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S. HRG. 115–306
NOMINATIONS OF RICHARD CLARIDA AND
MICHELLE W. BOWMAN
HEARING
BEFORE THE
COMMITTEE ON
BANKING, HOUSING, AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
ON
THE NOMINATIONS OF:
RICHARD CLARIDA, OF CONNECTICUT, TO BE A MEMBER AND VICE CHAIRMAN,
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
MICHELLE W. BOWMAN, OF KANSAS, TO BE A MEMBER, BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
MAY 15, 2018
Printed for the use of the Committee on Banking, Housing, and Urban Affairs
(
Available at: http: //www.govinfo.gov /
U.S. GOVERNMENT PUBLISHING OFFICE
WASHINGTON
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
MIKE CRAPO, Idaho, Chairman
RICHARD C. SHELBY, Alabama
SHERROD BROWN, Ohio
BOB CORKER, Tennessee
JACK REED, Rhode Island
PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey
DEAN HELLER, Nevada
JON TESTER, Montana
TIM SCOTT, South Carolina
MARK R. WARNER, Virginia
BEN SASSE, Nebraska
ELIZABETH WARREN, Massachusetts
TOM COTTON, Arkansas
HEIDI HEITKAMP, North Dakota
MIKE ROUNDS, South Dakota
JOE DONNELLY, Indiana
DAVID PERDUE, Georgia
BRIAN SCHATZ, Hawaii
THOM TILLIS, North Carolina
CHRIS VAN HOLLEN, Maryland
JOHN KENNEDY, Louisiana
CATHERINE CORTEZ MASTO, Nevada
JERRY MORAN, Kansas
DOUG JONES, Alabama
GREGG RICHARD, Staff Director
MARK POWDEN, Democratic Staff Director
ELAD ROISMAN, Chief Counsel
JOE CARAPIET, Senior Counsel
TRAVIS HILL, Senior Counsel
ELISHA TUKU, Democratic Chief Counsel
LAURA SWANSON, Democratic Deputy Staff Director
AMANDA FISCHER, Democratic Professional Staff Member
DAWN RATLIFF, Chief Clerk
CAMERON RICKER, Deputy Clerk
JAMES GUILIANO, Hearing Clerk
SHELVIN SIMMONS, IT Director
JIM CROWELL, Editor
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C O N T E N T S
TUESDAY, MAY 15, 2018
Page
Opening statement of Chairman Crapo .................................................................
Opening statements, comments, or prepared statements of:
Senator Brown ..................................................................................................
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NOMINEES
Richard Clarida, of Connecticut, to be a Member and Vice Chairman, Board
of Governors of the Federal Reserve System .....................................................
Prepared statement ..........................................................................................
Biographical sketch of nominee .......................................................................
Responses to written questions of:
Senator Brown ...........................................................................................
Senator Reed ..............................................................................................
Senator Menendez .....................................................................................
Senator Warner .........................................................................................
Senator Warren .........................................................................................
Senator Cortez Masto ................................................................................
Michelle W. Bowman, of Kansas, to be a Member, Board of Governors of
the Federal Reserve System ................................................................................
Prepared statement ..........................................................................................
Biographical sketch of nominee .......................................................................
Responses to written questions of:
Senator Brown ...........................................................................................
Senator Reed ..............................................................................................
Senator Menendez .....................................................................................
Senator Warner .........................................................................................
Senator Warren .........................................................................................
Senator Cortez Masto ................................................................................
ADDITIONAL MATERIAL SUPPLIED
FOR THE
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RECORD
List of Federal Reserve Enforcement Actions from January 2015–May 2018
submitted by Richard Clarida and Michelle W. Bowman .................................
Joint letter submitted in support of the nomination of Richard Clarida ............
ICBA letter submitted in support of the nomination of Michelle W. Bowman ..
Excerpt from the December 2012 FDIC Study submitted by Senator Brown ....
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NOMINATIONS OF RICHARD CLARIDA AND
MICHELLE W. BOWMAN
TUESDAY, MAY 15, 2018
U.S. SENATE,
URBAN AFFAIRS,
Washington, DC.
The Committee met at 10:17 a.m., in room SD–538, Dirksen Senate Office Building, Hon. Mike Crapo, Chairman of the Committee,
presiding.
COMMITTEE
ON
BANKING, HOUSING,
AND
OPENING STATEMENT OF CHAIRMAN MIKE CRAPO
Chairman CRAPO. The hearing will come to order.
This morning we will consider the nominations of the Honorable
Richard Clarida to be a Member and Vice Chairman of the Board
of Governors of the Federal Reserve System, and Commissioner
Michelle Bowman to be a Member of the Board of Governors of the
Federal Reserve System.
Welcome and congratulations to each of you for your nominations
to these positions. I see friends and family sitting with you, and I
welcome them here as well. You are certainly welcome to introduce
them.
We are fortunate to have two highly qualified nominees appearing today. These positions are critical to ensuring safe, sound, and
vibrant financial systems and a healthy, growing economy.
Dr. Clarida currently serves as managing director and global
strategic advisor at PIMCO, a position he has held since 2006.
Previously, he served as Assistant Secretary of the Treasury for
Economic Policy from 2002 to 2003 and as a senior staff economist
with the Council of Economic Advisers from 1986 to 1987.
In his academic career, he was an assistant professor at Yale
University from 1983 to 1988 and has served as a professor of economics at Columbia University in various capacities since 1988.
If confirmed, Dr. Clarida will serve as the Federal Reserve’s Vice
Chairman and will play an important role in monetary policy normalization.
Dr. Clarida has written extensively about monetary policy, and
I look forward to hearing more about his views. Such expertise will
be especially important as the Fed continues to wind down its balance sheet and raise interest rates after years at the zero lower
bound.
Commissioner Bowman is currently the State Bank Commissioner of Kansas, a position she has held since February 2017. Previously, Commissioner Bowman worked as a Vice President at
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Farmers & Drovers Bank, a community bank with $175 million in
assets, from 2010 through 2017.
She has also served in a number of Government roles, including
as a staffer in both the Senate and House and in various roles at
the Department of Homeland Security.
With past experience as a community banker and as a bank regulator, Commissioner Bowman is well equipped to fill the Federal
Reserve Board role reserved for someone with community banking
experience.
Rightsizing our regulation for community banks has been a critical goal of mine as Chairman. Earlier this year, the Senate passed
Senate bill 2155, a bipartisan bill focused on providing regulatory
relief for community banks.
If confirmed, Commissioner Bowman will play a key role in implementing the bill, if it is signed into law. In addition, the Federal
Reserve continues to review many of the rules put in place following the crisis.
If confirmed, I look forward to working with Dr. Clarida and
Commissioner Bowman on further regulatory and monetary policy
improvements. Congratulations again on your nominations and
thank you and your families for your willingness to serve.
Senator Brown.
STATEMENT OF SENATOR SHERROD BROWN
Senator BROWN. Thank you, Mr. Chairman. I want to congratulate the two of you and welcome your families to the Committee.
Thank you for your willingness to serve our country
In the last Congress, two of President Obama’s nominees to serve
as Members of the Federal Reserve Board of Governors were denied even consideration by this Committee. Mr. Allan Landon, a
Republican, was nominated in January 2015. He waited for 2 years
for a hearing—a hearing he never got. Ms. Kathryn Dominguez
waited nearly as long—a year and half. Again, nothing. It sounds
a lot like what the Republicans did on a Supreme Court nominee.
As a result, President Trump will be able to nominate six of the
seven members to the Board of Governors of the Federal Reserve.
His first picks, Chair Powell and Vice Chair Quarles, have already
been confirmed; Mr. Goodfriend has had his hearing.
Today’s nominees, the Honorable Richard Clarida and Commissioner Michelle Bowman, bring relevant experience to the Federal
Reserve Board. Dr. Clarida, who is nominated to serve as Vice
Chair of the Board, has spent his career studying monetary policy.
As we enter our ninth year of the recovery since the Great Recession, even though job growth in the last couple years has not been
quite what it was, with the Fed funds rate still below 2 percent and
inflation finally nearing the Fed’s target, expertise in that area is
critical.
Ms. Bowman has been nominated to serve in the role reserved
for an individual with experience working in or supervising community banks. She has done both.
But experience is only useful if you have learned the right lessons from it. So despite the nominees’ experience, I am concerned.
We have seen the Treasury’s recommendations urging that
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we ‘‘tailor’’ and ‘‘recalibrate’’ the financial protections put in place
after the crisis. It sound a lot like Wall Street’s wish list.
We have heard the Fed’s Vice Chair of Supervision’s plans for
bank rules. We have seen actions with the Fed’s recent capital and
leverage proposals, spoken out in opposition by Sheila Bair and
Tom Hoenig, two prominent Republican regulators. We see they decrease the amount of capital required by the biggest banks by $121
billion. So we have banks with some of the most—the highest profitability rates in their history. We have a huge tax cut bestowed
on the financial services industry. We have legislation that has
passed the Senate and will likely soon pass the House, rolling back
even more rules and regulations for banks. It just never seems to
be enough for them.
It matters more than ever, because of that, who will be voting
on proposals to weaken bank rules. The Fed, the OCC, the Office
of Thrift Supervision, and other watchdogs spent the decade—
‘‘watchdogs,’’ I use that term loosely—leading up to the crisis weakening bank rules and failing to protect communities.
In the first half of 2007, my ZIP Code in Cleveland—44105—had
more foreclosures than any other ZIP Code in the United States.
Factories closed; neighborhoods and towns emptied out. The population in Slavic Village where I live dropped 27 percent, down to
20,000 people. At the same time the subprime lending industry
swept in.
As early as 2000, the Cuyahoga County Treasurer and other local
officials went to the Federal Reserve asking them to take action
against subprime lenders preying on homeowners. As early as
2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007.
The Fed did nothing.
Dr. Clarida, you have said that the financial crisis resulted from
serious failures by regulators of securities markets and banks to
adequately understand and supervise markets. I appreciated your
comments in my office and the vigilance which I hope you show.
The financial crisis followed a decade of deregulation of the financial industry, and now too many people who informed the policies before the crisis are back.
Dr. Clarida admitted we got it wrong.
Ms. Bowman knows firsthand how bank failures impact communities across the country: 462 failures starting in 2008, including
bank failures in your home State and Senator Moran’s home State
of Kansas. Employment in Kansas is only 1.5 percent higher than
at the pre-crisis peak 10 years ago.
I wish others in the Administration and Congress would remember the devastating impacts of the financial crisis.
As I consider the nominations for each of you, I am not just looking to what expertise you bring to these positions. You do that. I
want to know that you remember the people behind the numbers.
I am looking at how you will approach the numerous issues considered by the Board: monetary policy, small bank regulation with
which you are so familiar, Ms. Bowman, but also big bank regulation and supervision, enforcement actions, and, most importantly,
whether you will push back on policies that weaken financial stability. Do not just rely on Vice Chair Quarles, who is Director of
Supervision. Study it. Push back on him when he is wrong. Push
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back on him when he deregulates beyond what he should, which
already seems imminent.
Thank you.
Chairman CRAPO. Thank you.
At this point we will administer the oath. Will the nominees
please rise and raise your right hands? Do you swear or affirm that
the testimony you are about to give is the truth, the whole truth,
and nothing but the truth, so help you God?
Mr. CLARIDA. I do.
Ms. BOWMAN. I do.
Chairman CRAPO. And do you agree to appear and testify before
any duly constituted Committee of the Senate?
Mr. CLARIDA. I do.
Ms. BOWMAN. I do.
Chairman CRAPO. Thank you. You may sit down.
I will advise the witnesses that your written statements will be
made a part of the record in its entirety. As you can see, we have
got a clock there. We ask you to try to keep your presentations to
5 minutes, if possible, so we will have time for questions from the
Senators. And, Dr. Clarida, you may proceed first.
STATEMENT OF RICHARD CLARIDA, OF CONNECTICUT, TO BE
A MEMBER AND VICE CHAIRMAN, BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
Mr. CLARIDA. Thank you very much. Chairman Crapo, Ranking
Member Brown, and Members of the Committee, thank you for the
opportunity to appear before you today. I am grateful for the Committee’s consideration for the important positions for which I have
been nominated. I am also honored to have been nominated by the
President to be Vice Chair of the Federal Reserve Board of Governors and a Member of the Board of Governors.
I am grateful for the support of my family who is with me here
today: my wife of 29 years, Polly Barry, and my sons Matthew and
Russell.
The Federal Reserve has been charged by the Congress with a
dual mandate responsibility of maximum employment and price
stability. I fully support both pillars of this dual mandate and, if
I am confirmed, will support a balanced approach to achieving
these important objectives.
The Federal Reserve also plays a central role in ensuring the
safety, soundness, and stability of our financial system. If I am confirmed, I will support policies that are effective, efficient, and appropriately tailored; but I will also want to preserve the important
gains in resiliency and stability of our financial system that have
resulted from the significant improvements and reforms put in
place since the financial crisis.
I believe I am well qualified for the positions for which I have
been nominated. In my published work, I have developed, along
with others, a framework for monetary policy analysis that has
been widely cited at the Fed and central banks around the world.
Although I have served most of my career in academia, I have had
two opportunities to serve in economic policy positions in the Federal Government, in the executive branch: as a senior staff economist with Council of Economic Advisers in 1986 and 1987; and as
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Assistant Secretary of the Treasury for Economic Policy between
2002 and 2003. These experiences taught me the importance of
doing economic analysis that is practical, that is relevant, and that
gives insights into the way that economic policy impacts the lives
of real Americans.
I have also had an opportunity to advise investment firms on economics and strategy, and I think these experiences have given me
some insights into the interplay between macroeconomics and financial markets.
The Federal Reserve has an enormous responsibility to achieve
the objectives assigned to it by the Congress, to communicate the
rationale for these policies, and to explain how the policies will
achieve the goals assigned. If I am confirmed, I look forward to
working with Chair Powell and my other colleagues to satisfy the
assignments given to the Federal Reserve and, importantly, to foster the transparent communication and accountability that is so
important for the Fed’s independent and nonpartisan status.
Thank you again for the privilege of appearing before you today,
and I look forward to answering your questions.
Chairman Crapo. Thank you, Dr. Clarida.
Commissioner Bowman.
STATEMENT OF MICHELLE W. BOWMAN, OF KANSAS, TO BE A
MEMBER, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Ms. BOWMAN. Good morning, Chairman Crapo, Ranking Member
Brown, and Members of the Committee. Thank you for this opportunity to appear before you today. I am deeply honored that the
President has nominated me to serve as a Member of the Board of
Governors of the Federal Reserve System. Because community
banking is a vital and ongoing part of my family’s legacy, I am also
humbled that, if I am confirmed, I will be holding the position designated for someone with community banking experience.
I am also grateful to my family and my husband’s family for
their continued support and belief in me. My husband, Wes, our
children Jack and Audrey, my sister Maggie, who is a school teacher in Kansas City, Missouri, and my parents, Jan and Hank White,
are with me today. My father, Hank, is a fourth-generation banker.
He is a farmer and a rancher, a Vietnam veteran, and a retired
U.S. Air Force officer. My mother, Jan, is a great inspiration. She
taught me that with hard work, anything is possible. My in-laws,
John and Sherry Bowman, and Sherry’s 91-year-old mother, Mary
Hopkins, could not be here with us today, but they are watching
from Everest, Kansas.
My family and I have been in community banking for generations. In 1882, my great-great-grandfather, W.H. White, helped to
charter the Farmers & Drovers Bank. The bank was named for the
customers it served then and continues to serve today: the farmers
and ranchers of the Flint Hills of Kansas. Today the fourth and
fifth generation of my family continue this long tradition of service
through the bank and through active participation in the community and through volunteer work in our community of 2,300 people.
I know firsthand that community banks are a vital part of the
backbone of small, rural, agricultural towns, and they play a
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critical role in providing access to credit and fostering economic activity in communities across our country. Without these institutions, many communities and many of our citizens will see their
economic opportunities suffer significantly.
I joined my family’s bank in 2010, and I learned the business
from the front line to the back office. My most challenging role was
as compliance officer—working with our small team to implement
many of the post-crisis regulations. Although the crisis revealed
weaknesses in the U.S. financial system that needed to be addressed, I have witnessed firsthand how the regulatory environment created in the aftermath of the crisis has disadvantaged community banks. And if confirmed, I will bring this perspective to my
work at the Board to ensure that rules preserve the resiliency of
the financial system, but that they are appropriately tailored to the
size, complexity, and risk of an institution.
As a community banker, it was my job to support local businesses and consumers. This experience has given me a personal
and deep understanding of how the Federal Reserve’s goals of fostering maximum employment and stable prices directly affect the
financial system and the broader economy. The dual mandate is
critically important to our economy, to our businesses, to our families, and our communities. If I am confirmed, I will be very focused
on how we can do the best job possible to fulfill that mandate.
I currently serve as the Kansas State Bank Commissioner, and
our office oversees hundreds of State-chartered banks, trust companies, money transmitters, and other nondepository financial service
institutions. Our mission is both proactive oversight and protection
of the consumers our financial institutions serve. As commissioner,
I am accountable to the people of Kansas. And as I carry out my
regulatory mission, my goal is to treat every consumer and every
institution fairly, respectfully, and with open communication.
I believe the experiences I have described qualify me for this important role, and if confirmed by the Senate, I will be committed
to accountability, transparency, and clear communication in all of
my responsibilities at the Federal Reserve.
Thank you for the honor of this hearing, and I look forward to
answering the Committee’s questions.
Chairman Crapo. Thank you very much, Commissioner Bowman.
I will proceed with the first questioning. My first question is
really to both of you, so I would like you each to respond to this.
There has been a lot of discussion here in the Senate and, frankly,
here today about the concept of tailoring and whether—some view
tailoring as rolling back regulations that should be in place. Others
views tailoring as getting the correct requirements of regulation focused properly on the risk that is presented by individual financial
institutions.
I would just like to have your perspective on both of those. I
think it is very clear that one way to improve economic growth is
by addressing areas where financial regulations can be improved.
Financial regulations should promote a vibrant, growing economy,
but should still ensure a safe and sound financial institution. And
I personally believe that those two objectives can be achieved. I
would simply like your perspectives on that. Dr. Clarida, would you
go first?
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Mr. CLARIDA. Well, thank you, Mr. Chairman. And, yes, I would
agree very much with that sentiment. I think that tailoring and efficiency are goals, but within the context of preserving the important improvements in the financial stability and soundness in our
financial system. And certainly were I to be confirmed, that would
be my focus on any particular matter that I would vote on as a
member, namely, to seek out efficiencies and tailoring to specifics
as best as possible, but not putting the system at risk in an unnecessary way.
Chairman CRAPO. Thank you.
Commissioner Bowman?
Ms. BOWMAN. Chairman Crapo, a great deal of work has gone
into improving the levels of both capital, liquidity, the stress testing that has been put in place, and also the resolvability of institutions has improved greatly since the crisis. I think when we are
talking about appropriateness of regulation and applying it to different institutions in our financial system, we need to be very
aware of the complexity, the size, and the risk of those institutions
as we are looking to ensure the safety and soundness of our financial system.
I believe it is appropriate to consider those characteristics within
the context of safety and soundness and looking to apply the most
appropriate level of regulation to each institution.
Chairman CRAPO. Well, I appreciate your answers, and to basically just summarize what I heard, we all agree that the primary
objective of our regulatory system should be to assure the safety
and soundness of our financial institutions in this country. Within
that standard there can be a level of regulation, depending on the
size, complexity, business model, and financial risk that is posed by
an individual financial institution.
I probably just have time for one more question, and so I am
going to ask that of you, Dr. Clarida, and this goes not to regulation but to basically economic policy. The Fed recently began the
process of shrinking its balance sheet, which currently sits above
$4 trillion. In a speech last year, Chairman Powell cited long-run
estimates of the appropriate size of the balance sheet as about $2.4
to $2.9 trillion by 2022. I would just like your opinion on these factors. What factors do you expect to focus on in determining the
pace and ultimate scope of the balance sheet reduction?
Mr. CLARIDA. Thank you, Mr. Chairman. Let me begin by saying
that certainly I think the Fed does need a smaller balance sheet,
and so I am very much in support of the efforts commenced last
year to begin to shrink that balance sheet. The ultimate destination for the balance sheet should be a lot smaller than it is today.
I am aware of Chairman Powell’s comments on that.
One factor determining the size of the balance sheet is the
amount of currency in circulation, and that number is growing. So
the Fed will have a larger balance sheet, I imagine, at the end of
this process, whenever it ends, than it did before the crisis.
I would look forward, if I am confirmed, to working with my colleagues to assess the appropriate metrics for determining when to
stop to shrink the balance sheet. So I think the numbers that the
Chair has mentioned, that Chair Powell has mentioned, makes
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sense to me, but I have not studied it deeply and would look forward to talking with my colleagues about that, if confirmed.
Chairman CRAPO. Thank you very much.
Senator Brown.
Senator BROWN. Thank you, Mr. Chairman.
A question for both of you. I will start with you, Commissioner
Bowman. Do you believe the Federal Reserve is intended to be
independent from the President of the United States?
Ms. BOWMAN. Absolutely.
Senator BROWN. Dr. Clarida?
Mr. CLARIDA. Absolutely. It is essential.
Senator BROWN. Thank you. My understanding is that, Commissioner Bowman, you did not meet with the President and, Dr.
Clarida, you did before the nomination?
Mr. CLARIDA. I did meet with the President, yes.
Senator BROWN. Ms. Bowman, you did not?
Ms. BOWMAN. Correct.
Senator BROWN. OK. When you were interviewed by the President, Dr. Clarida, did he say anything that gives the impression
that he did not view the central bank as independent?
Mr. CLARIDA. Absolutely not, and let me just state definitively
that I had a number of meetings over several months with a number of officials, including the President, and in no meeting and at
no time did I ever have any reason to question the independence
of the Federal Reserve. Absolutely not.
Senator BROWN. OK. Thank you.
Ms. Bowman, I appreciated the story of your family and the
bank, and I must admit maybe I should have listened more to Senator Moran. I did not know what a drover was until I saw the——
[Laughter.]
Senator BROWN. It is not a word, not a thing that we do in Ohio,
but the farmers and drovers, so I like that. Your family’s bank is
profitable. It serves its community. It has maintained a Tier 1 leverage ratio of well over 20 percent, which is five times the required ratio, to my understanding throughout your time working
there. Do you agree that banks with higher capital levels tend to
lend more, not less, through the ups and downs of the business
cycle?
Ms. BOWMAN. Senator, I agree that capital is a very important
part of the stability of our financial system, and capital is one of
the ways that banks have credit available or funds available to
loan to their communities or to their loan customers. It is a very
important part of the system. One of many of the four pillars that
have been strengthened since the crisis is capital, and liquidity as
well. Both of those are important parts of the——
Senator BROWN. And you—sorry to interrupt. You have been able
to serve your community well, your bank—you were not there during all this time, I understand. With those higher capital levels,
you were able to serve the community well in good times and bad
times, correct?
Ms. BOWMAN. That is my understanding, yes, correct.
Senator BROWN. OK. The Fed last month proposed weakening
the required leverage rules for the very largest banks, which already many experts think are too low at 5 percent. My question to
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both of you, and I will start with you, Ms. Bowman: Will you commit to oppose any Federal proposal that weakens leverage rules for
the largest banks?
Ms. BOWMAN. Senator, I think it is important to understand the
details of all of those proposals so that should I be asked, and if
I am confirmed, to participate in discussions regarding those proposals, that I am fully informed, that I have the opportunity to
speak with my colleagues, and that I can vote in a way that I feel
is appropriate.
Senator BROWN. Thank you for that. I did not expect anything
less—or anything more indirect. If you come to the conclusion after
talking to Supervision Chair Quarles, Vice Chair Quarles, whatever, and you analyze this and you believe in your mind that these
weakened leverage rules—weakening the required leverage rules,
you would oppose it?
Ms. BOWMAN. Senator, I would certainly express my opinion and
ask questions so that I would be——
Senator BROWN. But if your conclusion was, yes, these rules
would weaken required leverage rules, would that mean you would
oppose it?
Ms. BOWMAN. I would feel free to vote as I felt appropriate, and
if that were how I felt, I would certainly do so.
Senator BROWN. Dr. Clarida, would you like to comment on the
same question?
Mr. CLARIDA. Just briefly, just to say that, as I mentioned in my
opening statement, a priority of mine in any consideration on any
item I would vote on in this area would be I would need to be assured that are preserved the substantial gains in safety and soundness and resiliency that we have in place. So I would look at it on
a case-by-case basis, and I agree with the prior comment.
Senator BROWN. That is a bit of a surprise answer from you, Dr.
Clarida. In 2010, you wrote, ‘‘Financial history suggests ‘never
again’ eventually becomes ‘this time it is different.’ ‘This time it is
different’ eventually sets the stage for the next financial crisis.’’
Based on that, you give the same answer?
Mr. CLARIDA. My answer would simply be, as I mentioned, I
would want to preserve what we have in place. I would look on it,
if confirmed, on a case-by-case basis. But I would certainly hope
that I would never fall victim to the ‘‘this time it is different’’ with
regards to the financial crisis because it was enormously costly to
the economy, to individual communities, and certainly that is not
a lesson that I will forget.
Senator BROWN. Well, thank you. I am concerned that we have—
well, I am concerned when we have a very aggressive Vice Chair
of Supervision now at the Fed who has had a history of supporting
deregulation, in some cases ignoring signs of—well, suffering perhaps, as many on this Committee do, from collective amnesia about
what happened a decade ago. We have regulators in this Government who were in the Government before and did not see it coming. In fact, many contributed in their vigor and their aggressiveness—their vigor and interest in deregulating. And I am very concerned with the collective amnesia, with the regulators in place in
other agencies and at the Fed, who want to deregulate. I am very
concerned about the strength and aggressiveness of the two of you
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in pushing back. I will leave it at that, and I will remind you of
your comments later perhaps.
Chairman CRAPO. Senator Scott.
Senator SCOTT. Thank you, Chairman.
To the panel, thank you both for being here and thank you for
your willingness to serve. Commissioner Bowman, I would like to
say to your family, especially to your father, thank you for your
service as an Air Force officer, a banker, a farmer. I guess in the
tradition of Kansas, he is just a real Renaissance man. I am not
quite sure what your kids do to have to be punished here by sitting
through a Banking hearing.
[Laughter.]
Senator SCOTT. I apologize on behalf of this topic for your kids,
but I do want to make a couple of points.
The unemployment rate is at 3.9 percent. Wages have increased
over the last year by 2.9 percent, the highest increase since 2009.
Our economy is growing pretty quickly, 2.9 percent the last quarter
of 2017, 2.3 percent the first quarter of this year. With tax reform
I would imagine that we can anticipate 3 percent or higher growth
in our economy.
Despite all the positive indicators, the market had several days
of volatility, typically around the swearing-in of Chairman Powell.
If I look back at the recent past, the Federal Reserve has cited
stock market volatility as a reason not to raise interest rates. The
Fed backed down so many times that this seemed to become
learned behavior. Stock market volatility meant no interest rate
hikes.
I will ask both of you: Is the stock market a pillar of monetary
policy? And would stock market volatility deter you from plans to
raise interest rates?
Mr. CLARIDA. I guess let me begin by saying, Senator Scott,
thank you for that question. First of all, to me stock market volatility is not a pillar of monetary policy in and of itself. I would not
think it would be a factor. Sometimes stock market volatility is associated with other developments that you do pay attention to.
Senator SCOTT. Yes.
Mr. CLARIDA. But stock market volatility alone, absolutely not, as
far as I am concerned.
Senator SCOTT. Thank you. Commissioner?
Ms. BOWMAN. I would agree with Dr. Clarida that this should
perhaps be one of the several factors that should be considered, but
not in and of itself as a guiding factor.
Senator SCOTT. I am glad to hear your answer is basically. Congress says to seek maximum employment and stable prices, no
more, no less. I have highlighted in the past what people often
seem to forget about low interest rates. It has a negative impact
on savers and particularly seniors on a fixed income. So when interest rates go from 4 percent to 3 percent, if you have a $1 million
nest egg, that is a $10,000 swing in what you are able to live off
of. So it is really important to me, but let me move to a different
topic.
I sold insurance for my professional life. I have said it many
times that our State-based system of insurance regulation is the
best in the world. The President’s executive order on financial
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regulation favors a deferential approach by the Fed to working
with primary financial regulators, and when it comes to insurance,
that means State-based insurance regulators.
How will you integrate State-based insurance regulators into
your work? Both of you, please.
Ms. BOWMAN. Well, I would be happy to take that. As the Kansas
State Bank Commissioner, it is very important from where I sit
now to be able to have a dialogue about those issues that impact
State-chartered institutions or institutions that are regulated at
the State level. I believe that it is important to continue that dialogue between the Federal and the State level, and my understanding is that there is a mechanism for that to continue, and
that would be something that I would believe would be important
to continue.
Senator SCOTT. I am running out of time, so I want to ask you
a different question. Thank you for your answer.
I favor an activities-based approach to nonbank SIFI designations and more clarity around what gets you designated and what
gets you de-designated. What are your thoughts?
Mr. CLARIDA. Well, Senator, obviously SIFI designation is a part
of the process that is now in place. I believe that is handled at the
level of the Stability Oversight Council. It is not a subject that I
myself have studied. If I were confirmed, I would certainly look forward to learning more about it. But, in general, as a proposition
I think an activities-based approach makes a lot of sense. But beyond that, I have not really studied the issue.
Senator SCOTT. OK. Thank you. Let me add a little to the question. Oftentimes an insurance company may have a small bank
presence under their umbrella.
Mr. CLARIDA. Right.
Senator SCOTT. If we treat that entire insurance company as if
it were a bank, we are only increasing the cost to every single policyholder, even though a sliver of the overall picture of that insurance company has anything to do with a bank. So if you punish an
insurance company by treating it like a bank, you are actually not
punishing the insurance company. You are punishing the policyholders of the insurance company. So having a delineation between
nonbank presence as it relates to SIFI designation is an incredibly
important part that I hope you will take some time and learn more
about.
Thank you both for your answers and congratulations and condolences for being chosen.
Chairman CRAPO. Thank you.
Senator Reed.
Senator REED. Well, thank you very much, Mr. Chairman. Let
me begin, as Senator Scott did, by commending and thanking the
families for being here. And, Mr. White, thank you very much for
your service in Vietnam and the Air Force. And, Mr. Clarida, your
family, a great sacrifice. They could be relaxing in Westerly, Rhode
Island, right now.
Mr. CLARIDA. Absolutely.
Senator REED. I appreciate the sacrifice.
We all are pleased that the unemployment rate is 3.9 percent,
but behind that number is a labor participation rate that is falling.
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And there are perhaps many factors, but one is the continuing
innovation, automation of jobs, et cetera, and, you know, there is
at least a theoretical possibility that several years from now we
could have a very low unemployment rate but a huge number of
people without jobs.
I will start with you, Dr. Clarida. In terms of your mandate to
maintain full employment in this new technological era, how do
you factor in job loss? How do you emphasize training and adaptation? Because my sense is that many of these individuals are midcareer who have worked very hard, have skills—but those skills are
no longer marketable in many cases? So let me begin with that
general question, and then Ms. Bowman.
Mr. CLARIDA. Well, Senator Reed, you are absolutely right. The
economy is changing. The unemployment rate of 3.9 percent, as you
say, is welcome, but behind that one number is a very, very complex picture. Technology, as you mentioned, is changing rapidly. It
creates winners, it creates losers.
I believe with regards to monetary policy, if I were to be confirmed, I would not focus solely on the unemployment rate but on
broader measures of the labor market, including labor force participation. My sense is that with regards to technology and education
in mid-career, the policies that could best address those challenges
are probably policies for the Congress and the executive branch to
consider. I think the Fed can do its part by responsibly trying to
achieve maximum employment for the economy as a whole.
Senator REED. So there is a fiscal component of this which requires investment in training and job transition and a host of other
things.
Mr. CLARIDA. And I believe that is what the research does say.
Senator REED. Thank you.
Commissioner, your comments?
Ms. BOWMAN. Senator, I would frankly rely on my experience in
my community. When I returned to Kansas in 2010, we recognized
that there were many people unemployed as a result of the financial crisis. There were many partnerships that were developed with
training schools, vocational and community colleges that assisted
in the development of skills that could be used within perhaps a
new industry or a new technology that they might be able to utilize.
In my view, while it is very important in the context of monetary
policy and maximum employment, it is also very important for
communities to understand the needs of their workers and of their
businesses so that they can work to address those things at a local
level. That would be one thing that I think is a very critical part
of trying to address that.
I do not believe that the Fed has tools that are in its toolbox to
be able to address those particular issues, and as Dr. Clarida said,
it would be something that Congress would likely need to enact
some sort of law that could address those kinds of things. But I
have great faith in our communities to recognize the challenges
that they face and try to address those.
Senator REED. Thank you. One aspect that just seems to be ubiquitous is the cybersecurity threats to every aspect of our life, and
we have been trying to encourage the Securities and Exchange
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Commission to take what I think is a very modest step, which is
to require someone on a public company’s board to have either
knowledge of cybersecurity or have some other mechanism, just
simply informational to the shareholders. The bank holding companies are particularly, as you both recognize, targets of this type of
disruption effect.
Can you take or should you take action as a supervisor of the
bank holding companies to make sure that they have at every level,
and particularly—the biggest ones I assume have it; it is the smaller bank holding companies—have someone or some capacity for cybersecurity on an active basis? My time has expired, so this might
be just a yes or a no.
Mr. CLARIDA. I agree that cybersecurity is a very significant
threat to the economy and obviously the financial system. If I am
confirmed, I would look forward to understanding what actions the
Fed currently takes in that area, but I agree it is absolutely critical.
Senator REED. Thank you, Doctor. Ma’am?
Ms. BOWMAN. I would absolutely agree with the threat of cybersecurity and the importance of having some expertise within an institution to be able to address those risks.
Senator REED. Thank you very much.
Thank you, Mr. Chairman.
Chairman CRAPO. Thank you.
Senator Tillis.
Senator TILLIS. Thank you, Mr. Chairman. Thank you both for
being here, and thank you for the time in the office last week.
When we talk about deregulation around here, I think that some
people will kind of position the question as we are going to deregulate and we are going to expose ourselves to the underlying risk
that that regulation was intended to resolve. It does not seem to
me that that would be the way that you would go about taking a
look at rightsizing and deregulating. Let me give you an example
of a few things I would like for you to expand on.
One is the regulatory reform bill that we got bipartisan support
out of this Committee, S. 2155. Could you characterize how you
think that is—or take a position one way or the other how you
think that is the right kind of method for going and trying to find
regulations that fit the activities the size and scale of the institutions to which the regulations would be applied? And we will start
with you, Commissioner.
Ms. BOWMAN. Senator Tillis, I appreciate that question. At the
State level, I oversee banks that range in size from $7 million in
assets with three employees to $3.2 billion in assets. All of those
qualify by the Federal standard as community banks. It is important to be able to understand the burden on a staff of three to
implement the same regulations that apply to much larger institutions.
Senator TILLIS. So about one-third of that bank is probably in
regulatory compliance, right?
Ms. BOWMAN. Probably 100 percent of the time.
Senator TILLIS. Yes, OK. And then, Dr. Clarida, we talked about
international standards like Basel III.
Mr. CLARIDA. Right.
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Senator TILLIS. So you see these standards that are being formulated. I worked in an accounting firm. I am not an accountant, but
I worked in an accounting firm, and we were very much engaged
in that. So you create maybe these international standards, and
then we have those suggestions come into our rulemaking process,
and then suddenly you have got a lot of community banks that suddenly find out that they have Basel III regulatory requirements.
Is that a good thing? Or what should we be doing differently as
we are being instructed by emerging international standards and
making sure that, on the one hand, we provide regulatory relief
through the bill like S. 2155, but on the other hand, we come on
the back end and just layer on another set of regulations that may
not make sense for the nature of the institution targeted?
Mr. CLARIDA. Well, Senator, yes, as I understand, the Fed does
participate in these international discussions, but ultimately any
rulemaking has to go through a process with comment and affirmative votes of the members. And so certainly the situation you describe would be a situation that I would be concerned about.
So, again, if I am confirmed for this position, I will look at each
of those on a case-by-case basis, but would certainly want to respect and really pay attention to the comments and the feedback
that the Fed would be getting on any such proposed rulemaking.
Senator TILLIS. Thank you. By the way, I appreciate the answers
to the questions by the Ranking Member about your independence.
I saw President Erdogan from Turkey on Bloomberg this morning
who was talking about he needs to be the ultimate person deciding
some monetary policy or interest rates in Turkey. And I think if
you see the Turkish currency right now, maybe the markets do not
necessarily agree with that. So I appreciate you all continuing to
be independent on that scale. I think that is a very vital role that
you play.
I do want to associate myself with comments by Senator Scott on
insurance savings and loan holding companies. That is an area
that we are working on legislation on a bipartisan basis to, again—
we are not talking about going to no regulation. We are talking
about really taking a look at the nature of the business activities
in these institutions and making sure that we have lean regulations that manage the risk but do not actually put certain financial
institutions out of business. For anyone to look at the banking sector in North Carolina and see that we have half as many community banks today as we had pre-crisis and suggest that the regulatory overreach of Dodd-Frank was not a contributing factor, I
would love to see how they could present a case otherwise. Do you
agree with that?
Ms. BOWMAN. I think there are many things that contribute to
the reason why we have had either mergers, acquisitions, or failures. I would say that regulatory burden is part of that.
Senator TILLIS. And some of the mergers and acquisitions are a
survival decision: I can no longer be a three-person bank with the
regulatory construct of a large regional bank or a national bank.
So some of it was a natural part of the ecosystem being consumed;
as banks get larger, you buy their portfolio, and you build it in. But
some of it is just purely a survival decision. I cannot imagine that
half the community banks in North Carolina would be gone purely
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because they were good acquisition targets. And I think we have
to look at that so that we have a thriving pyramid, an ecosystem,
financial ecosystem that today I do not think we really have.
Thank you all and congratulations to the family, and I look forward to supporting your confirmation.
Mr. CLARIDA. Thank you.
Ms. BOWMAN. Thank you.
Chairman CRAPO. Senator Menendez.
Senator MENENDEZ. Thank you, Mr. Chairman. Congratulations
to both of you on your nominations.
I want to follow up on Senator Brown’s questions and make sure
we are clear on the question of independence. Mr. Clarida, in your
meetings with President Trump, did he ask you how you would
vote on proposed increases to the Federal funds rate?
Mr. CLARIDA. Absolutely not.
Senator MENENDEZ. Good. Did the President indicate a preference one way or the other for how you should approach decisions
on whether to increase the Federal funds rate?
Mr. CLARIDA. Absolutely not.
Senator MENENDEZ. Good. Now, for both of you, we are tasked
with examining your qualifications for 14-year terms, terms that
will outlast this Administration and the next. So it is critical—Senator Tester says, ‘‘Most of us.’’
[Laughter.]
Senator MENENDEZ. So it is critical that your decisions—I hope
not for you, Jon. So it is critical that your decisions be guided by
the Federal Reserve’s dual mandate and remain independent of
any political pressure or interference from the Administration, this
one or any other.
Will each of you commit today that, if confirmed, you will ignore
any political pressure or interference, whether it is direct or indirect, from the President or any other member of the Administration
in your decisionmaking?
Ms. BOWMAN. Senator, I would just say that the Fed makes decisions based on sound economic policies and judgments, and politics
has no place in that.
Senator MENENDEZ. So the answer is yes?
Ms. BOWMAN. Yes.
Mr. CLARIDA. The answer is absolutely yes.
Senator MENENDEZ. Thank you. We have made significant
progress from the darkest days of the recession, but in many ways
our economic recovery continues to be uneven. Today we are looking at an economy with 3.9 percent unemployment but still very
sluggish wage growth. As corporations have reaped billions of dollars in benefits from the new tax law, hardworking families are
still waiting to see their paychecks rise.
In a tight labor market, workers, I think, should be able to transform corporate profits as part of it into higher pay, but any acceleration in wages seems to be accruing only to high-paid executives
and managers.
This question is to both of you. Do you agree that the achievement of full employment should be associated with strong and
broad-based wage growth for average workers, not just senior executives and managers?
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Mr. CLARIDA. I will begin with that, Senator Menendez. Absolutely, that is something that we would like to see associated with
full employment. It is the case in recent decades that there has
been more dispersion between, you know, workers in different categories, and there are a number of factors that impact that. I think
the Fed’s focus—if I am confirmed, I think the Fed’s focus should
be on getting that unemployment rate at a level that is on average
consistent with a healthy labor market, but acknowledge that there
are factors at work that are impacting different workers in different ways.
Senator MENENDEZ. I am not quite sure—what about wage
growth?
Mr. CLARIDA. Wage growth will be a function of the growth of the
economy. It will be a function of productivity, of technology. There
are a number of factors. I think what the Fed can do, Senator, on
wage growth is to keep the economy as close as it can to that full
employment mandate that Congress has given it.
Senator MENENDEZ. Commissioner?
Ms. BOWMAN. Senator, wage growth is a very important issue,
and I think that as the economy improves, it is important that all
benefit from the economic conditions. It is a factor that should be
considered and looked at within the context of full employment or
maximum employment, which is one of the mandates that Congress has given the Fed. It is something that I think is very important, and I would be happy to speak with you further about that
if that is an issue that, should I be confirmed——
Senator MENENDEZ. Well, I appreciate your answers. I think a
tight labor market, forcing employers to offer higher and more competitive wages normally, that is not what we are seeing. As a matter of fact, wages are up about 2.6 percent annually, which is only
slightly higher than the rate at which they have been rising for the
better part of 3 years. So that says to me something about the recovery, and the recovery for average Americans not being realized.
Last, the Administration is planning to offer a proposal to make
changes to the Community Reinvestment Act with 97 percent of
banks receiving satisfactory or outstanding ratings, yet African
American and Latino families continue to be disproportionately denied mortgage loans, even when controlling for income, loan
amount, location. It seems to me that in that respect we have a
problem. But I have real concerns that the new proposals will lead
to weakened enforcement by regulators and a discounted importance of physical bank branches.
This is for both of you. Do you agree with Federal Reserve Governor Brainard that it is important to retain a focus on place as
the Fed contemplates CRA changes? In essence, do you agree that
in some low-income and hard-to-reach communities, physical
branches are sometimes the only way to meet local credit needs?
Ms. BOWMAN. Senator, if you do not mind, I would be very happy
to start with that. I think in any case discrimination is absolutely
unacceptable, whether that is based on race, religion, any of those
characteristics. It is important, as we are looking at reviewing the
Community Reinvestment Act, that we keep in mind how the country has evolved since the time that that Act was enacted in 1979.
There are many changes to the industry, to how our communities
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are shaped and how they look now, but it is very important that
we continue to understand the needs of the community from all
parts of the community and that they are addressed appropriately.
Senator MENENDEZ. Mr. Clarida?
Mr. CLARIDA. Senator Menendez, I would just simply say the
Community Reinvestment Act has been on the books for 40 years.
It would be a very high priority of mine, if confirmed, to make sure
that it is enforced. And, obviously, if there are discussions for improving or bringing it up to date, I would be open-minded to that.
But the essential mission of the Act I think needs to be respected.
Senator MENENDEZ. Well, let me close by just simply saying, 40
years later, African American families and Latino families are still
disproportionately discriminated against, and so something is
wrong. And I look forward to seeing how you would respond to that
discrimination.
Thank you, Mr. Chairman.
Chairman CRAPO. Senator Toomey.
Senator TOOMEY. Thank you, Mr. Chairman. And congratulations
to our two nominees. Let me start with Dr. Clarida.
Dr. Clarida, it is my view that the Fed contributed to the financial crisis by virtue of monetary policy in the years preceding it,
specifically very low interest rates for an extended period of time,
including negative real interest rates, that coincided, not coincidentally but coincided chronologically, with a housing boom that really
turned into a bubble, the bursting of which, of course, was one of
the essential features of the crisis.
Do you agree with the view that the Fed probably contributed to
the financial crisis in this fashion?
Mr. CLARIDA. Senator, I enjoyed our conversation in your office
on this and other topics very much. I fully agree that monetary policy was one part. I think it is tough—I think other factors were
also at play, so it is difficult to parse particular quantities of contribution. But, yes, monetary policy did play a part.
Senator TOOMEY. Commissioner Bowman, what is your view on
that same question?
Ms. BOWMAN. I would agree with Dr. Clarida that monetary policy did play a part.
Senator TOOMEY. Well, I think that is a really, really important
thing to keep in mind. I think we need to learn the lessons of the
mistakes that have been made. I agree it is difficult to quantify exactly what portion of the crisis originated in this fashion, but it
was part of it.
I think from our discussion, Dr. Clarida, my understanding is
you support the idea of continuing the normalization of interest
rates.
Mr. CLARIDA. Absolutely.
Senator TOOMEY. And that that you believe is important, and I
agree. I guess the question I would like to explore a little bit is:
Given the unprecedented behavior of the Fed in recent years, what
is normal? You know, what is the new normal, if there is a new
normal? And one of the things specifically I would like your
thoughts on is the extraordinary quantitative easing exercises. The
Fed went for almost 100 years without engaging in anything of the
sort, and then we had these repeated rounds of massive buying of
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fixed-income instruments, including in 2013 when our economy was
growing at over 2 percent, unemployment was coming down, the inflation rate was just below 2 percent. So there was no crisis. There
was no recession even. And yet we launched another $85 billiona-month bond-buying program, which included mortgage-backed securities.
So is it your view that during a period like we had in 2013 it
would be normal for the Fed to engage in a massive-scale bondbuying program?
Mr. CLARIDA. Perhaps I can begin on that, Senator. My general
feeling and what I have written and said about QE is that there
are benefits and costs, and initially I would have argued and did
at the time think that it made sense in the depths of the period
in 2008 for the Fed to pursue that option, acknowledging that it
had not been tried before. But at least in my memory, the U.S. had
not been essential at zero rates before. But I do believe that the
benefits of QE diminished as more and more rounds were added
and that the cost of QE went up. I do not know how, frankly, sir,
I would have voted if I had been on the Fed at that time, but I
am very sympathetic to your view that any discussion and thinking
about QE would have to take a serious look at the cost as well as
the benefit.
Senator TOOMEY. And would you consider non-Treasury instruments like mortgage-backed securities in a separate category? In
other words, do you acknowledge that when the Fed gets into selecting which category of non-Treasury securities, it is really allocating credit?
Mr. CLARIDA. Yes, absolutely, my preference certainly right now
going into this would be for the Fed to end up with a Treasuryonly portfolio. I do agree that the Fed began to buy the mortgages
under duress at a challenging time for the economy. But as a general proposition, my preference would be to have the Fed’s balance
sheet as much as possible in Treasury securities.
Senator TOOMEY. And, Ms. Bowman, would you like to share
your views on the kinds of securities that the Fed should be buying?
Ms. BOWMAN. Senator, I agree with Dr. Clarida’s comments
about the discussion that you were having previously. Having not
been a part of the decisionmaking process, I view the Fed from a
prospective perspective at this point. I agree that normalizing the
balance sheet is a good idea and that that is the appropriate path
forward. And my understanding is as that happens, the balance of
Treasurys versus other types of assets will be more normalized,
and that would be something that I think would be a good idea.
Senator TOOMEY. I see I have run out of time. Thank you, Mr.
Chairman.
Chairman CRAPO. Thank you, Senator Toomey.
Senator Tester.
Senator TESTER. Thank you, Mr. Chairman. I also want to congratulate both of you on your nominations. I appreciate your being
here and appreciate your willingness to serve. You have been very
succinct with your answers, and I hope you can do that with me,
too, because this one you can take all my time and I do not want
you to.
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I will start with you, Commissioner Bowman. I come from a rural
State. You have been a community banker in a past life in a rural
State. How would you advocate for rural America? And where do
you believe the biggest disconnect is?
Ms. BOWMAN. Senator Tester, I appreciate your perspective being
from a rural community, and I certainly also appreciate the partnership that I know that you share with your State commissioner
and learning more about their efforts at the State level with your
banking industry.
I think it is important to understand that since the crisis there
have been 1,500 mergers that have occurred within that community banking space across the country.
Senator TESTER. Yes.
Ms. BOWMAN. And last year alone, there were just over 250. Kansas experienced 16 of those in our State, and when you have just
over 200 to supervise and oversee, that is a pretty significant decline.
I think it is important that we understand the pain points for
those community banks, understand the importance of safety and
soundness within those institutions, but also recognize that in
some cases the regulatory framework could be more tailored to appropriately supervise the risk. Their activity basis, their complexity, and also their asset size is critically important in my view
with respect to that.
Senator TESTER. Mr. Clarida, Connecticut is a more urban State.
Do you have anything to add to her comments? Do you agree with
what she said?
Mr. CLARIDA. I completely agree. I will only say, Senator, that I
grew up in downstate Illinois in a coal mining town with 8,000 people, proud graduate of the University of Illinois. So I understand
how those communities can be impacted.
Senator TESTER. OK. Recently, the Federal Reserve imposed
growth restrictions on Wells Fargo in response to some abhorrent
treatment of their customers and lack of internal controls. Would
you assure me that you will not support releasing them from these
growth restrictions until they significantly change the way they do
business?
Mr. CLARIDA. Perhaps I can begin. First, let me say that just
based upon the news accounts, which, of course, is all I have to go
on, the activities of Wells Fargo in this domain are egregious and
unacceptable, and I was as shocked as anyone to read about it in
the newspaper. If I am confirmed and this matter came before me,
as it looks like it would, I would certainly individually want to be
absolutely convinced that appropriate steps had been taken and
could be verified.
Senator TESTER. OK. Commissioner?
Ms. BOWMAN. I would concur with Dr. Clarida’s comments. The
actions of Wells Fargo were absolutely inappropriate, and I would
certainly want to make sure that any concerns are addressed by
the bank prior to any discussion.
Senator TESTER. OK. Thank you both.
I want to talk a little bit about housing finance right now. Basically, do you guys believe there should be a Government guarantee
for a 30-year fixed-rate note?
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Ms. BOWMAN. Senator, in my view as a community banker, it is
important that our community members have access to 30-year
fixed-rate notes.
Senator TESTER. OK.
Ms. BOWMAN. Those are very important loan vehicles or mortgage vehicles. Without some kind of guarantee, banks cannot withstand that 30-year interest rate risk.
Senator TESTER. That is correct.
Ms. BOWMAN. So, in my view, it would be very important to
maintain that access to credit.
Senator TESTER. Dr. Clarida?
Mr. CLARIDA. I would simply say the 30-year fixed-rate mortgage
has served this country well for many, many decades, and I would
imagine that going forward it is going to be a crucial part of the
system.
Senator TESTER. Do you support it?
Mr. CLARIDA. That is the status quo. I certainly support it.
Senator TESTER. OK, good. The GSEs are in conservatorship. Do
you believe that is having any negative impact on the economy?
Mr. CLARIDA. Senator, the GSEs have been in conservatorship
since 2008. I am not an expert on housing finance, but obviously
for the housing agencies to be in this State is probably not desirable. I am not an expert on housing finance, but——
Senator TESTER. That is all right. That is good.
Commissioner?
Ms. BOWMAN. I would agree with Dr. Clarida.
Senator TESTER. OK. Thank you all. I have got some other questions for the record that we will present to you, but I appreciate
your answers not only to me but to previous questioners, too.
Senator Tester. Thank you for being here.
Mr. CLARIDA. Thank you.
Ms. BOWMAN. Thank you.
Chairman CRAPO. Thank you.
Senator Moran.
Senator MORAN. Chairman, thank you very much. Ranking Member, nice to know that we have educated you on the word ‘‘drovers.’’
And I look forward to you listening to me more often than you
sometimes do.
[Laughter.]
Senator MORAN. Let me welcome both of our nominees here
today. Doctor and Commissioner, thank you for joining us. Congratulations on your nomination.
For as long as I have been a Member of the U.S. Senate and a
Member of the Banking Committee, I have had conversations with
individuals who have sat in the seats that you now sit in after they
have been confirmed, mostly about the overregulation or community or what I call ‘‘relationship banks.’’ Our financial institutions
in rural America are very special and important. For as long as I
have been in Congress, I have been explaining to my colleagues
that, where I come from, economic development is often whether or
not there is a grocery store in town. That is something that many
in Congress do not understand, and certainly many within an Administration would find, of course, there is a grocery store.
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I think these two things are related. What I have concluded over
a period of time is that if we are going to have a grocery store in
town, it is dependent upon a financial institution that understands
the needs of their community and is not overly regulated in a way
in which they cannot make a loan to a business that may not on
paper be as financially capable as a regulation may require.
This recently hit home with me again. In our State of Kansas,
we had fires across a significant portion of grasslands, particularly
in southwest and western Kansas and the ranching community of
Ashland. The county is Comanche; the county seat is a town of 900
people. That is the biggest town in the county. And 80 percent of
the ground was burned, and most of the cattle died in that as a
result.
What hit home with me is that those bankers responded to a crisis for those ranchers. The ranchers, with the death of their cattle,
had no collateral. But the bankers continued to make loans, working capital, a line of credit was kept open to keep the ranchers in
business.
We are in the process, in the House in particular but soon in the
Senate, to debate a farm bill. We often talk about the farm bill as
being a safety net for agricultural producers. It is. But so is our
community or relationship bankers. In the absence of the ability to
access credit in difficult times, either as a result of a fire or low
commodity prices, both of which we are having in Kansas today, it
is our bankers who keep our farmers in business. It is our bankers
who keep our ranchers raising cattle and earning a living.
And so this is an important day for me, particularly with the
Commissioner. You, Doctor, and I are going to have a conversation
later today, and I will pursue this in further detail. But I know
that Ms. Bowman understands the circumstances that it is not just
a Kansas issue but it is across the country in rural America, and
why this is so different or what I expect to be so different from,
I hope, both of you is that every time I have had a conversation
about the overregulation of a community bank—a bank, incidentally, that if it was insolvent, would cause no problems for the
country, although significant challenges for the stockholders and
the community—I get what I would describe as mostly lip service.
The Federal Reserve or the FDIC or the Comptroller of the Currency will tell me, ‘‘Well, we have an advisory committee, we take
seriously our community banks,’’ and yet it seems to me that there
is an attitude among many of our regulators that it would be simpler to regulate a lot fewer financial institutions than the number
we have today. And, unfortunately, we are on that path, but that
is not the solution to the future of the places that I represent.
So I would give you the opportunity, Commissioner and Doctor,
to tell me again how you see the role of regulators, FDIC in your
regulatory capacity, in regard to financial institutions that, in my
view, if we are not careful, become products—their lending practices become a product of a computer program that spews out
whether the answer is yes or no as compared to the relationship
they have with the lenders, sometimes for generations. What you
see in Ashland is a community bank owned by generations of a
bank family lending to a set of people who are long-time
generational ranchers. And the issue here for me is what can you
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do to convince me that, once you are a member of the Federal Reserve, you will advocate in a way different than just the idea that
we are going to appoint an advisory committee to make certain we
do not have overreach?
Let me make a final conclusion before my 14 seconds concludes.
I am at a stage in life, Ms. Bowman, in which I know the previous
generation. I now know people’s parents better than I know, in this
case, you and I pay tribute to your Mom and Dad who are here and
to the effect, the consequence that their lives have had in the community of Council Grove and Morris County and the surrounding
area in the Flint Hills. The joy of being a community banker today
is a lot less than it used to be. The idea of the satisfaction that
comes with a job is diminished, but your parents and your family
have made a tremendous difference in a community in Kansas.
And as a result of their profession, Council Grove and the surrounding communities of Dwight and all the places that you and
I know have a brighter future as a result of the work of your Mom
and Dad. And I am very grateful to them, and from what I know
about you, I would tell them thank you for raising a great daughter
as well.
Chairman CRAPO. Thank you, Senator Moran.
Senator MORAN. Apparently, you do not have to respond.
[Laughter.]
Chairman CRAPO. Senator Warren.
Senator WARREN. Thank you, Mr. Chairman. And welcome to our
nominees and to your families.
Dr. Clarida, your views on monetary policy are well known, but
another critical part of your job at the Fed will be helping regulate
the big banks. So I want to get to your views on bank regulation.
Do you agree that inadequate regulation of banks helped lead to
the 2008 financial crisis?
Mr. CLARIDA. I do.
Senator WARREN. Yeah. So after the crisis, under former Fed
Chair Janet Yellen, the Fed imposed new rules on big banks relating to capital, stress tests, liquidity, among other things. Do you
believe that those rules helped make the financial system safer?
Mr. CLARIDA. I do.
Senator WARREN. Good. So as you know, Randal Quarles is now
the new Fed Vice Chair for Supervision, the person who will be responsible for the Fed’s regulatory approach toward the biggest
banks. He recently put out a new proposal on capital standards,
and by his own admission, when he testified here a few weeks ago,
his proposal would reduce capital requirements for every big bank
in the country, and that is why both the FDIC and Fed Governor
Brainard opposed this plan.
So given your agreement that the new rules have made the financial system safer, are you concerned that the Fed is looking to
reverse course and lower capital standards for the biggest banks?
Mr. CLARIDA. Well, Senator, let me say that, as I mentioned in
my opening statement, I do think there are opportunities to tailor
regulations appropriately. But an equal priority is preserving the
substantial gains and resiliency and stability of our financial system. And on any matter that would come before me as a member
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to vote on, I would want to be assured that we are not trading off
that improved resiliency and stability in that particular matter.
I cannot comment on this matter because I have not studied it.
I believe it is out for comment right now.
Senator WARREN. I am sorry. You are being—this is a hearing
about your becoming Federal Reserve Board Chair, and you have
not read this proposal that would take a significant step that, by
Mr. Quarles’ own admission, would reduce capital standards for the
largest banks? You have not read it, and you are telling me you
do not have an opinion about it?
Mr. CLARIDA. Senator, I am aware of it in broad ways. I have not
studied it in detail, and it is my understanding that before any
final decision on that, there would need to be another vote on the
matter once the comments are back.
Senator WARREN. Well, I actually am having a hard time understanding how you can sit here, how we evaluate you as a Fed Reserve Member if you cannot tell us how you feel about reducing
capital standards for the largest financial institutions.
I tell you what. Let me try this another way. Most experts agree
that too-big-to-fail is still a problem, and meanwhile the biggest
banks are making huge profits and are among the biggest beneficiaries of the Republican tax bill. These banks are now spending
billions of dollars each quarter in stock buybacks. So why on Earth
would this be the time to reduce capital standards for these toobig-to-fail banks?
Mr. CLARIDA. Again, Senator, I take the thrust of your observation, and I think that if I am confirmed for this position, I would
certainly come to the issue with an open mind. But as I mentioned,
my priority would not be to sacrifice any of the gains that we have
achieved with the existing policy——
Senator WARREN. Can you just give me any reason why you
think it would be appropriate to reduce capital standards for giant
financial institutions that are spending billions of dollars right now
in stock buybacks?
Mr. CLARIDA. Senator, as I understand it, part of the rationale
for the proposal is some of the incentives in the way that it is existing, that is implemented. But, again, beyond that I would look forward to studying it, and I agree that it would be important not to
give up any of the gains in resiliency and stability we have
achieved.
Senator WARREN. I will take that as, no, you cannot come up
with a reason, but you are not telling me you will commit to keeping capital standards high.
Let me ask one more question. Can you identify a single Fed rule
on capital, on liquidity, on stress tests, or Board Member obligations, risk management, anything else, that you think should be
made stronger than it is right now?
Mr. CLARIDA. Well, Senator Warren, I think in the area of stress
testing, I think it is vital. I think it is a crucial part of our system
right now, and it is my understanding that the stress test exercises
do take into account the loss of a particular institution in stress
scenarios. And if those stress scenarios were to be more damaging,
then the capital standards would be raised as a function of the
stress.
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Senator WARREN. I am sorry. So are you saying that you think
the rule on stress tests should be made tougher?
Mr. CLARIDA. No. I am saying that the stress scenarios that
are——
Senator WARREN. OK, but—I am sorry. Let me just be clear what
my question was.
Mr. CLARIDA. Yes.
Senator WARREN. There is a whole range of regulatory issues:
capital standards, stress tests, obligations of Board Members. I am
asking if you think there is a single regulation that the Fed now
has in place that ought to be made tougher.
Mr. CLARIDA. And I do not have one for you today.
Senator WARREN. You do not have one. Look, Dr. Clarida, for a
long time leaders at the Fed seemed to think that the only thing
they needed to worry about was monetary policy. But as we
learned in the 2008 crash, an equally important part of the Fed’s
job is regulating the giant banks. The defining economic event of
the last 50 years was the 2008 financial crisis, and as Alan Greenspan later admitted, it was brought about in part because the Fed
did not do its job on regulation.
I am concerned about your lack of background on regulatory
issues, and I am concerned about your unwillingness today to support strong capital standards for big banks. So I will be following
up with written questions.
Senator Warren. Thank you, Mr. Chairman.
Chairman CRAPO. Thank you.
Senator Cortez Masto.
Senator CORTEZ MASTO. Thank you. Welcome to your family
members. Thank you both. It was a pleasure to meet both of you.
Thank you for taking the time.
I have only got 5 minutes, so let me get through this with your
indulgence, and let me associate myself with my colleague from
Massachusetts and her line of questioning and Dr. Clarida. So let
me ask you this: I come from Nevada. The foreclosure crisis, we
were ground zero for the foreclosure crisis. What have you learned
from that foreclosure crisis? And how will you ensure we avoid another crisis?
Mr. CLARIDA. Well, certainly I think we have all learned that we
do not want to go back to the world of 2006 and 2007. And as I
have mentioned——
Senator CORTEZ MASTO. Can you give me specifics? I think we
would all agree with that, but specifically—you are going to be in
a key position, so specifically can you talk about what you have
learned and how you will apply what you have learned to your new
position that you are being nominated to?
Mr. CLARIDA. Well, some specifics would obviously be higher capital, stress testing at the banks, liquidity, but more broadly in our
financial system better understanding and better accounting for
the different parts of the system, including, I think, moving certain
transactions on to exchanges and clearing. Those are all important
steps forward, I think.
Senator CORTEZ MASTO. OK. Thank you.
Ms. Bowman, I am going to associate myself with Senator
Menendez’s questioning. When you are the last one to ask
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questions, the questions usually have been answered. But this is
another one that is just as important, I think, for many of us, the
Community Reinvestment Act exams. I understand—and Senator
Menendez stated this—that 98 percent of the banks pass the CRA
exams with a satisfactory rating. Ninety-eight percent. So what
would it have taken for your bank to earn an outstanding score or
any bank to earn an outstanding score based on your understanding?
Ms. BOWMAN. Senator, that is an excellent question. I think
those are discussions that I have on a community banking level frequently. I think part of the review that I mentioned with Senator
Menendez was that the goalposts seem a bit unclear. I think many
of the banks, if not most of the banks that I am aware of and familiar with, with respect to their Community Reinvestment Act activities or activities that benefit that process, there is not clarity for
them in and an understanding of the types of investments that
they make, whether they are extending credit, whether they are
making other investments in their communities if those types of activities can qualify for the CRA. I think that would be something
I would be very interested to speak with you about further regarding looking at those types of—how the rule is now and perhaps how
communities exist now and how the investments of banks can be
improved with respect to that.
Senator CORTEZ MASTO. Thank you, and I appreciate your candor, because the goalposts are unclear, and I guess that goes back
to the concerns of what factors do you think would be helpful in
determining whether small businesses, communities of color, and
low-income areas are truly receiving the support that the law intended. I guess that is our challenge, and that is what we are looking to you to help us identify that so we can make sure that they
are getting the help and the support they need.
Ms. BOWMAN. Senator, on that topic in particular, at our bank,
when I was the community banker, we worked very closely with
our small business customers to help them understand how a business plan should be formed, how they can qualify for different
types of credits, and how they can present to a banker in a way
that would assist with their approval process with respect to their
business plan. That is something that I think community banks in
particular are quite good at to help educate their communities
about the best ways to make investments.
Senator CORTEZ MASTO. Thank you. And then I have only got a
few seconds left. Can you talk about the Consumer Financial Protection Bureau and the importance of it and your interaction with
it in this new position? And I will start with you, Dr. Clarida.
Mr. CLARIDA. The Consumer Financial Protection Bureau, of
course, is part of the landscape now. As I understand it, a number
of the responsibilities were transferred over to the CFPB in the
Dodd-Frank legislation, and that is obviously an important part of
the way that the country oversees consumer protection, which is an
important goal.
Senator CORTEZ MASTO. Ms. Bowman?
Ms. BOWMAN. I believe that the CFPB, Consumer Financial Protection Bureau, is currently the agency that is responsible for
assisting in the protection of consumers, and it promulgates
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regulations that impact their ability to do that and the rest of the
prudential regulators and their ability to protect consumers in different ways. It is important that there is open communication and
working together to ensure consistency in the application of those
regulations and enforcement of those.
Senator CORTEZ MASTO. Thank you. I appreciate it.
Chairman CRAPO. Senator Brown had a request.
Senator BROWN. Thank you. Mr. Chairman, in light of comments
from Senator Tillis and others, I have two charts I am going to—
one brief study and one chart about community banks and the
number of them. This chart—and I know you cannot really see it,
but this just shows the number of U.S. community banks as it has
declined since 1981, and this sport right here in when Dodd-Frank
was enacted. So the decline, there is no way to ascribe Dodd-Frank
as accelerating the decline of community banks, decline meaning
either sell, merge, or go out of business, or sell to another bank.
So it is pretty clear that Dodd-Frank did not cause the demise
of community banks. That is a greatest hit in this Committee from
a lot of my colleagues saying, well, it is all because of Dodd-Frank
that community banks have gone out of business.
So, Mr. Chairman, I would just ask unanimous consent to put
this brief study and the charts into the record.
Chairman CRAPO. Without objection, so ordered.
Senator BROWN. Thank you.
Chairman Crapo. And with that, that concludes the questioning
and the hearing. I again thank both of you for participating at our
hearing today, and thank you for your willingness to serve the
country.
For Senators, all follow-on questions need to be submitted by
Tuesday, May 22nd. And for our witnesses, responses to those
questions are due by the following Tuesday morning, May 29th. So
please respond quickly to the questions you receive.
With that, the hearing is adjourned.
[Whereupon, at 11:40 a.m., the hearing was adjourned.]
[Prepared statements, responses to written questions, and additional material supplied for the record follow:]
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TO BE
A
PREPARED STATEMENT OF RICHARD CLARIDA
MEMBER AND VICE CHAIRMAN, BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM
MAY 15, 2018
Chairman Crapo, Ranking Member Brown, and Members of the Committee, thank
you for this opportunity to appear before you today. I am honored that the President
has nominated me to serve as a Member of the Board of Governors of the Federal
Reserve System and as the Board’s Vice Chairman, and I am grateful to have the
privilege of the Committee’s consideration for these positions. I am also very grateful to have the support of my family who is with me here today—my wife of 29
years, Polly Barry, and my two sons, Matthew and Russell.
The Federal Reserve has been charged by the Congress with a mandate to attain
maximum employment and stable prices. I fully support both pillars of this dual
mandate and pledge to the Committee that if I am confirmed by the Senate, I will
support monetary policies that take a balanced approach to achieving these important objectives. The Federal Reserve also plays a central role in our Government’s
efforts to ensure the safety and soundness and stability of the U.S. financial system
as it provides credit between households and businesses. If I am confirmed, my priority will be to support policies that are effective, efficient, and appropriately tailored and that preserve the far greater resiliency and stability of the financial system that has been achieved as a result of the significant reforms that have been
put in place since the financial crisis.
I believe I am well qualified to fulfill the responsibilities of the positions for which
I have been nominated. In my published research, I have studied the formulation
and communication of monetary policies and developed, along with others, a framework for monetary policy analysis that has been widely cited and used by monetary
policymakers and their staffs around the world. Although I have spent most of my
career in academia, I have had two opportunities to serve in economic policy positions in the executive branch of the U.S. Government—first, as a senior staff economist with Council of Economic Advisers from 1986 to 1987 and second, as assistant
Treasury secretary for economic policy from 2002 to 2003. These experiences were
invaluable in providing me a perspective that places a premium on doing economic
analysis that is practical, robust, and relevant to better understanding how economic policy affects individual Americans and their communities. Over the years,
I have also advised asset management firms on economics and strategy, with a particular focus on global monetary policy, and this experience has given me a deeper
understanding of the interactions between macroeconomic developments and financial markets.
The Federal Reserve has an enormous responsibility to achieve the mandates
given to it by the Congress, to communicate the rationale for its decisions, and to
explain how its policies will enable it to meet these objectives. If I am confirmed,
I pledge to work closely with Chairman Powell and my future colleagues to put in
place policies that best fulfill its obligation to meet the mandates that the Congress
has assigned to the Federal Reserve and to foster the transparent communication
and accountability that is so vital to preserving the Federal Reserve’s independent
and nonpartisan status.
Thank you again for the privilege to appear before you today and I look forward
to your questions.
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STATEMENT FOR COMPLETION BY PRESIDENTIAL NOMINEES
Name: Cbrida
n.-J
Rkbard
Ranis
(fill)
(OCicr)
Position to wbkb nominated: Vice Chairman, Fedml Reserve Board
Date of oomiutioo: 24-04-2018
Place of birth: Herrin Ullaols
Date of birth: JUS-1957
(ilo1)(Moa6)(YCII)
FuU name of spouJt: Polly Morg~~~ Barry
Marital Status: Mlnied
Name aod •en of children:
Matthew QuiM Clarida age 25
Russell William Clarida age 22
Degrees
received
Dates of
Institution
Da:es
aneoded
UniYetsity of Illinois
1975-1979
B.S. Economics
May 1979
1979-1983
M.A. Economics
Ph.D Economics
June 1983
Edueatioa:
Harvard University
Honors
and aw1rdJ:
degrfts
List below all scbolmps, fellowships, hono1'81)' degJte$, military medals, ho001'81)'
society membmhips and any olher spetiaJ recognition.s for outstanding service or
achievement.
United Slates Trwwy Medal fOf Distinguished Service 2003
Lowell Haniss Endowtd Olli- in Economics, Colwnbit University 2003
Hllional Scieru r-da!ioa ReseW~ c...., 1985-1917
World Bank IRIS PYopm on lnsniUiional Refonn, Resea!dl Ftllow, 1992
Fon! Foundatioo ()ran~ lncema~ional Economics Program at SIJ>A, 1992 • 1996
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scholarly,
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51518001.eps
Mta~bmbips:
29
civic, charitable and other organizations.
Organization
Off~ee held (if any)
Dates
Natiooal Burtau ofEoonomic Researtb
Reseaoh fdloldAS$0Ciate 19&3· Present
CollllCil on ForeiBJl Relations
Member
2001 ·Present
E<ooomk Club of New Yort
Member
20 Il • Prtsenl
List below all positions held since college, including lhe title or description ofjob,
Emplo)'llleDI record:
name
of employment, location of work, and inclusive dates of employment. (Please see
oJrached cv for further detail)
Teaching Fellow, Hll\lard Uni....sity, Cambrid&eMA 1981·1983
Assistaol Professor, Yale Uni....sily, New Havco CT 198>-1988 (member ofCowles Foondation)
Senior Staff Ecooomist, CCOlneil of Economic Advisa>, Wll5hingtoo DC, 1986·1987 (oo leave from Yale)
Colombia Universny, Professor of Economics, New Volt NY, 1988 - Prtsenl (AsdsWII Proft$SOr, 19Be-9l;
Associ&le Professor witb tenUit, 1993·96; Professor, 1996·Presenl; Co-dir<e10r Ctllter for Economic ar.d
Political Aatlysis, 2001).2001; Lo..uHarriss Proft5.10l, 2003-Prtsem;
Economics Dq>ar~mtnt Chairman, 1997·2001~ member, College Committee oa Admissionlnd Finii!Cial Aid
(CAFA11999·200I; member F11<11lly of Arts lnd Sciences Budget Comntittet, 2001).200 I; Co-Chair Provost
Coounittee oo Columbia H..tdt Cart Benefits, 2010·11; Member, Education Policy Plar.ning Commiltet
2013-2016
ConsuiW!' Federll Reserve Bank of New Vorl: 1991·1992, 199l·l997
Coosuliant, Croup o(J4, Project on £xcltance Rate Regimes. 1m
Coosuhan~ JP M01p11 Cbase, 1994
Consul11n~ Crtdit Suisse, Fortisn EJocbance Research 111d Strategy, 1998-2000
United States Treasury, Coosulbn' 9-200110 2·2002 (prior to ooofumation as AS3il1anl Secr<llt)')
Unntd Slales Treasury, Assistant Secrttary for Economic Policy, 2002-2003 (On leave from Co!lllllbia)
Tbt Clinton Group. Economic Stn!ltgjsl, 2003 7 200l
Director, NBERProject on G7 C\IITtllt Account Imbalances, 200J.200l.
P1ci0c lll'/tSUIItlll Mwgem~ Gloltal Stral<sie Advisor, 2006 - Present
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Noftes Bank W&tcher's Committee, MEMBER. 2009-2010
30
Governmtnt
exptrieoee:
List any experieo(e in or dine~ assocWion with Fedml, State, or local governments,
including any advisocy, consultativr, honorary or other part time savic:e or positions.
S.nior Slllf ftooomllt, <:®neilor Economic AcMJ<tS, WuhingtOil DC, 1916-t917
fcdml R"""" Sri or Now Van,Ac:ocSaole Advisocy Group, t995-t997
Ucoiwd s- r.....,., c--. J.20Gt10 2-2002 (jlrior" oco[...OO. 111 Assislaot S«naay)
U.k!d SllleS Trwury, Assl$lant Sca<llry for Eeo-ic Policy, 2002-200}
Publislled
Wrifillgs:
List the titles, publishm and dates of books, articles. rqlOitS or other published materials
you have written.
Plwt stt wched ljl!leDdix listing published articles, books, working papers and written conunenwies. I
havr done my btst to identify titles, publishm, and dates of books, 111icles, Rp01U, and other published
materials, including athorough ~ew of personal files and searthts of publically available electtonic
databases. Despite my searches, the~ may be other materials I have been unable to identify, find, or ~ember.
Polilical
Aff'diltioos
and activitits:
List memberships and offices held in and services rendmd to all political parties or
election conunittees during the last I0 years.
Ihavt bdd no office nor offeml any savic:es to any political pcties or election committees in last I0 years. I
signed a letter entitled "Economists for McCain" in 2008 and a leuer entitled "Economists for Romney" in 2012
but did not hold office or perform any services to those campaigns.
Political
Cootnllutioas:
ltanizt all political contribctions ofSSOO or~ to any individual, campaign
organization, political party, political ec:tion committee or simiw entity during the last
eight years and identify specific arnouots, dates, and names of recipients.
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"Kudlow for US Senate" exploratory committee on Jan\111)' 20, 2016 for S2700.00
31
Qualifications:
State fully your qualifications to serve in the position to which you have been named.
In my 35-year professional career, I have achieved recognition among a<:ademics, policy makers, and financial
market participants as an expert on the economics of monetary policy. My academic worlc on monetary policy
as a professor of economics and international affairs since 1988 at Columbia University (and before that at Yale
· University) has been frequently cited and the framewolk for a more effective monetary policy developed in
these papers has been widely consulted by economists at the Fed and as well as at other major central banks
around the world. In this regard, since 20071 have served as a member of the Deutsche Bundesbank Academic
Research Council and have been chairman of this group since 2012.1n 2009 • 2010 I served as an external
member of the Norges Bank monetary policy review committee, and since 2012 have served on the Academic
Advisory Board of the Hong Kong Monetary Authority's Institute for Monetary Research. Earlier in my career,
from 1991 to 1992 and again between 1995 and 19971 was a consultant at the economic research department of
the Federal Reserve Bank of New York as part of a group of academic experts that included Ben Bemanke and
future Nobel laureate Christopher Sims. And in 19991 served as a consultant to Paul Volcker and the Group of
30 and contributed to their Project on Exchange Rate Regimes. I have been an active member of the National
Bureau of Economic Research (NBER) since 1983, and since 2004 have served as a co-organizer of the
NBER's annual International Seminar on Macro Economics, which is typically hosted by a central bank in
Europe. I am also a regular participant in the annual Hoover Institution Conference on Monetary Policy, and
last summer, delivered a keynote address at the BIS Annual Research Conferenoe.
Although I have spent most of my career in academia, I have had two opportunities to serve in economic policy
positions in the executive branch of the U.S. government- firs~ as a Senior Staff Economist with Council of
Economic Advisers from 1986to 1987 and second, as Assistant Treasury Secretary for Economic Policy from
2002 to 2003. These experienoes were invaluable in providing me a perspective that places a premium on doing
economic analysis that is practical, robust, and relevant to better understanding how economic policy impacts
individual American and their communities.
Since 2006,1 have had the opportunity to advise Pacific Investment Management (PIMCO) on global
economics and strategy, with a particular focus on global monetary policy. While I myselfdo not manage
portfolios, I have worked with the firm's investment committee to help them interpret and assess global
economic and monetary policy trends. I believe this experience has given me an appreciation for the interaction
between macroeconomic developments and financial markets that! would not otherwise have obtained.
Future employment
relatioosbips:
!.Indicate whether you will sever all connections with your present employer, business
firm, association or organization if you are confumed by the Senate.
Yes, except that upon final appointment, ifoonfirmed, I will take an unpaid leave of absence from my position
as a professor at Columbia University. I will apply for annual extensions ofthe leave of absence until
completion of my term of service at the Federal Reserve.
2. As far as can be foreseen, state whether you have any plans after completing
government service to resume employment, affiliation or pra<:tice with your previous
employer, business firm, association or organization.
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None, other than terminating my leave ofabsence and returning to my position on the faculty of Columbia
University.
32
3. Has anybody made you a commitment to ajob after you l~\'e government?
No.
4. Do you exped to serve the full tenn for which you have been appointed?
Yes.
Poteatltl cumru
or interest:
I. Describe any fiDanciaJ anangemalts or deferred compensation ~ or other
c:ontinuing dealings with business associates, cliena or customers who will be alftded
by policies whicb you will influence in the position to which you have been
nominated.
In connection with the nomination process, I have consulted with the Office of Government Ethics and the
Federal Reserve Board's Designated Agency Ethics Official (DAEO) to identify potential conflicts of interest I
willrtSOive any conflicts by following tbe advice of the Board's DAEO and complying with the tenns of the
ethics apmentlhat I bave entered into wilh the DAEO and lhat has been provided to this Committee.
2. List any investments, obligations, liabilities, or other relationships ~ilich might
involve potential conflictS of interest with the position to which you have been
nominated.
In wnnection with the nomination process, I have wnsulicd with the Office of Government EthicS and the
Federal Reserve Board's Designated Agency Ethics Official (DAEO) to identify potenti11 conflicts of interest. I
willrtSOive any conflicts by foUo~ing the advice of the Board's DAEO and complying with the tmns ofthe
ethic$ aareanent that I have entered into with the DAEO and lhat bas been provided to this Committte.
3. Descn"be auy Mioess reiJtionship, dealing or fmancial tranSaCtion (other thaD tax
paying). which you have had during the last 10 yean with the Federal Oovernmen~
whether for yourself, on behalf of a clie~ or acting as an agen~ that might in any
way constit\ite or result in apossible conflict of interest with the position to which
you have been nominated.
In connection with the nominztion process, I bave coosulttd with the Oflice of Government Ethics and the
Federal Resme Board's Designated Agency Ethics OffJcial (DAEO) to identify pottz~ti11 conflicts of interest. I
~ill resolve any conflicts by following the advice of the Board's DAEO and c:omplying with the tenns of the
ethics agreement that I have entered into with the DAEO and that bas been provided to this Committee.
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SHERYL
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4. List any lobbying activity during the past ten years in which you have engaged in
for the purpose of directly or indirectly influencing the passage, defeat or
modification of any legislation at the national level of government or affecting the
administration and execution of national law or public policy.
33
None.
5. Explain bow you will rtSONe any conflia of interest thai may be disclosed by your
respooscs to the items above.
In connection with the nomination process, I have consulted with the Office of Government Ethics and the
Federal Reserve Board's Designated Agency Ethics Official (DAEO) to identify potential conflicts of interest. I
will rtSOive any conflicts by following the advice of the Board's DAEO and complying with the terms of the
ethics agreement that I have ente!ed into with the DAEO and that has been provided to this Committee.
Civi~ crimiaal ud
unutigatory
ldioiU:
I. Oive the full details of any civil or criminal proceeding in IWich you wm a defendant
or any inquiry or investigation by a Fedml, Slate, or local agtncy in which you wert
the subject ofthe inquiry or investigation.
None.
l Oive the full details of any proceeding. inquiry or investigation by any professional
association including any bar wociation in which you wert the subjea of the
proceeding, inquiry or investigation.
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None.
34
CUWCUWM JIITAE
~HAROHAmuSC~DA
January 2018
Address:
Oepar1ment of Economics, Columbia University
Room 1111 International Affairs Building
NewY0!1<, NewY0!1< 10027
(212) 854-3676 (phone)
rllc2@coll.ll1bia.edu (e-mai)
Date of Birth: May 18, 1957
Education:
B.S. Economics, University of Illinois at Urbana, 1979 Bronze Tablet Honors
MA and Ph.D. Economics, Harvard University, 1983 Wrth Distinction
Awards:
National Science Foundation Research Grant, 1985-1987
Wort! Bank IRIS ProgJam on Institutional Reform. Research Felow, 1992
Ford Foundation Grant, International Economics Program at SIPA. 1992 - 1996
Affiliation:
Member, The Cowles Foundation for Researeh inEconomics, 1983-1988
Research Fellow, National Bureau of Economic Research, 1983 ·1990
Research Associate, National Bureau of Economic Research, 1990 • Present
CcHKector, Columbia Center lot Economic and Poitical Analysis, 2000-01
Member, Counci on Foreign Relations, 2001 - Present
Member, Economics CMl of New YOilc, 2013- Present
Academic Appoinbnents: .
Assistant Professor of Economics, Yale University, 1983 ·1988,
Assistant Professor of Economics, Columbia University, 1988 ·1993
Associate Professor of Economics and International Affairs (with tenure),
Coklmbia University, 1993 ·1996
Professor of Economics and International Affairs, Coll.mbia University,
1~resent
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51518007.eps
C. lowel Harriss Professor of Economics, Cokmbia University
July 2003 - Present
35
Economic Polley Positions:
Senior Staff Economist, Councaof Economic Advisers, 1986 -1987
Assistant Secretary of the Unaed States Treasury for Economic Policy,
February 2002- May 2003 (awarded :rreasury Medal for Distinguished Servioe)
University Service:
Chainnan, Department of Economics, 1997 - 2001
College Committee on Admission and Financial Aid (CAFA), 1999-2001
Faculty of Arts and Soienoes Budget Committee, 2000-2001
CcrCha.ir Provost Committee on ColumbiaHeallh Care Benefils, 2010-11
Member, Education Policy Planning Committee, 2013-2016
Professional Service:•
Consuttant, Federal Reserve Bank of New York 1991-1992, 1995-1997
Consultant, Paul Volcker and Group of 30, Project on Exchange Rate
Regimes, 1999
Director, NBER Project on G7 Current ~nt lmbalanoes, 2003-2005.
Norges Bank Watche(s Committee, 2009-2010
Bundesbank Research Advisory Board, 2007-Present (Chainnan sinoe 2012)
Co-Organizer, NBER tntemational Seminar inMacroeconomics, 2004- Present.
Hong Kong Monetary Authority Institute for Monetary Research, Academic Advisory
Board, 2012-Present
Outside Professional Activities..
Consuttant, JP Morgan Chase, 1994
Consuttant, Cred~ Suisse, Foreign Exchange Research and Strategy, 1998-2000
Consuftant, Grossman Asset Managemenl2001
Economic Strategisl Clinton Group, July 2003- January 2006
Global Strategic Advisor, Pacific Investment Managemenl Company, 2006 -Present
Editorial:
Editor, GZ Current Aocount tmbatanoes: Sustainabil~y and AdjuslrnenL Chicago:
University of Chicago Press, May 2007.
Co.-Editor, NBER lntemational Macroeconomics Annual, Cambridge: MIT Press
2004 - present.
Citations: Google Scholar Citations 20,132
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• For smnl of these assignmenu I was paid an boocnrium of less dian I0,000 dollan.
" Tht Coillml>ia Uniwnily facully ol Ansllld Sci<~K<S ""ires ia lt<oily membm 10 diS<Ioso any JliOicssional
octirilies Ill~ miplpr<Smlt"" or""""' C<ICiftin ol inlemt. Hert islhe liu or 1\1)' oullid< professionol anh·ilics
eadl ol llllid! ' " ' poid moftlllDA IO.COO dolbl>.
36
Pub6cations:
'Na!OOal Monetary Policies Often Correlate, Sometine Coordinate, but Rarely
Cooperate' in 'Rules for lntemstional Monetary Stability: Past, Present and Future,'
ed~ed by Michael D. Bordo and John B. Taylor, Stanford University Press, 2017.
"The _Fed is Ready to Raise Rates: WiB Past be Prologue?' International Finance,
Winter 2Q15
"Optinal Monetary Policy in Open EconOtnies: Praclical Perspectives for Pragmatic
Central bankers,' Journal of economic Dynamics and Control, December2014
'Exchange Rates, Risk Premia, and lnf.ation Indexed Bond Y"lekis,' (with Showen
luo), in ~!chi Pojaliev and Richald M.l.evich , The Role of Currencv in
lns!Monal Poffolios: Risk Books - Incisive Media , 2014
'What have we learned about Monetary Polley In a low Inflation Envronrnent? A
Review of the 2000s' Boston Fed Conference on Monetary Poley in a low lnffation
Environrnen~ October 15-16, 201 0; publshed in Journal of Money. Cmdit, and
Banking,. February 2012.
'Get Real: Interpreting NOtninal Exchange Rate Fluctuations,' International Joumsl
of Central Banking, January 2012.
'Currency Carry Trades: Beyond the Fama Regression' (with Josh Davis and Niels
Pedersen), Journal olln!smational Money and Finance, December 2009.
'Perspectives on Monetary Policy in the Open Economy' NBER lntemational
Maaoeconomic /wwa/2008
,s
Bad News about Inflation Good News for the Exchange Rate?' (with Daniel
Waklman), in Asset Prices and Monetary PQriC'I. John CampbeD, editor, Chicago:
University of Chicago Press,·2008
'G7 Current Account Imbalances: Sustalnabrtity and Adjustmen~· Chapter 1in gz
Current Aocount Imbalances: SustalnabRitv and AdJustment, Richard Clarida, ed~or,
Chicago: University of Chicago Press, May 2007.
'Are There Thresholds.of Current Aocount Adjustment in the G7?" Chapter 5 in gz
Current Aocount Imbalances: SuS)alnabi&ft and Adlus!menl Richard Clarida, ed~or,
Chicago: University of Chicago Press, May 2007.
'The Role of Asyimlelries and Regine Shifts in the Tenn Structure of Interest
Rates (with Lucio Sarno, Mark Taylor and Giorgio Valente),' Journal of
~ss (19), May 2006.
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'Non-linear Permanent- Temporary Decompositions in Macroeconomics and
Finance (with Mark Taylor),' The EoonOtnic Joomal, March 2003.
37
"The Out of Sample Success of Term Structure Models as Exchange Rate
Predictors: AStep Beyond (with Lucio Sarno, Mark Taylor, and Giorgio
Valente),' The Journal of International Eoonomics, February 2003.
'A Simple Frameworf< for International Monetary Policy Analysis (with
Jordi Gali and Marl< Gertler),' The Journal of Monelary Economics,
September 2002.
• The Empirics of Monetary Policy Rules In Open Economies,' Invited
Keynote Address at The Bank of England Conference on the Future of
Macroeconomics, Apri 2000; The lntemational Joumal
of Filance and Economics, December 2001.
' Optimal Monetary Policies In Closed vs Open Eoonomies: An Integrated
Appioach (with Jordi GaSand Marf< GerUer),' American Economic Review
Papers and Proceedings, May 2001.
'G3 Exchange Rate Relationships: ARecap of the Re(Ord and a Review of
Proposals for Change,' Princeton Essays in lntematlonal Economics, September
2m
·
·
'Mooetary Policy Rules and Macroeconomic StabNity: Evidence and Some
Theory' (with Jordi Ga6 and Marl< Gertler), The Qulltetly Journal of
Economics, January 2000.
'The Science of Monetary Policy· A New Keynesian Perspective' (with .
Jordi Gai and Marf< Gertler), The Jolxnal of Economic L.ilefa/ure,
December 1999.
'G3 Exchange Rate Relationships' Group of Thltty Occasional Paper no.
59, September, 1999.
'Monetary PoUcy Rules in Practice: Some International Evidence' (with
Jordi Gali and Mark Gertler), European Economics Review, June 1998,
1033-1068.
"The Real Exchange Rate and US Manufaduring Profits: ATheoretical
Framework with some Empirical Support,'lnlemalional Journal of
Finance and Economics, 2,June, 1997.
"How the Bundesbank Conduds Monetary Policy' (with Matk GerUer),
Chapter 10 In C. Romer and D. Romer, eds., Re<Ncjog to!!a!ion:
M9tjyation and Strategy, Chicago: University of Chicago Press, 1997.
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SHERYL
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"The Term Structure of FoJWard Exchange Rates and the Forecastabii"Jty of
Spot Exchange Rates: Correcting the Errors' (with Mark P. Taylor),
38
Review of Economics and Statistics, LXXIX, August. 1997.
'Dumping; In Theocy, In Policy, and in Practice,' in J. Bhagwati and R.
Hudec, Eds•• fair Trade and Harmonization: Prerequisites for Free Trade?,
Cambrid~ MIT Press, 1996.
'Consumption, Import Prices, and the Demand for Imported Consumer
Durable$; A Structural Econometric Investigation," Review of Economics
and Statistics, LXVIII, August, 1996.
'Real Interest Differentials and Macroeconomic Fundamentals: Empirical
Estinates' (with Robert Blake), International Journal of Finance and
Economics, 1, April. 1996, 103-116.
'Sources of Real Exchange Rate Fluctuations.; How Important are Norrinal
Shocks?' (with Jordi GaiQ. The Carnegie-Rochester Conference Series on
Public Policy, December. 1994, 1-55.
'Cointegration, ~reg ate Consumption, and the Demand for Imports: A
Structural Econometric Investigation,' The American Economic Review,
84, March, 1994, 298-308.
·us Manufacturilg and the Demustriaization Debate: Macroeconomic
Perspectives and Sectoral Assessments,' ('rill Susan Hickok), The WOOd
Economy. 16, March, 1993, 173-192.
•AModel of liquidity Overhang,' European Economic Review, 37, Mareh,
1993, 61-73.
'Enlly, Dumping, and Shakeout,' The American Economic Review, 63,
Mareh, 1993, 180-203.
'Mer Maastricht Public lnveslmen~ International capital Mobility, and
Economic Integration,' (with Ronald Fllldlay), Economica. 61, July, 1994.
'Govemment, Trade, and Comparative Advantage,' (with Ronald Findlay),
Ametican Economic Review Papers and Proceedings, 82, May, 1992.
'Aggregate Stochastic lmpfations of the Life.Cycle Hypothesis," The
Quarterly Journal of Economics, CVl, August, 1991, 851-869.
"International Borrowing and Lending in a Stochastic Stationary
EquilibfUn,' /nlernationa/ acnomic Review, 31, Augus~ 1990, 543-558.
'That Trade Deficit, Protectionism, and Policy Coordination,' The World
Economy, 12, December, 1989,415-437.
"Household Saving and Permanent Income In Canada and the United
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Kingdom,' (with John Y. Campbell) in Economic Effects of the
39
Goyemment Budget E. Hetpman, A. Razin, and E. Sadka, edaOIS, MIT
Press, 1988, 122-141.
'The Dollar and Real Interest Rates; (with John Y. Campbel), carnegieRochester Conference Series on Public Policy, 27, Autumn, 1987, 103-139.
'Growth, Competitiveness and the Trade Deficit,' (wHh Michael L. Mussa
and J. David Gennany), Chapter 3, The Economic Reoort of the President,
1987, 132-171.
'Consumption, liquiday Constraints, and Asset Accumulation in the
Presence of Random income 111ctuations,' lntemational Economic
Review, 28, June, 1987, 339-351.
'The Tenn Structure of Euromarket Interest Rates: An Empirical
lnvesl9ation,' (with JohnY. Campbel), Journal of Monetary Economics,
19, January, 1987, 25-44.
'The Behavior of U.S. Short Tenn Interest Rates Since October, 1979' (with
Benjamin M. Friedman), Journal of Finance. 39, June, 1984, 671-682.
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51518012.eps
Why Have Short Tenn Interest Rates Been So High?' (with Benjamin M.
Friedman), Brooking Papers on Economics ActMty, 2, 1983.
40
Academic Papers
"lqcW Monttaty Pdlcies 011!11 Comtate. Somellmt ~dinm, but R¥111' Coop«att" in "RIJitsJot ltltttlllllilwiMMt!Orf
SCQblcy: fo$1. l'rrstnl.ond Mutt: edltd by M~ O. SO<do and .10M I. Tl'j4or, SUnlcrd l.mtrsily Pres~ 2017.
"Tht Ftd b Ready to Ralst Rites: Will Past be Prolocuer llltnnotilwl Fltlonct, Wftlttr 2015
"'pti!NI Monttaty Poficy InOpen E<onomies: PraaiQI PeBptetivtslot Pracmati< Ctntral banters: Joumo/ oftcCI1M1Ic fl1nomlcs
or>d Cont!O/, Otambtr 2014
'bthance Rites, Rill< Prl!mla, and lnflatiotl lndel<td Bond l1elds.• (Will> Showtn Luo),ln Momtdli PoJadig:ond Ricbtrd M Lcy!dl ,
!l!tRp!t of Cwensy in lnstitUIIona! PorfgJios: Risk Books •lndsiYt M~ ,2014
"WWIat 11MM lwntd about MoneUry Policy in a Low lnflatiotl EtwirOMitt\l? ARtYiew of tht 20001" Boston Ftd CDnferentt on
MontUty Poley In a Low !nftatloo ErMorvnen1. O«aber IS-16, 2010; pubishtd inJoumolo/Monty. Cttdil, ond ~ febNary
lOU.
"CU<rtncy CMry Trades: Btyond the Fama Repesslon' {wid~ Josh Oaw and Niels Ptderstni,A:Iurnolo/lnlttnotilwl Mooty ond
Finonct, OKtrnbtr 2009.
"Pmpectliltl on MOM!aty Poley in the Open Economy" NSER lllttfno!iMM MIKIOfCOnomic AMuo/2008
"Is Bad News about In Ration Good News lot the Exchanse Rater (will> Daniel Waldman), in A!set Prtcesand Monetary Policy, John
Campbe!~ tditot, Chlcaco: l.klivtrsily of Chl<aso Press, 2008
"G7 Curttnt ACcount Imbalances: Slrstainobiliy and Adjustmtnl.' Chap1tr I in GZ CUrti!!\! All!O!Jnt lmbalancn: Su!!alnabjity and
~ Ridlatd Clatlda. tditot, Olicaco: univtntty d Olicaco Press. Mry 2001.
"Ate TMrr Tlvesholds ol Current AaiOunl Ad'pstmtnt In tht Gzr Chap!er Sin G7 Qmnt Attwnt lmbai!!!CO!: Sagljnabllty and
~ Ridlatd Clatlda. tcb, Qiaco: l.kllwnlty ol Olicaco l'feu, Mly la!7.
"The ~of A$yiMitlries and fttcime Slifts in the Ttm SWclllrt ollnl¥est Rites (vritlllucio samo, M¥t Tl'j4or and GioiJio
ValtnttL" ~of Bldilm179L Moot 2006.
'Noft.Uiw Permanent· Temporary OKompolitions In Mxroeconomics and f'Nnct (with Mart T~• lilt Ea>IIOIIIic ~.
M•rdllOOl.
"'lit Out ol Simple S..CCessoiTerm Stru«ure Modtk as Excllonce Rite Prtdictots: AStep Btyond (with Lucio s.tno, Mark Taylor,
and Gloftio Valtnte); lilt Joumolo/lntmot/onof Etot~omk:s, Ftbruory 2003.
'A Simple Framew«k for lnternotional Monttory Polley Analysis (with Jotdl Galland Mark Gertler!: lilt Joumolo/ Monttory
Economics, Stpttmber la!2.
"'he Emplria of Monttary Policy Rules in Open E<onomitl,"lrMttd Ktynolt Addrtss at The Bank of~ Conference on the
Future ol-mia, AprlliXJO; lilt lllttmO!i>nolltMJmiJI 0/Fbwt or>d Economics, Oeamber 2001.
·~ - . y Poldts ID Closed vs Open E~ An lnlfllattd Aj>ploadl (with Jotdi Gil and M¥t Gtt!tet).' Amttton
(C1JMtltic ....... foptnondl'roctftfngs, Moyla!l.
'G3 ~Rote ~tionohips: AReap ol the Recotd and a RtYiew ol fropPials fot CNnct.• Ptitctton &says;, llltnnodotlol
Economics, Stpternbtt 2000.
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SHERYL
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'Monttory Polley Rules and Maaoeconotnic Stabiity: Evidtna and Some Thtory" (w!lh Jotdi Gali and Mart Gertler~ lilt Quotttrly
·
Joumo/o/ Economks, J•nuaty 2000.
41
"Tht Sdtn<t of Monewy Poley· ANew KtyntSiin Pfl1jl«tlvt" (with lotdi Gal and Mark GertlerL 'lilt ioiJmol ofEClll!llml<
Ultrarun, Dtctmbef 1999.
"Monttaty Poky ltvlts in PrMtict: Some International~· ('old~ .Iordi Gal ond Mart Gertilr~ EiJraptOO fconomoCs Rtl'itw,
June 1998,1013-1061.
"Tht Rtal Exd\1-.e ~te and US Manufattuflnc Profiu: AThtotetltal Framework with some Emplrbl Suppor~; lnttrnotional
Joumal ofFlnonct ond (Q)nomla, 1,June,1997.
'\low the Bllldllbank Conducts Monetary PolitY' (with Mart Gerti«L Chapter 10 in C. 11Dmtr and 0. IIDmtr, eds. ~
~ Moti'!J!!on and S!(JI!I'f. ChicaJO: Uniwrsily of ChicaJO PI'tiS, 1997.
"Tht Tem>Siruclllrtof f«w><d ~ ~mand the~oiSpol ~ Rates:C«r~ the Elron' (wi1ll MartP.
Tl)lorl. Rtl'itw of fconomoCs Ot>d S!at5!ics, lXIIDI. AICUSI. 1997.
"'umpilc: In llltory,ln Poley, and in Prattice; In l.llhapad ond R. Hu~ Eck., Foil Tridt end Haanoni!Jtion· P!Cf!S!!!isl!ts !01
E!a..Ir.isll?, Clmbrldct: MIT Prts~, 19%.
•eonsump!lori,lmp«t Prices, and !he Demand !or Imported Consumer OUrablts: AStructural EconomtUic lnvtsdptlon." Rtvltw of
Economics ond Statlllla, LXVIII, Augus1,1996.
"Rtlllntertsl Ditferendals and~ F~tals: Emjllrlcal Esfinatg" (with RDbtrt llabL/rlrtrnotilnolloutntllo/
Fillrltn Ot>d ft#tomlcs, I, Aj)rl.1996, 103-116.
"Sourt::s al Rtll ~Rate Auc:wations: How lmporUnt 11t NoniNI Sllcdsl'" ('old~ .Iordi Gal). 'lilt COmtgHoc:lltsttr
CorJfctrra Strits on MJ/ic Poley, Oectrnbtr,1994, I-SS.
•eo;,tl811tion, Aartsatt CoN~m~Ptioo, and the Otmllld !Of Imports: AStructwal EconO<nt111t lrwtSdptlon; 'lilt Amtricon
Ecanomlc Rtvftw, 84, Mard1,1994,29B·308.
"US Manu!atturlnallld the Oeindll!lrialiution Otbatt: Maaaeconamic Perspearm and S«twal Asstssmt~~ts." (with Susan
Hidu)tL 'lilt World Economy,16, March. 199~, 17l-192.
•After Musulcht: Public lnwslmentlnti!'INtional tapit.t MOblllty, and Economic lnteamiOn." (with Ronald FindllyL Economir:o,
61,My,1994.
•Govemmtftt Trade. and ~aralivt Advan111e: (with Ronald FindlayL Amtricon Economic Rtvltw Papers and Proutdjngs, 84
May,1992.
"lnttrnatiorllllorr...,.. and l.erdrlln a Stodlastic Stationary Eq\.tbrio."'\"lrllttnOtiot>al fa>IIOilW Rtvirw, ~I. AICIISI, 1990, 54~
ssa.
'Thlt Trade OtftCk. Proteclionlsm. and PoicyCoordlnation."'lllt World f"""""l',11. Otctrnbtr, 1989,41S-4~7.
"lfousthold Sl'lln1 and Permanent Income in canada and the United KlrcdO<n." (with John Y. tarnpbell)ln Eoon!!l!!ic Effetts o!thc
(j<rmnmtn! 8s!d1tt E. Helpmao, A. ~lin, and E. Sadka, editon, MIT Pl'ess,1988,122·141.
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SHERYL
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"Tht Oollar and Rtllln!ertsl ~ttl.• (with Jolin Y. ClmpbdL ~
RDdtt$1NColl/ttenaStritsOIIM«Polcy, 27,Ailtllm11.1917, 1QH39.
42
"Growth, Comptt<INtness and the Trade DefiCll; t~<lh Michael L. Mussa and J. David Germany). Chaplet 3, The Esonoml< Report of
~ 1987,132·171.
"Q:Insumption,liqu«My Constrain!S, and Asstt Accurnulatio• in the PreseJKe of Random oncome Fluctuations,* lottmotioMI
faloomic lltY>t.., 21, Juroe, 1987, 339-351.
"The Term Strudwe olfwornatl:t( Interest Rates: All fmpaal ~t.on." l,.,tll John Y. campbei].JoumoJofl.lonttOI'f
(""""""'· 19, Ja~.I!I87,2S44.
"The Behavior of US. ShortT erm Interest Rates SIJKe OClobtr, 1979" jwith Benjamin M. Friedman). Joumol ofF•w~nct, 39, June,
1984,671-682.
OpEd's
W§;
The Fed is starinc tl t nutv rttc di!effima in ?017
~
Sycolvr!!l dtmf!1d m
f!i)bl!l""' pow;h
121!;
Marcil Joble!l Rite 6 7!1· Enough lor Recovml
2010:
Urgrtainty s;t.tnctnc rrmtmmt ~sc:aoc
122!;
The OOIIa(} Got
a.-mu to Sfde
2005:
Our Po>Hillbb!t World
2003;
Where Art Ritts Htjdcdl
Stable and ConOdont
The International Economy
VerDate Nov 24 2008
17:41 Dec 14, 2018
'
TheOaridaVIew
In an~ lntenteW, TIE sat downwn!lthe
Bush Treasury'> clllef maaoe<onomoc straltCJS~
Or. Ricl>.1rd Clarida
2003
Richard H. O~oda
LenertoEditor
Respon1e1o Gale and Omag
2003
R.chardH.~da
Will tile !den U.S. dollar Itt the
s~etu a llobal f<OfiOI'P'OC boom a
ytat or two from nowl
SympoWm
2003
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...
RicNtd H. O""'a
43
Richard H. Clarida
lnftatlon Targelilg
Symposium: Should the Fede<al Reserve in its
conduct of monetary porq follow the European
Centtal Bank and adopt some form of inflation
laf!el rangeI TIE aued thlneen d"otlnguished
2004
Ricflard H. Oarida
The Bush Economy
2007
TIE sat down with Richard Oarida, the Bush
Treasury's fotmer point man lot economic policy,
for some frank talk on deficits, rate spreads, •nd
inflation risk>. Here's how he answered tiur
questions.
Richard H. Oarida
Reftections on Currency Regknei
The uncertainty of the dolla(s future role.
1008
Richard H. Clarida
Eyes on the Prize
The role of expectations in monet>ry
policymaklrc-
2012
Richard H.Oarida
Guidance Counselors
The Taylor Rule and the Fed's forward&uidance.
Wlth saumil Parikh.
2014
Richard H. Oanda
Good News for the Fed
Wagt lnf11tion k beginnins to tum up, but Yellen
willstilrun the eoonorny "hot.'
2016
expens.
PIMCO.com
"The Fed: More confident on Oudoot and Inflation Target.' PIMCO Slog, ht!pl·llbloe.plmoo.oomlonl201819!1the-fed-moreconfident:pn:9ut!ook·•nd·inl\ation-tarret January 2018.
' Chair Yellen's Last Act,' P/MCO Slog, httDtllbiog Dimco.com/en/2017/12/chair-Yl!lle<ls-last·xt December 2017.
"The Powell Fed: Continuity in Monetary Poficy; PIMCO 8/oq, httos:llbiOI.o!mco.oomkn/2Q17flllli!Howt11-feck;ontinuily.Jn.
mone:tfrv=colicv Hovember 2011.
'Fed on Track lot a oecembe< Rate Hike.• P/MCO 8/oq, https·f!b!og.pimco.comleni:?OI7/IIIfeck>n-tmk·for.. -decembe!~ate-hite,
NO\'ember 2017.
"The Global Factor in Neutral Po!icy Rates." Global Centro/ Bonk Focus, hltps·l!www.pimco.com/en-<Js0nsi!htsleC9!lO!!!!Nnd·
martet-commentarylilobakent!i!-bank-forulf!he·iloba~factor-in·neutra!·poliomtes. October 2017.
'fed on Tracl< for a oecember Hite But Stili 'Concemed' About Low tnllati<wl.' PIMCO Slog, httos:l/b!og,pimoo.oom/en/2017/10/ftd·
on-tracl!-!or-d!(tmbo!-h!\e-but-Sil-cpncemecj.aboyt·low-inflation October 2017.
' fed Balance Sheet Notmalization: Si&J>ed, sealed, oe!evered.• PIMCO Bfog, h!torf!bto&Pimco.com/enf20!71091f!d·balance-sheet·
nonnalizadonᣥned:lfaled-deleoreced, September 2017.
"Yelrn at Jackson Hole: long on History, Short on Hints About Future Fed Polley; PIMCO 8/oq,.
hnos:!Jb!og pimco.com/en/2017/081'1011e!>it-jacklon-ho!e-lons-on-l!lstON·!h0!!111l·hlnts-aboU)-!uturc-fe<!·oo!lcy Au&Vst 2017.
'fed Balance Sheet Tapering; We Gona Have Fa~h,' PIMCO 8/oq, hnps:f!bt0.. 01mco.com/en/L1)1Wl8/fed-balanctsbeet-taperjng.
we·ooUa.f!avr;faHh Allgust 2017.
' Fed Statement: 'Re!atiwly Soon' ~gna~ September Balance Sheet AMouncemen~~PIMCO 8/oq,
hnps·l/b!O!.pjmco.comlro/2017/97!!ed·ijateme!lt·rtlatively=soon·signalsm>tember-balanHert-annouoc:ement,luli 2017.
"The Fed Balance Sheet and the Taper Tanttum That Ain't jYet); Globof Qnttof Bonk foM, hUps:!fwww.p!mco.com/e<>
lllfinsigh!lhoonomk-and·martet-commentarx/slobal=q!!tra~ank·focus/thtfe<!·balanre4!eet·and·the·taw·tanJrunHhat..int·
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~.July2017.
44
'Fed Minutes: Mb-on Accomplshed on RattS, But Questions Remain on Salwe Shetl Plan,' PtMCC Biog,
https/Jbloc.g!mco (Omftn/2017/W/fed·miOU)C!·mb~OO·a«Omolsbtd·OM!t!l•bUt'Oye!llons-<emaifl:9n·b!lanet=Jb«t·plan, July
2017.
'ley T!Wways from PIMCO's S«xllat OUtloot: FNe l'lwll Points 1D Wltdl" !lo1dl Mdm<Bals one! Daniell Mltyll~ PtMCD &log.
!mps:J/b!oc.a!mf:• gxn/tn/2017/06f6rt!i*•!WM·fro!lto!mcm-secu!M:OY~oc!i-ftvt:p!Yo!.QO!nt!=!o=Wl!cl" Junt 2017.
'Piwt Points" lwlth AN.frew Balls and Daniel J. lvaJtyn), Srculor CMJppk, hUP!:I/www olmm cgmftn-us!ln!laht!lugnO!J!k·and·
mlrlc!!<ommcnt.WKI!Iu-ou!loo!!l.iiwtgts June 2017.
"Miy Fed Mefti'c; ~ Tlmr Untl tile Minutll,' nMCC Bilg, h!Jpf/AI!oc.plmruam/m/2017/05/~artn
ti~otii=JI!tmlnuta. May 2017.
'PtMCC 2017 Stall¥ forum Prtview,' EPOnOmlc OUtlook, b!IQ!:Uwww.olmcp cpmllfi;V!Ijnsi«hts/econgmlc-and;rnar%rt·
cpmmentardcs!onomJ<.ovdpok/dmce>-lQ171C<UI¥·f9!yrn.prtyiCW ~ril2017.
'Tho ffll's e.lwt 5llftt s.- fnli&llts In Mllcll Mftltes. aut O'Jeslions Rrmllri,'IW!O Bilg,
b!l!!!;/lbloc pitocp.g!m/cn/2017A:I4~1Pmt1nlilt~Mv!:Ql!O!!m...
rmm. Apt~ 2011.
·~ AccOfllmodadon,• GJobcl Ctntro/ ~Focus, hnps;fbwww.pimc!Kpm/Cf)11!1jnsllf!ts/ugncmic:Jnd:marlcct·
CQ!Omentarv!c!obt!seoutl=!!ink·focus/remoVInc·•Cl!Qmmgditloo. March 2017.
'Fed on lnfladon: 'S!lbllllt' _ 'SU!Iained' _ 'Symmetric',' PIMCO SIP9, hnm;/lb!ot.m
!!!b!i!M!IS!tlocdromegic. Mild12017.
comlen/20!7/l)31frd-oo4n!!ipQ9:
~Minutes: 'FalrttSoon',' 1tMCO &log. hnp<ilb!gc.a!mf:Wm/on1101ltll2llrd;;"*'Vtrffii1YjcM. frl>niMy 2017.
"TTie Calm Btf9!t _tht Mlnutll,• PIMCO B/oo, b!!os:l!b!ot Dfm<o Cl!t!l!tn/l()ll/02/thr:@n:liff-!htmlnu!CS. frbnlary 2017.
"Fed MinuttS: n~ln& MQ!e Hawk1s11,' PIMCC Slog, b!lps:llb!oujmco.sgmhni20!7/0illcd·mjnutes·tltlno-mpre·hawtlsb January
2017.
'Tho Fed b ~II I Nllly Ratelliemnll in 2017,' \1twpoi!IS, l!!!ps://l!ww.o!mcp.cpm/M;<I!{I!!!lgh!lMmp!nl$hhHr61s;
!R!'rcitY;M!r;Ott;dl!tnyr.t!f!._2017 , ~ pMshed b\' tho Fmldol rlllf1. Otctmber 2016.
'Tho Fed: l!ettinc on Trumponomics,' PtMCC Slog, ht!Q!ilb!os.oimco·'om'enno!6/12/tl!t:fed·bestin!=OQ:!Nmppnpmjq
De<:embrr 2016.
·~the Fed's Rtcotd on lnflodon: A 81& Glp,' Smort O..rts in FDws. httos;//www,p!mco.com/cnuslrC!!!!srmlsnw!!ll!r!sb!Nn<h!J!tS:i!;locy!lcly!ltl•:!be:fcd~-<m>rd-oo;lol!iJipn·f.bitcap, Dewllber 2016.
'Fed t.lilu!es lnd tho !lecdon: Tht ~for Otctmber Grows Sttq<r: PWCC r.bf, bttm;/Moo pima>.cptn/alll!6/I!Jl!d.
m!nutmnd:!I!H!re!IQ!l:!l!t;<f!o-lct-d....,...,.,...OWS:WO!!U Ncwomber <016.
•fed Statement: Ho Waves, Deormber Hike Still Ukely,' PIMCC Slog, bnps·!/b!gc Qlmco com/en/2016/lllf!d·!ll!tiDifl!·nP:w;rm·
dectmber.f!jkNlll·llkc!y November 2016.
"W!1r tile World's central Bonb Sometimes Coordlllatt aut Rarely ())operate,' PIMCO BJoo,
https:/lbloo,...... cpm/c!)/2016/J~VII;!ynts;sPm~!@!;Rrcfy;<qoooq!e,OcloW2016.
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51518017.eps
'Fed Statement: Let tile Dots-and the Db!ents- Do the Tll<irc,' PIMCC BJoo, bnPI:!Ib!ot.pimco.mmlcnnol6109/!!d1tatcmont·
!et·tbe-dots.and·d!t;<!l!!to!HIP:tbe-talclnc. September 2016.
45
'Yeleoat Jad<son Holt: Ho Trial Woons," PIMCO BJog, bt!m:llb!os.!limco·1!0!1!1tn/2016L08/ytnC!):It;ltct!on.f!o!H!o:t~i!
~ AIIIUSt 2016.
"kd MIMes: Falin to Coolnlu!Gtt.• PIMCO BJog, bUps;/J1!!gc.p<mccom/eni201M!IIfc61J!l!w!{JIW;!2<p!r.,.,..lgtt
Aur.lll2016.
"l11t ~:Silent on ~tembet: PIMCO Blog, hUM;/t))!ql p!mcp ll)mfmi2Q1610WI!t.fcd·!!ent=mHPtcmbf!. July 2016.
"National Monellry Policies Often Correlate, Somctlmts Coordinate, RarelyCooperate." Global Centn>l Bonk FocuJ,
bnm:l/www Ri!lltiQ ll!mJC!1111!1nsirht<lwnom!c·and1!1Jtk!Homml!!tarvlrlobal;(t!!t!J!-bani!·!OC!islnt!lonaknonetarv·pol!drt
oftC!t(«r$ttlO!DC!imts1PQ!dina!Narely;eoope!!!c lilly 2016.
"!.Qcroln!Wits Fr001 PIMCI1s Global Advis«y Bo¥d."lwftlllilby Clid m:t lllemben ol PMlYs Global Advis«y 8oudl.
EC1JI'CIIIIc ~ httos;Jfwww p!mtiQ.Il)mJift:!Jl!!m!!ht!lrcgnom!s~spmmc!!tlrtltsgoOI!'!c1!!1!!ootlfNC!o:i'»Johtt
lrom-pjm!ps:t!gbi=adl!lat'y-board, June 2016.
"Fed Statcmetlt: In Yellen We TN!!-But Mi<kcts Must Verify,• P/MCO Blog, h!tps:!lblor.plmll) comlenG01§/l)§l!ed:statement·ln·
ydltn:Wt1M)=b!Jt1J1irl!ets•mustjertfy June 2016.
"l'tMCO's Starlar Oulloot; Key Takeaways" (with Andrew his and Oarielllvascyn~ PIMCD Blog,
httPfl/!l!oc m.cpm/tnllOJ6tll6/pimccHtgi!¥;OUdpot.try.l!te!Wll!, June 2016.
"The Global Oudoot: Stable But Not SCClre" (with Attdtew his m:t OIC1ld J.tmcyn~ Stai/qf Olltbok, l!ttQ!;//wwpimll).mmhn:
!Jl!!n!llhtsltconom!c·anc!;mitlcet:<O!MJen!lrt!ltCI!!Jr1!U!Ipokl!hf.!Jobaklu!Jook·stabft.!!yt.ogs•!fCU!C Jl/ne 2016.
"l'tMCO 2016 Starlar f«um Preview: looklrc Ahead to 2020." Economic Out~ pimco.com, May 2016.
"fed Minutes: June Sw0011: PIMCO BJog, nttos:/Jblol p!mcg.mm/cn00!6fOS/fed·mlnutes=l!!ntswpoo. Ml'f 2016.
"A Door Ajar (But Hot W1de Open) to 1 June Hlkt." PIMCD Slog, bllpS:llb!oo.p!mll).I!0!1)1rn/2016/Q!/tdpoN!ar:buti!OI;'!!idt:
OOC!t!O=J:M!tMt. Aptl2016.
"Waccs Ate Rlq: Good Hews tot Worttn,lht Economy_ and lht ftc!," Globol ~Bonk FoM, hnm:llwww.pincp comfort
us6ns!¢ts/tsp!m!c=toc!:marl!et:<Prnmen!l!ylt4c!W:<C!!!f11:1ifO\.foM&qges-a~DfdC!\:l!!Hcgnot!!
~April2016.
"Some Uke ~ Hotl" PIMCO BJog, h!tos:l/b!oo.pi!!!%<pm!C!l/2016/l)liwme:!i!ce:it:flot Milldl2016.
"fed Minutes: HUrTy Up and Walt_ r• June?" PlMCO B)og, btt~n;/lb!OR pimco.cam/mi2016/Q24cc!·mi!Jy!e<·hurrtuD=and·WJh·
~ Fcbtuary2016.
'Fed Mn.1es: Gt»>ll r.ttw _ Gradllalr PIMCO BJog, h!tm;//b!Qc,Pi!rsp,a!mfm/2016/0itimtut!HRd!!M!ons-md\!i!
January 2016.
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51518018.eps
•eentnl hnks to Olvt<&e as Global EconomiC< Convcrte.• (with Andrew BalsL Cyc/icol OUtlook, hnpsi/www.p!mw.comlm:
usDns!ol!ts/tconofli:·•nd·mal1<fi:<Ommtlltirvkyd)Q1:9ytiQOI/ct!!tral:bi!l!<s·tO;dlvergtas·•l9bti·C<Onpmlcs<O!Mr!!• Oeeember
20!S.
46
' Pioddin&Aion&l AOiscu~ of Today's Global Economy" (with Joacflim Fels), Economic Outlook, ht!pS://I!Iww pimco com/en·
usOnsights/economic·an<l·marl:et-commentaryleconomlc-oorlook/ptoddinuiQ!!H;discu!Jlon-of·todm:globaJ.economy,
November 2015.
' r'•New Neutral,• Gl~l Ceni!OI Bonk Focus, httns;//www.pimco.com/e!t!!!ljnslghts/ecqnomic·and-market;eommentary/glob.a~
central-b.ank.fpoo/r=new:Jleutral. November 2015.
' October Fed Minutes Reinforce New Neutral VIew,• PIMCO 81og, httos:/Jb!og.oimco.com/en/2015/!Uoctober·fed..ninutes·
reinforctneW:Jleutral·11iew, November 2015.
·
' Fed Statement Opens a Door for December Wnhout CQmmitting to Step Outside,• PIMCO Slog.
·bttps:llbloa.Dimco.com/enf2015110ifed~tatemenr=Opel!s·a·door·for-de(ember-w'nhout-commilting.tMteJ!:9utside. October
2015.
'Gaps. Growth and Headwinds.' Viewpoinll, httos:ljwww.pimco.comlen1!s0nlightsllliewoointshap!1!rowtl\-and-l!eadwind!.
ori8)nally published by the F{nondol Timts, October 2015. ·
"Not Such a Oose Call in September, After All,' P/MCO Slog, htt!l!:/Jblog.pimco.com/roi201S/10/not·such·a-dose=g111n·
septembet·afte!-!11, October 2015.
' Balancing Risks and Opportunities in the Multi-Speed World.' (with Andrew Balls), cyclicol Outloolc. hnpriJw'Nw.pimco.comZen·
usOnsi!htsleconomk·and-marl:et<ommentary/tydlcal-outlooklbalaociNHisks·and-opoortunitles.fn·the·multl·s!!ffl!·wor!d.
September 2015.
'Lers Clll the Whole Thing Off?' PIMCO Slog, hltps.:l(b!og.pimco.comlen/2015!09/!ets<all·the-'Nhole-tblnK:9!1, September 2015.
' Jobs Data and the Words of Stanley Fischer,' PIMCO Slog, httos:/Ll!log.pimco.comltn/2915{09fioM-data-an<l·the-wordS=()f·
stanlgy-f!S<he; Septembei 2015.
' Data OependenCA! Is Not a Monetary Poficy,llut Ale the Ootsl' G/obol Centro/ Bonk Focus, hnps;//ww.v.plmco,oomle!t
usl!nslghtsleconomiNnd-market-commentardsloba!;«ntr;!.bank·focusldata·dtpendence·jknot·a·monetarv=ooli<v-but·arg.tfle.
~/une20JS,
"Fed Watchers wonder: 'See You InSeptember?" PIMCO Slog, hn0rl/blog oimco wmlen/201SIQ61fed·watchers·wonder·see·vou·
~June2015.
'Six Tren<ls to KnO'N, Six Risks to Hedge• (with Andrew 8alb and Daniel l.lvascyn), PIMCO Slog,
bttps:l/blog.Pimco.com/en/20!5/06/six·trends=tP.know·six·risks·to·hedge tune 201 S.
' All Eyes on Tomorrow's PayroQ Report- Ex(A!pt at the Fed,• PtMCO Slog, h!tos;//b!oB.oimoo.oom/evi2Q15/061all·nes-on·
tomorrows·pmolkeoort-txcept·at·tbe-led /une 2015.
'The New Neutral Re>'lslted,• (with Andi!W Balls and Daniel J.lvascyn), Secular Outlook, httos·l!www pjmoo com/eq.
usfinsights/econorni<:-and:market-commentary/secular-outlool</the·new·neutraf·re>'lslted May 2015.
' Q&A with PIMCO Global Strategic AcMsor and Forum Lnder Richard Oarlda,• plmco.com/investments, April lOts.
'What the Fed Thinks of the Bleak GOP Report,' PIMCO 8/og, bnps;//biO!!.pimco corn/en/20!5/04/w!!at·the-fed·thin!s:9f·tfle.
bleak-gdP.reoort. Aprii201S.
'Riding a Wave of Accommodation-Carefully" iw~h Andrew Bails), PtMCO Slog, httprl/blog.plmco.com/en/2015/03/tjdi!!J!:t
waYMf·accommo<!ation·carefullv March 2015.
' Riding a wave bf Accommodation- carefully' (With Andrew Bails), Economic Outlook, https:/JW't/W.QM.com/en·
us/insigbts/ewnomit·and-market<emmentary/econornlt-outlook/ridlnc·a·waw:-of-a«ommo<!ation-carefully March 2015.
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' Navigating the New Neutral,' Economic Outlook, httos:ljwww.pimw.comlen=usOnsights/ewnomic·and:matl!et·
commentary/economic'9utlook/namatlne-the-neWilevtral November 2014.
47
'Sh¥e and Share Alike; Global Ptrspee!lves, 1\ttDI'i/www plmcMomit!l1!slinslobts/economlc.. nd·marlcet·oommentarv/i!ob!l·
markeu/elobai=Oeflpec!iveslsharHnd·share..fike August 2014.
"The New Neutral" (with BiUGloss~ Stat/or Outlook. bttps;tJwww.pim<p cgm/en11s/lf!!i•h!lhrongmiN!!d·market·
cpmmtntarylsfMar.Putlookftbtncyr.neutral. May 2014.
' Is It lime for the Fed to 'level' With Matketsl' Global Perspeaives, htt!!I;{/IIIWW.pimoo.rom/en1Js/in~!!l!ts/economlc·and-mafket·
rommentary/elobal·marlcets/i!obak!ersPediMlt·drnt-lor·tl!e·r.d·to!eyel·with·mj!!kets Febnzary 2014.
'Guidance Counselon" (with Saumil Parikh), Global PmpecuVts, l!tn»·f/www.plmoo.oom!tn·usfii!Oghts/econornic-and:market·
commentary/e!obil·marlcflS/slob!l-wsPedives/guldance-coun!$!!. Novembe< 2013.
.
' ReOotion in the Balance," Global Ptrsptetlvts, htt!!l·ff11MW p!mco.com!e!l1!sArniB!!ts/economic..nd·marlcetsommentarvhlobal·
marl<e!!leloba~perspectlves/rcftotion.;n;he-balance May 2013.
"WWlatem n Takes in Jipillll! Tokes an 'Audocious' Monetary Policy I' (v.idl Tomoya Masonao), Global Perspectiws,
https;//www.plmco comltn-usOns!ghts/ecQ!!onjC·and-market·commentarvhlobol-morlcets/global-oerspec!i!!esbvbitmrjt·t•kes:
in-jopa&jt·!ikmn-audadous-monettry.pofq Match 2013.
"The Bank of canada Has Bilked, But Will! Bite?' (with Ed Devlin), CollOdion Perspectlvts, pimco.com, November 2012.
"level aes~· Global Perspeclivt!, pimoo.oom, My 2012.
'Somethirc Old, Sometiling Hew, Some!hirc Borrowed and Something 2; Global Perspteti'lts, pimco.com, Fdl<uary 2012.
' Eyes on the Prize; Global PtrspeCiillfS, pimro.oom, October 201L
"The End of Cwency WaiS?' Stat/or Outlook Sttits, plmoo.tcom. July 201L
' Anchon Away?' Gfobal Ptrspectlvts, pimco.oom, Apri1201L
'When Cooencies Collide: Opportunities (and Risks) Emerge foi lnwstors" (v.ithVinet< Bbansall), Strattgy Spotlight pimco.com,
November 2010.
'Whit Has-and Has~~- Been learned About Monetary Poley in at.ow lnfladon Envlrorvnentl AReview of the 2000s" (with Pa.A
McCIIIIey), Global Clntto/Bonk Focus, October 2010.
' Uncertainty Changing lnwstment Undscape• (with Mohamed A. EI·EriJn), V'oewpoint pfmco.COII\ originally published by the
FiMnciol r..... Ausust 2010.
"The Mean of the Hew N"""'l ~ an Observation Raret; Realized: focus Also on the Tails; Global Perspectives, pimco.oom,Jvly
2010.
·currency ln'lestirc to Express a Macro View: Global Ptrsptetlvts, pltnro.com, Mardl2010.
'With Privilege Comes... ?' Global Perspeellvts, pimco.com, October 2009.
'The Doc that Didn't Bart-and the One That Did,' Global Perspee!lvts, pltnco.com, Ally 2009.
' Atot of Bud<s, But How Much Bil\lll' Globol Ptrspeellvts, pimco.com. Marcil 2009.
'The U.S. Trade Deficit Is Set to Sh~nk: That's a Good Thing-· Right?' Global Ptrspectlvts, pimco.com, October 2008.
' Exchil\lle Rates Since the Us! Global financial Crisis: What My Crys!aiBaD Didn't Tell Me in 199B; Global PtrspP<IIvts, pimco.com,
altern!te lll!fsion !Pf!tired previously In Tilt lntemotionol Economy, June 2008.
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' After Futur (with Tomoya M!$inao), Global Ptrsptctivts, pimco.com, Apri12008.
48
"More ShotS to Ocop, But Investment OpportuM~ for 2008 Re~Nill" (with Wiliam Powers), Glollo/ Ptrspt<tivts, pimcMom,
l<nvary 2008.
"A I!Md Da(s ~· TheG!obil Finonciil ~~ C«lhonu ~.Not ~JU a.st(aN! tilt Od'ft<enctis ttnporUt~tL" Globol
PtfJ/Jt<ll"t!, pomco-, Oct~ 2007
"Is Bad News About Inflation Good News for the Exdlanct Rate?' G/obo/Pmptetivts, plmco.com. Ml'f 2007.
"Petrodollars, the s..tnss Bus~ and the U.S. Current A«ount Oefl<il." Global Perspectives, plmco.com, March 2007.
"A Gre•t Model~ But Global Divetsifation b Stol AGreat Dta~• Global PtrspeCIM!, pimoo.com. Januuy 2007.
"Dolor Downdraft to Rtsumt: The case for CUrrency ~alion" (~~r.lh Sudi MaNppaL Globol ft~ pmoo.-,
NOI'tiTibt< 2006.
,nttrestinc Times,• Global Persperoves, pimco.com. Stptembft 2006.
NBER Working Papers
~17
RI<Nrd H. Oarida The Global fjK!opn NMrtl Po!g Riles 5o!!!: lm!!ligtions for E>dlanac Rites MO!!ela!'t Po!i!y and
~16
Rdlatd II. Clarida ltlttrnationtl fNnoi! Adnlllmtnt jn I (i'>Oil'QI Oocn EC9!!!1!!!'f G!O!!!h lo!od!:l
llcil6Mac\'M
2013
009
Rich"d H. Clarida lfot Tip· Nominal Exchange Ratn •nd lnflatipn lnde§ Bond V'!f!ds
Rlcl\"d Clorlda
Cynency (arry Trade Rcg!mcr BeYond the Fama Regression
JoshOavis
Nl<ls Pedersen
I20CJ6
RICNrd II. Carie!a Are There Thrtl!dds of Current M91'"' AdM!me!!t in tht G7?
ManueiiGoretto
M"tP. Taylor
2006 Richard H. Oarida G7 Current Account lmbjllanccs: SU!Itlnabiliw and Adju!!menl
ASimole Framework fO! hliCfOJbQntl MoMtarv PoJicv Anatvsk
2002 Richard Oarida
JordoGtli
Mart Gertler
ZCOI
Rochard Clarida
woo Sarno
M"kToytor
Giorgio Valente
001
Richard Clarida
The Empicig of MonctJrv Po§cy Ruin In Dorn Economies
001
Richard Clarida
Ootimal Mcmetarv Policy In OoSfd vtrsusOoe~ Economies: An lntnritcd Apprpacb
Iordi GII
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Mart Ges1ltr
49
1999
RldlardOIIilla
Jordl~l
M.tG411ler
1999
llicNnl Clarida
li!a! Stm ond tht Rn! £.u!l!ra:
*" £mp!ica! fl!irNtn
Jot 1'\'endttpsl
1999
IWlard Clarida
Rf<fnt G3 Cl!trtnt Ac<OI!!lt lmbilaom·!!ow lmpo!li!!t arc StOJC!urt! fi<!O!!l
Joe 1'\'tlldtrlllt
1998 Rldlard Clarida
Moneta!\' Poll<y Ru!H l!ld Macrpccooornlc $tab!ntv· Evldrnct and Some JbroN
JordJGtll
Mart Gcr!ltr
ja91
l'.lctln Clorido
Moc1e!>!y
*am1n ftJ<!!<J: Sor!o "''mw Ey!d!!!cr
Jot4Gtll
Mart Gcr!ltr
1996
RlcNrd Clarida
How the SUndcsbant CondYcu Mo!!ttaN Po[q
Mat1cGtr!ltf
1994 Richard Clarida
Sourcn of Real Extban•• Rite fluqyations: !!ow lmpO!!anJ art Nominal Sl!ocls!l
JotdiGai
993 l'.ictln ll Clorido Tbtim Stryc!lrt of f<llwd Mn• PtA j!!'d tl!e fo!CW!J'blty AI Soot E!ll!i!Wt Rates;
CoqK!inl !ht En9!J
Mart P. Taylot
1991
Richard H. Clarida Endounoys Comoar!li'!t A!lyrfl,.. Goytmment and tl!e Panun o!Tracft
Ronald Findlay
1991
IWlard H. Clarida The RW El<llfnR Rate El!po!!s !!ld Mt!lflltc!utinc Profrts: AThcortt!-a! F!!mcwot1c W'rth Some
fmom!SUOOM
1991
Rldlrd ll Clarida E!!!!Y Dumoinuod Sl!ii:C!!U!
1987 Jolin Y. ~!lpbel
HowiJq!d Sllir!C and Pcmynmt lng!m!! in CM!arlu!!d tl!e Ur!lt!d lCtncdom
Rldlard ll Clarida
987
JohnY. ~mpbcl
The llo!lar and Real!nttmt Batn
llich~rd ll Clarida
~
IWlardllC!atlda fot!!lli!iona! LendinR and Bouowtw In aS!ocbasts S!gucncc EgujObr!ym
986 Richard ll Clarida Tbt 8ilm of l'ltmr!!!iMNsmcnt MWism in a RfliM!I £m<latlon! Eguj!i!Wn
119!6
John Y. ()nopbtl
8ldlr'd ll Clarida
11984 8ichird ll Clarida
WbYJ:ImSbott·T«m lntcmt Ratn Ban So HiJb?
Btnj!mlnM.
Friedman
1984 Richard H. Clarida Conditional ProlrcJ!on by M!IM of kalmi!!l fjlte<inc
1984 Rldlard ll Clarida The Bo!I!Yior ol US,
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BtnjamiRM.
ffildml!l
50
TO BE
PREPARED STATEMENT OF MICHELLE W. BOWMAN
MEMBER, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
A
MAY 15, 2018
Chairman Crapo, Ranking Member Brown, and Members of the Committee, thank
you for this opportunity to appear before you today. I am deeply honored the President has nominated me to serve as a Member of the Board of Governors of the Federal Reserve System. Because community banking is a vital and ongoing part of my
family’s legacy, I am also humbled that, if confirmed, I will be holding the position
designated for someone with community banking experience.
I am also grateful to my family and my husband’s family for their continued support and belief in me. My husband, Wes, our children Jack and Audrey, my sister
Maggie, a school teacher in Kansas City, Missouri, and my parents, Jan and Hank
White, are here with me today. My father, Hank, is a fourth generation banker,
Vietnam veteran, and retired U.S. Air Force officer. My mother, Jan, is a great inspiration. She taught me that with hard work, anything is possible. My in-laws,
John and Sherry Bowman and Sherry’s 91-year old mother Mary Hopkins, could not
be here with us today, but they are watching from home in Everest, Kansas.
My family and I have been in community banking for generations. In 1882, my
great great grandfather, W.H. White, helped to charter the Farmers & Drovers
Bank. The bank was named for the customers it served then and continues to serve
today—the farmers and ranchers of the Flint Hills of Kansas. Today, the fourth and
fifth generation of my family continue this long tradition of service through the
bank and through active participation and volunteer work in our rural community
of 2,300 people. I know firsthand that community banks are a vital part of the backbone of small, rural, agricultural towns and play a critical role in providing access
to credit and fostering economic activity in communities across our country. Without
these institutions, many communities and many of our citizens will see their economic opportunities suffer significantly.
I joined my family’s bank in 2010, and I learned the business from the front line
to the back office. My most challenging role was as compliance officer—working with
our small team to implement many of the new post-crisis regulations. Although the
crisis revealed weaknesses in the U.S. financial system that needed to be addressed,
I have witnessed firsthand how the regulatory environment created in the aftermath
of the crisis has disadvantaged community banks. If confirmed, I will bring this perspective to my work at the Board to ensure that rules preserve the resiliency of the
financial system, but are appropriately tailored to the size, complexity, and risk of
an institution.
As a community banker, it was my job to support local businesses and consumers.
This experience has given me a personal and deep understanding of how the Federal Reserve’s goals of fostering maximum employment and stable prices directly affect the financial system and the broader economy. The dual mandate is critically
important to our economy, businesses, families, and communities. If I am confirmed,
I will be very focused on how we can do the best job possible to fulfill that mandate.
I currently serve as the Kansas State Bank Commissioner and our office oversees
hundreds of State-chartered banks, trusts companies, money transmitters, and other
nondepository financial service institutions. Our mission is both proactive oversight
and protection of the consumers our financial institutions serve. As commissioner,
I am accountable to the people of Kansas. And as I carry out my regulatory mission,
my goal is to treat every consumer and institution fairly, respectfully, and with open
communication.
I believe the experiences I have described qualify me for this important role. If
confirmed by the Senate, I will be committed to accountability, transparency, and
clear communication in all of my responsibilities at the Federal Reserve. Thank you
for the honor of this hearing, and I look forward to answering the Committee’s questions.
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51
STATEMENT FOR COMPLETION BY PRESIDENTIAL NOMINEES
Name:
Wlllto
Member, Board of Governors, Federal Reserve System
Position to wbkh nominated:
Dateoho111illation: 24 April2018
Date of birth: 25 May 1971
Platt of birth: Honolulu, Hawaii
Marital Statvs: Married
FuU ume of spouse: John Wesley Bowman
Name nd a&es of thildren:
II
John Henry Bowman
Audrey Helen Bowman
9
Dates
IHtaded
Iastitvtioa
Wasllbwn Univmil)' Llw School
Univenity of Kansas
Hoaors
and awards:
Dtgrm
mtivtd
1/1994- 811996 Juris DoctOfllt
811989-S/1993 Bachelor of Scienet
Dates of
dqms
811996
S/1993
List below all seholanhips, fellowships, holl0!8l)' degrees, mililaly medals, honorary
society memberships and any oiher special rtCOgnitions for outstanding service or
achiC\'alltnl.
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51518023.eps
l.admhip Klnsas- 2016 Class Member. elemd 11 Class RepmclllaiM to Solid o(Tn~~~m
Kansas 8dtrs Association. Bank !aim o( K1m11 - 2013 Class Member. elemd 11 Class Represe~Uive
The 01\'isht 0. Eistnhower Series for Excellmct in Nllic SeMct- 2011 Class Member, elecud 11 Class R~vt to
Board of Govtmors
British American Project· 2008 Fellowship (lAndon, El\g)and)
52
List below all memberships and offiCeS held in professional, fraternal. business, scholarly,
civic, charitable and other orpnizations.
M1111btrsllips:
Off~ held (ifany)
Dates
Coof<m>ce of State 8ri s.pcMsors Vi<c Choir. Legisbliw Coolmint< 2017......,.
2016- cuntM
Boord ofTMI<es
LcadetsllipK111sas
The 0\lig)\1 D. Eiscnholm Series r.. ExcclleOC< inP\Jblic Service, Pmidcnl, Viet Presidenl, B.W Mtmb<r
2011-cumnr
Council GnMIMOfrls CoOM)' Chamber orcoromm:e & Tourism Presldtnl. Vke Pr<Sidcn~ Board Member (left
Boord iD 2017)2010-curreot
R*Y lolemlliooal, c-eil ()ow Cloal*r Pn:siclell, Viet Pmidnrl 2010<omol
2010.2017
Ccilatllrolyt.larlorilic,..,.. r.......
2011·2016
C..aiO....PRIDEc-iltt ~T
2014·2011
c-iaet
o...top.al
t-ic
0....
Ciryofc....;l
201~
Morris C<rualy RepobticM C-*t n-.r
2010.2017
~ 8rieB As!«iMion
2010.2017
Am<ri<an Bonkers A$10Cillion
2012-currtnl
S<ut&four
201J-cumnr
PEO
1991-cuntM
Dtup~m or llle Amcriclll R.....,utloo
1990-1993
Kappa Kappa
200S-2009
Rtplblicw Abn>od- UK
~
ThcRef0111Cklb
200S-2009
K..,.&Ordsaw..,.·scw.
:!C04-2001
Juoa tape o(l.llllloo, EaPod
1m2001
Jllliorl.az'JOofW....,..DC
1997-armnl
NewYOftSIIItllw
o..m.
Employment record:
List below all positions held sinct college, including the Iitle ordescriptionof job, name
of employment, location of wort, and inclusive dates of employment.
KaKmsasSuft Boot c-issiooer. Off>CC od'.. Sale 111111: eo-is$ioocr Topob. ~ 212017 _......
1/2010. 1/2017
c.a~ a..... Kmsas
Ya PmldaM. r -a o.-s Book
112011-112017
Cooocil GrM. KMsas
ow-r. rncn a o.-s Boot
1994-lm
Topb. K...
LawCiott, KMsas Brim Aaocialion
LoadH, £~&load
11/2004-1/2009
The Bowman Group. Govmlment& Public Mraln Coosuhioi London. EncJancl
WasbinC'o.,oc
S.niof M.....,..m Advisor, lmmipion & Customs Enrorctmenl (lntemlliooll Division). Depar1m<111 or Homeland Secwily ~004112004
Polk) Advisor 10 111< Secrelary, Oepu1y Assisunl Secrelary fG<I..qillllivt Afflirs, ~or Hoonelaod s-ily 2/200W2004
Dinetor, 8caadl Oief. Coropcuioaala ~Affairs Divisico, fcder11 Emerpy . . . . - Ap:t112002-2/200l
c-t. SorbcoMiattoa HiPwols& Tnosil. c_., ~ .. Ea>oollic DMiopaarC. Plrbli< Bolldiorp a~
,.,.._,us Haase c-a.....TIIISp>fiMioa a ~orr-1m 2002
IMstipiYt Aaoraey, US Haase c-iaet oa r.o..r- R.r- & o-ip11997·1999
Lq;sbiivtCormpoodarl.lllrll. US S..... Robcn J. De*, 199S-1996
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2
53
Government
experience:
List any experience in or direct association wilh Federal, State, or local governments.
including any advisory, consultative, honorary or other part time service or positions.
Kansas
Kansas Sllte 8111k Commissiooer. OffiCe oflbe Slue Bank Commissiooer Topeta, Kansas 212017- '"""'l
City of Council Gro'lt Ecooomic O..elopm<l\l Coolmitt,. Council Grovt, Kaosas 1.014·2017
Washlogtoo, DC
Senior Manasem<ol Advisor, lmmi&J1lion & CuSIOilll EAicrccmOIIl, International Divisioo. Depart"""' o!Homelaod Stalrity 412004·
&12004
Policy Advisor to the Soat~ary, Deputy Assisunt Secrtt~~y Tor Lqjslative Affairs, ~~of Homeland Security 212003-412004
DireCIOr, 81111cb Chief. Col1gr<Siiooal & lntersovanmeniJI Aflairs Division, Federal Emers""Y Mana&emtnl A&""Y 212002·212003
Counsc~ Suboommia.. on HigiiW>ys & Transi~ CollllStl, S.bc:ommitl.. on Ecooomie Devtlopm~ Public Buildi11QS & Emert"''Y
Manasom0111, US Hoost Commin.. on Tnnspo!Uiion & lnTraslnlcM< 1999-2002
lnvtstigativt AIIOmey, US HOU$< Cornmin" on Gov""""nl Rclom & 0Ytrsigh1 1997-1999
Lqjslllivt Corrt~pond<..,lntern, US &01\ator Robert J. Dole, 199l-1996
Published
Writings:
List !he titles, publishers and dates of books, articles, reports or other published materials
you have written.
None.
Political
Affiliations
and adivities:
List memberships and offices held in and services rendered to all political parties or
election committees during the last 10 years.
MorTis County, Kansas - Republican Precinct Committee Woman, 2014-<:wrent
MorTis County, Kansas- Republican Committee, Trei!S1J!er, 2013-cwrenl
Kansas 1" Congressional District, Alternate Delegate, 2014-2016
London, England- Republicans Abroad - UK, Chairman, Vice Chairman (not an official party organization)
2005-2009
Political
Contributions:
llemize all political contributions of $500 or more to any individual, campaign
organization, political party, political action committee or similar entity during the last
eight years and identify specific amounts, dates, and names of recipients.
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51518025.eps
$500 Romney for President 8-28-2012
54
Slatt folly your quolificotions 10 UIW in 1ht position 10 wlticlt )IHIW bttn named
My bac:karound and experientt align diRtily with !he satutory rtquirement thai at lust one member of
!he Board ofOovtmors of the Federal Reserve S)'$1em have"primary experientt WO!Iting in or supervising
community banks." My family and I have been in community banking for generations. I havt experienttd
community banking, not only from that incredibly valuable and rewarding perspective, but also through the
prism of being the lead state regulator of community banks, in my home state of Kansas. This unique
combination of experience would serve me well in this incredibly imponant role.
I t~~~m~tly serve as !he Kansas State Bank Commissioner. The OlfJCt of!he State Bank Commissioner
(OSBC) ovmees regulatory supervision for hundzeds ofstate chaneml banks, II1ISI companies,llllll'q
tJanSmitten, and olher IIOIHiepository financiJI ICTVice institutions. The mission of!he OSBC is both proactive
ovmight and protection of the cOtlSUIIlers our financial institutions serve. Every bank under my supervision
qualifies as a community bank a(X)Ording to the definitions currently used, including a heavy prmnce in rural
and agricultural markets. Our Kansas $\ate-chanered banks range in size from juSt under $7 million in assets to
just ovtr $3 billion.
Prior to my appointment as !he Kansas State Bank Commissioner, I served as a VP in my family's state·
cbarteml bank with asseuofapproximatelySI7S million. I became !he third member of!he fifth generation of
my family worong in our bank. My m.ies in!he bank included compliance offJCtr, trust offioer, and serving as
a member of!he board of directors. As a community banker, it was my job to suppon local businesses and
consumers. This experientt has gjven me a pe1$0nal and deep understanding for how the Federal Reserve's
goals of fostering maximum employment and stable prices directly affect !he financial s)'$1em and the broader
economy.
Chanered in I881, Farmers & Drovtrs Bank endured the Great Depression, the inflationary 1970s, the
fann crisis of the I980s, and the 2008 economic crisis. The 2008 crisis, in panicular, hit all banks hard, but I
havt firsthand experience of how !he initial impact as well as !he reguatory environment created in its aftermath
have disadvantaged community banks despite their minimal contribution to the cause of!he economic
meltdown.
My banking experience has been supponed and enhanced by more than 15 years of non-banking public
policy work in the legislative and executivt branches of the federal government in Washington, D.C., where I
held posts in Senator Bob Dole's office, several U.S. House of Representatives commiuee staff counsel
positions, and executive level appointments in FEMA and the Depanment of Homeland Security. I also bring
an international perspective through my work with the UK and EU go\'mlments and industl)' wbile living in
London, England.
Congrm enacted legislation to tD$lllt representation of community banks on the Federal Resenoe Board.
If confirmed, I will bring my broad e~periences and unique perspectives to the deliberations of the Federal
Reserve to better ensure well-rounded policy decisions.
Future tmploymtnt
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I. Indicate whelher you will se~'tr all connections \lith your present employer, business
fum, amciation or Olpnimion if you are confirmed by !he Senate.
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55
Yes.
2. As far as tan be r-. state wbelher you have any plans after c:oo~pletin&
government service to =rme employmen~ affiliation or practice with your previous
employer, business finn, association or organization.
No.
3. Has anybody made you a commitment to ajob al\er you leave go~"ti1Ul1C:Ill?
No.
4. Do you expect to ~trve the fulltenn for which you have been appointed?
Yes.
Pott~~lial coallitu
orinltmt:
I. Describe any financial arrangements or deferred compensation agJeernents or other
continuing dealings with business associates, clients or customen who will be
affected by policies which you will influence in the position to which you have been
nominated.
In connection '4ith the nomination process. I have consulted with the Office of Government Ethics and the
Federal Reserve Board's Designated Agency Ethics Official (DAEO) 10 identify potential conflicts of interest. I
will resolve any conflicts by following the advice ofthe Board's DAEO and eomplying with the tenns of the
ethics ag~tement that I have entered into with the DAEO and that has been provided to this Committee.
2. List any investments, obligations, liabilities, or other relationships wh.ich miiht involve
potential conflicts of interest with the position 10 wbicb you have been nominated.
In connection wilh the nomination process, I have consulted with the Office of Government Ethics and lhe
Federal Reserve Board's Designated Agency Ethics Official (DAEO) to identify potential conflicts of interest. I
will resolve any conflicts by following the advice of the Board's DAEO and complying '41th the tenns of the
clh.ics agreement !hat I have entered into with the DAEO and that bas been provided to this Comminee.
3. Describe any business relationship, dealing or financial transaction (ocher than tax
paying) which you have had during the last 10 yean with the Federal Govemmen~
whether for younclf, on behalf of a client, or acting as an agent, that might in any
way constitute or result in a possible conflict ofinterest with the position to which
you have been nominated.
In connection wilh the nomination process. I have c:onsulted with the Office of Govenur.ent Ethics and the
Federal Reserve Board's Designated Agency Ethics Official (DAEO) 10 identify potential conflicts of interest. I
will resolve any conflicts by following the advice of the Board's DAEO and complying with the terms of the
ethics agreement that! have entered into with the DAEO and that has been provided to this Committee.
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56
4. List any lobbying activity during the past len years in \lflich you hao;e ~in for the
purpose of directly or indirectly inlluencing the passage, defeat or modification of
any legislation at the nationallevtl of government or affecting the administration and
exetution of national law or public policy.
As a member ofthe Kansas Bankers Association and the American Bankers Association from 2010-2017,1
cJi5cussed aVlfiety of KBA and ABA supponed legjslatio;e initiath'CS with federal elected represt~~~Jti\'eS. As a
member of the Conference of Slate Bank Supetvisorsin 2017 and 2018,1distussed a variety of state banking
related issues with federal elected represertlatiV'CS.
S. Explain how you will resolve any conflict of interest that may be disclosed by your
responses to the items above.
In c:oonection with the nomination process. I have consulted with the Office of Government Elhies and the
Federal R~-e Board's Designated Agency EUtics Official (DAEO) 10 identify pocential conRicu of interest. I
will resolo;e any conflicts by following the advice of the Board's DAEO and complying with the terms of the
ethics agreement that I have entered into with the DAEO and that has b«n provided to this Commiuee.
Chi!, crimioal11d
illvestiptory
actioas:
I. Give the full details of any civil or criminal proceeding in which you were a defendant
or any inquiry or investigation by a Federal, Slate, or local agency in which you were
the subjett of the inquiry or investigation.
None.
2. Give the full details of any proceeding. inquiry or inV'CStigation by any professional
association including any bar association in which you were the subject of the
proceeding, inquiry or investigation.
None.
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57
RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
FROM RICHARD CLARIDA
Q.1. What is your view on what caused the 2008 financial crisis?
What responsibility does the Federal Reserve share in terms of failures in regulatory and supervisory policy?
A.1. Put simply, by 2007 the U.S. financial system was highly fragile. A buildup of leverage and maturity transformation in the years
leading up to the crisis left the U.S. and global economy vulnerable
to negative surprises. When the downturn in the U.S. housing market occurred, these vulnerabilities amplified the effects of the initial shocks and the result was the financial crisis.
The crisis revealed shortcomings and failures at private institutions, in the overall regulatory framework, and in the actions of
specific agencies, including the Federal Reserve.
In response to the crisis, the Federal Reserve increased its regulatory and supervisory scrutiny of the largest financial institutions,
for example, putting in place a comprehensive stress-testing regime. In my view, this response has, broadly speaking, increased
the resilience of the system.
The new regulatory regime for large banks ensures that the largest institutions are sufficiently strong to continue to function effectively as intermediaries even in periods of substantial financial
stress. Capital is critical to ensuring resiliency, as are the availability of high-quality liquid assets, appropriate management of
risks, and the presence of a plan for resolution in case needed.
Progress has been made in all of these areas, and newer tools like
the stress testing regime and the countercyclical capital buffer
should also contribute to the resiliency of the system going forward.
Q.2. How did large bank and investment bank leverage contribute
to the 2008 financial crisis?
A.2. The buildup of leverage to excessive levels was a key contributor to the spread of the financial crisis. In the run up to the crisis,
the firms that experienced the worst problems also had some of the
highest leverage ratios. And when the problems at Bear Stearns
were resolved through its acquisition by JPMorgan, market participants turned their attention to other firms with similarly high levels of leverage.
However, leverage at large financial institutions alone was not
responsible for the 2008 financial crisis. When the housing market
turned down and housing-related assets fell in value, a series of
vulnerabilities amplified the effects of that shock, including the reliance on short-term wholesale funding at large financial institutions. Some of these institutions faced runs by investors and had
to sharply cut back their activities in support of the real economy.
And, more broadly, the financial system was highly interconnected
in opaque and surprising ways.
Q.3. How would you characterize current risk-weighted and leverage capital levels for the largest U.S. banks—too low, too high, or
the correct amount?
A.3. It is critical to the safety and soundness of the largest U.S.
banks and to the broader U.S. financial system and economy that
these firms are well capitalized. Since the financial crisis, the U.S.
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banking agencies have significantly strengthened regulatory capital
requirements for large banking firms, which has made them much
more resilient and able to continue lending even when under financial stress.
If confirmed, I look forward to examining this question more
closely and consulting with my colleagues. Absent critical supervisory information, it would be premature for me to judge the precise appropriate capital levels. However, given its importance, I am
very encouraged by the steps that I have observed the Federal Reserve has taken.
Q.4. As you know, the Federal Reserve recently proposed reducing
leverage requirements for the eight biggest U.S. global systemically
important banks (G–SIBs).1 In discussing the impact of its proposal, the Federal Reserve noted that it would reduce the amount
of tier 1 capital required across the lead insured depository institution (IDI) subsidiaries of the G–SIBs by approximately $121 billion.
Q.4.a. Could a reduction in IDI capital pose any risks to depositors,
taxpayers, or financial stability? Why or why not?
A.4.a. In setting capital requirements, there is a risk that leverage
ratios may become too binding. When a leverage ratio becomes a
binding constraint, it can create incentives for firms to increase
their investments in higher-risk, higher-return assets and, conversely, reduce their participation in lower-risk activities.
Q.4.b. What is your view on raising the enhanced prudential standards threshold pursuant to Dodd-Frank section 165 from $50 billion to $250 billion in total consolidated assets, as contemplated in
S. 2155?
A.4.b. I support increased tailoring of regulation and supervision.
I believe that it was prudent for the Congress to raise the $50 billion asset threshold for larger bank holding companies in order to
limit the scope of enhanced prudential standards. In general, regulation and supervision should continue to be tailored to the size,
systemic footprint, and risk profiles of institutions, and my understanding of the Economic Growth, Regulatory Relief, and Consumer
Protection Act is that while it adjusts the $50 billion threshold, it
still allows the Federal Reserve to subject a firm with a higher risk
profile to more rigorous regulation.
Q.4.c. Federal Reserve Vice Chair Quarles has said that the
Volcker Rule ‘‘is an example of a complex regulation that is not
working well.’’2 Do you agree or disagree? Why?
A.4.c. I think it makes sense to explore whether or not the Volcker
Rule can be implemented in a simpler, less burdensome way while
still achieving the objectives of the statute.
Q.4.d. What is your view of the Community Reinvestment Act?
Does it need to be altered or modernized by the Federal Reserve?
If so, what changes do you support?
1 https://www.federalreserve.gov/newsevents/pressreleases/bcreg20180411a.htm.
2 https://www.reuters.com/article/us-usa-fed-quarles/u-s-considering-material-changes-tovolcker-rule-feds-quarlesidUSKBN1GH2U8.
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A.4.d. The Community Reinvestment Act (CRA) has been a part of
banking regulation for 40 years. It would be a very high priority
of mine, if confirmed, to make sure that it is enforced.
I support the CRA’s goal of encouraging banks to meet their affirmative obligation to serve their entire community, and in particular, the credit needs of low- and moderate-income communities.
Doing so benefits low- and moderate-income communities and helps
them to thrive by providing opportunities for community members,
for example, to buy and improve their homes and to start and expand small businesses.
If confirmed, I would be open-minded to discussions for improving or bringing the CRA up to date, but the essential mission of
the act needs to be respected.
Q.5. On May 23, the FDIC released their Quarterly Banking Profile. It shows that that bank profits increased 28 percent over the
last year, and even more for community banks.
Q.5.a. Do you think it is sound policy to reduce capital requirements for banks that have profit levels this high?
A.5.a. The financial crisis demonstrated the importance of a financial system that has sufficient capital to absorb losses and allow
banks to continue lending in an economic downturn. Stronger and
higher-quality regulatory capital requirements for U.S. banking
firms have therefore been an essential post-crisis reform. However,
I believe the banking agencies should continue to examine whether
the requirements remain effective over time and adjust the capital
framework as appropriate while preserving the essential gains in
resiliency and stability of our financial system that have resulted
from the reforms put in place since the financial crisis.
Q.5.b. If confirmed, you will be a member of the Federal Open
Market Committee. What experience will you bring to this role?
Are there any changes in how monetary policy is currently conducted that you will advocate for?
A.5.b. In my 35-year professional career, I have achieved recognition among academics, policymakers, and financial market participants as an expert on the economics of monetary policy. My
academic work on monetary policy as a professor of economics and
international affairs since 1988 at Columbia University (and before
that at Yale University) has been frequently cited, and the framework for a more effective monetary policy developed in these papers has been widely consulted by economists at the Federal Reserve and as well as at other major central banks around the
world. In this regard, since 2007 I have served as a member of the
Deutsche Bundesbank Academic Research Council and have been
chairman of this group since 2012. In 2009–2010, I served as an
external member of the Norges Bank monetary policy review committee, and since 2012 have served on the Academic Advisory
Board of the Hong Kong Monetary Authority’s Institute for Monetary Research. Earlier in my career—from 1991 to 1992 and again
between 1995 and 1997—I was a consultant at the economic research department of the Federal Reserve Bank of New York as
part of a group of academic experts that included Ben Bernanke
and future Nobel laureate Christopher Sims. And in 1999, I served
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as a consultant to Paul Volcker and the Group of 30 and contributed to their Project on Exchange Rate Regimes.
I have been an active member of the National Bureau of Economic Research (NBER) since 1983, and since 2004 have served as
a co-organizer of the NBER’s annual International Seminar on
Macroeconomics, which is typically hosted by a central bank in Europe. I am also a regular participant in the annual Hoover Institution Conference on Monetary Policy, and, last summer, delivered a
keynote address at the Bank for International Settlements Annual
Research Conference.
Although I have spent most of my career in academia, I have had
two opportunities to serve in economic policy positions in the executive branch of the U.S. Government: first, as a Senior Staff Economist with Council of Economic Advisers from 1986 to 1987 and second, as Assistant Treasury Secretary for Economic Policy from
2002 to 2003. These experiences were invaluable in providing me
a perspective that places a premium on doing economic analysis
that is practical, robust, and relevant to better understanding how
economic policy impacts individual American and their communities.
Since 2006, I have had the opportunity to advise Pacific Investment Management on global economics and strategy, with a particular focus on global monetary policy. While I myself do not manage portfolios, I have worked with the firm’s investment committee
to help them interpret and assess global economic and monetary
policy trends. I believe this experience has given me an appreciation for the interaction between macroeconomic developments and
financial markets that I would not otherwise have obtained.
The Federal Reserve’s monetary policy decisions are guided by its
statutory mandate to promote maximum employment and price
stability. Over the past few years, the Federal Open Market Committee (FOMC) has been gradually reducing monetary policy accommodation. Last year, it raised the target range for the Federal
funds rate by 3⁄4 percentage point, and in October it initiated a balance sheet normalization program to gradually reduce its securities
holdings. These steps to normalize the stance of monetary policy
are welcome, as they reflect the economy’s recovery from the financial crisis and recession, the durability of the economic expansion,
and the Committee’s confidence that inflation will return to 2 percent on a sustained basis. If confirmed, I look forward to working
with my colleagues on the FOMC to continue to promote maximum
employment and price stability.
Q.5.c. Since the crisis, do you think the Federal Open Market Committee has been on the right course by gradually increasing interest rates?
A.5.c. I believe that the gradual increases that the FOMC has
made since December 2015 in the target range for the Federal
funds rate have been consistent with its statutory mandate to promote maximum employment and price stability. Over the past few
years, the FOMC has been gradually reducing monetary policy accommodation, reflecting the improvement in the U.S. economy.
During 2017, it raised the target range for the Federal funds rate
by 3⁄4 percentage point, and in October 2017, it initiated a balance
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sheet normalization program that is gradually reducing the Federal
Reserve’s securities holdings.
As I noted previously, these steps to normalize the stance of
monetary policy are welcome developments, as they are responses
to the U.S. economy’s recovery from the financial crisis and recession, the sustained nature of the economic expansion, and the
FOMC’s confidence that inflation will return to 2 percent on a sustained basis. In addition, as decisions on the pace of policy firming
have reflected the FOMC’s assessment of incoming data and the
outlook for the economy, recent years’ monetary policy developments have underlined the fact that monetary policy is not on a
preset course; rather, it is data dependent and is chosen to promote
outcomes for the U.S. economy most consistent with the statutory
goals of maximum employment and price stability. If confirmed, I
look forward to working with FOMC colleagues on shaping policy
decisions in pursuit of these goals.
Q.6. As you know, the Federal Reserve currently uses a variety of
monetary policy rules, including the Taylor rule, in its analysis and
monetary policy decisionmaking, but does not rely solely on rules
to determine interest rate adjustments.
Q.6.a. Do you agree with the Federal Reserve’s current approach,
or will you advocate that the Fed use a single rule?
A.6.a. I understand that the simplicity of monetary policy rules has
some appeal. But the economy is very complex.
Conducting monetary policy based on simple formulas has a long
tradition in the research literature on monetary policy. But economic models are, of necessity, always simplifications of reality,
and we need to ask ourselves whether adhering to any simple
rule—even if it worked well in an economic mode—would in practice mean that we were implementing the monetary policy that was
most consistent with meeting our statutory objectives.
No simple policy rule can capture the full range of considerations
that the FOMC must take into consideration when making monetary policy decisions. For example, policymakers must consider not
just the current levels of economic variable—which are the variables that appear in many simple policy rule—but also the expected future paths of such variables. In addition, we need to take
account of possible risks surrounding those paths and whether the
costs associated with particular economic outcomes could be especially high.
We also need to take account of unobservable structural factors
that may affect the economy. For example, factors that may persistently lower the level of the neutral Federal funds rate or that
may affect the longer-run normal level of the unemployment rate.
In contrast, simple monetary policy rules often embed the assumption that these longer-run levels of the real interest rate or the unemployment rate are fixed.
In sum, policy rules’ prescriptions can be useful inputs in the
FOMC’s policy deliberations, but they are not an adequate or satisfactory substitute for FOMC decisions on monetary policy based on
a wide range of information.
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Q.6.b. While the unemployment rate continues to fall, the labor
force participation rate remains at about its lowest level in 40
years. What do you think is contributing to this?
A.6.b. Although we have seen solid job growth this year and further declines in the unemployment rate, the labor force participation rate is still quite low by historical standards. Much of this is
due to the movement of the large baby boom cohort into ages when
participation rates tend to fall sharply as workers retire. That said,
the labor force participation rate for prime-age workers—especially
men—has also not rebounded to pre-recession levels. A recent survey paper by Katherine Abraham and Melissa Kearney3 attributes
much of the longer-run decline in participation among prime-age
men to factors such as technical change and globalization. However, I also think that this group could represent an additional
margin of slack in the sense that some of them could be enticed to
reenter the labor force as the demand for labor continues to
strengthen.
Q.6.c. Do think the opioid addiction epidemic is related to the decline in labor force participation among prime-age workers?
A.6.c. Yes I do. Economists Anne Case and Angus Deaton 4 have
carefully documented the rise in ‘‘deaths of despair’’ in the United
States, to which the opioid epidemic has contributed. In addition,
Alan Krueger’s research 5 on the decline in labor force participation
among adult men suggests that the proportion of adult men taking
pain medication has risen sharply over the past two decades and
is one reason for the decline in labor force participation among this
population. More generally, opioid addiction has adversely affected
both the health and economic situation of many individuals and
their families and is an important issue that needs to be addressed
by policymakers.
Q.6.d. Over the past 40 years the link between productivity and
wage increases has eroded. More and more, productivity gains
aren’t shared with workers. Why do you think wage growth has not
kept pace with productivity growth? Is there anything the Fed can
do to increase wages? Can the Federal Reserve, through monetary
policy or regulatory policy, do more for individuals and communities that have not experienced the benefits from the economic recovery?
A.6.d. It is the case in recent decades that there has been more dispersion between workers in different categories and that some
workers have fallen behind. There is no consensus on the primary
reason for this divergence, but economists tend to attribute this to
a number of factors, including globalization, technological change,
and a need to better equip workers with the skills needed in today’s labor market.
In the aggregate, wage growth is a function of the strength of the
economy and the growth in productivity. I think the Federal Reserve can best promote faster wage growth by focusing on its full
employment mandate—that is, by getting the unemployment rate
3 http://www.nber.org/papers/w24333.
4 http://www.princeton.edu/∼accase/downloads/MortalitylandlMorbiditylinl21stl
CenturylCase-Deaton-BPEA=published.pdf.
5 https://www.brookings.edu/wp-content/uploads/2018/02/kruegertextfa17bpea.pdf.
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to a level that is, on average, consistent with a healthy labor market, but acknowledging that there are factors at work that are impacting different workers in different ways.
Q.6.e. If confirmed, how will you advocate for increased diversity
in the Federal Reserve System?
A.6.e. Diversity is a critical aspect of all successful organizations,
and it is important to have a diverse workforce at all levels of an
organization. I believe that better decisions are made, including in
the policy space, when there are individuals with a broad range of
backgrounds and perspectives engaged in the process.
If confirmed, I will have the opportunity to meet and speak with
individuals and groups throughout the Federal Reserve System,
the financial and banking sectors, and regional and community organizations. I will use those opportunities to advocate for career opportunities at the Federal Reserve Board (Board) and the System
for individuals with diverse backgrounds, experience, and perspectives. And I plan to actively support Board and Federal Reserve
Bank (Reserve Bank) initiatives to identify and recruit individuals
with diverse backgrounds and perspectives for careers at the Board
and the Reserve Banks. Of course, I also recognize that attracting
diverse talent is only the first step. To meet our objectives, we need
to create an environment where all will thrive and contribute.
Q.6.f. Federal Reserve Board of Governors nominee Marvin
Goodfriend, has recommended that the ‘‘central bank put in place
systems to raise the cost of storing money by imposing a carry tax
on its monetary liabilities.’’ Do you believe that there should be a
currency tax, or that there are financial conditions that would call
for a currency tax?
A.6.f. I am very skeptical that the real-world effects of a tax on
currency could justify imposing such a tax.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
FROM RICHARD CLARIDA
Q.1. The Federal Reserve is one of the agencies authorized to enforce the Military Lending Act (MLA), which is a bipartisan law enacted in 2006 that sets a hard cap of 36 percent interest for most
loans to servicemembers and their families. On July 22, 2015, the
Department of Defense finalized MLA rules that closed prior loopholes that allowed unscrupulous lenders to prey upon servicemembers and their families.
Q.1.a. Do you support these stronger MLA rules? If confirmed, will
you ensure that the MLA is vigorously enforced?
A.1.a. In enacting the Military Lending Act (MLA), Congress directed the Department of Defense to issue implementing regulations after consulting with the Federal Reserve and other agencies.
I understand that Federal Reserve staff has worked with Defense
Department staff to carry out that mandate and, if confirmed, I
will support that effort and the Federal Reserve’s full enforcement
of the MLA at the institutions it supervises.
Q.1.b. If changes are made to the Community Reinvestment Act
that lead to financial institutions, including those that have an
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online presence, to take deposits from communities but actually
make less of an effort to reinvest in these same communities,
would you consider that to be a good or bad outcome?
A.1.b. The Community Reinvestment Act (CRA) was enacted to ensure that banks help meet the credit needs of the communities
where they are chartered to do business. It is important that credit
flow to consumers and businesses in all communities, including in
low- and moderate-income areas, consistent with safe and sound
lending to meet their credit needs and further economic development and financial inclusion. Any revisions to CRA that expand
the area within which a bank’s CRA performance is evaluated
should ensure that the new areas are consistent with the original
intent of the law.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR
MENENDEZ FROM RICHARD CLARIDA
Q.1. How many times did you meet with President Trump prior to
being selected as a nominee to the Federal Reserve?
A.1. I met with President Trump one time.
Q.2. In that/those meeting(s), did President Trump ask how you
would vote on proposed increases to the Federal funds rate?
A.2. The President did not ask how I would vote on proposed increases to the Federal funds rate.
Q.3. Did the President indicate a preference, one way or the other,
for how you should approach decisions on whether to increase the
Federal funds rate?
A.3. The President did not indicate a preference for how I should
approach decisions on whether to increase the Federal funds rate.
Q.4. After meeting with the President, do you believe he understands the value of an independent central bank? If yes, what did
he say to give you that indication?
A.4. In addition to my meeting with the President, I had a number
of meetings over several months with a number of officials in the
Administration. In no meeting and at no time did I ever have any
cause for concern that anyone I met with questioned the independence of the Federal Reserve to conduct monetary policy that would
best achieve the mandates assigned to it by the Congress.
Q.5. Will you commit that if confirmed, you will ignore any political
pressure or interference, whether it be direct or indirect from the
President or any other member of the Administration?
A.5. I have no reason to expect any political pressure or interference, but I fully commit that if confirmed I would completely ignore any political pressure or interference, whether it be direct or
indirect from any member of the Administration.
Q.6. Do you agree that the achievement of full employment should
be associated with strong and broad-based wage growth for average
workers, not just senior executives and managers?
A.6. Absolutely, that is something that we would like to see associated with full employment. It is the case in recent decades that
there has been more dispersion between workers in different
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categories and that some workers have fallen behind. There is no
consensus on the primary reason for this divergence, but economists tend to attribute this to a number of factors, including
globalization, technological change, and a need to better equip
workers with the skills needed in today’s labor market.
I think the Federal Reserve can best promote faster wage growth
by focusing on its full employment mandate—that is, by getting the
unemployment rate to a level that is, on average, consistent with
a healthy labor market, but acknowledging that there are factors
at work that are impacting different workers in different ways and
encouraging policymakers to address those inequities.
Q.7. Why isn’t this tight labor market forcing employers to offer
higher and more competitive wages?
A.7. It is true that measures of nominal wage growth have been
increasing more slowly recently than during the strong labor markets of the mid-2000s or late 1990s. While many factors may be
contributing to the relatively slow growth in wages, the most important factor is likely the slowdown in productivity growth over
the past decade or so. Indeed, over the past couple of years (and
over the past decade), productivity growth averaged 1 percent per
year, well below the average rate of 2 1⁄4 percent since 1950. When
productivity growth is lower, employers cannot afford to increase
wages by as much as otherwise. Price inflation has also been slower over the past 2 years than the tight labor market of 2006–2007.
As a result, real wage growth, which is what matters for workers’
welfare, has not slowed as much as nominal wages. Even though
current wage growth is lower than previously, most measures of
aggregate wages have increased gradually as the labor market has
tightened, suggesting that the tighter labor market is pushing up
wages. If the labor market tightens further, I would expect wage
growth to rise as well, all else held constant.
Q.8. To what extent has workers’ decreased leverage to negotiate
with their employers impacted their ability to demand higher
wages?
A.8. It is difficult to assess how much decreased negotiating leverage has affected workers’ ability to demand higher wages. Workers’
leverage has increased as the labor market has tightened, producing higher wages and greater employment and employer-provided training. Although wage growth is lower currently than in
previous periods of strong labor demand—which would be consistent with decreased negotiating leverage—several other factors
are also likely holding down wages. Productivity growth, which is
ultimately responsible for the increase in real wages over time, has
been quite slow in recent years, as has inflation which influences
the rate of nominal wage growth. It’s possible that changes in technology may have decreased worker negotiating leverage by, for example, increasing employers’ ability to monitor workers and automate jobs, and by making it easier for employers to shift production to different locations. But it is difficult to distinguish the effect
of any change in workers’ negotiating leverage from the influence
of other factors.
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Q.9. Do you agree with Federal Reserve Governor Brainard that it
is important to retain a focus on place as the Federal Reserve contemplates changes to the Community Reinvestment Act? Do you
agree that in some low-income and hard to reach communities,
physical branches are sometimes the only way to meet local credit
needs?
A.9. Governor Brainard has stated that the time is right to revise
the Community Reinvestment Act (CRA) regulations and, in particular, expand the area in which a bank’s CRA activities are evaluated. She also emphasized the importance of retaining a core
focus on place. In her statement, she cited research that demonstrates that branches are an important vehicle for reaching small
business customers and low-income consumers.
I agree with her assessment that the agencies should be thoughtful about how to make the area where CRA activity is evaluated
more meaningful to both banks and low- and moderate-income
communities.
Q.10. Do you agree that robust enforcement against discriminatory
or unfair and deceptive lending practices must work hand-in-hand
with any revisions to the Community Reinvestment Act?
A.10. Discriminatory and other illegal credit practices are inconsistent with helping to meet community credit needs and, as such,
have a negative effect on a bank’s CRA performance. I understand
that the Federal Reserve takes evidence of discrimination into account when assigning CRA ratings as prescribed in the CRA regulations. It is important to retain the connection between CRA, fair
lending, and laws protecting against other illegal credit practices to
ensure that consumers have fair access to credit. I would support
examinations that are data-driven, as much as possible, to examine
for compliance with fair lending laws and regulations.
Q.11. A Treasury Department report issued in April recommends
that the Federal Reserve adopt the OCC’s new policy allowing
banks with failing CRA ratings to merge or expand so long as they
can demonstrate a potential benefit.
Do you think the Federal Reserve should adopt this policy?
A.11. The applications process serves as a means of enforcing CRA,
which requires that the appropriate Federal supervisory agency
consider a depository institution’s record of helping to meet the
credit needs of its local communities and to take that record and
public comments into account in evaluating applications for deposit-taking facilities, such as for mergers, acquisitions, and
branches.
I understand that the Office of the Comptroller of the Currency
(OCC) issued guidance last November on how it will assess CRA
ratings in the context of its review of a banking application, which
varies from the Federal Reserve’s guidance.1 If confirmed, I would
want to understand better how the agencies’ respective guidance
differ and ensure that there is clarity and transparency so that
banks can comply, and applications can be evaluated in a manner
1 OCC, Policy and Procedures Manual, ‘‘Impact of CRA Ratings on Licensing Applications’’,
PPM 6300–2, November 8, 2017, www.occ.treas.gov/publications/publications-by-type/otherpublications-reports/ppms/ppm-6300-2.pdf.
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that is consistent with the congressional intent of enforcing the
CRA.
Q.12. Prior to the financial crisis, regulators treated assets like
subprime mortgage-backed securities as ‘‘low risk,’’ which allowed
big banks to load up on risky assets without the necessary capital
backing. When the crisis hit, the Nation’s biggest banks didn’t have
the capital to withstand the losses.
Do you agree that regulators and banks misperceived risks before the last crisis, and assigned low ratings to assets that were actually toxic?
A.12. The financial crisis demonstrated the importance of a financial system that has sufficient capital to absorb losses and allow
banks to continue lending in an economic downturn. Since the crisis, the U.S. banking agencies have appropriately strengthened and
improved the quality of the regulatory capital requirements for
U.S. banking firms.
Q.13. Last month, the Fed and the OCC proposed a rule that
would weaken the enhanced supplementary leverage ratio, a requirement that the Nation’s biggest banks hold enough capital to
support lending and absorb losses in a downturn. Those banks are
required to meet leverage ratios at the holding company level and
at the depository institution level—where the deposits are backed
by taxpayers. According to the FDIC, this proposal would result in
the departure of more than $120 billion in capital—capital that our
regulators unanimously deemed necessary after the financial crisis
to ensure our Nation’s largest banks can withstand losses. Federal
Reserve Governor Brainard voted against this proposal—the first
dissent in the history of Board votes it keeps on its website (315
votes total)—and the FDIC declined to join the proposal, a significant departure from other postcrisis rulemaking, even though the
Fed and FDIC jointly established this rule after the crisis.
Are you at all concerned that without the backstop of an adequate leverage ratio for the Nation’s eight biggest banks, banks
will once again load up on so-called ‘‘low risk’’ assets, and place
taxpayers at risk of future bailouts?
A.13. In setting capital requirements, there is a risk that leverage
ratios may become too binding. When a leverage ratio becomes a
binding constraint, it can create incentives for firms to increase
their investments in higher-risk, higher-return assets and, conversely, reduce their participation in lower-risk activities. My understanding of the enhanced supplementary leverage ratio proposal
is that it was aimed at striking an appropriate balance between leverage and risk-based capital requirements. If I was to be confirmed, I would look forward to better understanding the analysis
underpinning the proposal and the public comments that were received in response.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
FROM RICHARD CLARIDA
Q.1. I believe strongly in the importance of the Fed’s independence.
Recent comments from another Fed candidate (and former Fed
Governor)—Kevin Warsh—suggest that President Trump has been
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anything but shy in revealing his preference for a low interest rate
environment.
Q.1.a. Has the President—or anyone in the Administration—impressed upon you their beliefs on how you should vote on matters
of monetary policy?
A.1.a. No. I had a number of meetings over several months with
a number of officials in the Administration including the President.
In no meeting and at no time did anyone impress upon me their
belief on how I should vote on matters of monetary policy.
Q.1.b. Do you commit to safeguarding the independence of our central bank?
A.1.b. Yes. I have no reason to expect any political pressure or interference that would challenge the independence of our central
bank, but I fully commit that if confirmed I would completely ignore any political pressure or interference, whether it be direct or
indirect from any member of the Administration.
Q.1.c. What do believe is the biggest threat to financial stability
at the moment?
A.1.c. An important lesson of the global financial crisis was the
need for greater vigilance in monitoring the financial system. This
includes looking at asset valuations, leverage, liquidity and maturity transformation, and the complexity of the financial system.
Understanding the key vulnerabilities in the system is a necessary
step in order to pursue effective policies to ensure the health of our
financial system should vulnerabilities increase.
Given that we have enjoyed many years of solid growth amid a
stable financial system, in my view complacency is a particular
threat. Failure to remain vigilant even as the financial system
evolves and grows risks the possibility that the reforms put in
place since the crisis will lose their effectiveness.
Q.1.d. Do you believe that Title II’s Orderly Liquidation Authority
is an important tool available at the Fed’s disposal during a crisis?
Would you vote to use the Authority if bankruptcy was not an appropriate method for resolving a systemic financial institution?
A.1.d. Bankruptcy should be the preferred resolution framework
for a failing financial firm. Companies, counterparties, the markets, and investors understand the rules and procedures under the
Bankruptcy Code. Nevertheless, Title II’s Orderly Liquidation Authority provides an important backstop resolution framework for
extraordinary situations.
Every failure of a systemic financial firm is different, and I
would consider the facts and circumstances on a case-by-case basis
in deciding whether to vote in favor of recommending that the
Treasury Secretary use Title II’s Orderly Liquidation Authority.
One aspect of Title II that would factor into my analysis is that
Title II does not allow for Government capital injections and requires that taxpayers suffer no losses from the resolution.
Q.1.e. Do you think current bank risk-based capital levels are too
high, too low, or about right? How about the leverage ratio?
A.1.e. Maintaining the safety and soundness of the largest U.S.
banks is fundamental to maintaining the stability of the U.S.
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financial system and the broader economy. To be safe and sound
financial institutions, these firms must be well capitalized. The
U.S. banking agencies have substantially strengthened regulatory
capital requirements for large banking firms, improving the quality
and increasing the amount of capital in the banking system.
High-quality common equity tier 1 capital (CET1) is important
because it is available under all circumstances to absorb losses.
Since the financial crisis, U.S. banks have been required to meet
new higher minimum requirements for CET1 to ensure a solid base
of protection against losses. U.S. banks also have been required to
meet a new capital conservation buffer on top of the minimum to
preserve flexibility to make capital distributions. For the U.S. global systemically important banks (G–SIBs), the Federal Reserve has
imposed an additional capital surcharge designed to reduce the
threat that a failure of any of these firms would pose to financial
stability. (Commonly referred to as the G–SIB surcharge.) Large
U.S. banking firms have roughly doubled their capital positions
from before the crisis to today.
If confirmed, I look forward to examining this question more
closely and consulting with my colleagues. Absent critical supervisory information, it would be premature for me to judge the precise appropriate capital levels. However, given its importance, I am
very encouraged by the steps that I have observed the Federal Reserve has taken.
Q.2. As you may know in S. 2155, we contemplate raising the enhanced prudential standards from $50 billion to $250 billion, with
an 18 month-delayed effectiveness to give the Fed time to do a
rulemaking and decide whether it should apply any of the enhanced prudential standards to banks between $100 billion and
$250 billion.
What do you see as the most important enhanced prudential
standards for these mid-size banks?
A.2. Throughout our banking regulatory system, we should continue to protect the core tenets of regulatory reform—capital, stress
testing, liquidity, resolution planning, and orderly liquidation authority. One important post-crisis reform maintained for banks of
that size by S. 2155 is periodic stress testing.
The Federal Reserve further helps ensure the capital adequacy
of our largest banking firms through the annual stress testing and
Comprehensive Capital Analysis Review (CCAR) exercises, which
consider the losses these firms would suffer under adverse economic scenarios on a forward-looking basis. In doing so, these programs help determine firms’ capital needs when they will be needed most—in a serious economic downturn.
As we move away from the crisis and as banks continue to add
risk to their balance sheets, the stress testing and CCAR programs
will be critical to ensuring that banks are doing so in a manner
that does not jeopardize their safety and soundness or the stability
of the U.S. financial system.
Q.3. The urban-rural economic divide is an area of particular interest for me and an area where I’ve done a lot of work. I believe that
someone shouldn’t be forced to leave their community to find a
good paying job. As we’ve seen in the Great Recession and the
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recovery that’s followed, the impacts of these macroeconomic trends
are not universal and, in this case, have often been felt more
harshly in rural areas.
• What do you believe to be the driving forces behind the decline
of rural America? Is this trend the result of globalization and
technological change?
• Do you believe these trends are irreversible?
A.3. Research has shown that employment growth relative to population has been slower in rural areas in recent years than in large
cities, and several important measures of well-being in rural areas
have declined dramatically over recent decades. While important
research is being done to better understand these disturbing
trends, no firm conclusions regarding the underlying causes have
yet emerged. Research does suggest that globalization and technological change have adversely affected the wages and employment
of lower-educated workers, many of whom reside in rural areas.
There is also some research that suggests that the increased availability of opioid drugs has also adversely affected employment and
welfare in rural areas.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
FROM RICHARD CLARIDA
Q.1. Now that you have had more time to examine the Fed’s recent
proposal on changes to capital standards, do you support the proposal as currently written? If so, why do you think it is appropriate
to reduce capital requirements for the country’s largest banks at
this time? If not, what changes would you need to see to the proposal before supporting it?
A.1. We need a resilient, well-capitalized financial system that is
strong enough to withstand even severe shocks and support economic growth by lending through the economic cycle. Since the crisis, the U.S. banking agencies have substantially strengthened regulatory capital requirements for large banking firms, improving the
quality and increasing the amount of capital in the banking system. It would be important to me not to give up any of the gains
in resiliency and stability that have been achieved since the crisis.
Risk-based and leverage capital requirements work best together
when leverage capital requirements generally serve as a backstop
to risk-based capital requirements. In cases where the leverage
ratio becomes a binding constraint, it can create incentives for
banking organizations to reduce their participation in lower-risk,
lower-return business activity, such as repo financing, central
clearing services for market participants, and taking custody deposits, notwithstanding client demand for those services.
I understand that the Federal Reserve’s enhanced supplementary
leverage ratio (eSLR) proposal is designed to maintain the eSLR
standards as a meaningful constraint on leverage while ensuring a
more appropriate complementary relationship between global systemically important banks’ (G–SIBs) risk-based and leverage-based
capital requirements, and to help ensure that the leverage-based
capital requirements generally serve as a backstop to risk-based
capital requirements. If confirmed, I would look forward to review-
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ing the comments that the Federal Reserve receives on the proposal.
Q.2. Do you believe that any U.S. banks are Too Big to Fail?
• If so, what can and should the Fed do to address this problem?
• If not, what evidence supports your conclusion?
A.2. I believe that the post-crisis regulatory reforms and stronger
supervision have resulted in a great deal of progress being made
in strengthening the financial system and making large firms better able to absorb losses. Having said that, it is important for financial supervisors to remain vigilant to ensure that the financial
system continues to remain resilient as economic conditions and
market practices evolve.
Q.3. Section 402 of S. 2155, which recently passed the Senate and
allows banks ‘‘predominantly engaged in custody, safekeeping, and
asset servicing activities’’ to have less capital.
Do you believe that language applies to JPMorgan Chase and
Citigroup? Would that analysis hold if those two banks created intermediate holding companies to house their custody services?
A.3. Section 402 of the Economic Growth, Regulatory Relief, and
Consumer Protection Act provides leverage ratio relief to firms that
qualify as ‘‘custodial banks’’ with respect to reserves held at certain
central banks. The bill defines a custodial bank as any depository
institution holding company that is predominantly engaged in custody, safekeeping and asset servicing activities (and any subsidiary
depository institution of such a holding company). The Federal Reserve Board (Board) and the other Federal banking agencies have
authority to issue regulations implementing this section. By its
terms, the bill does not appear to apply to diversified holding companies, such as JPMorgan Chase or Citigroup, because their custodial operations constitute a relatively small percentage of their
overall businesses.
The Board applies regulatory capital requirements to bank holding companies on a consolidated basis. Under this approach, the
top-tier bank holding company is required to aggregate all its activities and the assets of its subsidiaries. As a result, simply inserting an intermediate holding company would not affect the activities
or assets of the consolidated banking organization or the analysis
of whether the consolidated organization was considered to be predominantly engaged in custody, safekeeping, and asset servicing
activities. This result would apply to an intermediate holding company that controlled the custody services of the banking organization as well as to any other intermediate holding company in the
structure. An intermediate holding company therefore would not
affect the capital requirements of the consolidated banking organization.
Q.4. Banks today reported record profits—up 27.5 percent from the
first quarter of last year. The economy is nearly a decade into a
long expansionary period.
Why is a reduction in capital requirements necessary or appropriate at this time?
A.4. We need a resilient, well-capitalized financial system that is
strong enough to withstand even severe shocks and support
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economic growth by lending through the economic cycle. To that
end, the U.S. banking agencies have substantially strengthened
regulatory capital requirements for U.S. banking firms, improving
the quality and increasing the amount of capital in the banking
system. At the same time, it is important to monitor the capital
rules on an ongoing basis, to determine whether the framework is
effectively measuring and addressing risk and working as intended,
and to adjust the framework as needed.
Reforms proposed by the Federal Reserve suggest that the enhanced supplementary leverage ratio standards may be currently
calibrated too high, creating potential incentives for firms to disengage from certain low-risk, low-return financial activities that
are beneficial for the economy. Modest recalibration may reduce
these negative incentives while not materially changing overall
large bank capital requirements. As mentioned previously, if confirmed, I look forward to reviewing the comments received on reform proposals.
Q.5. Fed Chair Powell recently announced that the Fed’s Board of
Governors would vote on whether to relieve Wells Fargo from the
growth restriction the Fed imposed on it pursuant to its February
2018 consent order.
Q.5.a. What kind of changes at Wells Fargo would you need to see
before voting to lift the growth restriction?
A.5.a. First, let me say that just based upon the news accounts, the
activities of Wells Fargo in this domain are egregious and unacceptable, and I was as shocked as anyone to read about it in the
newspaper. If I am confirmed and this matter came before me, I
would certainly individually want to be absolutely convinced that
appropriate steps had been taken and could be verified. My understanding is that the firm must fully comply with the terms of the
Consent Order, which requires a number of improvements to be
made to the firm’s governance and risk management practices. If
confirmed, I would only vote to lift the asset cap if the required improvements are implemented to the satisfaction of the Federal Reserve.
Q.5.b. Do you believe the Fed should place more emphasis on finding diverse leaders for the regional banks?
A.5.b. Like many others, I was excited to see the appointment of
Raphael Bostic in 2017 as the first African American Reserve Bank
president and, more recently, the appointment of Andre Anderson
as the first African American First Vice President. Andre’s appointment to this senor leadership role was particularly satisfying as I
understand that he rose through the ranks at the Federal Reserve,
beginning at the Birmingham Branch where he was hired to process municipal bonds.
Despite these recent appointments, I know that the senior leadership of the Board, and indeed the System, agree that there is a
lot more work to be done to move the System toward its objective
of benefiting fully from a diverse workforce and leadership. I and
I know my potential future colleagues on the Board as well, view
this as critical first and foremost because it allows the best possible
job to be done in meeting the responsibilities enumerated for the
System in the Federal Reserve Act.
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If I am confirmed, I will arrive on the job eager to engage with
my colleagues across the System on this important issue. I fully
understand that the Federal Reserve Act assigns primary responsibility for selecting senior leadership at the Reserve Banks to their
Class B and Class C directors. But the Act also gives the Board of
Governors the responsibility to approve such appointments, and I
intend to take that role seriously, including by doing everything
that I can to use my position to help attract more diverse leaders
to the System like Raphael and Andre.
Q.5.c. If so, how do you recommend changing the current hiring
process so that it produces more diverse leaders?
A.5.c. Diversity is a critical aspect of all successful organizations.
In my experience, and in agreement with Chairman Powell’s sentiments, we make better decisions when we have a wide range of
backgrounds and voices around the table.
There is value in having a diverse workforce at all levels of an
organization. I am committed to achieving further progress, and to
better understanding the challenges to improving and promoting
diversity of ideas and backgrounds.
My understanding is that while different Reserve Banks tried
different approaches, diversity has been a point of emphasis in all
recent searches. Specific efforts of which I am aware include advance engagement with community groups and hiring of national
search firms with specific expertise in diversity. If confirmed I look
forward to encouraging the continuation of these efforts and I also
commit to look for additional proven approaches to further expand
the Federal Reserve’s efforts.
Q.6. The Fed is apparently participating in an interagency effort
to reform regulations implementing the Community Reinvestment
Act. In April, the Treasury Department sent a memo to the Fed,
the OCC, and the FDIC recommending several rule changes.
Q.6.a. Do you disagree with any of the Treasury recommendations?
A.6.a. I understand that Treasury’s recommendations were based
on the Department’s outreach effort and the summary sent to the
agencies includes helpful insights. If confirmed, I look forward to
reviewing the recommendations in more detail and supporting efforts to ensure that the agencies work together to find ways to improve both effectiveness and transparency in Community Reinvestment Act (CRA) supervision.
Q.6.b. What are your priorities for CRA reform?
A.6.b. If confirmed, I would work to better understand the calls
from banks, community development organizations and others for
making CRA evaluations more consistent and transparent. As well
as for calls to revise the CRA in a way that encourages more lending and investment in underserved areas.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR CORTEZ
MASTO FROM RICHARD CLARIDA
Community Reinvestment Act
Q.1.a. Should CRA be expanded to all nonbanks? Some assert that
in today’s financial landscape, CRA compliance should be expanded
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to all nonbanks, including credit unions, fintechs, mortgage companies, investment, and others.
A.1.a. The Community Reinvestment Act (CRA) has been a part of
banking regulation for 40 years. It would be a very high priority
of mine, if confirmed, to make sure that it is enforced.
I support the CRA’s goal of encouraging banks to meet their affirmative obligation to serve their entire community, and in particular, the credit needs of low- and moderate-income communities.
Doing so benefits low- and moderate-income communities and helps
them to thrive by providing opportunities for community members,
for example, to buy and improve their homes and to start and expand small businesses.
If confirmed, I would be open-minded to discussions for improving or bringing the CRA up to date, but the essential mission of
the act needs to be respected.
Q.1.b. Do you support a full scope review for CRA exams? Do you
think geographical assessment areas should define CRA accountability both where the majority of branch lending and the majority
of nonbranch lending occurs?
A.1.b. It is important that the agencies with rule writing authority
for CRA (the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency) evaluate ways to provide a meaningful evaluation of a bank’s CRA activities in all of the communities it serves. I understand that the
agencies are considering ways to make the area in which CRA performance is evaluated more reflective of current banking practices,
and I support that effort.
Q.1.c. If a fair lending exam detects a violation after a bank has
been graded for its CRA exam, do you think the bank should receive a retroactive downgrade?
A.1.c. Discriminatory and other illegal credit practices are inconsistent with helping to meet community credit needs. I can understand why regulators would want to take into account banks’
records in fair lending when evaluating their performance in the
spirit of community reinvestment. What would seem to be important is that there is clarity in the application and the implications
of the ratings on a bank’s supervisory record, particularly if the
timing of the examinations are different.
Q.2. Many Democratic, Republican and Independent current and
former regulatory officials raising concerns about the bank deregulation bill range from former Fed Chair Paul Volcker, former Fed
Governor and Deputy Treasury Secretary Sarah Bloom Raskin,
former FDIC Chair Sheila Bair, former Counselor to the Treasury
Secretary Antonio Weiss, and former Deputy Governor of the Bank
of England Paul Tucker. These former banking regulators either
State that a $250 billion bank threshold is too high to protect
financial stability or that we should not weaken the leverage rules
for the largest banks, or both.
Do you think anything in S. 2155 puts the financial system at
risk? Do you share the concerns raised by your predecessors? If so,
why? If not, why not?
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A.2. Regulation and supervision should continue to be tailored to
firms’ size, systemic footprint, and risk profiles. I believe that it
was prudent for the Congress to raise the $50 billion asset threshold for larger bank holding companies in order to limit the scope
of enhanced prudential standards. As I understand the Economic
Growth, Regulatory Relief, and Consumer Protection Act, it adjusts
thresholds but still allows the Federal Reserve to subject a firm
with a higher risk profile to more rigorous regulation.
Q.3. There are a number of places in S. 2155 that would require
the Federal Reserve to conduct additional cost-benefit analysis in
order to regulate big banks.
Mr. Clarida, you have said that the Federal Reserve underestimated the human costs of the financial crisis prior to 2008? What
have you learned from your previous analytic mistakes? How will
you ensure you will not repeat those previous errors?
A.3. The financial crisis and its effect on the economy clearly
harmed millions of Americans who lost their jobs, their homes,
their savings, access to credit, etc. The crisis served as a cautionary
tale about the critical importance of a resilient financial system
that supports economic growth and meets the credit needs of businesses and consumers. I believe this experience underpinned much
of the post-crisis regulatory agenda, and if I were to be confirmed,
I would certainly keep the importance of financial stability firmly
in mind as a policymaker.
Q.4. Chair Yellen was the first chair in Federal Reserve history to
share data with this Committee about racial economic disparities
during her semi-annual testimony. When she presented that data,
she touted significant progress, and indeed, black unemployment
fell from 11.8 percent at the beginning of her term to the current
historically low figure of 6.9 percent.
What do you attribute this trend to? Do you think the attention
that Janet Yellen paid to this issue and the policies of the Federal
Reserve deserve credit for the progress that has been made?
A.4. The unemployment rate of African Americans has historically
been more cyclical than the unemployment rate for the economy as
a whole. It deteriorates more when the economy goes into a recession and improves more during expansions. Thus, the current historically low level of the African American unemployment rate is
a function of the long economic expansion our country is currently
experiencing. The efforts of the Federal Open Market Committee
(FOMC) to achieve its dual mandate have likely contributed to the
strong overall macroeconomic performance, although many other
factors have also contributed. With respect to the attention paid by
former Chair Janet Yellen and the FOMC in recent years to racial
economic disparities, I would say that understanding the heterogeneity in how different groups in the economy fare can help to improve our understanding of the economy as a whole. That said, the
tools available to monetary policymakers are not designed to ameliorate long-standing economic disparities.
Q.5. At that same testimony where Janet Yellen presented information about racial economic disparities, she said, quote ‘‘it is troubling that unemployment rates for these minority groups remain
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higher than for the Nation overall, and that the annual income of
the median African American household is still well below the median income of other U.S. households.’’
Though African American unemployment is lower today, Chair
Yellen’s point remains true. Do you think the recent progress is
sufficient? What more can be done to ensure that unemployment
among African Americans is equal to white unemployment? In addition to increasing employment rates for African Americans, what
can the Fed do to increase wages and wealth for African Americans
and Latinos?
A.5. I have been heartened to see that, as you note, the steady
macroeconomic performance of recent years has measurably improved employment and income among African American households. That said, I believe more progress could be made. However,
the tools that the Federal Reserve has at its disposal are not designed for ameliorating long-standing economic disparities. The
main way in which the Federal Reserve can contribute is by promoting a healthy and stable economy, which will provide economic
opportunity for a broad range of households. Moreover, to the extent allowed by law, the Federal Reserve can also use its regulatory and supervisory role to ensure that African Americans have
equal access to credit and the financial system so as to promote
their economic well-being. In addition, the Federal Reserve produces a variety of datasets and research that can help inform our
understanding of the economy and policies that could be undertaken by those outside of the Federal Reserve System to help close
the gap between African Americans and other U.S. households.
Q.6. Marvin Goodfriend, another nominee to the Federal Reserve
Board of Governors has urged the Federal Reserve to incent spending by placing a tax on currency.1
Q.6.a. Do you support Mr. Goodfriend’s proposal to tax currency
kept outside of circulation?
A.6.a. I am very skeptical that a tax on currency could be justified
as a tool of monetary policy.
Q.6.b. If Mr. Goodfriend’s proposal were to be implemented, can
you estimate what the impact would be on savers and low-income
depositors?
A.6.b. I do not have such an estimate, as I have not undertaken
research on this topic.
Q.7. The Consumer Financial Protection Bureau has endured new
leadership that is hostile to its mission. A number of enforcement
actions aimed at helping people receive redress from fraud or overcharges has been stopped.
Q.7.a. If the Consumer Financial Protection Bureau’s leadership
refuses to ask for adequate funding or takes steps that you think
are harmful to people or our economy, will you let Senate Banking
Committee Members know? If so, how? If not, why not?
1 Goodfriend, Marvin. ‘‘The Case for Unencumbering Interest Rate Policy at the Zero Bound.’’
Carnegie Mellon University. September 15, 2015. Available at: https://www.kansascityfed.org/
∼/media/files/publicat/sympos/2016/econsymposium-goodfriend-paper.pdf.
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A.7.a. I understand that the Federal Reserve Board (Board) plays
a consultative role in Consumer Financial Protection Bureau
(CFPB) rulemakings and coordinates in the examinations as appropriate, but does not have any oversight of the CFPB organizational
or structural design, nor of CFPB enforcement priorities.
If confirmed, I would support efforts to collaborate with the
CFPB, while supporting the Federal Reserve’s efforts to continue to
carry out supervisory and enforcement responsibilities for the financial institutions, and for the laws and regulations under its authority to comply with all applicable Federal consumer protection
laws and regulations.
Q.7.b. The Federal Reserve retains supervision and enforcement
authority for financial institutions below $10 billion in assets.
Please provide a list of public enforcement actions taken toward
any Fed-regulated institutions in the past 3 years. Please note any
fines or penalties assessed. Please note if you agree or disagree
with these enforcement actions.
A.7.b. Although I cannot comment on the specific circumstances of
actions the Federal Reserve has taken in the past, I believe bank
supervisors have a responsibility to ensure that the institutions
subject to supervision operate safely and soundly and that they
comply with applicable statutes and regulations, and furthermore,
that the Federal Reserve should use its formal enforcement authority to achieve these objectives where appropriate. A list of public
enforcement actions taken against institutions regulated by the
Federal Reserve in the past 3 years, including any civil money penalties assessed against the institution, is provided in Appendix A
to this request.
Q.8. Some current Federal Reserve leaders support reducing banks’
capital requirements. This concerns me as capital requirements
have been a key tool in restoring the safety of the financial system
since the crisis. Ensuring modest leverage ratios prevents banks
from lending out more than they can afford to, and especially keeps
them away from riskier assets like the ones that fueled the crisis.
For this reason, Democrats and Republicans in the House and
Senate, as well as FDIC Vice Chair (and former Kansas City Fed
President) Thomas Hoenig all support higher capital requirements,
not lower ones. Do you support any changes to the current capital
requirements for financial institutions? If so, please describe.
A.8. The financial crisis demonstrated the importance of a financial
system that has sufficient capital to absorb losses and allow banks
to continue lending in an economic downturn. Since the crisis, the
U.S. banking agencies have strengthened and improved the quality
of the regulatory capital requirements for U.S. banking firms. However, I believe the banking agencies should continue to examine
whether the requirements remain effective over time and adjust
the framework as appropriate while preserving the essential gains
in resiliency and stability of our financial system that have resulted from the reforms put in place since the financial crisis.
Q.9.a. In recent years, Federal Reserve policymakers have warned
that we should raise interest rates to counter asset bubbles destabilizing the financial system. Board of Governor Nominee Marvin
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Goodfriend has suggested replacing liquidity coverage ratios and a
host of other regulations with tighter monetary policy.2
Do you believe that the blunt tool of monetary policy can be a
substitute for sound financial protections? What is your understanding of the historical evidence surrounding the relationship between monetary policy and asset bubbles?
A.9.a. Monetary policy, which is already tasked with the goals of
price stability and full employment, should not be considered a substitute for strong financial and supervisory standards. Such standards are critical for ensuring stability of the U.S. financial system.
The excessive leverage and maturity transformation in place in
2007 left the economy vulnerable to a deterioration in the housing
market and an increase in investor concerns regarding the solvency
and liquidity of large, interconnected financial institutions.
Reforms since that time, enacted by Congress and implemented
by the appropriate agencies, have raised loss-absorbing capacity
within the financial sector and reduced the susceptibility of the financial system to destabilizing runs.
Of course, gaps exist in financial regulation, and some institutions, like hedge funds and many finance companies, largely fall
outside of the prudential regulatory perimeter. Therefore, changes
in interest rates could at times be appropriate as a supplementary
tool to address threats to full employment and price stability emanating from widespread imbalances or buildups of risk in areas
where
more-targeted
tools
are
inadequate or nonexistent.
Asset-price swings owe to many factors, and monetary policy has
not generally been a prime factor in historical episodes involving
large increases in asset prices. Run-ups in asset prices that are not
supported by economic fundamentals usually involve an increased
tolerance for risk or a decreased perception of risk.
Q.9.b. Besides monetary policy, what other tools are available to
temper asset bubbles?
A.9.b. It is always difficult to judge whether the price of an asset
has reached an unsustainable level, particularly in real time. That
said, it is important for the appropriate authorities, including the
Federal Reserve, to monitor asset price developments and to consider whether, for example, unusually rapid increases in asset
prices are leading to vulnerabilities that could jeopardize the efficient functioning of the financial system, price stability, or full employment.
The difficulties associated with detecting asset bubbles as they
emerge highlight the need for strong and appropriately tailored
regulatory and supervisory standards at all times. Negative shocks,
including asset price declines, the sudden failure of a major financial institution and so forth are always possible. The core capital
and liquidity regulations and supervisory policies adopted by the
Federal Reserve, including stricter standards for the most systemic
firms, are, in my view, consistent with a view that the system
should be resilient to such shocks.
2 Senate Committee on Banking, Housing, and Urban Affairs, June 7, 2016, Hearing. Available at: https://www.gpo.gov/fdsys/pkg/CHRG-114shrg21603/pdf/CHRG-114shrg21603.pdf.
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Q.10. In the years since the financial meltdown, the Federal Reserve has played a key role in putting our economy back on stable
footing and setting the conditions for more robust growth. Still,
there have been bills introduced that would eliminate the Fed’s full
employment mandate on the basis that, according to the bill’s findings ‘‘at best, the Federal Reserve may temporarily increase the
level of employment through monetary policy.’’
Can you elaborate on how the Fed influences employment in the
short-run, and discuss whether failure to use monetary policy effectively in the face of severe downturns could do permanent damage
to the level of unemployment in the economy?
A.10. In the short run, the Federal Reserve influences employment
by adjusting its target range for the Federal funds rate and by influencing the expected future path of short-term interest rates
through its forward guidance. These monetary policy actions affect
the interest rates that many households confront when deciding
whether to borrow and spend, and that businesses face when making their investment plans. Additional spending by households and
businesses will, in turn, cause businesses to hire more workers to
meet the higher demand for their products and services. In this
way, monetary policy can be used to combat recessions and reduce
the associated rise in unemployment.
Q.11. Critics of quantitative easing have argued that it is incompatible with the Fed’s price stability mandate; however in discussing quantitative easing the Fed has consistently noted that the
program is designed to promote a stronger pace of economic growth
and to ensure that inflation, over time, is at levels consistent with
the Fed’s mandate.
Q.11.a. Can you comment on how the Fed’s policies in recent years
have actually supported the Fed’s price stability mandate?
A.11.a. Faced with the most severe financial crisis since the Great
Depression, the FOMC cut short-term interest rates to zero by the
end of 2008. In order to address the economic downturn and stem
disinflationary pressures, the Federal Reserve also turned to nontraditional tools such as asset purchases and forward guidance, as
means of providing the additional accommodation. These policies
put downward pressure on longer-term interest rates and helped to
make financial conditions more accommodative, encouraging and
supporting the economic recovery. By providing a cushion for aggregate demand during the recession and supporting spending during the recovery, the Federal Reserve’s monetary policy measures
helped to keep inflation close to 2 percent. In particular, in part because aggregate demand was supported by monetary policy, the
U.S. economy avoided the severe downward pressure on the price
level that occurred during the Great Depression, which in turn prevented inflation expectations from falling sharply below 2 percent.
Q.11.b. What does the latest research tell us about the effectiveness of the Fed’s large scale asset purchases?
A.11.b. Estimates of the effects of large-scale asset purchases vary
across studies, but most suggest that asset purchases put downward pressure on term premiums and resulted in lower longer-term
interest rates than would otherwise have been the case. Lower
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long-term interest rates, in turn, helped to support asset prices
more broadly and to bolster spending on goods and services by
households and businesses. That said, there are costs as well as
benefits to large-scale asset purchases and certainly today I support the Federal Reserve’s program to shrink its balance sheet.
Q.11.c. Is there any evidence that the Fed’s asset-purchase program, which sought to support the economy by lowering long-term
interest rates, has been a drag on U.S. productivity as some Republicans have suggested? Is there any evidence that the program has
created a ‘‘false economy’’ as Trump has asserted?
A.11.c. I am not aware of research suggesting that the Federal Reserve’s policies have contributed to the sluggish pace of productivity growth observed over recent years. Studies focusing on the
slowdown in U.S. productivity growth point to various developments such as weak capital spending in the wake of the financial
crisis, a slower pace of technological advance, a decline business
dynamism, and a deterioration in workforce skills as factors contributing to recent productivity trends.
Q.11.d. How would the economy have likely fared in terms of unemployment, GDP, wage growth, etc., had the Fed chosen not to
pursue its asset purchase program?
A.11.d. The Federal Reserve conducts monetary policy to promote
maximum employment and stable prices. Various research studies
by academic and central bank economists suggest that the Federal
Reserve’s asset purchase programs helped to make financial conditions more accommodative, support economic recovery, strengthen
labor market conditions, and foster price stability.3
Q.11.e. Is there any evidence that the Fed’s stimulus program has
paved the way for the next global meltdown, as Trump claimed?
A.11.e. While there are many sources of risk and uncertainty in
the global economy, the Federal Reserve’s conduct of monetary policy has contributed to an improved global economic outlook by supporting the U.S. economic expansion and maintaining low and stable inflation.
Q.11.f. How does the Fed’s balance sheet as a percentage of GDP
compare with the balance sheets of the next largest economies? Do
these countries have a dual mandate similar to the Fed?
A.11.f. The size of the Federal Reserve’s balance sheet relative to
nominal GDP currently stands at about 23 percent. Last October,
the FOMC initiated its plan to normalize the size of the Federal
Reserve’s balance sheet. Under that plan, the size of the Federal
Reserve’s balance sheet will decline gradually over coming years.
With nominal GDP expected to rise over that time, the size of the
Federal Reserve’s balance sheet relative to nominal GDP will likely
decline appreciably.
The size of the Federal Reserve’s balance sheet as a percent of
GDP is smaller than those of many other major foreign central
banks. The size of the central bank balance sheets relative to nomi3 See, for example, Eric M. Engen, Thomas Laubach, and David Reifschneider (2015), ‘‘The
Macroeconomic Effects of the Federal Reserve’s Unconventional Monetary Policies,’’ Finance and
Economics Discussion Series 2015–005, Washington: Board of Governors of the Federal Reserve
System, February, http://dx.doi.org/10.17016/FEDS.2015.005.
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nal GDP for the United Kingdom, the euro area, Japan, and Switzerland are, very roughly, about 28, 40, 100, and 120 percent, respectively.
All of these central banks employed large-scale asset purchase
programs to address the implications of the financial crisis in their
countries. All of these central banks operate with a single mandate
to pursue price stability. However, in many cases, this mandate is
treated as medium-term objective, and other goals, including output and employment stabilization and financial stability, are cited
to justify deviations from price stability in the short run.
Q.12. It is my understanding that major central banks around the
world maintain and have drawn on their authority to purchase a
wide range of assets including corporate bonds, commercial paper,
real estate investment trusts, and equities among other assets.
Q.12.a. Given the broad authorities available to other central
banks, rather than shrink the Fed’s tool kit, do you think Congress
should consider expanding it?
A.12.a. As I indicated above, I believe the FOMC’s existing monetary policy toolkit—notably including forward guidance and balance
sheet policies—has served the Nation well and has supported the
U.S. economy in the wake of the financial crisis. Currently, I do not
see compelling reasons why the toolkit needs to be expanded, but
I do believe that the experience of the past decade suggests the
value of preserving the existing toolkit.
Q.12.b. For example, with an expanded authority, could the Fed
play a useful role in supporting municipal finance, student loan financing or other types of consumer credit during periods where
each of these sectors experienced heightened distress? Would you
support or oppose such expansion of the Fed’s authority?
A.12.b. The Federal Reserve conducts monetary policy to promote
its statutory goals of maximum employment and stable prices. The
Congress has granted the Federal Reserve authority to purchase
and sell certain types of assets in pursuit of these goals. In general,
the range of assets the Federal Reserve is authorized to purchase
is limited to very high quality assets with minimal credit risk such
as Treasury and agency securities.
The Federal Reserve’s purchases of Treasury and agency securities during the crisis were effective in making financial conditions
more accommodative and helping to support economic recovery and
stem disinflationary pressures.
Limiting the Federal Reserve’s authorities to a narrow range of
very high-quality assets helps to insulate the Federal Reserve from
political pressures that could undercut the effective conduct of
monetary policy and result in poor macroeconomic outcomes. That
theme was highlighted in the joint statement issued by the Treasury and the Federal Reserve in 2009 on ‘‘The Federal Reserve’s
Role in Preserving Financial and Monetary Stability.’’
That document noted that, ‘‘Actions taken by the Federal Reserve should also aim to improve financial or credit conditions
broadly, not to allocate credit to narrowly defined sectors or classes
of borrowers. Government decisions to influence the allocation of
credit are the province of the fiscal authorities.’’
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Other central banks have the authority to purchase a broad
range of assets, and have utilized these authorities in responding
to the financial crisis. The Congress could consider expanding the
Federal Reserve’s asset purchase authorities if it wished. In doing
so, the Congress would need to weigh the possible benefits of expanded purchase authorities for the Federal Reserve as a tool for
addressing economic weakness versus the possible costs associated
with exposing the Federal Reserve to heightened political pressures
and involving the Federal Reserve in decisions involving significant
credit allocation.
My own view is that the Federal Reserve’s current authorities for
purchasing assets have served the country well, and I do not see
a compelling reason to expand those authorities.
Q.12.c. As the Fed begins to shrink its balance sheet, what are
some of the negative impacts that Senate Banking Committee
Members should monitor? What concerns—if any—do you have
about shrinking the balance sheet? What will you do to monitor the
process of maturing securities to avoid a negative impact on the
economy?
A.12.c. I believe that the FOMC’s gradual approach regarding the
removal of policy accommodation has supported the economy’s continued expansion, the ongoing strengthening of the labor market,
and a likely return to 2 percent inflation on a sustained basis.
As part of this gradual approach, the FOMC initiated its balance
sheet program last October. This program will reduce the Federal
Reserve’s securities holdings in a gradual and predictable manner.
The program has gone smoothly so far and has not given rise to
any unduly large reaction of financial markets.
The FOMC has indicated that, consistent with the data dependence of monetary policy, it could change the details of its plans in
light of economic and financial developments. If confirmed, I will
be monitoring developments very carefully along with Board and
FOMC colleagues for any signs that the normalization of the Federal Reserve’s balance sheet is contributing to strains in the financial system.
In addition, if confirmed, I will advocate continued clear communication by the FOMC about its longer-term plans regarding the
Federal Reserve’s balance sheet.
With regard to the liabilities side of its balance sheet, the FOMC
has stated that it anticipates a reduction in the quantity of reserve
balances, over time, to a level appreciably below that seen in recent
years but larger than that prevailing before the financial crisis.
Federal Reserve officials have indicated the aggregate level of Federal Reserve liabilities will reflect the public’s demand for currency,
the banking system’s demand for reserve balances, and the Committee’s decisions about how to implement monetary policy most efficiently and effectively in the future. These statements by the
FOMC and the Federal Reserve about the ultimate policymaking
framework strike me as appropriate and correct.
I support the FOMC’s position that, in the longer-run, it intends
to hold no more securities than it will need to implement monetary
policy efficiently and effectively. I believe that the Committee’s expectation that the Federal Reserve’s balance sheet will consist
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primarily of Treasury securities is appropriate and is consistent
with effective and efficient monetary policy implementation.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
FROM MICHELLE W. BOWMAN
Q.1. What is your view on what caused the 2008 financial crisis?
What responsibility does the Federal Reserve share in terms of failures in regulatory and supervisory policy?
A.1. A buildup of leverage and maturity transformation in the
years leading up to the crisis left the U.S. and global economy vulnerable to shocks. When the housing market turned down, the effects of that shock were amplified as leverage was wound down and
funding patterns shifted.The result was what we all painfully experienced as the financial crisis.
Since then, post-crisis reforms have been designed to reduce the
likelihood and severity of future financial crises. These efforts have
been aimed at shoring up issues in the private sector, in regulation,
and in the mandates and tools of the various regulatory agencies,
including the Federal Reserve.
The Federal Reserve’s response to the crisis included boosting
the resilience of the financial system through stronger capital, liquidity, and other prudential requirements for large banking firms.
Capital is critical to ensuring resiliency, as are the availability of
high-quality liquid assets, appropriate management of risks, and
the presence of a plan for resolution in case it is needed. Progress
has been made in all of these areas, and newer tools like the stress
testing regime and the countercyclical capital buffer should also
contribute to the resiliency of the financial system going forward.
I believe these actions have, broadly speaking, increased the resilience of the financial system.
Q.2. How did large bank and investment bank leverage contribute
to the 2008 financial crisis?
A.2. The increase in leverage, along with the rise of other
vulnerabilities, contributed to the negative effects that were felt
when the housing market turned down sharply in the United
States. As the crisis unfolded in the Spring of 2008, markets were
focused on the firms that had the highest leverage ratios, and it
was one of the factors that led to investors putting more pressure
on some firms than others.
It would be a mistake, however, to focus only on leverage. Maturity transformation, for example, also played a critical role, as did
other vulnerabilities. Many firms relied on short-term wholesale
funding that they then used to purchase longer-term assets. When
that funding dried up, firms had difficulty finding new financing
for those assets. As a result, assets were sold, and the effects were
felt throughout the financial system and in the real economy.
Q.3. How would you characterize current risk-weighted and leverage capital levels for the largest U.S. banks—too low, too high, or
the correct amount?
A.3. Maintaining the safety and soundness of the largest U.S.
banks is fundamental to maintaining the stability of the U.S. financial system and the broader economy. To be safe and sound
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financial institutions, these firms must be well-capitalized. The
U.S. banking agencies have substantially strengthened regulatory
capital requirements for large banking firms, improving the quality
and increasing the amount of capital in the banking system. Indeed, large U.S. banking firms have roughly doubled their capital
positions from before the crisis to today, making them significantly
more resilient, as well as able to support lending and financial
intermediation in times of financial stress. If confirmed, I look forward to looking more closely at this question and consulting with
my colleagues.
Q.4. As you know, the Federal Reserve recently proposed reducing
leverage requirements for the eight biggest U.S. global systemically
important banks (G–SIBs).1 In discussing the impact of its proposal, the Federal Reserve noted that it would reduce the amount
of tier 1 capital required across the lead insured depository institution (IDI) subsidiaries of the G–SIBs by approximately $121 billion.
Q.4.a. Could a reduction in IDI capital pose any risks to depositors,
taxpayers, or financial stability? Why or why not?
A.4.a. While capital is good for absorbing losses, the manner in
which capital requirements are determined can have important
consequences. If a leverage ratio becomes a binding constraint, it
can create incentives for banking organizations to reduce their participation in lower-risk, lower return business activity, such as repo
financing, central clearing services for market participants, and
taking custody deposits, notwithstanding client demand for those
services. Similarly, it can create incentives for firms to increase
their participation in higher-risk, higher-return activities.
Q.4.b. What is your view on raising the enhanced prudential standards threshold pursuant to Dodd-Frank section 165 from $50 billion to $250 billion in total consolidated assets, as contemplated in
S. 2155?
A.4.b. I agree that regulation and supervision should be tailored in
a manner that allows the financial system to more efficiently support the real economy. The Federal Reserve has been working for
many years to tailor regulation and supervision to the size, systemic footprint, and risk profile of individual institutions. Recognizing the levels and types of risk of the different institutions in
the financial system improves the quality and efficiency of regulation, but I believe more tailoring can and should be done.
It is reasonable for Congress to raise the $50 billion asset threshold to limit the scope of the enhanced prudential standards to larger bank holding companies. My understanding is that the Economic
Growth, Regulatory Relief, and Consumer Protection Act (Act) preserves the ability of the Federal Reserve to reach below the new
$250 billion line, if warranted, to subject a firm to more stringent
regulation. In general, the Act preserves the Federal Reserve’s ability to adequately monitor and regulate systemic risk of banking
firms as well as its ability to regulate banking firms for safety and
soundness objectives.
1 https://www.federalreserve.gov/newsevents/pressreleases/bcreg20180411a.htm.
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Q.4.c. Federal Reserve Vice Chair Quarles has said that the
Volcker Rule ‘‘is an example of a complex regulation that is not
working well.’’2 Do you agree or disagree? Why?
A.4.c. While Congress recently enacted legislation excluding smaller firms from the Volcker Rule, there is still room for the Federal
Reserve and the other responsible agencies to tailor and reduce
regulatory requirements to more efficiently implement the policy
objectives of the statute in a manner consistent with the safety and
soundness of the banking system. It is worthwhile for the agencies
to consider further tailoring the implementing rule as it applies to
firms that do not engage in a large amount of trading activity, and
to simplify the requirements for satisfying exemptions for permitted activities such as hedging, market making, and underwriting. These changes would provide clarity to banking organizations and help them more efficiently provide market liquidity and
facilitate capital formation.
Q.4.d. What is your view of the Community Reinvestment Act?
Does it need to be altered or modernized by the Federal Reserve?
If so, what changes do you support?
A.4.d. The Community Reinvestment Act’s (CRA) goal of encouraging banks to meet their obligation to serve their entire community, including in low- and moderate-income communities is critically important. All communities, particularly low- and moderateincome communities, thrive when they have access to credit on fair
terms that increase opportunities for investing in homes, starting
businesses, and education.
I believe that the current CRA supervisory and regulatory framework could be improved based on feedback from industry and
community stakeholders, and that it is time to review the CRA regulations to ensure they are effective in achieving the important objectives set by Congress. In particular, the regulation’s definition of
‘‘assessment area,’’ should be revised to reflect significant changes
in the banking landscape since CRA was enacted and the current
CRA regulations were adopted.
Technology and other industry advancements have enabled
banks to serve consumers in areas far from their physical
branches. As such, it is sensible for the agencies to consider expanding the assessment area definition to reflect the local communities that banks serve through delivery systems other than
branches.
I believe that additional input and analysis on this matter will
be needed to determine how best to define such assessment areas
and how to evaluate performance in those areas.
Q.5. On May 23, the FDIC released their Quarterly Banking Profile. It shows that that bank profits increased 28 percent over the
last year, and even more for community banks.
Q.5.a. Do you think it is sound policy to reduce capital requirements for banks that have profit levels this high?
A.5.a. We need a resilient, well-capitalized financial system that is
strong enough to withstand even severe shocks and support
2 https://www.reuters.com/article/us-usa-fed-quarles/u-s-considering-material-changes-tovolcker-rule-feds-quarlesidUSKBN1GH2U8.
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economic growth by lending through the economic cycle. To that
end, the U.S. banking agencies have substantially strengthened
regulatory capital requirements for U.S. banking firms, improving
the quality and increasing the amount of capital in the banking
system. At the same time, it is important to monitor the capital
rules on an ongoing basis, to determine whether the framework is
effectively measuring and addressing risk and working as intended,
and to adjust the framework as needed.
Q.5.b. If confirmed, you will be a member of the Federal Open
Market Committee. What experience will you bring to this role?
Are there any changes in how monetary policy is currently conducted that you will advocate for?
A.5.b. The Federal Reserve’s mandate to promote maximum employment and stable prices is critically important to our economy,
to businesses, families and communities, and if I am confirmed, I
will be very focused on how we can do the best job possible to fulfill
that mandate.
My views on employment and the labor market have certainly
been shaped by the experience of the last 10 to 15 years. We’ve
seen the Nation go from high levels of employment and solid wage
growth into a very deep recession. In the crisis, it was clear that
many people who were able to work lost their jobs and could not
find work, and businesses that had the capacity to produce and
grow could not find a market for their goods and services. And
when you have a huge gap between what the economy can do and
what it is currently doing, I believe that is where policymakers like
the Federal Reserve can take appropriate action, sometimes quite
strong action, and help the economy get back to a more normal
level of employment and output.
Of course, as I have seen in my career as a community banker
and as a regulator, the labor market, in a large, diverse economy
like ours, is quite complicated and there are many factors to consider in measuring its health. For example, who is available to
work and what can they do? I have worked with businesses that
have trouble hiring, because there may be a shortage of highly
skilled workers. In some communities in my home State, there are
demographic changes—an aging workforce, for example—that affects how much businesses can hire. My family’s bank lends to
many consumers, and often we have seen that a strong job market
will bring people back into the workforce and that is a good thing.
And, of course, when there is strong demand for workers and the
economy is growing, we see wages begin to grow. A strong economy
supports strong wage growth.
Given the complexity involved in looking at the labor market,
common sense tells me to be careful in assuming there is a precisely right level of employment that we can be very confident in
saying is the right level for all economic conditions. In general, my
approach as a community banker and regulator has been to take
a look at all the best evidence and analysis you can find, listen
hard to many different views, and then make your best judgment.
And that is how I will approach evaluating the health of the labor
market, should I be confirmed.
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Stable prices and the level of overall inflation is a critical part
of the dual mandate and, should I be confirmed, I will be focused
on achieving this important goal. When inflation gets too high or
too low, or is too volatile, that hurts everyone—consumers, businesses, and communities—because making economic decisions and
planning for the future becomes more and more difficult.
I think one of the most important things the Federal Reserve can
do is make sure that the expectations that people have for where
inflation is heading remain stable. As a banker, I never wanted
people to be put in a position where they were coming into my
bank and showing me a business plan where they were just unable
to predict what price they would be paying for a very broad range
of important goods and services a year or two from now. Of course,
some prices will always be going up while others will be going
down. That is just how markets work. What is important is that
the general level of prices remains fairly predictable. When people
borrow money or make plans, it is important that they feel confident that their future incomes will support that debt and those
plans. I want people focusing on making good business decisions,
not spending their time guessing about inflation. So keeping inflation and inflation expectations stable is very important to me.
I also think we have learned that inflation can be too low. If demand is weak for a prolonged period of time, businesses cannot sell
goods, they lower prices further, lay people off, keep wages down.
And we have seen that is a tough cycle to break free from. For the
Federal Reserve, when you get interest rates very low, it is hard
to create additional incentives for borrowing and investing. It is
tough to go below zero. As a policymaker, I would want to make
sure we keep inflation at an appropriate level, so we reduce our
risk of getting back to the so called Zero Lower Bound.
Finally, let me just say that there is a great deal of complexity
that goes into understanding why the general level of prices
change. For example, Kansas produces a lot of oil and natural gas,
so I am well aware of how swings in the supply and demand for
commodities can shape prices. But it is not always clear how businesses and consumers set their expectations for inflation. Productivity and technological change affect prices too. This is an important area for more research, and I look forward to learning more
about these topics, if I am confirmed.
Q.5.c. Since the crisis, do you think the Federal Open Market Committee has been on the right course by gradually increasing interest rates?
A.5.c. I believe the Federal Open Market Committee’s (FOMC)
monetary policy decisions should be guided strictly by its responsibilities under current law to promote maximum employment and
price stability. The FOMC has been raising its target for the Federal funds rate since December 2015 and reducing the size of its
holdings of Treasury securities and mortgage-backed securities
since October of 2017. The FOMC’s gradual approach to reducing
monetary accommodation in this way has been instrumental in
supporting the economic recovery and a return of inflation to the
FOMC’s 2 percent objective. The FOMC has also stressed and I
also believe that it is appropriate that monetary policy is not on a
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preset course. Instead, it is data dependent and chosen to best
achieve the objectives set forth by Congress. If confirmed, I would
look forward to working with other members of the FOMC to further promote the attainment of the FOMC’s statutory goals.
Q.6. As you know, the Federal Reserve currently uses a variety of
monetary policy rules, including the Taylor rule, in its analysis and
monetary policy decisionmaking, but does not rely solely on rules
to determine interest rate adjustments.
Q.6.a. Do you agree with the Federal Reserve’s current approach,
or will you advocate that the Fed use a single rule?
A.6.a. The economy is very complex, and monetary policy is determined in an environment in which a multitude of indicators and
conditions must be taken into account. Simple rules, by definition,
cannot accommodate such a wide variety of considerations. For example, simple rules generally do not accommodate variation in the
expectations of investors and consumers, risks to the economic outlook, or deep economic conditions such as productivity growth that
may be time varying. All that said, simple monetary policy rules
do have some appeal because they capture some key elements of
appropriate policy, and I believe that it is useful for policymakers
to routinely consult the recommendations from a variety of benchmark rules. I also believe it can be useful for the FOMC to explain
to Congress and the public the differences between its policies and
those prescribed by simple rules, and the reasons for those differences.
Q.6.b. While the unemployment rate continues to fall, the labor
force participation rate remains at about its lowest level in 40
years. What do you think is contributing to this?
A.6.b. The labor market remains strong. Job gains have been solid,
on average, in recent months, and the unemployment rate has fallen to 3.9 percent, the lowest level in many years. As you note, however, the labor force participation rate is still quite low by historical standards. To some extent, the downward trend in the overall
participation rate reflects demographic forces, most prominently increased retirements among members of the large baby boom generation. However, the labor force participation rate for prime-age
workers is also below its level prior to the financial crisis, although
it has risen more recently in response to the tight labor market.
Longer-term trends in globalization and automation have likely
contributed to the decline in prime-age participation over time, but
my hope and expectation is that a strong labor market will continue to pull many of these workers back into the labor force.
Q.6.c. Do think the opioid addiction epidemic is related to the decline in labor force participation among prime-age workers?
A.6.c. The opioid epidemic is a very serious crisis that has had severe consequences for the affected individuals and their families. In
addition, the opioid epidemic undoubtedly has had adverse effects
on the economy. For example, I think the evidence shows that
opioid addiction adversely affects an individual’s ability to participate effectively in the labor market and thus has contributed to the
decline in labor force participation among prime-age workers. Of
course, causality may go the other way as well, with a lack of job
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opportunities, particularly in rural areas, contributing to both withdrawal from the labor force and increased opioid abuse.
Q.6.d. Over the past 40 years the link between productivity and
wage increases has eroded. More and more, productivity gains
aren’t shared with workers. Why do you think wage growth has not
kept pace with productivity growth? Is there anything the Fed can
do to increase wages? Can the Federal Reserve, through monetary
policy or regulatory policy, do more for individuals and communities that have not experienced the benefits from the economic recovery?
A.6.d. Wage growth is a very important issue, and while it is encouraging that wages seem to be rising a little faster than a few
years ago, I would like to see stronger wage growth. In addition,
I think that, as the economy improves, it is important that a wide
range of individuals and communities benefit from a strong labor
market. However, monetary policy is a blunt tool that is not well
equipped to affect specific sectors of the economy. Rather, the Federal Reserve can best help individuals and communities by focusing
on achieving its dual mandate of full employment and stable inflation.
Q.6.e. If confirmed, how will you advocate for increased diversity
in the Federal Reserve System?
A.6.e. There is great value in having a diverse workforce at all levels of an organization. Diversity, including diversity of thought,
perspective, and experience, is an important attribute of all successful organizations. Better decisions are made when we have a
wide range of backgrounds and voices to draw from.
I am committed to achieving further progress, and to better understanding the challenges to improving and promoting diversity of
ideas and backgrounds at the Federal Reserve Board (Board) and
the Federal Reserve Banks (Reserve Banks), including in the senior
leadership ranks. My position will provide opportunities to meet
and speak with individuals and groups throughout the System, the
financial community, and regional and community organizations.
Those opportunities will enable me to express strong support for
the System’s initiatives to encourage individuals with diverse cultural, academic, and professional backgrounds to consider positions
with the Federal Reserve. I will also welcome the opportunity to
work with Board and System groups to enhance programs and initiatives to identify and recruit individuals with diverse backgrounds and perspectives for careers at the Board and the Reserve
Banks, as well as to create an environment where all will be successful.
Q.6.f. Federal Reserve Board of Governors nominee Marvin
Goodfriend, has recommended that the ‘‘central bank put in place
systems to raise the cost of storing money by imposing a carry tax
on its monetary liabilities.’’ Do you believe that there should be a
currency tax, or that there are financial conditions that would call
for a currency tax?
A.6.f. The United States dollar enjoys a well-earned status as a
store of value and a reliable means of exchange both domestically
and across the world. Any new policy that could undermine the
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confidence that is placed in the dollar should be thought through
very carefully and undertaken only after a great deal of study. Fortunately, the United States economy is strong and inflation is close
to 2 percent, so there is no need to consider such a policy. Moreover, the Federal Reserve’s main monetary policy tools have helped
to meet the goals set forth for the Federal Reserve by statute.
Q.6.g. Please provide a complete list of The Bowman Group’s clients.
A.6.g. The Bowman Group provided consulting services to the following entities in the United Kingdom and European Union between 2004 and 2009: UK Industry and Parliament Trust; Titan
Corporation, UK LTD; Conservative Shadow Homeland Security
Spokesman Patrick Mercer, MP (Homeland Security Advisory
Panel); DKE Aerospace; Conservative Friends of America; and
Localis.
Q.6.h. Please describe in detail greater than you provided in your
Office of Government Ethics letter how you will comply with the
Federal Reserve Act requirement that you cannot hold stock in any
bank, banking institution, or trust company?
A.6.h. I will divest shares of bank stock currently held in my name
in accordance with the ethics agreement following confirmation. In
addition, following confirmation, in accordance with the ethics
agreement, the two trusts containing bank stock will be rewritten
with advice of counsel according to a provision in Missouri trust
law that provides for ‘‘decanting’’—or rewriting—the trusts to exclude me and my heirs as beneficiaries of the trusts. While serving
as a member of the Board, I will not acquire any stock in a bank,
banking institution, or trust company.
Q.6.i. If confirmed, do you intend to serve for the entirety of your
term?
A.6.i. Should I be confirmed, I intend to serve the entirety of the
term.
Q.6.j. After your term as a member of the Federal Reserve Board
of Governors, do you have any plans to resume employment or
serve on the Board of your family’s bank?
A.6.j. At this time, I do not intend to, nor have I been asked to,
return to employment or board service at my family’s bank.
Q.7. This is the first time this Committee has considered a
nominee to fill the position on the Fed Board ‘‘with experience
working in or supervising community banks having less than
$10,000,000,000 in total assets.’’
Q.7.a. If confirmed, do you believe it is your role to advocate for
the community banking industry?
A.7.a. The Federal Reserve seeks to foster a strong and stable financial system that serves banking needs in a fair and transparent
manner. I believe that this objective can best be achieved when we
have a diversified and competitive banking industry that includes
a healthy community bank segment. My experience as a banker
and State supervisor has shown me the vital role community banks
play in providing credit and services to small businesses and communities both large and small. Consequently, I believe it is
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important to support the community bank model and avoid imposing regulatory burdens that are unnecessary to ensure their safe,
sound, and fair operation.
Q.7.b. If confirmed, what would you like to achieve for community
banks?
A.7.b. I am strongly committed to working to tailor the regulation
and supervision of community banks in a manner that ensures
their safety and soundness but is appropriate to their size and simplicity. I am particularly interested in working on simplifying capital rules for these banks and reducing the burden of their regulatory reporting requirements. As a community banker and State
bank supervisor, I have seen small banks struggle with the burdens imposed by regulation. If confirmed, I want to ensure that the
Federal Reserve Board fully considers the perspectives and challenges faced by these banks when it formulates and implements its
regulations.
Q.7.c. Can you clarify your answer to Senator Scott on whether or
not you believe the stock market is a pillar of monetary policy?
A.7.c. Current law requires the Federal Reserve’s monetary policy
decisions to be guided by its obligation to promote maximum employment and price stability. Many factors must be considered as
inputs into monetary policy decisionmaking, and the financial conditions facing business and households, including stock market performance, are often relevant aspects of the outlook for macroeconomic performance. However, the FOMC should not take into
account stock market performance for any purpose outside of what
is necessary to achieve its goals as established by Congress. Fortunately, the United States economy is strong and inflation is close
to 2 percent, and financial market conditions currently appear sufficiently accommodative to further support macroeconomic performance.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
FROM MICHELLE W. BOWMAN
Q.1. The Federal Reserve is one of the agencies authorized to enforce the Military Lending Act (MLA), which is a bipartisan law enacted in 2006 that sets a hard cap of 36 percent interest for most
loans to servicemembers and their families. On July 22, 2015, the
Department of Defense finalized MLA rules that closed prior loopholes that allowed unscrupulous lenders to prey upon servicemembers and their families.
Q.1.a. Do you support these stronger MLA rules? If confirmed, will
you ensure that the MLA is vigorously enforced?
A.1.a. The Military Lending Act (MLA) provides special consumer
protections for service members and their dependents. In enacting
the MLA, the Congress directed the Department of Defense to issue
implementing regulations after consulting with the Federal Reserve and other agencies. I understand that Federal Reserve staff
has worked with Department of Defense staff to carry out that
mandate and, if confirmed, I will support that effort as well as the
Federal Reserve’s full enforcement of the MLA at the institutions
it supervises.
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Q.1.b. If changes are made to the Community Reinvestment Act
that lead to financial institutions, including those that have an online presence, to take deposits from communities but actually make
less of an effort to reinvest in these same communities, would you
consider that to be a good or bad outcome?
A.1.b. The Community Reinvestment Act (CRA) was enacted to ensure that banks help meet the credit needs of the communities
where they are chartered to do business.
As a community banker and bank commissioner, it is my interest
to see credit flowing to consumers and businesses in all communities consistent with safe and sound lending—including in lowand moderate-income areas—to further economic development and
financial inclusion.
I believe that any revisions to CRA that expand the area within
which a bank’s CRA performance is evaluated should ensure that
the new areas are consistent with the original intent of the law,
and that changes would include clear guidance to banks so that
they are able to comply.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR
MENENDEZ FROM MICHELLE W. BOWMAN
Q.1. Will you commit that if confirmed, you will ignore any political
pressure or interference, whether it be direct or indirect from the
President or any other member of the Administration?
A.1. Yes.
Q.2. Do you agree that the achievement of full employment should
be associated with strong and broad-based wage growth for average
workers, not just senior executives and managers?
A.2. The labor market remains strong. Job gains have been solid,
on average, in recent months, and the unemployment rate has fallen to 3.9 percent, the lowest level in many years. However, wage
growth is also a very important issue, and while it is encouraging
that wages seem to be rising a little faster than a few years ago,
I would like to see stronger wage growth. In addition, I think that,
as the economy improves, it is important that a wide range of individuals and communities benefit from a strong labor market. The
Federal Reserve can best help a broad range of workers by focusing
on achieving its dual mandate of full employment and stable inflation.
Q.3. Why isn’t this tight labor market forcing employers to offer
higher and more competitive wages?
A.3. Even though wage growth has been slow relative to previous
decades, most measures of aggregate wages have increased gradually over the past few years as the labor market has tightened.
Moreover, we have seen some indications that workers are benefiting from a tighter labor market in ways other than higher wages.
Firms appear to be searching out workers whom they might have
previously passed over and seem to be more willing to offer training to workers whose skills need to be improved. I expect these
trends to continue and expect workers to reap greater benefits from
the strong labor market.
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Q.4. To what extent has workers’ decreased leverage to negotiate
with their employers impacted their ability to demand higher
wages?
A.4. Over much of the recovery, many workers had very little negotiating leverage with employers because labor was abundant, but
jobs were not. This has changed in recent years, and there are
signs that negotiating leverage for at least some workers has increased. Some firms are exerting considerably greater effort to find
and sign workers, which gives sought-after employees some negotiating leverage. Looking back over a longer time period, it could be
that changes in technology, or other factors, may have decreased
worker negotiating leverage by, for example, increasing employers’
ability to monitor workers, automate tasks or shift production to
different locations. But it is difficult to know how much such
longer-term developments have affected negotiating leverage and
wages.
Q.5. Do you agree with Federal Reserve Governor Brainard that it
is important to retain a focus on place as the Federal Reserve contemplates changes to the Community Reinvestment Act? Do you
agree that in some low-income and hard to reach communities,
physical branches are sometimes the only way to meet local credit
needs?
A.5. In Governor Brainard’s recent remarks on Community Reinvestment Act (CRA) modernization, she stated that the time is
‘‘ripe for a refresh to make it even more relevant to today’s challenges.’’ In particular, she focused on finding a way to expand the
area in which a bank’s CRA activities are evaluated, in addition to
the importance of retaining a core focus on location.
In her statement, she cited research that demonstrates that
branches are an important vehicle for reaching small business customers and low-income consumers.
I agree with her assessment that the agencies should focus on
how to make the area where CRA activity is evaluated more meaningful to both banks and low- and moderate-income communities.
Q.6. Do you agree that robust enforcement against discriminatory
or unfair and deceptive lending practices must work hand-in-hand
with any revisions to the Community Reinvestment Act?
A.6. Discrimination and other illegal credit practices are barriers
to helping to meet community credit needs and, as such, are inconsistent with the CRA.
I understand why the regulators take evidence of discrimination
into account when assigning CRA ratings as prescribed in the CRA
regulations.
I believe that there is a connection between CRA, fair lending,
and laws protecting against other illegal credit practices, and this
connection should be clear to bankers trying to comply with laws
designed to ensure that consumers and communities have fair access to credit.
Q.7. A Treasury Department report issued in April recommends
that the Federal Reserve adopt the OCC’s new policy allowing
banks with failing CRA ratings to merge or expand so long as they
can demonstrate a potential benefit.
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Do you think the Federal Reserve should adopt this policy?
A.7. One means of enforcing CRA is the bank applications process.
An institution’s most recent CRA record is a particularly important
consideration in the applications process. In addition to wanting to
serve their communities, banks know that CRA ratings are also important to their ability to grow and expand.
I understand that the Office of the Comptroller of the Currency’s
(OCC) guidance on how it will assess CRA ratings in the context
of its review of a banking application has recently changed and
varies from the Federal Reserve’s guidance. If confirmed to the
Federal Reserve Board (Board), I would want to understand how
the Federal Reserve guidance is applied and the nature of the differences between its guidance and the OCC’s approach.
Fundamentally, I believe that it is important to maintain the
Congress’ intent to use the CRA as a measure in evaluating banking applications, while ensuring that there is clarity and transparency for banks to understand how the guidance is applied.
Q.8. Prior to the financial crisis, regulators treated assets like
subprime mortgage-backed securities as ‘‘low risk,’’ which allowed
big banks to load up on risky assets without the necessary capital
backing. When the crisis hit, the Nation’s biggest banks didn’t have
the capital to withstand the losses.
Do you agree that regulators and banks misperceived risks before the last crisis, and assigned low ratings to assets that were actually toxic?
A.8. The financial crisis highlighted deficiencies in both the quantity and quality of capital required by the banking agencies’ regulatory capital rules. Since the crisis, U.S. banking agencies have
substantially strengthened regulatory capital requirements for
large banking firms. Maintaining the safety and soundness of the
largest U.S. banks is fundamental to maintaining the stability of
the U.S. financial system and the broader economy.
Q.9. Last month, the Fed and the OCC proposed a rule that would
weaken the enhanced supplementary leverage ratio, a requirement
that the Nation’s biggest banks hold enough capital to support
lending and absorb losses in a downturn. Those banks are required
to meet leverage ratios at the holding company level and at the depository institution level—where the deposits are backed by taxpayers. According to the FDIC, this proposal would result in the
departure of more than $120 billion in capital—capital that our
regulators unanimously deemed necessary after the financial crisis
to ensure our Nation’s largest banks can withstand losses. Federal
Reserve Governor Brainard voted against this proposal—the first
dissent in the history of Board votes it keeps on it’s website (315
votes total)—and the FDIC declined to join the proposal, a significant departure from other postcrisis rulemaking, even though the
Fed and FDIC jointly established this rule after the crisis.
Are you at all concerned that without the backstop of an adequate leverage ratio for the Nation’s eight biggest banks, banks
will once again load up on so-called ‘‘low risk’’ assets, and place
taxpayers at risk of future bailouts?
A.9. The supplementary leverage ratio is an important component
of the regulatory capital framework. The enhanced supplementary
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leverage ratio standards applicable to U.S. global systemically important banks were intended to serve as an appropriate complement and strong backstop to these firms’ risk-based capital requirements. It is important to get the relative calibration of the leverage and risk-based requirements right.
Experience suggests that the enhanced supplementary leverage
ratio standards are currently calibrated too high, creating potential
incentives for firms to disengage from certain low-risk, low-return
financial activities that are beneficial for the economy. Similarly,
they potentially incent high-risk, high-return activities. Modest recalibration can reduce these negative incentives while not materially changing overall large bank holding companies’ capital requirements.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
FROM MICHELLE W. BOWMAN
Q.1. I believe strongly in the importance of the Fed’s independence.
Recent comments from another Fed candidate (and former Fed
Governor)—Kevin Warsh—suggest that President Trump has been
anything but shy in revealing his preference for a low interest rate
environment.
Q.1.a. Has the President—or anyone in the Administration—impressed upon you their beliefs on how you should vote on matters
of monetary policy?
A.1.a. I have had no communication with the President or members of the Administration seeking to influence my position or future vote, if confirmed, on monetary policy issues.
Q.1.b. Do you commit to safeguarding the independence of our central bank?
A.1.b. I believe that Congress wisely chose to insulate monetary
policy decisions from short-term political influences. Insulation
from short-term political pressures is crucially important for the effective conduct of monetary policy, the Federal Reserve is and must
also remain accountable to the public. If confirmed, I will be committed to building on the Federal Reserve’s tradition of transparency, openness, and accountability while maintaining the independence of the Federal Reserve in the conduct of monetary policy.
Q.1.c. What do believe is the biggest threat to financial stability
at the moment?
A.1.c. We have enjoyed many years of economic growth since the
recession that followed the financial crisis. The financial system
has been relatively stable during that period. As a result, there is
a tendency to forget the lessons that we have learned. When we
forget, however, we make ourselves vulnerable again.
A crucial lesson from the financial crisis is that we always need
to be prepared. The reforms that have been implemented since the
crisis have helped us to build a more resilient financial system.
However, we cannot rest. We must be vigilant in monitoring the financial system, both the vulnerabilities that were important contributors to the financial crisis—like asset valuations, leverage,
maturity transformation, and complexity—as well as new
vulnerabilities that could emerge. Only with vigilance can we avoid
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the natural slide toward complacency that overtakes us as the distance between us and the crisis grows.
Q.1.d. Do you believe that Title II’s Orderly Liquidation Authority
is an important tool available at the Fed’s disposal during a crisis?
Would you vote to use the Authority if bankruptcy was not an appropriate method for resolving a systemic financial institution?
A.1.d. Bankruptcy should be the preferred resolution framework
for a failing systemic financial firm, in the same way that it is the
resolution framework for the holding companies of our Nation’s
community banks. However, as the Treasury noted in their report
on Orderly Liquidation Authority and Bankruptcy Reform, it is important to have an emergency tool for use in extraordinary circumstances.
I would need to know all of the facts and circumstances before
deciding whether it was appropriate to vote in favor of recommending that the Treasury Secretary use Title II’s Orderly Liquidation Authority in connection with a specific failure. One aspect
of Title II that I would weigh is that it does not allow for Government capital injections and requires that taxpayers suffer no losses
from the resolution.
Q.1.e. Do you think current bank risk-based capital levels are too
high, too low, or about right? How about the leverage ratio?
A.1.e. Maintaining the safety and soundness of the largest U.S.
banks is fundamental to maintaining the stability of the U.S. financial system and the broader economy. To be safe and sound financial institutions, these firms must be well-capitalized. The U.S.
banking agencies have substantially strengthened regulatory capital requirements for large banking firms, improving the quality
and increasing the amount of capital in the banking system. Indeed, large U.S. banking firms have roughly doubled their capital
positions from before the crisis to today, making them significantly
more resilient, as well as able to support lending and financial
intermediation in times of financial stress.
It is my understanding that reforms proposed by the Federal Reserve suggest that the enhanced supplementary leverage ratio
standards may be currently calibrated too high, creating potential
incentives for firms to disengage from certain low-risk, low-return
financial activities that are beneficial for the economy. Additionally, I understand that modest recalibration may reduce these negative incentives while not materially changing overall large bank
capital requirements.
Q.2. As you may know in S. 2155, we contemplate raising the enhanced prudential standards from $50 billion to $250 billion, with
an 18 month-delayed effectiveness to give the Fed time to do a
rulemaking and decide whether it should apply any of the enhanced prudential standards to banks between $100 billion and
$250 billion.
What do you see as the most important enhanced prudential
standards for these midsized banks?
A.2. I believe the bank regulatory framework should continue to
protect the core tenets of regulatory reform—capital, stress testing,
liquidity, resolution planning, and orderly liquidation authority.
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However, not all standards are appropriate for all banking organizations, and it is appropriate to tailor regulation and supervision
to the size, systemic footprint, and risk profile of individual institutions. Recognizing the levels and types of risk of the different institutions in the system improves the quality and efficiency of regulation.
Periodic supervisory stress testing is an important post-crisis reform maintained for banks with assets between $100 billion and
$250 billion by the Economic Growth, Regulatory Relief, and Consumer Protection Act, and will help the Federal Reserve Board ensure that these firms are engaged in less burdensome but still robust, forward-looking capital assessments.
Q.3. The urban-rural economic divide is an area of particular interest for me and an area where I’ve done a lot of work. I believe that
someone shouldn’t be forced to leave their community to find a
good paying job. As we’ve seen in the Great Recession and the recovery that’s followed, the impacts of these macroeconomic trends
are not universal and, in this case, have often been felt more
harshly in rural areas.
• What do you believe to be the driving forces behind the decline
of rural America? Is this trend the result of globalization and
technological change?
• Do you believe these trends are irreversible?
A.3. I agree that the relatively poor labor market outcomes in rural
areas in recent years is a big concern. Globalization and technological change may be playing a role, but determining the causes
of these adverse trends is difficult. What’s clearer to me is that
these trends are reversible. Public policy can ameliorate, if not fully
reverse, these trends by, for example, increasing infrastructure investment and promoting greater educational and job-training opportunities. Moreover, some current or future changes in technology can prove favorable to workers in rural areas by increasing
their ability to work remotely, or by making it easier for production
to be located in rural areas but still be connected to supply chains.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
FROM MICHELLE W. BOWMAN
Q.1. Do you believe that any U.S. banks are Too Big to Fail?
• If so, what can and should the Fed do to address this problem?
• If not, what evidence supports your conclusion?
A.1. I believe substantial progress has been made in making the
financial system more resilient, particularly as a result of stronger
capital, liquidity, stress testing, and resolution planning requirements that were introduced in the wake of the financial crisis. Activities and risks in the financial sector evolve quickly, however, especially at the largest firms, so I also believe that regulators need
to closely monitor risks to the financial system over time and act
accordingly.
Q.2. Section 402 of S. 2155, which recently passed the Senate and
allows banks ‘‘predominantly engaged in custody, safekeeping, and
asset servicing activities’’ to have less capital.
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Q.2.a. Do you believe that language applies to JPMorgan Chase
and Citigroup?
A.2.a. Section 402 of the Economic Growth, Regulatory Relief, and
Consumer Protection Act allows depository institution holding companies that qualify as ‘‘custodial banks’’ to exclude reserves
at certain central banks for purposes of leverage capital requirements. This section defines a custodial bank as any depository institution holding company that is predominantly engaged in custody, safekeeping and asset servicing activities (and any subsidiary
depository institution of such a holding company) and the banking
agencies could issue regulations to implement these provisions. Diversified bank holding companies, such as JPMorgan Chase and
Citigroup, have significant custodial operations but these operations are relatively small compared to the companies’ overall operations. Therefore, these organizations would not appear to qualify
as ‘‘custodial banks.’’
Q.2.b. Would that analysis hold if those two banks created intermediate holding companies to house their custody services?
A.2.b. The Federal Reserve Board’s (Board) regulatory capital rules
are based on financial consolidation. Consolidation combines the
assets and activities of the top-tier company and its subsidiaries so
that they can be viewed holistically. In my current understating,
if a depository institution holding company reorganized all of its
custodial services under an intermediate holding company but
made no other changes, the assets and activities of the top-tier,
consolidated depository institution holding company would not be
affected. Housing the custody services under an intermediate holding company therefore would not affect whether a company received capital relief under section 402 of the Economic Growth,
Regulatory Relief, and Consumer Protection Act.
Q.3. Banks today reported record profits—up 27.5 percent from the
first quarter of last year. The economy is nearly a decade into a
long expansionary period.
Why is a reduction in capital requirements necessary or appropriate at this time?
A.3. It is clear that a resilient, well-capitalized financial system
that is strong enough to withstand even severe shocks and support
economic growth by lending through the economic cycle is needed.
To that end, the U.S. banking agencies have acted to substantially
strengthen regulatory capital requirements for U.S. banking firms,
resulting in improved quality and an increase in our amount of
capital in our banking system. At the same time, it is important
to monitor the capital rules on an ongoing basis, to determine
whether the framework is effectively measuring and addressing
risk and working as intended, and to adjust the framework as
needed.
Reforms proposed by the Federal Reserve suggest that the enhanced supplementary leverage ratio standards may be currently
calibrated too high, creating potential incentives for firms to disengage from certain low-risk, low-return financial activities that
are beneficial for the economy. Modest recalibration may reduce
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these negative incentives while not materially changing overall
large bank capital requirements.
Q.4. Fed Chair Powell recently announced that the Fed’s Board of
Governors would vote on whether to relieve Wells Fargo from the
growth restriction the Fed imposed on it pursuant to its February
2018 consent order.
Q.4.a. What kind of changes at Wells Fargo would you need to see
before voting to lift the growth restriction?
A.4.a. As specified in the Consent Order, the firm must adopt and
implement the remediation plans the Consent Order requires to
improve Wells Fargo’s governance and risk management, including
internal controls and testing of those controls, particularly for compliance and operational risk.
I understand that the firm must also engage a third party to review the implementation of the plans and required improvements.
And furthermore, that a number of improvements must be made
to the firms’ governance and risk management practices to be fully
compliant with the terms of the Consent Order. If confirmed, with
regard to lifting the asset cap imposed, I would only vote to do so
if the required improvements are implemented to the satisfaction
of the Board.
Q.4.b. Do you believe the Fed should place more emphasis on finding diverse leaders for the regional banks? If so, how do you recommend changing the current hiring process so that it produces
more diverse leaders?
A.4.b. My impression is that the Federal Reserve System and its
leadership has placed considerable emphasis on increasing the diversity of senior leadership, and with some significant successes.
However, I think all also agree that more must still be done. If confirmed, I will join the Board with the intent to devote time and attention to understanding the full range of challenges in this space,
and think creatively about how the Board in particular can engage
more effectively in support of the shared goal of a more diverse
senior leadership.
In reviewing recent searches, I have observed that search committees have used a variety of new channels to solicit input on important attributes for the districts’ presidents, as well as suggestions of specific individuals for consideration. They have also
worked to make the process as transparent as possible. Outreach
has occurred through social media—for example, webinars and
YouTube videos—and also through more traditional efforts, such as
meetings with key constituencies, including nonprofit and advocacy
groups as well as the business community. All of this seems promising and important, and represents a foundation on which I hope
we can continue to build.
I believe the Federal Reserve is committed to making further
progress and to better understanding the challenges to promoting
and improving diversity of ideas and backgrounds. It has described
this as an ongoing objective, and I assure you that diversity will
remain a high-priority objective for the Federal Reserve, if I am
confirmed.
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Q.4.c. The Fed is apparently participating in an interagency effort
to reform regulations implementing the Community Reinvestment
Act. In April, the Treasury Department sent a memo to the Fed,
the OCC, and the FDIC recommending several rule changes. Do
you disagree with any of the Treasury recommendations?
A.4.c. I understand that the Treasury’s recommendations were
based on a broad outreach effort and the summary sent to the
agencies includes helpful insights.
As with any process, I believe that it is likely that some recommendations may be difficult to implement as a practical matter,
such as the recommendation to standardize the examination schedules across the regulatory agencies.
If confirmed, I would want to review the recommendations to see
which would result in improving the effectiveness of the Community Reinvestment Act (CRA), while focusing on potential ways to
relieve regulatory burden for community banks.
I would like to see the agencies work together to find ways to accomplish both goals.
Q.4.d. What are your priorities for CRA reform?
A.4.d. There is a great deal of consensus among banks, community
development organizations, and others regarding the need to make
CRA evaluations more consistent and transparent.
I also agree that CRA should be revised in a way that encourages
more lending and investment in underserved areas.
I believe these are good goals for the agencies to pursue and that
any revisions to the CRA regulations need to balance the interests
of both community and industry stakeholders.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR CORTEZ
MASTO FROM MICHELLE W. BOWMAN
Community Reinvestment Act
Q.1.a. Should CRA be expanded to all nonbanks? Some assert that
in today’s financial landscape, CRA compliance should be expanded
to all nonbanks, including credit unions, fintechs, mortgage companies, investment, and others.
A.1.a. If confirmed, I assure you that I would be committed to
using the authorities available to the Federal Reserve to identify
and take action against discriminatory lending practices. However,
as the scope of the Community Reinvestment Act (CRA) is mandated by statute, any expansion of its coverage to nondepository institutions would require a statutory change.
Q.1.b. Do you support a full scope review for CRA exams? Do you
think geographical assessment areas should define CRA accountability both where the majority of branch lending and the majority
of nonbranch lending occurs?
A.1.b. It is important that the agencies with rule writing authority
for CRA (the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency)
evaluate ways to provide a meaningful evaluation of a bank’s CRA
activities in all of the communities it serves.
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My understanding is that the agencies are considering ways to
make the area in which CRA performance is evaluated more reflective of current banking practices. I support that effort.
Q.1.c. If a fair lending exam detects a violation after a bank has
been graded for its CRA exam, do you think the bank should receive a retroactive downgrade?
A.1.c. Discriminatory and other illegal credit practices hinder access to credit, which can limit opportunity in communities, and
that is inconsistent with the spirit of the CRA.
I believe that regulators do take fair lending matters into consideration when assigning CRA ratings, as prescribed in the CRA regulations.
Given the importance of both the CRA and fair lending laws, I
believe it is critical to ensure clarity in the rules and an understanding of compliance with those rules, and to ensure credit is
flowing to consumers and businesses in all communities consistent
with safe and sound lending, including in low- and moderate-income areas. Doing so, will help meet credit needs and further economic development and financial inclusion.
Q.2. Many Democratic, Republican, and Independent current and
former regulatory officials raising concerns about the bank deregulation bill range from former Fed Chair Paul Volcker, former Fed
Governor and Deputy Treasury Secretary Sarah Bloom Raskin,
former FDIC Chair Sheila Bair, former Counselor to the Treasury
Secretary Antonio Weiss, and former Deputy Governor of the Bank
of England Paul Tucker. These former banking regulators either
State that a $250 billion bank threshold is too high to protect financial stability or that we should not weaken the leverage rules
for the largest banks, or both.
Do you think anything in S. 2155 puts the financial system at
risk? Do you share the concerns raised by your predecessors? If so,
why? If not, why not?
A.2. I believe that regulation and supervision should be tailored in
a manner that allows the financial system to more efficiently support the real economy. The Federal Reserve has been working for
many years to tailor regulation and supervision to the size, systemic footprint, and risk profile of individual institutions. Recognizing the levels and types of risk of the different institutions in
the system improves the quality and efficiency of regulation, but I
believe more tailoring can and should be done.
It is reasonable for Congress to raise the $50 billion asset threshold to limit the scope of the enhanced prudential standards to larger bank holding companies. My understanding is that the Economic
Growth, Regulatory Relief, and Consumer Protection Act preserves
the ability of the Federal Reserve to reach below the new $250 billion line, if warranted, to subject a firm to more stringent regulation. In general, the Act preserves the Federal Reserve’s ability to
adequately monitor and regulate systemic risk of banking firms as
well as its ability to regulate banking firms for safety and soundness objectives.
I also support the Act’s exemption for community banks from the
Volcker rule. Such a move provides relief for thousands of small institutions that face ongoing compliance costs simply to confirm that
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their activities and investments are indeed exempt from the statute. An exemption at this level is not likely to increase risk to the
financial system.
Q.3. CRA regulations establish different CRA exams for banks with
different asset levels. Small banks, those with less than $307 million in assets, have the most streamlined exam that consists of only
a lending test. Intermediate small banks (ISB), those with assets
of $307 million to $1.226 billion, have exams that consist of a lending test and a community development (CD) test. The CD test assesses the level of CD lending and investing for affordable housing,
economic development, and community facilities. Large banks,
those with assets above $1.2 billion, have the most complex exams
which consist of a lending test, an investment test, and a service
test.
It is my understanding that your bank qualified as a small bank,
so it had a streamlined exam focused on lending only. In your response to my question on what it would take for your bank to earn
an outstanding rating instead of a satisfactory rating, you stated
you found the exam guidelines unclear. Please identify where you
feel CRA guidelines for small banks are unclear.1
A.3. In general, community bankers seek to serve their customers
in ways that are safe and sound and within their institution’s ability. I believe that community bankers, in spirit, would say they
strive to be viewed as outstanding bankers by their customers and
in their communities.
The CRA examination procedures describe a variety of factors
that are taken into account, such as the economies and opportunities that may exist in the markets that the bank operates in. Given
that such conditions can vary between examinations, and that the
regulations are not prescriptive, it can be difficult for banks to have
certainty as to what factors may be viewed as more favorable and
result in an ‘‘Outstanding’’ rating.
Q.4. Chair Yellen was the first chair in Federal Reserve history to
share data with this Committee about racial economic disparities
during her semi-annual testimony. When she presented that data,
she touted significant progress, and indeed, black unemployment
fell from 11.8 percent at the beginning of her term to the current
historically low figure of 6.9 percent.
What do you attribute this trend to? Do you think the attention
that Janet Yellen paid to this issue and the policies of the Federal
Reserve deserve credit for the progress that has been made?
A.4. With the aggregate unemployment rate near its lowest point
since the 1970s, it is not surprising that the unemployment rate for
African Americans is also close to its lowest point since then. Both
figures reflect the long economic expansion our country has been
enjoying. Although our macroeconomic performance cannot be attributed to any single factor, the efforts of the Federal Open Market Committee (FOMC) to achieve its dual mandate have likely
been a contributing factor. Moreover, while monetary policy is
blunt tool, which works by lifting the economy as a whole rather
1 CRA Examination Procedures Overview: Available at: https://www.ffiec.gov/cra/pdf/
cralexsmall.pdf.
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than by targeting the well-being of any single group in our society,
the efforts of the Federal Reserve to pay attention to the diversity
of our economy contributes to a better understanding of how it
works for all Americans, which should help to improve policymaking.
Q.5. At that same testimony where Janet Yellen presented information about racial economic disparities, she said, quote ‘‘it is troubling that unemployment rates for these minority groups remain
higher than for the Nation overall, and that the annual income of
the median African American household is still well below the median income of other U.S. households.’’
Though African American unemployment is lower today, Chair
Yellen’s point remains true. Do you think the recent progress is
sufficient? What more can be done to ensure that unemployment
among African Americans is equal to white unemployment? In addition to increasing employment rates for African Americans, what
can the Fed do to increase wages and wealth for African Americans
and Latinos?
A.5. The economic disparities between African American households relative to other U.S. households, with respect to both unemployment and incomes, are long-standing, and I would like to see
the gap close further. By promoting a strong stable economy, the
Federal Reserve can create widespread economic opportunities that
both reduce unemployment and boost incomes among all households. African-Americans have also had problems accessing credit
and other financial resources on an equal footing, and the Federal
Reserve can use its regulatory and supervisory role to make sure
that financial institutions meet their obligations in this regard.
However, the tools available to the Federal Reserve cannot address
many of the longstanding challenges facing African American communities. These actions would require action by Congress and
State and local governments.
Q.6. Marvin Goodfriend, another nominee to the Federal Reserve
Board of Governors has urged the Federal Reserve to incent spending by placing a tax on currency.2
Q.6.a. Do you support Mr. Goodfriend’s proposal to tax currency
kept outside of circulation?
A.6.a. The United States dollar enjoys a well-earned status as a
store of value and a reliable means of exchange both domestically
and across the world. Any new policy that could undermine the
confidence the world places in the dollar should be thought through
very carefully and undertaken only after a great deal of study. Fortunately, the United States does not find itself in such a situation
presently, as the U.S. economy is strong and inflation is close to
2 percent, so there is no need to contemplate such a tax.
Q.6.b. If Mr. Goodfriend’s proposal were to be implemented, can
you estimate what the impact would be on savers and low-income
depositors?
2 Goodfriend, Marvin. ‘‘The Case for Unencumbering Interest Rate Policy at the Zero Bound.’’
Carnegie Mellon University. September 15, 2015. Available at:https://www.kansascityfed.org/
∼/media/files/publicat/sympos/2016/econsymposium-goodfriend-paper.pdf.
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A.6.b. The effects of a currency tax on savers and low-income depositors are certainly part of the myriad of potential consequences
that would have to be investigated if this policy were to be considered. As stated above, I believe that any new policy that could undermine the confidence the world places in the dollar should be
thought through very carefully and undertaken only after a great
deal of study. Moreover, the United States is not in a position of
needing to consider such a policy at present.
Q.7. The Consumer Financial Protection Bureau has endured new
leadership that is hostile to its mission. A number of enforcement
actions aimed at helping people receive redress from fraud or overcharges has been stopped.
Q.7.a. If the Consumer Financial Protection Bureau’s leadership
refuses to ask for adequate funding or takes steps that you think
are harmful to people or our economy, will you let Senate Banking
Committee Members know? If so, how? If not, why not?
A.7.a. My understanding is that the Consumer Financial Protection Bureau (CFPB) consults with the Federal Reserve Board
(Board) in its rulemakings and coordinates in the examinations as
appropriate, but the Board does not have oversight of the CFPB organizational or structural design.
If confirmed to serve on the Board of Governors, I would fully
support the Federal Reserve as it continues to carry out its supervisory and enforcement responsibilities to ensure that the banks it
regulates are held accountable for compliance with all applicable
Federal consumer protection laws and regulations.
Q.7.b. The Federal Reserve retains supervision and enforcement
authority for financial institutions below $10 billion in assets.
Please provide a list of public enforcement actions taken toward
any Fed-regulated institutions in the past 3 years. Please note any
fines or penalties assessed. Please note if you agree or disagree
with these enforcement actions.
A.7.b. Bank supervisors have a responsibility to ensure that the institutions subject to the Federal Reserve’s supervision operate safely and soundly and that they comply with applicable statutes and
regulations, and additionally, that the Federal Reserve should use
its formal enforcement authority to achieve these objectives where
appropriate. I cannot comment on the specific circumstances of actions the Federal Reserve has taken in the past. A list of public enforcement actions taken against institutions regulated by the Federal Reserve in the past 3 years, including any civil money penalties assessed against the institution, is provided in Appendix A
to this request.
Q.8. Some current Federal Reserve leaders support reducing banks’
capital requirements. This concerns me as capital requirements
have been a key tool in restoring the safety of the financial system
since the crisis. Ensuring modest leverage ratios prevents banks
from lending out more than they can afford to, and especially keeps
them away from riskier assets like the ones that fueled the crisis.
For this reason, Democrats and Republicans in the House and
Senate, as well as FDIC Vice Chair (and former Kansas City Fed
President) Thomas Hoenig all support higher capital requirements,
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not lower ones. Do you support any changes to the current capital
requirements for financial institutions? If so, please describe.
A.8. We need a resilient, well-capitalized financial system that is
strong enough to withstand even severe shocks and support economic growth by lending through the economic cycle. To that end,
the U.S. banking agencies have substantially strengthened regulatory capital requirements for U.S. banking firms, improving the
quality and increasing the amount of capital in the banking system. At the same time, it is important to monitor the capital rules
on an ongoing basis, to determine whether the framework is effectively measuring and addressing risk and working as intended, and
to adjust the framework as needed.
Q.9.a. In recent years, Federal Reserve policymakers have warned
that we should raise interest rates to counter asset bubbles destabilizing the financial system. Board of Governor Nominee Marvin
Goodfriend has suggested replacing liquidity coverage ratios and a
host of other regulations with tighter monetary policy.3
Do you believe that the blunt tool of monetary policy can be a
substitute for sound financial protections? What is your understanding of the historical evidence surrounding the relationship between monetary policy and asset bubbles?
A.9.a. Monetary policy is the primary tool through which the Federal Reserve works to achieve the goals of price stability and full
employment. To use that tool for other purposes could undermine
its effectiveness for those goals, and thus monetary policy should
not be considered a substitute for prudent financial and supervisory standards. As we learned in the crisis, the lack of such
standards had significant consequence. The buildup of leverage and
maturity transformation in the years leading up to the crisis left
the U.S. and global economy vulnerable to shocks. When the housing market turned down, the effects of that shock were amplified
as leverage was wound down and funding patterns shifted. The result was what we all painfully experienced as the financial crisis.
Post-crisis reforms have raised loss-absorbing capacity within the
financial sector and reduced the susceptibility of the financial
system to destabilizing runs. Of course, gaps exist in financial regulation, and therefore, changes in interest rates could at times be
appropriate as a supplementary tool to address threats to full employment and price stability emanating from widespread imbalances or buildups of risk in areas where more-targeted tools are
inadequate or nonexistent.
Understanding movements in asset prices is very difficult, and
there are many factors that contribute to their short- and longterm movements. Monetary policy has not generally been a prime
factor in historical episodes involving large increases in asset
prices.
Q.9.b. Besides monetary policy, what other tools are available to
temper asset bubbles?
A.9.b. Making a determination about the appropriate value of an
asset is extremely difficult. Many factors come into play in the
3 Senate Committee on Banking, Housing, and Urban Affairs, June 7, 2016, Hearing. Available at: https://www.gpo.gov/fdsys/pkg/CHRG-114shrg21603/pdf/CHRG-114shrg21603.pdf.
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determination of both the short-term and long-term value. Instead
of trying to determine every assets’ appropriate value, it is important to monitor asset prices more broadly, along with the other crucial vulnerabilities that contribute to financial market difficulties,
like leverage, maturity transformation, and interconnectedness.
When shocks occur, it is those vulnerabilities that amplify the effects of the shocks and jeopardize the efficient functioning of the
financial system, price stability, or full employment.
Because determination of the appropriate level of asset prices is
difficult, we need to be prepared at all times by ensuring the safety
and soundness of our financial institutions and our financial system through prudent regulations and supervisory standards. We
never know when a negative shock can occur, including asset price
reversals. As a result, the prudent capital, liquidity, and other regulations and policies adopted by the Federal Reserve are critical for
the protection of our financial system going forward.
Q.10. In the years since the financial meltdown, the Federal Reserve has played a key role in putting our economy back on stable
footing and setting the conditions for more robust growth. Still,
there have been bills introduced that would eliminate the Fed’s full
employment mandate on the basis that, according to the bill’s findings ‘‘at best, the Federal Reserve may temporarily increase the
level of employment through monetary policy.’’
Can you elaborate on how the Fed influences employment in the
short-run, and discuss whether failure to use monetary policy effectively in the face of severe downturns could do permanent damage
to the level of unemployment in the economy?
A.10. In the short run, the Federal Reserve influences employment
primarily through its effect on the financial conditions facing
households and businesses. For example, lower interest rates promote household spending by reducing the cost of borrowing for bigticket purchases such as houses and cars. Similarly, lower interest
rates make it less costly for businesses to invest in new plants and
equipment. This additional demand, in turn, leads to higher production, faster job growth, and rising household income and wealth.
A failure to use monetary policy to effectively combat a severe
downturn would risk persistently high unemployment and perhaps
even risk falling into a harmful deflation where wages and prices
actually fall.
Q.11. Critics of quantitative easing have argued that it is incompatible with the Fed’s price stability mandate; however in discussing quantitative easing the Fed has consistently noted that the
program is designed to promote a stronger pace of economic growth
and to ensure that inflation, over time, is at levels consistent with
the Fed’s mandate.
Q.11.a. Can you comment on how the Fed’s policies in recent years
have actually supported the Fed’s price stability mandate?
A.11.a. Faced with the most severe financial crisis since the Great
Depression, the FOMC cut short-term interest rates to zero by the
end of 2008. The Federal Reserve also turned to nontraditional
tools such as asset purchases and forward guidance, as means of
providing the additional accommodation. These policies put downward pressure on longer-term interest rates and helped to make
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financial conditions more accommodative, encouraging and supporting the economic recovery. By providing a cushion for aggregate demand during the recession and supporting spending during
the recovery, the Federal Reserve’s monetary policy measures
helped to keep inflation close to 2 percent. In particular, in part because aggregate demand was supported by monetary policy, the
U.S. economy avoided the severe downward pressure on the price
level that occurred during the Great Depression, which in turn prevented inflation expectations from falling sharply below 2 percent.
Q.11.b. What does the latest research tell us about the effectiveness of the Fed’s large scale asset purchases?
A.11.b. It is difficult to say with certainty what the effects of largescale asset purchases have been, but most studies find that the
purchases
put
downward pressure on long-term interest rates, which in turn lowered borrowing rates for businesses and consumers, and boosted
stock prices. These effects served to bolster spending on goods and
services by households and businesses, supporting the recovery.
Q.11.c. Is there any evidence that the Fed’s asset-purchase program, which sought to support the economy by lowering long-term
interest rates, has been a drag on U.S. productivity as some Republicans have suggested? Is there any evidence that the program has
created a ‘‘false economy’’ as Trump has asserted?
A.11.c. I find it unlikely that the Federal Reserve’s policies have
contributed to the sluggish pace of productivity growth observed
over recent years. It is more likely that factors such as subdued
spending on investment and research and development by businesses, as well as a reduction in the skills of the labor force resulting from the financial crisis and ensuing recession, have weighed
on productivity.
Q.11.d. How would the economy have likely fared in terms of unemployment, GDP, wage growth, etc., had the Fed chosen not to
pursue its asset purchase program?
A.11.d. The Federal Reserve conducts monetary policy to promote
maximum employment and stable prices. Various research studies
by academic and central bank economists suggest that the Federal
Reserve’s asset purchase programs helped to make financial conditions more accommodative, support economic recovery, strengthen
labor market conditions, and foster price stability.4
Q.11.e. Is there any evidence that the Fed’s stimulus program has
paved the way for the next global meltdown, as Trump claimed?
A.11.e. While there are many sources of risk and uncertainty in
the global economy, I believe the Federal Reserve’s conduct of monetary policy has contributed to an improved global economic outlook by supporting the U.S. economic expansion and maintaining
low and stable inflation.
4 See, for example, Eric M. Engen, Thomas Laubach, and David Reifschneider (2015), ‘‘The
Macroeconomic Effects of the Federal Reserve’s Unconventional Monetary Policies,’’ Finance and
Economics Discussion Series 2015–005, Washington: Board of Governors of the Federal Reserve
System, February, http://dx.doi.org/10.17016/FEDS.2015.005.
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Q.11.f. How does the Fed’s balance sheet as a percentage of GDP
compare with the balance sheets of the next largest economies? Do
these countries have a dual mandate similar to the Fed?
A.11.f. The size of the Federal Reserve’s balance sheet relative to
nominal GDP currently stands at about 23 percent. Last October,
the FOMC initiated its plan to normalize the size of the Federal
Reserve’s balance sheet. Under that plan, the size of the Federal
Reserve’s balance sheet will decline gradually over coming years.
With nominal GDP expected to rise over that time, the size of the
Federal Reserve’s balance sheet relative to nominal GDP will likely
decline appreciably.
The Federal Reserve’s balance sheet as a percentage of GDP is
smaller than those of most other major foreign central banks. The
central bank balance sheets of the United Kingdom, the euro area,
Japan, and Switzerland are about 28, 40, 100, and 120 percent of
their nominal GDP, respectively. All of these central banks employed large-scale asset purchase programs to address the implications of the financial crisis in their countries.
All of these central banks operate with a single mandate to pursue price stability. However, in many cases, this mandate is treated as medium-term objective, and other goals, including output and
employment stabilization and financial stability, are cited to justify
deviations from price stability in the short run.
Q.12. It is my understanding that major central banks around the
world maintain and have drawn on their authority to purchase a
wide range of assets including corporate bonds, commercial paper,
real estate investment trusts, and equities among other assets.
Q.12.a. Given the broad authorities available to other central
banks, rather than shrink the Fed’s tool kit, do you think Congress
should consider expanding it?
A.12.a. As mandated by Congress, the Federal Reserve conducts
monetary policy to promote maximum employment and price stability. It is important that the Federal Reserve has the tools it
needs to fulfill this mandate. The Federal Reserve’s purchases of
Treasury securities and agency securities in the wake of the financial crisis were designed to ease financial conditions and promote
the recovery.
The Federal Reserve is quite limited in the kinds of assets it can
purchase, and those limits seem appropriate to me. Expanding the
Federal Reserve’s authority to allow it to purchase a broad range
of securities could expose the Federal Reserve to pressures to influence the allocation of credit to particular sectors. Such pressures
could threaten the Federal Reserve’s independence, which is essential to allow the Federal Reserve to make decisions in the best interest of the Nation as a whole. Of course, it is up to Congress to
determine the Federal Reserve’s authorities.
Q.12.b. For example, with an expanded authority, could the Fed
play a useful role in supporting municipal finance, student loan financing or other types of consumer credit during periods where
each of these sectors experienced heightened distress?
Would you support or oppose such expansion of the Fed’s authority?
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A.12.b. Please see response to question 12a.
Q.12.c. As the Fed begins to shrink its balance sheet, what are
some of the negative impacts that Senate Banking Committee
Members should monitor? What concerns—if any—do you have
about shrinking the balance sheet? What will you do to monitor the
process of maturing securities to avoid a negative impact on the
economy?
A.12.c. I believe that the gradual approach to removing policy accommodation that the FOMC has been pursuing has supported the
economic recovery and helped the Committee make progress toward its 2 percent inflation objective. The program has proceeded
smoothly thus far with no outsized financial market movements. If
confirmed, I would support a continuation of clear communication
about the FOMC’s plans to shrink the Federal Reserve’s balance
sheet. My understanding is that, in the longer-run, the Federal Reserve intends to hold no more securities than it will need to implement monetary policy efficiently and effectively. I also understand
that the Federal Reserve expects its holdings will eventually consist primarily of Treasury securities. The FOMC has stressed and
I believe it is appropriate that the shrinking of the balance sheet
remains data dependent, and that it could change its plans if confronted with a substantial deterioration in the economic outlook.
Q.13. Ms. Bowman, in your testimony, you stated, ‘‘the regulatory
environment created in the aftermath of the crisis has disadvantaged community banks. If confirmed, I will bring this perspective
to my work at the Board to ensure that rules preserve the resiliency of the financial system, but are appropriately tailored to the
size, complexity, and risk of an institution.’’
As you know, the Dodd-Frank Wall Street Reform and Consumer
Protection Act (P.L. 111–203) rules are tailored so larger banks
have higher standards than smaller banks. Of the 14 ‘‘major’’ rules
issued by banking regulators pursuant to the Dodd-Frank Act, 13
either include an exemption for small banks or are tailored to reduce the cost for small banks to comply. Supervision and enforcement are also structured to pose less of a burden on smaller banks
than they do on larger banks, such as by requiring less frequent
bank examinations for certain small banks.
Q.13.a. Please explain which rules you think ‘‘have disadvantaged
community banks?’’ Please explain which rules you think should be
changed and how?
A.13.a. In my experience, both as a community banker and as the
Kansas State Bank Commissioner, two aspects of bank regulation
can be particularly problematic for community banks: complexity
and a one-size-fits-all approach that does not sufficiently differentiate between large and small banks. I believe it is worth exploring
whether some regulations can be made simpler while still achieving their prudential aims (the regulatory capital framework for
community banks, for example, could perhaps be simplified). Likewise, I would support exempting small banks from regulations that
address large-bank issues, such as the Volcker rule.
Q.13.b. Do you think community banks, those with less than $2
billion in assets, should follow Federal consumer protection rules?
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A.13.b. Decisions about the application of Federal consumer protection rules and compliance by particular institutions are for Congress to decide through law, and as implemented by the responsible
rulewriting agency. In this case the rulewriting agency is the
CFPB.
That being said, I believe that consumer protection is important
regardless of where a consumer chooses to bank or to seek credit
or other financial products. I also believe there is agreement across
the industry that one-size-fits-all regulation does not always work.
Exemptions to rules are sometimes warranted, and asset size of financial institutions can be a factor used to make that determination.
Q.13.c. Do you think community banks should comply with the requirement that loans should be made to people who can repay
them? This is called the ‘‘know before you owe’’ rule. Community
banks are largely exempt from both mortgage origination and servicing rules because they are small creditors with less than $2 billion in assets or service fewer than 500 loans.
A.13.c. I feel strongly that we should not allow the risky underwriting standards used by many originators prior to the housing
crisis to return. It is also important, however, that laws and rules
do not needlessly prevent creditworthy borrowers from getting a
mortgage.
Decisions about which banks must comply with consumer financial service laws are up to Congress through statute or implementation of the statute by the CFPB, as the responsible rulewriting
agency, through regulation.
As Congress and the CFPB consider which banks should comply
with particular underwriting rules, it is important to consider the
impact of any rule on a community bank’s ability to provide credit
to reliable borrowers but whose creditworthiness may be difficult to
capture in a broad, universally applied rule.
Q.13.d. Rules protecting people who send remittances apply to any
financial institution that sends more than 100 remittances a year.
Do you support changes to Regulation E/Electronic Fund Transfers? If so, how would you change this rule?
A.13.d. Under the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act), the CFPB has exclusive rule writing authority to implement most consumer laws, including the
Electronic Fund Transfer Act provisions governing remittance
transfers, which the Bureau implements through Regulation E.
The CFPB, however, generally is required to consult with prudential regulators or other Federal agencies, including the Board,
prior to proposing a rule and during the comment process regarding consistency with prudential, market, or systemic objectives administered by such agencies. (Sec. 1022(b) of the Dodd-Frank Act).
If confirmed, I will work to ensure that the Board continues to fulfill its consultative role in Bureau rulemakings, including any
rulemakings related to remittance transfers.
Q.13.e. Dodd-Frank limited compensation requirements for loan
originators to prevent steering to high-cost loans. Only originators
that make fewer than 10 loans in a 12-month period are exempt.
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Do you support changes to the Loan Originator Compensation Requirements (Regulation Z)?
A.13.e. Under the Dodd-Frank Act, the CFPB has exclusive rule
writing authority to implement most consumer laws, including the
compensation rules for loan originators issued under the Truth in
Lending Act. The Dodd-Frank Act also provides that the CFPB’s
rules are not subject to approval or review by the Board.
However, the Dodd-Frank Act also requires the CFPB to consult
with prudential regulators, which includes the Board, before and
during any rulemaking regarding the rules’ consistency with prudential, market, or systemic objectives administered by the respective agency.
If confirmed, I will work to ensure that the Board continues to
fulfill its consultative role in connection with the CFPB’s
rulemakings, including any rulemaking related to the loan originator compensation rules.
Q.13.f. Mortgage Servicing Rules under Regulation X and Z are designed to protect home buyers from high-cost loans. Servicers with
fewer than 5,000 mortgage loans are exempted from some of these
rules. What changes do your recommend to Regulations X and/or
Z?
A.13.f. The CFPB has exclusive rule writing authority to implement most consumer laws, including the mortgage servicing rules
under Regulation X and Z. The Dodd-Frank Act also speaks to the
autonomy of the CFPB’s rulemaking authority by providing, for example, that no rule can be subject to approval or review by the
Board. (Sec. 1012(c) of the Dodd-Frank Act). Therefore, changes to
the mortgage servicing rules under Regulations X and/or Z are up
to the CFPB to decide.
The Dodd-Frank Act requires that the CFPB engage in an interagency consultation process during the proposed and final rulemaking process with all the prudential regulators.
If the CFPB decided to amend the mortgage servicing rules, I
would expect that Board staff would participate in the CFPB’s
process, and review rulemakings to identify principal areas of concern and potential effects with respect to credit availability, safety
and soundness, regulatory burden, consumer protection and compliance supervision.
Q.13.g. Do you think banks that make more than 25 mortgage
loans should share the loan and borrower characteristics through
the Home Mortgage Disclosure Act database?
A.13.g. Decisions about what information banks should provide
under the Home Mortgage Disclosure Act (HMDA) are up to Congress through statute or as implemented by the CFPB, as the responsible rulewriting agency, through its regulation.
HMDA is a valuable public disclosure law, with the data reported being instrumental in enhancing supervisory and research
efforts for more than 30 years.
I am aware that an intent of the recently passed Economic
Growth, Regulatory Relief, and Consumer Protection Act is to provide regulatory relief from the HMDA data collection and reporting
requirements as expanded by the Dodd-Frank Act for certain banks
that have a lower volume of loan origination. I am also aware that
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the CFPB plans to revisit its 2015 rulemaking under HMDA to reevaluate institutional and transactional coverage, as well as what
data should be collected and reported under HMDA.
As noted above, Congress requires the CFPB to engage in an
interagency consultation process during the rulemaking process. If
confirmed, I will work to ensure that the Board continues to fulfill
its consultative role in connection with such rulemakings, including
any rules under HMDA.
Q.13.h. Banks with assets under $50 billion are not required to
comply with the liquidity coverage ratio. Do you think they should
be? Why or why not?
A.13.h. Prudent liquidity management is important at all banks.
Longstanding supervisory guidance emphasizes the importance of
banks regularly monitoring their liquidity positions and maintaining sufficient levels of liquidity to meet anticipated and unexpected
demands for funding. Supervisors monitor banks’ liquidity levels
using financial data provided by banks on quarterly Call Reports
and review liquidity risk management practices in depth during
bank examinations to ensure that banks are managing their liquidity in a safe and sound manner. In my experience, this supervisory
approach has been effective for smaller banks. For larger, systemically important banks that have more complex funding profiles,
the liquidity coverage ratio requirements are more important. In
the case of these entities, the liquidity coverage ratio helps ensure
that acceptable levels of liquidity are maintained in order to minimize the risk that a liquidity strain at one large bank causes
broader disruptions to the financial system.
I understand that the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act provides additional discretion to the Federal Reserve to determine the appropriate supervisory tools to monitor liquidity in institutions with assets between
$50 billion and $250 billion. If confirmed, I look forward to studying the liquidity coverage ratio and its effectiveness more closely
and working with my Board colleagues to ensure that Federal Reserve supervision continues to promote effective liquidity risk management in all institutions under its supervision, regardless of
their size or complexity.
Q.13.i. Banks with assets under $250 billion are not required to
comply with regulatory capital rules. Do you think they should be?
Why or why not?
A.13.i. Banks of all sizes must maintain adequate capital to ensure
their safety and soundness. All banks are required to comply with
regulatory capital rules. I believe it is appropriate that large banks
are subject to more stringent capital requirements, reflecting their
greater complexity and the greater risk they pose to the stability
of the U.S. financial system.
Q.13.j. The Volcker rule which prohibits proprietary trading applies to all banks but has streamlined policies and procedures for
banks with less than $10 billion in assets. Do you think banks
under a certain size should be allowed to invest in hedge funds and
private equity funds on their own behalf? Do you think the Volcker
Rule should not apply to banks under a certain size?
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113
A.13.j. Congress has recently spoken to this question by enacting
legislation that excludes certain small banking organizations from
the restrictions of the Volcker Rule. These firms do not have large
trading operations in relation to their size. I believe that this reform will reduce regulatory burdens on community banks without
causing harm to the financial system because these banks do not
engage in the type of trading that the Volcker Rule was intended
to restrict. Additionally, I believe that the regulatory regime that
applies outside of the Volcker Rule is sufficient to protect the safety
and soundness of community banks.
Q.13.k. Collateralized debt obligations backed by Trust Preferred
Securities are restricted. Do you think banks under a certain size
that hold CDO–TruPs should not have to comply with restrictions?
A.13.k. Interconnectedness in the banking system increases when
banking organizations invest in other banking organization’s capital securities, including through structured products. This interconnectedness heightens the likelihood that instability at one banking organization will spread to others, regardless of the size of the
banking organizations involved.
Q.13.l. Debit card interchange fees and routing requirements do
not apply to banks that have fewer than $10 billion in assets. Do
you think banks under this size should comply with interchange
fees and routing requirements?
A.13.l. I believe that it is a matter for Congress to decide what, if
any, additional exemptions from these provisions should be provided.
Q.14. Let me ask you about other regulations that apply to banks
but were not enacted by the Dodd-Frank Wall Street Reform and
Consumer Protection Act.
Q.14.a. Do you think the ‘‘primary duty’’ of a bank’s board of directors is ‘‘to ensure the bank operates in a safe and sound manner’’?
I believe that an effective board of directors is integral to the
continuing safety and soundness of a banking firm, including its
compliance with laws and regulations. I understand that the Federal Reserve has proposed guidance on board effectiveness in part,
and in recognition that the supervisory expectations in existing
guidance did not consistently focus on the core responsibilities of
boards. The proposed guidance would eliminate unnecessary or outdated expectations and encourage boards to devote more time and
attention to their core responsibilities, which when exercised effectively, promote the safety and soundness of the firm.
Q.14.b. Do you have recommendations for changes to the Bank Secrecy or Anti-Money Laundering rules?
A.14.b. Banks are required to comply with the Bank Secrecy Act
and Anti-Money Laundering (BSA/AML) laws and regulations in
order to safeguard the U.S. financial system from the risks of
money laundering and terrorist financing. In my time as a banker
at Farmers & Drovers Bank in Kansas, and as the Kansas State
Bank Commissioner, I know that banks take this responsibility seriously, but this compliance incurs significant costs and resources,
especially for smaller banks.
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114
BSA/AML regulations are generally issued by the Department of
Treasury’s Financial Crimes Enforcement Network (FinCEN) or on
an interagency basis, which means that most BSA/AML requirements are handled on an interagency basis. Further, I understand
that the Federal Reserve participates in several groups designed
specifically for BSA/AML issues. Notably, the Federal Reserve participates, along with other Federal banking agencies and the Conference of State Banking Supervisors, in the Federal Financial Institutions Examination Council (FFIEC) BSA/AML Working Group,
which meets regularly to discuss various BSA/AML supervisory
and policy matters. The Federal Reserve also participates in the
BSA Advisory Group (BSAAG), which brings together Federal and
State financial regulatory agencies, FinCEN, law enforcement and
industry.
I do not have any recommendations for changes to the BSA/AML
laws and regulations at this time; however, I support continuation
of the Federal Reserve’s interagency efforts to increase the efficiency, transparency, and effectiveness of the supervision and regulation of financial institutions, including those related to compliance with BSA/AML rules.
Q.15. In 2017, when you served as the Banking Commissioner of
Kansas, George and Agatha Enns conspired with Plains State
Bank employees to launder money. The Enns were sentenced to 3
years of probation and forfeited nearly $2 million in ill-gotten
gains.
Q.15.a. What was the Enns’ crimes? What was the role of the Kansas Banking Commission and your role personally in this investigation and lawsuit?
A.15.a. The Office of the State Bank Commissioner (OSBC) shares
regulatory authority with Federal agencies in enforcing banking
laws. The Department of Justice, in consultation with the FDIC,
IRS and DEA, prosecuted George and Agatha Enns and certain employees of the Plains State Bank for crimes of conspiracy to commit
money laundering, failing to file a Suspicious Activity Report, and
money laundering that occurred from 2011 to 2014. The indictments were unsealed in April 2015. The Department of Justice did
not consult with the OSBC in this matter, and no Kansas Bank
Commissioner has played a role in this Federal criminal action.
The charges alleging that the Plains State Bank employees failed
to file SAR reports for activity conducted 2011–2014 were dropped
in this case.
Q.15.b. Please describe other criminal and civil lawsuits that occurred during your tenure as Commissioner.
A.15.b. The OSBC is currently involved in an ongoing case filed in
2008 resulting from the actions of a previous Bank Commissioner
as described below.
Columbian Financial Corporation v. Bowman, in her official
capacity as Bank Commissioner of Kansas, et al.
Columbian Bank and Trust Company was a State-chartered
bank regulated by the OSBC. On August 22, 2008, the then-Kansas
Bank Commissioner declared the bank insolvent and appointed the
FDIC as receiver due to a liquidity failure. Shortly thereafter, Co-
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115
lumbian Financial Corporation, as the sole shareholder of Columbian Bank and Trust Company, began litigating the Declaration of
Insolvency and Tender of Receivership in State and Federal courts.
Most recently, Columbian Financial Corporation filed in the District Court of Kansas alleging violations of 42 U.S.C. § 1983 by the
Bank Commissioner of Kansas in the Commissioner’s official capacity. Due to being appointed as the Bank Commissioner of Kansas,
I was substituted as a defendant in this official capacity on September 18, 2017.
In 2008, Columbian Financial Corporation alleged that the Bank
Commissioner in his official capacity denied Columbian Bank and
Trust Company and Columbian Financial Corporation due process
by declaring the bank insolvent, seizing the bank’s assets and not
providing adequate constitutional protections and remedies before
and after the declaration and seizure. The allegations contained in
the suit arise from the actions of the former Bank Commissioner
who made the decision to close the bank. On November 21, 2017,
I, in my capacity as Bank Commissioner, filed a motion for
summary judgment and alterative motion for judgment on the
pleadings based on the doctrinal bars of res judicata and collateral
estoppel alleging Columbian Financial Corporation had a full and
fair opportunity to litigate these allegations in an administrative
hearing and judicial review in the Kansas court system. On May
17, 2018, the District Court of Kansas granted the Commissioner’s
motion for summary judgment and dismissed the case finding the
previous State proceedings did not fall below the minimum procedural requirements of the Due Process Clause. As of this writing,
Columbian Financial Corporation has not filed an appeal.
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CIT Group, Inc., Livingston, New Jersey
SS,200,000 CMP
MOC'tgagc Servicing
111212018
C itigroup Inc., New York. New York
C&O Order & $342.000,000 CMP
FX
SI201201S
Sfmt 6602
Clear Mountain Bank, Bruceton Mills. West Vintinia
L:\HEARINGS 2018\05-15 NOMINATIONS\HEARING\31196.TXT
Sl4.000CMP
Flood Insurance
COm-me..CeWetlt Bol'\k. riv-i_I\C,-CQufOrnia
C&oon,er
OSNAMl.
211212018
4.112/l016
Commer?..bank AO. Ftankt'Un #m Mi\-in, Ocl"mAnY
Cooperatieve Centrale RaifTeiscn·Boercnlccnbank B.A., Utrecht,
Netherlands, and Rabobnnk Nederland New Yortc Branch, New
York. NewYortc
Covenant 6aneA:rouo. Inc .. Leeds-. Alab..'l.ma
Credit Agricolc S .A .• Paris, France
C&D 6tder & $200.000.000 CMP
LlSAIAML And 6FAC
BSA/AML
3/ 121201S
6130/2015
Written Akrceme:tu
Safioty and SOUndOC$$
C&O Order & $90,.300,000 CMP
OFAC
12/281201S
1()1191201 s
Customers Bank. Phoenixville, Pennsylvania
C&O Order & $960,000 CMP
FTC Act
121212016
Deutsche Bank AG. Frankfurt am Main, Germany
C&O Order&SI9,710.000 CMP
Votcker
4/2Q/2017
Deutsche Oan.k AG, Frunkfur1 am Main, Oermany
C&D Order & $58,000,000 CMP
OFAC
1 114/201S
Deutsche Bank AO. Frank fun am Main, Gcnnany. and DB USA
Corp•• New York. New York. and OeubChe Bank AGNew York
Bmnch, New York. New York
C&O Order & S 136,9$0,000 CMP
FX
4/2012017
Written Agn::~emcnt
117
Fmt 6602
SHERYL
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Appendtl< A F~l R~ V.RC!btW~nent Acl~
VerDate Nov 24 2008
17:41 Dec 14, 2018
Jkt 046629
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J-.20I$·Ma)t201$
PO 00000
Frm 00122
hsue-Type
(e.g. Safety and Sou ndna~s,
BSAIAML:.etc.)
EffectJve/h s u ed D •tc
Sfmt 6602
L:\HEARINGS 2018\05-15 NOMINATIONS\HEARING\31196.TXT
OeutS<:hc Bonk AQ, Frunkfur1 am Mnin, Oemumy. und DB USA
Corp.-, New York. New York. and DeulKhe ·eank AGN-ew York
Bmnch, New York, New York. ond Deutsche BDilk Trusl Company
Amcric:.M, New York, New York
Di!l:cover F1nanei31 SC..Vices-. Rivei"'WWOds. lllinoi_j
East West Ban~ Pasadena, California
C&D Order & $41,000,000 CMP
OSNAMl.
S/2612017
Written A-~U"eemcnt
Written Agreement
BSNAMl.
BSAIAML.
SI26/201S
I 119/2015
Everbank Financial Core. Jacksonville. Florida
$1.800.000 CMP
S6.200CMI)
Sl2,000CM P
Mort.saac Servicins
Flood lnsuronee
Flood Insurance
4i2'6i2ci'i6
Fanners State Bank, VIctor, Montana
Fayette County Bank~ St. Blmo. Illinois
Written Agreement
Snfety and Soundness
6122.12015
Fayette County Bank, St. Elmo. Illinois
PCA
Safety and Soundness
1013112016
Federal One Holdings, LLC, Milton, Ma.uachusetts, and Admirals
Bancorp. lnc .• Boston. Massachusetts
FiNit Bankshnrcs, Inc., Barboursville, West Virginia
Written Agreement
Safety and Soundness
7/2812017
Written Agn::~cmcnt
Safety and Soundness
818/2016
First Community Bank, Glasgow. Montana
S27.28S CMP
$7.$00CMP
Flood Insurance
Flood I n:surance
Slll/2016
6/11201S
F'il'$t Nebraska Bank,. Valley, Nrbrnska
$SS.SOOCMP
Flood Insurance
9/13/2017
Fll'$t State Bank of Colorado. Hotchkiss. Colotado
Four Oaks Bank & TntSt Company, Four Oaks. North Carolina
$9.28SCMP
Written Agreement
Flood Insurance
Snfe\y and Soundness
9/1812015
71301201S
Freedom Bank ofVi~initt, Fairfax. Virginia
Ooldmnn Sachs B.a1\k USA. New York, New York
Ooldmnn Sachs Oroup. Inc., New Yorlt. New York. and Ooldman
Sachs Bank USA. New York. New York
$2.100 C.M I)
FlOOd lruuro.nce
S90.000CMP
$14.000.000 CMP
MortgA.&.C Servicing
SlllflOIS
1112.12018
1112.12018
Fa~:l'$
& Mcf'(:hfiniS Bank Of Ashland. AAhland. N-ebc"Mkl'l
Flrsl Iowa State B-ank. KC0$8uqua.. Iowa
Flood Insurance
61812017
10/6/2017
118
Fmt 6602
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Type-of
Enforce-ment Action
Name of Entlfy
VerDate Nov 24 2008
17:41 Dec 14, 2018
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Appendtl< A F~l R~ V.RC!btW~nent Acl~
J-.20I$·Ma)t201$
PO 00000
Frm 00123
EffeetJve/h s u ed D•te
Sfmt 6602
Ooldmnn Sachs Croup. Jnoc., New York. New York, und Ooldmtul,
Sachs & Co. New Yortc.. NC'v York
Ool<imtm Snchs OrOup, Inc,. New York. New YOrk
C&D Ordc• & $36,300,000 CMP
Snfety und Soundneu
v.l/2016
C&D Order & $54,150,000 CMP
FX
S/1/lOIS
Habib Bank Limited. Karachi, Paki$tan, nnd Hnbib Bonk Limited
New YOrk Brnnch, New York. New York
C&DOrder
BSAIAML
12/11/lOI 5
HI\Uird Bancorp, HaT.ard. Kcntu<:k;y, o.nd Pc<>ples Bank o.nd Trus1
Wrincn Aa,reemcnt
Snfety oM SOundnC$$
313/l016
PCA
Snf~y
C&D 0.-de< & 52.231.250 CMP &.
$24,000,000 R.cstitution
C&D OO'dc• & $175,2%,000 CMP
FTC A<:t
12/2312015
FX
912912017
or
ComP'!nY
Hazard. Hv.ard, Kentuc:ky
He:o.rthind 13an)(. L-ittle Rock. Arkan.$aS
Niaf'ter One. ln<:., New Htaven, Conn<:<:ti<:u1
HSOC l>loldlna,:s pic, L.ondon, Enal~nd. Qnd I•ISOC NQ,i,h Am<::ii¢a
HoldinKS Inc•• New YOrk, New YOr'k
HSBC Noi1h America Hofd-in$'. fne.:-New Y~. NewVori<. Qi\d
HSOC ~inonec Corp.. Mettn.w'ft, Illinois
Huia Ni;\n Commer<:-i.,tan.ik Ltd~. -Tio.-ip.if CilY.-T4hwn. tmd Hua Nun
Commert.:hll Bnn_k Ltd .. New York AaenQy, New York, New York
And Soundness
811512017
L:\HEARINGS 2018\05-15 NOMINATIONS\HEARING\31196.TXT
SIJI,OOO.OOOCMI'
MM.&ase-ScNlelna
2l$1iC!16
c&660'dot
OSNAMJ..
4/ 19/2018
Flood lnsuranee
BSAIAML.
8127/2015
3/ 12/2018
BSA!AMl.. and OPAC
2.1l4/2016
FX
S/2012015
Independent Bank, Grund Rapids. Michi~
$56.205CMP
lndu~ntfal t\nd commerciftl Ba•tk ofChil\0' Ltd., Uel]in&, People's
C&DOrder
Republic orChin{l~ lnd\IIStriol, ond Commcrci:tl Oank orChil'l-3 Ltd.
New York Brnneh, New Yotk, New York
lndUJtriol Bank of Koren, Seoul. South Kon:a, and Industrial Bank or( Written Agreement
Kon:a New York Branch. New Yortc. New York
JPMorgnn ChMe & Co., New York, New York
IC&D Order & $342,000.000 CMP
JPMorann Chuc & Co.. New York. New York
C&D Order & S61,932.SOO CMP
Snfcty and Soundness
11/1712016
Libertv Bank. South San FtanciS<:o, Cal ifomio
Written ARreenlt:f'H
Markesan State Bank. Markegn. Wl<t.eoauin
Mega lntemaliona.l Commercial Bank Co., Ud .• Taipei. Taiwnn
C&D Order & $29.000,000 CMP
9SAIAML.
Safety and Soundncu
BSNAML.
8.1512016
9/812017
ii'i"m''i"8
Wriuen Aatezment
119
Fmt 6602
SHERYL
51518032.eps
hsue Type
(e.g. Saf e ty and Sou ndna~s,
BSAIAML:.etc.)
Type or
Enroree-ment Action
Name or EnUey
VerDate Nov 24 2008
17:41 Dec 14, 2018
Jkt 046629
Appendtl< A F~l R~ V.RC!btW~nent Acl~
J-.20I$·Ma)t201$
PO 00000
Frm 00124
hsue.Type
(e.g. Saf ety and Sou ndna~s.
BSAIAML:.etc.)
Type of
E n forceme nt Action
I
EffeetJve/h s u ed D•tc
Mcaquit.c l~innnc;i011 ServiCe$, In<: .. Alice. Texas
Written Agreement
Snfety and Sound.ne$$
Mid Americu Bn.nk und Trust Company, Dixon, Mi»ouri
C&D & SS.OOO,OOO Re:nhution
FTC A~t
II 01261201 7
MOfPn Stanley, New Yo&., New York.
$8,000.000 CMP
M011.aaae Servlcina
11112/2018
N~tiona l BG.nk ofP$kisuan, Komchi, PoldS-tan, t~nd Ncniona.l Bank-of lwrinen Aa,reement
Pakisttan. New Yortc Bmnch, New York. New York
Nona,Hyup Bonk, Seoul, South K~~ and Nont;Hyup 013..nk,. New
IWrine:n A&reem¢1ll
Yortt: 91"\\nc:h, New Y(lrll;. New York
osa Community Bank. Brook.lyo, Miebi$3(1
IWrhten Aar«met~t
Sfmt 6602
Peoples Bnnk,
t..o~nee.,
J<onJAs
t)tiuie-Vat-toY ·a".nk. SC0it$btlirf, NebrMh
PNC·F-iMi.elat 8erviC:e~ -Gtouo. In¢ .. Piuiburah. J>erin!Ytva,lftt
OSNAMl.
171612017
311412016
BSNAMl-
111712017
Saf~y ~rw;t
7/30/201$
Soundness
IC&:D &. $2,800,000 R.e$,ilution
fi·CAet
11/Z81l017
ISJJ:iSS- CMP
Flood lnsu.runee
3/612017
Moniia\Ae -SeNfdnA.
111212018
7/10/2015
(S3.S00.0oo CMP
L:\HEARINGS 2018\05-15 NOMINATIONS\HEARING\31196.TXT
Raton Capital CCX"p., Raton, New Mexico
IWritten Agn::~ement
Safety and Soundness
Rock Bancsharcs. Inc.. Liulc Rock. Arkansas. nnd Heartland
Bank. Linle Rock. Artcnnsas
Royal Bank <>fSCQIIAnd, Edinbut'Q.h, Scotland, And R'ilS SeeuritieJ~
Inc.• Stamford, Connecticut
IWritten Agreement
Safety and Soundness
12/13/ZOI6
IC&.O Otdct & $274.000.000 CMP
FX
$J201201S
Safety and Soundness
312112017
Santander Holdings USA, Inc. Boston. Massachusetts. and Santander IWritten Agreement
Consumer USA, lne .• Dallas, Texas
Slanta.ndcr Holdin&$ USA, Inc. Boston. Massachusetts
Wriuen Aareement
sarcty ond so~it\d.n¢SS
7/l/lOIS
Seaway Banc5hares, lne., Chicago. llllnols
Written Agreement
Safety and Soundness
6i24J2015
$65,000,000 CMP
C&DOrder
Servicing
OSNAMl.
12/14/:i!:OT?
Service Link Holdings, LLC, Jacksonville, Florida
Soc i ~C O~uCrnle S.A., Paris~ Franee, and Societ6 Ci-Cn6mle New
York Branch. New Yoric:, New York
MOI1;RaJt.C
I/Z3/ZOI7
120
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Name of Entlfy
VerDate Nov 24 2008
17:41 Dec 14, 2018
Jkt 046629
PO 00000
Frm 00125
J-.20I$·Ma)t201$
Nam e or EnUey
h s ue Type
(e.g. Safe ty and So u ndna~s.
BSAIAM L:.etc.)
Type or
E n roree-m e n t Action
Stntc Street Corp.. ~ton.. MassnchuSoCUs, nnd Stl\tc Street Dunk ond IWritten Agreement
Trust Comoanv, Boston. Musachusetts
SunTNSt B;~.nk, Atlon1a, OcorvW
ISI,$0 1,000 CMP
E ffectJve/h s u ed D • tc
OSNAML
sn812o1s
Flood LO.Su.tanc:e
sn•no11
Tri·County Bank, Brown C.ity, Michi&on
lss.ooo CM 1
Flood ln.svronc:e
11118120 15
Truxttm T rwn COmpany, Nashvil l e~ Tenn_
e ssee
U.S. Bancorp, Minneapolis, M inncsOla
l$11.285 CMI>
l$4 ,400,000 CMP
Flood lnsuranc:e
Mortgage Servicing
4/291201S
1/ 12/2018
1
Sfmt 6602
U.S. Bancorp. Minneapolis, M inn0$0ta and USB Americas Holding IC&D Order & S 15,000.000 CMP
Co., Minneapolis. Minnesota
UBS AG. Zurich, Swilxerland, and UBS AO Stamford Branch~
C&..D Order & $342,000,000 CMP
S'lamford. Connecticut
Wavnc Bank and Trust Comoonv. Cambridg_c City, Indiana
$23.000 CMP
Wells Farao. So.n Fm.nci.s.co.• Colifomia
I CAD Order
BSAIAMLandOFAC
2/141'2018
FX
512012015
Flood Insurance
Safe1-y .-nd Soundness
:ln/2018
1013 1120 17
121
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122
May 14,2018
The Honorable Michael Crapo
Chairman
U.S. Senate Committee on Banking, Housing and Urban Affairs
United States Senate
Washington, DC 20510
The Honorable Sherrod Brown
Ranking Member
U.S. Senate Committee on Banking, Housing and Urban Affairs
United States Senate
Washington, DC 20510
Dear Chairman Crapo and Ranking Member Brown:
We write today in support of the nomination ofDr. Richard Clarida to be the Vice Chair
of the Board of Governors of the Federal Reserve. Each of us has known Dr. Clarida for many
years and has high regard for his academic work and professional qualifications.
Dr. Clarida is one of the nation's leading monetary policy scholars. He has been a
Professor of Economics at Columbia University for three decades and has published widely in
the top economics journals. His expertise in monetary issues, together with his thoughtfulness
and good judgment, will be invaluable assets to the Federal Open Market Com mince and the
Federal Reserve System.
Dr. Clarida also possesses extensive public and private sector experience. He served as
the Assistant Secretary for Economic Policy at the United States Treasury, where he was
awarded the Treasury Medal for Distinguished Service, and as a Senior Staff Economist at the
Council of Economic Advisers. In addition, his private sector roles have given him important
experience 11~th the functioning of financial marl<ets, which will be useful for making monetary
policy as well as in discharging the Federal Reserve's responsibilities to oversee banking
institutions and to promote financial stability.
Finally, we are confident that Dr. Clarida, if confirmed, will uphold the Federal Reserve's
tradition of independence and nonpartisan policymaking. He understands the importance of
hearing all sides of an issue and making policy decisions based on the best available data.
Accordingly, we believe he is well qualified to serve as the Vice Chair of the Federal Reserve
Board and strongly support his nomination.
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Sincerely,
123
Dr. Ben Bemanke
Former Chairman ofthe Board of Governors of the Federal Reserve
Former Chairman of the Council of Economic Advisors
Dr. Stanley Fischer
Former Vice-Chairman of the Board of Governors of the Federal Reserve
Or. Alan Blinder
Fonner Vice-Chairman of the Board of Governors of the Federal Reserve
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Dr. Martin Feldstein
Former Chairman of the Council of Economic Advisors
124
TIJ!lOi,y K.ZMrmeuoon, dlOilnon
Pr8lbl L Kemedy, Cloaitrrmfled
Nooll w.w,b:ft., Vu C11oirmon
Kollv.,.. Undelwood, Tte0$1tet
Ovi$1ophe< ]Oidon, Secrool)'
R. Scol Hei&.omp, lnmediole Poll OIOirma~
Rebeco 20111e10 201ney. l'resldoot ood ao
~~NDENTCoMMUNITY
BANKERS ofAMERICA~
May 14,2018
The Honorable Mike Crapo
Chairman
Committee on Banking, Housing.
and Urban Affairs
Washington, D.C. 20510
The Honorable Sherrod Brown
Ranking Member
Committee on Banking, Housing,
and Urban Affairs
Washington, D.C. 20510
Dear Chairman Crapo and Ranking Member Brown:
On behalfof the nearly 5,700community banks represented by lhe Independent Community
Bankers ofAmerica (ICBA), Iwrite to express our enthusiastic support for the nomination of
Michelle "Miki" Bowman for the Federal Reserve Board of Governors (Board). Ms. Bowman is
highly qualified to fill this important post by virtue of her broad government and bank regulatory
experience and her impressive community banker credentials. Iexpect her to make an invaluable
contribution to Board deliberations and to strengthen the Board's rulernaking and open marl<et
operations.
Ms. Bowman is a superb choice to fill !he Board seat reserved for an individual with community
banking regulatory or business experience. ICBA worl<ed hard to ensure the Board had a
dedicated member with community bank experience and fought to have that requirement enacted
into law. That position has not been filled since it was required by Congress in 2014. We are
proud that Ms. Bowman has been nominated to fill this important seaL Ms. Bowman knows
community banking from the inside as a fifth generation Kansas community banker. She isalso a
top finaneial regulator, currently serving as Kansas Bank Commissioner. She has been an officer
of the Farmers and Drovers Bank of Council Grove, Kansas, where she was involved in both lhe
lending and compliance aspects of the business. She has also worked in her family's cattle and
farm operation and thus appreciates the link between agriculture and community banking and the
importance of both to our national economy.
In Washington, Ms. Bowman has worked both in Congress and lhe Administration. She served
on the personal staff of Senator Bob Dole and as counsel to several House committees. She was
appointed by President George W. Bush to serve as an executive at the Federal Emergeney
Management Agencyand later as Deputy Assistant Secretary and Policy Advisor to the
Secretary for Homeland Security. She holds aJuris Doctorate from Washburn University School
of law and a Bachelor ofScienee from the University of Kansas.
The Nation~ Voice for Community Banks.•
Sl8~tcod
IQ8oo<261
Sa1JtC....,NN51>378
~.OC20036
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WAIHtlGION, OC
SuileQOO
125
Ican tell you Utat the oommunity bankers who know Ms. Bowman bes~ her industry oolleagues
in Kansas, are thrilled by her nomination and the prospect of her sen•ice on the Board. With
nearly 5,700community banks nationwide, we look forward to Ms. Bowman's representation
and input on the Federal Reserve Board. Thank you for scheduling her nomination hearing. I
urge that she be I'Oled out of oommittce and oonfirmed by the Senate expeditiously.
Sincerely,
Is/
Rebeca Romero Rainey
President & CEO
CC: Members of the Senate Committee on Banking, Housing, and Urban Affairs
The Nation's Voice for Community Banks.•
lol5tS.eeoW'I
5..010900
~. OC20030
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51518038.eps
WASHNGTON, DC
126
Chapter 2 • Structural Change Among Community
and Noncommunity Banks
In th<J'1Sil5l'""' the ntJmbeto(l\mk;hos<lxlmcJ
;haqfr. llcowo<n 19&1 and 1011, rh< rc.,J ntJmm ri («J.r.
allr in•tr<J bank and thrift chanm d«liool by S9
1'<10011, from 17,901m 7,))1. A
o( "'... char·
tm, f.uhrrn, ~ belll'ttnl\1nkml((otl\f'iln!G!, and
consol•btroo of duncrs withm holdtt'Qt COOt!<ln<> un.lcr·
loc tho <kclrnc. MCl«<l\~r. the.< c.hangcs and 01her ~"""
tural <h>l\l"' 111 the irdtSII\' l<ueh., the""'''""''
gtOO'th •lliOOJ! the ''CfJ' btgcst bnki) h:11~ Liken pbce m
d&tn<t waws :u.<ocratod .,;,h bankn-.g cnses •nd rlw bu...
""''~'k arJ me rnfu..nc<>l by n~"btot)' <h•l'4." th:ll
h:1w~n<r.l!ly bo<.>eordtd•t toconsoltd.M""'"'" tint<'.
coon""""
CommunKJ b.1nk• ~ from thiS r«iod (,.,..., in
number ,,nJ With a domi!U!hod lh.1rt o( lxtnkong tndu• tr
2~-b. ~n1helc». dw:r comitw.: ro rq:l'txmhrt· (:n the
m<lll c:ommon hu• lle$S model among R)JCtruurod
IMimuoru.
Th~ chol'tct ona~·,.. the declmc rn rh< nuonl:cr cibanks
to dttctmint rh< c((cm c( consoi.Jonon.
f.ulm<$.
and..., ch3!t<t<tndh·idually. ln ...der tog;M~ the ,...hd·
IIV cibonb o(dtikring asset a:e, rates ol coruolo.btoon.
m«;<r. (,,;(u.,, and IUrvl'oohipart cakul:llod by""" ~ ...
~"'""and b <•:cMU~nity :tnd n"oo-unoty hank!. The
lmJOO. o( bonk l'oih~rcs among diff~ hnk grours is
C1'1'(Uh'l by C<)(llpullllg 0 (;lllute
•ilic:h tnea•lltS the
freytlt'I'ICl' '~failures "'ilhm one ,:n.lp rd,,, .,~ hl ~~~It,'$
(or all lxmb duri"l! anypctiod.
""Ill'"'
om,
Consolidation
The loankinginduory "'pctic:nct<ll1ll.dl cOMOlod:nm
Juring rlw lludy pmad from1984 thRlllgh 1011.' Of the
1;,4J2 hanks (;H "'' """hi bonkill~ •KJ!'IIOatiltn>) th:tt
l'llitod dte in®,rry "'"""" 19ShnJ 2011.17 ptn:Cf\1
lnikd, 4'1 pcrccru me~ .,than nn:Ufll"'t"l bonk. and
'"'~her 31 ~"'<"" <OAA~i.loc<>l •itlt other chart"'
..uhmthetr ex•trngltonk holdin~ comronv.' These far~
urt.s, mergers, and coruoltdatl(lft h:wt occumd in dUunct
,,..... Must lailur.s .Lnru: the ptr>>d (l.m malii
occutted bc<.1use o( the bankn~ ond thrift crisi> o( the
L11< 19&15 and rorly 199Cs arJ the fitunctal ai!i> of 1007·
lOllS and its aft,'Ttltilth ~""Chan 1.1~ In C\II\U3ll, ooly •7
insrnutions latk.J Juring tlx· num•;tl (nltll 1996 ro 100).
Me~J!<n peaked mthe mi<l-19&lsunJ mid·I99Cs. dun!lli
pc~iods o( cconorntc txl"nslon («< O..n 1.1~ The a~·tr·
11!,"1: numb..'f (-/ un<tiSb:l-.'1.1mer~ w.·:b .346 per )\'2t
"'"'""" 198; •nd 1000 anddeclmod to 181 r« l"'' from
ZOOI through 1011, •1th the thret sk,..... )'tatS lor mcrgtr
r.:ri'\itl' \ICCmring bd:Wt'tn 2Vt» a~ Z.O.J1. The :mnual
roumltn cr( Ultr.><mlf'lllV, ..,.• .t.tnu (see O.art IJI
abo ~Uy""' in the Ia« 19&15 arJ tlx'll d«loool
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o f ll.S. Community Banks
18,000
16,000
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2016
1984
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127
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