[Senate Hearing 113-13]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 113-13
 
           NOMINATIONS OF: RICHARD CORDRAY AND MARY JO WHITE
=======================================================================



                                HEARING

                               before the

                              COMMITTEE ON

                   BANKING,HOUSING,AND URBAN AFFAIRS

                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                   ON

                            NOMINATIONS OF:

  Richard Cordray, of Ohio, to be Director of the Bureau of Consumer 
                          Financial Protection

                               __________

   Mary Jo White, of New York, to be a Member of the Securities and 
                          Exchange Commission

                               __________

                             MARCH 12, 2013

                               __________

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


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





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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  TIM JOHNSON, South Dakota, Chairman

JACK REED, Rhode Island              MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York         RICHARD C. SHELBY, Alabama
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
SHERROD BROWN, Ohio                  DAVID VITTER, Louisiana
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
MARK R. WARNER, Virginia             PATRICK J. TOOMEY, Pennsylvania
JEFF MERKLEY, Oregon                 MARK KIRK, Illinois
KAY HAGAN, North Carolina            JERRY MORAN, Kansas
JOE MANCHIN III, West Virginia       TOM COBURN, Oklahoma
ELIZABETH WARREN, Massachusetts      DEAN HELLER, Nevada
HEIDI HEITKAMP, North Dakota

                       Charles Yi, Staff Director

                Gregg Richard, Republican Staff Director

                  Laura Swanson, Deputy Staff Director

                   Glen Sears, Deputy Policy Director

                       Catherine Galicia, Counsel

                  Greg Dean, Republican Chief Counsel

                Mike Piwowar, Republican Chief Economist

                       Dawn Ratliff, Chief Clerk

                     Riker Vermilye, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                  (ii)


                            C O N T E N T S

                              ----------                              

                        TUESDAY, MARCH 12, 2013

                                                                   Page

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

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

                                NOMINEES

Richard Cordray, of Ohio, to be Director of the Bureau of 
  Consumer Financial Protection..................................     7
    Prepared statement...........................................    37
    Biographical sketch of nominee...............................    40
    Responses to written questions of:
        Senator Crapo............................................    69
        Senator Menendez.........................................    73
        Senator Vitter...........................................    78
        Senator Johanns..........................................    81
        Senator Kirk.............................................    83
        Senator Moran............................................   113
        Senator Coburn...........................................   114
Mary Jo White, of New York, to be a Member of the Securities and 
  Exchange Commission............................................     8
    Prepared statement...........................................    50
    Biographical sketch of nominee...............................    52
    Responses to written questions of:
        Chairman Johnson and Senator Crapo.......................   132
        Senator Crapo............................................   132
        Senator Reed.............................................   137
        Senator Menendez.........................................   139
        Senator Brown............................................   141
        Senator Warner...........................................   151
        Senator Hagan............................................   151
        Senator Warren...........................................   153
        Senator Vitter...........................................   162
        Senator Johanns..........................................   165
        Senator Toomey...........................................   165
        Senator Moran............................................   169

              Additional Material Supplied for the Record

Letter submitted by Representative Steve Stivers of Ohio.........   171


                            NOMINATIONS OF:

                       RICHARD CORDRAY, OF OHIO,

                            TO BE DIRECTOR,

                BUREAU OF CONSUMER FINANCIAL PROTECTION;

                      MARY JO WHITE, OF NEW YORK,

                            TO BE A MEMBER,

                   SECURITIES AND EXCHANGE COMMISSION

                              ----------                              


                        TUESDAY, MARCH 12, 2013

                                       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. I call this hearing to order.
    Today we consider the President's nominees to head the CFPB 
and the SEC. In response to the financial crisis, the Wall 
Street Reform Act charged these two agencies with leading roles 
in restoring consumer and investor confidence in our financial 
system.
    Richard Cordray has been nominated to lead the CFPB and has 
served as Director since January 2012. Prior to that, Director 
Cordray was Chief of Enforcement at the CFPB. He has a long 
history of public service, including serving as Ohio's attorney 
general, State treasurer, State representative, and Solicitor 
General. We will hear more about Director Cordray when Senator 
Brown introduces him.
    Since his first confirmation hearing in September 2011, 
Director Cordray has appeared before this Committee more than 
any other financial regulator. During that time, he has proved 
to be a strong leader of the CFPB. He has completed many of the 
rules required by Wall Street reform, including a well-received 
final QM rule. He listens and has crafted strong rules that 
take into account all sides of an issue. He has laid the 
groundwork for nonbank regulation. He has brought to light the 
financial challenges faced by students, elderly Americans, 
servicemembers, and their families. He has taken important 
enforcement actions against banks that took advantage of 
customers. So I ask what more can Richard Cordray do to deserve 
an up-or-down vote? I hope we can move forward with Richard 
Cordray's confirmation.
    Mary Jo White has been nominated to be a member of the SEC 
and will be formally introduced by Senator Schumer. As Members 
of this Committee have begun to get to know her in the past few 
weeks, it is clear Ms. White has an impressive resume. As the 
U.S. Attorney for the Southern District of New York, she was 
tough and respected. As a lawyer at Debevoise, she has an 
understanding of the complex issues facing the financial 
system.
    This is a critical time in the SEC's history as it works on 
a range of rules and policy issues. These include the Volcker 
Rule, derivatives, credit rating agencies, hedge funds, 
standards for broker-dealers and investment advisers, corporate 
disclosures, market structure, the JOBS Act, and money market 
funds, just to name a few. Wall Street reform increased the 
SEC's duties to better protect investors and oversee the 
market, but Congress has not increased the Commission's budget 
enough to keep up. I look forward to learning more from Ms. 
White on how she will approach these challenging issues.
    As we mark the 5-year anniversary of Bear Stearns' failure 
this month, we are reminded why we need strong cops on the beat 
enforcing our investor and consumer protection laws. I am 
pleased that the President has nominated Mary Jo White to lead 
the SEC and Richard Cordray to continue leading the CFPB. Both 
are well-qualified, thoughtful leaders who bring law 
enforcement experience to the job. As such, I hope we can move 
these nominees through the Committee in a timely manner.
    I now turn to Ranking Member Crapo for his opening 
statement.

                STATEMENT OF SENATOR MIKE CRAPO

    Senator Crapo. Thank you, Mr. Chairman. I appreciate your 
holding today's hearing on the nominations to lead the 
Securities and Exchange Commission and the Consumer Financial 
Protection Bureau. Both agencies are highly visible, complex, 
and were given very broad jurisdiction by Congress to act in 
their areas of expertise. In addition, each agency expends 
hundreds of millions of dollars every year to fulfill their 
respective missions.
    Mr. Cordray appeared before us last year at his nomination 
hearing, so we have already had a chance to get to know him. 
And Ms. White has extensive experience in our financial 
markets, both as a highly regarded U.S. Attorney in New York 
and as a securities law practitioner. I look forward to hearing 
from both nominees.
    Both the SEC and the CFPB were created after significant 
downturns in the financial markets. Nearly 80 years ago, 
Congress established the SEC to restore investor confidence in 
our capital markets and to ensure orderly markets for stock 
trading and investing.
    The CFPB was established more recently as a part of the 
Dodd-Frank Act and is intended to sweep all the consumer 
disclosure laws into one entity while leaving core prudential 
banking regulation with the other respective banking 
regulators. However, the SEC and the CFPB are administered in 
quite different ways.
    When established in 1934, Congress decided to create the 
Securities and Exchange Commission based upon the structure of 
corporate lords. Congress set forth that the SEC would be 
comprised of five Commissioners. Each Commissioner would be 
selected for a 5-year term and no more than three Commissioners 
from any one party.
    Around this same time, Congress also established the 
Federal Deposit Insurance Corporation. Again, Congress 
established the FDIC with a board structure.
    Both the SEC and the FDIC have survived nearly 80 years, 
and the board structure has provided sufficient transparency 
and openness so that Congress and the general public have a 
very good understanding of each agency's mission and operation.
    Unfortunately, the CFPB lacks this transparency and 
openness regarding its operations, budget, and intended 
activities, its intended mission. The Dodd-Frank Act 
specifically elevated the Director of the CFPB so that he or 
she holds unique power to determine the agency's budget and 
mission priorities without any public debate or input from 
Congress.
    For example, in fiscal year 2012, the CFPB spent more than 
$150 million on contracts and support services, which is more 
than the agency spent on employees. This is nearly half of the 
money that the CFPB received from the Federal Reserve last 
year. There is no public accounting on how these monies on 
contracts and support services are being spent.
    To alleviate these and other concerns, I believe that the 
structural changes to the CFPB that we have recommended are 
essential. Moving from a single Director to a board format is 
one of the important steps that will bring about the 
transparency and openness that now exists with the SEC.
    In addition, the agency needs to be put on the Federal 
appropriations process so that Congress knows how the monies 
are being spent, especially on items such as contracts and 
outside services.
    And, finally, the prudential regulators need to have more 
than just informal input into the CFPB's policy and rulemaking 
decisions.
    With regard to the President's recess appointment to the 
CFPB last year, my opinion has not changed. I continue to 
believe that the recess appointment was unconstitutional. The 
recent court case involving the National Labor Relations Board 
found that those recess board appointments violated the 
Constitution. Since the CFPB recess appointment was made on the 
same day, to me the same result should apply.
    Recently, members of the Republican Caucus sent a letter to 
the President objecting to the confirmation of the head of the 
CFPB unless these structural changes are made to the agency. 
Structural and other changes to the agency are, I believe, 
areas where we can work together to improve the operation of 
the CFPB and to improve accountability.
    Mr. Chairman, I look forward to hearing from Ms. White and 
Mr. Cordray on their qualifications to head the SEC and the 
CFPB, and, again, I appreciate the chance to work with you on 
these nominations.
    Chairman Johnson. Thank you, Senator Crapo.
    Does anyone else wish to make a short opening statement 
before we turn to the nominees for their testimony?
    Senator Schumer. Mr. Chairman.
    Chairman Johnson. Please withhold.
    We will now proceed to witness introductions. Senator 
Schumer will now introduce Ms. White. Senator Schumer.
    Senator Schumer. Thank you, Mr. Chairman, and thank you and 
Senator Crapo for holding this hearing so quickly. It is my 
great privilege to introduce Mary Jo White, the nominee to be 
the next Chairman of the SEC.
    Mary Jo was not born in New York but, like millions of 
others through the years, found her way to New York, found in 
New York her hopes, her dreams, and a place to call home.
    Ms. White's long and distinguished career as a public 
servant and as one of the most well respected and hardest 
working lawyers in the country leaves no doubt that she is well 
qualified to undertake the task that awaits the next Chairman 
of the SEC. She is competent and dedicated, tough and fair.
    From 1993 to 2002, she served as the U.S. Attorney for the 
Southern District of New York. She remains the only woman to 
have held that position in the 200-plus-year history that the 
office has existed. Prior to becoming U.S. Attorney for the 
Southern District, she served as the First Assistant U.S. 
Attorney and Acting U.S. Attorney in the Eastern District of 
New York from 1990 to 1993. She famously put ``The Teflon 
Don,'' John Gotti, behind bars and prosecuted the terrorists 
responsible for the 1993 World Trade Center bombing, including 
Ramzi Yousef and the ``Blind Sheik,'' Omar Abdel Rahman.
    Her case against the Trade Center terrorists bears special 
mention because it shows her creativity and determination as a 
lawyer. She dusted off a Civil War era seditious conspiracy 
statute to prosecute the case, a move considered risky at the 
time but that ultimately proved successful.
    She also prosecuted numerous white-collar crimes, including 
insider trading and securities fraud cases, establishing a 
track record that leaves no doubt she will vigorously pursue 
the SEC's enforcement agenda.
    She has also had a long and distinguished career in the 
private sector where she earned her reputation as one of the 
hardest working and most well respected attorneys in the 
country. She won a litany of awards from a diverse group of 
institutions. I will just name a few. In addition to the George 
W. Bush Award for Excellence in Counterterrorism and the Agency 
Seal Medallion given by the CIA, she also received the Woman of 
Power and Influence Award given by the National Organization of 
Women and the Sandra Day O'Connor Award for Distinction in 
Public Service.
    Now, Mr. Chairman, most of the attention on her personality 
is focused on her toughness and her aggressiveness, and with 
good reason. She apparently indulged a fondness for motorcycle 
riding and, despite her physical stature, was a fierce 
competitor in the women's basketball league in New York. The 
same toughness she showed playing basketball she will show as 
SEC Chair. She will score many points and not commit too many 
fouls.
    And if anyone--if anyone--questions her loyalty or 
patriotism, I am told that on those rare occasions when she 
does relax and takes a break from putting terrorists in jail, 
she likes to crack open a cold Bud.
    But she has a warm and fuzzy side, too. In 2011, she was 
elected Chair of the ASPCA, the American Society for the 
Prevention of Cruelty to Animals.
    So all accomplishments and accolades aside, the moment of 
truth for me came when I discovered that, despite being born in 
Kansas City and raised in Virginia, she was a diehard Yankees 
fan. I hope that will not deter the Senator from Ohio in his 
deliberations. I know he hates the Yankees. What is your Web 
site? OK, some anti-Yankee thing is his call name.
    Anyway, I am confident she will leave an indelible mark on 
the SEC and will continue the task of restoring the public's 
trust in the agency by challenging the agency to live up to her 
own standard of excellence, a standard unmatched by almost any 
nominee who has come before this Committee during my time here.
    U.S. capital markets have been and remain the envy of the 
world. A huge reason why is the reputation the SEC has 
established over the decades for robust investor protection. 
Over the last dozen years, the reputation has taken some hits: 
Enron, WorldCom, and, of course, Bernie Madoff and the 2008 
financial crisis. But Mary Jo is the right person at the right 
time to build on the efforts of her immediate predecessors and 
re-establish the SEC as the premier securities regulator in the 
world.
    I wholeheartedly support Ms. White's nomination to be the 
next Chairman of the SEC, and I am confident that after an 
appropriately thorough vetting process my colleagues will as 
well.
    Thank you, Mr. Chairman.
    Chairman Johnson. Thank you, Senator Schumer.
    Senator Brown will introduce Mr. Cordray. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman. And my 
understanding is that Rich Cordray loves dogs and cats, too.
    [Laughter.]
    Senator Brown. We all do.
    Senator Schumer. What about the Yankees?
    Senator Brown. I could show you our dog, Franklin, who we 
named after Franklin Roosevelt, and my daughter commented after 
we got this dog that I finally got the son I always wanted. But 
I will leave that alone. Thank you, Chuck, Chuck you noticed 
also got Iowa and Ohio mixed up, which happens far too often in 
this institution, and Idaho, Ranking Member Crapo. So thank 
you, Chuck.
    Mr. Chairman, thank you, and Ranking Member Crapo, thank 
you for holding this hearing and moving quickly on this. 
September 2011 was a previous confirmation hearing on this same 
nominee and this same Bureau. It was my privilege to introduce 
Rich Cordray and introduce Peggy, and joined here by their 
twins, Danny and Holly, who are a year and a half bigger, so 
good to see them here today.
    I have known Rich Cordray for 20-plus years. His parents 
served as strong advocates for people with developmental 
disabilities. He was raised to advocate on behalf of people who 
were too often pushed to the margins of our society. And during 
his service as Ohio State treasurer--he had been a county 
treasurer; he had clerked for U.S. Supreme Court Justice 
Kennedy. And during his time as the State treasurer and later 
attorney general in Ohio, he fought for Ohioans who struggled 
to stay in their homes.
    He remains the right person to head the Consumer Financial 
Protection Bureau. Under his leadership, CFPB helped 
servicemembers and veterans and military families understand 
their benefits. He has helped students plan for their futures 
and has helped baby boomers plan for retirement.
    He has had a role, a major role in refunding some $425 
million to consumers who were victims of fraudulent financial 
practices, and CFPB has handled more than 130,000 complaints 
from consumers in all of our States.
    Mr. Chairman, we already had our fight over the structure 
of the CFPB. A bipartisan majority in the Senate created the 
CFPB in 2010 to help ensure that Americans have access to safe 
and transparent financial products and services, including 
credit cards and loans. But in the U.S. Senate, a vocal 
minority is pledging to hold up the appointment of a qualified 
nominee. No one I have heard says anything less about Rich 
Cordray's qualifications than that he is superbly qualified for 
this job.
    The legislation created CFPB as the law of the land, but 
some here want to nullify the legislation creating our Nation's 
consumer watchdog.
    Rich Cordray has been supported by CEOs of Ohio companies. 
He has won praise from Ohio bankers whom I have spoken with 
over the years. But for the first time in Senate history--or 
actually it is the second time because this happened with the 
same nominee and the same Bureau just over the last couple of 
years. And I asked the Senate historian about this. Senators 
are blocking a nominee because they simply do not like the 
agency that he will lead.
    For CFPB to thrive, it must have sound leadership, a leader 
who is able to work with institutions and individuals to 
prevent insidious schemes from wreaking havoc on our 
communities, on our families, on the citizens of this great 
country. Now is the time to consider Rich Cordray's 
qualifications, not keep fighting old political battles.
    Thank you, Mr. Chairman.
    Chairman Johnson. Thank you, Senator Brown.
    I would also like to take this opportunity to submit a 
letter from our colleague Congressman Stivers, who could not be 
here today but wished for his support to be known.
    We will now swear in the nominees. 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. Cordray. I do.
    Ms. White. I do.
    Chairman Johnson. Do you agree to appear and testify before 
any duly constituted Committee of the Senate?
    Mr. Cordray. I do.
    Ms. White. I do.
    Chairman Johnson. Please be seated.
    Please be assured that your written statement will be part 
of the record. I invite you to introduce your family and 
friends in attendance before beginning your statements.
    Mr. Cordray, please proceed.

 STATEMENT OF RICHARD CORDRAY, OF OHIO, TO BE DIRECTOR OF THE 
            BUREAU OF CONSUMER FINANCIAL PROTECTION

    Mr. Cordray. Chairman Johnson, Ranking Member Crapo, and 
Members of the Committee, I am honored to be here once again as 
the nominee to serve as the Director of the Consumer Financial 
Protection Bureau. I am grateful to the President for the 
confidence he has shown in me and for giving me the opportunity 
to continue serving our country in this role. If confirmed, I 
pledge to continue to carry out and enforce the law that 
Congress passed to protect consumers and restore confidence in 
consumer finance markets.
    Over the past 2 years, I have come to understand how your 
Committee exercises great responsibility that affects the lives 
of all Americans. It is a pleasure to appear before you 
frequently in my current role, and we have seen that our 
relationship can be cooperative and fruitful. If confirmed, I 
look forward to working closely with you to see that the people 
and families whom we serve are treated fairly in the essential 
marketplace for consumer finance.
    As you had suggested, Mr. Chairman, I am glad once again to 
have my wife, Peggy, and my twins, Danny and Holly, with me 
here today. Like many of you, I commute back and forth from a 
long distance to do this work. My family has been willing to 
make real sacrifices, without complaint, because they believe 
in what I am doing to serve our country. They know how deeply I 
appreciate their steadfast support.
    From childhood, my parents taught me the value of work that 
seeks to improve the lives of others. My dad, Frank, who turned 
95 just last month, spent his entire career in programs that 
served children and adults with developmental disabilities. My 
mom, Ruth, who died of cancer when I was in college, founded 
the first foster grandparent program for the developmentally 
disabled in Ohio, in addition to doing all the many and various 
things that a mother does to raise three fairly rambunctious 
boys.
    My approach to the role of Director is deeply informed by 
their influence. It is also deeply informed by more than two 
decades in public service. I have served in the Ohio 
Legislature, as Ohio's first Solicitor General, as the Franklin 
County Treasurer, and as State Treasurer. Most recently, before 
joining the Bureau, I was Ohio's Attorney General. Out of hard 
lessons learned through these experiences, I developed a 
resolve to address the kinds of financial difficulties and 
challenges that confront our communities. I learned there is no 
such thing as a one-size-fits-all solution as we seek to aid 
those who want to do the right thing and, when necessary, to 
thwart those who seek to take advantage of others. And I 
learned that creative strategies to find solutions can benefit 
consumers and honest businesses, which share many common 
interests.
    When I became the Director of the Consumer Bureau last 
year, I resolved to do everything in my power to make the 
Bureau accountable to American consumers, to American 
businesses, and to the Congress. Although our work is still in 
the early stages, we have been busy. In addition to supervising 
the country's largest financial institutions, we have also 
begun to protect consumers and markets that previously received 
no Federal supervision at all. Consumers now have someone 
looking out for them as they deal with residential mortgages, 
payday loans, private student loans, credit reporting, and debt 
collection. This affects millions of people across this 
country--people who are your constituents as well as the 
consumers we seek to serve.
    At the same time, we are coming to a better understanding 
about how to use the other tools Congress provided to address 
the problems and challenges facing consumers. We have adopted 
new rules for the mortgage market to ensure that the excessive 
and irresponsible practices that helped precipitate our 
Nation's financial calamity cannot be repeated.
    In the credit card market, we are implementing and 
overseeing the extensive positive changes that Congress enacted 
in the CARD Act. For consumers who have been deceived by credit 
card companies, we have worked closely with our fellow 
regulators to put $425 million back in pockets of 6 million 
consumers.
    In the student loan market, we have teamed up with the 
Department of Education to create products like the Financial 
Aid Shopping Sheet. So far, we are pleased to see that 644 
colleges are voluntarily adopting it.
    Perhaps the most direct example of addressing problems in 
the consumer finance markets is our consumer response function. 
To date, we have handled more than 130,000 complaints. People 
have contacted us about specific problems with consumer 
financial products and services, ranging from improper charges 
on credit cards to mortgage payments that were wrongly applied. 
These consumers have come to us from every State; many of those 
have been referred by you, and we thank you for forwarding them 
to us.
    Along with these initiatives, Congress directed us to focus 
on the unique problems that confront special populations of 
consumers. Assistant Director Skip Humphrey and his team have 
targeted the financial exploitation of older Americans, helping 
seniors get sound information and advice about their retirement 
finances. Assistant Director Holly Petraeus and her dedicated 
team have identified and are resolving distinctive issues that 
affect our servicemembers, veterans, and their families.
    So these are the kinds of issues that the Consumer Bureau 
is already addressing on behalf of 313 million Americans. Of 
course, there is much more to do in each of these points, and 
we are determined to continue making progress.
    Thank you, Mr. Chairman, again, and Members of the 
Committee, for the opportunity to be with you here today. I 
look forward to your questions.
    Chairman Johnson. Thank you.
    Ms. White, please proceed.

STATEMENT OF MARY JO WHITE, OF NEW YORK, TO BE A MEMBER OF THE 
               SECURITIES AND EXCHANGE COMMISSION

    Ms. White. Thank you, Mr. Chairman, Ranking Member Crapo, 
and Members of the Committee, it is my privilege to appear 
before you today as President Obama's nominee to be the 31st 
Chair of the Securities and Exchange Commission.
    Before I begin my remarks, let me thank Senator Schumer for 
his kind introduction, and I also want to introduce my husband, 
John White, who is here today, and thank him for being here and 
for his support. Our son and his wife are law students and are 
attending class, so they are somewhere else today. Thank you, 
though.
    There is no higher calling, in my view, than public 
service. As the United States Attorney for the Southern 
District of New York for almost 9 years, I worked very hard on 
behalf of the American people investigating, prosecuting, and 
punishing those who committed crimes. From white-collar 
criminals to terrorists, regardless of the complexity of the 
case or the identity of the defendant, we always strove to do 
the right thing and to vigorously enforce the law. Today I am 
honored by the prospect of potentially returning to public 
service as the Chair of the SEC to help carry out its essential 
mission.
    While I served as United States Attorney, our office worked 
closely with the SEC prosecuting violations of the Federal 
securities laws by both companies and individuals. Through that 
experience, I became a strong admirer of the expertise, 
independence, and commitment of the Commission and its staff. I 
fully appreciate the critical role the SEC plays as the primary 
regulator of our capital markets and as a strong advocate on 
behalf of investors. Today, in the wake of the financial crisis 
and in the midst of implementing the substantial legislative 
mandates of Dodd-Frank and the JOBS Act, the SEC's importance 
and scope of responsibilities are greater than ever.
    If confirmed, I will vigorously carry out the SEC's mission 
to protect investors, maintain fair, orderly, and efficient 
markets, and facilitate capital formation. This mission has a 
tripartite mandate, but the component parts should not be 
viewed as in conflict with each other. It is the responsibility 
of the Chair and the Commission to take the long-term view, 
balance the objectives when necessary, and seek to fulfill all 
parts of the critical mission.
    As was true when Chairman Schapiro was here before you for 
the first time in 2009, this too is a critical time for the 
SEC. Although the worst of the recent financial crisis may be 
behind us, none of us can be complacent. Under the leadership 
of Chairman Schapiro and Chairman Walter, the SEC has made 
significant strides to strengthen its examination and 
enforcement functions, improve its capacity to assess risks, 
and enhance its technology. But fast-paced and constantly 
changing markets require constant monitoring and analysis, and 
when issues are identified, the investing public deserves 
appropriate and timely regulatory and enforcement responses.
    I am acutely aware that the position of Chair of the SEC 
carries with it heavy responsibilities and many challenges. 
But, if confirmed, I will work tirelessly and do everything in 
my power to effectively lead the SEC in fulfilling its mission. 
Let me just very briefly highlight a few early priorities.
    First, I would work with the staff and my fellow 
Commissioners to finish, in as timely and smart a way as 
possible, the rulemaking mandates contained in the Dodd-Frank 
Act and JOBS Act. The SEC needs to get these rules right, but 
it also needs to get them done. To complete these legislative 
mandates expeditiously must be an immediate imperative for the 
SEC.
    With respect to rulemaking, rigorous economic analysis 
should inform and guide the decisions that are made. Although 
challenging--particularly in the quantification of benefits--in 
my view, the SEC should seek to assess, from the outset, the 
economic impacts of the contemplated rulemaking.
    Second, if confirmed, it will be a high priority throughout 
my tenure to further strengthen the enforcement function of the 
SEC. It must be fair, but it also must be bold and unrelenting. 
Investors and all market participants need to know that the 
playing field of our markets is level and that all wrongdoers--
individual and institutional, of whatever position or size--
will be aggressively and successfully called to account by the 
SEC. Strong enforcement is necessary for investor confidence 
and is essential to the integrity of our markets. Proceeding 
aggressively against wrongdoers is not only the right thing to 
do; it also will serve to deter the unlawful practices of 
others who must be made to think twice--and stop in their 
tracks--rather than risk discovery, pursuit, and punishment by 
the SEC.
    Third, the SEC needs to fully understand all aspects of 
today's high-speed, high-tech, and dispersed marketplace so 
that it can be optimally and wisely regulated. High-frequency 
trading, complex trading algorithms, dark pools, and intricate 
new order types raise many questions and concerns. The experts 
and studies to date have not been consistent or definitive in 
their observations and findings about whether our modern market 
is causing harm or the extent of that harm to investors. There 
must be a sense of urgency brought to addressing these issues 
to understand the impact on investors and the quality of our 
markets so that, again, appropriate regulatory responses can be 
made. If confirmed, I will work to ensure that the SEC has the 
cutting-edge technology and expertise necessary to enable it to 
keep pace with the markets and its responsibilities to monitor, 
regulate, and enforce the securities laws.
    There are, of course, many other important areas within the 
jurisdiction of the Commission--from money market funds to 
credit rating agencies, from the appropriate standards and 
regulations governing the conduct of broker-dealers and 
investment advisers when providing investment advice to retail 
customers, to how to make public issuer disclosures more 
meaningful and understandable for investors, just to name a 
very few. If confirmed, I would focus on these and all of the 
many challenges facing the SEC.
    In conclusion, it would be my privilege and honor to carry 
out and help carry out the SEC's mission. Thank you for 
considering me to serve in this capacity and for the 
opportunity to appear before you today. I would be happy to 
answer your questions.
    Chairman Johnson. Thank you for your testimony.
    If any Member has any questions for the record for either 
of our nominees, I ask that you please submit them by noon on 
Thursday, March 14. I also ask that the nominees respond to the 
QFRs quickly so that we can move the nominations forward.
    We will now begin asking questions of our witnesses. Will 
the clerk please put 5 minutes on the clock for each Member?
    Mr. Cordray, South Dakota's community banks and credit 
unions continue to raise concerns about regulatory burden. How 
has the CFPB addressed the concerns of small institutions while 
maintaining effective protections for consumers? And what 
additional steps do you plan to take?
    Mr. Cordray. Thank you, Mr. Chairman. I recall the visit to 
South Dakota with you in which we met with local financial 
executives, and we have made it a point to do that around the 
country. I believe we have met with more than 40 community 
banker organizations or credit union organizations in the last 
6 months alone, so we have been very accessible to them. I will 
be speaking before the Independent Community Bankers of America 
tomorrow and spoke at a meeting of the Credit Union National 
Association last month.
    We also created, at my initiative, a Credit Union Advisory 
Council and a Community Banker Advisory Council, so we can hear 
regularly, and specifically, from them about what is on their 
mind, about their concerns, whether about us or about the 
marketplace, whatever it may be. I think that that outreach and 
the listening that we have done has informed work that we have 
done. It affected our qualified mortgage rule. It affected our 
escrow rule. It affected our servicing rule, where we put into 
practice what I have said here many times--that community banks 
and credit unions did not engage in practices that caused the 
financial crisis, and the regulatory response should take 
account of that fact and protect and preserve their traditional 
model of lending, which is a very responsible model and good 
for many communities across this country, like the community I 
grew up in in Ohio, and live.
    Chairman Johnson. Ms. White, if confirmed, what steps will 
you take to address potential conflicts of interest between 
your duties as SEC Chairman and the past work on behalf of 
clients, as well as potential conflicts with respect to your 
husband's work? How will these steps affect your ability to 
participate in the Commission's enforcement actions or other 
SEC matters?
    Ms. White. Thank you, Mr. Chairman. Before I agreed to be 
nominated for this position, I detailed to the White House, the 
Independent Office of Government Ethics, and the career SEC 
ethics official the nature and extent of my and my spouse's and 
our firm's legal practices to be certain that there were no 
conflicts that could be problematic or limit my ability to 
function effectively as SEC Chair, if I were to be nominated 
and confirmed. I went through a very rigorous process of my own 
and with these parties to ensure that I am in compliance with 
all ethics regulations and laws. And I am very scrupulous about 
these issues and place a very high bar on them, and I was also 
focused in that process very much on making certain I could 
effectively function as the Chair.
    I know the Senate has received a letter from the Office of 
Government Ethics concluding that I am in full compliance with 
all applicable laws governing ethics and conflicts of interest.
    I was also advised in this process that while I have 
recusals, as do many nominees, mine were not out of the 
ordinary in scope, nor out of the ordinary for past Chairmen or 
other Commissioners of the SEC.
    The career ethics officials at the SEC are quite 
experienced in managing these conflicts, should they arise. I 
will also be very vigilant in managing them myself and making 
sure that we are scrupulously attending to any that might 
arise. But I do not believe, Mr. Chairman, that the recusals, 
the extent of them, will prevent me from fully performing my 
duties. In general, I am not recused from any SEC rulemaking 
matters or policy matters, and as to party matters, as they are 
known, which primarily affects the enforcement function of the 
SEC, the scope of those recusals is also quite narrow.
    Chairman Johnson. Ms. White, what approach will you take 
with enforcement? How will the SEC under your leadership signal 
that wrongdoing will not be tolerated and restore confidence in 
the integrity of the U.S. capital markets?
    Ms. White. First, I do not think there is anything more 
important than vigorous and credible enforcement of the 
securities laws. I think it must be done. To some extent, I 
think you convey that confidence to the public by the deeds, by 
the cases that you make, by the deterrence that you effect by 
your cases. And so I will be very focused on that throughout my 
tenure, and if confirmed, I will meet with the Enforcement 
Division to review various of its structures, practices, and 
cases to make certain that that happens.
    Chairman Johnson. Mr. Cordray, what is your vision for the 
Consumer Financial Protection Bureau?
    Mr. Cordray. Mr. Chairman, my vision of the Consumer 
Financial Protection Bureau really arises out of our work and 
it arises out of the legislation that Congress passed. I think 
any agency needs to hew closely to its governing statute.
    Congress created us to protect consumers in the financial 
marketplace and to help make those financial markets work more 
effectively for the consumer public and for the honest and 
responsible businesses that, for the most part, dominate the 
marketplace and deserve protection against unscrupulous 
competitors.
    As I have said before, I see our vision in light of the 
people we serve. They are--to be most direct about it--they are 
our mothers and fathers, our sisters and brothers, our sons and 
daughters. Everybody in this room and everybody paying 
attention knows of people in their extended family, friends, 
who struggle with consumer financial issues, and who need some 
help and support in navigating complex financial markets. To 
the extent we can deliver value for those people who, again, 
are your constituents and the people we serve, that is what we 
aim to do.
    Chairman Johnson. Senator Crapo.
    Senator Crapo. Thank you, Mr. Chairman.
    Ms. White, recently the SEC has been commended by the GAO 
for raising the bar, frankly, when it comes to conducting 
economic analysis, and you actually already answered my first 
question. I am basically making a statement to you right now. 
But the SEC really has made major strides in this area, and I 
appreciate what I took in your opening statement to be your 
commitment to continue this and to even advance the agency's 
focus on economic analysis. Is that correct?
    Ms. White. Yes, that is correct, Senator, and if confirmed, 
I will also--there is SEC guidance which I think has brought 
about that enhancement that you mentioned, and I will be very 
focused on seeing that as it operates in practice.
    Senator Crapo. Well, thank you. And this question is also 
directed to you. Last year, the Financial Stability Oversight 
Council released a set of proposals regarding money market 
mutual funds, and many of us believe that that is a 
responsibility that much better lies with the SEC. Would you 
agree with that?
    Ms. White. Money market mutual funds, which are very 
important investment products, I think are in the heartland of 
the SEC's expertise, and I think it is the SEC's 
responsibility, as it is focused on now and has been before, in 
determining what additional reforms there should be to that 
investment product.
    Senator Crapo. And if confirmed, would you intend to see 
that the SEC takes prompt action in that area so that it takes 
the responsibility as it should?
    Ms. White. Yes, Senator, I would. And my understanding is 
that those discussions are going on currently.
    Senator Crapo. Thank you. And again, you have spent many 
years in the securities industry, in addition to your husband, 
as a prosecutor. Your husband is a highly experienced 
securities attorney. I appreciate your answer to the Chairman's 
question, which was one of my questions as well.
    Mr. Cordray, as you know, the Senate Republicans want to 
see key structural changes such as a board versus a single 
Director, funding through the appropriations process rather 
than direct access to the Federal Reserve Board, and 
establishing a safety and soundness check for the prudential 
regulators. Are you open to working with the Senate on these 
reforms to increase the transparency and accountability at the 
agency?
    Mr. Cordray. We continue to be, and I personally continue 
to be, interested in working with the Senate to further develop 
transparency and accountability of the agency. There are 
numerous provisions in place now that we follow. For example, 
we are subject to a specific GAO audit of our finances, which 
is unusual for agencies. We are also subject to an outside 
independent audit, we do a semiannual report to Congress, and I 
am required to testify in front of both this chamber and the 
House on each of those reports. That is at least a minimum of 
four testimonies per year. We have the Federal Reserve's 
Inspector General who oversees us as well.
    We also have been working toward further building out. You 
will recall that 2 years ago we had zero personnel, zero 
structure, and zero process. We have recently added the GPRA 
statutory performance review provisions into our budgetary 
process. I think we could make more commitments to you today 
than we could have a year or two ago, and would be willing to 
do so in order to improve transparency further and make sure 
that the Congress has all the information it needs and wants 
about our expenditures.
    As to our accountability to Congress, I always am 
accountable to you. I have found congressional oversight to be 
both vigorous and meaningful, and it keeps us in shape, and it 
keeps us on our toes. It is something we are very responsive to 
and I personally have been responsive to, and appreciate the 
value of that.
    Senator Crapo. Well, thank you, and I appreciate our 
private conversations about the importance of accountability 
and oversight and your commitment to help improve that.
    Mr. Cordray. Yes.
    Senator Crapo. I also recognize that you cannot say what 
the White House and the Congress will ultimately decide with 
regard to the issues with regard to changing the structure of 
the agency. But I look forward to trying to work with you to 
resolve those issues and seek your support in helping us 
resolve those issues.
    Mr. Cordray. Thank you.
    Senator Crapo. Finally, Ms. White, again, in your statement 
I appreciate the fact that you mentioned the JOBS Act and place 
those regulations as a top priority. What timelines do you 
think you could set for getting those regulations done? All of 
us up here I think are very anxious to see these regulations 
put into place as quickly as possible.
    Ms. White. I appreciate the question. There is no higher 
priority that I have than moving the SEC along, frankly under 
both the Dodd-Frank Act and the JOBS Act, to get those 
regulations out as quickly as possible. And I think you can do 
them well and smartly and still get them out quickly. I cannot 
give you an exact date, but I guarantee you that I am going to 
be focused on that, if confirmed, from day one.
    Senator Crapo. Well, thank you, and I appreciate your 
willingness to make that a high priority.
    The last question, again to you, Ms. White. With regard to 
the Dodd-Frank Act, the SEC made a public request for data and 
statistics, particularly on the potential regulatory costs to 
implement any potential changes to fiduciary standards for 
broker-dealers and investment advisers. Will you commit to 
reviewing the findings of this request prior to engaging in any 
rulemaking?
    Ms. White. Absolutely. I think it is a very important area, 
and I do commit to doing that.
    Senator Crapo. Thank you.
    Chairman Johnson. Senator Reed.
    Senator Reed. Thank you very much, Mr. Chairman, and, Mr. 
Cordray and Ms. White, thank you very much.
    Mr. Cordray, one of the responsibilities that you have is 
not just to protect consumers but to ensure there is a 
compliance regulation of what used to be known as ``the shadow 
banking system.'' In fact, one of the major defects that we 
discovered to our chagrin in doing Dodd-Frank and with the 
financial crisis is that many of these shadow banking 
institutions were unregulated or regulated by States, et 
cetera, and they tend, in retrospect, to sort of lead the 
standards down, to lower the bar, lower the bar, putting 
pressure on regulating agencies.
    And now for the first time, your agency is able to regulate 
these entities. In fact, they have done a remarkable job. You 
have recovered significant amounts of money for consumers, but 
you are also setting an even standard between the regulated 
industries that have Federal deposit insurance and other 
Federal protections and the unregulated. Can you comment upon 
that role of the Financial Bureau?
    Mr. Cordray. Thank you, Senator. That is one of the things 
that we have been working hard to be doing. It is one of the 
very positive advances made in the Dodd-Frank law, which is, 
you cannot regulate a market effectively if you are regulating 
part of the market and the rest of the market is going 
unsupervised and not subject to any standards or 
accountability. That is very much what we saw in the mortgage 
market leading up to the financial crisis. As you say, that not 
only opens the market to considerable exploitation of consumers 
without any oversight. It also hurts the responsible, honest 
businesses that are trying to do things right, but that do, as 
you say, feel pressure from unscrupulous competitors who are 
not subject to the same standards, not subject to the same 
requirements, and that is just a model that cannot work.
    The Consumer Financial Protection Bureau was given the 
authority in consumer finance markets to oversee not only 
banking institutions that are chartered, but also unchartered 
institutions. This has been a very important part of our work, 
and, frankly, since the day I was appointed, which is when we 
gained authority to do that work, it has been a very high 
priority for us.
    Senator Reed. I noticed in this context that the QM rule, 
the qualified mortgage rule, is something you have worked on 
with banking regulators, et cetera, and, frankly, to the praise 
of many in the banking industry. Jamie Dimon indicated they 
have done a great job, quoting him, and others have said that, 
too. But it sort of reinforces the notion, which I think is not 
appreciated enough, that you function really in a way to make 
sure that there is a level playing field, so that traditional 
banking institutions, regulated institutions, are not under the 
competitive pressure of unregulated entities. That is an 
important role.
    Mr. Cordray. It is an important role. It is one that we are 
very mindful of and I think is important to the markets being 
able to function effectively.
    Senator Reed. Let me also commend you for your work with 
military personnel. The Office of Military Services, headed by 
Holly Petraeus, has done a remarkable job, and that is another, 
I think, commendable aspect of what you have done with your 
leadership in protecting service men and women from foreclosure 
when they are on active duty, enforcing all of the different 
regulations. So I commend you for that and thank you.
    Let me just turn in my remaining time to Ms. White. First, 
you can assure us that in the rulemaking process your prior 
employment would in no way impinge upon your ability to 
participate in rulemaking because of the general nature of 
rules. Is that accurate?
    Ms. White. I can certainly assure you of that, Senator.
    Senator Reed. Thank you.
    Ms. White. And have been so advised by the Office of 
Government Ethics as well.
    Senator Reed. The next issue--and it sort of touches on 
what Senator Crapo suggested--can you give us your top three 
priorities of rules? You have a long, long list of actions 
pending, and it would be helpful to me to see, you know, what 
are your priorities going in. I understand when you get there 
and you get into the details those priority could change, but 
initially what are your priorities?
    Ms. White. Well, I have to say to that, Senator, that--and 
I realize--I am not a naive person in terms of can you get 
everything done at once.
    Senator Reed. I do not think anyone accused you of being 
naive at all.
    [Laughter.]
    Ms. White. Well, I have been accused of that, too, I think.
    Senator Reed. Trust me. Trust me.
    Ms. White. But, seriously, Senator, I think it is--and 
until I get into the SEC, if confirmed, you know, I do not have 
as much detail on the work streams that are proceeding, but it 
is my intention when I get there to personally take charge of 
assessing that and then truly trying to drive all of the 
rulemaking as quickly and as smartly as possible. So I do not 
have a rank order list yet. I just want to get in there, get it 
done, get it done smartly.
    Senator Reed. Let me also just add sort of a footnote to 
your previous comments, which is if there is an issue where 
there is a potential appearance of a conflict, what is the 
mechanism outside your own individual judgment that you will 
avail yourself to get guidance or to get clarification?
    Ms. White. Essentially, I will be frequently consulting--
first, I will be very vigilant myself, as I think I have been 
throughout my career. The SEC ethics official and I have 
already had discussions, assuming that I would be confirmed, 
about a very vigilant screening agreement as well as mechanisms 
to identify any possible appearance issues as well.
    Senator Reed. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Johnson. Senator Corker.
    Senator Corker. Thank you, Mr. Chairman. And, Mr. Cordray, 
once again your family has been a great asset to you today. 
Your son and daughter are acting perfectly in the back, and 
even sometimes act like the questioners are asking intelligent 
questions.
    [Laughter.]
    Senator Corker. So I do want to say that if you can get 
people dealing with consumers and the financial world to act 
like they are, you will do a very good thing for our country.
    And, Ms. White, during your introduction I thought at first 
you had to be a leading citizen from Tennessee, but thank you 
for being here.
    I have already talked to Mr. Cordray on many, many 
occasions. You are going to be dealing with the Volcker Rule, 
and we all know that prop trading is out, but hedging and 
market making is still something that is permitted. And I would 
just ask if you are committed to making sure that we have 
really bright lines there so that people--that the institutions 
that are affected by Volcker know the difference between prop 
trading, hedging, and market making.
    Ms. White. I am totally committed to that and recognize the 
importance of both the mandate to bar proprietary trading, but 
also the permitted activities of market making as well as the 
hedging activities. And, again, I guess I am listing everything 
I am going to do the first day, but if confirmed, that is one 
thing that I am going to turn my personal attention to.
    Senator Corker. OK. In the area of money market funds, I 
know we have had difficulties getting to a place. I know you 
and I talked a little bit about that in the office. But have 
you thought any about the floating proposition? Have you given 
thought to how you might want to resolve the money market 
issue?
    Ms. White. I have studied this issue. I am not, as I think 
I mentioned earlier, privy to the ongoing discussions in the 
Commission about it, and clearly I understand the risk that is 
trying to be--the systemic risk, possible run on the funds, 
that is trying to be addressed by the discussions that are 
ongoing. But I am also acutely aware of the value of the money 
market fund product, and so whatever is done, we want to take 
care that that is not harmed by this.
    I do not have a view on specific reforms until I get in 
there to meet with the staff and talk to my fellow 
Commissioners. You know, I do not have a conclusion on that.
    Senator Corker. And the process has been a pretty long 
process there, and I know there have been some differing 
opinions. Do you view having Commissioners like this that 
represent different viewpoints, hashing out a rule, do you view 
that as being a positive or a negative?
    Ms. White. That is a tough question.
    Senator Corker. It is a good question.
    Ms. White. It is a very good question.
    [Laughter.]
    Ms. White. It is a very good question. I mean, clearly, the 
structure, the Commission structure, which is designed to be 
bipartisan and to bring in as many different perspectives as 
possible I think is a wise structure. The structure I operated 
under before as U.S. Attorney, I was more autonomous, and I did 
not mind having that autonomy as well. But I understand the 
strengths of that structure.
    Obviously, that requires you in the Commission structure to 
do a lot of talking with each other, which I think is quite 
healthy as well, and to, you know, bring people together as 
much as possible.
    Senator Corker. Thank you.
    Mr. Cordray, I would not ask Mary Jo this because she is 
just starting, but the FSOC has the ability under, I think, 
Title II to wind down a large institution that poses a threat 
to our country, and I have a letter that is going out today to 
everybody that is part of the FSOC. But since you have been 
serving on it, is it your understanding that the FSOC has the 
ability to wind down an institution even if it is healthy 
because it poses a threat to our country if it were to have 
problems? Or is it your belief that that institution has to 
have financial issues before you can look at winding it down or 
doing away with various lines of business?
    Mr. Cordray. I do not think that that issue has been 
presented in the meetings that I have attended over the past 
year--that we would take a healthy institution and somehow seek 
to wind it down. It has been an assumption that the failure of 
an institution or the impending failure of an institution and, 
therefore, the imminent weakness of the institution would 
itself pose a potentially systematic threat to the financial 
system. That has been the basis on which discussions have 
proceeded, and I think that that is appropriate.
    Senator Corker. So at present, it has really been focused 
only if an institution gets in trouble. I would like some 
clarification there, and the letter will come to you, along 
with everyone else who is on the board, and if you could just 
look at it, Mary Jo, at the right time, if you could do that, 
that would be great.
    And on the equity markets, there have been a lot of 
discussions recently, and I do not think any of us have fully 
digested this yet. But there is a lot of high-frequency 
trading, dark pools, all kinds of things that are taking place, 
and there have been some concerns about that taking place to 
the harm, if you will, of just your everyday investors. I know 
you are committed to dealing with that, but do you have any 
initial thoughts in that regard?
    Ms. White. This is one of the priority areas that I did 
note in my oral remarks, and it is one that I take away from my 
briefings at the agency as a very high priority to figure it 
out so that appropriate responses can be made. I mean, 
certainly there are concerns and questions that arise from the 
high-frequency traders and our electronic market in general, 
the dispersed market in general. But I think in the first 
instance, we need to know what is happening and what the 
impacts are, and that, again, is one thing that I--I am getting 
a longer list of what I am personally driving, I guess, but I 
am very interested in focusing on that.
    Senator Corker. Well, thank you both for your testimony, 
and, Mr. Cordray, I do hope--I do appreciate the way that you 
have dealt with our office, and I would say most people here. 
And I do hope that over the course of the next short period of 
time we are able to figure out a way for the entity to function 
in a manner that makes everyone on both sides of the aisle feel 
comfortable. But I thank you both for your public service. I 
thank the families for being here, and I look forward to seeing 
you again.
    Mr. Cordray. Thank you, Senator.
    Chairman Johnson. Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Let me start off by saying these are two exceptional 
candidates for these positions, and they have tremendous 
background. And in the case of Mr. Cordray, I certainly hope 
that the ideological opposition to the entity which received a 
majority vote in its creation by the Congress of the United 
States does not continue to be the opposition to someone who is 
eminently qualified, who has been fair, who has been balanced, 
who has been transparent--all the qualities that you would want 
in a director of an office. And so if that is a new standard 
that a majority will can now be subverted by stopping a nominee 
in order to subvert the agency, then that is a dangerous slope. 
And so I hope that Mr. Cordray's nomination moves forward based 
on his abilities and what he has exhibited to us so far.
    And in the case of Ms. White, I know there are some who are 
concerned about her private sector experience. I remember her 
as a very tough prosecutor. I used a different word when we 
met, but I will not do that here.
    Ms. White. I said you could.
    [Laughter.]
    Senator Menendez. Yes, but, you know. So these are two 
exceptional witnesses. Having said that, I do have some 
questions.
    Ms. White, I get numerous constituent letters concerning 
the lack of prosecution of wrongdoers, and basically when I see 
the testimony of the Attorney General before the Judiciary 
Committee, when he was asked in this field, that the size of 
some of these institutions are so large that it does--this is 
quoting from his testimony--``it does become difficult for us 
to prosecute them when we are hit with indications that if you 
do prosecute, if you do bring a criminal charge, it will have a 
negative impact on the national economy, perhaps the world 
economy.''
    So the question then is: Are these institutions in essence 
protected against prosecution merely by their size, and 
understand that when, in fact, they do violate the law, that 
they will have an extensive fine and that will be the cost of 
doing business? Because if that is the case, then I think it 
subverts the very nature of the honesty and transparency that 
we want to see in the marketplace. If the American people and 
investors believe that entities can do this largely with 
impunity because they are so big that they cannot, you know, be 
prosecuted, at the end of the day then how do I know that the 
system is not being rigged at a time in which I am making my 
investments?
    So as the potential Chair of the SEC, give me your thoughts 
on what you would do in that regard in terms of when you found 
wrongdoing, assuming you found wrongdoing, what would you do?
    Ms. White. Assuming you found wrongdoing, I think you 
proceed quite vigorously against, frankly, anyone that you find 
evidence of wrongdoing on, but certainly financial 
institutions.
    At the SEC, which, of course, does not have the criminal 
powers, those collateral consequences are not taken into 
account before charging decisions are made. So at the SEC there 
is no institution too big to charge. On the criminal side, 
there are also--in my view from my former life, institutions 
are not too big to charge either, but Federal prosecutors are 
instructed by Department of Justice policy. They have a long 
line of factors to consider, and one of them is the collateral 
consequences of a criminal indictment to innocent shareholders, 
employees, or the public. And certainly prosecutors should 
consider that before proceeding, but that does not necessarily 
dictate a no decision.
    Senator Menendez. So if you were to confirmed as the Chair, 
at least to the extent that the SEC has powers of charging and 
proceeding, you would vigorously do that when you found the 
causes to be appropriate?
    Ms. White. Absolutely, Senator.
    Senator Menendez. Second, in Dodd-Frank, it has been 
reported that excessive compensation schemes provided part of 
the fuel for the financial crash. In response, I worked to 
include a provision in Dodd-Frank that would require publicly 
listed companies to disclose in their annual SEC filing the 
amount of CEO pay, the amount of the medium company worker pay, 
and the ratio of the two.
    Now, it seems to me while the agency has struggled with 
immensely more complicated rules, the SEC has yet to take 
action on this. Will you work to follow through on this, if 
confirmed, and make sure that we get to the rule that is called 
for under the law?
    Ms. White. I will, Senator.
    Senator Menendez. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Johnson. Senator Johanns.
    Senator Johanns. Thank you, Mr. Chairman.
    Let me just say to both of you thank you for being here. I 
appreciate it.
    Mr. Cordray, if I could start with you, first, thanks for 
stopping by my office the other day. I enjoyed the opportunity 
to visit with you.
    When you took the oath that the Chair administered, as you 
know, a piece of that was that you would agree to appear before 
any duly constituted committee of the U.S. Senate, so let me 
probe that a little bit.
    Would you be willing, if asked, to appear before the 
Appropriations Subcommittee, a duly constituted, of course, 
committee of the U.S. Senate, on financial services in general 
Government to walk through your budget document and just answer 
questions about that document, the spending habits of your 
agency? Would you be willing to do that?
    Mr. Cordray. Senator, Bureau officials, including myself, 
testify regularly. In fact, more than 30 times in the last 2 
years. Under the laws that exist, what has been contemplated, 
and what we have done, is that I appear before this Committee 
and before the House Financial Services Committee each time we 
issue a semiannual report. That is twice a year in front of 
each chamber, each committee, so that is four to begin with. We 
have also----
    Senator Johanns. Let me just focus on your budget, though, 
because to some of us that is important. And as a former 
Cabinet official, I did not think that was a bad deal that I 
would be called to account before the Senate and go through my 
budget and justify it and ask for permission to do transfers. I 
thought that was actually a good thing. And I think the Senate 
appreciated it, the House appreciated it.
    Would you do that? Would you be willing to do that?
    Mr. Cordray. I have been willing to appear in front of the 
committees of Congress and have done so. If I understand 
correctly, under the current law, this Committee has the 
opportunity to do that with me. If the desire were to have me 
do that in front of a different committee, we could consider 
that. That has not been the structure that we have had.
    I think it is difficult among the banking agencies to 
suggest that this should be the only banking agency that would 
be appropriated. If there are measures that, as you suggest, 
included walking through and being subject to more transparency 
and accountability that would be satisfactory to you and your 
colleagues, we could certainly consider those things.
    Senator Johanns. Let me give you a specific example why we 
are concerned.
    Mr. Cordray. OK.
    Senator Johanns. And I think it is very, very legitimate. I 
think we are elected to provide oversight.
    In fiscal year 2012, the CFPB spent about $150 million on 
contracts and support services, which is more than what was 
spent on employees. That is nearly half of the money you 
received from the Federal Reserve that year. There is no public 
accounting on how those monies were used for contract services 
and support services. Would you be willing to appear before 
that Subcommittee and answer all questions about that, let the 
Subcommittee members inquire about what that is about, where 
that money went, and who got that money, and follow up with 
additional written questions? We do that with every Federal 
department, really. Would you be willing to do that?
    Mr. Cordray. Senator, thank you for raising that issue 
again. The Ranking Member had mentioned it in his opening, and 
I did not get a chance to respond.
    The reason why we had so much money in contracts rather 
than personnel in our first year was that we did not exist as 
an agency before that. Much of the money was paid to the 
Treasury, which we were part of for the first year, and that we 
contracted with them for services. We continue to contract with 
them to piggyback on their IT service and other things as we 
are building an agency. Over time, that is diminishing and will 
continue to diminish.
    We also have published detail about our specific 
contracts--what they are, amounts--and I have been happy to 
provide that to this Committee. If the notion were that we 
provide it to a different Committee, we could consider that.
    Senator Johanns. Yes. I am running out of time here, but 
this is only part of the essence of our concern, and I think it 
is legitimate. I think we have a right as United States 
Senators to probe into this kind of information because it is 
important that we be able to tell our taxpayers, our 
constituents, ``Do not worry. This money is being spent wisely 
and thoughtfully and carefully. And we have dug into it, and we 
can say that.'' That is what we are thinking about.
    Mr. Cordray. It is this Committee that has had the 
opportunity to do that, and we are quite welcoming of that, and 
we understand. As I said at the beginning, I served in the 
legislature in Ohio. I appreciate and understand the importance 
of congressional oversight. I think it is a meaningful check on 
our agency. I do not take it lightly when I sit in this chair 
and answer your questions, when deal with questions for the 
record, or when we brief your staff. We try to be as 
transparent as we can, and as we have grown as an agency, we 
are able to do that more. We are completely committed to doing 
that.
    Senator Johanns. Thank you, Mr. Cordray.
    Chairman Johnson. Senator Brown.
    Senator Brown. Thanks, Mr. Chairman.
    Ms. White, I have a number of questions, if you would try 
to do yes or no on the first two or three, because they are 
pretty simple questions.
    When you were U.S. Attorney, my understanding is you 
consulted Bob Rubin and Larry Summers when considering whether 
to bring charges against financial firms. Is that correct?
    Ms. White. I actually consulted the Deputy Attorney 
General, who had Mr. Summers call me back. I was asking a 
factual question.
    Senator Brown. Did they reject the argument that 
institutions could not be prosecuted to the fullest extent of 
the law?
    Ms. White. I would like to answer that yes or no, but I 
cannot. Essentially, I was seeking information based on an 
argument that had been made by the lawyers for the institution 
that I ultimately indicted as to whether an indictment of that 
institution would result in great damage to either the Japanese 
economy or the world economy, and the answer that I got back is 
I should proceed to make my own decision, which I took to mean 
that it would likely not have that impact.
    Senator Brown. OK. I mean, policy seems to have changed. 
You had a moment ago said that--you talked about the SEC does 
not consider, you used the term ``collateral consequences'' to 
Senator Menendez's question. And then in 2008, the Fed's 
general counsel called the SEC to urge the Commission not to 
pursue full penalties against bailed out firm that had 
committed fraud. As a result, institutional investors, pension 
funds that provide retirement security for working Americans, 
for example, ended up with less compensation in the settlement. 
The New York Times affirmed that costs were shifted from Wall 
Street banks to working Americans.
    Was the SEC right to lower these penalties back in 2008?
    Ms. White. I think what the SEC does do--they do not take 
collateral--as I understand it, they do not take collateral 
consequences into their charging decisions. But they do 
consider consequences in their remedies. So that, for example, 
a corporate fine that, in effect, would have a grievous impact 
on innocent shareholders is taken into account in terms of 
remedies that they seek.
    I do not know all the particulars of the example you are 
giving me, so I cannot respond any further than that.
    Senator Brown. OK. We know today the banks are 
considerably--the largest institutions are considerably larger 
than they were only 5 years ago. The largest six banks in this 
country now control--and Senator Vitter and I are working on 
this and some responses to the too-big-to-fail issue, how they 
control some 65 percent of GDP when only 20 years ago it was 
less than a third of that. Senator Menendez mentioned Attorney 
General Holder's comments about concerned about the size of the 
institution and what prosecutorial action might do.
    Yesterday, Arthur Levitt, one of your predecessors, 
currently a policy adviser to Goldman Sachs, when asked about 
Attorney General's comments, said, ``I think he is right. There 
is no question these institutions are very unlikely to be the 
object of prosecutions.''
    You have said that bringing criminal charges against 
corporations could harm employees. By that logic--and I have a 
couple of questions. First, do you agree with Attorney General 
Holder and Mr. Levitt? And if so, are we not creating by the 
logic of what you have said about bringing criminal charges on 
corporations harming employees, are we not creating a two-
tiered system where we exempt the biggest banks because they 
have the most employees and shareholders who could be affected 
from criminal prosecution? How do you sort of reconcile that 
belief with your position that no firm is, as we say, ``too big 
to jail''? I understand that you do not have criminal 
authority, but where do you go with that.
    Ms. White. I think, again, it is a factor that prosecutors 
are directed to consider, and not just the impact on employees 
and shareholders, innocent employees and shareholders, but the 
public interest as well. And so, you know, I think we want our 
prosecutors making decisions in the public interest. Obviously, 
you do not want to have a two-tier standard for some 
institutions and not others. But I do think the deferred 
prosecution instrument, which has been used a great deal on a 
number of companies, was designed to be tough in terms of 
monetary sanctions, monitors, basically everything but the 
charge itself that might cause what the prosecutor may consider 
to be negative and very undesirable collateral consequences to 
the public interest.
    So, you know, I do not think you should--and I do not 
consider it to be a rule or even under the DOJ policy that, 
therefore, you cannot indict anyone. It is part of your 
consideration, and it should be part of the consideration, I 
think.
    Senator Brown. Let me ask one other question. There was 
concern, at least on this side of the Committee, I assume on 
both sides, of what people in this town call your ``revolving 
door'' from the firm to U.S. Attorney, back to the firm, back 
to U.S. Attorney, the firm, U.S. Attorney, and back to the 
firm, and now this. And nobody questions your integrity or your 
aggressiveness or your toughness. But could you just--we need 
some reassurance that when you have this job, that the culture 
you have come out of the last 10 years, I assume both socially 
and professionally, will allow you or perhaps make you better 
at--make that case. Answer this specific, if you can. What have 
you done over the last decade that ordinary investors--when you 
see the wealthiest in this country have done better and better 
and better, and most of America has not gotten a raise in the 
last 10 years, what have you done the last decade that ordinary 
investors can look and be assured that you will advocate for 
them?
    Ms. White. I think to some extent they--and it is true of 
anyone--they have to see what you do in the job, and in my 
case, I think they have a track record of when I was a 
prosecutor----
    Senator Brown. Well, over the last 10 years.
    Ms. White. Well, I have been a lawyer over the last 10 
years, and when you are a lawyer, you represent different kinds 
of clients, and you are ethically bound to represent them to 
the best of your ability, and I have done that. That does not 
change me as a person. It does not mean I embrace the policy 
thoughts of any of my clients in particular. And so I think the 
public investor should know that I am their advocate, that I 
have a very--and I say the track record because it is good to 
give them something concrete to look at. I think I was 
extremely, exceptionally aggressive against large institutions, 
against CEOs, senior executive types. And before I was that, I 
was in the private sector where I actually started. I actually 
started in the private sector.
    So after about the same amount of time in the private 
sector, I became U.S. Attorney and had that track record. I am 
the same person who--in this instance, if I am confirmed, the 
American public will be my client, and I will work as zealously 
as is possible on behalf of them.
    Senator Brown. All right. Thank you, Ms. White.
    Chairman Johnson. Senator Coburn.
    Senator Coburn. Thank you.
    Mr. Cordray, I appreciated your visit in my office, and as 
I told you then, I think in your capacity you have done a great 
job. One question for you. Do you presently submit your data to 
USASpending.gov on how you spend your money?
    Mr. Cordray. I do not actually know the answer to that 
question, Senator, but it is something I would be happy to 
explore with you or have my staff explore with your staff.
    I will say again that we started 2 years ago with just the 
beginnings of an agency----
    Senator Coburn. Well, I am not critical.
    Mr. Cordray. I understand.
    Senator Coburn. I am just asking a simple question. 
Everybody in the Federal Government--everybody--is supposed to 
submit data so that the American people can see where the money 
is spent. And so one way of answering Senator Johanns' question 
is, well, sure we will come discuss it because it has already 
been made public because the American people have a right to 
know where you are spending the money. And by Federal statute, 
as authored by President Obama and I, it is required of every 
agency to put their information and their spending on that 
site.
    So I would love to have an answer to that, and you do not 
have to answer it now.
    Mr. Cordray. I will get you an answer.
    Senator Coburn. And I have explained to you--and my 
positions are very similar to Senator Crapo's in terms of the 
requirements on this position. I know we are divided as a 
Committee on that, and I will not spend any more time on it, 
but I will compliment you. I think you have done a wonderful 
job so far in carrying out your duties.
    Ms. White, I will announce today at this hearing that I am 
going to aggressively support your nomination. I enjoyed our 
visit. The more I find out about you, the more I like you, and 
the more I am proud that you have agreed to accept to fulfill 
this critical responsibility. Thank you for doing that.
    Ms. White. Thank you, Senator, very much.
    Senator Coburn. Thank you.
    Chairman Johnson. Senator Tester.
    Senator Tester. Well, thank you, Mr. Chairman. And I just 
want to start with you, Ms. White, if I might. You have had a 
very interesting and distinguished career. As Senator Schumer 
has pointed out, both as a prosecutor in the Eastern and 
Southern Districts of New York, you developed a reputation for 
dedication and tenacity, and I think these qualities have 
contributed mightily to your success in taking down some pretty 
big dogs.
    You sent one of the most reputed mob bosses, John Gotti to 
jail for murder and racketeering. You led the charge, as 
Senator Schumer said, against the Blind Sheik, the mastermind 
behind the 1993 World Trade Center bombings. You not only put 
him behind bars, but you connected the pieces to reveal that 
this was not a single event but, rather, an emerging trend, one 
that you saw firsthand.
    Your office also indicted Osama bin Laden for his role in 
bombing American embassies in East Africa at a time before most 
Americans had a clue who he even was.
    A major part of your success in the Southern District of 
New York in prosecuting these criminals was your ability to dig 
deep to understand how they operated, the dynamics of their 
networks, their organizations, and what their motives were. 
These were some of the most dangerous criminals that you put 
away.
    So first I want to thank you for what you have done 
protecting this Nation. Some have questioned your toughness as 
a regulator, whether you would be able to hold accountable 
those sorts of folks that you might have defended in the past. 
And I would actually view your experience and expertise as an 
asset. Why? Because if someone was going to commit a crime, my 
gut tells me that you might have a pretty good idea where the 
body was buried. It also tells me that, given the list of 
enemies you already have, you would not be too concerned about 
Wall Street.
    So could you tell me, Ms. White, how your expertise as a 
prosecutor--because this question has been asked in many 
different ways this morning--how your expertise as a prosecutor 
will help you at the SEC, particularly as it relates to 
enforcement?
    Ms. White. Thank you very much, Senator. I think it helps--
I mean, I have extensive experience frankly from the public 
sector as a prosecutor and the private sector in investigating 
various things and trying to connect dots, trying to go up the 
chain to see whether there is evidence at high levels, and I 
really look forward to reviewing the entire enforcement 
function and hopefully adding value there from my experience in 
both the private and public sector.
    Senator Tester. If you saw wrongdoing with the folks that 
you regulate, would you have any hesitancy whatsoever going 
after them? Now, let me tell you where I am going with this. 
Senator Brown talked about the comments were made of too big to 
jail. Others talked about--I think it was you that talked about 
DOJ that has to consider collateral consequences.
    If I was a bad guy and wanted to take the consumers for a 
ride, I would design my bank, my financial institution, so that 
you could not prosecute them.
    Do you see any reason out there why you would not prosecute 
regardless of how big they are?
    Ms. White. Again, from the SEC perspective, I do not.
    Senator Tester. OK. You talked about in your opening 
remarks your goals, Dodd-Frank, JOBS Act as far as the 
rulemaking goes, specifically Regulation A plus, which does not 
have any statutory deadlines. Could you just talk to me about--
and we all talked about the first day you are in, you have got 
all this stuff to do. Could you just tell me how you are going 
to move that to the top of the list?
    Ms. White. I think that it is, again, something that--
whether a deadline or not----
    Senator Tester. Yes.
    Ms. White. And, again, the SEC has obviously been given a 
daunting list of rulemaking to do. I recognize that. But I 
think all of them have to proceed--the work streams have to be 
such that they all get done.
    You know, again, I come back to maybe I am not a naive 
person, but, you know, I think it has to be done. Some are 
easier to do than others as well, and there is no reason to 
hold them up.
    Senator Tester. Good. Well, I think that if there is some 
attention paid to them, which I have the clear indication that 
you are going to pay some attention to them, that those rules 
will be forthcoming in much better order than they have in the 
past.
    Rich Cordray, first of all, I want to thank you for what 
you have done. I think you have done some good work. I want to 
talk about something that has been pointed out to me from 
Indian country in tribal communities. And I believe there is a 
Memorandum of Understanding with the Navajo Nation at this 
point in time with you. These tribes have a unique 
relationship, and I should have asked Senator Brown when he was 
here whether there are any Indian reservations in Ohio or not, 
but there are many in Montana. And President Obama issued an 
Executive order mandating that agencies create and maintain a 
formal consultation policy with Native American tribes. I think 
it is very important from my perspective. This consultation is 
critically important as we deal with Government-to-Government 
relationships. And I appreciate the outreach CFPB has done.
    I just wondered: Have you initiated a formal consultation 
policy for Native American governments?
    Mr. Cordray. We are doing that, Senator. In fact, we have 
been doing a lot of outreach to the tribal communities and 
understand that they have particular needs as consumers and 
deserve protection. As you say, we recently entered into a 
Memorandum of Understanding with the Department of Justice and 
the Navajo Nation. We have done a lot of consultation with them 
over the particulars of the Cobell settlement, making sure that 
everyone is vigilant about potential scams and frauds around 
that money coming to the tribal community. We treat the tribes 
as sovereign entities, and we are working with them through our 
Office of Intergovernmental Affairs.
    If I could, Mr. Chairman, my staff, who always know more in 
the aggregate than I do as an individual, does inform me that 
the answer to Senator Coburn's question is yes, we do submit 
information to USASpending.gov. We will tell him that, but if 
you would pass that along, I would appreciate it.
    Senator Tester. That is good. I want to follow up on the 
consultation.
    Mr. Cordray. Yes.
    Senator Tester. You said you were in the process of 
developing a formal consultation policy or you have developed a 
formal consultation policy?
    Mr. Cordray. We have been in the process of having informal 
consultation and are working toward a formal consultation 
policy. We would be happy to follow up further with you, 
Senator, about what you would like to see in place.
    Senator Tester. I would love that. When do you anticipate--
or can you tell me when you will have a formal consultation 
policy for Indian country?
    Mr. Cordray. Based on your interest in it, I would say 
shortly.
    Senator Tester. OK. Thank you.
    [Laughter.]
    Senator Tester. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Johnson. Senator Toomey.
    Senator Toomey. Thank you very much, Mr. Chairman.
    I would like to direct my questions to Ms. White. Thank you 
very much for being here. Thanks for taking the time to meet 
last week in my office. I enjoyed our discussion, and I 
appreciated that.
    First, just a quick follow-up on the rulemaking regarding 
Reg A in particular of the JOBS Act. I know from both your 
testimony today and our discussion last week that you have made 
it clear that that is going to be a priority to get that done. 
I would just want to underscore how important that is now that 
we are almost a full year past the adoption of the JOBS Act. 
And unlike some of the regulations, rulemaking, such as some 
that come from Dodd-Frank, the Volcker Rule being a case in 
point, that are incredible difficult, perhaps in my view 
impossible, Reg A is not like that. It is really 
straightforward and simple.
    So I hope you will use the very simplicity as a criteria 
for moving it up the list of priorities so that we could get 
that done soon. Do you expect that to be something that we 
could expect to see movement on in the very near future?
    Ms. White. I appreciate your comment on that and our 
discussion, and I will not predict a time, but I will say that 
it strikes me as one that can be moved, and I am committed to 
moving everything as quickly as possible. But, again, as I 
said, some are easier to move and faster to move than others.
    Senator Toomey. And that would be one of them.
    Ms. White. Yes, at least from the outside looking in, 
without question.
    Senator Toomey. Great. Thank you.
    I would like to follow up a little bit also on the 
discussions about money market funds, and you mentioned earlier 
that you recognize the importance of the product. I wonder if 
you could just underscore the importance, especially to the 
commercial paper market, the marketplace that provides so much 
liquidity and funding that is such an important source for 
investors, and the fact that there is no obvious alternative, 
certainly not in the short run, to the money market funds as 
the vehicle through which this occurred. Do you agree with that 
summary?
    Ms. White. I do, Senator. Again, as I said, I have not had 
the opportunity to discuss, the internal discussions with the 
SEC, with my fellow Commissioners or the staff, but I have 
studied this issue, and I agree with your comments.
    Senator Toomey. And, again, you alluded earlier to the 
notion that since this is the area of jurisdiction and 
expertise of the SEC, it makes sense that the SEC would be 
responsible for the rulemaking. I make no secret about my view 
that the FSOC has put a lot of pressure, external pressure on 
the SEC, and I worry that the Commission might consider doing 
something in response to that pressure more than response to 
the needs of the industry. And I am just wondering if you could 
assure us, since you will have a seat on the FSOC as well as 
being the head of the SEC, your views on the importance of the 
SEC handling this.
    Ms. White. Yes. It is an investment product. It is where 
the SEC has expertise, and I think they should take the lead. I 
think FSOC has been, from what I have been briefed on, a very 
useful forum for bringing the different regulators together on 
different issues. But with respect to the rulemaking here, I 
would certainly like and expect to see it come from the SEC.
    Senator Toomey. Thanks. Furthermore, with respect to money 
market funds, I think you and I share the view that taxpayers 
should not be at risk of bailing out a money market fund. And 
if a money market fund were to fail, it should fail. The 
investors should bear that risk, but taxpayers should not. Do 
you agree with that general principle?
    Ms. White. Well, I guess I go back to the history in 2008 
where you had the breaking of the buck of the Reserve Primary 
Fund, and Treasury did step in to really guarantee the share 
price, which was to stop a run on the funds. You do not want to 
get to a run on the funds, I think. But I guess, you know, the 
reason that this is such a significant issue is to try to 
ensure, while preserving the product, that you do not run that 
risk going forward.
    Senator Toomey. Well, right, and I know you are very well 
aware that that incident happened in the context of a global 
financial meltdown. It was not caused by, it was not 
particularly concentrated in the money market funds. There were 
more serious and acute problems in other sectors as well. I 
think that is important. I also think it is important to note 
that throughout 40 years this has been an extraordinarily safe 
and sound product.
    But here is the question I have for your specifically. Is 
it your view that the role of the SEC is to make it impossible 
for a money market fund to break the buck?
    Ms. White. I think it is the role of the rulemaking to 
guard against--while preserving the product, you know, to guard 
against the systemic risk. I am not trying to be not responsive 
to the question, but I think that is----
    Senator Toomey. But that is different than making it 
impossible for an individual fund to break the buck.
    Ms. White. It is probably hard to make anything impossible.
    Senator Toomey. But that should not be the goal of the--
see, my point is that the goal is to make sure investors are 
aware of risks that they are taking, but that this is an 
investment that does carry some level of risk and that that is 
OK.
    Ms. White. I mean, there certainly is--you know, there are 
risks with a lot of products, investment products, risk is 
inherent in that. Again, I think the focus is on preserving 
that, but also dealing with the possibility of the systemic 
risk and run on the funds.
    Senator Toomey. OK. Well, I see I am out of time, but I do 
have some follow-up questions I will probably send to you. 
Thank you.
    Chairman Johnson. Senator Hagan.
    Senator Hagan. Thank you, Mr. Chairman. To both of our 
witnesses, thank you for being here today.
    Mr. Cordray, I think you are doing a very good job. I look 
forward to supporting your confirmation. I also want to say 
thank you to your family--your wife and your two children--who 
are here today.
    Ms. White, I appreciate you coming by my office to meet me. 
I am extremely impressed by your record as a prosecutor, and I 
look forward to you returning to public service. In your 
testimony, you mention investing in technology to keep pace 
with the markets. Can you discuss how a robust budget for the 
SEC would help achieve that goal?
    Ms. White. I think it is critical. I mean, today's 
technology is not tomorrow's, first of all, so it is very 
important for the SEC to be well funded for technology and some 
of--we are under a continuing resolution, as I think folks 
know, and, you know, a lot of those dollars that we do not have 
would have gone into technology. So that worries me.
    I also think it is a great investment of monies to hire 
more experts, market experts into this space so we really stay 
on top of what is the present-day market, the complexity of it, 
the speed of it. And so, you know, those funds are needed.
    Senator Hagan. Thank you. The FSOC has tasked the Office of 
Financial Research (OFR) with analyzing the potential risks to 
financial stability, if any, that may be posed by the asset 
management industry. Given that the SEC is the expert and 
primary regulator in overseeing the asset management industry, 
would you share with me your initial thoughts on how to ensure 
that the SEC plays a central role in this effort?
    Ms. White. Thank you, Senator. My understanding is that the 
SEC is in active discussions with the Office of Financial 
Research on precisely that subject so that the SEC's expertise 
in that industry is brought to bear. That is something that, if 
confirmed, you know, I also want to learn more about.
    Senator Hagan. OK. On February 1st of this year, the SEC's 
Advisory Committee on Small and Emerging Companies unanimously 
approved a recommendation to the SEC to initiate a pilot 
program to increase the tick sizes for securities of smaller 
companies. The SEC also hosted a February 5th Roundtable on the 
topic.
    What are your views on a pilot program that would increase 
this tick size for small and mid-cap companies, or stocks? What 
are the pros and cons of a pilot program?
    Ms. White. Again, this is something that, as I understand 
it, is under active consideration by the staff following that 
roundtable. I think, again, I have to be read into that before 
I reach a final conclusion, but clearly it is a priority to 
focus on that issue as well as just the small and mid-sized 
companies in general and to at least approach the issues with 
one size does not necessarily fit all, and we want obviously 
more liquidity for these smaller and mid-sized companies, and 
decimalization is a part of that, the size of the spread is 
part of that.
    Senator Hagan. The pilot program is going to be considered. 
Is that correct?
    Ms. White. My understanding is that the SEC is considering 
doing that based on the recommendation and the decimalization 
roundtable.
    Senator Hagan. OK. And do you know how big that would be?
    Ms. White. I do not. I would be happy to follow up.
    Senator Hagan. OK. That would be good.
    Thank you, Mr. Chairman.
    Chairman Johnson. Senator Moran.
    Senator Moran. Mr. Chairman, thank you very much. Mr. 
Cordray, Ms. White, thank you for joining us today.
    I think in listening to Senator Toomey and my colleague 
from North Carolina, the topics that I wanted to address with 
you, Ms. White, have at least been addressed. But I want to add 
my emphasis.
    One of the issues that Senator Warner and I have tried to 
champion is startup companies, trying to make certain that we 
create an entrepreneurial environment in the United States that 
advances the opportunities for folks with an idea to pursue 
those ideas and perhaps have a greater potential for success, 
and in the process of pursuing their success, create job 
opportunities for Americans. And both the topics that seem 
important to me is this tick size issue that you just were 
addressing, as well as the crowdsource funding that Senator 
Toomey pursued with you. And, again, you indicated in your 
testimony that you were going to pursue rulemaking, you would 
do it as quickly as possible. I want to indicate how important 
that is. I wanted to know if you have any serious reservations 
about crowdsource funding that would suggest that you would 
find fault with the process that Congress has instructed you to 
pursue. In other words, is there a philosophical or an economic 
reason that crowdsource funding, a consumer protection issue, 
that it bothers you that would delay? If you are confirmed and 
you are making these rules, would you be opposed to this 
outcome?
    Ms. White. Senator, thank you for the question. I know that 
a lot of people are very excited about this happening, 
crowdfunding. The SEC is always concerned about investor 
protection, and should be and is, and I would be throughout my 
tenure, if confirmed. There are some protections built into the 
crowdfunding mandates, and so, you know, I think that we would 
want to maximize those.
    I also think we want to be sure that, following these rules 
that may come out on crowdfunding as well as some of the 
others, we are monitoring what is happening in the marketplace 
so that if there is--were there to be fraud or some other 
events that are occurring that needed to be addressed, that we 
are on top of it after it is out the door. And I know the staff 
of the SEC is focused on that, the Enforcement folks are, 
should that happen so that those investor protections can be 
taken care of, you know, after the rulemaking is completed.
    But, again, I understand the priority that you put on it, 
and we will turn to that as well.
    Senator Moran. Do you know of any specifics at the SEC of 
concerns and why this is taking so long, any specifics about 
that?
    Ms. White. I do not, Senator. I do not.
    Senator Moran. And let me ask you--I think it is a similar 
question to what I have already asked but in a different way--
if you were a Member of Congress and this issue was before you, 
would you have been supportive or opposed to this concept of 
crowdfunding?
    Ms. White. I mean, that is a much harder question for me to 
answer. I think with respect to, frankly, you know, a number--
whether it is Dodd-Frank or the JOBS Act, you know, what I 
might have done as a legislator had I been fully read into it, 
I cannot really answer. But as a regulator, it is my mandate to 
carry out that rulemaking. Congress has made a policy judgment 
to do it expeditiously, and obviously as well and as smartly as 
possible.
    Senator Moran. While I would have been happy for an answer 
to the question about what you would have done, you did answer 
the question in the way that I was hoping that you would answer 
it, which is, ``It is my responsibility to implement the laws 
as Congress has determined.'' And I am not putting words in 
your mouth. Is that true?
    Ms. White. You are not putting words in my mouth. You said 
it better than I did.
    Senator Moran. And then on tick size, there are lots of 
IPOs, access to capital that see this as an opportunity for an 
improvement in that access to capital, and any reservations you 
have, I think you have pretty well described your thoughts 
about this with Senator Hagan.
    Ms. White. I think the thought of the pilot program would 
be to sort of see how it works with, you know, various spreads 
in various stocks so that you get more information before 
finally deciding, you know, what is optimal. This is one that, 
again, I need to be read into further, but at this point I do 
not have a reservation.
    Senator Moran. Would you confirm that my understanding is 
correct, which is the SEC conducted a roundtable. It is now at 
the staff level. Following that roundtable, they indicated--
this is, I guess, the question: Did they indicate that there is 
going to be a pilot program or that has not yet been 
determined?
    Ms. White. I do not know whether they have indicated it 
publicly, but clearly that was the discussion at the 
roundtable. It is under consideration by the staff, but I do 
not know that they have said anything publicly about a next 
step. They may have. I just may not know it.
    Senator Moran. Well, I really do believe that we can unlock 
lots of opportunities for Americans in job creation, and your 
job is an important one, and the regulatory environment, 
finding the right balance matters. And consumer protection 
obviously is important, but also the opportunity to create jobs 
for Americans is exceedingly important. And I would encourage 
you in both of these instances to act prudently, but to act 
prudently quickly.
    Ms. White. Understood, Senator.
    Senator Moran. Thank you.
    Ms. White. Thank you.
    Senator Moran. Mr. Chairman, thank you.
    Chairman Johnson. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman.
    Thank you both for being here. I am not going to have any 
questions for Director Cordray since you have already testified 
12 times. CFPB officials have testified more than 30 times. You 
have been an open book. I think there has been a lot of 
transparency, and you have won widespread praise for both your 
balance and your judgment.
    But I do have questions. What I want to know is why since 
the 1800s have there been agencies all over Washington with a 
single Director, including the OCC; but unlike the consumer 
agency, no one in the U.S. Senate has held up confirmation of 
their directors, demanding that the agency be redesigned.
    What I want to do know is why every banking regulator since 
the Civil War has been funded outside the appropriations 
process, but unlike the consumer agency, no one in the U.S. 
Senate has held up confirmation of their directors, demanding 
that that agency or those agencies be redesigned.
    And what I want to know is why there are agencies all over 
Washington whose rules are final, subject to the ordinary 
reviews and oversight, while the CFPB is the only agency in 
Government subject to a veto by other agencies, but unlike the 
CFPB, no one in the U.S. Senate holds up confirmation of their 
directors, demanding that those agencies be redesigned.
    From the way I see how other agencies are treated, I see 
nothing here but a filibuster threat against Director Cordray 
as an attempt to weaken the consumer agency. I think the delay 
in getting him confirmed is bad for consumers, it is bad for 
small banks, it is bad for credit unions. It is bad for anyone 
trying to offer an honest product in an honest market.
    The American people deserve a Congress that worries less 
about helping big banks and more about helping regular people 
who have been cheated on mortgages, on credit cards, on student 
loans, on credit reports. I hope you get confirmed. You have 
earned it, Director Cordray.
    So my questions are for Ms. White. Thank you very much. We 
have gotten a sense of you as a rule writer, and I am glad that 
is--I mean as a prosecutor, but I want to ask a couple of 
questions around rule writing, and actually I am going to start 
in the same place many of my colleagues have, and that is to 
talk about the things that have not yet been done. In fact, I 
will just make a little note here. The consumer agency has met 
virtually all of its rule-writing deadlines. The SEC has missed 
about half of them so far.
    But everyone has been highlighting the rules that they want 
to make sure that you focus on. I just want to draw a line 
under four of them that the SEC has not yet written any rules 
for.
    There are still no rules for credit rating agencies that 
took money to sign off on risky deals that crashed the economy 
and still operate with big conflicts of interest.
    There are still no rules from the SEC to deal with the 
derivatives that were right at the heart of the financial 
crisis.
    There are still no rules from the SEC to protect the 
counties and towns that were cheated.
    There are still no rules from the SEC to require disclosure 
of CEO pay relative to regular employees' pay.
    So if people are going to talk about priorities, I 
certainly hope that those are all near the top of your list.
    But one other thing I want to ask you about rule writing, 
because it came up earlier in the discussion, is the economic 
analysis or the cost/benefit analysis. You know, it is fairly 
easy to measure the costs of implementing a regulation. But 
what about the costs of underenforcing the rules? So what are 
the costs of people being cheated on mortgages and credit 
cards? What are the costs when money launderers are not 
prosecuted? What are the costs when big financial institutions 
crash our economy?
    So my question is: How do you make sure that when we are 
talking about cost/benefit that the costs not just of enforcing 
regulations but the costs of underenforcing those regulations 
is also accounted for, Ms. White?
    Ms. White. I appreciate the question. I think it also 
relates to measuring the benefits. I think it is kind of at 
least a similar issue, if not the same. Again, one of the 
things, if confirmed, I want to do first also when I get to the 
SEC is to really bore into exactly how this is being done. I 
also have the concern, as we all do, even though in terms of 
having our rules upheld by the courts, that needs to happen as 
well. But I think we have to recognize that there are some 
benefits, the cost of underenforcement, that have to be 
analyzed on their terms; in other words, that, you know, you 
have to say if you cannot quantify, you say why you cannot 
quantify. Or perhaps you do quantify, but you use a different 
parameter to do it. So I fully take your point.
    Senator Warren. OK. Thank you very much. I see my time is 
up.
    Thank you very much, Mr. Chairman.
    Chairman Johnson. Senator Merkley.
    Senator Merkley. Thank you very much, Mr. Chair, and thank 
you to both of you for coming to testify.
    First I wanted to accentuate the comments that Senator 
Moran made over crowdfunding. That legislation here in the 
Senate was my legislation. It was focused on the fact that I go 
to town meetings, I have been to over 160 of them in Oregon, 
and people really are looking for sources of capital to drive 
small business. So here is an incredible need for small 
business capital and a new, innovative strategy for helping 
provide that source of funds, and the rules were supposed to be 
done in January, and we do not even have a draft yet. So how 
can something so important to the economy, so important to the 
success of small business, with folks on both sides of the 
aisle saying that small businesses really create jobs in 
America, how is it possible the SEC does not even have a draft 
completed at this point?
    Ms. White. Well, I would go back to--and this is not 
offered by way of excuse, but the rulemaking that the SEC is 
undertaking as a result of Dodd-Frank and the JOBS Act truly is 
daunting. I mean, it truly is.
    On the other hand, I think, as I said in my oral remarks 
and my written testimony as well, these rules need to get out, 
and I need to figure out what work streams, additional work 
streams need to be put in place to do that.
    Senator Merkley. Thank you. Just take my remarks as an 
encouragement that something so important to the economy 
deserves to be near the top of the list.
    I want to turn to Director Cordray. Director, the CFPB is 
the only banking agency with decisions that are subject to the 
veto of its rulemaking powers by another agency. Is that 
correct? The FDIC does not have such a veto. The OCC does not 
have such a veto. The Fed does not have such a veto.
    Mr. Cordray. That is my understanding, Senator, yes.
    Senator Merkley. Thank you. And the CFPB is the only 
banking agency with a capped budget?
    Mr. Cordray. That is correct.
    Senator Merkley. OK. These are extraordinary, then, 
measures related to the CFPB, and yet all we kind of hear about 
is the CFPB actually has fewer restrictions than other banking 
agencies. Why is there so much confusion among some of my 
colleagues on this point?
    Mr. Cordray. I do not know, Senator.
    Senator Merkley. Thank you.
    Something that you have been working very hard on with your 
agency is assisting veterans and seniors and home buyers with 
relevant financial information. Have the veterans, seniors, and 
home buyers found that financial information to be of some use?
    Mr. Cordray. It has been a two-way street. I know that they 
have. There are changes that Assistant Director Petraeus has 
been able to achieve, such as taking account of Permanent 
Change of Station Orders and the kind of disruption that 
creates in the lives of servicemembers and their families, and 
making sure that they have additional protections for those.
    It is also the case that all of those discussions have 
brought back ideas and thoughts to us about how we can better 
deliver more effective protections for the unique circumstances 
of active-duty servicemembers, the strains it puts on their 
family, and as they become veterans and graduate out of the 
service, peculiar needs that they have as consumers. That has 
been a high priority for us. I want to thank the Congress for 
the work they did on the Military Lending Act at the end of 
last year. We are working with the Defense Department and the 
other agencies to implement that appropriately and effectively, 
and we will continue to do that work. It is an important focus 
for the agency.
    Senator Merkley. Well, thank you. I can tell you I am 
hearing nothing but praise back home from veterans' groups and 
senior groups for the type of work that you are doing.
    Another thing that CFPB is doing is a research-driven 
approach on financial literacy. For example, there is a whole 
host of financial literacy programs. Which ones actually work? 
I understand you are researching that. Consumer disclosures, 
what the format for consumer disclosures is actually of use to 
consumers? This is ongoing research. I do not know that you 
have published findings yet. But I think it is a great idea. Do 
you think it is going to have considerable promise in helping 
us understand better how to provide financial literacy or 
provide consumer protections that are at the right place at the 
right moment?
    Mr. Cordray. We are convinced that it will. It has been 
part of the leadership of the Consumer Financial Protection 
Bureau since we first were created that Know Before You Owe is 
an important principle, and that we need to rethink some of the 
assumptions in this field from the past, such as extensive, 
long, protracted disclosures were somehow good for consumers 
when, in fact, they often defeated consumers' abilities to 
understand or their willingness to wade through.
    We have published a proposal, and we will be finalizing 
Know Before You Owe provisions for mortgages later this year. 
We have voluntary efforts underway with industry at the moment 
on credit cards that we are pursuing. And we have Know Before 
You Owe efforts on student loans, which are very important and 
are part of our Paying for College Module, which is now up on 
our Web site and we are going to be promoting heavily over the 
next month as people come to making decisions about higher 
education. They and their families find those difficult and 
confusing at times.
    Senator Merkley. Thank you. My time is up, so I just want 
to note that all of these things are making families stronger, 
more successful. That is incredibly important. We should not be 
measuring the success of the American economy, if you will, 
simply by GDP but by how many families have living-wage jobs 
and how many families have the financial foundations to have a 
quality life. And I think your agency is playing an incredibly 
important role under your leadership in making that happen.
    Thank you.
    Mr. Cordray. I appreciate that, Senator.
    Chairman Johnson. Senator Schumer.
    Senator Schumer. Thank you, Mr. Chairman. I want to thank 
both witnesses. I have no questions for Mr. Cordray. I just 
fully support your nomination, and I do find it anomalous. You 
are in the same boat as some of our people on the D.C. Circuit. 
People are opposing you not because of you but because they do 
not want the body to which you are nominated to function 
properly. And it is something brand new, and I hope it is 
something people will reconsider.
    I have two quick questions for Mary Jo White. First, on 
credit rating agencies, as part of Dodd-Frank there was a 
bipartisan amendment led by Senators Franken, Wicker, and 
myself, and it gave the SEC authority to issue regulations 
rooting out conflicts of interest in credit ratings for 
structured products. The amendment passed on the Senate floor 
with 64 votes. It was bipartisan. Ranking Member Crapo voted 
for it. So did 10 other Republicans.
    So it is now 2\1/2\ years later, and the Commission has not 
used the authority. I understand the Commission is going to be 
hosting a roundtable on the topic in May. It is my hope that 
the Commission will then quickly proceed to a rulemaking as 
Dodd-Frank authorizes you to do.
    Will you make it a priority to exercise the Commission's 
authority under Dodd-Frank to address the conflicts of interest 
in rating of structured products?
    Ms. White. I will, and I think it is an extremely important 
issue.
    Senator Schumer. Good. That is all I can ask.
    Second question: As you know, because you and I have 
discussed this previously, I am very interested in a rule 
proposal before the Commission enhancing the ability of retail 
investors to access proxy materials and actually vote their 
shares. We all know that that does not happen enough. It is 
called the ``investor mailbox proposal'' or the ``enhanced 
brokers' Internet platform.''
    Can you state for the record whether you support this 
proposal?
    Ms. White. There is a tremendous amount of support for it, 
and as we discussed privately, it is a very, very good idea. I 
think the rule, the proposed rule, is still pending, but it is 
an excellent idea.
    Senator Schumer. You would make that a priority?
    Ms. White. I would. I would.
    Senator Schumer. Thank you.
    Mr. Chairman, the old maxim is, ``Quit while you are 
ahead.''
    [Laughter.]
    Chairman Johnson. Thank you, Ms. White and Mr. Cordray, for 
your testimony and for your willingness to serve our Nation. 
Please submit your answers to the written QFRs as soon as 
possible so that we can move your nomination in a timely 
manner.
    This hearing is adjourned.
    [Whereupon, at 11:56 a.m., the hearing was adjourned.]
    [Prepared statements, biographical sketches of nominees, 
responses to written questions, and additional material 
supplied for the record follow:]
                 PREPARED STATEMENT OF RICHARD CORDRAY
    Nominee for Director of the Consumer Financial Protection Bureau
                             March 12, 2013
    Chairman Johnson, Ranking Member Crapo, and Members of the 
Committee, I am honored to be here once again as the nominee to serve 
as the Director of the Consumer Financial Protection Bureau. I am 
grateful to the President for the confidence he has shown in me and for 
giving me the opportunity to continue serving our country in this role. 
If confirmed, I pledge that I will do all I can to carry out and 
enforce the law that Congress passed to protect consumers and help 
consumer financial markets emerge from the devastating financial 
collapse of 2007-2008.
    Over the past 2 years, I have come to understand how your Committee 
exercises great responsibility for managing legislation that affects 
the lives of all Americans. I am in earnest in saying that it is a 
pleasure to appear before you frequently in my current role, and we 
have seen that our relationship can be cooperative and fruitful. If 
confirmed, I look forward to working closely with each of you to pursue 
the common goal that we share: to see that the people and families whom 
we serve are treated fairly in the essential marketplace for consumer 
finance.
    I am also glad once again to have my wife Peggy and my twins Danny 
and Holly here with me today. Like many of you, I commute back and 
forth from a long distance to do this work. My family has been willing 
to make real sacrifices, without complaint, because they believe in 
what I am doing to serve our country. They know how deeply I care for 
them and depend on their steadfast support.
    From childhood, my parents taught me the value of work that seeks 
to improve the lives of others. My Dad, Frank, who just turned 95 last 
month, spent his entire career in programs that served children and 
adults with developmental disabilities. My Mom, Ruth, who died of 
cancer when I was in college, founded the first foster grandparent 
program for the developmentally disabled in Ohio, in addition to doing 
all the many and various things that a mother does to raise three 
rambunctious boys.
    My approach to the role of Director is deeply informed by their 
influence. It is also deeply informed by more than two decades in 
public service. After completing degrees in political theory, 
economics, and law, I worked as an attorney in the private sector with 
individual and business clients. During that time, I was in and out of 
public service, including a brief stint in the Ohio legislature where I 
first became involved in consumer protection law. In 2002, however, my 
life took a different direction when I became the Franklin County 
Treasurer.
    The job required me to develop managerial skills and knowledge 
needed to run a financial office and safeguard public funds. But there 
was also another, very significant dimension of this work. From the 
beginning, I set out to collect millions of dollars from those who were 
evading paying their property taxes, and in doing so to protect all the 
law-abiding taxpayers and businesses who faithfully find a way to meet 
their obligations.
    As I went about that task, I was deeply impressed by the importance 
of consumer finance issues and the growing difficulties they posed for 
families and households. Although I found that many delinquent 
taxpayers were not willing to pay their share until we moved 
aggressively to enforce the law against them, I also found something 
different and noteworthy: Many others did not want to be in trouble, 
and wanted to pay their share, but were in tough circumstances through 
no fault of their own. Sometimes it was because of the loss of a job. 
Other times it was because of a death or serious illness in their 
family or because of a divorce that heaped on the added expense of 
running two households instead of just one.
    Out of these experiences, I developed a resolve to address these 
kinds of financial difficulties that confront our communities. I 
quickly learned that there is no such thing as a one-size-fits-all 
solution as we seek to aid those who want to do the right thing and, 
when necessary, to thwart those who seek to take advantage of others. 
On a variety of issues, we experimented with new approaches, and sought 
partnerships with a wide array of stakeholders. We were successful in 
pushing for a new law requiring high school students to receive 
personal finance education before they could graduate. As we saw the 
foreclosure crisis wreaking havoc in many neighborhoods, we created a 
``Save Our Homes'' task force to bring together businesses and banks, 
nonprofits, and Government, to work together in assisting people who 
were just frantic not to lose their homes.
    Later I became the State Treasurer. In that position, it was my 
primary duty to protect the public's money during the financial crisis, 
a job I fulfilled by steering clear of risky investments. In addition, 
I continued to work on consumer issues. We expanded the ``Save Our 
Homes'' program into a statewide effort, and I cochaired a task force 
to work with mortgage servicers on a voluntary basis to seek fair 
treatment of their customers. The Chief Justice of the Ohio Supreme 
Court and I teamed up to start a foreclosure mediation program in the 
courts. And we implemented the new personal finance education law by 
developing a curriculum and training hundreds of teachers.
    Another major initiative during my time as Treasurer was the 
dramatic expansion of a low-interest loan program designed to help 
small businesses create jobs and to help farmers obtain needed funds on 
an affordable basis. We went out of our way to make this initiative 
available to the community banks that make credit available to 
borrowers and form the backbone of our smaller and medium-sized towns. 
All of this work reinforced for me how creative strategies can be 
beneficial to both consumers and honest businesses.
    Before coming to the Bureau as the chief of Enforcement, I also 
served as the Ohio Attorney General. There, we took on sweepstakes 
scams and other frauds targeting the elderly. We pursued many actions 
against foreclosure rescue scammers who were reaching into the pockets 
of desperate people in an effort to steal what little remained as they 
sought to keep their homes. And where necessary, we pursued those 
mortgage servicers who, despite strong warnings, repeatedly violated 
consumer protection laws.
    As Ohio's Attorney General, I instituted an early warning policy of 
notifying parties and giving them a chance to tell us their side of the 
story before we filed a lawsuit. On a number of occasions, this policy 
allowed us to resolve issues without going to court.
    At every stage of our work, I believed--and I believe today--that 
law enforcement which is evenhanded, fair, and reasonable not only 
protects consumers, but also supports what I call the honest businesses 
in two key ways. First, the businesses that cheat can gain a 
significant and unfair advantage, and law enforcement protects honest 
businesses against the cheaters. Second, keeping the marketplace clean 
ensures consumers are treated fairly and gives them confidence they 
need to participate in that market.
    These are the experiences that brought me in January 2011 to the 
Consumer Financial Protection Bureau. When I became director 1 year 
later, I resolved to do everything in my power to make the Bureau 
accountable to American consumers, to American businesses, and to the 
Congress.
    As the economy recovers, we want people to know they now have a new 
agency standing on their side, looking out for their interests, to help 
restore their confidence in the consumer financial marketplace. So far, 
even though our work is still in its early stages, we have been busy 
addressing some of the most critical problems.
    For the largest single consumer financial market--the mortgage 
market, worth trillions of dollars--we have adopted new rules to ensure 
that the excessive and irresponsible practices that helped precipitate 
our Nation's financial calamity cannot be repeated. These rules protect 
people shopping for a loan from being saddled with something they 
cannot afford. They protect existing homeowners from getting the 
runaround and being hit with surprises by their mortgage servicers. 
And, critically, they help struggling homeowners fighting to be 
responsible borrowers, pay back their mortgages, and avoid foreclosure.
    In the credit card market, we are implementing and overseeing the 
extensive positive changes that Congress made in the CARD Act. For 
consumers who have been deceived by credit card companies, we have 
worked closely with our fellow regulators to put $425 million back in 
consumer's pockets, with more to come.
    In the student loan market, we have teamed up with the Department 
of Education to create products like the Financial Aid Shopping Sheet, 
which helps students understand how best to manage increasing levels of 
student loan debt.
    We also are developing and delivering powerful new tools for all 
consumers. For consumers who have felt disempowered by the convoluted 
rhetoric around many financial products, we have harnessed the power of 
technology to deliver clear information through our ``Ask CFPB'' tool, 
which is an interactive database of nearly 1,000 answers to common 
consumer questions.
    Perhaps the most direct example of addressing problems in the 
consumer finance markets is our consumer response function. To date, we 
have already handled more than 130,000 complaints from people in every 
State around the country. Consumers have contacted us for help 
resolving specific problems they have experienced with consumer 
financial products and services, ranging from improper charges on 
credit cards to mortgage payments that were wrongly applied. Many of 
these complaints have been referred to us by you and your colleagues, 
and we thank you for that. Through our consumer response operation, we 
have helped return millions of dollars to consumers and have addressed 
many problems that had been frustrating your constituents for months or 
even years.
    We have begun to fulfill our pledge of transparency around the work 
we are engaged in. We are presenting information to the public about 
our Consumer Complaint Database, which sheds new light on where 
customer service is falling short and how it can be improved. And we 
are building a National Mortgage Database that will allow researchers 
to track the long-term performance of this critical marketplace for 
consumer credit in ways not possible before.
    We are also experimenting with new methods of broadening public 
participation and heightening our accessibility in our rulemaking 
process. We have embarked on unprecedented efforts to assist industry 
in implementing our new rules. Our goal is to reduce the compliance 
burdens of implementation and help us better understand how to write 
practical rules that deliver value for consumers.
    Along with these initiatives, we are responding to an explicit 
challenge that Congress laid down for us by attacking the unique 
problems that confront special populations of consumers. In addition to 
our work with students, Assistant Director Skip Humphrey and his team 
are working to help older Americans get sound information and advice 
about their retirement finances.
    We have also become fierce advocates for servicemembers, veterans, 
and their families. Assistant Director Holly Petraeus and her dedicated 
team have helped secure changes in mortgage programs to take account of 
permanent-change-of-station orders. They have also empowered 
servicemembers and veterans to make more informed decisions about how 
to use their benefits under the GI Bill for the 21st Century. And they 
have highlighted how consumer debt can adversely affect security 
clearances.
    So these are the kinds of issues that the Consumer Bureau is 
already addressing on behalf of the millions of American consumers from 
coast to coast, reflecting the full diversity of this great country. Of 
course, there is much more to be done in each of these areas, and we 
are determined to make more progress. Our essential work is to serve 
and protect consumers--our mothers and fathers, sisters and brothers, 
sons and daughters--all the people of this country who rely every day 
on the markets for consumer finance. They deserve a fair shake, and 
they deserve to have this agency standing on their side to make sure 
they are treated fairly.
    Mr. Chairman and Members of the Committee, thank you for your time 
and your consideration today. I will be glad to answer your questions.




















                  PREPARED STATEMENT OF MARY JO WHITE
      Nominee for Chair of the Securities and Exchange Commission
                             March 12, 2013
    Chairman Johnson, Ranking Member Crapo, and Members of the 
Committee, it is my privilege to appear before you today as President 
Obama's nominee to be the 31st Chair of the Securities and Exchange 
Commission.
    There is no higher calling than public service. As the United 
States Attorney for the Southern District of New York for almost 9 
years, I worked very hard on behalf of the American people 
investigating, prosecuting, and punishing those who committed crimes. 
From white collar criminals to terrorists--regardless of the complexity 
of the case or the identity of the defendant--we always strove to do 
the right thing and to vigorously enforce the law. Today, I am honored 
by the prospect of potentially returning to public service as the Chair 
of the SEC to help carry out its essential mission.
    While I served as United States Attorney, our office worked closely 
with the SEC investigating and prosecuting violations of the Federal 
securities laws by both companies and individuals. Through that 
experience, I became a strong admirer of the expertise, independence, 
and commitment of the Commission and its staff. I fully appreciate the 
critical role the SEC plays as the primary regulator of our capital 
markets and as a strong advocate on behalf of investors. Today, in the 
wake of the financial crisis and in the midst of implementing the 
substantial legislative mandates of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (Dodd-Frank Act) and the Jumpstart Our 
Business Startups Act (JOBS Act), the SEC's importance and scope of 
responsibilities are greater than ever.
    If confirmed, I will vigorously embrace and carry out the SEC's 
mission to protect investors, maintain fair, orderly, and efficient 
markets, and facilitate capital formation. The SEC's mission has a tri-
partite mandate, but the component parts should not be viewed as in 
conflict with each other. It is the responsibility of the Chair and the 
Commission to take the long-term view, balance the objectives when 
necessary, and seek to fulfill all parts of its critical mission. Then, 
our markets can thrive and investors will be protected and benefit.
    As was true when Chairman Schapiro was first before this Committee 
in 2009, this too is a crucial time for the SEC. Although the worst of 
the recent financial crisis may be behind us, none of us can be 
complacent--least of all the SEC, which has faced a number of its own 
challenges. Under the leadership of Chairman Schapiro and Chairman 
Walter, the SEC has made significant strides to strengthen its 
examination and enforcement functions, improve its capacity to assess 
risks, and enhance its technology. Our markets, however, are 
continuously evolving, and the technology of today is most certainly 
not the technology of tomorrow. Fast-paced and constantly changing 
markets require constant monitoring and analysis, and when issues are 
identified, the investing public deserves appropriate and timely 
regulatory and enforcement responses.
    I am acutely aware that the position of Chair of the SEC carries 
with it heavy responsibilities and many challenges. But I commit to 
this Committee and the American public that, if confirmed, I will work 
tirelessly and do everything in my power to effectively lead the SEC in 
fulfilling its mission. Let me very briefly highlight a few early 
priorities were I to be confirmed.
    First, I would work with the staff and my fellow Commissioners to 
finish, in as timely and smart a way as possible, the rulemaking 
mandates contained in the Dodd-Frank Act and JOBS Act. The SEC needs to 
get the rules right, but it also needs to get them done. To complete 
these legislative mandates expeditiously must be an immediate 
imperative for the SEC.
    With respect to rulemaking, rigorous economic analysis is important 
and should inform and guide the decisions that are made. Although 
challenging--particularly in the quantification of benefits--in my 
view, the SEC should seek to assess, from the outset, the economic 
impacts of its contemplated rulemaking. Such transparent and robust 
analysis, including consideration of the costs and benefits, will help 
ensure that effective and optimal solutions are achieved without 
unnecessary burdens or competitive harm. If confirmed, I would continue 
the efforts of the Commission to ensure that the SEC performs robust 
analysis in connection with its rules and in a manner that does not 
undermine the SEC's ability to carry out its mandate to protect 
investors and our capital markets.
    Second, if confirmed, it will be a high priority throughout my 
tenure to further strengthen the enforcement function of the SEC--it 
must be fair, but it also must be bold and unrelenting. Investors and 
all market participants need to know that the playing field of our 
markets is level and that all wrongdoers--individual and institutional, 
of whatever position or size--will be aggressively and successfully 
pursued by the SEC. Strong enforcement is necessary for investor 
confidence and is essential to the integrity of our financial markets. 
Proceeding aggressively against wrongdoers is not only the right thing 
to do, but it also will serve to deter the sharp and unlawful practices 
of others who must be made to think twice--and stop in their tracks--
rather than risk discovery, pursuit, and punishment by the SEC.
    Third, the SEC needs to be in a position to fully understand all 
aspects of today's high-speed, high-tech, and dispersed marketplace so 
that it can be wisely and optimally regulated, which means without 
undue cost and without undermining its vitality. High frequency 
trading, complex trading algorithms, dark pools, and intricate new 
order types raise many questions and concerns. Are they problematic for 
retail and noninstitutional investors? Do they result in unnecessary 
volatility, or create an uneven playing field? Or do these modern-day 
features bring benefits such as efficiency, price reduction, and 
healthy competition to our markets? Do they do all of these things? The 
experts and studies to date have not been consistent or definitive in 
their observations and findings about whether and to what extent harm 
is caused by the current market structure and practices. There must be 
a sense of urgency brought to addressing these issues to understand 
their impact on investors and the quality of our markets so that the 
appropriate regulatory responses can be made. If confirmed, I will work 
not only to ensure that the SEC has the cutting-edge technology and 
expertise necessary to enable it to keep pace with the markets and its 
responsibilities to monitor, regulate, and enforce the securities laws, 
but also to see around the corner and anticipate issues.
    There are, of course, many other important areas within the 
jurisdiction of the Commission: from money market funds to private fund 
advisers, from credit rating agencies to clearing agencies, from the 
appropriate standards and regulations governing the conduct of broker-
dealers and investment advisers when providing investment advice to 
retail customers to how to make public issuer disclosures more 
meaningful and understandable to investors, to name just a few. If 
confirmed, I would focus on these and the many other challenges facing 
the SEC.
    In conclusion, it would be my privilege and honor to work with the 
men and women of the Commission and this Committee to help carry out 
the SEC's mission. Thank you for considering me to serve in this 
capacity and for the opportunity to appear before you today. I would be 
happy to answer your questions.


































        RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO
                      FROM RICHARD CORDRAY

Q.1. For most of the rulemakings that the CFPB proposed since 
its inception, it claimed not to have sufficient data to 
conduct a thorough cost-benefit analysis. Is the CFPB spending 
enough money on its research and market analysis? If so, what 
else can the CFPB do to ensure that it has sufficient 
information to conduct a thorough cost-benefit analysis, as 
required by law?

A.1. As specifically required by the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Dodd-Frank Act), the CFPB 
has conducted analyses of the benefits, costs, and particular 
impacts of its rulemakings with the information that has been 
reasonably available to the CFPB. These analyses have been 
thorough and generally have been published for public comment 
before being finalized so that interested parties could submit 
additional information to the CFPB to enhance the analyses. 
When members of the public have submitted additional 
information, the Bureau has considered that information on the 
record in finalizing its analysis.
    The CFPB would prefer to have more data as opposed to less 
when analyzing regulatory impacts, but there are significant 
constraints on data availability. Where feasible and 
appropriate the CFPB has acquired data from third parties that 
have already collected and compiled the data. But often data 
are not available for acquisition, and undertaking a new data 
collection could impose costs on private parties. The CFPB 
determines on a case-by-case basis whether the potential costs 
of a collection are likely to be justified by the potential 
benefits. The CFPB also has to consider whether the data can be 
acquired or collected in time to meet statutory deadlines, 
which is an important constraint. Certain collections cannot 
even be commenced (let alone completed) until after a months-
long process to obtain approval for the collection under the 
Paperwork Reduction Act. Nevertheless, the Bureau will continue 
to work to ensure that it has sufficient information to conduct 
the analyses required by law.

Q.2. CFPB's mortgage servicing rule amended RESPA to expanded 
mortgage servicers' obligations. Since RESPA has a private 
right of action, consumers will now have a Federal private 
right of action against a servicer for any alleged failure to 
engage in proper loss mitigation. Did the CFPB conduct an 
economic analysis regarding whether and if so, how much, this 
rule will increase the cost of mortgages by exposing banks to 
more lawsuits?

A.2. The Bureau considered the advantages and disadvantages of 
the private right of action associated with the loss mitigation 
procedures and with certain other amendments to Regulation X in 
preparing the final rule. In that regard, the Bureau has 
multiple authorities under RESPA, some of which are subject to 
private causes of action and some of which are not, and the 
Bureau carefully calibrated the RESPA servicing rule with this 
in mind. Accordingly, with respect to loss mitigation, private 
causes of action exist only for specified provisions of the 
final rule, generally involving violations of specified 
procedural requirements and timelines relating to loss 
mitigation. Broader requirements for servicers to maintain 
certain policies and procedures relating to loss mitigation are 
not privately enforceable. Thus, once the final rule is 
effective, servicers will be subject to a private right of 
action under RESPA for failure to comply with certain 
procedural requirements with respect to evaluations for loss 
mitigation options--for instance, failing to evaluate a 
complete loss mitigation application within the timelines 
specified by the rule. However, servicers will not be subject 
to a private right of action under RESPA for failure to comply 
with investor guidelines to achieve loss mitigation results. 
The Bureau was concerned that such an approach might cause 
investors to stop offering loss mitigation options altogether 
for fear of litigation and delays in foreclosure timelines. 
Requirements that servicers maintain reasonable policies and 
procedures to evaluate loss mitigation options pursuant to 
investor guidelines are subject to enforcement by the 
appropriate regulator.
    Regulatory analyses generally assume that firms comply 
fully with a proposed rule and therefore incur costs associated 
with such compliance. Any other approach would require the 
Bureau to reduce the costs of compliance by a specified factor. 
In addition, assessing the potential costs of civil liability 
would require the Bureau to determine the probability that 
firms would under-comply with the loss mitigation provisions in 
questions and face resulting lawsuits, as well as the 
probability that firms would fully comply but nevertheless face 
nonmeritorious litigation. The analysis would involve further 
complexity given that compliance with the provisions of the 
final rule could also benefit firms by reducing other types of 
lawsuits asserting violations of existing legal requirements. 
For example, compliance with the general servicing policies, 
procedures, and requirements may reduce lawsuits asserting that 
servicers have failed to comply with applicable law with 
respect to sworn affidavits and notarized documents in 
connection with foreclosure proceedings. Similarly, compliance 
with the loss mitigation procedures may reduce lawsuits 
asserting claims based on a servicer conducting a foreclosure 
sale when a borrower has accepted an offer of a loss mitigation 
option and is performing pursuant to such option. Data that 
would permit the estimation of these various probabilities was 
not reasonably available to the Bureau. The Bureau intends to 
monitor the implementation of the servicing rules and to ensure 
that the rules achieve the intended consequences of 
guaranteeing borrowers an evaluation for a loss mitigation 
option where appropriate.

Q.3. Currently, the CFPB is collecting account-level data from 
payment card issuers. It is my understanding that the request 
covers millions of individuals' credit card accounts and that 
the information must be supplied to the CFPB on a monthly 
basis. The CFPB is requesting that the information be sent to 
the agency with personally identifying information about 
consumers. Please answer the following questions with regard to 
this collection of individual consumer transactions:
    What is the purpose of this data collection?

A.3. The CFPB is not collecting any personally identifiable 
information about any consumers as part of its credit card data 
collection effort. The data we are collecting as part of our 
ongoing supervisory activities will help the CFPB to assess and 
examine compliance with Federal consumer financial protection 
laws and risk to consumers in the credit card marketplace.

Q.4. How many accounts has the CFPB followed and how many is it 
currently following? Does it change the consumer accounts it 
maintains records for after a certain period of time or track 
certain account records continuously?

A.4. The CFPB is obtaining information from a number of credit 
card issuers on a monthly basis on those issuers' accounts. 
Information about the number of accounts on which the CFPB 
receives data is confidential supervisory information.

Q.5. Why is it necessary to demand all consumer account data 
instead of an anonymous representative sample?

A.5. The data are anonymous and cannot be used to identify any 
individual consumer. Identifying a sample that would be 
representative of an issuer's portfolio would be burdensome for 
the issuer, which would need to pull that sample each month and 
then go through further procedures and analyses to compare 
those accounts to its overall portfolio to assure that the 
sample was representative.

Q.6. What does the CFPB intend to do with it?

A.6. The CFPB uses the data to inform its supervisory processes 
and to monitor risks to consumers. These data help the CFPB to 
analyze and benchmark credit card issuers across our 
supervision work. The CFPB also uses the data to assess and 
examine compliance with Federal consumer financial protection 
laws.

Q.7. Has the agency set a time period for retaining this data, 
and will the individual consumer transaction information be 
purged from all Federal records after this retention period?

A.7. The data exclude personally identifiable information about 
individual consumers. There is no set time period for retention 
of the data.

Q.8. Does the CFPB share this information with any outside 
third parties? Are these outside third parties under contract 
with the CFPB? With whom does the CFPB intend to share it in 
the future?

A.8. The CFPB has retained a data services vendor that manages 
the data on the CFPB's behalf, and that vendor is under 
contract with the CFPB and is subject to all Federal data 
protection rules and requirements. The CFPB does not otherwise 
share this information with any nongovernmental outside third 
parties.

Q.9. Does the CFPB provide this data--in whole, part, or 
summary--to any other Federal agency or entity? If so, please 
describe how this data is requested and how it is shared.

A.9. The Bureau generally shares data with prudential 
regulators in accordance with the Supervisory Data Sharing 
Memorandum of Understanding between the CFPB and the prudential 
regulators. Any sharing of these loan-level data would comply 
with those agreements.

Q.10. How much does the agency spend annually on this data 
collection?

A.10. The Bureau spends approximately $3 million per year on 
this data collection.

Q.11. With respect to the Paperwork Reduction Act and other 
laws, OMB has set forth certain parameters for surveys and data 
collection. Please submit the OMB approval document for this 
data collection effort.

A.11. This data collection is not subject to PRA requirements.

Q.12. Do individuals and their families have the opportunity to 
opt out of this Federal agency data collection?

A.12. Individuals and families are not identified in this data 
collection, and individual consumers and their families are not 
participants in this data collection. Title X of the Dodd-Frank 
Act authorizes the Bureau to supervise certain consumer 
financial services companies to protect consumers. Some of the 
consumer financial services companies under CFPB supervision 
are the participants in this data collection, and they may not 
opt out of supervision activities.

Q.13. Do you anticipate that the CFPB will engage in rulemaking 
as a result of the data collection?

A.13. The CFPB uses the data to inform CFPB analysis of risks 
to consumers in the credit card marketplace and risks to the 
market. Analysis of the data may lead the CFPB to identify 
areas where appropriate regulations could improve the 
functioning of the market, and may support the CFPB's efforts 
to reduce outdated, unnecessary, or unduly burdensome 
regulations. Thus, this information may be used to inform 
future rulemaking activities as appropriate.

Q.14. I understand that this account-level data is 
comprehensive of each payment card issuer that furnishes data. 
How is the CFPB ensuring that the consumer information it 
collects is kept secure; to date, has the CFPB suffered any 
breaches of data, and has any data breach reached consumer 
information?

A.14. The data that the Bureau solicits and collects from 
issuers exclude personally identifiable information about the 
individual consumers to whom the data pertains. Accordingly, no 
breach of personally identifiable information by the CFPB is 
possible. For example, the names of individual consumers or 
their contact information, Social Security numbers, and credit 
card account numbers are not included in the data. Because the 
data is not personally identifiable, it also does not 
constitute a system of records that is subject to the 
requirements of the Privacy Act of 1974, 5 U.S.C. 552a. 
Nevertheless, all such data are subject to the protections 
given to information that the CFPB obtains through its 
supervisory authorities. \1\ The data are managed according to 
IT security requirements that comply with Federal laws, 
policies, and procedures.
---------------------------------------------------------------------------
     \1\ These include protections set forth in the Act; the Bureau's 
confidentiality regulations at 12 CFR 1070.40 et seq.; Exemption 8 of 
the Freedom of Information Act, 5 U.S.C. 552(b)(8); and CFPB Bulletin 
12-01, which is viewable online at http://www.consumerfinance.gov/wp-
content/uploads/2012/01/GC_bulletin_12-01.pdf.
---------------------------------------------------------------------------
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
             SENATOR MENENDEZ FROM RICHARD CORDRAY

Q.1. I have long been focusing my attention on the inability of 
New Jerseyans and tens of millions of Americans to gain access 
to capital and begin to build their credit worthiness. At last 
month's Consumer Advisory Board meeting, you spent a good 
portion of your time discussing this challenge. In fact, you 
said, ``There is an obvious demand for short-term credit 
products, which can be helpful for consumers who use them 
responsibly and which are structured to facilitate repayment. 
We want to make sure that consumers can get the credit they 
need without jeopardizing or undermining their finances. Debt 
traps should not be part of their financial futures.'' Based on 
your comments, and due to the fact that under Title 12 of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act, the 
CFPB is mandated to consider resources and foster financial 
innovation, what initiatives do you think your agency should 
pursue to increase access to credit for the millions of 
Americans who are currently unable to receive emergency loans? 
I think it is important to strike a balance between extending 
credit to consumers, while also implementing important consumer 
protections. There is certainly a demand for these products, 
but the American people need better options and protections. 
Are there ways the CFPB could regulate this industry while 
still keeping a product that's ``helpful for consumers who use 
them responsibly?''

A.1. While the CFPB is committed to understanding what, if any, 
risks of consumer harms are present in the small-dollar credit 
market and using available tools to mitigate those harms, we 
agree that it is important to balance the sometimes competing 
considerations of access and consumer protections in the 
provision of small dollar credit. In fact, the Dodd-Frank Act 
requires that when the CFPB considers rulemaking that we 
``consider the potential benefits and costs to consumers and 
covered persons, including the potential reduction of access by 
consumers to consumer financial products or services'' that may 
result.
    The CFPB also recognizes the need to learn about the 
potential for innovation in financial products and services. We 
have formalized our efforts with an initiative called Project 
Catalyst, which was launched at an event in Silicon Valley last 
November. This event included a roundtable that specifically 
focused on innovations in small dollar lending. Following that 
launch, we have established ongoing outreach and formal 
structures in which we will both learn from innovators and 
facilitate testing of certain innovations in the marketplace. 
The findings from these activities may help further inform any 
future policymaking on small-dollar lending.

Q.2. The lack of access to capital largely affects minorities 
and chronically underserved communities. There is a study on 
this issue by the CFPB that I am waiting to be completed, and I 
look forward to reading once it is completed. As I have worked 
on payday lending legislation over the years, one question 
continuously comes up but is never answered is: if payday 
lending is further curtailed, what products will take their 
place in communities where people have not built strong credit 
backgrounds, but need short-term credit? Is this something the 
CFPB is reviewing in its study? What are the Bureau's 
recommendations on this issue?

A.2. The CFPB recognizes that there is demand by consumers for 
credit that is available in small increments, including those 
consumers who may not qualify for products such as credit cards 
or signature loans. The CFPB is currently undertaking data-
driven analysis to determine the patterns of use undertaken by 
consumers using payday loans offered by nonbanks and deposit 
advances offered by certain depository institutions, and the 
outcomes of differing patterns of use. We are particularly 
concerned with loans intended for short-term, occasional use 
being used in a sustained, long-term way, particularly by 
households that are not using these products to deal with a 
specific financial emergency, but are instead turning to payday 
loans because their expenses regularly outstrip their income.
    As part of this analysis we are looking at a variety of 
models by which small-dollar credit is currently offered to 
otherwise credit-constrained households. This includes 
determining which product structures and features may curtail 
sustained use and negative outcomes, as well as the feasibility 
of implementation. Part of this analysis can include looking at 
the different methods States have employed to curtail sustained 
use of payday loan products, as well as the variety of safety 
features that depository institutions currently impose on 
deposit advances.

Q.3. The CFPB adopted new rules related to mortgage servicing 
standards in January 2013. I have long advocated for increasing 
consumer protections on borrowers before foreclosures, 
encouraging loan modifications, eliminating dual tracking, 
placing limits on foreclosure fees, and creating an appeals 
process for those denied loan modifications as well as a 
mediation program. Can you give an update on these rules and 
when we expect them to go into effect? Are lenders currently 
working to implement these standards now? What actions have 
mortgage servicers taken since the rules were issued in January 
2013?

A.3. The Bureau's January 2013 servicing rules take effect on 
January 10, 2014. The rules address a number of the issues that 
you reference. For instance, they generally require servicers 
to make good-faith efforts to contact borrowers who are 
experiencing serious trouble with their loans and to provide 
information regarding foreclosure alternatives. Servicers 
generally are required to review applications for loan 
modifications or other loss mitigation options received by 
specified deadlines promptly for completeness, and to work with 
borrowers to obtain any missing information. For applications 
received by specified deadlines, the rules set certain 
deadlines for servicers to respond, require notification to 
borrowers of the results, and provide an opportunity to appeal 
denials. The final rule also prohibits a servicer from making 
the first notice or filing required for a foreclosure process 
until a mortgage loan account is more than 120 days delinquent, 
and if a borrower submits a complete application for a loss 
mitigation option before a servicer has made the first filing 
required for a foreclosure process, a servicer may not start 
the foreclosure process unless certain requirements are met. 
Finally, servicers are required to maintain policies and 
procedures concerning various loss mitigation processes, 
including communications with both consumers and loan owners/
investors of the loans and proper evaluation of applications 
according to the criteria established by owners/investors. We 
believe that the combined rules will help to reduce avoidable 
foreclosures and help to address concerns about ``dual 
tracking.''
    Based on requests for guidance received from servicers, the 
Bureau is aware that servicers are already working on plans to 
implement the new requirements. The Bureau has a multifaceted 
regulatory implementation initiative underway to assist 
industry in implementing these and the other new mortgage rules 
that the Bureau issued to implement title XIV of the Dodd-Frank 
Act. The Bureau's initiative includes plans for several updates 
to the regulatory text and official interpretations over the 
coming year, the first of which will be issued this spring. It 
also includes publication of small business compliance guides 
(with companion video versions) for the new rules, updated 
examination procedures, and compliance ``readiness'' guides for 
the new rules. In addition, the Bureau will be working with 
other regulatory agencies, trade associations, industry service 
providers, and some individual lending and servicing 
organizations to track industry implementation efforts. Through 
this engagement, the Bureau expects to learn more about 
implementation challenges and provide support to help companies 
implement the new requirements more efficiently. Further, the 
Bureau issued a supervisory bulletin regarding mortgage 
servicing transfers on February 11, 2013 (CFPB Bulletin 2013-
01). Among other things, that bulletin advises servicers about 
existing consumer protection requirements and provisions in the 
mortgage servicing rules that specifically relate to mortgage 
servicing transfers. Notably, the Bureau's new mortgage 
servicing rules are backed by supervision and enforcement 
authority that encompass both large banks and nonbanks that 
service mortgage loans.

Q.4. Consumers' use of prepaid cards has exploded in the past 
few years, especially among underbanked consumers. Since credit 
cards, debit cards, and gift cards have all been regulated to 
some degree, prepaid cards remain one of the few largely 
unregulated products out there. Some fees on these cards are 
undisclosed and others are unreasonable, and they don't always 
come with FDIC insurance or protection against theft or loss 
for the consumer. What progress has the CFPB made in analyzing 
this issue, and when do you anticipate moving forward on it?

A.4. The CFPB issued an Advance Notice of Proposed Rulemaking 
(ANPR) on General Purpose Reloadable (GPR) prepaid cards in May 
2012. The ANPR reflects the Bureau's interest in learning more 
about this product, including its costs, benefits, and risks to 
consumers, and expressed the Bureau's intention to take 
regulatory action to extend the Regulation E protections to GPR 
cards. Our focus is on safety and transparency. Our ANPR 
generated approximately 250 comments, and we have combed 
through that feedback. We are currently in the process of using 
all the information we received to determine the scope of our 
rulemaking in this market. We do not yet have firm time frames 
for rulemaking in the GPR market, though activity will be under 
way later this year.

Q.5. The CFPB's Office of Minority and Women Inclusion (OMWI) 
is now up and running. The reason for creating these offices 
was that there just is not enough minority representation 
within our financial regulators. What will you do to increase 
the number of minorities and women, especially in management 
positions and as contractors, at the CFPB?

A.5. I agree that one of the primary roles of OMWI is to 
enhance diversity at the Bureau. As a newly formed agency, 
we've been able to build diversity into our work early on. 
While our employment of minorities and women at the Bureau 
exceeds the average for other FIRREA agencies, we believe we 
can further enhance diversity at the Bureau at all levels of 
the organization, including senior leadership positions. We 
have and will continue to do this by doing the following:

    Collaborating with the Office of Human Capital on 
        building and continually enhancing a comprehensive 
        workforce planning and development strategy that 
        includes training and developmental opportunities, 
        mentorship programs, rotations, lateral moves, and 
        detail opportunities that enhance the skills and key 
        competencies necessary for advancement and success at 
        the CFPB.

    Conducting training for employees and supervisors 
        in an effort to expand awareness, knowledge, and 
        cultural competencies that aid in the understanding and 
        management of a diverse workforce and its value to the 
        CFPB mission.

    Collaborating with division heads to promote 
        policies, practices and procedures to ensure that all 
        employees, including women and minorities, are being 
        developed to attain their maximum potential.

    Supporting the development of and facilitating a 
        framework for a diversity council to report to 
        management and discuss issues and concerns regarding 
        diversity and inclusion.

    Increasing outreach to and recruitment/hiring of 
        minority and women candidates by recruiting at 
        minority-serving institutions and women's colleges and 
        universities (e.g., Historically Black Colleges and 
        Universities and Hispanic-Serving Institutions).

    Utilizing the networks of current employees to 
        promote the mission of the Bureau and advertise 
        upcoming positions.

    Participating in targeted internship programs, 
        including the one operated by the Hispanic Association 
        of Colleges and Universities.

    Conducting specific diversity and inclusion 
        training for all personnel engaging in the hiring 
        process.

    Evaluating and assessing the diversity of the 
        candidate pool at various decision points and providing 
        feedback to hiring authorities.

    Partnering with divisions to develop diversity 
        initiatives associated with the work of the CFPB.

Q.6. What role does your OMWI play at the CFPB? Is it a part of 
the decision-making process when hiring employees and 
contractors? How often do you meet with Stuart Ishimaru (head 
of CFPB OMWI)? Does the CFPB's procurement office meet with the 
CFPB's OMWI?

A.6. The OMWI plays a central role in the operations of the 
Bureau. The Director of the OMWI participates in meetings of 
the Operations Advisory Committee and the Policy Committee, two 
of the primary governance mechanisms for the Bureau, addressing 
the full breadth of the Bureau's activities. The OMWI plays a 
consultative role in the hiring process, providing advice and 
counsel to hiring managers and the Office of Human Capital.
    I meet regularly with Stuart Ishimaru and he has direct 
access to me whenever he needs to speak with me. In addition, 
Stuart meets weekly with the Chief Operations Officer of the 
Bureau. The OMWI is housed in the Operations Division, which 
also houses the Office of Human Capital and the Procurement 
Office, both key partners of the OMWI under Section 342 of the 
Dodd-Frank Act. This placement facilitates cooperation and 
collaboration between these offices. The Procurement Office and 
the OMWI meet regularly, and are currently planning a number of 
joint activities to support our work with minority and women-
owned small businesses.

Q.7. Your OMWI has had a director for almost a year now, so can 
you provide a progress report? How many Hispanics, African 
Americans, women, and/or minorities are working at the CFPB? 
How about in mid-level to senior-level management positions?

A.7. Attached is a chart providing responses to the questions 
and data on employees at the higher pay bands at the Bureau as 
of February 23, 2013.


    Of the nine most senior positions (Director, Deputy 
Director, Chief of Staff, and six Associate Directors) at the 
Bureau in 2012, three minorities served in three positions and 
three women served in four positions (the General Counsel was 
previously Chief of Staff). At the next highest level, roughly 
half of the Assistant Directors are minorities and/or women. 
Minorities and women are represented in all six Divisions of 
the Bureau, and together lead roughly half of the offices in 
the Divisions.

Q.8. You've said your OMWI will develop standards for equal 
employment opportunity and standards for the racial, ethnic, 
and gender diversity of the workforce and senior management of 
the agency. Can you provide an update on the creation of those 
standards? What are the standards and how were they formulated?

A.8. The OMWI is required under Section 342 of the Dodd-Frank 
Act to create these standards, and is in the process of doing 
so. Recently, the Bureau created a separate Office of Equal 
Employment Opportunity to carry out the counseling, 
investigative, and enforcement functions required by various 
civil rights laws. The OMWI is working with the EEO Office and 
with the Office of Human Capital to develop standards for equal 
employment opportunity and for racial, ethnic, and gender 
diversity.
    The Bureau has established workforce planning processes and 
organizational structures allowing for more precise 
identification of position needs and successful performance 
attributes. We have identified and intend to utilize a variety 
of broad recruiting methods to capture a diverse pool of 
qualified candidates to be considered for employment at the 
Bureau.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR VITTER
                      FROM RICHARD CORDRAY

Q.1. The CFPB can write rules and enforce against unfair, 
deceptive, and abusive acts or practices. The Federal Trade 
Commission (FTC) has spent decades documenting and defining 
``unfair'' and ``deceptive'' through policy statements and 
guidance, so companies have an idea of what the standards mean. 
This is important because honest businesses want to treat their 
customers fairly and they build compliance programs based with 
these standards in mind to ensure they understand and abide by 
the rules of the road. ``Abusive'' is defined only in a cursory 
way by the Dodd-Frank Act, and the CFPB has not taken any steps 
to help companies understand what the standard means, and in 
particular, how it relates to unfairness and deception. In 
fact, the Bureau has said that abusive will be defined through 
enforcement action rather through regulation, guidance, or some 
other transparent means. Fifty-one State Attorneys General can 
also enforce against ``abusive'' making it all the more 
important the CFPB take steps to ensure the standard is 
consistently applied. For these reasons, Dodd-Frank 
contemplated the Bureau would need to undertake a rulemaking to 
establish a definition for abusive--and perhaps even for unfair 
and deceptive. Given the uncertainty created by this new term 
for the business community, and the likelihood that multiple 
interpretations will develop among the States, will you commit 
to initiating a transparent process to take public input and 
define ``abusive'' before the Bureau brings any kind or 
enforcement action using this authority?

A.1. In Section 1031(d) of the Dodd-Frank Act, Congress clearly 
and expressly limited the meaning of ``abusive'' acts or 
practices to those that:

  1.  materially interfere with the ability of a consumer to 
        understand a term or condition of a consumer financial 
        product or service; or

  2.  take unreasonable advantage of a consumer's:

    a.  lack of understanding of the material risks, costs, or 
        conditions of the product or service;

    b.  inability to protect his or her interests in selecting 
        or using a consumer financial product or service; or

    c.  reasonable reliance on a covered person to act in the 
        consumer's interests.

    The Bureau will be vigilant in obeying the law enacted by 
Congress and in observing and adhering to the limits of its 
authority under this provision. Its application will depend on 
specific facts and circumstances. Note also that if the Bureau 
were to undertake a rulemaking to implement the abusive 
standard that would allow 51 State Attorneys General to enforce 
that rule against federally chartered depository institutions, 
which cannot be done under the statute itself.

Q.2. The Federal Trade Commission has a widely admired 
automated complaint database, but you decided to expend funds 
to create your own database rather than using the FTC's 
database architecture. Why did you make that decision and how 
much has it cost to create your own database?

A.2. The Dodd-Frank Act instructed the CFPB to ``establish a 
unit whose functions shall include establishing a single, toll-
free telephone number, a Web site, and a database or utilizing 
an existing database to facilitate the centralized collection 
of, monitoring of, and response to consumer complaints 
regarding consumer financial products or services.'' In 
preparing to launch its Office of Consumer Response to serve 
these and other related functions, the CFPB researched and 
considered the complaint handling models, case management 
systems, and related databases of the prudential Federal 
regulators and the Federal Trade Commission.
    Given the specific complaint-handling requirements laid out 
in the Dodd-Frank Act, the Bureau was required to adopt an 
individual-level complaint operating model that required a case 
management system that is not congruent with the FTC's 
``complaint database.'' \2\ The Bureau's complaint-handling 
operational model and case management system allow it to 
collect, monitor, and respond to complaints for a wide range of 
consumer financial products and services, to ``coordinate with 
the Federal Trade Commission or other Federal agencies to route 
complaints to such agencies,'' to collect responses from 
companies to complaints, to allow for consumer review of those 
responses through a secure Web portal, to conduct individual 
investigations of consumer complaints, and to facilitate 
necessary record keeping in order to meet its Congressional 
reporting requirements. Nonetheless, for greater efficiency and 
sharing of information, the CFPB's case management system uses 
an application programming interface to feed consumer 
complaints directly into the FTC's complaint database (known as 
``Consumer Sentinel'') also, which makes those complaints 
available to civil and criminal law enforcement authorities.
---------------------------------------------------------------------------
     \2\ According to FTC's Complaint Assistant, 
www.ftccomplaintassistant.gov, ``The FTC enters all complaints it 
receives into Consumer Sentinel, a secure online database that is used 
by thousands of civil and criminal law enforcement authorities 
worldwide. The FTC does not resolve individual consumer complaints.''
---------------------------------------------------------------------------
    Creating a case management system that integrates the 
aforementioned functionality to support the Bureau's complaint-
handling model consistent with the requirements of Dodd-Frank 
has cost approximately $8 million to date, including the 
database.

Q.3. The CFPB established a legal safe harbor for certain 
Qualified Mortgages that creates a strong economic incentive 
for lenders to write very conservative mortgages. At the same 
time, however, the CFPB has said it will use disparate impact 
analysis for Equal Credit Opportunity Act (ECOA) enforcement. 
I'm concerned that these two policies are inherently in 
conflict. If a lender follows your ability to repay rule by 
making a business decision only to make QMs could that lender 
be found to be in violation of ECOA?

A.3. The Dodd-Frank Act provides a presumption of compliance 
with its new ability-to-repay requirements for certain 
``qualified mortgages.'' In its recent rules to implement those 
provisions, the Bureau accorded safe harbor status to certain 
qualified mortgages and a rebuttable presumption of compliance 
for others, depending on the annual percentage rate of the 
loans at issue. In defining the boundaries of qualified 
mortgages and of the safe harbor, the Bureau recognized that 
conditions are fragile and investors remain concerned about 
managing risks in the wake of the financial crisis. At the same 
time, we did not intend to stigmatize loans that fall outside 
those boundaries or to signal that responsible lending can or 
should take place only within the safe harbor space. Quite the 
contrary, the preamble to the final rule makes clear that the 
Bureau expects over time to see a robust market develop outside 
the QM safe harbor and, indeed, outside of QM altogether.
    We have received questions from a number of market 
participants about how decisions about what types of mortgages 
to offer under the ability to repay rule would be evaluated 
under ECOA and Regulation B. The Bureau recognizes that, 
depending on their business model, some creditors may primarily 
offer loans that are QMs, or non-QMs. The Bureau recognizes 
that business model decisions are affected by many legitimate 
considerations, including the ability to sell loans on the 
secondary market and appetite for repayment risk. We expect 
that business models will evolve over the next several years as 
creditors explore different options and as the mortgage markets 
shift in response to economic conditions and other regulatory 
initiatives. We are committed to engaging with stakeholders as 
they implement the new rules. We know creditors are working to 
make thoughtful decisions about their business models as the 
market environment evolves, and we are working as expeditiously 
as possible to develop and provide industry with consistent 
guidance on how we will approach supervision and enforcement 
under the QM rule and ECOA.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR JOHANNS
                      FROM RICHARD CORDRAY

Q.1. To follow up on a question I asked in our hearing, you 
have often taken the position that the budget of the CFPB is 
exceptionally transparent, and that transparency extends to 
your budget simply because you post it online. While I disagree 
with your refusal to allow Congressional oversight of your 
budget through the appropriations process, I know that this 
refusal is absolute. In the name of transparency, however, I 
need a more clear answer as to whether you are willing to 
appear before the Appropriations Subcommittee on Financial 
Services and General Government to walk through your budget 
documents and answer questions about the spending habits of the 
Bureau? Although you appear before the House and Senate 
Financial Services and Banking Committees, respectively, the 
Financial Services and General Government Subcommittee has the 
specialization and expertise in these areas and your commitment 
to working with the subcommittee is vital.

A.1. Section 1017(a)(2)(C) of the Dodd-Frank Act provides that 
the Bureau's funds derived from the Federal Reserve System 
shall not be subject to review by the Committees on 
Appropriations, and Section 1017(c)(2) provides that funds 
obtained by or transferred to the Bureau Fund shall not be 
construed to be Government funds or appropriated monies. Unlike 
agencies over which the Appropriations Committee has 
jurisdiction, the Bureau is an independent bureau within the 
Federal Reserve System. Nevertheless, the Bureau was pleased to 
provide over 100 pages of budget information in our annual 
report to the Appropriations Committees in July of 2012, 
including copies of fund transfer correspondence with the 
Federal Reserve Board, information on major expenditures, 
spending by division/program area, contractual obligations, a 
description of our budget process, our budget justification, 
information on our civil penalty fund, and numerous other 
materials. We also released a draft Strategic Plan for public 
comment in 2012, which includes goals, outcomes, strategies, 
and performance measures that inform our performance-based 
budget process. We anticipate releasing the final Strategic 
Plan in the Spring, along with updated budget and performance 
documents. The Bureau's annual financial reports, quarterly 
spending updates, and budget justifications are also available 
on our Web site at www.consumerfinance.gov/budget. Director 
Cordray has met with members of the Appropriations Committees 
on numerous occasions and has discussed various aspects of the 
Bureau's budget and operations with them. In addition, the 
Director has welcomed opportunities to testify before 
committees and subcommittees of both the House and Senate on 
the Bureau's budget. In fact, the Bureau has now testified 31 
times before Congress. The Bureau will be happy to meet with 
any Member of Congress to walk through its budget documents and 
answer questions.

Q.2. H.R. 4367, a bill on which I worked very hard here in the 
Senate, removed the Federal requirement for ``on the machine'' 
disclosures on ATM machines. This bill was signed into law 
nearly 3 months ago, yet a look at Regulation E (CFR 1005.16) 
still lists the ``on the machine'' requirement as something 
with which our community banks must comply. Why is it that the 
CFPB has not found the time to update the regulation and remove 
a requirement that the Congress unanimously agreed was 
unnecessary and costly?

A.2. The Bureau agrees that changes in the law to eliminate 
unnecessary and costly requirements are a high priority and has 
been working hard on a rule to implement this statutory 
revision. In fact, we expect to issue the rule this month. 
Because the rule provides compliance burden relief, and because 
it merely implements the specific statutory revision, it is 
structured as a final rule that takes effect immediately on 
publication.

Q.3. Lenders and service providers in the mortgage lending 
arena have stressed to the bureau that they will need a 
significant amount of time to implement new combined RESPA and 
TILA mortgage disclosures. Does the bureau have an 
implementation time frame in mind? Do you think 18 months is 
reasonable to ensure the greatest possible success with 
implementation?

A.3. The Bureau has heard and appreciates concerns expressed by 
the mortgage and real estate settlement industries about the 
time needed to implement changes under the Bureau's proposal to 
integrate TILA and RESPA disclosures. While the Bureau 
understands this concern and intends to remain engaged with 
affected persons in continuing to develop a final rule, that 
final rule has not yet been completed for two reasons. First, 
the Bureau is working carefully to ensure that such a 
significant undertaking as the integration of TILA and RESPA 
disclosures is done right, including through additional 
qualitative and quantitative consumer testing, which takes 
time. Second, the Bureau also has heard industry's request that 
the integrated disclosures not be implemented too quickly, as 
creditors, mortgage servicers, and other affected persons work 
to comply with the many other regulatory changes under the 
Bureau's January 2013 final rules implementing numerous new 
statutory requirements established by title XIV of the Dodd-
Frank Act. As a general matter, the Bureau intends to make an 
informed determination as to the amount of time industry needs 
to comply with the integrated disclosure requirements and to 
afford industry adequate time, but the Bureau thus far has 
refrained from prejudging the question of exactly how much time 
that means and for now, at least, considers it inappropriate to 
comment on whether 18 months is too short or too long. When the 
integrated disclosure rules are being finalized, and the Bureau 
knows exactly what they require and where the affected 
industries stand with respect to their implementation of the 
title XIV rules, the Bureau is confident that it will determine 
an appropriate implementation period in an informed manner.

Q.4. The Small Business Review panel process informed the 
bureau about how it can reduce or eliminate added costs to 
implement new combined RESPA and TILA mortgage disclosures. One 
Small Business Review panel recommendation was to maintain the 
current line numbering to reduce software programming costs and 
industry confusion. Why did the bureau ignore this 
recommendation in its proposed rule to combine RESPA and TILA 
mortgage disclosures?

A.4. One of the difficulties with the current HUD-1 that 
consumers receive at closing is that the line numbers for 
charges do not match the Good Faith Estimate that consumers 
receive 3 days after application. In addition, the three- and 
four-digit line numbering system has proved difficult for 
consumers to understand. The Bureau is particularly mindful of 
the potential risk of information overload for consumers, given 
the amount of numbers and complexity involved in the credit 
transaction and the underlying real estate transaction. 
Consumer participants at the Bureau's testing appeared 
overwhelmed by the three- and four-digit line numbers on the 
prototypes that were designed similarly to the current RESPA 
settlement statement. They performed worse in terms of 
understanding the pertinent information with prototypes 
containing that system. The Bureau also tested prototypes with 
a two-digit line numbering system, which performed better with 
both consumer and industry participants at the Bureau's 
testing, with some industry participants at the Bureau's 
testing preferring it over the system of the current RESPA 
settlement statement.
                                ------                                


         RESPONSES TO WRITTEN QUESTIONS OF SENATOR KIRK
                      FROM RICHARD CORDRAY

Q.1. At Tuesday's hearing, you stated that the CFPB is applying 
the Government Performance and Results Act (GPRA) to show how 
the agency is justifying its spending. Please provide the most 
recent GPRA report. If no current GPRA report is available, 
then please provide any interim GPRA report.

A.1. The Bureau's first draft of its strategic plan under GPRA 
is publicly available on its Web site at http://
www.consumerfinance.gov/strategic-plan/. We anticipate 
releasing a final version of the strategic plan this spring, 
along with updated budget and performance documents.

Q.2. The CFPB is required by Dodd-Frank to convene a Small 
Business Review Panel when issuing a rule that will 
significantly impact a large number of small entities. In your 
August 1, 2012, testimony before the House Committee on Small 
Business, you stated that ``[s]mall business review panels are 
a valuable component of our rulemaking process.'' Yet, the 
Bureau did not convene a panel for the ability-to-pay rule 
because the rule was transferred to the Bureau from the Federal 
Reserve. Nonetheless, the Bureau did convene a small business 
review panel for the RESPA TILA mortgage disclosures, even 
though that rule was also transferred to the Bureau from the 
Federal Reserve. Can you provide clarity regarding the Bureau's 
approach to convening small business review panels? Please 
explain why the CFPB chose to convene a panel for the RESPA 
TILA rulemaking but not for the ability-to-pay rulemaking.

A.2. The CFPB conducts Small Business Review Panels in 
accordance with the requirements of the Regulatory Flexibility 
Act (RFA). The RFA, as amended, identifies the types of rules 
for which a Small Business Review Panel is required. Generally, 
the RFA applies only to rules for which a notice of proposed 
rulemaking is required by the Administrative Procedure Act, or 
``any other law.'' When developing a proposed rule subject to 
the RFA, the CFPB is required to convene a Small Business 
Review Panel prior to issuing the proposal unless the CFPB 
certifies that the rule will not, if promulgated, have a 
significant impact on a substantial number of small entities. 
Accordingly, the CFPB is not required to convene Small Business 
Review Panels for proposed rules that are not subject to the 
RFA or for proposed rules that are subject to the RFA but that 
the Director certifies will not have a significant economic 
impact on a substantial number of small entities. The CFPB also 
is not required to convene a Small Business Review Panel where 
another agency, such as the Federal Reserve Board, issued a 
rule proposal which was later inherited and finalized by the 
CFPB, since the statutory timing of the Small Business Review 
Panel is supposed to occur prior to issuance of the original 
proposal. This was the case with respect to the ability-to-
repay rulemaking.
    The proposal to merge the TILA and RESPA mortgage 
disclosure requirements did not transfer to the CFPB from the 
Federal Reserve. The CFPB itself issued the proposal to merge 
the TILA and RESPA mortgage disclosure requirements pursuant to 
the requirements of the Dodd-Frank Act. The CFPB conducted a 
Small Business Review Panel before issuing this proposal.

Q.3. Under the Small Business Regulatory Enforcement Fairness 
Act (SBREFA), the CFPB is required to give small businesses a 
preview of new proposals and receive extensive feedback from 
small businesses before proposing a new rule, including the 
potential impact of any new rules on the cost of credit for 
small businesses. Yet, the CFPB published all three of its 
Small Business Review Panel reports simultaneously with the 
proposed rules. By comparison, the Occupational Safety and 
Health Administration issues such reports when the panel is 
done. Why did the CFPB decide to publish the reports at the 
same time as the proposed rules and not after the panels were 
completed? Are there benefits to publishing the report after 
the panel has convened and before the proposal is issued?

A.3. The statute requires that the Panel report be made public 
as part of the rulemaking record, but does not specify when the 
report should be released to the public. The CFPB released 
Panel reports with their corresponding proposed rules so that 
the public could consider them together. Publicly releasing the 
panel report with the Proposed Rule promotes transparency. As 
panel reports must be interpreted in the context of the 
corresponding proposed rule, releasing the Panel report before 
the proposed rule could cause unnecessary confusion.

Q.4. In your statement, you mention that the CFPB is looking to 
help older Americans get sound information and advice about 
their retirement finances. In addition, you gave an interview 
to Bloomberg in January stating the CFPB is exploring 
initiatives in the ``rollover moment.'' What is the ``rollover 
moment?'' Is the CFPB relying solely on the statutory authority 
in Section 1013(g) of the Dodd-Frank Act establishing the 
Office of Financial Protection for Older Americans? Has the 
CFPB engaged any contractors and/or outside third parties to 
conduct research or analysis in the retirement savings area? Is 
the CFPB looking at retirement savings issues that target 
individuals other than seniors?

A.4. Some of the most important decisions that consumers make 
involve saving for retirement and making choices to improve 
their economic security later in life. Large numbers of 
Americans are expected to retire over the next decade, so some 
have referred to it as the ``rollover moment.'' Section 1013(g) 
of the Dodd-Frank Act directed the CFPB's Office for Older 
Americans to undertake activities to enhance later-life 
economic security, including:

    Providing goals for financial literacy programs for 
        older Americans focusing on long-term savings and 
        later-life economic security--and self-protection 
        against unfair, deceptive, or abusive practices;

    Researching best practices and effective strategies 
        to educate older Americans on long-term savings as well 
        as planning for retirement and long-term care;

    Assessing and reporting on problems facing older 
        Americans due to misuse of certifications and 
        designations of financial advisors--and providing 
        Congress and the SEC with policy recommendations; and

    Coordinating consumer protection activities for 
        older Americans with relevant Federal agencies and 
        State regulators.

    The CFPB has a contract with Ideas42 d/b/a Behavioral Ideas 
Lab to help the Bureau examine consumers' financial challenges 
in a range of financial decision-making areas, including the 
financial challenges that face older Americans. Saving for 
retirement before reaching retirement age and managing 
retirement savings accounts after retirement pose challenges to 
consumers and affect their later-life economic security.

Q.5. Have you or any CFBP staff had conversations with 
officials and staff of the Departments of Treasury and Labor, 
the Internal Revenue Service, the Pension Benefit Guaranty 
Corporation, and the Securities and Exchange Commission 
regarding retirement savings issues? Has any agency request 
been made with respect to Section 1027 of the Dodd-Frank Act?

A.5. The Bureau has had conversations with officials and staff 
of other departments and agencies about retirement savings 
issues. The Bureau is not aware of any formal request having 
been made pursuant to Section 1027 of the Dodd-Frank Act.

Q.6. Has the CFPB entered into a contract with Ideas42 to look 
into the behavior science of auto enrollment and auto 
escalation features of 401(k) plans? Is this contract looking 
at seniors' retirement savings decisions or other individuals' 
retirement savings decisions? Was this contract put out for 
public bid? Please provide a copy of the contract and a copy of 
the justification if the contract was done as a sole source 
contract.

A.6. The CFPB has a contract with Ideas42 d/b/a as Behavioral 
Ideas Lab to help the Bureau examine consumers' financial 
challenges in a range of financial decision-making areas, 
including the financial challenges that face older Americans. 
The contract was properly competed for public bid and was not a 
sole source agreement. A copy of the contract is attached as 
Attachment A.

Attachment A


















































Q.7. Currently, the CFPB is collecting account-level data from 
payment card issuers. It is my understanding that the request 
covers millions of individuals' credit card accounts and that 
the information must be supplied to the CFPB on a monthly 
basis. The CFPB is requesting that the information be sent to 
the agency with personally identifying information about 
consumers. Please answer the following questions with regard to 
this collection of individual consumer transactions:
    What is the purpose of this data collection?

A.7. The CFPB is not collecting any personally identifiable 
information about any consumers as part of its credit card data 
collection effort. The data we are collecting as part of our 
ongoing supervisory activities will help the CFPB to assess and 
examine compliance with Federal consumer financial protection 
laws and risk to consumers in the credit card marketplace.

Q.8. How many accounts has the CFPB followed and how many is it 
currently following? Does it change the consumer accounts it 
maintains records for after a certain period of time or track 
certain account records continuously?

A.8. The CFPB is obtaining information from a number of credit 
card issuers on a monthly basis on those issuers' accounts. 
Information about the number of accounts on which the CFPB 
receives data is confidential supervisory information.

Q.9. Why is it necessary to demand all consumer account data 
instead of an anonymous representative sample?

A.9. The data are anonymous and cannot be used to identify any 
individual consumer. Identifying a sample that would be 
representative of an issuer's portfolio would be burdensome for 
the issuer, which would need to pull that sample each month and 
then go through further procedures and analyses to compare 
those accounts to its overall portfolio to assure that the 
sample was representative.

Q.10. What does the CFPB intend to do with it?

A.10. The CFPB uses the data to inform its supervisory 
processes and to monitor risks to consumers. These data help 
the CFPB to analyze and benchmark credit card issuers across 
our supervision work. The CFPB also uses the data to assess and 
examine compliance with Federal consumer financial protection 
laws.

Q.11. Has the agency set a time period for retaining this data, 
and will the individual consumer transaction information be 
purged from all Federal records after this retention period?

A.11. The data exclude personally identifiable information 
about individual consumers. There is no set time period for 
retention of the data.

Q.12. Does the CFPB share this information with any outside 
third parties? Are these outside third parties under contract 
with the CFPB? With whom does the CFPB intend to share it in 
the future?

A.12. The CFPB has retained a data services vendor that manages 
the data on the CFPB's behalf, and that vendor is under 
contract with the CFPB and is subject to all Federal data 
protection rules and requirements. The CFPB does not otherwise 
share this information with any nongovernmental outside third 
parties.

Q.13. Does the CFPB provide this data--in whole, part, or 
summary--to any other Federal agency or entity? If so, please 
describe how this data is requested and how it is shared.

A.13. The Bureau generally shares data with prudential 
regulators in accordance with the Supervisory Data Sharing 
Memorandum of Understanding between the CFPB and the prudential 
regulators. Any sharing of these loan-level data would comply 
with those agreements.

Q.14. How much does the agency spend annually on this data 
collection?

A.14. The Bureau spends approximately $3 million per year on 
this data collection.

Q.15. With respect to the Paperwork Reduction Act and other 
laws, OMB has set forth certain parameters for surveys and data 
collection. Please submit the OMB approval document for this 
data collection effort.

A.15. This data collection is not subject to PRA requirements.

Q.16. Do individuals and their families have the opportunity to 
opt out of this Federal agency data collection?

A.16. Individuals and families are not identified in this data 
collection, and individual consumers and their families are not 
participants in this data collection. Title X of the Dodd-Frank 
Act authorizes the Bureau to supervise certain consumer 
financial services companies to protect consumers. Some of the 
consumer financial services companies under CFPB supervision 
are the participants in this data collection, and they may not 
opt out of supervision activities.

Q.17. Do you anticipate that the CFPB will engage in rulemaking 
as a result of the data collection?

A.17. The CFPB uses the data to inform CFPB analysis of risks 
to consumers in the credit card marketplace and risks to the 
market. Analysis of the data may lead the CFPB to identify 
areas where appropriate regulations could improve the 
functioning of the market, and may support the CFPB's efforts 
to reduce outdated, unnecessary, or unduly burdensome 
regulations. Thus, this information may be used to inform 
future rulemaking activities as appropriate.

Q.18. I understand that this account-level data is 
comprehensive of each payment card issuer that furnishes data. 
How is the CFPB ensuring that the consumer information it 
collects is kept secure; to date, has the CFPB suffered any 
breaches of data, and has any data breach reached consumer 
information?

A.18. The data that the Bureau solicits and collects from 
issuers exclude personally identifiable information about the 
individual consumers to whom the data pertains. Accordingly, no 
breach of personally identifiable information by the CFPB is 
possible. For example, the names of individual consumers or 
their contact information, Social Security numbers, and credit 
card account numbers are not included in the data. Because the 
data is not personally identifiable, it also does not 
constitute a system of records that is subject to the 
requirements of the Privacy Act of 1974, 5 U.S.C. 552a. 
Nevertheless, all such data are subject to the protections 
given to information that the CFPB obtains through its 
supervisory authorities. \3\ The data are managed according to 
IT security requirements that comply with Federal laws, 
policies, and procedures.
---------------------------------------------------------------------------
     \3\ These include protections set forth in the Act; the Bureau's 
confidentiality regulations at 12 CFR 1070.40 et seq.; Exemption 8 of 
the Freedom of Information Act, 5 U.S.C. 552(b)(8); and CFPB Bulletin 
12-01, which is viewable online at http://www.consumerfinance.gov/wp-
content/uploads/2012/01/GC_bulletin_12-01.pdf.
---------------------------------------------------------------------------
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
                      FROM RICHARD CORDRAY

Q.1. What combined effect do you expect the final rule on 
Qualified Mortgages and new servicing rules to have on the cost 
and availability of mortgage credit in the near future?

A.1. In the Federal Register notices setting forth the final 
Ability-to-Repay/Qualified Mortgage (QM) rules and servicing 
rules, the CFPB shared its assessment of the potential effects 
of these rules on the cost and availability of mortgage credit. 
The CFPB stated its belief that the QM rule will not lead to a 
significant reduction in consumers' access to mortgage credit 
or a material impact on cost. The CFPB also laid out in detail 
the basis for this belief. Among other reasons, the CFPB noted 
that underwriting practices and standards have tightened 
significantly since the financial crisis, so that 
implementation of the rule will not require a major change in 
current practices. The Bureau also noted that it had carefully 
structured the rules defining qualified mortgages to provide 
broad coverage for Qualified Mortgages, including a transition 
period, and through a variety of provisions to help encourage 
responsible loans to creditworthy borrowers as the market 
adjusts to the new regulatory regime, including further 
provisions that are currently under consideration in the 
concurrent proposal.
    As for the servicing rules, the CFPB stated that the cost 
of these rules is likely to be small. Regarding the amendments 
to Regulation Z, the Bureau exempted small servicers from the 
periodic statement requirement and found that the costs were 
extremely small for the variable-rate periodic adjustment 
notice, the new initial interest rate adjustment notice, the 
prompt crediting requirement, and the payoff statement 
requirement. Regarding the amendments to Regulation X, the CFPB 
explained that over 80 percent of outstanding mortgages are 
guaranteed by Fannie Mae, Freddie Mac, FHA, or the VA and that 
many of the requirements of the final rule are similar or 
identical to requirements already imposed on servicers of such 
mortgages. Small servicers have been exempted from many of 
these requirements as well.

Q.2. What kind of analysis and coordination is the CFPB 
undertaking to understand the aggregate impact of the Qualified 
Mortgages and Qualified Residential Mortgages (QRM) on the cost 
and availability of mortgage credit? Is the CFPB also taking 
into account how the proposed risk-weighting of mortgages and 
servicing rights in the Basel III proposals by the Federal 
Reserve, FDIC, and OCC will affect the mortgage market before 
finalizing its QRM rulemaking?

A.2. As stated above, the Bureau analyzed the potential impact 
of the QM rule on the cost and availability of mortgage credit. 
Under the statute, the Bureau is not an agency that will be 
finalizing or issuing either the QRM or the Basel III 
proposals. Therefore, conducting such analyses in the context 
of the QRM rulemaking and the risk-weighting of mortgages and 
servicing rights in the Basel III proposals by the Federal 
Reserve, the FDIC, and OCC are within the purviews of those 
other regulators rather than the CFPB.

Q.3. In its first annual report, the CFPB Ombudsman recommended 
that the CFPB review and clarify what the enforcement 
attorney's role during the supervisory examination is since it 
may be causing institutions to be less willing to share 
information. When do you expect the CFPB to act on this 
recommendation?

A.3. The CFPB is currently reviewing its implementation of this 
policy, as recommended by the Ombudsman's report.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR COBURN
                      FROM RICHARD CORDRAY

Q.1. Currently, Federal Reserve provides for CFPB's operating 
costs from the ``combined earnings'' of the Federal Reserve 
System pursuant to Section 1017 of Dodd-Frank Wall Street 
Reform and Consumer Protection Act. In his February 14th 
testimony before the Senate Banking Committee, Chairman 
Bernanke stated that a recent Federal Reserve analysis 
estimated that the Federal Reserve might record losses of $40 
billion and suspend contributions to the Treasury for 4 years 
beginning in 2017 if interest rates rise to 3.8 percent later 
this decade. If rates rise by another percentage point, the 
losses would triple, according to the study. As a result, the 
CFPB would have to seek funds from Congress at that time. If 
the CFPB does not intend to seek funds from Congress at that 
time, please explain how you plan to fund CFPB's operations at 
that time? If the CFPB plans to seek funds from Congress at 
that time, why is it not appropriate to subject the CFPB to 
congressional appropriations process now?

A.1. The Dodd-Frank Act authorizes the CFPB to receive funding 
from the Federal Reserve in amounts determined by the Director 
to be reasonably necessary to carry out the authorities of the 
Bureau, up to capped annual funding levels. The caps on the 
Bureau's funding levels are expressed as a percentage of the 
total operating expenses of the Federal Reserve System as 
reported in its 2009 annual report and are thus fixed in amount 
at this time and going forward, without being affected by any 
ongoing fluctuations in earnings by the Federal Reserve. 
Estimates by the Congressional Budget Office show the CFPB as 
having spending authority derived from transfers from the 
Federal Reserve through the budget horizon. The Bureau is also 
authorized to seek up to $200 million annually in additional 
appropriated funds from Congress if deemed necessary, but the 
Bureau has no plans to seek any such appropriated funds at this 
time. However, the Bureau will continue to submit an annual 
report to the House and Senate Committees on Appropriations, as 
it did in July of 2012, and is happy to meet with any Members 
of Congress to discuss the Bureau's budget.

Q.2. At the hearing, you stated that the CFPB is applying the 
Government Performance and Results Act (GPRA) to show how the 
agency is justifying its spending. Please provide the most 
recent GPRA report. If no current GPRA report is available, 
then please provide any interim GPRA report.

A.2. The Bureau's draft strategic plan under GPRA is publicly 
available on its Web site at http://www.consumerfinance.gov/
strategic-plan/. We anticipate releasing a final version of the 
strategic plan this Spring, along with updated budget and 
performance documents.

Q.3. A November 2012 audit of the CFPB by the Government 
Accountability Office (GAO) revealed that of CFPB's 
approximately $300 million in obligations, $151 million was 
spent on Contracts & Support Services, $134.2 million on Salary 
& Benefits, and $14.6 million on other obligations. Moreover, 
total CFPB net costs for FY2012 for its three strategic 
missions are as follows: $150.2 million for Supervision, 
Enforcement, Fair Lending and Equal Opportunity; $56.7 million 
for Consumer Education and Engagement; and $39.3 million for 
Research, Markets, and Regulations. Do you consider these 
breakdowns to be appropriate and adequate? How do you 
anticipate them changing over time?

A.3. Yes, the display of Fiscal Year 2012 obligations in the 
Financial Report of the CFPB for Fiscal Year 2012 is a fair and 
accurate representation of spending by major program area.
    The CFPB also published quarterly updates on Fiscal Year 
2012 spending, which are available on the Bureau's Web site 
(http://www.consumerfinance.gov/budget/). The additional detail 
includes an accounting of spending by major budget category 
(object class) and division, as well as a listing of major 
investments for Fiscal Year 2012. In addition, as you inquired 
at the hearing, all CFPB-awarded contractual obligations over 
the threshold of $3,000 are publicly available at 
www.usaspending.gov.
    The proportional breakdown of the Bureau's spending is 
evolving over time. At the outset, most funds were expended on 
contractual services (including significant payments to the 
Treasury Department, which had initial statutory authority to 
stand up the new Bureau), as the Bureau began with small 
numbers of personnel and has gradually grown in staff and 
developed more fulsome structures. Accordingly, the amount of 
contract services will diminish over time. The proportion of 
funds expended on different functions of the Bureau will 
continue to evolve over time, though it is likely that 
Supervision, Enforcement, Fair Lending and Equal Opportunity 
will always require the largest share of resources to be 
devoted to their work.
    The CFPB received an unqualified ``clean'' opinion from the 
GAO on its Fiscal Year 2012 financial statements. GAO also 
provided an unqualified opinion on the Bureau's Fiscal Year 
2011 financial statements. These opinions confirm that the CFPB 
has implemented effective internal controls over the efficiency 
of operations, compliance with laws and regulation, and 
financial reporting.

Q.4. The GAO audit also revealed that in Fiscal Year 2012 the 
CFPB expended $39.3 million on ``Research, Markets, & 
Regulation.'' Yet, the audit did not provide a breakdown of 
spending in each of these categories. What portion of that 
budget was spent on research and what percentage on rule 
writing? Do you believe that the CFPB is spending adequate 
amounts on research and market analysis?

A.4. Of the $39.3 million obligated to support Research, 
Markets, and Regulations, approximately 19 percent supported 
Research activities while about 33 percent covered Regulation 
activities. The Bureau is building its Office of Research and 
has and will continue to make investments in these core 
functions to achieve the statutory purposes that Congress 
established and assure that its policymaking is backed by 
rigorous, data-driven analysis.

Q.5. Note 4 in the GAO audit states that ``[a]mounts in the 
Civil Penalty Fund are immediately available to CFPB and under 
the control of the Director, and shall remain available until 
expended, for payments to victims of activities for which civil 
penalties have been imposed. To the extent that such victims 
cannot be located or such payments are otherwise not 
practicable, the Bureau may use such funds for the purposes of 
consumer education and financial literacy programs.'' The audit 
report also notes that ``[d]uring fiscal year 2012, the CFPB 
negotiated $340 million in redress payments made directly to 
harmed victims. Additionally, the CFPB received $32 million 
from civil penalty settlements.'' Please provide detailed 
accounting for the amount contributed to and distributed from 
the Civil Penalty Fund since its inception, including a 
detailed breakdown of how much money was expended from the Fund 
to victims (as a lump sum) and how much money was distributed 
for purposes of consumer education and financial literacy 
programs, including a detailed list and amount for each such 
programs. Does the Bureau intend to use the funds from the 
Civil Penalty Fund to pay for existing consumer education and 
financial literacy programs or to create new programs?

A.5. The CFPB received $32 million in civil penalties during 
Fiscal Year 2012. The CFPB received an additional $14.1 million 
in penalties shortly after fiscal year 2012 closed. These 
amounts were reported in the Financial Report of the Consumer 
Financial Protection Bureau, Fiscal Year 2012 (Notes 16 and 
17), available at http://www.consumerfinance.gov/reports/
financial-report-of-the-cfpb-fiscal-year-2012/. Subsequent to 
the publication of the Financial Report, the CFPB collected an 
additional $5,001 in civil penalties in fiscal year 2013. No 
distributions have been made from the Civil Penalty Fund to 
date. The Bureau has been carefully proceeding to develop an 
initial rule governing the process of distributing funds from 
the Civil Penalty Fund. The Bureau will publish that rule soon 
and will also request public comment.

Q.6. In this report, the CFPB highlights that it spent $151 
million on contracts and support services for FY2012. At the 
hearing, you stated that most of this cost is due to start-up 
costs and most of the contracts were with Treasury and other 
Federal agencies. The report lists some but not all of the 
expenditures. In addition, USAspending.gov only lists $58 
million in contracts by the CFPB. Please provide a complete 
list of contracts the CFPB has entered into for FY2012 and 
FY2013, including the amount of the contract and whether the 
contract was a ``sole source'' contract or done through a 
public request for bid. For the contracts identified as sole 
source, please submit all justifications and contract amounts.

A.6. Lists of the contracts that the CFPB has entered into for 
Fiscal Year 2012 and Fiscal Year 2013, including the amounts, 
are attached as Attachments B and C. Attachment D identifies 
the contracts listed in Attachments B and C that were sole 
source, and the justification for each.

Attachment B


















Attachment C






Attachment D


Q.7. The report shows that the CFPB grew from 214 employees in 
the third quarter of FY2011 to nearly 1,000 employees by the 
end of the FY2012. There has been some criticism that the CFPB 
is paying some employees very high salaries. How many people 
are employed currently by the CFPB? Please provide the number 
of employees who earn more than $125,000, $150,000, and 
$200,000 respectively.

A.7. The Dodd-Frank Act requires the CFPB's pay and benefit 
programs to be comparable to those of the Federal Reserve Board 
and other Federal financial regulators. In compliance with the 
law, and following accepted salary administration practices, 
pay for CFPB employees is based on the skills, experience, and 
qualifications of the individual being hired, the position for 
which they are being hired, and the relevant pay band. As of 
February 23, 2013, the CFPB had 1,131 employees on board. Of 
these, 484 (43 percent) earned more than $125,000; 300 (27 
percent) earned more than $150,000; and 59 (5 percent) earned 
more than $200,000 per year.

Q.8. How many economists does the CFPB hire? How many 
economists work on economic analyses pursuant to rulemakings 
undertaken by the agency?

A.8. The CFPB has 20 PhD economists in its Office of Research 
at present. The number of economists working on analyses for 
rulemakings varies over time and depends on the number of 
rulemakings in process.

Q.9. The report states that the CFPB has spent $150 million on 
Supervision, Enforcement, Fair Lending and Equal Opportunity. 
Please provide a detailed breakdown of how the monies are being 
allocated. Are any of these monies being used for data 
collection? Are any of these monies used to hire contractors, 
and if so, please list the contracts and amounts?

A.9. The $150 million in costs allocated to Supervision, 
Enforcement, Fair Lending and Equal Opportunity represent both 
direct costs of that division as well as indirect costs. The 
indirect or centralized costs include certain administrative 
and operational services provided centrally to other Divisions 
(e.g., building space, utilities, and IT-related equipment and 
services).
    Direct costs for the Supervision, Enforcement, Fair Lending 
and Equal Opportunity division were approximately $77 million. 
Of this amount, approximately $60 million was spent on 
personnel and approximately $9 million on travel and 
transportation. The remaining $8 million was spent on other 
contractual services. In order to fulfill the CFPB's statutory 
purposes and objectives, including its obligations to assess 
compliance with Federal consumer financial protection laws and 
to monitor consumer financial markets, it is necessary for the 
Bureau to acquire and analyze qualitative and quantitative 
information and data pertaining to consumer financial product 
and service markets and companies. For your information, we 
have attached as Attachment B a detailed listing of all 
contracts and interagency agreements that the CFPB entered into 
in Fiscal Year 2012, including for goods and services 
supporting the Supervision, Enforcement and Fair Lending and 
Equal Opportunity function. Detailed information about each 
contract, including the vendor, description of service, and 
value of the contract, is also available at usaspending.gov.
                                ------                                


           RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN
          JOHNSON AND SENATOR CRAPO FROM MARY JO WHITE

Q.1. Your spouse, John White, sits on the advisory committees 
for the Public Company Accounting Oversight Board and the 
Financial Accounting Standards Board. Both of these entities 
received extensive comments from their respective advisory 
committees on auditing and accounting standards that are either 
approved or recognized by the SEC. How do you intend to handle 
any real or perceived conflict of interest on matters where the 
advisory committees make policy recommendations on these 
standards that may come before you as Chairman of the SEC?

A.1. Pursuant to my Ethics Agreement, I will only be recused 
from particular party matters involving the PCAOB and/or the 
FASB. I will generally not be recused from broad policy 
recommendations that come from either entity. However, I am 
sensitive to the appearance concerns that could arise due to my 
spouse's participation as an unpaid member of the advisory 
groups of the PCAOB and the FASB even in the context of broad 
policy discussions. In addition, although I understand that 
these advisory groups do not themselves make policy 
recommendations, I will be sensitive to situations, if any, in 
which my spouse makes a policy recommendation as a member of 
either group. Accordingly, I will consult with the SEC's Ethics 
Counsel and the SEC's Chief Accountant regularly to ensure that 
any appearance concerns are addressed.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO
                       FROM MARY JO WHITE

Q.1. SEC enforcement actions have often required respondents to 
undertake certain actions, such as correcting the violative 
conduct and strengthening internal policies and procedures to 
prevent or detect future violations. How will you ensure that 
SEC enforcement undertakings are not used as a way to inform 
regulated entities not directly involved in the enforcement 
action of new regulatory requirements, without the opportunity 
for those entities to provide comments?

A.1. I understand that undertakings strengthening internal 
policies and procedures to prevent or detect future violations, 
among other things, can be an important aspect of certain SEC 
enforcement actions. However, as I understand it, such 
undertakings are tied to the unique facts and circumstances of 
particular enforcement actions, and the underlying facts 
involved in the particular misconduct at issue in each action.

Q.2. Section 417 of Dodd-Frank requires the SEC to conduct two 
studies on short selling and submit reports on the results of 
those studies to Congress. The SEC has missed the statutory 
reporting deadlines for both studies. Will you commit to 
finishing the studies in a timely manner?

A.2. I have not yet had the opportunity to discuss the status 
of these two studies with the Commissioners and the staff, but 
as a general matter, I am committed to completing all Dodd-
Frank Act mandates--both rulemakings and studies--both 
thoughtfully and expeditiously.

Q.3. Section 619 of Dodd-Frank requires the SEC to work with 
the three banking regulators and the CFTC to adopt the so-
called Volcker Rule. How will you ensure that a final Volcker 
Rule will not unnecessarily restrict permitted market-making 
activities?

A.3. I understand the important role that market making plays 
in our financial markets. I look forward to working with the 
staff, my fellow Commissioners, and the other regulatory 
agencies to ensure that the final rules implementing Section 
619, and the way that these rules are described in the adopting 
release, appropriately, and with clarity, account for this 
critical market function and ensure that the rules continue to 
allow market makers to provide needed liquidity to investors in 
a broad range of instruments, while at the same time ensuring 
that all of the statutory objectives are furthered.

Q.4. Title VII of Dodd-Frank includes indemnification 
provisions that make it difficult, if not impossible, for 
foreign regulators to obtain information on swap transactions. 
All four of the current SEC Commissioners, as well as former 
SEC Chairman Mary Schapiro, support repealing the 
indemnification requirements. Do you agree with them?

A.4. Yes, I agree with the other Commissioners and former 
Chairman Schapiro and support repealing the provision in the 
Dodd-Frank Act (Section 763(i)) that requires any U.S. or 
foreign authority, other than the Commission, seeking to obtain 
security-based swap data from a Commission-registered security-
based swap data repository to agree to provide indemnification 
to the security-based swap data repository and the Commission 
``for any expenses arising from litigation relating to the 
information provided.''

Q.5. Last year, the CFTC issued proposed interpretive guidance 
on cross-border application of the swaps provisions of Dodd-
Frank, the so-called extraterritoriality guidance. The CFTC 
guidance received widespread criticism from foreign regulators 
across the globe for, among other things, not conforming to a 
G20 agreement, being too expansive in scope and confusing in 
application. Recently, the CFTC approved an exemptive order 
delaying the effective date for some of the provisions and 
issued further cross-border guidance in an attempt to clarify 
the scope and definition of ``U.S. person.'' However, at least 
one foreign regulator has stated that the further guidance made 
the definition even less clear. What steps will you take to 
ensure that the SEC will not face similar criticism?

A.5. As Chairman Walter recently testified before this 
Committee, I understand that the Commission intends to address 
the international implications of the security-based swaps 
rules arising under Title VII of the Dodd-Frank Act 
holistically in a single proposing release. To my mind, that 
approach allows the Commission to cover a broader set of issues 
than the CFTC included in its proposed interpretive guidance. I 
think the Commission's proposal should address the application 
of Title VII in cross-border contexts with respect to each of 
the major registration categories covered by Title VII relating 
to market intermediaries and infrastructures for security-based 
swaps, and certain transaction-related requirements under Title 
VII in connection with reporting, clearing, and trade execution 
for security-based swaps.
    This needs to be done with a notice-and-comment rulemaking, 
so that it can consider investor protection and incorporate an 
economic analysis that considers the effects of the proposal on 
efficiency, competition, and capital formation. It is clear 
this approach takes more time than simply issuing interpretive 
guidance, but it has a number of advantages. These include, 
among others, a full articulation of the rationales for, and 
consideration of reasonable alternatives to, the proposals the 
Commission puts forth and ultimately adopts. I agree that the 
cross-border rules adopted by the Commission need to provide, 
among other things, a clear and workable definition of ``U.S. 
person'' so that international participants have clear guidance 
as to how trading activities will trigger regulatory U.S. 
regulatory requirements.

Q.6. Section 975 of Dodd-Frank enhances the regulation of 
municipal advisors. The provision was intended to apply to 
previously unregulated financial advisors. However, the SEC's 
proposed municipal advisor rule went much further and would 
capture some activities of regulated bond underwriters. If 
confirmed, how will you address the ``underwriter exclusion'' 
provision of the proposal when moving to a final rule?

A.6. I have not yet had the opportunity to discuss this issue 
in detail with the staff or with my fellow Commissioners, but I 
understand that the Commission has received numerous comment 
letters that the 2010 proposed municipal advisor registration 
rules were too broad, including with respect to the scope of 
the underwriter exclusion. I understand that the staff is 
carefully weighing these comments as they develop 
recommendations for the Commission. I recognize the important 
role that bond underwriters play in assisting municipalities in 
the issuance and sale of municipal securities. If confirmed, I 
commit to reviewing the scope of the underwriter exclusion and 
I will work closely with staff and the Commissioners to 
finalize and adopt these rules in a balanced way, with careful 
consideration of public comments and concerns about undue 
breadth of the proposed rules.

Q.7. A July 2012 SEC staff report evaluated the development of 
International Financial Reporting Standards (IFRS) by the 
International Accounting Standards Board (IASB). The report 
highlighted several significant concerns about moving to IFRS, 
including its uneven application around the world, the 
potential cost to U.S. companies and the surrender of U.S. 
standard-setting sovereignty. The report also cited concerns 
about the independence of the IASB. How will you address 
concerns that adopting IFRS would cede control over U.S. 
accounting standards to a foreign entity?

A.7. I agree that the issues you have identified are concerns. 
I have not yet had the opportunity to discuss this issue in 
depth with the staff or with the Commissioners. As a general 
matter, I believe that the pursuit of a single set of high-
quality, globally accepted accounting standards is a worthy 
goal. I plan to work with the Commissioners and staff on the 
challenges raised in the final staff report. Ultimately, any 
decision to further incorporate IFRS within the U.S. should 
assure that such a change is in the best interest of U.S. 
investors and registrants.

Q.8. Last year, the SEC and the Department of Justice (DOJ) 
issued joint guidance containing detailed information about the 
Foreign Corrupt Practices Act (FCPA), its provisions, and the 
agencies' enforcement priorities. Since then, companies and 
individuals seeking to comply with the FCPA have asked for 
further clarification. If confirmed, will you commit to working 
with companies and individuals seeking to comply with the FCPA 
in order to improve the guidance?

A.8. I understand that the SEC worked extensively with the 
Department of Justice to prepare the recently issued joint FCPA 
Guidance. The Guidance explains how the Government interprets 
the FCPA and seeks to educate companies about the limits of 
permissible conduct. I understand that as part of the process 
of developing the Guidance, the Director of the SEC's Division 
of Enforcement and the Assistant Attorney General for the 
Criminal Division at the Department of Justice engaged in a 
series of roundtables with members of the business community, 
as well as others from the NGO and compliance community, to 
listen to their concerns about FCPA compliance. I understand 
that the Guidance addresses many of those concerns, and 
particularly seeks to clarify the type of conduct that gets 
prosecuted under the FCPA. I will need to review with the staff 
any requests for further clarification of the FCPA Guidance, 
but if confirmed as Chair, I certainly would remain open to 
listening to any additional concerns of those seeking to comply 
with the FCPA, along with the leadership of the Division of 
Enforcement and its specialized unit dedicated to FCPA 
Enforcement and our colleagues at the Department of Justice.

Q.9. Recently, the National Association of Manufacturers has 
challenged the SEC's conflict minerals rule in Federal court 
saying that ``The final conflict mineral rule imposes an 
unworkable, overly broad and burdensome system that will 
undermine jobs and growth and may not achieve Congress's 
overall objectives.'' In addition, there has been considerable 
concern that the conflicts mineral disclosures do not fit 
within the scope of the SEC's mission to protect investors, 
maintain fair and efficient markets, and promote capital 
formation. Do you believe that conflict mineral disclosures 
should be considered material disclosures for investor 
protection purposes?

A.9. As the Commission recognized in its release adopting the 
rule, several of the cosponsors of the conflict minerals 
statutory provision, as well as commentators during the 
rulemaking process, expressed the belief that conflict minerals 
disclosures are material to investors' understanding of the 
risks in an issuer's reputation and supply chain. The rule has 
been challenged in court and that issue has been raised, so I 
cannot appropriately comment further at this point.

Q.10. In July 2010, the SEC released an advance notice of 
proposed rulemaking with respect to the U.S. proxy system. The 
concept release addressed a number of important issues, 
including proxy mechanics and the growing influence of proxy 
advisory services. The concept release generated a large number 
of comments, as well as created substantial industry and 
investor interest in these issues. Since then, however, the SEC 
has not moved forward with any proposed rules or other action 
to address the issues in the concept release. If confirmed, 
what priority will you give to deciding whether, and if so how, 
to move on the SEC's proxy system concept release?

A.10. The Proxy Mechanics concept release addressed a number of 
significant issues related to the proxy system and a large 
number of commenters provided useful feedback to the 
Commission. I agree that addressing the issues discussed in the 
concept release is an important undertaking for the Commission. 
I have not yet had the opportunity to discuss the concept 
release with the Commission and the staff. If confirmed, I will 
work with the other Commissioners and the staff to outline the 
next steps to respond to the comments the Commission received 
on the concept release.

Q.11. Treasury Secretary Jack Lew recently wrote ``The 
Administration has consistently opposed a financial transaction 
tax on the grounds that it would be vulnerable to evasion, 
create incentives for financial reengineering and burden retail 
investors.'' Do you agree with this assessment?

A.11. While I understand there are arguments both for and 
against the imposition of financial transaction taxes, their 
imposition does raise many complex issues such as those 
mentioned by Secretary Lew. Before taking a position on this 
particular proposal, I would want to closely review the details 
and consider how it might affect incentives for particular 
types of capital markets activities or have other impacts, 
positive or negative.

Q.12. SEC Commissioner Dan Gallagher has pointed out that the 
last time the SEC conducted a comprehensive review of market 
and regulatory structure was almost 20 years ago, when the SEC 
undertook the ``Market 2000 Report'' in 1994. Since then, new 
forms of competition, technology, global growth in trading, and 
broader investor participation have integrated and 
interconnected the world's capital markets as never before. 
While many academic studies find that these trends have 
generally benefited retail investors in the form of lower 
trading costs, there have been a number of well-publicized 
technology failures in the past few years. Do you agree with 
Commissioner Gallagher that it is time to undertake a new 
comprehensive review of market and regulatory structure?

A.12. I agree with Commissioner Gallagher that the SEC needs to 
be in a position to fully understand all aspects of today's 
marketplace and, if confirmed, would take the steps necessary 
to achieve that objective. As I noted in my testimony, today's 
high-speed, high-tech, and dispersed marketplace raises many 
questions and concerns that must be addressed with a sense of 
urgency. I have not yet had an opportunity to discuss these 
issues with the Commissioners and staff, but generally believe 
that the SEC should follow a path that will enable it to 
address market and regulatory structure issues as expeditiously 
as possible.
                                ------                                


         RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
                       FROM MARY JO WHITE

Q.1. A recent New York Times editorial noted that, ``to earn 
and retain the public trust, it is crucial that [Ms. White] 
avoid the appearance of conflict in all SEC matters.'' To 
address the numerous conflict of interest concerns raised by 
many, you have indicated that in addition to direct conflicts 
involving your former law firm or clients, you will also 
consider the appearance of conflicts, including those that 
arise due to your husband's relationship to Cravath, Swaine & 
Moore LLP (Cravath). Please explain how you will avoid the 
appearance of conflicts that stem from Mr. White's 
participation on the advisory boards of the Public Company 
Accounting Oversight Board (PCAOB) and the Financial Accounting 
Standards Board (FASB), particularly given the SEC's oversight 
of the PCAOB and the SEC's reliance on the FASB in establishing 
accounting rules that apply to public companies? In addition, 
what further assurance can you provide regarding the 
consultative process you will use to decide when recusal is 
appropriate with respect to any matter in which Cravath appears 
before the Commission?

A.1. As I emphasized in my testimony, I am sensitive to any 
potential conflicts issues that could arise as a result of my 
or my spouse's (or our firms') legal practices. These issues 
were fully discussed and vetted with the Office of Government 
Ethics (OGE) and the SEC Ethics Counsel. During this process, I 
was informed that the extent of my possible conflicts and 
recusals are not out of the ordinary for other nominees, 
including former Chairmen of the SEC and other Commissioners. 
The Committee has my written Ethics Agreement that I have 
entered into with the SEC's Ethics Counsel and that agreement 
sets forth the manner in which these issues will be addressed.
    I am also sensitive to any appearance concerns that could 
arise due to my spouse's participation as an unpaid member of 
the advisory groups of the PCAOB and the FASB. These issues 
were also fully discussed and vetted with OGE and the SEC 
Ethics Counsel. My Ethics Agreement sets forth the manner in 
which these issues will be addressed. I will also consult with 
the SEC's Ethics Counsel and the SEC's Chief Accountant 
regularly to insure that any appearance concerns are addressed. 
In addition, if confirmed I will work with the SEC's Office of 
Ethics Counsel as well as my own counsel to vet all party 
matters that come before the Commission in which Cravath is a 
party or represents a party to determine whether any conflict 
or appearance concern exists. Any potential conflict of 
interest will be resolved in accordance with the terms of my 
Ethics Agreement.

Q.2. In October 2011, the Securities & Exchange Commission 
issued guidance to public companies regarding the disclosure 
they should provide about cybersecurity risks and incidents. 
Since the guidance was issued, we have witnessed an increase in 
cybersecurity threats and breaches that threaten our companies, 
financial markets and our national security. In fact, on 
February 12, 2013, the President signed the ``Improving 
Critical Infrastructure and Cybersecurity'' Executive Order to 
address this increasing threat. Given the risks posed by 
cybersecurity threats to public companies and financial market 
participants and regulators that rely on computer systems, will 
you request the agency re-evaluate the efficacy of its October 
2011 guidance and report to Congress on how such guidance in 
being implemented? Would you also consider evaluating whether 
updated guidance is needed in light of the Executive Order?

A.2. One of the SEC's most important roles is to oversee the 
disclosure provided by public companies. In this role, the SEC 
seeks to assure that investors have the information they need 
to make informed investment decisions. While I understand that 
there are not specific line item requirements for cybersecurity 
risk and breaches, a number of existing disclosure requirements 
may result in disclosure in this area. Companies provide 
disclosure on cybersecurity risk based on a general materiality 
analysis of what a reasonable investor would need to know. As I 
understand it, the goal of the guidance put out by the SEC 
staff was to assist companies in reviewing cybersecurity issues 
within the existing disclosure framework, which, I believe, is 
well suited to eliciting material information without 
overwhelming investors with other information that may not help 
them to make informed investment decisions. If confirmed, I 
will review these issues with the staff and my fellow 
Commissioners.
    I certainly understand and agree that cybersecurity is a 
key national security issue and one that will only grow in 
importance in the coming years. The frequency and severity of 
the attacks on companies and governmental institutions will 
inevitably increase, and the President's and Congress' focus on 
this issue is critical. The goal of the SEC staff's guidance 
and the disclosure requirements of the Federal securities laws 
are directed at providing material information about risks 
facing a public company. I believe it is important for the 
Commission and the staff to remain focused on cybersecurity, as 
risks in this area can change rapidly. If confirmed, I look 
forward to the opportunity to work with Congress on this 
matter.

Q.3. The FSOC is comprised of members representing the various 
financial services regulators. Diversity of views on the panel 
is important and there is no one-size-fits-all regulation when 
it comes to financial stability issues. How do you see the 
SEC's role on the FSOC? How do you plan to ensure the SEC's 
mission of investor protection is incorporated into the FSOC's 
efforts?

A.3. The FSOC serves a critical purpose by providing a cross-
agency focus on financial stability issues. I also believe the 
FSOC is an important and useful forum for the sharing of 
information and collaboration among financial services 
regulators.
    If confirmed as Chair, I would expect to be an engaged and 
active participant in the FSOC. Further, I would encourage 
staff to constructively share information with the FSOC's 
financial regulators and educate them on the role of the SEC as 
a capital markets regulator with a mission to protect 
investors, maintain fair, orderly, and efficient markets, and 
facilitate capital formation. As laid out in its 2011 and 2012 
annual reports, the FSOC has described its purposes as 
identifying risks to financial stability, promoting market 
discipline by eliminating expectation of Government protection 
from losses, and responding to emerging threats to the 
stability of the U.S. financial system. These purposes would 
seem to complement the SEC's mission and investor protection 
focus, and if confirmed as Chair of the SEC, I would expect to 
work with my fellow FSOC members to foster that outcome.

Q.4. The Dodd-Frank Act required the SEC to adopt rules 
mandating that municipal advisors register with the SEC. The 
SEC proposed rules in this area in 2010. Is it your intention, 
if you are confirmed as the SEC chair, to move to adopt final 
municipal financial advisor rules?

A.4. If confirmed, I will work closely with staff and my fellow 
Commissioners to finalize and adopt these important rules 
promptly to protect municipal entities and investors without 
unnecessary regulation.

Q.5. Have you had an opportunity to review the SEC's report on 
the municipal securities market, which was issued last year? If 
so, what are your thoughts with respect to the report's 
recommendations?

A.5. I am familiar with the Commission's Report on the 
Municipal Securities Market. Although I have not yet had the 
opportunity to review it in detail and discuss it with staff 
and my fellow Commissioners, I appreciate that this significant 
Report addresses two major areas that warrant careful 
consideration to ensure a stronger municipal securities market 
in the future. First, the Report made several important 
legislative and regulatory recommendations in the municipal 
disclosure area to improve the timeliness and uniformity of 
municipal disclosure and financial statements, including a 
recommendation to provide the SEC with direct authority to set 
baseline disclosure standards in this area. Second, the Report 
made a series of recommendations in the market structure area 
to improve price transparency in the municipal securities 
market.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
              SENATOR MENENDEZ FROM MARY JO WHITE

Q.1. Dodd-Frank Wall Street Reform requires the SEC to issue a 
uniform fiduciary standard to require all financial 
professionals--including broker-dealers who are not currently 
covered--to act in the best interests of their investors when 
providing investment advice. Fiduciary standards should apply 
to all professionals who give people investment advice. Do you 
see any reason why we should not have a uniform standard that 
includes broker-dealers? Will you move this provision forward 
in a timely manner?

A.1. Broker-dealers and investment advisers both provide 
investment advice, but are regulated differently when doing so. 
Whenever different standards apply to the same activity, I 
believe regulators should carefully consider whether such 
distinctions make sense from both the perspective of investors 
and industry. Section 913(f) of the Dodd-Frank Act gives the 
SEC the authority to adopt rules requiring a uniform fiduciary 
standard for the provision of personalized investment advice 
about securities to retail customers. As you know, the 
Commission very recently published a release requesting input 
from the public on a uniform fiduciary standard of conduct for 
broker-dealers and investment advisers. The release contained 
details about how a uniform fiduciary standard of conduct could 
operate. I am very much looking forward to reviewing with the 
Commissioners and the staff the information provided in 
response to that release. The goal in this effort should be to 
make sure that investors, particularly retail investors, are 
appropriately protected and have access to, and choices about, 
the type of investor-focused investment advice that they need.

Q.2. Wall Street Reform required the SEC to issue a rule on 
corporate political spending. The SEC has received over 490,000 
public comments asking for disclosure of political spending. 
The SEC's important move to consider this rule and its 
statement that it will issue a NPRM shows that they are 
adapting to the new way corporate money is being used in the 
marketplace, and that they take their mandate to protect 
investors seriously. Investors are told this corporate spending 
is for their benefit, and so should have an SEC rule that will 
allow them to assess that claim. How will you move this 
important rule forward when you take office?

A.2. Although the Commission is not required to issue a rule on 
corporate political spending, I understand that the Commission 
has received two rulemaking petitions asking the Commission to 
require the disclosure of political contributions made by 
public companies. These petitions have received considerable 
attention, both from those in favor and from those opposed. The 
staff is reviewing the petitions to determine whether or not to 
recommend any rulemaking in this area. It would be premature 
for me to make an assessment of the merits of the petitions, or 
to pre-judge the disclosure requirement generally, without the 
benefit of the staff's review.

Q.3. The SEC's Office of Minority and Women Inclusion (OMWI) is 
now up and running. The reason for creating these offices was 
that there just is not enough minority representation within 
our financial regulators. What will you do to increase the 
number of minorities and women, especially in management 
positions and as contractors, at the SEC?

A.3. I have met with the Director of the SEC's OMWI to discuss 
how I can personally help in this critical effort. If 
confirmed, I intend to give my full support to OMWI to ensure 
that the SEC has staff, infrastructure, and strategies in place 
to make significant strides in these areas. I will take a close 
look at the agency's management organization and training 
programs, and also will encourage the agency's managers and 
senior staff to work with OMWI both to expand the breadth of 
contracting opportunities available to minority-owned and 
women-owned businesses and to advocate for their inclusion in 
the competitive contract award process. I plan to make visible 
my commitment to diversity to ensure that the SEC's workforce 
and supplier base reflect the increasing diversity of our 
Nation and of the investing public the agency is charged with 
protecting.

Q.4. A bipartisan amendment led by Senators Franken and Wicker, 
which I supported, was added to Dodd-Frank that gave the SEC 
the authority to do a rulemaking to reduce conflicts of 
interest in the credit rating industry. Are you committed to 
aggressively using the Commission's authority to make sure that 
conflicts of interest are rooted out?

A.4. This is a very important issue. I am committed to ensuring 
that all violations of the Exchange Act and the rules 
thereunder regarding prohibiting or managing conflicts of 
interest are aggressively pursued. In the report to Congress 
pursuant to Section 939F of the Dodd-Frank Act issued in 
December 2012, the SEC staff recommended that the Commission, 
as a next step, convene a public roundtable to explore 
potential regulatory and statutory changes to further address 
any conflicts of interest. The roundtable will be held on May 
14 and, if confirmed, I look forward to participating with the 
other Commissioners.

Q.5. On the issue of money market mutual funds, there has been 
a great deal of discussion recently, from the role they play 
for consumers in the financial markets and whether or not new 
regulations are warranted in this space. I would appreciate 
your thoughts on whether you think money market funds played a 
role in the financial crisis and the current status of 
regulations of these products, as well as the process we might 
expect from the SEC moving forward as far as reviewing comment 
letters and hearing from affected parties in determining 
whether or not there's a need for new regulations.

A.5. As you know, late last year the SEC's Division of Risk, 
Strategy and Financial Innovation issued a report analyzing the 
run on money market mutual funds during the financial crisis 
and its potential causes and consequences. I have reviewed that 
report and, if confirmed, I am committed to continuing my 
review of this important set of issues. If confirmed, I also 
look forward to discussing with the SEC Commissioners and staff 
the potential need for further regulatory reform of money 
market mutual funds and, if so, what reforms would be optimal. 
I would expect that SEC staff would review all relevant comment 
letters, and I would look forward to hearing from any 
interested parties regarding the potential need for further 
reform as well as any impact potential further reforms could 
have.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                       FROM MARY JO WHITE

Q.1. In response to a question from Senator Menendez, 
``consider consequences in their remedies so that, for example, 
a corporate fine that in effect would have a grievous impact on 
innocent shareholders is taken into account in terms of 
remedies that they seek.'' You elaborated on this answer to me: 
``do consider consequences in their remedies so that, for 
example, a corporate fine that in effect would have a grievous 
impact on innocent shareholders is taken into account in terms 
of remedies that they seek''
    Is it the SEC's policy that institutions with more 
shareholders should be subject to lower penalties?
    Under Dodd-Frank's Title II Orderly Liquidation Authority, 
shareholders will be wiped out. The Nation's second largest 
bank has nearly 3,700 institutional and mutual fund 
shareholders alone.

A.1. No, it is my understanding that while the Commission 
analyzes a number of factors when determining the 
appropriateness of particular penalties imposed or sought in 
its enforcement actions, it does not to my knowledge have a 
policy that would dictate that a public company should receive 
higher or lower penalties simply as a result of its market 
capitalization or number of shareholders. What I was referring 
to in my testimony was the SEC's 2006 corporate penalty policy, 
which discusses the consideration of, among other things, 
whether current shareholders of the corporation were 
beneficiaries of the allegedly fraudulent conduct in 
determining the appropriate penalty level.

Q.2. Would the SEC consider whether a particular penalty would 
send this institution into Orderly Liquidation, thus wiping out 
these 3,700 shareholders, when determining whether such penalty 
is appropriate?

A.2. The Commission's penalty authority is limited by statute 
to certain specified tiers tied to particular levels of 
misconduct, and the Commission does not currently have penalty 
authority that would allow it to impose significantly larger 
penalties--for example, penalties calculated based on investor 
loss. Based on my understanding of the Commission's existing 
penalty authority, it is difficult to imagine a situation where 
an SEC enforcement action could result in a penalty of the 
nature envisioned by your question. Nonetheless, as indicated, 
I understand that the Commission considers a number of factors 
when determining the appropriateness of a particular penalty 
imposed or sought in one of its enforcement actions, but, to my 
knowledge, has no policy mandating that a particular penalty 
not be imposed because of anticipated collateral consequences.

Q.3. The SEC's so-called Guide 3 rules governing financial 
disclosures by Bank Holding Companies were written in the 
1970s. The largest financial institutions have grown 
significantly since then--as I said at your hearing, 18 years 
ago, the six largest banks had assets equal to 18 percent of 
GDP, whereas today they equal 64 percent of GDP. They are also 
much more complex--the six largest banks have around 14,420 
subsidiaries.
    Do you believe that the Guide 3 rules should be updated to 
reflect the growth and complexity of financial institutions?

A.3. I have not yet had the opportunity to discuss the 
disclosure rules for financial institutions with the 
Commissioners and the staff, but if confirmed, I will work with 
the Commissioners and the staff to review the effectiveness of 
the existing disclosure regime for these companies. As a 
general matter, I agree that consideration should be given to 
whether the staff should conduct an evaluation of the guidance 
set forth in Industry Guide 3 in light of the growth and 
complexity of financial institutions since it was issued.

Q.4. Should these disclosures be simplified so that investors 
have access to a more accurate picture of a financial 
institution's balance sheet?

A.4. Investors should have as accurate a picture as possible of 
every company's financial statements. I also believe that we 
should always strive for the most meaningful and understandable 
disclosure. It is also important to recognize that the 
financial reporting of the Nation's largest financial 
institutions is complex because the institutions themselves are 
complex, and, therefore, finding the right balance will 
continue to be a significant challenge. To address this, a 
review of the disclosure regime for these companies should also 
include an evaluation of how disclosures might be presented in 
a manner that is calibrated to the needs of different 
investors.

Q.5. Would you support a requirement that institutions 
disclose, on a quarterly and annual basis, all settlements, 
judgments, enforcement actions, and penalties brought against 
such institution?

A.5. I understand that disclosure of settlements, judgments, 
enforcement actions, and penalties brought against financial 
institutions is an important issue, and I would be interested 
in working with the staff to understand current practices and 
evaluating the adequacy of existing disclosure rules in this 
area.

Q.6. Upon leaving, your law firm, Debevoise & Plimpton, will 
give you $42,500 a month in retirement pay for life, or 
$510,000 per year, through the firm's partner-retirement plan. 
Debevoise would make a lump-sum payment to you in lieu of 
monthly retirement checks for the next 4 years, while you serve 
as SEC Chair. After that, your monthly payments would resume 
for life. Other Chairmen and Commissioners--Republicans Harvey 
Pitt and Daniel Gallagher, for example--severed all financial 
ties with their law firms when they went to work at the SEC.
    Doesn't your compensation arrangement create the perception 
that your financial future is tied to the performance of your 
former firm?
    Why not cut all financial ties with Debevoise & Plimpton?

A.6. If confirmed, I will retire from Debevoise & Plimpton LLP. 
I do not believe that the payment of retirement benefits to me 
should raise the perception you note. This retirement 
arrangement has been vetted by the U.S. Office of Government 
Ethics (OGE) and does not constitute a continued interest in 
the profitability or performance of the firm. I have earned 
this retirement benefit as a result of my years of work at the 
firm. (It is my understanding that neither former Chairman Pitt 
nor Commissioner Gallagher was eligible for retirement or 
retirement benefits at the time they left their firms to join 
the SEC.) The retirement benefit that I am entitled to receive 
is the same benefit available to any retiring partner at the 
firm. Like all retired partners, under the retirement plan, I 
am entitled only to the specified lifetime benefits, not to the 
cash value of such benefits in an up-front payment. And, 
although there is no realistic possibility that any matter at 
the SEC could impact Debevoise's willingness or ability to make 
the required retirement payments to me, under the terms of my 
Ethics Agreement, I would be recused from participating in any 
such matter.

Q.7. During the 2008 bailouts, many large financial firms made 
representations about their financial conditions and failed to 
disclose, or made vague disclosures, regarding assistance 
provided to them by the Federal Reserve, FDIC, or United States 
Treasury.
    Section 501.06c of the SEC's Codification of Financial 
Reporting Policies requires that any financial assistance that 
has ``materially affected, or are reasonably likely to have a 
material future effect upon, financial condition or results of 
operations, the [Management Discussion & Analysis portion of a 
company's 10-K] should provide disclosure of the nature, 
amounts, and effects of such assistance.''
    Do you agree that loans from the Federal Reserve, 
guarantees from the FDIC, or capital injections from the United 
States Treasury could materially affect the future financial 
conditions of financial large institutions?
    Do you believe that this support should be clearly 
disclosed to investors at the time that they occur?

A.7. A loan or other financial assistance from the Federal 
Government could materially affect the future financial 
condition of a large financial institution if that institution 
is in need of additional liquidity--and thus would require 
disclosure. On the other hand, there could be circumstances 
where a loan or other financial assistance is provided to a 
financial institution where the amount of the loan or the 
nature of the financial assistance is not material--whether 
because the financial institution is not in need of the 
liquidity or the amount of the assistance is not material. 
Materiality is a very fact specific analysis that will differ 
from one financial institution to another. If a financial 
institution receives assistance in the form of a loan or 
similar obligation that is material to the financial 
institution, it would be required to provide disclosure in a 
Current Report on Form 8-K within four business days of 
receiving the assistance. I think it is important for financial 
institutions to carefully and broadly consider their 
materiality analyses as they relate to the receipt of financial 
assistance from the Federal Government.

Q.8. You have been credited with creating the Deferred 
Prosecution Agreement when prosecuting Prudential Securities. 
Since 2009, the Justice Department has used DPAs on a number of 
financial institutions, however, it has recently adopted an 
approach that permits it to criminally charge smaller foreign 
subsidiaries of financial companies.
    It has been noted that the Securities and Exchange 
Commission began using DPAs in 2010, and that the SEC's 
financial crisis cases--including a settlement with your former 
client JPMorgan Chase for selling faulty mortgage securities--
have rarely named executives as defendants.
    Do you believe that the widespread use of DPAs is 
appropriate?
    Do you continue to believe that DPAs are an appropriate 
tool for the largest financial institutions?
    What will be your approach to using DPAs? Will you continue 
the SEC's policy regarding the use of DPAs, or will you push 
for more companies and executives to admit guilt as part of 
settlements?

A.8. In appropriate circumstances, I believe that DPAs can be 
an effective tool for addressing corporate misconduct, 
particularly by making sure that companies and other entities 
implement remedial measures and other reforms to ensure future 
compliance with the law. In addition, DPAs can be used to help 
secure an entity's self-reporting of misconduct and 
extraordinary cooperation against the individuals responsible 
for the wrongdoing. I understand that in 2010, the SEC 
initiated a series of measures to strengthen its enforcement 
program by encouraging greater cooperation from individuals and 
companies in the agency's investigations and related 
enforcement actions. These initiatives, which included the use 
of DPAs, were patterned after the cooperation tools that 
criminal authorities have regularly and successfully used for 
years.
    I understand that under the cooperation measures adopted in 
2010, the SEC issued a policy statement setting forth a 
framework for analyzing and evaluating cooperation in 
investigations and related enforcement actions in evaluating 
appropriate dispositions. Each situation is dependent on the 
facts and circumstances, but if confirmed as Chair, I will 
review with the staff the appropriate use of DPAs in resolving 
SEC enforcement matters.

Q.9. Do you believe that requiring firms to admit to, or be 
charged with, criminal liability will cause the ``loss of jobs, 
the loss of pensions and other significant negative 
consequences to innocent parties who played no role in the 
criminal conduct''?

A.9. The SEC does not have the authority to charge firms with 
criminal liability. The SEC's mandate is to enforce the Federal 
securities laws, and I understand that the Commission seeks to 
hold wrongdoers accountable wherever it identifies evidence 
sufficient to establish a violation of those laws. As discussed 
in my testimony, the DOJ has a long-standing policy that 
Federal prosecutors should consider, among other factors, the 
collateral consequences of a corporate indictment in evaluating 
bringing charges against a business organization. The actual 
collateral consequences of a corporate criminal charge will 
vary case to case.

Q.10. An important component of SEC settlements is the 
requirement that financial institutions agree not to breach 
antifraud laws in the future. According to the New York Times, 
during the last 15 years, at least 51 enforcement actions were 
brought against at least 19 Wall Street firms for breaking 
antifraud laws they had agreed never to breach. These companies 
included: American International Group, Bank of America, Bear 
Stearns, Deutsche Asset Management, Credit Suisse, Goldman 
Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, RBC Dain 
Rauscher, UBS, and Wells Fargo/Wachovia.
    Should there be increased penalties for firms that violate 
their pledges not to break laws, in addition to the penalties 
for breaking those laws?

A.10. It is my understanding that the staff will consider 
recidivism in evaluating appropriate penalties for a current 
enforcement action, but that the Commission's existing 
statutory penalty authority does not authorize it to seek a 
specific penalty enhancement for a defendant that has 
previously been subject to a judgment or order in an SEC 
action. Nor does existing statutory authority authorize the SEC 
to seek a civil penalty if an individual or entity has violated 
an existing Federal court injunction or bar obtained or imposed 
by the SEC in an enforcement action. Former SEC Chairman Mary 
Schapiro requested that Congress provide the SEC with such 
enhanced statutory penalty authority, as well as additional 
enhanced statutory penalty authority. I support that request 
and I believe that this approach would be more efficient, 
effective, and flexible than the limited and cumbersome civil 
contempt remedy. I understand that such authority also would be 
comparable to the Commission's existing ability to obtain civil 
penalties for violations of its administrative Cease and Desist 
orders. A bipartisan bill has been introduced in the Senate to 
enhance the SEC's penalty authority and, if confirmed as Chair, 
I look forward to working with Congress on that important 
legislation.

Q.11. Should the Commission consider the fact that a firm has 
broken one of these pledges, and whether it has done so 
repeatedly?

A.11. As indicated, I support Chairman Schapiro's request to 
Congress for additional penalty authority to authorize the 
Commission to seek an enhanced penalty against a defendant that 
has been subject to a judgment or order in an SEC action within 
the previous 5 years and to seek a civil penalty against a 
defendant that has violated an existing Federal court 
injunction or bar obtained or imposed in an SEC action. If 
Congress authorizes such enhanced penalty authority, and if 
confirmed as Chair, I would work with my fellow Commissioners 
and the Division of Enforcement to exercise that authority 
where appropriate. As also indicated, I believe the Enforcement 
staff does consider recidivism in evaluating appropriate 
penalties for enforcement actions.

Q.12. You previously represented JPMorgan Chase. According to 
the New York Times, ``despite six securities fraud settlements 
in 13 years, JPMorgan rarely if ever lost any special 
privileges. It has been awarded at least 22 waivers since 2003, 
with most of its SEC settlements generating two or more. In 
seeking the reprieves, lawyers for JPMorgan stated in letters 
to the SEC that it should grant a waiver because the company 
has `a strong record of compliance with the securities laws'. 
''
    The Times continues:

        Bank of America and Merrill Lynch, which merged in 
        2009, have settled 15 fraud cases and received at least 
        39 waivers . . . Only about a dozen companies . . . 
        have felt the full force of the law after issuing 
        misleading information about their businesses. 
        Citigroup was the only major Wall Street bank among 
        them. In 11 years, it settled six fraud cases and 
        received 25 waivers before it lost most of its 
        privileges in 2010. By granting those waivers, the SEC 
        allowed Wall Street firms to have powerful advantages, 
        securities experts and former regulators say. The 
        institutions remained protected under the Private 
        Securities Litigation Reform Act of 1995, which makes 
        it easier to avoid class-action shareholder lawsuits.

    Do these repeat offenders have strong records of compliance 
with securities laws, in spite of their frequent pattern of 
violations?
    The SEC's head of Corporate Finance told the New York Times 
that the purpose of these rules is to protect investors. Do 
investors need to be protected from repeated legal violations 
by the largest broker dealers?
    As Chairman of the SEC, will you revisit this waiver policy 
in a manner that is less friendly to large broker-dealers?

A.12. I have not yet had the opportunity to discuss in detail 
the issue of waivers with the Commissioners and the staff, but 
will examine the issue if confirmed. I believe strong 
enforcement is necessary for investor confidence and is 
essential to the integrity of our financial markets. And, I 
certainly believe that wrongdoers must be held accountable for 
their misconduct, including large broker dealers. As a general 
matter, when considering whether a waiver would be appropriate, 
I believe consideration should be given to the purpose of the 
specific disqualification and whether a waiver would be 
consistent with the Commission's goals of protecting investors, 
maintaining fair, orderly, and efficient markets, and 
facilitating capital formation.

Q.13. The central premise of the JOBS Act, which I did not 
support, was that reducing long-standing investor protections 
would make it easier for companies to raise capital and 
therefore lead companies to create more jobs. Chairman Schapiro 
was very strong in voicing her opposition to that legislation, 
however, I am concerned that some, including members of the 
SEC's Advisory Committee on Small and Emerging Companies, 
continue to press for further deregulation.
    Do you believe that the JOBS Act will achieve its stated 
purpose?
    Do you have any concerns with the JOBS Act, generally, or 
any of its specific provisions?
    Can you assure us that the SEC will not, absent a specific 
directive from Congress, move forward with any further 
deregulatory proposals?

A.13. As I understand it, through the JOBS Act, Congress was 
seeking to address, at least in part, the decline in the number 
of initial public offerings in the United States and the 
challenge faced by small businesses to raise capital. Both of 
these objectives are seen as catalysts for supporting the 
growth and development of small businesses, which are drivers 
of job growth. It is too early to tell what impact the JOBS Act 
will have on strengthening small businesses and job growth.
    Investor protection is always a concern and priority for 
the SEC. A very important challenge for the Commission as it 
relates to the JOBS Act will be in its implementation. The 
success of the implementation and the ability for small 
businesses to have meaningful capital formation will depend on 
whether investors understand what they are investing in and 
feel secure in making such an investment. It will be critically 
important to consider this as the rules are implemented, but 
also after the rules are in place. If confirmed, I would work 
with the Commission and the staff to implement a robust program 
to review the capital raising practices that develop as a 
result of the JOBS Act and assess the impact these practices 
have on investors, capital formation and the markets generally.
    While I believe that the Commission should always consider 
whether its existing regulations should be further improved to 
encourage capital formation, if confirmed, I will be committed 
to ensuring that any such consideration would be coupled with a 
thoughtful, robust, and transparent review of the impact on 
investor protection.

Q.14. When Congress passed the JOBS Act, it included a number 
of measures to make it easier for companies to go public 
without having to immediately meet the full obligations of 
public companies (such as internal control audits, compliance 
with basic corporate governance rules related to executive 
compensation, and even adoption of new accounting and auditing 
standards). But, in our eagerness to promote IPOs, we have paid 
little attention to the need to reform the IPO process itself. 
Questions have surrounded some of the biggest recent IPOs--
questions about the adequacy of Facebook's disclosures 
regarding revenue trends around the time of its IPOs, for 
example, and about Groupon's failure to disclose, prior to its 
IPO, a material weakness in its internal controls. There are 
even lingering questions about the fairness of investment bank 
IPO practices around the dot.com boom and bust, as described in 
a recent column by New York Times columnist Joe Nocera. I am 
not suggesting that these are examples of illegal actions 
(though some may be).
    What would you do, a chairman, to ensure that the IPO 
process operates in a way that is fair to all participants?

A.14. The JOBS Act made significant changes to the Commission's 
rules concerning the offering process, disclosure, and 
communications in connection with initial public offerings. I 
believe it is too early to tell what impact these changes have 
had, or will have, on the IPO market and the way that IPOs are 
conducted. If confirmed, I would work with the staff to better 
understand the impact of the JOBS Act on offering practices and 
where challenges may still exist.
    As I noted in my written testimony, I believe that 
investors and all market participants need to know that the 
playing field of our markets is level. Accordingly, when issues 
that frustrate the fundamental integrity of our markets are 
identified, I believe that the investing public and market 
participants deserve appropriate and timely regulatory and 
enforcement responses. If confirmed, I would look forward to 
working with the staff and the Commission on the important 
issue of ensuring the fairness of the IPO market.

Q.15. Do you have a view on areas that may be most in need of 
reform?

A.15. I have not yet had the opportunity to discuss the issue 
of reforms to the IPO process with the Commissioners and the 
staff, but if confirmed, I would work with the staff and my 
fellow Commissioners to better understand the range of current 
IPO practices and offering practices generally. I believe 
continued improvement and transparency is important and should 
be supported by all market participants. In general, I believe 
that the Commission's offering rules must keep pace with 
innovations in technology and methods of communication in order 
to properly balance its mission to protect investors, 
facilitate capital formation, and maintain fair and orderly 
markets. If confirmed, I would seek to ensure that the 
Commission continues to assess the effectiveness of its rules 
in light of evolving communications technology, and, 
importantly, changes in the manner in which companies and 
investors communicate. The costs and benefits of the regulatory 
structure governing communications during offerings should be 
considered as a part of that review.

Q.16. Every year thousands of investors file complaints against 
their stockbrokers and investment advisers. Almost every 
broker-dealer and many investment advisers include in their 
customer agreements a mandatory pre-dispute arbitration 
provision, with some now also including class action waivers. 
Section 921 of the Dodd-Frank Act authorizes and delegates to 
the Commission the responsibility to reform or prohibit pre-
dispute arbitration requirements if it finds that such changes 
are in the public interest and for the protection of investors. 
Congress has, in effect, given the SEC both the tools and a 
mandate to act in this area.
    Will the SEC take a serious look at the use of mandatory 
pre-dispute arbitration agreements?

A.16. I have not yet had the opportunity to discuss this issue 
with the Commissioners and staff, but, as you noted, Section 
921 of the Dodd-Frank Act amended the Securities Exchange Act 
of 1934 and the Investment Advisers Act of 1940 to provide the 
Commission with authority to conduct rulemaking, under certain 
circumstances, relating to agreements that require customers or 
clients to arbitrate any future disputes arising under the 
Federal securities laws or related rules or regulations. If 
confirmed, I commit to exploring the use, reform, and possible 
prohibition of these mandatory pre-dispute arbitration 
agreements.

Q.17. If the SEC concludes that these agreements are, in fact, 
not in the best interest of investors (in other words, the 
threshold set forth in the statute has been met), will the SEC 
exercise its authority under Section 921 and will it take 
action to limit or prohibit the use of these contract clauses?

A.17. If confirmed, I commit to exploring with the staff and my 
fellow Commissioners the use, reform, and possible prohibition 
of these mandatory pre-dispute arbitration agreements. At this 
point, I am not able to commit to any specific outcome or 
approach.

Q.18. The Foreign Corrupt Practices Act (FCPA) forbids U.S. 
companies and their subsidiaries from paying foreign Government 
officials to obtain or retain business. The New York Times has 
reported that Walmart, one of the largest companies in the 
United States, bribed Mexican officials in exchange for permits 
to open new stores. According to that story, members of the 
highest levels of company's management also quashed an internal 
investigation in 2005 into the alleged bribery, and failed to 
notify the SEC and shareholders of either the allegations or 
the investigation. Only now, with the SEC and Justice 
Department investigating Walmart, are shareholders learning 
that the company believes that it may have committed additional 
FCPA violations in China, India, and Brazil. Meanwhile, the 
U.S. Chamber of Commerce has argued that the FCPA hampers the 
ability of U.S. companies to compete overseas and is leading a 
movement to weaken the law.
    What steps will you take to ensure that the SEC sends a 
clear message about the importance of complying with the 
Foreign Corrupt Practices Act?

A.18. I believe that the SEC has a strong record of FCPA 
enforcement. I understand that the Commission has filed a 
number of significant FCPA actions in recent years that have 
imposed penalties and other sanctions against U.S. and non-U.S. 
companies that have engaged in bribery of foreign officials to 
obtain or retain business abroad and that have failed to 
implement strong policies and procedures to ensure FCPA 
compliance at their subsidiaries operating around the world. I 
believe that the SEC's FCPA enforcement actions can have a 
powerful deterrent impact--typically, they are carefully 
studied by the private bar and by compliance professionals at 
U.S. companies with overseas operations. I also understand that 
the SEC's Enforcement Division has a specialized FCPA unit with 
investigative attorneys and industry experts at SEC offices 
around the country dedicated to FCPA investigations. This FCPA 
Unit worked extensively with the Department of Justice to 
develop and issue the recent FCPA Guidance that explains how 
the Government interprets the FCPA and seeks to educate 
companies about the limits of permissible conduct. I believe 
that the deterrence obtained through the SEC's FCPA enforcement 
actions, along with the prevention that the SEC believes can be 
obtained through the FCPA Guidance, sends a clear message about 
the importance of complying with the FCPA.

Q.19. FCPA enforcement often involves only the corporation with 
no related individual prosecutions. Do you agree that a more 
effective deterrent of FCPA violations necessitates individual 
prosecutions?

A.19. As indicated, I understand that the SEC has brought a 
number of significant FCPA enforcement actions in recent years. 
I assume that where there has been sufficient evidence to 
charge individual executives or employees in connection with 
the company's FCPA violations, the Commission has not hesitated 
to do so. In fact, numerous recent FCPA enforcement actions 
have involved charges against individuals. I believe that full 
enforcement of the FCPA means investigating potential 
violations and pursuing the evidence wherever it leads, 
including appropriate actions against individual executives and 
employees. It is also my understanding that both the DOJ and 
SEC have in recent years emphasized the importance of 
prosecuting individuals (as well as companies) in appropriate 
cases. I agree with that emphasis.

Q.20. What is your position on the U.S. Chamber of Commerce's 
call to amend the FCPA?

A.20. I believe that the FCPA sends a powerful message that 
bribery of foreign officials cannot be a way of doing business 
for U.S. companies operating abroad. If confirmed, as 
indicated, I would continue the SEC's existing focus on strong 
FCPA enforcement. I also believe that the recently issued SEC-
DOJ FCPA Guidance educates U.S. companies about the limits of 
permissible conduct and also makes clear how the SEC would 
reward companies that adopt compliance programs that are 
effective in preventing FCPA violations. With respect to 
proposed amendments to the FCPA, if confirmed, I would further 
study this issue.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                       FROM MARY JO WHITE

Q.1. Right now there are about 50 rules under the SEC's 
jurisdiction that have missed their deadlines. In the case of 
the crowdfunding rules, the delay is legitimately holding up 
capital formation among startups. Can you respond to how you 
might confront the SEC's challenging workload as Chairman, and 
what improvements can be made in order to expedite the 
regulatory process in a prudent manner?
    Specifically in the JOBS Act, how might the SEC move the 
Title III Crowdfunding regulations more expeditiously? I know 
you are working through concerns about private placements and 
the new definition of accredited investors. However, some level 
of predictability about what is expected from securities 
crowdfunding platforms would help this sector develop 
appropriately.

A.1. Under the Dodd-Frank Act and the JOBS Act, the SEC was 
mandated to engage in extensive and complex rulemaking. A 
substantial number of rulemakings have been completed, but a 
substantial number have not, including the crowdfunding rules. 
The remaining rulemaking mandates contained in the Dodd-Frank 
Act and JOBS Act must be completed swiftly. Though voluminous, 
if confirmed, I will work with the staff and my fellow 
Commissioners to finish, in as timely and smart a way as 
possible, those mandates required by Congress. This will 
require, I believe, strong leadership of parallel workstreams 
and close consultation with each of my fellow Commissioners. In 
working through the remaining rulemakings under Dodd-Frank and 
the JOBS Act, I will be cognizant of potential improvements 
that could be made to make the regulatory process more 
efficient.
    As I indicated in my testimony, completing the rulemaking 
mandates that the Commission has received from Congress, 
including the crowdfunding rulemaking mandated under Title III 
of the JOBS Act, will be a high priority for me if confirmed. 
An important first step in this process will be for the 
Commission to issue a rule proposal on which issuers, 
investors, potential crowdfunding intermediaries, and other 
interested parties may comment. My understanding is that 
Commission staff has been actively working on a rule proposal 
for the Commission's consideration. I also understand that 
Commissioners and staff have met with a number of interested 
groups, and the staff has engaged in collaborative discussions 
with FINRA, the relevant national securities association for 
crowdfunding intermediaries, about the most efficient and 
effective way to move forward with the rulemaking. If 
confirmed, I will consult with the Commission and staff to 
determine how best to move forward with rule proposals to 
implement the crowdfunding provision.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR HAGAN
                       FROM MARY JO WHITE

Q.1. In August 2012, the SEC adopted conflict minerals rules to 
implement Section 1502 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act. These rules require public companies 
with conflict minerals that are necessary to the functionality 
or production of their products to make annual disclosures in 
their SEC filings, obtain an independent audit and post 
information on their Web sites. Aside from the actual 
disclosure and independent private sector audit that is 
required (other than during a brief transition period), I 
understand than an extensive process is required for companies 
to determine if they are subject to the rules.
    When the SEC proposed these rules, it estimated that the 
additional costs of the disclosure requirements would be less 
than $75 million. Commentators responded that the SEC had 
vastly underestimated the costs of the rules. Professors from 
Tulane University estimated the costs to be $7.93 billion, and 
the National Association of Manufacturers estimated cost of $8-
16 billion. After reviewing this input, the SEC concluded that 
the implementation costs of the revised rules would be $3-4 
billion, and the ongoing compliance costs would be $207-609 
million. It nevertheless proceeded to adopt final rules.
    Given the extraordinary cost of these rules, do you think 
the SEC should have adopted the final rules?

A.1. The Dodd-Frank Act required the SEC to promulgate the 
final rule. In fulfilling this mandate, the Commission tried to 
reduce the burden of compliance in areas in which it had 
discretion while remaining faithful to the language and intent 
of the statutory provision Congress adopted. The rule has been 
challenged in court, and the extent of the Commission's 
responsibilities in light of the cost is at issue, so it would 
be inappropriate for me to comment further at this point.

Q.2. Given the pending legal challenge to the SEC's conflict 
minerals rules what steps do you plan on taking if confirmed as 
Chairman to lessen the prospect of these legal challenges?

A.2. A thoughtful and transparent rulemaking process--which 
includes a careful economic analysis--is an essential part of 
agency decision making and rulemaking. While it is impossible 
to predict or control the choices that potential litigants may 
make when contemplating a court challenge to an SEC rulemaking, 
I believe that such analyses to support SEC rules will lessen 
the strength of many arguments raised against our rules.

Q.3. The issue of fiduciary duty is one that has received 
considerable attention.
    What are your thoughts on harmonizing the standard of care 
for investment advisers and brokers?
    Along these lines and agency harmonization, do you believe 
that the SEC should work with the Department of Labor to ensure 
that there is a consistent standard of care, or at least 
workable dual models, for those who provide investment advice 
for retail products and retirement plans?

A.3. Broker-dealers and investment advisers both provide 
investment advice, but are regulated differently when doing so. 
Whenever different standards apply to the same activity, I 
believe regulators should carefully consider whether such 
distinctions make sense from both the perspective of investors 
and industry. As you know, the Commission very recently 
published a release requesting input from the public on a 
uniform fiduciary standard of conduct for broker-dealers and 
investment advisers. The release contained details about how a 
uniform fiduciary standard of conduct could operate. I am very 
much looking forward to reviewing with the Commissioners and 
the staff the information provided in response to that release. 
I believe that the goal in this effort should be to make sure 
that investors, particularly retail investors, are 
appropriately protected and have access to, and choices about, 
the type of investor-focused investment advice that they need.
    With respect to the SEC's coordination with the DOL, my 
understanding is that SEC staff has coordinated fairly 
extensively with DOL staff on the question of how to implement 
a workable fiduciary standard and the practical effect for 
financial services providers, particularly broker-dealers, of 
operating under a fiduciary duty. I think such coordination and 
discussion is important and, if confirmed, I would encourage 
the staff to pursue coordination with DOL and other regulators. 
I have every expectation that the SEC and the DOL will continue 
to collaborate on developments regarding the statutory 
standards each agency administers.

Q.4. Final implementing rules for the Volcker Rule have been 
significantly delayed. Given that the agencies will most likely 
not publish final rules until summer and that the statute 
explicitly recognized a minimum 2-year conformance period, do 
you expect that guidance should be given to extend the current 
implementation date beyond July 2014?

A.4. The Federal Reserve Board has sole authority under Section 
619 of the Dodd-Frank Act to determine whether the law's 
conformance period should be extended. However, I understand 
that the Commission has been consulted on issues regarding the 
Volcker Rule's conformance period in the past. If confirmed, I 
will review this issue and consult with the Federal Reserve 
Board to ensure that the requirements both implement the intent 
of Congress and provide adequate time for entities that the 
Commission supervises to make the changes necessary to fully 
comply.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
                       FROM MARY JO WHITE

Q.1. I'm very concerned about the revolving door that exists 
between the SEC and the private sector. Last month, the Project 
on Government Oversight released a report showing that, between 
2001 and 2010, more than 400 former-SEC employees filed almost 
2,000 disclosures indicating that they were representing a 
client in front of the SEC. Those disclosures were required to 
be filed only by former employees who had left the SEC within 
the previous 2 years--so the actual revolving door activity 
went beyond the reported 2,000 disclosures. I'm worried if 
someone works for the SEC and is already looking ahead to their 
next job, particularly their next very fancy, very high-paying 
job, that it might affect their judgment while they are still 
working at the SEC.
    Do you believe the revolving door is still a problem, and 
if so, can you talk about any plans you have to fix it?

A.1. Every agency needs to be concerned about both the fact and 
appearance of the so-called revolving door and must have rules 
in place governing post-employment activity, as well as strong 
mechanisms for dealing with any potential conflicts resulting 
from prior employment activity. I understand that the GAO 
issued a report that noted the SEC's post-employment procedures 
are similar to those of other regulatory agencies. In addition, 
the GAO only made one recommendation--that the agency has 
already adopted--related to documenting the advice that ethics 
officials provide to SEC employees before they depart. If 
confirmed, I would further review these issues.

Q.2. According the same report, the SEC heavily redacts the so-
called disclosures so that the public is often left in the dark 
about the real conflicts of interest. I think that's a mistake 
and that transparency here should be a bigger priority for the 
SEC. Do you agree?

A.2. As someone who previously served in Government, I too 
value transparency. But, without knowing what is being 
redacted, it is difficult for me to weigh the various factors 
that may be at play. I would, however, note that the reason 
these disclosures exist is because the SEC has a specific rule 
that requires former employees to notify the agency if they are 
going to appear before the Commission within 2 years of 
departure--something that goes beyond what is required by the 
Office of Government Ethics. If confirmed, I will look into the 
process regarding these disclosures.

Q.3. The consumer agency has met virtually all of its Dodd-
Frank rule-writing deadlines. The SEC has missed about half its 
deadlines.
    Can you outline your plans as SEC Chairman to make sure the 
SEC issues rules required by Dodd-Frank swiftly?

A.3. The rulemaking mandates contained in the Dodd-Frank Act 
must be completed swiftly. Though voluminous, if confirmed, I 
will work with the staff and my fellow Commissioners to finish, 
in as timely and smart a way as possible, those and any other 
mandates required by Congress. As an initial matter, I believe 
strong leadership of parallel workstreams and close 
consultation with each of my fellow Commissioners is required 
to complete this rulemaking in a responsible and expedited 
manner.

Q.4. To what extent do you think the SEC's reliance on 
appropriations for funding has played a role in the agency's 
failure to meet its rule-writing deadlines?

A.4. As one not yet employed at the Commission, I cannot yet 
speak specifically as to how the appropriations process may 
have impacted the Commission's ability to meet all of the rule-
writing deadlines imposed by the Dodd-Frank Act. I do note, 
however, that under the Dodd-Frank Act the SEC was given over 
90 complex rulemakings to complete without being given 
significant additional resources to do so. As a general matter, 
I also believe that the Commission has significant resource 
needs: to build out programs newly created under the Dodd-Frank 
and JOBS Acts; to strengthen other core agency functions like 
enforcement and examinations; and to continue critical 
investments in information technology. The fact that the 
Commission has been flat funded during FY13 in a Continuing 
Resolution--and frequently is funded under a Continuing 
Resolution--will make it difficult for the SEC to plan long-
term in hiring the experts and investing in the information 
technology projects the SEC needs to keep pace with its dynamic 
markets.

Q.5. To what extent do you think the dynamics around SEC's 
governance structure--a five-person board--has played a role in 
the agency's failure to meet its rule-writing deadline?

A.5. As one not yet employed at the Commission, I cannot speak 
specifically to how the five-person board structure has played 
a role in the agency's ability to meet all of the rule-writing 
deadlines imposed by the Dodd-Frank Act. As a general matter, 
while there are certainly benefits to a five-person Commission 
structure, it would also seem that the participation of 
multiple decision makers could impact the pace by which rules 
are promulgated. If confirmed, I look forward to working with 
my fellow Commissioners to finish, in as timely and smart a way 
as possible, all rulemaking mandates required by Congress.

Q.6. As you know, all of the bank regulators--the Federal 
Reserve Bank, the OCC, and the consumer agency--are funded 
independently--outside the political process. Earlier this 
week, in an Op-ed in Politico, former CFTC Chairman Brooksley 
Born and former SEC Chairman William Donaldson called for the 
CFTC and SEC to be independently funded as well. Do you believe 
that independent funding would increase the ability of the SEC 
to live up to its mission of protecting investors, the public, 
and the capital markets?

A.6. Yes. During the Dodd-Frank debate, I understand Congress 
considered making the SEC ``self-funded'' like the SEC's bank 
regulator counterparts. I believe that such a change, had it 
been made, would have been a significant benefit to the SEC in 
many respects, including closing the resource gap between the 
SEC and its regulated entities and in fulfilling its mission.
    While self-funding did not come to pass, there were 
significant changes made to the SEC's funding structure so that 
now it is charged with collecting transaction fees from the 
securities industry to match the SEC's appropriation. With this 
so-called matched-funding, a rise or fall in the SEC's 
appropriation is matched by an increase or decrease in 
transaction fee collections. This is significant, as no matter 
what level Congress appropriates, the SEC's budget is deficit-
neutral. I would hope that this change would make it easier for 
the SEC to receive the resources it badly needs to carry out 
its wide-ranging responsibilities on behalf of investors and 
our capital markets.

Q.7. Many Americans are concerned about the impact that well-
funded lobbying of large corporations--particularly Wall 
Street--has had on weakening and slowing down the SEC's rule-
writing process.
    Can you describe what you would do as SEC Chairman in 
general to stand up to lobbyists and help make sure the SEC 
lives up to its mission to protect investors, the public, and 
the capital markets?

A.7. While I will always listen to differing viewpoints, and 
think it is important to do so, my focus will be on doing what 
is right to protect investors and effectively overseeing our 
capital markets, focusing on aggressive enforcement of the 
securities laws and smart and timely regulation. At the end of 
the day, it is the responsibility of the Commission to do the 
right and best thing in every situation and to make every 
rulemaking decision to further the SEC's mission to protect 
investors, maintain fair, orderly and efficient markets, and 
facilitate capital formation. If confirmed, that is what I 
would always endeavor to do.

Q.8. At the hearing, we discussed the importance of measuring 
not only the costs of regulation in any cost-benefit analysis 
but also the costs of under-regulation--such as the costs of 
when too-big-to-fail banks take the kinds of risks that lead to 
the crash of our economy.
    Can you describe in more detail what you will do to make 
sure that the analysis carried out at the Commission is a real 
cost-benefit analysis that incorporates both the costs of 
regulatory implementation and the costs of inaction?

A.8. I agree that an important part of good economic analysis 
is determining the benefits of regulation as well as the costs. 
As you stated at the hearing, in some situations avoiding the 
harms that result from the absence of sound regulation can be a 
very significant benefit of a regulation. I am aware that it 
can be quite difficult to quantify the benefits of regulation; 
thus, while we must try to do so, if we cannot, we should 
explain why and still consider the qualitative benefits of 
regulation.

Q.9. The SEC's chief counsel has determined that the SEC should 
use cost-benefit analysis only in cases of discretionary 
action. Economic consultants to the Commission have called for 
performing a cost-benefit analysis on even core statutory 
directives. Which approach do you favor?

A.9. I understand that the approach currently set forth in the 
SEC staff's guidance for economic analysis is to consider the 
overall economic impacts of a rulemaking, including both those 
deriving from statutory mandates and those resulting from the 
Commission's exercise of discretion. If confirmed, I look 
forward to having the opportunity to more carefully consider 
these issues in the context of specific Commission rulemakings.

Q.10. Analysis after analysis has shown that the willingness of 
credit rating agencies to give AAA ratings to toxic mortgage-
backed securities played a huge role in the crash of our 
economy. In 2011, the SEC proposed rules under its Dodd-Frank 
authority to implement a number of provisions to improve the 
integrity of the ratings system and limit future risk. It has 
now been 2 years since then, and we haven't seen final adoption 
of the rules. I am concerned that the credit rating agencies 
continue to have clear conflicts of interest. I understand the 
SEC will be hosting a roundtable on this topic in May, and it 
is my hope that the Commission then immediately proceed to a 
rulemaking, as Dodd-Frank authorizes it to do.
    What will you do as Chairman to accelerate this process?

A.10. In the report to Congress pursuant to Section 939F of the 
Dodd-Frank Act issued in December 2012, the SEC staff 
recommended that the Commission, as a next step, convene a 
public roundtable to explore potential regulatory and statutory 
changes to further address any conflicts of interest. The 
roundtable will be held on May 14 and, if confirmed, I look 
forward to participating with the other Commissioners. I have 
not yet discussed with the Commissioners and staff the process 
to finalize the particular rules you identified. If confirmed, 
I am committed to reviewing the agenda and prioritizing the 
required rulemakings that remain outstanding.

Q.11. Can you describe the substantive approach you believe the 
SEC should take to fix this problem and dial down the risk?

A.11. If confirmed, I look forward to participating with the 
other Commissioners in the roundtable and exploring potential 
regulatory--and considering possible statutory--changes to 
further address any conflicts of interest. In the meantime, I 
understand that the SEC staff will continue to perform annual 
examinations of the NRSROs, which specifically includes 
reviewing the management of any conflicts of interest by the 
NRSROs.

Q.12. What will you do to make sure that the conflicts of 
interest are reduced and that the agencies follow the law? I've 
heard a lot of concerns that the rule proposals were too weak 
in these areas.

A.12. I understand that there currently are rules in place to 
prohibit or manage certain conflicts of interest and I am 
committed to aggressively pursuing any violations of those 
rules. That said, if confirmed, I will work with the SEC staff 
and the Commissioners to review the proposed rules and identify 
any provisions that may be further strengthened to address 
conflicts of interest.

Q.13. As you know, derivatives markets are global in scope. How 
do you plan to make sure the SEC effectively oversees 
international derivatives transactions?

A.13. For the security-based swaps that the Commission 
regulates, transactions that involve multiple jurisdictions are 
the norm, not the exception. It is therefore critical that the 
Commission consider how to apply the security-based swap rules 
in a cross-border context and in doing so, also consider how to 
create and apply a regulatory framework to an existing market 
that is already global in nature.
    As Chairman Walter recently testified before this 
Committee, the Commission plans to address holistically the 
international implications of the security-based swap rules 
arising under Title VII of the Dodd-Frank Act in a single 
proposal. I believe this will give interested parties, 
including investors, market participants, foreign regulators, 
and other interested parties, an opportunity to consider as an 
integrated whole the Commission's approach to the application 
of Title VII's requirements to cross-border security-based swap 
transactions and non-U.S. persons that act in capacities 
regulated under the Dodd-Frank Act. Through these proposed 
rules, I believe the Commission can develop a strong regulatory 
framework that addresses the risks that can be posed to the 
United States by cross-border security-based swap transactions.

Q.14. The taxpayers of many cities and towns have suffered huge 
losses in recent years as a result of bad and self-serving 
financial advice provided by large financial institutions. The 
Dodd-Frank Act requires anyone who provides financial advice to 
public entities to register as municipal financial advisors and 
follow a fiduciary standard of care. The SEC proposed rules on 
this issue more than 2 years ago but has not yet issued final 
rules.
    Do you agree with the principle that anyone who provides 
financial advice to municipalities should be held to a 
fiduciary standard?

A.14. The municipal advisor registration provision in the Dodd-
Frank Act imposes a fiduciary duty on municipal advisors to act 
in the best interests of municipal entities that they advise. 
If confirmed, I will work with staff and my fellow 
Commissioners to implement this provision fully and adopt final 
municipal advisor registration rules promptly. Congress added 
the municipal advisor provisions for good reason--to protect 
municipalities, their taxpayers, and investors in municipal 
securities from conflicted advice and unregulated advisors. 
They deserve the benefit of effective municipal advisor 
regulation.

Q.15. What will you do to prioritize the issuing of a strong 
final rule that defines municipal advisors so that the 
fiduciary standard can move forward?

A.15. As I stated in my written testimony, if confirmed, one of 
my early priorities would be to finish the rulemaking mandates 
contained in the Dodd-Frank Act in as timely and smart a way as 
possible. I understand that SEC staff is moving as promptly as 
possible to finalize the municipal advisor registration rules 
and that this rulemaking is the highest immediate priority in 
the SEC's newly established Office of Municipal Securities. The 
staff has indicated that it would like to present final rules 
for the Commission's consideration in the first part of this 
year. If confirmed, I will work closely with staff and my 
fellow Commissioners to finalize and adopt these important 
rules promptly in a way that would carry out the intent of this 
Dodd-Frank Act provision to ensure the core protection of 
imposing a fiduciary duty on municipal advisors to municipal 
entities.

Q.16. In Section 953(b) of the Dodd-Frank Act, Congress 
required the SEC to issue a regulation mandating that companies 
disclose the ratio of pay between the company's CEO and the 
company's median employee. This disclosure requirement is 
intended to help investors evaluate total levels of CEO pay 
relative to other company employees. Many investors want to 
know about these pay ratios because high pay disparities 
between the CEO and other employees--particularly in a time of 
economic belt tightening--can result in lower employee morale, 
reduced productivity, and higher turnover, thereby signaling 
economic trouble for the company. It has now been more than 2 
years since the SEC issued its rule implementing the Dodd-Frank 
``say-on-pay'' vote requirement, but the SEC has not yet issued 
a rule implementing Section 953(b).
    What will you do to finally get the rules implementing 
Section 953(b) finally issued?

A.16. Completing the rulemaking mandates that the Commission 
has received from Congress will be a priority for me if 
confirmed. This is the case both for those provisions with 
statutory deadlines, and those without, such as the Section 
953(b) ``pay ratio'' rulemaking mandate. An important first 
step in this process for the Commission will be issuing a rule 
proposal through which the Commission will be able to receive 
feedback from shareholders, companies, and other interested 
parties. I understand that there are differing views relating 
to the implementation of this mandate. Some believe that the 
disclosures required by Section 953(b) represent critically 
important disclosures to investors and have expressed concerns 
about any implementation approach that would narrow the 
provision's scope. In contrast, others have questioned the 
usefulness to investors of the mandated disclosures, while at 
the same time questioning the ability of companies to collect 
the data necessary to make the disclosures required by the 
provision and asserting that the compliance costs will be quite 
high. If confirmed, I will consult with the Commission and the 
staff to determine the most effective and expeditious path 
forward for implementation of the pay ratio provision.

Q.17. U.S. capital markets are uniquely diverse and provide 
consumers with a wide range of banking and investment products. 
There has been concern expressed that various new regulations 
may result in making our financial markets even more reliant on 
banks.
    Do you agree with concerns over the concentration of assets 
in a few of the largest institutions?

A.17. The strength of our capital markets depends on the 
existence of vigorous competition but also on sound regulation 
that gives investors, depositors, and other participants 
confidence in the safety of their assets. Regulators, in 
considering the economic effects of new rules, must take into 
account their benefits and costs, which includes the impact on 
competition and the potential risk of concentrating market 
share among a few large financial institutions. Further, the 
financial regulators--as members of the Financial Stability 
Oversight Council (FSOC)--must be vigilant in seeking to 
identify and address concentrations that create systemic risk. 
I understand these responsibilities and, if confirmed, will 
make sure that SEC does its part to live up to them.

Q.18. What would be the implications of that consolidation for 
retail investors?

A.18. The SEC's mission is to protect investors. If confirmed, 
I will seek to ensure that the SEC's authority is used in a way 
that avoids risk to retail investors as a result of 
concentration and that preserves a broad array of choice among 
both providers and products.

Q.19. Investors receive advice about securities under two 
standards of care. While investment advisors must follow a 
fiduciary standard of care when offering advice, broker-dealers 
must follow a different suitability standard. The result of 
having different rules for what is virtually the same service 
causes confusion and creates problems. Under the Dodd-Frank 
Act, the SEC is authorized to extend the fiduciary duty to 
broker-dealers. As you know, the SEC recently put out a request 
for additional cost-benefit data.
    What is your view about extending the fiduciary standard to 
broker dealers?
    Will this be a priority for you?

A.19. Whenever different standards apply to the same activity, 
I believe regulators should carefully consider whether such 
distinctions make sense from both the perspective of investors 
and industry. This is true of broker-dealers and investment 
advisers, which you point out both provide investment advice 
but are regulated differently when doing so. As you know, the 
Commission very recently published a release requesting input 
from the public on a uniform fiduciary standard of conduct for 
broker-dealers and investment advisers. The release contained 
details about how a uniform fiduciary standard of conduct could 
operate. I am very much looking forward to reviewing with the 
Commissioners and the staff the information provided in 
response to that release. I believe that the goal in this 
effort should be to make sure that investors, particularly 
retail investors, are appropriately protected and have access 
to, and choices about, the type of investor-focused investment 
advice that they need.

Q.20. The SEC enforcement division plays a critical role in 
ensuring compliance with securities laws, but the private right 
of action is also a critical tool for making sure that 
corporations are accountable to their shareholders and that 
investors can recover losses they suffer as a result of 
violations of securities laws.
    In Morrison v. National Australia Bank, the Supreme Court 
limited the ability of U.S. shareholders, especially public 
pension funds, to recover losses from securities fraud. Can you 
describe what you think the response should be to this ruling, 
and also in what ways you think the SEC should play a role in 
that process?

A.20. I understand that, pursuant to Section 929Y of the Dodd-
Frank legislation, the Commission last year undertook a study 
of potential legislative proposals that would address the 
Supreme Court's decision in Morrison with respect to private 
rights of action. If confirmed, I commit to reviewing the 
study's proposals with the staff and determining what role the 
Commission can play in helping Congress determine what, if any, 
further legislative response to Morrison is necessary to ensure 
that investors have appropriate protections under U.S. 
securities laws.

Q.21. Under the Dodd-Frank Act, the SEC has the authority to 
write rules on mandatory arbitration agreements. To date, the 
SEC has not done so. What is your stance on mandatory 
arbitration clauses that force investors to agree to 
arbitration instead of other measures during securities 
disputes, and what approach do you think the SEC should take on 
this issue?

A.21. I have not yet had the opportunity to discuss this issue 
with the Commissioners and staff, but I am committed to having 
those discussions if confirmed. As you know, Section 921 of the 
Dodd-Frank Act amended the Securities Exchange Act of 1934 and 
the Investment Advisers Act of 1940 to provide the Commission 
with authority to conduct rulemaking, under certain 
circumstances, relating to agreements that require customers or 
clients to arbitrate any future disputes arising under the 
Federal securities laws or related rules or regulations. If 
confirmed, I commit to exploring the use of these mandatory 
pre-dispute arbitration agreements. At this point, I am not 
able to commit to any specific outcome or approach.

Q.22. Do you believe there are other steps the SEC should take 
to strengthen the rights of private action for shareholders?

A.22. Private rights of action have long been recognized as an 
important element of the Federal securities laws, as 
meritorious private actions provide an essential supplement to 
the Commission's own enforcement efforts. Historically, key 
issues surrounding the scope of private rights of action have 
been resolved by the courts in judicial decisions or addressed 
through legislation by Congress. If confirmed, I certainly will 
focus on whether there are ways the Commission could help to 
improve the current system of private securities litigation.

Q.23. Through its Citizens United decision, the Supreme Court 
unleashed a powerful group of millionaires and billionaires who 
would spend hundreds of millions of dollars to influence 
election outcomes--all in secret. When there was a push in 
Congress to require disclosure of corporate spending on 
elections, armies of corporate lobbyists used their influence 
to kill it--and to keep the American people in the dark. The 
SEC is considering a proposed rule requiring public companies 
to disclose political spending, but I am very concerned that 
the rule is in the sights of many powerful interests.
    Can you describe what you will do as SEC Chairman to make 
sure that corporations have to disclose the use of corporate 
resources for political activities?
    To what extent will ensuring transparency over political 
spending by corporations be a priority for you?

A.23. I understand that the Commission has received two 
rulemaking petitions asking the Commission to require the 
disclosure of political contributions made by public companies. 
These petitions have received considerable attention, both from 
those in favor and from those opposed. The staff is reviewing 
the petitions to determine whether or not to recommend any 
rulemaking in this area. It would be premature for me to make 
an assessment of the merits of the petitions, or to pre-judge 
the disclosure requirement generally, without the benefit of 
the staff's review.

Q.24. As you know, last year, Congress passed the JOB Act.
    What will you do to make sure that the SEC implements this 
legislation in a way that ensures investors will be protected?
    What will you do to make sure that the SEC implements this 
legislation in a way that ensures sufficient transparency in 
our capital markets?

A.24. The rulemakings mandated by the JOBS Act represent new 
capital raising opportunities for companies of all sizes. I 
recognize, however, that the JOBS Act made significant changes 
to the securities laws. In connection with the implementation 
of the changes, it will be important to make sure that the 
Commission and its staff are focused on the agency's critical 
mission of protecting investors. The success of the JOBS Act, 
and the ability of companies to raise capital, will depend on 
whether investors understand what they are investing in and 
feel secure in making such an investment. It will be critically 
important to consider this as the rules are implemented, but 
also after the rules are in place. If confirmed, I would work 
with the Commission and the staff to implement a robust program 
to review the capital raising practices that develop as a 
result of the JOBS Act and assess the impact these practices 
have on investors, capital formation, and the markets 
generally.

Q.25. Do you believe that the 1982 accredited investor standard 
continues to be appropriate in 2013, or do you think it makes 
sense to increase the threshold ($1 million in assets, $200,000 
in income)?

A.25. I think it is very important for the Commission to 
undertake a thorough study of the current definition of 
accredited investor, particularly as it relates to the net 
worth and income tests for natural persons. The Dodd-Frank Act 
instructs both the Government Accountability Office and the 
Commission to study the definition. I believe that the insight 
and recommendations that come from those studies will be 
important components of the Commission's consideration of any 
possible rulemaking relating to changes to the accredited 
investor definition.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR VITTER
                       FROM MARY JO WHITE

Q.1. What will you do to ensure that coordination is taking 
place between the SEC's uniform fiduciary standard of care for 
broker dealers and investment advisers and the DOL fiduciary 
rule that also seeks to regulate financial advice provided to 
investors planning for retirement?

A.1. I think such coordination and discussion is important, and 
if confirmed, I would encourage the staff to pursue 
coordination with DOL and other regulators.

Q.2. Do you know if anyone at the SEC has engaged in regular 
conversations with the DOL on this subject over the last year 
as Congress asked?

A.2. My understanding is that SEC staff has coordinated fairly 
extensively with DOL staff--including over the last year--on 
the question of how to implement a fiduciary standard and the 
practical effect for financial services providers, particularly 
broker-dealers, of operating under a fiduciary duty.

Q.3. The SEC's mission is to protect investors, maintain fair, 
orderly, and efficient markets, and facilitate capital 
formation. How would you balance these sometimes competing 
goals to insure that our capital markets remain the envy of the 
world?

A.3. As I noted in my testimony before the Committee, I do not 
believe that the three components of the SEC's mission should 
be viewed as in conflict with each other. While each is 
critical in its own right, they also are complementary. For 
example, a market with robust investor protections--protections 
that help to assure that investors will have the confidence to 
participate in the market--will create the environment for 
sustained and meaningful capital formation. Without these 
protections, and the investor confidence that comes with it, 
the markets will not attract the breadth and depth of capital 
that will enable our markets to flourish.
    It is the responsibility of the Chair and the Commission to 
take the long-term view, balance the objectives when necessary, 
and seek to fulfill all parts of its critical mission. Then, 
our markets can thrive and investors will be protected and 
benefit.

Q.4. How much importance do you place on the careful analysis 
of the costs and benefits of any proposed rulemaking?

A.4. I believe that carefully analyzing the potential economic 
effects of a proposed rule is an essential part of sound 
rulemaking practice. Such careful analysis involves a 
qualitative and, where possible, a quantitative assessment of a 
rule's potential costs and benefits. As I stated at the 
hearing, I understand that it can be difficult to quantify 
certain economic effects of financial regulation, and 
particularly the benefits of such rules. But I believe we must 
make reasonable efforts to quantify the likely costs and 
benefits of a proposed rule, and if we cannot we should explain 
why.

Q.5. In a meeting with reporters you were adamant that Anthony 
Hargrove, a Saints defensive lineman, was shown saying, 
``Bobby, give me my money.'' You also told Peter King that you 
were sure it was Hargrove ``because you can see his lips 
moving.'' You also said that as a prosecutor you had gotten 
convictions with less evidence. Roger Goodell said he now 
believes that Hargrove didn't make these comments. In his 
letter to the accused players after their appeal put doubt to 
these claims Goodell stated, ``I need not resolve the issue of 
who made the statement. Instead, I am prepared to assume--as he 
apparently stated publicly--that he did not make it.'' Mr. 
Hargrove has been unable to find work in the NFL since your 
allegation. What does your insistence of Hargrove's guilt say 
about your credibility as an independent evaluator?

A.5. In meetings on June 18, 2012, in connection with 
disciplinary proceedings brought by the NFL, whom I 
represented, against Mr. Hargrove and other players, I 
presented a summary of the evidence obtained by investigators 
from NFL Security. On this point, I explained how the NFL 
investigators viewed the sideline footage that captured Mr. 
Hargrove and others. At the time, Mr. Hargrove had declined to 
be interviewed by NFL investigators or to otherwise provide 
evidence contradicting the NFL's findings, which was noted 
during those proceedings. Subsequently, Mr. Hargrove denied to 
the media that he had made some or all of the quoted statement.
    In denying Mr. Hargrove's appeal, Commissioner Roger 
Goodell noted, in his July 3, 2012, decision, that the NFL 
investigators ``reasonably concluded'' that Mr. Hargrove was 
the speaker of the quoted language, but he would assume, as Mr. 
Hargrove asserted after the June 18 meetings, that he was not 
the speaker. As Commissioner Goodell also made clear, it was 
not necessary to resolve the issue to conclude that Mr. 
Hargrove had misled the NFL investigators as to the existence 
of a pay for performance/bounty program, which was the basis of 
the discipline imposed on Mr. Hargrove. In ruling on the 
players' ultimate appeals, former NFL Commissioner Paul 
Tagliabue, while vacating the specific discipline, affirmed 
both Commissioner Goodell's factual findings as to all players, 
including Mr. Hargrove, and his conclusion that Mr. Hargrove 
(and two of the other players) had engaged in ``conduct 
detrimental to the integrity of, and public confidence in, the 
game of professional football.'' As an independent evaluator of 
evidence, it is always important to be open-minded and to take 
into account all of the relevant facts available to you, which 
is what I did.

Q.6. Ms. White, you stated that the punishments the Saints 
received were based on ``multiple, independent first-hand 
accounts.'' How many of these accounts specifically mentioned a 
``pay for injury'' program? And, did any of the witnesses have 
a vested interest in collaborating what the league was 
alleging?

A.6. As the record of these proceedings reflects, a number of 
witnesses stated that the pay for performance/bounty program 
rewarded injury-producing plays. The credibility of witness 
testimony must always be carefully scrutinized before reaching 
any conclusions; part of that scrutiny involves a consideration 
of any bias or self-interest. Here, the accounts of witnesses 
were credited where they were consistent with and corroborated 
by the independent accounts of other witnesses and/or the 
documentary evidence. As noted in response to Question 5, the 
factual findings of Commissioner Goodell were affirmed on 
appeal.

Q.7. What do you believe the FSOC's proper role is in money 
market fund rulemaking?

A.7. I believe that the next step on money market fund reform 
should occur at the SEC. If confirmed as Chair of the SEC, I 
would certainly be open to the views of FSOC members, as well 
as other interested parties, with respect to money market fund 
reform. However, the SEC is the primary regulator of money 
market funds and should take the lead in regulating the 
product.

Q.8. If you choose to go with a floating NAV for some or all 
funds, will you commit to working on the accounting issues and 
working through the tax issues with the IRS?

A.8. If confirmed, and the Commission were to propose requiring 
that some or all money market mutual funds transact with a 
floating NAV, I would seek to ensure that the SEC considered 
and worked to mitigate any potential accounting issues 
associated with such a reform. Further, I would seek to ensure 
that SEC staff worked with the appropriate tax regulators at 
the IRS and the Treasury Department to mitigate any potential 
tax issues associated with a floating NAV.

Q.9. In a recent speech, FRBNY President Dudley suggested that 
money market funds might be a good candidate for a Fed 
backstop. Do you agree with Mr. Dudley?

A.9. The fundamental nature of money market funds is that they 
are an investment product. Although I have not had the 
opportunity to study Mr. Dudley's speech in detail, my initial 
reaction is that, as investment products, they presumably would 
not represent the type of vehicle that should carry a backstop 
of the Federal Reserve Board. However, if confirmed, I would 
expect to explore this issue further with the staff, 
Commissioners, and other Federal financial regulators.

Q.10. Are you open to giving serious consideration to voluntary 
gating by fund boards as a potential reform?

A.10. I am open to a variety of potential reforms of money 
market funds that address the concerns that remain since the 
adoption of the SEC's important 2010 money market fund reforms. 
That would include giving consideration to voluntary gating by 
fund boards, as well as other reform options. If confirmed as 
Chair, I would want to continue to study the issue--and the 
potential impacts of potential reform options--with the SEC 
staff and Commissioners.

Q.11. Some have argued that having an inadequate capital buffer 
is worse than having no buffer at all. Do you agree with that 
argument?

A.11. If confirmed as Chair, I would want to study the issue of 
capital buffers for money market mutual funds with the SEC 
staff and Commissioners and consider whether having a capital 
buffer of any size would be beneficial for money market funds 
and advance the Commission's investor protection and capital 
formation goals.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR JOHANNS
                       FROM MARY JO WHITE

Q.1. You mentioned in your written statement as well as during 
the hearing that you intend to focus on equity market structure 
by first getting a better understanding of the market segments. 
As you know the SEC issued a Concept Release in 2010 about 
equity market structure, this Committee has held several 
hearings about equity market structure, the Financial Services 
Committee in the House of Representatives has held a hearing, 
the Joint CFTC-SEC Advisory Committee made recommendations 
about equity market structure and there has been several recent 
studies conducted by independent third parties such as Tabb 
Research and the CFA Institute about equity market structure. 
Given all of this work that has already been done, I believe 
the prudent step is to move forward rather than start over. 
Regardless as to what people believe should be done to address 
the cracks and lack of confidence in the U.S. equity market 
structure, it is clear that there is a problem and it should be 
addressed before all trading is done in the dark and investor 
confidence continues to decline. What substantive steps do you 
intend to take to address the increased level of trading in the 
dark and the lack of confidence in the public markets?

A.1. I agree that the SEC should take all steps necessary to 
promote investor confidence in the fairness and integrity of 
the equity markets. Equity investing inherently involves risks 
and rewards. Our equity market structure should be perceived by 
investors as a strength and source of confidence, rather than 
perceived as a risk factor in and of itself. As I noted in my 
testimony, today's high-speed, high-tech, and dispersed 
marketplace raises questions and concerns that must be 
addressed with a sense of urgency. While I agree that the 
Commission, other regulators, and Congress have done 
significant work on equity market structure, I have not yet had 
an opportunity to discuss these issues with the Commissioners 
and staff. I generally believe that the SEC should follow a 
path that will enable it to address market structure issues in 
a responsible manner as expeditiously as possible.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
                       FROM MARY JO WHITE

Q.1. The conflict minerals rule seriously impacts publicly 
traded companies, many of whom are trying to be compliant but 
are unclear on the timing of the rule. There was a somewhat 
ambiguous final rule, and I have heard that the SEC intends to 
release guidance to clear up these ambiguities. Can you just 
let us know what the timing is for the release of the guidance 
and the scope of the guidance?

A.1. The Commission adopted the Conflict Minerals rule in 
August 2012, and the Commission established a compliance date 
that requires issuers subject to the rule to file the first 
reports by May 31, 2014, for the reporting period covering 
January 1, 2013, to December 31, 2013. I understand that the 
staff has stated publicly that it has received inquiries from 
companies seeking interpretive guidance on the conflict 
minerals rule and that it is working to respond to the 
inquiries and hopes to provide guidance soon. I have not 
discussed the scope and specific timing of the guidance with 
Commission staff.

Q.2. What are your views on the Fed's proposed rules on foreign 
banks and specifically their impact on foreign owned broker-
dealers?
    Are you concerned about the case where a foreign firm does 
not own a U.S. bank subsidiary but the Fed is still seeking to 
set U.S. bank capital standards for the foreign firm's U.S. 
broker-dealer, via an intermediate holding company, on top of 
SEC standards?
    Won't this have the effect of discriminating against 
foreign-owned broker-dealers?
    As the new Chairman of the SEC, how would you address the 
Federal Reserves' attempt to override the SEC broker-dealer 
capital requirements?

A.2. The Federal Reserve Board has stated that its proposed 
rules regarding foreign banking organizations are consistent 
with its long-standing policy of national treatment and 
equality of competitive opportunity between the U.S. operations 
of foreign banking firms and U.S. banking firms. \1\ Generally, 
I am informed that the proposal is meant to ensure foreign 
banking organizations maintain sufficient capital and liquidity 
within its U.S. subsidiaries on a consolidated basis, instead 
of relying on the strength of a foreign parent or guarantor.
---------------------------------------------------------------------------
     \1\  The phrase ``consistent with [the Fed's] long-standing policy 
of national treatment and equality of competitive opportunity between 
the U.S. operations of foreign banking firms and U.S. banking firms'' 
is taken from the Fed's proposing release. See, Enhanced Prudential 
Standards and Early Remediation Requirements for Foreign Banking 
Organizations and Foreign Nonbank Financial Companies, Proposed Rule, 
77 FR 76629 (Dec. 28, 2012).
---------------------------------------------------------------------------
    Large U.S. bank holding companies, including those with 
large broker-dealer subsidiaries, are already required to meet 
the Fed's standards on a consolidated basis, while the broker-
dealer is required to meet the SEC's standards. The Fed is 
proposing that the U.S. operations of certain large foreign 
banking organizations meet the same prudential standards as 
domestic bank holding companies at the intermediate holding 
company level, which also may include large broker-dealers 
regulated by the SEC.
    I understand that certain foreign banking organizations 
have raised the issue of whether the Fed's proposed rules will 
discriminate against foreign-owned broker-dealers. It would be 
expected that the Fed would address any such comments it may 
receive in the context of its final rulemaking in this area.
    I have not yet had the opportunity to discuss this issue 
with the Commissioners and staff. But if confirmed, I will do 
so and work closely with the Fed to ensure that its prudential 
oversight of foreign banking organizations in the U.S. at the 
intermediate holding company level would be consistent with the 
Commission's oversight objectives and with the safe operation 
of broker-dealer subsidiaries of foreign banking organizations 
in the U.S. securities markets.

Q.3. Should the Federal Reserve Board, OCC, FDIC, SEC, and CFTC 
all work together to ensure consistency and uniformity, and 
issue one set of final Volcker Rule regulations?
    Should the SEC make finalizing the Volcker Rule regulation 
as a priority since the Federal banking agencies are further 
along in their process?

A.3. I understand that the Federal Reserve Board, OCC, FDIC, 
SEC, and CFTC are, in fact, working together closely to develop 
rules to implement the requirements of Section 619 of the Dodd-
Frank Act, commonly referred to as the ``Volcker Rule.'' I 
agree that, as recognized by Congress in the statute, 
inconsistent rules could provide advantages to, or impose 
disadvantages on, the different types of legal entities subject 
to the provisions of the Volcker Rule. In addition, commenters 
on the joint proposed rules have emphasized the importance of 
comparable regulations and have noted that diverging rules 
would increase regulatory burdens. I am committed to following 
the statutory mandate and will work closely with my fellow 
regulators to assure that our regulations are comparable and 
consistent. I understand that Commission staff and the staffs 
of the other regulatory agencies, along with Treasury staff in 
their role as coordinator, are involved in regular discussions 
on this rulemaking. Since the staffs of the various agencies 
are working together closely to refine the proposed rules in 
response to comments, I am informed that it is not the case 
that any of the agencies are further advanced than others in 
the process of adopting final rules.

Q.4. Will the SEC conduct a comprehensive cost/benefit analysis 
before any money market mutual fund rule is either proposed or 
adopted?

A.4. If confirmed, I will ensure that any SEC proposal for 
further money market mutual fund reform will contain a full 
proposed economic analysis (including a cost-benefit analysis) 
compliant with the staff's ``Current Guidance on Economic 
Analysis in SEC Rulemakings'', and would request comment on 
that analysis. I similarly commit to ensure that any SEC 
adoption of such money market mutual fund reforms would contain 
a final economic analysis in accordance with that Guidance. 
This Guidance is available at such money market mutual fund 
reforms would contain a final economic analysis in accordance 
with that Guidance. This Guidance is available at such money 
market mutual fund reforms would contain a final economic 
analysis in accordance with that Guidance. This Guidance is 
available at http://www.sec.gov/divisions/riskfin/
rsfi_guidance_econ_analy_secrulemaking.pdf.

Q.5. The IPO On-Ramp, Title 1 of the Jumpstart Our Business 
Startups Act, is being used by many emerging companies in 
pursuit of public financing. Without such easing of up-front 
and ongoing regulatory burdens to incentivize companies to 
enter the U.S. public equities market, such companies would 
remain on the sidelines, failing to grow their businesses, 
create new jobs, and speed U.S. innovation. I am very 
encouraged by use thus far of the IPO On-Ramp and expect 
interest in entering the public market as an Emerging Growth 
Company to grow, as more companies are familiarized with its 
advantages.
    However, I don't believe we should stop there. Do you agree 
that there is more to be done to give smaller public companies 
the tools they need to be successful--not only at IPO, but 
throughout their future as a publicly listed and traded 
company?
    As Chairman, will you examine volume and liquidity issues 
of smaller public companies, acknowledging that a one-size-
fits-all approach does not make sense, nor does it best serve 
our country and our economy?

A.5. I recognize that small companies play a significant role 
in the economic growth and job creation in this country, and 
believe that a strong initial public offering market would 
serve to encourage increased investment in small companies. The 
JOBS Act made significant changes to the initial public 
offering process for smaller companies, but I believe it is too 
early to tell what impact these changes will have on the 
initial public offering market. If confirmed, I would ask the 
staff to closely monitor these developments.
    I do agree that consideration should also be given to 
address concerns raised by smaller public companies regarding 
the ongoing regulatory requirements facing these companies and 
the impact of market structure on the ability of these 
companies to grow and raise capital. I understand that a review 
of the public company disclosure requirements has been 
considered by Commission staff for a long time. If confirmed, I 
would seek to gather more information from Commission staff 
regarding this issue. Additionally, if confirmed, I would work 
with the staff to better understand the impact of the lack of 
post-initial public offering liquidity on small companies. I 
would like to learn from the staff's work on the impact of 
decimalization to understand the role that tick size plays on 
liquidity for small companies.

Q.6. We understand that the staff has been working on a final 
rule regarding municipal advisors. Can you tell us what stage 
the rulemaking is in and when the Commission may vote on it?

A.6. I understand that SEC staff is moving as promptly as 
possible to finalize the municipal advisor registration rules 
and that this rulemaking is the highest immediate priority in 
the SEC's newly established Office of Municipal Securities. The 
staff has indicated that it would like to present final rules 
for the Commission's consideration in the first part of this 
year. If confirmed, I will work with staff and my fellow 
Commissioners to finalize and adopt these important rules 
promptly.

Q.7. Many have criticized the municipal advisor rule as being 
potentially overbroad and covering industries that are already 
highly regulated. Are you aware of these concerns generally, 
and particularly those of the banking industry which provides 
such a broad range of services to municipalities?

A.7. I am aware of these concerns generally and understand that 
the Commission has received numerous comment letters that the 
2010 proposed municipal advisor registration rules were too 
broad. I further understand that one of the major themes of the 
public comments concerned the potential effects of the proposed 
rules on traditional banking activities and that the staff is 
carefully weighing these comments as they develop 
recommendations for the Commission. If confirmed, I will work 
closely with staff and the Commissioners to finalize these 
rules in a balanced way to ensure protection of municipal 
entities and investors without overregulation. Additionally, I 
will give careful consideration to addressing overbreadth 
concerns in general with more tailored rules, and also will 
give careful consideration to the concern you highlighted 
regarding the potential impact on the banking industry.

Q.8. Are you concerned about the impact on municipalities if 
small banks decline to provide loans and other services to them 
because of the additional cost of complying with SEC regulation 
in addition to existing regulatory requirements?

A.8. I have not yet had the opportunity to discuss this 
particular issue with staff and my fellow Commissioners, but as 
a general matter, I am concerned about the costs and 
consequences of all SEC rules. I understand that the staff is 
working closely with staff in the SEC's Division of Risk, 
Strategy, and Financial Innovation to assess the economic 
impacts of the municipal advisor registration rulemaking as 
they develop recommendations for the Commission. If confirmed, 
I commit to reviewing this issue and I look forward to working 
with staff and the Commissioners to strike an appropriate 
balance to ensure protection of municipal entities and 
investors without unnecessarily imposing additional regulation, 
including careful consideration of the issue you raise 
regarding the potential impact on small banks and the services 
they provide to municipalities.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
                       FROM MARY JO WHITE

Q.1. Economic impact of new SEC rules and regulations can only 
be properly assessed by a comprehensive cost-benefit analysis. 
How will such a cost-benefit analysis be applied to rules such 
as the developing Consolidated Audit Trail? What will be the 
frequency and depth of this cost-benefit analysis?

A.1. I understand that the Consolidated Audit Trail will be 
implemented through a National Market System (NMS) plan that 
must be submitted to the Commission by the self-regulatory 
organizations (SROs) by December 6, 2013. The NMS plan must 
provide details regarding how the SROs plan to meet the 
requirements of the Consolidated Audit Trail rule adopted by 
the Commission. The NMS plan also must: (1) provide an estimate 
of the costs associated with creating, implementing, and 
maintaining the Consolidated Audit Trail; (2) discuss the 
costs, benefits, and rationale for the choices made by the SROs 
in developing the NMS plan; and (3) provide the SROs' analysis 
of the NMS plan's potential impact on competition, efficiency, 
and capital formation.
    Once the NMS plan is submitted to the Commission, I 
understand the Commission would publish the plan for public 
comment. After considering any comments received, the 
Commission would need to determine whether or not to approve 
the plan. The cost estimates and analyses provided by the SROs 
in the NMS plan will help inform the Commission as it evaluates 
whether to approve the NMS plan and will help inform the 
Commission's own economic analysis of the Consolidated Audit 
Trail.
    The Consolidated Audit Trail rule provides that, in 
determining whether to approve the NMS plan and whether the NMS 
plan is in the public interest, the Commission must consider 
the impact of the NMS plan on efficiency, competition, and 
capital formation of creating, implementing, and maintaining 
the national market system plan. I also understand that the 
Commission agreed to consider the costs and benefits of the 
creation, implementation, and maintenance of the consolidated 
audit trail pursuant to the details proposed in the NMS plan 
submitted to the Commission for its consideration.
              Additional Material Supplied for the Record


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