[Senate Hearing 111-501]
[From the U.S. Government Publishing Office]
S. Hrg. 111-501
NOMINATIONS OF: ERIC L. HIRSHHORN,
MARISA LAGO, AND STEVEN L. JACQUES
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
ON
Nominations of:
Eric L. Hirschhorn, to be Under Secretary for Export Administration,
Department of Commerce
__________
Marisa Lago, to be Assistant Secretary for
International Markets and Development,
Department of the Treasury
__________
Steven L. Jacques, to be Assistant Secretary for Public Affairs,
Department of Housing and Urban Development
__________
NOVEMBER 5, 2009
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
Available at: http://www.access.gpo.gov/congress/senate/senate05sh.html
----------
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
CHRISTOPHER J. DODD, Connecticut, Chairman
TIM JOHNSON, South Dakota RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York JIM BUNNING, Kentucky
EVAN BAYH, Indiana MIKE CRAPO, Idaho
ROBERT MENENDEZ, New Jersey MEL MARTINEZ, Florida
DANIEL K. AKAKA, Hawaii BOB CORKER, Tennessee
SHERROD BROWN, Ohio JIM DeMINT, South Carolina
JON TESTER, Montana DAVID VITTER, Louisiana
HERB KOHL, Wisconsin MIKE JOHANNS, Nebraska
MARK R. WARNER, Virginia KAY BAILEY HUTCHISON, Texas
JEFF MERKLEY, Oregon
MICHAEL F. BENNET, Colorado
Edward Silverman, Staff Director
William D. Duhnke, Republican Staff Director and Counsel
Joe Hepp, Professional Staff Member
Neal Orringer, Professional Staff Member
Beth Cooper, Professional Staff Member
Drew Colbert, Legisltive Assistant
Mark Oesterle, Republican Chief Counsel
John O'Hara, Republican Senior Investigative Counsel
Dawn Ratliff, Chief Clerk
Devin Hartley, Hearing Clerk
Shelvin Simmons, IT Director
Jim Crowell, Editor
(ii)
C O N T E N T S
----------
THURSDAY, NOVEMBER 5, 2009
Page
Opening statement of Chairman Dodd............................... 1
Opening statements, comments, or prepared statement of:
Senator Shelby............................................... 3
WITNESSES
Stephen J. Solarz, former Representative from the State of New
York........................................................... 4
Claire McCaskill, Senator from the State of Missouri............. 10
NOMINEES
Eric L. Hirschhorn, of New York, to be Under Secretary for Export
Administration, Department of Commerce......................... 7
Prepared statement........................................... 23
Responses to written questions of:
Senator Shelby........................................... 26
Senator Bunning.......................................... 28
Marisa Lago, of New York, to be Assistant Secretary for
International Markets and Development, Department of the
Treasury....................................................... 8
Prepared statement........................................... 24
Responses to written questions of:
Chairman Dodd............................................ 30
Steven L. Jacques, of Kansas, to be Assistant Secretary for
Public Affairs, Department of Housing and Urban Development.... 10
Prepared statement........................................... 24
(iii)
NOMINATIONS OF:
ERIC L. HIRSCHHORN, OF NEW YORK,
TO BE UNDER SECRETARY FOR
EXPORT ADMINISTRATION,
DEPARTMENT OF COMMERCE;
MARISA LAGO, OF NEW YORK,
TO BE ASSISTANT SECRETARY FOR INTERNATIONAL MARKETS AND DEVELOPMENT,
DEPARTMENT OF THE TREASURY;
STEVEN L. JACQUES, OF KANSAS,
TO BE ASSISTANT SECRETARY FOR
PUBLIC AFFAIRS,
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
----------
THURSDAY, NOVEMBER 5, 2009
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 9:40 a.m. in room SD-538, Dirksen
Senate Office Building, Senator Christopher J. Dodd, Chairman
of the Committee, presiding.
OPENING STATEMENT OF CHAIRMAN CHRISTOPHER J. DODD
Chairman Dodd. The Committee will come to order. Let me
welcome everyone here this morning, and I apologize for being a
couple minutes later getting underway. We are here this morning
to consider several nominations. I want to thank each of the
nominees for their willingness to serve and, of course, to
thank the President for sending us what I believe to be very,
very competent and qualified nominees as well. And I thank all
of those who are in the audience here this morning.
I want to make some brief opening comments. I will turn to
Senator Shelby very quickly, and then we will turn to our--we
have several guests here this morning, one in particular, Steve
Solarz, my dear, wonderful friend. We were elected to the House
together just a couple of years ago.
Senator Reed. Me, too.
Chairman Dodd. And Jack served with Steve, so we have all
served with him, a wonderful Member of Congress who is here,
and I will introduce him appropriately in a few minutes.
Well, this morning we meet in open session to consider
three of the President's nominees. These critical nominations
arrive before this Committee at a time of heightened security
and continuing economic turmoil, as we all know. If confirmed,
these qualified, highly qualified individuals I believe will
play an important role in safeguarding our national interests
and returning our country to the prosperity that we all seek.
Our first nominee is Eric Hirschhorn who has been nominated
to be the Under Secretary for Export Administration, and we
thank him for his willingness to serve. If confirmed, Mr.
Hirschhorn would serve as head of the Commerce Department's
Bureau of Industry and Security, overseeing the implementation
of our Nation's export controls for dual-use products, that is,
goods and technologies that have both military and commercial
applications. In that capacity, Mr. Hirschhorn may be tasked
with developing and carrying out reforms to our Nation's export
control system, which I understand is a high priority for the
Secretary of Commerce, Gary Locke.
Additionally, Mr. Hirschhorn would be responsible for
implementing certain improvements to the Defense Production
Act, as authored by Senator Shelby and myself and very recently
signed into law by President Obama. These enhancements will
help the United States industry's ability to deliver supplies
to the Government during national crises.
Our next nominee, Marisa Lago, has been nominated to be
Assistant Secretary for International Markets and Development.
It gives me a great deal of pleasure to note that this position
was created as part of the Foreign Investment and National
Security Act, the FINSA law, as it is called, which was passed
unanimously by this Committee and signed into law during the
last Congress. And, again, I commend all the members of the
Committee that worked on that, including my partner and friend,
Senator Shelby. It was one of those efforts we did together
here to make a difference, and we believe it is doing all the
things we hoped it would.
The Assistant Secretary supports the Under Secretary for
International Affairs in advising the Secretary and Deputy
Secretary of the Treasury in the formation and execution of
United States international economic policy as related to
foreign investment in the United States and security policy
through the Committee on Foreign Investment in the United
States, the CFIUS bill, which, again, was a subject of
considerable debate and discussions. We reformed that law in
this Committee as well. And, again, I thank my fellow Committee
members for the tremendous effort we made during that
legislation. It was a very explosive debate, you may recall,
over the acquisition of ports in our country by foreign
governments, and it created quite a stir for a time, and the
Committee responded to all of that in a very sound piece of
legislation.
Ms. Lago is a Harvard Law School classmate of our
colleague, Jack Reed, and I am going to turn to Jack in a
minute here to introduce her.
Our final nominee is Mr. Steven Jacques, who has been
nominated to serve as Assistant Secretary for Public Affairs in
the U.S. Department of Housing and Urban Development. As
Assistant Secretary for Public Affairs, Mr. Jacques would be
the principal adviser to HUD Secretary Donovan and his staff on
public information, opinion, and events. In addition, Mr.
Jacques would advise the Secretary on public education and
information regarding one of the most critical institutions, of
course, our homes--whether it is raising awareness of mortgage
rescue scams or ensuring that families facing homelessness know
where to turn in their communities. The need for HUD to raise
public awareness in my view could not be more vital.
I would also like to note that our former colleague Senator
Robert Dole and Representative Emanuel Cleaver, among others,
have sent letters of support for Mr. Jacques that will be
entered as part of the record here this morning.
Chairman Dodd. I look forward to hearing the testimony of
our nominees, and, again, I congratulate all of you for your
willingness to serve and the President for nominating you, and
we hope we can move you along fairly quickly so that you can
meet your obligations.
With that, let me turn to Senator Shelby.
STATEMENT OF SENATOR RICHARD C. SHELBY
Senator Shelby. Thank you, Mr. Chairman.
The core mission of the Bureau of Industry and Security is
to keep sensitive dual-use items away from dangerous countries,
organizations, and individuals. Performing this function must
be done in a manner that preserves the innovative and
productive capacity of the United States.
Mr. Hirschhorn, the Under Secretary for Export
Administration has an enormous responsibility, as you know.
Every decision you make entails a national security assessment,
a foreign policy statement, and a fundamental business decision
that affects the bottom line of U.S. companies and our workers.
It will be your job to objectively provide solutions narrowly
tailored to maintain an effective national security umbrella
over the country's healthy promotion of exports.
Ms. Lago, the work you have been nominated to perform
focuses primarily on foreign direct investment security issues,
particularly as they pertain to the Committee on Foreign
Investment in the United States, CFIUS, as Senator Dodd
referred to. You will need to work the CFIUS process in a
timely way while remaining cognizant of the national security
implications of each covered transaction. This can be a very
difficult balance to strike, as you well know.
Mr. Jacques, you are also nominated for a very important
position at the Department of Housing and Urban Development.
You will serve as a key point of contact for a multi-billion-
dollar agency that plays a role in the lives of millions and
millions of Americans. As the Department's public liaison, you
will be expected to establish an active and an open
relationship with the American people. We look forward to
hearing how you intend to do so, and I congratulate all three
of you on being nominated by the President.
Thank you.
Chairman Dodd. Thank you very much, Senator.
I am going to turn, if I can briefly, to Senator Solarz--
Congressman Solarz. I just elevated you.
Senator Shelby. Well, he would have made a good Senator.
Chairman Dodd. He would have made a very good Senator, I
tell you, and just a wonderful friend, and I have fond memories
of being sworn in together in January 1975 and working
together. There was no more talented and gifted Member of the
Congress than Steve Solarz. I just recall on countless
occasions his inquiries. Whether serving in a committee or just
in informal conversations with visiting dignitaries from other
countries, no one was more perceptive and incisive in their
examination of people who came before us. And so it is a
pleasure to have you back. I regret in some ways you are not
sitting on this side of the dais, my friend. You would have
been a wonderful United States Senator. But we are honored to
have you here this morning, so the floor is yours.
STATEMENT OF STEPHEN J. SOLARZ,
FORMER REPRESENTATIVE IN CONGRESS FROM
THE STATE OF NEW YORK
Mr. Solarz. Thank you very much. It is a pleasure----
Chairman Dodd. Is that microphone on, Steve?
Senator Shelby. Put your microphone on, Steve.
Chairman Dodd. You have to push that button there.
Mr. Solarz. Thank you very much, Mr. Chairman. Let me say
first of all it is a pleasure to see some of my former
colleagues in the House who have gone on to bigger and,
arguably, better things in the Senate. But it is a particular
honor to be able to testify today before a Chairman and on
behalf of a nominee for both of whom I have the greatest
respect and affection.
As you indicated, Mr. Chairman, we go back a long way
together. We have known each other for 34 years when we were
both elected in 1974 as members of the Watergate class. And in
the words of my old district back in Brooklyn, I want you to
know that I ``shep naches,'' which means I derive great pride
and pleasure from your achievements since then.
But believe it or not, I know the nominee Eric Hirschhorn
even longer than I know you, because back in 1971, as a back-
bench member of the New York State Assembly, a minority within
the minority, where the measure of my influence was that with
an assembly of 150 members, I was given New York State Assembly
license plate 152.
[Laughter.]
Mr. Solarz. Together with several of my other colleagues
equally situated in the Assembly who had the quaint notion that
we ought to understand the bills we were voting on, we pooled
our meager staff resources and hired a young attorney by the
name of Eric Hirschhorn to brief us each Monday morning when
the legislature reconvened on the bills that were on the
calendar for that week.
During the course of that experience, I came to feel that
what Winston Churchill once said about Harry Hopkins when he
dubbed him ``Lord Root of the Matter'' could be said with equal
applicability to Eric Hirschhorn because he had the ability to
go to the heart of the matter, the legislation before us.
Also like Hopkins, Eric has the rare capacity to disagree
without being disagreeable, and I think that would be an asset
in this position.
After he left us in Albany, he came to Washington, where he
went to work as a legislative assistant for Congresswoman
Abzug, whom you may have heard of, who was another member of
the New York delegation. He went on to become the Deputy
Assistant Secretary for Export Administration in the Commerce
Department under President Carter. And for quite some time
afterwards until now, he has been a partner in Winston &
Strawn, one of the major American law firms.
And it seems to me that this combination of experiences
makes him in a way the perfect candidate for this particular
position. He knows the Congress, its sensitivities and
concerns. He knows the executive branch, its procedures and
politics. And he knows the private sector, its objectives and
its perspectives.
And I think that the combination of these experiences
clearly equip him to balance the competing desire of the
private sector to export its goods and services and the needs
of the Government to protect our vital national security
interests. And I have no doubt, given a clash between those
objectives, where national security is at stake, Mr. Hirschhorn
will do what needs to be done to protect our vital interests.
So for all these reasons, I urge you to expeditiously
facilitate his confirmation as the Under Secretary of Commerce
for Export Administration.
Chairman Dodd. Steve, thank you very much. Could not be
more eloquent. Case over, I think, Mr. Hirschhorn. I would not
say a word at that point.
[Laughter.]
Chairman Dodd. Case made.
Jack.
Senator Reed. Well, thank you very much, Mr. Chairman, and
I will confess, Marisa does not have as good a lawyer as Mr.
Hirschhorn.
[Laughter.]
Senator Reed. But it will have to do.
I am just delighted and honored to be able to introduce
Marisa Lago. Marisa is my classmate from Harvard Law School.
She graduated with great distinction and was recognized as such
by being awarded a clerkship in the First District, which
suggests her legal skill which she has developed through her
extraordinary career.
Unlike so many people who would have taken that clerkship
and gone to a big law firm and done big things in some sense,
she went to New York City Department of Planning to commit
herself to helping people live better, neighborhoods to develop
better, and she has followed through in so many different ways
in public service, at the New York City Economic Development
Corporation, and she served Mayor Menino in the city of Boston
as the chief economic development officer. So she has committed
herself to making a difference in the communities that are so
important.
And I think significant for the job that she is about to
assume--I hope--is that she was the chief in the Securities and
Exchange Commission for International Activities under Chairman
Arthur Levitt. In that sense, she handled all of the
international aspects of SEC operations. She prepared herself
well for the job that she will, I hope, assume, which is
looking at complex merger and acquisitions, which are at the
heart of security transactions, but involving national security
considerations. And I do not think we could find a better not
only lawyer but, perhaps more importantly, person than Marisa
Lago to do this.
So I think the President has chosen wisely, and I would
hope that we could move this nomination expeditiously.
Chairman Dodd. Well, that is good. Jack, thanks immensely,
and that is a pretty good case to be made as well.
Mr. Jacques, you have a colleague of ours coming in as
well, and when she gets here, we are going to recognize her to
give you an appropriate introduction. We cannot have you
sitting there and not get as good an introduction as you have
heard for these other nominees.
What I would like to do, if I could, though, before we do
that, there is always a courtesy we extend, and that is, if any
of your family members are here--I do not know if they are or
not. But, Mr. Hirschhorn, do you have any family members that
are with us?
Mr. Hirschhorn. Yes, Mr. Chairman. My wife is here, Leah
Wortham. She teaches up the road at Catholic University Law
School. And my son Alex and my brother-in-law, Henry Howard,
are all here today.
Chairman Dodd. Terrific. I noticed going over your resume
last night that each of your children have your wife's maiden
name as their middle name.
Mr. Hirschhorn. Yes.
Chairman Dodd. That is not a bad idea. That was a very
smart move on your part.
[Laughter.]
Chairman Dodd. Ms. Lago, any family members?
Ms. Lago. Yes, thank you very much. I would like to
introduce my best friend of 35 years, my husband, Ron Finiw.
Ron is an architect, and some of you may have seen one of his
buildings that graces our capital, the new International Law
Center at Georgetown Law School.
Chairman Dodd. Absolutely. Wonderful, terrific.
Ms. Lago. And I am also joined by my brother, Paul Lago.
Like me, Paul has dedicated his life to public service. He has
been with the Defense Intelligence Agency for 20 years,
including serving voluntarily as a civilian in Iraq. And my
sister-in-law, Kelly Lago, who serves with the Bureau of
Alcohol, Tobacco, and Firearms.
Chairman Dodd. Clearly, a distinguished family. We are
honored to have all of you with us.
Mr. Jacques, do you have----
Mr. Jacques. Mr. Chairman, I am sorry to say that my wife
could not make it here today, but my wife, Christine, is back
in Kansas and she will be watching this on your website when it
is up to make sure that I did OK.
Chairman Dodd. I have a 4-year-old daughter named
Christina. That is a connection we can make here.
[Laughter.]
Chairman Dodd. I am going to ask you to rise, if you could,
and to raise your right hand while I swear you in and give the
oath, if you would. Do you swear or affirm that the testimony
you are about to give us is the truth, the whole truth, and
nothing but the truth, so help you God?
Mr. Hirschhorn. Yes.
Ms. Lago. I do.
Mr. Jacques. I do.
Chairman Dodd. And do you agree to appear and testify
before any duly constituted committee of the U.S. Senate?
Mr. Hirschhorn. Yes.
Ms. Lago. Yes.
Mr. Jacques. I do.
Chairman Dodd. I thank you for that.
With that, why don't we begin in the order, Mr. Hirschhorn,
that you were introduced? By the way, just to let you know, any
and all documentation and support services or activities,
rather, that you want to include in the record, we will make
part of the record here today. And any of the comments and
statements by any of the members--and I will leave the record
open for a few days here for them to submit any questions they
may have for you as well, and I would urge you to respond as
quickly as you can to questions of members who may not be here
this morning but would like to submit a few, if they could.
With that, Mr. Hirschhorn, the floor is yours.
STATEMENT OF ERIC L. HIRSCHHORN, OF NEW YORK,
TO BE UNDER SECRETARY FOR EXPORT ADMINISTRATION, DEPARTMENT OF
COMMERCE
Mr. Hirschhorn. Thank you, Mr. Chairman, and thank you
also, Ranking Member Shelby and Senator Reed. I am quite
honored to be here today. I appreciate the expression of
confidence in me by President Obama and Secretary Locke, and I
am hopeful that I can gain your confidence as well. I want to
thank the Committee members and staff for making time for this
nomination hearing in the midst of a busy legislative session.
And should I be confirmed, I very much look forward to
continuing to work with you.
I want to thank Steve Solarz for doing me the honor of
introducing me. He has been a dear friend for many years, and I
am delighted he could be here.
I had the privilege of working on export control,
antiboycott compliance, and Defense Production Act issues at
the Commerce Department in 1980 and 1981, so this would be a
return for me. I found the career staff who administer that
system, those laws--not only at Commerce but also the other
agencies who were deeply involved in it--to be extremely
capable and one hundred percent committed to the interests of
our country. Should I be confirmed, I will be delighted to be
working with them all once again.
As Secretary Locke has noted, the Bureau of Industry and
Security ``has a unique mission at the intersection of
international trade and national security.'' Working closely
with the Departments of State, Defense, and Energy, BIS
evaluates thousands of export license applications each year to
ensure that items proposed to be sold abroad are going to
suitable end users for appropriate end uses. Getting this right
is very important. It is equally important to have an
enforcement program ensuring that those who flout the rules are
caught and are punished. I am committed to ensuring that BIS
does the best possible job of performing these important
functions as well as overseeing its role in ensuring an
effective treaty compliance system and promoting continued U.S.
leadership in strategic technologies.
President Obama has asked the agencies to take a hard look
at the existing system in an effort to see whether it can be
improved consistent with our national security. Of course, this
Committee will be significantly involved in that process, and I
hope you will give me the opportunity to help carry it out.
Since leaving the Government for private law practice in
1981, I have spent a good deal of my time advising clients
whose activities are subject to U.S. export control and embargo
regulations. My practice also has included considerable
litigation, much of it involving railroad issues, and I have
served as an internal ethics counselor for my law firm. Outside
the firm, I have been an active member of the D.C. Bar's Ethics
Committee and the D.C. Bar's Rules Review Committee.
Most of my practice has involved explaining to clients how
the often complex regulations work, analyzing whether a
proposed course of action requires advance Government
permission, and, if a license is required, assisting the client
in preparing the application. I have assisted clients with
their internal compliance programs and have represented some
regarding enforcement issues. I also have acted as an advocate
for clients who believe that our export control system can be
improved. I frequently have written and spoken in the area, and
my writings include not only articles but also a book whose
third edition will be published early next year. I believe that
this experience will be of great help to me in what I hope will
be my new job.
If I am confirmed by the Senate, my goal will be to perform
competently and objectively, and that means to me hearing and
considering all viewpoints on the matters that would come
before me.
I recently read the remarks that my law school's dean
delivered this fall to the incoming class. He spoke of two
``fundamental truths.'' ``First,'' he said, ``excellence is its
own reward.'' Second, ``integrity is the bedrock of any
successful career.'' I promise you that, if confirmed, I will
strive to bring these qualities to everything I do.
Again, thank you, and I would be delighted to respond to
any questions you may have.
Chairman Dodd. Thank you very, very much.
Ms. Lago.
STATEMENT OF MARISA LAGO, OF NEW YORK,
TO BE ASSISTANT SECRETARY FOR INTERNATIONAL MARKETS AND
DEVELOPMENT, DEPARTMENT OF THE TREASURY
Ms. Lago. Thank you, Mr. Chairman.
Chairman Dodd, Ranking Member Shelby, distinguished members
of the Committee, I am so honored to have my nomination come
before you today, and I do want to start by thanking the staff,
many of whom are here today, who took the time this week to
speak with me about CFIUS, principally, and also about other
international financial matters.
I am so honored to have been nominated by President Obama
to serve as Treasury Assistant Secretary for International
Markets and Development, especially at such a critical time not
just in our Nation's but also in the world's economies. I am
grateful to Secretary Geithner for recommending me to the
President. I had the pleasure of working with Secretary
Geithner when he was last at Treasury, so I know what I would
be getting into, if confirmed, and I look forward to having the
opportunity to join his team.
I would want to recognize two people who are not here
today: Louis and Maria Lago. My parents cannot be here. After
six decades in the U.S., they now live in the village in Spain
where my mother was born. But my love of public service stems
from my parents. My father served in the U.S. Navy during World
War II, and he then spent the rest of his career as a civilian
employee at a Department of Defense facility, Picatinny Arsenal
in New Jersey. So I grew up in this setting, and I wish they
were here today. But thanks to the Internet, they will be able
to watch the proceedings.
As my family's first college graduate, I have lived the
American dream. As Senator Reed noted, upon graduating from
Harvard Law School, the traditional route after having a
clerkship in the First Circuit Court of Appeals would have been
to go on to a law firm, and certainly those opportunities had
been open to me. But I made the non-traditional choice because
of a mentor in law school of joining New York City government,
and I became absolutely hooked on public service, the ability
to do good, to serve--the word ``servant'' in ``public
servant'' matters to me--to make my home town a better place.
Over the past 25 years, I have had the ability to serve New
York State, New York City, and Boston in senior capacities in
economic development. In each of these roles, I have had to
strike a balance among multiple competing interests--fiscal
prudence, the interests of the business community, job
creation, and neighborhood concerns. And one of the hallmarks,
I believe, of my career has been forging consensus but also
showing the leadership to make tough decisions when a decision
needs to be made and not all are agreed.
I have also been fortunate to have served at the Federal
level in the 4 years that I worked with Chairman Arthur Levitt
at the Securities and Exchange Commission. As the head of
International Affairs, I was involved in issues that ranged
from trade in financial services to international accounting
standards to enhancing the financial regulation in
underregulated and uncooperative offshore financial centers.
Throughout this time, I held a top secret security clearance
because of the sensitive nature of the international matters
with which I was dealing.
In the private sector, I headed compliance globally for
Citigroup's investment banking, its markets and banking
business. In this role, I was responsible for compliance
matters that ranged from anti-money laundering to OFAC
sanctions initiatives, to all of the regulatory requirements
attendant to Citigroup's investment banking, trading, public
finance, and transaction services businesses. I dealt routinely
with both the securities and the banking regulators of not just
the U.S. but the regulators in over 80 countries. I had a team
of over 500 in 80 different countries around the world.
Turning to the future, if approved by this Committee and
confirmed by the Senate, I commit closely to working with the
Committee as a whole, individual members, and the staff to
carry out the weighty responsibilities that are laid out in the
landmark FINSA legislation and also to being part overall of
the senior Treasury team that promotes economic growth,
financial market stability, and open markets for U.S. firms. A
critical component is going to be open, regular dialogue with
the Committee, with the other agencies that are members of
CFIUS, and with my colleagues in the Treasury Department. If I
have the honor of being confirmed, I welcome the dialogue.
Chairman Dodd. Thank you very much. Very good testimony.
Yes, Mr. Jacques.
STATEMENT OF STEVEN L. JACQUES, OF KANSAS,
TO BE ASSISTANT SECRETARY FOR PUBLIC AFFAIRS, DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT
Mr. Jacques. Thank you, sir. Chairman Dodd, Ranking Member
Shelby, Senator Reed, it is an honor to be here today as the
President's nominee for the position of Assistant Secretary for
Public Affairs for the Department of Housing and Urban
Development. As a student of government, I understand that the
confirmation process is one of the most critically important
constitutional responsibilities of the Senate, so I come to you
with humility and great respect for this process.
Chairman Dodd. Well, it was just perfect timing here, Mr.
Jacques. You sit anywhere you would like, Claire.
Mr. Jacques. I cede my time to Senator McCaskill.
[Laughter.]
Chairman Dodd. Very smart nominee there.
Claire, it is perfect. We were waiting for you, and I
announced ahead of time that as soon as you arrived, we would
take a pause in the middle of the testimony, and we are
delighted you are here this morning to present Mr. Jacques to
the Committee.
STATEMENT OF CLAIRE McCASKILL,
SENATOR FROM THE STATE OF MISSOURI
Senator McCaskill. Thank you. It is not often that you get
to introduce an old friend under these circumstances, and I am
honored to be able to introduce Steve to the Committee this
morning. He has a long history in Missouri both in politics,
public policy, and public service--in all three. He, in fact,
volunteered for a South Side St. Louis Democratic Club at the
age of 11. So he actually--I think I was giving out ``Vote for
Haskell Holman'' emery boards when I was 11 or 12, but you may
have beat me by 6 months or so in terms of political
involvement.
His father and mother lived in St. Louis. He graduated from
Washington U. with a master's degree in international affairs
and a bachelor's in political science. His dad and his family
helped found a church in St. Louis. They did inner-city
service--his dad was an optometrist. They did inner-city
service for kids who could not afford to have optometry
services, and his family kind of is responsible for his ethos
of public service.
He was a deputy campaign manager for Representative Jerry
Litton in his race for the U.S. Senate, a successful race that
ended tragically on the night of his victory in the primary in
one of several tragic airplane accidents we have had in
Missouri that have taken some of our best and brightest from
us.
He worked in government in various capacities. He was
Director of Communications for the U.S. State Department,
Director of Communications and Senior Adviser to the Under
Secretary of Export Administration, all during the Clinton
administration. He has worked in higher education in Missouri
and has continued to stay very involved with the public in
every capacity since he began working in campaigns at the age
of 11.
He is going to be a terrific addition to this Department.
He is going to, I think, bring a trench perspective, the
perspective of somebody who has been out there working in these
neighborhoods, working in these communities. While he has been
in Washington, he has not been here long enough that he has got
that insular disease that detaches you from what is really
going on out there, and Lord only knows we need more of that in
every agency of the Federal Government.
So I am pleased that he has received this nomination. I am
honored to be here today to support his nomination, and I
certainly urge unanimous support from this Committee for his
nomination to this administration.
Chairman Dodd. Thank you very much, Senator McCaskill. We
appreciate your being here. I served with Jerry Litton. I think
Richard may have as well.
Senator Shelby. He was right before me.
Chairman Dodd. He was right before you? I often thought
that had it not been for that tragic accident, Jerry Litton
might have ended up President of the United States. He was that
talented. His roundtable things he did in the early days going
back, I do not know if that was your idea or not.
Mr. Jacques. It was not.
Chairman Dodd. If it was, you ought to be confirmed right
now.
[Laughter.]
Chairman Dodd. It was a brilliant stroke for a Congressman
in a small district in Missouri. I remember he had Henry
Kissinger and Hubert Humphrey. He would get all these national
figures to come to his congressional district to be part of
those discussion groups and forums in the round, or in the
circle. Circle in the round he would do. Very, very talented
individual. Thank you, Claire, very much.
Mr. Jacques. Thank you, Senator. Appreciate it.
Chairman Dodd. Mr. Jacques, the floor is still yours.
Mr. Jacques. Thank you, sir. And, no, that was Jerry
Litton's own idea. He was his best adviser on those matters, a
real professional.
I will pick up where I left off. I come to you from the
great State of Kansas after a long career in public service in
both the public and private sectors. A considerable portion of
my career has been spent in politics and government, including
many bipartisan endeavors. One of the great honors of my life
has been the opportunity to serve as a senior fellow and
associate director of the Robert J. Dole Institute of Politics
at the University of Kansas. The primary mission of this
wonderful institution is to show students that a career in
politics and government is an honorable profession. Former
Senator Dole is obviously our prime exemplar, but the concept
of ``politics as an honorable profession'' also includes many
of the practitioners from the world of public service who have
graced the institute with their wisdom.
Through my work in government, politics, higher education,
and with civic and charitable organizations, nonprofit
corporations, and businesses, I have been privileged to be able
to provide timely, useful information to those who can benefit
from it. This is my mission and the part of my career that
provides me with the most satisfaction.
I view the primary mission of the Assistant Secretary for
Public Affairs at HUD as ensuring that the people who need our
services find out about those services and ultimately know how
to access those services. Specific information that comes to
mind are the resources that can help Americans avoid
foreclosure, refinance their homes, find affordable rental
housing, or rebuild their homes after a natural disaster.
My broad spectrum of experience has taught me the
difference between simply ``releasing'' information and truly
communicating that information. How do we reach those who do
not have access to the Internet or email? How do we inform
people who do not get newspapers or do not have the time to sit
down and watch TV news because they are working two jobs and
running a household?
I have been honored to serve as Director of Communications
and Strategic Communications Planning for the U.S. State
Department, where I participated in the successful NATO 50th
Anniversary Summit, and the accession to NATO of the first 3
former Eastern Bloc countries--Poland, Hungary, and the Czech
Republic. I was also honored to serve at the U.S. Department of
Commerce as the Communications Director for the Bureau of
Export Administration.
My public sector experience also includes two State
universities--the University of Kansas, where I served at the
Dole Institute, and the University of Missouri-Kansas City,
where I served as associate vice chancellor for public affairs.
At the University of Missouri, I worked hard to bring new
positive media and community attention to the school's good
works.
Since 1976, I have served on the national advance staff in
nearly every Presidential election. I have used the skills I
learned in the intense working environment of Presidential
campaign advance to serve both Republican and Democratic public
officials in the conduct of their official duties.
In the private sector, I have worked for numerous nonprofit
and civic organizations, as well as municipalities. Among those
clients I was most proud to serve was the Kansas City,
Missouri, Police Department, for which I developed and
implemented a public affairs campaign to increase the number of
minorities and women on the police force. We were successful in
dramatically increasing the number of high-quality individuals
who applied and eventually became police officers.
I view the role of public affairs in government, academia,
civic and nonprofit organizations as the nexus between policy
and action. Not even the best policies have a hope of being
implemented, or of helping people, without effective
communication and outreach to those who need to know and can
act on the information they receive. You can build the
proverbial better mousetrap, but no one will beat a path to
your door unless they are aware of it.
I ask for your support, and in return I promise to actively
search for every opportunity to provide you and your
constituents with the information you need and want regarding
the work of the U.S. Housing and Urban Development Department.
Chairman Dodd. Terrific. Great statement. Thank you very
much, Mr. Jacques. I appreciate it very much.
I am going to ask the clerk to put on 6 minutes. There are
only three of us here right now and more may come, but we will
try and move this along. A lot of questions, obviously, for you
and a very important hearing.
Mr. Hirschhorn, the Secretary of Commerce recently gave a
speech in which he criticized the current export control system
for hampering American competitiveness and inadequacy focusing
on certain national security items. The aerospace industry, as
I know you must be aware, certainly in my State it is a very
important industry. United Technologies is a major industrial
corporation with Pratt and Whitney and Sikorsky Helicopters,
the Electric Boat Division. We have a lot of defense work and
aerospace work in our State of particular importance.
So my questions are: What priorities should be considered
in modernizing the cold war-era export licensing system? How
can limited resources available to the Bureau of Industry and
Security be better utilized to promote America's current
national security needs? And the Export Administration
regulations currently provide for exemptions if certain
products are readily available overseas, and I wonder if you
might share with us in your experience how has this foreign
availability standard helped level the playing field for U.S.
companies without compromising our security. Let me ask you
that, but also let me in the same context--and I will give you
a chance to respond to all of this.
This Committee voted just a few days ago unanimously, 23-0,
to report our comprehensive sanctions legislation targeting
Iran. Under our bill, the U.S. would assist other countries in
halting the transshipment of sensitive U.S. technology to Iran.
If these countries refuse to cooperate, then under the bill
that was passed unanimously we could subject them to severe
export controls.
So I wonder if you might discuss your commitment to working
with our Committee and the Congress, obviously, to combat the
efforts of Iran, North Korea, Syria, and others who trawl
transshipment hubs for various parts to assemble high-tech
weapons, which is going on. And what other risks are currently
borne by the trade-sensitive technologies in the global
marketplace and how serious are those threats posed by this
proliferation, such as Pakistan scientist A.Q. Khan's selling
missile and nuclear technologies around the world as an example
of what can happen. So the juxtaposition of how we reconcile
these goals here of recognizing we are in a post-cold war
period, and yet there are, as we all know, continuing threats
to our national security and people who are obviously engaged
in the transshipment of technologies that can do us great
damage. How do you respond to that?
Mr. Hirschhorn. I think this job is, above all, a national
security job, and I expect to work closely with this Committee
and with the Congress on making sure we have a system that is
the best system we can have for that.
Diversion is certainly a problem that we have to look
closely at. I think it requires a team effort among the
agencies, because Commerce is not the only agency involved
here, but certainly with Commerce doing its part to work with
foreign governments to ensure that they have perhaps both the
carrot and the stick to assist in keeping important, critical
items out of the hands of dangerous people. I think that is
what the job is about. I certainly consider it to be one of the
foremost responsibilities I would take on.
Chairman Dodd. Well, good. You might want to just in time
want to explore that, because this obviously is a delicate
balance as we move forward in these areas.
One of the--as you are aware, the foreign governments
oftentimes impose foreign offsets on U.S. manufacturers in
exchange for lucrative contracts. I recall that back--in fact,
there was language that existed for a long time, including up
to a few years ago--in fact, it may still exist--that in an
effort to provide help to war-torn Europe, is the language,
that we allowed for offset contracts. And what an offset
contract is, if a certain country decides to award you a
contract, as a business in the United States, you must in many
cases provide subcontractors in that country a certain quantity
of work. We actually have some countries where that agreement
requires 100 percent or more of subcontract work in exchange
for the larger contract.
It is very troubling. This goes on--there is a
proliferation of these offset contracts, in my view. BIS is
responsible for reporting annually the tens of thousands of
U.S. jobs lost as a result of these offsets, and I wonder how
you would characterize the process of offset contracts, what
steps can be taken to ensure that American workers and
suppliers are not disadvantaged by them.
Six years ago, I authored a law requiring an interagency
team to work with foreign governments to limit the loss of jobs
in the United States to the defense industry. I wonder if you
would like to discuss the efforts and tell the Committee, if
confirmed, of your commitment to revive this body's work.
Mr. Hirschhorn. Well, I must say that, I know less about
offsets than I know about export controls, but I am certainly
aware of it. I am aware of your interest in it and the
importance of it. I think that it is very important that we
maximize U.S. jobs, especially in these difficult times, but at
other times, as well, and if working with foreign countries on
offsets, as I understand this interagency committee did, will
help do that, I think it is something we should take very
seriously.
Chairman Dodd. Well, I would be very interested in hearing
back on that. It had clearly been lying dormant, but that
idea--and again, we are living in a global economy. These
things are very important. But there are a lot of antiquated
ideas that exist out there. We do not provide--we do not have
offset contracts. We do not require that at all.
And I am not suggesting we should, but it seems to me we
ought to be doing something here to minimize this practice
which goes on which disadvantages very talented workers, the
industrial base, absolutely critical in the 21st century. We
have an aging workforce in many of these areas, and if we are
beginning to lose business because of these offset contracts,
it is going to be harder to replace those workers with the
talented young people who can provide that kind of work that
needs to be done. So I have a lot of interest in the subject
matter and would hope that you would get back to us and share
some thoughts with us.
Ms. Lago, very quickly, if I can, this Committee labored
over the course of the last Congress to produce the landmark
Foreign Investment National Security Act, which was unanimously
approved by the Committee and the full Senate and signed into
law in 2007. Again, I want to thank Senator Shelby and Jack
Reed and others here. A lot of our staff and others worked
very, very long and hard to get the kind of unanimity on a very
complex and delicate issue, and I believe that, if implemented
correctly, it will achieve two principal objectives. One,
protecting our national security, which is critical, but two,
ensuring that appropriate foreign investment in the United
States is not inhibited, which we don't want to stop.
I wonder if you would agree with that assessment and how
would you help to fill the mandate, if confirmed?
Ms. Lago. Interestingly, Senator, in much the same way that
Mr. Hirschhorn noted that his position is principally a
national security position, I think that the position, this
Assistant Secretaryship that was created by the landmark FINSA
legislation is principally a national security position----
Chairman Dodd. Yes.
Ms. Lago.----and in your remarks, Senator, I have to echo
your comment that there is not an inconsistency between having
a bipartisan longstanding approach of encouraging--of nurturing
open markets, open markets that benefit U.S. citizens and U.S.
firms, while recognizing that a focus on national security on
assuring through the CFIUS process that no national security
risk goes unaddressed, those two are not at odds with each
other. Actually, they reinforce each other.
Chairman Dodd. Well, I appreciate that. Again, we want to
work closely with you on this and monitor, so stay in touch
with us.
Mr. Jacques, quickly, and then I will turn the time over to
Senator Shelby, you have had a wonderful career, and I couldn't
agree more that at a time like this, here we all work very hard
to come up with what we believe are hopefully good ideas that
will begin to make a difference, particularly when people are
looking to see whether or not anyone is paying attention to
what is happening with them, and so you are absolutely correct
in your assessment.
Great ideas, creating that mousetrap you described, and if
no one knows it exists out there--we saw this, again, Senator
Shelby, and again, Senator Reed and I, we all worked on trying
to come up with the best idea we could on mitigation on
foreclosures. But you looked at it, it was so complex that the
ability for an average person going through that, to understand
it and how to access it, I think was one of the difficulties we
faced. There were other problems, but that was one of them.
I wonder if you might share with us any thoughts you have
had, and this is just very quickly, on how do you reach--what
are some of the ideas you would bring to the table on reaching
those constituencies? We have listened to all sorts of people
talk to us about how do we penetrate a marketplace where
typically, in many cases, because they are holding down two or
three jobs, because they are struggling to hold things
together, there may be a health crisis in the family, all sorts
of things which make it almost impossible for them necessarily
to get information about what is available to them in the area
of housing and related matters. What ideas do you bring to the
table?
Mr. Jacques. Absolutely, sir. Well, I come to this position
with kind of a private sector mentality. Many, many years ago,
in the mid-1980s, I believe, there was a study done that showed
that people are bombarded with something like 5,000 marketing
messages every single day and they call that the communications
jungle, and cutting through that and penetrating with the
information that the American people need to respond to the
crisis, the foreclosure crisis, especially at this moment in
time, is a challenge. And we have high technology and everybody
now is more aware of the technology aspect of things, but also
going down that spectrum, down to low-technology, word of mouth
is still the most effective form of communication.
And to the extent that we can, I view this office within
the Department as a service agency, as a service unit for both
the Department, for the American public, and for Congress to be
able to respond to people's understanding or lack of
understanding in an effective way and just keep bombarding
them, really. It is the shotgun approach, repeating, repeating,
repeating the information that people need so that you can get
through to people with what is the information they need? How
do they access that information effectively? It runs the entire
spectrum of communication.
I remember when I was at the State Department, a professor
came in to speak about communicating in the electronic age and
he said that there is no difference between public sector and
private sector marketing. The only differences are legal and
ethical. I bring that kind of a mentality to this, that you
just have to make sure that you are doing every single thing in
your power to reach out. And certainly feedback from this
Committee and from Members of Congress, from your staff, in
terms of how effective we are being in this regard, being a
valuable part of that.
Chairman Dodd. Well, one suggestion I would make to you,
and as the Chairman of this Committee, I have served on this
Committee a long time, and when we prepare for hearings, I have
a terrific staff, we all do, who work really hard and really
know these issues tremendously well, I will get acronyms for
various organizations. I mean, I am looking at it, and I have
been here a long time, and I have to go back and review, what
does that acronym stand for? What are we actually talking
about?
I think, too often, we talk to each other in this town and
we don't talk to the people outside. We use language that even
people here have a hard time understanding. So we need a
translator sometimes to be able to talk about what these
programs are and how they work and language that the average
person can begin to understand. And so I urge you, as you look
over statements being made, testimony being provided in
committees, whether it is the Internet or being carried on C-
SPAN and others, that there be an ability to speak in plain
English about what these ideas are and how people can
understand them even better. It is just a thought, but as one
here who pays a lot of attention to these issues, I find myself
wondering what we are talking about sometimes with these
various programs and ideas.
Mr. Jacques. Thank you. It is one of the most important
aspects, simple language.
Chairman Dodd. Well, I thank you.
Senator Shelby.
Senator Shelby. Thank you, Mr. Chairman.
Mr. Hirschhorn, our allies and trading partners, as you
well know, do not always share the same export controls. So
some of our restrictions are, quote, ``unilateral.'' You have
argued before this Committee in the past that, and I will quote
your words, ``unilateral controls don't work,'' and that we
should not restrict trade any more than other countries do.
U.S. unilateral export controls, however, include prohibitions
on trade with Iran, as you well know, and other terrorist-
supporting states.
My question to you is this. If confirmed, how will you
reconcile your duty to enforce unilateral U.S. export controls
with your opposition, or seemingly opposition, to such
controls? Are you just stating the truth in your----
Mr. Hirschhorn. I think we can't doubt that there is a cost
to unilateral controls.
Senator Shelby. Sure, there is.
Mr. Hirschhorn. Often, they are important. I would have no
trouble enforcing the laws as this Congress has enacted them,
the regulations as they stand. None at all.
Senator Shelby. In the past, you have suggested that the
Commerce Department should be given more authority for the
oversight of dual-use exports while the responsibilities of the
Defense and State Departments in this area should be reduced.
Do you continue to hold this view, and if so, what makes you
confident that under this construct American technology will
not fall in wrong hands?
Mr. Hirschhorn. I think the team approach that currently
exists is an excellent approach that enables the Commerce
Department, although it is handling the physical act of
processing and licensing cases, to get the foreign policy
advice of the State Department, to get military advice of the
Defense Department--certainly, I don't think anyone thinks the
Commerce Department is an expert on military policy--and the
resources of the intelligence community, and that is certainly
what is missing for a lawyer in private practice who is
advocating for his clients. It is all behind the curtain for
me, and I obviously will have a much better sense of the whole
picture----
Senator Shelby. You are saying to us you will do your duty
in----
Mr. Hirschhorn. Absolutely, Senator.
Senator Shelby. Ms. Lago, while foreign investment plays a
crucial role in our economy--we all know that--national
security considerations, I think, always should remain
paramount, the security of this nation. Under what conditions
might a foreign acquisition of a U.S. company constitute a
genuine national security threat to the United States?
Ms. Lago. Thank you for the question, Senator. I think that
Congress, this Committee, actually, the two of you, Senators
Dodd and Shelby, deserve such praise for passing FINSA. That
piece of legislation is so finely crafted to address just this
concern. Obviously, the entire CFIUS process is premised on
assuring that national security risks are addressed, and it is
the composition of that committee that I think gives a high
degree of comfort.
Looking at the broad array, 16 different agencies that are
represented on the committee, the fact that every CFIUS process
begins with an assessment from the Director of National
Intelligence, that has at its core an assurance that those
expert agencies, the expert agencies that Nominee Hirschhorn
just mentioned, are bringing to bear their expertise.
With respect to particular cases, the confidentiality
provisions that, again, very properly were built into the CFIUS
process because of the sensitive commercial and national
security information, mean that I haven't had the possibility--
I appropriately could not have been briefed on particular
matters. But there is one other facet of the CFIUS process that
I think gives the comfort that the proper decision giving
proper weight--predominant weight to national security concerns
will prevail, and that is the creation of the new Assistant
Secretary position----
Senator Shelby. That is right.
Ms. Lago.----which has someone appointed with the approval
of the Senate, accountable, and reporting to the Committee
following the conclusion of every CFIUS matter. And if
confirmed, I would take that accountability seriously as well
as the reporting and communication obligation.
Senator Shelby. Generally speaking, how should analysts and
strategists at CFIUS assess risk and threats to distinguish
between the serious and the inconsequential? That is a big job.
Ms. Lago. Certainly, Senator, and it is a job. I think,
again, it is why this Committee, it is why Congress in
reforming the CFIUS process so recently assured that the right
folks were at the table, the folks with the level of national
security expertise, the full gamut, from Homeland Security to
the Department of Defense, so that on a case-by-case basis the
proper experts could be brought to bear.
Another feature of FINSA that I think also assures that the
right folks are at the table is the provision to appoint a co-
lead agency. Treasury serves as the chair, but in FINSA, the
emphasis was placed on choosing that lead agency that would
have the most expertise about the particular transaction before
the Committee.
Senator Shelby. Do you anticipated as a result of FINSA an
increase in CFIUS reviews that will generate the need for
further resources being devoted to the CFIUS process?
Ms. Lago. Thank you for raising that point, Senator. I
think one of the challenges when one runs a process, an
extremely important process that has strict time lines, is
making sure that there are adequate resources brought to bear.
The FINSA, the CFIUS legislation calls for strict time lines--
30 days, an additional 45 days if an investigation is to occur.
As there is increased request by non-U.S. parties for
investment in the U.S., there may be an increase in the
workload of CFIUS and it is going to be incumbent, not just
upon Treasury, but upon the other members of CFIUS, to make the
appropriate and expert staff available to be able to carry out
these obligations.
Senator Shelby. OK. Thank you.
Mr. Jacques, last, one of the greatest challenges, I
believe, that you will face, and Senator Dodd has already
brought this up, will involve making HUD programs
understandable to the average American. As Chairman Dodd noted,
there can be a lot of jargon involved in government, especially
at HUD. This challenge of how you will need to be able to cut
through this so the average person can understand in simple
English what they are getting is important to all of us, is it
not?
Mr. Jacques. Absolutely.
Senator Shelby. Do you look at that as a big challenge, and
do you think you can be the first one to break through that?
[Laughter.]
Mr. Jacques. I----
Senator Shelby. We hope you will.
Mr. Jacques. It is a little bit challenging----
Senator Shelby. It is.
Mr. Jacques.----because when you are forcing the issue
within an agency and trying to simplify things, it is a little
bit tough sometimes to get through to people, but I commit to
you that my staff will get tired of hearing me harp on that
particular aspect----
[Laughter.]
Senator Shelby. We won't get tired of hearing you.
Mr. Jacques.----to keep things simple and to reach out to
local stakeholders, community organizations, faith-based
organizations, our local field offices to explain these things
in simple terms and really reach the people with good
information they can understand and understand how they can
access our services.
Senator Shelby. Thank you. We wish you well. And I
congratulate you all again.
Mr. Jacques. Thank you.
Chairman Dodd. Thank you, Senator Shelby.
Senator Reed.
Senator Reed. Thank you very much, Mr. Chairman.
Ms. Lago, you have the interesting challenge, if confirmed,
to coordinate 18 different agencies under the CFIUS. Could you
give us an idea of similar challenges you have had in your
career, coordinating multiple agencies with different cultures
and different viewpoints?
Ms. Lago. Thank you, Senator, for recognizing that it is a
formidable challenge, but if confirmed, it is one that I would
so welcome. It feels quite familiar, principally because of the
work that I did while at the Securities and Exchange
Commission. I was the SEC's lead representative in any number
of international groups where we needed to forge consensus.
The one example that I would point out is I was the U.S.
lead in the drafting of the IOSCO core principles of securities
regulation. IOSCO is the International Organization of
Securities Commissions, and there was a recognition that the
investors would benefit from having a globally consistent set
of principles.
In these negotiations, we ranged with companies--we worked
with countries that ranged from the most developed economies to
emerging economies, and it was critical both to assure that
there wasn't a watering down, that the United States approach
of fair, open markets, of transparency prevailed, while at the
same time recognizing that other countries weren't at the same
stage of development.
I was struck by Chairman Dodd's reference to language, to
translation, echoed by Nominee Jacques, and I do think that
having been brought up in an language other than English--
English was not my first language--is very helpful. It teaches
one to hear and to communication, and certainly that is a skill
that I think would be essential, if confirmed. in the CFIUS
process, the ability to hear what this multiplicity of agencies
is saying, the ability to respect the varying viewpoints, the
ability to look for consensus, but also, as the Chair, to lead
and to drive that consensus. And so I do think that my work,
principally at the Securities and Exchange Commission, but also
in my other leadership roles that I have had over the years,
would serve me well, if confirmed.
Senator Reed. And you are now wondering how I could have
graduated from Harvard Law School, but I copied from Marisa.
[Laughter.]
Senator Reed. Sovereign wealth funds--should they be
treated differently than others who were investing in American
assets?
Ms. Lago. Thank you for asking about the sovereign wealth
funds. I found it interesting that 4 years ago, it was a term
that was a little bit exotic, and now I would think that many
average Americans are aware of the importance of sovereign
wealth funds. Again, I would compliment the Committee for the
FINSA legislation, which I think lays out the road map for how
to treat sovereign wealth funds. Sovereign wealth funds are
arms of government, and under FINSA, there is a heightened
accountability when the proposed investment is by a foreign
government. And so I think that FINSA itself lays out the
appropriate approach.
If a sovereign wealth fund is the potential acquirer, then
generally there will be an investigation. That is an additional
45-day review. And so this heightened accountability, I think,
properly recognizes that sovereign wealth funds are not just
any private sector investor, but rather are arms of government.
Senator Reed. Thank you very much.
Mr. Hirschhorn, you have, as you all do, a very challenging
job with multiple and, at times, conflicting demands. I think
you rightly said your primary responsibility is national
security, protecting our key technologies. But we are in a
world where if we don't increase our exports, we are not going
to be economically viable to develop the sophisticated
technologies.
How do you--and I know this is a very, very, almost
philosophical question--see the balancing? I know the priority
is national security, but can we also accomplish that and still
encourage imports in these areas? Exports, I should say?
Mr. Hirschhorn. I think we can. I think we have been trying
to do that for many years. When I served in the Commerce
Department in the early 1980s, we were trying to do it, and
people are still trying to do it. It is a difficult set of
choices, and it is a question principally of risk tolerance.
You could say in a sense that any sale involves a risk, but you
have to make judgments and that is why we have a licensing
mechanism. We look at this and say, OK, what is this
technology? How serious is it? We look at who wants to use it,
what they say they want to use it for, what we can find out,
perhaps from the intelligence community, about what they want
to use it for. And if confirmed, I intend to make sure that is
done carefully and in a way that maximizes both values. They
are not always in concert.
Senator Reed. Let me just make a point from my perspective
on the Armed Services Committee. So much of the technology
transfer there is off-the-shelf in commercial or not the
traditional military platform, a jet plane or a sophisticated
computer. I wonder, would you be considering sort of--or how do
you deal with this other trade? For example, the fertilizer
that is used in IEDs? This is a rather extreme example, but in
some respects, the competition in the old days was between the
Soviet Union trying to get a hold of a very sophisticated
device, and now the competition is people, guerrillas, who are
trying to get a hold of fertilizer or priming cord or mining
equipment. Is that something that you are going to be concerned
with in your role?
Mr. Hirschhorn. Absolutely. That is a lot of what BIS does,
because the State Department, which handles military exports,
knows that what they are being asked to license is for a
military--ordinarily for a military purpose. It certainly is
something that was designed with a military purpose in mind.
BIS handles dual-use items, which could be like fertilizer.
It could have a perfectly benign civilian use in agriculture,
or it could be used to make a bomb, and that is true of many of
the items that are controlled under the Commerce Control List.
That is why there have to be judgments made about how
sophisticated is this item, how available is it, who wants it,
and why?
Senator Reed. Thank you very much, Mr. Hirschhorn.
Mr. Jacques, good luck in your endeavors. You have got a
great story to tell, but it hasn't been told, so good luck.
Mr. Jacques. Thank you.
Senator Reed. Thank you, Mr. Chairman.
Chairman Dodd. Thank you, Jack, very, very much.
Senator Corker is here. Do you have any questions at all?
Senator Corker. I don't. I think you all have done a really
good job of ferreting out background and questions. I know we
have some other business coming up right after this, so----
Chairman Dodd. Yes, we do.
Judd, any comments or questions at all?
Senator Gregg. No, I am all set.
Chairman Dodd. All right. Thank you.
Well, listen, all three of you, I appreciate immensely your
willingness to serve. You are very talented and accomplished
people. This is going to help us tremendously. This is a
complicated area and I appreciate, Ms. Lago, your strong
comments about the effort this Committee made over many, many
weeks in crafting CFIUS legislation, including obviously the
FINSA piece of it, and to adopt it unanimously as we did and
then unanimously by the Congress in a very delicate area. As I
said, it was an explosive issue. This was, Bob, was in the
foreign ports. That was the Dubai--I think it was the Dubai
port. It really became sort of a major headline story day after
day, and we went back and tried to wrestle with the conflicting
goals, obviously, of expanding exports and increasing economic
opportunity and simultaneously having an opportunity to make
judgments about when the national security of the country might
be jeopardized. Not an easy path to walk. And the staff on this
Committee, both Democratic and Republican staff members, did a
fantastic job and it was rewarded by our colleagues outside of
this Committee adopting unanimously the efforts of the
Committee. So I appreciate your strong comments. It was a major
accomplishment in the midst of everything else that was going
on. So we wish you well.
I am going to leave the record open for a few days because
other colleagues of ours who could not be here this morning may
have some additional questions for you, and I would urge you to
get answers back as quickly as we can.
We would like to move along and get you confirmed, if we
can. I strongly support your nominations. I think they are very
exciting nominees to have working with us in Washington on
these issues. Thank you.
I should have noted, by the way, and I apologize, I saw
Steve, but I didn't see Mrs. Solars, who was in the audience.
Good to see you being here this morning, as well. You were
hiding behind him and I didn't spot you and I apologize to you,
and a great friend, as well, and an honor and a pleasure to
have both of you here with us this morning. Steve, welcome back
to the Congress. You are welcome any time to be here, as well.
Senator Corker. Mr. Chairman, I do want to thank each of
you for your desire to serve in this way. We do very much
appreciate competent people coming forward like you, so thank
you.
Mr. Hirschhorn. Thank you, Senator.
Chairman Dodd. Good. Thank you all. The hearing will stand
adjourned.
[Whereupon, at 10:43 a.m., the hearing was adjourned.]
[Prepared statements and responses to written questions
supplied for the record follow:]
PREPARED STATEMENT OF ERIC L. HIRSCHHORN
Nominee for Under Secretary for Export Administration,
Department of Commerce
November 5, 2009
Chairman Dodd, Ranking Member Shelby, and Members of the Committee,
I am honored to be here today. I appreciate the expression of
confidence in me by President Obama and Secretary Locke, and I am
hopeful that I can gain your confidence as well. I want to thank the
Committee members and staff for making time for this nomination hearing
in the midst of a busy legislative session. Should I be confirmed, I
look forward to continuing to work with you.
At the outset, I'd like to introduce my wife, Leah Wortham, who
teaches law at Catholic University here in Washington; our son, Alex
Hirschhorn; and my brother-in-law, Henry Howard. Our two daughters,
Elizabeth and Anne, and my sisters Victoria and Jessica, are out of
town and so cannot be with us. My family's support is very important to
me.
I had the privilege of working on export control, antiboycott
compliance, and Defense Production Act issues at the Department of
Commerce in 1980 and 1981, so this would be a return for me. I found
the career staff who administer the system--not only at Commerce but
also the other involved agencies--to be extremely capable and one
hundred percent committed to the interests of our country. Should I be
confirmed, I will be delighted to be working with them again.
As Secretary Locke has noted, the Bureau of Industry and Security,
or BIS, ``has a unique mission at the intersection of international
trade and national security.'' Working closely with the Departments of
State, Defense, and Energy, BIS evaluates thousands of export license
applications each year to ensure that items proposed to be sold abroad
are going to suitable end users for appropriate end uses. Getting this
right is very important. It is equally important to have an enforcement
program ensuring that those who flout the rules are caught and
punished. I am committed to ensuring that BIS does the best possible
job of performing these important functions as well as overseeing its
important role in ensuring an effective treaty compliance system and
promoting continued U.S. leadership in strategic technologies.
Further, President Obama has asked the agencies to take a hard look
at the existing system in an effort to see whether it can be improved
consistent with our national security. Of course, this Committee will
be involved significantly in that process. I hope you will give me the
opportunity to help carry it out.
Since leaving the government for private law practice, I have
spent a good deal of my time advising clients whose activities are
subject to U.S. export control and embargo regulations. My practice
also has included considerable litigation, much of it involving
railroad issues. I also have served as an internal ethics counselor for
my law firm, and as a member of the D.C. Bar's Ethics Committee and
Rules Review Committee.
Most of my export control and embargo practice has involved
explaining how the often complex regulations work, analyzing whether a
proposed course of action requires advance government permission, and,
if a license is required, assisting the client in preparing the
application. I have assisted clients with their internal compliance
programs and have represented some regarding enforcement issues. I also
have acted as an advocate for clients who believe that our export
control system can be improved. I frequently have written and spoken in
the area; my writings include a number of articles and a book whose
third edition will be published early next year. I think this
experience will help me in what I hope will be my new job.
If confirmed, my goal will be to perform this job competently and
objectively. That includes hearing and considering all viewpoints.
I recently read the remarks that my law school's dean delivered to
this fall's incoming class. He spoke of two ``fundamental truths.''
``First,'' he said, ``excellence is its own reward.'' Second,
``integrity is the bedrock of any successful career.'' I promise that
if confirmed, I will strive to bring those qualities to my work.
Again, thank you. I would be pleased to respond to any questions
you may have.
______
PREPARED STATEMENT OF MARISA LAGO
Nominee for Assistant Secretary for International
Markets and Development,
Department of the Treasury
November 5, 2009
Chairman Dodd, Ranking Member Shelby, distinguished members of the
Committee, I am honored to have my nomination come before you today.
I want to thank your staff for meeting with me to discuss CFIUS and
other international financial matters.
I am honored to have been nominated by President Obama to serve as
Treasury assistant secretary for international markets and development,
especially at such a critical moment for our nation's--and the
world's--economies. And I am grateful to Secretary Geithner for
recommending me to the President. Having had the pleasure of working
with Secretary Geithner when he was last at Treasury, I am looking
forward to having the opportunity to join his team.
Before I begin, I would like to briefly introduce my family members
who are here with me today. My husband, Ron Finiw, is my best friend of
35 years. Our nation's Capitol is graced by one of Ron's buildings: he
was the principal architect for the international law center library at
Georgetown Law School. I am also joined by my brother, Paul Lago. Paul
shares my passion for public service. He is a senior intelligence
officer at the Defense Intelligence Agency, where he has served for the
past two decades.
My parents, Louis and Maria Lago, cannot be here today. After 6
decades in the United States, they now live in the village in Spain
where my mother was born. But, my love of public service stems from my
parents. My father served in the U.S. Navy during World War II, and
spent the rest of his career as a civilian employee of the Department
of Defense at Picatinny Arsenal in New Jersey.
As my family's first college graduate, I have lived the American
dream. Upon graduating from Harvard Law School, I made the atypical
decision to join New York City government, rather than the more
traditional path of joining a law firm. I became hooked on public
service, because of the ability to do good, to serve, to make my
hometown a better place. Over the past 25 years, I have had the
privilege of heading the economic development arms of government in
both New York State and the city of Boston, and serving as the general
counsel of New York City's economic development agency. In each of
these roles, I have had to balance competing interests--of fiscal
prudence, of the business community, of neighborhood concerns.
I have also been fortunate to have been able to serve at the
Federal level. For 4 years, I headed the Securities and Exchange
Commission's Office of International Affairs. Working closely with
then-Chairman Arthur Levitt, I played a key role on numerous
international initiatives involving trade in financial services,
international accounting standards, and enhancing financial regulation
in offshore financial centers. Throughout this time, I held a top
secret security clearance.
In the private sector, I headed the compliance department globally
for Citigroup's markets and banking business. In this role, I was
responsible for compliance matters, including anti-money laundering and
OFAC (sanctions) initiatives, for Citigroup's investment banking,
trading, public finance and transaction services businesses. In
addition to securities regulators, I dealt routinely with both domestic
and non-U.S. banking regulators, as I had members of my team in over 80
countries.
Turning to the future, if approved by this Committee and confirmed
by the Senate, I commit to working closely with this Committee to carry
out the weighty responsibilities laid out in FINSA, and to being part
of the Treasury team that promotes economic growth, financial market
stability, and open markets for U.S. firms. A critical component will
be open and regular dialogue with this Committee, with the other
members of CFIUS, and with my colleagues in the Treasury Department. If
confirmed, I will welcome this dialogue.
______
PREPARED STATEMENT OF STEVEN L. JACQUES
Nominee for Assistant Secretary for Public Affairs,
Department of Housing and Urban Development
November 5, 2009
Chairman Dodd, Ranking Member Shelby, members of the Senate
Committee on Banking, Housing and Urban Affairs, it is an honor to be
here today as nominee for the position of Assistant Secretary for
Public Affairs for the Department of Housing and Urban Development.
I come to you from the great State of Kansas after a long career in
both the public and private sectors. My work in public affairs and
communications has taken me throughout the United States, where I have
been blessed to become part of communities from the smallest of towns
to the biggest of cities. The one constant theme throughout my career
is that it has always been an invaluable education. All of you are
state-wide elected officials, so you have seen the diversity of
communities and people even within your own states. As national
figures, you have witnessed first-hand the incredible diversity of our
country, as well as the common bonds that make us all so similar in so
many ways.
A considerable portion of my career has been spent in politics and
government, including many bipartisan endeavors. One of the great
honors of my life has been the opportunity to serve as a Senior Fellow
and Associate Director of the Robert J. Dole Institute of Politics at
the University of Kansas. The primary mission of this wonderful
institution is to show students that a career in politics and
government is an honorable profession. Former Senator Bob Dole is
obviously our prime exemplar, but the concept of ``politics as an
honorable profession'' also includes many of the practitioners from the
world of public service who have graced the Institute with their
wisdom.
Through my work in government, politics, higher education, and with
civic and charitable organizations, non-profits corporations, and
businesses, I have been privileged to be able to provide timely, useful
information to those who can benefit from it. This is my mission, and
the part of my career that provides me with the most satisfaction.
I view the primary mission of the Assistant Secretary for Public
Affairs at HUD as ensuring that the people who need our services find
out about those services, and ultimately know how to access them.
Specific information that comes to mind are the resources that can help
Americans avoid foreclosure, refinance their homes, find affordable
rental housing, or rebuild their homes after a natural disaster.
My broad spectrum of experience has taught me the difference
between simply ``releasing'' information and truly communicating that
information. How do we reach those who don't have access to the
internet or email? How do we inform people who do not get newspapers,
or do not have the time to sit down and watch TV news because they are
working two jobs and running a household?
I have been honored to serve as Director of Communications and
Strategic Communications Planning for the U.S. State Department, where
I participated in the successful NATO 50th Anniversary Summit, and the
accession to NATO of the first three former Eastern Bloc countries,
(Poland, Hungary and the Czech Republic). I was also honored to serve
at the U.S. Department of Commerce as the Communications Director for
the Bureau of Export Administration.
My public sector experience also includes two state universities--
the University of Kansas, where I served at the Dole Institute, and the
University of Missouri-Kansas City, where I served as Associate Vice
Chancellor for Public Affairs. At the University of Missouri, I worked
hard to bring new positive media and community attention to the
school's good works.
Since 1976, I have served on the national advance staff in nearly
every Presidential election. I have used the skills I learned in the
intense working environment of Presidential campaign advance to serve
both Republican and Democratic public officials in the conduct of their
official duties.
In the private sector, I have worked for numerous non-profit and
civic organizations, as well as municipalities. Among those clients I
was most proud to serve was the Kansas City, Missouri Police
Department, for which I developed and implemented a public affairs
campaign to increase the number of minorities and women on the police
force. We were successful in dramatically increasing the number of high
quality individuals who applied, and eventually became police officers.
I view the role of public affairs in government, academia, civic
and non-profit organizations as the nexus between policy and action.
Not even the best policies have a hope of being implemented, or of
helping people, without effective communication and outreach to those
who need to know and can act on the information they receive. You can
build the proverbial better mousetrap, but no one will beat a path to
your door unless they are aware of it.
I ask for your support, and in return I promise to actively search
for every opportunity to provide you and your constituents with the
information you need and want regarding the work of the U.S. Department
of Housing and Urban Development.
REPONSES TO WRITTEN QUESTIONS OF ERIC L. HIRSCHHORN FROM
SENATOR SHELBY
Q.1. For many years, you have been executive secretary of a
group of major trade association called the Industry Coalition
on Technology Transfer (ICOTT). On behalf of ICOTT, you have
advocated several steps that would weaken U.S. export
controls--including abolishing controls on items that are not
controlled by our major trading partners.
If you are confirmed, wouldn't you be required to enforce
controls that you have spent a major portion of your career
opposing?
A.1. If confirmed, I will act solely in the interests of the
United States and will enforce the rules vigorously. During my
prior service at the Commerce Department, I enforced the
controls that were on the books and did so forcefully. This
included unilateral controls, such as the embargo on grain and
other agricultural products that we imposed on the Soviet Union
in the wake of their invasion of Afghanistan.
The role of a lawyer in private practice is to advocate his
clients' positions. Moreover, a private practitioner is not
privy to all the foreign and military policy considerations, or
to the intelligence data, that often are critical in deciding
what items should be controlled, to which end users and
countries, and for which types of end uses. I recognize the
difference between the role of a private practitioner/advocate
and the role of an official whose sole ``client'' is the United
States and the national interest. If confirmed, I will act
solely in the interests of the United States.
Q.2. The United States retains jurisdiction over re-exports of
U.S.-origin goods abroad, beyond their initial export from
American soil. Such ``extraterritorial'' application of export
controls helps the United States prevent and punish diversion
of American goods that might be used against U.S. soldiers, or
to help Iran build weapons of mass destruction. You have
previously recommended that this Committee ``should consider
terminating (or greatly limiting) the extraterritorial
application of United States export controls.'' Without such
application, however, it would be impossible to thwart
companies like Mayrow General Trading, based in Dubai, which
diverted U.S.-origin exports to Iran, exports that wound up in
IEDs used against our forces in Iraq and Afghanistan.
If confirmed, how would you reconcile the need to maintain
``extraterritorial'' U.S. export controls with your opposition
to such controls?
A.2. If confirmed, I will enforce our country's embargoes and
export controls, including those that may have extraterritorial
application.
Q.3. The Iran Sanctions Act is a tool adopted by Congress for
the purpose of pressuring Iran to abandon its dangerous nuclear
ambitions and its support for terrorism. The Act authorizes
penalties against foreign firms that invest in Iran's energy
sector. Congress is now working to strengthen this statute and
to expand its reach to also penalize Iran's refined petroleum
suppliers. You have previously criticized this statute before
the Committee as a ``secondary boycott'' and an example of
``unacceptable extraterritorial controls.''
If confirmed, how would you reconcile your opposition to
the Iran Sanctions Act with the possibility that the
administration might need to enforce it?
A.3. As noted above, if confirmed, I will enforce the laws
under BIS's jurisdiction vigorously, regardless of arguments I
made as an advocate in private law practice.
Q.4. This Committee has just approved a bill which would
authorize state and local governments to divest from companies
which invest in Iran's energy sector. This bipartisan proposal
has already been overwhelmingly endorsed by the House. The
proposal is modeled on the Sudan Divestment and Accountability
Act of 2007. That statute was adopted by Congress and signed by
President Bush after the National Foreign Trade Council (NFTC)
sued to prevent the state of Illinois from divesting from Sudan
over the genocide in Darfur. You represented the NFTC in that
lawsuit. Your firm, Winston and Strawn, became a member of
NFTC, which is opposed in principle to ``unilateral'' and
``extraterritorial'' controls and sanctions. You became the
NFTC's point of contact at your firm. Today, the NFTC continues
to oppose Iran divestment legislation and other Iran sanctions
measures in Congress.
Do you still oppose allowing divestment from companies
dealing with Iran and Sudan?
A.4. I have never opposed allowing public pension funds to
divest from companies dealing with Iran and Sudan. The NFTC,
along with eight Illinois fire and police pension funds and
nine individual retirees, hired my firm to challenge a law that
imposed Illinois' own version of an embargo that already had
been imposed, in substantially different form, by the Federal
Government. The plaintiffs in that case did not take the
position that the conduct of the Sudanese authorities was
humane or worthy of support. Instead, the plaintiffs argued
that the Illinois embargo conflicted with and undermined the
Federal Government's policy.
The Federal district court in Chicago agreed that the
Illinois law was preempted by Federal law. Rather than appeal
the ruling, the State of Illinois repealed the law and enacted
a substitute that, so far as I am aware, has not been
challenged.
Q.5. Commerce Secretary Locke recently proposed to eliminate
license requirements for dual-use exports to a large number of
countries which are our ``allies and partner nations.''
Although this proposal appears to be in the conceptual stage at
present, it raises several troubling questions. Nearly all
direct exports from the United States to Iran are prohibited by
our embargo. But Iran's WMD and military procurement networks
routinely seek to acquire U.S. origin dual-use goods through
third countries. The United States exercises controls over such
re-exports, and prosecutes foreign entities who re-export U.S.
goods to Iran without U.S. authorization.
LIf export license requirements are removed for
items sent to the European Union, for example, how will
the United States be able to stop re-exports?
LHow will BIS deal with suspect entities located in
these suggested license-free countries? Will additional
resources be allocated to maintain and expand the
Entity List for this purpose?
LHas the Department of Justice been consulted on
this proposal, and if so, what was the response?
LMore generally, how will you ensure that any
proposals to decrease controls on sensitive U.S.
exports will not make it easier for Iran to acquire
such exports?
A.5. While I am aware of Secretary Locke's proposal, I am not
employed by the Commerce Department as a consultant or
otherwise, and did not prepare the proposal or any regulations
that would implement the proposal. I share Secretary Locke's
view that implementation of the proposal, as well as any
additional reforms, must include strong, effective protections
against reexport of United States-origin items to unauthorized
parties or destinations.
------
REPONSES TO WRITTEN QUESTIONS OF ERIC L. HIRSCHHORN FROM
SENATOR BUNNING
Implementation of the Iran Sanctions Act
Q.1. Mr. Hirschhorn, in June 1999 when you were Executive
Secretary of the Industry Coalition on Technology Transfer
(ICOTT), you testified before the Senate Banking Committee on
the reauthorization of the Export Administration Act. In your
testimony, you said the Committee should ``consider terminating
(or greatly limiting) the extraterritorial application of the
United States export controls.'' One example you cited was the
implementation of the Iran-Libya Sanctions Act of 1996. You
noted United States insistence that
origin goods and technology remain subject to United States
export controls forever--no matter how many years may pass or
how many different owners the items have--are but two examples
of unacceptable extraterritorial controls.
LAt the time of your comments, you were representing
the interests of industry. However, you have now been
nominated to fill a position with responsibility to
enforce export controls for the United States. Do you
still stand by your comments about export controls?
LIf confirmed, will you support full implementation
of U.S. export laws?
A.1. As the question recognizes, my testimony of a decade ago
was on behalf of a group of trade associations and their many
members. I recognize that the role of a lawyer/advocate is far
different from that of a government official. Moreover, my role
as advocate was not informed by foreign policy considerations
or by intelligence information, to which private individuals
are not privy. If I am confirmed, my sole ``client'' will be
the United States and the national interest, and I will fully
and vigorously implement our country's export control laws.
This includes regulations requiring that foreign companies
seeking to reexport U.S.-origin technology abide by U.S. rules,
including obtaining a reexport license where warranted.
Diversion of goods to Iran
Q.2. The transshipment of sensitive technology to Iran
continues to be a problem. The UAE has been a major hub for
illegal transshipments of goods to and from Iran. We have seen
reports that Dubai has been working to prevent these
transshipments from going through, but it seems that the
activities have moved north to the Emirate of Ras al-Khaimah.
Also, Malaysia and Oman continue to be key intermediaries for
Iran to illegally acquire U.S. technology.
LWill Iran and the enforcement of our export control
laws remain a priority for the Commerce Department if
you are confirmed?
LIf confirmed, how do you intend to work with Oman,
the UAE, and Malaysia to stop these illegal shipping
networks? What steps do you think should be taken by
these countries in order for them to successfully
control items from being diverted to Iran?
A.2. Iran and the enforcement of our export controls will be a
priority if I am confirmed. Countries that are diversion points
should be pressed to prevent such conduct. I am not now in a
position to recommend specific actions but would consult with
appropriate enforcement and diplomatic personnel about what
steps would be appropriate and likely to be effective.
Q.3. When Daniel O. Hill testified before this Committee in
October, he indicated that the Bureau of Industry and Security
only had five agents overseas working on issues related to the
diversion of sensitive goods to Iran.
LIf confirmed, will you increase the number of
agents that are stationed abroad to monitor this
problem?
LHow will you cooperate with other U.S. agencies in
stopping and prosecuting illegal export schemes?
A.3. My outsider's impression is that cooperation among the
agencies enforcing our export control and embargo laws,
including the Departments of Commerce, Justice, and the
Treasury, is far greater than when I previously served in the
Department of Commerce. If confirmed, I will be committed to
such cooperation.
Before offering specific recommendations about the
placement of enforcement resources, I would have to consult
with BIS's career enforcement staff and others in the executive
branch. I have no hesitation, though, in agreeing that rigorous
enforcement is important in improving compliance with our
export control laws.
Boycott of Israel
Q.4. The Commerce Department is responsible for enforcing U.S.
anti-boycott laws which discourage, and in some circumstances,
prohibit U.S. companies from furthering or supporting the
boycott of Israel, sponsored by the Arab League and certain
Muslim countries.
LIf confirmed, will you fully enforce U.S. anti-
boycott laws?
LIn dealings with countries that participate in the
boycott of Israel, will you make it a priority to
encourage them to end their boycott?
A.4. Though it occurred nearly thirty years ago, I still take
pride in having personally negotiated the first six-figure
settlement under the Commerce antiboycott regulations. If
confirmed, I will fully enforce those regulations and will
follow U.S. Government policy, which I understand encourages
boycotting countries to end their boycotts.
------
REPONSES TO WRITTEN QUESTIONS OF MARISA LAGO
FROM CHAIRMAN DODD
FINSA Objectives
Q.1. Ms. Lago. As we noted, this Committee labored over the
course of the last Congress to produce the landmark Foreign
Investment and National Security Act (FINSA), which was
unanimously approved by this Committee and the full Senate, and
signed into law in July 2007.
LI believe that if implemented correctly, it will
achieve two principal objectives: (1) protecting our
national security and (2) ensuring that appropriate
foreign investment in the United States is not
inhibited. Would you agree with this assessment? How
would you fulfill this mandate, if confirmed?
A.1. Yes, I agree that FINSA provides CFIUS with a set of tools
necessary to safeguard national security in a manner consistent
with the United States' longstanding policy of welcoming
foreign investment. In addition, by focusing CFIUS reviews
solely on national security, FINSA provides foreign investors
with confidence in our open investment approach while making
clear that we will take any necessary action within our
authority to protect national security. If confirmed, I will
work to ensure that CFIUS continues to conduct rigorous and
comprehensive national security reviews, seeks to resolve or
mitigate any and all national security concerns so that
transactions can proceed (and recommends that the President
prohibit a transaction if the threat cannot be mitigated), and
processes reviews fairly and expeditiously in accordance with
statutory requirements and deadlines.
Control
Q.2. Ms. Lago. For over a year after FINSA was enacted, we
worked with the Bush Administration to issue satisfactory CFIUS
regulations. Of particular concern was the definition of
``control.'' Ultimately, we were pleased the regulations
recognized that even foreign entities holding less than 10
percent of voting interest, may still exercise control and thus
prompt a CFIUS review.
LPlease discuss the definition of ``control'' under
this new set of regulations. What do you believe to be
the various factors constituting an exercise of
control, even if a foreign investor was acquiring a 5-
percent (or less) stake in a U.S. company?
A.2. The regulations provide an illustrative list of important
matters for CFIUS to consider in determining whether there is
control. These include, for example, the total outstanding
voting interest in an entity, board representation, proxy
voting, special shares, negative rights, contractual
arrangements, and formal or informal arrangements to act in
concert. The facts and circumstances of each case vary, of
course, and CFIUS must consider them in their totality in
making this determination. Therefore, this list is not
exhaustive and is not dependent on any particular numerical
threshold ownership interest. Instead, the regulations permit
and expect that CFIUS will consider any ``other means'' by
which an investor might exercise control.
Mitigation
Q.3. Ms. Lago. As you are aware, the CFIUS process is not
simply an up-or-down vote on investment in the United States.
Under FINSA, Treasury and other Departments often-times
negotiate ``mitigation agreements'' with both foreign investors
and U.S. entities, to address specific national security
concerns.
LWhat priorities and principles would you adhere to
in developing such arrangements?
A.3. As required by FINSA, any such arrangements must be based
on a risk-based analysis conducted by CFIUS of the threat to
national security posed by the covered transaction. Executive
Order 11858, as amended in 2008, implements this statutory
requirement by requiring that any CFIUS agency proposing risk
mitigation measures must provide CFIUS, for its approval, with
such an analysis and proposed mitigation measures the agency
believes are reasonably necessary to address the risk. The
Order also makes clear that, before using a risk mitigation
agreement, CFIUS should determine whether any national security
concerns that it has identified can adequately be addressed
through the exercise of other existing legal authorities. If
confirmed, I will work to ensure that the framework for use of
mitigation measures defined in FINSA and the Executive Order
continues to be implemented faithfully in each case, including
ensuring that all national security concerns are resolved or
mitigated before CFIUS concludes action on a transaction and
that mitigation is used only when justified by, and
proportional to, the national security risk posed by the
transaction.
Q.4. How will you work to ensure that these agreements are
continually monitored and enforced?
A.4. I understand that, as required by FINSA, CFIUS has
developed and agreed upon methods for evaluating compliance
with every risk mitigation agreement entered into or condition
imposed, allowing CFIUS to adequately assure compliance. In
addition, I understand that the mitigation agreements
themselves generally contain provisions that facilitate
compliance monitoring. I further understand that Treasury, as
chair of CFIUS, convenes a quarterly meeting for agencies
designated as lead agencies for monitoring any agreement to
report to CFIUS on the state of compliance with such
agreements. If I am confirmed, I will work to ensure that CFIUS
as a whole, and each lead agency for mitigation monitoring,
continue to be actively engaged in monitoring and ensuring
compliance with mitigation agreements.
Reciprocity
Q.5. Ms. Lago, During the previous Administration, many trade
discussions focused on the United States commitment to remain
open to foreign investment. But I remain concerned that there
oftentimes seemed to be a reluctance to promote reciprocity--
that is, to insist that countries remove their barriers to U.S.
investment.
LUnder your stewardship in the Office of Investment
Security and as manager of the Committee on Foreign
Investment, would you undertake bilateral discussions
on these matters, particularly with China to advance
mutual economic interests?
LHow should the United States use multilateral
forums to advance such an agenda?
A.5. The U.S. open investment policy emphasizes openness both
at home and abroad and, if confirmed, I will continue to push
for robust open investment policies in other countries,
including China. I understand that Treasury is already very
engaged in this effort, both bilaterally and multilaterally.
With regard to other countries' investment review processes,
Treasury strongly supports the OECD's current program of peer
review to ensure that its members' processes are--as I believe
CFIUS is--consistent with the OECD's open investment
principles: non-discrimination, transparency, predictability,
accountability, and proportionality.
The Administration is also engaged in bilateral investment
treaty negotiations, including with China. One objective of
these negotiations is to lock in open investment policies such
as non-discriminatory treatment of U.S. companies and increased
market access. Multilaterally, the United States is an active
participant in the OECD Investment Committee's pursuit of open
investment policies among OECD members and observer countries,
as well as the OECD's investment liberalization outreach
efforts to developing countries.
Sovereign Wealth
Q.6. Over a year ago, the Bush Administration participated in
an IMF forum in Santiago, Chile to develop the ``Generally
Accepted Principles and Practices'' (or GAPP) for Sovereign
Wealth Funds to observe when investing in various economies
around the world.
LWhat is your assessment of the GAPP?
A.6. The GAPP aims to help maintain a stable and open global
financial system by encouraging sovereign wealth funds (SWFs)
to establish sound institutional and operational practices. The
GAPP is credible in that it responds directly to the key
macroeconomic, financial market, and investment issues raised
by the rapid growth in the size and number of SWFs, and helps
to demonstrate a significant positive shift in SWF practices.
Q.7. What sorts of principles and practices should the United
States government be promoting regarding sovereign wealth
investment?
A.7. The United States government should promote the principles
and practices identified in the GAPP, which will help allay
concerns that SWF investments may be politically motivated and
reduce potential uncertainty and volatility in financial
markets.
Key principles include:
LSWF investment decisions should aim to maximize
risk-adjusted financial returns in a manner consistent
with the SWF's investment policy, and based on economic
and financial grounds.
LFinancial information, including asset allocations,
benchmarks, and historical returns, should be publicly
disclosed.
LInvestment policies, including policies for voting
publicly traded equity shares, should be publicly
disclosed.
LThe governance framework for the SWF should be
sound and should establish a clear and effective
division of roles and responsibilities in order to
facilitate accountability and operational independence
in the management of the SWF to pursue its objectives.