
Senator Cochran .
OPENING STATEMENT OF THAD CO CHRA N
A U.S. S E N A T O R F R O M T H E S T A T E O F M I SS I S SI P P I
Senator C O C H R A N . Mr. Chairm an , than k yo u very m u c h for the
opportunity to appear with m y good friend a n d colleague, Senator
Lott, to endorse t h e no mi n at io n of Dennis Dollar to serve on this
important National Credit U ni on Administration Board .
Dennis is well qualified, he has good ju dg men t, he's well e d u
cated , he has served with distinction in the State legislature in our
State, a n d he's a good friend a n d a good all-around person w h o will
bring a perspective a nd good c o m m o n sense to the decisionmaking
process of this B oard .
W e are honored that he has been selected . O u r State is honored ,
a n d w e are very proud of Dennis a nd k n o w that he will do a w o n
derful job.
I ask that m y full statement be included in the record .
T h e C H A I R M A N . So ordered .
Senator, w e again are deeply appreciative. M r . Dollar, I k n o w
y ou m u s t be very honored that both Senators would take their time
12
to c o m e and physically be supportive here and loan themselves so
strongly to your nomination .
Senators ,I k n o w that you're busy , and I don't think w e have any
questions.
Senator Faircloth , now's the time to ask Senator Lott w h a t you
w an t ed to before.
(Laughter .]
In the interesto f t i m e, I a m going to suggest w e hear from the
third panel n o w . I hope the second panel will understand .
I'm going to ask that both Ms. S e i d m a n a nd Mr. Dollar stand for
the oath .
[Witnesses sworn .]
Mr. Dollar , w h y don't w e turn to yo u for your opening statement,
an d then w e will go to Ms. Sei dman .
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4
S W O R N TESTIMONY OF DENNIS DO L LA R
O F M I S S I S S I P P I, T O B E A M E M B E R O F T H E
NATIONAL CREDIT UNION ADMINISTRATION B O A R D
Mr. D O L L A R . T h a n k you , Mr. C ha i rm an , a nd ladies an d gentle
m e n of the Co mmi tte e . I appreciate very m u c h the confidence of
the President a n d the nomination to serve as a M e m b e r of the N a
tional Credit Un io n Administration Board , and t h e appearance
here today of both Senator Lott and Senator Cochran . It is quite
an honor, a nd I appreciate it so m u c h . I also appreciate the o p p o r
tunity to m ee t before the C ommi tte e , an d I w a n t to tha nk y o u for
this prompt hearing.
A s the Chief Executive Officer of a credit union which can best
be described as of small to moderate size — the Gulfport V A Federal
Credit U nio n has approximately $ 31 million in assets, right on the
nationwide average of b et wee n $ 25 a nd $ 30 million — for the past
6 years , I have dealt with the day -to-d a y issues facing our Nation's
credit unions .
I have sat across the desk from the m e m b e r of limited m e a n s
w h o says , “ I can't send m y daughter to college without this loan ,"
or “M y son will not have clothes for school unless m y credit union
can help m e .”
I have stood in the parking lot with that proud m e m b e r w h o fi
nally financed his first car or truck a nd says, “I never thought I
would o w n one on m y o w n , n o w I can take th at n e w job that m y
family really needs but it's 20 miles a w a y ."
I have seen the regulatory process firsthand an d experienced the
depth of an N C U A examination . I a m a committed adherent to the
importance of safety a n d soundness considerations .
O f all of the m e m b e r services w e provide at our credit union , I
tell m y m e m b e r s daily that the most important m e m b e r service w e
can provide is a strong , safe, sound , an d viable credit union .
Il o o k forward to the opportunity to w o r k as a M e m b e r of the
N C U A Board to use this perspective I have gained in the credit
union trenches, while at the s a m e time applying the public policy
perspective that I gained through 8 years as a State legislator.
H av in g served as a M e m b e r of the Mississippi H o u s e of R e p
resentatives for two 4
- y e a r t e r m s, from 1976 to 1984 , I have looked
at issues from a public policy, regulatory, an d legislative point of
view as well.
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I understand that not only credit union m e m b e r s have a stake
in the safety and soundness of our Nation's credit unions, but so
do the A mer ic an people .
I look forward to w o rk i ng with this C o mm it te e and Congress, as
a M e m b e r of the N C U A Board up o n confirmation , to continue to
ensure the safety an d soundness of a growing credit union system
for years to c o m e .
Again , Mr. C h a i r m a n a n d M e m b e r s of the Co mm it te e , I a m h o n
ored to be before you today for this confirmation hearing, a n d I will
gladly a nsw er an y questions that you might have of m e .
T h a n k you very m u c h .
T h e C HA I R M A N . T h a n k you , Mr. Dollar .
Ms. S e i d m a n has been n omi nat ed to be the Director of the Office
of Thrift Supervision an d w e would be pleased to have s om eo ne of
her caliber in this very important position. T h e position nee ds to
be filled, as Senator Sarbanes pointed out . W e have been urging
the Administration to decide on a n omi nee .
Ellen S e i d m a n has served as Special Assistant to the President
for Economic Policy since 1993. Before that , she w or k ed at the F e d
eral National Mortgage Association as a Senior Vice President for
Regulation , Research ,and Economics . S he has also wor ked in the
De p a r tm e n t of the Treasury as a Special Assistant to the U n d e r
Secretary for Finance . Ms. Seidman earned an M B A from George
W as h in g t on University , a law degree from G eorgetown University
L a w Center, and her undergraduate degree f r o m Radcliffe College.
I think w e are fortunate that the President has chosen such a n
able person as yourself.
Ms. Seidman .
S W O R N TESTIMONY OF ELLEN SEIDMAN
O F T H E DISTRICT O F C O L U M B I A ,T O B E T H E D I R E C T O R
O F T H E OFFICE O F THRIFT SUPERVISION
Ms. S E I D M A N . T h a n k you very m u c h , Mr. C h a i r m a n .
Mr. Cha irma n , Senator Sarbanes, a n d M e m b e r s of the C o m m i t
tee , I a m honored to appear before you as President Clinton's n o m i
n ee to head the Office of Thrift Supervision . I w a n t to thank you
for h oldi ng this hearing. I also w a n t to th ank President Clinton
a n d Secretary Rubin for their confidence in m e ; m y family - m y
h u s b a n d , W al t Slocombe , and m y son , Will Slocombe — for all their
support a n d patience; and Nic Retsinas , Jonathan Fiechter , and
the staff at the Office of Thrift Supervision for their hard w o r k and
go od spirits. A n d I w a n t to thank the Committee's Staff Director,
H o w a r d Menell , for reminding m e of our years spent together at
N e w Rochelle H ig h School .
(Laughter .]
M r . Ch a ir m an , the prospect of serving as the Director of O T S is
h u m b l i n g a n d exciting. A s I spoke to m a n y Co mmi tte e M e m b e r s
during m y courtesy calls, I w a s inevitably asked, "W h y do you w a n t
this job ?” Quite simply, I think it is one of the best public service
jobs in W ash in gto n today.
Thes e are dy nam ic times in the financial services industry, a n d
O T S a n d the institutions it regulates are playing a very important
part in the industry's evolution. A s yo u know , the country's first
Înternet “b a n k ” w a s a thrift, an d n e w companies are entering the
14
thrift industry, even as consolidation continues to reduce the total
n u m b e r of institutions w hich a r e supervised by the O T S . A t the
s a m e time ,thrifts continue their critical role as h o m e m ortgage
lenders , with residential whole loans comprising over 50 percent of
the industry's assets, and traditional h o m e lenders leading the in
dustry in profitability.
These have been good years for the thrift industry, but OTS's pri
m a r y responsibility m u s t always be to m a k e certain the industry
continues to be safe an d sound , no matter w h a t the economic condi
tions . Depositors and taxpayers are counting on O T S to understand
w h a t the risks are , to establish sound a n d sensible rules, an d to
m a k e certain those rules are followed . In contrast to thrift regula
tion of the 1980's, O T S has the statutory and regulatory tools, the
resources,a n d the public a nd political support to accomplish this
mission . M y responsibility, if confirmed , will be to support and e n
hance w h a t h a s been accomplished, both leading and backing the
agency's staff as they take sometimes difficult actions.
T h e O T S m u s t also encourage the institutions it supervises to
me et their responsibilities to m a k e certain that financial services
are available on a fair and equitable basis in all communities the
institutions serve. This is not only good for consumers a nd c o m m u
nities, it is go od for business .I f communities have access to capital
and are part of the financial mai ns tre am , economic development
follows, as do jobs a nd profits for the businesses whi ch serve those
communities.
T h e challenges for the industry , and thus for O T S , are m a n y , but
w h a t m a k e s th e prospect of leading the agency exciting is that e a c h
challenge brings opportunities. Homogenization of different types of
financial services a n d consolidation in the financial services i nd u s
try can bring increased access to capital an d the advantages of
greater scale, particularly in development a n d d ep lo ym en t of n e w
products and the best n e w technology. Bu t these trends challenge
m a n a g e m e n t and morale . T h e y challenge institutions to continue to
effectively serve their customers an d their communities , a nd they
challenge regulators to fully understand a n d effectively supervise a
broader array of risks an d of activities.
Technology, too, is the source of opportunities a nd challenges .
Technology not only provides better tools for understanding t h e
business b u t also the ability to serve c usto mers in n e w w a y s a n d
m o r e efficiently. B u t technology's challenges are legion: preparing
for the year 2000; protecting t h e security a n d privacy o f institu
tions' systems a n d customers' accounts ; understanding the tools so
that m a n a g e m e n t a n d regulators c an use t h e m rather than being
trapped in a world of black boxes ; an d , finally, m a k i n g the benefits
of technology available to all.
Th at m e a n s being careful that credit scoring tools, which can
clearly enhance productivity, a r e used to free u p underwriters t o
analyze applications that don't fit the scoring systems precisely,
rather than to restrict access to credit. A n d it m e a n s enhancing,
not restricting, access to A T M ' s and electronic banking as those
technologies b e co m e m o r e a nd m or e prevalent.
Finally, there is the challenge of the ch ang in g legal structure.
O n e cannot be nominated to b e the Director of O T S without being
aw are that people have been talking about abolishing the O T S vi r
a
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Senator R E E D . T h a n k you , Mr. Dollar .
Ms. S e i d m a n , you mention i n your statement that it w a s a thrift
institution that w a s the first Internet bank .
W i t h all these technological changes , I w on d e r if you might c o m
m e n t on the role, going forward , of the C o m m u n i t y Reinvestment
Act i n a very m u c h c h a n g e d circumstance ?
Ms. S EI DM AN . T h a n k you, Senator. That's actually a n extraordi
narily difficult question that w e allh a v e to w o r k o n very carefully,
an d one that O T S has started to fully consider .
T h e question of h o w the C o m m u n i t y Reinvestment Act applies to
entities that don't exist in place, but only exist in cyberspace ,is one
that w a s not thought of in 1 9 7 8 w h e n the Act w a s first passed .
I fully believe those institutions hav e a full C R A obligation.T h e
challenge to O T S an d the other financial services regulators is to
figure out with those institutions the very best w a y tom a k e certain
that they me et their obligation to their c o m m u n i t y , even if that
c o m m u n i t y is a nationwide c o m m u n i t y.
Senator R E E D .T h a n k you .
I h a v e just one final point. Y ou r nomination has b e e n greeted
with enthusiasm in m a n y quarters, particularly by Nic Retsinas,
w h o would like to get back to the Federal Housing Administration .
M s . SE ID MA N . I'm very ha p p y , if confirmed , to be able to free Nic
u p . It's been an amaz ing service he's put in over the course of this
last year .
Senator R E E D . T h a n k you very m u c h . T h a n k you , Mr. Chairman .
T h e C H A I R M A N . T h a n k you .
Senator Faircloth .
OPENING C O M M E N T S OF SENATOR L AU C H FAIRCLOTH
Senator F A I R C L O T H .T h a n k you , Mr. Ch a i rm a n .
Ms. S e i d m a n and Mr. Dollar , thank you both for being here.
Ms. Se id m an , did you write a m e m o for the President regarding
the meeting he held with a n u m b e r of bankers in M a y 1996 ?
Ms. S EI D MA N . Yes , I did , sir.
Senator FAIRCLOTH . While you w er e at the Wh ite H o us e , did you
ever see this m a n y bankers gathered before the M a y meeting ?
Ms. SE I DM AN . Senator , I w a s not at the M a y meeting , so I didn't
see t h e m gathered then .
Senator FAIRCLOTH .Y o u didn't go to the meeting ?
Ms. SEIDMAN . N o , I didn't.
Senator FAIRCLOTH . W h y not?
Ms. S EI DM AN . I wasn't invited.
Senator FAIRCLOTH . W h y not?
Ms. SEIDMAN . I think itw a s above m y pa y grade.
Senator FAIRCLOTH . Y o u r w h a t ?
Ms. SE IDM AN . I w a s a staff person w h o w a s wo r ki n g for the N a
tional Economic Council in connection with that briefing. I wrote
m y briefing m e m o , an d h a d nothing m o r e to do with the event.
Senator F A I R C L O T H . W h o selected the bankers w h o were to be
there?
Ms. SEI DMA N . I have no idea w h o selected t h e m . T h e Office of
Public Liaison handled the entire matter .
Senator FAIRCLOTH . In the m e m o you wrote, you said, w e d o
have concerns about the specifics of Leach's reform proposal, whi ch
17
w ou l d greatly increase the Federal Reserve's role in financial serv
ices policymaking at the expense of the Administration , generally ,
a n d the O C C , in particular.
I f I wo u ld read the m e m o directly, there seems to have been an
effort by the Administration to block financial services legislation,
a n d to reserve those decisions for the O C C . T h e Administration a p
parently w a n t e d to capitalize on that by raising m o n e y from the
banking industry .
W h a t do yo u have to say to that analysis ?
Ms. S EIDM AN . Senator, it w a s t h e Administration's policy then ,
a n d it is the Administration's policy n o w , that financial services r e
form is something that ought t o be done , a nd it ought to be done
legislatively. W e h a d s o m e serious concerns with Senator Leach's
proposal then , a nd w e have s o m e serious concerns with the propos
als that are currently pending before the H o u s e .
Nevertheless, w e firmly believe that financial services m o d e r n i
zation is an appropriate subject for legislation,a n d that it is i m p o r
tant that Congress have the opportunity to fully consider the m a n y
ramifications of the whole financial services evolution , rather than
just leaving it to mainly the marketplace , but also the regulators.
Senator FAI RCLOTH . Well , your m e m o s ee me d tos a y that the r e
form proposal w ould greatly increase the Federal Reserve's role in
financial servicespolicy at the expense of the O C C .
Ms. S E I D M A N . Senator, yes , that is, in fact, the position that w e
took with respect to
Senator FAIRCLOTH . “W e ,” being w h o ?
Ms. SE IDMA N . T h e Administration — with respect to Mr. Leach's
legislation.
Th is isn't a n issue of whether Congress should have the r e s p o n
sibility for m a k i n g the rules. In m a n y respects, it w a s a question
of exactly whi ch regulatory body would have w hich particular kinds
of responsibility .
Senator FAIRCLOTH . All right. W h a t are your views on preserving
the Savings & L o a n Charter ?
M s . S E I D MA N . I firmly believe that it is important to maintain i n
stitutions wh o se primary focus continues to be h o m e lending.
Senator FAIRCLOTH . Ms. S e i d m a n , m y question w a s , do you think
w e should preserve the Savings & L o a n Charter ?
Ms. S E ID M A N . I believe w e c a n preserve the focus of the Charter
in a n u m b e r of w a y s . I think the legislative debate that we're h a v
ing, that is ongoing, will be a debate about whether it is only p o s
sible to preserve that focus in a separate charter, or whether itc a n
be preserved in a broader charter.
Senator FAIRCLOTH .Y o u lost m e . Ye s or n o , I c a n understand.
D o y ou believe w e should preserve the Savings & Lo an Charter ?
M s . S EI D M AN . Senator,I believe w e should preserve the functions
that are served by that Charter.
Senator FAIRCLOTH . Bu t put its o m e w h e r e else ?
Ms. S E ID M A N . W h e t h e r that Charter itself needs to be preserved
is something that I think will be a continuing subject of debate in
this Congress.
Senator FAIRCLOTH . It is going to be a subject of debate in C o n
gress, a n d you think there should be s o m e regulation, but yo u don't
18
think w e should preserve the Savings & L o a n Charter ; is that w h a t
you're saying ?
Ms. SE I DM AN . That's not w h a t I said . A s you know , the A d m i n i s
tration sent two proposals to Congress, one w h i c h would have fully
preserved the Savings & Lo a n Charter, a nd another which wou ld
have m a d e available
Senator FAIRCLOTH . W h i c h one did you support ?
Ms. SEIDMAN . Senator , I supported both proposals.
Senator FAIRCLOTH . Ms. Seid man , a real concern of m i n e is that
a n u m b e r of companies are putting in applications t o charter s a v
ings and loans, such as insurance c om pa ni e s. W h a t procedures do
you plan to put in place at the O T S t o ensure that n e w savings a n d
lo an charters are operated in a safe an d s o u n d m a n n e r , a nd that
w e don't have a repeat of the savings an d loan crisis ?
Ms. SE I D MA N . Senator , as I said in m y statement , I believe that
at this point, O T S has m u c h better tools, regulatory authority, an d
resources than the savings regulators ever h a d during the 1980's.
T h e processes that are currently in place in order to determine
whether n e w charters will be granted are processes that look care
fully into the m a n a g e m e n t a nd capitalization a n d prospective b u s i
nesses of a n e w S & L .
W h e n I reach O T S , if confirmed , I will obviously be working very
hard to m a k e certain that those procedures do continue to enable
us to have a safe a nd sound industry, no matter w h o o w n s the indi
vidual institutions.
Senator FAIRCLOTH . That's all, Mr. C ha ir ma n .
T h e C H A I R M A N . T h a n k you , Senator .
Senator Kerry
Senator K E R R Y. I don't h a v e any questions at this time .
T h e C H A I R M A N . Mr. Dollar, I w ou ld like to c o m m e n d you on your
very incisive a nsw er to Senator Reed's question about the case
pending before the S u p r e m e Court concerning the scope of credit
union m emb er shi p .
I think you have given a firsthand illustration as to h o w a nd w h y
you have h a d this m o v e m e n t from a very na rrow interpretation .
That m o v e m e n t has helped the system as opposed to being an e x
pansive intrusion .
Indeed , at s o m e point, there m a y be a need to further clarify the
scope of the mission of credit unions. B u t I certainly think that
under certain circumstances, itis important to maintain the viabil
ity of the institution, as it fulfills its mission . I favor the c om pe ti
tive nature that has taken place .
Y o u have given a n excellent response to the critics.
I w a n t to t h an k both of the nominees . W e certainly look forward
to m o v i n g the process in a very expeditious m a n n e r .
Ms. SE ID M AN .
T h a n k y o u ,Senator.
Mr. D O L L A R . T h a n k you , Senator.
T h e C H A I R M A N . I would like to call our second panel.
W e will hear from E d w a r d Gramlich a n d Roger Ferguson , both
of w h o m have been nominated to be M e m b e r s of the Board of G o v
ernors of the Federal Reserve System .
Mr. Gramlich is currently t h e D e a n of the School of Public Policy
at the University of Michigan . H e has h a d a distinguished career,
both in academia an d in G o v e r n m e n t, having been both a Professor
19
a n d C h a i r m a n of the Economics D ep art me nt at th e University of
Michigan , as well a s t h e Deputy Director a n d Acting Director of
the Congressional Budget Office. Early in his career , Mr. Gramlich
w o r k e d for the Federal Reserve Board in the Research Division .
M o r e recently, Mr. Gramlich w a s the C h a i r m a n of the Quadrennial
Advisory Council on Social Security from 1994–1996 .Mr. Gramlich
has received m a n y awards , an d has a very extensive list of publica
tions to his credit. H e is a graduate of Williams College ,a n d r e
ceived his Ph.D. from Yale University.
Rog er Ferguson is currently a Partner an d Director of Research
a nd Information Systems at M c K i n s e y & C o m p a n y . H e has also
h a d a n impressive career as a securities a nd banking attorney in
private practice a nd as a consultant to banks a nd financial institu
tions. Mr. Ferguson has received both a law degree and a Ph.D. in
Economics from Ha rv ar d University. H e h a s studied m a c r o e c o
nomics , m o n e y and banking, international trade and development,
and industrial organization .
O n behalf of the C om mi tt ee, I a m pleased to welc ome you both ,
an d your families and friends w h o a re with us today.
A t this point, before I turn to Mr. Gramlich , I'm going to ask you
both to stand for the oath .
[Witnesses sworn , en b anc.)
T h e C H A IR M A N . D o you agree to appear and testify before any
duly constituted C o mm i t te e of the Senate ?
Mr. GR A ML I CH . I do .
Mr. F E R G U S O N . I do .
T h e CH AI R MA N . T h a n k you .
Senator Kerry .
O P E N I N G S T A T E M E N T O F S E N A T O R J O H N F. K E R R Y
Senator K E R R Y . Mr. C h a i r m a n , thank you very m u c h . I w a n te d
to say a few words about Roger Ferguson . Unfortunately , I can't
stay for the hearing itself. Y o u have cited mo st of his accomplish
m e nt s in your o w n introduction . I won't repeat all of t h e m , except
to say that they are an extraordinary testimony to the background
an d preparation that h e brings to this job . I believe that w e are
very lucky to have s om eb od y of that quality coming out of a c o m
p a n y with as strong a reputation as M c K i n s e y & C o m p a n y , with
the b ac kg ro un d that he has as a securities lawyer , prepared to a s
s u m e this responsibility.
I wou ld also point out to the Co mmi ttee that he w a s b o r n here
in Washington , and comes from a middle -income family. His father
w a s a G S - 10 Federal employee a n d his mother a public school
teacher. Together, they have raised an individual w h o , during the
1960's here , s a w the early days of the civil rights m o v e m e n t a nd
s o m e of the disturbances in the city and took his o w n inspiration
f r o m A n d r e w B r i m m e r , another Harvard -trained economist ,w h o is
the first African -American to serve on the Federal Reserve Board .
I think he's following in great footsteps an d will himself be able
to serve as a terrific role m o d e l an d example to other yo u ng people
and to their aspirations. I think it's wonderful to have h i m n o m i
nated by the President,a n d look forward to his service.
T h e C H A I R M A N . T h a n k you , Senator .
Mr. Gramlich .
20
S W O R N T E S T I M O N Y O F E D W A R D M. G R A M L I C H
O F VIRGINIA ,T O B E A M E M B E R O F T H E
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr. GRAM LICH . T h a n k you , Mr. C h ai r m an .
Mr. C h a i r m a n and M e m b e r s of the Co mm itt ee , it is a pleasure
to appear before you today as President Clinton's n o m i n e e to be a
M e m b e r of the Board of Governors of the Federal Reserve S ys te m .
If the Co mmi tte e an d the rest of the Senate approve m y n o m i n a
tion , Ilook forward to serving in this im p or ta nt position.I promise
to w o r k with the other M e m b e r s of the B oa r d , with Dr. Ferguson ,
a n d with the Com mit tee, to carry out the objectives that Congress
has established for the Federal Reserve ,both for overall mo ne tar y
policy and to assure the safety a n d soundness of our Nation's b a n k
and p a y m e n t system .
ing
I h a v e in m y statement, M r . C ha ir ma n , a short biographical
sketch which you have already s u m m a r i z e d ,so I will just ask that
you insert that into the record , a nd let m e proceed an d talk about
the Federal Reserve .
T h e overall objectives which are faced by the Federal Reserve,
listed in the Federal Reserve Act , are "m a x i m u m e m p l o y me n t, sta
ble prices, a n d moderate long-term interest rates .” I would like to
discuss each .
In the long run , the most fundamental of these three objectives
is stable prices. In the short run , there are m a n y factors, oil price
shocks , exchange rate m o v e m e n t s , and so forth , that can influence
price m o v e m e n t. B ut , in the long run , I believe, along with mo st
other economists , that the fundamental responsibility for control
ling a nation's inflation rate rests with its central b a n k policies.
Since nominal interest rates equal real interest rates plus the
rate of inflation , controlling inflation also controls n o m i n a l interest
rates . Real interest rates c a n then be controlled by fiscal policy.
M o d e r n day macroeconomic thinking suggests that w h e n economies
are open to international trade a n d capital flows, monet ary policy
becomes the k e y policy to stabilize e m p l o y m e n t, an d fiscal policy
determines the overall saving rates a n d real interest rates . If the
Federal Reserve is adequately guarding stabilization n ee d s , w hi ch
I hope it will be w h e n I a m there , if I a m privileged to go there,
fiscal policy is free to keep national saving rates high a n d real in
terest rates low . This wo uld be m y idea of a desirable monetary /
fiscal policy m i x .
Finally, th e objective of “m a x i m u m e m p l o y m e n t ” brings u p the
famou s tradeoff between inflation an d u n e m p l o y m e n t.A l o n g with
most other economists, I believe that ultimately there is n o t m u c h
of a tradeoff. S o m e u n e m p l o y m e n t rates are so low that, if contin
ued , they will lead to steadily accelerating price increases. In the
economic literature, the lowest sustainable rate of u n e m p l o y m e n t
has c o m e to be called N A I R U , the N o n -Accelerating Inflation Rate
of U n e m p l o y m e n t.
I a m often asked whether I believe in N A I R U , but I think that
this simple question glosses over a key policy issue, for it turns out
to be rather difficult to me a s ur e and identify N A I R U . W h e n I first
c a m e out of graduate school , the target u n e m p l o y m e n t rate w a s
said to be about 4 percent . Later on , as inflation dramatically i n
creased , the standard estimate shifted to about 6 percent. N o w , the
21
e c o n o m y has been operating for a whi le in the r a n g e of 5 percent
u n e m p l o y m e n t, w i t h as y e t few signs of incipient inflation. Given
all this uncertainty, one can believe in a loose sense in t he exist
ence of N A I R U , b ut still find it hard to say h o w one w ould vote on
mo ne ta ry policy in particular circumstances. I wou ld put myself in
that category.
H e n c e ,I would be an advocate of promoting m a x i m u m e m p l o y
m e n t within t he Fed's long -term responsibility to control inflation.
These conditions w o u l d guarantee a healthy e c o n o m y, a reasonable
growth in the living standards over time , an d a realistic chance for
workers at all income levels an d ethnic backgrounds to prosper.
T h a n k y ou very m u c h , Mr. Cha irma n . I wou ld like to submit the
rest of m y statement for the record , an d would be h a p p y to answ er
a n y questions you might have .
T h e C H A I R M A N . T h a n k you very m u c h , Mr. Gramlich .
Mr. Ferguson .
S W O R N T E S T I M O N Y O F R O G E R W. F E R G U S O N , JR .
O F M A S S A C H U S E T T S ,T O B E A M E M B E R O F T H E
B O AR D OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr. F E R G U S O N . T h a n k you , C h a i r m a n D 'A mat o .
C h a i r m a n D 'A m a t o, M e m b e r s of the Committee , I a m pleased to
appear before y o u today as President Clinton's nomi nee to serve on
the B oa r d of Governors of the Federal Reserve Sy ste m , along with
Professor Gramlich . Let m e also thank Senator Kerry for that kind
introduction a nd statement about m y background.
I a m mindful that the decisions of the Federal Reserve influence
the economic well -being of all Americans through their impact on
output growth , job creation, inflation, interest rates, an d the value
of the dollar. T h e F e d also has important supervisory a n d r eg u
latory responsibilities for the safety a n d soundness of the banking
system , for the integrity of the pay me nts m e c h a n i s m , a nd for t he
enforcement of the fair lending a n d other c onsu mer laws, including
the C o m m u n i t y Rein vestme nt Act.
If I a m confirmed , I pledge to w o r k with other M e m b e r s of the
Board to craft a mone tary policy geared toward stable prices,m a x i
m u m e m p l o y m e n t, and moderate long-term interest rates, the goals
established i n the Federal Reserve A c t , a n d to faithfully execute
the regulatory enforcement a n d oversight responsibilities entrusted
by Congress to the Federal Reserve Board .
A s did Dr. Gramlich , I have other statements here dealing with
m y background. I will pa ss over those, as you an d Senator K e r r y
have already given m e a background introduction .
Let m e turn n o w to s o m e of the issues confronting the Federal
Reserve.
Price stability, I believe, should be a central goal of m o n e t a r y
policy. There are m a n y reasons for according high priority to this
objective . Inflation undermines social equity an d h a r m o n y in our
diverse Nation . A s interest rates rise to compensate for inflation,
m a n y families will find it increasingly difficult to qualify for a n d
service loans for h o m e s an d cars. T h e wa ge s a n d salaries of s o m e
workers d o not keep u p with inflation, a n d their standard of living
falls. Inflation erodes the wealth of any small investors w h o s e a s
sets are denominated in fixed dollar terms . In addition , with high
22
an d unstable inflation , managerial efforts often emphasize , and c o r
porate profits derive from , taking advantage of rapid increases in
the general level of prices rather than from producing a n d selling
the products that consumers need .J o b creation eventually slows as
businesses focus m o r e on financial rather than productive aspects
of their operations .
M a n y factors affect the behavior of prices in the short run , b u t
in the long run , inflation on a sustained basis cannot occur unless
mo netary policy a ccommo dates it. T h e Federal Reserve controls the
Nation's m o n e y supply , and thus the F O M C effectively determines
the level of inflation over the longer run . T h e Fed's responsibility
is to be ever vigilant for early signs of inflation , and to choose poli
cies that are designed to maintain a noninflationary environment
that allows sustainable g row th and job creation .
T h e effect of Federal Reserve policies on the e c o n o m y occurs with
a very substantial lag. Therefore, I agree with the Fed's historic a p
proach of reducing m onetary stimulus before the emergence of obvi
ous and strong inflationary pressure .
T h e second objective of the Federal Reserve is to keep the ec o n
o m y growing as close as possible to its m a x i m u m potential output.
T h e Federal Reserve is to seek the lowest rate of u n e m p l o y m e n t
that can be achieved without risking the acceleration of inflation.
M y goal, as a Governor of the Federal Reserve Board , would be to
create an environment conducive to achieving a n d sustaining this
low level of u n e m p l o y m e n t.T h e r e are m a n y reasons to avoid u n e m
plo ymen t. Just as with inflation , u n e m p l o y m e n t has real h u m a n
a nd economic costs. T h e toll of high u n e m p l o y m e n t, like that of a
regressive tax , falls mo st heavily on groups in the w o r k force that
are the least able to bear the burden .Additionally, full e m p l o y m e n t
gives m o r e of our citizenry an opportunity to gain useful skills a n d
work -related disciplines.
In the short run, the Federal Reserve frequently faces a tradeoff
between the goals o f low inflation and hi gh e m p l o y m e n t , but ulti
mately price stability underpins sustainable output growth a n d job
creation .
If I a m confirmed, I will join the Federal Reserve at a time w h e n
the macroeconomic fundamentals are exceptionally sound. A s s o m e
others in this r o o m have noted , underlying inflation is the lowest
it has been in m o r e than 30 years ,a n d the u n e m p l o y m e n t rate h a s
declined to u nd e r 5 percent ,also the lowest in a generation . S i m i
larly, growth in the output of goods an d services over the past year
has been approximately 3.5 percent. M a n y economists are search
ing for an explanation for this splendid performance.
Unfortunately, e v e n in today's strong e c o n o m y, there are still
segments of society in which jobs are not plentiful, and income d i s
tribution remains skewed .
T h e role of the Federal Reserve Governor n o w , as always, is to
monitor every available economic indicator to m a k e ne ede d policy
readjustments. This is a role that requires p rag ma tis m a nd b a l
ance, not adherence to an imm uta ble set of preconceived notions.
W it h current uncertainties, Federal Reserve Governors should be
open to the possibility that underlying dynamics of the e c o no m y
might be changing, but they should seek evidence for such develop
me nt s and not act on the presumption of change.
23
I n addition, the Federal Reserve is an active supervisor a nd r e g
ulator of b a n k holding companies a nd State m e m b e r banks. In this,
the Federal Reserve, in cooperation with other agencies, is r e s p o n
sible to preserve the safety a nd soundness of the entire banking
system for the benefit of society. W e are living in an era of consoli
dation in the banking industry, the gradual blurring of distinctions
b e tw e e n ba nks a nd other financial institutions , an d the ongoing
globalization of the financial sector. T h e role of the Federal Reserve
G overnor with respect to banking supervision is to execute prudent
j u dg me nt s to impose regulations on banks that ensure the safety
a n d soundness of the banking system , that mirror the operation of
a well -functioning m ar k et , that allow a reasonable pace of financial
modernization , a n d that assure a full range of financial services for
our citizens, our communities, and our businesses . T h e basic fr am e
w o r k for banking regulation is set by Congress .
I will note that I have other pages here which I wou ld like to
hav e placed into the record .
In conclusion , I wo uld like to thank you , Senator D 'A mat o , a nd
the Co mm it te e for considering m y nomination . I would be pleased
to respond to any questions you m a y have .
T h e C H A I R M A N . T h a n k you very m u c h , Mr. Ferguson .
Senator Faircloth .
Senator FAIRCLOTH . T h a n k you , Mr. C h a i r m a n . I have a couple
of very brief questions.
M r . Ferguson, you attended P e m b r o k e College?
Mr . F E R G U S O N . Yes , in Ca mb ri dg e.
Senator FAIRCLOTH . In C am br id ge. O K . There w a s one in No rth
Carolina, a nd I couldn't figure out h o w you m a d e that j u m p for
w a r d from P e m b r o k e .
Mr. F E R G U S O N . Unfortunately, not the one in North Carolina .
Senator FAIRCLOTH . O K . I have a couple of questions.
Ar e you in agreement with the constraints that C h a i r m a n G r e e n
span has held on interest rates — his agreement to let t h e m rise if
it's necessary to contain inflation ? D o you hold the s a m e views on
restraining inflation that the Federal Reserve has followed in the
last 3 or 4 years ?
Mr. F E R G U S O N . I think the ans wer to that question is that I cer
tainly believe that price stability is the primary goal.
Senator FAIRCLOTH . That w h a t is?
Mr. F E R G U S O N . Price stability is the primary goal that the F e d
eral Reserve should be following; it is written into the law .
I think if w e look at the response a nd the nature of the e c o n o m y
today, it is clear that the Federal Reserve, along with Congress,
has m a d e s o m e very wise decisions that have gotten us into the p o
sition w he re w e have w h a t n o w appears to be very solid growth ,
relatively low u n e m p l o y m e n t, an d n o immediate signs of incipient
inflation .
I believe the Federal Reserve is certainly to be c o m m e n d e d for
w h a t it has done thus far. Obviously, I w a s not in the r o o m at each
F O M C meeting, so I can't c o m m e n t exactly on h o w I wo uld have
voted in the past, but I woul d say the record indicates that wise
decisions have been m a d e .
24
Senator FAIRCLOTH . W h a t is your visceral reaction to the q u e s
tion : If w e h a d to m a k e a choice between inflation, mo ne tar y infla
tion , or an increase in u n e m p l o y m e n t, whic h w a y wou ld y o u m o v e ?
Mr. F E R G U S O N . As I h a v e said here, I believe, in the long run ,
those two things w o r k together, which is to say that I believe that
price stability creates t h e underpinnings that allow the e co n o my to
achieve sustainable growth .
Se nat or FAIRCLOTH . In a w or d , yes or no , which w ou ld be your
visceral reaction?
Mr. F E R G U S O N . In honesty , Senator , I can't give you a w o r d , yes
or no , on that, an d I understand w h y you're asking the question.
I believe there are m a n y , m a n y factors that w ou ld have to go into
the decision . W e have to be mindful that w e are trying to pu sh for
m a x i m u m e m p l o y m e n t, consistent with price stability.
Senator FAIRCLOTH . T h a n k you .
Mr. Gramlich , I ask you the s a m e question .
Mr. G R A M L I C H . Unfortunately, S enator
Senator FAIRCLOTH . I just w a n t your visceral reaction, which is
the m o s t
Mr. G R A M L I C H . Unfortunately , I'm going to give the very s a m e
answer . I think w e both believe
Senator FAIRCLOTH . T h a n k you so m u c h .
[Laughter.]
I h a v e already heard it. So w e don't get an answ er to that.
Mr. G RA M LI C H . Let m e try to add one m o r e sentence to that , if
Imay .
W e b ot h believe that, in the long r u n , if w e have stable prices,
then those bec ome the a t m o s p h e r e for m a x i m i z i n g e mp l o y m e n t. I
think we're both saying that stable prices would b e , in our view ,
the primary goal of central ba nk policy.
T h e C H A I R M A N . Senator Re e d .
Senator R E E D . T h a n k you , Mr. Ch a i rm a n . I w a n t to also tha nk
the nominees . I have h a d the chance to me et with them , a n d they
are both extraordinarily gifted a nd accomplished individuals, a n d
fully prepared to deal with all the aspects of the responsibilities of
the Federal Reserve.
W h a t I think is particularly interesting and c o m m e n d a b l e is that
their individual expertise mirrors the t w o major functions of the
Board , macroeconomic policy - and Professor Gramlich is one of the
r en ow ne d experts in A merica — and the regulation of the financial
services industry. Mr. Ferguson , at Mc K i ns e y & C o m p a n y, w a s a n
A meri can leader in advising financial institutions. Both individ
ually a nd collectively, I think these are very wise nominees .
I don't really h av e an y questions, but w o u l d like to assert the
statement I m a d e in our meetings ,a n d that is that I think it is
incumbent that w e maintain a moderate to low interest rate policy.
I do , in fact, think that is helping our economic recovery. I think
it also is filling in the gaps for a very constrained fiscal policy as
w e reduce spending here in Washington .
I have another point which I h a v e tried to m a k e, a n d that is that
our greatest success in terms of balancing the budget a n d having
confidence in the Am er ic an e co n om y rests o n relatively low interest
rates over the next several years. Without those interest rates , our
25
budget plans, I think , will be shredded , a nd w e will not only face
a mo ne ta ry an d economic crisis, but a political crisis again .
I don't k n o w if you would like to c o m m e n t on those thoughts, but
essentially, I would like to reiterate t h e m with you today . N o c o m
m e n t is necessary .
Mr. G R A M L I C H . I don't m i n d c o mm e n t in g . I said in m y statement
that the w a y economists think about interest rates is that there are
t w o components, the real interest rate and the inflation premium .
T h e inflation p r e m i u m comes just from controlling inflation, as
w e have been talking about . That's certainly one important w a y to
ke ep interest rates moderate . T h e other w a y is by responsible fiscal
policy. Matters such as reducing budget deficits play an important
role there.
I think Congress a n d the central b an k have followed a policy
that actually does try to k e e p interest rates moderate, a n d I would
like to keep doing that . I think w e have things on the right track ,
a n d w e shouldn't change it.
Mr. F E R G U S O N . Let m e c o m m e n t . I think there is also an i m p o r
tant implication in your observation .
It is true t hat we're certainly having good times . S o m e people
ha ve called it a goo d -time-e co n o my. B u t w e have seen n e w s a s re
cently as yesterday that indicates that this is not happening for all
components , all parts of our Nation . W e still have w h a t for m e , p e r
sonally, is an embarrassingly high poverty level in this country.
I referred briefly to distribution of income . S o m e of these things
the Federal Reserve just cannot do anything about directly. T h e y
fall m u c h m o r e u nder the ambit of perhaps fiscal policy. H ow ev er ,
as Professor G r a m l i c h has pointed out, a nd I have stated as well,
certainly maintaining price stability and creating as m a n y op por tu
nities as w e possibly can for job growth a nd job creation isa n i m
portant objective of the Federal Reserve.
Senator R E E D . T h a n k yo u very m u c h , gentlemen . I thank you ,
Mr. C ha ir m an .
T h e C H A I R M A N .T h a n k you , Senator.
Dr. Ferguson , I don't w a n t to prolong this, but you spoke about
the importance of maintaining a policy of price stability. I u n d e r
stand that. Y o u have also emphasized the importance of job growth
an d job creation .
W h a t exactly d o you think the Fed's role is in that regard ? I a m
concerned w h e n I hear about emphasizing the Fed's rolei n growth .
Could you be m o r e specific ?
Mr. F E R G U S O N . Let m e be quite clear.
T h e C H A I R M A N . I wou ld like that.
Mr. F E R G U S O N . I a m a firm believer, for sure , in price stability,
as I have said . I strongly believe, as does Dr. Gramlich , that is the
underpinning wh ich allows the e c o n o m y to maintain sustainable
growth .
T h e response that I gave to Senator Reed's question talked m o r e
broadly about a variety of other issues that are of concern person
ally, but not as a policy matter .
A s w it h m a n y citizens, w e are concerned that w e maintain s u s
tainable growth . I think the role that the Federal Reserve can play
there is certainly primarily in maintaining price stability.
26
T h e C H A I R M A N . W e are not looking at s o m e k i n d of activist policy
or philosophy that's going to c o m e from the Fe d because yo u m a y
ha ve a concern for t h e unevenness of the economic expansion , a n d
I understand that . Everyone should be concerned with that.
Mr. F E R G U S O N . N o , Ia m not suggesting activist policy; w h a t I'm
suggesting is that the role that the F ed c a n play is one of m a i n
taining price stability. I think that is consistent wit h maintaining
sustainable growth .
T h e C H AI R M AN . O K .
I w a n t to than k the nominees . I believe the President has chosen
two nominees w h o have extraordinary backgrounds, a nd have d e m
onstrated a c o m m i t m e n t to helping this country.
I hope that in their capacities as Governors of the Fed , they are
successful in loaning their intellect an d their capabilities to this
very important position . W e look forward to m o v i n g these nom inee s
as quickly as possible to the floor for Senate confirmation .
W e stand in recess . T h a n k you .
Mr. G RA M L IC H . T h a n k you .
Mr. F E R G U S O N . T h a n k you .
[W h e r e u p o n , at 11 a.m., Tuesday , Sept ember 30 , 1997 , the h e a r
ing w a s adjourned .)
[Prepared statements, biographical sketches of the nominees , a n d
response to written questions follow :)
27
PREPA RED STATEMENT OF SENATOR TH AD C O C H R A N
ON THE NOMINATION OF DENNIS DOLLAR TO BE A MEMBER OF THE
NATIONAL CREDIT UNION ADMINISTRATION BOARD
Mr. Chairman , I am pleased to have the opportunity to speak in support of the
confirmation of Dennis Dollar to the Board ofthe National Credit Union Adminis
tration.Dennis is a longtime friend and a fellow Mississippian.
Dennis has had a diverse career as a realtor,educator, Member ofthe Mississippi
House of Representatives, and as President of the Gulfport V A Federal Credit
Union.He would bring a great deal of knowledge and experience to the Board from
these varied positions.
In addition to his work , Dennis has found the time to participate in numerous
other professional, civic, and charitable organizations, holding leadership roles in
most of them . His long and distinguishedhistory of community involvement has
earned him greatrespect and appreciation in Mississippi.
I believe that Dennis' character, combined with his excellent understanding of
credit unionissues and his broad range of experience,would make him an excellent
addition to the N C U A Board .
Mr. Chairman and Members of the Committee, I urge you to support Mr. Dollar's
nomination.
P R E P A R E D S TA T EM E NT OF S EN AT OR DANIEL PATRICK M O Y N I H A N
ON THE NOMINATION OF LAURA S. UNGER TO BE A COMMISSIONER OF THE
SECURITIES AND EXCHANGE COMMISSION
It is m y pleasure today to support Laura S. Unger for confirmation to the position
of Commissioner of the Securities and Exchange Commission (SEC ).
Ms. Unger was born in New York City. After graduation from the University of
Californiaat Berkeley in 1983, she returned to the city to attend New York Law
School.
It was during law school that Ms. Unger began her work with SEC matters.As
a summer associate and law clerk at Moskowitz Altman & Frankel, she assisted in
preparing documents and filings for private placements,initial public offerings, ex
change listings, and annual and quarterly reports filed with the Commission.
Ms. Unger went towork for theS E C asa staff attorney and moved to Washington
in 1989. In thisposition she worked o n investigations and cases involving insider
trading, financialfraud,and other violations of Federal securities laws.
Ms. Unger's most recent experience working for Senator D'Amato, first as a SEC
Congressional Fellow and then as Counsel, has added very valuable experience to
Ms. Unger's repertoire and knowledge of the workings of the SEC .
Ms. Unger currently serves as Securities Counsel to the Senate Banking Commit
tee. She has gained a solid understanding of securities issues and helped craft a
number of bills that have become law,including the National Securities Market I m
provements Act of 1996, the Securities Litigation Reform Act of 1995,and the Small
Business Loan Securitization and Secondary Market Enhancement Act of 1994.
I thank the President for bringing Ms. Unger's name forward and I urge my col
leagues to approve her nomination.
ON THE NOMINATION OF PAUL R. CAREY TO BE A COMMISSIONER OF THE
SECURITIES AND EXCHANGE COMMISSION
Paul R. Carey is a young man of great intelligence and unwavering sound judg
ment. M y enthusiasm for him is shared by many of my colleagues who have had
occasionto work with him in his capacity as Special Assistant to the President for
Legislative Affairs.
The son of Ne w York's legendary Governor, Hugh L. Carey, Paul has lived most
of his life in New York. Born in Brooklyn and raised in Albany, he received his
Bachelor's degree in Economics from Colgate University. His professional career
began with securities work for Donaldson, Lufkin & Jenrette in Manhattan and
then with First Albany Corporation in Albany, New York.
Paul Carey has an extraordinary knowledge of Government and how it works and
how it is supposed to work. He has served as an Advisor to the President on bank
ing and financialmatters, devoting a considerable portion of his time to matters di
rectly related to the Securities and Exchange Commission.
W e have a rare opportunity tobring a n individual of highintellect and flawless
integrity to a position of critical importance. I commend the President for bringing
his name forward and I urge the Committee to support his nomination.
28
P R E P A R E D S T A T E M E N T O F L A U R A S. U N G E R
COMMISSIONER -DESIGNATE , SECURITIES AND EXCHANGE COMMISSION
SEPTEMBER 30, 1997
Chairman D'Amato, Senator Sarbanes, and Members of the Committee, as a
member of the Committee staff,it is an especially great honor to appear before you
today to testify in connection with m y nomination by the President to be Commis
sioner ofthe Securities and ExchangeCommission.
I am also pleased to share the table today with m y able colleague, Paul R. Carey,
the President's choice for the other vacant Securities and Exchange Commissioner
seat, a fellow New Yorker,and an individual with whom I have had the pleasure
of working. If confirmed, I look forward to sharing a table at the Commission with
Mr. Carey.
A s the Chairman knows, I joined his staff as a Congressional Fellow from the
SEC almost exactly 7 years ago. Over the last years, Iha ve had the pleasure and
privilege to work closely with the Chairman and Committee Members on a variety
of issues. It has never been dull. I have had the opportunity to work on a number
of important pieces of legislation and have enjoyed every moment of my tenure on
the Committee staff.
Working for the Chairman and the Committee at this challenging time in our fi
nancial history has afforded me the opportunity to help shape the securities laws
and to participate in important policydecisions concerning the efficiency and fair
ness ofthe capital markets and the protection of investors. Should the full Senate
confirm m y nomination, I look forward to continuing my work in this area as a Se
curities and Exchange Commissioner.
The Commission's mission is to administer and enforce the securities laws to pro
tect investors and to maintain fair, honest, and efficient markets. In order to fulfill
this mission,the SEC must consider the delicate balance between theinvestors and
the marketplace. Without investor confidence, the capital markets will not flourish.
However, too much regulation will make the markets an unattractive source of fi
nancing to companies.If confirmed, I will work to ensure that the Commission's pro
grams strike theappropriate balance.
I feel extraordinarily honored to have been the President's choice for a seat on
the Commission. As the Commission heads toward the 21st century, it will face a
myriad of challenges, including issues involvingmarket structure,technology, inter
nationalization,continued growth in the mutual fund industry, as well as financial
modernization.Ifconfirmed, I welcome the opportunity to work on these issues and
tobe a Member ofthe Commission as it prepares forthe new millennium.
When I left the Securities and Exchange Commission 7 years ago to come to C a p
itol Hill to work for Senator D'Amato, I promised I would return to the Commission .
As hard as it will be to leave the Committee, the Committee Members, and all of
m y colleagues on the staff, should the Senate confirm m y nomination, it is with
great enthusiasmand anticipation that I will return to the Commission to serve as
a Commissioner. If confirmed, I look forward to continuing to work with this C o m
mittee and staff in m y new capacity.
Thank you,Mr. Chairman . I look forward to answering any questions.
29
S T A T E M E N T F O R C O M P L E T I O N B Y PRE SI DE NTI AL N O M I N E E S
Name:_Unger
Simone
Laura
(First)
(
Other)
Dateof
Positiontowhich
nominated: Commissioner, Securities& Exchange Comin'n. nomination:9/18/97
(Last)
Dateofbirth: 08/01/61
(Day) (
Month)
MartialStatus: married
(Year
Placeofbirth: New York, New York
Fullname ofspouse: Peter Van Buren Unger
Nameandages
ofchildren: Simone Taylor
9 months
Dates
attended
Institution
Education:
Degrees
received
Datesof
degrees
Fort Lee High School
9/75 - 6/78
Redwood High School
9/78 - 6/79
U.C. Berkeley
9/79
6/83
B.A.
6/83
New York Law School
9/84
6/87
J.D.
6/87
H.S. Diploma
6/79
Honorsandawards: Listbelowallscholarships,fellowships,honorarydegrees,militarymedals,honorarysociety
memberships,andanyotherspecialrecognitionsforoutstandingserviceorachievement.
U.C. Berkeley Honor Society
New York Law School Journal of International & Comparative Law
SEC Quality Increase Award (1988)
SE Performance Award (1989)
1
49-692 98 -2
30
Memberships:
Listbelowallmembershipsandofficesheldinprofessional,fraternal,business,scholarly.
civic,charitableandotherorganizations.
Officeheld
(ifany)
Organization
Dates
see attached
Employmentrecord:
Listbelowallpositionsheld sincecollege,includingthetitleordescriptionofjob,nameof
employment,locationofwork,anddatesofinclusiveemployment.
see attached
2
31
MembershipsandOffices
Organization
Officeheld(ifany)
Dates
JuniorLeagueofNew York
none
1983-1989
New YorkLawSchoolStudent
BarAssociation
Secretary
1987-1989
1989-present
JuniorLeagueofWashington
ChristmasTeaCo-chair
1/96-12/96
SilentAuctionCo-chair
CateringCo-chair
SilentAuctionCo-chair
CharitiesCo-chair
3/94-12/94
1/95-12/95
1/96-12/96
1/97-present,
Women inHousingandFinance
none
1992-present,
AmericanBarAssociation
BusinessLaw Section,Committee
onFederalRegulationofSecurities
none
1993-present,
ABA SubcommitteeonCivilLitigation
andSEC EnforcementMatters
none
1994-present,
ABA SubcommitteeonSEC
Administration,BudgetandLegislation
none
1994-present.
The DecadeSociety
Employment Record
OfficeManager,Pogue-Simone,New York City,8/83-5/84
Legal Assistant,Pogue-Simone,New York City,5/84-1786
Law Clerk/Summer Associate,Moskowitz Altman & Frankel,New York City,2/86-5/87
StaffAttomey,SEC DivisionofEnforcement,New York City, 1/88-4/89
StaffAttorney,SEC Division ofEnforcement,Wash.,D.C.,4/89-10/90
SEC Congressional Fellow,Office ofSenator Alfonse M. D'Amato,Wash.
,D.C., 10/90-4/92
Counsel,Senate Committee on Banking,Housing & Urban Affairs,Wash.,D.C.,4/92-present
32
Government
experience:
Published
Writings:
Political
Affiliations
and activities:
ListanyexperienceinordirectassociationwithFederal,State,orlocalgovernments,including
anyadvisory,consultative,honoraryorotherparttimeserviceorpositions.
see attached
Listthe titles,publishersand datesofbooks,articles,reportsorotherpublished materials
youhavewritten.
not applicable
Listmembershipsandofficesheldinandservicesrenderedtoallpoliticalpartiesorelection
committeesduring thelast10years.
none
3
34
Political
Contributions:
Qualifications:
Futureemployment
relationships:
Itemizeallpoliticalcontributionsof$500ormoretoanyindividual,campaignorganization,
politicalparty,politicalactioncommitteeorsimilarentityduring thelasteightyearsand
identityspecific amounts,dates,andnamesofrecipients.
none
Statefullyyourqualificationstoserveinthepositiontowhichyouhavebeennamed.
(attachsheet)
see attached
1.Indicatewhetheryouwillseverallconnectionswithyourpresentemployer,business
firm,associationororganizationifyouareconfirmedbytheSenate.
yes
see attached
2.Asfarascanbeforeseen,statewhetheryouhaveanyplansattercompletinggovernment
servicetoresumeemployment,affiliationorpracticewithyourpreviousemployer,business
firm,associationororganization.
no
3.Hasanybodymadeyouacommitmenttoajobafteryouleavegovernment?
no
4.Doyouexpecttoservethefulltermforwhichyouhavebeenappointed?
yes
37
2.
PotentialConflicts ofInterest
Potential conflictsofinterest might involve the following entities:
Dreyfus Worldwide Money Market Fund
Fidelity Contra Fund
Fidelity Puritan Fund
FidelityNew Millenium Fund
Fulbright& Jaworski
MBNA America
Riggs Bank
Vanguard 500 Index Trust Fund'
1
AcquiredJuly1,1997(afterclose ofreportingperiodforForm278).
40
P R E P A R E D S T A T E M E N T O F P A U L R. C A R E Y
COMMISSIONER -DESIGNATE, SECURITIES AND EXCHANGE COMMISSION
SEPTEMBER 30, 1997
Thank you, Mr. Chairman, Senator Sarbanes, and Members of the Committee. I
am grateful to the President for nominating me to the Securities and Exchange
Commission. I am also honored to appear before you today and appreciatethe C o m
mittee's scheduling ahearing in such an expedited fashion. I a m especially pleased
to be embarking on this endeavor at the same time as Laura Unger. I have had
the good fortuneto work with Laura on many issues.Ifconfirmed, I a m enthusiastic
about the contribution we can both make tothis Commission by our ability to work
together.
Before his elevation to the Supreme Court by PresidentRoosevelt,William 0 .
Douglas served as the third Chairman of the SE — from 1937 to 1939. He described
the missionof the S E C in very simple but compelling words: “W e are theinvestor's
advocate.” It remains true to this day, and I believe it has been particularly evident
during the tenure of Chairman Arthur Levitt. I am proud to note that m y relation
ship with the Chairman dates back tothe 1970's when our fathersserved together
as Governor and Comptroller of New York State.If confirmed, I look forwardto ex
tending into thisgenerationthe shared honor of public service of our two families
by joining the S E C with Chairman Levitt.
I believe the SEC , in recent years, has been a model for the relationship that
should existbetween the regulators and the regulated. This relationshiprequires
both a healthy tension and a level of cooperation on a variety of issues. W e have
improved thew a y our markets function and preserved the United Statescapital
markets' exemplary standing throughout the world. As a result, I believe fairness
and transparency in our markets have been enhanced, to the enormous benefit of
investors.
Many of the challenges that lie ahead are inthe relationship between our markets
and those of other nations. Ongoing efforts to arrive at international accounting
standards as well as cooperationon enforcement matters shouldpermit us to accom
modate thegrowth of across-the-border transactions without diminishing investor
protection. The integrity of our markets and the confidence thathas produced is
owed in large measure to the vigorous enforcement efforts of the SEC . Markets are
dramatically affected by the rapid development oftechnology, which presents both
opportunities and risks that must be carefully monitored. Investors will also benefit
from the SEC's “plain English” effort to m a k e disclosure documents clearer and
easier to understand, as well as the Investor Education and Assistance Program
which gives investors a forum in which they can get objective information.
It takes vigilance and judgment to encouragecapital formation and vigorously
maintain investor protection. This will be my principal concern if Ia m confirmed
by this Committee and the full Senate as a Securitiesand Exchange Commissioner.
I hope that I can look forward to working with this Committee and its staff on the
many issues we will face together.
Thank you.
41
S T A T E M E N T F O R C O M P L E T I O N B Y P R ES I D E N T I A L N O M I N E E S
Paul
Carey
an
Ion
Commissioner
United
States
Positiontowhich,
Dateof
'
Securities
and
Exchange
Commission
nominated:
nomination:
18
62
Date ofbirth: 10
Placeof birth: Brooklyn, NY
DAN (MONTO (TULO
Full name of spouse:
Marital status: Single
Name and ages
of children:
Robert
onto
Name:
Education:
Dates
attended
Institution
Skidmore College
9/81-6/83
Colgate University
2/84-6 /86
September 16, 1997
Degrees
received
N/A
B.A. Economics
Datesof
degrees
N/A
1986
Honorsand awards: Listbelowallscholarships,fellowships,honorarydegrees,militarymedals,honorarysociety
memberships,andanyotherspecialrecognitionsforoutstandingserviceorachievement
1
42
Memberships:
List below allmemberships and officesheld inprofessional,fraternal,business,scholarly,
civic,charitableandotherorganizations.
Orice held
(ifany)
Organization
Ostes
Gardiners Bay Country Club
1986-1988
Mashomack Preserve
university Club of
Washington, DC
1989-1992
1993-Present
The Flax Trust
Eastern Professional Ski
Instructors Association
Board Member
Instructor
Disabled Program
1989-1991
Irelands Children
Development
1985-1991
Children's Hospital-Albany
Development
1988-1991
1986-1993
Employment record: Listbelowallpositions held sincecollege,includingthetitleordescriptionofjob,name of
employment,location of work,and dates of inclusive employment.
February 1993 to Present
Special Assistant to the President.
June 1992 to Feb 1993
Northeast Finance Director
The Democratic National Committee
Washington, DC
Northeast Finance Director
Clinton for President Committee
Little Rock, Arkansas
The White House, Washington, DC
Sept 1991 to June 1992
June 1988 to Sept 1991
Associate First Albany Corporation
Albany, New York
July 1986 to May 1988
Associate
Donaldson, Lufkin & Jenrette
New York, New York
2
43
Government
experience:
List any experience in or direct associationwith Federal,State,or local governments,in.
cludingany advisory,consultative,honoraryorotherpart-time serviceorpositions.
Special Assistant to the President for Legislative Affairs,
February 1993 to Present
Published
writings:
Ust thetitles,publishersanddatesofbooks,articles,reportsorotherpublished materials
youhavewritten.
None
Political
affiliations
andactivities:
List all memberships and offices held in and services rendered toall political partiesor
election committees duringthe last 10 years.
Clinton For President Committee
Northeast Finance Director
September 1991 to June 1992
Democratic National Committee '. Northeast Finance Director
June 1992 to February 1993
44
Political
contributions:
itemize all political contributions of$500or more toany individual,campaign organiza.
tion,political party, political action committee or similar entity during the last eight
years and identity the specific amounts,dates,and names of the recipients.
Lynn Yeakel for Senate, June 30, 1992, $500
Cinton for President Committee ,May 21, 1992, $616
DemocraticNational Committee, January 29, 1993, $5,937
Qualifications:
Statefullyyourqualificationstoserveinthepositiontowhichyou havebeennamed.
(atuch sheet)
Futureemployment
relationships: 1. Indicate whether you will sever allconnections with your present employer,business
firm,associationororganizationifyouareconfirmedbytheSenate.
I am presently employed as Special Assistant to thePresident. I certify
that immediately upon taking the oath of office as Commissioner, I
WITT resign from thTS DOSition.
2. As faras can be foreseen,statewhetheryou have any plans aftercompletinggovern.
ment service to resume employment,affiliationor practice with your previous em .
ployer,businessfirm,associationororganization.
No
3. Has anybodymadeyou acommitmenttoajobafteryouleavegovernment?
No
4. Doyou expecttoservethefulltermforwhichyouhavebeenappointed?
Yes
45
Qualifications
During my tenure as Special Assistant to the President , I
have been an adviser on banking and financial services policy and
legislation and have focused a considerable portion of my time to
Securities and Exchange Commission matters . Additionally , I
worked in the securities industry for most of my career prior to
joining the public sector . I believe the combination of these
experiences will provide me with a unique insight in the issues
facing the SEC .
46
Potentialconflicts
of interest:
1. Describe any financial arrangements or deferred compensation agreements or other
continuing dealings with business associates,clients or customers who will be af.
lected by policies which you will influence in the position to which you have been
nominated.
None
2. Listany investments,obligations,liabilities,orother relationshipswhichmight involve
potentialconflictsof interestwiththepositiontowhichyouhavebeennominated.
Westmoreland Grantor Trust (beenficiary interest in family residence
held in trust form )
See attached.
3. Describe any business relationship.dealing or financial transaction (other thantax.
paying)which you have had during the last 10 years with the Federal Government.
whether foryourself,on behalf of a client,or acting as an agent,that might in any
way constituteorresultina possibleconflictofinterestwiththepositiontowhichyou
havebeennominated.
None
s
47
Potential Conflicts of Interest
No member of my immediate family is an officer or director
of any securities firm , investment company , investment adviser ,
registered public utility holding company or any of its
affiliates , or of any company that has public security holders .
Two of my siblings , however , are employed by Goldman , Sachs &
Co. , a regulated securities firm . My brother Donald Carey is a
Vice-president in the Municipal Finance Division's headquarters
office , and my sister Helen Carey is a Vice-president in the
Municipal Sales Division's headquarters office .
48
4. List any lobbying activity during the past 10 years inwhich youhave engaged for the
purpose of directly or indirectly influencing the passage,defeat or modification of
anylegislationatthenationallevelof governmentoraffectingtheadministrationand
executionofnationallaworpublicpolicy.
Since February of 1993 I have been a Special Assistant to
the President for Legislative Affairs.
5. Explain how you will resolve any potentialconflict of interest that may bedisclosed by
yourresponsestotheaboveitems.
See attached sheet
Civil,criminaland
investigatory
actions:
1. Give the full dc:ailsof any civil or criminal proceeding in which you were a defendant
or any inquiry orinvestigation bya Federal,State,or localagency inwhich you were
thesubjectoftheinquiryorinvestigation.
See attached sheet
2. Give the full details of any proceeding, inquiry or investigation by any professional
association including any bar association inwhich you werethe subject of the pro
ceeding.inquiryorinvestigation.
None
6
49
Explain how you will resolve any potential conflict of
interest that may be disclosed by your responses to the above
items .
I have been furnished with a copy of 18 U.S.C. 208, as
amended by the Ethics Reform Act of 1989 , and the Canons of
Ethics for Members of the Securities and Exchange Commission , 17
C.F.R. 200.50 et seq ., both of which I have read . I understand
that , as required by 18 U.S.C. 208 , I must disqualify myself from
any particular matter that , to my knowledge , would have a direct
and predictable effect on my financial interests or a financial
interest imputed to me, unless a written waiver of such
disqualification is issued pursuant to 18 U.S.c. 208 (b).
Accordingly , I intend to disqualify myself from
participation in any particular matter involving specific parties
that has a direct and predictable effect on my financial
interests or a financial interest imputed to me .
In addition , I intend to participate in matters of general
applicability , such as general policy considerations , rulemaking
proceedings or legislation , except that , as required by 18 U.S.C.
208 , I will not participate when such a matter would , to my
knowledge have a direct and predictable effect on my financial
interest , or financial interested imputed to me .
As long as either of my siblings is employed by Goldman
Sachs , I will disqualify myself from any particular matter
involving specific parties in which either of their respective
divisions is involved if the circumstances regarding my
participation would cause a reasonable person with knowledge of
the relevant facts to question my impartiality , unless I have
received authorization to participate . 5 C.F.R. 2635.502 .
Finally , I intend to disqualify myself on a case-by-case
basis , with respect to any other matter where , in order to avoid
the possible appearance of impropriety , it appears desirable to
me to disqualify myself , despite the lack of any actual conflict
of interest or any requirement to do so .
I understand that the financial interests that would be
imputed to me are those of a spouse , dependent child ,
general partner , or any organization
which I am serving
as officer , director , or trustee or any person with whom I
am negotiating for employment.
50
Give the full details of any civil or criminal proceeding in
which you 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 .
On August 15, 1995 , in the normal course of carrying out its
supervisory responsibilities of the Clinton for President
Committee , Inc. (1992 ), the Federal Election Commission found
reason to believe I violated a provision of the Federal Election
Campaign Act of 1991 as a result of the Committee's failure to
reimburse me in a timely fashion for expenses i incurred .
However , after considering the circumstances of the matter , the
Commission by letter dated September 12, 1995 stated its
determination to take no further action and closed its file as it
pertains to me . A copy of the Commission's letter is attached .
51
FEDERAL ELECTION COMMISSION
WASMINCIONO
September 12, 1995
Paul Carey
100 Now Haaponice Avenue , N.W.
Washington , D.C. 20037
RE : MUR 4172
Paul Carey
Doar MC . Caroy :
on August 15 , 1995 , the federal Election Condinsion found
5 6 4 0 to believe that you violated 2 U.S.C.$ 4410!21 (1)(a ), a
provision of the rederal Election Campaign Act of 1971. 16
anended , by making an exCURRivo conceibuéion to the clinton foe
Prosidont Committee ("the Committee ). However , after considering
the circumstances of this macter , the Commission also determined
to take no further action and closed its file de it pertains co
you . The Pactual and Legal Analysil , which corned . barne for the
Commission's finding . 18'attached for your information .
Please be advised that your total amount of contributions
violated the contribution limitation ac ? U.S.C. § 441alallilla .
The Commission remindo you that "advances' for the costs incurred
in providing goods or services to , or obtaining goods or services .
that are used by or on behalf of , a candidate or a political
Committee are considered contributions . See 11 C.fin . s 116.5 (b).
You should take steps to ensure that you aoTde by the contribucion
11mitation and this regulation in the future .
The file will be aide public within 30 days after this matter
has been closed with respect to all other respondents . You are
advised that the confidenciality provisions of ? U.S.C.
§ 4379 (a)(12 )(a ) still apply wiën'respect to all respondents stil !
involved in this matter .
If you have any questions , please contact poto G. Blumberg
or Andre Pineda , thi ittorneys assigned to this matter , at (2021
219-3690 or (800 ) 126-9530 .
Sincerely ,
D e n
1.
Donald
Danny V. McDonald
Chaicman
Enclosure
factual and Logal Analysis
52
FEDERAL ELECTION COMMISSION
FACTUAL AND LEGAL ANALYSIS
RESPONDENT :
Paul Carey
MUR : 4112
This matter was gonerated by information obtained by the
Foderal Election Commission ("the Commission") in the normal
course of carrying out its supervisory responsibilities purouane
to tho Federal Election Campaign Act of 1971 , as aaondod l"the
Act "). 2 U.S.C. § 437glal (2). The intormation is based on
contribucions made to the clinton for President Comaittee , Inc.
"the Committee ").
The Ace scates that no person may make contributions to any
candidate and his or her authorized political committees with
respect to any election for federal ollico which , in the
aggregate , excoed $1.000 . 2 U.S.C. § 441a(a)(1)(1 ).
The payment by an individual from his or her personal funds
for the costs incurred in providing goods or services to, or
obeaining goods or services that are used by or on behalf of a
political committee is a contribucion . 11 C.F.R.
116.516 ).
However , two exemptions exist . First , an individual may spend an
aggregate of $1,000 per election for personal transportation
expenses on behalf of a candidate without such expenditures
counted a contributions . 11 C.F.R. $S 100.716 )( ) and 116.510 ).
second . advances of personal funds will not be considered
couco abulions if they are for the individual's personal
transportation expenses or for the usual and noraal subsistence
expenses of the individual who is not a voluntees , where such
53
-2
expenses are incurred while the individual is traveling on behalf
of a candidate or a policical committee of a political party .
11 c.8.n. s 116.516 ); see also
explanation and Justification for
11 C.F.R. S 116.5 (b ), 55 red. Reg. 26382-83 (June 17, 1989 ). If
the individual's transportation and subsistence expenses are paid
by porsonal credit card , they must be relabursed within 60 days
atter the closing date of the billing statement on which the
charge liest appears , or if a personal credit card was not woed .
Wii..... 30 days after the date on which the expensos veco incurced .
id . when an individual incuro expenses for the subsistence of
others , a contribution occurs at the time the financial obligacion
is incurred , regardless of when the payment is due or when the
individual pays tho debe . 11 C.P.A. § 116.5 . See also
Explanation and Justification of 11 C.F.R. S 116.516 ), 55 pod.
Reg. 26382 (June 27 , 1989 ).
The Coani6sion inconded section 116.5 to provide a
limited exception to the general rules governing contributions for
an individual's personal transportation expenses , and for usual
and normal subsistence expenses of an individual who is not a
volunteer . 11 C.F.R. s 116.5 . 55 red . Rag . 26382-3 (June 27,
1989 ). The Commission also adopted section 116.5 out of concorn
that during critical periods in a campaign when an authorized
committee 10 experiencing financiad difficulties , individuals nay
alteape to circumvent the contribution limitations by paying
committee expensos and not expecting ceiabutseaent foc substancial
periods of tine , Explanation and Justification for 11 C.BA ,
§ 116.5 . 55 pod . Reg . 26382-3 (June 27 , 1989 ): see also MUR 1349
54
-)
(Connisbion found probable cause co believe the thae Reagan toc
Presidene Connitte
violated 2 U.S.C. s 141016 ) by waiting 81 days
to reimburse a volunteer who paid $18,713 in expenses on behalf of
the committee .).
From September 1991 to July 1992 , Mr. Carey made
expenditures for transportation , food , packing , taxi , and
miscellaneous costs . since these expenditures were for himself
ana for the subsistence of others . chese expenditures rosulted in
contributions to the Committee . Il C.E.A.
116.516 ). because
Me . Carey paid for his own travel and subs16tonco Cosco wien hoe
personal credit card or by means other than his personal credit
card . and because he was not reimbursed for those costs within 30
or 60 days , he made contributions to the Courite...
Id. By
making expenditures for the subsisconce of others , Mr. Carey made
contributions to the Connittee at the time he incurred such
expenditures . id. The above-stated expenditures ranged from
$2.00 to $791.14 . on February 29, 1992 , Mr. Carey's excessive
anoune reached its highest ac $5.358.1
Therefore , there is reason to believe that Paul Carey
violator 2 U.S.C. S 4410call1 )(A) by knowingly asking
contributions in excess of the coneribution liaitations .
1/
on February 29. 1992 , Mr. Carey's highest excessive enount
zoached $6.350 . However , pursuant to 11 c.i.d. $ 100.71b /18). Mr.
Carey was entitled to spend an aggregate of $1.000 per election
for personal transportation expenses on behall President Clinton
witnout such expendituros counced as contribucions . Thoretose .
Ms. Carey's nighese excessive anount on february 29 , 1992 was
$5.358 136,358 - $ 1,000 ).
55
P R E P A R E D S TA T EM E NT OF DENNIS D O L L A R
MEMBER -DESIGNATE, NATIONAL CREDIT UNION ADMINISTRATION BOARD
SEPTEMBER 30, 1997
Thank you, Mr. Chairman, and ladies and gentlemen of the Committee for the
prompt hearing and the opportunity to meet with you on behalf of my nomination
to serve on the Board of theNational Credit Union Administration.
As the Chief Executive Officer of a credit union which can best be described as
of smallto moderate size (the Gulfport V A Federal Credit Union has approximately
$31 million in assets, right on the nationwide average of just under $30million) for
the past 6 years, I have dealt with the day-to-day issues facing our Nation's credit
unions.
I have sat across the desk from the member of limited means who says, “I can't
send m y daughter to college without this loan,” or “M y son will not have clothes
for school unless my credit union can help me .”
I have stood in the parking lot with thatproud member who finally financed his
first car or truck and says,“Inever thought I would own one on my own , now I
can take that new job that my family reallyneeds but it's 20 miles away.”
I have seen the regulatory process firsthand, have experienced the depth of an
N C U A examination,and a m a committed adherent to the importance of safety and
soundness considerations.
Of all of the member services we provide at our credit union, Itell m y members
daily that the most important member service we can provide is a strong, safe,
sound, and viable creditunion.
I look forward to the opportunity to work as a Member of the N C U A Board to
use this perspective Ihave gained in the credit union trenches, while at the same
time applying the public policy perspective that I gained through 8 years as a State
legislator
Having served as aM e m b er ofthe Mississippi House of Representatives for two
4-year terms, from 1976 to 1984, I have looked at issues from a public policy, regu
latory, and legislative pointof view as well.
I understand that not onlycredit union members have a stake in the safety and
soundness ofour Nation's credit unions, but so do the American people .
I look forward to working with this Committee and Congress,as a Member of the
N C U A Board upon confirmation, to continue to ensure the safety and soundness of
a growing credit union system for years tocome.
Again,Mr. Chairman and Members of the Committee, Ia m honored to be before
youtoday for this confirmation hearing, and I would gladly answer any questions
you might have of m e .
Thank you very much .
56
S T A T E M E N T FO R C O M P L E T I O N B Y PRESIDENTIAL N O M I N E E S
Name:
Parl
OTATIO
Dennis
Dollar
VID
Dateof
Positiontowhich
nominated:
Board, National Credit Union Adais. nominalion:. August 1, 1997
Dateof birth: 22 August 53
Placeofbirth: Union, KS
DAN OXO.STIO iro
Fullnameofspouse Janie Maureen Sullivan Dollar
Marital status: married
Name and ages
of children:_Christopher Ryan Dollar (age 16)
Hindsay Blair Dollar (age 122
Education:
Institution
Mississippi Gulf Coast
Community College
University of Mississippi
Dates
attended
1971-1973
1973-1975
Degrees
received
A.A.
B.A.
Datesof
degrees
1973
1975
2
7
Honorsandawards. Listbelowall scholarships,fellowships,honorarydegrees,militarymedals,honorarysociety
memberships,andanyotherspecialrecognitionstoroutstandingserviceorachievement
Outstanding Young Men of America, 1980-88
Who's Who In Mississippi, 1989
Who's Who On The Gulf Coast, 1990
Notable Americans, 1978
Selected as one of five outstanding credit wion CDO's lo "Most
Duroretrugwol nationridt recogatttoo by Grethe Maicon fines, 1994
57
Memberships:
Lis:belowalimembershipsandofficesheldinprosessional.fraternal,business,scholarly.
civis.charitableandher organizaiions.
Oriceheld
(ifany)
Organization
(see attached
sheet for
additional)
March of Dimes
United Way of South Ms.
Gulfport Job Corps Center
Co-Chairso
Chairman
Community Covacil
1994
1993-94
1884-96
Gulfport Rotary Club
Merber
1991-present
Kids Voting-Mississippi
Board Member
1994-95
Leadership Board
Board Member
1991-present
1979-90
Boys and Girls Club
Goodril Industries
Einploymenirecord: Lis:belowallpositions heldsincecollege,includingthetitleordescriptionofjob,nameof
employment.locationofwork,anddatesofInclusiveemploymerii.
Mississippi House of Representatives, StateRepresentative,District 118,
Elected state legislator io 1975 and re-elected 1979. Served 1976-84.
Coast Mateciala Company:-Ready Mix Concrete:Sales, 1976–79.Gulfport, MS.
Port City Real Estate, Real Estate Sales, 1979-81,Gulfport, MS.
Tom Jennings Realtor, Real Estate Sales, 1981–86, Gulfport, MS.
Phillips Junior College, Gulfport, MS, Teacher, Adoinistrator, 1984-91.
First Baptist Church of Lyman, Gulfport, MS, Music/Youth Director, 1979:82.
Big Ridge Baptist Charch, D'Ibervilee, MS, Music/Youth Director, 1983–89.
Robinson Road Baptist Church, Gulfport, MS, Music Director, 1990–93.
Big Ridge Baptist Church, D'Ibervild , AS, Music Director, 1993-present.
Gulfport VA Federal Credit Valon, Gulfport, MS, President and CBO, 1991
present
2
58
MEMBERSHIPS (Continued)
Mississippi Arts Fair for the lanciapped, Board Member, 1977–85
Mississippi Coast Chamber of Commerce, Board Member, 1991-93
Mississippi Credit Union Systea, Chair, Governmental Affairs Committee, 1993-95
Vaited Way of South Mississippi, Board Member, 1986–89
Gideons Laternational, Member, 1989-present
Gulf Coast Baptist Association , Moderator, 1996-97
Big Ridge Baptist Church, Meuber, Music Director, Deacon, 1993-present
Gulf Coast Mental Health Center, Advisory Board, 1976-82
59
Government
experience:
Puclished
writings:
Political
affiliations
andactivities:
Listanyexperienceinordirectassociationwith Federal.Staie,oflocalEcvernments,in.
cludinganyadviscry,consultative,honoraryoroiherpart-iimeserviceorpositions.
Mississippi House of Represe tatives, Scate Representative, District 111
Gurtporto this, btected 19750 lonelected 1929. Served 1976-86,
Listthetites,publishersanddatesofbooks,articles,reportsorothe:publishedmaterials
youhavewritten.
None
Lisiallmemberships and offices held in and servicesrenderedtoallpoliticalpartiesor
eiectioncommitteesduringthelast10years.
Republican Douinee for 0. S. Congress from Stb District of
Mississippi ia 1996. Meaber of Mississippi Republican Party.
Served as State Convention delegate, 1996.
2
60
Political
contributions:
Qualifications:
Itemizeellpoliticalcontribu:iorsof$500ormoretoanyindividuai.campaigncrganiza.
lion,political party,political action committee or similarentityGuringthelasieighi
yearsandideniitythespecificamcunts,dates,andnamesoftherecipients.
Nope
Statefullyyourqualificationstoserveinthepositiontowhichyouhaveteennamed.
(artachshet:)
Futureemployment
relationships: 1. Indicate whetheryou willsever allconnoctionswithyour presentemployer,business
firm,associationororganizationityouareconfirmedbytheSenate
Yes
2. As faras canbeforeseen,statewhetheryou haveanyplansattercompletingsovero.
mentservicetoresumeemployment,affiliationorpracticewithyourpreviouserst
pioyer,businessfirm,associationororganization.
Ihave no plans to resume employmeat vich the Gulfport VA Federal
Credit Union after completing government service.
3. Hasanybodymadeyouacommitmenttoajobafteryouleavegovernment?
No
4. Doyouexpecttoservethefullterm'orwhichyouhavebeenappointed?
Yes
t
61
Potentialconflicts
ofinterest:
1. Describe any financial arrangemenis or delerrec compensacion agrotrients orother
continuing dealings with business associates,clien:sor cusiomerswho willbe af.
fectedby policies which you will Influence inthe position!owhichyou have been
nominated.
None
2 Listanyinvestments,obligations,liabilities,orotherrelationshipswhichmightinvolve
potercialconflicisofinteresiwith thepositionionäichyouhavebeennominated.
None
3. Describe any business relationship,dealing or financial transaction (otherthan tax
paying)which you havehad duringthe last10yearswith the Federal Government,
whetherforyourself,on beha!cta client,oractingas anagent,thatmight inany
wayconstituteorresultinapossibleconflictofinterestwiththeposi iontowhichyou
havebeennominated.
None
49-692 98 -3
62
4. Lis:anylobbyingactivityduringthe past10yearsinwhichyou haveengagedforthe
purposeofdirectlyor indirectly influencingthepassage,deleator modification of
anylegislationatthenationallevelofgovernmentoradiectingtheadministrationand
executionofnationallaworpublicpolicy.
Nope
i 5. Explainhowyouwillresolveany potentielconflictofinterestthatmay bedisclosedby
yourresponsestotheaboveitems.
N/A
Civil,criminaland
investigatory
actions:
1. Givethefulldetailsofanycivilorcriminalprocesdinginwhichyouwereadetenderit
oranyinquiryorinvestigationbya Federal,State,orlocalagencyinwhichyouwere
thesubjectoftheinquiryorinvestigation
Noge
2. Give the fulldetails of any proceeding,inquiryorinvestigation by any professional
associationincludinganybarassociation inwhichyouwerethesublectofthepro
ceeding,inquiryorinvestigation.
None
63
DENNIS DOLLAR
. lifelongresidentofGulfpors,Mississippi.
AsteadedGulfportpublicschoola GraduatedGulfportEastHighSchool,1971. GaduatedMisalssippiGulf
CoostCommunityCollegescha.)1973. GraduatedUniversityofMississippi
,(BA )1975.
ElectedtoMississippiHouseofRepresentativesin1975 from HarrisonCountyatage22. Atthattime,the
youngestmemberoftheHouseofRepresentativa
Re electedtoMississippiHouseofRepresentativesin1979withoutoppositioa.
. Declinedtorun forthirdterm in1983,opting lastead tomeettheofficeofSecretary ofSute. Narrowly
deletedinthisbid.
AppointedbyGovenorasamemberofthe1986 Commission ontheMississippiCoastitution.Alsoappointedto
chairtheEducationCoonmitteeofthisconstitutionCommission,
PresentlyservingasPresidentandCEO oftheGulfportVA FederalCreditValon,•$J1 milbon federally.
charteredcreditunionwithover11,500membersrepresentingover150employergroupsontheMississippiGulf
Coast.Charteredin1935ontheproundsofitsoriginalsponsor,theGulfportVAMedicalCenter,theGulfport
VAFederalCreditValoohasthreebranchesinGulfporr,oneinBoySt.Louk,andonelaBiloxiandisthe1993
recipientoftheHarrisonCorantyEconomicExcellenceAwardusOutstandingSmallBusinessoftheYear;the
1994recipientoftheMississippiCreditValonLeagueMoodshotAwardforachievingthehighestpercentageof
membershipgrowite;both the1993 and 1995 first-place recipieat($20-$50 million ssuesategory) ofthe
Missisippi Don Marwell Social ResponsibilityAward recognizingcreditunions for their outstanding
contributionstotheircommunity, sad the1995firstplacerecipient(520-550milion assetcategory)ofthe
NationalDorrMaswellSocialRespoasibilityAwardrecognizingcreditunionsforthelsoutsundingcontribution
totheircocamunity.
RepublicandomineeforU.S.Conpreufrom SthDistrictofMississippiin1996,havingwon the Republican
nominationwith80%ofthevoteintheSuperTuesdayprimary.Althoughdefeatedingeneralelection,received
highestvotepercentageofanypreviouschallengeragainstseven-yearIncumbentDemocratcongressman.
Pormer realtorsadeducator,havingservedasPresideotofPhillipsJuniorCollegefrom1986-89,aswellas
otheradministrativecapacideswithinthe92campusPhillipsrystem.
electedin"OutstandingYoungMenofAmerica,1980-1988
O S
electedforWho'sWhoInMississippi,1989sadWho'sWhoOnTheGulfCoor,'1990
. S
SelectedasoneoffireoutstandingcreditunionCEO'sin'MostOutstandingCEO nstioawiderecognitionby
C
editUnionTimes, prestigiouscreditunionindustrypublication,1994.
. Cr
mpaignCo-Chairman,MarchofDimes"WalkA.Thon,1994.
. Ca
rnpoigaChairman,UnhedWayofSouthMississippi,1993-94.
. Ca
hairmaa,MississippiCreditUnionSystemCorcameotalAffairsCommittee,1993-95.
CommunityCouncil,GulfportJobCorpsCenter.LeadershipBoond,BoyssodGirlsClub.
Graduate,LeadershipGulfCoostClassof1991-92.Member,GulfportRotaryClub.
BoardofDtractors,MississippiGullour ChamberofCommerce(1991-93),VoltedWoyofSouthMississippi
(1986-89),MississippiArtsFairfortheHoodicapped(1977-85), Goodwillladustries(1979-90),GulfCour
MentalHealthCeater(1976-87),andKidsVacingMlosissippi(1994-95).
Moderator,GulfCoustBaptistAssocistion.Member,GideonsInternatioosl.
BaptistDeacon.PrescattyservingasMusic&YouthDirector,BigRidgeBepalaChurch,Alberville.
MarriedtoformerJonteSullivanofGulfporty:Gulfportschoolteacher. Twochildren,Christopher,Is,and
Lindsay,12
LEGISLATVEFACTSABOUTDENNISDOMAR
Servedonthefollowinglegislativecommittees Education,Judiciary,PublicHealthandWelfore,Ilighwayand
HistwayFioraclayandthepowerfulWaysandMeansComanittee.
Authoredbillswhichweretractedlavtolowtogroot18-year-oldstherigtusofcredis,protectrapevictimsfrom
wadecennyabuseincourt,makedecalssmailableforthelictoseplatesofhnadicapped citizens,outlawchild
pornographyinthewateandtheparte's1983touchesdrunkdetulinglow,
InstrumentalindraftingandguidingthroughtheHouse EducationCommitteetheEducation ReformaActof
1982andtusreductionlegislationis1977aad1979.
. BestknownforauthorshipofMinissippi1981OpenMeetinglowandthe1983PublicRecordsAct
RecipientofMargaretDamonAwardfromtheAssociatedPressin1981for"courageandselflessnessinfighting
toprotectforallpeoplethestatestobefeellaformed.
DenisDollar
49-BSsch Sores
Gulfport,MS39507
(601)864-0884(home)
(601)868-9522(office)
64
P REP ARE D STATEMENT OF ELLEN SEIDMAN
DIRECTOR -DESIGNATE , OFFICE OF THRIFT SUPERVISION
SEPTEMBER 30, 1997
Mr. Chairman, Senator Sarbanes, Members of the Committee, I am honored to
appear before you as President Clinton'snominee to head theOfficeof Thrift Super
vision. I want to thank you for holding this hearing.I also want to thank President
Clinton and Secretary ubin for their confidence in me ; m y family —m y husband,
Walt Slocombe,and m y son,Will Slocombe - for their supportand patience; and Nic
Retsinas, Jonathan Fiechter, and the staff at the OT S fortheir hard work and good
spirits. And I want to thank the Committee's Staff Director, Howard Menell, for re
minding me ofour years togetherat Ne w Rochelle High School.
Mr. Chairman, the prospect of servingas the Director of OTS is humbling and
exciting. As I spoke to many Committee Members during m y courtesy calls, Iw a s
inevitably asked, “W h y do you want thisjob ?” Quite simply, I think it is one of the
best public servicejobsin Washington today.
These are dynamic times in the financial services industry ,and OTS and the in
stitutionsit regulates are playing an important part in the industry's evolution.T he
country's first Internet “bank”was a thrift,and new companies are entering the thrift
industry, even as consolidation continuesto reduce thetotal number of institutions
supervised by OTS .At the same time, thrifts continue their critical role as home
mortgage lenders, with residential whole loans comprising over50 percent of the in
dustry's assets, and traditional home lenders leading the industry in profitability.
These have been good years for the thrift industry, but OTS's primary responsi
bility must always be to make certain that the industry continues to be safe and
sound,no matter what the economic conditions. Depositors and taxpayers are count
ing on OTS to understand what the risks are, to establish sound and sensible rules,
and to make certain those rules are followed. In contrast to thrift regulation ofthe
1980's,O T S has the statutory and regulatory tools, the resources, and the public
and political support to accomplish thismission. M y responsibility, ifconfirmed ,will
be to support and enhance what has been accomplished, both leading and backing
the agency's staff as they take sometimes difficultactions.
OTS must also encourage the institutions it supervises to meet their responsibil
ities to make certain that financial services are available on a fair and equitable
basis in all communities the institutions serve. This is not only good for consumers
and communities, it is good for business. Ifcommunities have access to capital and
arepart ofthe financial mainstream , economic development follows, as dojobs and
profits for the businesses serving those communities.
The challenges for the industry, and thus for OTS , are many,but what makes
the prospect of leading the agency exciting is that each challenge brings opportuni
ties.Homogenization of different types of financial services andconsolidation in the
financial services industry can bring increased access to capital and the advantages
of greater scale, particularly in development and deployment of new products and
the bestnew technology. But these trends challenge management and morale. They
challenge institutionsto continue to effectively serve theircustomers and their c o m
munities. And they challenge regulators to fully understand and effectively super
vise a broader array of activities and of risks.
Technology, too, is the source of opportunitiesand challenges. Technology not only
provides better tools for understanding the business but also providesthe ability to
serve customers in new ways and more efficiently. But technology's challengesare
legion: preparing for the year 2000; protecting the security and privacy of institu
tions'systems and customers' accounts; understanding thetools so management and
regulators can use them rather thanbeing trappedin a world of blackboxes; and,
finally, making the benefits oftechnology available to all.That means being careful
that credit scoring tools, which can clearly enhance productivity, are used to free
up underwriters to analyze applications that don't fit the scoring systems precisely,
rather than to restrict access to credit. It means enhancing, not restricting, access
toATM's and electronicbanking as those technologies become more prevalent.
Finally,there isthe challengeofthe changing legal structure.O n e cannot be n o m
inated tobethe Director of OTS without being aware thatpeople have been talking
about abolishing OTS virtually sinceitw as founded.The office needs full-time lead
ership and direction so it canb e part ofdetermining its future and that of the thrift
industry, and to implement thatfuture, whatever it may be , ina manner that pro
tects depositors, the insurance funds, and taxpayers, and is sensitive and responsive
tothe needs ofemployees.
Thank you for the consideration of m y nomination. If confirmed , I look forward
to working with you to meet the challenges of this new era .
sto
UT
093
HE
65
S T A T E M E N T F O R C O M P L E T I O N B Y PR E SI DE N TI AL N O M I N E E S
Ellen
Seidman
Laat)
(Fire
Positiontowhich
Director,
Office
of
Th
ri
ft
Supervision
nominated:
Shapiro
(Other
Name:
Dateofbirth: 12/3/48
Day) ponor)
MartialStatus: Married
(Yean
Dateof
nomination:276797
Placeofbirth: New York, New York
Fullname ofspouse: Walter Becker slacombe
Name andages
ofchildren: Benjamin William Slacombe (12)
Sarah Cody Slocombe (Step-daughter)(29)
Merrin Hayes Slocombe (Step-daughter) (27).
Dates
Education:
attended
Institution
New Rochelle High School
1961-65
Radcliffe College
1965-69
University of Chicago
1967-68
Degrees
roceived
Datesof
degrees
AR
1969
Boston University
1970-71
Georgetown Univ LawCentr
JFK School of Government
1971-74
1981
JD
1974
George Washington Univ
1984-87
MBA
1988
Honorsandawards: Listbelowallscholarships,fellowships,honorarydegrees,militarymedals,honorarysociety,
memberships,and anyotherspocialrecognhionsforoutstandingserviceorachievemeni.
Secretary's Award for Meritorious Achievement. OSDOT, 10/9/29
General Counsel's Award, US Treasury, 5/86
Special Achievement Award, US Treasury, 7/86
Treasury Department Award, 12/8/87
66
Memberships:
List below all memberships and offices held in professional, fraternal.
business, scholarly, civic, charitable, and other organizations.
OE.ice neid
Daces
(if any)
Organization
WomeninHousing& Finance
Women'sBarAssociation
Women'sTransportationSeminar
Emily'sList
PotomacPedalersTouringClub
BaltimoreBicycleClub
DC JewishCommunityCenter
WashingtonSavoyards
UnitedCerebralPalsyorDC
VAA
DC Bar(inactive)
Employment
record:
BdMember
1988(?)todate
1980(?)1019830)
1981(?)to1989(?)
19851?)todate
1976(?)todate
1989(?)todate
1989to1993(?)
1990(?)todate
1991(?)to1993
1986todate
1975todate
List below all posicions held since college, including the title or
description of job, names of employment, location of work, and jaces of
inclusive employment.
March 1993 topresent-Special AssistanttothePresidentforEconomic Policy;Executive
Officeofthe President:Old ExecutiveOfficeBuilding,Washington,DC
November 1991 toFebruary 1993-SeniorVice President,Regulation,Research&
Economics:FederalNational MortgageAssociation: Washington,DC
February 1991 toNovember 1991 -Vice PresidentforStrategic Planning& Critical Issues:
Federal NationalMortgage Association;Washington,DC
November 1988 toFebruary 1991 -Vice PresidentandAssistanttotheChairman;Federal
National MortgageAssociation;Washington,DC
November 1987toNovember 1988-DirectorofStrategicPlanning;FederalNational
MortgageAssociation;Washington,DC
March 1986toNovember 1987-Special AssistanttotheUnder Secretary(Finance);U'S
DepartmentoftheTreasury;Washington,DC
December 1981 toMarch 1986-Attorney-Advisor,Office oftheGeneralCounsel, and
AssociateGeneralCounsel,ChryslerLoanGuarantee Board;US Departmentofthe
Treasury;Washington,DC
March 1979toDecember 1981 -DeputyAssistantGeneralCounsel forEnvironmental,Civil
RightsandGeneral Law;US DepartmentofTransportation;Washington,DC
2A
2
68
Government
experience:
List any experience in or direct association with Federal, state, or local
governments, including any advisory, consultative, honorary or other
part-time service or positions.
My federalgovernmentexperienceislistedaspartofmy employment record.
Inaddition,during 1975,IservedonaDistrictofColumbiataskforcetodevelop the
AdvisoryNeighborhoodCommissionsystemestablishedunderthehome rulelegislation.
From 1975 to1977,IservedasanAdvisoryNeighborhoodCommissioner,fromdistrict6B07
on CapitolHill.
Published
wr!tings:
Lise the title, publishers and dates of books, acticles, reports or othe:
published materials you have written.
"TheGovernmentSecuritiesActof1986,"ReviewofFinancial ServicesRegulation
December 10,1986.
Political affi
liations and
activities:
List all memberships and offices held in and services rendered to all
political parties of election committees during the last 10 years.
Iam aregisteredDemocrat. Ihavenotheldofficeinnorrendered serviceto anypolitical
partyorelectioncommitteeduringthelast10years. As noted inmy responsetothenext
question,IhavecontributedmoneytotheDemocraticNational Committee andthe
DemocraticSenatorialCampaignCommittee.
!
3
69
Political con
t::butions:
itemize all political cone:ibutions of $500 or more to any individual,
campaign organization, political party, political action coimustee ::
similar entity during the last eigh: years and identiSy the speciiis
amounts, dates, and names of the recipients.
Emily'sList-total of$950-on 1/30/89;9/22/89;4/7190;6/10/90;9/7/91;1/13193;and
1/4/97
Women's CampaignFund -total of$1,000-on4/21/89;10/23/89;2/24/91; 10/19/91;and
12/2/91
DSCC -total of$600 -on 10/29/89;10/22/90;2/24/91;2/22/92;and 11/5/94
DNC -S500on8/1/92
JosieHeath forSenate-totalof$600-on2/2/90;6/10/90;8/2/90;9/14/90;and 6/26/92
Qualifica
tions:
state fully your qualifications to serve :n the position. Co which you have
been named.
(attach sheet)
Future
employment
relationships: 1. indicate whether you will seve: all connec:ions with your present
employe:, business firm association, or organ:zation :: you are
confirmed by the Senate.
Iwillsevermy connectionwiththeExecutiveOfficeofthePresident. Iwillcontinueto
remainemployedbytheUnited Statesgovernment.
2. As far as can be foreseen, state whether you have any pians aider
compiering government service to resume employment, arciliation or prac:ice
with your previous erapioyes, business Li.ms, association or organization.
Ihavenoplanstoresumeemploymentwithanyoneaftermy governmentservice.
3. Has anybody made you a committent to a job after you leave government?
No onehasmade acommitment tome ofajobafterIleavethegovernment.
4. Do you expect to serve the full term for which you have been appointed?
IexpecttoserveforthefulltermforwhichIhavebeenappointed.
4A
70
Statementofqualification:
Iam qualifiedtobethe Directorofthe OfficeofThriftSupervisionbyvirtueofmy
educationand my governmentand business experiences. Inadditiontomy Bachelor's
degree inGovernment,Ihavea lawdegreeanda Masters inBusinessAdministration in
FinanceandInvestments. Ihavepracticed law,both inandoutofthegovernment. Much
ofmy govemment serviceinvolved issuesrelatingtothe appropriatedegreeandmanner
ofgoverment regulationofprivatebusinesses–therailroads,thegovermentsecurities
industry,andmost recently,the bankingandthriftindustries. Duringmy yearsatFannie
Mae,Iworkedextensivelyonthe measurementandregulationofriskinthemortgage
industry,aswell ashow thatindustrycan bestserveallcommunities. Ialsoparticipated
intheregulatorysystem fromtheperspectiveofaregulatedentity,complementingmy
governmentexperience. Inmy currentposition,Ihave participatedinthedevelopmentof
thisAdministration'spolicies toreduce regulatoryburdensonthe bankingandthrift
industriesandtoencourage themtoextendtheprofitablereachoftheirservicestoall.My
management experience includes lineresponsibilityforadepartmentwithdiverse
responsibilitiesatFannie Mae. Inaddition,throughout my careerIhavemanaged
interdisciplinaryand interagencyteams toproducehighqualityproductsinatimely
manner.
4B
71
Potential con
Flicts of
interest:
1. Desc:ibe any financial arrangements or deferred compensat:... aczeements
or other continuing dealings with business associates, c1:200s os
customers who will be aifected by policies which you will inéluence in
the position to which you have been nominated.
Iam fullyvestedinafully-fundednon-contributorydesined benefit pensionplanatthe
FederalNationalMongage Association. Ialso have money ina401(k)plan atthe Federal
NationalMortgageAssociation.NeitherFNMA norIam contributingto theplan,anditis
runbyFidelity,withfulldiscretionon my parttochooseinvestments. Idonotbelieveeither
ofthesepensionplanscreatesanyconflictofinterest. Nevertheless,Ihaveagreedwiththe
TreasuryDepartmentthatIwilltakeactionsdescribedinaletterdatedFebruary6,1997and
attachedhereto asExhibitA toavoid anyappearanceofconflict
2. List any investments, obligation, liabilities, or other celationships
which might involve potential conilicts of interest with the position
to which you have been nominated.
None
3. Desc:ibe any business relat:ons 29, dealing, or Sinancial 0:1..saction
(other than taxpaying) which you have had during the last 10 years
the Federal Government, whethe: for yourse:6, on behalf oi a client, or
acting as an agent, that mighe in any way conscitute or result in a
possibie conslice of interese with the position to which you have been
nominated.
As notedinmy employmenthistory,Ihavebeenemployed bytheUnited StatesGovernment
formorethan4ofthepast 10years. Ido notbelievethisemploymentcreatesanyconflictof
interest.
5
73
P R E P A R E D S T A T E M E N T O F E D W A R D M. G R A M L I C H
MEMBER -DESIGNATE, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
SEPTEMBER 30, 1997
Mr. Chairman and Members of the Committee,it is a pleasure to appear before
you today as President Clinton's nominee to be a Member of the Board of Governors
of the Federal Reserve System .Ifthe Committee and the rest of the Senate approve
m y nomination, I look forward to serving in this important position. I promise to
work with the other Members of the Board, and with the Committee, to carry out
the objectives that Congress has established for the Federal Reserve, both forover
all monetary policy and to assure the safety and soundness of our Nation's banking
and payment system .
Background
Were I to rejoin the Federal Reserve System , this would complete the cyclefor
m e . After receivingm y Ph.D. inEconomics from Yale Universityin 1965, m y first
professional job was with theresearch staff of the Fed. I served there for 5 years,
being part of a new and at the time avant garde project to build an econometric
model explaining the workings of monetary policy.This was a very heady project
forayoung economist, and one that I think was very productive. A successor version
of this model is stillin use at the Fed. I will never claim , nor did I then, that models
could explain everything,butthe attempt to specify the workings ofmonetary policy
in hard and cold termshas led to great insightson appropriate overall macroeco
nomic targets formonetary policy and on strategies to achieve these objectives.
I left the Fed in 1970 tobecome Director of the Policy Research Division at the
Office of Economic Opportunity. Followingthat, I became first a Senior Fellow at
the Brookings Institution, and later a Professor of Economics and PublicPolicy at
the University ofMichigan .At Michigan, I have served for11 years as either Dean
of the School of PublicPolicyor Director of the Institute for Public Policy Studies
(the predecessor institution).I have alsospent 4 years as Chair of Michigan's Eco
nomics Department and, while on leave,2 years back in Washington as Deputy and
Acting Director of the Congressional Budget Office.
Over this time, m y work has spread out widely from m y early econometric model
days.I have both taught and written on macroeconomics,income distribution, State
and local fiscal issues, benefit-cost analysis, education,a n d in recent years have
delved intothe economics of professionalbaseball (Iwas Staff Director for baseball's
Economic Study Commission) and Social Security (I was Chair of the Quadrennial
Advisory Council on Social Security).
While the particular topics are very different, there is a common theme to this
work .Throughout my professionallifeI have believed in, and tried to promote, poli
cies that are economically practical but still provide opportunities for human growth
and advancement. The Social Security plan iproposed, for example,is the one that
I feelbest preserves the important socialprotections now built intoSocial Security,
but also provides for enough total saving that future benefits can beafforded eco
nomically .At the C B O , I and others there argued for humane ways of cutting defi
cits; at O E O ,for economically efficient ways of dealing with poverty. I strongly feel
thatboth economic and social goalsare important. Sometimes one's advice must be
weighted toward economic practicality, sometimes toward humanity. A good econo
mist should know how to balance both objectives, which is what I have tried to do
throughout my career.
The Federal Reserve
Turning now to issuesfacingthe Federal Reserve, the overall objectives ofFederal
Reserve policy,listed in the Federal Reserve Act, are "maximum employment, stable
prices,and moderate long-term interest rates." Let me discuss each.
In the long run, the most fundamental of these objectives is stable prices. In the
short run, there are many factors - oil price shocks,exchange rate movements,bad
harvests — that can influenceprice movement. But,in thelong run, I believe, along
with most other economists, that the fundamental responsibility for controlling a n a
tion's inflation rests with its centralbank policies. It used to be feltthat inflation
could be related in a very mechanical way to the rateof money growth. These days
this linkage has become more complicated because ofthe impact of financial innova
tion on holdings of variousmonetary assets. But while the relationships may have
become more complicated, Federal Reserve policyis still the dominant influence in
determining U.S. inflation rates in the longrun. I believe both that it is important
to keep inflation under control, and that the Fed must play an importantrole in
doing so.
74
Since nominal interest rates equal realinterest rates plus the rate of inflation,
controlling inflation also controls nominal interest rates. Real interest rates can
then be controlled by fiscal policy. Modern day macroeconomic thinking suggests
that when economies are open to international trade and capital flows,monetary
policy becomes the key policy to stabilizeemployment, and fiscal policy determines
the overall national saving rates and real interest rates.If the Federal Reserve is
adequately guarding stabilization needs, fiscal policy is then freeto keep national
saving rateshigh and real interest rates low.That would be m y idea of a desirable
monetary/fiscalpolicy mix.
Previously, I have worked mainly on the fiscal side. At the Congressional Budget
Office, Iw as a strong proponent ofdeficit reduction, as a way to raise national sav
ing. In the Social Security Council,I was a strongproponent of policies to raise n a
tional, and retirement, saving. Joining the Fed will give me an opportunity to work
on this issue from the monetaryside,but Iwillretain an interestin fiscalrestraint
as a key way to assure longrun low real interest rates.
Finally, the objective of “maximum employment” brings up the famous tradeoff
between inflation and unemployment. Along with most other economists, I believe
that ultimatelythere is not much of a tradeoff — some unemployment rates are so
low that, if continued, will lead to steadily accelerating price increases. In the eco
nomicliterature, the lowest sustainable rate of unemploymenthas come to be called
NAIRU — the Non -Accelerating Inflation Rate of Unemployment.
While I am often asked whether I believe in NAIRU , I think this simple question
glosses over the key policy issue, for it turns out to be rather difficult to measure
and identify NAIRU . When Ifirst came out ofgraduate school, the target unemploy
ment rate (we did not use the term N AIRU in those days) was said to be about
4 percent.Later on,as U.S. inflation became virulent, the standard estimate shifted
to above 6 percent.Now , the economy has been operating for a while in the range
of 5 percent unemployment,with as yet few signs of incipient inflation. Given all
this uncertainty, one can believe in a loose sense in the existence of NAIRU , but
still find it hard to say how one would vote on monetary policy in particular cir
cumstances. I would put myself in that category.
Part of the reason for this uncertainty could be that the manifestationsof infla
tion are rather subtle. Chairman Greenspan in the past has defined stable prices
as a set of economic circumstances where inflation, per se, plays little role in eco
nomic decisions. The U.S. economy may be close to this point now .The soaring stock
market may be one indication that the inflation monster has at least for now been
tamed. Another suggestive indication is that the spread between long- a n d short
term interest ratesis very narrow - there hasnever been much explanation for this
spread, otherthan that bond markets have distrusted the centralbank's long-term
commitment to stopping inflation. Right now , bond markets seem to have become
more trusting of the Fed. There are still other advantages of stable prices, and it
stands to reasonthat one of those is that NAI RU might decline a bit that is, in
the end stable prices may even advance the goal of maximum employment.
Hence, I would be an advocate of promoting maximum employment within the
Fed's long-term important responsibility to control inflation. These conditions would
guarantee a healthyeconomy, a reasonable growth in the living standards over
time, and a realisticchance for workers of all income levels and ethnic backgrounds
to prosper.
Finally, the Federal Reserve has other significant responsibilities that extend b e
yond overall monetary policy. It has important responsibilities for regulating the
safety and soundness of the banking system,for promoting efficient payments sys
tems, and for insuring fair and nondiscriminatoryallocations of credit. While I have
studied these issues less than overall monetary policy, I see them as being particu
larlyimportantright now . Regulatory issueshave become very complicatedwiththe
rapid financial innovation now proceeding within the Nation's banking system .The
Fed has to provide a regulatory environment that facilitates financial innovation,
but yet preserves safeg
Iwill work with the other Board Members to try to
fashion à forward-looking, but safe,regulatory strategy.
Mr. Chairman and Members of the Committee, I would be happy to answer any
questions you might have.
75
STATE MENT FOR COMPLETION B Y PRESIDENTIAL NOMINEES
Name:
Gramlich
Edward
rositiontowhich
nominatos: Governor. FederalReserve Board
DaleulLinur: 18
M.
Find
6
(Moner
MartielStatus: married
39
love
Datoof
nomination:
Placeofbirth:Rochester.NY
Fullname ulspust: Ruth Brown Gramlich
Nameandages
ofchildren: Sarah Becker Gramlich 30,
Robert Edward Granlich 28
Education:
Dates
attonded
Inctuution
Degrees
received
Datosof
degrees
Williams College
BA
1961
Yale University
.MA
1962
1965
yale
Yale University
Ph.D.
Honorsandawards: Listbelowallscholarships,tellowships,nonoraryOagrees,militarymedals,honorarysociety
memberships,andanyotherspecialrecognitionsforoutstandingserviceorachievement.
ational Association of Business Economists. Abramson Award 1970
ssociation for Public Policy and Management, Vernon Award, 1987
ociety of Government Economists, Honorary Lifetime Member, 1994
conomics Trading Cards, 1995
ichigan Association of Governing Boards, Distinguished Faculis.Awarde 1994
1
76
Memberships:
Listbelowallmombershipsandofficesheldinprotessional,traternal,business.scholarly.
civic,charitableandotherorganizations.
Otficeheld
fitany)
Organization
Dates
American Economic Association
Vice President
1992
Association for Public Policy and Management
Vice President
1979-80
National Tax Association
Board of Directors
1988-91
Employmentrecord:
Listbelowallpositionsheldsincecollege,includingthetideordescriptionofjob,nameof
employment,locationofwork,anddatesofinclusiveemployment.
Federal Reserve Board, Research Division 1965-70
Office of Economic Opportunity, Director Policy Research Division 1971-73
The Brookings Institution, Senior Fellow, 1973-76
The University of Michigan, Professor of Economics and Public Policy. 1976-97
The University of Michigan, Chair Economics Department, 1983-86 and 1989-90
The University of Michigan, Director, Institute of Public Policy Studies 1970-83 1991-9
The University of Michigan, Dean, School of Public Policve 1995-97
Congressional Budget Office, Deputy Director 1986
Congressional Budget Office, Acting Director 1987
2
7
7
Government
experience:
LisianyexperienceinordirectassoclauonwiinFederal,State,orlocalgovemments,including
anyadvisory,consultauvamdonoraryorotherparttimeserviceorpositions.
Federal Reserve Board Research Division 1965-70
Office of Economic Opportunity, Director Policy Research Div. 1971-73
Congressional Budget Office. Deputy Director 1986
Congressional Budget Office, Acting Director 1987
Published
Writings:
Political
Affiliations
andactivities:
Listthetitles,publishersanddatesofbooks,articles,reportsorotherpublishedmaterials.
youhavewritten.
see attached.CY
Listmembershipsandofficesheldinandservicesrenderedtoallpoliticalpartiesorelection
committeesduringthelast10years.
None
78
Political
Contributions:
Qualifications:
Futureemployment
relationships:
Atomizeallpoliticalcontributionsof6500ormorctoanyindividual,campaignorganization,
politicalparty,politicalactioncommittooorsimilarentityduringthelasteightyoarsand
Identityspecificamounts,dates,andnamesofrecipients.
None
Statcfullyyourqualificationstoserveinthepositiontowhichyouhavebeennamed.
(arachsheet
sies next
page
1.Indicalewhetheryouwillseverallconnectionswithyourpresentemployer,business
firm,associationororganizationifyou areconfirmedbytheSenata.
I hope to take an unpaid leave of absence from the University of Mic:
2.Asfarascanbeforescen,statewhetheryouhaveanyplansaftercompletinggovernment
servicetorecumeemployment,affiliationorpracticewithyourpreviousemployor,bucinoss
firm,associationororganization.
I hope to take an unpaid leave of absence from the University of Michi:
3.Has anybudyinaveyouacurrutilment10ajoballeryouleaveyovernment?
I hope to take an unpaid leave of absence from the University of Michi,
4.Doyouexpecttoservethetulltermforwhichyouhavebeenappointed?
Yes
79
Beginning with m y firstprofessional job at the Federal Reserve in
1965,I have been interested in monetary and macroeconomics;. I
have taught courses in macroeconomics at all levels over the years,
in both Economics Departments and the School ofPublic Policy.
In addition to the Federal Reserve Board,I also have much
government experience,having had management jobs at the Office
of Economic Opportunity and the Congressional Budget Office. I
also chaired the widely -noted Quadrennial Advisory Council on
Social Security from 1994-96 .
80
Potentialconflicts
ulusterest.
1. Describe any financial arrangements or deferred compensaliun ay gernells ui ullier
continuing dealings will business associales,clients or customers who willbe
affected bypolicies whichyou willInfluence inthe position10which you have been
nominated.
None
2. Listany investments,obligations,liabilities,or other relationships which might involve
potential conflicts of interest with the position to which you hAVA BARN nominated.
At present , I own stock in Citicorp and in
Salomon Brothers . I have been advised that these
holdings could present a conflict of interest.
3. Describe any business relaliunsliip,dealiny ur financial transaction (ulher than lax
paying)which you have had during the last 10 years with the FederalGoverment,
wnemer for yourselt,on behalf ofa dlent,or acting as an agent,thatmight inany
wayconstituteorresuh ina possibleconflictofinterestwiththe positiontowhich you
havebeennominated.
None
5
81
4.Ustanylobbyingactivityduringthe pasttenyearsinwhichyouhaveengagedinforthe
purposeof directlyorindirectlyinfluencing the passage,deteat ormodificationofany
legislation at the nationallevel of government oraffecting the administration and
executionofnationallaworpublicpolicy.
None
5. Explain how you will resolve any conflict of interest that may be disclosed by
yourresponsestotheitemsabove.
I have agreed to sell my Citicorp and Salomon Brothers
Civil,criminaland
Investigatory
actions:
stock if my nomination is confirmed .
1. Give the fuliderails ofanycivilor criminal proceeding inwhich you were a defendant
orany inquiryor investigation by a Federal,State,or localagency inwhich youwere
thesubjectoftheinquiryorinvestigation.
None
2. Give tho fulldetailsof any proceeding,inquiry or investigation by any professional
associaliunt including any was associalion in which you were the subject of the
proceeding,inspuiryorinvestigulloni.
None
82
April 1997
Curriculum Vitae
E DW A RD M. GRAMLICH
Dean,SchoolofPublic Policy
440 Lorch Hall
The UniversityofMichigan
Ann Arbor,MI 48109-1220
(313)764-9483
FAX:(313)763-9181
nedg@umich.edu
1720 Morton Avenue
Ann Arbor, MI 48104
(313)665-5207
Bom :June 18, 1939;Rochester,NY
Married, two children(bom 1966, 1968)
SS number: 108-30-7255
Education
BA,Williams College, 1961
M A ,Yale University, 1962
Ph.D. Yale University, 1965
FullTime Positions
FederalReserve Board,ResearchDivision, 1965-70
OfficeofEconomic Opportunity,Director,PolicyResearchDivision, 1971-73
The BrookingsInstitution,SeniorFellow, 1973-76
The UniversityofMichigan:
ProfessorofEconomicsand PublicPolicy,1976 ,
Director,InstituteofPublicPolicyStudies, 1979-83, 1991-95
Dean,SchoolofPublicPolicy, 1995
Chair,Economics Department, 1983-86, 1989-90
Congressional BudgetOffice:
Deputy Director, 1986
ActingDirector, 1987
Temporary Positions
Monash University, 1970
GeorgeWashingtonUniversity, 1974
CornellUniversity, 1975-76
StockholmUniversity, 1979
1
83
Other Professional
Editorial Board:
NationalTaxJournal, 1970-83
JournalofPolicyAnalysisandManagemeni,1980
EvaluationReview,1980-83
Journal of EconomicLiterature, 1981-84
Brookings Panelon Economic Activity, 1973-81
White House Summit Conference, 1974
NationalScienceFoundation,Economics Panel, 1973-75
AssociationforPublicPolicyand Management:
PolicyCouncil, 1979-84
VicePresident, 1979-80
ProgramChair, 1981
EditorialSelectionCommittee, 1984, 1988, 1993
MinorityFellowsProgramAdvisoryCommittee, 1994
AmericanEconomic Association,VicePresident, 1992
Truman ScholarshipSelectionPanel, 1982-85, 1994
Ford FoundationAdvisoryCommitteeon SocialWelfare Policy, 1984-87
InternacionalSeminaronPublicEconomics,ExecutiveCommittee, 1986- .
NationalTax Association,Board ofDirectors,1988-91
CongressionalBudgetOffice,PanelofEconomic Advisors, 1988-92
Ann ArborBlueRibbonPanelon CityFinances,Chair, 1991-92
Major LeagueBaseballEconomic StudyCommittee,StaffDirector, 1991-92
MichiganAssociationofGoverning Boards,DistinguishedFacultyAward, 1994
US SocialSecuritySystemQuadrennial Advisory Council,Chair,1994-96
SocietyofGovernmentEconomists,Honorary LifetimeMember, 1994
EconomistTradingCards:
U M FlintSeries
Prentice-HallSeries
University ofMichigan Committees
Committee on Economic StatusofFaculty, Chair, 1978-79
Economics DepartmentExecutiveCommittee,1977-80, 1982-83, 1988-89
Committee on UndergraduateFinancialAid,Chair, 1983-84
InstituteforSocialResearchExecutiveCommittee, 1983-86, 1989-92
PopulationStudiesCenterExecutiveCommittee, 1990-91
SpecialTaskForceonStatisticalSuppon, 1988-90
BoardofStudentPublications,1989-92
AdvisoryCommitteeon UniversityRelations, 1990
CostofHigherEducationTask Force,1989-90
Provost'sAdvisoryCommittee on Excellence,Chair, 1990-92
AdvisoryCommittee on University Budgets, 1992-93
InternationalInstituteGoverningBoard, 1994-97
Economic DevelopmentCouncil,1994-95
JournalismTask Force, 1995
Books
Savings, Deposits, Mortgages, and Housing in the FRB -MIT -Penn Econometric Model,
coeditedwithDwightM. Jaffee,HeathLexington, 1972
2
84
Educational Performance Contracting: An Evaluation of an Experiment, with Patricia P.
Koshel,The Brookings Institution, 1975
Setting National Priorities: The 1975 Budget, with Barry M. Blechman and Robert W.
Hartman,The Brookings Institution, 1974
Serring National Priorities: The 1976 Budget, with Barry M. Blechman and Robert W.
Hartman,The Brookings Institution, 1975
Benefit-CostAnalysisofGovernmentPrograms,PrenticeHall, 1981
TaxReform : ThereMustBe a Better Way,with Paul N. Courant,NationalPolicyExchange,
1982
Control ofLocal Government, coedited with B. C. Ysander, Industriens Utredningsinstitut
(Sweden), 1985
Federal Budget Deficits: America's Great Consumption Binge, with Paul N. Courant,
Prentice Hall, 1985
A Guide to Benefit CostAnalysis,PrenticeHall, 1990
FinancingFederal Systems: The Selected Essays ofEdward M. Gramlich, Edward Elgar
Publishing Limited,1997
IsitTime toReform SocialSecurity?,UniversityofMichigan Press, 1998
Journal Articles
"The Behavior and Adequacy of the U.S. Federal Budget," Yale.Economic Essays, Spring
1966
"A Technique for Forecasting Defense Expenditures," with Harvey Galper, Review of
Economics and Statistics, May 1968; reprinted inWilliam F. Butler,Robert A. Kavesh, and
Robert B. Platt(eds.), Methods and Techniques of BusinessForecasting,PrenticeHall, 1974
"State and Local Governments and Their Budget Constraint,' International Economic
Review ,June 1969
"AlternativeFederalPolicies forStimulatingStateand Local Expenditures,' NationalTax
Journal,June 1968 (withalaterclarificationinJune 1969)
"The Federal Reserve - MIT Econometric Model,' with Frank de Leeuw , Federal Reserve
Bulletin,January 1968;reprintedin Proceedings ofthe Conferenceon theEconomic Outlook,
Universityof MichiganPress, 1968; in Proceedings ofthe Business and Economic Statistics
Section of the American Statistical Association, 1967; in John M. Dutton and William H.
Starbuck (eds.), Computer Simulations ofHuman Behavior, Wiley, 1972; in Bobbs Merrill
reprintseries, 1972;andinaJapaneseperiodical
"The ChannelsofMonetary Policy: A FurtherReporton theFRB-MIT Econometric Model,"
withFrank de Leeuw, FederalReserveBulletin,June 1969;reprinted in JournalofFinance,
may 1969; in William E. Gibson and George C. Kaufman (eds.), Monetary Economics:
3
86
h
"Public Employee Market Power and the Level of Government Spending.' with Paul N.
Courant and Daniel L. Rubinfeld, The American Economic Review, December 1979;
reprinted in W. Patrick Beaton (ed.), Municipal Expenditures, Revenues, and Services:
EconomicModelsand Their UsebyPlanners,Rutgers University Press, 1983
"A Procedure for Evaluating Income Distribution Programs," with Michael J. Wolkoff,
Journal of Human Resources, Summer 1979; reprinted in Robert H. Haveman and Julius
Margolis (eds.), PublicExpendituresandPolicyAnalysis, Rand McNally, 1982, 1983
"Stimulating the Macroeconomy through State and Local Governments," The American
Economic Review, May 1979; reprinted in George Farkas and Emst Stromsdorfer (eds.),
EvaluationStudiesReviewAnnual,Russell Sage, 1980
"Tax Limitacion and the Demand for Public Services in Michigan," with Paul N. Courant
and DanielL. Rubinfeld, NationalTaxJournal,June 1979
"Macro PolicyResponses to PriceShocks," BrookingsPaperson EconomicActivity, 1:1979
"Why Voters Support Tax Limitation: The Michigan Case," with Paul N. Courant and
Daniel L. Rubinfeld, National Tax Journal, March 1980; reprinted in Helen Ladd and
NicolausTideman (eds.), COUPE Paperson PublicEconomics, 1981
"Why Do Voters Turn Out for Tax Limitation Votes?" with Daniel L. Rubinfeld and
Deborah A. Swift, NationalTaxJournal,March 1981
"Micro Estimates of Public Spending Demand Functions and Tests of the Tiebout and
Median Voter Hypotheses," with Daniel L. Rubinfeld, Journal ofPolitical Economy, June
1982
"Voting on Public Spending: Differences between Public Employees, Transfer Recipients,
and Private Workers," with Daniel L. Rubinfeld, Journal of Policy Analysis and
Management,Summer 1982;reprintedin ProblemidiAmministrazionePublica, 1983
"Models of Inflation Formation: A Comparison of Household and Economist Forecasts,"
JournalofMoney, Credit, andBanking,May 1983
"An Econometric Examination of the New Federalism ," Brookings Papers on Economic
Activity,2:1982
"Migrationand Income Distribution Responsibilities," with Deborah S. Laren, Journal of
Human Resources,Fall 1984
"EvaluationofEducation Projects: The Case ofthePerry Preschool Program ," Economics
ofEducation Review, 1:1986
"TheDeductibilityofStateandLocalTaxes," NationalTaxJournal,December 1985
"Subnational Fiscal Policy," Perspectives on Local Public Finance and Public Policy: A
ResearchAnnual, 1987
"Cooperation and Competition in Public Welfare Policy," Journal ofPolicy Analysis and
Management,Spring 1987 (giventhe 1987 Veron Prizeforbestarticleinthejournal)
5
88
"A Report on School Finance and Educational Reform in Michigan," with Paul N. Courant
and Susanna Loeb, American EconomicReview, May 1995; and in National Tax Association
Proceedings. 1994; and in Thomas A. Downes and William A. Testa (eds.), Midwest
Approaches to School Reform , Federal Reserve Bank of Chicago, 1995; and in Saul H.
Hymans (ed.),TheEconomic Outlook for1995,UniversityofMichigan Press, 1995
"Differing Approaches for Dealing withSocial Security." Journal of EconomicPerspectives,
Summer, 1996;and inAmerican Economic Review ,May 1996;and inLSA Magazine, Spring
1996.
"Mending but not Ending Social Security: The Individual Accounts Plan," Benefits
Quarterly,forthcoming;and inSt. LouisFederalReserve Bank, forthcoming.
"ReflectionsofaPolicy Economist," TheAmerican Economist,forthcoming
Major Reports (Principalauthor)
"The Experiment in Educational Performance Contracting,
Opportunity, 1973
Office of Economic
"StaffAnalysis," inReportofMajor League Baseball's Economic Study Group, 1992
"Report of the Quadrennial Advisory Council on Social Security, Social Security
Administration, 1997
Chapters inBooks
"Measures ofthe Aggregate Demand Impact ofthe Federal Budget," inWilfredLewis (ed.),
Budget ConceptsforEconomic Analysis, The Brookings Institution, 1968; reprinted in Staff
Papers ofthePresident's Commission on Budget Concepts, Government PrintingOffice, 1968;
and in Horst Claus Recktenwald (ed.), Finanztheorie, Neue Wissenschaftliche Bibliothek,
1969
" The Impact ofSavings Deposits on Mortgage Markets and Residential Constructioninthe
FRB -MIT Model," with David T. Hulett, in Donald P. Jacobs (ed.), Savingsand Residential
Financing, US Savings and Loan League, 1970;reprinted inNational Planning Association,
Consumption Issues in the Seventies, 1970; and in Gramlich and Dwight M. Jaffee (eds.),
Savings Depos
Mortgages, and
using in the FRB-MIT -Penn EconometricModel, Heath
Lexington, 1972
*Public Service Employment and the Inflation Problem ," in Harold Shepard et al(eds.),
ThePoliticalEconomy ofPublicServiceEmployment, Heath Lexington, 1972
"The Ethics of Social Experimentation," with Larry L. Orr, in Alice M. Rivlin and P.
Michael Timpane (eds.), Ethical and Legal Issues ofSocial Experimentation, The Brookings
Institution, 1975
"TheEconomic and Budgetary EffectsofIndexing theTax System, in Henry J. Aaron (ed.),
Inflationand theIncome Tax,The Brookings Institution, 1976
"A Review ofthe Empirical Literature on IntergovernmentalGrants,"inWallaceE. Oates
(ed.), ThePoliticalEconomy ofFiscalFederalism, Heath Lexington, 1977
7.
89
"Evaluating Anti-Recessioa Fiscal Assistance," Conference Report on Evaluating the 1977
EconomicStimulusPackage, Department ofLabor, 1978
"Future Research on Poverty and Income Maintenance," in Vincent T. Covello (ed.),
Poverty and Public Policy: An Evaluation ofSocial Science Research, National Academy of
Sciences, 1980
"State and Local Budget Surpluses and the Effect of Federal Macroeconomic Policies,"
JointEconomic Committee Print, 1979
"Relief Work and Grant Displacement in Sweden," with B. C. Ysander, in Gunnar
Eliasson, Bertil Holmlund, and Frank Stafford (eds.), Studies in Labor Market Behavior:
Swedenand the UnitedStates,IndustriensUtredningsinstitut, 1982
"Models ofExcessiveGovernment Spending: Do the Facts Support the Theories?"in Robert
H. Haveman (ed.), Public Finance and Public Employment, Wayne State University Press,
1982; reprinted in Gramlich and B. C. Ysander (eds.), Control of Local Government,
Industriens Utredningsinstitut, 1985
"The Roleof Tax Limitation Referenda in State Fiscal Policy," with Gary C. Woodard, in
Harvey E. Brazer and Deborah S. Laren (eds.), Michigan's Fiscal and Economic Structure,
The UniversityofMichigan Press, 1982
"The New Federalism ," with Deborah S. Laren, in Joseph A. Pechman (ed.), Setting
NationalPriorities: The 1983 Budget,The Brookings Institution, 1982
"A Dynamic Micro Estimate of the Life Cycle Model," with Paul N. Courant and John P.
Laitner,inHenry J. Aaron andGary Burtless(eds.), RetirementandEconomic Behavior,The
Brookings Institution, 1984
"Government Services," in Robert P. Inman (ed.), Managing the Service Economy:
Problemsand Prospects,Cambridge UniversityPress, 1985
*How Bad are the Large Deficits?"inJohn L. Palmer and Gregory B. Mills (eds.), Federal
BudgetPolicyinthe1980s,The UrbanInstitutePress, 1984
"The Distributional Impact of Much Higher Unemployment: A New Look ," with Deborah
S. Laren, in Lee C. Bawden (ed.), The Social Contract Revisited: Aims and Outcomes of
PresidentReagan's Social WelfarePolicy,The UrbanInstitutePress, 1984
"A FairGo: The Fiscal FederalismArrangements," inRichard E. Caves and Lawrence B.
Krause (eds.), The Australian Economy: A viewfrom theNorth,The Brookings Institution,
1984
"An Expenditure Tax: Has the Idea's Time Finally Come?" with Paul N. Courant, in
Walter W. Heller (ed.), Tax Policy: New Directions and Possibilities, Center for National
Policy, 1984
"Reforming U.S. Fiscal Federalism Arrangements," in John M. Quigley and Daniel L.
Rubinfeld (eds.), American Domestic Priorities: An Economic Appraisal, University of
CaliforniaPress, 1985
8
91
*Options for Social Security Reform ," in Saul H. Hymans (ed.)
, The Economic Outlookfor
1996,UniversityofMichigan Press, 1996
*The Policy ImplicationsofGrowing loequality,"withMark Long,PolicyBytes,June 1996
Comments,Discussion,Revicws
"Break,'Finanzund Geldpolitikin Umbruch 1969
"Shoup,"Journal of Finance,March 1970
"Silber,' Journal of Finance,September 1970
"Christ,'JournalofMoney,Credit,andBanking,May 1971
"Lee,'Econometrica,March 1972
"O'Brien,"NationalTaxJournal,March 1972
"Zamowicz,'JournalofFinance,December 1972
*Pechman,"BrookingsPaperson Economicactivity,2:1973
"Vogel,"JointEconomic Committee Print,7:1975
"Shoven-Bulow ,"BrookingsPaperson Economic Activity,3:1975;1:1976
"Hamermesh,"CreatingJobs:PublicEmploymentProgramsand Wage Subsidies, 1978
"Kasten-Greenberg-Betson,' Microeconomic Simulation Modelsfor Public Policy Analysis,
1980,and Income TestedTransferPrograms: The CaseForandAgainst, 1982
"Crandall,“Brookings Papers on Economic Activity, 2:1978 and Curing Chronic Inflation,
1978
"Holmlund-Bjorklund,' Studies in Labor MarketBehavior: Sweden and the United States,
1982
"Plotick,'HorizontalEquity, Uncertainty, andEconomic Well-Being, 1985
'Summarizing the Conference,“ FightingPoverty: What Worksand WhatDoesn' ?1985
"Burtless-Vroman,"IndustrialRelationsResearchAssociationProceedings, 1985
"Netzer,"TheEconomic ConsequencesofTarSimplification, 1986
"Solow ,'TheNegativeIncome TaxExperimentThenand Now , 1987
"Government growth theorists,"JournalofPolicyAnalysisandManagement,Summer 1989
"Tobin,"Money, Macroeconomics, and Economic Policy: Essays in Honor ofJames Tobin,
1991
"Moffitt,"A Future ofLousyJobs? 1990
"Haveman-Nathan,'Journal ofHuman Resources,Spring 1990
*Taxanalysts,”NationalTaxAssociationProceedings, 1989
'vonFurstenberg,'The GreatFiscalExperiment, 1991
"CongressionalBudgetOffice," TheNew PalgraveDictionaryofMoney andFinance, 1992
"Ladd," Journal ofPolicyAnalysisandManagement,Winter 1993
*Schultze,"Journal of EconomicLiterature,September 1993
"Zimbalist,"FederalReserveBank ofBostonRegionalReview,Spring 1993
*RateofReturn,'DetroitNews Op Ed,March, 1994
"Maskus-Pecuberti,"forthcomingvolume inhonorofRobert Stem
"Cutler,'SocialSecurity: What Role fortheFuture?, 1996
*Blank,"Demand SideExplanationsofEarnings Inequality, forthcoming
*Kodikoff,"FiscalPolicy:Lessons from EconomicResearch,forthcoming
10
92
P R E P A R E D S T A T E M E N T O F R O G E R W. F E R G U S O N ,JR .
MEMBER -DESIGNATE, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
SEPTEMBER 30, 1997
Chairman D'Amato, Members of the Committee, I a m pleased to appear before
you today as one of President Clinton's nominees to serve on the Board of Governors
of the Federal Reserve System . I a m honored that the President has nominated m e
to serve as a Member ofthe Board.
I am mindful that the decisions of the Federal Reserve influence the economic
well-being of all Americans through theirimpact on output growth,job creation, in
flation, interest rates, and the value of the dollar. The Fed also has important su
pervisory and regulatory responsibilities for the safety and soundness of the banking
system ,for the integrity of the payments mechanism , and for the enforcement of the
fair lending and other consumer laws, including the Community Reinvestment Act.
Finally, the Federal Reserve Board has general oversight for the functioning of the
12 Federal Reserve Banks.
If I am confirmed, Ipledge to work with other Members of the Board to craft a
monetary policy gearedtoward stable prices, maximum employment,and moderate
long-term interest rates, the goals established in the Federal Reserve Act, and to
faithfully execute the regulatory enforcement and the oversightresponsibilities e n
trusted by Congressto the FederalReserve Board. These are challenging andimpor
tant tasks and I will devote my full energies to carrying out these duties to the best
of my ability.
Before commenting on some of the issues which confrontthe Federal Reserve, let
me briefly describe m y background and qualifications for the position as Governor.
I was born and raised in a moderate-income neighborhood ofWashington,D.C. I
spent 12 years going to school in Cambridge, Massachusetts.M y collegean d grad
uate education were received at Harvard University. I received m y undergraduate
degree in economics in 1973, my law degree in 1979, and my Ph.D. in Economics
in1981. I also studiedfor 1 year at Cambridge University in England.
M y interestin the Federal Reserve is long-standing. It dates from the late1960's.
At thattime, President Lyndon Johnson nominated Andrew Brimmer to be the first
black Governor of the Federal Reserve System . As my interest in economics was
emerging then, the nomination of Dr. Brimmer caught m y attention and captured
my imagination. I am therefore particularly pleased to follow Andrew Brimmer and
Emmett Rice as the third black nominee for the Board of Governors.
I started my professional career as a securities and banking lawyer, representing
major investment banks in their securities underwriting and merger activities,and
commercial banks in their syndicated loan origination and project financing. In
1984,I leftthe law and went to McKinsey & Company as a consultant to banks
and other financial institutions. As a consultant, I have worked on a broad range
ofstrategic and operational issues relating to financial institutions.
Furthermore, since 1991, I have served as the Director of Research and Informa
tion Systems for McKinsey & Company. In that role, I a m responsible for nearly
400 professionals and have been immersed in the problems of attractingand devel
oping a research staffsimilar to the staffin the Federal Reserve System .I have also
had responsibility for some ofour firm's technology investments.
I hope m y broad background and range of experiences have equipped m e with the
analytical tools, the general problem -solving skills,and the exposure to particular
problems needed in order to comprehend emerging trends in the domestic economy
and the banking industry and to help in the formulation of monetary policy, bank
supervision, and regulatory policies and oversight procedures for the Federal R e
serve System .
Let me turn now to some of the issues which confront the Federal Reserve.
Price stability should be a central goal of monetary policy.There are many rea
sonsfor according high priorityto this objective. Inflation undermines social equity
and harmony inour diverse Nation. As interest rates rise to compensate for infla
tion, many families will find it increasingly difficult to qualify for and service loans
for homes and cars.The wages and salaries of some workers do not keep up with
inflation and their standard of living falls.Inflationerodes the wealth of any small
investors whose assets are denominated in fixed dollar terms. Times of inflation
often become stressful to the leastadvantaged among us.In addition, with high and
unstable inflation, managerial efforts emphasize, and the corporate profits derive
disproportionately from , taking advantage of rapid increases in the general level of
pricesrather than from producing and selling the products that consumers need.
Job creation eventually slows as businesses focuso n the financial rather than pro
ductive aspects of their operations. Inflation creates uncertainty and distorts price
93
signals, complicating business and household planning. Higher inflation diminishes
incentives to save and invest in productive real and financial assets and increases
theincentive to investin assets thought to be good “hedges”forinflation.
Many factors, including fiscal policy, exchange rates,external shocks, and produc
tivity shifts, affectthe behaviorof prices in the short run, but in the long run, infla
tiono n a sustained basis cannot occur unless monetary policy accommodates it.The
Federal Reserve controls theNation's money supply, and thusthe F O M C effectively
determinesthe level of inflation over the longer run. The Fed's responsibility is to
be ever vigilant for early signs of inflation and to choose policies that are designed
to maintain a noninflationary environment that allows sustainable growth and job
creation .
This isa challenging task. The effectof Federal Reserve policies on the economy
occurs with a substantial lag. Uncertainties concerning the strengthof key economic
linkages make accurate predictions difficult. Therefore, I agree with the Fed's his
toric approach of reducing monetary stimulus before the emergence of any obvious
and strong inflationarypressure.Unfortunately,the timing and appropriate amount
ofa change in monetary policy involve some guesswork and some risk taking.
The second objective of the Federal Reserve is to keep the economy growing as
close as possibleto its maximum potential output. The Federal Reserveisto seek
the lowest rate of unemployment that can be achieved without risking accelerating
inflation. M y goal, as aGovernor of the Federal Reserve Board, would be to create
an environment conducive to achieving and sustaining this low level of unemploy
ment. There are many reasons to avoid unemployment. Just as with inflation, un
employment has real human and economic costs. A rough rule of thumb is that each
percentage point ofunemployment,in excess of the natural rate, coststhe economy
about 2 percent of G D P , roughly $140 billion. The toll of high unemployment,like
that of a regressive tax, fallsmost heavily on groups in the work forcethat areleast
able to bear the burden. There is a phrase that you may be aware of, “lasthired,
first fired,” which describes the experience of some of our least advantaged citizens
in the labor markets. Additionally, full employment givesmore of our citizenry an
opportunity to gain useful skillsand work -related disciplines. This opportunity is
lost in periods of high unemployment.
In the short run, the Federal Reserve often faces a tradeoff between the goals of
low inflation and high employment, but ultimately price stability underpins sustain
able output growth and job creation. A monetary policy which pushes the economy
beyond its potential forthe sake of current job gains is shortsighted and ultimately
unfair to American workers. The recessionof the early 1980's illustrates the enor
mous price that workers and businesses might pay tobring inflation under control
after it builds up.
IfI am confirmed, I will join the Federal Reserve at a time when the macroeco
nomic fundamentals are exceptionally sound, but there is some uncertainty as to
just how long this is sustainable. Underlying inflation is the lowest it has been in
more than 30 years, and the unemployment rate has declined to under 5 percent,
also the lowest in a generation. Similarly, growth in the output of goods and servo
ices over the past year has been approximately 3.5 percent.M an yeconomists are
searching for an explanationfor thissplendid performance of high employment,low
inflation ,and rapid growth. Explanations include productivity increases spurred by
technology investments, the globalization of production, and deregulation in a n u m
ber ofindustries.
Unfortunately, even in today's strong economy, there are segments of society in
which jobs are notplentiful, and income distribution remains skewed .
The role of a Fed Governor now , as always, is to monitor every available economic
indicator in order to update and refine judgments of economicperformance and to
make needed policy readjustments.This is a role that requires pragmatism and bal
ance,not adherence to an immutable set of preconceived notions. With the current
uncertainties, FederalReserve Governors should be open to the possibility that u n
derlying dynamics of the economy might be changing,but they should seek evidence
for such developments and not act on the presumption of change. The evidence of
basic improvements in the longer-term efficiency of the economy is suggestive now .
I hope that itbecomes clearerin the future.
The Federal Reserve is,and should be, an active supervisor and regulator ofbank
holding companies and State member banks. In this, the Federal Reserve, in co
operation with other agencies,is responsible to preserve the safety and soundness
of the entire banking systemfor the benefit of society. W e arelivingin an era of
consolidation in the banking industry, the gradual blurring of distinctions between
banks and other financialinstitutions, and the ongoingglobalization of the financial
sector. The role of the Federal Reserve Governor with respect to banking super
vision is to execute prudent judgments to impose regulations on banks that ensure
94
the safety and soundness ofthe banking system , that mirror the operation of a well
functioning market, that allow a reasonable pace offinancial modernization, and
that assure a full range of financial services for our citizens, our communities, and
our businesses.The basic framework for banking regulation is set by Congress.
W e cannot and should not attempt to substitute thejudgments of regulators for
the judgments of individualbank management. Nor can w eprotect everybank from
thecompetitive forces that are part of our free-market economy; some banks will
make bad strategic decisions or have bad luck. However, the Federal Reserve must
ensure that the misfortunes of individual banks do not become a contagion that
spreads to the rest of the banking system .T o execute the assigned role fully, Fed
eral Reserve Governors should continue to have a voice in the current lively discus
sionon the pace and direction of deregulation.Similarly, the FederalReserve should
speak clearly if and when it sees trends in the banking industry that, if left u n
checked, can create the risk oferoding the stability of a large number of depository
institutions. Finally, the roleof supervisor should be exercised so as to minimize the
burden of regulation, maximize the flow of valuable information to the Federal R e
serve Board ,and, if possible, accelerate the spread of sound practices throughout
the banking industry.
I am a strong believer in the independence of the Federal Reserve.A policy regi
men geared toward long-term economic health must avoid the temptation to conduct
policies that overheat the economy for short-term gains. Occasionally, the F O M C
will have to undertake unpopular actions in order for the economy to maintain sus
tainable growth. Congress wisely devised a system which enablesthe Federal R e
serve to take the long view free from any undue influence. I believe that this system
best serves the interests of the American people and ultimately enhances economic
performance. I also appreciate the necessity for accountability on the part ofthe Fed
to Congress and ultimately to the American people. Appropriate reports to Congress'
oversight committees are an important part ofthe Federal Reserve's functioning in
a democracy. Additionally, the entire Federal Reserve System must be good stew
ards ofits resources. There should be no question that resources are used carefully.
Federal Reserve independence comes with the expectation that the leaders of the
System will husband its resources and will also be prepared to providethe proper
accountings when called for. If I am confirmed, I pledge m y full cooperation in this
process.
In conclusion, I would like to thank you and the Committee for considering m y
nomination. I would be pleased to respond to any questions you may have.
95
S T A T E M E N T F O R COMPLETION BY PRESIDENTIAL NO MINE ES
Name:
Ferguson, Jr.
Walton
(Middle)
Roger
(First)
Positiontowhich
nominated: Govemor ofFederalReserve Board
Dateofbirth:
10
51
28
(Day) (Month) (Year)
Dateof
nomination:
(Other)
July 11.1997
Placeofbirth:_Washington,D.C.
Maritalstatus: Maried
Fullname ofspouse: AnnetteLaporteNazareth
Names andages
ofchildren: RogerWalton Ferguson III
Son
6 years
Daughter
2years
CarolineLawson Ferguson
Dates
attended
Degrees
received
Datesof
degrees
HarvardGraduateSchool
ofArtsandSciences
9779-6/81
9/75-6/77
Ph.D.
A.M.
6/81
6/77
HarvardLawSchool
9/77-6/79
9/74-6/75
J.D.(cum laude)
6/79
Education:
Institution
PembrokeCollege
9/73-6/74
Nodegreegranted
HarvardCollege
9/69-6/73
A.B.(magna cum laude) 6/73
SidwellFriendsSchool
9/66-6/69
HighSchooldiploma
Honorsandawards:
6/69
List below all scholarships, fellowships, honorary degrees, military medals,
honorarysocietymemberships,and anyotherspecial recognitionsforoutstanding service
orachievement.
NationalAchievementAward
B.A.Magna Cum Laude.Harvard University
1972Richard PerkinsParkerAward
1972-73 CFIA Undergraduate Associate and TravelingFellowship
1973-74 FrankKnoxMemorialFellowship
1
1
96
Memberships: List below all memberships and offices held in professional, fratemal,business,scholarly,civic,
charitableand otherorganizations.
Officeheld
Dates
Organization
(ifany)
HarvardAlumniAssociation
FriendsofEducation(Trustee's
CommitteeoftheMuseum of
Modem Art)
HarvardClubofNewYorkCity
WykagylCountryClub
LarchmontYachtClub
St.John'sEpiscopalChurch
New YorkMuseum ofNaturalHistory
New YorkZoologicalSociety
Museum ofModem Art
New YorkBotanicalGardens
NorwalkMaritimeAquarium
New YorkScienceMuseum
Greenburgh NatureCenter
BadgerSportsClub,Inc.
ElectedDirector
Treasurerand
ViceChair
1996topresent
1994topresent
None
None
None
None
None
None
None
None
None
None
None
None
1992 to present
1993 to present
1997to present
1989 to present
1992 to present
1992 to present
1991 to present
1997 to present
1993to present
1994 topresent
1993topresent
1995topresent
Employmentrecord: Listbelowallpositions held since college,including thetitleordescription ofjob,name of
employment,locationofwork,anddatesofinclusiveemployment.
10/84 -present.ConsultantandDirector ofResearch and Information Systems(Partner).
McKinsey & Company,Inc.,55East52nd Street,NY,NY
9/81-9/84,Attomey.Davis,Polk &Wardwell,450Lexington Avenue,NY,NY
9/79 -6/80. Assistant Senior Tutor.LeverettHouse,Harvard University.Cambridge,MA
6/79-9/79,AssistantDirector,Program on Regulation,Kennedy School ofGovernment.
Harvard University,Cambridge,MA
9/78-6/79.Assistant Senior Tutor.LeverettHouse,Harvard University,Cambridge,MA
6/78 -9/78,SummerAssociate.Davis,Polk &Wardwell.450 Lexington Avenue,NY,NY
9777-6/78.Economics Tutor and Pre-law Adviser.Leverett House,Harvard University,
Cambridge,MA
6/77 - 9/77 Summer Associate.Debevoise,Plimpton,Lyons &Gates,NY,NY
9/76 -6/77.Economics Tutor and Pre-law Adviser.LeverettHouse,Harvard University.
Cambridge,MA
6/76-9/76.Summer Intern,Intemational TradeCommission.Washington,DC
2
97
9775-6/76.Non-residentEconomics Tutor.LeverettHouse,Harvard University,Cambridge.
MA
6/75-9/75,Summer Intem,ForeignAgriculturalService,U.S.D.A.,Washington,DC
6/74-9/74.Summer Intem.ForeignAgriculturalService,U.S.D.A.,Washington,DC
6/73-9/73,SummerIntem .CongressionalResearch Service.Washington,DC
Goverment
experience: Listanyexperienceinordirect associationwith Federal,State,orlocalgovernments,including any
advisory,consultative,honoraryorotherparttimeserviceorpositions.
Summerjobs: -DepartmentofAgriculture
CongressionalResearch Services
InternationalTradeCommission
Published
writings:
Listthetitles,publishersanddatesofbooks,articles,reports orotherpublished materialsyou have
written.
Interview in OnlineUser,March/April 1997.Vol.3,No.2
"RealWealth.' TheMcKinsey Quarterly,1991,Number 4
Political
affiliations
and activities:List memberships and offices held in and services rendered to all political parties or election
committeesduringthelast10years.
RegisteredmemberofDemocraticParty
3
49-692 98 -5
98
Political
contributions: Itemize allpoliticalcontributions of$500ormore toany individual,campaign organization,political
party,political action committee or similar entity during the last eight years and identify specific
amounts,dates,andnamesofrecipients.
None
Qualifications: Statefullyyourqualificationstoserveinthe position towhich you havebeen named.
(attachsheet)
SeeAttachmentA
Futureemployment
relationships: 1.
Indicate whether you will sever allconnectionswith your present employer,business firm ,
associationororganizationifyou areconfirmedbythe Senate.
Yes
2.
Asfarascan be foreseen,statewhetheryou have any plans aftercompleting govemment
service toresume employment,affiliationorpracticewith yourpreviousemployer,business
firm, associationororganization.
Ihavenocurrentplansto resumeemploymentwith my previousbusiness firm
3.
Hasanybodymade youa commitmenttoajobafteryou leavegovemment?
No
4.
Do you expecttoservethefulltermforwhichyouhavebeenappointed?
Yes
99
Attachment A
M y trainingand experienceineconomics,law and management consulting
qualifyme forthisposition.
Ihave worked asasecuritiesand banking lawyer,representingsecuritiesfirms
and banks intheirunderwriting and lending activities. Ihave alsoserved asa
consultanttobanks and otherfinancial institutions. Inthatrole,among other
projects,Ihave worked with money -centerand regionalbanks on payment
system issues,regionalbank strategy,merger evaluationand postmerger
integration,organizationalstructureand costreduction. Ihave alsoworked
with afull-linebrokerage firmindeveloping an informationtechnology
strategy. These consultingassignments have given m e adirectunderstanding of
thedaily and longer termmanagement challengesfacedby banks and other
financialinstitutions.
Inaddition,forseveralyearsIhavebeen responsible forresearchand
informationsystemsforMcKinsey & Company,a management consultingfirm .
Through thatrole,Ihave both abackground ininformationtechnology and the
management ofresearchprofessionals.
Iwas an Associatewith Davis Polk and Wardwell,alaw firmlocatedin
New York City,between 1981 and 1984. Ihave been withMcKinsey &
Company,Inc.,amanagement consultingfirm ,since 1984 and became a
shareholder ofthefirmin1992. Ireceived my B.A.ineconomics (magna cum
laude)in1973,my J.D.(cum laude)in1979 and my Ph.D. ineconomicsin 1981.
Allofthese degrees arefrom Harvard University. Ihave alsostudied at
Pembroke College,Cambridge University. Inadditiontostudyingmacro
economics,money and banking,and internationaltrade and development,I
have alsostudied industrialorganization,theeconomic disciplinethatisthe
basisforevaluating thecompetitiveeffectsofmergers and acquisitions.
Thisbroad background preparesme toanalyze thewide range ofmonetary
policy,regulatoryand managerial issuesconfrontingthe FederalReserve Board.
100
Potentialconflicts
ofinterest: 1.
2.
Describe any financial arrangements or deferred compensation agreements or other
continuing dealings with business associates,clients or customers who will be affected by
policieswhich youwillinfluenceinthe positiontowhichyouhavebeennominated.
List any investments, obligations, liabilities or other relationships which might involve
potentialconflictsofinterestwiththepositiontowhichyouhavebeennominated.
Ihave been advised thatthefollowing could presentan actualorapparentconflictofinterest
with my position as a Board member,my investments in First USA Inc.,Morgan StanleyDean
WitterDiscover & Co. U.S.dollar increase warrants on Japanese yen,Compass GlobalPrivate
Equity_Capital Fund. Compass Global Equities Fund. Compass Global Opportunities Fund,
Compass Strategic Investments Fund, Income Arbitrage Partners Class A. Income Arbitrage
Partners Class B and Partners IncomeFund and also Oppenheimer & Co. Arbitrage Partners LP:
andmy position as a shareholderinMcKinsey & Company,Inc.,amanagementconsulting firm,and
as Treasurer oftheMuseum ofModem Art'sFriendsofEducation Committee.
Inaddition,a potentialconflictofinterestcould ariseas aresultofmy wife's employmentby
Smith Bamey Inc. and her future stock interest inthe Travelers Group. In order to addressthese
potentialconflicts ofinterest.Ihave agreed to recusemyselffrom certain mattersassetforth inmy
letterto theBoard'sGeneralCounseldated July 15.1997. (
See answerto question 5.below.)
3.
Describe any business relationship,dealing orfinancialtransaction(otherthan tax paying)
which you have had during the last 10 years with the Federal Govemment,whether for
yourself,on behalf of a client,or acting as an agent,that might in any way constitute or
resultinapossibleconflictofinterestwiththepositiontowhichyouhavebeennominated.
None
5
101
4.
List any lobbying activityduring the past ten years inwhich you have engaged in forthe
purpose of directly or indirectly influencing the passage,defeat or modification of any
legislation at the national level of goverment or affecting the administration and
executionofnationallaworpublicpolicy.
None
5.
Explain how you will resolve any conflict of interest that may be disclosed by your
responsestotheitemsabove.
Iwillselltheseinvestments and resign from McKinsey & Company,Inc.and from the
Friends ofEducation.
In addition, Iwill recusemyselffrom any particularmatter that could have adirect and
predictable effect on my wife's employment with Smith Bamey, and from any particularmatter
specificallyinvolving Smith Bamey oritsparent,theTravelersGroup,unless Ireceiveauthorization
from the Board's Ethics Officer. I also have agreed that I will not obtain knowledge of the
composition ofSmith Bamey's portfolio.
Civil,criminaland
investigatory
actions:
1.
Givethefulldetailsofanycivilorcriminal proceeding inwhich youwere a defendantorany
inquiryorinvestigation bya Federal,State,orlocal agency inwhich you werethe subject
ofthe inquiryorinvestigation.
None
2.
Give the full details of any proceeding, inquiry or investigation by any professional
associationincludinganybarassociationinwhichyouwerethe subjectoftheproceeding,
inquiryorinvestigation.
None
6
102
R E S P O N S E T O W R I T T E N Q U E S T I O N S O F S E N A T O R ENZI
F R O M L A U R A S. U N G E R
Q.1 . T h e Securities Litigation Re form A c t of 1995 , as you are well
aware , w a s passed to discourage frivolous Federal lawsuits result
ing from the disclosure of “rosy” forecasts a n d corporate i n f o r m a
tion. D o you feel, as S E C C h a i r m a n Arthur Levittd o e s, that it is
too early to m a k e a definitive assessment of the Act's impact a n d
effectiveness, a nd therefore urge Congress to wait until this impact
can be determined ?
A.1 . T h e Com mi ssi on staff's Report to the President and the C o n
gress on the First Yea r of Practice U n d e r the Private Securities
Litigation Refo rm Act of 1995 has identified several areas in w h i c h
the Act appears to be working as intended an d others whi ch n ee d
further analysis. Its preliminary findings are helpful in assessing
whether the A c t is achieving its intended pu rp os e of curbing frivo
lous litigation.
Certain provisions of the Act appear to b e w o r k i n g as intended.
T h e heightened pleading standards, along with the discovery stay,
are m a k i n g it harder to bring securities class actions in Federal
court, w he re the stay is strictly applied . T h e heightened pleading
standards also s e em to have resulted in better drafted complaints.
Plaintiffs are suing secondary actors, such as accountants a n d l a w
yers , less frequently .
Other provisions d o not yet appear to have h a d their intended e f
fect. Apparently, the safe harbor for forward -looking statements
has not yet resulted in m u c h additional disclosure. The lead plain
tiff provision has not yet encouraged institutional investors to take
charge of securities class actions. While the discovery stay is being
applied strictly in Federal court, it appears that s o m e plaintiffs are
filing parallel States cases to obtain discovery in a Federal case.
Both the H o u se an d the Senate are planning to hold hearings on
this issue later this mon th . T h e evidence presented at those h e a r
ings should shed additional light o n whet her the Re for m Act is
working as intended or w h e t h e r legislation is needed .
Further, m a n y important provisions of the Reform Act have not
yet been interpreted by the courts, including the appellate courts .
T h e Ninth Circuit soon will hear t wo cases on the proper interpre
tation of the pleading standards under the Ref orm Act. T h e o u t
c o m e of these cases could significantly impact a n y evaluation of the
effectiveness of the Act .
Q .2 . State laws against securities fraud have served to co mp le m en t
the enforcement of Federal laws . D o you believe that States should
still b e allowed t he flexibility to design an d i mpl eme nt their o w n
antifraud securities laws ?
A.2 . W h e n Congress enacted the first Federal securities laws in the
1930's , the la ws were intended to supplement, rather than displace,
the existing laws of the States . State laws have coexisted with the
Federal securities laws for over 60 years now , a n d State regulators
continue to play an important role in investor protection. State r e g
ulators can identify an d respond quickly to local problems , supple
men ting the Commission's enforcement program .
Because State antifraud laws have played an important role to
date, it s eems to m e that any decision to shift the balance between
103
State a n d Federal law should be m a d e only after careful study a nd
consideration. For example, State antifraud law has played an i m
portant role in individual (n on -class action) cases . In addition , cor
porations are created under State law , a n d there very often is a n
interplay between State corporate law a n d State antifraud laws. If
C o n g r es s determines that the filing of securities class action fraud
suits in State court undermines the R efo rm Act, this issue will r e
quire careful consideration a nd a carefully crafted response.
RESPONSE T O WRITTEN QUESTIONS OF SENATOR SARBANES
F R O M L A U R A S. U N G E R
Priorities
Q.1 . W h a t do you believe the priorities of the Securities and E x
change Co mm i ss io n should b e at this time ? W h a t developments in
the marketplace should the S E C be responding to or preparing for ?
A .1 . A s the C om mi s si on heads toward the 21st century , it m u s t be
prepared to address a variety of issues, including those involving
m a rk e t structure, technology , internationalization, the continuing
grow th in the mu tua l fund industry, an d financial modernization .
T e c h n o l o g y a n d M a r k e t Structur e
Technology has a n d will continue to have t he m ost significant
impact on the marketplace. Technology changes the w a y securities
mar kets operate. A s a result, our regulatory f ra me wo r k m u s t be
flexible en oug h to a cc o mm od a te these changes. Just recently, the
C om m is si o n issued for public c o m m e n t a concept release on m ark et
structure a n d the appropriate regulation of n e w trading systems.
This concept release will enable the Co mm i ss io n to have input from
ma r k e t participants in its review an d determination of h o w to e n
sure that our regulatory sc he me remains viable well into the 21st
century .
T h e Y e a r 2000 conversion also should be a high priority for the
financial markets. I understand that the C om mi s si on is monitoring
the progress of SRO's , broker -dealers, a nd investment companies in
their preparations a n d identifying a ny other critical actions the in
dustry m u s t take to prepare for the year 2000 .
Internationalization
A s markets be c om e increasingly globalized , the S E C should c o n
tinue to develop w a y s to e nha nc e international m e c ha n i s ms for ef
fective m ark et surveillance a nd for cooperation in the investigation
a n d prosecution o f cross -border fraud a n d m ar k et manipulation. In
particular, the S E C should continue to forge strong relationships
with its foreign counterparts.
Maintaining the high standards of the U.S. m a r k e t s — including
standards for accounting a n d disclosure — is critical to the contin
u ed global preeminence of our markets . T h e C o m m is s i o n should be
careful not to give preferential treatment to foreign companies over
Am er ic an companies, a n d should focus its efforts on m a k i n g the
markets m o r e accessible for all issuers, U.S. as well as foreign .
G r o w t h in the M u t u a l F u n d I nd ust ry
Investments in mu tua l funds have topped $ 4 trillion - a reflec
tion of the strength a n d importance of the m u tu a l fund industry .
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T h e industry has suffered no major problems in over t wo decades ,
a nd the C om m is si o n should w o r k with the industry to continue this
excellent record .
T h e Co mm iss io n should encourage fund investors to be c om e e d u
cated ; to m a k e sure fund information , including risk , is c o m m u
nicated clearly to investors; a n d to maintain the industry's record
of compliance i n the face of the pressures of increasing competition .
Financial Modernization
In general, I believe that legislative action in this area is n e c e s
sary . W e need an effective system of regulation that permits m a r
ket innovation . W e also need to u pd at e financial regulation to fit
the current marketplace a n d to prepare for further changes in the
future.
Financial services modernization should provide for true f u n c
tional regulation which w ould require a financial services provider
to conduct banking a nd securities activities in separate entities,
subject to oversight by the specialized regulator of that function . It
should also include a true “t wo -w a y street " that would permit se cu
rities firms to o w n banks a n d banks to o w n securities firms.
Private Ri g ht s of Ac t io n
Q.2 . D o private rights of action for securities fraud serve a n i m p o r
tant function in our securities markets ? D o they deter fraud ? D o
they supplement the SEC's antifraud enforcement activities ?
A.2 . T h e C om mi s si on has historically taken the view that private
rights of action for securities fraud are an important supp lement
to its o w n enforcement activities. T o the extent that the threat of
litigation effectively deters fraud, private lawsuits woul d play a n
important role because of the SEC 's limited resources . Private suits
also enable defrauded investors to seek compensation .
Fe d e ra l vs. State R e g u l a t i o n
Q.3 . For over 6 0 years, w e have h a d both Federal an d State regula
tion of securities offerings an d the securities industry. In s o m e r e
spects, the dual regulation is complementary ; in other respects, it
m a y be duplicative .
Does State regulation perform an important function in the r e g u
lation of securities? H o w should the duties of Federal an d State
regulators be further defined ?
A.3 . T h e National Securities M ar k et Im prov emen ts Act of 1996
(N S M I A ) significantly realigned the Federal -State partnership in
securities regulation .
In the N Š M I A , Congress recognized that the Federal G o v e r n
m e n t h a d a stronger interest a n d expertise in regulating nationally
traded securities a n d that these securities did not need the extra
layer of State regulation . Congress also determined that the States
play an important role in protecting investors. Consequently , the
N S M I A split regulation so tha t States regulate smaller corporate
offerings,broker -dealer licensing, a nd smaller investment advisers
a nd the Federal G o v e r n m en t regulates larger corporate offerings,
larger investment advisers, an d financial responsibility and record
keeping for broker-dealers . I agree with this conclusion a nd think
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the N S M I A strikes a balance that will benefit issuers a nd investors
alike.
The N S M I A w a s enacted just 1 year ago . In assessing whether
the role of State a n d Federal regulators should be further defined ,
it w o ul d be helpful to observe the effectiveness of the N S M I A . Í
w o ul d also w a n t to review the Commission's uniformity studies on
capital formation a nd State licensing requirements w h i c h will be
submitted to Congress shortly. Irrespective of whether additional
changes should be m a d e to the State -Federal regulatory structure,
the regulators an d the industry should w o r k together to achieve
greater uniformity in these areas.
S h a r e h o l d e r P ro p o s a l s
Q.4 . D o the SEC's current proxy rules provide adequate opportuni
ties for investors to bring important matters to the attention of
their fellow shareholders ? W h a t steps should be taken to increase
the ability of the shareholders to co m m u ni c a t e with corporate m a n
agers a nd influence corporate policy through the proxy system ? Is
it important to achieve a consensus between the shareholders a nd
the m a n a g e r s on this issue ?
A.4 . T h e C o m mi s s i on recently delivered its report on the results of
a congressionally -m a n d a t e d s tu dy of shareholder access to proxy
materials. T h e report includes a formal release proposing a p a c k
age of a m e n d m e n t s, including a reversal of the Cracker Barrel posi
tion.I intend to very carefully study these proposals to determine
whe ther revised rules will provide sufficient opportunity for s h a r e
holder communications.
T h e proxy process is a n important m e a n s by wh ich investors in
a corporation can m a k e their v i e w s k n o w n to m a n a g e m e n t a nd to
other shareholders. It is very critical to strike a balance between
investor communication an d man age men t's ability to conduct the
corporation's business . Shareholders should have input in certain
issues affecting the c o m p a n y in which they invest. H o w e v e r , m a n
a g e m e n t should be a bl e to conduct the corporation's d a y -to-day
business without substantial interference . I understand the C o m
mission intended the proposals to be a solid, balanced approach .
In m y view , consensus between m a n a g e m e n t a n d shareholders
o n this issue wou ld be admirable but notnecessarily practical c o n
sidering the differing objectives.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR D O D D
F R O M L A U R A S. U N G E R
Q.1 . D o yo u believe that frivolous a nd abusive private securities
class actions could u n d e r m i n e public confidence i n the system of
private rights of action ?
I f the private securities class action system is abused ,please e x
plain the possible negative consequences for a c o m p a n y that is the
target of the abusive lawsuit.
If a co mpan y m u s t use its time and m o n e y to defend against friv
olous an d abusive private securities class actions, please
d e t a i l a ny
consequences o f such expenditures to c o m p a n y shareholders w h o
are not plaintiffs in the frivolous or abusive litigation.
A.1. The C om m is s i on has traditionally endorsed private securities
class actions as a n important supplement to the Commission's e n
106
forcement efforts. T h e C om mi s si on has also recognized frivolous
lawsuits as contrary to investors' interests. I believe that evidence
of abusive and frivolous securities class actions sufficiently u n d e r
m i n e d public confidence in the system of private actions to cause
Congress t o enact the Securities Litigation R e f o r m Act of 1995. N o
tably , the Private Securities Litigation Re for m Act subjects frivo
lous suits to a ma nd at o ry sanctions inquiry.
A frivolous suit could have a disruptive effect on the c o m p a n y
targeted . Responding t o abusive litigation can b e particularly b u r
d e n s o m e to start -u p ,high -tech companies — wh i c h are often targets
of these lawsuits -because the defendant c o m p a n y is forced t o di
vert resources to defend the lawsuit that wo uld otherwise be u se d
for research a n d development or other business growth activities.
Generally, a c o m p a n y defending such a suit wo ul d incur the cost
of legal fees, as well a s m a n a g e m e n t time a n d energy spent in r e
sponding to the lawsuit.
Unfortunately, shareholders often pa y the litigation costs for a c
tions that occurred before they ever o w n e d a stake in the c o m p a n y .
Further, these s a m e shareholders are not entitled to a ny recovery
from the litigation. This issue has been the subject of legal c o m
mentaries and w a s discussed before the Reform Act of 1995 w a s
adopted . A s the C o mm is s io n continues to monitor the Ref orm Act's
implementation , this issue deserves further attention.
Q.2 . T h e “ Year 2000 ” prob lem is one o f the biggest challenges fac
ing all Federal financial regulators. Please explain your views o n
the seriousness of this subject, your understanding of the role that
your agency is playing in addressing a n d remediating this problem ,
a n d any suggested changes or improvements to that role that y o u
woul d advocate if confirmed .
A.2 . T h e U.S. securities markets a n d m a rk e t participants are d e
pendent on computer sys tems - m a k i n g the Y e a r 2 0 0 0 problem p a r
ticularly sensitive. M a n y applications used b y the industry are date
sensitive, w h i c h c o m p o u n d s the potential impact of the Ye ar 20 00
problem on the financial markets.
T h e C om mi s si on is monitoring the progress of the SRO 's, b r o k e r
dealers , and investment companies in their efforts at remediation .
T o accomplish this, the C om m is si o n has been receiving d ocu men ts
from N a s d a q , the exchanges, and clearing agencies detailing their
Ye ar 2000 efforts. T h e Division of M a r ke t Regulation has recently
written these entities a ski ng for updates on this information , a n d
informing t h e m that the Co mm i ss io n expects their participation in
industry -wide testing in 1999 .
T h e C omm is sio n is wor king closely with industry groups such as
the Securities Industry Association a n d with the SRO's to monitor
the progress of the broker -dealer c om m u n it y. T h e S I A has taken a
lead role in getting information to its m e m b e r s on Y ea r 2000 a n d
in coordinating industry -wide testing.
T h e industry has also expressed concern about wh ether their for
eign counterparties will b e prepared for Y ea r 2000. If confirmed, I
would encourage the C om m is s io n to consider encouraging foreign
mar ket participants to take part in U.S. industry testing in 1999 .
The Commission is also working on m a k i n g its internal s ys te ms
Year 2000 compliant. T h e C om m is si o n is reviewing all of its d a t a
107
bases , applications, sy ste ms, a nd user interfaces that are d e p e n d
ent on dates an d taking th e steps needed to correct a ny problems
found . T h e C o m m i s s i o n believes its electronic filing system , Elec
tronic Data Gathering, Analysis, an d Retrieval system (E D G A R ), is
already Year 2000 compliant.
R E S P O N S E T O W R I T T E N Q U E S T I O N S O F S E N A T O R ENZI
F R O M P A U L R. C A R E Y
Q.1 . T h e Securities Litigation R eform A c t of 1995, as you are well
awa re , w a s passed to discourage frivolous Federal lawsuits result
ing from the disclosure of "r o s y " forecasts and corporate informa
tion . D o you feel, as S E C C h a i r m a n Arthur Levitt does, that it is
too early to m a k e a definitive assessment of the Act's impact a nd
effectiveness, and therefore urge Congress to wait until this impact
can be determined ?
A.1. T h e Ref orm Act has been on the books for less than 2 years .
M a n y important provisions o f the Reform Act, such as its propor
tional liability provision an d requirement of a m a nd a to r y sanctions
inquiry for dismissed cases , have not yet been interpreted by the
courts. O n c e appellate courts have an opportunity to interpret key
provisions of the Ref orm Act, there will be m o r e information r e
garding h o w well the Act is working, an d whet her it is achieving
its stated purposes .
I understand that congressional hearings on the R e f o r m Act are
planned sometime this m on t h . Those hearings should provide a d d i
tional information on whe ther the R e f o r m Act's intent is being
achieved or whether additional legislation is needed .
Q .2 . State laws against securitiesf raud have served to c om pl em en t
t h e enforcement of Federal l aw s. D o you believe that States should
still b e allowed the flexibility to design and imple ment their o w n
antifraud securities laws?
A.2 . Since the 1930's , State and Federal antifraud laws have c o m
plemented each other and both are very important to investor p r o
tection. A n y changes m a d e to this balance should be undertaken
with caution . If Congress finds evidence that the purposes of the
R e f o rm A c t are being u nd er m in ed by the filing in State court of
securities class action fraud suits that were traditionally filed in
Federal court, Congress m a y wish to consider whe ther a legislative
response is needed . A n y m o v e to pr eempt State law in this area
needs to be sensitive to critically important corporate governance
issues , w h i c h are largely governed b y State law , a n d also needs to
consider the important role played by State antifraud laws in indi
vidual, non -class action cases .
Q.3 . I understand that you have potential conflicts of interest as
tw o of your siblings are employed b y G o l d m a n , Sachs & Co. H o w
do you plan to keep an arm's -length distance from a n y decision yo u
m a k e as Commissioner that will directly or indirectly impact G o l d
m a n , Sachs & Co.?
A.3 . A s you note, I have two siblings w h o are employed by G o l d
m a n , S a c h s & Co. , a firm directly regulated by the Securities an d
Ex c h an g e C o mm is s io n . Neither one has a n ownership interest in
the firm . Nevertheless, I a m concerned about the appearance that
I might lack impartiality were I to participate in matters w hich
108
would directly affect the specific departments in wh ich they w o r k .
Therefore, w h e n ma tt e rs specifically involving those d e p a r t m e n t s
c o m e before the C o mm is s io n , I will consult closely with the a g e n c y
ethics officials to determine w h e t h e r there are a n y particular c i r
cumstances that would cause m y participation in such matters to
violate the Office of G o v e r n m e n t Ethics regulation regarding i m
partiality in performing official duties , 5 C F R § 2635.502. U n d e r
this regulation, I a m not in a " covered relationship " with the firm .
I do have a “covered relationship ” with m y two siblings ,a nd w o u l d ,
consequently, not participate in an y matter affecting either of t h e m
individually . In this regard, I have personally adopted a policy
wh ich exceeds the requirements of applicable l aw an d regulations
to avoid even an appearance of a conflict of interest.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES
F R O M P A U L R. C A R E Y
Priorities
Q.1 . W h a t do y o u believe the priorities of the Securities a n d E x
change C om mi s si on should b e at this ti me? W h a t developments in
the marketplace should the S E C be responding to or preparing for ?
A.1 . T h e Co mmi ss ion is facing n u m e r o u s challenges a s it m o v e s
toward the 21st century. It has the important dual role of e nc ou r
aging capital formation a n d vigorously maintaining investor protec
tion . Developments in the marketplace should be viewed with both
of these goals in m i n d . A m o n g the most important are : (i) tec h
nology's impacts on the m a r k e t s; (ii) the globalization of the securi
ties mark ets; and (iii) the influx of n e w investors into our marke ts
an d the protections w e m u s t provide to them .
H o w the Co mm iss io n responds to technological change in the
securities industry will be one of the most important issues facing
the Co mm i ss io n as w e m o v e into the 21st century . A dvancing t e c h
nology provides tremendous benefits a nd opportunities for both the
investors a n d industry participants alike, a n d the Commission's
actions should encourage a nd support innovation an d competition
in this area . T h e Commission's regulatory f r a m e w o r k needs to be
flexible enough to a c co mm o da t e these changes, and it ha s b eg un to
re -examine securities regulation in light of advancing technologies.
This is evidenced b y its interpretive releases on t h e electronic d e
livery of m a n d a t e d disclosure d o cu me nt s such as prospectuses, a n d
its willingness to exam ine its regulation of mar kets in light of the
w a y s technology has changed the w a y s in w hich securities markets
operate. At the s a m e ti me, the Co mm iss io n m u s t remain vigilant
in monitoring the use of technology to assure that investor protec
tions r e m a i n in place. T h e C om mi s si on m u s t also continue its e f
forts on encouraging securities industry participants to address the
Ye ar 2000 computer problem so that industry -wide Ye ar 2000 c o m
pliance can be ensured .
M a n y of the challenges to face the C o m m i s s i o n in the future are
in the relationships b etwe en o ur markets a n d those of other n a
tions. T h e Co m m is s io n should continue to open our exchanges to
U.S. as well as foreign issuers . T h e Commission's ongoing efforts
to arrive at high -quality international accounting standards, as
well as cooperation with foreign regulators on enforcement matters,
109
should permit the C om m is si o n to a cc om mo dat e the growth of cross
border transactions without diminishing investor protection .
T h e increase in the n u m b e r of investors m ovi n g their funds from
b a n k deposits to the mar kets, particularly mu tua l f u n d s , creates
n e w challenges for the Co m mi ss i on .This heightens the need to pro
vide as m u c h information as possible to recent or inexperienced in
vestors to help t h e m adequately assess risk and reasonable rates
of return . In addition , the integrity of our markets and the c o n
fidence it has p r o d u c e d is owed in large me asu re t o the vigorous
enforcement efforts of the S E C . Its enforcement initiatives, includ
ing its surveillance of trading activities over the Internet, its efforts
to c o mb a t fraud in the p e n n y stock a n d micro-cap markets , its c o
operation with criminal authorities and other regulators, a n d its
investor education p ro gra ms, m u s t be continued .
Privat e Ri g ht s of A ct i o n
Q.2 . D o private rights of action for securities fraud serve an i m p o r
tant function in our securities markets ? D o they deter fraud ? D o
they supplement the SEC's antifraud enforcement activities ?
A.2 . T h e Commission's traditional position is that private rights of
action for securities fraud a u g m e n t the Commission's enforcement
activities. In m o r e recent years, the Commission's resources have
not kept pace with the significant growth of U.S. a nd foreign m a r
kets a n d o f investment c o m p a n y assets u n d e r m a n a g e m e n t. T h u s ,
private rights of action continue to be important. This system a l
lows defrauded investors to obtain redress f r o m the perpetrators of
fraud , something the C om mi s si on alone cannot always provide.
I a m , however, sensitive to the concerns that h a v e been raised
regarding abusive private litigation. A s you know , the President
asked the Co mm i ss io n to monitor developments under the Private
Securities Litigation R eform Act a n d t h e C om mi ss io n has recently
issued a report to the President an d Congress on the Act's effect
o n private securities litigation . These a r e serious issues that d e
serve further study . If confirmed, I look forward to working with
the Co mm it te e as this process m o ve s forward .
F e d e r a l vs. State Re g u l at i o n
Q .3 . For over 6 0 years, w e have h a d both Federal a n d State regula
tion of securities offerings a n d the securities industry. In s o m e r e
spects, the dual regulation is complementary; in other respects, it
m a y be duplicative .
Does State regulation perform a n important function in the r e g u
lation of securities ? H o w should the duties of Federal and State
regulators be further defined ?
A.3 . T h e National Securities M a rk e t I m p r o ve m e n t s Act of 1996 a f
fected a significant realignment in the regulatory partnership b e
tw e en Federal a n d State securities regulators. B y continuing to
preserve important functions for the States, Congress recognized
that the States play an important role in protecting investors in
our capital markets . I agree that the States perform a n important
function .
I understand that under the provisions of the Act, States c o n
tinue to play an important role in smaller offerings a nd in licensing
broker -dealers. Larger, national offerings by companies, a n d f inan
110
cial responsibility an d recordkeeping requirements for the b r o k e r
dealers , are regulated only at the Federal level. While I will w a n t
to study this further, at this point, this strikes m e as a very g oo d
balance.
I think w e need to see h o w this n e w realignment works before
deciding whether, or h o w , th e duties of Federal and State r e g u
lators should be further defined . I would like to see m o r e de v e l o p
me nt s under the n e w approach before reconsidering w h a t Congress
just accomplished . T h e Commission's studies on uniformity, both in
the capital formation and broker -dealer areas, will be submitted to
Congress soon . I look forward to reviewing these reports a nd m o n
itoring this area closely in the future.
S h a r e h o l d e r Pr op os a ls
Q.4 . D o the SEC's current proxy rules provide adequate opportuni
ties for investors to bring important matters to the attention of
their fellow shareholders ? W h a t steps should be taken to increase
the ability ofthe shareholders to c om m u n i ca t e with corporate m a n
agers an d influence corporate policy th r ou gh the proxy system ? Is
it important to achieve a consensus betw een the shareholders a n d
the m a na g e rs on this issue?
A.4 . T h e C om mi ss io n has recently proposed changes to its current
proxy rules. T h e Commission's proposals are intended to balance
the s o me t im e s conflicting concerns expressed by various partici
pants in the process . It is premature for m e to h av e reached a n y
conclusions on the proposals, a nd I intend to e xamine t h e m closely
a nd to monitor their progress as the C om mi ss io n m o ve s toward the
adoption of an y final rules.
O f course , it is far better that a ny solution reflect a consensus
a m o n g different participants — that is, a m o n g different types of i n
dividual and institutional shareholders, as well as the corporations
that receive proposals each year .I will monitor t h e progress of the
proposals with great interest a nd the m a n n e r in wh i ch consensus
can be reached .
RESPONSE TO WRITTEN QUESTIONS OF SENATOR D O D D
F R O M P A U L R. C A R E Y
Q.1 . D o you believe that frivolous a n d abusive private securities
class actions could u n d e r m i ne public confidence i n the system of
private rights of action?
If the private securities class action system is abused , please e x
plain the possible negative consequences for a c o m p a n y that is the
target of the abusive lawsuit.
If a c o m p a n y m u s t use its time and m o n e y to defend against friv
olous a nd abusive private securities class actions, please detail a ny
consequences o f such expenditures to c o m p a n y shareholders w h o
are not plaintiffs in the frivolous or abusive litigation .
A.1 . W h e n e v e r the public perceives that lawsuits are brought for
reasons other than the merits of the complaint- for example , to s e
cure a “nuisance-value” settlement, or to harass or stifle a business
competitor — the legitimacy of our system of civil justice can be
brought into question. Similarly, if the public w e r e to perceive that
investors with genuine complaints wer e effectively precluded from
pursuing a fraud claim because of onerous procedural obstacles,
111
similar concerns about the legitimacy of the system could arise.
T ha t is w h y it is so important to w o r k to achieve the appropriate
balance in any legislation involving the public's right to bring suit.
It is m y hope that the key provisions of the Private Securities Liti
gation R e f o r m Act of 1995 will be interpreted by the courts in a
m a n n e r that deters frivolous cases while still permitting meritori
ous ones .
It is well established that a frivolous securities class action can
be disruptive a n d potentially costly to a c o m p a n y that is the target
of the litigation. L ik e m a n y other types of civil lawsuits, these
cases can involve bu rd en so me discovery requests that can absorb
the time o f c o m p a n y m a n a g e m e n t and perhaps other key p er s o n
nel . Unlike mo st other civil lawsuits , however, the potential d a m
ages alleged in a securities fraud class action are a l mo s t always
quite substantial, often a m o u n t i n g to tens of millions of dollars.
T h u s, it can be argued that e v e n in a case w he re the c o m p a n y b e
lieves it only has a small risk of losing, the small risk can b e offset
by the fear o f a h u g e d a m a g e award ,a n d the c o m p a n y reluctantly
agrees to settle. While settlements are and should continue to be
an important part of the civil justice system , they should be driven
by the merits of the case an d not by economics .
Finally , I understand that there is an apparent an om al y built
into our sy ste m of private securities class actions that w a s dis
cussed at the time the R efo rm Act w a s being considered by C o n
gress . T h e an oma ly is that there are often shareholders w h o will
ha ve to shoulder a share of responsibility for a recovery an d other
costs even though they acquired their holdings long after the al
leged misconduct occurred . A s the C om m is si o n continues to e x a m
ine the effects of the R efo rm Act on securities litigation , it should
continue to take this issue into account.
Q.2 . T h e “ Year 2 0 0 0 ” pr obl em is one o f the biggest challenges fac
ing all Federal financial regulators. Please explain your views on
the seriousness of this subject, your understanding of the role that
your agency is playing in addressing a n d remediating this problem ,
a n d a n y suggested changes or improvements to that role that you
wo uld advocate if confirmed .
A.2 . I believe Year 2000 remediation is critical for the securities i n
dustry, a n d that facilitating this process should be o n e of the C o m
mission's top priorities. T h e U.S. securities markets are highly
computerized, a n d ma r ke t participants — investors, broker -dealers,
mar kets, clearing agencies - rely on computer systems for their o p
erations as well. The Co mm is si on is taking this problem very seri
ously . T h e Co mm is si on a n d otheragencies will report to the Senate
B a n k i n g C om mi tt e e monthly on Y ear 2000 progress.
I understand that the Co mm iss io n staff is closely monitoring the
Y e a r 2000 efforts of regulated entities (such as N a s d a q an d other
exchanges ) a n d has contacted a n d will continue to contact any of
these entities that appears to be lagging. T h e C om mi ss io n also is
working with the self-regulatory organizations to evaluate their
m e m b e r s ' Ye ar 2000 efforts, and w i t h the Securities Industry A s s o
ciation , w hich has taken a leading role in Ye ar 2000 remediation .
T h e C om mi s si on has informed all markets a nd clearing agencies
112
that it expects t h e m to participate in industry -wide testing of sys
te ms during 1999 .
Despite the Commission's efforts, there will be problems . I u n d e r
stand t h e C om m is si o n staff will w o r k with the industry a nd other
agencies to develop contingency plans for different scenarios. I h a v e
also heard s o m e talk of a “holiday ” D e c e m be r 31 or January 3 to
fix an y unanticipated problems . T h e C omm is sio n is already very
active i n this area - w h a t I wo uld change is to raise the profile of
our efforts, a n d to w o r k even harder to bring foreign markets a n d
counterparties to the s a m e level of a w ar e ne s s and effort.
R E S P O N S E T O W R I T T E N Q U E S T I O N S O F S E N A T O R ENZI
F R O M DENNIS DO LL AR
Q.1 . D o yo u feel a credit union should be allowed to offer loans to
businesses ? If they can m a k e loans to businesses , should they be
able to keep their tax -e xe mp t status?
A . 1. Credit unions ' commercial lending powers are n o w already e x
tremely limited . Loans m a d e for commercial purposes constitute
less t h a n 1 percent of total credit union assets. H o w e v e r , I strongly
believe that credit unions should have the flexibility to provide
small , business -purpose loans to individual credit union m e m b e r s .
N C U A ' s regulations safeguard the insurance fund while m a i n t a i n
ing this flexibility.
În an y ca s e, credit unions' tax exem ptio n is not based on the n a
ture of t h e services they offer, but on their structure as not -for
profit financial cooperatives, o w n e d an d m a n a g e d by the consumer /
m e m b e r s they serve. Instead of paying out profits to stockholders
like b a n k s, credit unions return their earnings to their m e m b e r s .
This structure, unique a m o n g financial institutions, remains the
s a m e regardless of the services they offer.
Finally, it is important to note that whatever the purpose of a
loan , credit u n i o n s will never be able to lend to the general public.
Rather , credit unions m u s t limit their services to consumers within
their defined fields of mem ber ship .
Q.2 . H o w will a S u p r e m e Court decision against credit unions (the
A T & T case) affect the institutions ?
A.2 . A t this time , it is very difficult to predict the o ut co me of a neg .
ative decision. In the event of a negative o ut c o me, N C U A w ou ld
consider regulatory changes in order to allow credit unions to e x
p a n d beyond a single employer while still complying with the law .
W e w ould also continue to urge that Congress a m e n d the Federal
Credit Un io n Act to allow multiple e mplo yee group credit unions .
T h u s , the effect of a negative Court decision wou ld depend on m a n y
variables, including whether : (1) the Court orders credit unions to
divest all of the select employee groups that they presently have ;
(2 ) credit unions are permitted to continue to a d d n e w m e m b e r s
from select employee groups that they presently have ; (3 ) bank s
are successful in seeking to prevent N U A from providing so m e r e
lief through regulation in this area ; a nd (4 ) Congress passes legis
lation to overrule a negative decision .
A significant proportion of Federal credit unions could be affected
by the Court's decision . About half of all Federal credit unions have
114
RES PONSE T O WRITTEN QUESTIONS OF SENATOR BE NN ET T
F R O M ELLEN SEIDMAN
Q.1 . Recently , I invited the heads of all the major financial r e g u
latory bodies to a hearing on h o w prepared w e are to deal w i t h the
Y e a r 20 00 conversion . Since you h a ve been nominated to h ead one
of these agencies, let m e pose s o m e of the s a m e questions to you .
H o w prepared is O T S to deal
w i t h the Yea r 2000 c h a n g e ? H o w p r e
par ed are the firms that O T S regulates? Does O T S have adequate
examination and supervisory authorities in order to monitor a n d
ensure Y ea r 2000 compliance ?H o w serious a concern will this be
to you in your n e w capacity as Director of O T S ?
A.1 . Permit m e to an swe r the final part of the question first: T h e
Ye ar 2000 conversion is an extremely serious, complex , an d dif
ficult issue that will b e o f highest concern to m e should I be c o n
firmed as Director of O T S . No t only is smooth conversion critical
to the safety and soundness of the institutions O T S regulates, it is
a serious issue for the global financial system . A s to the other parts
of your question , m y response is based on t h e public testimony of
O T S a n d on limited discussions I have h a d with O T S staff in c o n
nection with m y current position a nd in preparation for m y c o n
firmation hearing. In particular, I have felt it inappropriate to have
any conversations with O T S supervisory or examination staff prior
to confirmation a nd therefore have not h a d any such discussions.
M y impression is that O T S , over the course of the last 2 years,
has b e e n working to prepare both the agency a n d the institutions
itregulates for as smoot h a transition a s possible. For exam ple ,
O T S com ple ted the assessment of its national systems a nd d evel
oped a conversion plan , which is fully budgeted , by the end of 1996 .
It is m y understanding that O T S expects all modifications to be
completed during 1998 , allowing time for the testing that is e ss e n
tial to a sm oot h conversion .
W i t h respect to the institutions O T S supervises, the agency has
been raising awareness of Y e a r 2000 conversion as a major strate
gic an d business issue since 1996. Further, in M a y of this year, as
part of the coordinated w o r k of allt h e depository institution r e g u
lators participating in the Federal Financial Institutions E x a m i n a
tion Council (F F I E C ), the O T S distributed to those institutions it
supervises a policy sta tem ent , examiner questionnaire, and e x a m
ination guidelines that highlight the risks p o s e d b y the conversion ,
the steps that need to be taken , and a n appropriate timetable that
allows time for testing an d debugging , especially of inter-connected
systems. O T S has recently put on its W e b site a spreadsheet-based
checklist that helps institutions t o understand an d prioritize the
steps that need to be taken , a nd to keep track of w h a t has been
done a nd w h a t remains outstanding. I understand the agency w a s
on schedule to complete off -site supplemental conversion e x a m i n a
tions.T h e agency's goal - in coordination with that of the other
F F I E C m e m b e r s — ist h a t all institutions should have completed
the conversion of all critical systems by the end of 1998 , to allow
for testing.
In discussions with O T S personnel , they have indicated that they
have adequate examination and supervisory authorities in all but
one area - examination of service providers. M a n y small institu
tions do not do the bulk of their systems w o r k in -hou se, but rather
115
rely on outside service providers. It is critically important that
these vendors not only be fully compliant b y the year 2000 , b u t
that their s y st e ms be tested in integration with the systems that
reside in the thrift. Simple representations of compliance are insuf
ficient to provide confidence that the financial system will not be
adversely affected. In contrast to the other Federal banking r e g u
lators, O T S does not have statutory authority to exam ine service
providers, a n d m u s t instead rely on contractual arrangements b e
t w ee n the individual thrift a n d the institution's service provider.
This is at best inefficient an d at worst potentially dangerous. I b e
lieve itis important that Congress m o v e quickly to enact legislation
that will fix this flaw in agency authority. (It is m y understanding
that O T S staff is working with Senate B an k i ng C om mi tt e e staff to
draft legislation to resolve this matter .)
In conclusion, I believe that — with the o n e potential exception of
service providers - O T S is well positioned with respect to the year
2000. H o w e v e r , as the Basle Com mi tt ee on Ba n k in g Supervision
recently pointed out in its technical paper for b a n k s o n Y ea r 2000
compliance, "the Ye ar 2000 issue is potentially the biggest ch al
lenge ever faced by the financial industry. ... Unlike most a u t o m a
tion projects that can be staggered as to schedule and delayed if
problems are encountered , all critical renovations m u s t be a d
dressed at once with no possibility for extending roll out deadlines .”
In other wor ds , Ja nua ry 1, 2 0 0 0 will c o m e on time whether we're
ready or not. It is extremely critical that O T S remain focused on
this top priority a n d ensure that the institutions it regulates are
equally focused .
R E S P O N S E T O W R I T T E N Q U E S T I O N S O F S E N A T O R ENZI
F R O M ELLEN SEIDMAN
Q.1 . I a m sure yo u are a war e of the Federal H o m e L o a n B a n k r e
form legislation w hich is included in the H o u s e Ba n ki n g reform
bill, H.R. 10. D o y ou feel that voluntary m e m b e r s h i p w ould be det
rimental to Federal thrifts ?
A.1 .M e m b e r s h i p in the Federal H o m e L o a n B a n k Sy ste m provides
thrifts— particularly small institutions— with an important source
of liquidity a n d tools w it h w h i c h to better m a n a g e the relationship
betwee n their assets and liabilities. This in turn helps t h e m safely
perform their traditional function of portfolio lending for housing.
In addition , the C o m m u n i t y Investment a n d Affordable Housing
programs of the B a n k Sys tem are valuable tools for housing an d
c o m m u n i t y development for low- a n d moderate -income families a nd
communities .
T h e vast majority of Federal savings associations value their
B a n k S y s t e m me mb er sh ip . It is unlikely that few , if any , would a c
tually leave the S y st e m . Nevertheless, the choice wh ether to belong
to the Sy ste m should properly be the institution's, an d voluntary
m e m b e r s h i p should b e a c o m p o n e n t of H o m e L o a n B a n k reform
legislation .
Q .2 . W h a t do you see as the greatest challenge facing Federal
thrifts and h o w d o you propose to r e m e d y the problem ?
A.2 . I believe the greatest challenge facing thrifts o v e r the long
te rm is adapting to a changing financial services marketplace while
116
maintaining their individual a nd collective safety a nd so un dn es s in
all economic conditions . O n a m o r e immediate basis , the Ye ar 2000
transition poses a serious challenge for all institutions .
I view these challenges m o r e as opportunities than as pr ob le ms.
B ut O T S has an important role in both . W i t h respect to adaptation
to a changing marketplace, the agency m u s t m a k e certain it r e
duces unne eded regulatory barriers to evolutionary developments.
Last w e e k , for examp le, O T S took a step in this direction b y p u b
lishing a proposed electronic banking rule that clarifies that thrifts
m a y engage in any activity through electronic m e a n s that they can
do in a m o r e traditional w a y . Moreover , the agency has started a
series of seminars on small business lending, so that thrifts w h i c h
are considering using the greater authority they received from C o n
gress in 1996 have a better understanding of both the opportunities
and risks . At the s a m e time , O T S m u s t m a k e certain its e x a m i n a
tion a n d supervision staff is fully able to understand a nd e xa m in e
for the risks of these n e w w a y s of doing business , a n d the agency
m u s t be willing to m a k e difficult decisions to protect safety a n d
soundness if things start to go awry . T h e agency m u s t also m a k e
certain its processes fully support this endeavor.
W i t h respect to the Y ear 2000 issue,this is an extremely serious,
complex, a n d difficult issue that will be of highest concern to m e
should I be confirmed as Director of O T S . N o t only is smo oth c o n
version critical to the safety an d soundness of the institutions that
O T S regulates, it is a matter of highest concern for the global fi
nancial system . M y impression is that O T S , over the course of the
last 2 years , has been working to prepare both the agency a n d the
institutions it regulates for a s smooth a transition as possible. For
example, O T S completed the a s s e s s m e nt of its national systems
a nd developed a conversion plan , which is fully budgeted , b y the
end of 1996. It is m y understanding that O T S expects all mod ific a
tions to be completed during 1998 , allowing time for the testing
that is essential to a smooth conversion .
W i t h respect to the institutions O T S supervises, the agency has
been raising awareness of Yea r 2000 conversion as a major strate
gic an d business issue since 1996. Further, in M a y of this year , as
part of the coordinated w o r k of all t h e depository institution r e g u
lators participating in the Federal Financial Institutions E x a m i n a
tion Council (F F I E C ), the O T S distributed to those institutions it
supervises a policy s ta tem en t , examiner questionnaire, a n d e x a m
ination guidelines th at highlight the risks p o s e d by the conversion ,
the steps that need to be taken , an d an appropriate timetable that
allows t ime for testing a nd debugging,especially of inter -connected
systems . O T S has recently put on its W e b site a spreadsheet -based
checklist that helps institutions to understand a n d prioritize the
steps that need to be taken , and to k e e p track of w h a t has been
done and w h a t remains outstanding. I understand that agency w a s
on schedule to complete off-site supplemental conversion e x a m i n a
tions.T h e agency's goal — in coordination with that of the other
F F I E C m e m b e r s — is t h at all institutions should have completed
the conversion of all critical systems by the end of 1998 , to allow
for testing.
117
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES
F R O M ELLEN SEIDMAN
Q.1 . Last w ee k , an article appeared in T h e W all Street Journalt i
tled "Brokers, Insurers Q u e u e U p for Thrift Charters ." According
to the article, so far this year , t h e Office of Thrift Supervision h a s
received 23 applications for n e w Federal thrift charters, including
six fr o m insurance comp anies or fr om securities firms. T h e agency
projects that it will receive a total of 32 charter applications this
year, which is m o r e th an twice the n u m b e r it received 4 years ago.
T h e article states, “ The applications, coming less t h a n a decade
after the savings a nd loan crisis nea rly w i p e d out the industry, are
fueling a resurgence o f interest in t he lowly thrift, once considered
a backwater of A m e ri c a n finance.”
O n e implication of this resurgence is that thrifts are n o w be g in
ning to affiliate with other types of financial institutions a nd a r e
forming m o r e complex a nd vast financial arrangements . These n e w
arrangements m a y impose safety a nd soundness concerns of a m a g
nitude that the O T S h a s not been presented with before. N o t only
are n e w financial affiliations possible, but the unitary thrift h o l d
ing c o m p a n y model permits a thrift to engage in unlimited affili
ations with commercial enterprises.
Is it your view that there are safety a n d soundness implications
which are associated with a thrift's affiliations with other financial
institutions ?
A.1 . Affiliations be tween insurance or securities firms a n d thrifts
are not n e w , but there clearly is an increase in interest in thrift
ownership by such firms. Moreover , the changing financial services
marketplace m a y m e a n that such affiliations will have qualita
tively different characteristics in the future than they h a v e in the
past. O T S m u s t be able to fully understand h o w these affiliations
function and h o w the thrift an d its customers benefit or are put at
risk from such affiliations, an d m u s t have in place a reporting and
examination system that provides sufficient warni ng an d enforce
m e n t action if any problems begin to arise. I regard this to be a
top priority, not only with respect to the n e w charter applications,
but also in connection with supervision a nd examination of existing
thrifts.
That said , however , it is important that the affiliation tran s
actionprotections provided b y Congress in t he Financial Institu
tions Reform , Recovery, a n d E n fo rc e me n t Act of 1989 (F I R R E A )
and the Federal Deposit Insurance Corporation I mp r o ve m en t Act of
1991 (FD I CI A ), an d the O T S rules an d regulations implementing
those statutes, have greatly enhanced O TS's regulatory authority
to m a n a g e the risks involved w h e n a thrift affiliates with a finan
cial or a commercial institution . I n particular, based on the c a p
italization a n d earnings of a thrift, O T S imposes restrictions to the
extent to whi ch the thrifts m a y m a k e capital distributions (includ
ing, b ut not limited to, dividends) to its holding c o m p a n y a n d i m
poses w h a t appear to be very stringent transaction restrictions on
a thrift's dealing with its holding c o m p a n y an d affiliates. In a d d i
tion, if a holding c o m p a n y or affiliate is engaged in activities that
would not be permissible for a b a n k holding c o m p a n y or affiliate,
the thrift m a y not m a k e a n y loans or extensions of credit to the
holding c o m p a n y or affiliate. In the event that the thrift's safety
118
and soundness appear to be threatened by the activities of a h o l d
ing c o m p a n y or affiliate, O T S m a y exa mine the holding c o m p a n y
or affiliate a n d take appropriate action to protect the safety a n d
soundness of the thrift.
Q.2 . It is m y understanding that the O T S has the statutory ability
to set capital standards for the holding c o m p a n y of a thrift a n d its
various financial affiliates. This statutory authority is the s a m e a u
thority as that provided to the Federal Reserve. H o w e v e r, the F e d
eral Reserve has chosen to exercise its authority over the holding
companies of banks a nd the O T S has refrained from exercising its
authority over the holding companies of thrifts.
W h y is it not appropriate to exercise authority for determining
the financial responsibility of the holding companies of the insured
thrifts, particularly w h e n given this country's experience with the
thrift crisis ?
A.2 . Completely aside from wh ether O T S has statutory authority
to i m p o s e capital requirements on unitary thrift holding companies
(multiple thrift holding companies a n d thrift holding companies
that also o w n banks are regulated by the Federal Reserve ), it is
important to de te rm i ne whether imposition of such requirements
would be either practical or effective to protect t h e safety a n d
soundness of the thrift, an d whether other tools could better a c c o m
plish the s a m e result. I understand that to date , O T S has found
that focusing on the thrift, and on its interactions with both its
holding c o m p a n y a n d its affiliates, has been a productive w a y t o
examine a n d supervise thrifts that are m e m b e r s o f a unitary h o l d
ing c o m p a n y . A s discussed in m y a nswer to the previous question,
F I R R E A a n d F D I C I A , as well as O T S regulations a n d rules, place
significant limitations on such interactions. In addition to the limi
tations mentioned above, OTS's regulations provide that if a thrift
becomes undercapitalized , it m u s t submit a capital restoration plan
which , under F D IC I A , m u s t include a guarantee b y the holding
c o m p a n y that will assure the thrift's performance of the plan .
I a m , of course , open to considering whether holding c o m p a n y
capital requirements m i g h t be an appropriate addition to the r e g u
latory system for unitary thrift holding companies in general or for
classes of institutions or situations. H o w e v e r, I think it is i m p o r
tant in considering this issue to take into account that, unlike a
b a n k holding c o m p a n y, a thrift holding c o m p a n y m a y not only be
subject to a variety of capital regulations under other regulatory
systems, but m a y be part of an industry in w hich capital structures
typically include substantially m o r e equity an d less debt than is
the case with b a n k s, b a n k holding companies, a nd thrifts.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR D O D D
F R O M ELLEN SEIDMAN
Q.1 . T h e “ Year 2 0 0 0 ” p robl em is one o f the biggest challenges f a c
ing all Federal financial regulators. Please explain your views on
the seriousness of this subject, your understanding of the role that
your agency is playing in addressing a n d remediating this problem ,
a n d any suggested changes or improvements to that role that y ou
would advocate if confirmed .
119
A. 1. T h e Yea r 2 0 0 0 conversion is an extremely serious, complex,
a n d difficult issue that will be of highest concern to m e should I
be confirmed as Director of O T S . N ot only is s m o o t h conversion
critical to the safety and soundness of the institutions O T S r e g u
lates, it is a serious issue for the global financial system .
M y impression is that O T S , over the course of the last 2 years,
has b e e n working to prepare both the agency a n d the institutions
it regulates for as smo oth a transition a s possible. For example ,
O T S com plet ed the assessment of its national systems a nd dev el
oped a conversion plan , which is fully budgeted , by the en d of 1996 .
It is m y understanding that O T S expects all modifications to be
completed during 1998 , allowing time for the testing that is essen
tial to a s moo th conversion .
T h e O T S has been raising awareness of Y ear 2 0 0 0 conversion as
a major strategic and business issue since 1996. In M a y of this
year,a s part of the coordinated w o r k of all the depository institu
tion regulators participating in the Federal Financial Institutions
Examination Council (F F I E C ), the O T S distributed to those insti
tutions it supervises a policy statement , examiner questionnaire,
a n d examination guidelines that highlight the risks p o se d by the
conversion , the steps that need to b e taken , an d a n appropriate
timetable that allows time for testing an d debugging, especially of
inter -connected systems. T h e O T S recently put on its W e b site a
spreadsheet -based checklist that helps institutions to understand
a n d prioritize the steps that need to be taken , and to keep track
of w h a t has been done and w h a t remains outstanding . I u n d e r
stand the agency w a s on schedule to complete off-site supplemental
conversion examinations. T h e agency's goal — in coordination with
that of the other F F I E C m e m b e r s - is that all institutions should
h a v e completed the conversion of all critical systems by the end of
1998 , to allow for testing.
In discussions with O T S personnel , they have indicated that they
h a v e adequate examination an d supervisory authorities in all but
one area - examination of service providers. M a n y small institu
tions do not do the bulk of their systems w o r k in -house, but rather
rely on outside service providers. It is critically important that
these vendors not only be fully compliant by the year 2000 , but
that their sy s te m s be tested in integration with the systems that
reside in the thrift. Simple representations of compliance are insuf
ficient to provide confidence that the financial system will not be
adversely affected. In contrast to the other Federal banking r e g u
lators, O T S does not have statutory authority to exa mine service
providers , and m u s t instead rely on contractual arrangements b e
twee n the individual thrift a n d the institution's service provider.
This is at best inefficient a n d at worst potentially dangerous . I b e
lieve it is important that Congress m o v e quickly to enact legislation
that will fix this flaw in agency authority. (It is m y understanding
that O T S staff is working wi th Senate Ba nki ng Co mmi tte e staff to
draft legislation to resolve this matter .)
In conclusion , I believe that with the o n e potential exception of
service providers — O T S is well positioned w it h respect to the year
2000. H o w e v e r , as the Basle Committee on B an ki ng Supervision
recently pointed out in its technical paper for banks o n Ye ar 2000
compliance, "the Year 2000 issue is potentially the biggest chal
120
lenge ever faced by the financial industry. ... Unlike most a u t o m a
tion projects that can be staggered as to schedule and delayed if
problems are encountered, all critical renovations m u s t be a d
dressed at once with no possibility for extending roll out deadlines .”
In other words, Janua ry 1, 2 0 0 0 will c o m e on tim e whether we're
ready or not. It is extremely critical that O T S remain focused on
this top priority a nd ensure that the institutions it regulates are
equally focused.
R E S P O N S E T O W R I T T E N Q U E S T I O N S O F S E N A T O R ENZI
F R O M E D W A R D M. G R A M L I C H
Q.1 . W e ar e now entering one of the longest periods of economic
growth since W or l d W a r II .H o w e v e r, w h e n this type of expansion
occurs , there are always those w h o b eco me nervous. There are
s o m e trends in the e co n o my that are not easily understood . For e x
ample, personal bankruptcies have been on an u p w a r d trend e v e n
though w e have been in an almost unprecedented period of e c o
n o m i c growth and expansion . Associated with the increase i n b a n k
ruptcies is the increase of delinquencies in s o m e categories of loans.
W h a t are the reasons for these high n u m b e r s a n d w h a t can be
done to curb these delinquencies a n d bankruptcies ?
A.1 . I d o not believe that anyone has a satisfactory explanation for
the rapidity of the increase in bankruptcies since early 1995. H o w
ever , it is not unprecedented that personal bankruptcies rise d u r
ing a n economic expansion. F o r example, personal bankruptcies
m o r e than doubled between 1983 a n d 1989, also a period of vigor
ous expansion .
S o m e rise in bankruptcies an d loan delinquencies seem s to be a n
inevitable consequence of the growth of debt that occurs in a n e x
panding e c o no m y . This expanded debt leaves people m o r e vu lner
able to serious injuries a n d health problems (or other factors that
might cause bankruptcies ). Moreover , even w h e n the e c o n o m y is
strong, s o m e people m a y borrow m o r e than t h e y c a n reasonably
handle . Still, analysts feel that bankruptcies have increased lately
by m o r e than such factors wou ld normally explain . Perhaps s o m e
of the extra increase stems from the declining social stigma that
n o w seems to be associated with bankruptcy.I n addition , liberal
izations in State laws mi ght have played a role.
It is not clear that there are desirable legislative options. A s long
as sound macroeconomic policies create a stable environment w h e r e
credit participants can realistically assess their o w n risks, lenders
themselves are likely to adjust their standards to curb the uptrend
in personal bankruptcies. Be y on d that, it is h a r d to think of s e n
sible legislative alternatives.
Q.2 . T o w h a t do yo u attribute this almost unprecedented gr owt h
period in o u r e c o n o m y ? W h a t impact h a v e the projections o f the
budget being in or near balance through the year 20 0 2 h a d ? D o y ou
believe that a balanced budget a m e n d m e n t is needed to provide
m o r e fiscal responsibility for the Federal G o v e r n m e n t ?
A.2 . S o m e of the principal contributors to the healthy economic e x
pansion seem clear.B o t h the public a n d private sector have done
their part .I think the Federal Reserve h a s played a role , by sta
bilizing prices a nd avoiding distortions. Fiscal policy has also been
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There are m a n y variants of such a plan , but s o m e h o w or other
the growth in benefits m u s t be scaled back a nd there m u s t be n e w
saving for retirement .
RESPONSE TO WRITTEN QUESTIONS OF SENATOR D O D D
F R O M E D W A R D M. G R A M L I C H
Q.1 . T h e “ Year 2000 ” pr oblem is one o f the biggest challenges fac
ing all Federal financial regulators. Please explain your views on
the seriousness of this subject, your understanding of the role that
your agency is playing in addressing a nd remediating this problem ,
a n d a n y suggested changes or improvements to that role that y ou
would advocate if confirmed .
A.1 . T h e Year 2000 problem is indeed a major challenge for the fi
nancial industry , in the United States a n d globally. It will be a
matter of the highest priority for the Federal Reserve over the c o m
ing m o nt h s .
T h e F ed has a crucial responsibility to monitor the progress of
institutions it supervises a n d t o take other appropriate actions t o
ensure their Ye ar 2000 compliance. I believe that the Fe d a n d the
other b a n k regulators have taken important steps to raise the issue
within the ba nk in g c o m m u n i t y ,to set target dates for assessment
a nd remediation , a n d to c o m m i t all institutions to completion b y
m i d -1998 .
A s the Nation's central ban k , with responsibility for maintaining
financial stability, it is crucial that the F e d correctly assess the p o
tential for problems and have plans in place to deal with them . I
unde rstand that the F ed does plan to have its o w n systems ready
for testing with customers by mid -1998, a n d that such efforts are
proceeding. O n the international level, the Fed's w o r k within the
Basle C o m mi t t e e on Ba nking Supervision resulted in last month's
press release a nd pa per highlighting the global importance of the
issue . I regard the Fed's efforts within the B I S and other in te r
national bodies as extremely important to m a k e sure that global fi
nancial markets are not disrupted .
Oversight of project w o r k a n d clear co mm uni cat io n to the public
are important components of the Fed's role. This matter will be
high o n m y list of priorities once I take office.
R E S P O N S E T O W R I T T E N Q U E S T I O N S O F S E N A T O R ENZI
F R O M R O G E R W. F E R G U S O N , JR .
Q.1 . W e ar e now entering one of the longest periods of economic
growth since W o rl d W a r II. H o w e v e r, w h e n this type of expansion
occurs, there are always those w h o bec ome nervous. There are
s o m e trends in the e c o n o m y that are not easily understood . For e x
ample , personal bankruptcies have been on a n u p w a r d trend e v e n
though w e have b e e n in an almost unprecedented period of eco
nom ic growth an d expansion . Associated w i t h the increase in b a n k
ruptcies is the increase of delinquencies in s o m e categories of loans.
W h a t are the reasons for these high n u m b e r s a n d w h a t can be
done to curb these delinquencies a n d bankruptcies ?
A.1 . T h e reasons for the recent increase in bankruptcies an d delin
quency rates are m a n y a n d varied. Financial setbacks owing to a c
cidents, illnesses, or other calamities, no doubt, lie behind m a n y
bankruptcy cases. B u t society's attitudes toward bankruptcy ha ve
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changed greatly over the years so that bankruptcy is no longer
seen as a last resort to debt p a y m e n t problems, a n d that probably
has boosted the n u m b e r of ba nkruptcy petitions,a s have the m o r e
liberal asset exemptions n o w available to the bankrupt under State
an d Federal laws . S o m e people m a k e mistakes and borrow m o r e
than they should , a n d creditors tend to relax lending standards
w h e n the e c o n o m y is strong,a c c o m m o d a t i n g riskier borrowers w h o
ha ve a higher incidence of delinquency an d bankruptcy.
H i g h levels of delinquencies in credit card loans during this p e
riod o f solid economic performance is of concern a nd should b e
monitored closely by regulators. Fortunately, the excesses in credit
markets are usually addressed by the markets themselves , w h e n
lenders respond to rising losses by tightening u p their lending
practices. This is exactly w h a t has been h a p p en i n g in the credit
card area over the past y e a r or so,a n d the results are beginning
to s h o w u p in a leveling off in credit card delinquency rates this
year; s o m e measures , in fact, suggest that these rates are actually
declining. T h e credit m a r k e t c a n d o little to reduce the n u m b e r of
bankruptcies caused by catastrophic events of one sort or another.
H o w e v e r, I understand that there is a n effort u n d e r w a y to reform
the B a n k r u p t c y Co de , which m a y reduce s o m e w h a t the n u m b e r of
bankruptcy filings.
Q.2 . T o w h a t do you attribute this almost unprecedented growth
period in our e co n om y ? W h a t impact h a v e the projections o f the
budget being ino r near balance through the year 2 0 0 2 h a d ? D o you
believe that a balanced budget a m e n d m e n t is needed to provide
m o r e fiscal responsibility for the Federal G o v e r n m e n t ?
A.2 . T h e economic expansion whi ch began in th e spring of 1991 is
n o w the third longest of the p o s t w a r period, and there are few
signs of a ny im mi ne nt interruption in this remarkable perform
ance . In an ec ono my as large a n d complex as ours , there are likely
m a n y factors that have contributed to this period of steady growth .
M a n y businesses have reorganized their operations a nd are invest
ing heavily in capital eq uipm ent, especially high -technology e qu ip
m e n t, that offers opportunities for considerable gains in efficiency,
Moreover, the increased flexibility of labor markets in the United
States has contributed to the substantial job creation that w e have
witnessed in recent years — a performance that is u n m a t c h e d by
a n y other major industrial country.
Economic policy also has contributed to the favorable outcomes
in recent years. Fiscal restraint by the Federal G ov e r n m e n t has al
lowed resources to be shifted to private investment and ,i n part,
has supported the current capital spending b o o m . Me an whi le, m o n
etary policy has been directed at achieving and maintaining a low
inflation en viro nmen t . T h e benefits of this policy are clear: There
are fewer inflation -induced distortions, a m o r e smoothly function
ing price system , a nd a m o r e stable economic environment that e n
courages long-term planning by households and businesses .
If the current budget projections, whic h s h o w the Federal budget
m o v i n g into balance b y the year 2 0 0 2 ,c o m e to pass , w e can re ason
ably expect several benefits. W i t h the Federal G o v e r n m e n t creating
fewer d e m a n d s on the Nation's resources through the credit m a r
kets , interest rates will likely be lower than they otherwise wo uld
124
have been .This , in turn , should stimulate capital spending b y bu si
nesses , m a k e housing m o r e affordable for m a n y families,a n d ease
the burdens on m a n y individuals of financing the investment in
higher education that will be increasingly important for participa
tion in our rapidly changing e co n o my .
I do not believe a balanced budget a m e n d m e n t to the Constitu
tion is necessary . Although the task w a s daunting, the efforts by
Congress and the Administration this last year to reach agreement
on legislation that will produce over time a balanced budget strike
m e a s a fundamentally m o r e sound approach to dealing with fiscal
matters. In addition , I believe it w o u l d be very time consumi ng to
draft and pass a constitutional a m e n d m e n t that responds to t h e
various contingencies that wou ld have to be considered in m a k i n g
future fiscal policy a matter of constitutional law . F r o m a personal
perspective, I believe that legislative effort would be better spent
in achieving the goals set forth in last year's legislation and in
planning for future challenges to maintaining a sound fiscal policy.
RESPONSE TO WRITTEN QUESTIONS OF SENA TOR D O D D
F R O M R O G E R W . F E R G U S O N , JR .
Q.1 . T h e "Year 2000” p robl em is one o f the biggest challenges fac
ing all Federal financial regulators. Please explain your views on
the seriousness of this subject, your understanding of the role that
your agency is playing in addressing a nd remediating this problem ,
and any suggested changes or improvements to that role that you
would advocate if confirmed .
A.1 . T h e Y ear 2000 issue is an en orm ou s challenge for the banking
industry. T h e resolution of this problem requires focused a n d c o n
certed attention on the part of regulators, senior level b a n k officers,
a nd technical personnel. B y s o m e estimates, U.S. commercial banks
will spend about $ 7 to $ 10 billion to deal with this issue. T h e m a g
nitude of the resources , both personnel a n d financial, required to
resolve this problem m e a n s that m a n y b ank s will find that b e c o m
ing Ye a r 2000 compliant will force a delay in other important stra
tegic endeavors .
T h e Year 2000 issue is a n enterprise-wide business problem that
calls fort he c o m m i t m e n t of senior officers in ban ks as well a s s u p e
rior project m a n a g e m e n t skills to implement a technical business
solution. It is also a problem that will require solutions that cross
from financial institutions to their vendors , correspondents, an d
customers , with w h o m the institutions often h a v e automated link
ages and interdependencies .
Complicating the challenge of t h e resolution of the Year 2000
issue are other projects, such as the Eu ro a n d domestic mer ger an d
acquisition activity, that are placing significant competing d e m a n d s
on scarce technical resources . Finally, for m a n y U.S. financial insti
tutions with international operations, this is also a global inter
dependency problem crossing nationalboundaries.
M y understanding is the Federal Reserve S yst em has developed
a nd is executing a comprehensive plan to ensure its o w n Ye ar 2000
readiness. I believe the Federal Reserve is giving the Y ea r 2000 its
highest priority,c o m m e n s u r a t e w it h its goal of maintaining the
stability o f t h e Nation's financial m ar k e t s an d pa ym e nt s systems,
preserving public confidence, an d supporting reliable G o v e rn m e n t
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operations. All Federal Reserve computer program changes , as well
as system a nd user-acceptance testing, are scheduled to b e c o m
pleted by year -end 1998. Critical financial services systems that
interface with customers will be Year 2000 ready by m i d -1998 , p e r
mitting approximately 18 m o n t h s for customer testing.
In its role as supervisor and regulator, the Federal Reserve has
u ndert aken a comprehensive p rogram to promote increased a w a r e
ness , establish targets a n d b en ch m ar ks for the industry, develop
industry -wide status assessments , and utilize proactive supervisory
pressures .
Financial institutions are expected to have identified mission
critical applications by the end o f the third quarter of 1997 , an d
p r o g r a m mi n g c h an g es should be largely completed an d testing well
u n d e r w a y b y D e c e m b e r 31 , 1998. T h e Federal Reserve will have e x
a m in e d every b a n k subject to its jurisdiction by m i d -1998 a n d it
has a variety of supervisory tools that can be used to encourage in
stitutions to achieve Yea r 2000 compliance.
M y initial perspective is that the Federal Reserve has u n d e r
taken a rigorous effort to ensure that it an d the institutions for
whic h it has responsibility will be Year 2000 compliant. H o w e v e r ,
in a challenge of this m agni tude, there is certainly r o o m for change
a nd i m pr ov e me n t.
For example , if I a m confirmed, I would advocate that the F e d
eral Reserve, perhaps in conjunction with private industry -wide o r
ganizations, identify institutions that h a v e done a particularly good
job in becoming Y ea r 2000 compliant so that those leading institu
tions might serve as models o f better practice in this area .I would
also encourage the senior Federal Reserve staff and officials to
have direct a nd ongoing contact with senior officers, both line an d
technical support, at major institutions in ea ch Reserve District to
assure that senior m a n a g e m e n t understands that this problem is
of a strategic nature , an d not merely a technical issue. Finally, I
wou ld expect the Federal Reserve supervisory staff to follow u p its
Yea r 2000 examination pro gram with a focus on those institutions
that are likely to h a v e trouble becoming Year 2000 compliant an d
then w o r k with them , in groups or individually, to determine the
sources of their difficulties a nd to assist t h e m in identifying cre
ative solutions.
In all of this, the m a i n goal is for the Federal Reserve to be a
supervisor that adds to the solution , not one that substitutes its
ju dgm ent for that of senior m a n a g e m e n t at an y b a n k .
@FedFRASER