[Senate Hearing 109-901]
[From the U.S. Government Publishing Office]


 
                                                        S. Hrg. 109-901


                    NOMINATIONS OF: JAMES LAMBRIGHT,
                 ARMANDO J. BUCELO, JR., TODD S. FARHA,
            JOHN T. RYMER, JOHN W. COX, AND WILLIAM HARDIMAN

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

                                HEARING

                               before the

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

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                   ON

                            nominations of:

           james lambright, of missouri, to be president of 
              the export-import bank of the united states

                               __________

         armando j. bucelo, jr., of florida, to be chairman of 
             the securities investor protection corporation

                               __________

   todd s. farha, of florida, to be member of the board of directors 
           of the securities investor protection corporation

                               __________

  jon t. rymer, of tennessee, to be inspector general of the federal 
                     deposit insurance corporation

                               __________

        john w. cox, of texas, to be chief financial officer of 
          the u.s. department of housing and urban development

                               __________

 william hardiman, of michigan, to be member of the board of directors 
             of the national institute of building sciences

                               __________

                              MAY 16, 2006

                               __________

  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                    THOMAS R. CARPER, Delaware
JOHN E. SUNUNU, New Hampshire        DEBBIE STABENOW, Michigan
ELIZABETH DOLE, North Carolina       ROBERT MENENDEZ, New Jersey
MEL MARTINEZ, Florida

             Kathleen L. Casey, Staff Director and Counsel

     Steven B. Harris, Democratic Staff Director and Chief Counsel

                         Andrew Olmem, Counsel

                          Justin Daly, Counsel

                       Jonathan V. Gould, Counsel

                 Dean V. Shahinian, Democratic Counsel

                   Aaron Klein, Democratic Economist

               Patience R. Singleton, 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, MAY 16, 2006

                                                                   Page

Opening statement of Chairman Shelby.............................     1

Opening statements, comments, or prepared statements of:
    Senator Sarbanes.............................................     2
    Senator Crapo................................................     4
    Senator Martinez.............................................     4
    Senator Dodd.................................................    10
    Senator Allard...............................................    11
        Prepared statement.......................................    29

                                WITNESS

Kit Bond, A U.S. Senator from the State of Missouri..............     5

                                NOMINEES

James Lambright, of Missouri, to be President of the Export-
  Import Bank of the United States...............................     6
    Biograpical sketch of nominee................................    32
Armando J. Bucelo, Jr., of Florida, to be Chairman of the 
  Securities Investor Protection Corporation.....................    12
    Biograpical sketch of nominee................................    40
Todd S. Farha, of Florida, to be Member of the Board of Directors 
  of the Securities Investor Protection Corporation..............    14
    Biograpical sketch of nominee................................    54
Jon T. Rymer, of Tennessee, to be Inspector General of the 
  Federal Deposit Insurance Corporation..........................    21
    Prepared statement...........................................    29
    Biograpical sketch of nominee................................    60
John W. Cox, of Texas, to be Chief Financial Officer of the U.S. 
  Department Of Housing And Urban Development....................    21
    Prepared statement...........................................    30
    Biograpical sketch of nominee................................    67
William Hardiman, of Michigan, to be Member of the Board of 
  Directors of the National Institute of Building Sciences.......    22
    Biograpical sketch of nominee................................    74

                                 (iii)





                            NOMINATIONS OF:

                     JAMES LAMBRIGHT, OF MISSOURI,

                            TO BE PRESIDENT,

                EXPORT-IMPORT BANK OF THE UNITED STATES;

                  ARMANDO J. BUCELO, JR., OF FLORIDA,

                             TO BE MEMBER,

    BOARD OF DIRECTORS, SECURITIES INVESTOR PROTECTION CORPORATION;

                       TODD S. FARHA, OF FLORIDA,

                             TO BE MEMBER,

    BOARD OF DIRECTORS, SECURITIES INVESTOR PROTECTION CORPORATION;

                      JOHN T. RYMER, OF TENNESSEE,

                        TO BE INSPECTOR GENERAL,

                 FEDERAL DEPOSIT INSURANCE CORPORATION;

                         JOHN W. COX, OF TEXAS,

                     TO BE CHIEF FINANCIAL OFFICER,

            U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                     WILLIAM HARDIMAN, OF MICHIGAN,

                   TO BE MEMBER, BOARD OF DIRECTORS,

                NATIONAL INSTITUTE OF BUILDING SCIENCES

                              ----------                              


                         TUESDAY, MAY 16, 2006

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

    The Committee met at 10:43 a.m., in room SD-538, Dirksen 
Senate Office Building, Senator Richard C. Shelby (Chairman of 
the Committee) presiding.

        OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY

    Chairman Shelby. The hearing will come to order.
    This morning, we will consider several nominations, and I 
appreciate the willingness of the nominees to appear before the 
Committee today. Today's hearing will consist of three panels. 
Our first panel will consist of Mr. James Lambright, who has 
been nominated to be President of the Export-Import Bank. Mr. 
Lambright is currently the Acting President and Chairman of the 
Export-Import Bank. Prior to assuming his current position, he 
served as the Bank's Executive Vice President and Chief 
Operating Officer. Mr. Lambright came to the Bank in 2001 from 
Credit Suisse-First Boston, where he was Vice President of 
Private Equity. A native of St. Louis, Missouri, Mr. Lambright 
graduated from Harvard Law School and received a bachelor's 
degree from Stanford University.
    Our second panel will consist of Mr. Armando Bucelo and Mr. 
Todd Farha, who have been nominated to be Directors of the 
Securities Investor Protection Corporation. Mr. Bucelo is being 
renominated to serve as a director. He was first appointed to 
the Board in 2002, and earlier this year, President Bush 
appointed him Chairman of the Board. Mr. Bucelo is an attorney 
at his own firm in Coral Gables, Florida. He earned his law and 
bachelor's degrees from the University of Miami.
    Mr. Farha is currently the President and Chief Executive 
Officer of WellCare Health Plans, Inc., a leading multistate 
provider of managed health care services. A native of Wichita, 
Kansas, Mr. Farha received his bachelor's degree from Trinity 
University and his MBA from Harvard Business School.
    Our third panel will consist of three nominees, Mr. Jon T. 
Rymer, who has been nominated to be Inspector General of the 
Federal Deposit Insurance Corporation. Mr. Rymer is currently 
on active duty in the Ohio Army National Guard, serving as 
Command Sergeant Major of the 155th Chemical Battalion. Mr. 
Rymer previously served as a Director of KPMG, LLP and as 
Executive Vice President for Bank America of Arkansas. Mr. 
Rymer received his bachelor's degree from the University of 
Tennessee and his MBA from the University of Arkansas.
    Mr. John Cox has been nominated to be the Chief Financial 
Officer at the U.S. Department of Housing and Urban 
Development. He began his professional career as an accountant 
with Ernst & Young, LLP. He also served as the Chief Financial 
Officer and Chief Accounting Officer for BMC Software.
    Mr. William Hardiman has been nominated to be a Member of 
the Board of Directors of the National Institute of Building 
Sciences. Currently, Mr. Hardiman represents the 29th District 
in the Michigan State Senate. Previously, he served 10 years as 
the Mayor of Kentwood, Michigan. We look forward to hearing 
from each of you later.
    Senator Sarbanes.

             STATEMENT OF SENATOR PAUL S. SARBANES

    Senator Sarbanes. Mr. Chairman, thank you very much. I join 
you in welcoming the nominees before the Committee this 
morning. I obviously hold public service in high esteem, and I 
congratulate all of the nominees, and I appreciate their 
willingness to serve the Nation.
    Let me just say first of all about Jim Lambright, who has 
been nominated to serve as Chairman and President of the 
Export-Import Bank. He has been at the Bank now for a number of 
years, and he brings a very substantial background to this 
work. He is no stranger to the Committee. He has testified on 
more than one occasion, including on the pending 
reauthorization of the Export-Import Bank, and I understand 
that there is going to be a full Committee hearing on this 
reauthorization in the near future.
    Chairman Shelby. Absolutely.
    Senator Sarbanes. I do want to express my very strong 
concern that there are currently three empty seats on the five-
person board of the Export-Import Bank, and in fact, the Bank 
is only able to achieve a quorum in order to conduct its 
business because Mr. Lambright is serving in an acting capacity 
under the Vacancies Act. In February of this year, the Bank 
came close to losing a quorum of three Board members 
altogether, and I simply want to take this opportunity to urge 
the Administration to move immediately to fill the other 
vacancies.
    Chairman Shelby. Absolutely.
    Senator Sarbanes. We ought not to have this situation. It 
is not good for the Bank. It is not good for the country.
    The second panel, the Securities Investor Protection 
Corporation, which, of course, was created by Congress to give 
investors certain protections against losses relating from the 
failure of their securities brokerage firms. Under SIPC, 
broker-dealers contribute to the fund, which helps customers of 
failed brokers recover their cash and securities, with limits 
of $500,000 per customer; cash claims are limited to $100,000. 
It is a very important part of the whole picture to maintain 
investor confidence, and we need SIPC to operate in an 
effective, efficient, and fair manner. I welcome the two 
nominees who will be before us on the second panel, and I look 
forward to hearing from them, Mr. Bucelo and Mr. Farha.
    The third panel is a mix of offices, Jon Rymer to be the 
Inspector General of the FDIC; John Cox to be Chief Financial 
Officer of the Department of Housing and Urban Development, and 
Bill Hardiman to be a Member of the Board of the National 
Institute of Building Sciences. I want to emphasize the 
importance of the position for which Mr. Rymer has been 
nominated. He brings important experience in internal auditing 
and consulting for the banking industry. I am pleased to see 
that. The FDIC's Office of Inspector General is an independent 
unit that conducts audits, investigations, and other reviews of 
the FDIC's programs and operations.
    I think it makes an important contribution to the stability 
of and public confidence in the Nation's financial system. One 
of the main responsibilities of the Inspector General's office 
is to inform the FDIC Chairman and Congress of problems in the 
FDIC programs and operations and the necessity for and progress 
of corrective actions. It also conducts criminal investigations 
in coordination with the Justice Department and U.S. Attorneys 
throughout the country, the FBI, the IRS, and State and local 
enforcement agencies. An acting Inspector General responsible 
for overseeing the operations of the office has been in place 
since January 2005. That is 15, 16 months ago. And so, I am 
relieved, and I guess in a sense pleased, although I am 
displeased that it has not come sooner, that the President is 
now filling this important position.
    Now, Mr. Cox, who comes to the job of Chief Financial 
Officer of HUD, has had important previous experience that is 
relevant to this work. This is a very important position. In 
fact, the Department has consistently had difficulty managing 
its financial and program systems. I see Senator Bond nodding 
his head. This has been a problem for many years across many 
administrations, I would note.
    These financial systems are crucial tools that managers at 
the Department should be able to use to help evaluate the 
programs they oversee. Current and accurate financial 
information is important, should be available to HUD and here 
on Capitol Hill. This position has remained vacant for over a 
year. I mean, HUD has a budget of about $30 billion in annual 
appropriations, oversees $400 million in FHA insurance, so 
finally, this position is being filled.
    Finally, I want to thank Mr. Hardiman. He actually serves 
on a volunteer basis at the Board of the National Institute of 
Building Sciences, which seeks to improve the building 
regulatory environment and facilitate the introduction of new 
and existing products and technology.
    Mr. Chairman, I look forward to hearing from our nominees 
today.
    Chairman Shelby. Thank you.
    Senator Sarbanes. And I welcome all of them before the 
Committee.
    Chairman Shelby. Senator Crapo.

                STATEMENT OF SENATOR MIKE CRAPO

    Senator Crapo. Thank you very much, Mr. Chairman, and I 
will be brief, but I do want to thank you for bringing the 
nomination of Mr. Lambright forward promptly and for what I 
hope will be expedited treatment of this nomination.
    I am a strong supporter of Jim Lambright to be the Chairman 
and President of the Export-Import Bank. His expertise and his 
experience is going to be very helpful to both us on the 
Committee as well as the Bank itself as we move forward with 
reauthorization of the Export-Import Bank. As Senator Sarbanes 
has indicated, he is no stranger to this room. He has testified 
twice before our Subcommittee on International Trade and 
Finance to discuss the reauthorization of the Ex-Im Bank, and I 
think he has shown that he has earned a reputation of working 
with all sides and I believe enjoys wide support and respect 
both in and out of Congress. I cannot think of a better choice, 
and I am hopeful that we can expedite this process.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Martinez, do you have an opening 
statement?

               STATEMENT OF SENATOR MEL MARTINEZ

    Senator Martinez. Mr. Chairman, I have an opening statement 
for panel two if I could.
    Chairman Shelby. Thank you.
    Senator Martinez. Thank you very much.
    Chairman Shelby. Senator Bond, we welcome you to our 
Committee for any statement you want to make on behalf of the 
nominee.

                     STATEMENT OF KIT BOND

           A U.S. SENATOR FROM THE STATE OF MISSOURI

    Senator Bond. Mr. Chairman, Members of the Committee, it is 
good to be back in this room in which we spent many hours. I 
worked in this room with you, Senator Sarbanes, on the problems 
of HUD, and I have since had the dubious distinction of being 
either the member or the Chairman of the Appropriations 
Subcommittee who has dealt with that problem for many years, 
and I think Senator Sarbanes' understatement was that we have 
not yet gotten financial controls over that very important 
Department.
    But we are here today on another matter, and this one gives 
me a great honor and pleasure to introduce James Lambright to 
this Committee, reintroduce him as President-Designate for the 
Export-Import or Ex-Im Bank. I have known Jim's family for 
decades, since before I first ran for Governor in Missouri back 
in the early 1970's. I am very proud that Jim is a native of 
St. Louis. As you said, Mr. Chairman, he graduated with honors 
from Harvard Law School, received a bachelor of arts in 
linguistics from Stanford. He is a term member of the Council 
on Foreign Relations and a Henry Crown Fellow of the Aspen 
Institute.
    Presently, as you know, he is Acting President of Ex-Im, 
having been elevated to that role from his position as the 
Bank's Executive Vice President and Chief Operating Officer in 
July 2005 by President Bush. Before that, Jim created and ran 
the Credit and Risk Management Group, overseeing risk 
assessment activities for the Bank's transaction flow of nearly 
$1 billion per month. He came to Ex-Im in 2001 from Credit 
Suisse-First Boston in Los Angeles, where he was Vice President 
for Private Equity. While there, he specialized in the 
underwriting and negotiation of real estate and venture capital 
transactions. Thus, in addition to being eminently qualified 
for the position of President of the Bank, Jim is a man of 
energy, commitment, and integrity, who will bring all those 
good qualities of character to the Bank.
    Throughout his career, Jim has had a reputation for 
creativity and competence. I am confident that he will approach 
his job at the Bank with the same intelligence and enthusiasm 
he has brought to all of his other endeavors. The new President 
must have leadership skills to run such a large agency. Let me 
assure you that what I know about him, Jim Lambright is the 
right man for this job, and with the important upcoming 
reauthorization, I trust that the Committee can move quickly to 
consider this nomination, and I would urge your favorable 
consideration.
    Thank you, Mr. Chairman.
    Chairman Shelby. Mr. Lambright, will you stand and be 
sworn?
    [Witness sworn.]
    Senator Sarbanes. Mr. Chairman.
    Chairman Shelby. Yes.
    Senator Sarbanes. Senator Stabenow wanted to be here this 
morning to welcome and introduce Mr. William Hardiman who is 
from Michigan and has been nominated to be a Member of the 
Board of Directors of the National Institute of Building 
Sciences. Regrettably, she has a direct conflict with another 
Committee of hers.
    Chairman Shelby. Okay. Any written statement will be made 
part of the hearing record on her behalf.
    Senator Sarbanes. Certainly. Thank you very much.
    Chairman Shelby. Thank you, Senator.
    Mr. Lambright, do you have any family members you want to 
introduce?

           STATEMENT OF JAMES LAMBRIGHT, OF MISSOURI,

                        TO BE PRESIDENT,

            EXPORT-IMPORT BANK OF THE UNITED STATES

    Mr. Lambright. Yes, I would like to recognize my father, 
Steve Lambright.
    Chairman Shelby. Thank you.
    Mr. Lambright. Thank you.
    Chairman Shelby. You proceed as you wish.
    Mr. Lambright. Thank you, Mr. Chairman.
    Mr. Chairman, Senator Sarbanes, Members of the Committee, I 
am pleased to come before you today as you consider my 
nomination to be President of the Export-Import Bank of the 
United States. I would like to thank Senator Bond for his kind 
introduction. I want to thank President Bush for the confidence 
he has shown in me by nominating me to lead an organization I 
hold in such high regard.
    Reflecting on my nearly 5 years at Ex-Im Bank, I am struck 
by the good fortune I have enjoyed working for three leaders, 
each of whom achieved a high degree of private sector success 
and demonstrated a deep commitment to public service.
    In 2001, I came to Washington from investment banking to 
work for the Bank's then-Chairman, John Robson. In the short 
time that we served together before his untimely passing, 
Chairman Robson showed through his attitude and actions that 
there is no canvas as big to paint on as that offered by public 
service. Then, under Vice Chairman Eduardo Aguirre, I was able 
to take on increasing levels of responsibility and assist him 
in applying best practices from private sector banking to the 
Bank's operations.
    Most recently, I served under Chairman Philip Merrill, to 
whom I owe a tremendous debt of gratitude for his trust and 
confidence in providing me an opportunity to assume a senior 
leadership role.
    If confirmed, I hope to continue this line of service and 
leadership in a way that best positions Ex-Im Bank to fulfill 
the important mandate given it by Congress, to create and 
sustain American jobs by helping to finance export transactions 
that would not otherwise go forward.
    To be clear, if confirmed, my focus will be U.S. exporter 
competitiveness. My top priorities will be: Pursuing the 
successful reauthorization of the Bank; institutionalizing 
recent changes to our small business program, which included 
the creation of a dedicated small business division; and 
preparing the Bank to face nontraditional competition emerging 
within the evolving global economy.
    During my tenure at the Bank, and particularly in my 
capacity as Acting President over the last 9 months, I have 
come to see the primary job of the Bank's President as 
navigating the Bank between two beacons established in our 
charter. One beacon represents our customers, America's 
exporters, to whom we owe our aggressive support. The other 
beacon represents our shareholders, the U.S. taxpayers, to whom 
we owe our prudent stewardship. I have found that the smoothest 
course between these beacons can best be chartered through 
cooperation with all stakeholders.
    To that end, I have worked closely with Members of Congress 
on their concerns about particular cases, changes to our small 
business program, and other issues relating to the Bank's 
current reauthorization. I have made a concerted effort to 
reach out to our customers, large and small, to understand 
better their views of how Ex-Im Bank can deliver its services 
more effectively and efficiently. And, I have maintained strong 
relationships with my fellow Board members, Linda Conlin and 
Senator Max Cleland.
    If confirmed, I will continue to manage the Bank in a way 
that pays close attention to the concerns of Members of 
Congress, the Bank's customers, and my fellow Board members as 
we all work together to support U.S. exporter competitiveness.
    Mr. Chairman, Senator Sarbanes, Members of the Committee, 
it is with great respect that I ask for favorable consideration 
of my nomination. I will be pleased to respond to your 
questions. Thank you.
    Chairman Shelby. Thank you, Mr. Lambright.
    Mr. Lambright, if confirmed, which I believe you will be, 
you will assume significant responsibilities. Ex-Im authorized 
nearly $14 billion in financing last year and has approximately 
400 employees. Your management will have a decisive impact on 
how effectively Ex-Im utilizes these resources to support 
American exports. What do you see as the most significant 
management issues facing Ex-Im, and how do you plan to confront 
them? You have been there awhile. You are the acting now.
    Mr. Lambright. I think of them in terms of shorter range 
versus longer range challenges. In the short-term, we need to 
get the Bank through reauthorization and implement the guidance 
Congress gives us, and part of that will be finding the right 
organizational structure and devotion of resources to maximize 
our support for small businesses that export. But in the longer 
range, there is a lot going on in the world of export credit 
that the Bank will need to adjust to in the future. There is an 
emergence of competitors that are not parties to our OECD 
agreements that govern much of our behavior. I am thinking of 
Brazil, India, and China in particular, and figuring out how 
the Bank can best support exporters in the face of this new 
competition. This is the biggest challenge.
    Chairman Shelby. The Export-Import Bank is required by law 
to allocate 20 percent of its aggregate loan guarantee and 
insurance authority for financing exports to small businesses 
in America. Since this mandate was enacted, it is my 
understanding that Ex-Im has never met that goal of 20 percent. 
If confirmed, what actions will you take to ensure or try to 
meet that 20 percent small business mandate, which I think is 
important to the country.
    Mr. Lambright. I agree with you that it is very important, 
Mr. Chairman. Upon assuming my current position, nothing has 
received more attention than our efforts to increase support 
for small business exporters. We have already made a number of 
changes, including the creation of an Outreach Division, 
focused exclusively on reaching small business exporters, 
headed by a new Senior Vice President. We have designated 
specialists within each of the business units who will handle 
just small business applications, and I am sure that there is 
more we can do, and if confirmed, I will continue to focus on 
exploring new and creative ways to support small businesses.
    Chairman Shelby. Ex-Im's mission is to provide export 
financing when the private sector is unable or unwilling to do 
so. By providing export financing to exports to developing 
countries which private banks are unwilling to provide, Ex-Im 
facilitates the development of new markets for U.S. exports, 
for business.
    In your view, can Ex-Im do more to expand the U.S. exports 
to developing countries, and can it safely assume the 
additional risk that financing exports to these countries would 
involve some risk, as you know?
    Mr. Lambright. There certainly is more that we can do. Ex-
Im Bank is a provider of a service, and like any service 
provider, we can do more, and we can do it better. So we are 
looking at a lot of ways that we can do what we do more 
efficiently and more effectively. We have a new online 
application program that will be launched next month that 
should make it a lot easier for our customers to apply and will 
also help us manage the credit risk, which touches on the 
second point you raised about protecting the taxpayer from 
exposing them to too much risk.
    Chairman Shelby. Many foreign export credit agencies have 
entered into what they call co-financing agreements that you 
are very familiar with by which they agree to jointly support 
exports from each of their respective nations. Co-financing 
helps exporters around the world work together to compete for 
large transactions. How many co-financing agreements has Ex-Im 
entered into, and do you think that Ex-Im needs to enter into 
any additional co-financing agreements? Do you have any opinion 
on that?
    Mr. Lambright. Yes, we currently have five co-financing 
agreements. The last one was an agreement I signed a few months 
ago with Atradius, the Dutch export credit agency, but I do 
think that there is more we can do. The Europeans are ahead of 
us in this respect, largely because the European market is so 
integrated by currency and production, but there is more that 
U.S. Ex-Im can do on the co-financing front to help our 
exporters.
    Chairman Shelby. The Export-Import Bank Reauthorization Act 
of 2002, Mr. Lambright, mandated that Ex-Im implement 
technology improvements to improve its small business outreach 
and to enhance the tracking of all of Ex-Im's pending 
transactions. One of those initiatives to meet this mandate was 
Ex-Im Online. Despite having 4 years to meet this, however, Ex-
Im, to my understanding, has still not finished developing the 
Ex-Im Online. When do you expect that to be operational?
    Mr. Lambright. June 1.
    Chairman Shelby. June 1. That is good news.
    Senator Sarbanes.
    Senator Sarbanes. Thank you very much, Mr. Chairman.
    I wanted to ask you about these vacancies on the Export-
Import Board, which I mentioned in my opening statement, but it 
is an issue that has me very concerned. Chairman Merrill's term 
expired on January 20, 2005. The term of the Vice Chairman, 
April Foley, expired on the same date, and the term of Joe 
Grandmaison expired on that date, January 20, 2005. That is 
about slightly over 15 months ago.
    Now, under the terms of the Export-Import Bank structure, 
they can stay on for 6 months, which they did in each instance, 
and then, they have to leave the Board altogether, so you have 
a vacancy. So the Board was without a quorum. I mean, it had 
only two members, not three.
    Now, they used the Vacancies Act to put you in there on an 
acting basis, thereby giving it a quorum, but is this not a 
problem? What is your view on these--so many vacancies and the 
ability of the Board to function in a normal, rational way?
    Mr. Lambright. It is an important concern, Senator 
Sarbanes. Fortunately, as you know, we were able to have a 
quorum, and so, since the terms expired, we have not had to 
interrupt the regular meetings of our Board to provide 
authorizations for export credits to our customers. But you 
correctly note that we might have had a problem with that.
    Senator Sarbanes. You do not get the benefit of the advice 
and counsel of a full Board. Furthermore, the way the statute 
is written, two of the five Members have to come from the party 
other than the President's party, and I think the thinking 
behind that was that you would get a balanced board. It would 
help to take the Ex-Im Bank out of politics, not thrust it into 
politics, which I think is a very important consideration.
    But obviously, that balance can be affected by having these 
empty seats. And it seems to me that the objective should be to 
have a fully appointed Board, not just enough to constitute a 
bare quorum, which can transact business, but if that is going 
to be, maybe you should change it to a three-member Board 
instead of a five-member Board. I mean, the rationale for a 
five-member Board I think is pretty good but begins to collapse 
if these seats are allowed to go unfilled.
    Now, obviously, you do not make the nominations, but as the 
prospective Chairman of the Board, you are going to have a 
heavy responsibility in making sure the Bank works right.
    Chairman Shelby. He is going to want them.
    Senator Sarbanes. And it seems to me, I want to just 
energize you on this particular issue. Mr. Chairman, I think it 
is very important. In fact, I have some hesitation moving ahead 
on these Export-Import nominations until the Administration 
comes through with its other nominees. You know, they are 
partly crippled, in my perception.
    Chairman Shelby. They should be at full strength.
    Senator Sarbanes. Strength, yes.
    Chairman Shelby. Senator Sarbanes, if you want to, we can 
work together and maybe contact the Administration and tell 
them how important this is, not to just us but to the operation 
of the Bank as well.
    Senator Sarbanes. Yes, I think that is very helpful. I 
mean, Mr. Grandmaison has been down there. He has done a good 
job, from all accounts, but he is out there in the wings, I 
guess, just waiting around, and we need a nominee for Ms. 
Foley. In fact, she is going to have a hearing here very 
shortly. She has been nominated by the President to be the 
Ambassador to Hungary.
    Chairman Shelby. Senator Martinez, do you have any 
questions?
    Senator Martinez. No, sir.
    Chairman Shelby. Not of these nominees?
    Senator Martinez. Only to comment that I think Mr. 
Lambright is an eminently qualified individual, and I look 
forward to his confirmation.
    Chairman Shelby. Senator Dodd.
    Senator Sarbanes. Mr. Martinez is anxious to get to these 
Florida nominees.
    Chairman Shelby. Absolutely.
    [Laughter.]
    Senator Martinez. It is a couple of friends from Florida 
who are here, sir, and I thought I would talk about them when 
the time came, but I am patiently awaiting.
    Senator Sarbanes. We understand.
    Senator Dodd.

            STATEMENT OF SENATOR CHRISTOPHER J. DODD

    Senator Dodd. Thank you, Mr. Chairman. I apologize getting 
here a little bit late, and as the Chairman and Senator 
Sarbanes know, I have a particular interest in how well the 
Export-Import Bank does. My spouse is a former Vice Chair of 
the Bank, Chief of Staff of the Bank.
    Senator Sarbanes. A very good one, too.
    Senator Dodd. And she had a wonderful experience; still 
raves and talks about the friendships she developed down there 
and what a terrific job this institution--I think one of the 
smallest if not the smallest of our Federal agencies; there may 
be a smaller one, but I am not aware of what it would be and 
just does a remarkable job. It is such a unique place and 
performs a very unique function. I mean, there are very few 
places where job creation really can occur, and the Bank has 
had some remarkable leaders over the years and is doing some 
very exciting things in environmental, small businesses, and 
making credit more available under difficult circumstances and 
been a real engine for growth and success.
    And so, I bring a strong bias in support of this 
institution and on the few occasions I have had a chance to 
meet people at the Bank who have dedicated themselves with 
careers at the Bank and really made a wonderful contribution. 
And I just want to underscore what Senator Sarbanes and Senator 
Shelby have said here, and I intended to raise the same issue, 
and that is I know in the past, there have been Chairs who 
frankly would have probably preferred a smaller Board, maybe no 
Board at all in some cases, given the fact that boards can be 
unruly from time to time, and they do not necessarily all 
agree. And I know there are some heated discussions from time 
to time on whether or not a certain proposal should go forward 
or not.
    But until we statutorily change, and that is a decision to 
make, and I am not sure we ought to, but that is a legitimate 
question, but in the meantime, we should try and fill these 
positions to have the full complement. And so, I would 
underscore what has been said and would join the Chairman and 
Senator Sarbanes in any communication they might share with the 
White House or others about sending these names up. And I 
gather, in the case of Joe Grandmaison that there has been 
White House support for that decision. We just have not seen 
any documentation. At least I am led by the memos I have from 
my staff that that is the case, and if it is not the case, 
then, we should know that as well, but I underscore what 
Senator Sarbanes has said. I think the general impression I had 
was that Joe did a pretty terrific job at the Bank and really 
was very knowledgeable and tremendously helpful in his position 
as a Member of the Board.
    So, I would hope, Mr. Chairman, that you could communicate 
however you want to communicate but add my voice to that 
communication as well.
    Senator Sarbanes. Absolutely.
    Senator Dodd. And it is important that we get people in 
place, and the Acting Chair is a new creation, I think, if I am 
not mistaken. There has never been an Acting Chair before. We 
either had a Chair or did not have a Chair.
    Mr. Lambright. I am not aware of a precedent for it.
    Senator Dodd. I think that is a precedent setting move. 
Creative, in a sense, I must say, and I understand why, but my 
hope would be that we would fill these seats as soon as we can.
    Chairman Shelby. Senator Dodd, you make an excellent point. 
We will work on that together.
    Senator Dodd. Thank you, Mr. Chairman.
    Chairman Shelby. Senator Allard.

               STATEMENT OF SENATOR WAYNE ALLARD

    Senator Allard. Mr. Chairman, I just want to follow up on 
one area. I just want to put a statement in the record.
    Chairman Shelby. Without objection, the full statement will 
be made part of the hearing record.
    Senator Allard. And I just want to thank Mr. Lambright for 
taking on the responsibilities that he has already begun to 
assume and raise a question about how he is getting along with 
the Inspector General. You know, we reauthorized the Export-
Import Bank, and during that deliberation, I pushed to have an 
Inspector General for the Export-Import Bank, because this is 
the only institution we had out there, as I understood it, that 
gave direct loans or gave loan guarantees that did not have an 
inspector general there, and I just wanted to know how you 
viewed your relationship with him and if that is helpful or 
not. Do you find him helpful at this particular point in time?
    Mr. Lambright. Well, since 2002 at the last 
reauthorization, this was the first fiscal year that we were 
appropriated funds for an Office of Inspector General.
    Senator Allard. That is right.
    Mr. Lambright. And this is another position where we are 
waiting for a nomination for filling the spot.
    Senator Allard. Another one of those vacancies, Mr. 
Chairman, that we maybe should visit, because the Inspector 
General is the eyes and ears----
    Chairman Shelby. The Administration needs to fill them, and 
we need to confirm them.
    Senator Allard. Yes. It is the eyes and ears of this 
Committee and the Members of Congress, and we need to get the 
input, and we need to get him on board. So, I would encourage 
you and the Ranking Member, if you would, to also bring that 
up.
    Chairman Shelby. Absolutely.
    Senator Allard. Thank you very much.
    Do you think it is going to be helpful to you to have an 
Inspector General?
    Mr. Lambright. I think that there is a lot that an 
Inspector General would add to our operations. We have a strong 
system of internal controls with an Audit Committee currently, 
but we are already in the process of making preparations to 
receive the Inspector General and have a fully functioning 
Office of Inspector General as soon as possible.
    Senator Allard. Thank you very much, Mr. Chairman.
    Chairman Shelby. Mr. Lambright, we appreciate your 
willingness to serve, and we will try to expedite this 
nomination. Thank you very much.
    Mr. Lambright. Thank you very much, Mr. Chairman.
    Chairman Shelby. We are going to call up the second panel, 
if you will take your seats.
    [Witnesses sworn.]
    Chairman Shelby. Your written testimony will be made a part 
of the record. If you will just briefly sum up your testimony 
here this morning, and if you have any members of your family 
you want to introduce, you proceed.

        STATEMENT OF ARMANDO J. BUCELO, JR., OF FLORIDA

                        TO BE CHAIRMAN,

           SECURITIES INVESTOR PROTECTION CORPORATION

    Mr. Bucelo. Thank you, Mr. Chair. With me today is my wife, 
Beatrice, and my son, Alex. Senator Sarbanes, if you remember, 
4 years ago, I brought Alex as a 9-year-old before you.
    Senator Sarbanes. He has come back again; all right.
    Mr. Bucelo. And you interrogated him as far as his baseball 
ability. He has won two batting titles since 2002.
    Senator Sarbanes. Good.
    Mr. Bucelo. And he is glad to be back.
    Chairman Shelby. I think Senator Sarbanes has been waiting 
here. I mean, Senator Sarbanes has been waiting. Senator 
Martinez is really waiting.
    [Laughter.]
    Chairman Shelby. Go ahead.
    Mr. Bucelo. Would you like me to make my opening statement?
    Chairman Shelby. Yes, sir, you may proceed.
    Mr. Bucelo. Mr. Chairman, Senator Sarbanes, Members of the 
Committee, I am pleased to appear before the Committee today as 
SIPC's Chairman. With me today is also SIPC's President Stephen 
Harbeck and SIPC's General Counsel, Josephine Wang. Not with me 
today is my daughter, Alexis. She is a 20-year-old graduate of 
the University of Miami. She will be entering law school next 
year and my son A.J. He is a 19-year, second-year student at 
Miami-Dade Community College, which is the largest college in 
the country and of which I am a trustee appointed by Governor 
Bush.
    And if I may just take a second, also not with me today is 
my father. He is 87. He is not doing very well. I am eager to 
get back to him, and I just wanted to mention his name. Thank 
you very much.
    It is an honor to serve as SIPC Chairman, and I look 
forward to a full term in that capacity. I joined the SIPC 
Board in 2002 as a Director and Vice Chairman, and since the 
appointment of SIPC's Chairman Tim Timken as Ambassador to 
Germany in late 2005, I have served as its Chairman.
    I am very proud of my association with SIPC, Mr. Chairman, 
which, as we all know, serves to protect investors in the event 
of brokerage firm failures, as Senator Sarbanes previously 
mentioned. During the years I have served on the Board, I have 
had the opportunity to see for myself that this segment of the 
investor safety net is functioning very well.
    A brief background of SIPC will be useful to the Committee 
in measuring how far investor protection has gone since SIPC's 
inception. In 1969 and 1970, as we all know, customer losses 
mounted as the rate of stockbroker failures accelerated. 
Congress responded by enacting the Securities Investor 
Protection Act, SIPA. SIPA had many purposes: Mainly to protect 
individual investors from financial hardship, to insulate the 
economy from the disruption which can follow the failure of a 
major financial institution, and obviously to achieve a general 
upgrading of financial responsibility requirements of brokers 
and dealers, to eliminate, as much as possible, the risks which 
lead to customer loss. SIPA also created SIPC at that time, and 
among other things, established procedures for liquidating 
financially troubled broker-dealers who are members of SIPC.
    I am proud to report that SIPC is about to conclude the 
largest brokerage firm liquidation in its 36-year history. MJK 
Clearing Corporation was a prominent regional brokerage firm in 
Minneapolis that failed when a fraudulent stock loan scheme 
completely depleted its cash reserves. In the troubled period 
of late September 2001, that was before my time, SIPC and a 
trustee appointed to liquidate the firm returned control of 
customer assets to 175,000 customers in approximately one week. 
SIPC advanced $177 million in returned cash and securities to 
those investors. I am extremely pleased to report to the 
Committee that as the case comes to a close, as a result of 
rigorous litigation efforts to recover missing customers' 
assets, all customers, all creditors, all lenders and SIPC have 
been paid, Mr. Chairman, 100 cents on the dollar plus interest. 
SIPC's board and staff are very proud of this achievement. As 
the only attorney on the Board, I have come to appreciate the 
complexity of the legal issues that SIPC faces with regard to 
bankruptcy and securities law. I can report to the Committee 
that investors have benefited from SIPC's vigorous pursuit of 
those who are responsible for any particular brokerage firm 
failure.
    I am also pleased to report at this time to the Committee 
that the regulatory system is preventing brokerage firm failure 
in the first place. Only one small brokerage firm failed in 
2005. Only one small firm has failed this year. This is an 
incredible record. We attribute these outstanding results to 
the Securities and Exchange Commission, the State regulatory 
authorities, and the securities industry self-regulatory 
organizations that monitor, in fact, the financial health of 
the securities brokerage industry. As I noted in SIPC's 2005 
Annual Report, investor confidence in the securities markets is 
enhanced when investors know that the brokerage firm failure is 
a rare event.
    Our Board is committed to maintaining adequate resources to 
fulfill SIPC's statutory mission. SIPC's fund now stands at 
well over $1.3 billion, a historic high. As Chairman, I have 
initiated a Board-level Investment Committee to make sure that 
SIPC continues the prudent management of the fund. No taxpayers 
funds, I repeat no taxpayer funds, have ever been used in the 
SIPC program, and the Board continually monitors the adequacy 
of SIPC funding.
    Investor education has been my number one priority since I 
have been Chairman. The statute that created SIPC is, by the 
very nature of bankruptcy and securities laws, a complex and 
technical law. We have also undertaken a continuing public 
interest media campaign to make sure investors know what SIPC 
protects, and equally important, Mr. Chairman, what it does not 
protect.
    Finally, SIPC is preparing for the future and the 
inevitable problems we have not faced in the past. We have 
tested a business continuity program, complete with an 
emergency alternative work facility. We are also preparing for 
the possibility of brokerage firm failure that crosses 
international borders. SIPC has executed memoranda of 
understanding at this stage with its counterparts in Canada and 
the United Kingdom. Others will follow.
    In summary, SIPC is very robust financially, fulfilling its 
statutory mission and preparing for the future. I am very 
pleased to be its Chairman, and I am honored to be here. Thank 
you.
    Chairman Shelby. Do you have any family members you want to 
introduce?

            STATEMENT OF TODD S. FARHA, OF FLORIDA,

            TO BE MEMBER OF THE BOARD OF DIRECTORS,

           SECURITIES INVESTOR PROTECTION CORPORATION

    Mr. Farha. No, sir.
    Chairman Shelby. You can proceed as you wish.
    Mr. Farha. Good morning, Chairman Shelby, Senator Sarbanes, 
and distinguished Members of the Committee. My name is Todd S. 
Farha, and it is my pleasure to appear before you as a 
candidate for the Board of Directors of the Securities Investor 
Protection Corporation. I am honored to be nominated to serve 
on the SIPC Board and look forward to my public service if 
confirmed by the Senate.
    I understand you have been informed of my background, so I 
will only highlight my qualifications and why I am pleased by 
the opportunity to serve on the SIPC Board of Directors.
    I am a native of Wichita, Kansas. I received my bachelor's 
degree in economics magna cum laude from Trinity University and 
my MBA with distinction from Harvard Business School.
    As you know, I am the President and CEO of WellCare Health 
Plans, headquartered in Tampa, Florida. WellCare is one of the 
largest providers of managed care services, targeted to 
government-sponsored healthcare programs, such as Medicare and 
Medicaid. We are pleased to be participating in the 
groundbreaking Medicare Part D program, and with enrollment of 
over 800,000 Medicare Part D members today, WellCare now ranks 
among the top five prescription drug plans in the country, 
filling close to 100,000 prescriptions per day for Medicare 
beneficiaries in all 50 States.
    I am pleased to have the opportunity to serve on the Board 
of Directors of the Securities Investor Protection Corporation. 
SIPC serves a vital role to strengthen investor confidence in 
our capital markets. SIPC has a demonstrated track record of 
recovering $14.2 billion in assets for an estimated 624,000 
investors.
    As a Board member, my priority is ensuring that SIPC 
remains focused on continuing to execute its mission. I will 
hold the organization accountable for the results of its 
efforts, and I will work closely with SIPC's management to 
support their continuing daily responsibilities. I know 
Chairman Armando Bucelo has made tremendous progress in 
advancing SIPC's mission during his tenure, and I would look 
forward to working with him to continue this progress.
    As the CEO of a public company, I have experience in issues 
of corporate governance, compliance, public disclosure, and 
Sarbanes-Oxley implementation. I take seriously all aspects of 
these responsibilities and the need to ensure the utmost 
discipline and integrity in every area of corporate governance.
    I seek your support of my nomination to the Board of 
Directors of SIPC. If confirmed, I believe my experience as a 
CEO of a public company as well as my prior experience and 
education, will prove valuable to SIPC.
    Thank you very much, and I look forward to answering any 
questions or clarifying any comments I made.
    Chairman Shelby. Thank you.
    We will start with you, Mr. Bucelo. The Securities Investor 
Protection Act, the 1970 legislation that created the 
Securities Investor Protection Corporation, has been 
substantially amended only once, in 1978. In your estimation, 
does the Act need to be modernized or amended in any way, or do 
you want to withhold that?
    Mr. Bucelo. At this time, Mr. Chairman, I do not believe 
that there is any need for any major legislative changes. We 
are in direct conversation; as a matter of fact, I will be 
meeting with Chairman Cox on Friday.
    Chairman Shelby. Good.
    Mr. Bucelo. There are a few issues that are pending on the 
table, but at this time, there is nothing as far as any major 
changes.
    If I may also at this time report to Senator Sarbanes, 4 
years ago, your marching instructions to me, sir, were to make 
sure that SIPC was adequately funded, and we are. As a matter 
of fact, what we have done is made it a topic at virtually 
every SIPC Board meeting since I appeared before you in 2003 
after the most expensive brokerage firm failure, the one I 
previously mentioned. Senator Sarbanes, SIPC commissioned, the 
latest in a long series of independent studies, and that study 
concluded that a loss in excess of $500 million is expected 
once every 100 years. Using what they call the Ruin Theory 
analysis, an early study indicated that there was a 1 in 40,000 
chance that SIPC would not have sufficient funds. We now have a 
commercial line of credit of $1 billion, plus the backing of 
the Federal Government of $1 billion, so we are okay. We feel 
very confident. And I know you made it a point, Senator 
Sarbanes, 4 years ago to make sure that I did that as then-Vice 
Chairman.
    Chairman Shelby. It is very important.
    Mr. Bucelo. Yes, I think it is incredibly important.
    Chairman Shelby. The number of brokerage firm liquidations 
are at an all-time low. You have only had one customer 
protection proceeding this year is my understanding.
    Mr. Bucelo. That is correct, sir.
    Chairman Shelby. There were only two last year and one in 
2004. In your view, why have there been so few?
    Mr. Bucelo. I do not know, and I really do not want to 
know.
    [Laughter.]
    Chairman Shelby. That is good news.
    Mr. Bucelo. That is very good news. When I became a member 
of the Board 4 years ago, I was Acting Chairman for a number of 
months pending the confirmation of Chairman Timken, I insisted 
that one of my major goals as Vice Chairman was to make sure 
that the public was well-informed. And again, when I was 
appointed to the Board of SIPC, in Miami, people said you 
received a Presidential appointment. They said what to? SIPC. 
What was that? I mean, a lot of people know the FDIC. The 
answer is I believe we are informing the investor, and based on 
that, we are proud to report that we have only had one case 
this year.
    Chairman Shelby. That is wonderful. The Corporation's 
financial health appears to be strong. Are there any challenges 
or potential problems that you know about that may lay ahead 
and that we need to know about?
    Mr. Bucelo. No, sir, none, Mr. Chairman.
    Chairman Shelby. Some people have suggested that the fund 
should also be allocated to cover fraud at brokerage firms. The 
classic example would be a pump-and-dump case. What is your 
view regarding the Securities Investor Protection Corporation 
reimbursing investors for market losses?
    Mr. Bucelo. There are strong arguments against protecting 
against fraud. The first thing that comes to my mind when I 
hear fraud is a stockbroker with a potential victim saying go 
ahead and do it; invest here and there, and if anything goes 
wrong, SIPC will pay for it.
    Chairman Shelby. That is right. It could be open-ended, 
could it not?
    Mr. Bucelo. That is right, it could open up a Pandora's 
box. Irrespective of the fact that it would need Congressional 
authorization, I would never recommend that.
    Chairman Shelby. I did not suggest that. I just asked about 
it.
    Mr. Bucelo. Oh, okay.
    Chairman Shelby. Yes, sorry.
    Mr. Bucelo. Yes, I think definitely, Congress should not 
make any change without considering the policy concerns and 
costs, and I am very concerned, so my gut feeling would be no.
    Chairman Shelby. I have several questions, one question for 
you. To fund the operation, 6,000 members pay a flat annual fee 
of $150 is my understanding. This has been the funding 
arrangement since 1996. But over 25 years prior to that, the 
Corporation had assessed fees on a sliding scale based on net 
operating revenues. Why should the smallest broker-dealer pay 
the same fee as the large Wall Street firms? Just a question.
    Mr. Farha. Mr. Chairman, a very good question and one that 
I will not represent that I am expert in. I have been briefed 
by the SIPC leadership team on the general issues regarding 
SIPC. I think your question exposes an interesting issue that 
perhaps we should evaluate at SIPC and determine if a sliding 
scale is appropriate based on whatever study----
    Chairman Shelby. I do not know myself, but I just suggest 
to you that you should maybe look at it.
    Mr. Farha. Clearly merits evaluation and a very good 
question.
    Chairman Shelby. Senator Sarbanes.
    Senator Sarbanes. Thank you very much, Mr. Chairman.
    Mr. Bucelo, how long have you been Chairman now?
    Mr. Bucelo. Since Chairman Timken was appointed Ambassador 
to Germany; late 2005.
    Senator Sarbanes. How long was there a vacancy in the 
Chairmanship? Do you recall?
    Mr. Bucelo. When I became a member of the Board of 
Directors, and I was appointed Vice Chairman, I was Acting 
Chairman for about 7, 8 months pending the confirmation of 
Chairman Timken.
    Senator Sarbanes. Right.
    Mr. Bucelo. Then, Chairman Timken was made U.S. Ambassador 
to Germany in late 2005, at which time, I became Acting 
Chairman. And then, I was nominated by President Bush and made 
Chairman.
    Senator Sarbanes. In a relatively short period of time?
    Mr. Bucelo. Yes, yes, Senator.
    Senator Sarbanes. I am relieved to hear that. I do not like 
these positions being in a floating status.
    Mr. Bucelo. No, sir.
    Senator Sarbanes. I do not think it is good for the 
workings of the institution.
    Mr. Bucelo. No, sir.
    Senator Sarbanes. The GAO, in a 2004 report, concerning the 
Securities Investor Protection Corporation, stated that the 
SEC, and I am now quoting the GAO, ``found that SIPC had 
inadequate internal controls over the fees and expenses awarded 
to trustees and their counsel.''
    And then, the GAO added, to address SEC's concerns, SIPC is 
in the process of enhancing its controls for reviewing and 
assessing fees. Now, obviously, these internal controls are 
important for any organization. How have you progressed on this 
concern expressed by the SEC? This is now not quite a couple of 
years ago.
    Mr. Bucelo. Although not personally involved as a member of 
the Board, I know for a fact that President Harbeck and the 
entire administration has thoroughly looked into that, and I 
know that changes have been made, and as far as I am concerned 
now, we are back on track, and not that we ever deviated, in my 
opinion, but they had some concerns, and we addressed them.
    Senator Sarbanes. If you could go back, I understand that 
you have instituted a number of changes with respect to this 
which have tightened up your procedures, but given that the GAO 
raised this concern in its report, if you could go back and 
take another look at this, we would appreciate that.
    Mr. Bucelo. We will do so.
    Senator Sarbanes. I am not going to go into this proposal 
that SIPC submitted to raise compensation of its Board Members. 
That has been withdrawn, as I understand it.
    Mr. Bucelo. That is correct, Senator.
    Senator Sarbanes. It does, however, lead to a question 
about the salaries that are being paid to the SIPC employees, 
which are, I think it is fair to say, fairly high-end, and how 
much attention is the SIPC Board paying to these compensation 
levels?
    Mr. Bucelo. Very much so, and----
    Senator Sarbanes. When you compare it with the SEC, it is 
quite a contrast, actually.
    Mr. Bucelo. The SIPC staff contains a high degree of 
specialized professionals, in my opinion, and they definitely 
discourage a revolving door type of procedure in and out. We 
have had employees there for--well, our President has been 
there close to 30 years. And they benefit--I believe SIPC 
benefits from the lengthy tenure of these professionals.
    I am of the opinion--this is one voice speaking--that 
salaries are definitely below those in the private sector and 
in some instances substantially less than other financial 
services professionals in government, and as such, we did a 
little bit of a study, and if you will, for example, the 
Municipal Securities Rulemaking Board, its executive makes--it 
is a package in excess of $1 million; the ABA Securities 
Association, same thing, American Bankers Association.
    So in order for us, Senator Sarbanes, to keep the level of 
professionalism and competency that we have, I sincerely and 
truly do not believe that we are overpaying anybody. As a 
matter of fact, I think, for example, you take our highest, the 
CEO, our President, his salary is under $300,000, which I 
believe is not competitive at all. He has a full package of 
approximately $400,000, which, I believe, is quite low when you 
compare it to the NASD and other institutions comparable to 
SIPC.
    But nevertheless, we as a Board do in fact regulate that 
and keep an eye on it, and I will do whatever you indicate me 
to do as----
    Senator Sarbanes. It is always a challenge, and I think you 
have outlined it fairly well, the balancing act that has to 
take place.
    Mr. Bucelo. That is correct.
    Senator Sarbanes. So, I do not think we can ever anticipate 
that the salaries in the public sector will reach those that 
exist in the private sector, particularly in the financial 
sector.
    Mr. Bucelo. That is correct.
    Senator Sarbanes. Actually, a lot of concerns are now being 
raised about the private sector compensation.
    Mr. Bucelo. Yes, sir.
    Senator Sarbanes. Every day, you read the business section 
of The Wall Street Journal or The New York Times, there is 
another major story on that issue, but I think it is important 
for the SIPC Board to keep this matter in focus.
    Mr. Bucelo. We do.
    Senator Sarbanes. I wanted to just ask one question: How 
old were you when you came to the United States from Cuba?
    Mr. Bucelo. 1960--my God, I am so old now; 3, 4 years old.
    Senator Sarbanes. All right; well, you have had a very 
impressive life story, and I mentioned that before when you 
were here.
    Mr. Bucelo. Yes, thank you; I appreciate that.
    Senator Sarbanes. I wanted to recognize my respect for you.
    Mr. Bucelo. Coming from you, it is an honor.
    Senator Sarbanes. Mr. Farha, I want to put just one 
question to you. I am drawn to do so. It is like a dangling 
bait before a fish or something.
    [Laughter.]
    Mr. Farha. Thank you, Senator.
    Senator Sarbanes. You say in your statement as the CEO of a 
public company, I have had experience in issues of corporate 
governance, compliance, public disclosure, and Sarbanes-Oxley 
implementation. How has your experience been with Sarbanes-
Oxley implementation?
    [Laughter.]
    Mr. Farha. Absolutely.
    It is interesting: We took our company public in 2004, so 
that makes us a relatively young New York Stock Exchange-listed 
company, and the process of complying with Sarbanes-Oxley, and 
in our first year, we did fully comply with no reservations 
from our auditors, which we thought was quite an 
accomplishment; I think it had a number of positive impacts on 
the company. It enhanced our focus on process and internal 
controls and processes for managing and verifying those 
controls.
    And I mentioned that I take very seriously the compliance, 
and quite frankly, as I sign the reports that are required 
under your Act, I do so with the cognizance of the liability 
that it creates. So, I think it has been a definite positive on 
our company. I would mention to you that the cost of compliance 
is meaningful, both in terms of our auditors as well as other 
professional staff, but I think a balanced approach would 
clearly say it has had a positive impact on the company.
    Senator Sarbanes. Okay; and I guess the costs are in some 
respects like an investment in capital goods. I mean, once you 
put the systems in place and everything, it is, I guess, 
reasonable to assume in subsequent years, the costs will not 
run at that level; is that a fair assumption, do you think?
    Mr. Farha. In fact, that is an accurate assumption, and as 
we have gone through our recent Audit Committee, the hours of 
our auditors allocated for year two review of our 404 
compliance are reduced. So, I think your statement is 
definitely accurate.
    Senator Sarbanes. Okay; thank you very much. I appreciate 
that.
    Chairman Shelby. Senator Martinez? I want to know who got 
here first.
    Senator Martinez. I think I did. I was older when I got 
here, first of all, I should say.
    Mr. Bucelo. He is a lot older.
    [Laughter.]
    Senator Sarbanes. The Committee is obviously going to have 
to look into this Florida monopoly of this SIPC Board.
    [Laughter.]
    I think that is a question for us and not for you.
    Senator Martinez. But I am delighted to be here to welcome 
these Floridians to the Committee and very honored to have an 
opportunity to speak on both of their behalves, Mr. Chairman. I 
am not going to have a lot of questions for them. I am 
basically here to say how pleased I am as the Senator from 
Florida that we have these dedicated people who offer 
themselves to public service. I am particularly impressed with 
Mr. Farha's comments on Sarbanes-Oxley; well done, sir.
    But Mr. Bucelo and I share a common background, as Senator 
Sarbanes indicated, and a shared bond of our life experience as 
Cuban-Americans making it in this wonderful land. And so, I am 
very pleased and proud to welcome him here. He is someone who 
also shares a legal background, which we both have, he as a 
Miami Hurricane and me as a Florida State Seminole, but 
nonetheless----
    Chairman Shelby. You are friends other than that.
    Senator Martinez. Other than that, we get along very well.
    I was recently at Miami-Dade Community College. You 
mentioned being on the Board, and this is one of the many 
community activities that I know Armando is a part of and a 
remarkable college and a great institution that is serving the 
community so well. And so, I am just delighted, Mr. Chairman, 
to welcome him here. I know he has done a great job in his Vice 
Chair position; will do equally as well in the future, and 
Alex, I am proud of your batting prowess, buddy. I may have to 
get you with Andrew, who is 12 and cannot hit the curve ball. 
But anyway.
    [Laughter.]
    Mr. Bucelo. Neither can he.
    Senator Martinez. Todd Farha is a good friend and also 
someone who I believe is a very innovative person in the area 
of health care. I am so glad, Todd, that you mentioned your 
involvement with Medicare Part D and the success that you have 
had in implementing that. His company is innovative in the 
managed health care area in Tampa, Florida; very strong and 
rising entrepreneur in our State and someone that we also have 
a lot of pride in his contributions to our State. So, I am 
delighted that they are both going to be serving in this 
capacity and very pleased to be able to welcome to the 
Committee and look forward, Mr. Chairman, to a swift vote on 
their nominations and again, a confirmation in the full Senate 
in the near future.
    Mr. Farha. Thank you, Senator.
    Mr. Bucelo. Thank you, Senator.
    Chairman Shelby. Mr. Farha, did you start this company?
    Mr. Farha. No, I acquired it as a leveraged buyout in 2002.
    Chairman Shelby. And you are doing well with it.
    Mr. Farha. Thank you very much.
    Chairman Shelby. What we need in health care is more 
competition and I hope ultimately some market forces involved.
    Mr. Farha. Absolutely. Thank you, Senator.
    Chairman Shelby. We thank you both for appearing. We will 
try to expedite your nominations as soon as possible. And we 
feel good about your nominations.
    Mr. Bucelo. Thank you, Mr. Chairman.
    Mr. Farha. Thank you, Mr. Chairman.
    Chairman Shelby. We are going to call up the third panel if 
we can: Jon Rymer, Inspector General-designee, Federal Deposit 
Insurance Corporation; John W. Cox, Chief Financial Officer-
designee, Department of Housing and Urban Development; William 
Hardiman, Member of the Board of Directors nominee, National 
Institute of Building Sciences.
    [Witnesses sworn.]
    Chairman Shelby. Mr. Rymer, we will start with you. I will 
tell all of you that without objection, all of your written 
testimony will be made part of the hearing record, and if you 
will just briefly sum up what you basically want to say; before 
then, if you have any family members you want to introduce, you 
may. Mr. Rymer, we will start with you.

            STATEMENT OF JON T. RYMER, OF TENNESSEE,

                    TO BE INSPECTOR GENERAL,

             FEDERAL DEPOSIT INSURANCE CORPORATION

    Mr. Rymer. Thank you, Mr. Chairman. I would like to 
introduce my wife, Deb, and my son, Thomson, who are with me 
here today.
    Chairman Shelby. I think that is always wise to introduce 
your wife.
    Mr. Rymer. Yes, sir, it is, absolutely. And sir, you do 
have my opening statement and I would like to include it in the 
record.
    Chairman Shelby. It has been made a part of the record.
    Mr. Rymer. And so, I will forego that and be prepared to 
answer any questions you may have, sir.
    Chairman Shelby. Thank you.
    Mr. Cox.

              STATEMENT OF JOHN W. COX, OF TEXAS,

                 TO BE CHIEF FINANCIAL OFFICER,

        U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Mr. Cox. Yes, sir, Mr. Chairman, I am happy to introduce my 
wife, Sally.
    Chairman Shelby. Absolutely. You all are smart men.
    Mr. Cox. And my daughter, Kate. I also have my mother and 
father.
    Chairman Shelby. Point them out to us, your wife here and 
your daughter.
    Mr. Cox. My daughter, Sally.
    Chairman Shelby. Good.
    Mr. Cox. I also have my mother and father from Texas.
    Chairman Shelby. Absolutely.
    Mr. Cox. And my in-laws here are from Virginia.
    Chairman Shelby. That is good.
    Mr. Cox, do you have anything to say other than your 
opening statement?
    Mr. Cox. No, sir, I do not.
    Chairman Shelby. Okay; Mr. Hardiman, do you have any family 
here?

           STATMENT OF WILLIAM HARDIMAN, OF MICHIGAN,

            TO BE MEMBER OF THE BOARD OF DIRECTORS,

            NATIONAL INSTITUTE OF BUILDING SCIENCES

    Mr. Hardiman. I do not, Mr. Chairman.
    Chairman Shelby. You will pay for that later, will you not?
    Mr. Hardiman. I probably will. I do acknowledge that my 
wife is such an important part of my life.
    Chairman Shelby. Absolutely.
    Mr. Hardiman. But she could not make it today.
    Chairman Shelby. Sure.
    Mr. Hardiman, do you have any oral statement? Your written 
statement will be made a part of the record?
    Mr. Hardiman. Thank you, Mr. Chairman. I just want to say 
that I am just honored to be here. It is really a pleasure. I 
serve in the Michigan State Senate, so I do understand that 
brevity is----
    Chairman Shelby. That is where I started, too, in the 
Alabama Senate.
    Mr. Hardiman. Oh, wonderful.
    Chairman Shelby. Good experience.
    Mr. Hardiman. Maybe there is hope for me as well.
    Chairman Shelby. You will be here if you want to be. Maybe 
you will go into other things.
    Mr. Hardiman. Thank you.
    I do want to say that I am honored to be appointed by 
President Bush to serve on the Board of Directors for the 
National Institute of Building Sciences. You have seen my 
background. I think I have some things to add to the Board.
    Chairman Shelby. Absolutely.
    Mr. Hardiman. And I would be pleased to answer any 
questions you have.
    Chairman Shelby. We like all of these nominees. We want to 
move them as soon as we can, but we have to do our duty up here 
to go through. Mr. Rymer, I have several questions here for 
you, if I could for the record.
    Mr. Rymer. Yes, sir.
    Chairman Shelby. In your view, what is the appropriate 
relationship of the Inspector General to the FDIC, and how does 
the Office of the Inspector General contribute to the safety 
and soundness of the banks the FDIC regulates?
    Mr. Rymer. A two-part question, sir, and I would answer it 
this way, the first of which is that the relationship between 
any Inspector General, the Board, and the Chairman is one of 
advice. I mean advice in the sense that the IG must maintain a 
significant degree of independence from policymaking and direct 
activities within that organization.
    And, a successful IG has to be viewed as a part of the 
leadership team. So as policies are developed, they can be 
developed in such a way that they address any potential risks 
that may be associated with the new policy and that those risks 
are identified and the policies modified as needed.
    Chairman Shelby. Absolutely. Your professional experience 
includes the Army, an accounting firm, and several banks. You 
have a good background. Can you elaborate on how these past 
experiences will contribute to your effectiveness as Inspector 
General?
    Mr. Rymer. Yes, sir, certainly. I began my career, and the 
majority of my civilian career, as a banker, and spent about 16 
years in positions of increasing responsibility. I understand 
how banks operate. I understand the interface between a bank or 
bank executives and a regulatory body, particularly such as the 
FDIC.
    I understand that the cooperation of banks is critical for 
the FDIC to complete its mission, so the fact that I bring that 
banking experience, I think, is very important. The other thing 
is as a banker, I spent a significant amount of time dealing 
with customer issues, fairness issues, and how a bank would 
interface with its customers, so I am very aware of the role 
that the FDIC plays in upholding consumer rights as they use 
financial services.
    Second, I would say that obviously, my experience as an 
auditor with a Big Four accounting firm was very valuable and 
that all of my audit experience was focused in the financial 
services community, large banks down to small thrifts and 
savings and loans. I spent a lot of time there understanding 
credit policy as it was developed, and as you are well aware, 
Mr. Chairman, if the FDIC experiences problems with a member 
bank, it will inevitably start with credit. So, I have spent a 
great deal of time auditing credit processes in banks.
    And then, last, I think what I have learned as a soldier is 
the discipline and the pride and the honor in serving the 
United States. That is why I decided rather than to go back 
into public accounting, with the Senate's approval, sir, I 
would like to continue my Government service as an Inspector 
General.
    Chairman Shelby. Do you anticipate any specific challenges 
in your office as Inspector General?
    Mr. Rymer. Well, sir, from what I can see, from the public 
information I have reviewed, I see no specific challenges. I 
think any new manager or leader has a responsibility to 
evaluate programs once he or she assumes office, whether it is 
funding levels, staffing levels, organization structure, but at 
this point, sir, I am not aware of any specific problems.
    Chairman Shelby. In its April 2006 audit report just a few 
weeks ago, the Office of Inspector General noted certain 
deficiencies in the methods employed by the FDIC to calculate 
the reserve ratio of the Bank Insurance Fund. Accurate 
reporting of the reserve ratio is basically essential to ensure 
the continued viability of the insurance fund, which we deal 
with here. Are you aware of this report, and if you have not 
been, will you get into it and its recommendations? Where are 
you on that?
    Mr. Rymer. Yes, sir, I have read the report as published on 
the OIG's Website. As I would summarize the report as an 
auditor, I would view the issue that the report raises as one 
of significance of decisions or degree of governance: Should 
that decision to have basically not changed the calculation 
method for Oakar deposits come before the full Board or not, 
and I think as an outsider----
    Chairman Shelby. It is a very important area.
    Mr. Rymer. Yes, sir. I think as an outsider, it probably 
should have received more Board attention than it did.
    Chairman Shelby. You will look into it seriously, though.
    Mr. Rymer. Yes, sir, I will.
    Chairman Shelby. Mr. Cox, financial controls.
    Mr. Cox. Yes, sir.
    Chairman Shelby. GAO has stated that HUD's financial 
management systems cannot currently provide the day-to-day 
information needed by its managers to effectively manage and to 
monitor the Department's programs. A lot of us believe it is 
critical that HUD have reliable financial and accounting 
systems. It is key. Are you familiar with the problems 
confronting HUD's financial management systems, and have you 
faced or resolved similar systems probably in your previous 
private sector experience?
    Mr. Cox. Yes, sir, I have. I have reviewed those issues in 
the GAO reports and been briefed by the staff at the 
Department.
    Chairman Shelby. That is a big challenge there.
    Mr. Cox. It is a very big challenge. My experience in the 
private sector dealt very much with these similar type of 
issues, and taking large, complex IT environments, many of 
which are ancient in terms of their technology, and bringing 
them into a common standard; the Department is close to making 
an acquisition decision on bringing that up to speed with a 
common, off the shelf technology solution, which they have 
already successfully implemented at FHA. I am very comfortable 
that my experience, I can help them guide through that if I am 
confirmed.
    Chairman Shelby. FHA's single family mortgage insurance is 
the subject. GAO has for some time considered FHA single family 
mortgage insurance a high risk to the Federal Government, to 
the taxpayers.
    Mr. Cox. That is right.
    Chairman Shelby. For instance, GAO has stated that, ``HUD's 
system for rating the underwriting quality of loans does not 
adequately assess the risks that the loans pose to the agency's 
insurance fund.''
    With the Administration's proposing to expand the range of 
its current underwriting, some of us are concerned that HUD is 
moving forward without knowing the real risk posed. Have you 
had the opportunity to discuss with FHA's underwriting 
standards and assure that the program's true risk is reflected 
on HUD's financial statements? I think it has to be stated some 
way.
    Mr. Cox. Yes, sir, I have, and clearly, I am not on board 
yet, and if I am confirmed, I will be very much involved with 
that issue, but what I can tell you is that for the current 
fiscal year, it is my understanding that the estimation of the 
loan loss reserves is very close to the actual experience. So 
the actuarial work that has to be done to estimate that, there 
have been improvements made in those models in the current 
year, and we will continue to make improvements there. And as 
you said, with the current FHA proposals on the table for a 
risk-based premium, that has to be part of that mix as well.
    Chairman Shelby. I am concerned that HUD's current 
acquisition practices leave the Department vulnerable to theft 
and to fraud. For instance, GAO has reported that HUD lacks 
adequate supporting documentation and effective controls over 
its computer purchases. GAO found that HUD did not consistently 
report purchases or even inspect the quantity or quality of its 
purchases. I know you are not there yet. Are you aware of any 
of these deficiencies? And if so, what is your plan to get your 
hands around that?
    Mr. Cox. Yes, sir, I have actually been briefed on that 
specific topic, and there are specific control mechanisms in 
place. The Office of Administration at HUD now specifically has 
a plan of internal control to monitor those physical assets. So 
we have made improvements since that report was issued.
    Chairman Shelby. If you can do that, you will do a great 
job for the country.
    Mr. Cox. Thank you.
    Chairman Shelby. Improper payments subject.
    I believe it is also vital in all of HUD's program that 
payments, be they to local governments, housing authorities, or 
contractors, be accurate and timely. Congress took a major step 
in addressing this problem in 2002 with the Improper Payments 
Information Act. In the past, HUD has had considerable errors 
in its payment systems, particularly with the Section 8 Rental 
Assistance program. Are you aware of this issue, and what are 
some of the methods that you used in the private sector to 
guarantee that payments were accurate and timely? I think it is 
just financial management.
    Mr. Cox. It is good management, and I am actually pleased 
to tell you that from the period of 2001 to 2004, HUD reduced 
its estimated improper payments by 62 percent and was the first 
cabinet-level agency to report green on the President's----
    Chairman Shelby. But you can reduce it more, I hope.
    Mr. Cox. Absolutely; 62 percent means I have still got 38 
percent out there that needs to be reduced. I will use my 
private sector experience to reduce those payments. One thing 
we are doing, particularly, you mentioned Section 8, is we are 
involved in income verification. That has had a big impact on 
reducing improper payments, and there is more work to do, some 
of which we can do at the Department; some of which may require 
some legislative fixes.
    Chairman Shelby. A lot of that is bordering on fraud, too, 
is it not?
    Mr. Cox. That is right. But having the income verification 
through the HHS systems allows us to prevent that fraud before 
it occurs.
    Chairman Shelby. If you could bring some of the basic, 
fundamental private sector systems to HUD, you will be doing a 
great service to the taxpayer.
    Mr. Cox. I will do my best, sir.
    Chairman Shelby. Federal financial management improvement.
    It has been 10 years since Congress passed the Federal 
Financial Management Improvement Act, which requires an 
agency's underlying financial systems and individual financial 
transactions to meet Federal financial standards. This past 
September, GAO reported that HUD's external auditor concluded 
that HUD is still not compliant with the Act's requirements. 
Are you aware of HUD's current lack of compliance on a 
transactional level?
    Mr. Cox. I am aware of that, and that is part of the IT 
projects that we are working on.
    Chairman Shelby. Do you believe the relation to have a 
strong accounting or transaction base in relation to the 
overall accuracy of the agency's financial statements? In other 
words, you have to have accuracy here.
    Mr. Cox. Absolutely, and more importantly, you have to have 
that information so the program heads can use that information 
to run the Department.
    Chairman Shelby. Thank you, Mr. Cox.
    Mr. Hardiman, disaster-resistant construction: I am not 
sure whether you had an opportunity to visit the Gulf States, 
Alabama, Florida, Louisiana, Mississippi, and, of course, 
Texas. One thing that continues to strike me is that newer 
structures often withstand natural disasters when the older 
structures do not. It depends on the standard of building, I 
suppose. What role do you see by the NIBS, which is very 
important, I think, having in developing safer, more disaster-
resistant building technologies?
    Mr. Hardiman. Mr. Chairman, I have not visited the Gulf 
States since the hurricane, but I have prior to that. But I 
believe my experience in the past--I served as mayor of a very 
fast growing community prior to going to the Senate. I believe 
that experience will help me in working with not only the 
building trades but also engineers and architects. We work with 
all of them to build safe structures.
    Chairman Shelby. It basically pays to build strong 
structures.
    Mr. Hardiman. Absolutely.
    Chairman Shelby. It is just common sense.
    Mr. Hardiman. So, I think we have to work together and 
listen to each other. I think that is going to help us move a 
long way in making sure that our structures are safe and that 
our regulations are obeyed but something that can be obeyed by 
the building trades.
    Chairman Shelby. Community partnerships.
    Mr. Hardiman. Absolutely.
    Chairman Shelby. As you are very aware, building 
regulations are almost exclusively decided at the local or 
State level. Hence, much of the important research conducted at 
NIBS is dependent upon adoption by the State and local 
governments. I believe that your own experience as a mayor, 
public sector at the State and local level, can increase this 
collaboration, because you understand, you have been where it 
works or does not work.
    Mr. Hardiman. Absolutely.
    Chairman Shelby. Would you share with the Committee any 
insights that you have as a locally elected official and 
serving as one that could increase this level of collaboration 
or understanding between the NIBS and the local governments?
    Mr. Hardiman. Absolutely, Mr. Chairman.
    As I mentioned, I served as Mayor of Kentwood for about 10 
years, and that was one of the fastest growing cities in the 
State of Michigan. Many times, I saw that some of the officials 
had one opinion, and the builders, architects, had another. And 
I believe that my ability, and I love doing this, of drawing 
people together, let us sit down and talk this through and work 
on a better solution was very helpful in meeting the demands 
not only of the market but also meeting the safety demands that 
government should really enforce. And so, I would love to take 
that same type of bridge building to the National Institute of 
Building Sciences.
    Chairman Shelby. Another important concern is seeing that 
the opportunity to own a home is available to all Americans. We 
all think that is important. One of the obstacles to 
homeownership for many families is simply the high cost of 
housing today. Part of this high cost is sometimes driven by 
land use regulations. What role do you see for the National 
Institute of Building Sciences in helping to reduce some of the 
regulatory burden placed on home construction to moderate the 
high cost of construction materials? How can we make some 
progress there?
    Mr. Hardiman. I really believe that sometimes, there are 
regulations that are promulgated that may be good in someone's 
eyes, but sometimes, they are not necessary. Sometimes, the 
regulators do not realize what it does to the cost of housing, 
and without that communication, that public-private 
partnership, they are certainly not perhaps working out a 
better way to bring about the safety but keep the costs down. 
So once again, I think that having a meeting of the minds, 
bringing people together is a good way to try to do that.
    In Kentwood, we looked very hard at land use, obviously, 
because we are a growing city. And I think we had a wonderful 
master plan, which we executed. But we also worked very hard to 
avoid unnecessary regulations. I remember being approached by 
the homebuilders about a change in the regulation in the width 
of a stairway that was put into one of the series of 
regulations, and we took a good look at it, realized that the 
cost that it would have to all homeowners or home purchasers, 
and made a change but still had very safe housing.
    I think having that dialogue is very important, and I would 
work to do that if confirmed by the Senate.
    Chairman Shelby. Let me get into disaster modeling with you 
just a little. In addition to building technologies, the 
National Institute of Building Sciences also helps develop 
technologies to estimate the impact on natural disasters. One 
of these projects is the NIBS Multi-Hazard Loss Estimation 
Model. This technology could help localities plan appropriate 
mitigation activities in order to reduce the future losses from 
natural disasters.
    Could you share with the Committee some of the activities 
you witnessed at the local level in terms of disaster 
mitigation? I know you are not coming from the hurricane area. 
You might have tornadoes up in Michigan; I am not sure. Are 
there additional tools that could be developed by NIBS which 
could help communities plan for natural disasters?
    Mr. Hardiman. Mr. Chairman, I believe that various regions 
have different threats, and certainly, we do have those in 
Michigan as well, and there are those threats all across the 
United States. I believe a real key is utilizing the 
information that is available, and certainly, the National 
Institute of Building Sciences provides good information that 
can help municipalities. But I also believe that a key, and we 
did this in Kentwood, was we would go through and exercise 
every year to make sure that we were prepared. And then, the 
key is to execute, once there is a disaster, and I believe that 
emphasizing that, emphasizing the communication between the 
State, the county, and the local governments as well as the 
Federal Government in making sure that that will be executed 
when there is a disaster is also very key.
    Chairman Shelby. That is good.
    Gentlemen, I do not have any other questions. We have two 
votes coming up on the Senate floor. I appreciate your 
appearance. I appreciate your willingness to serve. It is a 
great honor, and we will try to expedite your nominations out 
of the Committee to the Senate floor as soon as possible. The 
hearing is adjourned.
    [Whereupon, at 12:05 p.m., the hearing was adjourned.]
    [Prepared statements, biographical sketches of nominees, 
and additional material supplied for record:]
               PREPARED STATEMENT OF SENATOR WAYNE ALLARD
    I would like to thank Chairman Shelby for convening the Committee 
this morning to consider pending nominations. I appreciate the 
opportunity to learn more about the nominees' backgrounds, as well as 
their intentions for their agencies.
    First, I would like to welcome James Lambright, who is nominated to 
be President of the Export-Import Bank. With this Committee currently 
considering reauthorization of the Export-Import Bank, it is especially 
important to have strong leadership in place, and his experience will 
be helpful.
    Next, I would like to welcome Armando Bucelo and Todd Farha, both 
of whom are nominated to the Board of Directors of the Securities 
Investor Protection Corporation. The Securities Investor Protection 
Corporation has recovered $14.2 billion in assets for 624,000 investors 
when brokerage firms closed due to bankruptcy or other financial 
problems.
    Finally, I would like to welcome our third panel, comprised of Jon 
Rymer, nominated to be the Inspector General for the FDIC; John Cox, 
nominated to be the CFO for HUD; and William Hardiman, nominated to be 
on the Board of Directors for the National Institute of Building 
Sciences. As Chairman of the Housing Subcommittee, I am particularly 
interested in the position of CFO at HUD. HUD administers billions of 
taxpayer dollars, and I have been concerned by the length of time that 
this key position has remained vacant.
    Our nominees bring outstanding private sector credentials to their 
positions, and I appreciate their willingness to enter or remain in 
public service. I encourage them to remain focused on results and 
outcomes, rather than processes. I look forward to your testimony.
                               ----------
                   PREPARED STATEMENT OF JON T. RYMER
                      Inspector General-Designate
                 Federal Deposit Insurance Corporation
                              May 16, 2006
    Chairman Shelby, Ranking Member Sarbanes, and Members of the 
Committee, it is my great honor to have been nominated by President 
Bush for the position of Inspector General (IG) of the Federal Deposit 
Insurance Corporation (FDIC). I am privileged and humbled by the 
opportunity to appear before this Committee today. I would like to 
thank the Members of the Committee and their staffs who met with me as 
I prepared for this hearing. I would also like to thank former FDIC 
Chairman Powell for his expression of confidence in me. Finally, and 
importantly, I want to acknowledge and offer my heartfelt thanks to my 
wife and son for their commitment and support during my career.
    Mr. Chairman, as you and the Members of the Committee are well 
aware, the responsibilities of Inspectors General are defined by the 
Inspector General Act of 1978, as amended. This Act requires all 
Inspectors General to supervise and coordinate audit and investigative 
activities; prevent and detect fraud and abuse in agency programs; and 
make recommendations to senior management aimed at improving the 
economy, efficiency, and effectiveness of programs and operations. 
Additionally, the Inspector General at the FDIC investigates fraudulent 
activities associated with FDIC-supervised institutions, federally 
insured financial institution failures, and the recovery of assets 
after insured institutions fail. The FDIC IG is also responsible for 
keeping the Congress, the FDIC Chairman, and the Board of Directors 
informed of problems and corrective actions within the Corporation. If 
confirmed, I will use my experience as a banker, an auditor, and a 
soldier to fulfill these responsibilities to the best of my ability.
    As a banking executive, I have held leadership roles in projects 
and activities ranging from running major business units to mergers and 
divestitures, systems conversions, and business and strategic planning. 
Along with many of these positions came management and leadership 
responsibilities for hundreds of employees.
    During my years with a big four accounting firm, I provided 
services to scores of banking clients on matters of process 
improvement, assurance processes, and internal auditing. My clients 
ranged from international banks to community banks, thrifts, and credit 
unions. As a result, I understand banking operations and am familiar 
with the concerns of bankers and customers alike.
    I also take pride in my 25 years of service in the active and 
reserve components of the U.S. Army. I have learned that it is a 
special privilege and honor to serve the United States. I have also 
learned that it is a serious duty requiring vigilance and integrity.
    I appreciate the vital role that the FDIC plays in insuring 
deposits and helping ensure the safety and soundness of our banking 
system. I am also keenly aware of the growing globalization and 
complexity of the financial services industry, the importance of 
protecting consumers, and the many challenges and potential threats to 
the stability of the banking system. If confirmed, I will capitalize on 
my past experience and commit to providing the strong, independent 
oversight of the FDIC envisioned by the IG Act. I will also look 
forward to working with the Congress and the other leaders of the FDIC 
to preserve the public trust and confidence in the banking system that 
has endured since the Corporation's creation in 1933.
    In closing, Mr. Chairman, I thank you and the Members of the 
Committee again for allowing me to appear here today. This concludes my 
prepared statement. I would be pleased to respond to any questions that 
you or other Members of the Committee may have.
                               ----------
                   PREPARED STATEMENT OF JOHN W. COX
                   Chief Financial Officer-Designate,
            U.S. Department of Housing and Urban Development
                              May 16, 2006
    Chairman Shelby, Senator Sarbanes, and distinguished Members of the 
Committee, my name is John Cox. I thank you for the privilege to appear 
before the Committee today as it considers my nomination to serve as 
Chief Financial Officer of the U.S. Department of Housing and Urban 
Development. I want to thank you and all the Members of the Committee 
and your staffs who have met with me over the past weeks.
    I would like to thank President Bush and Secretary Jackson for 
giving me the opportunity to serve our country. I am humbled and 
honored by this appointment. Second, I want to thank my family, many of 
whom are here today. I want to recognize my wife Sally and daughter 
Kate who have been very supportive of me in this process. I want to 
also recognize my mother and father, Jo and Wallace Cox. We are blessed 
to have other family members and friends who have traveled to be here 
today.
    My great-grandparents moved to Texas in the late 1800's. They were 
sheepherders and lived first in a dirt dugout. They moved to my 
hometown of Haskell, Texas and purchased a home in the early 2000's. My 
grandfather purchased his first home for $2,500 in the late 1920's. I 
vividly recall my grandmother telling me how she was in tears when she 
learned that he had borrowed funds to purchase their first home. She 
was concerned that she had not been frugal enough with the family 
budget. My father paid $6,500 for their first home in 1963 and was 
advised by the banker that, no offense, but he was the proud owner of a 
$4,000 lot and a $2,500 home. I purchased a home in Houston that was 
guaranteed by FHA. Mr. Chairman, I only wish I could say that in 2006 I 
found a similarly priced home in the district!
    I graduated from Texas A&M University with a bachelor's degree in 
accounting. My first job was for Ernst & Young LLP. Subsequently, my 
15-year career at BMC Software in Houston, Texas prepared me well for 
the role I hope to assume at HUD. BMC is a New York Stock Exchange 
company with $1.5 billion in revenue and operations in fifty countries. 
My team prepared and monitored expense budgets and sales forecasts, 
prepared and reviewed audited financial statements, prepared and 
presented quarterly management scorecards to the board of directors, 
and managed a billion dollar securities portfolio. As the Chief 
Financial Officer at BMC, I was responsible for the implementation of 
Section 404 of the Sarbanes-Oxley Act of 2002. As Chairman of the Audit 
Committee of the Board of Benchmark Electronics, Inc., I had the 
fiduciary responsibility of ensuring that our shareholders could take 
comfort in knowing that Benchmark's internal controls were adequate. I 
have also served on Benchmark's nominations and governance and 
compensation committees. Benchmark is a New York Stock Exchange company 
with annual sales in excess of $2 billion.
    If confirmed, I will ensure that as the Department moves toward 
implementation of OMB Circular A-123 (the Federal Government equivalent 
of Sarbanes-Oxley Section 404), our focus is on improving the process 
and efficiency of government. I am confident my experience as an 
executive sponsor on numerous large, complex IT projects shows that I 
can manage projects effectively, within scope and on budget. Updated, 
modernized financial systems are critical to HUD's success in meeting 
the President's management agenda.
    My goals for HUD include working to improve internal controls, 
improving the timeliness and effectiveness of our financial reporting 
leading to both ``clean'' financial statements as well as improved 
decisionmaking by the Department's program heads, implementing FFMIA 
compliant financial systems and improving HUD's metrics on the 
President's management agenda. There is a lot of work to do and, if 
confirmed, I look forward to getting started.
    In closing, I realize that Washington can be a very partisan city. 
But HUD's goals of providing Americans opportunities to increase 
homeownership, promoting decent affordable housing, and strengthening 
communities are issues that all of us can support, regardless of party. 
If confirmed, I look forward to working with the President, Secretary 
Jackson, and Congress to ensure that this mission is accomplished. I am 
proud to do what I can in public service.
    Thank you, Mr. Chairman, Senator Sarbanes, and all Members of the 
Committee for your time and consideration of my nomination.
    I am pleased to answer any questions you may have.
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