[Senate Hearing 108-583]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-583

 
                   NOMINATIONS OF: ALFRED A. PLAMANN
                   THOMAS W. GRANT, NOE HINJOSA, JR.
                       AND WILLIAM R. TIMKEN, JR.

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                                   ON

                            NOMINATIONS OF:

   ALFRED A. PLAMANN, OF CALIFORNIA, TO BE A MEMBER OF THE BOARD OF 
          DIRECTORS OF THE NATIONAL CONSUMER COOPERATIVE BANK

                               __________

           THOMAS W. GRANT, OF NEW YORK, TO BE A DIRECTOR OF
             THE SECURITIES INVESTOR PROTECTION CORPORATION

                               __________

            NOE HINJOSA, JR., OF TEXAS, TO BE A DIRECTOR OF
             THE SECURITIES INVESTOR PROTECTION CORPORATION

                               __________

          WILLIAM R. TIMKEN, JR., OF OHIO, TO BE A DIRECTOR OF
             THE SECURITIES INVESTOR PROTECTION CORPORATION

                               __________

                             MARCH 25, 2003

                               __________

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

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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  RICHARD C. SHELBY, Alabama, Chairman

ROBERT F. BENNETT, Utah              PAUL S. SARBANES, Maryland
WAYNE ALLARD, Colorado               CHRISTOPHER J. DODD, Connecticut
MICHAEL B. ENZI, Wyoming             TIM JOHNSON, South Dakota
CHUCK HAGEL, Nebraska                JACK REED, Rhode Island
RICK SANTORUM, Pennsylvania          CHARLES E. SCHUMER, New York
JIM BUNNING, Kentucky                EVAN BAYH, Indiana
MIKE CRAPO, Idaho                    ZELL MILLER, Georgia
JOHN E. SUNUNU, New Hampshire        THOMAS R. CARPER, Delaware
ELIZABETH DOLE, North Carolina       DEBBIE STABENOW, Michigan
LINCOLN D. CHAFEE, Rhode Island      JON S. CORZINE, New Jersey

             Kathleen L. Casey, Staff Director and Counsel

     Steven B. Harris, Democratic Staff Director and Chief Counsel

                       Mark F. Oesterle, Counsel

               Patience R. Singleton, Democratic Counsel

             Jonathan Miller, Democratic Professional Staff

                 Dean V. Shahinian, Democratic Counsel

   Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator

                       George E. Whittle, Editor

                                  (ii)


                            C O N T E N T S

                              ----------                              

                        TUESDAY, MARCH 25, 2003

                                                                   Page

Opening statement of Chairman Shelby.............................     1
    Prepared statement...........................................    12

Opening statements, comments, or prepared statements of:
    Senator Sarbanes.............................................     2
    Senator Dole.................................................     2
        Prepared statement.......................................    12
    Senator Voinovich............................................    13

                                NOMINEES

Alfred W. Plamann, of California, to be a Member of the Board of 
  Directors
  of the National Consumer Cooperative Bank......................     3
    Prepared statement...........................................    13
    Biographical sketch of nominee...............................    15
    Responses to written questions of Senator Sarbanes...........    62
Thomas W. Grant, of New York, to be a Director of the Securities 
  Investor
  Protection Corporation.........................................     4
    Biographical sketch of nominee...............................    21
    Response to written question of Senator Shelby...............    61
Noe Hinjosa, Jr., of Texas, to be a Director of the Securities 
  Investor
  Protection Corporation.........................................     5
    Biograhpical sketch of nominee...............................    28
William R. Timken, of Ohio, to be a Director of the Securities 
  Investor Protection Corporation................................     6
    Biographical sketch of nominee...............................    47
    Response to written question of Senator Shelby...............    61

                                 (iii)


                            NOMINATIONS OF:
                    ALFRED A. PLAMANN, OF CALIFORNIA
                         TO BE A MEMBER OF THE
                       BOARD OF DIRECTORS OF THE
                   NATIONAL CONSUMER COOPERATIVE BANK
                                  AND
                      THOMAS W. GRANT, OF NEW YORK
                       NOE HINJOSA, JR., OF TEXAS
                    WILLIAM R. TIMKEN, JR., OF OHIO
                           TO BE DIRECTORS OF
                        THE SECURITIES INVESTOR
                         PROTECTION CORPORATION

                              ----------                              


                        TUESDAY, MARCH 25, 2003

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.

    The Committee met at 9:25 a.m., in room SD-538 of the 
Dirksen Senate Office Building, Senator Richard C. Shelby, 
(Chairman of the Committee), presiding.

        OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY

    Chairman Shelby. The Committee will come to order.
    Gentlemen, I want to thank you for your appearance before 
the Committee today and your willingness to accommodate the 
Senate's busy schedule of roll call votes this morning.
    Starting at around 9:30, or so, we are facing a series of 
stacked roll call votes on the budget resolution. In the light 
of the efforts you all made to appear before the Committee 
today, we wanted to proceed as expeditiously as possible.
    Any additional questions that we are unable to ask of you 
this morning we will submit in writing. We would ask that you 
respond as quickly as possible to them so that we can consider 
your nominations in the coming weeks.
    I intend to waive my opening statement other than what I 
have said and include it in the record so that we can allow you 
to make your statements and respond to questions the Committee 
may have.
    Senator Sarbanes.

              COMMENTS OF SENATOR PAUL S. SARBANES

    Senator Sarbanes. Mr. Chairman, I am pleased to join you in 
welcoming the nominees, one for the National Cooperative Bank 
and three for the Securities Investor Protection Corporation.
    Of course, the bank has a very important responsibility--to 
help low-income individuals, particularly in the areas of 
affordable housing and community economic development.
    The President is required actually under the Act to appoint 
a representative to the board who, ``has extensive experience 
in the cooperative field representing low-income cooperatives 
eligible to borrow from the bank and who is expected to be an 
advocate on behalf of the low-income cooperatives.''
    I would want to address a question or two to Mr. Plamann 
about this matter when we turn to questions.
    The SIPC, of course, we know of its importance. It helps 
customers of failed brokers recover their cash and securities. 
It has a very important responsibility not often appreciated. 
These are part-time positions, but I think they are very 
important to the workings of our economic system.
    I will forego the balance of the statement because we know 
that the nominees have traveled and I want to commend Chairman 
Shelby for really doing the best he can to get you up and have 
your hearing and try to clear you in face of this vote-a-rama 
that we are about to have.
    Chairman Shelby. Senator Dole.

               COMMENTS OF SENATOR ELIZABETH DOLE

    Senator Dole. Mr. Chairman, I do have an opening statement 
which I will submit for the record in the interest of time.
    Chairman Shelby. It will be made a part of the record, 
without objection.
    Senator Dole. I would like to welcome each of you this 
morning. I particularly want to welcome Tim Timken, my friend. 
He is a man of tremendous commitment and will bring a great 
deal of expertise to the table.
    I am delighted to have this opportunity to see you this 
morning.
    Chairman Shelby. Thank you. Gentlemen, would you stand and 
be sworn. Hold up 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. Plamann. I do.
    Mr. Grant. I do.
    Mr. Hinojosa. I do.
    Mr. Timken. I do.
    Chairman Shelby. Do you agree to appear and testify before 
any duly-constituted committee of the Senate?
    Mr. Timken. I do.
    Mr. Hinojosa. I do.
    Mr. Plamann. I do.
    Mr. Grant. I do.
    Chairman Shelby. Thank you. Be seated. Your written 
testimony will be made part of the record. We will start with 
Mr. Plamann, do you have a brief statement you would like to 
make?
    Mr. Plamann. Yes.
    Chairman Shelby. Please make it brief, if you can.
    Mr. Plamann. Good morning. Thank you very much.
    Chairman Shelby. Thank you.

           STATEMENT OF ALFRED PLAMANN, OF CALIFORNIA

          TO BE A MEMBER OF THE BOARD OF DIRECTORS OF

             THE NATIONAL CONSUMER COOPERATIVE BANK

    Mr. Plamann. Chairman Shelby, Ranking Member Sarbanes, and 
distinguished Members of the Committee. I am honored to appear 
here today as the nominee to become a Member of the Board of 
Directors of the National Consumer Cooperative Bank.
    I actively sought this nomination in order to again serve 
on the Board of Directors of the NCB. I served as an elected 
Board Member for 6 years and as Chairman for two of those 
years.
    During my tenure, the Bank made over $800 million in low-
income loans, which represents a substantial increase, and the 
Bank's commitment to low-income housing was improved.
    I am currently President and CEO of Unified Western 
Grocers, a cooperative wholesale grocery company in Los Angeles 
serving six western States. I am a graduate of the University 
of Colorado and a graduate of the University of Pennsylvania. I 
live in Los Angeles with my wife.
    If confirmed by the Senate, I will bring to the Board of 
Directors of the National Consumer Cooperative Bank extensive 
experience in the cooperative field in support of low-income 
communities and low-income borrowers.
    My low-income experience is in three areas. First, as CEO 
of Unified Western Grocers. Second, as a Board Member of the 
Weingart Center for the Homeless in Los Angeles. And third, as 
an elected Director of the NCB for 6 years.
    Fifty-five percent of Unified Western Grocers' business is 
in Southern California heavily weighted to the Los Angeles 
area. Within the L.A. area, our retailers have catered to the 
central urban population, which is predominantly lower-income 
Hispanic, approximately 42 percent and African-American, 
approximately 36 percent.
    As a member of the Weingart Center Board of Directors, I 
serve on the finance committee. The Weingart Center, one of the 
largest and most comprehensive facilities of its kind in the 
country, is breaking the cycle of homelessness in Los Angeles. 
They provide individual housing for 630 clients.
    The Center also assists its clients by giving them basic 
skills necessary to stabilize their lives, secure a stable 
income, and find permanent housing within 4 months. Follow-up 
shows 30 percent are still free from addictive substances and 
live in their own homes with steady employment.
    As a Board Member of the NCB for 6 years, two of which I 
served as Chair of the Board, I strongly supported the Bank's 
efforts to expand its low-income business. I was elected to the 
NCB Board in 1995, during which the NCB originated $82 million 
of low-income loans. During the 2 years I served as Chair of 
the Board, 1997 and 1998, the NCB originated a total of $362 
million.
    These activities give me a strong understanding of low- and 
no-income individuals and issues. I am committed to making a 
difference in low-income areas, not only through monetary 
assistance in my professional capacity, but also in personal 
time commitment.
    I would be proud to serve on the Board of Directors of the 
National Consumer Cooperative Bank, and I appreciate your 
consideration.
    Please allow me to answer any questions that you have at 
this time.
    Chairman Shelby. Thank you.
    Mr. Grant.

           STATEMENT OF THOMAS W. GRANT, OF NEW YORK

                      TO BE A DIRECTOR OF

         THE SECURITIES INVESTOR PROTECTION CORPORATION

    Mr. Grant. Good morning, Chairman Shelby, Senator Sarbanes, 
and Senator Dole.
    My remarks will be very brief. I did not write a very long 
statement. I will read it quickly.
    It is an honor to have my nomination confirmed by the U.S. 
Senate as a Director of the SIPC. Provided the Senate and the 
President approve this nomination, I feel certain that I can be 
a positive force in continuing the careful, watchful role the 
SIPC plays in protecting investors, particularly in light of 
recent corporate and market difficulties.
    With more than 35 years' experience in the securities 
industry, both with full-service securities firms and a small 
mutual fund family, my background should assist me in 
contributing to what is essentially care of the individual 
investor. Aside from my professional background, I feel that 
the support of a fine family with a wonderful spouse of 35 
years and two great children further supports the values needed 
in this position.
    The SIPC, in conjunction with the existing self-regulatory 
organizations, has played a significant role in making our 
capital markets the strongest in the world. Throughout the past 
30 years, more than 99 percent of all investors have had all of 
their securities and cash returned when the firm holding their 
assets failed. This security for investors must remain firmly 
in place to continue the rebuilding of investor confidence.
    The Committee can also be assured that I understand the 
responsibility of assuring that the assets we hold are used 
wisely. If needed, as time passes and conditions change, I 
further realize that a director's role includes the 
responsibility to see that the assets remain adequate. To date, 
taxpayers have not funded the SIPC and I feel that this is a 
sound policy for the future. The SIPC has also initiated an 
excellent education effort to better explain the SIPC's role 
and I am particularly interested to see that this effort is 
continued.
    In conclusion, I would like to thank the President and this 
Committee for the opportunity to serve.
    Chairman Shelby. Thank you.
    Mr. Hinojosa.

            STATEMENT OF NOE HINOJOSA, JR., OF TEXAS

                      TO BE A DIRECTOR OF

         THE SECURITIES INVESTOR PROTECTION CORPORATION

    Mr. Hinojosa. Chairman Shelby, good morning. Senator 
Sarbanes, good to be here. Senator Dole, good to see you again.
    Good morning. My name is Noe Hinojosa, Jr., of Dallas, 
Texas, and I am honored to have been nominated by President 
George W. Bush to serve as a Director of the Securities 
Investor Protection Corporation.
    My wife, Marcia, and my children, Mary Elizabeth and Noe 
III, express their regrets for not being here. They would have 
loved to have been here. But the children's commitment didn't 
permit that.
    I was born in Brownsville, Texas and raised just across the 
border in Matamoros, Mexico. About 12 years ago, when I joined 
my partner, Bob Estrada, to start a firm in 1992, we had two 
employees, a pocket calculator, and a $300,000 loan. Today, we 
have over 20 employees, over $1 million in capital, and the 
finest technology available in the securities market. I am the 
Vice Chairman and part owner of an investment banking firm that 
specializes in public finance. And as a small business owner, 
particularly a minority small business owner, with my name on 
the door and my money on the line, I am keenly aware of the 
need to conduct our business in an ethical and professional 
manner.
    I am also keenly aware of the important functions that 
agencies, such as the SIPC, provide and as such, I can assure 
this body, as I have assured the President, that if I am 
confirmed, I will work hard to maintain and promote the vital 
role the SIPC plays as the first line of defense for investors 
when a securities firm fails or declares bankruptcy. In the 
past 30 years, as you well know, more than 600,000 investors 
have recovered nearly $14 billion in assets with the SIPC's 
help. That safety net for investors must remain strong and be 
prepared for every contingency.
    I believe my unique perspective as an owner of a securities 
firm and as an individual investor adds value to the 
policymaking role I shall play as a Director. My company, 
Estrada Hinojosa & Company, Inc., is a member in good standing 
of the Municipal Securities Rulemaking Board, the National 
Association of Securities Dealers, the Securities and Exchange 
Commission, and of course, the SIPC. In fact, my partner 
recently served as Chairman of the MSRB.
    Since 1992, our business plan limits our involvement in 
securities to the municipal bond business. Our investor base is 
limited to institutional investors, most commonly described as 
bond funds, bank trust departments, and similar institutions. 
Hence, I have a good working knowledge of the responsibilities 
and obligations of securities firms and the great importance of 
compliance with all the rules and regulations placed on our 
industry.
    In addition, I have made personal investments over the 
years ensuring the future security of my immediate and extended 
family. I can assure you I have the utmost interest in 
protecting the integrity of our capital markets, because 
without an institution such as the SIPC, the trust element of 
our financial system would be lost.
    The SIPC must continue to maintain sufficient resources to 
handle its statutory responsibilities and to plan for every 
contingency in these perilous times. The SIPC must continue its 
investor education initiatives and its record of reliance on 
industry assessments rather than taxpayer assistance.
    I look forward to the opportunity to serve and respectfully 
request your support.
    Chairman Shelby. Thanks. Mr. Timken.

          STATEMENT OF WILLIAM R. TIMKEN, JR., OF OHIO

                      TO BE A DIRECTOR OF

         THE SECURITIES INVESTOR PROTECTION CORPORATION

    Mr. Timken. Chairman Shelby, Senator Sarbanes, Senator 
Dole, it is good to be with you.
    My name is W.R. Timken, Jr., from Canton, Ohio. I am 
honored to be here today as President Bush's nominee for the 
position of Chairman of the Board of the Securities Investor 
Protection Corporation. Thank you for your consideration.
    With me today are my wonderful wife, Sue Timken, and my 
sons, Kurt and Beau.
    By way of background, I have for 28 years been Chairman of 
the Timken Company, a New York Stock Exchange-listed company 
since 1922. I received a bachelor's degree in economics and 
history from Stanford University and an MBA degree from Harvard 
University. I have served as the Vice Chairman and the Chairman 
of the National Association of Manufacturers, a nonprofit 
organization with 14,000 member-companies nationwide.
    Although I have never been involved in the securities 
business, in addition to the Timken Company, I have served on 
the board of directors of three other public corporations and 
personally have been a substantial investor in securities.
    I believe effectively functioning capital markets in which 
investors are willing to invest their resources are essential 
to our free enterprise system, which itself is essential to our 
American democracy. Investor confidence is a crucial factor.
    I know that the SIPC, a nonprofit corporation, was 
established by the Congress in 1970 to protect the investor for 
the custody function undertaken by registered securities 
brokers and dealers. Handing over hard-earned money without 
immediately receiving a tangible piece of property is a leap of 
faith that investors must make. They do need some protection.
    The results have been outstanding as the SIPC has served 
investors as their first line of defense in the event of 
brokerage firm failures. No fewer than 99 percent of eligible 
investors receive all of their cash and securities in a 
liquidation proceeding under the Securities Investor Protection 
Act. From its creation in 1970, through December 2002, the SIPC 
advanced $513 million in order to make possible the recovery of 
almost $14 billion in assets for an estimated 622,000 
investors.
    My intention as Chairman will be to work with our board and 
the SIPC associates to continue to fulfill the objectives of 
the Securities Investor Protection Act of 1970. I will seek 
advice from Congress, the securities industry, and the SEC. And 
I will see that the SIPC Fund and lines of credit are 
sufficient to meet the demands of our charge.
    I would appreciate your support of my nomination and I will 
be happy to answer any questions and listen to any advice.
    Thank you.
    Chairman Shelby. Thank you all. I will try to be as brief 
as I can. Mr. Timken, I will start with you and move from right 
to left.
    One area of concern that I have concerns the public 
awareness of the Securities Investor Protection Corporation's 
function. I fear that many investors believe that the role is 
to indemnify investors against trading losses or market swings.
    Do you agree that this may be a problem? Do you think there 
is a greater need for investor education in this regard?
    Mr. Timken. Senator, I agree. We have the results of the 
study conducted by the GAO for Representative Dingell which 
gave us some additional information on that. And the SIPC 
responded with an increased awareness program. I think 
advancements that Mr. Hinojosa referred to have been made.
    I think we can do a better job and that would certainly be 
one of the things that we would definitely attempt to 
undertake.
    Chairman Shelby. Mr. Hinojosa, in August 2001, the 
Securities Investor Protection Corporation was faced with a 
liquidation of the MJK Clearing, Inc., a Minneapolis brokerage 
firm, that cleared trades from 175,000 accountholders.
    By all accounts, the liquidation went smoothly. I 
understand that the fund was recently deemed to be sufficiently 
capitalized with a 99 percent confidence interval.
    Nevertheless, are there any lessons that you feel can be 
drawn from this failure, the MJK failure, to help avoid such 
massive liquidations in the future?
    What can be done to ensure the fund's ongoing health, which 
is a concern for everybody, especially for you board people?
    Mr. Hinojosa. I think in briefings that I have had with 
staff, there are serious attempts for ensuring that we have the 
appropriate lines of credit extended. We are working and we 
intend to work as a board very diligently with staff to ensure 
that the proper lines of credit care in place, that the $1.3 
billion in net capital that the SIPC has is always there.
    I wish that we could have 100 percent guarantee, not 99 
percent. That is something we will continue to strive for. We 
certainly won't be bashful about coming before you and asking 
for your guidance if you feel that that needs to be enhanced 
and improved.
    Chairman Shelby. Mr. Grant, just following up on the MJK 
failure, that was the Securities Investor Protection 
Corporation's largest liquidation to date. MJK's financial 
difficulties were caused in large part by its securities 
lending business. Is this business particularly risky, or did 
MJK mismanage its activities, if you know?
    Mr. Grant. I am not 100 percent clear on it. But being in 
the securities business, I do lend securities myself, I do not 
think that lending is the risky part. The dimension is the 
risky part.
    I think lending of securities is a good function for 
investors. It is a way to borrow money to buy houses and other 
things. And handled correctly, that is not the core of the 
problem.
    The core of the problem is the management of the company 
and the ill-use of their funds.
    Chairman Shelby. The health of the funds has to be 
paramount.
    Mr. Grant. I think, just to comment further on the first 
question, we can raise more money. The amount charged of each 
firm is very minimal.
    Chairman Shelby. Going to the Board of the National 
Consumer Cooperative Bank, as a representative from the 
community development sector, what special perspectives do you 
believe you bring to the service on the Board of the NCB?
    Mr. Plamann. My company is very active in providing 
services to the retailers who are an integral part of----
    Chairman Shelby. Is that the wholesale grocery business?
    Mr. Plamann. The wholesale grocery business, yes.
    Chairman Shelby. Okay.
    Mr. Plamann. And we provide goods and services to 
independent grocers who are an integral part of many low-income 
communities, particularly in South Central Los Angeles and 
areas like that.
    So, we try to bring those services at a price and a cost 
that can keep them very competitive in those communities. We 
have to link very closely with those communities.
    Many times, these grocery stores are the anchor of shopping 
areas that are neighborhood-oriented shopping areas. That 
anchor sometimes acts as a magnet, if you will, for other 
services, such as dry cleaners or shoe repair, or whatever it 
is, small businesses that find themselves around those areas.
    On a professional basis, I think that is my link. On a 
personal basis, I commit a fair amount of time to the homeless 
problem in Los Angeles, which I think is a very difficult 
social problem for us.
    Chairman Shelby. The NCB's primary corporate mandate is to 
support cooperative efforts. What is special about the 
cooperative structure here? What is it about co-ops that you 
believe makes the structure particularly well suited for the 
community revitalization?
    Mr. Plamann. Co-ops, of course, have been around for a long 
time, agricultural co-ops and buying co-ops. Our co-op has been 
around for 80 years. Its mission today is the same as it was 
when it was organized. That is, to allow small independent 
grocers to buy products at a price that is competitive with the 
larger, self-distributing channel. So, I believe that is the 
strength of it. In addition, we return our profits back to the 
small retailer.
    Chairman Shelby. Okay.
    Senator Sarbanes.
    Senator Sarbanes. Thank you very much, Mr. Chairman.
    Mr. Plamann, the National Consumer Cooperative Bank Act 
requires that the Board of Directors use its best efforts to 
ensure that at the end of each fiscal year of the bank, at 
least 35 percent of its outstanding loans are either, one, the 
cooperatives, at least a majority of the members of which are 
low-income persons and, two, other cooperatives if the proceeds 
of such loans are directly applied to finance the facility 
activity or service, that the Board finds would be used 
predominantly by low-income persons.
    Now it is my understanding that the National Consumer Bank 
has yet to reach this goal. Is that your understanding?
    Mr. Plamann. That is my understanding, yes, sir.
    Senator Sarbanes. In fact, it is falling fairly short of 
it, is it not?
    Mr. Plamann. If it is measured strictly in the percentages, 
yes, sir. But several years ago, the Board decided that we 
needed to add some additional incentives and we suggested that 
we may use some qualitative measures with regard to putting 
those assets in those communities.
    I think we have been very successful in accomplishing that, 
basically through the NCB Development Corporation.
    Senator Sarbanes. I raise the point because you have 
chaired the Board and from all reports, did it in a very 
competent and efficient way. But 12 of the Members of the Board 
represent cooperative endeavors. Three remaining seats are 
reserved for appointment by the President.
    Mr. Plamann. Yes, sir.
    Senator Sarbanes. Now you are back before us as a 
Presidential nominee.
    Two people have been nominated by President Bush and 
confirmed by us to take care of small business and the 
agencies. So, you are going on as the representative of the 
low-income areas.
    I have to say, with all due respect to your past 
activities, they are quite different from others who have gone 
on the Board as a representative of the low-income areas.
    So what do you see as the rationale that justifies you 
being nominated to us as a representative of the low-income 
area, since this is an important goal of the National 
Cooperative Bank?
    Mr. Plamann. I agree with you. It is a critical mission of 
the Bank. The Bank's economic equation has proven to be very 
successful in achieving, I would say, a significant increase in 
the years that I was there.
    The last long-range plan that we put into place at the Bank 
set as a target approximately $600 million in low-income loans 
over a 3-year period. Last year, we achieved the first such 
number at $191 million, and there will be over $200 million per 
year in the next 2 years.
    I would like to get back on the Bank board to ensure that 
that emphasis is in fact carried out.
    Senator Sarbanes. That is $200 million out of, what?
    Mr. Plamann. There are I think about a billion dollars' 
worth of loans on the books at the moment.
    Senator Sarbanes. So you are running at 20 percent, as 
opposed to the 35 percent figure.
    Mr. Plamann. Well, I think that, given the nature of the 
balance sheet, the $200 million are the originations in 1 year. 
But many of the loans are sold into the marketplace today.
    I think the measure that was used when the Bank Act was set 
up is a little different from the percentage you are talking 
about.
    Senator Sarbanes. Well, we will be following this very 
closely. I do think it is a very important responsibility of 
the bank.
    I would like to ask the SIPC nominees about two studies 
that the SIPC commissioned, one by Deloitte & Touche and one by 
Fitch Risk Management, after it handled the largest failure in 
history of MJK Clearing Corporation, which involved 174,000 
customer accounts, over $10 billion in securities and cash.
    Are you familiar with those studies?
    Mr. Grant. I am, sir.
    Senator Sarbanes. Is everyone, all three, familiar with 
them?
    They have made a number of very important recommendations. 
Do you have any view on implementing the recommendations that 
have been made in those studies?
    Mr. Timken. Maybe I should start.
    Senator Sarbanes. We are running short on time, so if you 
could give me a brief answer.
    Mr. Timken. Actually, the SIPC's record has been one of 
excellence, I would say, in execution in getting securities to 
the individuals that lose them.
    To date we have done relatively little on risk management. 
It is the conclusion of those two studies that the MJK 
situation, with the securities lending, not only had an issue 
of management of that firm, but also, it exposed the risk of 
the SIPC to variations going on in the financial markets with 
different types of actions.
    And the suggestion derived from there was that we should 
work, first of all, with the SEC and the individual agencies 
like the New York Stock Exchange and the Nasdaq to improve 
surveillance. But also, that the SIPC itself needed perhaps to 
either, on an in-house basis or by contracting, develop a 
greater skill at the risk-management function to make sure that 
the Fund is protected and that we know what kind of problems 
are out there.
    My current understanding is that the Board is considering 
that. The decision required is whether to move forward with an 
internal capability, which would require some more assets 
expended, or to contract it out. But it is a new phase of the 
SIPC's career, I think.
    Mr. Hinojosa. I think from my experience with the report, I 
think what we need to do is try to enhance or attempt to 
anticipate the problem issues in regards to broker-dealers 
getting into trouble.
    I think that the report very specifically makes a 
recommendation in regards to enhancing surveillance. I think we 
need to work very closely with the SEC in regards to that 
because in the whole scheme of things, I think the SIPC did a 
tremendous job in coming to the rescue of investors. But, 
certainly, many instances like this would be a concern for us.
    Chairman Shelby. Mr. Grant.
    Mr. Grant. I agree with both of my colleagues that the SIPC 
can obviously strengthen their role and become tighter in their 
controls as to what they see.
    But the first line of defense on the regulatory side is 
still up to the SRO's like the New York Stock Exchange, Nasdaq, 
and the SEC. And if a firm is going to be fraudulent, the 
records they file are false to begin with. We still always have 
to trust in that first line.
    Senator Sarbanes. But the Deloitte & Touche study had some 
very specific recommendations, all of which seemed to me to 
make a lot of good sense.
    You are going to be three additions to this Board now. And 
so, you have an opportunity to go in there and really 
strengthen the system of investor protection, which is under 
assault for lots of reasons right now and it is a matter of 
real concern, and I commend that to you.
    There are other studies. The GAO has recommended a robust 
investor education program that the SIPC undertake. I presume 
that you all would be in favor of encouraging an active 
investor education program with respect to what the SIPC 
provides for investors.
    Am I correct in that assumption?
    Mr. Hinojosa. You are very correct.
    Mr. Grant. Very correct. I agree completely. And they have 
made a much greater effort in recent years because investors 
are somewhat confused as to what they are protected for. And I 
think we will, as I said in my opening remarks, we will try to 
strengthen that greatly.
    Senator Sarbanes. And finally, very quickly, the SIPC Fund 
has about $1.26 billion reserves. SIPC broker-dealers hold $3 
trillion of investor securities.
    The broker-dealers are paying about $150 a year assessment 
into the Fund. And the question is, is this fund adequately 
capitalized?
    Now, presumably, the broker-dealers think it is.
    [Laughter.]
    But to some extent, I think your decision on this question, 
if you decide that it is adequately capitalized, goes back to 
implementing the recommendations of Deloitte & Touche and of 
the Fitch Risk Management review.
    I think the system has to be tightened up. I think there 
are a lot of stresses on investors right now in the current 
economic circumstance and it needs to be tightened up.
    We do not want you coming in here after the fact, when we 
really had a bad event and we weren't really able to handle it 
very well and we had an impact on the economy.
    And so, that is the message that I want to leave with you 
this morning.
    Mr. Chairman, thank you very much.
    Mr. Timken. We hear that and understand that, and we will 
certainly take that into account as we proceed forward.
    As you know, the SIPC does not have regulatory powers, so 
our work will be very much with the SEC and the SRO's, to make 
sure that the investor is protected.
    Senator Sarbanes. Thank you.
    Chairman Shelby. Thank you.
    Thank you, Senator Sarbanes.
    I want to thank all of you for your testimony today. We 
know we have been in a rush and in a hurry.
    We hope to move your nominations quickly. Members of this 
Committee may wish to submit questions for the record, and if 
they do submit questions for the record, I hope you will 
respond as quickly as possible, and that will enable us to 
expedite your nominations.
    The hearing is adjourned.
    [Whereupon, at 9:57 a.m., the hearing was adjourned.]
    [Prepared statements, biographical sketches of the 
nominees, and response to written questions supplied for the 
record follow:]

            PREPARED STATEMENT OF SENATOR RICHARD C. SHELBY

    Good morning. I am pleased to welcome the four of you before the 
Senate Banking Committee. One of the most important responsibilities of 
the Committee is the examination and confirmation of the 
Administration's nominations that fall underneath our jurisdiction. 
Three of you are here today as nominees to serve on the Board of 
Directors of the Securities Investor Protection Corporation. Mr. 
Plamann has been nominated by the President to serve as a Member of the 
Board of Directors of the National Consumer Cooperative Bank. Both 
organizations play an important role in our economy.
    The SIPC was chartered by Congress to secure and return the assets 
of investors in bankrupt or failing firms. While not designed to be a 
blanket insurance fund for investor fraud or losses, the SIPC has a 
specific focus that is very meaningful--restoring investors with assets 
in the hands of bankrupt or otherwise financially troubled brokerage 
firms. Without the SIPC, investors at these firms might never recover 
their securities or money or face lengthy delays while their assets are 
tied up in our judicial system. From its creation by Congress in 1970 
through December 2001, the SIPC advanced $513 million in order to make 
possible the recovery of $13.9 billion in assets for an estimated 
622,000 investors.
    The National Consumer Cooperative Bank was chartered by Congress to 
assist consumer and small business cooperatives. The NCB provides the 
resources necessary for cooperative endeavors to achieve growth and 
success. It serves its members through its lending and financing 
arrangements and by providing financial and other technical assistance. 
The NCB subsidiaries assist cooperatives and small businesses by 
providing organizational and technical assistance, banking services, 
advocacy, informational services, financial advice as well as 
information on capital sources. To date, the NCB has provided more than 
$6 billion in financing--creating thousands of homeownership 
opportunities and providing other critical services to our Nation's 
communities.
    Both the SIPC and the NCB provide an invaluable service to 
individuals, communities and the economy. As leaders at these two 
organizations, you will be expected to address the current issues 
facing SIPC and the NCB and to adjust to challenges which lay ahead. As 
future public servants, I commend your willingness to step forward to 
embrace this responsibility. I look forward to hearing the testimony of 
each of the nominees present here today.

                               ----------

              PREPARED STATEMENT OF SENATOR ELIZABETH DOLE

     I would like to express my appreciation to you and to Ranking 
Member Sarbanes for agreeing to hold this hearing on the President's 
nominations to the Board of the National Consumer Cooperative Bank and 
to the Board of the Securities Investor Protection Corporation, known 
as the SIPC. The President has indeed nominated fine individuals with 
diverse backgrounds.
     The National Consumer Cooperative Bank plays an important role by 
serving as a key source of financing to cooperative endeavors which 
serve both the interests of the consumer and society very well. The 
SIPC serves a critical need in our Nation by providing certain 
protections against losses to customers from the failure of a 
securities firm. This function gives a floor of protection to our 
securities markets and assures investors and pension holders won't be 
wiped out due to the failure of a securities firm.
     The protections afforded by the SIPC carry greater importance when 
the market drops and the economy struggles especially when the 
fundamentals of the market are under such scrutiny. While the SIPC does 
not cover market losses, it does cover investors when a securities firm 
fails, especially if there were unauthorized trades made before the 
firm failed or if a Ponzi scheme was involved in the failure. However, 
many investors may be confused as to what protections the SIPC affords 
and what conditions must be met to access them.
     According to a May 2001 General Accounting Office (GAO) report, 
investors may confuse the SIPC with other financial guarantee programs, 
and opportunities exist to improve the disclosure of the SIPC's 
policies. In addition, some investors who have gone through the process 
to receive compensation from SPIC have questioned what the SIPC 
appointed trustee's priorities are: The protection of investors or the 
protection of the SIPC Fund. These are important issues, and I look 
forward to discussing some of them with the nominees.
     Our nominees are to be thanked for their commitment to our Nation 
in devoting some of their time to these positions. The President is to 
be congratulated for seeking such qualified individuals with such 
diverse backgrounds. Their different experiences should bring a great 
deal to the table when reviewing the policies they will oversee. I 
especially want to welcome my friend William Robert Timken, known as 
Tim to his friends. He is a gentleman of honor and distinction. The 
SIPC and investors will greatly benefit from his expertise and 
dedication.
     Thank you.

                               ----------

            PREPARE STATEMENT OF SENATOR GEORGE V. VOINOVICH

    I am pleased to introduce W.R. ``Tim'' Timken Jr., who has been 
nominated by the President to serve as Chairman of the Board of the 
Securities Investor Protection Corporation.
    I have had the privilege of knowing Tim for many years and consider 
him to be a valuable leader and close friend. He serves as a role model 
for what a corporate executive can and should be. He has truly made a 
difference in the quality of life in his community, state and country.
    The Timken Company headquartered in Canton, Ohio, manufactures 
highly engineered bearings and alloy steels. They are also becoming a 
leader in providing related components and services such as bearing 
refurbishment for the aerospace, medical, industrial, and railroad 
industries. The company's mission is to continually increase 
shareholder value by strengthening its leadership position in their 
chosen markets. More than fifty plants and 100 sales design and 
distribution centers around the world provide unmatched product quality 
and customer service.
    Since becoming Chairman of the Board in 1975, Tim has led his 
family business, the Timken Company, to become a leading international 
manufacturer with operations in twenty-four countries employing 
approximately 28,000 people worldwide.
    A former Chairman of the National Association of Manufacturers, Tim 
has always impressed me with his consistent sense of civic 
responsibility and has remained a leader in many facets of his 
community. He has been the backbone for many initiatives in the State 
of Ohio. Tim's relentless dedication to his neighbors and our 
Nation's leaders has proven his patriotism and compassion. He has a 
genuine appreciation for all that America stands for and is a 
tremendous civic leader not only for Canton, Ohio but also for the 
United States.
    One thing that has remained constant, both in his professional and 
political endeavors, that will prove to be a valuable asset to the 
Securities Investor Protection Corporation, is his insistence on 
ethical behavior. Tim Timken is a man of unique character and 
integrity. His considerable accomplishments over the years have been 
made possible, in part, by the reputation that he has built for himself 
as an extraordinarily honest and forthright individual.
    I believe that Tim's professional experience has prepared him well 
to serve in the position for which he has been nominated. In this era 
of uncertainty about the future, Tim would be a strong advocate for 
fairness and common sense and will serve with the vigilance and 
dedication that this Board requires.
    I urge the Committee to quickly report the nomination of W.R. 
Timken, Jr. so that the Senate may soon vote on his confirmation.
    Thank you, Mr. Chairman.

                               ----------

                PREPARED STATEMENT OF ALFRED A. PLAMANN

        Member-Designate, the National Consumer Cooperative Bank
                             March 25, 2003

    Chairman Shelby, Ranking Member Sarbanes, and distinguished Members 
of the Committee, I am honored to appear here today as a nominee to 
become a Member of the Board of Directors of the National Consumer 
Cooperative Bank.
    I actively sought this nomination in order to again serve on the 
Board of Directors of the NCB. I served as an elected Board Member for 
6 years and as Chairman for two of those years. During my tenure, the 
Bank made over $800 million in low-income loans, which represents a 
substantial increase, and the Bank's commitment to low-income housing 
was improved.
    I am President and CEO of Unified Western Grocers, a cooperative 
wholesale grocery company in Los Angeles serving six western States. My 
background is financial, and I have worked in diverse companies such as 
Unified, ARCO, and U.S. 
Financial. I am a graduate of the University of Colorado where I earned 
my B.S. in accounting and I received by MBA from University of 
Pennsylvania (Wharton) with an emphasis in finance.
    As you may know, the National Consumer Cooperative Bank was 
established in 1978 to address the unmet financial needs of an 
underserved market--those people who join together cooperatively to 
achieve their personal, social, and business goals. And in 1982, the 
NCB was privatized as a member-owned financial institution. Today, the 
Bank provides a broad array of financial services to cooperatives 
across the country. These businesses are large and small, and they 
serve both rural and urban communities.
    The NCB--in partnership with its nonprofit affiliate, NCB 
Development Corporation--plays a vital role meeting the underserved 
financial needs of America's communities. Over the course of its 20-
plus year history, the NCB has loaned or invested more than one billion 
in the areas of education, affordable housing, health care, small 
business ventures, affordable assisted living, worker ownership, and 
economic and community development ventures.
    The cumulative impact is considerable. NCB loans and investments 
have created approximately:

 25,000 units of affordable housing;
 10,000 jobs for low-income individuals;
 School facilities for more than 4,500 students;
 Nearly 1 million square feet of community health center space 
    serving 100,000 patients annually; and
 More than 1,000 units of affordable assisted living.

    In 2002 alone, the NCB provided or arranged more than $191 million 
in financing for low-income and at-risk communities, and over the past 
6 years it has originated over $1 billion of critically needed 
financing. It is obvious that the National Consumer Cooperative Bank 
has accomplished much. And I know it has the potential to do even more, 
not only as a lender and valued financial resource, but also as an 
exceptional example of the type of collaborative and innovative venture 
we need to respond to today's challenging problems and changing times.
    If confirmed by the Senate, I will bring to the Board of Directors 
of the National Consumer Cooperative Bank extensive experience in the 
cooperative field in support of low-income communities and low-income 
borrowers. My low-income experience is in three areas: As the CEO of 
Unified Western Grocers, as a Board Member of the Weingart Center for 
the Homeless in Los Angles, and as an elected Director of the NCB for 6 
years.
    Fifty-five percent of Unified Western Grocers' business is in 
Southern California heavily weighted to the Los Angeles area. Within 
the LA area, our retailers have catered to the central urban 
population, which is predominately lower-income Hispanic (41.7 percent) 
and African-American (36.08 percent), with a per capita income of 
$10,800. In that base, our retailer members control an estimated 87 
percent market share.
    Most of the members in that market have been financed from 
inception by the corporation through working capital or facility loans. 
As CEO (and former CFO), I am intimately involved with the approval 
process and details of the unique issues involved in financing 
retailers. Many, if not most, of these loans are sold to the NCB or are 
completed in participation with the NCB.
    One example is a company named KV Mart doing business as Top Valu 
and Valu Plus, headquartered in Carson, California, a leading 
independent grocery chain serving inner-city communities across 
Southern California. Over the past 24 years, KV Mart has developed a 
unique business model designed to cater to the needs of different 
ethnicities residing in inner-city neighborhoods by offering a wide 
range of culturally specific products and services. The company's 
approach to serving inner-city communities has been successful 
partially as a result of its hiring practices that center on employing 
residents from each of the local areas in which the company operates 
stores.
    In 1992, KV Mart had nine stores with sales volume totaling 
$81,000,000 and 590 employees. Today the company operates twenty-two 
stores with sales volume totaling $250,000,000 and employs 1,400 
individuals. Under my direction as CFO, and subsequently as CEO, 
Unified Western Grocers (UWG) and its subsidiary, Grocers Capital 
Company (GCC), have been instrumental in providing financial assistance 
to help KV Mart achieve this level of growth. Over the past 10 years, 
GCC has provided KV Mart with over $18,000,000 in long-term loans for 
store purchases, store remodels, and capital stock investments. UWG has 
also provided numerous short-term inventory loans to support new 
stores, and GCC has supplied guarantees in support of $8,000,000 in 
loans from the National Consumer Cooperative Bank. Finally, UWG has 
provided lease guarantees/sublease arrangements in support of four of 
KV Mart's locations.
    During the Los Angles riots, thirty-six of our members' stores were 
destroyed, twenty experienced delayed openings, and twenty were 
subjected to looting. With our assistance, sixteen stores were totally 
rebuilt in these lower-income communities. The corporation helps people 
who want to get started and have staying power so low-income people 
have continuing service.
    Unified Western Grocers, under my leadership, actively supports 
low-income communities. In fact, our bakery and dairy divisions are 
located in low-income areas in south LA where we provide employment for 
109 in the bakery and 148 in the dairy. As a member of the Weingart 
Center Board of Directors, I serve on the finance committee. The 
Weingart Center, one of the largest and most comprehensive facilities 
of its kind in the country, is breaking the cycle of homelessness in 
Los Angeles. They provide individual housing for 630 clients.
    The Center also assists its clients by giving them the basic skills 
necessary to stabilize their lives, secure a stable income, and find 
permanent housing within 4 months. Follow-up shows 30 percent are still 
free from addictive substances 6 months after completing the program 
and reside in their own homes with steady employment. Additionally, 
Weingart presents service referrals for 6,000 people a year and offers 
high school and English classes to 200 students per day. As a member of 
the finance committee, which meets monthly, I assist with allocating a 
$10,000,000 budget, requests for grants, and other significant funding 
activities.
    As a Board Member of the NCB for 6 years, two of which I served as 
Chair of the Board, I strongly supported the Bank's efforts to expand 
its low-income business. I was elected to the NCB board in 1995, during 
which the NCB originated $82.3 million of low-income loans. During the 
2 years I served as Chair of the Board, 1997 and 1998, the NCB 
originated a total of $361.8 million of low-income loans. The 
significant growth of the NCB's low-income business speaks volumes 
about the efforts of the Board and staff to serve low-income 
communities and to carry out the public policy mission of the bank.
    These activities give me a strong understanding of low- and no-
income individuals and issues. I am committed to making a difference in 
low-income areas, not only through monetary assistance in my 
professional capacity, but also in personal time commitment.
    I would be proud to serve on the Board of Directors of the National 
Consumer Cooperative Bank, and I appreciate your consideration.
    Allow me to answer any questions you may have at this time.

    
    
    
         RESPONSE TO WRITTEN QUESTION OF SENATOR SHELBY
                      FROM THOMAS W. GRANT

Q.1. I understand that a number of exchange rule changes are 
pending before the SEC that would permit the implementation of 
a pilot program for portfolio margining in the account of a 
customer with an account equity of at least $5 million for 
positions in broad-based index options and futures. This pilot 
program, which was developed nearly 4 years ago, is integral to 
the consideration of risk-sensitive portfolio margining for 
securities customers. SEC Chairman Bill Donaldson recently 
pledged his assistance in working to finalize these rules so 
that the pilot program can finally be implemented.
    The SIPC has bean asked to use its existing rulemaking and 
rule interpretation authority to determine whether the SIPA 
will apply to the securities accounts in the portfolio 
margining pilot. Will you work with the SIPC staff to resolve 
this issue as soon as possible?

A.1. I have spoken with the SIPC staff concerning the subject 
of margining an account which contains both securities and 
futures. The issues which are raised by such a ``cross-
margined'' account are new and complex. The complexity arises 
from the historical separation of the regulatory regimes for 
securities, on the one hand, and futures, on the other. Thus, 
for example, the Securities Investor Protection Act protects 
securities left with a stock brokerage firm for safekeeping, 
but the definition of the term ``security'' in that statute 
specifically excludes, ``any commodity or related contract or 
futures contract, or any warrant or right to subscribe to or 
purchase or sell any of the foregoing.'' The SIPC staff informs 
me that periodic discussions of the cross-margining of 
securities and futures among the SIPC, the Securities and 
Exchange Commission, the Options Clearing Corporation, and the 
Chicago Board Options Exchange have taken place over the last 
one and a half years.
    I will work with the SIPC staff to determine the best 
approach to resolve promptly the issues raised by the proposed 
pilot program for portfolio margining.

         RESPONSE TO WRITTEN QUESTION OF SENATOR SHELBY
                  FROM WILLIAM R. TIMKEN, JR.

Q.1. I understand that a number of exchange rule changes are 
pending before the SEC that would permit the implementation of 
a pilot program for portfolio margining in the account of a 
customer with an account equity of at least $5 million for 
positions in broad-based index options and futures. This pilot 
program, which was developed nearly 4 years ago, is integral to 
the consideration of risk-sensitive portfolio margining for 
securities customers. SEC Chairman Bill Donaldson recently 
pledged his assistance in working to finalize these rules so 
that the pilot program can finally be implemented.
    The SIPC has been asked to use its existing rulemaking and 
rule interpretation authority to determine whether the SIPA 
will apply to the securities accounts in the portfolio 
margining pilot. Will you work with the SIPC staff to resolve 
this issue as soon as possible?

A.1. I have spoken with the SIPC staff concerning the subject 
of margining an account which contains both securities and 
futures. The issues which are raised by such a ``cross-
margined'' account are new and complex. The complexity arises 
from the historical separation of the regulatory regimes for 
securities, on the one hand, and futures, on the other. Thus, 
for example, the Securities Investor Protection Act protects 
securities left with a stock brokerage firm for safekeeping, 
but the definition of the term ``security'' in that statute 
specifically excludes ``any commodity or related contract or 
futures contract, or any warrant or right to subscribe to or 
purchase or sell any of the foregoing.'' The SIPC staff informs 
me that periodic discussions ofthe cross-margining of 
securities and futures among the SIPC, the Securities and 
Exchange Commission, the Options Clearing Corporation, and the 
Chicago Board Options Exchange have taken place over the last 
one and a half years.
     I will work with the SIPC staff to determine the best 
approach to resolve promptly the issues raised by the proposed 
pilot program for portfolio margining.

        RESPONSES WRITTEN QUESIOTNS OF SENATOR SARBANES
                     FROM ALFRED A. PLAMANN

     The National Consumer Cooperative Bank Act requires that 
the Board of Directors, ``use its best efforts to ensure that 
at the end of the each fiscal year of the Bank at least 35 per 
centum of its outstanding loans are to: (1) cooperatives at 
least a majority of the members of which are low-income persons 
and (2) other cooperatives, if the proceeds of such loans are 
directly applied to finance a facility, activity, or service 
that the Board finds will be used predominantly by low-income 
persons.'' It is my understanding that the NCB has yet to reach 
that goal.
Q.1.a. As the low-income representative on the Board, how will 
you ensure that 35 percent of the Bank's loans are made to low-
income cooperatives and cooperatives that directly service the 
needs of low-income persons?

A.1.a. During my past tenure an the Board there was a dual 
effort to spur and support low-income, cooperative development 
both through the use of the NCB loan portfolio and through the 
use of the NCB's other resources. I will continue to be an 
advocate on the Board for low-income cooperatives by setting 
higher and higher standards and expectations for increasing 
low-income loans and measuring best efforts based on out 
willingness and ability to invest increasing resources to 
deliver capital and technical assistance to low-income 
cooperatives.
    My focus, however, and what I hope to achieve on the Board, 
goes well beyond the resources we have available through the 
NCB loan portfolio and balance sheet. The NCB is a relatively 
small organization and the needs of low-income cooperatives are 
substantial and growing. I would hope to leverage the expertise 
of the NCB and its balance sheet to access other capital that 
can be directed to low-income cooperatives, For example, in 
2002, the NCB used its resources to arrange over $100 million 
of low-income transactions, which involved other sources of 
private and public investment. As a low-income representative I 
will advocate raising the bar for deploying these critical 
resources to low-income cooperatives. I would also advocate for 
capacity building and technical assistance programs for low-
income cooperatives. For example, the NCB's affiliate, NCB 
Development Corporation, is operating a program in 10 States 
directed at revolutionizing the use of Medicaid resources for 
affordable assisted living recipients. I would push to increase 
the resources that the NCB is directing to these kinds of 
programs.

Q.1.b. It is my understanding that the NCB staff bonus 
structure provides an incentive for staff to originate low-
income loans. Do you support the bonus provisions for employees 
that takes into account the Board's efforts to reach the 35 
percent annual goals?

A.1.b. When I was Board Chair, we increased the weight of low-
income activities in the incentive plans. The plans provide for 
an increased reward for achieving the low-income goals, but the 
plans also have a penalty that substantially reduces the 
overall award if the low-income goal is not achieved. I feel 
that these plans provide an appropriate incentive for 
management to reach even higher to achieve the mission of the 
Bank.

Q.2. How do you plan to use your board seat to represent low-
income consumers at the NCB and assure that the Bank continues 
to help finance consumer-owned cooperatives that serve poor 
people? Would you advise the Bank to do anything differently?

A.2. My job will be to promote the needs of low-income 
cooperatives, even in circumstances where these needs may 
appear to be in conflict with the NCB's requirements to operate 
a viable, financial services organization, I understand the 
bottom-line requirements of running a business, and once I 
think those requirements can be met, I will be pressing to use 
as many resources as we can to serve low-income cooperatives.

Q.3. What are your plans to work with the various national and 
regional advocacy groups that represent underserved populations 
to ensure that their views are represented on the NCB Board?

A.3. The NCB, and its affiliate, NCB Development Corporation, 
are involved in a number of partnerships and programs with 
national and regional advocacy groups. As I understand it, 
there are also a number of advisory groups in various sectors 
like community health care, education, and housing that have 
been convened to assist the NCB to determine how best to deploy 
its resources in these areas. I expect to be personally 
involved in these discussions to learn fast hand what the views 
of low-income constituents are.

Q.4. Congress specifically directed the NCB to, among other 
things, ``encourage the development of new and existing 
cooperatives eligible for its assistance by providing 
specialized credit and technical assistance.'' As the low-
income representative Board Member, how would you encourage the 
creation of now cooperatives owned by low-income individuals?

A.4. Vital to the creation of new, low-income cooperatives are 
programs that are focused on providing higher risk, 
nontraditional 
financing and that are directed at building the capacity of 
low-income residents to form and operate their own enterprises. 
I intend to use my Board role to continue to advocate for and 
expand the resources that the NCB directs to these areas.
