[Senate Hearing 114-162]
[From the U.S. Government Publishing Office]
S. Hrg. 114-162
NOMINATIONS OF: ADEWALE O. ADEYEMO, AMIAS MOORE GERETY, AND JAY N.
LERNER
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
ON
NOMINATIONS OF:
Adewale O. Adeyemo, of California, to be Assistant Secretary for
International Markets and Development, Department of the Treasury
__________
Amias Moore Gerety, of Connecticut, to be Assistant Secretary for
Financial Institutions, Department of the Treasury
__________
Jay N. Lerner, of Illinois, to be Inspector General, Federal Deposit
Insurance Corporation
__________
SEPTEMBER 29, 2015
__________
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
RICHARD C. SHELBY, Alabama, Chairman
MIKE CRAPO, Idaho SHERROD BROWN, Ohio
BOB CORKER, Tennessee JACK REED, Rhode Island
DAVID VITTER, Louisiana CHARLES E. SCHUMER, New York
PATRICK J. TOOMEY, Pennsylvania ROBERT MENENDEZ, New Jersey
MARK KIRK, Illinois JON TESTER, Montana
DEAN HELLER, Nevada MARK R. WARNER, Virginia
TIM SCOTT, South Carolina JEFF MERKLEY, Oregon
BEN SASSE, Nebraska ELIZABETH WARREN, Massachusetts
TOM COTTON, Arkansas HEIDI HEITKAMP, North Dakota
MIKE ROUNDS, South Dakota JOE DONNELLY, Indiana
JERRY MORAN, Kansas
William D. Duhnke III, Staff Director and Counsel
Mark Powden, Democratic Staff Director
Dana Wade, Deputy Staff Director
John V. O'Hara, Senior Counsel for Illicit Finance and National
Security Policy
Jay Dunn, Professional Staff Member
Shelby Begany, Professional Staff Member
Laura Swanson, Democratic Deputy Staff Director
Colin McGinnis, Democratic Policy Director
Dawn Ratliff, Chief Clerk
Troy Cornell, Hearing Clerk
Shelvin Simmons, IT Director
Jim Crowell, Editor
(ii)
C O N T E N T S
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TUESDAY, SEPTEMBER 29, 2015
Page
Opening statement of Chairman Shelby............................. 1
Opening statements, comments, or prepared statements of:
Senator Brown................................................ 2
NOMINEES
Adewale O. Adeyemo, of California, to be Assistant Secretary for
International Markets and Development, Department of the
Treasury....................................................... 4
Prepared statement........................................... 17
Biographical sketch of nominee............................... 19
Responses to written questions of:
Senator Menendez......................................... 40
Amias Moore Gerety, of Connecticut, to be Assistant Secretary for
Financial Institutions, Department of the Treasury............. 5
Prepared statement........................................... 24
Biographical sketch of nominee............................... 25
Responses to written questions of:
Senator Menendez......................................... 44
Jay N. Lerner, of Illinois, to be Inspector General, Federal
Deposit Insurance Corporation.................................. 7
Prepared statement........................................... 32
Biographical sketch of nominee............................... 33
Responses to written questions of:
Senator Brown............................................ 47
(iii)
NOMINATIONS OF:
ADEWALE O. ADEYEMO, OF CALIFORNIA,
TO BE ASSISTANT SECRETARY FOR INTERNATIONAL MARKETS AND DEVELOPMENT,
DEPARTMENT OF THE TREASURY;
AMIAS MOORE GERETY, OF CONNECTICUT,
TO BE ASSISTANT SECRETARY FOR FINANCIAL INSTITUTIONS,
DEPARTMENT OF THE TREASURY;
JAY N. LERNER, OF ILLINOIS,
TO BE INSPECTOR GENERAL,
FEDERAL DEPOSIT INSURANCE CORPORATION
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TUESDAY, SEPTEMBER 29, 2015
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10 a.m., in room SD-538, Dirksen
Senate Office Building, Hon. Richard Shelby, Chairman of the
Committee, presiding.
OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY
Chairman Shelby. The Committee will come to order. This
morning we will hear testimony on several nominations.
Mr. Adeyemo--is that correct?
Mr. Adeyemo. Yes, sir.
Chairman Shelby. OK.----is nominated to be Assistant
Secretary of the Treasury for International Markets and
Development, which is primarily a national security position.
He has served as Deputy Chief of Staff of the Treasury
Department since 2012. He was also the Chief of Staff at the
Consumer Financial Protection Bureau for 16 months in 2010 and
2011.
As the Assistant Secretary, he would directly oversee the
process by which foreign persons seek approval to purchase
controlling interests in U.S. businesses with national security
implications. In this position, he would also support the
management of Treasury's portfolio on international financial
services, regulation, trade, banking and securities,
development, and technical assistance.
Mr. Amias Gerety is nominated to be Assistant Secretary of
the Treasury for Financial Institutions. Mr. Gerety has been
working in the Treasury Department since January of 2009. He
has recently served as the Deputy Assistant Secretary for the
Financial Stability Oversight Council and is currently serving
as the Acting Assistant Secretary for Financial Institutions.
If confirmed, he will be responsible for managing
Treasury's efforts regarding regulations and legislation
affecting financial institutions including systemic risk
designations. He will also be responsible, among other things,
for coordinating Treasury's initiatives on financial education
policy as well as overseeing the Terrorism Risk Insurance
Program and the Community Development Financial Institutions
Fund.
The Committee will also consider the nomination of Mr. Jay
Lerner for Inspector General of the Federal Deposit Insurance
Corporation. Mr. Lerner has extensive experience in law
enforcement at the Department of Justice as well as in other
Government oversight and supervisory roles.
The Committee looks forward to receiving testimony from the
nominees today and their responses to our questions.
Senator Brown.
STATEMENT OF SENATOR SHERROD BROWN
Senator Brown. Thank you, Chairman Shelby, for holding
today's nomination hearing. Congratulations to the three of
you. I am hopeful that as we do this hearing and learn more
about you, the confirmation can be affirmative and speedy if
you earn it, as I think you will.
Last week, we held a hearing on Adam Szubin's nomination
for a key counterterrorism post in the Treasury Department. It
was the Committee's first nomination hearing of this Congress.
I am pleased we have three nominations today before the
Committee. It has been a long time coming. Mr. Lerner and Mr.
Adeyemo were first nominated last year. Mr. Gerety was
nominated in February. Before I discuss their outstanding
qualifications, I want to express my hope that the Committee
will make progress in our nominations backlog. We have seven
nominees who have yet to receive a hearing. Not one nominee has
received a vote from this Committee in this entire Congress.
They all deserve full, fair, and prompt consideration.
On Thursday, the Committee will hold an executive session
to mark up oil exports legislation. I have expressed my
interest and hope that we use that opportunity to act on Mr.
Szubin's nomination. It was clear at that hearing last week
that he has this Committee's support.
That said, we have a distinguished panel of public servants
before us today.
Mr. Adeyemo has been nominated to be Assistant Secretary
for International Markets and Development at the Department of
Treasury. The position he has been nominated for is responsible
for leading Treasury's efforts related to CFIUS as well as
international financial service regulation, trade, development,
technical assistance, and climate finance. After the financial
crisis and as economies around the world continue to recover,
it is essential that Treasury engage with their international
counterparts to implement strong financial services regulation,
fair trade, and foreign investment that protects our national
interest. I look forward to hearing about your priorities in
this role.
Mr. Gerety has been nominated to be Assistant Secretary for
Financial Institutions at Treasury. The Assistant Secretary is
responsible for developing and coordinating the Treasury's
policies regarding financial institution legislation and
regulation that affect financial institutions, Federal agencies
that regulate or insure financial institutions and securities
markets. As we continue to implement and enforce Wall Street
reform, this position is key to ensuring that strong
regulations promote financial stability and safety and
soundness and robust consumer protections. I think, too, Mr.
Gerety, as this moves forward, keep in mind what the chief
financial services lobbyists in this town said right after the
President of the United States signed Dodd-Frank. He said, ``It
is halftime.'' So it is clear that some interests in this town
seem oblivious that there was a financial crisis. They seem to
suffer from amnesia, some of them Members of Congress, many of
them lobbyists, and the move by many of them will be to delay
and dilute and weaken these rules. And all of you should have
that at the back of your mind as you do this job.
Mr. Gerety played an important role since the beginning of
the current Administration to help our country recover from the
worst financial crisis since the Depression. I believe he will
continue that superb work, Mr. Chairman, if we confirm him for
this position.
Mr. Lerner has been nominated to be the Inspector General
at FDIC. That job heads an independent division within the
agency that conducts audits and investigations and reviews of
FDIC programs and operations. The IG is required by law to
provide written reports to the FDIC on why failed institutions
resulted in a material loss to the Insurance Fund and to make
recommendations for preventing additional losses in the future.
It is a vital task in understanding both what causes bank
failures and how to prevent bank crises.
Steve Linick, the current IG at the Department of State, a
frequent witness for this Committee, during his tenure at the
Federal Housing Finance Agency's Inspector General wrote that
Mr. Lerner ``not only has a strong background in combating
waste, fraud, and abuse, which is critical for an Inspector
General, but also understands the world of banking and
financial regulation.'' I look forward to hearing your
testimony today, too.
Congratulations to the three of you.
Mr. Chairman, we are all grateful that this Committee is
beginning to move on nominations.
Chairman Shelby. Thank you.
Will all three of you stand and raise your right hand? Do
you swear or affirm that the testimony that you are about to
give is the truth, the whole truth, and nothing but the truth,
so help you God?
Mr. Adeyemo. I do.
Mr. Gerety. I do.
Mr. Lerner. I do.
Chairman Shelby. Do you agree to appear and testify before
any duly constituted committee of the U.S. Senate?
Mr. Adeyemo. Yes.
Mr. Gerety. Yes.
Mr. Lerner. Yes.
Chairman Shelby. Do you have any family members, any of
you--we will start with you, sir--that you want to introduce
who are here today?
Mr. Adeyemo. I do not at this time, Senator.
Chairman Shelby. OK. Do you, sir?
Mr. Gerety. Thank you. I want to thank my family and
friends for being here: my three children, Susie, Pierce, and
Jenny; my wife, Margaret; my mom, Adelia; and my brother,
Rowan, and my sister-in-law, Clara. Thank you all for being
here.
Chairman Shelby. Do you have some?
Mr. Lerner. I would like to introduce my supporting and
loving girlfriend, Libby Stern, behind me. Thank you.
Chairman Shelby. Thank you.
Sir, we will start with you. Your written testimony will be
made part of the record in its entirety. You proceed as you
wish.
STATEMENT OF ADEWALE O. ADEYEMO, OF CALIFORNIA, TO BE ASSISTANT
SECRETARY FOR INTERNATIONAL MARKETS AND DEVELOPMENT, DEPARTMENT
OF THE TREASURY
Mr. Adeyemo. Thank you, Mr. Chairman.
Chairman Shelby, Ranking Member Brown, and distinguished
Members of this Committee, thank you for giving me an
opportunity to be here today. It is a privilege to be the
President's nominee to serve as the Assistant Secretary for
International Markets and Development. I am grateful to
Secretary Lew for his support of my nomination and his
confidence in my ability to serve our country in this role.
While they could not be here today, I want to acknowledge
my father and mother who immigrated to this country in search
of the American dream and the opportunity to give my brother,
sister, and me a better life. They have worked hard, as an
elementary school principal and a nurse, to give opportunities
to their children, but along the way they have instilled in us
the values that guide us every day. They often remind us that
this country affords the chance to do anything we want if we
work hard. And they have taught us that we have a
responsibility to serve the community and the country that has
afforded them so many opportunities.
This desire to instill the value of service in me led my
father to wake me early on the morning of February 11, 1990, to
watch as Nelson Mandela was released from prison. Although the
images on my television were of a reality thousands of miles
from my home in California, I could feel the hope Mandela
inspired not only in South Africans but also in my father.
Watching Nelson Mandela go from prisoner to president and start
the process of bringing together a country was more than
inspirational; it motivated me to imagine how I could use
public service to improve the world around me. And it continues
to remind me that events far from home can make a meaningful
difference in the lives of Americans.
Serving in Government is in many ways the fulfillment of my
childhood dream. I joined the Treasury Department in the midst
of the greatest economic downturn since the Great Depression. I
worked alongside policymakers charged with coordinating the
international response to the global recession. The policies
the United States advocated internationally played a pivotal
role in breaking the back of the global recession and restoring
economic growth at home and abroad.
In 2010, I was given the opportunity to help implement a
part of the Wall Street Reform and Consumer Protection Act. I
had the honor and privilege of working for Senator Warren as
the first Chief of Staff of the Consumer Financial Protection
Bureau. Helping to build an agency devoted to protecting
consumers was deeply personal for me. I grew up in the Inland
Empire, a region of Southern California where, in 2010, one in
every 14 homes faced foreclosure. These were not just numbers
to me; they were my friends and my family. I know the impact
that a lost job, cut in hours, or a bad financial decision can
have on the ability to stay in the home your children grew up
in. I am grateful to have played a role in standing up an
agency that helps consumers better understand and deal with
their financial choices.
Before and after my time at CFPB, I have worked on a
variety of international economic issues, including our trade
and investment policy agenda, the Committee on Foreign
Investment in the United States, and our engagement with the
multilateral development banks. I have represented the United
States in bilateral and multilateral settings, and no matter
the destination there is always admiration for the strength and
resilience of the American economy. Our recovery from the Great
Recession is no accident. It is the direct result of the
determination and persistence of the American people and the
policy choices we have made.
However, we have more work to do. We still face a number of
economic challenges, and we also have opportunities. Our
decisions in the coming years will determine our ability to
meet the future needs of the American people, like my neighbors
in California and the families across this country. As the
global economy becomes more complex and interconnected, the
policy choices we make now will have an impact on our ability
to advance our economic and strategic interests in the future.
While a great deal of the work in International Affairs at the
Treasury Department is mitigating risks, in a number of areas
we have an opportunity to advance our economic agenda. If
confirmed as the Assistant Secretary for International Markets
and Development, I plan to do just that, by working to level
the international playing field for American workers and firms,
protecting our national security, and advancing our development
agenda.
It would be my privilege to work with this Committee to
advance America's economic interests at home and abroad.
Thank you for taking the time to consider my nomination. I
am happy to take your questions.
Chairman Shelby. Thank you.
Mr. Gerety.
STATEMENT OF AMIAS MOORE GERETY, OF CONNECTICUT, TO BE
ASSISTANT SECRETARY FOR FINANCIAL INSTITUTIONS, DEPARTMENT OF
THE TREASURY
Mr. Gerety. Chairman Shelby, Ranking Member Brown, and
distinguished Members of the Committee, thank you for inviting
me to testify today. It is an incredible honor to be nominated
to serve as the Assistant Secretary for Financial Institutions
and to be here today before this Committee.
I want to thank President Obama for nominating me and
Secretary Lew for entrusting me with this opportunity. I have
learned so much from my colleagues at the Treasury Department,
and I am committed to continuing to earn the trust that they
have put in me if I am fortunate enough to be confirmed for
this position.
I believe that public service can make a meaningful
difference in the lives of our fellow Americans. I was raised
in a family that held service as both a calling and a career.
My paternal grandfather served as a senior official in the
Eisenhower administration at the Civil Service Commission and
at the State Department, where he assisted refugees fleeing
Communist regimes in Eastern Europe. My maternal grandfather
served as a parish priest in Jersey City before becoming an
Episcopal bishop in Washington and New York. Their examples of
public leadership have guided me from a young age.
During the 6 \1/2\ years I have been at Treasury, I have
had the tremendous opportunity to work with you and your
staffs, with others in Congress, with the private sector,
independent regulators, and other important stakeholders. We
have been able to collaborate to pursue policies that support
the economic and financial well-being of homeowners and small
businesses, and support firms whose lending powers economic
growth and the savers who invest in these firms. I have been
inspired by entrepreneurs who need credit to expand and thrive
and by local leaders who are transforming communities in
partnership with Federal lending programs.
Over the course of my private sector career, I have helped
companies both large and small as they interact with the
financial system and seek support to grow and expand. These
experiences range from a T-shirt company improving its
efficiency ahead of an initial public offering or helping an
insurance company manage and build relationships with
independent agents and brokers. Each experience has given me a
perspective on how a stable and effective financial system
supports economic growth and expands economic opportunity
across the country.
In Government, I have also seen firsthand the challenges
and limits of Federal response, when economic confidence is
shaken, households have been ill-protected, and the financial
system is not able to support economic growth. If confirmed, I
will work to safeguard our financial system and confront
financial and economic threats, whether from malicious cyber
activity or from panic in financial markets. I have learned the
importance of coordination and open dialogue as we work to
reform our financial system, and I am committed to continuing
this critical collaboration.
As memories of the most searing financial crisis in
generations begin to recede, I look forward to engaging with
this Committee and Congress to move forward on pressing
national priorities: working to make sure that our financial
system is both stable and supportive of economic growth;
expanding access to credit for small businesses and low-income
communities; and building on our experience so that financial
services act as a ladder of opportunity toward economic and
financial security.
Thank you again for your time, and I look forward to
answering your questions.
Chairman Shelby. Thank you.
Mr. Lerner.
STATEMENT OF JAY N. LERNER, OF ILLINOIS, TO BE INSPECTOR
GENERAL, FEDERAL DEPOSIT INSURANCE CORPORATION
Mr. Lerner. Thank you, Chairman Shelby, Ranking Member
Brown, and Members of this Committee. It is truly an honor to
appear before you today as the nominee to serve as the next
Inspector General at the Federal Deposit Insurance Corporation.
At the outset, I would like to recognize and thank my kind
and caring family, friends, and colleagues for their support.
In particular, I would like to acknowledge the contributions of
my parents, as I am blessed for the opportunities that they
have afforded me and the qualities they have instilled in me:
honesty, integrity, perseverance, responsibility, and hard
work. I am also grateful to my supportive girlfriend and my
three wonderful sisters and their families. My eight nieces and
nephews have kept me grounded and act as reminders of the
importance of what we do here today--public service.
The FDIC plays a critical role in maintaining the stability
of our financial system and protects the savings of millions of
hard-working Americans. It insures more than $6 trillion in
deposits at approximately 6,300 financial institutions and
directly examines and supervises more than 4,000 of those
institutions. In addition, the FDIC plays an important role in
consumer financial protection, resolution and receivership of
insolvent institutions, and management of significant assets in
the Deposit Insurance Fund.
The FDIC Inspector General conducts audits and evaluations
which make recommendations for improving the FDIC's operations,
as well as investigations which preserve the integrity of the
system and protect the savings of bank customers, families, and
businesses. In this time of pressing need to improve efficiency
and effectiveness at Government agencies and to eliminate
waste, the position of the FDIC Inspector General is an
extremely important one.
I believe that I am particularly well suited to serve as
the Inspector General at the FDIC. I have substantial
leadership and management experience, and I have conducted
oversight and handled complex banking and financial matters. I
trained as an accountant and passed the Certified Public
Accountant examination, and I am an experienced lawyer and
prosecutor as well. I am confident that this background has
prepared me well to be successful as an Inspector General, if I
am confirmed.
I have worked in public service for more than 23 years, and
it has been a privilege to serve this country. Currently, I am
the Chief of Staff and Senior Counsel at the Department of
Justice Office of the Inspector General, and I have worked in
the IG community since early 2011. I have seen firsthand the
many challenges an Inspector General faces and have learned how
to run a strong IG office that can achieve results. I have also
gained considerable leadership and management experience under
the guidance of the current Inspector General, Michael
Horowitz, as well as other leaders in the office and in the IG
community. During my tenure, I have been the congressional
liaison and have worked with the Justice Department's
leadership, so I can appreciate the importance of an IG's
unique reporting responsibilities to keep both Congress and the
agency head fully informed.
Importantly, I understand the critical role that
independence plays in the Inspector General's mission. The core
principles of integrity, objectivity, fairness, and
accountability must guide an IG's judgment and decisionmaking.
These are essential attributes to maintain the public's
confidence in the work of the office. If confirmed, I intend to
oversee an office that conducts audits and evaluations in a
thorough and comprehensive manner; pursues investigations
aggressively and follows the facts wherever they may lead;
issues fair-minded and impartial reports; and makes
recommendations to improve the agency's programs.
Prior to my current position with the Department of Justice
OIG, I gained extensive experience working on banking and
financial matters and am, therefore, familiar with how banks
operate and their relationships with regulators. I served as
Assistant Chief in the DOJ's Fraud Section, where I worked on
enforcement initiatives against financial crimes. I prosecuted
banking and money-laundering cases while in the Money
Laundering Section at DOJ, and I worked at two law firms on
similar financial matters. Much of my professional career has
focused on conducting effective oversight and ensuring
accountability, and this background will form a strong
foundation to be a successful Inspector General.
In closing, I understand the challenges ahead and look
forward to the opportunity to serve the American people in this
new role. I would like to thank the Committee for consideration
of my nomination, and I look forward to continuing to work with
you and your staffs, if I am confirmed.
I would be pleased to respond to any questions that you
might have. Thank you.
Chairman Shelby. Thank you.
Mr. Gerety, you have been the Acting Assistant Secretary
for Financial Institutions since March. Prior to that, you were
the Deputy Assistant Secretary for the FSOC. This Committee has
put forward legislation--that you are familiar with--that would
bring accountability and transparency to FSOC's designation
process for so-called systemically important firms. If
confirmed, would you commit to working with Congress to improve
the designation process based on existing concerns?
Mr. Gerety. Thank you, Mr. Chairman. I appreciate the
opportunity to be here today. In my role as Assistant
Secretary, if confirmed, for Financial Institutions, I would
not have direct oversight of the Financial Stability Oversight
Council work. Nonetheless, I think what the Council has
demonstrated in its years is its ability to work with Congress
to understand those concerns and to modify its procedures over
time to increase transparency and clarity.
I think most recently the Council took steps this past year
to make a series of changes that give people earlier
information, more public transparency, and also a better
opportunity to understand the process after designation. So I
think those concerns are ones that the Council staff have
listened closely to, and I would be glad to continue working
with Congress to understand those concerns.
Chairman Shelby. Thank you.
Mr. Adeyemo--I am getting close maybe.
Mr. Adeyemo. You are getting it.
[Laughter.]
Chairman Shelby. The business of insurance in the United
States is currently regulated by the States, as you know.
Congress codified that approach in the McCarran-Ferguson Act of
1945, more than half a century ago. Nonetheless, the Financial
Stability Board, FSB, is now issuing directives on insurance
even though it is neither a State nor a U.S. Federal regulator.
Does Treasury develop consensus positions with the U.S.
State insurance regulators for FSB advocacy on insurance
issues? If not, do you believe that it should?
Mr. Adeyemo. Thank you for having me here, Mr. Chairman. We
work very closely with the 50 State regulators and the six
regulators who represent jurisdictions to develop a U.S.
position on these issues, and I think that we also consult and
actively speak with industry about their position on these
issues as we work within the FSB and other international
organizations.
We also consult with and work actively with Congress, and
if confirmed for this job, I look forward to working with you
and your staff and the Members of this Committee as we develop
America's position in those institutions.
Chairman Shelby. Mr. Lerner, there have been many press
reports of the Department of Justice's Operation Choke Point,
an effort by the Administration to choke off legal businesses
the Administration finds objectionable by denying them access
to financial services. In your current position, did you ever
recommend opening an investigation into Operation Choke Point?
Mr. Lerner. Thank you, Mr. Chairman. I am glad you raised
that issue. Operation Choke Point raises some very serious
allegations and some very serious concerns. We were following
the media and press reports at the Department of Justice Office
of the Inspector General, and we received an inquiry from
congressional staff, a call, in the summer of 2014. At that
time, we were not investigating the matter, and the matter
appeared to be mostly attorney misconduct and allegations of
attorney misconduct. Operation Choke Point, as you know, was
run by attorneys, and Section 8E of the IG Act prohibits the
IG's Office from looking into allegations of attorney
misconduct. Those allegations go to the Office of Professional
Responsibility. They have exclusive jurisdiction over those
matters. The IG's Office has argued against it and advocated
repeal of the Section 8E provision. But that is the law, and we
have tried to comply with the law. So we have not----
Chairman Shelby. What is the law again?
Mr. Lerner. It is Section 8E of the IG Act.
Chairman Shelby. And what does it say?
Mr. Lerner. It basically says that the Office of
Professional Responsibility, another office in DOJ, has
exclusive jurisdiction over those matters. There is a pending
legislative bill that would repeal that provision, and the IG's
Office has argued to repeal that provision for many, many
years.
Chairman Shelby. Do you agree with the Department of
Justice approach in Operation Choke Point; in other words, you
are going after--withholding financial support for businesses
that are legal, nothing illegal?
Mr. Lerner. As I said, I think it raises some very serious
questions in terms of prosecution strategies, legal
interpretations under the FIRREA law. OPR looked at that issue
and issued its report in July.
Chairman Shelby. If you are confirmed, how would you use
your position, if you could, to ensure that the Federal Deposit
Insurance Corporation does not pressure banks to cut ties with
legal businesses?
Mr. Lerner. Thank you. That is a very important question
and a high priority for me, if I am confirmed for this
position. As you know, the FDIC OIG issued its report about 2
weeks ago and raised some serious questions that will require
follow-up, including the recommendations, which is part of its
normal follow-up procedures, as to how those communications are
made to banks and how the communications are made from the
headquarters of the FDIC to its regional directors. There is
also an ongoing investigation in terms of the refund-
anticipated loans that were identified in that report. I intend
to ask a lot of very difficult questions and to continue those
investigations and get to the bottom of it. It is a high
priority for me as an IG.
Chairman Shelby. Sir, I will come back to you. The
Committee on Foreign Investment's review process is mandated by
the Foreign Investment National Security Act to preserve a
necessary line between uninhibited foreign investment and the
protection of U.S. national security. In your opinion, where is
that line, if you can designate it? And if confirmed, how would
you fulfill that mandate?
Mr. Adeyemo. Senator, thank you for the question. I think
that our primary goal, the primary goal of CFIUS, is to protect
the national security of the United States. As you stated, we
do have an open investment policy in the United States, but our
goal is also to make sure that any investment in this country
is mindful of our paramount national security interest. And our
goal is always to make sure that we look at the national
security interest first in terms of does the company that is
being acquired have contracts with the U.S. Government that are
essential, or is it a critical infrastructure component. And in
doing that, the legislation that this Committee designed
provides us with the flexibility we need to make sure that we
are able to address those national security concerns either by
mitigation or, in the very rare circumstance, a block of a
transaction. I think that over the last few years, as we have
implemented the law through regulations and through practice,
we have found the ability to deal with most of the cases during
review. Some of them have moved to investigation. And when we
have been in an investigation, we have used mitigation when
needed to make sure that we are always mindful of national
security.
Chairman Shelby. Is national security paramount to
commercial interests?
Mr. Adeyemo. In terms of the CFIUS process, it is, yes.
Chairman Shelby. Thank you.
Another question to you on political interference in FOIA
inquiries. While serving as a high-ranking official at
Treasury, you created a new review process for sensitive FOIA
requests, deviating from prior policy at the Treasury. Such
requests were reviewed by a special committee including
yourself and representatives from Public Affairs, Legislative
Affairs, and the General Counsel's office.
Do you believe it is appropriate for high-ranking political
appointees to be involved in the FOIA release process? And if
so, why?
Mr. Adeyemo. Thank you for the question, Senator. My
understanding is that before we created this process, there was
a review process that was used where various officials
throughout the Treasury Department reviewed FOIA requests. When
we arrived at Treasury in 2009, I was charged with working with
the International Affairs Office, the Office of Terrorism and
Financial Intelligence, and the Office of the Assistant
Secretary for Management. The Assistant Secretary for
Management is charged with working with FOIAs. We had a huge
FOIA backlog at that point.
Working with the officials charged with working on the FOIA
system, we decided to try and create a process to clear the
backlog and also deal with incoming requests. One of the issues
with the FOIA process was that we were not getting enough
people to pay attention to the FOIAs on a regular basis, so we
set up a bi-monthly meeting, and our goal was to set up a
process and framework for dealing with the FOIA requests, not
in any way to interfere with them getting out but, rather, to
help move them out more quickly.
I think that when we look at the numbers, what we found was
that by 2010 we had reduced our backlog dramatically, and over
the last few years, we have actually released more FOIAs than
have come into the Treasury Department departmental offices.
Chairman Shelby. Sir, did you or the review committee ever
override the advice of a career FOIA officer with respect to
releases or exemptions? If so, explain.
I will ask it again. Did you or the review committee ever
override the advice of a career FOIA officer with respect to
releases or exemptions?
Mr. Adeyemo. In the time I participated in the review
committee, I never overruled a career FOIA official or our
lawyers in terms of making determinations about the release of
FOIAs.
Chairman Shelby. Thank you.
Senator Brown.
Senator Brown. Thank you, Mr. Chairman.
Mr. Gerety, I will start with you. The Independent
Community Bankers, in endorsing your nomination, Cam Fine
said--if I could read this--``I can personally attest to his
intelligence, knowledge of financial policy, and dedication to
public service. He appreciates the critical role played by
community banks in our national economy. He has demonstrated
his willingness to address the ongoing challenge of ``too big
to fail'' institutions and the threat they pose to our
financial system and economy.''
Mr. Gerety, describe how Treasury has worked to ensure that
regulators tailor regulations for smaller and regional
institutions as they implement Wall Street reform?
Mr. Gerety. Thank you. It is a great opportunity for me----
Senator Brown. And also if you could sort of take that and
kind of expand in a way to ensure that regulations are not sort
of one size fits all. So answer that together, if you would.
Mr. Gerety. Absolutely. I think that one of the very
significant opportunities that I have had in my time at
Treasury is to build relationships with the private sector and
with community bankers--I was meeting yesterday with a group of
community bankers from the Northeast--and try to take
opportunities as often as possible to understand the
perspective that they can offer in terms of the granularity of
local economies, local businesses, and the local way that
community banks handle regulation and make sure that they run
their banks in a safe and sound manner.
I think certainly when I look at our forward-going
priorities, we are constantly searching for opportunities to
make sure that our financial system is diverse and includes a
very healthy role for thousands of community institutions, both
banks and credit unions.
I believe that the Wall Street Reform and Consumer
Protection Act has a tiered and tailored approach and that in
implementation we need to continue to build on that approach,
both in the direct implementation of regulations in the reform
effort, but also looking back over the course of regulations. I
am encouraged by the banking regulators' seriousness with which
they are doing their decennial review, the every-10-year,
called the ``EGRPRA process.'' And, also, I am struck by the
fact that often seemingly small things like simplifying a form
can make a very big difference in terms of the regulatory
approach and the burden associated with being a community bank.
So just last week, we saw the banking regulators come together
and release a proposal to simplify the call report.
So I think there are opportunities through engagement,
through understanding the direct experience of community
bankers all across the country to make sure that our approach
in designing standards lives up to the principle that the
toughest standards and the highest scrutiny should be on the
firms that are the largest, most complex, and pose the most
risk.
Senator Brown. Is there a way through FSOC, when sending
examiners and auditors into, say, regional banks or mid-sized
or small banks, to sort of collapse their duties into fewer
numbers of people so that you do not have regulators saying
different things in different ways and asking for duplicative
information?
Mr. Gerety. Thank you, Senator. I think the issue that you
highlight is an important one because it comes at a difference
between what you might think of as the standard and what you
might think of as the actual supervisory or regulatory process.
And one of the things that I have found interesting when I
speak with regional bankers, community bankers, and others is
that they do support higher capital, they do support higher
liquidity; but they often express concerns about the way those
standards are implemented or the way those standards are
approached. And I think our job as policymakers is to work with
them to understand those concerns and to work with our
colleagues across Government to try to make sure that the
standards are forefront and that we can make the process of
supervision as clear as it can be so the focus is on the
economic and financial standard for a safe and sound system.
Senator Brown. Thank you.
Mr. Adeyemo, the financial crisis obviously made clear how
interconnected we are, our financial system is, inside the
world's economies, if you will, and the need for coordination
when it comes to financial regulation. Share with us the
importance of engaging with international counterparts to
strengthen financial regulation, to sort of prevent a race to
the bottom, to ensure fair trade, to encourage foreign
investment. Talk through your views about that, if you would.
Mr. Adeyemo. Thank you for the question, Senator. I
completely agree that the financial system is more integrated,
more interconnected, more complex today than it has ever been.
I think that what we did in this country was that we acted
quickly and decisively to address some of the financial risks
that were created prior to the financial crisis.
Our goal in the International Affairs Office since Congress
took steps in the Wall Street Reform and Consumer Protection
Act, was to make sure that other countries met the high
standard that we have set domestically. We have been working to
do that through bilateral relationships but also through bodies
like the FSB to make sure that our firms and our workers not
only enjoy a level playing field, but that we are protected
from the risks that exist abroad.
As you know well, many of our trading partners have large
financial institutions as well, and the economic problems in
those countries have an impact on our trading relationships and
on our economy. Our goal has been to make sure that large firms
internationally, to help protect ourselves from the risks that
they pose to our economy as well.
Senator Brown. Thank you.
Mr. Lerner, the FDIC Chair announced significant changes to
the agency's information security governance structure. The
IG's most recent report, annual report, describes the
significant progress made in implementing these changes. I know
of your interest in that. Talk about your priorities as IG.
Expand on them, if you would, especially in the area of
cybersecurity.
Mr. Lerner. Thank you, Senator Brown. As you mentioned,
cybersecurity is one of my top priorities. I think it is
critical to the Nation's infrastructure, stabilizing the
financial system as well as it is a national security issue. In
fact, I am aware there is another hearing going on before the
Senate on this issue. I see it as a critical issue to protect
the savings of hard-working Americans, and I would like to
explore ways that the IG's Office can participate and
contribute to that discourse.
The IG's Office issued a report in March of 2015, just a
few months ago, which identified a few areas where the IG's
Office can contribute. In particular, the things are like the
guidance to the banks, the examination process, making sure
they have the proper staffing, training, competencies, and
supervision of the supervisors and the examiners, as well as
ensuring the safety and security of the cyber systems within
the FDIC. I see that as a critical, important area, and I would
like to explore it further.
Senator Brown. OK. Thank you.
One more question, Mr. Adeyemo. Do you have any thoughts on
the CFIUS' handling of the acquisition of Smithfield by the
Chinese company a couple of years ago maybe? Congress raised
many concerns. Do you know much about that? Do you have any
thoughts on how CFIUS--how it played out?
Mr. Adeyemo. So, Senator, I do not currently have
responsibilities for the CFIUS portfolio, and as you know, we
do not comment on cases that are reviewed by CFIUS. What I can
tell you is that, if confirmed for this role, I look forward to
reviewing cases with our national security in mind. I think
that the statute designed by this Committee gives CFIUS the
flexibility to look at cases that pose a risk to our national
security and attempt to find ways to mitigate that risk; and if
we cannot mitigate that risk, to block those transactions. I
look forward to working with your staff and you to look at ways
that we can continue to do that in an effective way that
protects America.
Senator Brown. Is the statutory balance about right?
Mr. Adeyemo. I believe that the statute provides us with
the right level of balance.
Senator Brown. OK. Thank you.
Chairman Shelby. Senator Warren.
Senator Warren. Thank you, Mr. Chairman.
I want to start by welcoming Wale Adeyemo. Wale and I
worked closely together when I was helping set up the new
consumer agency, and as he testified, he was the agency's first
Chief of Staff. I do not say this lightly. Wale is a miracle
worker. He works hard. He is smart. He manages people and
projects with amazing skill, and he understands policy all the
way down.
And here is one other thing I want to make sure everybody
on this Committee knows. Everyone who works with Wale likes
him, Republicans and Democrats, everyone, Inspectors General,
Secretary Geithner, Secretary Lew, me. He really is a
remarkable guy.
I did not have anything to do with Wale getting this
nomination. In fact, I am sorry, Wale, I just did not know. I
did not know until I got the call from the FBI background
checkers that he had been nominated or was about to be
nominated. But he is a great choice.
Wale knows where he came from. He remembers who he grew up
with, and he tries every day to make this a better country. So
I hope that everyone on this Committee will support him and
that he gets an up-or-down vote from the Senate very quickly.
We are lucky to have him in service. And I want to thank all of
you for being here today and thank you for your service.
I just have one question I will focus on in the time I have
left, and that is a question around systemic risk. Mr. Gerety,
as you know, in Dodd-Frank Congress directed the Fed to impose
tougher standards on banks that have more than $50 billion in
total assets. That covers about 40 of the biggest banks in the
country, about one-half of 1 percent of the 6,500 banks that we
have in the United States, but about 95 percent of all the
banking assets in the United States.
Now, this tougher scrutiny is designed to focus the
attention of the regulators on where the risk is--not on
community banks or credit unions but on the biggest banks that
can threaten our financial security.
Of course, among these 40 biggest banks, some are riskier
than others, and Congress knew that, so it directed the Fed to
tailor its rules to match the risk that a particular bank
poses.
There has been some talk recently about exempting many of
these banks from the tougher rules that are imposed on banks
with $50 billion or more, above that threshold, and there is
talk about increasing the threshold to as much as $500 billion.
So what I want to ask, Mr. Gerety, is: As Acting Assistant
Treasury Secretary for Financial Institutions, you have gotten
a close look at the risks posed by banks of different sizes.
Based on that experience, do you think it makes sense to exempt
banks with up to $500 billion in assets from heightened
standards in Dodd-Frank rather than just directing the Fed to
tailor the rules appropriately for riskier and somewhat less
riskier banks?
Mr. Gerety. Thank you, Senator. I think you raise an
important principle at the heart of our approach in financial
supervision, which is that the toughest standards should be
applied and the highest scrutiny should be applied to the
largest and most complex financial institutions.
As the Secretary has said, raising the number that high
raises significant concerns. It would leave only a handful of
firms subject to the statutory enhanced prudential standards
and raises the risk that firms that we saw in the crisis--
Countrywide, Washington Mutual, Bear Stearns--of course, were
significantly below that threshold, also demonstrated that they
could pose risks to the system more broadly.
I think the central question for us is: How do we make sure
that the tailoring is appropriate? It is very clear that a $50
billion institution is different than a $2 trillion institution
and also that it is different than a $2 billion institution. I
think that we have seen the Federal Reserve and the banking
regulators look at ways to design different standards, even
above $50 billion. But I know that we continue to hear concerns
from firms, particularly at the lower end of that threshold.
And I think there is always continued dialogue that would be
very valuable to make sure that those standards are
appropriately tailored and that they appropriately capture the
risk that may exist within a range of financial institutions in
our country.
Senator Warren. All right. Thank you very much, Mr. Gerety.
To me, this is an easy decision. We can raise the threshold and
cut loose half or more of the biggest banks in the country and
just hope they do not make the same mistakes that they made in
2008 when they nearly brought down the whole economy and had to
be bailed out. Or we can play it safe, keep the threshold where
it is, and rely on the Fed to follow the law and tailor the
risks--tailor the regulations to the risks that are posed by
different large financial institutions. You know, since the
American taxpayers are on the hook when the economy starts to
implode, I suspect that most of them would prefer that Congress
play it safe here. Thank you.
Thank you, Mr. Chairman.
Chairman Shelby. Senator Brown, do you have another
question?
Senator Brown. No. Thank you.
Chairman Shelby. If there are no other questions, I want to
thank all the participants here today, and we will try to see
if we can move your nominations.
Thank you very much. The Committee is adjourned.
[Whereupon, at 10:45 a.m., the hearing was adjourned.]
[Prepared statements, biographical sketches of nominees,
and responses to written questions supplied for the record
follow:]
PREPARED STATEMENT OF ADEWALE O. ADEYEMO
To Be Assistant Secretary for International Markets and Development,
Department of the Treasury
September 29, 2015
Chairman Shelby, Ranking Member Brown, and distinguished Members of
this Committee, thank you for giving me an opportunity to be here
today. It is a privilege to be the President's nominee to serve as the
Assistant Secretary for International Markets and Development. I am
grateful to Secretary Lew for his support of my nomination and his
confidence in my ability to serve our country in this role.
While they could not be here today, I want to acknowledge my father
and mother who immigrated to this country in search of the American
dream and the opportunity to give my brother, sister, and me a better
life. They have worked hard, as an elementary school principal and a
nurse, to give tremendous opportunities to their children, but along
the way, they have instilled in us the values that guide us every day.
They often remind us that this country affords the chance to do
anything we wanted if we work hard. And they have taught us that we
have a responsibility to serve the community and the country that has
afforded them so many opportunities.
This desire to instill the value of service in me led my father to
wake me early on the morning of February 11, 1990, to watch as Nelson
Mandela was released from prison. Although the images on my television
were of a reality thousands of miles from our home in California, I
could feel the hope Mandela inspired not only in South Africans but
also in my father. Watching Nelson Mandela go from prisoner to
president and start the process of bringing together a country was more
than inspirational, it motivated me to imagine how I could use public
service to improve the world around me. And it continues to remind me
that events far from home can make a meaningful difference in the lives
of Americans.
Serving in Government is in many ways the fulfillment of my
childhood dream. I joined the Treasury Department in the midst of the
greatest economic downturn since the Great Depression. I worked
alongside policymakers charged with coordinating the international
response to the global recession. The policies the United States
advocated internationally played a pivotal role in breaking the back of
the global recession and restoring economic growth at home and abroad.
In 2010, I was given an opportunity to help implement a part of the
Wall Street Reform and Consumer Protection Act. I had the honor and
privilege of working for Senator Warren as the first Chief of Staff of
the Consumer Financial Protection Bureau. Helping to build an agency
devoted to protecting consumers was deeply personal for me. I grew up
in the Inland Empire, a region of Southern California, where in 2010, 1
in every 14 homes faced foreclosure. These were not just numbers to me;
they were my friends and family. I know the impact that a lost job, cut
in hours, or one bad financial decision can have on the ability to stay
in the home your children grew up in. I am grateful to have played a
role in standing up an agency that helps consumers better understand
and deal with their financial choices.
Before and after my time at the Consumer Financial Protection
Bureau, I have worked on a variety of international economic issues,
including our trade and investment policy agenda, the Committee on
Foreign Investment in the United States, and our engagement with the
multilateral development banks. I have represented the United States in
bilateral and multilateral settings, and no matter the destination
there is always admiration for the strength and resilience of the
American economy. Our recovery from the great recession is no accident.
It is the direct result of the determination and persistence of the
American people, and the policy choices we have made.
However, we have more work to do. We still face a number of
economic challenges, and we also have tremendous opportunities. Our
decisions in the coming years will determine our ability to meet the
future economic needs of the American people, like my neighbors in
California and families across the country. As the global economy
becomes more complex and interconnected, the policy choices we make now
will have an impact on our ability to advance our economic and
strategic interests in the future. While a great deal of the work we do
in International Affairs at the Treasury Department is mitigating
risks, in a number of areas we have opportunities to advance our
economic agenda. If confirmed as the Assistant Secretary for
International Markets and Development, I plan to do just that, by
working to level the international playing field for American workers
and firms, protecting our national security, and advancing our
development agenda.
It would be my privilege to work with this Committee to advance
America's economic interests at home and abroad.
Thank you for taking the time to consider my nomination. I am happy
to take your questions.
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PREPARED STATEMENT OF AMIAS MOORE GERETY
To Be Assistant Secretary for Financial Institutions
Department of the Treasury
September 29, 2015
Chairman Shelby, Ranking Member Brown, distinguished Members of the
Committee. Thank you for inviting me to testify today.
It is an incredible honor to be nominated to serve as Assistant
Secretary for Financial Institutions and to be here today before this
Committee.
I want to recognize the many people who have supported me--family,
friends, and colleagues. I especially want to thank my wife Margaret
and our three children Susie, Pierce, and Jenny. Also my parents,
Adelia and Tom, and my three brothers. And recognize my brother Rowan
and my sister-in-law Clara, who are here as well. My family's love and
support has been critical at each step in my career and my 5 years as a
father have taught me much about both patience and joy.
I also want to thank President Obama for nominating me and
Secretary Lew for entrusting me with this opportunity. I have learned
so much from my colleagues at the Treasury Department, and I am
committed to continuing to earn the trust that they have put in me if I
am fortunate enough to be confirmed.
I believe that public service can make a meaningful difference in
the lives of our fellow Americans. I was raised in a family that held
service as both a calling and a career. My paternal grandfather served
as a senior official in the Eisenhower administration at the Civil
Service Commission and at the State Department, assisting refugees
fleeing Communist regimes in Eastern Europe. My maternal grandfather
served as parish priest in Jersey City before becoming an Episcopal
Bishop in Washington and New York. Their examples of public leadership
have guided me from a young age.
During the six and a half years I have been at Treasury, I have had
the tremendous opportunity to work with you and your staffs, with
others in Congress, with the private sector, independent regulators,
and other important stakeholders. We have been able to collaborate to
pursue policies that support the economic and financial well-being of
homeowners and small businesses, and support firms whose lending powers
economic growth and the savers who invest in those firms. I have been
inspired by entrepreneurs who need credit to expand and thrive, and by
local leaders who are transforming communities in partnership with
Federal lending programs.
Over the course of my private sector career, I have helped
companies both large and small interact with the financial system,
seeking support to grow and expand. These experiences range from
helping a T-shirt company improve its efficiency in preparation for an
initial public offering to helping an insurance company build and
manage relationships with independent agents and brokers. Each has
given me a perspective on how a stable and effective financial system
supports economic growth and expands economic opportunity across the
country.
In Government, I have also seen first-hand the challenges and
limits of Federal response, when economic confidence is shaken,
households have been ill-protected, and the financial system is not
able to support economic growth. If confirmed, I will work to safeguard
our financial system, and confront financial and economic threats,
whether from malicious cyber activity or from panic in financial
markets. I have learned the importance of coordination and open
dialogue as we work to reform our financial system, and I am committed
to continuing this critical collaboration.
As memories of the most searing financial crisis in generations
begin to recede, I look forward to engaging with this Committee and
Congress to move forward on pressing national priorities: working to
make sure that our financial system is both stable and supportive of
economic growth; expanding access to credit for small businesses and
low-income communities; and building on our experience so that
financial services act as a ladder of opportunity toward economic and
financial security.
Thank you again for your time and I look forward to answering your
questions.
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PREPARED STATEMENT OF JAY N. LERNER
To Be Inspector General, Federal Deposit Insurance Corporation
September 29, 2015
Thank you, Chairman Shelby, Ranking Member Brown, and Members of
the Committee. It is truly an honor to appear before you today as the
nominee to serve as the Inspector General (IG) of the Federal Deposit
Insurance Corporation (FDIC).
At the outset, I would like to recognize and thank my kind and
caring family, friends, and colleagues for their support. In
particular, I would like to acknowledge the contributions of my
parents, as I am blessed for the opportunities that they have afforded
me, and the qualities they have instilled in me: honesty, integrity,
perseverance, responsibility, and hard work. I am also grateful to my
supportive girlfriend and three wonderful sisters and their families.
My eight nieces and nephews have kept me grounded and act as reminders
of the importance of what we do here today--public service.
The FDIC plays a critical role in maintaining the stability of our
financial system and protects the savings of millions of hard-working
Americans. It insures more than $6 trillion in deposits at
approximately 6,300 financial institutions, and directly examines and
supervises more than 4,000 of these institutions. In addition, the FDIC
plays an important role in consumer financial protection, resolution
and receivership of insolvent institutions, and management of
significant assets in the deposit insurance fund.
The FDIC Inspector General conducts audits and evaluations which
make recommendations for improving the FDIC's operations, as well as
investigations which preserve the integrity of the system and protect
the savings of bank customers, families, and businesses. In this time
of pressing need to improve efficiency and effectiveness at government
agencies and to eliminate waste, the position of the FDIC Inspector
General is an extremely important one.
I believe that I am particularly well-suited to serve as the
Inspector General at the FDIC. I have substantial leadership and
management experience, and I have conducted oversight and handled
complex banking and financial matters. I trained as an accountant and
passed the Certified Public Accountant Examination, and I am an
experienced lawyer and prosecutor. I am confident that this background
has prepared me well to be successful as an Inspector General, if
confirmed.
I have worked in public service for more than 23 years, and it has
been a privilege to serve this country. Currently, I am the Chief of
Staff and Senior Counsel at the Department of Justice (DOJ) Office of
the Inspector General (OIG), and I have worked in the IG community
since early 2011. I have seen first-hand the many challenges an
Inspector General faces, and have learned how to run a strong IG office
that can achieve results. I have also gained considerable leadership
and management experience under the guidance of the current Inspector
General Michael Horowitz, as well as other leaders in the Office and in
the IG community. During my tenure, I have been the Congressional
liaison and have worked with the Justice Department's leadership, so I
can appreciate the importance of an IG's unique reporting
responsibilities to keep both Congress and the agency head fully
informed.
Importantly, I understand the critical role that independence plays
in an Inspector General's mission. The core principles of integrity,
objectivity, fairness, and accountability must guide an IG's judgment
and decisionmaking. These are essential attributes to maintain the
public's confidence in the work of the Office. If confirmed, I intend
to oversee an Office that conducts audits and evaluations in a thorough
and comprehensive manner; pursues investigations aggressively and
follows the facts wherever they may lead; issues fair-minded and
impartial reports; and makes recommendations to improve the agency's
programs.
Prior to my current position with the Department of Justice OIG, I
gained extensive experience working on banking and financial matters,
and am therefore familiar with how banks operate and their
relationships with regulators. I served as Assistant Chief in DOJ's
Fraud Section, where I worked on enforcement initiatives against
financial crimes. I prosecuted banking and money laundering cases while
in the Money Laundering Section at DOJ, and I worked at two law firms
on similar financial matters. Much of my professional career has
focused on conducting effective oversight and ensuring accountability,
and this background will form a strong foundation to be a successful
Inspector General.
In closing, I understand the challenges ahead and look forward to
the opportunity to serve the American people in this new role. I would
like to thank the Committee for consideration of my nomination, and I
look forward to continuing to work with you and your staffs, if I am
confirmed. I would be pleased to respond to any questions that you
might have.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR MENENDEZ FROM ADEWALE
O. ADEYEMO
Q.1. As Assistant Secretary for International Markets and
Development at the U.S. Department of the Treasury, you will
play an integral role in the Committee on Foreign Investment in
the United States (CFIUS). As you know, CFIUS is tasked with
reviewing the national security implications of foreign
investment in U.S. companies. In a day and age in which U.S.
infrastructure, information technology, and intellectual
property and innovations are subject to almost constant threat
of hacking and cyberterrorism, we must be particularly vigilant
of the acquisition of certain systems and technology by foreign
firms.
How you will navigate the competing interests of
facilitating essential foreign investment in the United
States with the very real threats to our national
security?
Based on your knowledge of the CFIUS review
process, under what conditions might a foreign
acquisition of a U.S. company constitute a national
security threat to the United States?
From where do you see that threat most likely to
emanate today?
Do you see Iran as a national security threat?
Do you see Cuba as a national security threat?
A.1. CFIUS is focused on protecting the national security. As
Assistant Secretary, I would maintain this focus on national
security, pursuant to which CFIUS clears transactions only when
the committee has no unresolved national security concerns with
the transaction. Within this national security mission, CFIUS
can facilitate foreign investment by, among other things,
focusing on national security; acting consistent with the
timeframes provided in statute; using targeted mitigation to
resolve identified concerns, where mitigation can fully resolve
such concerns; and making the process accessible, by publishing
regulations, guidance, annual reports, and having an open door
for companies interested in learning about the process.
CFIUS determines whether a transaction poses a national
security risk by evaluating the threat, vulnerability, and
consequences posed by a transaction. Applying this analytical
framework on a case-by-case basis, CFIUS assesses whether the
transaction under review poses a national security risk. In
conducting its analysis, CFIUS considers a variety of potential
national security factors, including the factors listed in the
CFIUS statute, as appropriate. For example, while investments
from countries subject to sanctions, such as Iran and Cuba, are
still limited by law, in reviewing investments from other
countries, CFIUS considers, among other factors, the adherence
of the subject country to nonproliferation control regimes, the
relationship of the country with the United States, its record
on cooperating in counter-terrorism efforts, and the potential
for transshipment or diversion of technologies with military
applications.
We can, and do, protect the national security while also
promoting foreign investment. Foreign investment creates good
jobs, spurs innovation, and results in lower prices and greater
consumer choice. Accordingly, the executive branch has engaged
in extensive efforts to encourage foreign investment in the
United States, such as the Department of Commerce-led SelectUSA
initiative, and Treasury supports these initiatives, consistent
with Treasury's mission.
Q.2. Last month, the Departments of Treasury and Commerce
announced the broadest easing of restrictions to Cuba Sanction
Regulations we have seen yet. And shortly after, the Department
of Commerce announced that Secretary Penny Pritzker would
travel there next month. Opening Cuba for business by easing
restrictions and legitimizing a totalitarian regime is a lavish
reward that is earning us nothing in return. I completely
reject the notion that it is the United States that has created
hardship on the Cuban people, not the regime itself.
With regard to the Department of Treasury's recent
announcement, changes to the Cuban Assets Control Regulations
were undertaken with little notice to Congress. There was no
opportunity for the American people to comment on the proposed
changes, and, I suspect little consideration for the second and
third order effects of funneling new cash-flows into the Cuban
regime's coffers. As I've said before, the U.S. policy in Cuba
should be guided by one, single principle, and that is
supporting the Cuban people's aspirations for a democratic
future. This was the intent of the Libertad Act, which I helped
author. Providing the regime the funds it needs to continue its
repressive rule is not the way to support a democratic
transition, and it's not consistent with the intent of the law.
Despite the Administration easing restrictions on
everything from travel to telecommunications to banking and
commercial transactions, the fact remains that the Cuban regime
controls most of the country's economy, and it is highly
unlikely that any financial benefits will make their way to the
Cuban people.
As Assistant Secretary of International Markets and
Development, what role will you play in ensuring that
the Administration's easing of these crucial sanctions
will not be manipulated by the regime to further
disadvantage the Cuban people?
What do you expect the impact of sanctions relief
to be on your work?
If--in spite of this inappropriately generous
easing of sanctions--Cuba continues to act as a
ruthless, totalitarian regime without regard for the
needs of its people, does the Department of the
Treasury plan to reassert restrictions?
Will the Castro regime face any consequences from
the Department of the Treasury if it continues to jail
dissidents, silence political opponents and harbor
American fugitives?
A.2. Along with the Commerce Department's Bureau of Industry
and Security, the Department of the Treasury's Office of
Foreign Assets Control administers and enforces the Cuba
sanctions program, in consultation with other relevant agencies
of the U.S. Government, including the Department of State. I
understand that colleagues at the State Department are engaged
in multiple lines of negotiations with the Government of Cuba,
including to address law enforcement cooperation and issues
such as fugitives. I would refer you to the State Department
for further details regarding these negotiations.
Q.3. The position of Assistant Secretary of International
Markets and Development was created by the Foreign Investment
and National Security Act, the FINSA law, passed by this
Committee and signed into law in 2007. While foreign investment
and development is in our economic interests, the foremost
consideration of the person who holds this position should be
national security.
Do you agree with that statement?
In this position, there may be pressures--pressure by those
above you to consider political and economic interests about
national security interests. And with these pressures, you will
need to work through the CFIUS process, coordinating numerous
agencies under the fairly strict timelines the law prescribes.
This can be a difficult balance to strike and a significant
moral and professional challenge.
Can you give us an idea of a similar challenge you
have had in your career, coordinating, under pressure,
multiple agencies with different cultures and
viewpoints--and how you responded?
A.3. By statute, the focus of CFIUS is national security. If
confirmed, I would exercise my responsibilities with respect to
CFIUS consistent with FINSA.
In July of 2015, Secretary Lew led the U.S. delegation to
the United Nations (UN) Third International Conference on
Financing for Development (FfD) in Addis Ababa, Ethiopia,
signaling strong U.S. engagement and support for the global
sustainable development agenda. Both in the lead up to the
meeting and during the meeting itself, I coordinated
intensively with multiple agencies as the point person from
Treasury. This included working closely with colleagues from
various agencies and the NSC to resolve issues and priorities
as we prepared for FfD. Negotiations over the FfD outcome
document required intensive interagency coordination within the
United States Government as well as coordination with other
U.N. member states. I responded to the challenges that arose by
working to identify viable options, helping to develop a
process for reaching a conclusion, and collaborating with
colleagues in an attempt to reach consensus. Ultimately, our
efforts resulted in approval of the Addis Ababa Action Agenda,
the outcome document for the Financing for Development
conference. The Action Agenda represented an expansion of the
development agenda, moving away from an exclusive focus on
official development assistance toward a more holistic approach
that includes countries raising their own resources and
leveraging private sector financing to address development
challenges.
Q.4. In December 2014, the Administration announced major
changes in U.S. policy toward Cuba, including the restoration
of diplomatic relations, a review by the Department of State of
Cuba's designation as a state sponsor of terrorism, and an
increase in travel, trade, and the flow of information to Cuba.
This third step required the Departments of Treasury and
Commerce to amend sanctions regulations. Treasury implemented
changes to the Cuban Assets Control Regulations (CACR) on
January 16, 2015, and again on September 21, 2015.
On September 21, 2015, the Office of Foreign Assets Control
published the following in the Federal Register:
The Department of the Treasury's Office of Foreign Assets
Control (OFAC) is amending the Cuban Assets Control Regulations
to further implement elements of the policy announced by the
President on December 17, 2014, to engage and empower the Cuban
people. Among other things, these amendments further facilitate
travel to Cuba for authorized purposes (including authorizing
by general license the provision of carrier services by
vessel), expand the telecommunications and Internet-based
services general licenses, authorize certain persons subject to
U.S. jurisdiction to establish a physical presence in Cuba,
allow certain additional persons subject to U.S. jurisdiction
to open and maintain bank accounts in Cuba to use for
authorized purposes, allow certain additional financial
transactions (including removing the limit on donative
remittances to Cuba and unblocking certain previously blocked
remittances and funds transfers), authorize all persons subject
to U.S. jurisdiction to provide goods and services to Cuban
national individuals located outside of Cuba, and allow a
number of other activities related to, among other areas, legal
services, imports of gifts sent to the United States, and
educational activities. These amendments also implement certain
technical and conforming changes.
LDid the Department of the Treasury conduct a legal
review of the amendments to the Cuban Assets Control
Regulations? What is the process for this legal review?
What entity or individual makes the final legal
determination that amendments to the Cuban Assets
Control Regulations do not violate other legal
provisions?
LUnder what legal authority did the Department of
the Treasury make the January 16, 2015 and September
21, 2015 changes to the Cuban Assets Control
Regulations? Do these changes conflict with any portion
of the Cuban Liberty and Democratic Solidarity
(LIBERTAD) Act of 1996 (Pub. L. 104-114, 22 U.S.C.
6021 et seq.) or other Cuba sanctions laws, including
the Cuban Democracy Act of 1992 (Pub. L. 102-484, 22
U.S.C. 6001 et seq.), and the Trade Sanctions Reform
and Export Enhancement Act of 2000 (Pub. L. 106-387, 22
U.S.C. 7201 et seq.)?
LHow does the Department of the Treasury interpret
the legal limits for changes to Cuba sanctions under
the Cuban Liberty and Democratic Solidarity (LIBERTAD)
Act of 1996 (Pub. L. 104-114, 22 U.S.C. 6021 et seq.)
or other Cuba sanctions laws, including the Cuban
Democracy Act of 1992 (Pub. L. 102-484, 22 U.S.C.
6001 et seq.), and the Trade Sanctions Reform and
Export Enhancement Act of 2000 (Pub. L. 106-387, 22
U.S.C. 7201 et seq.)?
LWhat additional actions does the Department of the
Treasury feel it can pursue without violating the Cuban
Liberty and Democratic Solidarity (LIBERTAD) Act of
1996 (Pub. L. 104-114, 22 U.S.C. 6021 et seq.)?
A.4. The Department of the Treasury's Office of Foreign Assets
Control Office manages the department's policy with respect to
Cuba sanctions. My understanding is that the Cuban Assets
Control Regulations (CACR) were originally issued pursuant to
the Trading With The Enemy Act (TWEA), which affords the
President and his designees the authority to revise the
regulations. The President continues to exercise his authority
to adjust the regulations consistent with and subject to
limitations in certain statutes subsequently enacted by
Congress with respect to Cuba, including the Trade Sanctions
Reform and Export Enhancement Act of 2000 (TSRA), the Cuban
Democracy Act of 1992 (CDA), and the Libertad Act. My
understanding is that attorneys in all relevant agencies have
confirmed that the amendments to the CACR issued by the
Department of the Treasury's Office of Foreign Assets Control
are consistent with these existing statutes.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR MENENDEZ FROM AMIAS
MOORE GERETY
Q.1. I am deeply concerned that the current economic crisis in
Puerto Rico threatens to destabilize the island. Together with
seven of my colleagues, I recently sent a letter to Secretary
Lew urging the Department of the Treasury to move beyond simply
providing technical assistance and take an active leadership
role to immediately resolve this crisis.
To be clear, this crisis requires assistance from both
Congress and the Administration. It is essential for Congress
to approve the pending legislation I introduced with Senators
Schumer, Blumenthal, and others, which would allow the
government of Puerto Rico to authorize its public utilities to
rework their debts under Chapter 9 of the U.S. Bankruptcy Code.
But taken alone, this action is simply not enough.
The Department of the Treasury is best suited to take a
leadership role to bring creditors and debtors to the table to
resolve this crisis immediately.
LIn addition to resolution of the island's public
debts through Chapter 9 bankruptcy--an option not
currently available to Puerto Rico--what other
interventions are necessary to solve the economic
crisis there?
LWill the Department commit to bringing creditors
and debtors to the table to resolve the outstanding
debt issues?
LWhat specific tools will the Department utilize to
resolve this crisis? What steps will it take to
intervene, beyond continuing to provide ``technical
assistance''?
LWhat is the timeline for implementing these
actions?
A.1. The U.S. Treasury remains committed to finding solutions
that support the people of Puerto Rico. While I do not work
directly on those issues, Treasury has a dedicated team that is
closely monitoring the situation and sharing its expertise with
the Commonwealth officials who are working to manage through
these difficult times. However, any meaningful response to
assist the U.S. citizens living and working in Puerto Rico
requires Congressional action.
To that end, the Department believes a central element for
any Federal response to Puerto Rico's fiscal situation must
include an orderly legal process built on the tested principles
of Chapter 9 of the U.S. Bankruptcy Code. Without Congressional
action, Treasury is deeply concerned that a protracted and
disorderly restructuring process will cause long-term damage to
the health, safety, and financial well-being of the families
living and working in Puerto Rico.
If you have further questions regarding the Department's
work on this important and urgent issue, I would be happy to
ask my colleagues to follow up with you directly.
Q.2. Over the last 6 years, you have worked extensively on
addressing systemic risk to the financial system. As we saw in
the financial crisis, sources of risk can build anywhere in the
financial system, regardless of the types of entities involved
or the jurisdictional boundaries between regulators. So it's
crucial to have tools for identifying risks to the financial
system and properly addressing them.
LWhat tools have been the most helpful in
identifying potential risks and areas of weakness in
the financial system?
LFrom your perspective, 8 years from the start of
the financial crisis, what are the greatest unresolved
systemic risks to our financial system, and how would
you go about addressing these risks?
A.2. One of the critical lessons of the financial crisis is
that no single entity had responsibility for monitoring the
overall stability of the financial system. In response,
Congress created the Financial Stability Oversight Council
(FSOC), which brings the financial regulatory community
together with the mission to identify and respond to potential
threats to financial stability. The FSOC now provides an
important forum for member agencies with supervisory,
examination, data, surveillance, and policy expertise, to
collectively gather and analyze information to assess risks
that affect financial markets and institutions. The Dodd-Frank
Act also gave regulators additional authority to impose more
stringent prudential requirements on the largest, most complex
financial institutions so that they employ sound risk
management practices, are more resilient in the face of stress,
and, if necessary, are able to be safely wound down in an
orderly manner.
FSOC continuously monitors for threats to financial
stability and issues annual reports that highlight emerging
threats and make related recommendations. The 2015 annual
report identified 11 key areas, including potential incentives
for greater risk-taking in a low-yield environment; the need
for continued progress to reform benchmark rates, such as
LIBOR; and the continued reliance on short-term wholesale
funding. I also believe that more work needs to be done to
improve our financial system's ability to address emerging
cybersecurity risks, and that we must continue working with our
international peers to implement reforms necessary to
facilitate effective cross-border resolutions. If confirmed, I
will continue to make sure that Treasury is doing all it can to
monitor these issues and to take action where appropriate.
Q.3. As part of your responsibilities at the Department of the
Treasury, you will oversee the Community Development Financial
Institutions (CDFI) Fund. By providing funding and technical
assistance to local organizations that work to expand the
availability of credit for families and for small businesses,
the CDFI Fund plays a critical role in community development
for some of our most distressed neighborhoods. In my State of
New Jersey, CDFIs have used funding to build multifamily
affordable housing and community facilities, offer small
business and commercial real estate loans, and to increase food
access and create jobs in low-income communities, in addition
to many other important community and economic development
projects. Funding for CDFIs is particularly important, as
communities throughout the country continue to struggle with
the longstanding effects of the foreclosure crisis and high
household debt.
LAs Assistant Secretary for Financial Institutions,
what will you do to ensure that the CDFI Fund has the
tools and resources it requires to continuing providing
funds and technical assistance to CDFIs throughout the
Nation?
A.3. This past year Treasury celebrated the twentieth
anniversary of the CDFI Fund, a celebration I was proud to take
part of because of the critical role CDFIs play in supporting
one of Treasury's core objectives of promoting economic growth
that is inclusive of all communities and Americans. In the 20
years since it was created, the CDFI Fund has awarded more than
$2 billion to CDFIs, allocated $44 billion in tax credit
authority through the New Markets Tax Credit Program, and has
guaranteed $857 million in bonds through the CDFI Bond
Guarantee Program. In many cases CDFIs are the only sources of
capital for borrowers in the communities they serve.If
confirmed, I will advocate for keeping the CDFI Fund's programs
fully and adequately funded, as reflected in the President's
budget requests. I will stand ready to work with Congress to
support legislative changes to deepen the impact of existing
programs, such as changes to the CDFI Bond Guarantee Program to
enable more CDFIs to participate in the program and more
communities to benefit from low-cost, long-term community
development capital. And I will work closely with the Director
of the CDFI Fund to develop the 5-year strategic plan that
identifies the key priorities for today and for the CDFI Fund's
future.
Q.4. The Department of the Treasury plays a crucial role in
coordinating the Federal financial regulators. As Assistant
Secretary for Financial Institutions, you will oversee the
coordination of policies that affect financial institutions of
varying size, scope, and activity. Of utmost importance in the
development of these policies is crafting rules and regulations
that are responsive to the experiences of institutions of
varying size.
LIn your opinion, have the Federal financial
regulators been successful in formulating policies in
such a way?
LWhat are the challenges to formulating policies
that are responsive to the experiences of institutions
of varying size? What do you plan to do as Assistant
Secretary to mitigate those challenges?
A.4. A key objective of financial regulatory policy should be
to scale regulations appropriately so that our financial system
is safe and resilient while remaining innovative and dynamic.
The Dodd-Frank Act codifies this principle by providing for
regulators to adopt a tailored regulatory framework that
focuses the most stringent standards on the largest, most
complex financial institutions, such as enhanced capital,
liquidity, and risk management requirements. Our regulatory
approach must properly account for the fact that smaller
institutions, such as community banks and credit unions,
present a different set of risks than larger firms. I spend a
lot of time talking to representatives of financial
institutions of all sizes to better understand the challenges
they face, and, if confirmed, I will continue working with
regulators so that rules and supervisory expectations are
calibrated in a manner that enables firms to thrive while
remaining safe and sound.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN FROM JAY N.
LERNER
Q.1.a. The Department of Justice's Office of Professional
Responsibility and the FDIC's Office of the Inspector General
recently completed reports regarding DOJ's ``Operation Choke
Point'' and the FDIC's supervisory approach to institutions
that conducted business with merchants associated with high-
risk activities. OPR found no wrongdoing by the DOJ, and the
FDIC OIG found the FDIC's role in Operation Choke Point to be
inconsequential. The FDIC OIG determined that the FDIC's
supervisory approach was within its authorities, and that there
was no evidence that the FDIC used the high-risk list to target
financial institutions. The FDIC OIG also determined that the
five officials at the FDIC did not play a role in the
development or implementation of Operation Choke Point. The
FDIC OIG provided recommendations to the FDIC to review and
clarify, as appropriate, existing policy and guidance
pertaining to the provision and termination of banking
services; assess the effectiveness of the FDIC's supervisory
policy and approach after a reasonable period of time is
allowed for implementation; and coordinate the FDIC's Legal
Division to review and clarify, as appropriate supervisory
policy and guidance.
Do you have any concerns about the completeness or
conclusions of these reports?
A.1.a. I have reviewed the ``Operation Choke Point'' reports
written by the Department of Justice's Office of Professional
Responsibility and the Federal Deposit Insurance Corporation
(FDIC) Office of the Inspector General (OIG) (as referenced in
the question), and I do not have information at this time that
would cause me concern about the completeness of or conclusions
contained in the reports.
Q.1.b. If confirmed, you will be responsible for monitoring the
FDIC's implementation of the OIG's recommendations. What will
you do to carry out this responsibility?
A.1.b. If confirmed as FDIC Inspector General, I would follow
up on the recommendations made in the FDIC-OIG report on
``Operation Choke Point.'' I intend to learn more about what
has been done by the FDIC with respect to the issues identified
in the report and encourage the FDIC Chairman and other FDIC
officials to implement remaining recommendations. If confirmed,
my goal as Inspector General would be to make recommendations
to improve the FDIC's programs and operations, and to ensure
implementation in an effective and efficient manner.