[Senate Hearing 112-321]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-321

 
   NOMINATIONS OF: MARTIN J. GRUENBERG, THOMAS J. CURRY, AND S. ROY 
                                WOODALL

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

                                HEARING

                               before the

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

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                                   ON

                            NOMINATIONS OF:

     MARTIN J. GRUENBERG, OF MARYLAND, TO BE CHAIRPERSON, BOARD OF 
DIRECTORS, AND A MEMBER, BOARD OF DIRECTORS, FEDERAL DEPOSIT INSURANCE 
                              CORPORATION

                               __________

  THOMAS J. CURRY, OF MASSACHUSETTS, TO BE COMPTROLLER OF THE CURRENCY

                               __________

   S. ROY WOODALL, OF KENTUCKY, TO BE A MEMBER, FINANCIAL STABILITY 
                           OVERSIGHT COUNCIL

                               __________

                             JULY 26, 2011

                               __________

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


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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

                     Laura Swanson, Policy Director

              Brian Filipowich, Professional Staff Member

                 Andrew Olmem, Republican Chief Counsel

            Dana Wade, Republican Professional Staff Member

            Chad Davis, Republican Professional Staff Member

                       Dawn Ratliff, Chief Clerk

                     Levon Bagramian, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                  (ii)
?

                            C O N T E N T S

                              ----------                              

                         TUESDAY, JULY 26, 2011

                                                                   Page

Opening statement of Chairman Johnson............................     1
    Prepared statement...........................................    26

Opening statements, comments, or prepared statements of:
    Senator Shelby...............................................     2

                               WITNESSES

Paul S. Sarbanes, a former U.S. Senator from the State of 
  Maryland.......................................................     3
Senator Ben Nelson of Nebraska...................................     4

                                NOMINEES

Martin J. Gruenberg, of Maryland, to be Chairperson and a Member, 
  Board of Directors, Federal Deposit Insurance Corporation......     6
    Prepared statement...........................................    26
Thomas J. Curry, of Massachusetts, to be Comptroller of the 
  Currency.......................................................     7
    Prepared statement...........................................    27
S. Roy Woodall, of Kentucky, to be a Member, Financial Stability 
  Oversight Council..............................................     8
    Prepared statement...........................................    28
    Responses to written questions of:
        Senator Corker...........................................    30

                                 (iii)


                            NOMINATIONS OF:

                   MARTIN J. GRUENBERG, OF MARYLAND,

  TO BE CHAIRPERSON AND A MEMBER, BOARD OF DIRECTORS, FEDERAL DEPOSIT 
                         INSURANCE CORPORATION;

                   THOMAS J. CURRY, OF MASSACHUSETTS,

                 TO BE COMPTROLLER OF THE CURRENCY; AND

                      S. ROY WOODALL, OF KENTUCKY,

         TO BE A MEMBER, FINANCIAL STABILITY OVERSIGHT COUNCIL

                              ----------                              


                         TUESDAY, JULY 26, 2011

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:04 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 our nominees for joining us here today. 
I also want to extend a warm welcome to our witnesses' family 
and friends who are here with us.
    Today we consider three nominees that will play a key role 
in the continued safety and soundness of our financial system 
as well as protecting consumers.
    We need strong leadership at all our financial regulators, 
and I am glad that the President has sent us three well-
qualified individuals to fill openings at the Federal Deposit 
Insurance Corporation, the Office of the Comptroller of the 
Currency, and on the Financial Stability Oversight Council. 
Especially at this point in our economic and financial 
recovery, these are extremely important positions to be filled.
    Under the Wall Street Reform Act, the FDIC was given new 
authorities that put an end to too big to fail by allowing the 
orderly resolution of large, complex financial institutions. 
Those authorities are a key part of making sure taxpayers are 
never again forced to bail out Wall Street, and it is vital 
that the FDIC have a Senate-confirmed Chairman as it works to 
implement these rules.
    Both the FDIC and OCC play crucial roles in our Nation's 
ongoing housing recovery. Recent reports exposing abusive 
practices by mortgage servicers and banks--from excessive fees 
to fraudulent foreclosures--highlight the importance of 
continued oversight and regulation of the housing sector.
    The OCC and the FDIC also help ensure that consumers and 
small businesses continue to have access to credit. From 
maintaining consumers' access to a stable mortgage market, to 
protecting small businesses' access to capital to help create 
jobs, to promoting small community banks' ability to provide 
credit to consumers in areas where big banks simply will not 
go, both these agencies have their work cut out for them.
    I will look to our nominees to place a priority on all 
these issues at their agencies.
    Last, the Financial Stability Oversight Council is a key 
pillar of the Wall Street Reform Act. It was created to 
identify systemic risks posed by large, complex financial 
institutions before they threaten the stability of our economy. 
I am pleased to consider the nomination of Mr. Woodall to be 
the voting insurance expert on the FSOC. AIG showed us how 
interconnected the insurance industry is with the health of our 
economy, and I am sure Mr. Woodall's contribution as an FSOC 
member will be invaluable.
    The stability of our financial system, and of our economy, 
is vitally important, and so I hope we can move expeditiously 
on these nominations.
    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 very important 
nominations, as the Chairman has said. Martin Gruenberg has 
been nominated to serve as Chairman of the Federal Deposit 
Insurance Corporation. He is no stranger to the Banking 
Committee, having served right here with us on the staff for 
over 19 years. For the past 6 years, he serve as Vice Chair of 
the Federal Deposit Insurance Corporation.
    As Chairman, he would oversee the FDIC at a challenging 
time. Due to the financial crisis and the weak economy, bank 
failures continue at a steady pace. It will be no easy task for 
the FDIC to resolve these failed banks in a manner that 
protects the Deposit Insurance Fund.
    The FDIC must also decide how it will undertake the new 
regulatory responsibilities that it acquired under the Dodd-
Frank Act. I hope to hear how Mr. Gruenberg would approach both 
of these tasks. In particular, I would like to learn his views 
on whether the FDIC's new resolution authority will be 
sufficient to end too big to fail and prevent further 
Government bailouts.
    Also before us today is Thomas Curry, who has been 
nominated to be the Comptroller of the Currency. As the 
regulator of our largest banks, the Comptroller plays a key 
role in ensuring the safety and soundness of our whole banking 
system. Accordingly, I hope to hear today Mr. Curry's views on 
capital requirements. One of the lessons of the financial 
crisis should be the importance of maintaining strong capital 
requirements, especially for large global banks.
    Finally, Roy Woodall has been nominated to served as a 
member of the Financial Stability Oversight Council. He will be 
a sole member on the Council specializing in insurance issues 
and the first person to hold this position. He will be working 
on a Council that includes the Treasury Secretary, the Federal 
Reserve Chairman, and all of the heads of the major financial 
regulatory agencies. Since Mr. Woodall will not be supported by 
the staff of a financial regulator, unlike the other members of 
the Council, I am interested in hearing how he believes he can 
most effectively express his views and help the Council monitor 
systemic risk.
    The Federal Government has historically paid little 
attention to insurance. The failure of AIG, however, 
demonstrated that the Federal Government needs to do a far 
better job monitoring risk in this critical facet of our 
financial markets. Hopefully Mr. Woodall can improve the 
Federal Government's understanding of the risk presented by 
insurers and in so doing help prevent another AIG.
    Mr. Chairman, I look forward to hearing from the nominees 
here this morning.
    Chairman Johnson. Are there any other Members who would 
like to make any remarks?
    [No response.]
    Chairman Johnson. Now for a brief introduction of our three 
nominees. Senator Paul Sarbanes, former Chairman of the Senate 
Banking Committee, will introduce Martin Gruenberg. Senator 
Sarbanes.

 STATEMENT OF PAUL S. SARBANES, A FORMER U.S. SENATOR FROM THE 
                       STATE OF MARYLAND

    Senator Sarbanes. Chairman Johnson, thank you very much. 
Senator Shelby, Senator Corker, Senator Toomey, Senator Moran, 
I am pleased to be back in the Committee room, and I am mindful 
of the Chairman's gentle admonition when he introduced me when 
he said ``brief introduction.''
    [Laughter.]
    Senator Sarbanes. I will do my best to abide by that. It is 
hard for a former Senator when he gets the microphone to do 
that.
    I am very pleased to have the opportunity to come before 
the Committee today to introduce the President's nominee for 
Chairman of the FDIC, Marty Gruenberg. Marty worked on the 
staff of the Senate Banking Committee for almost two decades, 
both as staff director of the Subcommittee on International 
Finance and Monetary Policy and as senior counsel, and I think 
all would agree made an extraordinary contribution to the work 
of the Committee, and I should take a moment just to recognize 
all staff to the Committee who do a terrific job day in and day 
out. I have enormous respect and admiration for those who staff 
the Committee, and this Committee in particular has had very 
high standards over the years.
    During his time on the Committee, he was involved in all of 
the major legislation enacted by the Banking Committee, 
including the Financial Institutions Reform and Recovery Act, 
the Federal Deposit Insurance Corporation Improvement Act--
highly relevant to this nomination--Gramm-Leach-Bliley, 
Sarbanes-Oxley, and so forth.
    In August of 2005, he was appointed by President George W. 
Bush to the FDIC as Vice Chairman and, of course, was 
recommended out by this Committee and confirmed by the Senate.
    As FDIC Vice Chairman, Marty was closely involved in all of 
its efforts to respond to the financial crises we have 
encountered. He actually served as Acting Chairman of the FDIC 
for 8 months, from November of 2005, shortly after he went on 
the board, until June of 2006 because Chairman Don Powell, a 
close friend of President Bush's, left to go coordinate the 
recovery effort in the gulf coast in the aftermath of Hurricane 
Katrina.
    Actually, 4 months after he left the Committee, he was 
Acting Chairman of the FDIC. I called him up and said, ``Marty, 
I read in the American Banker this morning that you are the 
Acting Chairman of the FDIC in 4 months' time.'' So he gave a 
kind of embarrassed laugh, and he said, ``Yes, that is right.'' 
I said, ``Marty, is this a great country or what?''
    [Laughter.]
    Senator Sarbanes. I simply want to close with this 
observation. Given his experience on the Banking Committee and 
at the FDIC, Marty is extremely well prepared to serve as its 
Chairman. He would bring right from the beginning stability and 
continuity to the work of the FDIC, which, as both the Chairman 
and the Ranking Member indicated, is a very important 
consideration. I simply say to the Members of the Committee I 
know Marty to be a person of exceptional ability and character, 
and I very strongly commend him to you for this position.
    Thank you all very much.
    Chairman Johnson. Thank you, Senator Sarbanes.
    I will now introduce Thomas Curry. Thomas Curry took office 
on January 12, 2004, as a member of the Board of Directors of 
the FDIC for a 6-year term. Mr. Curry also serves as the 
Chairman of the NeighborWorks America Board of Directors. Prior 
to joining the FDIC's Board of Directors, Mr. Curry served five 
Massachusetts Governors as the Commonwealth's Commissioner of 
Banks. He also served as the Chairman of the Conference of 
State Bank Supervisors from 2000 to 2001.
    Senator Ben Nelson will now introduce Roy Woodall.

   STATEMENT OF BEN NELSON, A U.S. SENATOR FROM THE STATE OF 
                            NEBRASKA

    Senator Nelson. Good morning, Mr. Chairman and Ranking 
Member Shelby and Members of the Committee. Thank you for 
conducting this hearing today and for giving me the opportunity 
to offer a few comments on an outstanding nominee, Roy Woodall, 
who has been nominated to be a member of the Financial 
Stability Oversight Council.
    When Roy asked me to be here with him today to introduce 
him, I said I would be honored to do so because Roy and I go 
back a ways, and then some. In fact, I first got to know Roy in 
the year ``The Sound of Music'' won the Academy Award for Best 
Picture and the first TV episode of ``Star Trek'' was 
broadcast. You know what it cost to send a letter first class 
then? Five cents.
    Now, that might seem like a hundred years ago. Not quite, 
but it was 45 years ago. You see, I first met Roy in 1966 when 
he was appointed Commissioner of the Kentucky Insurance 
Department and I was working in the Nebraska Department of 
Insurance at the time. Over these years I have followed his 
career closely. We have kept in touch, and we have many common 
friends.
    As we all know, the Dodd-Frank law calls for appointment of 
``an independent insurance expert'' to make sure that the 
insurance viewpoint is acknowledged in the Financial Stability 
Oversight Council's work. I can think of no one better 
qualified to be that independent insurance expert than Roy 
Woodall. He is an outstanding leader who possesses a sharp 
mind, has the background and knowledge needed to do the job 
well. Equally important, he has the wisdom, too.
    He brings an invaluable perspective gained through a half-
century of experience in insurance and insurance regulation. 
Roy Woodall has worked at the State level as an insurance 
attorney and helped rehabilitate troubled insurance companies. 
He has been a national leader serving as the president of the 
National Association of Life Companies and after a merger 
served as a senior official in the American Council of Life 
Insurers, and in more recent years as a senior insurance 
analyst for the Department of Treasury.
    Mr. Chairman, I ask that the Committee work diligently and 
quickly to work toward the confirmation of Roy Woodall. He will 
fulfill the duties of this position with skill, wisdom, 
integrity, and, I believe, great success.
    Thank you, Mr. Chairman.
    Chairman Johnson. Thank you, Senator Nelson. I will look 
forward to hearing the nominee's testimony.
    Will the nominees please rise and raise your right hand? Do 
you swear or affirm that the testimony that you are about to 
give is the truth, the whole truth, and nothing but the truth, 
so help you God?
    Mr. Gruenberg. I do.
    Mr. Curry. I do.
    Mr. Woodall. I do.
    Chairman Johnson. Do you agree to appear and testify before 
any duly constituted committee of the Senate?
    Mr. Gruenberg. I do.
    Mr. Curry. I do.
    Mr. Woodall. I do.
    Chairman Johnson. Please be seated.
    Please be assured that your written statement will be part 
of the record. Please also note that Members of this Committee 
may submit written questions to you for the record, and you 
should respond to these questions promptly in order for the 
Committee to proceed on your nomination.
    I invite all the witnesses to introduce your family and 
friends in attendance before beginning your statement.
    Mr. Gruenberg, please begin.

STATEMENT OF MARTIN J. GRUENBERG, OF MARYLAND, NOMINATED TO BE 
 CHAIRPERSON AND A MEMBER, BOARD OF DIRECTORS, FEDERAL DEPOSIT 
                     INSURANCE CORPORATION

    Mr. Gruenberg. Thank you very much, Mr. Chairman. If I may, 
I would like to introduce my wife, Donna, who is sitting right 
behind me here.
    Chairman Johnson, Ranking Member Shelby, Members of the 
Committee, it is my privilege to appear before you as the 
President's nominee to serve as Chairman and Member of the 
Board of the Federal Deposit Insurance Corporation.
    I would like to thank President Obama for the honor of this 
nomination and Chairman Johnson and Ranking Member Shelby for 
scheduling this confirmation hearing.
    I have had the privilege of serving as Vice Chairman and 
Board Member of the FDIC since 2005, having been nominated by 
President Bush and confirmed by the Senate. From November 2005 
to June 2006, as Senator Sarbanes indicated, I served as Acting 
Chairman following the departure of former Chairman Donald 
Powell. I am now again serving as Acting Chairman following the 
recent departure of former Chairman Sheila Bair.
    Prior to joining the FDIC, as you know, I worked for 
Senator Sarbanes on the staff of the Senate Committee on 
Banking, Housing, and Urban Affairs from January 1987 to August 
2005. During that period I had the opportunity to work on the 
major legislation acted on by the Committee including FIRREA, 
FDICIA, the Riegle-Neal Interstate Banking Act, the Gramm-
Leach-Bliley Act, and the Sarbanes-Oxley Act.
    In addition to working on some of the key pieces of 
legislation governing the operations of the FDIC, I have had 
the opportunity to serve on the Board as it responded to the 
most severe financial crisis in the United States since the 
1930s. I think it is fair to say that the deposit insurance, 
resolution, and supervision functions of the FDIC proved 
critical to maintaining public confidence and financial 
stability during the crisis.
    The experiences of serving on the staff of the Senate 
Banking Committee and on the Board of the FDIC have been good 
preparation to serve as Acting Chairman and, if confirmed, 
Chairman of the FDIC during what remains a challenging period 
ahead. If I may say, there are some positive signs. Although 
over 880 insured institutions remain on the FDIC's problem bank 
list, we believe that number may have peaked and may start 
heading down in the near future. Similarly, although the FDIC 
closed 157 failed banks last year, we are projecting a 
substantially smaller number of bank failures this year. Fifty-
eight banks have failed thus far this year. That is compared to 
103 at this time last year. The FDIC's Deposit Insurance Fund, 
which had a negative balance as a result of the costs of the 
bank failures, actually moved into positive territory at the 
end of June.
    In terms of priorities, the FDIC will have significant new 
responsibilities to implement under the Dodd-Frank Act for the 
resolution of systemically significant financial institutions. 
As the primary Federal regulator of the majority of our 
country's community banks, the FDIC carries a particular 
responsibility for the future of this crucial segment of our 
financial industry. Finally, the FDIC will also continue to 
play a leading role in expanding access to insured financial 
institutions to all Americans as a vehicle for economic 
opportunity and financial security.
    Mr. Chairman and Ranking Member Shelby, it has been a great 
privilege for me to serve on the Board of the FDIC for almost 6 
years now. I have come to have a deep respect for the 
professionalism and dedication of the staff of the FDIC who 
have performed with such distinction during this recent 
difficult period. I believe that the FDIC, which celebrated its 
75th anniversary just 3 years ago, has proven itself to be one 
of our country's great public institutions. It is certainly the 
greatest honor of my career to have been nominated by the 
President to serve as Chairman of the FDIC and to be considered 
by this Committee for confirmation.
    Thank you very much, and I will be pleased to respond to 
your questions.
    Chairman Johnson. Thank you, Mr. Gruenberg.
    Mr. Curry, please begin.

STATEMENT OF THOMAS J. CURRY, OF MASSACHUSETTS, NOMINATED TO BE 
                  COMPTROLLER OF THE CURRENCY

    Mr. Curry. Chairman Johnson, Ranking Member Shelby, and 
Members of the Committee, thank you for this opportunity to 
appear before you today. I am honored that President Obama has 
nominated me to be Comptroller of the Currency.
    Eight years ago, I had the honor to be nominated by 
President Bush and to come before this Committee for 
confirmation hearings to be a Board Member of the Federal 
Deposit Insurance Corporation. It has been a tremendous 
privilege to serve at the FDIC during one of the most 
tumultuous economic periods in our Nation's history. I take 
great pride in the work of the FDIC and its very dedicated 
staff who maintained the American people's trust in the FDIC 
deposit insurance guarantee and the fundamental safety and 
soundness of our financial system. Independent and professional 
bank regulatory agencies like the FDIC and the Office of the 
Comptroller of the Currency are one of the strengths of our 
financial system.
    Prior to my Federal service, I served five successive 
Massachusetts Governors as the Commonwealth's Commissioner of 
Banks for approximately 10 years and served for 7 years as a 
senior State bank regulatory official and attorney. My State 
bank regulatory experience also coincided with the New England 
banking crisis of the late 1980s and early 1990s. During this 
period of regional economic disruption and subsequent recovery, 
I gained invaluable experience and perspective which served me 
well as an FDIC Board Member.
    My 25 years of experience as a Federal and State bank 
supervisor has underscored the fundamental importance of a safe 
and sound banking industry to our economy, particularly in 
times of stress. Economic recovery and prosperity requires a 
healthy, independently regulated banking system that has both 
the financial capacity and confidence to extend credit to 
individuals and businesses.
    In sum, I believe my public service career has given me 
invaluable financial safety and soundness and public protection 
regulatory experience and judgment to capably serve as the 
Comptroller of the Currency, if confirmed.
    It has been the greatest professional honor of my life to 
serve my country during this difficult time. Should the Senate 
choose to confirm me, I look forward to the opportunity to lead 
the team at the Office of Comptroller of the Currency as it 
serves the individuals, businesses, and communities that 
benefit from a safe, sound, and fair national bank system.
    Thank you, Chairman Johnson and Ranking Member Shelby, for 
this opportunity, and I look forward to your questions.
    Chairman Johnson. Thank you, Mr. Curry.
    Mr. Woodall, please begin.

  STATEMENT OF S. ROY WOODALL, OF KENTUCKY, NOMINATED TO BE A 
         MEMBER, FINANCIAL STABILITY OVERSIGHT COUNCIL

    Mr. Woodall. Chairman Johnson, Ranking Member Shelby, and 
distinguished Members of the Committee, it is my honor to 
appear before you today, and I am also deeply honored to be 
President Obama's nominee for this position. And I would also 
like to thank you and your staff for the time you have spent 
with me, helping to move my nomination forward.
    With me today is my wife, Jane, my best friend and life 
partner of 53 years, along with our four sons and their 
respective families. Jane is a former English teacher and 
school principal and now serves as the General Manager of the 
Smithsonian Chamber Music Society at the National Museum of 
American History. Our sons, in chronological order: Sam, the 
oldest, is an attorney in Washington; Brock is a hardwood 
flooring contractor in Georgia; Claiborne works with the 
Virginia Natural Heritage Program in Abingdon, Virginia; and 
Garner, our youngest, is an intelligence analyst with the FBI. 
When we get together with our daughters-in-law and nine 
grandchildren, there are 19 of us, and I think most of them are 
here today filling up this space.
    If approved by this Committee and confirmed by the Senate, 
I know that the constant support and guidance of this wonderful 
family will continue to enlighten my thoughts and actions as I 
carry out the duties as a member of the Financial Stability 
Oversight Council, better known as FSOC.
    As stated earlier, FSOC was created by the Dodd-Frank Wall 
Street Reform and Consumer Protection Act to identify risk to 
U.S. financial stability, promote market discipline, and 
respond to emerging threats. The FSOC is comprised of existing 
Federal financial services regulators as voting members, and 
both Marty and Tom would be serving on that as heads of the two 
agencies. However, since there is no existing Federal financial 
services regulator in the insurance field, the bill provided 
for a Presidential appointment of an independent person with 
insurance expertise in order to assure that insurance, which 
represents a substantial portion of the United States financial 
system, is appropriately recognized and accommodated within the 
new framework.
    I frankly know of no one who could technically qualify as 
an undeniable ``expert'' in all aspects of the highly 
diversified and constantly changing insurance industry, as well 
as its State-based regulatory regime and its international 
position. However, if I am confirmed, I do believe that my 
half-century of experience in insurance would provide FSOC with 
the insurance perspective that was envisioned by the Dodd-Frank 
Act.
    Insurance is in my blood. My grandfather, C.A. Woodall, 
started selling insurance from a mule-drawn wagon in 1904 and 
continued to be a leading insurance producer in Princeton and 
western Kentucky for over 50 years. My father, Roy Woodall, 
Sr., started his own general agency in Paducah, Kentucky, in 
the 1920s and ran it until he retired in 1973.
    I was first introduced to the regulatory side of insurance 
as a law student in the summer of 1961 at the University of 
Kentucky when I was an intern at the Kentucky Insurance 
Department. After getting my law degree in 1962, I continued to 
work as an attorney for the department, became general counsel 
in 1964, and was appointed commissioner in 1966. After the 
completion of my term, I practiced law with a firm in 
Louisville, Kentucky, until 1972, at which time I became a 
court-appointed rehabilitator of three publicly owned life 
insurance companies that had been seized by the State. The 
rehabilitation was concluded successfully in 1976, and from 
then until 1980 I worked as the assistant to the president of a 
family owned insurance company in Louisville, Kentucky. At that 
time I was selected to become the President of an Atlanta-based 
insurance trade association, the National Association of Life 
Companies, which merged in 1993 with the American Council of 
Life Insurers, or ACLI, as many of you know it. Following the 
merger I served ACLI as managing director of issues and chief 
counsel for State relations until my retirement in 1999. I then 
became Of Counsel to an Atlanta-based law firm and was pretty 
well set on that type of work for the rest of my life, but then 
9/11 hit.
    As with many others I know, the terrorist attacks of 9/11 
changed the focus of my life and my career. I became an 
insurance consultant to the Congressional Research Service as 
it addressed the needs of Congress in developing the Terrorism 
Risk Insurance Act, or TRIA. Following the passage of TRIA, I 
was asked by Treasury to assist in its implementation of the 
new law. I continued to serve as Treasury's senior insurance 
policy analyst for 8 years, monitoring all types of insurance 
issues and the State insurance regulatory system.
    In all of these insurance-related areas, my experiences 
taught me lasting lessons about the various aspects of 
insurance. Also, I believe that those experiences qualify me to 
serve in the position to which I have been nominated. If 
confirmed by the Senate, I pledge to work closely with the 
other members of FSOC, and to continue expanding my knowledge 
of, fascination with, and passion for the complex world of 
insurance and the substantial role that it plays in our 
financial system.
    Thank you again for opportunity to appear before you today, 
and I look forward to answering any questions that you might 
have.
    Chairman Johnson. Thank you, Mr. Woodall.
    We will now begin the question-and-answer period. Will the 
clerk please put 5 minutes on the clock for Members' questions?
    Mr. Gruenberg, can you tell us how the new Office of 
Complex Financial Institutions positions the FDIC to address 
its new responsibilities?
    Mr. Gruenberg. Yes, Mr. Chairman. The key new 
responsibility that the FDIC has under the Dodd-Frank Act is 
responsibility for the Title II authorities for the orderly 
liquidation of systemically significant financial companies. In 
addition, we have a responsibility under Title I for the 
resolution plans that systemically significant companies will 
be required to prepare.
    These are really new responsibilities and authorities 
created under this Act and implementing them in a credible way 
is really the major new challenge for the agency. In fact, in 
some sense, it is a major new challenge for any agency of any 
financial regulator around the world. And to undertake this 
responsibility, as you indicate, we have established a new 
Office of Complex Financial Institutions which will have three 
key responsibilities.
    First, there will be a group within that office responsible 
for monitoring the condition of the large systemically 
significant companies from the standpoint of resolvability.
    Second, there will be a group responsible for overseeing 
the development of the resolution plans that will be required 
of all systemically significant companies under the Act. That 
is a joint authority that the FDIC shares under the law with 
the Federal Reserve and we are in the process of developing a 
rule for the implementation of that responsibility. Those 
resolution plans have to meet the standards of the Bankruptcy 
Code. In addition to the plans that the institutions will 
prepare, the FDIC will be preparing our own plans for the 
resolution of these companies using our Title II authorities.
    And finally, the third group within this office will be 
responsible for dealing with the cross-border relations with 
the foreign supervisors for the international operations of 
these systemic companies. Many of them, as you know, have 
extensive foreign activities and an effective resolution of 
these companies really will require cooperation and 
coordination across borders.
    This is our major new challenge. We are in the process of 
setting this office up. We expect it to be fully operational by 
the end of this year. And in some sense, from an operational 
side, it is our top priority in terms of the implementation of 
the legislation.
    Chairman Johnson. Mr. Curry, as Comptroller, you will be 
expected to be independent, exercise independent judgment, and 
act independently from the Treasury Department. Are you 
prepared to act independently and use your own judgment?
    Mr. Curry. Senator, yes, I believe so. I have, I think, a 
25-year history of acting independently as both a member of the 
FDIC, an independent agency of the United States, and as Bank 
Commissioner for the Commonwealth of Massachusetts. As Bank 
Commissioner, in particular, you are called upon often to make 
decisions that affect individuals, institutions, and 
communities. Many times, those decisions are unpopular. 
However, I believe in my past history and experience, I have 
demonstrated the independence to fairly and reasonably apply 
the rules and laws that govern bank regulation.
    Chairman Johnson. Mr. Woodall, as the FSOC works to 
complete its rulemaking to designate Systemically Important 
Financial Institutions, or SIFIs, you will be the lone 
insurance voice voting on this rule. How will you approach this 
crisis, and do you think insurance companies should be 
designated?
    Mr. Woodall. Well, as far as the first part, fortunately, 
there are two other insurance members that are members of FSOC, 
even though they are not voting members. One is the Director of 
the Federal Insurance Office that was created by the Dodd-Frank 
Act and the other one is a State regulator, John Huff from 
Missouri, who represents the State regulators. So there are 
really three of us that would be working on insurance issues, 
but the appointed position that I have been nominated for is 
the only voting member. Certainly, I will be working in 
cooperation with the other two members and with all members of 
FSOC in trying to bring the insurance perspective.
    Now, as far as the question as to whether insurers are 
systemic, I think that has to be done on a case-by-case basis 
and looking under the hood of each insurance company to see 
whether or not they are systemic. But I think, generally, that 
most people agree and I agree that if a company follows a 
traditional core model of insurance products and insurance 
practices, they are likely not to be systemic. However, you do 
not know that until you see what sort of products they are 
selling, what sort of interconnectedness there might be with 
either other insurance companies or noninsurance companies or 
banking institutions, and I think that is why it does have to 
be done on a case-by-case basis.
    Chairman Johnson. Senator Shelby.
    Senator Shelby. Thank you, Mr. Chairman.
    Basel III--Mr. Gruenberg and Mr. Curry, both the FDIC 
Chairman and the Comptroller, as you well know, play important 
roles in ensuring that our Nation's banks hold sufficient 
capital to guard against another financial crisis. Recently, 
the Basel Committee reached an agreement on the new Basel III 
capital accords with the aim to increase capital requirements 
for large international banks. Mr. Gruenberg and Mr. Curry, do 
you support higher capital requirements for large financial 
institutions, and what is your assessment of the new Basel III 
capital accords? Will they work and will they be sufficient? 
Mr. Gruenberg.
    Mr. Gruenberg. Thank you, Senator Shelby. We do support the 
new Basel III agreements. The FDIC is a member of the U.S. 
delegation to the Basel Committee. I have participated as the 
FDIC's representative at Basel Committee meetings. And I think 
we view the Basel III agreement as a step forward to strengthen 
capital both in the United States and, quite importantly, 
internationally.
    Historically, U.S. institutions have generally had higher 
levels of capital than some of the large foreign financial 
institutions and Basel III will have the effect of both 
strengthening the quality and amount of capital under the U.S. 
standards and, importantly, apply those standards 
internationally for both the leverage ratio and a risk-based 
capital standard. So from both a domestic standpoint and an 
international standpoint, it seems to us to be a significant 
step forward.
    Senator Shelby. Mr. Curry.
    Mr. Curry. Senator, I would agree with Vice Chairman 
Gruenberg that capital is critically important to the health of 
our financial system. At the FDIC, I think we have a 
demonstrated position of looking for both higher quantity and 
quality of capital. I would also offer that this past crisis 
and earlier crises have demonstrated that when institutions or 
the banking system needs capital is when it is the hardest to 
obtain it. So having strong capital levels in place in advance 
of an economic downturn is critically important.
    With respect to Basel III, Basel III, I think, achieves 
those important goals of stronger capital on an international 
basis and will work to potentially eliminate any unlevel 
playing field between domestic banking institutions and foreign 
institutions.
    Senator Shelby. Preemption language--I will address this to 
Mr. Curry. There is an ongoing debate on whether the Dodd-Frank 
Act changed the standard for determining when national banks 
are subject to State law. The OCC and the authors of the 
preemption amendment in Dodd-Frank have taken one position. The 
Treasury Department has disagreed with that view. Mr. Curry, 
what are your views about how the Dodd-Frank preemption 
provisions have been interpreted by the OCC and the Treasury?
    Mr. Curry. I understand that the actual language of Dodd-
Frank is a matter of some controversy between interested 
parties. Generally speaking, I think the principle is clear 
from the Constitution that the Federal law supercedes 
conflicting State law and that is an important concept to 
remember.
    Senator Shelby. Is that the position that the Comptroller's 
Office takes?
    Mr. Curry. I believe so. It is a Federal agency----
    Senator Shelby. Are you aware of the position that the 
Treasury Department is taking?
    Mr. Curry. I understand that the Treasury Department did 
file a public comment on the OCC's position. I think that 
having a comment on the record is probably the most appropriate 
way to express those views. Ultimately, I think it is incumbent 
upon the OCC to maintain its independence as a bank regulatory 
agency and to remain free from any undue influence from any 
external source.
    Senator Shelby. Mr. Gruenberg, a report by the Government 
Accountability Office--we call it GAO, as you know--concluded 
that prompt corrective action has not prevented sizable losses 
to the Deposit Insurance Fund. The GAO found that every bank 
that underwent prompt corrective action because of capital 
deficiencies and failed since 2008 has produced a loss to the 
Deposit Insurance Fund. The GAO also found that the, and I will 
quote, ``the presence and timeliness of enforcement actions 
were inconsistent.'' Their words. For example, more than 80 
percent of the banks that failed were on the regulatory watch 
list that you alluded to earlier for more than a year on 
average before failing.
    Do you agree with GAO's findings, and what steps would you 
take as Chairman to improve prompt corrective action and 
protect the Deposit Insurance Fund? What would you do 
differently than we have been doing?
    Mr. Gruenberg. Thank you, Senator. I do agree with the 
findings of the GAO report. I think one of the lessons we have 
learned from this crisis is that capital tends to be a lagging 
indicator and capital is the trigger for prompt corrective 
action, so that during the course of this crisis, to the extent 
we are relying on capital as an early warning device for 
problems at institutions, it did not prove as effective as we 
would have liked.
    I should point out that PCA still proved important because 
it established, once an institution reaches that critically 
undercapitalized level of 2 percent, it provides for certainty 
in terms of the resolution process, which is quite important. 
But in terms of an early warning indicator, it really has not 
proven as effective as it could have been.
    I should note that for each failing institution, the 
Inspector General of the FDIC has to prepare a report on the 
causes of the failure--these are called material loss reviews--
and our Inspector General in the course of conducting these 
reviews identified three key factors common to failing 
institutions. One was rapid growth. Two was concentration in 
commercial real estate. And three was reliance on broker 
deposits and other volatile deposits.
    I actually chair the Audit Committee at the FDIC, which 
oversees our IG. We have asked the IG to prepare a set of 
recommendations for us based on these material loss reviews as 
to how prompt corrective action could be improved and we expect 
to receive that report in the near future. We will be glad to 
share the results of that report.
    Senator Shelby. With the Committee? Thank you. Thank you, 
Mr. Chairman.
    Chairman Johnson. Senator Reed.
    Senator Reed. Thank you very much, Mr. Chairman.
    Mr. Gruenberg, Chairman Bernanke earlier this--a few months 
ago, actually, or weeks--said that the Federal Reserve is 
committed to rulemaking on resolution authority of the so-
called living wills for large financial institutions by late 
this summer. What is the FDIC's schedule with respect to this 
rulemaking?
    Mr. Gruenberg. Late summer, Senator. We have been working 
in tandem with the Federal Reserve. It has actually been a very 
cooperative process. We are really near--we issued a joint rule 
earlier this year. I think we are near completion of the final 
rule and we do expect to issue the final rule in August.
    Senator Reed. Very good. Thank you so much.
    You are the primary regulator of community banks and they 
are vital to our economy. They usually are the ones that are 
doing the most aggressive lending to small business and have 
the best record in terms of lending to small business and that 
creates jobs.
    Your view of the impact of Dodd-Frank on the community 
banks and community banking. Many of the provisions of Dodd-
Frank were specifically excluded from application to small 
banks given that, one, they were not a major cause, and two, 
this dynamic contribution they make to local economies. But can 
you give me a brief sort of view of where you think they stand 
at the moment.
    Mr. Gruenberg. Yes, Senator. As you note, the FDIC is the 
primary Federal regulator of the majority of community banks in 
the United States, so I think it is fair to say we bear a 
particular responsibility for the future of that important 
segment of our financial industry. I would note community banks 
account for about 11 percent of the banking assets in the 
United States but account for nearly 40 percent of the small 
business lending done by all insured institutions in the U.S. 
So they really occupy a very important niche in our financial 
system.
    On balance, I believe they have come through this episode 
reasonably well. They have been impacted. Of the 380 or so 
institutions that have failed in the course of this episode, 
over 300 of them have been institutions with assets less than 
$1 billion. But it is worth noting that even with that, we 
still have nearly 7,000 community banks in the United States 
and most of them have worked their way through this difficult 
period in good shape and are really positioned now to continue 
to play their important role.
    In regard to Dodd-Frank, you noted accurately that in many 
of the provisions that are applied to the larger institutions, 
smaller institutions are excluded, and I would note in 
particular the deposit insurance provisions of Dodd-Frank, on 
balance, I think, are actually helpful to community banks. The 
increase in the limit on deposit insurance to $250,000 is 
something that community banks have sought and has proven to be 
during the course of this crisis a valuable source of 
attracting liquidity to community banks, which proved quite 
stabilizing.
    In addition, the Act changes the assessment base on which 
deposit insurance premiums are charged from deposits to assets. 
The consequence of that is actually to shift the burden of 
funding deposit insurance more to institutions with assets over 
$100 billion, and for institutions with assets under $10 
billion, they will actually, in the aggregate, receive a 30 
percent reduction in their deposit insurance premiums under the 
Act. So it will mean real money for community banks and should 
be helpful to them.
    So, on balance, particularly those provisions, I think were 
positive.
    Senator Reed. Thank you very much.
    Mr. Curry, just first a quick comment. You have served at 
the State level under a number of Governors--Governor Dukakis, 
Governor Weld, Governor Celluci, Governor Swift, and Governor 
Romney, both Republicans and Democrats. So you have been 
essentially recognized from both sides of the aisle as a 
consummate professional and I think that is a quality that we 
are looking for in the next OCC Director--Comptroller.
    The other factor, too, is I think you bring a valuable 
perspective to the efforts because a lot of the issues, as has 
been suggested by some of the questions, involves this constant 
sort of discussion of and rebalancing of the lines between 
appropriate national authority and local State banking 
regulations, local State banking institutions.
    So I am particularly pleased that you have been nominated 
and I wish you well. I also, too, want to join Senator Shelby, 
who has been one of the most vigorous advocates for strong 
capital rules, to reinforce his point about the need for the 
U.S., we hope--I hope--the OCC Comptroller, to have significant 
capital in place.
    Mr. Curry. Thank you, Senator.
    Senator Reed. And since my time has expired, you are going 
to provide a valuable sort of expertise because the world of 
insurance is--it is not a Federal world here in the United 
States, but internationally, particularly. I note that in Great 
Britain, 30 percent of the assets in their financial system are 
held by insurance companies, not by financial institutions, or 
banks, rather, but 15 percent in the United States. So both 
looking within the United States and looking internationally, 
your views are going to be extremely important, and once again, 
I would hope that we will move quickly to confirm you and get 
you on the FSOC. Thank you for your service. Thank you.
    Chairman Johnson. Senator Corker.
    Senator Corker. Thank you, Mr. Chairman, and I thank all of 
you for being here today and being willing to serve the way 
that you have offered yourself, and I thank your families for 
being here. I know you certainly will not receive many tough 
questions with all of these family members in the audience, so 
we are glad they are here and we are glad to see all of them.
    I will start with you, Mr. Vice Chairman, soon to be 
Chairman. When Dodd-Frank was being debated and discussed, the 
previous Chairman did an outstanding job of convincing the 
majority of members of the Senate and the House to turn you 
into a super-entity with orderly liquidation abilities. As we 
were leading up to that, many of the rating agencies began 
saying that because they really thought that too big to fail 
was going to end, they were thinking about downgrading these 
institutions.
    Now that the law is law and people have interpreted what it 
really says, the big four institutions in our country are 
receiving disproportionately higher ratings and benefits. So it 
is evident that most of the world does not believe that we have 
ended too big to fail and I am wondering if there is anything 
that you are going to come see us about to change orderly 
liquidation so that people know that, in fact, we are in this 
country going to end the prospect of any entity being too big 
to fail.
    Mr. Gruenberg. Thank you, Senator. That is really a 
critically important question, if I may say. It is our view 
that the authorities provided under Title II and Title I of the 
new law really are sufficient to deal with the issue. The 
challenge to us and what I think we are going to have to 
demonstrate with credibility to the financial markets is our 
capability to implement the authorities that we have been 
given, and that was really the basis of my response to the 
question that Chairman Johnson asked earlier. We have to 
demonstrate the capability to close a systemically significant 
financial company without creating a significant disruption to 
the financial system as a whole. There is no greater priority 
for us.
    It does not surprise me that much that the markets are in 
some sense taking a ``show me'' attitude. Simply providing an 
authority is not a demonstration of the capability and 
willingness to carry it out. And I think the challenge to the 
FDIC, in particular, will be to demonstrate both that we have 
the capacity and the willingness to implement it.
    Senator Corker. Do you think the Bankruptcy Code ought to 
be tremendously expanded so that people know that unless there 
is some really unusual situation, there is a better vehicle for 
institutions through bankruptcy?
    Mr. Gruenberg. I think the way the law is structured, the 
premise is that the Bankruptcy Code is still the first recourse 
for dealing with the failure of a financial company. It is only 
in the circumstance--and frankly, I hope and expect it to be 
rare--where a determination is made that, in effect, if you are 
going through the bankruptcy process, it could present issues 
for the system as a whole, in which case you would turn as a 
final resort to the orderly liquidation authority under Title 
II. I think it is a last measure to avoid a disruption to the 
system, and I think that is as it should be.
    Senator Corker. Would you be willing to work with us to 
tighten up orderly liquidation and to make sure that these 
large institutions are not enjoying significant benefits 
because people believe that they are too big to fail, and to 
work with us on streamlining the Bankruptcy Code so that it 
would actually work better for these large highly complex 
institutions?
    Mr. Gruenberg. Yes, sir.
    Senator Corker. OK. Thank you. We talked a little bit in 
our office. I think you are aware that one of the biggest 
complaints community bankers have across this country is the 
lack of consistency with the examiners in charge. You know it 
is a problem. So a big part of your problem, and I think you 
know this, is going to be to get the culture better as it 
relates to that issue, not in any way criticizing the former 
Chairman. We had these same conversations. But the examiners in 
charge, to make sure their careers are not interrupted by 
making mistakes, are no doubt being overly zealous and really 
creating a self-fulfilling prophecy around our country. I think 
you are aware of that and I hope you will work to end that.
    Mr. Gruenberg. Senator, I will have no higher priority than 
the community bank responsibilities, and we will work with our 
examiners to assure that examinations are done in as balanced 
and fair a way as possible.
    Senator Corker. I just have a few seconds. To you, Mr. 
Curry, I think we all are concerned about this Federal 
preemption issue. I know that you were State Commissioner of 
Banking for Massachusetts back in 2000 and made a quote, and I 
just want you to reaffirm that this is not where you are, but 
we suggest that--this is you--``we suggest that Federal 
preemption itself sometimes has the unintended consequence of 
limiting State regulators' ability to protect consumers and 
ensure a healthy banking and lending industry. Many States 
responded through statute or regulation to protect consumers 
from predatory practices. However, it has been the perhaps 
unintended consequence of Federal preemption that has made it 
difficult for States to offer the protection their consumers 
demand.''
    So you are going to be in a position, obviously, of making 
sure that we have uniform national standards, and yet seem to 
have in the past indicated that you question that, and we just 
want you to affirm that you absolutely are not going--you are 
going to be independent, you are not going to let Treasury 
brow-beat you into a different position, and that you are 
denouncing this former position.
    Mr. Curry. I want to assure you, Senator, that I will 
zealously enforce and uphold the National Bank Act, 
particularly where it relates to Federal preemption.
    What I would want to point out is that I think that the 
Dodd-Frank Act's provisions actually resolve some of the issues 
that I was highlighting in that statement. There is now much 
more clarity in terms of the role of State Attorneys General, 
the applicability of Federal law to it and its relation to 
State consumer financial laws. And you also have the creation 
of the CFPB to address any gaps in terms of consumer 
protection. So I do think that my statement in the past is 
actually addressed by Dodd-Frank.
    Senator Corker. Thank you both, and Mr. Woodall, you are 
apparently universally loved.
    [Laughter.]
    Senator Corker. I may have a question for you later, but we 
will see. Thank you.
    Chairman Johnson. Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Let me in this atmosphere that we are in here in Washington 
right now, let me strike a bipartisan note with Senator Corker 
and say to you, Mr. Gruenberg, that his observation about 
community banks and just banks in general, you know, we are 
sitting on the Committee saying to those institutions, 
particularly those that we helped save in 2008, we would like 
to see you lend, and then we listen to a chorus of voices that 
say, well, everything you want us to do, we are being told 
totally different by examiners.
    So the question is, how do you strike the pendulum in the 
right way? We are not talking about speculative lending, 
obviously. For those of us who had to cast the votes to change 
the course of 2008, we do not want to see that again. By the 
same token, many of us have the observation that the pendulum 
has swung so far that we are creating a crisis in terms of 
getting access to capital and moving this marketplace and 
creating an economy that can thrive again. Without that access 
to capital, it is not going to happen. And if I have listened 
to one bank president or board of directors after another, I 
get a common thread, and when I get a common thread, I do not 
always believe it is contrived.
    So I hope that you--you know, we have performing assets 
that are being asked to be recapitalized. We have areas of 
lending in which there are basically examiners saying, do not 
do it. So I understand that there were some who were not the 
cop on the beat when they needed to be, but that does not make 
them now the total opposite. So I would like to hear how you 
will direct to find this balance in the pendulum so we can get 
this economy moving again.
    Mr. Gruenberg. Thank you, Senator. That really is one of 
the key questions. The FDIC has six regional offices around the 
country. Over the course of this year, I had the opportunity to 
visit each of our regional offices, and in each office, I met 
with a group of our examiners without senior management 
present, except for one meeting where the senior manager kind 
of snuck in. But the rest, it was without management present to 
try to hear from them what they were seeing in terms of the 
institutions they were examining.
    What we tried to communicate to them was the need for 
balance and to work with the institutions to enable them to the 
maximum extent they can to carry out their basic mission, which 
is extending credit to creditworthy borrowers.
    I will tell you, for what it is worth, it is my sense that 
most of our examiners are career professionals who try to carry 
out their job in a balanced way. I have no doubt that there are 
some that go too far or go overboard. I think most are trying 
to do their best in a difficult environment.
    What I will say to you is we are staying in close touch. 
People often talk about a disconnect between the policy makers 
in Washington and the examiners in the field. We will do our 
best to maintain or see that that connection is followed 
through, to stay in close touch with our examiners, and to 
encourage them to exercise judgment and discretion to allow 
these institutions to carry out their basic purpose. That is 
certainly going to be one of my top priorities.
    Senator Menendez. Well, I appreciate that.
    Let me ask both of you, Mr. Curry and yourself, I am 
concerned that if the qualified residential mortgage definition 
being worked out by regulators is not broad enough, it could 
hurt a housing market that is already suffering enormously in 
terms of being part of our national economic recovery, 
especially if you perceive high downpayments of 20 percent or 
more. Can you comment on that?
    Mr. Curry. I would be happy to, Senator. We are in the 
process at the FDIC, and with the other Federal bank regulatory 
agencies, of reviewing the comment letters, the numerous 
comment letters on both the risk retention proposal and its 
qualified residential mortgage exemption provisions. The issues 
you raised of whether or not the proposal appropriately 
excludes a large number of American families and households 
from home ownership is an issue that we are looking at very 
carefully and are mindful of the consequences to those families 
and individuals as well as our economy.
    Mr. Gruenberg. Senator, I just might add, as you know, the 
agencies went forward with a Notice of Proposed Rulemaking on 
this issue. When the FDIC Board approved that Notice of 
Proposed Rulemaking, I commented at the time that we will have 
to strike a balance between trying to address the problems made 
evident in this crisis in terms of securitization and proper 
underwriting of mortgages with access to mortgage credit for 
creditworthy borrowers. I think that is the challenge of this 
rule. We extended the comment period. We expect to get 
additional comment and are seeking it and I think we understand 
a close review of this rule is going to be necessary.
    Senator Menendez. Well, we are going to be looking at it 
with great interest.
    Finally, Mr. Curry, I will not go through all of the 
specifics of it, but we have sent, along with ten of our 
colleagues and about a dozen House colleagues, to the OCC as 
well as to other agencies the issue of alleged reports on 
mortgage modifications that suggests that the continued 
practice of robo-signing continues to be a reality, which is 
not acceptable and is not acceptable under the law. It should 
not be acceptable for the regulatory agencies. We are being 
told--we have been told by the regulatory agencies that that 
practice has ended, yet there are reports that it has not.
    So my question is, the question that is put before all of 
you who have jurisdiction in this field, is will you disclose 
the results of the foreclosure reviews on a bank-by-bank basis, 
including the letters of engagement for the independent 
consultants performing those reviews and the action plans by 
the mortgage services? I have got to believe--I know that there 
is some claim of proprietary realities. The Congressional 
Research Service has said that, in fact, it can be released in 
the public interest. There has to be some medium here by which 
you can assure those of us who are both policy makers as well 
as the public that this has ended.
    Mr. Curry. Senator, I think the robo-signing mortgage 
foreclosure issue is an extremely important one that affects 
individuals, families, the banking industry, and the overall 
mortgage finance industry. I think it is critically important 
that we work to restore credibility to that system. I think 
that the framework that is under the cease and desist orders--
consent orders that were issued by the OCC and the other 
Federal regulatory agencies--were an important first step in 
trying to restore that credibility. I think, as well, the 
greater transparency that the agencies can show in how failures 
in that system are being corrected and individuals who have 
been harmed will find redress is critically important, and I 
think the agencies and the OCC, in particular, if I were 
confirmed, should work to be as transparent as possible, 
consistent with any governing supervisory or legal 
restrictions.
    Senator Menendez. Well, we will look forward to that. Thank 
you, Mr. Chairman.
    Chairman Johnson. Senator Moran.
    Senator Moran. Mr. Chairman, thank you very much.
    Mr. Gruenberg, Mr. Curry, Mr. Woodall, thank you for your 
current and past public service. Thank you for your interest in 
providing even additional leadership.
    Mr. Woodall, you seem to have avoided any kind of serious 
conversation today. I only have to suggest to you that you must 
be a good person because your grandchildren are so well 
behaved.
    [Laughter.]
    Senator Moran. Congratulations.
    I want to focus my attention on community banks, as has 
been at least in conversation today a topic of conversation. 
You indicate, Mr. Gruenberg, in your testimony, ``As the 
primary Federal regulator of the majority of our country's 
community banks, the FDIC carries a particular responsibility 
for the future of this crucial segment of our financial 
industry.''
    I have genuine concern that community banks are on the 
verge of becoming a thing of the past, and in large part I 
believe that because of the increasing regulatory burden that 
is being placed upon those banks.
    I do not know whether you would know a number, but I would 
be interested in knowing what the percentage of regulatory cost 
is in comparison to assets or loans or deposits as compared to 
larger financial institutions. But in my view--and Kansas has 
lots of community banks. They are the ones, as you outlined, 
making loans to small business, in our case to farmers and 
ranchers. It is a different kind of environment. If you are 
seeking a loan at a community bank and you are someplace in a 
larger city with a larger financial institution, those personal 
relationships are important in rural States like mine. And I 
have had this conversation with every regulator that has sat in 
this room, and I would admit, Mr. Gruenberg, you have been in 
this room much longer than I have. But I have had this 
conversation at every opportunity, and I always get the same 
answer, which is, ``We take special consideration, we account 
for community banks. We understand their importance.'' But 
there is virtually no end to the concern or criticism raised by 
our commercial banks about the regulatory environment which 
they in and the amount of money which is being spent to comply 
with regulations, the additional staff that is necessary. And 
it would be one thing, I suppose, if community banks were not 
succeeding because they no longer serve an economic purpose, 
but that is not the case. In my view, the demise, the fewer 
number of community banks is much more related to the 
environment in which they are finding themselves having to 
work.
    One of our larger banks in our State, their CEO told me 
earlier this year that community banks for the first time in 
history are calling the large bank asking, ``Are you at all 
interested in buying us? It is no longer any fun. The 
regulatory environment and costs that we encounter no longer 
make this a profitable venture.''
    So you see continued consolidation. The numbers are out 
there. We have fewer community banks as a result of some of the 
closures that have occurred. But in large part, it seems to me 
it is because they are consolidating with other banks in order 
to spread the regulatory costs among more assets and more 
loans.
    And so while I appreciate your reassurance, it is somewhat 
like you said, Mr. Gruenberg, about the too big to fail in 
response to Mr. Corker. We are waiting for the evidence that 
something is different in regard to those community banks. And 
so, in particular, I want to--and I certainly agree with you 
that the FDIC insurance issues that you raise I think are a 
positive development. But let me particularly raise with you 
the disparate treatment of capital standards between community 
banks and large financial institutions.
    The definition of ``well capitalized'' seems to have a 
different definition in regard to whether or not you are a 
large or small bank, and many of our community banks are being 
regulated in which they are required to have a much higher 
percentage of capital than our smaller banks--I am sorry, than 
our larger banks, many of which those larger banks are under 
other regulatory restrictions as a result of their financial 
condition.
    So my point is that there is a double standard, in my view, 
between the capital requirements that small banks, community 
banks are required to have and that of larger financial 
institutions across the country, including on Wall Street.
    And so my question is: Will you continue to regulate higher 
capital levels for the so-called too small to save community 
banks and in a sense let Wall Street--I do not want to say 
that--in a sense have a double standard, a disparate standard 
compared to Wall Street financial institutions?
    Mr. Gruenberg. Well, Senator, let me try to respond to 
that. It is my understanding that, as a matter of the rules 
that apply today, they are the same across the board. I think 
it is fair to say that community banks as a general matter 
actually have higher capital than larger institutions.
    I think from my own perspective, one of the important 
authorities of the new law is to impose enhanced prudential 
requirements on our largest systemically significant 
institutions for precisely the point you make. They do derive 
an implicit benefit from their size, and to a certain extent, 
their capital requirements have not fully reflected those 
benefits. And that approach is reflected in the Basel III 
accords that Senator Shelby asked about earlier. In addition, 
there is provision to impose what in effect is an additional 
surcharge on our largest institutions. That authority is under 
the Dodd-Frank Act. There is a new international agreement to 
impose a particular additional level of capital on our largest 
banks in an effort to both have them account for the systemic 
risks that they pose and to bring about some greater leveling 
of the playing field with the smaller institutions.
    I agree with you that that playing field has not been 
level. We should make efforts to try to bring greater balance 
to it. One of the things we can do under the new law which I 
think is important, in addition to the capital and prudential 
requirements, is to develop the capacity to place these large 
institutions into receivership because until you can do that, 
that also contributes to the funding advantage that they have.
    Senator Moran. True.
    Mr. Gruenberg. So on that end of it, I think the FDIC 
carries a responsibility in regard to the large institutions, 
and as you noted and I noted earlier, we have a responsibility 
for the small institutions.
    Senator Moran. Well, there is a belief among bankers that 
there is an attitude at the FDIC that small banks are more 
difficult to regulate, it takes more assets, the sense that you 
do not believe--not you personally, but the FDIC does not 
believe the management skills and capabilities are there. So I 
assume that in this setting you are going to tell me that is 
not the case, but I would just reaffirm what I continually hear 
about a belief that the FDIC has--I would not say a policy but 
an approach that says it would be a lot better for our economy 
if there were a lot fewer financial institutions. I will tell 
you for the economy of Kansas that would not be the case.
    Mr. Gruenberg. Senator, I appreciate you raising that 
point. I would say to you, it is my view we do not have that 
attitude toward community banks. Quite the contrary, we think 
they are really quite different in operation, and in a positive 
way, from the large institutions. In some sense, their business 
model, if anything, has been validated during the course of 
this crisis. They stay close to their customers. They rely on 
core deposits. They generally are a source of stability during 
difficult times. And they serve a function in their communities 
that is really quite unique and quite important for small 
business, for rural areas, for small towns that otherwise might 
not have access to financial services.
    I will note we do have a Community Bank Advisory Committee. 
It is made up of 14 community banks from around the country. 
Our board meets with those bankers three times a year to hear 
directly from them what they and their colleagues are 
encountering in the field. We are endeavoring to stay close to 
this issue. I know we are less than perfect, but I do commit to 
you this is something that will be a matter of continuing 
attention for us.
    Senator Moran. Thank you, Mr. Gruenberg.
    Thank you, Mr. Chairman.
    Chairman Johnson. Mr. Gruenberg and Mr. Curry, it seems to 
me that when producing a cost/benefit analysis of each 
individual rule your agency writes, you must also take into 
account the cost of the financial crisis and the harm inflicted 
on consumers, investors, and the overall economy. How will you 
ensure that your agencies are taking into account the costs of 
this crisis when evaluating the costs and benefits of the new 
rules?
    Mr. Curry. Thank you, Chairman Johnson. I think it is 
critically important that all the agencies--the FDIC and the 
OCC in particular--identify and appropriately weigh all the 
costs as well as the benefits for any proposed rulemaking. And 
as you identified, the cost of the crisis I think is an 
appropriate factor to be weighed in that price as the long-term 
cost especially.
    What is critical, I think, to any rulemaking is to have an 
open process and to encourage input from all affected sources, 
and I think the FDIC, which I have been associated with for the 
last 8 years, almost 8 years, has been very effective in 
reaching out to interested parties to hear their views and to 
help assess the costs as well as the benefits of any rule that 
comes before the agency.
    Mr. Gruenberg. Mr. Chairman, I would just add to that. When 
the FDIC has a rulemaking to do, we put together an 
interdivisional team to oversee that process, and the way that 
works is that team comes up with a series of options for 
implementing the regulation. And the whole purpose of the 
exercise is to evaluate the different options, in effect to 
weigh the balance between costs and effectiveness. And when we 
come out with a proposed rule, quite often in our Notice of 
Proposed Rulemaking not only do we put forward the proposal 
that is agreed to by that working group, but we will also ask 
for comment on the other options that are developed by that 
group in some sense to get a full airing of the different 
approaches for implementation, to get the benefit of public 
comment for the series of options.
    And I would note that our Inspector General undertook a 
review of three of our rulemakings pursuant to the Dodd-Frank 
Act, in effect to evaluate the economic analysis that we do. 
And I refer you to that report. I think it is fair to say that 
that report found our process pretty credible and balanced. So 
I think we do a pretty good job. I am sure we could do better.
    Chairman Johnson. Mr. Curry, do you anticipate a good and 
effective partnership with the CFPB in the rulemaking process 
and other functions?
    Mr. Curry. I think there is an important opportunity to 
collaborate between the bank regulatory agencies and the CFPB. 
I think that issues and rulemakings in this area really tend to 
have elements of both disciplines at stake. I would use as an 
example the implications from a financial safety and soundness 
or risk management standpoint of the nontraditional mortgage 
loan products. They have both elements of consumer protection 
and also, as we saw in the financial crisis, significant 
financial consequences to our banking system. If I were to be 
confirmed, I think it would be beneficial as a two-way street 
for the OCC to communicate to the CFPB the financial context in 
which a proposal would operate and also for the OCC, who will 
retain the ability to--or the responsibility to supervise 
institutions under $10 billion, to have the opportunity to be 
aware of emerging or potential consumer protection issues.
    So, in summary, I think there really is a need for close 
collaboration and communication between the OCC, the banking 
agencies, and the CFPB.
    Chairman Johnson. Senator Shelby.
    Senator Shelby. I would like to pick up on Senator Corker's 
question about too big to fail and so forth. I would think that 
the ideal situation would be a message from the regulators that 
nobody is too big to fail, and that if you do reckless things 
and you are--the Comptroller of the Currency, the FDIC, and the 
Fed are the big regulators here--that we are going to close you 
down no matter who you are. Of course, we are going to try to 
prevent as regulators you from getting into this kind of 
trouble if you are hands on. But we all realize that a lot of--
not everything, but a lot of the blame for the financial 
crisis, a lot of it came from the regulators right here. When I 
was Chairman of this Committee, I asked questions of the 
regulators, not you but the others, the Federal Reserve 
Chairman, the FDIC Chairman at that time, the Comptroller: What 
are the conditions of the bank? We had a hearing on this. I 
hope that the Chairman will continue this, to hold a hearing 
specifically on the condition of our banking system. And what 
was the answer right here? Right here in this Committee. The 
banks are in good shape. But they were not. They were 
undercapitalized and in a lot of instances not well managed, 
hands off instead of hands on.
    You do have the capacity now--I think you could have had it 
then, more capacity. But I agree with Mr. Gruenberg here that 
you have got to have the will, and you have got to send the 
message. Part of it is a message, but they will not believe 
you. What is the old story you have heard all your life? If you 
tell somebody you are going to shoot them if they cross the 
line and you do not shoot them, they have got you, you know? 
The question is: What are you as the regulators are going to do 
your job? You got the capacity but you have the will. I hope 
you do. And I think that the regulatory environment is tough. 
The Senator from Kansas got into that.
    I have never worried about--maybe I should--a lot of the 
small banks bringing systemic risk in this country, on this 
country or into this country. But some of the biggest 
institutions will--have and will again. I do worry about 
Europe, and as the Chairman said, the Acting Chairman, a lot of 
our European banks are undercapitalized, much more so than us. 
Basel III, which we have all worked on. I think you have got 
the framework, and the question is: Will you as the regulators 
implement Basel III capital?
    My question to both of you: If a foreign bank--let us say 
it is a German bank or a French bank or a British bank--doing 
business in this country if they are undercapitalized, do you 
have any power over them at all as to their capital standards 
doing business in this country? Because they could cause 
systemic risk here. Marty?
    Mr. Gruenberg. Senator, to the extent the foreign bank has 
a subsidiary here subject to our regulatory authorities, the 
answer to that is yes.
    Senator Shelby. And what does that mean? Does that mean you 
have some capacity to deal with their capital, their overall 
capital? Because their overall capital is what matters.
    Mr. Gruenberg. To the extent that we are dealing with the 
capitalization of their foreign operations, that is something 
we do not have direct authority over, and that is, frankly, why 
these international agreements are very important, not only to 
reach them but to monitor compliance with them. And we really 
need to develop that capacity to monitor not only our own 
compliance but what the major foreign institutions are doing, 
because at the end of the day it does all come together, and 
risk there poses risk here as well.
    Senator Shelby. Mr. Curry, do you have any thoughts on 
that? Because some of those big foreign banks are doing 
business here, and some of them, as you know, had some shaky 
foundations just a few years ago.
    Mr. Curry. I would have to agree with Vice Chairman 
Gruenberg that, with respect to the OCC, they would have to be 
a supervised entity by the OCC to take action.
    I would comment that I agree with you that you cannot 
legislate supervisory fortitude. It is something that you have 
to bring to the table, and I would hope, if confirmed, that I 
would do that. And I also believe that it is appropriate for 
all the banking agencies to look at, as the Vice Chairman 
mentioned with the material loss reviews, how we could have 
done better and to learn from the lessons of this recent 
crisis.
    Senator Shelby. Mr. Woodall, I know you have gotten by here 
today, but I think that we basically believe that you are well 
qualified for this position. And you do have a well-behaved, 
nice-looking family. That does not hurt anything.
    [Laughter.]
    Senator Shelby. But this position is unique here, as you 
pointed out and as we know, the position you have been 
nominated to serve on. You will be the first person to hold the 
insurance seat on the Financial Stability Oversight Council and 
how you carry out your duties will set important precedents for 
the role of this position that we will have in the future on 
the Council.
    What contributions do you see--and I know you do not see 
every crisis because they have not emerged yet--can this 
position make to improve the effectiveness of the Council from 
the perspective of insurance companies? And you will be, as you 
well know, in the company of some very powerful people, 
including the two here perhaps, and also the Chairman of the 
Federal Reserve and others at Treasury. How do you see your 
position there? I do not believe you are going to be a 
shrinking violet. You did not take the position for that.
    Mr. Woodall. No, I do not intend to be a shrinking violet.
    Senator Shelby. I do not believe you are a shrinking 
violet. I see four sons behind you.
    [Laughter.]
    Mr. Woodall. In trying to bring the perspective of the 
insurance world--and it is not just the insurance industry or 
just the regulators or the international part--it is all of 
that.
    Senator Shelby. And a lot of financial products are created 
through the insurance company, just like banks, in a different 
way.
    Mr. Woodall. That is right. As I said, those products 
sometimes, when they veer away from what the normal model, take 
on more risk, and they could, in some way have systemic risk 
involved in them. But that is what we have to look at, and we 
have to look at it from a company-by-company aspect. But the 
fact that the insurance industry is such a large part of 
financial services, I think that in all the issues that come 
before FSOC, there essentially is an insurance element, in the 
total picture of financial services. And as I said, this is a 
new creation, and I am an independent voice. I will not be 
speaking for the Administration or for the industry, or for the 
State regulators. I have to take all of that into account, 
along with what is happening at the international level, and 
vote my conscience.
    Senator Shelby. But there are some big insurance companies 
that could cause systemic risk to this country. I hope they do 
not ever, but, you know, they are such a size they could. But 
they, too, have got to have standards of capital and working 
capital and everything that goes with it, have they not?
    Mr. Woodall. Well, you have been talking about Basel with 
the banks.
    Senator Shelby. Right.
    Mr. Woodall. Well, on the insurance side, you have got 
Solvency II----
    Senator Shelby. And prevent another AIG. We do not want to 
go down that road.
    Mr. Woodall. And I think I tried to address that.
    Senator Shelby. You did.
    Mr. Woodall. As I said before, history showed us that when 
an insurance company, that one in particular, went beyond what 
the traditional model was, it got us into trouble. And you have 
to look under the hood and make sure there are not any 
regulatory gaps in there that would bring systemic risk. That 
is why the FIO was set up, too, to help identify any sort of 
regulatory gaps and to help develop within the Federal 
Government positions both nationally and internationally on 
insurance issues.
    Senator Shelby. Well, thank you.
    Thank you, Mr. Chairman.
    Chairman Johnson. I thank the witnesses for your testimony 
and for your willingness to serve our Nation.
    I ask all Members of this Committee to submit questions for 
the record by noon this Friday, July 29, and I request that the 
witnesses submit your answers to us by close of business on 
Tuesday, August 2, so that we can move your nominations forward 
as quickly as possible.
    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 CHAIRMAN TIM JOHNSON

    Thanks to all of our nominees for joining us here today. I also 
want to extend a warm welcome to our witnesses' family and friends who 
are here with us.
    Today we consider three nominees that will play a key role in the 
continued safety and soundness of our financial system as well as 
protecting consumers.
    We need strong leadership at all our financial regulators, and I am 
glad the President has sent us three well qualified individuals to fill 
openings at the Federal Deposit Insurance Corporation, the Office of 
the Comptroller of the Currency, and on the Financial Stability 
Oversight Council.
    Particularly at this point in our economic and financial recovery, 
these are extremely important positions to be filled.
    Under the Wall Street Reform Act, the FDIC was given new 
authorities that put an end to ``too big to fail'' by allowing the 
orderly resolution of large, complex financial institutions. Those 
authorities are a key part of making sure taxpayers are never again 
forced to bail out Wall Street, and it is vital that the FDIC have a 
Senate confirmed Chairman as it works to implement these rules.
    Both the FDIC and OCC play crucial roles in our Nation's ongoing 
housing recovery. Recent reports exposing abusive practices by mortgage 
servicers and banks--from excessive fees to fraudulent foreclosures--
highlight the importance of continued oversight and regulation of the 
housing sector.
    The OCC and FDIC also help ensure that consumers and small 
businesses continue to have access to credit. From maintaining 
consumers' access to a stable mortgage market, to protecting small 
businesses' access to capital to help create jobs, to promoting small 
community banks' ability to provide credit to consumers in areas where 
big banks simply won't go, both these agencies have their work cut out 
for them.
    I will look to our nominees to place a priority on all these issues 
at their agencies.
    Lastly, the Financial Stability Oversight Council is a key pillar 
of the Wall Street Reform Act. It was created to identify systemic 
risks posed by large, complex financial institutions before they 
threaten the stability of our economy. I am pleased to consider the 
nomination of Mr. Woodall to be the voting insurance expert on the 
FSOC. AIG showed us how interconnected the insurance industry is with 
the health of our economy, and I am sure Mr. Woodall's contribution as 
an FSOC member will be invaluable.
    The stability of our financial system, and of our economy, is 
vitally important and so I hope we can move expeditiously on these 
nominations.
                                 ______
                                 
               PREPARED STATEMENT OF MARTIN J. GRUENBERG

  To Be Chairperson and a Member, Board of Directors, Federal Deposit 
                         Insurance Corporation
                             July 26, 2011

    Chairman, Johnson, Ranking Member Shelby, Members of the Committee, 
it is my honor to appear before you as the President's nominee to serve 
as Chairman and Member of the Board of the Federal Deposit Insurance 
Corporation.
    I would like to thank President Obama for the honor of this 
nomination, and Chairman Johnson and Ranking Member Shelby for 
scheduling this confirmation hearing.
    I have had the privilege of serving as Vice Chairman and Board 
Member of the FDIC since August 2005. From November 2005 to June 2006 I 
served as Acting Chairman following the departure of former Chairman 
Donald Powell. I am now again serving as Acting Chairman following the 
departure of former Chairman Sheila Bair.
    Prior to joining the FDIC, as you know, I worked for Senator 
Sarbanes on the staff of the Senate Committee on Banking, Housing, and 
Urban Affairs from January 1987 to August 2005. During that period I 
had the opportunity to work on the major legislation acted on by the 
Committee including FIRREA, FDICIA, the Riegle-Neal Interstate Banking 
Act, the Gramm-Leach-Bliley Act, and the Sarbanes-Oxley Act.
    In addition to working on some of the key pieces of legislation 
governing the operations of the FDIC, I have had the opportunity to 
serve on the Board of the FDIC as the FDIC responded to the most severe 
financial crisis in the United States since the 1930s. I think it is 
fair to say that the deposit insurance, resolution, and supervision 
functions of the FDIC proved critical to maintaining public confidence 
and financial stability during the crisis.
    The experiences of serving on the staff of the Senate Banking 
Committee and on the Board of the FDIC have been good preparation to 
serve as Acting Chairman and, if confirmed, Chairman of the FDIC during 
what remains a challenging period ahead. There are positive signs. 
Although over 880 insured institutions remain on the FDIC's problem 
bank list, we believe that number may have peaked and may start heading 
down in the near future. Similarly, although the FDIC closed 157 failed 
banks last year, we are projecting a substantially smaller number of 
bank failures this year. Fifty-eight banks have failed thus far this 
year compared to 103 at this time last year. The FDIC's Deposit 
Insurance Fund, which had been in negative balance as a result of the 
costs of the bank failures, moved into positive territory at the end of 
June.
    In terms of priorities, the FDIC will have significant new 
responsibilities under the Dodd-Frank Act for the resolution of 
systemically significant financial institutions to implement. As the 
primary Federal regulator of the majority of our country's community 
banks, the FDIC carries a particular responsibility for the future of 
this crucial segment of our financial industry. Finally, the FDIC will 
also continue to play a leading role in expanding access to insured 
financial institutions to all Americans as a means for economic 
opportunity and financial security.
    Mr. Chairman, it has been a great privilege for me to serve on the 
Board of the FDIC for almost 6 years. I have come to have a deep 
respect for the professionalism and dedication of the staff of the FDIC 
who have performed with such distinction during this recent difficult 
period. I believe that the FDIC, which celebrated its 75th anniversary 
just 3 years ago, has proved itself to be one of our country's great 
public institutions. It is certainly the greatest honor of my career to 
have been nominated by the President to serve as Chairman of the FDIC, 
and to be considered by this Committee for confirmation.
    Thank you very much. I would be pleased to respond to your 
questions.
                                 ______
                                 
                 PREPARED STATEMENT OF THOMAS J. CURRY

                   To Be Comptroller of the Currency
                             July 26, 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 to be Comptroller of 
the Currency.
    Eight years ago, I had the honor to be nominated by President Bush 
and to come before this Committee for confirmation hearings to be a 
Board Member of the Federal Deposit Insurance Corporation (FDIC). It 
has been a tremendous privilege to serve at the FDIC during one of the 
most tumultuous economic periods in our Nation's history. I take great 
pride in the work of the FDIC and its very dedicated staff who 
maintained the American people's trust in the FDIC deposit insurance 
guarantee and the fundamental safety and soundness of our financial 
system. Independent and professional bank regulatory agencies like the 
FDIC and the Office of the Comptroller of the Currency are one of the 
strengths of our financial system.
    Prior to my Federal service, I served five successive Massachusetts 
Governors as the Commonwealth's Commissioner of Banks for approximately 
10 years and served for 7 years as a senior State bank regulatory 
official and attorney. My State bank regulatory experience also 
coincided with the New England banking crisis of the late 1980s and 
early 1990s. During this period of regional economic disruption and 
subsequent recovery, I gained invaluable experience and perspective 
which served me well as an FDIC Board Member.
    My 25 years of experience as a Federal and State bank supervisor, 
has underscored the fundamental importance of a safe and sound banking 
industry to our economy particularly in times of stress. Economic 
recovery and prosperity requires a healthy, independently regulated 
banking system that has both the financial capacity and confidence to 
extend credit to individuals and businesses.
    In sum, I believe my public service career has given me invaluable 
financial safety and soundness and public protection regulatory 
experience and judgment to capably serve as the Comptroller of the 
Currency, if confirmed.
    It has been the greatest professional honor of my life to serve my 
country during this difficult time. Should the Senate choose to confirm 
me, I look forward to the opportunity to lead the team at the Office of 
Comptroller of the Currency as it serves the individuals, businesses, 
and communities that benefit from a safe, sound, and fair national bank 
system.
    Thank you, Chairman Johnson and Ranking Member Shelby for this 
opportunity. I look forward to your questions.
                                 ______
                                 
                  PREPARED STATEMENT OF S. ROY WOODALL

         To Be a Member, Financial Stability Oversight Council
                             July 26, 2011

    Chairman Johnson, Ranking Member Shelby, and distinguished Members 
of the Committee, it is my honor to appear before you today. I am also 
deeply honored to be President Obama's nominee for this position and I 
want to thank you and your staff for the time you have spent with me, 
helping to move my nomination forward.
    With me today is my wife, Jane, my best friend and life partner of 
53 years, along with our four sons and their respective families. Jane 
is a former English teacher and now serves as the General Manager of 
the Smithsonian Chamber Music Society at the National Museum of 
American History. Our sons, in chronological order are: Sam, an 
attorney in Washington; Brock, a hardwood flooring contractor in 
Georgia; Claiborne, who works with the Virginia Natural Heritage 
Program in Abingdon, Virginia; and Garner, who is an Intelligence 
Analyst with the FBI. When we get together with our daughters-in-law 
and nine grandchildren, which we do frequently, there are 19 of us.
    If approved by this Committee and confirmed by the Senate, I know 
that the constant support and guidance of my wonderful family will 
continue to enlighten my thoughts and actions as I carry out my duties 
as a member of the Financial Stability Oversight Council (FSOC).
    FSOC was created by the Dodd-Frank Wall Street Reform and Consumer 
Protection Act to identify risk to U.S. financial stability, promote 
market discipline and respond to emerging threats. The FSOC is 
comprised of existing Federal financial services regulators as voting 
members. However, since there is no insurance regulatory agency at the 
Federal level, Dodd-Frank provides for a Presidential appointment of 
``an independent insurance expert'' in order to assure that insurance, 
which represents a substantial portion of the U.S. financial system, is 
appropriately recognized and accommodated within the new FSOC 
framework.
    I frankly know of no one who could technically qualify as an 
undeniable ``expert'' in all aspects of the highly diversified and 
constantly changing insurance industry, as well as its State-based 
regulatory regime and international position. However, if I am 
confirmed, I do believe that my half century of experience in insurance 
would provide FSOC with the insurance perspective envisioned by Dodd-
Frank. Aspects of that career include experience as a State insurance 
regulator, insurance attorney, insurance company rehabilitator, 
insurance trade executive, and a Federal insurance resource at the 
Congressional Research Service and the U.S. Treasury.
    Insurance is in my blood. My grandfather, C.A. Woodall, started 
selling insurance from a mule-drawn wagon in 1904 and continued to be a 
leading insurance producer in Princeton and Western Kentucky for over 
50 years. My father, Roy Woodall, Sr., started his own general agency 
in Paducah, Kentucky, in the 1920s and ran it until he retired in 1973.
    I was first introduced to the regulatory side of insurance as a law 
student in the summer of 1961, when I was an intern at the Kentucky 
Insurance Department. After getting my law degree in 1962, I continued 
to work as an attorney for the Department; became General Counsel in 
1964, and was appointed Commissioner in 1966. After the completion of 
my term, I practiced law with a Louisville law firm until 1972, at 
which time I became a court-appointed rehabilitator of three publicly 
owned life insurance companies that had been seized by the State. The 
rehabilitation was concluded successfully in 1976, and until 1980 I 
worked as the Assistant to the President of a family owned life insurer 
in Louisville, Kentucky. At that time I was selected to become the 
President of an Atlanta-based insurance trade association, the National 
Association of Life Companies, which was merged in 1993 with the 
American Council of Life Insurers (ACLI). Following the merger I served 
the ACLI as Managing Director/Issues and Chief Counsel, State Relations 
until my retirement in 1999. I then became Of Counsel to an Atlanta-
based law firm in its Washington office.
    As with many others I know, the terrorist attacks of 9/11 changed 
the focus of my life. I became an insurance consultant to the 
Congressional Research Service as it addressed the needs of Congress in 
developing the Terrorism Risk Insurance Act (TRIA). Following the 
passage of TRIA, I was asked by Treasury to assist in its 
implementation of TRIA. I continued to serve as Treasury's Senior 
Insurance Policy Analyst for 8 years, monitoring all types of insurance 
issues and the State insurance regulatory system.
    In all of these insurance-related areas, my experiences taught me 
lasting lessons about the various aspects of insurance. Also, I believe 
that those experiences qualify me to serve in the position to which I 
have been nominated. If confirmed by the Senate, I pledge to work 
closely with the other members of FSOC, and to continue expanding my 
knowledge of, fascination with, and passion for the complex world of 
insurance.
    Thank you for opportunity to appear before you today. I look 
forward to answering any questions that you may have.

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR CORKER
                      FROM S. ROY WOODALL

Q.1. An important decision yet to be finalized by the Financial 
Stability Oversight Council (FSOC) deals with the method for 
determining what financial firms and insurance companies may be 
designated as systemically important. What metrics do you think 
should be considered by the FSOC in making a determination of 
whether an insurance company is systemically important?

A.1. Section 113 of the Dodd-Frank Act (DFA) sets out a list of 
10 specific considerations that FSOC is to consider in 
determining whether a U.S. nonbank financial company, including 
an insurance company, should be designated as systemically 
important and thus subject to enhanced supervision by the Board 
of Governors of the Federal Reserve. These statutory 
considerations or criteria are:

  1.  The extent of the leverage of the company;

  2.  The extent and nature of the off-balance-sheet exposures 
        of the company;

  3.  The extent and nature of the transactions and 
        relationships of the company with other significant 
        nonbank financial companies and significant bank 
        holding companies;

  4.  The importance of the company as a source of credit for 
        households, businesses, and State and local governments 
        and as a source of liquidity for the United States 
        financial system;

  5.  The importance of the company as a source of credit for 
        low-income, minority, or underserved communities, and 
        the impact that the failure of such company would have 
        on the availability of credit in such communities;

  6.  The extent to which assets are managed rather than owned 
        by the company, and the extent to which ownership of 
        assets under management is diffuse;

  7.  The nature, scope, size, scale, concentration, 
        interconnectedness, and mix of the activities of the 
        company;

  8.  The degree to which the company is already regulated by 
        one or more primary financial regulatory agencies;

  9.  The amount and nature of the financial assets of the 
        company; and

  10.  The amount and types of the liabilities of the company, 
        including the degree of reliance on short-term funding.

    It would appear that some of these statutory criteria are 
more relevant than others with respect to insurance entities 
and groups in order to determine their overall risk. As I said 
in my testimony before the Committee, I believe that each large 
nonbank financial company under consideration by FSOC should be 
examined on a case-by-case basis, utilizing both quantitative 
metrics and qualitative judgments. It would appear to me that 
the following criteria drawn from the statutory list above 
would be of primary utility to FSOC in establishing those 
metrics necessary to determine whether an insurance company 
might present systemic concerns:

  1.  Size: While size alone is not a determinative 
        consideration, larger insurance entities or groups are 
        likely to be more interconnected. Thus FSOC could use 
        size to identify a subset of those larger firms that 
        could possibly be systemic and thereby present a threat 
        to the financial system. Smaller insurers and those 
        that clearly do not diverge from the traditional 
        insurance core model would probably not need to be 
        subject to the same degree of scrutiny unless they 
        might be involved in specialized lines of insurance 
        directly connected to the financial system, such as 
        monoline or financial guarantee insurers. FSOC could 
        consider various size metrics such as total 
        consolidated assets of a firm or group, total assets of 
        noninsurance financial entities within a firm or group, 
        as well as total consolidated liabilities (including 
        off-balance sheet liabilities, guarantees, and 
        derivatives) of a firm or group.

  2.  Interconnectedness: In order to measure the importance of 
        the insurer in the equities market, the bond market, 
        and the residential and commercial mortgage market, 
        FSOC could review the maximum ownership share of these 
        asset classes. It could also look at derivative 
        exposure in order to capture the counterparty exposure 
        risk beyond transactions to hedge existing risks.

  3.  Degree to which the insurer is already regulated: FSOC 
        could profile the number of primary or domiciliary 
        State regulators of insurance entities, as well as the 
        number of other State regulators with regulatory 
        jurisdiction by virtue of the entities' being licensed 
        in their State. It could also be important to determine 
        which entities within a group are unregulated. Also 
        important could be an evaluation of the nature and 
        extent of any supervision on a group wide basis.

  4.  Other applicable metrics that could be of assistance in 
        certain situations would include: lack of substitutes, 
        leverage, liquidity risk, and maturity mismatch.

    If confirmed by the Senate, I look forward to working with 
the other FSOC members, and especially the two nonvoting 
insurance members, to develop in a fair and transparent manner 
the appropriate metrics to be used; and also to exercise my 
independent judgment, based on my years of experience, in 
applying those metrics.
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