    [Senate Hearing 112-115]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 112-115

     NOMINATIONS OF: DAVID S. COHEN, DANIEL L. GLASER, TIMOTHY G. MASSAD,
                     WANDA FELTON, AND SEAN ROBERT MULVANEY

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

                                    HEARING

                                   before the

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

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                       ON

                                NOMINATIONS OF:

     David S. Cohen, of Maryland, to be Under Secretary for Terrorism and
                  Financial Crimes, Department of the Treasury

                                   __________

        Daniel L. Glaser, of the District of Columbia, to be Assistant
         Secretary for Terrorist Financing, Department of the Treasury

                                   __________

       Timothy G. Massad, of Connecticut, to be Assistant Secretary for
                Financial Stability, Department of the Treasury

                                   __________

    Wanda Felton, of New York, to be First Vice President and Vice Chair of
                  the Export-Import Bank of the United States

                                   __________

       Sean Robert Mulvaney, of Illinois, to be a Member of the Board of
           Directors for the Export-Import Bank of the United States

                                   __________

                                  MAY 3, 2011

                                   __________

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

                     Available at: http: //www.fdsys.gov /

                                    _____

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                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                      TIM JOHNSON, South Dakota, Chairman

    JACK REED, Rhode Island              RICHARD C. SHELBY, Alabama
    CHARLES E. SCHUMER, New York         MIKE CRAPO, Idaho
    ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
    DANIEL K. AKAKA, Hawaii              JIM DeMINT, South Carolina
    SHERROD BROWN, Ohio                  DAVID VITTER, Louisiana
    JON TESTER, Montana                  MIKE JOHANNS, Nebraska
    HERB KOHL, Wisconsin                 PATRICK J. TOOMEY, Pennsylvania
    MARK R. WARNER, Virginia             MARK KIRK, Illinois
    JEFF MERKLEY, Oregon                 JERRY MORAN, Kansas
    MICHAEL F. BENNET, Colorado          ROGER F. WICKER, Mississippi
    KAY HAGAN, North Carolina

                         Dwight Fettig, Staff Director

                  William D. Duhnke, Republican Staff Director

                           Charles Yi, Chief Counsel

                               Pat Grant, Counsel

                   Colin McGinnis, Professional Staff Member

                    Brian Filipowich, Legislative Assistant

                    Hester Peirce, Republican Senior Counsel

              John O'Hara, Republican Senior Investigative Counsel

                          Anu Kasarabada, Deputy Clerk

                          Brett Hewitt, Hearing Clerk

                          Shelvin Simmons, IT Director

                              Jim Crowell, Editor

                                      (ii)

                                C O N T E N T S

                                  ----------

                              TUESDAY, MAY 3, 2011

                                                                       Page

    Opening statement of Chairman Johnson............................     1

    Opening statements, comments, or prepared statements of:
        Senator Shelby...............................................     3

                                   WITNESSES

    David S. Cohen, of Maryland, nominee for Under Secretary for
      Terrorism and Financial Crimes, Department of the Treasury.....     4
        Prepared statement...........................................    26
        Responses to written questions of:
            Chairman Johnson.........................................    31
            Senator Shelby...........................................    33
            Senator Schumer..........................................    34
            Senator Brown............................................    37
            Senator Vitter...........................................    37
            Senator Johanns..........................................    43
            Senator Kirk.............................................    44
    Daniel L. Glaser, of the District of Columbia, nominee for
      Assistant Secretary for Terrorist Financing, Department of the
      Treasury.......................................................     6
        Prepared statement...........................................    27
        Responses to written questions of:
            Senator Shelby...........................................    54
            Senator Brown............................................    58
            Senator Hagan............................................    59
    Timothy G. Massad, of Connecticut, nominee for Assistant
      Secretary for Financial Stability, Department of the Treasury..     8
        Prepared statement...........................................    28
        Responses to written questions of:
            Chairman Johnson.........................................    59
            Senator Shelby...........................................    62
    Wanda Felton, of New York, nominee for First Vice President and
      Vice Chair, Export-Import Bank of the United States............     9
        Prepared statement...........................................    29
        Responses to written questions of:
            Chairman Johnson.........................................    64
            Senator Shelby...........................................    65
            Senator Vitter...........................................    66
    Sean Mulvaney, of Illinois, nominee for Member of the Board of
      Directors, Export-Import Bank of the United States.............    10
        Prepared statement...........................................    29
        Responses to written questions of:
            Chairman Johnson.........................................    73
            Senator Shelby...........................................    74
            Senator Vitter...........................................    75

                                     (iii)

                                NOMINATIONS OF:

                          DAVID S. COHEN, OF MARYLAND,

           TO BE UNDER SECRETARY FOR TERRORISM AND FINANCIAL CRIMES,

                          DEPARTMENT OF THE TREASURY;

                 DANIEL L. GLASER, OF THE DISTRICT OF COLUMBIA,

               TO BE ASSISTANT SECRETARY FOR TERRORIST FINANCING,

                          DEPARTMENT OF THE TREASURY;

                       TIMOTHY G. MASSAD, OF CONNECTICUT,

               TO BE ASSISTANT SECRETARY FOR FINANCIAL STABILITY,

                          DEPARTMENT OF THE TREASURY;

                           WANDA FELTON, OF NEW YORK,

                   TO BE FIRST VICE PRESIDENT AND VICE CHAIR,

                    EXPORT-IMPORT BANK OF THE UNITED STATES;

                       SEAN ROBERT MULVANEY, OF ILLINOIS,

                    TO BE A MEMBER OF THE BOARD OF DIRECTORS,

                    EXPORT-IMPORT BANK OF THE UNITED STATES

                                  ----------

                              TUESDAY, MAY 3, 2011

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Committee met at 10:06 a.m. in room SD-538, Dirksen
    Senate Office Building, Hon. Tim Johnson, Chairman of the
    Committee, presiding.

               OPENING STATEMENT OF CHAIRMAN TIM JOHNSON

        Chairman Johnson. Good morning. I call this hearing to
    order. Thanks to all of you for joining us here today, and a
    special thanks to our witnesses and their family members who
    are with us.
        Before we begin, I want to take a moment to mention the
    devastation and the tragic loss of life in the wake of hundreds
    of tornadoes that broke out across the Southern United States
    last week. Ranking Member Shelby, I know your home town of
    Tuscaloosa was among the hardest hit, and I want to convey my
    condolences to all of those affected by these catastrophic
    events. I was also pleased to see a quick, coordinated response
    from President Obama, FEMA, and a number of Cabinet
    Secretaries.
        Today we consider five distinguished individuals nominated
    to serve in critical positions within the Obama administration.
    David Cohen and Daniel Glaser have both been nominated for key
    antiterrorism positions within the Department of the Treasury.
    As the President said in his address to the Nation on Sunday
    night, the death of Bin Laden marks the most significant
    achievement to date in our Nation's effort to defeat Al Qaeda.
    But his death does not mark the end of the effort. There is no
    doubt that Al Qaeda will continue to pursue attacks against us.
    We must and we will remain vigilant at home and abroad.
        I wholeheartedly agree with the President. Mr. Cohen's and
    Mr. Glaser's nominations are critical to these ongoing efforts
    to protect our homeland. Mr. Cohen has been nominated to become
    the Under Secretary for Terrorism and Financial Crimes and is
    currently serving in the role in an acting capacity. Mr. Glaser
    has been nominated to become the Assistant Secretary for
    Terrorist Financing. Timothy Massad has been nominated to serve
    as Assistant Secretary for Financial Stability at the Treasury
    Department, a role he is currently fulfilling in an acting
    capacity. Wanda Felton and Sean Mulvaney have both been
    nominated for positions at the Export-Import Bank of the United
    States. Ms. Felton has been nominated to serve as the First
    Vice President and Vice Chair, and Mr. Mulvaney has been
    nominated to become a member of the Board. Let me say a brief
    word about each of these nominees.
        David Cohen has had a long and distinguished career of
    public service in the public and private sector. Prior to
    serving as Acting Under Secretary for Terrorism and Financial
    Crimes, he was the Assistant Secretary for Terrorist Financing.
    He has also worked in the Treasury Department's Office of
    General Counsel and in the private sector with the law firm of
    Wilmer, Cutler, Pickering, Hale & and Dorr.
        Daniel Glaser also has had an outstanding career at the
    Treasury Department. He currently serves as the Department's
    Deputy Assistant Secretary for Terrorist Financing and
    Financial Crimes. Prior to serving in this role, Mr. Glaser was
    the first Director of the Executive Office of Terrorist
    Financing and Financial Crimes established in 2003. Previously
    he served as the Senior Counsel for Financial Crimes in the
    Treasury Department's Office of General Counsel.
        These nominees are providing key leadership in one of the
    Treasury Department's most critical offices. Since its
    creation, the Office of Terrorism and Financial Intelligence
    has played an even greater role in protecting our national
    security.
        As the Acting Assistant Secretary for Financial Stability,
    Timothy Massad heads the Office of Financial Stability which
    administers the Troubled Asset Relief Program. Previously he
    served as the Chief Counsel for OFS, and before joining
    Treasury, Mr. Massad had a diverse corporate practice as a
    partner at Cravath, Swaine & Moore. As both a special legal
    adviser to the Congressional Oversight Panel for its first
    report on the TARP investments and in his current capacity, Mr.
    Massad has already demonstrated his commitment to TARP
    transparency and maximizing taxpayer returns.
        Wanda Felton and Sean Mulvaney have been nominated for
    positions at the Export-Import Bank and the Official Export
    Credit Agency of the United States.
        Ms. Felton brings a varied and distinguished business
    record to the Ex-Im Bank. She currently owns and directs MAP
    Capital Advisors, a financial advisory firm. Prior to her work
    at MAP, Ms. Felton was the Managing Director at Helix
    Associates, a global placement agency for private equity funds.
    I note that this position would be a form of homecoming for Ms.
    Felton as she started her career with Ex-Im Bank as a loan
    officer.
        Sean Mulvaney currently serves as the Director of the
    Economic Policy Program at the German Marshall Fund of the
    United States. Prior to this, he worked for the U.S. Agency for
    International Development, where he served until November 2008
    as Assistant Administrator for Management, a Presidential
    appointment and Senate-confirmed position.
        It is my sincere hope that the Senate can act quickly on
    all of these nominations, including Ms. Felton and Mr.
    Mulvaney, since two of the three remaining members of the
    Export-Import Bank's Board will conclude their terms this July.
    I look forward to hearing all of our nominees' testimonies.
        I now turn to Senator Shelby for any opening remarks he may
    have. Senator Shelby.

                 STATEMENT OF SENATOR RICHARD C. SHELBY

        Senator Shelby. Thank you, Mr. Chairman. Today the
    Committee will consider several nominations.
        David Cohen, as you have mentioned, has been nominated to
    served as Under Secretary of the Treasury for Terrorism and
    Financial Crimes. In this role Mr. Cohen will be responsible
    for shaping U.S. sanctions policy. Mr. Cohen will be succeeding
    Stuart Levey who has served in that position for the past 7
    years. I believe it will be a challenge for Mr. Cohen to follow
    in Mr. Levey's footsteps, but I believe he is up to it.
    Nevertheless, he will need to refocus our efforts on the
    dangers that this country and its financial institutions face
    here at home, such as cash smuggling, sophisticated money
    laundering, and TARP-related fraud.
        Daniel Glaser has been nominated to serve as Assistant
    Secretary of the Treasury for Terrorist Financing. He has been
    working at the Treasury Department on terrorism financing
    issues for nearly 7 years. He presently is Deputy Assistant
    Secretary for Terrorist Financing. If confirmed, his background
    will allow Mr. Glaser to hit the ground running.
        Timothy Massad has been nominated to serve as Assistant
    Secretary for Financial Stability at the Department of
    Treasury. He has been working in the Office of Financial
    Stability for 2 years, currently as the Acting Assistant
    Secretary, and prior to this as Chief Counsel. This office was
    created in October 2008 to run the Troubled Asset Relief
    Program we call ``TARP.''
        It is critical that the heads of these offices be committed
    to greater transparency and accountability for TARP here.
        Finally, there are two nominations that the Chairman
    mentioned for the Board of Directors of the Export-Import Bank.
    The Bank is the official export credit agency of the United
    States. Wanda Felton has been nominated to serve, as he has
    mentioned, as First Vice President and Vice Chair of the Board
    of Directors; and Sean Mulvaney has been nominated to serve as
    a Board member. It is important that these Board positions are
    filled promptly to allow the Bank to operate effectively and
    fulfill its missions to assist both large and small companies
    export their goods and services to foreign markets. I think it
    is particularly important now to have a full Board as the
    Committee will be considering legislation to reauthorize the
    Bank this year.
        I look forward to hearing from the nominees and working
    with Chairman Johnson so that we can move these nominations
    through the process as quickly as possible.
        Chairman Johnson. Will the panel please rise and raise
    their right hand? Do you swear or affirm that the testimony
    that you are about to give us is the truth, the whole truth,
    and nothing but the truth, so help you God?
        Mr. Cohen. I do.
        Mr. Glaser. I do.
        Mr. Massad. I do.
        Ms. Felton. I do.
        Mr. Mulvaney. I do.
        Chairman Johnson. Do you agree to appear and testify before
    any duly constituted Committee of the Senate?
        Mr. Cohen. I do.
        Mr. Glaser. I do.
        Mr. Massad. I do.
        Ms. Felton. I do.
        Mr. Mulvaney. I do.
        Chairman Johnson. You may sit down. Please be assured that
    your written statement will be part of the record, so if you
    could confine your remarks to 5 minutes, that would be greatly
    appreciated.
        Please also note that the Members of this Committee may
    submit written questions to you for the record, and you should
    respond to these questions promptly in order that the Committee
    may proceed on your nomination.
        I invite all the witnesses to introduce your family and
    friends in attendance before beginning your statements. Mr.
    Cohen.

    STATEMENT OF DAVID S. COHEN, OF MARYLAND, TO BE UNDER SECRETARY
     FOR TERRORISM AND FINANCIAL CRIMES, DEPARTMENT OF THE TREASURY

        Mr. Cohen. Thank you, Chairman Johnson. I would like to
    begin by introducing my wife, Susie Cohen, who is here with me
    today.
        Chairman Johnson, Ranking Member Shelby, and distinguished
    Members of this Committee, thank you for the opportunity to
    appear before you today. It is an honor to be the nominee to
    serve as Under Secretary for Terrorism and Financial Crimes. I
    want to thank President Obama for the confidence he has shown
    in me by nominating me and Secretary Geithner for recommending
    me to serve in this position.
        Having served for the past 2 years as the Assistant
    Secretary of Treasury for Terrorist Financing, I am keenly
    aware of the very significant responsibilities assigned to the
    Under Secretary for Terrorism and Financial Crimes, as well as
    the consequential contributions that the Under Secretary can
    make in advancing our Nation's security.
        Illicit finance, in its many forms, is a threat to the
    integrity of our financial system, both domestically and
    internationally. Combating illicit finance not only protects
    our financial system from abuse by money launderers, terrorist
    financiers, weapons proliferators, and others engaged in
    financial crime, but it helps to advance our most critical
    foreign policy and national security objectives. The many tools
    that the Treasury Department can deploy--ranging from anti-
    money laundering regulatory oversight, to outreach to
    counterparts overseas, to deploying targeted financial measures
    focused on particular individuals and entities--play an
    integral role in responding to many of the challenges we face.
    Treasury's unique capacity to understand financial flows and
    the operation of the financial system, to analyze financial
    intelligence, to map financial and material support networks,
    and to take targeted, powerful actions are key to meeting these
    challenges.
        I believe that my professional experience, particularly
    serving as Assistant Secretary for Terrorist Financing since
    May 2009, has prepared me well to undertake the
    responsibilities of Under Secretary.
        As Assistant Secretary, I have had the opportunity to work
    very closely with the previous Under Secretary, participating
    in almost all aspects of the work of the Office of Terrorism
    and Financial Intelligence (TFI). This has included
    coordinating closely with my colleagues in each of the
    components of TFI the Office of Intelligence and Analysis, the
    Office of Foreign Assets Control, the Financial Crimes
    Enforcement Network, and the Treasury Executive Office for
    Asset Forfeiture.
        In my capacity as Assistant Secretary, I also have had the
    chance to work on many of the issues in TFI, but I have focused
    most intently on several key issues:
        First, our use of targeted financial sanctions, as well as
    outreach to the private sector and foreign governments, to
    increase pressure on the government of Iran for its continued
    refusal to live up to its international non-proliferation
    obligations;
        Second, and relatedly, our efforts to financially isolate
    and apply pressure on the North Korean regime for its continued
    provocative conduct;
        Third, our efforts to combat the financing of terrorism,
    especially financial support for Al Qaeda, the Taliban, and
    other violent extremist groups in South Asia;
        And, finally, the effort to ensure that information about
    the true beneficial owners of corporations is available to
    State and Federal law enforcement and regulators pursuing
    money-laundering and terrorist-financing investigations.
        Prior to serving as Assistant Secretary, I was an attorney
    for close to 20 years, in both private practice and in
    Government. In private practice, I represented institutions and
    individuals in complex financial investigations and litigation
    and counseled clients on their obligations to comply with
    Treasury's anti-money laundering and economic sanctions laws
    and regulations. From late 1999 to mid-2001, I served in the
    Treasury's General Counsel's Office, focusing much of my
    attention on anti-money-laundering law and policy.
        If confirmed, I look forward to working closely with you as
    the Treasury Department continues to implement the President's
    priorities for safeguarding our financial system from illicit
    finance. The variety and intensity of these challenges are well
    known to this Committee. Effectively addressing them requires
    great vigilance and constant innovation. I would welcome the
    opportunity to serve our great Nation by taking on these
    challenges as the leader of Treasury's critical work to fight
    illicit finance.
        In closing, I want to thank the Committee for the attention
    it has given to my nomination. If confirmed, I intend to work
    closely with you, Mr. Chairman, the other Members of this
    Committee, and your staff to pursue our shared objective of
    protecting national security and the integrity of the financial
    system. I am deeply committed to maintaining the very
    productive and close relationship that exists between this
    Committee and the office that I have been nominated to lead.
        Mr. Chairman, I would be pleased to respond to any
    questions that you or Members of the Committee may have.
        Chairman Johnson. Thank you, Mr. Cohen.
        Mr. Glaser, do you have family to introduce?
        Mr. Glaser. Yes, I do, Senator. I would like to introduce
    my wife, Laura, and my son, Ethan; and my parents, Gary and
    Lillian Glaser.
        Chairman Johnson. Mr. Glaser, please proceed.

    STATEMENT OF DANIEL L. GLASER, OF THE DISTRICT OF COLUMBIA, TO
     BE ASSISTANT SECRETARY FOR TERRORIST FINANCING, DEPARTMENT OF
                              THE TREASURY

        Mr. Glaser. Thank you, Chairman Johnson, Ranking Member
    Shelby, distinguished Members of the Committee. Thank you for
    the opportunity to appear before you today. It is a tremendous
    personal and professional honor to have been nominated for the
    position of Assistant Secretary of the Treasury for Terrorist
    Financing. I would like to thank President Obama for the
    confidence he has shown in me by nominating me and Secretary
    Geithner for recommending me for this important position. If
    confirmed, I will certainly work my hardest to live up to their
    very high expectations.
        Mr. Chairman, over the course of my career I have served in
    the area of illicit finance under six Secretaries of the
    Treasury across three Presidential administrations. My
    positions have included serving as an attorney in the U.S.
    Secret Service Chief Counsel's Office, as Senior Counselor for
    Financial Crimes within the Treasury Department's Office of
    General Counsel, Director of the Money Laundering and Financial
    Crimes Section within Treasury's Office of Enforcement,
    Director of Treasury's Executive Office for Terrorist Financing
    and Financial Crimes, and since 2004, as the Deputy Assistant
    Secretary of the Treasury for Terrorist Financing and Financial
    Crimes within TFI. Additionally, since September 2001, I have
    served as head of the U.S. Delegation to the Financial Action
    Task Force--the premier international body that sets anti-
    money-laundering and counterterrorist financing standards and
    works for their global adoption and implementation. I believe
    this experience has left me well prepared to take on this new
    position.
        Over the course of these years, I am proud to have been
    part of the team that has built something new and unique at the
    Treasury Department--a finance ministry with a central role in
    the development and implementation of national security policy.
    This evolution began in the late 1990s with Treasury's leading
    role in the development of the first National Money Laundering
    Strategies and culminated in March 2004 with the creation of
    the Office of Terrorism and Financial Intelligence. TFI brings
    together a broad and diverse range of Treasury's authorities
    and expertise for two goals: protecting the United States and
    international financial systems from abuse; and identifying,
    disrupting, and dismantling the financial networks that support
    terrorist groups, organized crime, weapons proliferators, and
    countries that threaten the national security of the United
    States. This approach has been successful. We have made it
    harder for terrorist groups to raise and move funds, disrupted
    the financial networks that support drug-trafficking
    organizations, and applied substantial financial pressure on
    regimes such as Iran and North Korea, while at the same time
    making it more difficult for them to acquire the material
    necessary to develop their nuclear programs.
        As the central policy office within TFI, the Office of
    Terrorist Financing and Financial Crimes works to develop and
    implement strategies and engages with multilateral bodies,
    foreign government counterparts, and private sector colleagues
    to achieve all of these objectives. If confirmed, I will lead
    TFFC in continuing to develop innovative approaches to
    undermining illicit finance and strengthening our national
    security. Challenges abound. From Iran's and North Korea's
    nuclear programs and other illicit activities, to drug-
    trafficking and criminal organizations in the Western
    Hemisphere and Eastern Europe, to global terrorist
    organizations such as Al Qaeda and Hamas, to the new challenges
    posed by recent developments in the Middle East--never has it
    been more important to strategically and effectively marshal
    our financial tools and those of our allies in support of
    international security.
        In closing, I would like to thank the Committee for its
    time and consideration. If confirmed, I pledge to work closely
    with you, Mr. Chairman, and other Members of the Committee and
    your staff on our collective goal of combating illicit finance
    and protecting America. It is my immense honor to sit here
    before you today, and I would be happy to respond to any
    questions you or other Members of the Committee might have.
        Thank you.
        Chairman Johnson. Thank you, Mr. Glaser.
        Mr. Massad, do you have family to introduce?
        Mr. Massad. Yes, I do, Chairman Johnson. I would like to
    introduce my wife, Charlotte.
        Chairman Johnson. Please proceed.

    STATEMENT OF TIMOTHY G. MASSAD, OF CONNECTICUT, TO BE ASSISTANT
     SECRETARY FOR FINANCIAL STABILITY, DEPARTMENT OF THE TREASURY

        Mr. Massad. Thank you. Chairman Johnson, Ranking Member
    Shelby, and Members of the Committee, thank you for the
    opportunity to appear before you today. I am honored that
    President Obama has nominated me for this position, and I am
    deeply grateful to Secretary Geithner for his confidence in me.
        Over the last 2 years, it has been my privilege to be a
    part of the Treasury Department. I joined in May 2009 as Chief
    Counsel for the Troubled Asset Relief Program, and I had the
    honor of working closely with former Assistant Secretary Herb
    Allison, who set an outstanding example for us all. When Mr.
    Allison decided to return to retirement in September of 2010,
    Secretary Geithner asked me to serve as Acting Assistant
    Secretary.
        I was born in Louisiana, and I lived in Texas, Oklahoma,
    and Connecticut as a child. All of my grandparents were
    immigrants who came to this country as teenagers, barely able
    to speak English and with nothing more than a suitcase. My
    parents grew up during the Great Depression. Their families
    struggled to make ends meet. My parents worked hard and
    provided my siblings and me with many opportunities, and I have
    been very fortunate as a result.
        I mention this because I often think of the stories my
    parents told about life during the Great Depression, because
    this financial crisis has caused many American families to
    suffer on a scale not seen since that time. As a result of this
    crisis, millions of people have lost their jobs. Many have lost
    or are still in danger of losing their homes. Many small
    businesses have collapsed. Many families have lost their
    retirement savings, and many young people have had to postpone
    college plans. We must never forget that this human suffering
    is the true cost of this financial crisis.
        Congress passed the Troubled Asset Relief Program, or TARP,
    in the midst of this terrible crisis in order to stabilize our
    financial system. Of course, TARP could not avert or repair all
    the damage caused by this crisis. However, I strongly believe
    that without TARP, the suffering would have been much, much
    worse. While no one liked using taxpayer funds to rescue
    financial institutions, I believe that TARP--along with the
    other actions our Government took--helped prevent a
    catastrophic collapse of our financial system.
        Today, our financial system and our economy are much
    stronger, and important work remains for TARP. First, we must
    exit our remaining investments in banks and other companies. We
    have already recovered two-thirds of the amount of money
    invested, and our economy and our financial system will be
    stronger when the Government gets out of the business of owning
    interests in private companies. Second, we must continue to
    implement and improve our programs to help American families
    stay in their homes and avoid foreclosure. And, third, we must
    do both of these tasks in a manner that protects taxpayer
    interests and ensures accountability.
        In particular, I want to emphasize the importance of
    accountability and transparency. This program must meet the
    highest standards. Before joining Treasury, I helped the
    Congressional Oversight Panel get started. I served as their
    first special legal advisor on a voluntary basis and worked
    closely with them to help write one of their first reports. If
    confirmed, I will continue to work closely with the Special
    Inspector General for TARP, the Government Accountability
    Office, the Financial Stability Oversight Board, as well as
    this Committee and other Committees of Congress to ensure that
    the TARP program meets the highest standards.
        It has been the greatest professional honor of my life to
    serve my country during this difficult time. I have been
    fortunate to lead an extremely talented and dedicated team at
    the Office of Financial Stability, and I look forward to
    continuing this work should the Senate choose to confirm me.
        Thank you, Chairman Johnson and Ranking Member Shelby, for
    this opportunity, and I look forward to your questions.
        Chairman Johnson. Thank you, Mr. Massad.
        Ms. Felton, do you have family to introduce?

       STATEMENT OF WANDA FELTON, OF NEW YORK, TO BE FIRST VICE
      PRESIDENT AND VICE CHAIR, EXPORT-IMPORT BANK OF THE UNITED
                                 STATES

        Ms. Felton. Yes, Senator, I do: my husband, Mike Owens, who
    is sitting right behind me; and my mother, Maro Lester. I also
    have several friends here: my best friend, Ivonia Slade, and my
    dear friends, Lesley Redwine and Grace Speights, who attended
    college with me.
        Senator Shelby, please allow me to express my sincere
    sympathies for the devastation in your State.
        Chairman Johnson, Senator Shelby, and distinguished Members
    of the Committee, I am honored to appear before you today as a
    nominee for the position of First Vice President and Vice Chair
    of the Export-Import Bank of the United States. To say that I
    am deeply honored to have the opportunity to serve my country
    in this capacity does not begin to capture my feelings. I am
    awed and I am humbled. And I am so grateful to President Obama
    for the opportunity to serve him and our country.
        Briefly, I have more than 25 years of financial industry
    experience. I began my career, as noted earlier, as a loan
    officer at Ex-Im Bank. I understand and am committed to the
    Bank's mission. Creating good-paying jobs that can sustain the
    American middle class and promote the competitiveness of U.S.
    companies overseas, these are imperatives in the current
    economy. To my knowledge, Ex-Im Bank is the only lever
    available to our Government to accomplish these goals without
    burdening taxpayers. As such it is a vital tool.
        However, I believe that the imperative extends beyond the
    current economic cycle. Maintaining American competitiveness
    over the long term is a strategic imperative. President Obama
    has observed that 95 percent of the world's customers are
    outside the United States. I believe that American businesses--
    large and small--must capture a larger share of this market so
    that our country can continue to prosper.
        Under Chairman Hochberg, Ex-Im Bank's activity has
    increased dramatically with many innovative programs that
    stretch every dollar and leverage every resource the Bank has
    available. Ex-Im Bank's support for small businesses is at an
    all-time high. There are new programs that provide outreach,
    training, and financing to help small businesses penetrate
    overseas markets. This financing fills a void left by the
    banking industry. If I am confirmed, I will be committed to
    helping to build on this success.
        I believe I bring a skill set that will allow me to make a
    meaningful contribution. My experience in banking gives me the
    tools to perform my primary duty, which is to assess the
    creditworthiness of transactions that are brought before the
    Board. Should I be confirmed, I will be committed to ensuring
    that the Bank remains self-financing. I see the role as
    fulfilling a fiduciary duty to the American taxpayer.
        If confirmed, I also feel well suited to help grow U.S.
    exports in Sub-Saharan Africa. I understand this is a
    congressional mandate and believe that I can contribute in this
    area as well. I have experience working in South Africa and
    Nigeria, two of the nine countries which Ex-Im Bank has named
    as primary markets. There is a growing need in Africa and many
    emerging markets for equipment and services to build basic
    infrastructure, telecom, transportation, and other areas. These
    are needs which American businesses can and should supply. I
    believe that my experience positions me well to pursue this
    mandate.
        For the past 15 years, I have performed due diligence on a
    number of transactions involving emerging markets. For example,
    in 1994, I advised CalPERS and the New York State Common
    Retirement Fund as they made their first private equity
    investments in post-apartheid South Africa.
        Mr. Chairman and Members of the Committee, thank you for
    the opportunity to seek your support for my nomination. I look
    forward to answering any questions you may have for me.
        Chairman Johnson. Thank you, Ms. Felton.
        Mr. Mulvaney, do you have family and friends to introduce?
        Mr. Mulvaney. I do, Mr. Chairman: my wife, Susan, and my
    daughters, Kate and Rachel, who are right behind me.
        Chairman Johnson. Welcome. Please proceed.

    STATEMENT OF SEAN MULVANEY, OF ILLINOIS, TO BE A MEMBER OF THE
      BOARD OF DIRECTORS, EXPORT-IMPORT BANK OF THE UNITED STATES

        Mr. Mulvaney. Mr. Chairman, Senator Shelby, other Members
    of the Committee, please allow me also to start by expressing
    deep appreciation for the opportunity to appear before you. I
    am honored to be a candidate for the Board of the Export-Import
    Bank of the United States. As a former congressional staffer, I
    understand and recognize the importance of the Committee and
    this hearing. I would also like to thank President Obama for
    nominating me to this position, as well as Senator McConnell.
    If confirmed, I would welcome the opportunity to serve.
        Over the course of my career, I have had several positions
    that have contributed to my candidacy for the position. These
    positions span the private and public sectors and include
    experiences in management, U.S. trade policy, budget, and
    international affairs. If confirmed, I stand ready to leverage
    these experiences in support of the Bank at this critical time
    during the ongoing U.S. recovery from the economic crisis.
        Let me express some key commitments and priorities in this
    hearing.
        First, I would like to express my commitment to the Bank's
    mission. While Ex-Im Bank may be a small and a lean agency, its
    mission is by no means insignificant or modest. Last year, the
    Bank supported over $34 billion of U.S. exports with
    authorizations of over $25 billion. This financing support was
    essential to sustain over 227,000 American jobs at more than
    3,300 companies. Since my nomination, I have had a few
    opportunities to interact with the Bank's staff. In these
    initial meetings, I have quickly appreciated the Bank's
    professionalism and a clear sense of purpose that emanates from
    its employees. If confirmed, I would be honored to work with
    the Chairman and the rest of the organization.
        Second, I am committed to the Ex-Im Bank's strong
    relationship with the legislative branch. The Bank has earned
    the trust and confidence of this Committee and the Congress.
    Even though the Bank's operations are self-sustaining, the Bank
    extends the full faith and credit of the United States as it
    supports U.S. exports and jobs. It is important that this trust
    and confidence be preserved in the years ahead, particularly as
    the Bank seeks reauthorization.
        Third, I am committed to the Bank's partnership with other
    Federal agencies. The Bank plays a vital complementary role to
    the programming of organizations like OPIC, TDA, SBA, USTR, and
    the Department of Commerce. Together, the Bank and these
    agencies enable greater U.S. economic engagement in the global
    economy so that the United States can secure economic growth,
    job creation, and prosperity.
        If confirmed, I would hope to work with Chairman Hochberg
    and the Bank staff on a few areas.
        First, the Bank has developed a strategic plan for 2010
    that includes a number of priorities, including expanding
    awareness of Ex-Im Bank services through increased outreach and
    partnerships, increasing the number of small- and medium-sized
    businesses using Bank services, and targeting business
    development in emerging markets with high potential for U.S.
    export growth. A key statistic I have come to appreciate in
    this nomination process is the fact that over 20 percent of the
    dollar volume and 85 percent of its transaction volume benefit
    American small business.
        Finally, I firmly believe in the practice of measuring for
    results. I would consider it an important part of my job to
    understand and improve Bank metrics that give stakeholders a
    sense of its performance over time, particularly mitigating
    risk in its operations to the U.S. taxpayer.
        Again, I appreciate the opportunity to be here, Mr.
    Chairman and Senator Shelby, and I look forward to answering
    any of your questions.
        Chairman Johnson. Thank you, Mr. Mulvaney.
        Will the clerk put 5 minutes on the clock?
        Mr. Cohen, as you noted in your statement, combating
    illicit finance protects our financial system from abuse by
    money launderers, terrorist financiers, weapons proliferators,
    and others engaged in financial crime and helps to advance our
    most critical foreign policy and national security objectives.
    Can you describe the overall state of the Treasury Department's
    efforts in this area and where you think we need to more
    clearly focus in the coming years to ensure a more effective
    counterterrorist financing effort? Are there tools that you do
    not now have that you think would be useful in this fight?
        Mr. Cohen. Thank you, Mr. Chairman. I would say that the
    state of the overall Treasury effort to combat terrorist
    financing is quite good. We have in TFI an integrated approach
    to combating terrorist financing that includes the policy
    developments that come from the Office of Terrorist Financing
    and Financial Crimes, the office that Mr. Glaser has been
    nominated to lead; the Office of Intelligence and Analysis, an
    intelligence shop in the Treasury Department, and I would note
    that we are fortunate to be the only finance ministry in the
    world that has an in-house intelligence unit that is dedicated
    specifically to the intelligence related to following the money
    and combating terrorist financing and other forms of illicit
    finance; the Office of Foreign Assets Control, which
    administers our Counterterrorist Financing Executive Order; and
    FinCEN, which also contributes by regulating the domestic anti-
    money laundering market and the Bank Secrecy Act and gathering
    information.
        We bring all of that information together in targeting our
    efforts to combat terrorist financing, and it involves both
    taking specific targeted actions against terrorist financiers,
    the donors, the facilitators, and others who are involved in
    moving the money, but also, importantly, engaging with
    counterparts overseas.
        I think one of the most effective things that we as a
    Department do is interacting with foreign governments, foreign
    central banks, foreign financial institutions, and foreign
    intelligence services, sharing information, sharing best
    practices, learning from one another about the networks that
    are supporting the terrorist activity.
        So bringing together this integrated approach, I think we
    have made some important strides in weakening, in particular,
    Al Qaeda core. I think we have, obviously, work still to be
    done with Al Qaeda core and with the affiliates, Al Qaeda in
    the Arabian peninsula, Al Qaeda in the Islamic Maghreb, Al
    Shabaab. These are all serious challenges. They all depend on
    receiving financing in order to survive and we will continue to
    bring to bear all of the resources that I mentioned in
    attacking those problems.
        Chairman Johnson. Mr. Glaser, I understand you are working
    hand-in-hand with Acting Under Secretary Cohen to counter
    terrorist financing, weapons proliferation, money laundering,
    and similar scourges as he did with his predecessor, Stuart
    Levey. I gather that part of your efforts will focus on anti-
    narcotics and anti-money laundering efforts on our Southern
    border. Can you describe for us the scale of the problem and
    how we are combating it, including new ways being used by the
    cartels to smuggle in funds and prepaid digital stored value
    cards. Do you think we are winning this war, losing it, or just
    holding our ground?
        Mr. Glaser. Thank you, Mr. Chairman, for the question,
    because I think it is a really important issue and it is an
    important issue for the U.S. Treasury Department, in
    particular, to be focusing on. In my opening statement, in
    David's opening statement, we spent a lot of time talking about
    all of the innovative work that we have done over the years in
    terms of mapping out the financial networks that support
    regimes such as North Korea, Iran's nuclear proliferation
    networks, terrorist organizations like Hamas and Al Qaeda.
    There has been a tremendous amount of effort from a systemic
    level to understand those networks and then to look at the
    tools that we have, sanctions, tools, regulatory tools, law
    enforcement tools, diplomatic tools to attack those networks,
    to disrupt and dismantle those networks.
        There has not been the same type of thought process, I
    think, or enough of the type of thought process that has gone
    into looking at the narcotics networks and I think that that is
    something that we could really innovate on, and I think that
    that is something that we at Treasury could really lend our
    assistance to. There has been a tremendous amount of work that
    has been done by the DEA, by the Justice Department, by all our
    law enforcement agencies in case-driven efforts to identify
    individuals, to arrest them, to take down narcotics
    organizations, and they have done heroic work on that. We
    ourselves have contributed to that through our kingpin
    designations. That said, I think that we can do some more
    systemic work in understanding these flows.
        Precisely to the question that you asked, later this month,
    I am going to be traveling down to Mexico to meet with my
    counterpart in the Mexican Finance Ministry and then we are
    going to do something that I do not think has been done before.
    He and I are going to do a joint Mexican-United States visit to
    Central America, to places like Guatemala and Panama, so that
    we and Mexico can work together to begin to jointly understand
    precisely how these broad networks work and then look at our
    array of tools, which is what we do in TFI, look at our array
    of financial tools to see how we could target it.
        I think that a good example of the value that we could
    bring to this is an action that we at the Treasury Department
    took recently with respect to Lebanese Canadian Bank. Lebanese
    Canadian Bank is a bank in Beirut that is part of the global
    narcotics financing network. When I first started in this job,
    when we looked at the drug cartels, we looked at a system that
    was limited to the Western Hemisphere. Now, it is a system that
    is worldwide--Africa, the Middle East, Asia. The action that we
    took in coordination with the DEA to target this bank in
    Beirut, which, by the way, involved a network with ties to
    Hezbollah, allowed us to really find a way to disrupt the way
    these drug cartels are moving their money. I think we could do
    more of that and I look forward to working on that if
    nominated--if confirmed. Thank you, Chairman.
        Chairman Johnson. Thank you, Mr. Glaser.
        Senator Shelby.
        Senator Shelby. Thank you, Mr. Chairman.
        Mr. Cohen, although there has been some success in
    sanctioning Iranian banks, Iran's nuclear program and support
    for terrorist organizations continues, I believe, unabated.
    Financing for these activities must be coming from somewhere,
    so my question to you is this. What role, if any, do you
    believe that the Central Bank of Iran plays in supporting
    Iran's nuclear proliferation activities or helping businesses
    evade U.S. or U.N. sanctions on Iran, and what is the
    Treasury's criteria for sanctioning the Central Bank of Iran,
    if you have one?
        Mr. Cohen. Thank you, Senator Shelby. I want to begin by
    also extending my condolences and sympathy to you and to your
    constituents.
        Senator Shelby. Thank you.
        Mr. Cohen. With respect to the Central Bank of Iran, we are
    very, very focused on the role the Central Bank of Iran may
    play in supporting Iran's nuclear program as well as its
    support for terrorism. I would note that in the most recent
    Security Council Resolution 1929 from last June, the Security
    Council made special pains to point out that vigilance is
    required with respect to the Central Bank because of its
    potential role in supporting Iran's nuclear program and its
    ballistic missile program.
        We at the Treasury Department in several FinCEN advisories
    have noted for our financial institutions the potential that
    the Central Bank of Iran could be involved in that sort of
    activity. The criteria that we apply for the Central Bank of
    Iran is the same criteria that we would apply for any financial
    institution. That is, if we have the evidence, if we have the
    evidence that the Central Bank of Iran is involved in
    proliferation activities or in supporting terrorism, we will
    take that into account and we will, if the facts----
        Senator Shelby. What do you mean when you say you will take
    it into account? What are you really telling us?
        Mr. Cohen. I am telling you that this is something that we
    are very focused on----
        Senator Shelby. OK.
        Mr. Cohen. We are looking for evidence that would suffice,
    and we need to take this into account in our general policy of
    applying pressure on Iran.
        Senator Shelby. OK. Mr. Glaser, what are the main lifelines
    of Iranian financing for its nuclear and terror programs right
    now? In other words, where are they getting the money? I know
    they have a lot of oil and gas. We understand that.
        Mr. Glaser. Thanks for the question, Senator Shelby. You
    know, again, just to step back for a second, when we really
    first started working on this issue in earnest at the Treasury
    Department back in 2006, it was more or less outside the United
    States's business as usual with Iran in terms of the financial,
    international financial community. There are very few, if any,
    financial institutions that were voluntarily not doing business
    with Iran.
        We have made tremendous progress over the years on that,
    and I think a watershed moment was last summer when in very
    quick succession we had 1929, U.N. Security Council Resolution
    1929, CISADA, and then the very robust implementation of the
    U.N. resolution by the E.U., Republic of Korea, and Japan. So
    where we started, where it was business as usual, now what we
    are left with there is, as your question implies, there are a
    few lifelines, and the challenge now--and in some ways it is a
    good challenge to have, in some ways it is making it more
    challenging--is to identify those.
        I think one of the more important lifelines that exists is
    a bank in Europe called EIH, which I know this Committee has
    focused on. It is an Iranian-owned bank in Germany which,
    again, provides one of the last real broad points of access for
    Iran into the European financial system. It is a bank that we
    designated at the Treasury Department under our WMD
    proliferation authorities some time ago and it is one that we
    have been engaged very closely with the Germans and with the
    European Union as a whole on because we think it is very
    important that that lifeline be closed down.
        Senator Shelby. What basic initiatives that you have been
    dealing with have been successful against the Iranian financial
    lines?
        Mr. Glaser. Well, again, I think----
        Senator Shelby. And I do not want to say about all of it,
    not here.
        Mr. Glaser. I am sorry?
        Senator Shelby. I said, you might not want to disclose all
    of it----
        Senator Shelby. No. No. I certainly understand the
    question. I think what we have really succeeded in is bringing
    an international coalition together to make the international
    financial system very difficult for Iran to access. I will say,
    I think that Congress enacting CISAD and President Obama
    signing CISAD into law was extremely effective in cooling the
    willingness of banks around the world to do business with
    designated Iranian banks. I think that has been extremely
    effective.
        Senator Shelby. OK. Mr. Massad, former Special Inspector
    General for TARP Neil Barofsky wrote in a recent op-ed that he
    strongly disagrees with the Obama administration's assertion
    that TARP has been effective by any objective measure.
    Particularly, Mr. Barofsky noted that the Home Affordable
    Modification Program, HAMP, has been a colossal failure. HAMP
    was announced with the promise by the Administration to help up
    to four million families with mortgage modifications. However,
    it is my understanding there have been only about 600,000
    permanent modifications to date and more than 800,000 trial
    modifications have failed and been canceled. Why has HAMP
    failed to live up to the expectations? Have you done any work
    there?
        Mr. Massad. Yes, sir. I would be happy to answer that
    question. I would say, first of all, that HAMP has not failed.
        Senator Shelby. OK.
        Mr. Massad. I think we have helped many, many people, both
    directly and indirectly. As you point out, about 630,000 have
    entered into permanent modifications. We will be coming out
    with a new report later this week which will indicate
    additional families----
        Senator Shelby. But it has not lived up to expectations.
    You have got to admit that, have you not?
        Mr. Massad. Yes, sir. We will not achieve three to four
    million----
        Senator Shelby. OK.
        Mr. Massad.----permanent modifications.
        Senator Shelby. All right.
        Mr. Massad. I think there are a couple of reasons for that.
    One is we set eligibility criteria which provide that we do not
    offer assistance to everyone. This program was never meant to
    help stop every foreclosure. We do not help, for example,
    people who can afford their mortgage without Government
    assistance. We also do not help those that even with the
    Government assistance may not be able to sustain their
    situation. We do not help people in million-dollar homes and
    vacation homes and vacant properties. That is factor number
    one. So the eligibility pool today, for example, is about 1.4
    million families.
        Second, servicer implementation has been difficult and
    disappointing in many ways and we have taken many steps to try
    to improve that.
        And finally, it is difficult to reach borrowers sometimes.
        The other thing I would point out, though, is that this
    program has had a very big indirect effect. Prior to the launch
    of HAMP, very few modifications were getting done by the
    industry and the standards that we have set have pushed the
    industry to do an additional two million modifications on their
    own. So I think it is important to look at both the direct and
    indirect effects.
        Senator Shelby. Mr. Chairman, I have a number of other
    questions I would like to submit for the record, if it would
    please you.
        Chairman Johnson. It will be received.
        Senator Shelby. Thank you.
        Chairman Johnson. Senator Reed?
        Senator Reed. Thank you very much, Mr. Chairman. I, too,
    want to join you in offering our support and help to the
    Senator from Alabama with those devastating tornadoes.
        Senator Shelby. Thank you.
        Senator Reed. We saw some floods in Rhode Island last
    summer and we received your help and assistance, Mr. Chairman,
    and we look forward to helping you.
        Senator Shelby. Thank you.
        Senator Reed. Mr. Cohen and Mr. Glaser, how do you measure
    the effect of these sanctions? Is there a metric that they are
    using? And then, second, as we impose sanctions, individuals
    adapt and modify their behavior. Can you indicate in that
    regard what is the most disturbing trend in terms of their
    reaction to the sanctions? Both of you can deal with these
    questions.
        Mr. Cohen. Senator Reed, with respect to the Iran sanctions
    in particular, I think we measure our success in terms of the
    qualitative disruptive impact that the sanctions have on Iran's
    ability to access the worldwide financial system. We have seen
    over the last several years, as Mr. Glaser was mentioning, a
    substantial reduction in the number and quality, frankly, of
    banks around the world that are willing to transact with
    Iranian banks.
        It is unquestionable that that has applied pressure on the
    Iranian government. It is not a pressure that I think is easily
    quantifiable, but we can see it in a variety of different ways,
    that this is having an impact on Iran's ability to engage in
    the transactions that it needs to engage in to support its
    nuclear program and to support terrorism around the world. And
    it is also, just more generally, imposing pressure on the
    Iranian government, which is obviously part of the dual-track
    strategy that we are pursuing as an Administration.
        You know, in other programs, there are other measures of
    success. The Libyan program comes to mind in which we have
    frozen, you know, $35 billion in assets. But that is not a
    measure that is translatable across programs and it is--the
    number of frozen assets is sort of not a measure that we use as
    a metric because it is dependent, obviously, on so many
    variables that are outside of our control, including the use of
    the U.S. financial system.
        So I think for each program, the measures are different,
    but the goal of each of these sanctions programs is to disrupt
    and to apply pressure as a sort of a coercive measure to
    encourage change in behavior, and that is how we measure the
    effectiveness.
        Senator Reed. Mr. Glaser, you might take the second
    question, which is basically you have been involved in three
    Administrations. What trends, and most disturbing trends, do
    you see in terms of response to these sanctions?
        Mr. Glaser. Thank you, Senator, and I will focus
    specifically on our Iran sanctions program, because that is
    what I think your question was focused on. I think you are
    right. When we think about how we are going to apply sanctions
    and what tools to use with respect to Iran, we need to
    understand that this is a dynamic process, that as we impose
    sanctions, Iran is going to respond to it, and that then
    creates challenges and opportunities for us in terms of how we
    respond, and there is an inevitable cat-and-mouse game that
    goes on. So as we identify banks for designation, other banks
    emerge that provide Iran opportunities.
        One good example of that, for example, was Post Bank. Post
    Bank had never really been a particularly important bank for
    Iran internationally. It is their postal bank. After the broad
    international sanctions against Iran and other large state-
    owned banks, all of a sudden, you start seeing a huge amount of
    transactions emanating from Post Bank. Essentially, Post Bank
    was stepping into the shoes of these other Iranian banks. That
    was something that we saw. We responded and applied sanctions
    on Post Bank. So there is an element of cat and mouse to it.
        Additionally, it is important to look at other alternative
    mechanisms. Is Iran looking to purchase banks surreptitiously?
    Is Iran looking to use mechanisms outside of the formal
    financial system? We need to be careful about that. Is Iran
    looking at sort of second-tier financial centers? So now that
    we have closed off Europe, we have closed off South Korea, we
    have closed off Japan, is Eastern Europe something that Iran is
    interested in?
        I took a visit earlier this year to Albania and to Ukraine
    to discuss it with them, the challenges they face with respect
    to potential Iranian involvement. As we look at South Korea and
    Bank Mellat-Seoul being cutoff to the Iranians, will they start
    looking to Chinese financial institutions more? That is
    something that we need to keep our eye on.
        But I just want to conclude by saying there is more to it
    than just the cat-and-mouse game. Iran has a real economy, a
    large economy. They are a large country. It is--as their access
    to the international financial system decreases, it is not like
    the second-tier options and the third-tier options and the
    fourth-tier options are perfect substitutes for the first-tier
    options, and that over time is going to hopefully apply the
    pressure that we need to apply to seek a change in Iranian
    attitudes and policy.
        Senator Reed. Thank you. Mr. Chairman, I have no further
    questions, but I do want to recognize Mr. Massad. We have had
    the chance to have hearings together. I support you and your
    efforts and thank you, sir. And to our nominees at the Ex-Im
    Bank, good luck. Thank you.
        Mr. Massad. Thank you.
        Chairman Johnson. Senator Johanns?
        Senator Johanns. Thank you, Mr. Chairman.
        Let me just start out and say to all of you,
    congratulations on great careers. You have done a lot of
    interesting things, served your nation and wanted to do some
    more and I appreciate that.
        Let me, if I might, focus, if I could. Mr. Cohen and Mr.
    Glaser, I think you can see from the bipartisan questioning on
    the sanctions that there is a concern that we in Congress pass
    these laws, we work with the Administration, we work with
    Treasury, whoever. We put something in place that gets
    tremendous bipartisan support here. Just literally, by the time
    it is done, there are no votes against it and no controversy,
    and then it is kind of like, what is happening? Is anything
    coming out of this?
        So let me start with a very, very direct question, and that
    is has any foreign-owned non-Iranian financial institution been
    sanctioned under the Iran sanctions bill? Anyone out there?
        Mr. Cohen. With respect to the law that was passed just
    this past summer----
        Senator Johanns. Right.
        Mr. Cohen.----we have not yet sanctioned any foreign
    financial institution outside of Iran under that legislation.
    But I would hasten to add that that legislation has been
    extraordinarily effective and very powerful and we have used it
    in traveling around the world, in meeting with close to 20
    foreign governments, central banks, close to 50 financial
    institutions where we had a concern that the financial
    institution, the foreign financial institution may be involved
    in significant transactions with either designated Iranian
    banks or with IRGC entities and we have had very good success
    in moving those financial institutions away from interactions
    with Iran.
        So as we began this effort over the summer, as Mr. Glaser
    had mentioned earlier, we had seen over the preceding several
    years many financial institutions stepping out of the Iranian
    market, but there were still some that remained involved with
    these designated Iranian banks, and CISADA has been a very
    effective tool in going after many of those banks that remained
    engaged with designated Iranian institutions.
        That said, it has not been uniformly effective and we are
    focused quite vigorously on identifying and pursuing those
    financial institutions that continue to maintain significant
    transactional activity with designated Iranian banks. We have
    not yet designated a bank under CISADA, but that should not be
    taken to mean that we will not.
        Senator Johanns. I do not take it to mean we will not. I am
    just curious as to, you know, some months have now passed, why
    that action would not be taken if you have got banks out there
    with significant financial transactions relating to Iran. Why
    would we not be pursuing that leverage?
        Mr. Cohen. Senator, we are pursuing the leverage. Our first
    best option is to get them to stop. Our second best option is
    to apply sanctions, and without getting too much into the
    details of any particular investigation that we are conducting,
    I can tell you that we are, I would say, close to a decision
    point on several institutions.
        Senator Johanns. Mr. Glaser, do you have anything to add on
    that?
        Mr. Glaser. Thank you, Senator. Not surprisingly, I agree
    with my present and future boss----
        Senator Johanns. That is a good idea.
        [Laughter.]
        Mr. Glaser. But----
        Mr. Cohen. Not always the case, I would add.
        Senator Johanns. Yes, I know.
        Mr. Glaser. I do think it is--I think it is important to
    emphasize that we are using the leverage that CISADA has given
    us and we have seen a dramatic reduction in Iranian access to
    the financial system as a result. The challenge now, as you
    highlight, is to pick out the points where it remains, the
    points that we have not been able to exert adequate leverage,
    the banks that think that they are immune, and target them, and
    that is something that we are committed to doing.
        Senator Johanns. I am running out of time, but let me wrap
    up and just say, this is an example of exactly what I was
    saying with my opening. We passed the law. We want something
    done. You do, too. I am not questioning your desire to be as
    effective as you can. But there is a point at which we mess
    around with these financial institutions, there is a point at
    which it is time to just drop the hammer. And I can almost
    assure you that here in Congress, you are going to get support
    for that effort because we want these laws to be effective. So
    good luck to all of you.
        Chairman Johnson. Senator Bennet?
        Senator Bennet. Thank you, Mr. Chairman, and I would like
    to thank all of the witnesses here today for your willingness
    to serve, and congratulations on the nomination.
        Just to pick up where Senator Johanns left off for a
    second, on the Iranian sanctions, can you give us an
    impression, either of you, of whether there is a geographic
    profile of the 50 or so institutions that you have been most
    worried about, and how--and maybe specifically how some of
    these institutions actually have modified their behavior in a
    way that makes you feel confident that they do not need to be
    sanctioned, they are responding to the law.
        Mr. Cohen. I would say, Senator Bennet, that there is not a
    particular geographic profile other than it is obviously not
    the United States----
        Senator Bennet. Right.
        Mr. Cohen.----and largely not in Europe. ``Largely''
    probably leaves too much room there. Not in Europe. What we
    have are financial institutions, you know, whether it is in
    Eastern Europe and in the Gulf, in Asia, a variety of
    jurisdictions that have been the focus of our efforts. And what
    has satisfied us, and I will say it is a trust but verify
    approach, is commitments from the financial institutions that
    to the extent that they were engaged in any of the transactions
    that would be sanctionable under CISADA, that they are stopping
    entirely. Obviously, we do not take them just at their word. We
    pursue whatever information we can to assess whether their
    representations are accurate. But that is what the statute
    focuses on is significant transactions with designated Iranian
    institutions, but I think for our purposes, we are looking for
    these banks to completely exit the market.
        Senator Bennet. And to shift to Al Qaeda for a second,
    because you raised it, Mr. Cohen, in, I think, one of your
    answers to the Chairman, I wonder--you had said that you had
    had some success, you think, in interrupting the financial
    networks that supported Al Qaeda, and I wonder if you could
    describe that a little bit to the extent that you can in a
    public hearing, the effect that Osama bin Laden's death might
    have on that financing, if any. And then can you give us a
    sense, either of you, of how overlapping the networks are for
    Al Qaeda, Al Qaeda on the Arabian Peninsula, Hamas, or any
    other terrorist organizations, just an impression of whether
    you are seeing some geographic relationship here.
        Mr. Cohen. The success that we have had with respect to Al
    Qaeda core, to the Al Qaeda leadership in Pakistan, has been
    something that has developed over a number of years and is the
    result of both taking targeted actions against the facilitators
    who were involved in moving money for Government-Qaeda as well
    as very dedicated engagements with counterparts in the Gulf. We
    have been working with governments in the Gulf to identify the
    networks that are where the money is raised and the money is
    moved into Pakistan, and it has really put a fair amount of
    pressure, financial pressure on Al Qaeda. Frankly, some of the
    other actions that the governments, you know, some of the other
    things that we have been doing in Afghanistan and elsewhere has
    also put pressure on Al Qaeda core.
        The death of bin Laden is obviously a tremendously
    important step. I think it will--it takes away a person who
    was, at a minimum, a symbol that was helpful in raising money.
    But I think our assessment is that it is by no means the end of
    the road in terms of going after the financing.
        I will just make one observation on that. Obviously, all
    credit for that action goes to other components of the
    Government. The Treasury Department did not play a role. But
    the reports are that what led us to bin Laden was a
    facilitator, an information facilitator. What we do in large
    part is go after financial facilitators and use that leverage
    as a way to go after the senior leadership and the
    organizations themselves, and I think it does point up to some
    extent the value of the approach that we pursue, which is to
    sort of, much like a law enforcement agency builds its case by
    going after the low-level people and building its way up, we go
    after the networks and the facilitators in the networks and
    that has been quite effective in disrupting the financing for
    these organizations.
        The question about overlapping networks, you know, there
    are overlapping networks and success with respect to Al Qaeda
    core does to some extent yield some success with the other
    organizations. But it is also the case that over the last
    several years, we have seen this franchising of the Al Qaeda
    network so you have Al Qaeda in the Arabian Peninsula, you have
    Al Qaeda in the Islamic Maghreb, you have Shabaab in Somalia.
    They also have independent sources of financing and our efforts
    to disrupt Al Qaeda core have some impact, but clearly not
    complete impact on those other entities. So we need to, you
    know, for each one of those and other terrorist groups, we need
    to apply the same theory but different tools--but different
    specific application.
        Chairman Johnson. Senator Hagan?
        Senator Bennet. Thank you.
        Senator Hagan. Thank you, Mr. Chairman.
        Sort of following up on Senator Bennet's question, Mr.
    Glaser, in your testimony you stated that you would lead the
    Office of Terrorist Financing and Financial Crimes in
    developing innovative approaches to undermining illicit finance
    and strengthening our national security. What do you see as the
    most imminent threats in this area? And what are some of the
    innovative approaches that you would advocate?
        Mr. Glaser. Thank you, Senator, for the question. I think
    the challenges that we face, I think the targets that are out
    there that are imminent, are the ones that we have been focused
    on around North Korea, terrorist groups, organized crime
    groups, WMD proliferators.
        There are emerging issues. I made reference in my opening
    statement as well to recent developments in the Middle East,
    and within the last month or so, the Treasury Department has
    been quite active in applying financial pressure, just last
    week, when President Obama announced the new Executive order
    with respect to Syria. So there is a whole range of challenges
    that we have; there is a whole range of international security
    problems that we face.
        When I talk about innovative solutions to those problems,
    what I really have in mind is, again, what I think TFI, the
    Office of Terrorism and Financial Intelligence, as a whole
    brings to the table in all of this, which is our ability to
    come at it from the perspective of a finance ministry, to look
    systemically at the way these financial networks operate and
    then think creatively about what sort of tools do we have to
    disrupt those networks.
        In my testimony already today, I think I pointed to two of
    the recent, again, innovative approaches that we have taken.
    Again, I could point to the recent action we took under Section
    311 of the PATRIOT Act with respect to Lebanese Canadian Bank,
    a bank that stood at the center of a global narcotics and
    money-laundering network, again, with ties to Hezbollah,
    allowing us to use authority to disrupt a network, to initiate
    a process within the Lebanese Government to strengthen their
    own money-laundering and financial crimes regulations, and to
    demonstrate the links that all of these illicit activities have
    with Hezbollah. I thought that was a very creative use of our
    authority and a very effective use of our authority.
        I think we would like to see--we would like to do more of
    that, and I think we will do more of that as we move forward.
        Senator Hagan. When you commented on weapons of mass
    destruction, in this setting can you go over that in a little
    bit more detail from the proliferation?
        Mr. Glaser. Well, sure. I would put our actions in sort of
    two broad categories. The first set of initiatives that I would
    highlight would be our overall efforts with respect to North
    Korea and around putting wide financial pressure on those
    countries, and that is something that we have been doing for
    years now. What we do in that regard is, again, marshal all of
    our tools, so unilateral sanctions under Executive Order 13382,
    which is the Executive order specific to WMD proliferation;
    working on multilateralizing these efforts through
    organizations like the Financial Action Task Force, U.N.
    Security Council resolutions; and then importantly, as
    important as anything else, working with the private sector to
    encourage financial institutions around the world to have very,
    very robust implementation of these obligations. And the goal
    is to create a dynamic within the financial system that tends
    to isolate these regimes, either as a matter of international
    law, as a matter of domestic law, or as a matter of
    international practice. And I think that we have had a lot of
    success on that.
        Senator Hagan. Thank you.
        Mr. Mulvaney and Ms. Felton, Congress has enacted
    legislation to restrict the Export-Import Bank from making
    loans or providing guarantees in relation to certain projects
    or companies that conduct prohibited business in or with Iran.
    If confirmed, will you ensure the Export-Import Bank strictly
    adhere to congressional restrictions on the provisions of funds
    related to Iran?
        Ms. Felton. Senator, yes. I believe, first of all, that the
    Export-Import Bank takes the sanctions against Iran very
    seriously, and if confirmed, I would make sure that every
    transaction that came before the Board during my tenure is
    compliant.
        Mr. Mulvaney. Let me also say that, if confirmed, I would
    follow the law as well. The Ex-Im Bank does not conduct foreign
    policy. It follows the foreign policy set by the President and
    directives from Congress.
        Senator Hagan. Thank you, Mr. Chairman.
        Chairman Johnson. Senator Menendez.
        Senator Menendez. Thank you, Mr. Chairman.
        Mr. Cohen, you just recently returned from Turkey, as I
    understand, where I also understand--and correct me if I am
    wrong--you pressed the Erdogan government on Turkey's financial
    ties to Iran. And for me, it is pretty clear that Iran has
    turned to Turkey to conduct illicit financial transactions in
    support of its nuclear program, and that it is actively seeking
    to establish new financial mechanisms in Turkey to bypass and
    evade U.S. and other international sanctions and gain access to
    European markets.
        What was the Turkish Government's response to your
    concerns? And--well, let me hear the answer to that first.
        Mr. Cohen. Senator Menendez, I was just in Turkey last week
    raising the concerns that you just articulated. We have seen, I
    think, two trends recently in Turkey. We have seen the
    Government at the highest levels talking up interaction with
    Iran and expanded trade with Iran and, with that, naturally
    expanded financial relationships. We have also seen, on the
    other hand, the financial sector in Iran--in Turkey, rather,
    being much more cautious. It is in part the effect of CISADA
    that I was addressing with Senator Johanns earlier, and in part
    their recognition that if they want to be part of the
    international financial system, they are much better off
    isolating Iran.
        My trip to Turkey was focused on raising the question with
    the Government of the extent to which their rhetoric is
    conflicting with the full compliance with their U.N. Security
    Council obligations and, more generally, dissonant with the
    international community's efforts to apply maximum pressure on
    Iran. The reaction that I got was, you know, first of all, the
    Turkish Government reaffirming strongly their opposition to the
    development of a nuclear program in Iran, an acknowledgment, I
    would say, of the importance of the international sanctions
    regime; and, you know, a hearty discussion about the place of
    Turkey both geographically and as a leader in the region, and
    their desire to expand their economy, not just with Iran but
    expand their economy generally.
        Senator Menendez. So let me ask you this, though--I
    appreciate that. But as I understand it, there are certain
    Turkish financial institutions that are currently doing
    business with a designated Iranian bank. Are we ready to
    sanction them?
        Mr. Cohen. Senator, as a matter of longstanding Treasury
    policy, we cannot comment on any particular action that we may
    take. I will say, though, that----
        Senator Menendez. Are we ready to generically sanction
    those that, notwithstanding our overtures, are still doing
    transactions in violation of CISADA?
        Mr. Cohen. Well, that is----
        Senator Menendez. I voted for you in the Finance Committee
    because I wanted to move your nomination along. But I want
    someone who is going to vigorously pursue the law, and so I am
    trying to get a sense from you whether you are going to
    vigorously pursue the law, or are we just going to have a
    sanctions law that ultimately is sitting out there unenforced
    or enforced with low-level participants instead of being
    enforced when there is a significant entity?
        Mr. Cohen. Absolutely, Senator, and we are committed to
    enforcing the law. And just as you say, generically, if we have
    a financial institution that is not responsive to our overtures
    and is engaged in activity that is sanctionable under CISADA,
    we will pursue that very vigorously.
        Senator Menendez. Let me ask you this: It is no secret that
    while China eventually supported U.N. sanctions on Iran, it did
    so reluctantly, and only after it succeeded in significantly
    watering down the sanctions. Iran continues to use Chinese
    companies to procure hardware for its nuclear and missile
    programs, and Chinese companies continue to invest in Iran's
    energy sector.
        So what financial tools does the United States have to
    press China to reduce that relationship with Iran? And why has
    the United States been willing to confront China on trade
    issues, but then unwilling to sanction Chinese banks or energy
    companies for dealing with Iran?
        Mr. Cohen. Well, with respect to the energy aspects, that
    aspect of CISADA, as you know, is implemented by our colleagues
    at the State Department, and they have been pursuing those
    issues. You know, for the Treasury Department I can say that
    there is no country that is exempt from the application of
    CISADA. We have both CISADA tools as well as other tools that
    can be brought to bear in the appropriate circumstance to
    address whether it is Chinese financial institutions or other
    Chinese businesses that may be supporting the Iranian
    proliferation activity.
        We have in the past used those tools, and, you know, I can
    assure you that in the event that we have a good case, we will
    proceed.
        Senator Menendez. Mr. Chairman, I hope, I would urge the
    Chair--I know you have a busy agenda, but at some point to hold
    hearings on the sanctions legislation that we have passed and
    its enforcement. I am seriously concerned, as one of the prime
    movers of that legislation, that a sanctions regime that
    ultimately goes largely unenforced or to low-level players
    sends a message of a toothless tiger. And to the extent that
    Congress had a real intention to see entities sanctioned that,
    in fact, were violating the law, I am concerned that we are
    just not seeing that type of action. So I know you have a very
    busy agenda. I would just urge you at some point to consider
    including that.
        I have a series of other questions for all of these
    witnesses, and I look forward to your answers. Your answers are
    going to, you know, color my decision as to how I vote.
        Chairman Johnson. Mr. Cohen, I gather that the Iranian
    government has been working to craft ways to get around current
    international sanctions. What are the primary ways that you are
    focused on now to combat such efforts by the government of Iran
    to circumvent U.S., U.N., and EU sanctions? What are we doing
    to counter their efforts? Is there anything more we should be
    considering to make those efforts more effective? For example,
    do we need to address by statute the sophisticated barter
    arrangements into which they have reportedly entered to support
    certain transactions? Or can that already be used using CISADA?
        Mr. Cohen. Mr. Chairman, we are very much focused on
    Iranian efforts to develop alternative financial arrangements
    to the financial ties that they had previously. So we are alert
    to efforts of Iran to find banks in jurisdictions where they
    had previously not been present that will do business with
    them. We are alert to efforts by Iran to expand transactional
    activity with the branches of Iranian banks that they have
    overseas.
        To follow up on an earlier answer to Senator Menendez, one
    of the issues that I addresses in Turkey was the existence in
    Turkey of branches of Bank Mellat. That is a concern that we
    have that Iran will use its branches of its state-owned banks
    in Turkey and in several other countries where these branches
    exist to compensate for their lack of access to other financial
    institutions. So we are staying alert to any efforts by Iran to
    develop alternative access to the financial system.
        With respect to barter arrangements, that is also something
    that is on our radar screen and that we are focused on. We are
    happy to work with you and your colleagues on the question of
    whether additional legislative tools might be necessary to
    address those issues. I am not certain that it is, but we are
    very happy to engage in that effort.
        Chairman Johnson. Ms. Felton and Mr. Mulvaney, in large
    part due to the economic crisis, the Ex-Im Bank has seen a 70-
    percent increase in its authorized transactions over the last 2
    years. As the economy continues to recover, how do you think
    the Ex-Im Bank will be affected?
        Ms. Felton. Senator, as I stated in my opening comments, I
    believe that the Ex-Im Bank plays a vital role in helping to
    ensure and promote American competitiveness in international
    markets as well as promoting job growth in this country and
    stimulating the economy. I believe that that is a long-term
    strategic goal that should not be abandoned in any market
    conditions. Going forward, as the economy improves, the Ex-Im
    Bank can continue to make a very important contribution to
    American exporters. I believe that this country has not--let me
    state it differently, had had the luxury of not paying much
    attention to international markets because of the size of our
    domestic market. But going forward, what we are seeing is that
    many, many countries that are substantially less developed than
    the United States are actively pursuing exporting as a strategy
    to grow their economies, and that if the United States is to
    prosper, it has to continue to promote exports.
        Chairman Johnson. Mr. Mulvaney.
        Mr. Mulvaney. Thank you, Mr. Chairman, for the question. I
    interpreted your question as kind of eliciting a discussion of
    some of the key challenges that the Ex-Im Bank faces. One of
    the impressions that I had initially in interacting with the
    Bank staff, which is only about 400 full-time equivalent
    positions, is the enormous level of authorizations the Bank has
    done in the wake of the economic crisis while its staff size
    has remained the same and its admin budget has only increased
    about 8 percent. So I have appreciated that the staff is
    actually accomplishing a lot more with less, with the same
    amount of resources. This has created a little bit of stress on
    the personnel and systems of the institution, and I am
    committed to going to the Bank, if confirmed, and helping the
    Bank through this challenge.
        Another challenge I would frame is the growing competition
    in the global economy and the role that Ex-Im Bank can play in
    helping U.S. exporters and supporting U.S. jobs in that
    competition. When you look at the export credit activity of
    other ECAs around the world, countries like Japan do $130
    billion worth of export credit business, and according to some
    private sector estimates, China has done about $300 billion. It
    puts in perspective the competition that American exporters
    face around the world.
        Chairman Johnson. Thank you, Mr. Mulvaney.
        I thank the witnesses for your testimony and for your
    willingness to serve our Nation. We are going to submit
    questions for the record to you by 12 noon this Friday, May
    6th. Please submit your answers to us by the close of business
    Monday, May 9, so that we can move your nominations in a timely
    manner.
        This hearing is adjourned.
        [Whereupon, at 11:32 a.m., the hearing was adjourned.]
        [Prepared statements and responses to written questions
    supplied for the record follow:]
                      PREPARED STATEMENT OF DAVID S. COHEN
         Nominee for Under Secretary for Terrorism and Financial Crimes
                           Department of the Treasury
                                  May 3, 2011
        Chairman Johnson, Ranking Member Shelby, and distinguished Members
    of this Committee: Thank you for the opportunity to appear before you
    today. It is an honor to be the nominee to serve as Under Secretary for
    Terrorism and Financial Crimes. I want to thank President Obama for the
    confidence he has shown in me by nominating me, and Secretary Geithner
    for recommending me, to serve in this position. Having served for the
    past 2 years as the Assistant Secretary of Treasury for Terrorist
    Financing, I am keenly aware of the very significant responsibilities
    assigned to the Under Secretary for Terrorism and Financial Crimes, as
    well as the consequential contributions that the Under Secretary can
    make in advancing our Nation's security.
        Illicit finance, in its many forms, is a threat to the integrity of
    our financial system, both domestically and internationally. Combating
    illicit finance not only protects our financial system from abuse by
    money launderers, terrorist financiers, weapons proliferators and
    others engaged in financial crime, but it helps to advance our most
    critical foreign policy and national security objectives. The many
    tools that the Treasury Department can deploy--ranging from anti-money
    laundering regulatory oversight, to outreach to counterparts overseas,
    to deploying targeted financial measures focused on particular
    individuals and entities--play an integral role in responding to many
    of the challenges we face. Treasury's unique capacity to understand
    financial flows and the operation of the financial system, analyze
    financial intelligence, map financial and material support networks,
    and take targeted, powerful actions are key to meeting these
    challenges.
        I believe that my professional experience, particularly serving as
    Assistant Secretary for Terrorist Financing since May 2009, has
    prepared me well to undertake the responsibilities of Under Secretary.
        As Assistant Secretary, I have had the opportunity to work very
    closely with the previous Under Secretary, participating in almost all
    aspects of the work of the Office of Terrorism and Financial
    Intelligence (TFI). This has included coordinating closely with my
    colleagues in each of the components of TFI--the Office of Intelligence
    and Analysis, the Office of Foreign Assets Control, the Financial
    Crimes Enforcement Network, and the Treasury Executive Office for Asset
    Forfeiture.
        In my capacity as Assistant Secretary, I have had the chance to
    work on many of the issues in TFI, but I have focused most intently on
    several key issues: First, our use of targeted financial sanctions, as
    well as outreach to the private sector and foreign governments, to
    increase pressure on the government of Iran for its continued refusal
    to live up to its international non-proliferation obligations; second,
    and relatedly, our efforts to financially isolate and apply pressure on
    the North Korea regime for its continued provocative conduct; third,
    our efforts to combat the financing of terrorism, especially financial
    support for Al Qaeda, the Taliban, and other violent extremist groups
    in South Asia; and finally, the effort to ensure that information about
    the true beneficial owners of corporations is available to State and
    Federal law enforcement and regulators pursuing money laundering and
    terrorist financing investigations.
        Prior to serving as Assistant Secretary, I was an attorney for
    close to 20 years, in both private practice and in Government. In
    private practice, I represented institutions and individuals in complex
    financial investigations and litigation, and counseled clients on their
    obligations to comply with Treasury's anti-money laundering and
    economic sanctions laws and regulations. From late-1999 to mid-2001, I
    served in the Treasury's General Counsel's office, focusing much of my
    attention on anti-money laundering law and policy.
        If confirmed, I look forward to working closely with you, as the
    Treasury Department continues to implement the President's priorities
    for safeguarding our financial system from illicit finance. The variety
    and intensity of these challenges are well known to this Committee.
    Effectively addressing them requires great vigilance and constant
    innovation. I would welcome the opportunity to serve our great Nation
    by taking on these challenges as the leader of Treasury's critical work
    to fight illicit finance.
        In closing, I want to thank the Committee for the attention it has
    given to my nomination. If confirmed, I intend to work closely with
    you, Mr. Chairman, the other Members of this Committee and your staff
    to pursue our shared objective of protecting national security and the
    integrity of the financial system. I am deeply committed to maintaining
    the very productive and close relationship that exists between this
    Committee and the Office that I have been nominated to lead.
        Mr. Chairman, I would be pleased to respond to any questions that
    you or Members of the Committee may have.
                                     ______

                     PREPARED STATEMENT OF DANIEL L. GLASER
            Nominee for Assistant Secretary for Terrorist Financing
                           Department of the Treasury
                                  May 3, 2011
        Chairman Johnson, Ranking Member Shelby, and distinguished Members
    of this Committee: Thank you for the opportunity to appear before you
    today. It is a tremendous personal and professional honor to have been
    nominated for the position of Assistant Secretary of the Treasury for
    Terrorist Financing. I would like to thank President Obama for the
    confidence he has shown in me by nominating me, and Secretary Geithner
    for recommending me, for this important position. If confirmed, I will
    certainly work my hardest to meet their high expectations.
        I know time is short, but if you permit me, Mr. Chairman, I would
    like to introduce the members of my family who are here today--my
    parents, Gary and Lillian Glaser, my wonderful wife Laura, and our son
    Ethan. Their love and support over the years have been indispensable,
    and are an important part of why I am able to sit before you today.
        Mr. Chairman, over the course of my career I have served in the
    area of illicit finance under six Secretaries of the Treasury across
    three Presidential Administrations. My positions have included serving
    as an attorney in the U.S. Secret Service Chief Counsel's Office,
    Senior Counselor for Financial Crimes within the Treasury Department's
    Office of General Counsel, Director of the Money Laundering and
    Financial Crimes Section within Treasury's Office of Enforcement,
    Director of Treasury's Executive Office for Terrorist Financing and
    Financial Crimes, and since 2004, Deputy Assistant Secretary for
    Terrorist Financing and Financial Crimes within Treasury's Office of
    Terrorism and Financial Intelligence. Additionally, I have served,
    since September 2001, as the head of the U.S. Delegation to the
    Financial Action Task Force--the premier international body that sets
    anti-money laundering and counter-terrorist financing standards and
    works for their global adoption and implementation. I believe this
    experience has left me well prepared to take on this new position.
        Over the course of these years, I am proud to have been part of the
    team that has built something new and unique at the Treasury
    Department--a finance ministry with a central role in the development
    and implementation of national security policy. This evolution began in
    the late 1990s with Treasury's leading role in the development of the
    first National Money Laundering Strategies, and culminated in March
    2004 with the creation of the Office of Terrorism and Financial
    Intelligence (TFI). TFI brings together a broad and diverse range of
    Treasury's authorities and expertise for two goals: protecting the U.S.
    and international financial systems from abuse, and identifying,
    disrupting, and dismantling the financial networks that support
    terrorist groups, organized crime, weapons proliferators, and countries
    that threaten the national security of the United States. This new
    approach has been successful. We have made it harder for terrorist
    groups to raise and move funds, disrupted the financial networks that
    support drug trafficking organizations, and applied substantial
    financial pressure on regimes such as Iran and North Korea, while at
    the same time making it more difficult for them to acquire the material
    necessary to develop their nuclear programs.
        As the central policy office within TFI, the Office of Terrorist
    Financing and Financial Crimes (TFFC) works to develop and implement
    strategies, and engages with multilateral bodies, foreign government
    counterparts and private sector colleagues, to achieve all of these
    objectives. If confirmed, I will lead TFFC in continuing to develop
    innovative approaches to undermining illicit finance and strengthening
    our national security. Challenges abound. From Iran's and North Korea's
    nuclear programs and other illicit activities, to drug trafficking and
    criminal organizations in the Western Hemisphere and Eastern Europe, to
    global terrorist organizations such as Al Qaeda and Hamas, to the new
    challenges posed by recent developments in the Middle East--never has
    it been more important to strategically and effectively marshal our
    financial tools and those of our allies in support of international
    security.
        In closing, I would like to thank the Committee for its time and
    consideration. If confirmed, I pledge to work closely with you, Mr.
    Chairman, and other Members of the Committee and your staff to advance
    our collective goal of combating illicit finance and protecting
    America. It is my immense honor to sit here before you today and I
    would be happy to respond to any questions you or other Members of the
    Committee may have.
                                     ______

                    PREPARED STATEMENT OF TIMOTHY G. MASSAD
            Nominee for Assistant Secretary for Financial Stability
                           Department of the Treasury
                                  May 3, 2011
        Chairman Johnson, Ranking Member Shelby, and Members of the
    Committee, thank you for the opportunity to appear before you today. I
    am honored that President Obama has nominated me for this position, and
    I am deeply grateful to Secretary Geithner for his confidence in me.
        I would like to introduce my wife Charlotte. Her love and support
    have always been critical to me. And I want to thank her in particular
    for all she has done to support me in my work for the Department of the
    Treasury.
        Over the last 2 years, it has been my privilege to be a part of the
    Treasury team. I joined in May 2009 as Chief Counsel for the Troubled
    Asset Relief Program, and I had the honor of working closely with
    former Assistant Secretary Herb Allison, who set an outstanding example
    for us all. When Mr. Allison decided to return to retirement in
    September of 2010, Secretary Geithner asked me to serve as Acting
    Assistant Secretary.
        I was born in Louisiana, and lived in Texas, Oklahoma, and
    Connecticut as a child. All of my grandparents were immigrants who came
    to this country as teenagers, barely able to speak English and with
    nothing more than a suitcase. My parents grew up during the Great
    Depression. Their families struggled to make ends meet. My parents
    worked hard and provided my siblings and me with many opportunities,
    and I have been very fortunate as a result.
        I often think of the stories my parents told about life during the
    Great Depression, because this financial crisis has caused many
    American families to suffer on a scale not seen since that time. As a
    result of this crisis, millions of people have lost their jobs. Many
    have lost or are still in danger of losing their homes. Many small
    businesses have collapsed. Many families have lost their retirement
    savings, and many young people have had to postpone college plans. We
    must never forget that this human suffering is the true cost of the
    financial crisis.
        Congress passed the Troubled Asset Relief Program, or TARP, in the
    midst of this terrible crisis in order to stabilize our financial
    system. Of course, TARP could not avert or repair all the damage caused
    by this crisis. However, I strongly believe that without TARP, the
    suffering would have been much, much worse. While no one liked using
    taxpayer funds to rescue financial institutions, I believe that TARP--
    along with the other actions our Government took--helped prevent a
    catastrophic collapse of our financial system.
        Today, our financial system and our economy are much stronger. And
    important work remains for TARP. First, we must exit our remaining
    investments in banks and other companies. We have already recovered \2/
    3\ of what was invested, and our economy and our financial system will
    be stronger if the Government gets out of the business of owning
    interests in private companies. Second, we must continue to implement
    and improve our programs to help American families stay in their homes
    and avoid foreclosure. And third, we must do both of these tasks in a
    manner that protects taxpayer interests and ensures accountability.
        In particular, I want to emphasize the importance of accountability
    and transparency. This program must meet the highest standards. Before
    joining Treasury, I helped the Congressional Oversight Panel get
    started. I served as their first special legal advisor on a voluntary
    basis, and helped write one of their first reports. If confirmed, I
    will continue to work closely with the Special Inspector General for
    TARP, the Government Accountability Office, the Financial Stability
    Oversight Board, as well as this Committee and other Committees of
    Congress to ensure that the TARP program meets those high standards.
        It has been the greatest professional honor of my life to serve my
    country during this difficult time. I have been fortunate to lead an
    extremely talented and dedicated team at the Office of Financial
    Stability I look forward to continuing this work should the Senate
    choose to confirm me.
        Thank you, Chairman Johnson and Ranking Member Shelby for this
    opportunity. I look forward to your questions.
                                     ______

                       PREPARED STATEMENT OF WANDA FELTON
                Nominee for First Vice President and Vice Chair
                    Export-Import Bank of the United States
                                  May 3, 2011
        Chairman Johnson, Senator Shelby, and distinguished Members of the
    Committee, I am honored to appear before you today as a nominee for the
    position of First Vice President and Vice Chair of the Export-Import
    Bank of the United States.
        If I may, I would like to take a moment to acknowledge my husband,
    Mike Owens, and my mother, Maro Lester. They are both in attendance. I
    am also grateful to Ivonia Slade, Lesley Redwine, Grace Speights and my
    cousin, Brandon Felton, for being here.
        To say that I am deeply honored to have the opportunity to serve my
    country in this capacity does not begin to capture my feelings. I am
    awed and humbled. I am especially grateful to have the opportunity to
    serve President Obama.
        Briefly, I have more than 25 years of financial industry
    experience. I began my career as a Loan Officer at Ex-Im Bank. I
    understand and am committed to the Bank's mission. Creating good-paying
    jobs that can sustain the American middle-class and promote the
    competitiveness of U.S. companies overseas, are imperatives in the
    current economy. To my knowledge, Ex-Im Bank is the only lever
    available to our Government to accomplish these goals without burdening
    tax payers. As such, it is a vital tool.
        Moreover, I believe the imperative extends beyond the current
    economic cycle. Maintaining American competitiveness over the long-term
    is a strategic imperative. President Obama has observed that 95 percent
    of the world's customers are outside the United States. I believe that
    American businesses--large and small--must capture a larger share of
    this market so that our country can continue to prosper.
        Under Chairman Hochberg, Ex-Im Bank's activity has increased
    dramatically with the introduction of innovative programs that stretch
    every dollar and leverage every resource the Bank has available to it.
    Ex-Im Bank's support for small businesses is at an all-time high with
    programs that provide outreach, training and financing to help them
    penetrate overseas markets and fill a void left by the banking
    industry. If I am confirmed I will be committed to helping to build on
    this success.
        I believe I bring a skill set that will allow me to make a
    meaningful contribution. My experience in banking gives me the tools to
    perform my primary duty which is to assess the creditworthiness of
    transactions brought before the Board in order to find that there is a
    reasonable assurance of repayment. Should I be confirmed, I will remain
    committed to ensuring that the Bank remains self-sustaining. I see the
    role as fulfilling a fiduciary duty to the American tax payer.
        If confirmed, I also feel well suited to help grow U.S. exports in
    sub-Saharan Africa. I understand this is a congressional mandate and
    believe I can contribute in this area. I have experience working in
    South Africa and Nigeria, two of nine countries which Ex-Im Bank has
    named as primary markets. There is a growing need for services and
    equipment that can support the development of basic infrastructure,
    telecom, transportation and other sectors which American businesses can
    and should supply. I believe that my experience positions me well to
    pursue this mandate.
        For the past 15 years, I have worked on a number of transactions
    involving emerging markets. A main feature of my career has involved
    testing the investment merits and risks of various emerging markets.
    For example, in 1994, I advised CalPERS and New York Common Retirement
    Fund, as they made their first private equity investments in post-
    Apartheid South Africa.
        Mr. Chairman and Members of the Committee, thank you for the
    opportunity to seek your support for my nomination. I look forward to
    answering any questions you may have for me.
                                     ______

                      PREPARED STATEMENT OF SEAN MULVANEY
         Nominee for Director, Export-Import Bank of the United States
                                  May 3, 2011
         Mr. Chairman, Senator Shelby, other Members of the Committee,
    please allow me to start by expressing deep appreciation for the
    opportunity to appear before you. I am honored to be a candidate for
    the Board of the Export-Import Bank of the United States. I understand
    and recognize the importance of the Committee and this hearing. I would
    also like to thank President Obama for nominating me to this position
    as well as Senator McConnell. If confirmed, I would welcome the
    opportunity to serve.
        I am accompanied here today by my wife, Susan, and daughters, Kate,
    and Rachel. Other members of my family were not able to join me today
    but I am grateful for their love and support, particularly my mother,
    Kathryn, and my late father, James.
        Over the course of my career, I have had several positions that
    have contributed to my candidacy for the position of U.S. Export-Import
    Bank Board member. These positions span the private and public sectors
    and include experiences in management, U.S. trade policy, budget, and
    international affairs. If confirmed, I stand ready to leverage these
    experiences in support of the Bank at this critical time during the on-
    going U.S. recovery from the economic crisis.
        Let me express some key commitments and priorities in this hearing.
        First, I would like to express my commitment to the Bank's mission.
    While Ex-Im may be a small and lean agency, its mission is by no means
    insignificant or modest. Last year the bank supported over $34 billion
    of U.S. exports with authorizations of nearly $25 billion. The
    financing support was essential to sustain over 227,000 American jobs
    at more than 3,300 companies. Since my nomination, I have had a few
    opportunities to interact with the Bank's career staff. In these
    initial meetings, I have quickly appreciated the Bank's professionalism
    and clear sense of purpose that emanate from its employees. If
    confirmed, I would be honored to work with Chairman Hochberg and the
    rest of the organization.
        Second, I am committed to the Ex-Im Bank's strong relationship with
    the legislative branch. The Bank has earned the trust and confidence of
    this Committee and the Congress. Even though the Bank's operations are
    self-sustaining, the Bank extends the full faith and credit of the
    United States as it supports U.S. exports and jobs. It is important
    that this trust and confidence be preserved in the years ahead,
    particularly as the Bank seeks reauthorization.
        Third, I am committed to the Bank's partnership with other Federal
    agencies. The Bank plays a vital complementary role to the programming
    of organizations like OPIC, TDA, USTR, the SBA, and the Department of
    Commerce. Together, the Bank and the agencies enable greater U.S.
    economic engagement in the global economy so that the United States can
    secure growth, job creation, and prosperity.
        If confirmed, I would hope to work with Chairman Hochberg and bank
    staff on a couple of key areas.
        First, the Bank has developed a strategic plan for 2010 that
    includes a number of priorities, including expanding awareness of Ex-Im
    Bank services through increased outreach and partnerships, increasing
    the number of small- and medium-sized business using Bank services, and
    targeting business development in emerging markets with high potential
    for U.S. export growth. A key statistic I have come to appreciate in
    this nomination process is the fact that over 20 percent of the dollar
    value of Bank activities are to the benefit of small business and 85
    percent of its transaction volume.
        Second, I firmly believe in the practice of measuring for results.
    I would consider it an important part of my job to understand and
    improve Bank metrics that give stakeholders a sense of its performance
    over time, particularly mitigating risk in its operations to the U.S.
    taxpayer. Again, I appreciate the opportunity to be here today and look
    forward to answering any questions the Committee may have.
        Thank you.
    RESPONSE TO WRITTEN QUESTIONS OF CHAIRMAN JOHNSON FROM DAVIS S.
                                 COHEN

    Iran
    Q.1. You indicated in the hearing that you believed the
    Treasury Department was ``close to a decision point'' in making
    certain CISADA-related determinations regarding designations
    for certain banks. I know various factors inform that
    decisionmaking process, but in general do you expect those
    decisions to be made in the next month, the next 3-6 months, or
    later than that?

    A.1. While there are always uncontrollable and unexpected
    factors that affect the timing of our work, we expect to reach
    a decision on several open CISADA-related investigations within
    the next month or so.

    Q.2. You indicated in the hearing, in response to my question
    about sophisticated barter arrangements being used by the
    government of Iran to circumvent sanctions on its energy
    industry, that TFI is aware of and monitoring this activity.
    Can you describe in greater detail how these barter
    arrangements are structured, and how you might be able to
    address their use by the Iranian government to circumvent
    sanctions under current law?

    A.2. Treasury is aware that Iran is using a number of means to
    circumvent sanctions, including bartering arrangements in which
    it sells oil in exchange for goods in order to avoid accessing
    the formal financial sector. We assess that Iran is forced to
    turn to such mechanisms because it is increasingly isolated
    from the financial sector as a result of international
    financial sanctions. Treasury has been aggressive in exposing
    and publicizing Iran's efforts to evade sanctions, and remains
    committed to taking action in response to activity that
    implicates existing U.S. or international sanctions against
    Iran. We are studying whether current law adequately addresses
    Iran's use of barter arrangements, and if confirmed I look
    forward to working with you and your colleagues in ensuring
    that U.S. law appropriately addresses this emerging issue.

    Q.3. Since assessing internal bank activity, including
    correspondent relationship activity, in the detail required by
    CISADA is a complex undertaking for TFI, do you believe you
    have sufficient intelligence resources, within the Office of
    Intelligence Analysis and elsewhere within the intelligence
    community, to determine what foreign banks are actually doing
    in this area, and to provide information to support strict
    enforcement of the new mandatory financial sanction? If you had
    additional intelligence-related resources, what would you do
    with them?

    A.3. For reasons that I am certain you understand, there is a
    limit to what I can say in this setting regarding our
    intelligence resources and capabilities. TFI is fortunate to be
    the only finance ministry in the world with an internal
    intelligence shop, the Office of Intelligence and Analysis
    (OIA), dedicated specifically to the intelligence related to
    following the money and combating illicit finance. I am
    impressed daily by the analysts in OIA. Their work product, as
    well as the intelligence produced by OIA's sister agencies in
    the intelligence community, is used daily by TFI in pursuing
    our work, including implementing CISADA.
        I believe the intelligence resources devoted to supporting
    our policy with respect to Iran, including implementing CISADA,
    are sufficient.
    Libya
    Q.4. I know the Administration acted quickly and effectively to
    freeze approximately $36 billion in assets of the Qadhafi
    government. What are the Administration's current decision
    rules, to the extent you can describe them, about how and when
    and to whom those funds might eventually be released? What
    standards under current law will you be applying in considering
    whether to seize and release any frozen assets to the Libyan
    opposition? What new legal authorities, if any, might be
    necessary to enable such a release?

    A.4. Treasury blocked Libyan government assets within U.S.
    jurisdiction under Executive Order 13566 in order to hold the
    Qadhafi regime accountable for its use of violence against
    unarmed civilians and to protect those assets from
    misappropriation by Colonel Muammar Qadhafi and his associates.
    United Nations Security Council Resolutions 1970 and 1973
    affirm the intention to ensure that assets frozen under
    paragraph 17 of United Nations Security Council Resolution 1970
    are made available, at a later stage, as soon as possible to
    and for the benefit of the people of the Libyan Arab
    Jamahiriya. The Administration has drafted legislation that
    would authorize the President to confiscate assets frozen under
    EO 13566 and to use some or all of those assets to defray costs
    related to providing humanitarian relief to and for the benefit
    of the Libyan people. We have begun consulting with Congress on
    this legislation and are hopeful that we can work together to
    enact it as soon as possible.
    Budget: BSA Enforcement
    Q.5. The Administration's 2012 budget proposal proposes to
    limit direct access to BSA data to only State coordinators and
    to cancel scores of current direct access agreements with State
    and local law enforcement and regulators, sharply limiting
    their access to this critical data. I have consulted with law
    enforcement and regulatory officials in my State and elsewhere,
    and I believe this would be a serious mistake, and would
    sharply reduce the effectiveness of State and local law
    enforcement and regulatory efforts in this area. Will you work
    with authorizing and appropriations Committees of Congress, and
    internally with the Treasury Department, to reverse this
    proposal, and to ensure full funding to provide continuing
    unfettered direct access to BSA data for State and local
    officials?

    A.5. I fully agree that BSA information plays a critical role
    in investigations and proceedings at all levels. I am committed
    to working with you and your colleagues to identify a
    meaningful solution that will provide a continuation of support
    to State and local law enforcement and regulatory agencies.
                                    ------

     RESPONSE TO WRITTEN QUESTIONS OF SENATOR SHELBY FROM DAVID S.
                                 COHEN

    Q.1. In reference to Treasury's proposed rule implementing
    section 104(e) of the Comprehensive Iran Sanctions,
    Accountability, and Divestment Act Act of 2010 (``CISADA''),
    what performance measures is the Office of Terrorism and
    Financial Intelligence (``TFI'') contemplating using to satisfy
    its congressional oversight obligation?

    A.1. We will use Performance Measure #1, ``Impact of TFI's
    Programs and Activities,'' included in the Department of the
    Treasury's Fiscal Year 2010 Annual Performance Report, which
    measures TFI's impact as an organization through its sanctions,
    law enforcement, intelligence, regulatory and diplomatic
    programs to reduce threats to U.S. national security. In doing
    so, we will ensure that Congress is kept apprised of
    developments pursuant to the implementation of this regulation.
    In addition, if desired, we will keep the Committee apprised of
    when requests for information pursuant to the rule implementing
    section 104(e) are sent to U.S. banks, including the number of
    U.S. banks that receive a request and the number of foreign
    banks that are the subjects of the request.

    Q.2.-1. In reference to CISADA and its implementation,
    generally, how does Treasury interpret and execute the various
    clauses to ``consult with the Secretary of State?''
        More specifically, how are conflicts of policy and
    intention to sanction a proven illicit financial entity
    resolved?

    Q.2.-2. What conflicts of policy exist in the sanctioning of a
    proven illicit financial institution?

    Q.2.-3. Can you provide an example of where a conflict of
    policy prevented a proven CISADA violator from being
    sanctioned?

    A.2.1.-3. The Treasury Department has been in close contact
    with the State Department throughout our CISADA implementation
    efforts. Treasury and State have coordinated various outreach
    events, shared information about activities of concern, and
    utilized the combined resources available in our Embassies
    abroad to engage with foreign counterparts.
        Treasury interprets and executes the clause in CISADA that
    requires the Secretary of the Treasury to ``consult with'' the
    Secretary of State in the same way as similar clauses are
    interpreted in Executive Orders, including E.O. 13224
    (terrorism) and E.O. 13382 (WMD proliferation)--that is, we
    engage with our colleagues at State (as well as our colleagues
    in other Departments and agencies as appropriate) on an ongoing
    and collaborative basis. As in many contexts, Executive
    agencies discuss their perspectives and elevate as appropriate
    to achieve resolution. As required by CISADA, Treasury consults
    with State in taking steps with respect to the financial
    provisions of CISADA. I am not aware of any circumstance in
    which a conflict in policy has prevented sanctions from being
    imposed on an entity engaged in activities that are
    sanctionable under CISADA.

    Q.3.-1. The Financial Crimes Enforcement Network (``FinCEN'')
    can be said to be the public face of the Office of Terrorism
    and Financial Intelligence (TFI). It works directly with
    financial institutions, international, Federal, State, and
    local law enforcement, and banking regulators, all in attempt
    to be one step ahead of illicit actors intent on using our
    banks to launder money or finance terror.
        TFI now has a number of new regulatory initiatives in the
    FinCEN pipeline, and some of them will bring entire new
    industries under the purview of the Bank Secrecy Act (``Bank
    Secrecy Act'') for the first time.
        How have the roles and responsibilities of FinCEN been
    changed or strengthened since the formation of TFI?

    A.3.-1. The growth of FinCEN's responsibilities is commensurate
    with the expansion of covered financial institutions subject to
    the BSA, and with the increased focus on the financial
    component of criminal investigations by law enforcement and
    FinCEN's Financial Intelligence Unit counterparts globally. As
    an integral part of TFI, FinCEN is also involved in our overall
    efforts to effectively apply our sanctions and other
    authorities, as well as engagement with foreign counterparts on
    systemic illicit finance issues.

    Q.3.-2. Are current staffing and funding levels sufficient to
    maintain these new programs, without instituting cuts in other
    areas of FinCEN's work, or are they lacking?

    A.3.-2. I believe that FinCEN's current staff and funding
    levels are sufficient to maintain these programs.

    Q.3.-3. Will you ensure this Committee that Treasury will
    preserve the State and local law enforcement BSA direct access
    agreements, from either being curtailed or eliminated?

    A.3.-3. I am committed to working with you and your colleagues
    to identify a meaningful solution that will provide a
    continuation of support to State and local law enforcement and
    regulatory agencies so that critical law enforcement functions
    are not impaired.

    Q.4.-1. The central role that offshore correspondent accounts
    and shell companies may play in illicit financing cannot be
    underestimated.
        Can you assure this Committee that it will be consulted,
    briefed, and included on any efforts to reform the laws of
    limited liability companies as they pertain to the jurisdiction
    of this Committee?

    A.4.-1. Yes, Treasury will continue to work with the Members of
    this Committee on this priority of the Treasury Department.

    Q.4.-2. Is Treasury actively engaged right now on any such
    efforts?

    A.4.-2. We continue to be engaged in efforts to address the
    issue of disclosure of the beneficial owners of limited
    liability companies. We have had conversations with the
    Congress on legislation in this area, and have prepared our own
    legislative proposal in an effort to find a meaningful solution
    to this vulnerability.
                                    ------

    RESPONSE TO WRITTEN QUESTIONS OF SENATOR SCHUMER FROM DAVID S.
                                 COHEN

    Q.1. More than 10 months after Congress enacted new Iran
    sanctions, no foreign, non-Iranian, bank has been sanctioned by
    this Administration pursuant to the requirements of the
    Comprehensive Iran Sanctions, Accountability, and Divestment
    Act of 2010. If confirmed--do you plan to shift course and
    immediately sanction a non-Iranian bank(s) as the sanctions law
    gives you the power do?

    A.1. The Comprehensive Iran Sanctions, Accountability, and
    Divestment Act of 2010 (CISADA) has been an enormously
    effective tool in achieving the law's key objective--to
    increase Iran's isolation from the international financial
    system. Since the enactment of CISADA on July 1, 2010, and the
    publication of the Iranian Financial Sanctions Regulations on
    August 16, 2010, Treasury has been engaged in an aggressive
    campaign, involving dozens of foreign countries and scores of
    financial institutions, to explain the choice put to foreign
    financial institutions by CISADA between continued access to
    the U.S. financial system or continued involvement with Iran's
    proliferation efforts, its support for terrorism, and
    sanctioned Iranian-linked parties such as U.S.-designated banks
    and the Islamic Revolutionary Guard Corps. The response to
    Treasury's outreach has been very positive, and the great
    majority of financial institutions with which we have engaged
    have chosen to close their correspondent accounts with U.S.-
    designated, Iranian-linked financial institutions, thus closing
    off avenues that Iran's designated banks had relied upon to
    engage in financial activities. Nonetheless, Treasury has
    concerns that a limited number of financial institutions may be
    continuing to engage in activities that could result in a
    finding under CISADA. We are actively investigating those
    situations, and are moving toward closure within the next month
    or so.

    Q.2. Treasury has also failed to impose any specific sanctions
    against Bank Markazi (Iran's Central Bank) which, according to
    a February 25, 2008, Wall Street Journal story, is helping
    other Iranian banks circumvent the U.S. and U.N. banking
    pressure. Are you able to explain Treasury's failure to
    sanction Iran's Central Bank? And, if confirmed, would you take
    immediate steps to finally sanction Bank Markazi?

    A.2. The activities of the Central Bank of Iran (CBI) have
    been, and continue to be, a focus of the Treasury Department.
    Treasury has noted previously that the CBI and Iranian
    commercial banks have requested that their names be removed
    from international payment messages to make it more difficult
    for intermediary financial institutions to determine the true
    parties to the transaction, and we remain concerned that the
    CBI may be facilitating transactions for sanctioned Iranian
    banks.
        While the CBI has not been designated under our
    proliferation authorities, under the Iranian Transactions
    Regulations U.S. financial institutions are prohibited, with
    only limited exceptions, from doing business directly or
    indirectly with all Iranian banks, including the CBI. As
    highlighted in UNSCR 1929, we remain vigilant over the
    activities of the CBI and other Iranian financial institutions,
    and the United States will continue to highlight its concerns
    with foreign governments and the private sector. We have been
    diligent in exposing and publicizing Iran's deceptive
    practices, as a result of which many in the private sector--
    unable to distinguish between Iran's legitimate and illicit
    transactions--have become increasingly wary of engaging in any
    business with Iran, including business with the CBI.
    Financial Crimes Enforcement Network
    Mr. Cohen, I understand that the Department of Treasury has
    submitted a budget to Congress that would cut direct local and
    State access to the Bank Secrecy Act database. Doing this would
    save about $1.3 million in your budget. While I fully
    appreciate and take seriously the need to save money, I am very
    concerned that this measure would be penny-wise and pound-
    foolish. In fact, I wrote to my colleagues on the
    appropriations committee to ask them to restore full funding
    for access to the BSA database in the FY 2012 budget.
        Here are my questions for you:

    Q.3.-1. In 2009, the GAO issued a report in which 16 out of 20
    law enforcement agencies said that direct access to the BSA
    database was the most useful part of FinCEN's services. Do you
    agree that the BSA database is a major force multiplier that
    has no substitute at the State or Federal level?

    A.3.-1.Yes.

    Q.3.-2. In New York, many law enforcement agencies routinely
    rely on direct access to this information to conduct
    sophisticated investigations into terror financing, mortgage
    fraud, drug trafficking, and other serious crimes that involve
    hiding financial proceeds. I understand that the plan to cut
    direct access, as conceived, would replace direct access with a
    middleman, through whom all search requests would have to be
    funneled. How will this affect the speed and quality of the
    searches that are now conducted by the on-the-ground
    investigators who are directly involved with local cases?

    A.3.-2. I do not believe there are any specific metrics that
    would capture the impact of this budget reduction on individual
    case investigations, but I acknowledge that there would likely
    be some impact. I am committed to working with you and your
    colleagues to identify a meaningful solution that will provide
    a continuation of support to State and local law enforcement
    and regulatory agencies so that critical law enforcement
    functions are not impaired.

    Q.3.-3. I hope that this funding will be restored through the
    budget process.
        Would you support the full restoration of funding?

    A.3.-3. As noted, I am committed to working with you and your
    colleagues to identify a meaningful solution that will provide
    a continuation of support to State and local law enforcement
    and regulatory agencies.

    Q.3.-4. If it is not restored, will you work to make sure that
    neither the quality nor quantity of information is restricted
    for local enforcement agencies that need it?

    A.3.-4. Yes.
                                    ------

     RESPONSE TO WRITTEN QUESTIONS OF SENATOR BROWN FROM DAVID S.
                                 COHEN

    Q.1. Are you investigating foreign banks today for possible
    violation of CISADA?

    A.1. Yes, we are currently investigating several foreign banks
    for activities that may result in findings under CISADA.

    Q.2. If a foreign central bank is supporting Iran's
    proliferation activities or facilitating the activity of
    entities under U.S. or U.N. sanctions, would it be
    sanctionable?

    A.2. Yes, a foreign central bank, like any other person or
    entity, may be subject to designation or other sanctions under
    U.S. law for supporting Iran's proliferation activities or
    providing material support to persons designated under U.S.
    counter-proliferation sanctions.

    Q.3. What financial tools does the United States have to press
    China to reduce its relationship with Iran?

    A.3. China voted for all relevant United Nations Security
    Council Resolutions relating to Iran, and has publicly
    committed to implementing them. Treasury has actively engaged
    with the Chinese government on this basis, encouraging a broad
    interpretation of both the letter and spirit of the
    Resolutions, and providing specific information to enable a
    robust Chinese implementation. Moreover, Treasury has
    communicated directly with large Chinese banks through their
    offices in the United States to ensure that they understand the
    risks they face from financial activities with Iran. We believe
    this ongoing engagement with China has been productive. Beyond
    this engagement, Treasury retains the same diverse set of tools
    it has available to protect the U.S. financial system from all
    illicit activity, including anti-money laundering authorities
    grounded in the Bank Secrecy Act and USA PATRIOT Act and
    sanctions authorities grounded in the International Emergency
    Economic Powers Act (IEEPA) and CISADA.
                                    ------

     RESPONSE TO WRITTEN QUESTIONS OF SENATOR VITTER FROM DAVID S.
                                 COHEN

    Q.1.-1. In your role as a Senior U.S. Treasury official and
    Acting Undersecretary for Terrorism and Financial Intelligence,
    you recently traveled to France and Turkey to discuss ongoing
    measures against the regimes in Iran and Libya. Including
    multilateral sanctions, and in your own words to ``urge full
    and robust implementation of U.N. Security Council resolution
    1929 against Iran.''
        Given your statement, do you believe that current efforts,
    including those of the Treasury Department are falling short of
    FULL implementation?

    A.1.-1. The international community has responded to UNSCR 1929
    with an unprecedented and comprehensive framework of new
    sanctions against Iran. In particular, the EU Council Decision
    of July 2010 provided a model that has been replicated by other
    major jurisdictions throughout the world, including Japan,
    South Korea, Australia, and Switzerland, among others. As Iran
    continues to seek new ways to evade international sanctions and
    continues to defy the international community, the Treasury
    Department and the broader U.S. Government will continue to
    work aggressively to impose our own sanctions as well as with
    our international partners to identify and implement measures
    that are consistent with and strengthen the multilateral
    sanctions framework.

    Q.1.-2. If nominated would you consider the imposition of
    sanctions, as required under CISADA, against Turkish financial
    institutions that are currently doing business with designated
    Iranian banks?

    A.1.-2. Yes.

    Q.2.-1. As I understand it, the rate of issuing the draft rule
    appears to be abysmal with disregard to the severity of the
    situation should the sanctions fail to be fully utilized to
    impede Iran from achieving nuclear capabilities. I have serious
    concerns over the Treasury's apparent lack of enforcement of
    Comprehensive Iran Sanctions Accountability and Divestment Act
    (CISADA). The recent draft rule to implement Section 104(e) of
    the Comprehensive Iran Sanctions and Divestment Act (CISADA)
    published by the Treasury Department was not published until
    over 10 months after being signed by President Obama.
        What does your department need to expedite the enforcement
    for CISADA?

    A.2.-1. Our initial CISADA implementation efforts focused on
    issuing a regulation implementing section 104(c) of CISADA. On
    August 16, 2010, the Office of Foreign Assets Control (OFAC)
    published the Iranian Financial Sanctions Regulations, which
    implement that section.
        Section 104(e) of CISADA complements section 104(c). It
    requires the Secretary to prescribe regulations to establish
    one or more of four specific requirements (set out in section
    104(e)(1)(A)-(D)) for U.S. financial institutions maintaining
    correspondent accounts for foreign financial institutions. The
    time it took to publish the proposed rule does not reflect a
    lack of seriousness on our part; rather, it reflects a desire
    to craft a rule that will best achieve our policy aims in this
    complex and novel context. Because we are mindful of the need
    to obtain the information targeted by the section 104(e) rule
    as expeditiously as possible, we issued the proposed rule with
    a 30-day comment period (quite often, proposed rules have 45-
    or 90-day comment periods). You have my assurance that, once
    the comment period closes on June 1, we will move to publish a
    final rule as quickly as possible, and, if confirmed, I will
    ensure that the tool created by the rule is used aggressively.

    Q.3. When Congress passed the 1996 Iran-Libya Sanctions Act, it
    did so with the aim to compel foreign companies to diverge from
    trading with Iran. Yet, over the past 15 years despite
    additional international sanctions and the CISADA being signed
    last year, a failure to enact sanctions has produced an
    unmistakable message and precedent of allowing foreign
    companies to do business as usual with Iran. Additionally, I
    have seen reports that Iran circumvents current laws by
    altering the material grade of its gasoline, and continues to
    use foreign countries that regularly do business with the
    United States.
        What policies are you currently developing to track
    documentation of cocktail blends of gasoline to determine
    whether products originated in Iran?

    A.3. The State Department is responsible for implementing the
    Iran Sanctions Act and the energy related provisions of CISADA,
    and as a result, I must defer to the State Department on any
    questions regarding energy-related sanctions.

    Q.4.-1. Additionally, I have concerns over the Treasury
    Department's interpretation of Section 104(e). As I understand
    it, the draft rule published by Treasury in the Federal
    Register on April 27, 2011, has misinterpreted Section 104(e)
    as discretionary and infrequent.
        Please spell out the scope of the agency's authority to
    issue and implement these comprehensive sanctions?

    A.4.-1. Please see below answer.

    Q.4.-2. Please explain your understanding of Section 104(e) as
    well as what institutions this section will be applied?

    A.4.-2. Treasury does not interpret section 104(e) to be
    discretionary. To the contrary, we understand section 104(e) to
    require the Secretary to prescribe regulations mandating that
    domestic financial institutions take one or more actions, one
    of which is to provide requested reports to Treasury, and we
    believe that the proposed rule reflects this understanding.
        We have proposed to target this reporting requirement on
    those foreign banks that the Department has reason to believe
    may be engaged in activities that may be sanctionable under
    section 104(c) of CISADA. We considered requiring every U.S.
    bank to provide periodic reports from every foreign bank for
    which they maintain correspondent accounts, but concluded that
    we would be better served by a rule that focused on those
    foreign banks that are of interest for purposes of CISADA. By
    requiring reports from those U.S. banks that maintain
    correspondent accounts with the specific foreign banks that are
    of interest to Treasury for purposes of CISADA implementation,
    we believe that Treasury will receive the information needed
    without generating a multitude of unnecessary and uninformative
    reports.
        The reporting requirement in the proposed rule, moreover,
    is scalable. Based on the circumstances, it permits Treasury to
    expand the number of U.S. banks that would be required to file
    reports, as well as the number of foreign banks from which
    information would be sought. For instance, if Treasury were
    unsure which U.S. bank maintains a correspondent account with a
    specific foreign bank, the requirement to file reports could be
    expanded to cover a broader number of U.S. banks to ensure that
    the information sought is captured.

    Q.4.-3. What actions were taken during the last 10 months to
    backlog and track transactions that violate Section 104(e)?

    A.4.-3. Since the enactment of CISADA on July 1, 2010, and the
    publication of the Iranian Financial Sanctions Regulations
    (IFSR) on August 16, 2010, Treasury has been engaged in an
    aggressive campaign, involving dozens of foreign countries and
    scores of financial institutions, to explain the choice put to
    foreign financial institutions by CISADA between continued
    access to the U.S. financial system or continued involvement
    with Iran's proliferation efforts, its support for terrorism,
    and sanctioned Iranian-linked parties such as U.S.-designated
    banks and the Islamic Revolutionary Guard Corps. The response
    to Treasury's outreach has been very positive, and the great
    majority of financial institutions with which we have engaged
    have chosen to close their correspondent accounts with U.S.-
    designated, Iranian-linked financial institutions, thus closing
    off avenues that Iran's designated banks had relied upon to
    engage in financial activities. CISADA, in short, has proven to
    be a very powerful tool to further isolate and pressure Iran--
    precisely what we understand Congress intended in enacting the
    law. Nonetheless, Treasury has concerns that a limited number
    of foreign financial institutions may be continuing to engage
    in activities that could result in a finding under CISADA. We
    are actively investigating those situations, and are moving
    toward concluding our investigations within the next month or
    so.

    Q.4.-4. As the language mentioned above is draft language, do
    you intend to modify the language to more clearly reflect the
    intention of CISADA?

    A.4.-4. Fully implementing CISADA, and the Administration's
    sanctions strategy more broadly, to hold Iran accountable for
    its persistent refusal to comply with its international non-
    proliferation obligations and its continued illicit conduct is
    an obligation we take very seriously. We crafted the proposed
    rule with that in mind, and are fully prepared to modify the
    rule before it is issued in final form to more effectively
    support this overarching objective. We will review all of the
    public comments we receive on this proposed rule and assess
    whether any changes to the proposed rule should be made based
    on those responses.

    Q.4.-5. What policies are being considered to improve Congress
    oversight of this implementation?

    A.4.-5. We will use Performance Measure #1, ``Impact of TFI's
    Programs and Activities,'' included in the Department of the
    Treasury's Fiscal Year 2010 Annual Performance Report, which
    measures TFI's impact as an organization through its sanctions,
    law enforcement, intelligence, regulatory and diplomatic
    programs to reduce threats to U.S. national security. In doing
    so, we will ensure that Congress is kept apprised of
    developments pursuant to the implementation of this regulation.
    In addition, if desired, we will keep the Committee apprised of
    when requests for information pursuant to the rule implementing
    section 104(e) are sent to U.S. banks, including the number of
    U.S. banks that receive a request and the number of foreign
    banks that are the subjects of the request.

    Q.5.-1. Trade continues to be increasingly used to disguise
    illegal activities of rogue states and money laundering to
    support illicit nuclear programs. Other than proposing a new
    international standard with the Financial Action Task Force and
    assisting the Department of Homeland Security and State
    Department with the Trade Transparency Unit program, what
    initiatives has the Treasury Department implemented to address
    trade based money laundering?

    A.5.-1. Treasury works closely with Immigration and Customs
    Enforcement (ICE) and other interagency partners, including the
    Drug Enforcement Agency, to combat trade based money laundering
    (TBML).
        One recent example involves an action taken by Treasury in
    February 2011, when we identified the Lebanese Canadian Bank
    (LCB) in Beirut, Lebanon as a financial institution of
    ``primary money laundering concern'' under Section 311 of the
    USA PATRIOT Act for its role in facilitating the money
    laundering activities of an international narcotics trafficking
    and money laundering network. This network moved drugs from
    South Africa to Europe and the Middle East via West Africa and
    laundered hundreds of millions of dollars monthly through
    accounts held at LCB, as well as through TBML involving
    consumer goods throughout the world.
        Treasury also conducts targeted outreach to key countries
    on the dangers of the trade system being abused by WMD
    proliferators. For example, Treasury, in conjunction with the
    State and Commerce Department, worked with Malaysia during the
    development of Malaysia's implementing regulations for its
    Strategic Trade Act in an effort to establish financial
    controls to guard against WMD proliferation through its trade
    sector. In addition, Treasury has presented at State's Export
    Control and Related Border Security Program (EXBS) conferences
    to raise awareness of WMD proliferation financing and possible
    ways to combat such financing.

    Q.5.-2. Do foreign trade zones (FTZs) have the proper level of
    vigilance necessary to mitigate illicit and potentially
    dangerous cargo slipping into a country?

    A.5.-2. Activities that take place within free trade zones
    (FTZs) as well as the laws and regulations governing FTZs vary
    greatly by jurisdiction. The Financial Action Task Force has
    published a typology of potential money laundering and
    terrorist financing vulnerabilities associated with FTZs
    including the inconsistent application and enforcement of anti-
    money laundering and counter-terrorist financing laws within
    FTZs.

    Q.5.-3. Additionally, please expand on any trade ties that you
    see as potential to provide Iran cover to mask illicit
    transactions.

    A.5.-3. The Treasury Department has consistently cautioned that
    all business with Iran carries a risk of supporting Iran's
    illicit activity, and as such requires an extremely high level
    of scrutiny and due diligence to ensure that Iran is not using
    seemingly legitimate activity to mask illicit transactions. The
    current international sanctions regime, however, does not call
    for a trade embargo on Iran, thus legitimate trade with Iran
    continues to occur. The U.S. Government has reached out to
    countries, such as Turkey, that have expressed a desire to
    expand trade with Iran to share with them the importance of
    great vigilance in all trade with Iran. This outreach
    emphasizes that, as Iran is increasingly isolated from major
    trading centers, those countries that maintain or increase
    their trade ties with Iran are at a greater risk of being used
    by Iran to conceal proliferation-related transfers amidst
    legitimate trade flows.

    Q.6.-1. As part of sanctions against Iran, U.S. financial
    systems may freeze out banks involved in significant
    transactions with proscribed Iranian banks.
        Do you know of any instances where the United States is
    aware of but not currently implementing full use of this?

    A.6.-1. No, I am not aware of any such instances.

    Q.6.-2. Has the Treasury Department sanctioned any foreign,
    non-Iranian bank pursuant to the Comprehensive Iran Sanctions
    Accountability and Divestment Act (CISADA)?

    A.6.-2. To date, the Treasury Department has not sanctioned any
    foreign, non-Iranian bank pursuant to CISADA. Nonetheless,
    Treasury has concerns that a limited number of financial
    institutions may be continuing to engage in activities that
    could result in a finding under CISADA. We are actively
    investigating those situations. While there are always
    uncontrollable and unexpected factors that affect the timing of
    our work, we expect to reach a decision on several open CISADA-
    related investigations within the next month or so.

    Q.7. The Treasury Department, as well as the U.S. Congress,
    have repeatedly raised concerns about the role of the Central
    Bank of Iran--that it facilitates Iran's illicit financial
    activities--and has warned banks to exercise extreme caution in
    dealing with it. In September, the Treasury Department
    sanctioned the bank EIH, incorporated in Germany, for allegedly
    providing financial services to Iranian WMD proliferators and
    facilitating transactions on behalf of other sanctioned Iranian
    banks. Secretary Cohen, in your testimony to the Finance
    Committee last month, you said the United States is ``working
    aggressively to try and shut down the Iranians' ability to use
    that financial institution [EIH].''
        Why hasn't the United States taken more action against
    foreign banks that continue to work with EIH as required by
    CISADA?

    A.7. Treasury has been working closely with our European
    allies, particularly Germany, to urge them to take action
    against EIH to ensure that this U.S.-designated, Iranian-owned
    institution can no longer serve as Iran's key access point to
    the European financial sector, and we believe that our European
    partners understand the threat posed by EIH's continued
    operation. Moreover, as Treasury has become aware of instances
    in which foreign financial institutions engage in transactions
    with EIH, Treasury has informed these foreign financial
    institutions and their regulators of the potential consequences
    under CISADA of engaging in such transactions.

    Q.8. Additionally, I have concerns about the potential sale of
    the New York Stock Exchange to Deutsche Boerse; specifically I
    am concerned about the activity of Deutsche Boerse's subsidiary
    Clearstream Banking S.A. in Iran. I am also troubled that
    Luxembourg's lax anti-money laundering laws have allowed
    Clearstream to engage in questionable activity. While
    Luxembourg has implemented regulations over the past year to
    improve enforcement after the Financial Action Task Force
    (FATF) questioned its practices, much greater steps must be
    taken.
        Have Treasury Department officials raised concerns with
    officials from Luxembourg about Iranian money laundering
    efforts?

    A.8. Treasury has long maintained a close and cooperative
    dialogue with the Luxembourg government and its banking
    regulators. Within the context of that relationship, senior
    Treasury officials have engaged the government of Luxembourg
    about the risks of doing business with Iran. Most recently,
    former Under Secretary Stuart Levey traveled to Luxembourg in
    January 2011 for consultations with the Luxembourg government
    about Iran, among other issues.
                                    ------

    RESPONSE TO WRITTEN QUESTIONS OF SENATOR JOHANNS FROM DAVID S.
                                 COHEN

    Q.1. Despite the Administration's description of Syrian
    President Bashar Assad's regime as ``barbaric,'' why has
    President Assad himself not been sanctioned since the beginning
    of the unrest?

    A.1. On April 29, the President signed Executive Order 13572
    targeting those responsible for human rights abuses in Syria,
    including those related to repression. Several high-ranking
    Syrian officials, the Syrian General Intelligence Directorate
    and the Iranian Islamic Revolutionary Guard Corps--Qods Force
    were listed in the Annex to E.O. 13572. Included in this
    listing is Syrian President Bashar Assad's brother Mahir, a
    brigade commander in the Syrian Army's 4th Armored Division,
    who has played a leading role in the Syrian regime's
    reprehensible actions in Dar'a, where protesters have been
    killed by Syrian security forces. While we do not comment on
    prospective actions, we continue to monitor the situation in
    Syria closely and are actively developing new designation
    targets. The Statement issued by the White House Press
    Secretary on Friday, May 6, put it well:

            Absent significant change in the Syrian government's current
            approach, including an end to the government's killing of
            protestors and to the arrest and harassment campaigns of
            protestors and activists, coupled with a genuine political
            reform process responsive to the demands of the Syrian people,
            the United States and its international partners will take
            additional steps to make clear our strong opposition to the
            Syrian government's treatment of its people.

    Q.2. Is there evidence that Syrian financial institutions have
    conducted sanctionable activities with Iranian organizations or
    with the Lebanese Hezbollah? If they have, how have they been
    sanctioned?

    A.2. In 2004, Treasury identified the Commercial Bank of Syria
    (CBS), along with its subsidiary Syrian Lebanese Commercial
    Bank, as a financial institution of ``primary money laundering
    concern'' under Section 311 of the USA PATRIOT Act. This action
    was based on information that CBS had been used by terrorists
    and their sympathizers, in addition to having acted as a
    conduit for the laundering of proceeds generated from the
    illicit sale of Iraqi oil. In February 2011, Treasury
    identified the Lebanese Canadian Bank in Beirut, Lebanon, as a
    primary money laundering concern for the bank's role in
    facilitating the money laundering activities of an
    international narcotics trafficking and money laundering
    network. U.S. Government information indicates that Hizballah
    derived financial support from the network's criminal
    activities. Additionally, Treasury has sanctioned regional
    banks affiliated with Hizballah, including the 2006 designation
    of Bank Saderat Iran, which had funneled $50 million to a
    Hizballah-controlled institution. We will continue to take
    aggressive measures in Syria, or anywhere we identify financial
    connections to Iran or Lebanese Hizballah.

    Q.3. Elements of Turkey's recent foreign policy have been
    extremely unhelpful, such as its involvement with the Gaza
    flotilla incident last May and its resistance to new sanctions
    on Iran. How would you describe Turkey's cooperation with the
    U.S. sanctions regime on Iran in general and CISADA in
    particular?

    A.3. As part of Treasury's ongoing global engagement on Iran, I
    traveled to Turkey recently to meet with senior Government
    officials to discuss global efforts to impose sanctions against
    Iran for its failure to live up to its international non-
    proliferation obligations. Turkish officials emphasized their
    desire to prevent Iran from acquiring nuclear weapons
    capability and their commitment to fully implementing UNSCR
    1929. Because several of the key financial provisions in UNSCR
    1929--in particular, paragraphs 21 and 23--call upon Member
    States to take steps beyond what is explicitly mandated by the
    Resolution, e.g., freezing the assets of specifically
    designated institutions, I emphasized for my Turkish
    counterparts the importance of adhering not just to the letter,
    but also to the spirit, of UNSCR 1929. Thus far, the Turkish
    authorities have not adopted an approach to the implementation
    of UNSCR 1929 that reflects this view. Treasury will continue
    to encourage Turkey's leadership to ensure a robust
    implementation of the international sanctions regime and to be
    vigilant concerning Iranian efforts to take advantage of Iran's
    commercial ties with Turkey to abuse the Turkish financial
    system.
        With regard to CISADA, Treasury has been in contact with
    the Turkish government and its banking regulators about CISADA-
    related concerns. The response from the government and the
    regulators has been quite positive in terms of recognizing how
    the law functions and the importance of Turkish banks
    maintaining access to the U.S. financial system.
                                    ------

      RESPONSE TO WRITTEN QUESTIONS OF SENATOR KIRK FROM DAVID S.
                                 COHEN

    Background: On March 28, 2011, Senator Kyl, Senator Lieberman
    and I sent a letter to Secretary Geithner along with a
    classified annex detailing specific concerns about sanctionable
    activities involving energy investments in Iran, the provision
    of refined petroleum to Iran, financial relationships with
    Iran, as well as the regime's proliferation activities. To
    date, we have not received any specific responses to each
    individual activity detailed in our annex.

    Q.1. While I appreciate your recent unclassified response, when
    will the Treasury Department be providing written classified
    responses to each sanctionable activity outlined in our March
    28th letter?

    A.1. As a matter of longstanding policy, Treasury does not
    comment on any possible or pending law enforcement
    investigation, including possible designations or sanctions.
    Accordingly, it would not be appropriate for me to comment on
    any particular financial institution, entity or person that may
    be under investigation until a final determination has been
    made regarding a designation or similar action. As noted in my
    response dated May 2, 2011, I am very familiar with the
    finance-related issue addressed in the classified annex to your
    letter, and my team and I are pursuing that matter--as well as
    several other similar matters--with a great sense of urgency.

    Q.2. Why have no banks been sanctioned under the Comprehensive
    Iran Sanctions and Divestment Act (CISADA)? Is it your
    contention that no foreign, non-Iranian bank has engaged in
    sanctionable activity pursuant to Section 104 of CISADA?

    A.2. Since the enactment of CISADA on July 1, 2010, and the
    publication of the Iranian Financial Sanctions Regulations
    (IFSR) on August 16, 2010, Treasury has been engaged in an
    aggressive campaign, involving dozens of foreign countries and
    scores of financial institutions, to explain the choice put to
    foreign financial institutions by CISADA between continued
    access to the U.S. financial system or continued involvement
    with Iran's proliferation efforts, its support for terrorism,
    and sanctioned Iranian-linked parties such as U.S.-designated
    banks and the Islamic Revolutionary Guard Corps. The response
    to Treasury's outreach has been very positive, and the great
    majority of financial institutions with which we have engaged
    have chosen to close their correspondent accounts with U.S.-
    designated, Iranian-linked financial institutions, thus closing
    off avenues that Iran's designated banks had relied upon to
    engage in financial activities. CISADA, in short, has proven to
    be a very powerful tool to further isolate and pressure Iran--
    precisely what we understand Congress intended in enacting the
    law. Nonetheless, Treasury has concerns that a limited number
    of foreign financial institutions may be continuing to engage
    in activities that could result in a finding under CISADA. We
    are actively investigating those situations, and are moving
    toward concluding our investigations within the next month or
    so.

    Q.3. Are you currently investigating foreign banks for possible
    violation of CISADA and do you expect determinations to be made
    soon?

    A.3. Yes, we are currently investigating several foreign banks
    for activities that may result in findings under CISADA. These
    investigations involve obtaining data from multiple sources,
    engaging in dialogue with the financial institutions and/or
    their home-country regulators, and using official channels to
    highlight the seriousness of the situation. We expect that
    several investigations will reach their conclusion within the
    next month or so.

    Background: Last week, the Financial Crimes Enforcement Network
    (FinCEN) issued a proposed rule to implement key requirements
    of the Comprehensive Iran Sanctions Accountability and
    Divestment Act (CISADA). Under the proposal, U.S. banks would
    be required to inquire of their foreign correspondent banks
    whether they maintain correspondent relations with Iranian
    banks under U.S. sanctions--but only when specifically asked to
    do so by the Treasury Department. Under such circumstances, the
    U.S. bank would also be required to ask whether that foreign
    bank has processed transfers of funds on behalf of the IRGC in
    the past 90 days. At the end of this process, U.S. banks would
    then be required to report this information back to FinCEN.

    Q.4. Why under the proposed rule are U.S. banks that maintain
    foreign correspondent accounts only required to provide FinCEN
    with information about foreign partners when the Treasury
    Department makes an inquiry?

    A.4. We have proposed to target this reporting requirement on
    those foreign banks that the Department has reason to believe
    may be engaged in activities that may be sanctionable under
    section 104(c) of CISADA. We considered requiring every U.S.
    bank to provide periodic reports from every foreign bank for
    which they maintain correspondent accounts, but concluded that
    we would be better served by a rule that focused on those
    foreign banks that are of interest for purposes of CISADA. By
    requiring reports from those U.S. banks that maintain
    correspondent accounts with the specific foreign banks that are
    of interest to Treasury for purposes of CISADA implementation,
    we believe that Treasury will receive the information needed
    without generating a multitude of unnecessary and uninformative
    reports.
        The reporting requirement in the proposed rule, moreover,
    is scalable. Based on the circumstances, it permits Treasury to
    expand the number of U.S. banks that would be required to file
    reports, as well as the number of foreign banks from which
    information would be sought. For instance, if Treasury were
    unsure which U.S. bank maintains a correspondent account with a
    specific foreign bank, the requirement to file reports could be
    extended to a broader number of U.S. banks to ensure that the
    information sought is captured.

    Q.5. Do you or do you not believe U.S. banks that maintain
    foreign correspondent accounts [should] be required to ensure
    their foreign partners are not conducting business with
    prohibited entities in Iran at all times?

    A.5. Under section 312 of the USA PATRIOT Act and its Bank
    Secrecy Act (BSA) implementing regulations, every U.S. bank is
    required to ``establish a due diligence program that includes .
    . . policies, procedures, and controls that are reasonably
    designed . . . to detect and report, on an ongoing basis, any
    known or suspected money laundering activity conducted through
    or involving any correspondent account established, maintained,
    administered, or managed by such covered financial institution
    in the United States for a foreign financial institution.'' In
    addition, U.S. banks monitor the transaction activity that is
    conducted through the U.S. banks' correspondent accounts with
    foreign banks in order to comply with the Office of Foreign
    Assets Control's (``OFAC'') regulations. Because of the due
    diligence U.S. banks conduct over their foreign correspondent
    accounts to comply with the BSA and OFAC regulations, a foreign
    bank should not be utilizing its U.S. correspondent account to
    conduct transactions with designated entities in Iran. Indeed,
    it would be a violation of law and OFAC regulations for a U.S.
    bank to process any non-exempt, unlicensed transactions with
    any Iranian bank.
        In the normal course of business, however, U.S. banks are
    not likely to be in a position to monitor transactional
    activity between a foreign bank and its non-U.S. customers--
    that is, transactions not involving the U.S. bank's
    correspondent account, including transactions with U.S.-
    designated Iranian-linked financial institutions or with the
    Islamic Revolutionary Guard Corps (IRGC) or its U.S.-designated
    agents or affiliates. In proposing a rule to implement section
    104(e) of CISADA, Treasury tentatively determined that the most
    sensible way for U.S. banks to determine whether foreign banks
    are doing business with those designated persons (transactions
    that almost certainly would not transit through the U.S.
    correspondent account) would be to require the U.S. banks to
    ask the foreign bank to certify that it is not doing business
    with those persons, or to report to the U.S. bank on any such
    business it is doing. We have chosen a targeted approach to
    requesting information regarding certain foreign banks both
    because we thought it would be the most efficient way to
    collect this information and because the mere act of asking may
    pressure those targeted foreign banks to discontinue business
    with U.S.-designated Iranian-linked financial institutions or
    with the IRGC or its U.S.-designated agents or affiliates.

    Q.6. Do you or do you not believe U.S. banks should be required
    to provide such information to the Treasury Department as soon
    as they are aware of it to enable swift and appropriate
    enforcement action?

    A.6. U.S. banks are already monitoring the transaction activity
    that is conducted through the U.S. banks' correspondent
    accounts with foreign banks under both OFAC and the BSA
    regulations, and a variety of regulations require or result in
    U.S. banks reporting any improper activity in their
    correspondent accounts promptly to the Treasury Department. As
    noted above, however, in the normal course of business U.S.
    banks are not likely to be in a position to monitor
    transactional activity between a foreign bank and its non-U.S.
    customers, unless the foreign bank conducts transactions for
    those customers through the foreign bank's correspondent
    account with the U.S. bank. Requiring U.S. banks to obtain this
    information with regard to foreign banks that are of interest
    to the Treasury Department will provide Treasury with
    information that Treasury may use in taking action under CISADA
    or other applicable authorities, and we have drafted the
    proposed rule implementing section 104(e) to accomplish this
    goal.

    Q.7. Your proposed regulation refers to the invocation of the
    reporting requirement ``as necessary.'' Could you please
    explain why FinCEN has made optional a requirement mandated by
    CISADA and can you describe a situation when this requirement
    would not be necessary?

    A.7. We have proposed to target this mandatory reporting
    requirement on those foreign banks that the Department has
    reason to believe may be engaged in sanctionable activities
    under section 104(c) of CISADA. We considered requiring every
    U.S. bank to provide periodic reports from every foreign bank
    for which they maintain correspondent accounts, but concluded
    that we would be better served by a rule that focused on those
    foreign banks that are of interest for purposes of CISADA. By
    requiring reports from those U.S. banks that maintain
    correspondent accounts with the specific foreign banks that are
    of interest to Treasury for purposes of CISADA, we believe that
    Treasury will receive the information needed without generating
    a multitude of unnecessary and uninformative reports. There are
    a number of foreign banks that maintain correspondent accounts
    with U.S. banks, many of which the Department has no reason to
    suspect are doing business that implicates CISADA.

    Q.8. The proposed rule requires banks to report whether the
    foreign bank has correspondent relations with sanctioned Iran
    bank or has processed fund transfers on behalf of the IRGC in
    the past 90 days. But under CISADA, the reporting requirement
    also includes transactions with any entity under U.N. sanction
    that has assisted Iran's proliferation activity. Why is the
    reporting requirement under the proposed rule limited to only
    part of the requirement outlined by the statute?

    A.8. In our proposed rule, Treasury determined that obtaining
    information regarding whether a foreign bank is conducting
    transactions with a U.S.-designated, Iranian-linked financial
    institution or with Iran's Islamic Revolutionary Guard Corps or
    any of its U.S.-designated agents or affiliates is the most
    useful information Treasury can obtain in the most workable
    manner. Your question, however, raises an important point that
    we will consider in preparing the final rule.

    Background: In a 2010 report entitled Iran's Dirty Banking and
    sourced to Bankers' Almanac, Mr. Avi Jorisch detailed a list of
    44 international banks providing services to Iranian-linked
    banks designated by the Treasury Department under Executive
    Order 13382. The report also listed 18 U.S. banks conducting
    business with international banks that service designated
    Iranian banks in possible violation of Section 104 of the
    Comprehensive Iran Sanctions and Divestment Act.

    Q.9. Which of the following international financial
    institutions ceased all of its business dealings, including but
    not limited to providing correspondent banking services, with
    Iranian-linked banks designated under Executive Order 13382?

       LAmeriabank CJSC (Armenia)

       LRaiffeisen Zentralbank Osterreich AG (Austria)

       LUniCredit Bank Austria AG (Austria)

       LAlubaf Arab International Bank BSC (Bahrain)

       LFuture Bank BSC (Bahrain)

       LSonali Bank Limited (Bangladesh)

       LFortis Bank SA/NV (Belgium)

       LDanske Bank A/S (Denmark)

       LSociete Generale (France)

       LBHF-BANK Aktiengesellschaft (Germany)

       LCommerzbank AG (Germany)

       LDeutsche Bank AG (Germany)

       LLandesbank Baden-Wurrttemberg (Germany)

       LUniCredit Bank AG (Germany)

       LING NV (Holland)

       LHabib Bank Limited (India)

       LState Bank of India (India)

       LUnited Bank Ltd (India)

       LBank of the Middle East Iraqi Investment (Iraq)

       LTrade Bank of Iraq (Iraq)

       LIntesa Sanpaolo SpA (Italy)

       LMizuho Corporate Bank Ltd (Japan)

       LSumitomo Mitsui Banking Corporation (Japan)

       LThe Bank of Tokyo-Mitsubishi UFJ Ltd (Japan)

       LDnB NOR Bank ASA (Norway)

       LNordea Bank Norge ASA (Norway)

       LBankMuscat SAOG (Oman)

       LQatar National Bank SAQ (Qatar)

       LVTB Bank (Russia)

       LRiyad Bank (Saudi Arabia)

       LAresbank SA (Spain)

       LBanco Santander SA (Spain)

       LBanque Marocaine du Commerce Exterieur
            International SA (Spain)

       LBank of Ceylon (Sri Lanka)

       LNordea Bank AB (Sweden)

       LSkandinaviska Enskilda Banken AB (Sweden)

       LSvenska Handelsbanken AB (Sweden)

       LBanque de Commerce et de Placements SA (Switerland)

       LUnited Bank AG (Switzerland)

       LZurcher Kantonalbank (Switzerland)

       LTurkiye Halk Bankasi AS (Turkey)

       LTurkiye IS Bankasi AS (Turkey)

       LDubai Islamic Bank PJSC

       LEmirates NBD Bank PJSC

    A.9. Treasury understands that Mr. Jorisch obtained the
    information for his 2010 report from the Bankers Almanac, a
    financial industry resource that, among other services, prints
    profiles of most of the world's banks. These profiles are based
    on information provided by the banks themselves, and include
    details such as the bank's correspondent and settlement
    partners. The information presented in Bankers Almanac is not,
    to our knowledge, assessed for accuracy before it is published,
    nor do we have any reason to believe that Mr. Jorisch
    independently sought to verify the accuracy of the information
    that he republished in his report.
        With respect to the list of banks in Mr. Jorisch's article,
    the Bankers Almanac profiles of several banks indicated that
    they maintained correspondent accounts for U.S.-designated
    Iranian-linked financial institutions, such as Bank Sepah or
    Bank Melli. We determined, however, that at the time CISADA was
    enacted, many of those profiles were inaccurate, and that the
    relevant Iranian banks had far fewer correspondent banks than
    indicated. Moreover, in the Bankers Almanac profiles of some of
    the U.S.-designated Iranian-linked financial institutions,
    several of the banks listed above were listed as
    correspondents. Investigation by Treasury has similarly
    revealed out of date information for accounts long since closed
    or frozen.
        Since the enactment of CISADA and the promulgation of the
    IFSR, Treasury has been in contact with the majority of the 44
    banks listed above and/or their regulators to discuss any
    relationships maintained for U.S.-designated Iranian-linked
    financial institutions. The great majority of financial
    institutions that Treasury has focused on with CISADA-relevant
    concerns have indicated that they already have closed, or will
    immediately close, any correspondent accounts they previously
    maintained for U.S.-designated Iranian-linked banks. As noted
    above, however, Treasury has concerns that a limited number of
    financial institutions may be continuing to engage in
    activities that could result in a finding under CISADA. We are
    actively investigating those situations.

    Q.10. Are there any other financial institutions not on the
    list provided in the previous question that are currently doing
    business, including but not limited to providing correspondent
    banking services, with Iranian-linked banks designated under
    Executive Order 13382?

    A.10. Relying on a wide variety of information sources, we are
    following available leads in order to identify and investigate
    any institution that may be engaging in activity that may be
    sanctionable under section 104(c) of CISADA. As noted above,
    until we complete any such investigation and make the
    determination to take action, we are unable to comment on the
    identity of any financial institution that may be a target of
    our efforts. I can assure you, however, that my team and I are
    aggressively pursuing investigations that may lead to action
    under CISADA or our other sanctions authorities.

    Q.11. What is the current status of your investigations into
    each of the following U.S. financial institutions that may be
    in violation of Section 104 of CISADA?

       LBank of America NA

       LThe Bank of New York Mellon

       LThe Bank of Tokyo-Mitsubishi UFJ Ltd

       LCitibank

       LCommerzbank AG

       LCredit Suisee AG

       LDeutsche Bank Trust Company Americas

       LHabib American Bank

       LHSBC Bank USA NA

       LIntesa Sanpaolo SpA

       LJPMorgan Chase Bank NA

       LMashreqBank PSC

       LMizuho Corporate Bank USA

       LSociete Generale

       LStandard Chartered Bank

       LState Bank of India

       LSumitomo Mitsui Banking Corporation

       LWells Fargo Bank NA

    A.11. U.S. branches of foreign financial institutions, like
    financial institutions headquartered in the United States, are
    U.S. persons for the purposes of U.S. sanctions laws.
    Accordingly, U.S. branches of foreign financial institutions
    are required to comply with the regulations and restrictions
    that apply to U.S. persons conducting business with Iranian
    banks and other entities under sanctions programs administered
    by Treasury, including the Iranian Transactions Regulations and
    Executive Order 13382 pertaining to Weapons of Mass Destruction
    Proliferators and Their Supporters. These restrictions include
    the prohibition on maintaining correspondent accounts for, or
    generally providing financial services to, Iranian banks and
    U.S.-designated individuals and entities. In our regulatory
    role, we maintain vigilance over U.S. persons and are prepared
    to act quickly if we detect any action that implicates any of
    our sanctions programs. As noted above, we are unable to
    comment on the identity of any financial institution that may
    currently be a target of our investigations or enforcement
    efforts.

    Background: As you know, the Central Bank of Iran (CBI)
    facilitates Iran's illicit financial activities. According to a
    banking advisory issued by FinCEN on March 28, 2008 (and
    updated on June 22, 2010), the CBI is listed as an Iranian bank
    that is engaged in ``illicit and deceptive activity.'' Banks
    have been warned to exercise extreme caution in dealing with
    virtually every Iranian-linked financial institution, including
    the CBI. As the United States and some of our allies have
    sanctioned individual Iranian banks, Iran's Central Bank has
    reportedly taken over many of the illicit activities of the
    sanctioned entities.

    Q.12. Do you believe the Central Bank of Iran is supporting
    Iran's proliferation activities or facilitating the activity of
    entities under U.S. or U.N. sanction? If so, why hasn't the
    U.S. designated the Central Bank of Iran?

    A.12. The activities of the Central Bank of Iran (CBI) have
    been, and continue to be, a focus of the Treasury Department.
    Treasury has noted previously that the CBI and Iranian
    commercial banks have requested that their names be removed
    from international payment messages to make it more difficult
    for intermediary financial institutions to determine the true
    parties to the transaction, and we remain concerned that the
    CBI may be facilitating transactions for sanctioned Iranian
    banks.
        While the CBI has not been designated under our
    proliferation authorities, under the Iranian Transactions
    Regulations U.S. financial institutions are prohibited, with
    only limited exceptions, from doing business directly or
    indirectly with all Iranian banks, including the CBI. As
    highlighted in UNSCR 1929, we remain vigilant over the
    activities of the CBI and other Iranian financial institutions,
    and the United States will continue to highlight its concerns
    with foreign governments and the private sector. We have been
    diligent in exposing and publicizing Iran's deceptive
    practices, as a result of which many in the private sector--
    unable to distinguish between Iran's legitimate and illicit
    transactions--have become increasingly wary of engaging in any
    business with Iran, including business with the CBI.

    Background: In September, the Treasury Department sanctioned
    the Iranian-owned bank EIH, incorporated in Germany, for
    providing financial services to Iranian weapons proliferators
    and facilitating transactions on behalf of other sanctioned
    Iranian banks. Secretary Cohen, in your testimony to the
    Finance Committee last month, you said the United States is
    ``working quite, quite aggressively to try and shut down the
    Iranians' ability to use that financial institution [EIH].''

    Q.13. Can you please be more specific--what steps are you
    taking to shut down Iran's ability to use EIH?

    A.13. On September 7, 2010, Treasury designated EIH pursuant to
    Executive Order 13382, which blocks the property of designated
    weapons of mass destruction proliferators and their supporters.
    To suspend EIH's access to the EU financial system, however,
    either Germany or the EU must take similar action and add EIH
    to its own list of designated entities. Treasury has been
    working closely with our European allies, particularly Germany,
    to urge them to take action against EIH to ensure that this
    U.S.-designated, Iranian-owned institution can no longer serve
    as Iran's access point to the European financial sector, and we
    believe that our European partners understand the threat posed
    by EIH's continued operation.

    Q.14. What steps will you be taking to stop foreign banks that
    continue to work with EIH despite Treasury's designation?

    A.14. As Treasury has become aware of instances in which
    foreign financial institutions engage in transactions with
    EIH--a U.S.-designated, Iranian-linked financial institution
    for purposes of CISADA--Treasury has informed these foreign
    financial institutions and their regulators of the potential
    CISADA consequences of engaging in such transactions. In
    addition, as noted in the response to the previous question,
    Treasury has been working with Germany and other EU member
    states to have EIH designated by either Germany or the EU,
    which, we believe, would effectively end EIH's ability to
    operate at all.

    Q.15. Why has the Treasury Department not taken action against
    foreign banks that continue work with EIH as required by
    CISADA?

    A.15. Treasury is aggressively pursuing investigations of
    possible activity that may be sanctionable under CISADA or our
    other authorities designed to bring economic and financial
    pressure to bear on Iran. As noted above, Treasury does not
    comment on any specific possible or pending law enforcement
    investigations, including possible designations or sanctions.

    Background: In July 2010, Germany designated its affiliate of
    the Turkish group IHH as a terrorist organization due to its
    close ties to Hamas. Last week, the Dutch government also
    designated its IHH affiliate as a terrorist group and froze its
    assets. I understand the Israeli Government has provided the
    Treasury Department extensive evidence detailing the IHH's ties
    to Hamas, a U.S.-designated foreign terrorist organization, and
    the ``Union of the Good,'' which was designated by the Treasury
    Department under Executive Order 13324 in November 2008 and
    referred to by the Department as ``an organization created by
    Hamas leadership to transfer funds to the terrorist
    organization.'' As you know, Hamas is responsible for the
    murders of at least 26 American citizens.

    Q.16. Why are you delaying designation of the IHH as a
    terrorist entity despite evidence demonstrating the group's
    ties to the Hamas terrorist organization and the Union of the
    Good terrorist entity?

    A.16. Although I cannot comment on any possible or pending
    designation of IHH, I can assure you that my team and I are
    fully committed to taking action against sources of support for
    terrorist organizations. With respect to Hamas, Treasury has
    actively sought to disrupt its financing through a number of
    methods, including: designating individuals and entities
    raising funds on behalf of the organization; engaging and
    sharing information with the Palestinian Authority to disrupt
    Hamas' charitable infrastructure in the West Bank and Gaza; and
    pressing European allies to take corresponding action.
    Specifically:

       LTreasury has designated a number of charities for
            providing support to Hamas, being owned or controlled
            by it, or acting for or on its behalf, including the
            Union of Good (November 2008), Al Salah Society (August
            2007), Interpal/The Palestinian Relief and Development
            Fund (August 2003), Commite de Bienfaisance et de
            Secours aux Palestiniens and the Association de Secours
            Palestinien (August 2003), the Palestinian Association
            in Austria (August 2003), the Al-Aqsa Foundation (May
            2003), and the Holy Land Foundation for Relief and
            Development (December 2001).

       LThe Treasury Department engages regularly with
            senior Palestinian Authority (PA) officials on illicit
            finance issues, including sharing information on Hamas-
            controlled charities and NGO's operating in the West
            Bank and Gaza. Since 2007, the PA has taken significant
            steps to rid the charitable sector in the West Bank of
            Hamas influence, including the dissolution and
            reformation of Zakat committees (Islamic charitable
            organizations) that received financial support from
            Union of Good member organizations.

       LPressing the Europeans to crack down on Hamas
            fundraising in Europe has been one of our priorities.
            Together with our State Department colleagues, we have
            been specifically pushing both the EU and European
            member states to designate the Union of Good. Recently,
            Treasury participated in a delegation led by the State
            Department's Coordinator for Counter-Terrorism,
            Ambassador Benjamin, to press our European partners on
            these issues.
                                    ------

    RESPONSE TO WRITTEN QUESTIONS OF SENATOR SHELBY FROM DANIEL L.
                                 GLASER

    Q.1.-1. China is always at the center of a sanctions
    controversy, whether it be related to North Korea, or Iran. The
    United States has recently sanctioned a North Korean bank and
    tightened sanctions prohibiting the import of goods, services
    and technology from North Korea.
        How does the revival in commerce between China and North
    Korea compare to U.S. efforts to isolate North Korea? Are U.S.
    sanctions working here, or is the back door to China overcoming
    U.S. efforts?

    A.1.-1. U.N. Security Council Resolutions 1718 and 1874 provide
    the foundation for the international sanctions framework
    against North Korea. These instruments are supplemented by the
    recent warning by the Financial Action Task Force of the risks
    to the international financial system of North Korea's failure
    to comply with international anti-money laundering standards.
    The United States has taken a broad interpretation of the
    financial provisions of these instruments, and relying on these
    and our other authorities, our implementation has gone beyond
    them. Just last month, President Obama signed Executive Order
    13570 continuing our broad import restrictions on North Korea.
    In August 2010, President Obama signed Executive Order 13551,
    authorizing Treasury, in consultation with State, to impose
    sanctions on the financial networks that facilitate North
    Korean trafficking in arms and related materiel, procurement of
    luxury goods, and engagement in other illicit activities, such
    as money laundering and counterfeiting. Treasury has put this
    authority to good use, targeting not just North Korean
    government entities such as Office 39 and the Reconnaissance
    General Bureau, but also important nodes in their respective
    financial networks such as Daesong Bank and Bank of East Land.
    Treasury has also targeted numerous North Korean entities
    pursuant to our WMD sanctions authorities under Executive Order
    13382, and has issued several advisories to our financial
    institutions warning of the risks presented by North Korea's
    illicit financial activities. These formal measures have been
    accompanied by an aggressive outreach campaign, both to foreign
    governments and the private sector. I have personally traveled
    throughout Asia and the Middle East, providing both general and
    specific information to governments and banks to assist them in
    protecting themselves from illicit North Korean financial
    activity. To date, our efforts have been effective in
    significantly restricting North Korea's access to the
    international financial and commercial systems.
        China also voted for UNSCRs 1718 and 1874. China, however,
    has taken a narrower approach to the implementation of the
    financial provisions of these instruments, and continues to
    maintain a unique relationship with North Korea, both
    financially and commercially. Given North Korea's financial
    isolation from much of the rest of the world, these financial
    ties with China are of increasing importance to North Korea.
    Treasury has, therefore, actively engaged with the Chinese
    government, encouraging a broad interpretation of both the
    letter and spirit of the resolutions, and providing specific
    information to enable robust Chinese implementation. Moreover,
    Treasury has communicated directly with large Chinese banks
    through their offices in the United States to ensure that they
    understand the risks they face from their financial activities
    with North Korea.

    Q.1.-2. Generally, what is behind the perception that Chinese
    banks and energy companies comply with U.N. sanctions but
    appear to violate CISADA?

    A.1.-2. As with the domestic financial sanctions regimes of
    many of our allies, the financial provisions of CISADA go
    significantly beyond the provisions of the relevant U.N.
    Security Council resolutions. For example, the U.N. applies
    full targeted sanctions on only two banks--Bank Sepah and First
    East Export Bank. In contrast, the U.S. targeted sanctions, and
    by extension the financial provisions of CISADA, apply to many
    more Iranian-linked banks, including Bank Melli, Bank Mellat,
    Export Development Bank of Iran, Bank Saderat, Post Bank, and
    Europaisch-Iranische Handeslbank (EIH). It is therefore
    possible for a foreign bank to be acting consistent with its
    domestic laws and U.N. sanctions, and nevertheless be engaged
    in conduct that implicates CISADA.
        Since the passage of CISADA in 2010, Treasury has engaged
    the Chinese government and its banking regulators to discuss
    CISADA-related concerns and to raise awareness of the potential
    consequences that Chinese financial institutions may face under
    CISADA should they engage in sanctionable activity. As partners
    in the P5+1 process, we believe that China shares our concern
    about Iran's nuclear program and would not want its banks to be
    engaged in activity that could support Iranian proliferation-
    related activities.
        The State Department is responsible for implementing the
    Iran Sanctions Act and the energy related provisions of CISADA,
    and as a result, I must defer to the State Department on any
    questions regarding energy-related sanctions.

    Q.1.-3. Are U.N. sanctions working perversely to provide cover
    to cheat on U.S. sanctions with respect to either China or
    North Korea?

    A.1.-3. U.N. Security Council Resolutions provide an important
    foundation and baseline for the international sanctions regime
    against North Korea and Iran. Given deep international concerns
    regarding North Korean and Iranian behavior, many countries
    have gone beyond this baseline. Equally as important, given
    long-standing international concerns about the illicit
    financial activities of Iran and North Korea, financial
    institutions throughout the world--including many in China--
    have eliminated or severely restricted their dealings with
    entities from those jurisdictions beyond what is required under
    their domestic law. It is certainly possible for a financial
    institution to be in compliance with a strict reading of the
    UNSCRs, but nevertheless be engaged in conduct inconsistent
    with U.S. sanctions, and the sanctions regimes of many of our
    allies. In the case of China, the challenge has been to
    encourage a broad interpretation of both the letter and spirit
    of the relevant U.N. resolutions, and to provide specific
    information to enable robust Chinese implementation. I have
    spent time with the Chinese doing precisely this. Moreover, we
    must continue to encourage the dynamic among private sector
    financial institutions--including Chinese financial
    institutions--to take strong measures to protect themselves
    from illicit Iranian and North Korean financial conduct.

    Q.2. What is the current status of the report authorized by
    section 6303 of the 2004 Intelligence Reform and Terrorist
    Prevention Act? What are the problems involved with its
    production?

    A.2. Terrorist financing is constantly evolving, both in terms
    of sources and methodologies and in terms of international and
    domestic efforts to combat it. It is important that Congress be
    kept informed on developments in this area. One way of doing so
    is through broad reports such as the one authorized by section
    6303 of the 2004 Intelligence Reform and Terrorist Prevention
    Act, and, if confirmed, I will work to see that it is completed
    expeditiously. Moreover, I commit to make myself available to
    you, other members of the Committee, and your staff to ensure
    that as an ongoing matter your specific questions and concerns
    related to terrorist financing are being addressed.

    Q.3.-1. The result of Treasury policies and increased law
    enforcement have forced a good deal of financing into informal
    channels like hawala, and the use of charities.
        Is charitable financing of terror a growing problem, or
    more of a manageable constant? And, is the problem different in
    the Gulf, Europe and here at home?

    A.3.-1. The financing of terrorism and extremism by charities
    remains a concern to which Treasury devotes considerable
    effort. Charities are not just attractive vehicles by which
    terrorist organizations can raise funds, but they also provide
    opportunities to legitimize the organizations and radicalize
    populations. Domestically, we have made significant progress.
    Of course, only an extremely tiny fraction of the 1.8 million
    charitable organizations in the U.S. have ever presented a
    significant risk of terrorist financing. However, since 9/11 a
    combination of law enforcement actions and sustained dialogue
    with the charitable community has ensured that the U.S. is not
    a favorable environment for terrorist fundraising. Globally, we
    have also made progress, though much work remains to be done.
    In the Gulf, certain charities continue to support a wide range
    of terrorist organizations from Al Qaida to Hamas. In combating
    these organizations, we have over the last several years
    significantly improved our counter-terrorist financing
    cooperation and information sharing with partners such as Saudi
    Arabia and the UAE, even as we look for improvements in
    countries such as Qatar and Kuwait. The designation of groups
    such as the Revival of Islamic Heritage Society (RIHS)
    demonstrates that a continued focus on certain charities in the
    Gulf is required. In Europe our focus has been more
    specifically on Hamas fundraising. We consistently work with
    our partners in Europe and in the Middle East to try to block
    the flow of funds from charities in Europe that support Hamas--
    most notably charities affiliated with the U.S.-designated
    Union of Good.

    Q.3.-2. It is impossible to put a dollar figure on money moving
    through hawala, but is that system financing the majority or
    minority of terrorist activity in the world, and are our
    counter threat financing measures sophisticated enough to make
    a difference in this area?

    A.3.-2. The Treasury Department has long-recognized the
    vulnerability of informal value transfer systems to illicit
    finance. As noted in the question, specific measurements are
    impossible, though by any account hawala continues to be among
    the most significant mechanisms through which terrorist
    organizations move funds. Hawalas can be an attractive transfer
    mechanism for terrorists for two primary reasons: (i) hawala
    networks often provide basic financial services to communities
    and regions that are not reached by more modern financial
    service providers, and (ii) if not adequately regulated,
    hawalas provide the opportunity for non-transparent financial
    activity.
        Treasury has worked to address the vulnerabilities
    presented by informal value transfers through a four-pronged
    approach: targeted financial sanctions and other enforcement
    actions; systemic regulation; outreach; and international
    engagement. The international component of this strategy is
    discussed in greater detail below, but includes standard
    setting through FATF, targeted sanctions on such illicit actors
    as the New Ansari Network in Afghanistan, and encouragement to
    countries such as Pakistan to strengthen their regulatory
    regimes.
        Domestically, hawalas, like all other money services
    businesses, are required to register with FinCEN, and we have
    worked to establish a transparent financial system with
    appropriate anti-money laundering and countering the financing
    of terrorism (AML/CFT) requirements on informal financial
    service providers. Where these requirements are not observed,
    it is important that we act. In the last 5 months FinCEN has
    taken civil enforcement actions against three unregistered
    money transmitters. Treasury is also working to ensure that our
    domestic regime is as robust as possible. Treasury is currently
    conducting a broad analysis of hawalas operating in the United
    States to better understand domestic hawala users and the money
    flows associated with their transactions. Moreover, Treasury is
    also engaging in rulemaking to impose cross-border reporting
    requirements on all cross-border transfers above one thousand
    dollars for all money transmitters. This will enhance our
    understanding of cross-border money flows through the industry
    and inform our outreach, enforcement and regulatory compliance
    efforts.

    Q.3.-3. How effective are either international efforts through
    the Financial Action Task Force (``FATF'') or international law
    enforcement measures on informal value systems?

    A.3.-3.The Financial Action Task Force (FATF) sets
    international AML/CFT standards and works for their global
    implementation. The FATF standards require that informal value
    systems be licensed or registered, and subject to transparency
    requirements. These standards provide an important baseline for
    global efforts in this area. In particular, FATF--in
    cooperation with the IMF, World Bank, and FATF's regional
    affiliates--has undertaken a global initiative to assess the
    compliance of virtually every country in the world with the
    FATF standards.
        International standard setting, however, is necessary but
    insufficient to protect the U.S. financial system from illicit
    informal value transfer networks. As noted above, it must be
    combined with adequate regulation domestically and robust
    enforcement action as necessary. In February 2011, for example,
    Treasury designated the New Ansari Money Exchange, a major
    Afghan hawala and money laundering vehicle, and 15 affiliated
    individuals and entities under the Foreign Narcotics Kingpin
    Designation Act. These actions exposed a primary money
    laundering network that transferred billions of dollars into
    and out of Afghanistan and the neighboring region, including
    proceeds of narcotics trafficking and corruption and funds used
    to support insurgency financing. More broadly, Treasury has
    worked with the Pakistani government to improve its AML/CFT
    regime, including with respect to informal value transfer
    systems such as hawalas.
                                    ------

     RESPONSE TO WRITTEN QUESTIONS OF SENATOR BROWN FROM DANIEL L.
                                 GLASER

    Q.1. Are you investigating foreign banks today for possible
    violation of CISADA?

    A.1. Yes, Treasury is currently investigating several foreign
    banks for activities that may result in findings under CISADA.

    Q.2. If a foreign central bank is supporting Iran's
    proliferation activities or facilitating the activity of
    entities under U.S. or U.N. sanctions, would it be
    sanctionable?

    A.2. Yes, a foreign central bank, like any other person or
    entity, may be subject to designation under U.S. law for
    supporting Iran's proliferation activities or providing
    material support to persons designated under U.S. counter-
    proliferation sanctions.

    Q.3. What financial tools does the United States have to press
    China to reduce its relationship with Iran?

    A.3. China voted for all relevant United Nations Security
    Council resolutions relating to Iran, and has publicly
    committed to implementing them. Treasury has actively engaged
    with the Chinese government on this basis, encouraging a broad
    interpretation of both the letter and spirit of the
    resolutions, and providing specific information to enable
    robust Chinese implementation. Moreover, Treasury has
    communicated directly with large Chinese banks through their
    offices in the United States to ensure that they understand the
    risks they face from financial activities with Iran. We believe
    this ongoing engagement with China has been productive. Beyond
    this engagement, Treasury retains the same diverse set of tools
    it has available to protect the U.S. financial system from all
    illicit activity, including anti-money laundering authorities
    grounded in the Bank Secrecy Act and USA PATRIOT Act and
    sanctions authorities grounded in the International Emergency
    Economic Powers Act (IEEPA) and CISADA.
                                    ------

     RESPONSE TO WRITTEN QUESTIONS OF SENATOR HAGAN FROM DANIEL L.
                                 GLASER

    Q.1. During your testimony, you mentioned that you plan to
    visit Panama during a joint Mexican-United States visit to
    Central America later this month in an attempt to better
    understand the networks that narcotics organizations use to
    launder money and finance illicit activities. It is my
    understanding from testimony provided to the Senate Armed
    Services Subcommittee on Emerging Threats and Capabilities that
    one of the predominant challenges that exists in Panama is its
    weak anti-money laundering regime and its inability to go after
    illicit finance.
        What is your assessment of Panama's current anti-money
    laundering regime? How involved are Panamanian financial
    institutions in the financing of narcotics activity throughout
    the world? What steps has Panama taken in recent years to limit
    these activities?

    A.1. Like many other countries in the region, Panama's AML
    regime has deficiencies that make it vulnerable to money
    laundering activity related to narcotics trafficking.
    Deficiencies of particular concern include the lack of AML
    regulation and supervision in the Colon Free Zone and the
    opaque company formation options available in the jurisdiction.
    These deficiencies and others make the Panamanian financial
    system vulnerable to being exploited by bad actors. Through the
    South American FATF Style Regional Body (GAFISUD), we are
    working with Panama to remedy these deficiencies. A recent step
    Panama has taken to address transparency issues is the
    ratification of a tax information exchange agreement with the
    United States. During my upcoming trip, I hope to discuss
    additional steps Panamanian authorities can take to protect
    themselves and their financial institutions from money
    laundering predicated on narcotics trafficking.

    Q.2. In your testimony, when discussing Central America's
    financial institutions, you referenced the Lebanese Canadian
    Bank. Was it your implication that similar institutions support
    the global narcotics financing network from Panama?

    A.2. Lebanese Canadian Bank (LCB) was an important financial
    node in a narcotics money laundering network with links in the
    Western Hemisphere, Asia, Africa, and the Middle East. Though
    it was not my intention to imply that there are financial
    institutions in Panama that are precisely analogous to LCB,
    clearly narcotics trafficking organizations have financial
    networks in the Western Hemisphere and it is important that we
    target them. An important part of my upcoming visit to Panama
    will be to seek Panamanian government assistance in identifying
    and disrupting these financial networks.
                                    ------

    RESPONSE TO WRITTEN QUESTIONS OF CHAIRMAN JOHNSON FROM TIMOTHY
                               G. MASSAD

    Q.1. Mr. Massad, since our last hearing on TARP oversight (3/
    17/11), you quickly responded to concerns I and others raised
    regarding HAMP with announced changes to the program, including
    a new servicer scorecard that includes penalties for non-
    compliance. What impact do you expect these changes to have?

    A.1. Recently, Treasury announced two enhancements to the
    Making Home Affordable (MHA) program implementation and
    reporting practices, which will be implemented soon. First, we
    will require servicers to establish a single point of contact
    with potential HAMP-eligible borrowers who will serve as a
    relationship manager to assist with the borrower's
    communications with the servicer. Treasury recognizes that too
    often homeowners receive conflicting information from their
    servicer and cannot gain access to someone knowledgeable about
    their case. This program enhancement is aimed at addressing
    that problem.
        Second, we will be enhancing MHA reporting by expanding our
    disclosure of the results of our servicer compliance reviews.
    Treasury has a robust compliance program, with compliance
    agents performing reviews as often as monthly in the largest
    servicers. The top priority of our compliance program has been
    to ensure that homeowners are appropriately assisted under MHA
    and that servicers are meeting their obligations under the
    program. In doing so, we require remedial action where needed
    to correct areas of non-compliance.
        To further bolster these efforts, Treasury is developing
    and plans to release next month more information regarding
    compliance reviews for each of the ten largest MHA
    participating servicers. This will provide more information
    regarding each of those ten largest servicers' respective
    compliance with MHA requirements, and is designed to provide
    greater transparency for the public regarding servicer
    performance. Under the contracts associated with MHA, Treasury
    will begin withholding financial incentives for servicers whose
    performance is deemed to be materially insufficient.
        The number of homeowners who will benefit from these
    enhancements to the program depends upon numerous variables,
    including the performance of participating mortgage servicers,
    the impact of any future changes to program terms and
    procedures, and the overall state of the economy and the
    housing market. That said, by requiring a single point of
    contact, Treasury expects servicers to improve their
    performance resulting in better communication with homeowners,
    fewer situations where homeowners feel their servicer is not
    responsive, more people in the program, fewer lost documents,
    and greater homeowner understanding of their mortgage
    mitigation options. Similarly, we believe that expanded
    reporting on compliance will enhance servicer performance
    overall. Approximately 1.4 million homeowners are currently
    estimated to be eligible for the program, in addition to the
    670,000 homeowners who have already received permanent
    modifications.

    Q.2. In a Bloomberg poll last year, 60 percent of Americans
    said they believe most of the TARP money to the banks is lost.
    What is the current state of TARP repayments, and what steps
    will you take to ensure the administration of TARP is
    transparent to Congress and the American people?

    A.2. Congress originally authorized $700 billion for TARP. We
    will spend no more than $475 billion. Of the $411 billion
    disbursed to date, we have already received back a total of
    $296 billion. Taxpayers have now recovered an amount equal to
    72 percent of total TARP disbursements, and I am hopeful that
    we will recover most of the outstanding amount within the next
    few years, market conditions permitting. Moreover, taxpayers
    have now recovered more than 100 percent ($251.6 billion) of
    the $245.1 billion in total funds disbursed for TARP
    investments in banks (inclusive of dividends, interest, and
    other income). Every additional dollar recovered from banks
    will constitute a positive return to taxpayers. Indeed,
    Treasury currently estimates that bank programs within TARP
    will ultimately provide a lifetime positive return of over $21
    billion. CBO's latest estimate puts the overall cost of TARP at
    approximately $19 billion--just a fraction of the initial
    estimate of $356 billion.
        To address the second part of your question, Treasury has
    taken many steps that have made TARP one of the most
    transparent programs in the Federal Government. Our website has
    a daily TARP tracker that shows the amount of funds disbursed,
    still outstanding, and returned by program. This is updated
    every day. We also provide a full report on TARP funds returned
    and outstanding in our monthly report to Congress (pursuant to
    Section 105(a) of the Emergency Economic Stabilization Act of
    2008 (EESA)), which details how TARP funds have been used, the
    status of recovery of such funds by program, and information on
    the estimated cost of TARP. In addition, Treasury has published
    hundreds of comprehensive reports and other information about
    TARP, so that the public knows how its money was invested, who
    received it and on what terms, how much has been repaid, and
    how much income has been earned from investments. This
    information is posted on our website, FinancialStability.gov,
    and includes:

       LThe daily TARP tracker and the monthly 105(a)
            report to Congress referenced above;

       LA monthly housing report containing detailed
            metrics on the housing programs;

       LA quarterly report on the PPIP program that
            provides detailed information on the funds, their
            investments, and returns;

       LA report on each transaction (such as an investment
            in or repayment by an institution) within two business
            days of its completion;

       LA quarterly report that details all dividend and
            interest payments;

       LPeriodic reports on the sale of warrants, including
            information on auctions as well as on how the sale
            price was determined in the case of any repurchase of
            warrants by a TARP recipient;

       LMonthly lending and use-of-capital surveys that
            contain detailed information on the lending and other
            activities of banks that have received TARP funds;

       LA list of all the institutions participating in
            TARP programs and of all the investments Treasury has
            made; and

       LEvery contract and financial agency agreement it
            has entered into.

    Further, pursuant to EESA, Treasury prepares separate, audited
    financial statements for TARP. In its first 2 years of
    operations, TARP's financial statements received unqualified
    (``clean'') audit opinions from the Government Accountability
    Office (GAO), and separate reports on internal control over
    financial reporting were unqualified and found no material
    weakness-unprecedented achievements for a startup operation
    with an extraordinary emergency mission. As a result of these
    efforts, the Office of Financial Stability (OFS) just received
    its second Certificate of Excellence in Accountability and
    Reporting award from the Association of Government Accountants.

    Q.3. Former Senator Ted Kaufman testified before our panel on
    TARP, saying the program ``has become one of the most
    thoroughly scrutinized Government programs in U.S. history.''
    Has TARP oversight been helpful to Treasury in administering
    the program? Will you continue to be responsive to concerns and
    suggestions Congress and the oversight bodies have to improve
    TARP?

    A.3. OFS has a very cooperative relationship with our oversight
    bodies, and their reports and recommendations have made
    important contributions to the development, strength, and
    transparency of TARP programs. To date, we have responded to 80
    reports from GAO, the Congressional Oversight Panel, and the
    Special Inspector General for TARP (SIGTARP); have participated
    in more than 30 Congressional hearings on TARP; and have
    adopted more than 120 of the recommendations made by the
    oversight bodies. If confirmed, I will continue to be
    responsive to and will work closely with this Committee and
    other Committees of Congress, SIGTARP, GAO, and the Financial
    Stability Oversight Board to ensure that TARP meets the highest
    standards.
                                    ------

    RESPONSE TO WRITTEN QUESTIONS OF SENATOR SHELBY FROM TIMOTHY G.
                                 MASSAD

    Q.1. Last month, the Government Accountability Office (GAO)
    issued a report entitled, ``Improvements are Needed in Internal
    Control Over Financial Reporting for the Troubled Asset Relief
    Program.'' The report described deficiencies that the GAO had
    identified in the Office of Financial Stability's internal
    control over its accounting and financial reporting processes.
    What steps have you taken to remedy these deficiencies? What
    plans do you have for ensuring that TARP assets are properly
    valued?

    A.1. Before addressing what action we have taken, it is
    important to put the report in context. Treasury has taken many
    steps that have made TARP one of the most transparent programs
    in the Federal Government. Pursuant to the Emergency Economic
    Stabilization Act of 2008 (EESA), Treasury prepares separate,
    audited financial statements for TARP. In its first 2 years of
    operations, TARP's financial statements received unqualified
    (``clean'') audit opinions from the GAO. In addition, GAO
    issued separate reports on internal control over financial
    reporting that were unqualified and that found no material
    weakness. These are unprecedented achievements for a startup
    operation. Those clean opinions demonstrate that the Office of
    Financial Stability (OFS) has accurately valued and reported on
    TARP assets since the program's inception.
        The deficiencies noted by GAO were related to recommended
    improvements regarding internal control over financial
    reporting, not the accuracy of OFS's financial statements or
    the valuation of OFS assets. After its fiscal year 2010 report,
    GAO sent OFS a management letter with specific recommendations
    relating to improvements to specific internal control
    processes. With those recommendations as a guide, OFS
    anticipates that by the end of June, OFS will have corrective
    actions in place that will address each of the issues
    identified by GAO. GAO's overall conclusion concerning the
    quality and accuracy of fiscal year 2010 OFS statements was as
    follows:

            OFS's financial statements for TARP, including the accompanying
            notes, present fairly, in all material respects, in conformity
            with U.S. generally accepted accounting principles, OFS's
            assets, liabilities, and net position as of September 30, 2010,
            and 2009, and its net cost, changes in net position, and
            budgetary resources for fiscal years 2010 and 2009.

    As a result of these efforts, OFS just received its second
    Certificate of Excellence in Accountability and Reporting award
    from the Association of Government Accountants.
        On April 18, 2011, GAO sent OFS a management report (the
    ``Report'') based on GAO's fiscal year 2010 audit of OFS's
    financial statements and its audit of internal control over
    OFS's financial statements. The Report makes nine individual
    recommendations to OFS to correct one significant deficiency
    and two lesser control deficiencies. For example, the Report
    recommends that OFS take corrective action to ensure that only
    designated officials conduct and review period-end
    reconciliations; that journal entry review properly considers
    supporting documentation before entry into the general ledger;
    and that asset valuations only reflect amounts outstanding at
    fiscal year end.
        OFS is working hard to develop a corrective action plan
    (``CAP'') to address each of the nine recommendations. However,
    because we received the Report only 3 weeks ago, the CAP is not
    yet complete. Nonetheless, the CAP will provide the following:
    it will list GAO's findings and related recommendations; it
    will describe OFS's planned activities; and it will identify
    target completion dates. Moreover, the OFS Chief Financial
    Officer has identified and has assigned individual OFS staff
    members to address each of the nine recommendations. These
    staff members will develop corrective actions, which will be
    compiled and reviewed by OFS's Internal Control Program Office
    and senior management relative to GAO's findings. The
    corrective actions, in turn, will be entered into the
    Department of the Treasury tracking system and progress will be
    monitored by OFS leadership, Treasury's Deputy Chief Financial
    Officer staff, and the GAO. Corrective actions will not be
    closed until they have been resolved successfully and there is
    sufficient documentation of that fact. OFS anticipates that by
    the end of June we will have corrective actions in place that
    will address each of the recommendations made by GAO.
        Additionally, you specifically ask about our plans to
    ensure that TARP assets are valued properly. We agree that this
    is an important issue, and as noted above, we are working hard
    to develop a CAP to address all of GAO's recommendations,
    including areas GAO identified in which controls regarding the
    estimation process could be improved. In particular, during its
    review of interim estimates, GAO found that the Governmentwide
    discounting tool--which OFS is required to use--has limitations
    in making adjustments to exclude future disbursements that are
    separately needed for budget formulation purposes. Therefore,
    GAO recommended that OFS only include cash-flows related to
    outstanding investment balances. In addition, GAO noted several
    instances where documentation was insufficient involving the
    rationale for model changes and assumptions. In response to
    these recommendations, OFS is strengthening its testing,
    procedures, and documentation to ensure that estimates continue
    to be accurate and fully supported. We will make sure that
    these corrective actions taken will be described in our CAP and
    supporting materials.
        While OFS is committed to implementing each of the nine
    recommendations set forth in the GAO's Report, we are pleased
    with GAO's overall conclusion that OFS's financial statements
    ``present fairly, in all material respects, in conformity with
    U.S. generally accepted accounting principles, OFS's assets,
    liabilities, and net position as of September 30, 2010, and
    2009.'' In its first 2 years of operations, TARP's financial
    statements received unqualified (``clean'') audit opinions from
    the GAO. In addition, GAO issued separate reports on internal
    control over financial reporting that were unqualified and that
    found no material weakness. As a result of these efforts, OFS
    just received its second Certificate of Excellence in
    Accountability and Reporting award from the Association of
    Government Accountants.
                                    ------

      RESPONSE TO WRITTEN QUESTIONS OF WANDA FELTON FROM CHAIRMAN
                                JOHNSON

    Q.1. Congress has mandated that at least 20 percent of the
    Export-Import Bank's annual authorizations go toward small
    business transactions. How can the Export-Import Bank work to
    exceed the 20 percent mandate moving forward?

    A.1. One of Ex-Im Bank's mandates is to ``aid, counsel, assist,
    and protect, insofar as is possible, the interests of small
    business concerns in order to preserve free competitive
    enterprise.'' It is my understanding that Ex-Im Bank treats
    this mandate seriously--recognizing that small business is the
    engine that drives job creation. Under Chairman Hochberg, the
    Bank has announced its intent to achieve the following goals
    with respect to small business activity:

       Lincrease the cumulative value of authorized small
            business transactions to at least $30 billion by fiscal
            year 2015;

       Lsupport a total of $44.1 billion in small business
            export sales; and

       Ladd 5,000 small business clients.

        A variety of tools are available to increase support for
    small businesses. These include:
    Proactive Outreach and Training (road shows, seminars and webinars) To:

       Lincrease awareness of the Bank's programs;

       Lencourage small businesses to begin exporting; and

       Ltrain small businesses in how to access and utilize
            its programs.
    Innovative Products Tailored To Meet the Specific Needs of Small
            Businesses
       LProvide access to competitively priced capital.

       LStreamline the application process.

       LReduce response time.
    Leverage All Available Resources To Maximize Impact
       LDesign products that will attract bank and
            insurance company participation.

       LLeverage other agencies such as the SBA.

       LUse Board members to get the message out.

    It is my understanding that, through these efforts, Ex-Im Bank
    authorized nearly 3,100 small businesses transactions, which
    accounted for more than 87 percent of the Bank's total
    transactions in fiscal year 2010.

    Q.2. The Export-Import Bank's decisions occasionally gain the
    attention of interested parties that do not necessarily
    interact with the Bank. What is your view on how the Export-
    Import Bank can best receive input from various stakeholders
    who will be impacted by the decisions it makes?

    A.2. It is reasonable to expect that Ex-Im Bank's decisions may
    affect many parties, including industry participants, Congress
    and its constituents, and other Government agencies. The Bank's
    primary mission is to promote U.S. job creation through
    exports. However, the Bank is required to fulfill this mandate
    while considering other policy objectives such as promoting
    renewable energy. Ex-Im Bank should anticipate the impact of
    its activities in the context of these broader considerations
    and undertake reasonable efforts to engage interested parties
    to seek their input, when appropriate. Ex-Im Bank's charter
    stipulates that it must notify Congress of authorized
    transactions of $100 million or more. In addition, there is a
    duty to seek input from the Department of Treasury, the State
    Department, and the National Security Council in connection
    with transactions with perceived implications for foreign
    policy, national security, and environmental policy as well as
    competitive factors which are perceived as potentially harmful
    to domestic interests.
        Ex-Im Bank has established internal due diligence
    procedures and policies to promote compliance and flag
    potential issues. Moreover, the Bank's staff is highly
    professional and experienced. To the extent that additional
    input is needed, Board members and staff can engage external
    resources. It is the Board's fiduciary responsibility to make
    its best efforts to weigh the various implications of its
    actions.
        If confirmed, I would have an open door policy regarding
    transactions pending before the Board. I would welcome and
    encourage input from individuals, industry and the Congress
    regarding transactions large and small.

       RESPONSE TO WRITTEN QUESTION OF WANDA FELTON FROM SENATOR
                                 SHELBY

    Q.1. The duties of Board members of the U.S. Export-Import Bank
    (Ex-Im Bank) are not defined or explained in Ex-Im Bank's
    Charter. It is largely up to each Board member to determine how
    they want to have an impact on Ex-Im Bank.
        What will each of your priorities be as Board members?
    Taking into consideration the Chairman's set of priorities and
    those mandated by Congress, which aspects of Ex-Im Bank's
    operations would you each request to focus on, and why?

    A.1. If confirmed, I feel confident that my priorities will be
    consistent with Ex-Im Bank's Charter, the Bank's Congressional
    mandates, and by extension, the Chairman's priorities. I am
    strongly committed to the Bank's mission. Certainly, the
    ability to promote American competitiveness in foreign markets
    to protect jobs, without burdening tax payers, is a unique and
    valuable tool in less robust economic cycles. However, I
    believe that Ex-Im Bank serves a critical need irrespective of
    economic conditions and that utilizing every resource to
    promote American competitiveness would serve the nation's long-
    term strategic interests. As President Obama has observed, 95
    percent of consumers are outside the United States. U.S.
    businesses must position themselves to compete for these
    consumers.
        The Bank has also been directed by Congress to meet other
    important objectives, including providing access to capital to
    small business (including minority- and women-owned
    enterprises); promoting renewable energy; and promoting U.S.
    exports to sub-Saharan Africa. I believe that my background
    would allow me to make a meaningful contribution in bolstering
    American exports in Africa. Ex-Im Bank has identified nine
    countries which should be the focus of attention by virtue of
    the size of their markets, their projected economic growth, and
    substantial need for equipment and services to build basic
    infrastructure. I have prior business experience in two of the
    targeted countries in sub-Saharan Africa (Nigeria and South
    Africa) and believe I can be of value in this effort.
        In addition, while the Bank has made reaching out to small
    business a significant priority, there may be an opportunity to
    address the needs of middle-market companies which have also
    experienced a significant withdrawal of bank financing in the
    current down economic cycle. Again, I have been active in this
    arena by virtue of my prior business experience and I believe I
    have an understanding of how to approach this task. I believe
    that I can help raise general awareness of Ex-Im Bank through
    speaking engagements and other outreach.
        Finally, I am interested in specific tasks such as helping
    to plan Ex-Im Bank's next annual conference. I have previously
    been active in investor relations and helped plan annual
    conferences and have a network that may be valuable in
    attracting high quality speakers.
                                    ------

      RESPONSE TO WRITTEN QUESTIONS OF WANDA FELTON FROM SENATOR
                                 VITTER

    I do not have personal knowledge of the issues you raised. If I
    am confirmed, I will request to be briefed on them and will be
    happy to continue to work with you on these issues of concern.
    In the meantime, the Ex-Im Bank staff has provided the
    following information on the questions you asked.

    Q.1. Please provide a list of all loans or other financial
    support over the last decade that have gone to foreign state-
    owned energy companies that have been utilized in projects for
    their domestic energy production or to increase refining
    capacity.

    A.1. See attached spreadsheet.

    Q.2. Please provide a list of the top 5 U.S. companies that
    have been financial beneficiaries of Ex-Im Bank financing over
    the last decade in terms of total dollar support.

    A.2. See attached spreadsheet.

    Q.3. Of the initial request for Ex-Im Bank financing by
    Petrograd based on the May 7, 2009 preliminary commitment of $2
    billion how many companies have filed documentation to qualify?

    A.3. There is no process of qualification for a preliminary
    commitment, since the Bank acts on actual transactions, not
    non-binding preliminary commitments. We are close to finalizing
    a $308 million credit guarantee facility as part of the
    preliminary commitment. Bank transactions are individually
    evaluated on the bases of ``reasonable assurance of repayment''
    and, where applicable, the Bank's environmental guidelines. In
    other words, the great majority of the Bank's credit
    evaluations involve foreign buyers of U.S. exports, in both the
    public and private sectors.

    Q.4. What metrics does Ex-Im Bank use in analyzing the return
    on investment before approving loans?

    A.4. The Ex-Im Bank is not a traditional bank or a for-profit
    business. Bank transactions are individually evaluated on the
    basis of ``reasonable assurance of repayment.'' Other return on
    Ex-Im Bank transactions that is important can be measured, when
    possible, in U.S. jobs. Our measurement is that, on average,
    every $1 billion in U.S. exports supports approximately 7,400
    U.S. jobs. The Bank's primary mission is to support jobs
    through exports. Through prudent management the Bank has been
    self-sustaining since fiscal year 2008, meaning that revenues
    have exceeded losses and expenses. The Bank has returned more
    than $3.4 billion over the past 5 years. In addition, Congress
    recently rescinded $275 million of the Bank's excess funds as
    part of the fiscal year 2011 Continuing Resolution, which is
    additional money that benefits the U.S. taxpayers.

    Q.5. What is the minimal return on investment Ex-Im Bank
    requires before issuing a loan or any other form of financial
    support?

    A.5. The Federal Credit Reform Act of 1990 requires Ex-Im Bank
    to set aside reserves for all transactions at the time of
    authorization or commitment. If funds are not available at that
    time, the Ex-Im Bank is legally prohibited from approving a
    transaction. Since fiscal year 2008, Ex-Im Bank has been self-
    sustaining where the fees charged on its transactions have paid
    for both prudent loan loss reserves as well as the Bank's
    administrative expenses. Again, Bank transactions are
    individually evaluated on the bases of ``reasonable assurance
    of repayment'' and the other return on Ex-Im Bank transactions
    that is important can be measured, when possible, in U.S. jobs.
    By the congressional mandate in its charter, Ex-Im Bank must
    find a reasonable assurance of repayment before it can approve
    a transaction. Transactions must also comply, where applicable,
    with the Bank's environmental guidelines. The return on
    investment is measured in U.S. jobs supported.

    Q.6. Please provide a list of all Ex-Im Bank financing in which
    GE was the beneficiary over the last decade.

    A.6. See attached spreadsheet.

    Q.7. Please provide a list of all financial arrangements that
    have gone bad or not been repaid and by what companies and in
    what countries over the last decade.

    A.7. See attached spreadsheet.

    Q.8. What is the total dollar amount of all outstanding Ex-Im
    Bank financing obligations and what is the estimated annual
    return on investment for each year over the next 5 years.

    A.8. The Export-Import Bank has been self-sustaining since
    fiscal year 2008, and expects to be self-sustaining going
    forward. As a self-sustaining agency, Ex-Im Bank pays for all
    annual costs from receipts or fees that it charges on the
    supported transactions. The following chart shows that Bank's
    self-sustaining results since fiscal year 2008.
    Export-Import Bank of the United States

                                                 Self-Sustaining Results
                                                     FY 2008-FY 2010
                                                  (dollars in millions)
    ----------------------------------------------------------------------------------------------------------------
                   FY                  Authorized Amount        Revenue            Expenses               Net
    ----------------------------------------------------------------------------------------------------------------
    2008............................          $14,398.9              $122.8              $103.4               $19.4
    2009............................          $21,021.1              $292.1              $118.5              $173.6
    2010............................          $24,467.8              $479.4              $126.8              $352.6
    ----------------------------------------------------------------------------------------------------------------

        As a result of its self-sustaining, the Bank in fiscal year
    2009 returned to the U.S. Treasury $136 million as negative
    subsidy, and in fiscal year 2011 the U.S. Congress rescinded
    $275 million in unobligated balances.
        During the past 5 years, the Bank has returned $3.4 billion
    to the U.S. Treasury.
        The Ex-Im Bank is a demand driven agency and we forecast
    total exposure growth of approximately 12 percent per year. In
    fiscal year 2010, Ex-Im Bank's total exposure was $75.2 billion
    and by the end of fiscal year 2014, the Bank forecasts exposure
    to be $125 billion. The exposure increase is driven by the
    significant increase in new authorizations. Since fiscal year
    2008, new authorizations have increased an average of 25
    percent per year. Based on the Bank's new authorization
    pipeline and other factors, it forecasts growth in new
    authorization at 15 percent per year after fiscal year 2010.
    The Bank will continue to be self-sustaining during this time
    and forecasts revenue of $468 million compared to expenses of
    $201 million during fiscal year 2012. By FY 2014, the Bank
    forecasts revenue to grow to approximately $1.0 billion with
    expense levels slightly higher than the fiscal year 2012
    levels.

                                    ------

      RESPONSE TO WRITTEN QUESTIONS OF CHAIRMAN JOHNSON FROM SEAN
                                MULVANEY

    Q.1. The President has called for a doubling of our nation's
    exports by 2015. In your view, what role should the Export-
    Import Bank play in that effort?

    A.1. Trade is a very important part of the American economy.
    Some estimates put trade as contributing a quarter of U.S. GDP
    growth over the last decade. In 2008, total trade (exports plus
    imports) represented more than 30 percent of U.S. GDP. In 1947,
    when the GATT was launched, it represented only 7.5 percent of
    U.S. GDP. Exports represent 12.5 percent of U.S. GDP. Over the
    last 13 years, total U.S. exports have increased 6.8 percent
    per year (1995-2008).
        The President has called for a doubling of our nation's
    exports by 2015 as part of his National Export Initiative
    (NEI). It is an ambitious goal that will require wide ranging
    efforts across the public and private sector. The Export-Import
    Bank of the United States plays an important role contributing
    to overall U.S. Government efforts. First, the Bank enables
    U.S. companies--large and small--to turn export opportunities
    into real sales that help maintain and create U.S. jobs and
    contribute to a stronger national economy. In fiscal year 2010
    the Bank supported over $34 billion of U.S. exports with
    authorizations of direct loans, guarantees, and export
    insurance of nearly $25 billion.
        Second, the Bank influences U.S. Governmentwide public
    awareness efforts about export opportunities. The Bank has more
    than 60 city/State partners in 40 States with a mission of
    expansion, promotion, and creation of jobs in a given region by
    helping to make available export financing and entrepreneurial
    services. The Bank cooperates with other Federal organizations
    such as OPIC, TDA, the Commerce Department, and USTR in
    providing leadership to this public awareness effort.
        And third, the Bank is a member of the Trade Promotion
    Coordinating Committee, the U.S. Government inter-agency
    process that deliberates on U.S. trade policy and supports
    executive branch leadership on trade issues in conjunction with
    the Congress. Tools of the Bank to support U.S. exports under
    the National Export Initiative will need to be complemented by
    other public and private sector efforts such as bilateral trade
    agreements to remove barriers to U.S. exports (FTAs with
    Panama, Colombia, and South Korea) and regional trade
    liberalization efforts as the Trans Pacific Partnership.
    Private sector efforts to innovate and invest will be
    critically important as well to meeting America's export goals.

    Q.2. Information technology is an important tool in ensuring
    that the Export-Import Bank is operated effectively and
    transparently. According to the Export-Import Bank's 2010
    annual report, the Bank has taken several steps to improve its
    website and outreach efforts for customers and the public. How
    do you propose to work to further these initiatives?

    A.2. Prior to this position, I served as the Assistant
    Administrator for Management, a Presidentially appointed and
    Senate-confirmed position, at the U.S. Agency for International
    Development. In this position, I supervised the Agency's Chief
    Information Officer (CIO) and secured Agency approval of an IT
    strategic plan. Through this experience, I developed an
    understanding of key enterprise architecture and IT change
    management issues as organizations undergo substantial
    renovation or modernization of their IT infrastructure.
        If confirmed, I would make every effort to bring this
    experience to the Bank's management. I would work with the
    Chairman and other Board members in oversight efforts that the
    Board might undertake as the Bank aims to implement IT
    improvements across its operations, particularly outreach
    efforts to customers and the general public.
                                    ------

       RESPONSE TO WRITTEN QUESTIONS OF SENATOR SHELBY FROM SEAN
                                MULVANEY

    Q.1. The duties of Board members of the U.S. Export-Import Bank
    (Ex-Im Bank) are not defined or explained in Ex-Im Bank's
    Charter. It is largely up to each Board member to determine how
    they want to have an impact on Ex-Im Bank.
        What will each of your priorities be as Board members?

    A.1. If confirmed, my primary responsibility and priority will
    be to exercise the fiduciary duty and Board oversight
    responsibility as requested by the President of the United
    States and expected under the law. The primary elements of this
    will be to assess the largest transactions considered by the
    Bank. In my nomination statement, I identified two priorities,
    including supporting the Bank's strategic plan developed in
    2010 and improving Bank metrics that give stakeholders a sense
    of its performance over time.
        The Bank completed a strategic review in July, 2010. The
    plan identified ways to expand awareness of Bank services
    through increased outreach and partnerships, and ways to
    improve turn-around time of transactions. Four key programmatic
    priorities were developed, including increase the number of
    small- and medium-sized businesses using Bank services, support
    for environmentally beneficial exports with a particular focus
    on renewable energy, target business development with high
    potential for U.S. export growth, and build expertise and
    product offering in industries with high potential for export
    growth.
        Finally, if confirmed, I would like to help the Bank
    leadership and management explore opportunities to fill trade
    finance gaps facing U.S. service exporters. Between 1992 and
    2009, U.S. services exports increased by 183 percent, reaching
    $502 billion in 2009 according to the Commerce Department. The
    services industry is the largest component of the U.S. economy,
    employing 8 of 10 Americans. U.S. service exports constitute 30
    percent total value of all U.S. exports. The Bank currently
    supports about $2.5 billion in services exports, a modest
    percentage of its annual total program authorizations. The
    services portfolio of the Bank may have the potential to grow
    thereby enhancing U.S. service exports and job creation.

    Q.2. Taking into consideration the Chairman's set of priorities
    and those mandated by Congress, which aspects of Ex-Im's
    operations would you each request to focus on, and why?

    A.2. As part of its charter and authorization approved by
    Congress and the President, the Bank has a number of
    priorities. Board Members will undertake priorities and
    initiatives from time to time that are prescribed by the Bank's
    President that further the Bank's mission. These could include
    business development (international or domestic), priorities
    identified by Congress, and special projects. Priorities from
    the latest authorization agreed to by the President and the
    Congress include small business, women and minority-owned
    businesses, environmentally beneficial technologies and
    renewable energy, and Sub-Saharan Africa. Board members are
    expected to collaborate with the Chairman and select one of
    these areas and devote considerable effort in promoting and
    furthering the Bank's activities therein.
        Working in partnership with the Chairman's office, the Bank
    directors are expected to select one or more target
    international markets for outreach and engagement. Ex-Im Bank
    has identified nine focus countries, including Brazil,
    Colombia, India, Indonesia, Mexico, Nigeria, South Africa,
    Turkey, and Vietnam. In addition, Board members are expected to
    select one or more key exporting sectors and conduct outreach
    to exporters in that sector domestically.
        At this point, I have had no conversations with Chairman
    Hochberg so it is premature for me to firmly identify areas of
    priority since I need to work with him and the other Board
    members. I also would like to work with Bank staff to
    understand where there are needs to be filled. However, if
    confirmed, I believe that some of my skills and experiences
    could support Bank efforts to meet congressional directives
    relating to small business or perhaps Sub-Saharan Africa.
    Country or regional areas where I might add value to the Bank's
    mission include Turkey, South Africa, or Latin America.
    Potential sector areas where I might support the bank would
    include information and communication technology (that often
    include a services component) as well as medical technology. My
    earlier U.S. trade and development policy positions as well as
    private sector experience in the health care industry could be
    leveraged across these areas of Bank activity. For example, a
    number of countries in Latin America are partnered with the
    United States in either bilateral or regional trade agreements.
    Moreover, a number of these countries are either lower or
    middle income countries with significant opportunities for
    infrastructure development.
                                    ------

       RESPONSE TO WRITTEN QUESTIONS OF SENATOR VITTER FROM SEAN
                                MULVANEY

    I do not have personal knowledge of the issues you raised. If I
    am confirmed, I will request to be briefed on them and will be
    happy to continue to work with you on these issues of concern.
    In the meantime, the Ex-Im Bank staff has provided the
    following information on the questions you asked.

    Q.1. Please provide a list of all loans or other financial
    support over the last decade that have gone to foreign state-
    owned energy companies that have been utilized in projects for
    their domestic energy production or to increase refining
    capacity.

    A.1. See attached spreadsheet.

    Q.2. Please provide a list of the top 5 U.S. companies that
    have been financial beneficiaries of Ex-Im Bank financing over
    the last decade in terms of total dollar support.

    A.2. See attached spreadsheet.

    Q.3. Of the initial request for Ex-Im Bank financing by
    Petrobras based on the May 7, 2009 preliminary commitment of $2
    billion how many companies have filed documentation to qualify?

    A.3. As senior Bank officials explained to your staff at your
    office on May 6th, there is no process of qualification for a
    preliminary commitment, since the Bank acts on actual
    transactions, not non-binding preliminary commitments. We are
    close to finalizing a $308 million credit guarantee facility as
    part of the preliminary commitment. Bank transactions are
    individually evaluated on the bases of ``reasonable assurance
    of repayment'' and, where applicable, the Bank's environmental
    guidelines. In other words, the great majority of our credit
    evaluations involve foreign buyers of U.S. exports, in both the
    public and private sectors.

    Q.4. What metrics does Ex-Im Bank use in analyzing the return
    on investment before approving loans?

    A.4. Ex-Im Bank is not a traditional bank or a for-profit
    business. Bank transactions are individually evaluated on the
    bases of ``reasonable assurance of repayment.'' Other return on
    Ex-Im Bank transactions that is important can be measured, when
    possible, in U.S. jobs. Our measurement is that, on average,
    every $1 billion in U.S. exports supports approximately 7,400
    U.S. jobs. The Bank's primary mission is to support jobs
    through exports.
        Through prudent management the Bank has been self-
    sustaining since fiscal year 2008, meaning that revenues have
    exceeded losses and expenses. The Bank has returned more than
    $3.4 billion over the past 5 years. In addition, Congress
    recently rescinded $275 million of the Bank's excess funds as
    part of the fiscal year 2011 Continuing Resolution, which is
    additional money that benefits the U.S. taxpayers.

    Q.5. What is the minimal return on investment Ex-Im requires
    before issuing a loan or any other form of financial support?

    A.5. The Federal Credit Reform Act of 1990 requires Ex-Im Bank
    to set aside reserves for all transactions at the time of
    authorization or commitment. If funds are not available at that
    time, the Ex-Im Bank is legally prohibited from approving a
    transaction. Since fiscal year 2008, Ex-Im Bank has been self-
    sustaining where the fees charged on our transactions have paid
    for both prudent loan loss reserves as well as the Bank's
    Administrative expenses. Again, Bank transactions are
    individually evaluated on the bases of ``reasonable assurance
    of repayment'' and the other return on Ex-Im Bank transactions
    that is important can be measured, when possible, in U.S. jobs.
    By the congressional mandate in our charter, Ex-Im Bank must
    find a reasonable assurance of repayment before it can approve
    a transaction. Transactions must also comply, where applicable,
    with our environmental guidelines. The return on investment is
    measured in U.S. jobs supported.

    Q.6. Please provide a list of all Ex-Im financing in which GE
    was the beneficiary over the last decade.

    A.6. See attached spreadsheet.

    Q.7. Please provide a list of all financial arrangements that
    have gone bad or not been repaid and by what companies and in
    what countries over the last decade.

    A.7. See attached spreadsheet.

    Q.8. What is the total dollar amount of all outstanding Ex-Im
    financing obligations and what is the estimated annual return
    on investment for each year over the next 5 years.

    A.8. The Export-Import Bank has been self-sustaining since
    fiscal year 2008 and expects to be self-sustaining going
    forward. As a self-sustaining agency, Ex-Im Bank pays for all
    annual costs from receipts or fees that we charge on the
    supported transactions. The following chart shows that Bank's
    self-sustaining results since fiscal year 2008.

                             Export-Import Bank of the United States Self-Sustaining Results
                                                     FY 2008-FY 2010
                                                  (dollars in millions)
    ----------------------------------------------------------------------------------------------------------------
                   FY                  Authorized Amount        Revenue            Expenses               Net
    ----------------------------------------------------------------------------------------------------------------
    2008............................          $14,398.9              $122.8              $103.4               $19.4
    2009............................          $21,021.1              $292.1              $118.5              $173.6
    2010............................          $24,467.8              $479.4              $126.8              $352.6
    ----------------------------------------------------------------------------------------------------------------

        As a result of our self-sustaining, The Bank in fiscal year
    2009, Bank returned to the U.S. Treasury $136 million as
    negative subsidy and in fiscal year 2011, the U.S. Congress
    rescinded $275 million in unobligated balances. During the past
    5 years, the Bank has returned $3.4 billion to the U.S.
    Treasury.
        The Ex-Im Bank is a demand driven agency and we forecast
    total exposure growth of approximately 12 percent per year. In
    fiscal year 2010, Ex-Im Bank's total exposure was $75.2 billion
    and by the end of fiscal year 2014, the Bank forecasts exposure
    to be $125 billion. The exposure increase is driven by the
    significant increase in new authorizations. Since fiscal year
    2008, new authorizations have increased an average of 25
    percent per year. Based on the Bank's new authorization
    pipeline and other factors, we forecast growth in new
    authorization at 15 percent per year after fiscal year 2010.
    The Bank will continue to be self-sustaining during this time
    and forecasts revenue of $468 million compared to expenses of
    $201 million during fiscal year 2012. By fiscal year 2014, the
    Bank forecasts revenue to grow to approximately $1.0 billion
    with expense levels slightly higher than the fiscal year 2012
    levels.