[Senate Hearing 116-38]
[From the U.S. Government Publishing Office]




                                                         S. Hrg. 116-38


  NOMINATIONS OF THOMAS PETER FEDDO, NAZAK NIKAKHTAR, IAN PAUL STEFF, 
       MICHELLE BOWMAN, PAUL SHMOTOLOKHA, AND ALLISON HERREN LEE

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

                                HEARING

                               BEFORE THE

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

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                                   ON

                            NOMINATIONS OF:

 THOMAS PETER FEDDO, OF VIRGINIA, TO BE ASSISTANT SECRETARY, TREASURY 
                        FOR INVESTMENT SECURITY
                               __________

   NAZAK NIKAKHTAR, OF MARYLAND, TO BE UNDER SECRETARY, COMMERCE FOR 
                         INDUSTRY AND SECURITY
                               __________

 IAN PAUL STEFF, OF INDIANA, TO BE ASSISTANT SECRETARY OF COMMERCE AND 
     DIRECTOR GENERAL, UNITED STATES AND FOREIGN COMMERCIAL SERVICE
                               __________

 MICHELLE BOWMAN, OF KANSAS, TO BE A MEMBER, BOARD OF GOVERNORS OF THE 
                         FEDERAL RESERVE SYSTEM
                               __________

  PAUL SHMOTOLOKHA, OF WASHINGTON, TO BE FIRST VICE PRESIDENT, EXPORT-
                    IMPORT BANK OF THE UNITED STATES
                              __________

    ALLISON HERREN LEE, OF COLORADO, TO BE A MEMBER, SECURITIES AND 
                          EXCHANGE COMMISSION
                               __________

                              JUNE 5, 2019
                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs
                                
                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                Available at: https: //www.govinfo.gov /
                
                              ___________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
37-106 PDF                 WASHINGTON : 2019  




            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                      MIKE CRAPO, Idaho, Chairman

RICHARD C. SHELBY, Alabama           SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania      JACK REED, Rhode Island
TIM SCOTT, South Carolina            ROBERT MENENDEZ, New Jersey
BEN SASSE, Nebraska                  JON TESTER, Montana
TOM COTTON, Arkansas                 MARK R. WARNER, Virginia
MIKE ROUNDS, South Dakota            ELIZABETH WARREN, Massachusetts
DAVID PERDUE, Georgia                BRIAN SCHATZ, Hawaii
THOM TILLIS, North Carolina          CHRIS VAN HOLLEN, Maryland
JOHN KENNEDY, Louisiana              CATHERINE CORTEZ MASTO, Nevada
MARTHA MCSALLY, Arizona              DOUG JONES, Alabama
JERRY MORAN, Kansas                  TINA SMITH, Minnesota
KEVIN CRAMER, North Dakota           KYRSTEN SINEMA, Arizona

                     Gregg Richard, Staff Director

                 Mark Powden, Democratic Staff Director

                      Joe Carapiet, Chief Counsel

              Kristine Johnson, Professional Staff Member

                 Elisha Tuku, Democratic Chief Counsel

            Laura Swanson, Democratic Deputy Staff Director

              Phil Rudd, Democratic Legislative Assistant

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                    Charles J. Moffat, Hearing Clerk

                          Jim Crowell, Editor

                                  (ii)


                            C O N T E N T S

                              ----------                              

                        WEDNESDAY, JUNE 5, 2019

                                                                   Page

Opening statement of Chairman Crapo..............................     1
    Prepared statement...........................................    32

Opening statements, comments, or prepared statements of:
    Senator Brown................................................     2
        Prepared statement.......................................    33

                                NOMINEES

Thomas Peter Feddo, of Virginia, to be Assistant Secretary, 
  Treasury for Investment Security...............................     5
    Prepared statement...........................................    34
    Biographical sketch of nominee...............................    36
    Responses to written questions of:
        Senator Brown............................................    91
        Senator Toomey...........................................    93
        Senator Perdue...........................................    93
        Senator Tillis...........................................    94
        Senator Warner...........................................    95
Nazak Nikakhtar, of Maryland, to be Under Secretary, Commerce for 
  Industry and Security..........................................     6
    Prepared statement...........................................    41
    Biographical sketch of nominee...............................    43
    Responses to written questions of:
        Senator Brown............................................    97
        Senator Perdue...........................................    99
        Senator Moran............................................   101
        Senator Menendez.........................................   102
        Senator Warner...........................................   104
        Senator Cortez Masto.....................................   107
Ian Paul Steff, of Indiana, to be Assistant Secretary of Commerce 
  and Director General, United States and Foreign Commercial 
  Service........................................................     8
    Prepared statement...........................................    50
    Biographical sketch of nominee...............................    52
    Responses to written questions of:
        Senator Menendez.........................................   110
Michelle Bowman, of Kansas, to be a Member, Board of Governors of 
  the Federal Reserve System.....................................    10
    Prepared statement...........................................    60
    Biographical sketch of nominee...............................    61
    Responses to written questions of:
        Senator Brown............................................   111
        Senator Rounds...........................................   120
        Senator Tillis...........................................   121
        Senator Menendez.........................................   125
        Senator Warren...........................................   126
        Senator Cortez Masto.....................................   127

                                 (iii)



Paul Shmotolokha, of Washington, to be First Vice President, 
  Export-Import Bank of the United States........................    11
    Prepared statement...........................................    69
    Biographical sketch of nominee...............................    70
    Responses to written questions of:
        Senator Brown............................................   132
        Senator Warner...........................................   134
        Senator Cortez Masto.....................................   135
        Senator Sinema...........................................   137
Allison Herren Lee, of Colorado, to be a Member, Securities and 
  Exchange Commission............................................    13
    Prepared statement...........................................    79
    Biographical sketch of nominee...............................    80
    Responses to written questions of:
        Senator Rounds...........................................   138
        Senator Menendez.........................................   139
        Senator Warner...........................................   140
        Senator Warren...........................................   143
        Senator Cortez Masto.....................................   145

              Additional Material Supplied for the Record

Letter submitted by Senator Bob Dole in support of Thomas Peter 
  Feddo..........................................................   148
Letter submitted by the Independent Community Bankers of America 
  in support of Michelle Bowman..................................   149

                                  (iv)

 
  NOMINATIONS OF THOMAS PETER FEDDO, NAZAK NIKAKHTAR, IAN PAUL STEFF, 
       MICHELLE BOWMAN, PAUL SHMOTOLOKHA, AND ALLISON HERREN LEE

                              ----------                              


                        WEDNESDAY, JUNE 5, 2019

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 9:52 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Michael Crapo, Chairman of the 
Committee, presiding.

            OPENING STATEMENT OF CHAIRMAN MIKE CRAPO

    Chairman Crapo. This hearing will come to order.
    First of all, I want to thank our six nominees who are here 
to serve in five different agencies. As you are well aware, we 
have had votes scheduled today at eleven o'clock. So we are 
trying to adjust how we move along, and we have changed the 
instructions to you several times this morning.
    Let me tell you how we will proceed. At one point, we had 
asked you to just forego your opening statements to give us 
more time for Senators to ask questions. The Senators have 
indicated that they would like to have you make your opening 
statements, if you would like to make one, and so any of you 
who would like to--and I invite you to--can make your opening 
statements.
    We will then proceed normally from there. We are going to 
ask everybody here to help us move along quickly with answers 
and questions, and hopefully, we will get through this with no 
difficulty.
    With that, this morning, we have first Mr. Thomas Peter 
Feddo. He is nominated to be the Assistant Secretary of 
Treasury for Investment Security.
    Next, the Honorable Nazak Nikakhtar. Did I get it right? 
Where are you? There you are.
    Then next, Mr. Ian Paul Steff.
    By the way, Nazak is to be the Under Secretary of Commerce 
for Industry and Security.
    Next, Mr. Ian Paul Staff to be the Assistant Secretary of 
Commerce and Director General of the United States and Foreign 
Commercial Service.
    Then we have the Honorable Michelle Bowman to be a member 
of the Board of Governors of the Federal Reserve System.
    We next have Mr. Shmotolokha--I got it pretty close--who 
has been nominated to serve as the First Vice President and 
Vice Chairman of the Export-Import Bank of the United States.
    And, finally, we have Ms. Allison Lee, who is nominated to 
serve as a Member of the Securities and Exchange Commission.
    I welcome all of you to the hearing today.
    I see friends and family behind you, and I welcome you to 
introduce them, if you would like to do so as well, when we 
turn the time over to you.
    At this point, I am going to forego any further statement 
of my own so that we can move on more quickly.
    Senator Brown does have a statement, and let me turn to 
you, Senator Brown.

           OPENING STATEMENT OF SENATOR SHERROD BROWN

    Senator Brown. Thank you, Chairman Crapo, and thanks to all 
of you, and welcome to your families.
    I know even though this hearing may be truncated, we do not 
want that to happen. So I want you to do whatever you want to 
say in your opening statements, and do not feel pressured in 
time in terms of answering questions or anything else.
    Your family is here. It is a big moment for them. It is a 
big moment for you. If for reasons of votes--and the Chairman 
and I have talked. He has not agreed to this, but if we do need 
to bring you back for questions, if Members do not get a chance 
to ask questions because of the floor votes--I would also just 
mention the frustration on this side of the aisle that all this 
Senate seems to be doing is the Majority Leader just wants to 
jam through as many possible judges as possible as he can get 
through the Senate. That is why we have many of these votes 
today, especially considering the number of judges that the 
Majority Leader blocked in the Obama administration and now is 
trying to fill all these with very young judges.
    So it is a power move from the Majority Leader. My 
relationship with the Chairman has been great, and we will 
continue to work together. We disagree on some of the bigger 
picture issues. We want to move on all of you, if we can. Some 
of you, I am happier with than others, as your public records 
and all.
    But I want to just speak and with my opening statement give 
some thoughts, and then we will move forward. But these are all 
really important jobs, all six of you, and I do not think it is 
fair to you or to Members in both parties to get anything but a 
chance to do full questioning. Just the fact that there are six 
of you here is frankly too many--that is our decision, not 
yours--to bring you all together, considering the importance of 
your jobs and considering that all of us have questions, 
multiple questions for many of you, far beyond our 5 minutes. 
That is why it is rare to do six together and why I am not wild 
about doing six together. I understand the crunch of time, but 
that crunch of time is often artificially squeezed.
    Let me say a few things. Mr. Feddo, thank you for joining 
us, first nominee to be Assistant Secretary of the Treasury for 
Investment Security, a position we created under the Foreign 
Investment Risk Review Modernization Act of 2018, the 
bipartisan legislation that came out of this Committee. We are 
thrilled you are here.
    We created this new position because of the critical role 
that CFIUS plays promoting U.S. national security from 
increasing threats from certain foreign investments. Yesterday 
we heard about how China has adopted new tactics to acquire 
American technology in sectors vital to our national security. 
It is why we passed this bill. It is why your job is so, so 
important.
    Mr. Feddo currently serves as Deputy Assistant Secretary 
for Investment Security. He has played a key role in 
formulating the reforms last year and is now working to carry 
out the technical and structural changes under FIRRMA, 
including finishing the rulemaking to expand CFIUS's scope.
    If confirmed, Mr. Feddo, you will need to continue this 
critical work. I know you have made progress. I look forward to 
hearing from you about next steps.
    Ms. Nikakhtar, welcome. Nice that you are here. You have 
been nominated to serve as Under Secretary of Commerce for 
Industry and Security, responsible for a set of key U.S. 
national security, foreign policy, and economic objectives 
through application of effective U.S. and multilateral export 
controls and treaty compliance. Although Ms. Nikakhtar has 
extensive experience in international trade, she has more 
limited experience in national security and export control 
matters. If confirmed, she will be responsible for 
administering critical U.S. export control laws and regulations 
that cover all kinds of sensitive technology.
    I hope you will work with your colleagues to navigate, Ms. 
Nikakhtar, the complex national security and political concerns 
that surround the export of sophisticated U.S. technology.
    Mr. Steff is nominated to be Assistant Secretary of 
Commerce for Global markets and Director General of the U.S. 
and Foreign Commercial Service. Welcome. He will be responsible 
in that role for the ITA's work to advance U.S. business 
overseas and promote U.S. exports and fair trade rules. His 
current experience as Deputy Secretary for Manufacturing at 
Commerce and his prior experience working on economic 
development, providing an understanding of how to strengthen 
the competitiveness of U.S. industry. We count on you for that.
    Ms. Bowman, welcome. Good to see you again. She is 
nominated to be a member of the Board of Governors for a full 
14-year term, expiring in 2034. As a former State bank 
commissioner, she serves in the role designated for a Fed 
Governor with community bank experience.
    At her first nomination hearing, I was concerned that Ms. 
Bowman would be a rubber stamp for Wall Street. I think I was 
right to be concerned about that. This Administration looks 
like a retreat for Wall Street executives. Far too many people 
with Wall Street connections and Wall Street bias have been 
nominated by this Administration to key regulatory positions.
    I know you possess a deep understanding of community banks 
and are being nominated for a full 14-year term. I am concerned 
that you have too often taken the side on the Fed, the side of 
big banks and Wall Street, doing favors for Wall Street by 
relaxing capital standards and weakening stress tests and other 
postcrisis safeguards. That Federal Reserve and the Trump 
nominees seem to have a collective amnesia about what happened 
in this country 10 years ago and the number of people that lost 
savings, lost lifetime savings, lost their jobs, lost their 
home.
    I hope you will do, if confirmed, all that you can to 
ensure the regulatory system works for community banks, but for 
our financial system and protecting all consumers. So far, you 
have fallen short. I am hoping you will do better.
    Mr. Shmotolokha is the nominee to be First Vice President 
of the EXIM Bank.
    For 4 years, I have pushed EXIM to be fully reopened. The 
Vice President, apparently, and a handful of Republicans on 
this Committee have blocked the Export-Import Bank, costing 
thousands of manufacturing jobs in my State and tens of 
thousands, maybe hundreds of thousands of jobs around the 
United States because they have blocked--they have not seen fit 
to do what this Congress used to do bipartisanly, almost 
unanimously to support the Export-Import Bank.
    We are counting on you to push back when they try to slow 
it and stop it and cripple that agency. Your work is especially 
important as the final nominee to the bank's board to be before 
this Committee.
    Ms. Lee, welcome. She has been nominated to be Commissioner 
of SEC. If confirmed, she would return to the SEC at a critical 
time. I expect Ms. Lee to draw on her SEC enforcement 
experience while considering rules that would affect investor 
rights and remedies against wrongdoers and when weighing 
penalties in misconduct cases.
    Your work is especially important in light of what I said 
earlier that this Administration has such a strong bias toward 
the most privileged in this country, whether it is Wall Street, 
whether it is corporations that ship jobs overseas, whether it 
is special interests that take advantage of people. We really 
count on you, Ms. Lee, in that job.
    Thank you, Mr. Chairman.
    Chairman Crapo. Thank you, Senator Brown.
    I know I said I was not going to make an opening statement, 
but I do need to respond to two things that you said.
    Senator Brown and I do have an excellent working 
relationship. I just want to make it clear that there is plenty 
of precedent, both in this Committee as well as others, to have 
six nominees before us. Frankly, especially, I do not know of 
any significant controversy about any of the nominees before us 
today.
    Second, with regard to the comments you made about us being 
jammed by unreasonable pressure to push votes on the floor for 
nominations of judges, I guess this is one where we are just 
going to have to continue to disagree. I think that the reason 
we are having these kinds of extensive votes is because we have 
been stopped from having votes in what I consider to be a 
reasonably and orderly process for the last 2\1/2\ years, and 
we are now moving forward with more votes because we have been 
in a battle, if you will, on the floor the Senate over getting 
two votes.
    So, anyway, we have had this debate for many months and 
will continue to have it.
    With that, before we proceed to the nominees, I do need to 
administer the oath to you. So would each of you please rise 
and raise your right hands.
    Do you swear or affirm that the testimony you are about to 
give is the truth, the whole truth, and nothing but the truth, 
so help you God?
    Mr. Feddo. I do.
    Ms. Nikakhtar. I do.
    Mr. Staff. I do.
    Ms. Bowman. I do.
    Mr. Shmotolokha. I do.
    Ms. Lee. I do.
    Chairman Crapo. And do you agree to appear and testify 
before any duly constituted committee of the Senate?
    Mr. Feddo. I do.
    Ms. Nikakhtar. I do.
    Mr. Staff. I do.
    Ms. Bowman. I do.
    Mr. Shmotolokha. I do.
    Ms. Lee. I do.
    Chairman Crapo. All right. Thank you. You may sit down.
    With that, we will proceed in the order that I introduced 
you earlier, and so, Mr. Feddo, please make any remarks or 
introductions you would like to make.

 TESTIMONY OF THOMAS PETER FEDDO, OF VIRGINIA, TO BE ASSISTANT 
          SECRETARY, TREASURY FOR INVESTMENT SECURITY

    Mr. Feddo. Chairman Crapo, Ranking Member Brown, and 
distinguished Members of the Committee, I am honored to appear 
before you today. I am humbled to be nominated by the President 
to serve as Assistant Secretary of the Treasury for Investment 
Security, a new position created by the Foreign Investment Risk 
Review Modernization Act of 2018.
    Last August, FIRRMA was enacted with overwhelming 
bipartisan support from this Committee, both houses of 
Congress, and the Administration. In creating this position, 
specifically through an amendment by Chairman Crapo, the 
statute recognizes the need for dedicated, accountable 
leadership of the critical national security function executed 
by the Committee on Foreign Investment in the United States. I 
am confident that my professional background affords me the 
experience and knowledge to lead CFIUS and to effectively and 
faithfully implement FIRRMA over the coming months.
    I grew up with two younger sisters and attended public 
school near Buffalo, New York. We had a full-time mom and a dad 
who served in the Marine Corps and then worked for the local 
electric company for nearly 25 years. My dad worked long hours 
to make sure that our family had all that we needed and a 
little more than he had as a child. He suddenly passed away 
just months after seeing me graduate college, but I know that 
he would be pleased were he here today. My mom dedicated 
herself to building a warm and loving home for us, and she is 
watching the hearing from Buffalo. I am deeply grateful to my 
parents for laying the foundation that has brought me to this 
point. By example, they instilled the virtues in my sisters and 
me, and we came to know the value of hard work, loyalty, and 
family.
    I would not be here today without my extraordinary wife, 
Muffet. She has been an unwavering source of support and 
encouragement, while selflessly devoting her many talents to 
raising our three wonderful children, who are dispersed through 
the crowd, Emma, Kay, and Gus.
    Early in high school, I decided that I would serve our 
Nation in the military and sought to attend the Naval Academy, 
and I am honored to have my two Academy roommates in attendance 
today. Since taking the oath of office at Annapolis 33 years 
ago, it has been my privilege to spend literally half of my 
life in public service, including first as a lieutenant on a 
nuclear submarine and then with the Naval Criminal 
Investigative Service.
    After law school, I served as a counsel with the House 
Energy and Commerce Committee, before stints as an attorney at 
the Pentagon, and a civil servant at the Treasury Department. I 
have served in all three branches of the Federal Government, 
with nearly 20 years in a national security-related capacity.
    In the private sector, I practiced law as a patent and 
trademark litigator and most recently as a partner in a large 
firm's international trade group.
    By virtue of these professional experiences, I understand 
the importance of protecting American innovators' intellectual 
property, our Nation's vital economic engine.
    And as a Navy submariner, educated and trained as an 
engineer, I experienced firsthand how America's superior 
technology ensures our warfighting edge.
    As an attorney representing global businesses, large and 
small, I have gained a true appreciation for the importance of 
foreign investment to our strong and vibrant economy, as well 
as the benefits of regulatory certainty to business 
transactions.
    If I am confirmed, you have my unqualified commitment that 
I will work closely with this Committee and Congress as a whole 
to continue what I have been doing over the last year as Deputy 
Assistant Secretary, faithfully and transparently implementing 
FIRRMA, ensuring our national security is protected while 
foreign investment is fostered, and serving with humility and a 
deep and abiding respect for our dedicated and talented career 
professionals at Treasury and across the Government who 
diligently execute the CFIUS mission.
    Thank you again for the privilege and opportunity to appear 
before you today. I am happy to answer any questions that you 
may have.
    Chairman Crapo. Thank you, Mr. Feddo.
    Ms. Nikakhtar.

    TESTIMONY OF NAZAK NIKAKHTAR, OF MARYLAND, TO BE UNDER 
         SECRETARY, COMMERCE FOR INDUSTRY AND SECURITY

    Ms. Nikakhtar. Mr. Chairman, Ranking Member Brown, and 
Members of the Committee, thank you for the opportunity to 
appear before you today.
    In 2018, I was honored to be confirmed as the Assistant 
Secretary for Industry and Analysis at the Department of 
Commerce, and today I am extremely honored to be nominated for 
the position of Under Secretary for Industry and Security.
    With me today are my husband, Gene Degnan, and my mother, 
Dr. Manijeh Nikakhtar. My father Bijan Nikakhtar passed away 
several months ago, but he would have been beaming with pride 
if he were here today, as an amateur political historian and 
one of the greatest American patriots I have ever known. I am 
proud to say that my parents and my husband have served our 
Government as Federal employees for many years.
    My husband served for over a decade at the Department of 
Commerce, and my parents served for over 40 years collectively 
as physicians at the VA hospital, taking care of our Nation's 
veterans.
    My brother, Nersi Nikakhtar, also a physician at the VA 
hospital, had work obligations today.
    I am proud to be part of a family that honors Government 
service.
    I immigrated to America with my family 39 years ago. I can 
remember from a very young age how proud I was to be an 
American and how I marveled at American innovation and 
ingenuity. I knew at an early age that I wanted to be part of 
the narrative of American growth.
    This is what prompted me to study law and economics after 
college. I obtained my Juris Doctor and Master's in Economics 
from Syracuse University, and in 2002, I began my career at the 
Commerce Department, first at the Bureau of Industry and 
Security and subsequently at the International Trade 
Administration.
    At the Department, I worked with and learned from 
incredibly smart and talented civil servants. Many of those 
dedicated professionals are still there today, and they are the 
pillars that shape our Government from Administration to 
Administration. I have great respect for them, and I am 
privileged to work with them again.
    I joined the private sector several years later as a trade 
and export control lawyer, representing industries in aerospace 
and steel sectors, in aquaculture, high-tech goods, chemicals, 
and minerals.
    In private practice, I worked to level the playing field 
for U.S. industries, and on exports, I conducted internal 
investigations to enforce clients' compliance agreements with 
the U.S. Government to address U.S. national security concerns.
    My training and experience, both as a lawyer and an 
economist, have given me the expertise to protect U.S. national 
security and simultaneously advance the economic interests of 
U.S. industries.
    Today national security no longer begins and ends with 
military strength. It is a fact in today's world that national 
security is dependent on our economic strength and our 
technological leadership. Yet advancements in technology and 
the interconnectedness of our economies make our national 
security challenges more complex than ever before.
    Economic integration has emboldened some foreign Nations to 
behave in ways that undermine our national security, expecting 
that the threats of economic retaliation will weaken our 
resolve to act. They have increased illicit procurement of 
items to build weapons of mass destruction and transshipped 
those items to terrorist organizations and regimes.
    We are witnessing illegal acquisitions of sensitive 
technologies to weaponize dual-use items and oppress millions 
of innocent citizens, and we have seen for years how rampant 
intellectual property theft has displaced U.S. industries, 
stifled innovation, and enabled the advancement of strategic 
competitors.
    The key to our success is maintaining U.S. technological 
superiority and economic interests through multilateral 
coordination that is more forward leaning, better use of 
intelligence analytics, robust enforcement of our laws, and 
tightly coordinated whole-of-Government approach that includes 
more proactive engagement with Congress.
    Time is of the essence, and during my 3\1/2\ months at the 
Bureau, I have been leading the Department's efforts to update 
our regulations to incorporate ECRA reforms and address global 
threats.
    We are engaging with industry to identify emerging 
technologies that undermine our national security.
    I have begun an initiative to work with like-minded allies 
on better export control coordination and wider end-use checks. 
It is imperative that we better coordinate multilateral 
policies on sensitive technology so U.S. companies can compete 
globally while Governments prevent technologies from being 
misused by adversaries.
    At the Bureau, I challenge my colleagues every day to 
rethink how we can modernize policies to stay ahead of new 
threats, and I have made it a priority to seek industry input, 
as today's complex challenges cannot be solved without close 
engagement with U.S. businesses. Our policies must advance 
America's technological and economic leadership.
    My parents immigrated to America knowing that this is the 
greatest country in the world, and as an American, it is my 
responsibility and honor to preserve this Nation's security for 
future generations.
    I thank you again for the opportunity to be here in front 
of this Committee, and I look forward to your questions.
    Chairman Crapo. Thank you, Ms. Nikakhtar.
    Mr. Steff.

   TESTIMONY OF IAN PAUL STEFF, OF INDIANA, TO BE ASSISTANT 
 SECRETARY OF COMMERCE AND DIRECTOR GENERAL, UNITED STATES AND 
                   FOREIGN COMMERCIAL SERVICE

    Mr. Steff. Chairman Crapo, Ranking Member Brown, Members of 
the Committee, it is the greatest of honors to sit before you 
today.
    If confirmed, it would be my privilege to serve as the 
Assistant Secretary of Commerce for Global Markets and Director 
General of the U.S. and Foreign Commercial Service.
    I thank President Trump for this nomination. So, too, I am 
grateful for the continued support of Vice President Pence, 
both in my former capacities in Indiana and now in Washington, 
DC.
    Speaking of Hoosiers, I am proud to be joined by my wife, 
Brittany. I remain forever grateful for your incredible 
encouragement, compassion, and flexibility as we serve the 
Nation we love and raise our two little stars, Daniel and Owen.
    I am also joined by my parents, Wayne and Lisa. Our 
childhood home was filled with love, faith, respect, hard work, 
and an enduring sense of service to one's country. Thank you, 
Mom, Dad, Gram, Aunt Lori, Aaron, and to all those family 
members, friends, and teachers who helped me along the way.
    My story started under a few feet of snow, 30 miles south 
of Buffalo, New York, on my grandparents' dairy farm. My two 
younger brothers, Eric and Levi, often reflect on the comradery 
we developed shoveling that never-ending lake-effect byproduct, 
raising our pet ducks, and commiserating over our beloved 
Buffalo Bills. Childhood summers encompassed exploring the 
pastures and woods, working on our neighbor's berry and plant 
farm, and waiting for the rumble of Dad's cycle as he returned 
home from his job in highway maintenance. This is a glimpse of 
our small slice of country and my upbringing in rural America.
    Rural? Yes. Encouraged to dream big? Every step of the way, 
and dream we did. I devoted nearly every penny earned on the 
farm to my stamp and coin collection. Years later, as I arrived 
at American University to begin my academic career in 
international affairs, I knew unequivocally that my future 
involved fostering relations with foreign markets and the 
people personified in that postage and currency I had 
accumulated. That dream and future continue here today.
    If confirmed, I would be incredibly honored to lead a 
world-class team of professionals providing export counseling 
to small- and medium-sized businesses, while identifying new 
foreign markets for their products and services; advocate on 
behalf of U.S. companies competing for foreign Government 
procurements; attract foreign direct investment, while working 
to grow the U.S. manufacturing base; and reduce, remove, and 
prevent foreign trade barriers that impede market access for 
U.S. goods in a free, fair, and reciprocal fashion.
    As the Deputy Assistant Secretary of Commerce for 
Manufacturing since June of 2017, I have seen the impact the 
Global Markets team has on U.S. manufacturers and service 
providers. This vast network of more than 1,300 trade and 
investment specialists in headquarters and the U.S. field, 
combined with the presence of the Foreign Commercial Service in 
over 70 markets deliver daily. Simply put, I have come to know 
the Global Markets team as a team that works, a team that 
chooses to compete, and a team that delivers. These 
professionals deliver one deal at a time and have a tremendous 
impact measured at over $120 billion in fiscal year 2018 in the 
areas I outlined.
    In my former professional capacities, I accrued experience 
in economic development, executive leadership, and trade 
policy. In my past economic development roles, I worked 
successfully to attract foreign direct investment.
    SelectUSA, which would be under my purview, if confirmed, 
is a valued economic development partner to many States.
    Likewise, during my time in the semiconductor industry, I 
witnessed the contributions of the Commerce Department to 
ensure foreign market access. I regularly engaged with the 
Commerce team while managing the leading chip industry 
association's international engagements and technology programs 
for a decade. I have seen the challenges posed by unfair 
foreign trade measures and massive market-distorting practices 
that have crippled companies looking to compete 
internationally.
    Earlier in my professional career, I worked on the Trade 
Subcommittee of the House Ways and Means Committee. I have a 
profound appreciation for the vital role of Congress when it 
comes to ensuring the global competitiveness of U.S. industry.
    While my stamp and coin collection are now the 
responsibility of my two young Hoosiers, I have no doubt that 
they and our country have a limitless and prosperous future 
based on the unparalleled accomplishments of the Global Markets 
team at Commerce. I aspire to help this team continue to 
achieve its mission. If confirmed, I will devote every working 
moment to its success on behalf of our Nation's exporters.
    Distinguished Members of the Committee, thank you for your 
consideration.
    Chairman Crapo. Thank you, Mr. Steff.
    Ms. Bowman.

TESTIMONY OF MICHELLE BOWMAN, OF KANSAS, TO BE A MEMBER, BOARD 
           OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

    Ms. Bowman. Chairman Crapo, Ranking Member Brown, and 
Members of the Committee, it has been just over a year since 
this Committee first recommended my nomination as a Federal 
Reserve Board Governor.
    While I am not the first community banker to serve on the 
Board, I am humbled by the opportunity you gave me to serve as 
the first Governor to fill the role Congress designated for 
someone with community banking experience on the Federal 
Reserve Board.
    I am deeply honored the President has renominated me to 
serve in that capacity. Thank you for the honor of this hearing 
today.
    I am also grateful to my family for their continued 
support. My husband, Wes, and our children, Jack and Audrey, 
are here with me today. The rest of my family are watching from 
home in Kansas.
    Since my confirmation last year, I have worked to fulfill 
my unique role on the Board by traveling widely and listening 
closely to community bankers, to consumers, small business 
owners, and community leaders. I have visited with farmers, 
workers, and business leaders from across the country to 
discuss the economy. I am making sure these unique perspectives 
are represented in the Federal Reserve's deliberations and 
decision making on both monetary policy and regulatory matters.
    During my time at the Board, I have also drawn on my 
experience as a community banker and regulator to ensure that 
our work is guided by a deep understanding of the practical 
realities confronting bankers and the communities they serve 
across the country. The work done after the crisis to address 
the weaknesses of the U.S. financial system and ensure its 
future resilience was essential.
    However, during my time in my family's community bank, I 
saw firsthand how the regulatory changes created in the 
aftermath of the crisis impacted community financial 
institutions. Small, solid institutions like this one are 
essential to so many of our citizens and communities. As 
regulators, we need to ensure that we are not imposing 
unnecessary burdens on community banks. That is why one of my 
priorities as a Governor has been to appropriately tailor our 
supervision and regulation to the size, complexity, capacity, 
and risks posed by an institution.
    To further this effort, I recently formed a working group 
of experts from across the Federal Reserve System to launch a 
comprehensive review of our supervisory work with smaller 
regional and community banks. While serving as the Kansas State 
Bank Commissioner, I was committed to treating every consumer 
and institution fairly and respectfully and fostering open 
communication. This working group will follow those same 
principles. We are looking for ways to optimize our supervision 
and regulation to ensure it adapts to the on-the-ground 
realities of an evolving industry and changing consumer 
expectations while maintaining the safety and soundness of our 
banking system.
    Let me close by saying a few words about monetary policy 
and the Federal Reserve's dual mandate. As a community banker, 
it was my job to support local businesses and consumers. I draw 
upon this experience often when thinking about monetary policy 
because it has given me a personal and practical understanding 
of how the Federal Reserve's goals of fostering maximum 
employment and stable prices directly affects individuals as 
well as the broader financial system and economy.
    The Congress has given the Federal Reserve independence to 
pursue these goals because our work is critical to our economy, 
to businesses, to families, and to communities, and I am deeply 
committed to fulfilling this mandate.
    If confirmed by the Senate, I will continue the important 
work I have begun and be committed to accountability, 
transparency, and clear communication in all of my 
responsibilities at the Federal Reserve.
    Thank you for the honor of this hearing, and I look forward 
to answering the Committee's questions
    Chairman Crapo. Thank you, Ms. Bowman.
    Mr. Shmotolokha.

TESTIMONY OF PAUL SHMOTOLOKHA, OF WASHINGTON, TO BE FIRST VICE 
       PRESIDENT, EXPORT-IMPORT BANK OF THE UNITED STATES

    Mr. Shmotolokha. Chairman Crapo, Ranking Member Brown, and 
distinguished Members of the Committee, thank you for 
considering my nomination to serve as First Vice President of 
the Export-Import Bank of the United States.
    I am deeply thankful to President Trump for selecting me 
and humbled by the obligations that this role brings to 
American workers and taxpayers.
    I would like to introduce some family members who are with 
me today; first, my parents, Stephen and Christine, who made 
the trip from California. They came to America as child 
refugees of World War II, and I am always inspired by their 
contributions to our country.
    My father worked as an engineer in the defense industry for 
more than 40 years, and my mother served tirelessly as a nurse.
    I am also joined by my wife and best friend, Dania, who 
guided the family through multiple international moves and 
extensive overseas travels, and Max, my son, who is entering 
his senior year in college.
    My brother Adrian and many of my friends, family, and 
coworkers from around the world are also watching online.
    I sit before you as somebody who has spent the past 16 
years in the front lines of global trade, with a strong record 
in growing American exports. I also bear the battle scars of 
leadership in a time of unparalleled competition in global 
markets.
    I am here out of a sense of duty, honor, and the wish to 
use my experience to serve a wider grouping of American 
businesses to grow their exports, and I am also paying back a 
debt for all this country has given to my family.
    It is not simple for any manufacturer to export. They must 
overcome political risks, economic hazards, and many nontariff 
barriers. Sometimes they also need extra financial support, 
especially when there are over 100 export credit agencies that 
are upping the ante and creating new incentives for the end 
customer.
    I have experienced firsthand the circumstances requiring an 
ECA like EXIM to finance deals in a timely and relevant fashion 
when the private sector cannot.
    My deep commitment and my international experience on both 
the buying and the selling side of international trade over the 
last 30 years will allow me to contribute strongly to the team 
at EXIM.
    EXIM's mission is to help support and create jobs. I have 
experienced firsthand the thrill of walking assembly lines in 
Georgia and in Washington State and meeting the newest workers 
putting together products for export, thanks to deals that my 
team closed. These are some of my best experiences. My legacy 
and value as a business person comes from the people that I 
mentor and the jobs that I help create.
    By working with the president of the Bank, my fellow board 
members, and the talented staff at EXIM, I believe I can best 
serve America to multiply the job creation effects of EXIM.
    Having served on numerous private-sector boards in various 
capacities, I understand board responsibilities of proper 
corporate governance, the need for transparency, and how good 
strategic guidance and a positive leadership attitude can 
enable organizations to realize their full productive 
potential.
    The EXIM board needs to make sure it does not lose sight of 
its role as an important source for small businesses. Many of 
its financial products in this area resonate with those who are 
looking to expand to new markets.
    As an entrepreneur, I have worked in small companies and 
faced the pressure of making payroll. Speed to market and 
effective financing can make or break these companies. I built 
a significant export business in a medium-sized U.S. 
manufacturer that, while a very successful domestic business, 
had yet to find its legs overseas.
    All companies--small, medium, and large--need help at times 
in leveling the playing field in today's global economy.
    If confirmed, I will bring a fresh perspective and a 
fiercely competitive mindset to the Bank. My experience as an 
officer in the United States Army taught me to lead from the 
front, and I will work tirelessly to support the Made in 
America brand that we all share and support. I will ensure that 
American companies have full access to and understanding of the 
programs authorized by Congress to maximize their global reach 
and competitiveness.
    To this end, I would paraphrase Vince Lombardi. Winning is 
not everything; it is the only thing for American business and 
American workers. And I pledge to bring a can-do winning 
attitude and to win responsibly for the American taxpayer.
    Thank you for your consideration. I would be pleased to 
answer any questions.
    Chairman Crapo. Thank you, Mr. Shmotolokha.
    Ms. Lee.

 TESTIMONY OF ALLISON HERREN LEE, OF COLORADO, TO BE A MEMBER, 
               SECURITIES AND EXCHANGE COMMISSION

    Ms. Lee. Chairman Crapo, Ranking Member Brown, and 
distinguished Members of the Committee, it is a tremendous 
privilege to appear before you today and to be considered for 
the position of Commissioner at the Securities and Exchange 
Commission, an agency in whose mission and dedicated staff I 
believe deeply.
    I am very fortunate today to be supported by a large 
contingent of family. I would like to introduce them: my 
husband, Jay Brown; four of the five children in our blended 
family, Tess, Beth, Josh, and Zoey. Also our granddaughter, 
Emerson, is here, and our son-in-law Colin, my sister Laurie, 
my brother Wil, my niece Emily, and my brothers-in-law, Jeff 
and Chris. Unfortunately, my mother could not be here today, 
but I know she will be watching.
    I have spent the bulk of my legal career at the SEC for a 
very simple reason. The SEC has a mission that is vital to the 
economic well-being of Americans and American businesses. It 
navigates the critical intersection between these two--between 
everyday Americans striving to build savings to buy a home, to 
send children to college, and eventually retire, and American 
businesses that need capital to grow and prosper. This 
reciprocal relationship must be nourished from both sides.
    We are a Nation of investors, both retail and 
institutional, and it is the SEC's job to protect them. This is 
especially important as we continue the shift away from 
employer pensions toward individual plans in which people must 
fund and select their own retirement assets and, importantly, 
manage their own risk.
    The SEC works to ensure that investors are taking the kinds 
of risk they sign up for, business and economic risk, not the 
risk of fraud and not the risk of poorly structured or opaque 
markets that may disadvantage investors. This instills 
confidence which in turn promotes capital formation.
    Beyond instilling investor confidence, the SEC works to 
ensure that American businesses of all sizes can access the 
capital they need to grow their businesses and thus create the 
kinds of opportunities that investors want and need. These 
businesses deserve thoroughly researched, well-tailored, and 
clear rules.
    I have seen, experienced, and understood this 
interdependence between investors and business from nearly 
every angle. I have worked in the oil business at both private 
and public companies. I have owned and run my own small 
business. Since law school, I have worked for over two decades 
as a securities lawyer, first in private practice as a 
litigator and partner, and then I was privileged to work on the 
staff of the SEC.
    Like many Americans, I have worn a lot of hats and juggled 
a lot of priorities, working my way through college and 
eventually through law school, raising children, paying the 
bills, and investing my savings for retirement. If I have the 
honor of being confirmed, I will bring all of these 
perspectives to bear in my role as commissioner, and I will 
reach out and listen to all constituencies served by the SEC to 
further its critical mission.
    Thank you for the opportunity to appear before you today, 
and I am happy to answer questions.
    Chairman Crapo. Thank you, Ms. Lee.
    And in the interest of time, I am going to forego my 
questions. We will go immediately to Senator Brown.
    Senator Brown. Thanks, Mr. Chairman.
    Mr. Shmotolokha, thank you. Thanks for sharing your story 
and your experience with us.
    Explain why U.S. companies in the technology and 
telecommunications sector look to EXIM to expand their sales 
abroad, and as you answer that, if you would also answer if 
EXIM is unavailable, assistance is unavailable, are companies 
able to complete foreign sales.
    Mr. Shmotolokha. If I could touch on the second one first?
    Senator Brown. Sure.
    Mr. Shmotolokha. In my own experiences, self-financing is 
the first thing any company looks for. It is the easiest, the 
quickest, and when you are doing a deal with somebody, you are 
looking to see if you can consummate it in the speediest of 
fashions and receive your payables.
    But next, I turn to private sector, and when you look to 
EXIM, that is largely when you start really expanding your 
business. You are looking at countries that have a higher 
degree of political risk or economic risk or legal systems in 
which you cannot recuperate your receivables.
    Probably the biggest challenge, though, that we face today 
is the fact that other ECAs or ECA-like institutions in several 
countries, specifically in the BRICS that are non-OECD 
countries, are using additional finance vehicles, especially 
long-term ones. So where we came up against this was in the 
telecommunications industry. Certain global vendors today 
create extremely attractive medium- to long-term financing 
situations for the same clients for which we are competing. 
Sometimes those clients do not have to even make a payment the 
first 2 years. They get extremely low interest rates, and it 
makes it very attractive for them just simply from a capital 
perspective where quality, trust, and good customer service 
sometimes are overcome.
    So, at that point, being able to seek institutions that can 
help bring about medium- to longer-term financing when 
sometimes private-sector institutions are not comfortable in 
many of those locations. I would add that today a lot of the 
game or a lot of the opportunities are actually in emerging 
markets. There are tremendous infrastructure builds going on in 
those markets. So to compete in the first-world markets, it can 
be relatively level, but today the opportunities are in Latin 
America, Africa, and parts of Asia. So that makes it a real 
challenge.
    And then having sort of the sense of approval of EXIM 
behind you makes many in those countries extra comfortable with 
a vendor.
    Senator Brown. Right.
    Mr. Shmotolokha. So that combination of public and private 
with those loan guarantees that EXIM does is sometimes very 
useful.
    Senator Brown. Thank you very much.
    Ms. Bowman, thank you for your service in Kansas and at the 
Federal Reserve.
    You have said that community banks, quote, ``were 
significantly affected by the global financial crisis, a crisis 
they did not cause.'' I think every member of this Committee on 
both sides would agree with that.
    Recently, though, the Fed has issues many rules that would 
weaken requirements for the largest U.S. and foreign banks, the 
same Wall Street banks that made risky bets and crushed the 
economy.
    I have a couple of yes or no questions. Have you voted 
against any of the Fed's proposals that weaken the rules for 
the largest Wall Street banks?
    Ms. Bowman. I would not characterize them as necessarily 
weakening the rules. I voted in favor of those proposals, but I 
would disagree with your characterization that they have 
weakened the requirements for banks.
    Senator Brown. They have scaled back the requirements. You 
would not disagree with that?
    Ms. Bowman. I would say that we have targeted the 
requirements more to the risk of the banks as they pose them.
    Senator Brown. This is another yes or no question. Does 
weakening rules for Wall Street banks help community banks? 
Putting aside how you voted, does actually weakening the rules, 
scaling back rules for Wall Street banks, does that help 
community banks?
    Ms. Bowman. I think with respect to community banks, it is 
important that we understand the risks that they pose to the 
system and target the regulations and rules that they are 
required to abide by to their risks that they pose, the size, 
the complexity, and the risks that they pose to the system. 
They are a separate category of banks from Wall Street banks, 
the largest of----
    Senator Brown. We are not arguing that the community banks 
pose--even in the aggregate pose much risk. It is the larger 
banks where this Fed and the FDIC have weakened rules. It is 
not the community banks that we focus on.
    Let me ask you another question. You said community banks 
are a priority, but the Fed's actions weakening the rules for 
Wall Street, opening the door for shadow banks and for Silicon 
Valley. The Fed is also considering a merger between two 
regional banks, each with over $200 billion in assets. They say 
it is too difficult for them to compete with the biggest banks' 
investment in technology.
    I hear from community bankers, some of your friends, I am 
sure, in my State and across the country that this leads to 
more consolidation making it harder for small banks to compete.
    So my question is, Do you believe that consolidation of the 
banking industry has an adverse effect on community banks?
    Ms. Bowman. As consolidation applies in the community 
banking space, my concern is more that the investment in the 
local communities are distributed instead of located where the 
charter was originally held, so as branches are acquired in 
rural communities that home investment in the community tends 
to be dissipated.
    Senator Brown. Real quick, Mr. Chairman.
    Yes or no. Will you support Fed actions and the FDIC votes 
in this too, such as approval of BB&T and SunTrust merger? 
Would you vote for that?
    Ms. Bowman. It would depend on how the outcome of the 
review of the application is. We have several statutory factors 
that we must consider as we are reviewing that application.
    If the statutory factors are met and a recommendation is 
for approval, I would certainly consider that, as I would cast 
a vote.
    Senator Brown. OK. Thanks.
    Chairman Crapo. Thank you.
    Senator Toomey.
    Senator Toomey. Thank you very much, Mr. Chairman. I 
appreciate this hearing, and I want to thank our witnesses for 
testifying today and coming before us.
    Ms. Nikakhtar, am I pronouncing that right?
    Ms. Nikakhtar. Yes, Senator.
    Senator Toomey. Thank you.
    I would like to start with you. My understanding is in your 
recent position as Assistant Secretary for Industry and 
Analysis at Commerce, you played a lead role in the Commerce 
Department's investigation into whether auto and auto part 
imports threaten U.S. national security.
    As you no doubt know, that report is still being kept a 
secret from the American public, but we now know that it 
contained an affirmative finding that foreign car imports and 
part imports were deemed to be a national security threat.
    First of all, it is highly objectionable to me that this 
report has not been disclosed to Congress and the American 
public.
    If Toyotas and Volkswagens really pose a national security 
threat to the United States so great that we have to tax my 
constituents when they purchase one, I think the American 
people ought to know why.
    So my first question to you, Ms. Nikakhtar, are you aware 
that Federal law and regulations actually require that the auto 
232 report be made public?
    Ms. Nikakhtar. Yes, Senator. It is in the statute.
    Senator Toomey. Yes. So do you know why it has not been 
made public?
    Ms. Nikakhtar. Senator, when we completed the report and we 
delivered it to the Secretary and then to the President, it 
sits with the White House right now, and per the statute, it is 
up to the President to determine when he wants to release it 
and when the timing for that.
    Senator Toomey. Well, let me just say the post to which you 
have been nominated obviously has a very significant national 
security component. Your signature recent effort in this space 
is that report, and it is hard for me to understand how 
Senators can properly judge your qualifications without being 
able to read that report.
    I understand that is not in your direct control, but it is 
important.
    The President's May 29th proclamation repeatedly states 
that--and I quote this phrase--``American-owned producers,'' 
end quote, must be able to increase R&D spending in order to, 
quote, ``developing cutting-edge technologies that are critical 
to the defense industry.'' And, as such, the proclamation 
reaches the conclusion that, quote, ``Domestic conditions of 
competition must be improved by reducing imports.''
    So the conclusion that Toyotas and Volkswagens are a threat 
to our national security seems to be premised on the notion 
that the sales of those vehicles precludes sales that would 
otherwise occur at American-owned producers, which would then 
lead to additional, presumably sufficient R&D investment.
    So let me ask a factual question here. So despite the fact 
that foreign-headquartered auto companies have invested 
hundreds of billions of dollars in the U.S., building plants, 
hiring tens of thousands--hundreds of thousands of American 
workers, is it true that auto report considers, quote, 
``American-owned'' to include only GM, Ford, and Tesla?
    Ms. Nikakhtar. Senator, I should put that in a little bit 
more context.
    Yes, American-owned is GM, Ford, and Tesla.
    Senator Toomey. OK. I am going to run out of time here. So 
you are confirming that it is only those three.
    So for the purpose of considering the R&D investment of 
American-owned companies, did you include in your analysis the 
investment made by companies like Google and Apple and Uber 
into the space, into especially automation of vehicles? Was 
that included in your analysis?
    Ms. Nikakhtar. Yes, Senator. A large part of our research 
did include that.
    Senator Toomey. Thank you.
    It would be nice to be able to see that.
    This very narrow definition of ``American-owned'', even 
accepting that definition for this purpose, between Tesla, GM, 
and Ford, my understanding is in 2017, they spent a combined 
investment of $17 billion in R&D alone. NASA's budget, by way 
of comparison, is about $16 billion. If the $17 billion is 
inadequate, what is the correct number? What do the people at 
the Defense Department tell you they need American-owned car 
companies to invest in R&D in order to be able to defend 
America adequately?
    Ms. Nikakhtar. Senator, what I was trying to get at earlier 
was the fact that the--to your point about the investments that 
foreign-made auto--foreign-headquartered automakers have made 
in the United States, without question, those contributions are 
significant.
    But because we allow for an open-investment climate, which 
we absolutely encourage--and we have the SelectUSA Summit 
forthcoming at the Department of Commerce--that is not the 
point. The point is the excessive imports have basically--the 
closed U.S. market now is being shared by American-owned and 
foreign-owned producers, and that is fine. We have lost market 
share here, but we have been unable to make up those lost sales 
in foreign markets when less than 1 percent of autos sold in 
Japan, for example, are from the United States, let alone 
American-owned.
    Senator Toomey. OK, OK. But we----
    Ms. Nikakhtar. That is the focus, and that is the R&D, 
erosion of the R&D that the report----
    Senator Toomey. But the R&D is at a record level. It is $17 
billion, and my question is, What did the Defense Department 
folks tell you they need for American-owned car producers to 
invest in R&D in order to be able to safeguard the United 
States?
    Ms. Nikakhtar. The Defense Department did not provide us a 
number. We looked at our shrinking share of R&D vis-a-vis 
Europe and Japan and our global competitors, and based on that, 
the Secretary's assessment was that we needed to increase R&D.
    And I should incidentally note that all of the surveys that 
we issued to all automakers and armored vehicle producers had 
inquired about their levels of R&D, and we took all of that 
information into account.
    Senator Toomey. Thank you, Mr. Chairman.
    Chairman Crapo. Senator Tester.
    Senator Tester. Thank you, Mr. Chairman, Ranking Member, 
and I want to thank all the folks who are here today on the 
panel. I appreciate it very much.
    I am going to start with you, Ms. Bowman. The 2018 farm 
bill decriminalized hemp and took it from the Controlled 
Substances List. It is now as legal as soybeans or wheat to be 
able to grow on the farms.
    Producers in Montana are hitting the fields. Some has been 
planted. It is kind of wet. Some has yet to be planted. The 
problem is they still face barriers to access the financial 
system, and not only the farms themselves who grow the hemp, 
but also input suppliers are facing barriers if they supply 
inputs for the growing of hemp as well as equipment dealers.
    I understand that FinCEN will have to update their 
guidelines, and I sent a letter to Director Blanco to tell him 
to get moving on it.
    As the primary regulators of our financial institutions, 
can you give me an update on what you are telling banks and 
credit unions today that will help them be able to do business 
in the hemp sector?
    Ms. Bowman. Senator, this is an important issue that when I 
meet with bankers from across the country, many States have 
engaged heavily in this crop for growth, and when we visit with 
them and speak with them about the treatment by the prudential 
regulators, the Federal Reserve, in particular, we refer them 
to BSA/AML guidance to ensure that they are understanding the 
risks of the customers that they face, and that those decisions 
about who they are working with or who they choose to serve as 
customers are appropriately vetted according to their business.
    Senator Tester. So are you telling them they can bank them, 
or are you telling them to go ahead, but you might end up 
upside-down?
    Ms. Bowman. No, we absolutely tell them that it is not our 
job or our role to tell them who their customers should be, and 
that they should understand what their business strategies and 
risks are with respect to any customer that they have.
    We do recognize that this is a challenging regulatory 
environment based on the relationship with----
    Senator Tester. When the Montana bankers were in a month-
and-a-half ago, they said that they could not bank them because 
the regulators told them they could not bank them. Have you 
told them they could bank?
    Ms. Bowman. We have not told them that they cannot bank 
them. We have told them that there are regulations in place.
    Senator Tester. Let us be proactive about it because we 
decriminalized it in the farm bill. And this is not pot; this 
is hemp. Why not just tell them they can do it? Because, quite 
frankly, I would just tell you prices are in the tank. These 
tariffs are killing production of agriculture. I am not saying 
hemp is going to bail anybody out, because it is not, but it 
gives them another option.
    But they are not going to do it. I would not do it. If you 
cannot get the dough, you are not going to do it, and this 
economic time for production in ag, they need the banks, so----
    Ms. Bowman. I would agree with you, and we would not 
discourage banks from banking these types of customers.
    Senator Tester. OK. Well, maybe we are saying the same 
thing, but I am not sure bankers are hearing the same thing, 
OK?
    Ms. Bowman. We will try to clarify that. Hemp is not an 
illegal crop.
    Senator Tester. Right. That is what I wanted to hear.
    Thank you very, very much.
    Mr. Feddo, good to have you here. Under the current 
structure of CFIUS, you have been able to review--or the body 
has been able to review several large agribusiness transactions 
in recent years, including a biggie when Bayer acquired 
Monsanto. And I would just tell you, unequivocally, this 
company plays a huge role in production of agriculture across 
this country. I believe that food security is equivalent to 
national security. I do not think there is any debate about 
that.
    So do you believe CFIUS currently does enough to protect 
our food systems here in the U.S.
    Mr. Feddo. Senator Tester, I do. With respect to any 
transaction that implicates national security, we bring in the 
appropriate member agencies to assist us in that analysis.
    Senator Tester. So do you agree that food security and 
national security go hand-in-hand?
    Mr. Feddo. It can. It depends on the facts and 
circumstances. Yes.
    Senator Tester. So if you have got people starving to 
death, do you think that is good for national security? If you 
have got people starving to death, do you think that is good 
for national security?
    Mr. Feddo. Sir, we take a look at who the investor is.
    Senator Tester. Yeah, yeah, yeah. That is not the question.
    If you do not have adequate food supply, it is my 
contention that you have turned your national security on its 
ear. That is why these mergers are so critically important.
    And let me give you a statistic. Currently, with the 
merger, Bayer, Monsanto, whatever you want to call them, 
controls 25 percent of the seed supply, which if you control 
the seed, you control the food, and 23 percent of the 
chemicals.
    The question, does CFIUS think about this stuff? And then I 
will kick it back, but does CFIUS think about this stuff? 
Because it is real, and if for a second that I thought we were 
offshoring our food security to a foreign country, that is what 
it appears to me.
    Now, in retrospect, they may have offshored a lot of 
liability, but the truth is when it happened, we did not know 
that.
    Mr. Feddo. We do think about that. It is part of our risk-
based analysis. We look at the threat from the actor, from the 
investor. That is the intent and capacity to exploit a weakness 
in our national security as well as the vulnerability of the 
U.S. business. So we look at both of those factors to determine 
the risk to national security.
    Senator Tester. Well, I would just say I think 25 percent 
is a lot. I mean, we are talking the whole shebang here, and so 
I would just ask for you to specifically ask some tough 
questions to the folks on that, OK?
    Thank you very, very much.
    Mr. Feddo. I will.
    Chairman Crapo. Senator Tillis.
    Senator Tillis. Thank you, Mr. Chairman.
    Mr. Feddo, I am going to--first off, I share some of 
Senator Tester's concerns. I am not going to ask you questions.
    I am going to do a couple of questions for the record for 
you specifically around U.S.-controlled private funds, 
particularly when they are controlled by U.S. persons, because 
I have a concern about some scoping and focus there, but we 
will do that for the record.
    Mr. Steff, in your opening statement, you said you had pet 
ducks and a coin collection. I had a pet rooster named Pete and 
a coin collection. So I am glad to see we share--in the rural 
areas, so I am glad we share a common bound there.
    Ms. Bowman, I am going to spend most of my time talking 
with you, and some of this is--I do not normally speak from 
notes, but this is something important for us to get on the 
record because it is a priority that I hope I can get your 
commitment, and it has to do with interaffiliate margins.
    Number one, I think that we are out of step with the 
European Union, Japan, and most other G-20 jurisdictions. 
Number two, I think that we have a record across 
Administrations on the issue. In 2013, we had the CFTC chair 
provide an exemption. In 2015, we had the CFTC chair provide an 
exemption. And now we have a situation where the Fed has not 
provided an exemption from the initial margin from the 2016 
rules, and I think as a result, U.S. banking entities collected 
nearly $50 billion in initial margin from their own affiliates. 
That is capital that could be deployed that right now is 
sitting on the sidelines.
    In 2017, the Treasury noted that this rule puts U.S. firms 
at a disadvantage, both domestically and internationally, 
recommending that your agencies provide an exemption consistent 
with the margin requirements of the CFTC.
    Do you agree that an initial exemption--an exemption from 
initial margin is appropriate for interaffiliate transactions?
    Ms. Bowman. Senator Tillis, we are very aware of this issue 
and aware of your concern with respect to this issue.
    We are actively reviewing the application of margin 
requirements for interaffiliate transactions.
    Senator Tillis. I would like to get--and we can follow up 
and maybe give you an opportunity to respond to a question for 
the record, but I would like to get a commitment to prioritize 
the rule, to provide an exemption. And I think that it can be 
done expeditiously. I do not think it has to necessarily be 
done with Regulation W rewrite, which can take a couple of 
years. I think it is something that can be done relatively 
quickly.
    For the record, we will go through mechanically how we 
think we can get it done, and I would like to get your specific 
response. We have been talking about this for a while. We have 
met with a lot of the other Fed regulators. Everybody seems to 
think it is a good idea. It has been a policy that has 
transcended Administrations. So I do not think it is 
politically volatile, and I would like to figure out a way to 
expeditiously move and not have this be a 2- or 3-year matter. 
I think putting $50 billion back into play is something that is 
helpful and will let us continue our economic growth.
    The last thing I want to talk with you about has to do with 
the Fed payments proposal. It is another area where, again, I 
am going to honor the time commitment. It is another area where 
we will probably just submit context for the record, but I do 
not believe that we need two systems. I think that we have 
emerging opportunities that are in play with the private 
sector. I think it is something that the Fed should think 
seriously about not spending their time and resources on.
    And I have gotten mixed responses. It feels like when you 
go to a public hearing and you talk to some of the regulators, 
they say, ``Thank you very much for your input,'' and move on, 
but it gives me a sense that they are going to move in that 
direction. And I think they should step back and really decide 
if that is a good use of their resources.
    I will give you a few minutes to respond, and then we will 
put that as a question for the record for a more fulsome 
response.
    Ms. Bowman. Senator, this is an issue that has been active 
within the Federal Reserve since 2014 when we had a working 
group focused on this issue.
    The Fed has had historically a strong role in payments 
since its inception. This is something that we think is very 
important, and we issued questions last fall so that we could 
consider the comments back from the public regarding the 
appropriate place and structure for this type of initiative.
    We are continuing to review the work of the working group 
and the comments that we have received through that 
publication, and at this point, no decision has been made, but 
I would be happy to answer your question for the record.
    Senator Tillis. Thank you.
    This is something our office will spend a significant 
amount of time on.
    Thank you all very much. I look forward to supporting all 
of your confirmations.
    Chairman Crapo. Thank you.
    Senator Jones.
    Senator Jones. Thank you, Mr. Chairman, and thank you to 
all the witnesses that are here today. And thank you for your 
service.
    Mr. Feddo, I would like to talk to you a little bit about 
CFIUS. I think Congress last year passed FIRRMA because of some 
concerns, especially the rise of the way China has been doing 
business in this country. I think Ms. Nikakhtar--and I 
apologize for bumbling that--talked about that in her role.
    I want to raise a transaction that occurred last year and 
ask you about this, and when I do this, I am not making--
casting any aspersions, but something that troubles me because 
it has an impact on Alabama and also I think national security 
implications.
    2018, a Chinese steel company formed a joint venture with 
an American company that is known for its supply of highly 
specialized stainless steel, which is used across defense and 
aerospace sectors.
    Now, stainless steel is a very technology-sensitive 
industry. There are a lot of different recipes, and there was 
no question that China was lacking in their ability to produce 
high-quality stainless steel.
    Given everything that we know about the Chinese practices, 
it seems pretty clear that at least some portion of this 
transaction was done simply to acquire manufacturing technology 
and know how by the Chinese, but there is no evidence 
whatsoever that CFIUS reviewed this transaction before it was 
closed.
    Again, I am not casting aspersions, but it seems--even 
though this deal was slightly before FIRRMA passed, can you 
confirm that this is actually the same kind of joint venture 
deal that CFIUS had the authority to review for whatever 
reason, resources or something did not? But this seems like the 
exact kind of thing that they had the authority to review. Can 
you confirm that for me?
    Mr. Feddo. Senator, so as you alluded to, I cannot comment 
in this venue on a particular transaction or whether a review 
occurred or a pending review is under way.
    I can talk about accomplished or completed reviews with you 
in a closed setting with classified information as well.
    But more to your point, though, it is important to protect 
America's critical technology.
    On the joint venture front, CFIUS can and does look at 
joint ventures when there is a U.S. business involved. We have 
the ability to look at investments in U.S. businesses engaged 
in interstate commerce. This is something that was talked about 
a great deal during the build-out of FIRRMA with respect to 
outbound joint ventures and where CFIUS might have a gap.
    Senator Jones. Can we do a look-back? If, for instance--and 
I can talk to you in a different setting. If CFIUS did not 
review this, can we do a look-back and review something that 
occurred last year if it now comes to your attention?
    Mr. Feddo. As a general matter, we do have the opportunity 
and ability to look back at transactions that have already been 
consummated and were not reviewed by the Committee. We call 
those ``non-notifieds'', and we certainly do that often.
    The one point I would make is that some joint ventures that 
do not contribute a U.S. business are more appropriately 
tackled through the export controls process, but I am happy to 
continue----
    Senator Jones. Well, I will get with you on that.
    Ms. Nikakhtar, I want to follow up on Senator Toomey's 
questions because I am exactly where he is on this automobile 
tariff stuff. My State is sitting on edge right now, waiting to 
determine whether or not the 60,000 jobs in Alabama are going 
to go away because of these tariffs.
    And did I understand your testimony earlier that with 
regard to national security, the Commerce Department did not 
contact or ask the Defense Department anything about the 
security implications for foreign automobiles and foreign auto 
parts?
    Ms. Nikakhtar. No, Senator. Well, thank you for that 
question.
    The response only was in terms of the quantitative level of 
R&D that we actually had a lot of proprietary information from 
survey results. So we did not need to ask them about that, but 
we have worked very closely, hand in glove, with the Department 
of Defense all past summer for months and months, and we had a 
really wonderful working relationship with them to understand 
the interconnectedness between the commercial and the defense 
needs for innovation.
    Senator Jones. Did the Defense Department believe that 
these foreign automobiles, the Volkswagens and the Mercedes-
Benzes and the Toyotas, posed a national security threat?
    Ms. Nikakhtar. The Secretary of Defense submitted a letter 
to the Secretary of Commerce noting the importance of the 
commercial auto sector and the innovations they provide for the 
defense sector.
    Senator Jones. All right. Well, it sounded to me, with all 
due respect--and I agree with Senator Toomey that without 
having seen that in the analysis that went through that, it 
seems to me--because a lot of your answer was purely market 
driven. I mean, a lot of the answer that you gave Senator 
Toomey was about the markets, and I do not know how many 
foreign--I do not know how many American automobiles it would 
take in Japan to make it not a national security threat.
    But, with all due respect, it sounded to me in your answer 
that somebody said, ``We need to use this as leverage to get 
our market share up, and so let us find a way to make this 
national security.'' I hope I am wrong about that, and I hope I 
get to look at that report. I would love to be able to look at 
that report before your nomination comes to the vote here or 
certainly before the Senate, and I would encourage you to talk 
to the Secretary of Commerce and the President of United States 
to release that report to us, even in a closed setting that we 
can look at it before your nomination.
    Ms. Nikakhtar. And, Senator, I just wanted to assure you 
that trade leverage, none of that constituted any of our 
thinking when we were drafting the report. We used publicly 
available data, and all of that was corroborated by 
confidential survey information we received.
    Senator Jones. All right. Well, thank you.
    Thanks, Mr. Chairman.
    Chairman Crapo. Senator McSally.
    Senator McSally. Thank you, Mr. Chairman. Thanks for 
holding this hearing today to consider these nominations for 
many critical positions at a number of agencies.
    I do want to specifically focus on Governor Bowman's 
renomination to continue to be a member of the Federal Reserve 
Board. You are off to a good start representing community banks 
and being a voice to them, and I really appreciate that.
    Community banks are really vital for us in Arizona. By 
extending credit and other services to especially small 
businesses, they really reach a lot of rural and underserved 
populations that are just critical for our economy and 
continuing to support people that I represent.
    And we really feel the presence along the border of the 
importance of community banks, and when they close, the impact 
is severe. And the financial services that they provide are 
just very critical for us in Arizona. So I am pleased that you 
are providing that voice at the Federal Reserve Board with your 
perspective, and I hope you will continue to do so.
    Can you walk me through some problems you see that 
community banks are currently facing, even with some of the 
reforms that we have made and adjustments, and what the Federal 
Reserve is doing to make sure that regulations are properly 
tailored?
    Ms. Bowman. Senator McSally, thank you for that. Community 
banks are clearly important to our community, to our 
businesses, our families, and our communities.
    Let me first say that one of the first priorities for the 
Federal Reserve is to implement the provisions of S. 2155. So 
through my chairmanship of the Smaller Regional Bank and 
Community Bank Subcommittee at the Federal Reserve, we are 
working very diligently to finalize the CBLR, the Community 
Banking Leverage Ratio proposal, which simplifies capital 
requirements for community banks.
    We have revisited that proposal, reengaged our State bank 
supervisors for their input and participation in that process 
as well since I came on board.
    That proposal was issued prior to my joining the Board of 
Governors, so it is something that we are taking another close 
look at.
    We are also looking closely at the call report reduction, 
the burden for call report reduction and reduction of those 
burdens. That is a priority for our subcommittee as well.
    So there are many things that we are looking at. One thing 
that is probably important to your community banks is the BSA 
and AML procedure. So that is something that is on our agenda 
as well to look at examination procedures and see where we can 
find some efficiencies.
    Senator McSally. Great. Thank you.
    When Chairman Powell testified before our Committee, we 
spent a lot of time talking about the rural-urban divide and 
what is going on economically in the country. Again, I 
represent a lot of rural communities. So from your perspective, 
what does access to banking--or are there other factors that 
you think are really causation for that divide and the 
challenges for rural communities?
    Ms. Bowman. The differences between rural communities and 
urban communities is often vast. Ninety-seven percent of our 
country is rural. I am from a rural community as well. I 
recognize many of these economic challenges that we face in 
those rural communities.
    The importance of community banks in those communities is 
leadership that is provided to the community. It is access to 
credit for consumers and for small businesses. It is an 
important cornerstone of many of those communities.
    One of the concerns that we discussed earlier with Ranking 
Member Brown was the consolidation of those rural institutions 
and the continued commitment of the remaining entity in the 
community that they are serving.
    Senator McSally. Great. Thank you.
    We also have some unique cross-border challenges right at 
the border that are impacting our communities there, and we 
have talked a lot about this on the Committee already. But we 
need to continue to work across multiple agencies to make sure 
that our legitimate cross-border commerce still has access to 
banking.
    I do not know if you have any comments on specifically the 
border elements of that, but it is not just rural but also the 
cross-border.
    Ms. Bowman. Yes. We recognize that those are challenges for 
the banks that are on the border.
    I was recently in El Paso, Texas, and in Deming, New 
Mexico, where we were able to observe some of those and visit 
with bankers on the border. I would be happy to visit with you 
further about that and continue to work with you on those 
issues.
    Senator McSally. Great. Thank you.
    Yield back.
    Ms. Bowman. Thank you.
    Chairman Crapo. Senator Cortez Masto.
    Senator Cortez Masto. Thank you, Mr. Chair.
    Ms. Bowman, let me follow up on some of the conversation. 
You just said you were in Texas.
    I am curious. Friday, the regulators closed Enloe State 
Bank in Texas. I think it was a $36 million bank. What went 
wrong?
    Ms. Bowman. My understanding--that was an FDIC-regulated 
bank--was that there was fraud on behalf of one of the 
management, representatives of management.
    Senator Cortez Masto. OK. And my understanding is that the 
cost to the FDIC because of this closure is about $27 million.
    I guess my question to you, if this community bank had more 
assets, would the loss have been such as great?
    Ms. Bowman. I think the challenges when you are dealing 
with the closure of an institution, as I mentioned when I was 
testifying last May before this Committee as well, I closed a 
similar situation, institution in Kansas during my time as the 
State bank commissioner.
    When you have fraud that is resident in the institution, 
oftentimes it only comes to light during an examination. My 
understanding is that the call report information that was 
filed indicated that the bank was in good condition, and it was 
revealed when the FDIC came to do an examination that that was 
not the case.
    Senator Cortez Masto. But the intent is--and I guess this 
is my concern. Community banks, many have record profits, but 
the goal here is to ensure that if there is a fraud of if there 
is something happening, they have access, they have efficient 
capital or assets for just this very reason, so that there is 
not a big hit, and they have the ability to cover those costs.
    So I guess my concern with this process that is happening 
right now, in all due respect to the Chairman, there is no way 
I am going to get to ask every single one of you a question, 
but here is what I do know. Last time you were before us, we 
had a short, limited time to ask questions, and when I did not 
get the answers, I actually submitted questions for the record. 
But your questions that you responded to me were similar, word 
for word, to another individual that was on the panel at the 
same time.
    So I guess my concern is I do not have enough time to ask 
you questions the way this has been presented here, and this is 
ridiculous to me. These are important positions for every 
single one of you, and to not even be able to have 5 minutes 
with all of you, let alone a second, is outrageous to me.
    And let me jump over here. For the last 2 years, the 
Export-Import Bank has not been filled. We are finally filling 
these positions, and I will tell you the Export-Import Bank is 
important to Nevada. We have 21 firms that export electrical 
equipment, machinery, minerals, and other products to other 
Nations like Mexico, Turkey, and India, and we are now just 
putting in place individuals that can help finalize and start 
moving this forward.
    I think, Mr. Chairman, with all due respect, this is no way 
to conduct our business long term in the Senate. It is time for 
us to start working together and start putting people in 
positions but making sure we get the right people in these 
positions and not crowd everybody in because there is no way I 
am going to be able to ask everybody that is before us a 
question that is important for my State.
    So I appreciate you all being here, but at the same time, I 
am frustrated with how this process is moving forward. And I 
just do not think it does a service to anybody here in 
Congress, let alone the people that represent--are in my State 
that I am supposed to represent or any of the States that we 
are supposed to be represent. This is not how we should be 
doing business.
    Chairman Crapo. Senator Menendez.
    Senator Menendez. Let me echo the Senator from Nevada's 
concerns. I expressed this to the Ranking Member as well.
    Six people, major positions, in one hearing is almost an 
impossibility to get what you need, but I am going to try to 
get some of it. But I doubt I am going to get all of it.
    So let me start off with Ms. Nikakhtar. I appreciated your 
visit with me.
    Are you aware that 3D gun blueprints are already available 
online?
    Ms. Nikakhtar. Yes, Senator, and I understand that it is 
currently the subject of litigation.
    Senator Menendez. So my concern is, my understanding of the 
department which you have been nominated to takes the position 
that once something has been published, it can no longer seek 
to control it. So what will you do to allay the concerns of 
Americans who are worried about the Administration's actions 
that could make 3D gun blueprints more widely available?
    And if you cannot control the release of those designs 
under existing regulations, will you commit to changing those 
regulations or simply change the proposed transfer to leave 
such technical information under the purview of the State 
Department?
    Ms. Nikakhtar. Senator, I very much enjoyed our 
conversation yesterday. Thank you for taking the time.
    What you are referring to, it is the Cats I, II, III 
transfer from the Munitions List to the Commerce Control List. 
Once that happens--and I want to go on record saying it here 
and as I communicated to you--I am committed to working with 
every single Member of Congress to the extent that they would 
like to engage with me and my bureau to make sure that we are 
developing and implementing sound policies with respect to our 
export controls, rules, and procedures
    Senator Menendez. Well, I appreciate that, but that does 
not answer my question.
    So when it comes to 3D guns specifically, because of my 
understanding of the regulations as they exist, since they are 
supposedly published in some entity, they no longer can be 
controlled. But we do not need the widespread distribution of 
this.
    So I hope that you will do something, and I would like to 
see an answer in writing from you as to what you will do.
    As I will repeat to you what I said in private, it is no 
value, your offer to me, which I appreciate, to be engaged on 
transactions if I do not know the transaction exists. If I have 
no notification that you are in the midst of considering an 
arms sale to some entity, if I do not know it, unless I find 
out through some other source, I cannot comment on it. So there 
has to be some way, if this goes through, in which you, if 
confirmed, ultimately engage us in letting us know, at least a 
simple notification, so we can comment and take value of your 
offer. Otherwise, your offer is of no value. So I hope you 
understand it in that respect.
    Mr. Feddo, one of the provisions that I offered in FIRRMA 
was to require CFIUS to develop regulations to ensure that 
State-owned entities are declaring their transactions with 
CFIUS and not using complex financial structures to conceal 
their ownership or evade CFIUS review.
    We saw this situation at work in December when the Wall 
Street Journal reported that a firm owned by China's Ministry 
of Finance was able to use offshore subsidiaries to purchase a 
U.S. satellite firm and was thereby allegedly able to access 
information that may have been restricted under U.S. export 
controls.
    Do you agree that CFIUS needs to do more to evaluate the 
extent of foreign Government control or influence over foreign 
firms seeking to invest in the United States? And, second, will 
you commit to implementing this provision, which is law, of 
FIRRMA so that foreign Governments seeking to invest in 
critical American industries are required to file declarations 
with CFIUS?
    Mr. Feddo. Sir, I absolutely commit to implementing that 
provision. I think it is a very important piece of FIRRMA with 
respect to State-owned entities.
    As you are well aware, there is a real challenge in 
discerning ultimate beneficial owners, and so we are taking a 
great deal of energy and attention to building out a team to 
look at non-notified transactions and identify ultimate 
beneficial owners when appropriate.
    I cannot comment about the specific transaction that you 
raise, but I am absolutely committed to implementing this 
provision.
    Senator Menendez. Well, I appreciate it and look forward to 
working with you on that.
    Mr. Shmotolokha----
    Mr. Shmotolokha. ``Shmotolokha.''
    Senator Menendez. ``Shmotolokha.'' Thank you very much.
    I have always been a strong supporter of the Export-Import 
Bank. Given in your experience in the private sector, how 
important is it that we reauthorize a bank and do not let it--
to shut it down as we did in 2015?
    Mr. Shmotolokha. It is critical, sir.
    Senator Menendez. And do you believe it is appropriate for 
Congress to increase the bank's exposure cap, the amount of 
loans it can finance in light of the increased resources some 
economic competitors like China are giving to their export 
credit agencies?
    Mr. Shmotolokha. Yes, sir.
    Senator Menendez. If everybody gave me answers like that, I 
could get through the whole process.
    [Laughter.]
    Senator Menendez. I have one last question, if I may, Mr. 
Chairman, I would like to ask Ms. Lee.
    I appreciate the conversation we had yesterday in my 
office.
    Do you believe that tough penalties are a successful 
deterrent for future lawbreakers? I am concerned that we often 
seem to have at the SEC a reticence to pursue the type of 
enforcement and penalties that are a deterrent and ultimately 
pursue what we want, which is conformance with the rules. 
Should such an effective enforcement strategy incorporate tough 
penalties as part of its strategy to prevent harm, deter bad 
actors, and punish wrongdoers?
    Ms. Lee. Yes. Thank you, Senator.
    I actually think that compliance is the overall goal of 
enforcement, and the best way to get at compliance is 
deterrence. I think that includes tough penalties where they 
are warranted on a case-by-case basis, but I do support strong 
penalties in the right case because I do think that has the 
best deterrent value.
    Senator Menendez. I have other questions, Mr. Chairman. My 
time has expired.
    Chairman Crapo. Senator Van Hollen.
    Senator Van Hollen. Thank you, Mr. Chairman.
    Thank all of you for your testimony.
    Governor Bowman, you and I have spoken about this. I think 
the fact that the United States does not have a real-time 
payment system is an embarrassment, and it is costing millions 
of Americans billions of dollars, especially Americans who do 
not have big balances in their bank accounts.
    Now, I heard some questions from Senator Tillis along these 
lines. I just want to point out to you an article by Thomas 
Hoenig, a former vice chair of the FDIC and former president of 
the Federal Reserve Bank of Kansas City, who wrote a recent 
editorial regarding this issue stating, and I quote, ``The 
needs of consumers and businesses and the depository 
institutions nationwide that provide them services will be best 
served by the Federal Reserve continuing to play its role as a 
payments processor.'' He goes on to say, ``The alternative is 
to award the clearinghouse a de facto monopoly resulting in a 
less competitive and less efficient market for immediate 
payments.'' Are you aware of that editorial?
    Ms. Bowman. Senator Van Hollen, I am familiar with the 
editorial, and I have read it. It is consistent with some of 
the comments that we have received during our request for 
comment on the questions we issued last fall.
    Senator Van Hollen. And do you share some of those 
concerns?
    Ms. Bowman. There are many factors that are in 
consideration as we are deliberating this issue within the 
Federal Reserve System. It is a live discussion, and we are 
actively in the process of considering all of the comments that 
we have received.
    Senator Van Hollen. All right. So part of your job, of 
course, is to look out for the community banks----
    Ms. Bowman. Yes, sir.
    Senator Van Hollen. ----and the concerns expressed about 
giving this monopoly to the clearinghouse come from community 
banks in large measure. You are aware of that, right?
    Ms. Bowman. Yes. I have heard from community banks about 
this issue.
    Senator Van Hollen. So, Ms. Nikakhtar, let me just follow 
up on the use of Section 232 because, in my view, it has been 
sort of a gross abuse of claims of national security when we 
use that to place tariffs on our allies like Canada and others.
    So count me in with those other Members who have said we 
really want to get this report with respect to Section 232 and 
automobiles.
    Where I do agree with some of the actions the 
Administration has taken is where I think we face a real 
strategic threat, which is China's theft of a lot of our IP and 
technology. So I supported the efforts that you at the Commerce 
Department took last year with respect to ZTE after it was 
found in violation of our sanctions. I was incredibly 
disappointed that the President then tweeted out that he is 
going to reverse the blocking order because he wanted to help 
his, quote, ``friend,'' President Xi.
    So now we have your measure putting Huawei on the entities 
list because of 5G, and as I read the explanation for that--and 
I think this is a move in the right direction, lots of 
complicated issues, but a move in the right direction--it was 
based not only on the finding that they violated the Iran 
sanctions but also other findings that they pose a national 
security threat. Is that right?
    Ms. Nikakhtar. Senator, yes, that is what we have 
indicated.
    Senator Van Hollen. OK. So I am with you in addressing this 
issue.
    What I am concerned about is you are trading off something 
that you agree is a national security issue as part of 
concessions over a tariff fight. Can you tell this Committee 
that you will not tradeoff legitimate national security 
concerns in order to get some better deal in a tariff fight 
with China?
    Ms. Nikakhtar. Senator, you raise very important points. If 
it is up to me, I want to make sure that we do everything we 
can to protect national security. Trade is not in my 
jurisdiction, national security.
    With respect to ZTE, I completely get your points. Under 
the compliance agreement, ZTE now is the most monitored company 
in the world.
    My commitment is to make sure that we never, ever 
compromise national security threats, and to the extent that 
you ever have any concerns, I am happy to engage with you or 
your staff directly to make sure those concerns are addressed.
    Senator Van Hollen. Right.
    And so the actions that you have taken with respect to the 
Huawei and 5G are a result of your conclusion that it poses a 
national security threat. Is that correct?
    Ms. Nikakhtar. A national security threat and undermining 
foreign policy interests of the United States.
    Senator Van Hollen. So I am going to be watching very 
carefully to see if we somehow are trading off that legitimate 
national security issue to try to get a better deal on some 
tariff issues. Not only do I think it is wrong in compromising 
our national security, it totally undermines our credibility 
when foreign countries think that we are using national 
security concerns as leverage in some other area like trade 
because that is a very, very dangerous path to go down. Would 
you agree with that?
    Ms. Nikakhtar. You have my commitment, and I want to go on 
the record that my singular focus is national security. That is 
the purview of my job, and that is what I am committed to.
    Senator Van Hollen. Thank you.
    Chairman Crapo. Thank you, Senator Van Hollen.
    That concludes our questioning for today's hearing. For 
Senators who wish to submit questions for the record, those 
questions are due to the Committee by the end of the day on 
Friday, June 7th.
    And we ask that our nominees respond to those questions no 
later than the close of business on Friday, June 14th.
    Senator Menendez. Mr. Chairman, may I make one remark 
before we close?
    Chairman Crapo. Yes. Yes, you may.
    Senator Menendez. I have other questions. I am going to 
submit them for the record. I would like to get substantive 
answers. If I do not get substantive answers, then I will do 
everything possible on the floor to impede the nominations 
moving forward. Since we do not have time to go through a 
second round here or have enough time, I would like to get 
substantive answers to those questions.
    Chairman Crapo. That is a fair request.
    We would like to thank our nominees for being here today. 
Thank you again for your willingness to serve. We have got a 
vote that is already 15 minutes under way, so we are going to 
wrap this up and leave quickly.
    I just want to again extend to each of you our thanks for 
your willingness to help keep our Country strong and to serve 
in your respective capacities.
    With that, this hearing is adjourned.
    [Whereupon, at 11:21 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 CHAIRMAN MIKE CRAPO
    This morning we will hear testimony on six nominees to serve at 
five different agencies. Welcome, all of you.
    I see friends and family behind you, and I welcome them here today 
as well.
    If confirmed, I look forward to working with each of these nominees 
on many important issues within each of their respective policy areas, 
including: continuing efforts from last Congress to right-size 
regulations, making it easier for consumers to get mortgages and obtain 
credit; encouraging capital formation, reducing burdens for smaller 
businesses and improving corporate governance; exploring the proper 
role of the Export-Import Bank in providing finance in response to 
foreign Governments, like China, that provide aggressive subsidies and 
place U.S. exporters at a disadvantage; and preserving the 
technological edge and national security of the United States while 
also preserving an open U.S. investment environment and ability of our 
industry to export its products through the implementation of FIRRMA 
and export control rule.
    First we have, Mr. Thomas Peter Feddo, to be an Assistant Secretary 
of the Treasury for Investment Security.
    This is an important national security job that protects our most 
critical technology companies from foreign takeovers and influence.
    He currently leads the U.S. Department of the Treasury's Office of 
Investment Security in executing Treasury's statutory role as the Chair 
of CFIUS.
    He also spent 7 years at the Treasury Department's Office of 
Foreign Assets Control implementing and enforcing U.S. economic 
sanctions.
    As a graduate of the U.S. Naval Academy, Mr. Feddo served as a 
lieutenant in the Navy's nuclear submarine force and as an officer at 
the Navy Antiterrorist Alert Center.
    Next, The Honorable Nazak Nikakhtar, to be Under Secretary of 
Commerce for Industry and Security.
    She was previously confirmed by voice vote to be an Assistant 
Secretary of Commerce for Industry and Analysis
    She is currently serving as the Acting Under Secretary, evaluating 
and promulgating effective regulation of emerging U.S. technologies.
    She comes to the Bureau of Industry and Security from her role as 
Assistant Secretary for Industry and Analysis for the International 
Trade Administration, or ITA.
    While at ITA, she worked on policies to strengthen the 
competitiveness of U.S. companies globally.
    Previously, she was a trade attorney at several high profile 
Washington law firms and an industry analyst at the Bureau of Industry 
and Security.
    Next, we have Mr. Ian Paul Steff, to be Assistant Secretary of 
Commerce and Director General of the United States and Foreign 
Commercial Service.
    Mr. Steff's job is to open markets and sell whatever Mr. Feddo and 
Ms. Nikahktar do not control, which is about 98 percent of what America 
makes.
    Mr. Steff currently serves as Deputy Assistant Secretary for 
Manufacturing at the U.S. Department of Commerce's International Trade 
Administration.
    In that role, he oversees approximately 1,400 trade and investment 
professionals based in more than 100 U.S. cities and 70 markets around 
the world.
    Prior to joining the U.S. Department of Commerce, he worked as vice 
president of global policy and technology partnerships for the 
Semiconductor Industry Association for nearly a decade and he started 
his professional career as staff on the U.S. House of Representatives 
Committee on Ways and Means.
    Next, we have the Honorable Michelle Bowman, to be a Member of the 
Board of Governors of the Federal Reserve.
    Governor Bowman currently serves as a Governor on the Federal 
Reserve Board and is the first person to fill the Federal Reserve's 
community banking seat after her confirmation last year by a bipartisan 
vote of 64 to 34.
    While Governor Bowman's current 14-year term expires January 31, 
2020, President Trump has renominated her to the same position for a 
full 14-year term.
    Prior to serving as a Governor, she was the State bank commissioner 
of Kansas from January 2017 to November 2018, served as vice president 
of a Kansas-based community bank, Farmers & Drovers Bank, between 2010 
and 2017, and served in a number of Government roles.
    Next, we have Mr. Shmotolokha, who has been nominated to serve as 
First Vice President and Vice Chairman of the Export-Import Bank of the 
United States.
    As President Trump and other senior officials in his Administration 
have noted, a fully functioning Export-Import Bank has the ability to 
provide financing and level the playing field in response to 
Governments, like China, which can provide almost limitless subsidies 
from its Treasury, which places U.S. exporters at a disadvantage.
    His career in the private sector has focused on international 
business and trade, particularly in the fields of telecommunications, 
technology and renewable energy.
    He currently leads the international division for Alpha 
Technologies.
    Finally, we have Ms. Allison Lee who is nominated to serve as a 
Member of the Securities and Exchange Commission.
    As an SEC Commissioner, Ms. Lee would be responsible for helping 
the SEC fulfill its mission of protecting investors; maintaining fair, 
orderly and efficient markets; and facilitating capital formation.
    Ms. Lee is currently a consultant with Congress Park Consulting 
where she teaches courses on U.S. corporate and securities law in Spain 
and Italy, and works as a contributing author on treatises in corporate 
and securities law.
    She previously served as Senior Counsel in the Division of 
Enforcement's Complex Financial Instruments Unit, and as counsel to 
former Commissioner Kara Stein.
    Thank you all for your willingness to serve and for appearing 
before our Committee today.
                                 ______
                                 
              PREPARED STATEMENT OF SENATOR SHERROD BROWN
    Thank you, Chairman Crapo, for holding today's hearing on the 
nominations of Mr. Thomas Feddo, Ms. Nazak Nikakhtar, Mr. Ian Steff, 
Ms. Michelle Bowman, Mr. Paul Shmotolokha, and Ms. Allison Lee. I look 
forward to hearing their views and would like to welcome their families 
to the Committee.
    Mr. Feddo is the first nominee to be Assistant Secretary of the 
Treasury for Investment Security, a position created under the Foreign 
Investment Risk Review Modernization Act of 2018--the bipartisan 
legislation from this Committee that made major reforms to the 
Committee on Foreign Investment in the United States.
    We created this new position because of the critical role CFIUS 
plays protecting U.S. national security from increasing threats from 
certain foreign investments. Yesterday we heard about how China has 
adopted new tactics to acquire American technology in sectors that are 
vital to our national security. It's why we passed this bill, and it's 
why this job will be so important.
    Mr. Feddo is currently serving as deputy assistant secretary for 
investment security, he played a key role in formulating the reforms 
last year, and is now working to carry out the technical and structural 
changes required under FIRRMA, including finishing the rulemakings to 
expand CFIUS's scope, and filling new staff positions necessary for 
enhanced review of potential investments that could pose risks to 
national security.
    If confirmed, Mr. Feddo, you will need to continue this critical 
work. I know you've made progress, and I look forward to hearing from 
you about next steps.
    Ms. Nikakhtar has been nominated to serve as Under Secretary of 
Commerce for Industry and Security, responsible for a set of key U.S. 
national security, foreign policy, and economic objectives through 
application of effective U.S. and multilateral export controls and 
treaty compliance. Although Ms. Nikakhtar has extensive experience in 
international trade, including at the International Trade 
Administration, she has more limited experience in national security 
and export control matters.
    If confirmed, Ms. Nikakhtar will be responsible for administering 
critical U.S. export control laws and regulations that cover emerging, 
foundational, and other forms of sensitive technology--an area of 
increasing importance.
    Ms. Nikakhtar, I hope that you will work with your colleagues to 
navigate the complex national security and political concerns that 
surround the export of sophisticated U.S. technology.
    Mr. Steff is nominated to be Assistant Secretary of Commerce for 
Global Markets and Director General of the United States and Foreign 
Commercial Service. In that role, he will be responsible for the 
International Trade Administration's work to advance U.S. business 
overseas and to promote U.S. exports and fair trade rules.
    Mr. Steff's current experience as Deputy Assistant Secretary for 
Manufacturing at Commerce, and his prior experience working on economic 
development, in particular focusing on innovation and technology, 
provide him with an understanding of how to strengthen the 
competitiveness of U.S. industry, which ultimately should support 
American manufacturing and jobs. That's good for the economy and for 
workers.
    Ms. Bowman was renominated to be a Member of the Board of Governors 
of the Federal Reserve System for a full 14-year term, expiring in 
2034.
    As a former State bank commissioner, Ms. Bowman serves in the role 
designated for a Fed Governor with community bank experience.
    At her first nomination hearing, I was concerned that Ms. Bowman 
would be a rubber stamp for Wall Street. I was right to be concerned.
    Ms. Bowman, I know you possess a deep understanding of community 
banks and are being nominated for a full 14-year term based, in part, 
on that understanding.
    But, time and again, you have taken the side of the big banks as 
the Fed has done favors for Wall Street by relaxing capital standards 
and weakening stress tests and other postcrisis safeguards meant to 
protect taxpayers and the financial system.
    If you are confirmed to a full term, I expect that you will do all 
you can to ensure that the regulatory system works for community banks 
and protects their customers.
    Mr. Shmotolokha is the nominee to be First Vice President of the 
Export-Import Bank.
    For nearly 4 years, I have pushed for the EXIM to be fully 
reopened, and with the confirmation of three board members last month, 
the Bank is finally running at full capacity. To stay competitive as 
they pursue business abroad American manufacturers need a reliable 
Export-Import Bank that is authorized for the long term.
    Mr. Shmotolokha is the final nominee to the Bank's board to appear 
before our Committee. The full Senate needs to consider his nomination 
and the nomination of Claudia Slacik, who our Committee reported with 
overwhelming bipartisan support, so they can provide their expertise as 
the Bank resumes full operations.
    If confirmed, he would bring significant private sector experience 
in the export of U.S. products to the global telecommunications 
industry. When the EXIM Bank was fully functioning, it supported more 
than 164,000 jobs a year. I look forward to hearing how we can expand 
on the number of U.S. jobs supported by the Bank.
    Ms. Lee has been nominated to be a Commissioner of the Securities 
and Exchange Commission. If confirmed, Ms. Lee would return to the SEC 
at a critical time. The agency is considering several issues that will 
define the rights and protections for both individual and institutional 
investors.
    I expect Ms. Lee to draw on her SEC enforcement experience when 
considering rules that could affect investors' rights and remedies 
against wrongdoers and when weighing penalties in misconduct cases.
    The SEC needs to promote integrity and fairness in the capital 
markets so that investors can trust the markets and have faith in the 
regulator.
    I look forward hearing from all of you.
    Thank you, Chairman Crapo.
                                 ______
                                 
                PREPARED STATEMENT OF THOMAS PETER FEDDO
      To be Assistant Secretary, Treasury for Investment Security
                              June 5, 2019
    Chairman Crapo, Ranking Member Brown, and distinguished Members of 
the Committee, I am honored to appear before you today. I am humbled to 
be nominated by the President to serve as Assistant Secretary of the 
Treasury for Investment Security, a new position created by the Foreign 
Investment Risk Review Modernization Act of 2018 (FIRRMA).
    Last August, FIRRMA was enacted with overwhelming, bipartisan 
support from this Committee, both houses of Congress, and the 
Administration. In creating this position--specifically through an 
amendment by Chairman Crapo--the statute recognizes the need for 
dedicated, accountable leadership of the critical national security 
function executed by the Committee on Foreign Investment in the United 
States (CFIUS). I am confident that my professional background affords 
me the experience and knowledge to lead CFIUS, and to effectively and 
faithfully implement FIRRMA over the coming months.
    I grew up with two younger sisters, and attended public school near 
Buffalo, New York. We had a full-time mom, and a dad who served in the 
Marine Corps and then worked for the local electric company for nearly 
25 years. My dad worked long hours to make sure that our family had all 
that we needed, and a little more than he had as a child. He suddenly 
passed away just months after seeing me graduate college, but I know 
that he would be pleased were he here today. My mom dedicated herself 
to building a warm and loving home for us. I am deeply grateful to my 
parents for laying the foundation that has brought me to this point--by 
example, they instilled the virtues in my sisters and me, and we came 
to know the value of hard work, loyalty, and family.
    I would not be here today without my extraordinary wife Muffet. She 
has been an unwavering source of support and encouragement, while 
selflessly devoting her many talents to raising our three wonderful 
children.
    Early in high school, I decided that I would serve our Nation in 
the military, and sought to attend the Naval Academy. Since taking the 
oath of office at Annapolis 33 years ago, it has been my privilege to 
spend literally half of my life in public service--including first as a 
lieutenant on a nuclear submarine, and then with the Naval Criminal 
Investigative Service. After law school, I served as a counsel for the 
House Energy and Commerce Committee, before stints as an attorney at 
the Pentagon, and a civil servant at the Treasury Department. I have 
served in all three branches of the Federal Government--with nearly 20 
years in a national security related capacity. In the private sector, I 
practiced law as a patent and trademark litigator, and most recently as 
a partner in a large firm's international trade group.
    By virtue of these professional experiences, I understand the 
importance of protecting American innovators' intellectual property--
our Nation's vital economic engine. And as a Navy submariner, educated 
and trained as an engineer, I experienced firsthand how America's 
superior technology ensures our warfighting edge.
    As an attorney representing global businesses large and small, I 
have gained a true appreciation for the importance of foreign 
investment to our strong and vibrant economy, as well as the benefits 
of regulatory certainty to business transactions.
    If I am confirmed, you have my unqualified commitment that I will 
work closely with this Committee, and Congress as a whole, to continue 
what I have been doing as Deputy Assistant Secretary over the past 
year: faithfully and transparently implementing FIRRMA; ensuring our 
national security is protected while foreign investment is fostered; 
and serving with humility, and a deep and abiding respect for our 
dedicated and talented career professionals at Treasury and across the 
Government who diligently execute the CFIUS mission.
    Thank you again for the privilege and opportunity to appear before 
you today. I am happy to answer any questions that you may have.

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                 PREPARED STATEMENT OF NAZAK NIKAKHTAR
       To be Under Secretary, Commerce for Industry and Security
                              June 5, 2019
    Mr. Chairman, Ranking Member Brown, and Members of the Committee, 
thank you for the opportunity to appear before you today. In 2018, I 
was honored to be confirmed as the Assistant Secretary for Industry and 
Analysis at the Department of Commerce, and today I am extremely 
honored to be nominated for the position of Under Secretary for 
Industry and Security.
    With me today are my husband Gene Degnan and my mother Manijeh 
Nikakhtar. My father Bijan Nikakhtar passed away several months ago, 
but he would have been beaming with pride if he were here today, as an 
amateur political historian and one of the greatest American patriots I 
have ever known. I am proud to say that my parents and my husband have 
served our Government as Federal employees for many years. My husband 
served for over a decade at the Department of Commerce, and my parents 
served for over 40 years collectively as physicians at the VA hospital 
taking care of our Nation's veterans. My brother, Nersi Nikakhtar, also 
a physician at the VA hospital, had work obligations today. I am proud 
to be part of a family that honors Government service.
    I immigrated to America with my family 39 years ago. I can remember 
from a very young age how proud I was to be an American and how I 
marveled at American innovation and ingenuity. I knew at an early age 
that I wanted to be part of the narrative of American growth.
    This is what prompted me to study law and economics after college. 
I obtained my Juris Doctor and Master's in Economics from Syracuse 
University and, in 2002, I began my career at the Department of 
Commerce, first at the Bureau of Industry and Security and subsequently 
at the International Trade Administration. At the Department, I worked 
with, and learned from, the incredibly smart and talented civil 
servants. Many of those dedicated professionals are still there today, 
and they are the pillars that shape our Government from Administration 
to Administration. I have great respect for them and am privileged to 
work with them again.
    I joined the private sector several years later as a trade and 
export control lawyer, representing industries in the aerospace and 
steel sectors, in aquaculture, high-tech goods, chemicals, and 
minerals. In private practice, worked to level the playing field for 
U.S. industries and, on exports, I conducted internal investigations to 
enforce compliance agreements that clients with the U.S. Government to 
address the Government's national security concerns.
    My training and experience as both a lawyer and an economist have 
given me the expertise to determine how to protect U.S. national 
security and simultaneously advance the economic interests of U.S. 
industries.
    Today, national security no longer begins and ends with military 
strength. It is a fact in today's world that our national security is 
dependent on our economic strength and technological leadership.
    Yet, advancements in technology and the interconnectedness of our 
economies make our national security challenges more complex than ever 
before. Economic integration has emboldened some foreign Nations to 
behave in ways that undermine our national security, expecting that 
threats of economic retaliation will weaken our resolve to act. They 
have increased illicit procurement of items to build weapons of mass 
destruction and transshipped those items to terrorist organizations and 
regimes. We are witnessing illegal acquisitions of sensitive 
technologies to weaponize dual-use items and oppress millions of 
innocent citizens. And we've seen for years how rampant intellectual 
property theft displaces U.S. industries, stifles innovation, and 
enables the advancement of strategic competitors.
    The key to our success is maintaining U.S. technological 
superiority and economic interests through multilateral coordination 
that is more forward leaning, better use of intelligence data and 
analytics, robust enforcement of our laws, and a tightly coordinated 
whole-of-Government approach, that includes more proactive engagement 
with Congress.
    Time is of the essence, and during my 3\1/2\ months at the Bureau 
of Industry and Security, I have been leading the Department's efforts 
to update our regulations to incorporate ECRA reforms and address 
global threats. We are engaging with industry to identify emerging 
technologies that can undermine our national security. In addition, I 
have begun an initiative to work with like-minded allies on better 
export control coordination and wider end-use checks. It is imperative 
that we better coordinate multilateral policies on sensitive technology 
so U.S. companies can compete globally while Governments prevent those 
technologies from being misused by adversaries.
    At the Bureau, I challenge my colleagues every day to rethink how 
we can modernize our policies to stay ahead of new threats. And I have 
made it a priority to seek industry input, as today's complex 
challenges cannot be solved without close engagement with U.S. 
businesses; our policies must maintain and advance America's 
technological and economic leadership.
    My parents immigrated to America knowing that this is the greatest 
country in the world. As an American, it is my responsibility and honor 
to preserve this Nation's security for future generations. I thank you 
again for the opportunity to be here in front of this Committee. I look 
forward to your questions.

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                  PREPARED STATEMENT OF IAN PAUL STEFF
  To be Assistant Secretary of Commerce and Director General, United 
                 States and Foreign Commercial Service
                              June 5, 2019
    Good morning, Chairman Crapo and Ranking Member Brown, Members of 
the Committee. It is the greatest of honors to sit before you today. If 
confirmed, it would be my privilege to serve as the Assistant Secretary 
of Commerce for Global Markets and Director General of the United 
States and Foreign Commercial Service. I thank President Trump for this 
nomination. So too, I am grateful for the continued support of Vice 
President Pence, both in my former capacities in my home State of 
Indiana, and now in Washington, DC.
    Speaking of Hoosiers, I am proud to be joined by my wife, Brittany. 
I remain forever grateful for your incredible encouragement, 
compassion, and flexibility as we serve the Nation we love and raise 
our two little stars, Daniel and Owen. I am also joined by my parents, 
Wayne and Lisa. Our childhood home was filled with love, faith, 
respect, hard work, and an enduring sense of service to one's country. 
Thank you, Mom, Dad, Gram, Aunt Lori, Aaron, and to all those family 
members, friends, and teachers who helped me along the way.
    My story started under a few feet of snow, thirty miles south of 
Buffalo, New York, on my grandparents' dairy farm. My two younger 
brothers, Eric and Levi often reflect on the comradery we developed 
shoveling that never-ending lake-effect byproduct, raising our pet 
ducks, and commiserating over our beloved Buffalo Bills. Childhood 
summers encompassed exploring the pastures and woods, working on our 
neighbor's berry and plant farm, and waiting for the rumble of Dad's 
cycle as he returned home from his job in highway maintenance. This is 
a glimpse of our small slice of country and my upbringing in rural 
America.
    Rural? Yes. Encouraged to dream big? Every step of the way. And 
dream we did. I devoted nearly every penny earned on the farm to my 
stamp and coin collection. Years later, as I arrived at American 
University to begin my academic career in international affairs, I knew 
unequivocally that my future involved fostering relations with the 
foreign markets and the people personified in the postage and currency 
I accumulated. That dream and future continue to be realized.
    If confirmed, I would be incredibly honored to lead a world-class 
team of professionals that provide export counseling to small- and 
medium-sized businesses, while identifying new foreign markets for 
their products and services; advocate on behalf of U.S. companies 
competing for foreign Government procurements; attract foreign direct 
investment, while working to grow the U.S. manufacturing base; and 
reduce, remove, and prevent foreign trade barriers that impede market 
access for U.S. goods in a free, fair, and reciprocal fashion.
    As the Deputy Assistant Secretary of Commerce for Manufacturing 
since June of 2017, I've seen the impact the Global Markets team has on 
U.S. manufacturers and service providers. This vast network of more 
than 1,300 trade and investment specialists in headquarters and the 
U.S. Field, combined with the presence of the Foreign Commercial 
Service in over 70 foreign markets, deliver daily.
    Simply put, I have come to know the Global Markets team as: ``A 
Team that Works, a Team that Chooses to Compete, and a Team that 
Delivers.'' These professionals deliver ``one deal at a time'' and have 
a tremendous impact measured at over $120 billion in FY2018 in the 
areas outlined above.
    In my former professional capacities, I accrued experience in 
economic development, executive leadership, and trade policy. In my 
past economic development roles, I worked successfully to attract 
foreign direct investment. SelectUSA, which would be under my purview 
if confirmed, is a valued economic development partner to States.
    Likewise, during my time in the semiconductor industry, I witnessed 
the contributions of the Commerce Department to ensure foreign market 
access. I regularly engaged with the Commerce team while managing the 
leading chip industry association's international engagements and 
technology programs for a decade. I have seen the challenges posed by 
unfair foreign trade measures and massive market distorting practices 
that crippled companies looking to compete internationally.
    Earlier in my professional career, I worked on the Trade 
Subcommittee staff of the House Ways and Means Committee. I have a 
profound appreciation for the vital role of Congress when it comes to 
ensuring the global competitiveness of U.S. industry.
    While my stamp and coin collections are now the responsibility of 
my two young Hoosiers, I have no doubt that they and our country have a 
limitless and prosperous future based on the unparalleled 
accomplishments of the Global Markets team at Commerce. I aspire to 
help this team continue to achieve its mission. If confirmed, I will 
devote every working moment to its success on behalf of our Nation's 
exporters. Distinguished Members of the Committee, thank you for your 
consideration.

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                 PREPARED STATEMENT OF MICHELLE BOWMAN
    To be a Member, Board of Governors of the Federal Reserve System
                              June 5, 2019
    Chairman Crapo, Ranking Member Brown, and Members of the Committee, 
it has been just over a year since this Committee first recommended my 
nomination as a Federal Reserve Board Governor. While I am not the 
first community banker to serve on the Board, I am humbled by the 
opportunity you gave me to serve as the first Governor to fill the role 
the Congress designated for someone with community banking experience 
on the Federal Reserve Board. I am deeply honored the President has 
renominated me to serve in that capacity.
    I am also grateful to my family for their continued support. My 
husband, Wes, and our children, Jack and Audrey, are here with me 
today. The rest of my family are watching from home in Kansas.
    Since my confirmation last year, I have worked to fulfill my unique 
role on the Board by traveling widely and listening closely to 
community bankers, consumers, small business owners, and community 
leaders. I have visited with farmers, workers, and business leaders 
from across the country to discuss the economy. I am making sure these 
unique perspectives are represented in the Federal Reserve's 
deliberations and decision making on both monetary policy and 
regulatory matters.
    During my time at the Board, I have also drawn on my experience as 
a community banker and regulator to ensure that our work is guided by a 
deep understanding of the practical realities confronting bankers and 
the communities they serve across the country. The work done after the 
crisis to address the weaknesses in the U.S. financial system and 
ensure its future resilience was essential. However, during my time at 
my family's community bank, I saw firsthand how the regulatory changes 
created in the aftermath of the crisis impacted community financial 
institutions. Small, solid institutions like this one are essential to 
so many of our citizens and communities. As regulators, we need to 
ensure that we are not imposing unnecessary burdens on community banks. 
That is why one of my priorities as a Governor has been to 
appropriately tailor our supervision and regulation to the size, 
complexity, capacity, and risks posed by an institution.
    To further this effort, I recently formed a working group of 
experts from across the Federal Reserve System to launch a 
comprehensive review of our supervisory work with smaller regional and 
community banks. While serving as the Kansas State Bank Commissioner, I 
was committed to treating every consumer and institution fairly and 
respectfully and fostering open communication. This working group will 
follow those same principles. We are looking for ways to optimize our 
supervision and regulation to ensure it adapts to the on-the-ground 
realities of an evolving industry and changing consumer expectations 
while maintaining the safety and soundness of our banking system.
    Let me close by saying a few words about monetary policy and the 
Federal Reserve's dual mandate. As a community banker, it was my job to 
support local businesses and consumers. I draw upon this experience 
often when thinking about monetary policy, because it has given me a 
personal and practical understanding of how the Federal Reserve's goals 
of fostering maximum employment and stable prices directly affects 
individuals as well as the broader financial system and economy. The 
Congress has given the Federal Reserve independence to pursue these 
goals, because our work is critical to our economy, to businesses, to 
families, and to communities. I am deeply committed to fulfilling this 
mandate.
    If confirmed by the Senate, I will continue the important work I 
have begun and be committed to accountability, transparency, and clear 
communication in all of my responsibilities at the Federal Reserve. 
Thank you for the honor of this hearing, and I look forward to 
answering the Committee's questions.

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                 PREPARED STATEMENT OF PAUL SHMOTOLOKHA
  To be First Vice President, Export-Import Bank of the United States
                              June 5, 2019
    Chairman Crapo, Ranking Member Brown, and distinguished Members of 
the Committee, thank you for considering my nomination to serve as 
First Vice President of the Export-Import Bank of the United Sates. I 
am deeply thankful to President Trump for selecting me and humbled by 
the obligations that this role brings to American workers and 
taxpayers.
    I would like to introduce some family members who are with me 
today. First, my parents Stephen and Christine who made the trip from 
California. They came to America as child refugees of World War II and 
I am always inspired by their contributions to our country. My father 
worked as an engineer in the defense industry for more than 40 years 
and my mother served tirelessly as a nurse. I am also joined by my 
wife, and best friend, Dania, who guided the family through multiple 
international moves and extensive overseas travels and Max, my son, who 
is entering his senior year in college. My brother Adrian and many of 
my friends, family and coworkers from around the world are also 
watching online.
    I sit before you as someone who has spent the past 16 years on the 
front lines of global trade with a strong record in growing American 
exports. I also bear the battle scars of leadership in a time of 
unparalleled competition in global markets.
    It is not simple for any manufacturer to export. They must overcome 
political risks, economic hazards, import regulations and diverse 
marketing environments. It takes diplomacy and mutual respect to forge 
international customer relationships that help guide a business or an 
institution through the process of closing a successful deal. Sometimes 
it also takes extra financial support, especially when there are over 
100 export credit agencies that are upping the ante and creating new 
incentives for the end customer. In my travels, I have seen firsthand 
how critical it is to support the current needs of the market and for 
EXIM to be able to finance deals in a timely and relevant fashion when 
the private sector cannot. My demonstrated commitment to this mission 
and my international experience on both the buying and the selling side 
of international trade over the last 30 years will allow me to 
contribute strongly to the team at EXIM.
    EXIM's mission is to help support and create jobs. I have 
experienced firsthand the thrill of walking assembly lines in Georgia 
and in Washington State and meeting the newest workers putting together 
products for export, thanks to deals that my team closed. These are 
some of my best experiences. My legacy and value as a business person 
comes from the people that I mentor and the jobs that I help create. By 
working with the President of the Bank, my fellow board members and the 
talented staff at EXIM, I believe I can best serve America to multiply 
the job creation effects of EXIM. Having served on numerous private 
sector boards in various capacities, I understand board 
responsibilities of proper corporate governance, the need for 
transparency and how good strategic guidance and a positive leadership 
attitude can enable organizations to realize their full productive 
potential. I believe that every organization can do better and that 
constant advancements to American competitiveness should match changes 
in global market demand.
    The EXIM board needs to make sure it doesn't lose sight of its role 
as an important source of support for small businesses. Many of its 
financial products in this area resonate with those looking to expand 
to new markets. As an entrepreneur, I have worked in small companies 
and faced the pressure of making payroll. Speed to market and effective 
financing can make or break opportunities for these companies. I built 
a significant export business in a medium-sized U.S. manufacturer that, 
while a very successful domestic business, had yet to find its legs 
overseas. All companies--small, medium, and large--all need help at 
times in leveling the playing field in today's global economy.
    If confirmed, I will bring a fresh perspective and a fiercely 
competitive mindset to the Bank. My experience as an officer in the 
U.S. Army taught me to lead from the front and I will work tirelessly 
to support the ``Made in America'' brand that we all share and support. 
I will ensure that American companies have full access to and 
understanding of the programs authorized by Congress to maximize their 
global reach and competitiveness. To this end, I would paraphrase Vince 
Lombardi: ``Winning isn't everything, it is the only thing'' for 
American business and the American worker and I pledge to bring a ``can 
do'' winning attitude and to win responsibly for the American taxpayer.
    Thank you for your consideration. I would be pleased to answer any 
questions.

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                PREPARED STATEMENT OF ALLISON HERREN LEE
           To be a Member, Securities and Exchange Commission
                              June 5, 2019
    Chairman Crapo, Ranking Member Brown, and distinguished Members of 
the Committee. It is a tremendous privilege to appear before you today 
and to be considered for the position of Commissioner at the Securities 
and Exchange Commission, an agency in whose mission and dedicated staff 
I believe deeply.
    I'm very fortunate today to be supported by a large contingent of 
family. I'd like to introduce my husband Jay Brown, four of the five 
children in our blended family, Tess, Beth, Josh, and Zoey. Also, our 
granddaughter, Emerson, is here, and our son-in-law, Colin, my sister 
Laurie, my brother Wil, my niece Emily, and my brother-in-law, Jeff. 
Unfortunately, my mother could not be here today, but I know she will 
be watching.
    I have spent the bulk of my legal career at the SEC for one very 
straightforward reason: the SEC has a mission that is vital to the 
economic well-being of Americans and American businesses. It navigates 
the critical intersection between these two; between everyday Americans 
striving to build savings to buy a home, to send kids to college and 
eventually retire, and American businesses that need capital to grow 
and prosper. This reciprocal relationship must be nourished from both 
sides.
    We are a Nation of investors, both retail and institutional, 
protected by the SEC. This protection is especially important as we 
continue the shift away from employer pensions toward individual plans 
in which people must fund and select their own retirement assets and 
manage their own risk.
    The SEC works to ensure that investors are taking the kinds of risk 
they sign up for--business and economic risk--not the risk of fraud, 
and not the risk of poorly structured or opaque markets that may 
disadvantage investors. This instills confidence which, in turn, 
fosters capital formation.
    Beyond instilling investor confidence, the SEC works to ensure that 
American businesses of all sizes can access the capital they need to 
grow their businesses, and thus create the kinds of opportunities 
investors want and need. These businesses deserve thoroughly 
researched, well-tailored, and clear rules.
    I have seen, experienced, and understood this interdependence 
between investors and business from nearly every angle. I worked in the 
oil business, at both private and public companies. I've owned and run 
my own small business. Since law school, I've worked for over two 
decades as a securities lawyer, first in private practice as a 
litigator and partner, and then I was privileged to work on the staff 
of the SEC.
    Like many Americans, I've worn a lot of hats and juggled a lot of 
priorities, working my way through college and eventually through law 
school, raising children, paying the bills, and investing my savings 
for retirement. If I have the honor of being confirmed, I will bring 
all of these perspectives to bear in my role as a Commissioner, and I 
will reach out and listen to all constituencies served by the SEC to 
further its critical mission.
    Thank you for the opportunity to appear before you today, and I'm 
happy to answer questions.

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        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                    FROM THOMAS PETER FEDDO

Q.1. One of the many reasons it was important to increase 
resources and staff at CFIUS with the FIRRMA reforms was to be 
able to better monitor information about completed mergers, 
acquisitions, or other investments where the parties to the 
transaction did not file with CFIUS.
    Has CFIUS been able to increase resources to this type of 
monitoring, and has it identified any non-notified transactions 
that need to be reviewed? How many transactions has CFIUS 
pulled into the process this way, and is this an increase over 
past efforts? Are you seeing any trends when it comes to 
companies that do not file with CFIUS but should?

A.1. Since the enactment of FIRRMA, Treasury's Office of 
Investment Security has established a new Office of Mitigation 
and Enforcement whose mandate includes full-time monitoring for 
non-notified and nondeclared transactions that could impact 
national security. This team has dedicated resources to 
accomplish its mission and is working with CFIUS member 
agencies to refine the processes for identifying potentially 
covered transactions that may pose national security concerns. 
As Treasury and CFIUS dedicate further resources to this 
mission, the number of non-notified and nondeclared 
transactions screened by CFIUS will likely rise; it is 
anticipated that the dedicated and increased screening will 
consequently result in additional transactions being pulled in 
for review.
    In some cases when CFIUS contacts parties to transactions 
identified through the non-notified process, the parties 
indicate that they are planning to file. Because CFIUS filings 
are largely voluntary, it can be difficult to determine which 
cases were ultimately filed as a result of CFIUS initiating 
engagement and which would have been filed even without CFIUS 
contact. It is too early to discern any post-FIRRMA trends with 
respect to non-notified transactions. Anecdotal evidence 
suggests that FIRRMA has served to elevate the public's 
awareness both of CFIUS and emerging national security risks 
related to foreign direct investment. As a result, more 
companies may be filing transactions without contact from 
CFIUS, either as a declaration or a full notice, thereby 
allowing the non-notified screening to focus on transactions 
that in fact may be trying to evade CFIUS. The Office of 
Mitigation and Enforcement will help to ensure that CFIUS 
identifies and responds to any trends in parties attempting to 
evade CFIUS review.

Q.2. The Government shutdown impacted CFIUS's ability to 
implement important reforms. The shutdown stopped and/or slowed 
down work on rulewriting, hiring, and implementation of the 
pilot program to review foreign investments in critical 
technologies.
    What is your assessment of where CFIUS is on implementation 
of FIRRMA, including the pilot program? Are you seeing any 
other investment trends emerge, particularly from countries 
like China that the 2018 reforms do not address?

A.2. Treasury's Office of Investment Security is fully engaged 
with other CFIUS agencies in the rulemaking process necessary 
to implement FIRRMA. CFIUS has made substantial progress on the 
implementation of FIRRMA. In October 2018, CFIUS promulgated 
regulations to implement, and make updates consistent with, 
certain provisions of FIRRMA that were immediately effective. 
In November 2018, CFIUS through regulations commenced a 
tailored pilot program related to noncontrolling, nonpassive 
foreign investments in certain U.S. businesses with critical 
technologies, and simultaneously initiated the use of FIRRMA's 
declaration process, including the issuance of a standardized 
5-page ``short form'' for the more efficient electronic 
submission of the declarations. Post-FIRRMA, Treasury 
reorganized the Office of Investment Security into functional 
offices to execute the various mandates of the statute, 
including with respect to policy making and regulations 
writing, increased engagement with allies and partners, and 
enhanced mitigation and enforcement efforts. Since August 2018, 
CFIUS has timely submitted reports required by FIRRMA and 
conducted related briefings with Committee staff. Treasury is 
utilizing additional resources appropriated in FY2019, as well 
as FIRRMA's special hiring authority, to ensure that the Office 
of Investment Security is appropriately staffed to carry out 
new CFIUS authorities; this includes nearly tripling the 
Office's personnel to date, and commencing development of an 
end-to-end information technology infrastructure to support 
additional caseloads and related work streams. CFIUS member 
agencies are making similar resource upgrades and improvements 
to support the CFIUS mission.
    CFIUS anticipates publishing draft regulations for public 
comment in the coming months. The Office of Investment Security 
has engaged extensively with industry stakeholders throughout 
the implementation process, and this timeline will allow ample 
opportunity for public comment before these regulations become 
effective by February 2020.
    The pilot program, a tool provided by FIRRMA, was promptly 
implemented to confront CFIUS's inability to review certain 
noncontrolling investments in critical technologies, given the 
rapid changes in those technologies. Since November 2018, the 
pilot program has allowed CFIUS to review transactions that it 
would not otherwise have had the opportunity to evaluate, as 
well as to more fully understand the nature of foreign direct 
investment as it relates to these critical technologies. Some 
pilot program transactions have in fact raised potential 
national security concerns that warranted the parties filing a 
full written notice. CFIUS has also been able to clear a number 
of transactions based upon the information provided in the 
declarations. The critical technology pilot program continues 
to inform the full implementation of FIRRMA as regulations are 
being drafted.
    CFIUS will be able to assess FIRRMA's impact more fully 
including any resulting investment trends--after the 
legislation is fully implemented. One of the legislation's 
greatest strengths is that it provides important flexibility to 
address new risks to U.S. national security as they emerge.

Q.3. One of the few ways that Congress is able to understand 
and oversee foreign direct investment in the U.S., and the 
national security threats posed by certain investments is the 
CFIUS annual report. It is also why FIRRMA added new 
requirements in the annual report going forward. The Department 
of Treasury has not submitted the CFIUS annual report to 
Congress since 2016 (covering transactions in 2015).
    Why have the annual reports been delayed, and if confirmed, 
what is your plan to ensure that annual reports are submitted 
to Congress in a timely manner going forward? What is your plan 
for submission of annual reports for years 2016, 2017, and 
2018?

A.3. I agree that timely submission of CFIUS's annual report to 
Congress is important to its ability to understand and oversee 
CFIUS's execution of its national security mission. I am fully 
committed to ensuring that annual reports are timely submitted 
to Congress going forward. Having joined the Office of 
Investment Security in mid-2018, it is my understanding that in 
the past case volume and complexity strained the limited 
resources of CFIUS member agencies, including Treasury. Shortly 
thereafter, I identified the need to remedy the delay in 
reporting, and directed my staff to dedicate resources to 
complete the 2016 and 2017 annual reports as soon as possible. 
Treasury anticipates submitting to Congress these reports as a 
combined document by the end of July 2019. CFIUS anticipates 
submitting the 2018 annual report thereafter. The additional 
resources provided to implement FIRRMA will help to address 
this issue in the future.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
                    FROM THOMAS PETER FEDDO

Q.1. During consideration of FIRRMA, Congress heard concerns 
that extended timelines for CFIUS procedures could change the 
economics of deals with U.S. companies, reduce their 
competitiveness, and shift investment overseas, undermining the 
pace of innovation in this country and possibly contributing to 
the speed of acquisition of sensitive technologies by our 
foreign adversaries. Regulations pursuant to FINSA and the 
ongoing pilot program temporarily implementing portions of 
FIRRMA require that CFIUS respond to notices and declarations 
``promptly.''
    What do you think is a reasonable amount of time to have 
elapsed before taking initial action on a notice or 
declaration? Would you direct your staff to write a regulation 
codifying that window?

A.1. Section 1704 of FIRRMA requires that CFIUS provide 
comments on a draft or formal written notice or accept a formal 
written notice of a covered transaction no later than 10 
business days after the date of submission of the draft or 
formal written notice. This requirement applies when parties 
stipulate that the transaction is a covered transaction. The 
regulations for FIRRMA will implement this requirement. More 
broadly, with the benefit of additional staff and resources, my 
goal is to respond to parties in a timely, efficient, and 
responsive manner on all written notices and declarations 
submitted to CFIUS.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR PERDUE
                    FROM THOMAS PETER FEDDO

Q.1. When implementing FIRRMA, Treasury needs to clarify how 
the foreign entity definition will apply to U.S.-controlled 
private funds. I understand that much of the responsibility for 
implementing FIRRMA falls within your current position at 
Treasury.
    Do you agree with me that the final regulations should not 
treat a fund as a ``foreign entity'' if it is controlled by 
U.S. persons, even if a majority of the equity ownership is 
held by passive limited partners? Investments from such 
entities will not create a national security risk because of 
the nature of limited partners and structure of their passive 
investments.

A.1. I agree that a fund that is organized and headquartered in 
the United States and is not controlled by a foreign person (as 
that term is defined in 31 CFR 800.216) should not be treated 
as a foreign person.
    With respect to CFIUS's new jurisdiction over certain 
nonpassive, noncontrolling investments, FIRRMA includes a 
clarification for investment funds that addresses the practice 
of foreign limited partners serving as members of a fund's 
advisory board or committee. FIRRMA clarifies that such 
membership does not, in and of itself, cause an investment by 
the fund to be subject to CFIUS jurisdiction.
    FIRRMA also carves out transactions involving investment 
funds that meet certain specified criteria from being subject 
to a mandatory declaration requirement. CFIUS is working to 
implement these provisions as part of the rulemaking to fully 
implement FIRRMA, and as part of this process, we are 
considering whether additional clarification would be 
appropriate.

Q.2. Will you commit to meeting with me, my staff and industry 
representatives on this important issue and to follow up as 
necessary so we can get this issue addressed correctly to 
ensure that funds controlled by U.S. persons will not be 
considered ``foreign entities'' under the regulations?

A.2. Since FIRRMA's enactment, my staff and I have met and will 
continue to meet with various industry stakeholders regarding 
this issue, among others. I also look forward to the 
opportunity to meet with you and your staff. When Treasury 
issues the proposed regulations implementing FIRRMA in the 
coming months, the public will have the opportunity to provide 
formal comments for CFIUS's consideration.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS
                    FROM THOMAS PETER FEDDO

Q.1. When implementing FIRRMA, Treasury needs to clarify how 
the foreign entity definition will apply to U.S.-controlled 
private funds.
    Do you agree that the final regulations should not treat a 
fund as a ``foreign entity'' if it is controlled by U.S. 
persons, even if a majority of the equity ownership is held by 
passive limited partners? Investments from such entities will 
not create a national security risk because of the nature of 
limited partners and structure of their passive investments.

A.1. I agree that a fund that is organized and headquartered in 
the United States and is not controlled by a foreign person (as 
that term is defined in 31 CFR 800.216) should not be treated 
as a foreign person.
    With respect to CFIUS's new jurisdiction over certain 
nonpassive, noncontrolling investments, FIRRMA includes a 
clarification for investment funds that addresses the practice 
of foreign limited partners serving as members of a fund's 
advisory board or committee. FIRRMA clarifies that such 
membership does not, in and of itself, cause an investment by 
the fund to be subject to CFIUS jurisdiction.
    FIRRMA also carves out transactions involving investment 
funds that meet certain specified criteria from being subject 
to a mandatory declaration requirement. CFIUS is working to 
implement these provisions as part of the rulemaking to fully 
implement FIRRMA, and as part of this process, we are 
considering whether additional clarification would be 
appropriate.

Q.2. Will you commit to working with stakeholders and to follow 
up as necessary so that funds controlled by U.S. persons will 
not be considered ``foreign entities'' under the regulations?

A.2. Since FIRRMA's enactment, my staff and I have met and will 
continue to meet with various industry stakeholders regarding 
this issue, among others. I also look forward to the 
opportunity to meet with you and your staff. When Treasury 
issues the proposed regulations implementing FIRRMA in the 
coming months, the public will have the opportunity to provide 
formal comments for CFIUS's consideration.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                    FROM THOMAS PETER FEDDO

Q.1. As Vice Chairman of the Senate Intelligence Committee, I 
see how our competitors are accessing critical U.S. 
technologies through legal and illegal means, stealing our 
intellectual property, and dulling America's competitive 
advantage. This sustained, comprehensive, multiyear effort 
shows no sign of slowing, but is rather accelerating: we are 
seeing a ``whole of society'' effort on the part of some 
adversaries--cyberattacks to steal intellectual property that 
then mysteriously is fielded by our competitors, attempts to 
acquire critical technology companies, or, more recently, 
strategic investments that could be used to acquire technology. 
That is the threat we face.
    We are now 6-months into FIRRMA's pilot program. What are 
your thoughts on the efficacy of the pilot program?

A.1. The pilot program has benefited U.S. national security. 
Since November 2018, the pilot program has allowed CFIUS to 
review transactions that it would not otherwise have had the 
opportunity to evaluate, as well as to more fully understand 
the nature of foreign direct investment as it relates to the 
critical technologies falling within its scope. Some pilot 
program transactions have in fact raised potential national 
security concerns that warranted the parties filing a full 
written notice. CFIUS has also been able to clear a number of 
transactions based upon the information provided in the 
declarations. The critical technology pilot program continues 
to inform the full implementation of FIRRMA as regulations are 
being drafted.
    CFIUS will be able to assess FIRRMA's impact more fully 
including any resulting investment trends--after the 
legislation is fully implemented. One of the legislation's 
greatest strengths is that it provides important flexibility to 
address new risks to U.S. national security as they emerge.

Q.2. What is working and what challenges/gaps have come up?

A.2. The critical technology pilot program has benefited U.S. 
national security. Since November 2018, the pilot program has 
allowed CFIUS to review transactions that it would not 
otherwise have had the opportunity to evaluate, as well as to 
more fully understand the nature of foreign direct investment 
as it relates to the critical technologies falling within its 
scope. The pilot program will terminate upon the full 
implementation of FIRRMA, but I anticipate that it will inform 
various substantive and administrative adjustments to the final 
regulations.

Q.3. FIRRMA contains a requirement, based on an amendment I 
included, that Treasury exempt categories of investors from the 
expanded CFIUS screening of certain minority investments. As 
you know, the pilot program applies on a global basis and does 
not exclude categories of investors from the scope of the 
pilot. Is this authority being used to exempt investments made 
by investors from friendly countries?

A.3. CFIUS appreciates the flexibility provided by FIRRMA's 
``country specification'' authority. CFIUS is currently 
examining how best to use this authority to more effectively 
address national security concerns while maintaining the 
longstanding U.S. open investment policy. CFIUS developed the 
pilot program without exempting any country from the mandatory 
declaration requirement to comprehensively understand and 
examine the nature of foreign direct investment as it relates 
to critical technologies and the specified pilot program 
industries. CFIUS provided the public with an immediate 
opportunity to comment on the interim rule in the 30 days prior 
to the pilot program's effective date. The critical technology 
pilot program continues to inform the full implementation of 
FIRRMA as regulations are being drafted, including with respect 
to the country specification authority.

Q.4. The pilot program identifies 27 ``critical technologies'' 
that if a U.S. business is involved with, would require a 
filing with CFIUS in the event of a foreign investment. Through 
the lifetime of the pilot program to date, has that list of 
technologies been sufficient in providing the Committee the 
jurisdiction necessary to protect U.S. national security?

A.4. FIRRMA defined the scope of ``critical technology'' as it 
pertains to CFIUS, and provides future flexibility as 
``emerging and foundational'' technologies are identified by 
the Department of Commerce. The 27 pilot program industries 
identified in Annex A to the pilot program regulations were 
carefully developed by the U.S. Government to narrowly scope 
the pilot program to include only those industries in which the 
threat of erosion of technological superiority from some 
foreign direct investment required immediate action. The 
critical technology pilot program continues to inform the full 
implementation of FIRRMA as regulations are being drafted, 
including whether adjustments need to be made to the scope of 
declarations for U.S. businesses with critical technology.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                      FROM NAZAK NIKAKHTAR

Q.1. Last year, there was bipartisan concern that when it came 
to ZTE the Administration allowed trade, economic and political 
considerations to drive what should have been exclusively law 
enforcement and national security decisions. ZTE had clearly 
repeatedly and willfully violated our export control laws, and 
Commerce enforcement officials in the Government had inflicted 
major punishments that were then reversed by the President.
    Many in Congress are concerned that we are preparing to see 
the same thing on Huawei, with the Administration making 
certain trade concessions to China in return for not pressing 
our national security concerns, including in developing 5G 
systems around the world.
    What is your view on this question? Do you think these 
concerns are justified? What should Congress be doing to 
reinforce our concern that law enforcement and national 
security considerations should be treated as separate--and 
paramount--in these situations?

A.1. When an action taken by the Bureau of Industry and 
Security (BIS or the Bureau) is based on law enforcement or 
national security concerns, then that action should only be 
amended if the enforcement and security concerns which prompted 
that action are addressed by that amendment. In the case of 
ZTE, the 2018 superseding settlement agreement that replaced 
the denial order contained three interlocking elements, each in 
place for a decade and all of them enabling the Bureau to 
protect U.S. national security: a suspended denial order; $400 
million in escrow (in addition to the criminal and 
administrative penalties paid by the company in 2017 and the 
additional $1 billion penalty to the U.S. Treasury in the 2018 
superseding settlement agreement); and a special compliance 
coordinator selected by and accountable to the Department of 
Commerce.
    The facts and circumstances pertaining to the entity 
listing of Huawei are different from ZTE, and any change to 
Huawei's listing status will need to ensure that the national 
security and foreign policy concerns that led to the listing 
are no longer applicable or are addressed by the change. As a 
national security arm of the U.S. Government, BIS's mission--
and my priority--is to protect the United States' national 
security interests at all times.

Q.2. One of the most significant changes in last year's export 
control reforms required the President to establish an 
interagency process to identify emerging and foundational 
technologies critical to U.S. national security--areas like 
artificial intelligence, advanced computing, certain forms of 
biotechnology, and the like. Commerce then was to establish a 
licensing policy for those items. That is moving forward.
    What do you think the Committee should be looking for in 
the coming months as we assess whether these lists are 
targeting the right technologies, and appropriately balancing 
critical national security concerns vs. commercial 
considerations? What has been the reaction of industry to the 
preliminary lists already published?

A.2. The Bureau is working with interagency partners (including 
the Department of Defense, Department of Energy, Department of 
State, and the intelligence community) to identify emerging and 
foundational technologies that are essential to U.S. national 
security interests. As part of this work, BIS has also been 
consulting with U.S. industry, research facilities, and 
universities, and will be seeking input from its Emerging 
Technology Technical Advisory Committee (ETTAC) this summer. I 
also welcome engagement with Congress to ensure that the Bureau 
is targeting the right technologies.
    Additionally and consistent with the requirements of the 
Export Control Reform Act of 2018, as well as the Bureau's 
mandate to encourage technological innovation while also 
protecting U.S. national security, the Bureau has been 
evaluating the impact of export controls on such technologies. 
Our evaluation includes the identification of any foreign 
sources of such technologies both in like-minded countries and 
countries of concern, and the effectiveness of various types of 
controls on these technologies.
    The public comments in response to the Advanced Notice of 
Proposed Rulemaking (ANPRM), which were collected from November 
2018 through January 2019, generally supported the need to 
address national security threats arising from emerging 
technologies. However, commenters stressed that national 
security concerns should be balanced by the impact that 
controls may have on innovation, the United States' competitive 
position globally, foreign direct investment in the United 
States, and the United States' ability to achieve multilateral 
controls. These important factors are informing our analysis.
    On the latter point, I have been actively working on a 
multilateral initiative with like-minded allies to implement 
controls on emerging technologies in a consistent manner. This 
is particularly important, given that export controls are most 
effective and better able to promote the growth of innovation 
when applied with the same rigor across Nations.
    Finally, BIS will be publishing an ANPRM for foundational 
technologies in a few weeks. Our analysis of controls on 
foundational technologies will also be informed by the above 
outlined considerations.

Q.3. If confirmed, you will be part of the interagency CFIUS 
review process. As you know, CFIUS is able to look at joint 
ventures when there is a U.S. business involved. In the 
confirmation hearing, Senator Jones asked Mr. Feddo about a 
Chinese steel company that formed a joint venture with an 
American stainless steel component parts company key to U.S. 
national defense and aerospace sectors.
    If a joint venture results in the Chinese company gaining 
access to sensitive steel manufacturing technology and trade 
secrets important for U.S. national security, and it 
potentially disrupts the U.S. supply chain, should CFIUS review 
it? If the same company's request for a Section 232 tariff 
exclusion was denied, is that information relevant to the CFIUS 
review? What experience and perspective would you bring to 
CFIUS on matters similar to this one and as well as others 
considered by the Committee?

A.3. In my current role performing the nonexclusive duties and 
functions of the Under Secretary for Industry and Security and 
as the current Assistant Secretary for Industry and Analysis, I 
am deeply involved in the Department's CFIUS work, leading a 
team of industry and policy experts at both BIS and the 
International Trade Administration (ITA) that reviews CFIUS 
transactions to analyze their impact on U.S. national security. 
As part of the interagency CFIUS team, we work collaboratively 
with the Department of the Treasury (chair) and the Departments 
of State, Defense, Justice, Energy, and Homeland Security, as 
well as the Office of the United States Trade Representative 
and the White House Office of Science and Technology Policy, to 
analyze each transaction and understand the potential national 
security risks involved.
    Further, I have encouraged the BIS and ITA CFIUS teams to 
review transactions not only through the lens of presently 
identifiable national security risks but also by accounting for 
potential risks that may result from those transactions. This 
analytical exercise requires that the Department of Commerce, 
in partnership with other CFIUS agencies, keep abreast of 
developments in U.S. supply chains, monitor influence by 
foreign adversaries over the development of international 
standards, and identify predatory patterns of investment that 
may impede the growth of the domestic industrial base and 
thereby threaten U.S. national security.
    These considerations underscore the important role that 
CFIUS reviews play, and the need to ascertain all relevant 
information about each transaction under review. The 
transaction described in the question raises national security 
concerns, and I am committed to ensuring that the U.S. 
Government has the tools to, and does, effectively respond to 
all transactions that pose national security risks. All 
relevant information should be considered in a U.S. Government 
review.
    CFIUS is one of my most important responsibilities at the 
Department of Commerce, and I am committed to ensuring that we 
continue to be forward-leaning in our analysis. The U.S. 
Government must continue to encourage an open investment 
climate in the United States, but we must also proactively 
bring all transactions that undermine our national security 
interests under CFIUS review. My combined experiences at BIS 
and ITA, as well as my experiences as a lawyer and economist, 
provide me with a comprehensive understanding of how to assess 
foreign investments in the United States while protecting 
national security so that the United States can continue to 
attract capital to support technological advancements and the 
growth of our industries.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR PERDUE
                      FROM NAZAK NIKAKHTAR

Q.1. USML to CCL Transition--Ms. Nikakhtar, as I'm sure you are 
aware, the previous Administration implemented the transfer of 
export licensing authority for dual-use items from the U.S. 
Munition List to Commerce Control List to modernize our cold-
war era export licensing controls to enhance our national 
security and to improve the ability of U.S. companies to better 
compete in an increasingly global marketplace, increasing the 
amount of U.S. exports and creating more American jobs. One of 
the ECR's objectives was to rationalize the control lists and 
pursuant to its authority under the Arms Export Control Act, 
transfer export licensing authority for commercial or dual-use 
items to the Commerce Department--Bureau of Industry Security 
(BIS) and its Commerce Control List (CCL) from the State 
Department's Directorate of Defense Trade Controls (DDTC) and 
its U.S. Munitions List. The prior Administration moved 
commercial and dual-use products covered in 18 of the 21 USML's 
categories to the BIS's CCL.
    However, 3 of the 21 categories--USML categories I, II, and 
III (commercial and sporting firearms and ammunition 
products)--were purposely singled out by the past 
Administration for transparent political reasons and have not 
realized the benefits of the USML to CCL Initiative. I am very 
concerned of the impact this is having on our small businesses 
and national security. Each day that passes with no action 
taken on Categories I, II, and III American businesses are at a 
competitive disadvantage and our national security is at risk 
because the State Department is having to dedicate time on 
commercial articles rather than on controlling those sensitive 
articles with national security implications. Approximately 25 
percent of DDTC's current export licensing workload now 
involves Category I products like the single shot bolt action 
.22 caliber rifle that are used at summer camps. I know that 
several of my colleagues from both sides of the aisle share 
these same concerns, and 29 Senators and 145 members of the 
House sent bipartisan letters to Secretary Ross and then-
Secretary Tillerson urging the completion of the ECR 
initiative. BIS published the proposed rule on May 24, 2018, 
which was then opened up for public comment. The congressional 
committees of jurisdiction received formal 30-day Section 38(f) 
notification in February of the final rules, and it was our 
understanding that the final rules were expected to be 
published in about mid-March.
    It is now June 5th--more than a year after the proposed 
rules were published and 3 months since Congress received 
notification. When can we expect the final rules to be 
published to transfer to BIS the export licensing 
responsibility for commercial and sporting products currently 
on the USML categories I, II, and III? I am looking for a date 
certain by which the final rules will appear in the Federal 
Register.

A.1. The finalization of these rules is dependent on a White 
House-led interagency review that is still under way. Because 
this process is not under BIS's jurisdiction, I am regrettably 
unable to give you a firm date for publication.

Q.2. If confirmed by the Senate, will you commit to having the 
Commerce Department expeditiously as possible publish the final 
rule to transfer from the State Department to the Commerce 
Department the export licensing responsibility of dual-use, 
commercial and sporting firearms and ammunition products 
currently on the USML categories I, II, and III?

A.2. Yes, as noted above, I will work to quickly bring the 
final rule into effect, once the White House-led interagency 
review is finalized.

Q.3. What steps will BIS take to work with members of the 
firearms and ammunition industry to ensure a smooth transition 
to BIS from DDTC? It is my understanding that the industry's 
trade association, the National Shooting Sports Foundation, has 
done joint seminars and industry outreach with BIS, to ensure a 
smooth transition. Can you commit that BIS will continue those 
public-private cooperative efforts that work toward achieve 
compliance with the legal and regulatory requirements under the 
Export Administration Regulations (EAR)?

A.3. BIS will work with industry to make the transition from 
the DDTC to BIS seamless and efficient. Once the transition 
occurs, training on these Commerce-controlled items will become 
part of BIS's regular outreach activities, which includes 
direct engagement with industry through seminars as well as 
online training. Moreover, like with other industries with 
items subject to the EAR, BIS will support joint training 
events with private industry upon request and consistent with 
Federal ethics rules to continue its long-standing practice of 
public-private cooperation to promote compliance with the EAR. 
It is one of BIS's primary responsibilities to ensure that 
industries comply with our export control laws and regulations.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
                      FROM NAZAK NIKAKHTAR

Q.1. This Committee shepherded to passage the Export Control 
Reform Act (ECRA), which enjoyed a strong bipartisan consensus 
due to its careful approach toward pursuing important U.S. 
national security objectives while preserving U.S. leadership 
in technological innovation. The Commerce Department is now 
leading implementation of export control reforms for emerging 
and foundational technologies called for in the legislation.
    If confirmed as Under Secretary, what steps will you take 
to ensure that any new export controls do not undermine the 
ability of U.S. companies to innovate and compete on at the 
frontiers of technology?

A.1. This question touches the core of BIS's mission, which is 
to counter national security threats while protecting the 
United States' ability to innovate. Innovation, in turn, 
results from global competition and the accumulation of revenue 
that is invested to develop next-generation technologies. I 
have represented many industries in my career and I understand 
the direct relationship between access to global markets and 
its impact on remaining at the forefront of technological 
innovation. At the same time, I appreciate and fully support 
the need for controlling exports to prevent adversaries from 
using U.S. technologies to threaten our national security. This 
is why BIS regulations must be carefully developed, and 
encourage multilateral support, to protect U.S. national 
security and foreign policy interests without impeding U.S. 
technological leadership. At the intense pace of global 
competition, U.S. companies cannot afford to take any step 
backwards.
    This reality underscores the importance of establishing 
controls on emerging and foundational technologies with the 
support of key allies and partners. My approach for a 
multilateral framework consists of three critical components: 
(1) the identification of dual-use technologies that pose 
significant national security risks when misused by 
adversaries, (2) the implementation of controls (e.g., 
licensing requirements) that are multilateral to the maximum 
extent possible, and (3) fulsome information sharing among 
allies to minimize potential circumvention and to maximize the 
enforcement of controls. These three components are key to a 
successful export control system, and further advance the 
creation of an efficient and secure trading ecosystem among 
like-minded allies and partners. By establishing a secure 
ecosystem for trade and research in emerging technologies, the 
United States and its partners will be able to continue to make 
significant strides in technological advancements while 
impeding our adversaries' attempts to exploit differences in 
control frameworks among countries to obtain controlled items.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
             SENATOR MENENDEZ FROM NAZAK NIKAKHTAR

Q.1. If export control of the technical information to produce 
handguns using 3D printers is transferred from the jurisdiction 
of the Department of State to the Department of Commerce, can 
the Bureau of Industry and Security prevent the posting of such 
information on the Internet by U.S. persons without a license 
from BIS? If not, why not?

A.1. Under BIS's Export Administration Regulations (EAR) as 
currently written, information posted on the Internet on a site 
available to the public is considered ``published'' and thus 
not subject to the EAR. Since I began my role at BIS, I have 
discussed this provision and other provisions of the EAR with 
my colleagues across the U.S. Government to determine how to 
best conform the EAR to the Export Control Reform Act of 2018, 
how to use the export control regulations of other U.S. 
Government agencies to complement the EAR, and, importantly, 
how to modernize our regulations to keep pace with emerging 
national security threats. I welcome your office's perspective 
on improvements to our export control authorities to ensure 
that we are keeping pace with all national security risks.

Q.2. If the Export Administration Regulations prevent that--
especially if someone has previously, illegally, posted such 
information--why won't BIS seek to change such regulations?

A.2. As set forth above, I am actively engaged in an effort to 
modernize our regulations to keep pace with existing and 
emerging national security threats. I am also mindful of my 
obligation to ensure that BIS's regulations are consistent with 
U.S. law. To this end, I would welcome your office's input on 
the effectiveness of our regulatory authorities.

Q.3. Should U.S. law be changed in order for BIS to maintain 
control in all instances?

A.3. It is my responsibility at BIS to ensure that our 
regulations on export controls are fully compliant with U.S. 
law, including the statutory requirements of the Export Control 
Reform Act of 2018. I am also committed to working through the 
interagency process to provide input to Congress on any 
amendments it proposes to update U.S. export control laws.

Q.4. If BIS will not be able to maintain positive export 
controls over such information in all instances, then why does 
Commerce seek to acquire regulatory control over such 
information if it ultimately cannot control it? Isn't that 
effectively the decontrol of such 3D gun printing information?

A.4. In May 2018, an announcement was made to transfer firearms 
under the International Traffic in Arms Regulations' U.S. 
Munitions List (USML)--Categories I-III including 3D gun 
printing technology--to the Commerce Control List (CCL). That 
transfer is ongoing and, once the transfer occurs, BIS will not 
be seeking to decontrol the technology. Pursuant to the current 
regulatory framework under the EAR, BIS will control and 
license technology for the development, production, operation, 
installation, maintenance, repair, overhaul, or refurbishing of 
firearms that are moved from the USML to the CCL. In addition, 
EAR license requirements will apply to the export of firearms 
themselves.

Q.5. The Export Control Reform Act states that the Secretary of 
Commerce shall control emergent technology for national 
security purposes, and in a public notice for comment last year 
in the Federal Register, identified 3D printing or ``additive 
manufacturing'' as an example of an emergent technology. So, 
shouldn't the use of such an emergent technology to produce 
lethal weapons be controlled in all instances? If not, why not?

A.5. 3D printing and ``additive manufacturing'' are activities 
currently being reviewed closely as part of the process of 
identifying emerging technologies that may warrant control as 
required by the Export Control Reform Act of 2018. This review 
is ongoing, and BIS notes that discussions are presently 
underway with partner countries on where multilateral controls 
are warranted. As noted above in the response to Question 4, 
BIS, under current regulations, would regulate ``technology'' 
for the ``production'' of firearms, as well as the other 
elements of ``technology'' that are subject to the EAR.

Q.6. The Congress has acted to place heightened oversight over 
the sale of lethal firearms to ensure that they are not going 
to dangerous or unreliable end-users. They have also been 
subject to a decades-long informal process of consultation, 
which has in the past prevented just such sales. BIS could 
inform the Congress, specifically the Senate Foreign Relations 
Committee, which has jurisdiction over the export of lethal 
arms abroad, before licenses are granted, if it chooses to do 
so. Will you so inform us?

A.6. In May 2018, at the time of the Department of Commerce's 
and the Department of State's publication of the proposed rules 
to transfer firearms and related items from the USML to the 
CCL, the Export Administration Act (EAA) did not include a 
Congressional notification requirement for firearms, nor did 
any other governing statute. On August 13, 2018, the President 
signed the National Defense Authorization Act for Fiscal Year 
2019, which included the Export Control Reform Act of 2018. 
Congress did not include in the Act a specific requirement for 
Congressional notification for firearms and related items 
exports. Should Congress wish to issue such a requirement, BIS 
will certainly comply.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                      FROM NAZAK NIKAKHTAR

Q.1. As Commerce compiles its emerging and foundational 
technologies list, are there sectors concerned may not receive 
enough coverage or inclusion?
    What areas of China's Made in China 2025 priority list or 
in terms of the gaps in their military capabilities development 
are not covered?

A.1. China's Made in China 2025 strategy contains a broad swath 
of technologies, some of which are more easily identifiable as 
military-related or military-enabling. \1\ To initiate the 
review of emerging and foundational technologies mandated by 
the Export Control Reform Act of 2018, BIS published a November 
2018 Federal Register notice that listed 14 emerging technology 
categories for which the Bureau sought industry input on 
controls. \2\ This list was developed after receiving technical 
insight from interagency colleagues based on subject matter 
experts' evaluation of technology categories that were 
considered to be most critical to U.S. national security 
interests, for example due to potential uses as conventional 
weapons, conduits for intelligence collection, use as weapons 
of mass destruction, or facilitators of terrorist activities. 
Technologies that could potentially provide the United States 
with a qualitative military or intelligence advantage were also 
identified. Many of these technology categories fall under one 
of China's 2025 priority sectors.
---------------------------------------------------------------------------
     \1\ The China 2025 ten priority sectors are: (1) new advanced 
information technology; (2) automated machine tools and robotics; (3) 
aerospace and aeronautical equipment; (4) maritime equipment and high-
tech shipping; (5) modern rail transport equipment; (6) new-energy 
vehicles and equipment; (7) power equipment; (8) agricultural 
equipment; (9) new materials; and (10) biopharma and advanced medical 
products.
     \2\ The 14 categories were: (i) biotechnology; (ii) artificial 
intelligence; (iii) Position, Navigation, and Timing (PNT) technology; 
(iv) microprocessor technology; (v) advanced computing technology; (vi) 
data analytics technology; (vii) quantum information and sensing 
technology; (viii) logistics technology; (ix) additive manufacturing; 
(x) robotics; (xi) brain-computer interfaces; (xii) hypersonics; (xiii) 
advanced materials; and (xiv) advanced surveillance technologies.
---------------------------------------------------------------------------
    At the same time, BIS recognizes that the technologies 
listed in the Federal Register notice do not, by themselves, 
represent the full range of emerging technologies that warrant 
control. There are numerous additional technologies on the 
China 2025 priority list that also may warrant evaluation for 
control. Further to this point, China's civil-military 
integration strategy is a national strategy that incentivizes 
virtually the entire civilian sector to enter the defense 
market. This whole-of-Government effort by China now informs 
BIS's analysis of dual-use emerging technologies and how 
commercial technologies may be used as weapons. Of course, 
China is not the only country that poses this type of 
technological threat through the integration of its civil and 
military sectors.
    Given these realities, we are actively engaging with U.S. 
industry, interagency colleagues, and academia, as well as 
ETTAC members, to assess the full range of emerging 
technologies that warrant control and their potential 
commercial and military applications. We are also assessing the 
level of development of each of these technologies in the 
United States and in foreign countries to determine when those 
technologies are expected to mature into real-use applications. 
Finally, we are analyzing potential harmful uses of these 
technologies by foreign adversaries.
    We are mindful of the fact that our identification of 
emerging technologies is a complex exercise, and so we have 
been actively collaborating with industry, interagency 
colleagues, and academia to obtain all pertinent information 
for our analysis. The answers we are pursuing will help us 
determine the range of technologies that warrant control, and 
given the nature of each technology, the most effective mode of 
control. We encourage engagement with all members of the 
Legislative Branch to ensure that we are able to benefit from 
Congress' insight as well.

Q.2. What steps should be considered to address the problem of 
companies seeking to redefine the technologies or products to 
skirt review?

A.2. Since my start at BIS, I have stressed the need to 
modernize our mechanisms for control. In light of the ever-
changing nature of technology, controls must be implemented in 
ways that adapt to technological advancements over time. For 
example, we have seen adversaries forego the acquisition of 
high-tech items subject to controls and opt for lower-tech 
items that fall outside of current controls but can be used to 
create the functional equivalent of the controlled item. While 
we intend to define controls with sufficient specificity to 
allow industry to identify what is regulated from what is not, 
controls on technologies need to be better fashioned with 
flexibility to avoid loopholes or circumvention of the 
controls.
    Of course, the manner by which each control is defined is 
dependent on the particular type of technology, but I am 
confident that with continued and proactive engagement on this 
issue, BIS is developing effective controls that keep pace with 
the evolution of technology. Just as important, we must make 
every effort to ensure that our controls are implemented 
multilaterally so that U.S. industries are able to complete on 
a global playing field that is level. I have already begun 
proactive engagement with foreign-Government counterparts to 
secure multilateral cooperation on emerging technologies.

Q.3. As one of the most persistent critics of Huawei's 
concerning relationship with the Chinese Government and its 
pattern of behavior, I was pleased to see the Trump 
administration finally take steps to place Huawei on the Entity 
List.
    At the same time, I have concerns that this move reflects a 
haphazard and not-coherent approach to these issues--
particularly when we see the President suggest that the 
designation could simply be a bargaining chip, to be trade away 
in the context of a trade deal. Huawei represents a real--not 
speculative--security risk and one that will not be resolved in 
the context of a trade agreement.
    We see a number of technology companies that boast 
unusually intimate relationships with the Chinese Government, 
are instrumental in domestic efforts within China to harness 
technology to conduct in censorship, surveillance and social 
control, and that receive significant support--in the form of 
digital infrastructure grants and loans--to help China export 
its model of tech-enabled authoritarianism abroad. We even see 
municipalities in the U.S. buying security cameras from 
companies like Hikvision because--as in the case of Huawei--
it's artificially priced below products from legitimate 
vendors.
    Would you support entity list designations with other 
technology providers, such as Hikvision and Dahua, that are 
engaged in activities that are contrary to the U.S. national 
security and U.S. foreign policy interests?

A.3. BIS continually evaluates information from multiple 
sources to assess possible additions to the Entity List that 
meet the criteria specified in part 744 (Control Policy: End-
User and End-Use Based) of the EAR. When BIS or any other 
member of the End-User Review Committee (ERC) identify 
activities by a party that meet the criteria set forth in 
Section 744.11(b) of the EAR (acting contrary to the national 
security or foreign policy interests of the United States) and 
a majority of ERC members approve its addition, BIS will add 
that party to the Entity List.

Q.4. Given the pattern of behavior we've seen from a company 
like Huawei--with well-documented allegations of a concerted 
effort to evade sanctions on Iran, a longstanding and 
comprehensive strategy of IP theft from U.S. companies, and a 
close relationship with the Chinese Communist Party and Chinese 
military--would it be appropriate for the President to roll 
back the Entity List designation in exchange for minor trade 
concessions by the Chinese Government?

A.4. When an action taken by the Bureau of Industry and 
Security (BIS or the Bureau) is based on law enforcement or 
national security concerns, then that action should only be 
amended if the enforcement and security concerns which prompted 
that action are addressed by that amendment.
    Huawei and its affiliates were added to BIS's Entity List 
(Supplement No. 4 to part 744 of the EAR) on the basis of 
activities that were contrary to U.S. national security or 
foreign policy concerns. Any change to Huawei's listing status 
will need to ensure that the national security and foreign 
policy concerns that led to the listing are no longer 
applicable or are addressed by the change. As a national 
security agency, BIS's mission is to uphold the United States' 
national security and foreign policy interests; that is and 
will continue to be our focus specific to the Huawei listing.

Q.5. What is your view on the scope of the Temporary General 
License the Trump administration issued with respect to Huawei?
    Are there areas where a more relaxed policy would be 
warranted?

A.5. BIS implemented the Temporary General License to provide 
U.S. companies impacted by the listing time to adjust and BIS 
continues to evaluate the scope of the Temporary General 
License based on information from a variety of sources, 
including input from U.S. companies and other potentially 
affected parties. We want to ensure the scope of the Entity 
List listing and Temporary General License are appropriate to 
address the national security and foreign policy concerns and 
are well-understood by industry.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
           SENATOR CORTEZ MASTO FROM NAZAK NIKAKHTAR

Q.1. Would you agree that trade and international cooperation 
have a direct impact on tourism?

A.1. Fostering long-term mutually beneficial trade relations 
and cooperation with Nations has been one of my priorities as a 
U.S. Government official and, as we seek to expand jobs in our 
economy, we have been intimately aware of the impact that 
international travel and tourism has had on this objective. In 
2018, international visitors supported 1.2 million American 
jobs and spent a record-breaking $255.5 billion experiencing 
the United States, an increase of nearly 2 percent when 
compared to the previous record set in 2017. Additionally, 
these travel trade exports accounted for 31 percent of total 
U.S. services exports and 10 percent of all U.S. exports, goods 
and services alike. Spending by international visitors who stay 
one night or more in the United States for leisure, business, 
education, or medical purposes is counted as a U.S. travel and 
tourism export. Our two largest visitor markets (defined by 
country of residence) both increased last year: Canadian 
visitation to the United States was up 4.9 percent and 
visitation from Mexico increased 3.9 percent. Despite the fact 
that the number of Chinese visitors to the United States 
decreased last year by 5.7 percent, visitation from western 
European countries--France, Spain, the U.K., and Italy--also 
increased between 3.9 and 6.0 percent. In 2018, the United 
States finished the year with a trade in travel surplus of more 
than $69 billion. As we forge closer trade ties with our 
allies, we expect to see continued increases in inbound tourism 
numbers and greater positive contributions to the U.S. economy. 
I am committed to encouraging such growth.

Q.2. What specifically will you do on a regular basis in this 
role to help expand the interests of bringing international 
visitors to one of America's best destinations for both indoor 
and outdoor activities, namely Nevada--where we saw over eight 
million international visitors in Las Vegas alone in 2016, 
accounting for $11 billion in spending?

A.2. Having grown up in California, Nevada was a frequent 
travel destination for my family, friends, and me. Through many 
frequent visits, I have watched Nevada flourish as a tourist 
destination for international travelers. Nevada's bourgeoning 
tourism industry has not only boosted U.S. economic growth, but 
it has also encouraged a greater understanding of U.S. culture 
and values, which are important components of fostering better 
international cooperation between the United States and its 
global partners.
    During my time at the International Trade administration, I 
worked to support the long-term growth and competitiveness of 
the travel and tourism sector and to encourage more 
international visitors to the United States. I worked with my 
colleagues across the agency to connect U.S. companies and 
destinations to opportunities in growth markets of interest to 
Nevada and other U.S. destinations. For example, while in 
India, my staff at the National Travel and Tourism Office 
(NTTO) met with Herb Santos, Jr., Nevada Tourism Commissioner, 
and Carson City Culture and Tourism Authority Executive 
Director David Peterson, to discuss a number of issues 
important to the State of Nevada.
    Additionally, in 2018, I personally worked with U.S. 
Customs and Border Protection to resolve an issue related to 
the country of residence data it was collecting so that ITA 
NTTO's statistical program could provide the most accurate 
traveler data to U.S. businesses in order to improve their 
competitiveness and effectiveness in the international travel 
marketplace. Many State tourism offices and convention and 
visitors' bureaus are dependent upon the program as the source 
for comparable State and city visitation and international 
traveler trend information. In my former ITA role and current 
BIS role, I continue to be committed to advancing policies that 
will encourage tourism across the United States, including the 
State of Nevada.

Q.3. Can you provide us a sense of how we can continue to 
improve our outreach worldwide?

A.3. The Department of Commerce proactively examines all export 
markets to identify opportunities for future growth. The 
Department's NTTO and U.S. Foreign Commercial Service Officers 
(including professionals in embassies worldwide) work together 
as a focused travel and tourism team, to increase U.S. exports 
in the travel and tourism sector.
    One particular example is India. Under the U.S.-India 
Commercial Dialogue, we have a travel and tourism work stream 
where the NTTO and India's Ministry of Tourism collaborate on 
opportunities to increase tourism between our Nations. The 
Department of Commerce also works directly with the private 
sector both in the United States and in our source markets to 
support efforts to secure more business for companies and 
destinations across the United States.

Q.4. During your consideration by the Senate Commerce Committee 
last Congress, you stated in your response to me the importance 
of ``initiatives that facilitate travel to the United States, 
such as aviation liberalization, the streamlining of visa 
application processes, improvements to customer service at 
ports of entry, and the enhancement of passenger screening.'' 
How do you reconcile that statement with the lack of progress 
in these areas under the current Administration, even going so 
far to employ the questionable tactic of moving passenger 
screeners from the Transportation Security Administration (TSA) 
to the southern border where they have not been trained and are 
vacating their security posts at our Nation's airports and 
surface transportation outlets?

A.4. The Department of Commerce welcomes international visitors 
and forward-thinking policies that may be implemented to 
increase travel and tourism to the United States. An example of 
a recent initiative that ITA has undertaken to facilitate the 
travel process is its work with CBP to develop a pilot a 
biometric entry and exit system that, once fully deployed, will 
help create a more secure and seamless travel experience. To 
this end, the United States Travel and Tourism Advisory Board, 
an advisory committee established pursuant to the Federal 
Advisory Committee Act and overseen by ITA, is tasked with 
providing recommendations on how the public and private sectors 
can collaborate to accelerate progress on the implementation of 
the biometric entry and exit system at U.S. ports of entry. The 
Board provided recommendations on this topic in April 2019, and 
Department officials are reviewing them with interagency 
partners to determine how to best implement the 
recommendations. We welcome further engagement with your office 
on initiatives that the Department may pursue to further 
facilitate travel to the United States.

Q.5. While I received your assessment during consideration of 
your nomination last Congress, can you please provide an update 
to the trends we are currently seeing in international tourism 
given the rhetoric and policies toward some Nations or groups, 
of this Administration?

A.5. International visitation and international visitor 
spending both set records in 2018. A record 79.6 million 
international visitors enjoyed the United States and spent a 
record-setting $255.5 billion. International tourism supports 
1.2 million jobs in the United States. Thirty-one percent of 
all services exports in 2018 were travel and tourism-related 
and travel and tourism accounted for 10 percent of all exports, 
goods and services alike, in 2018. In terms of growth in 
visitation by residents from specific markets, the United 
States saw increases from the two biggest visitor markets, 
Canada (4.9 percent) and Mexico (3.9 percent). South America 
was up 8.5 percent with Brazil up 15.5 percent and Colombia up 
12 percent, among our biggest gainers. Western Europe saw 
increases in several key markets--U.K. (3.9 percent), France (6 
percent), Spain (6 percent), and Italy (4 percent). Visitation 
by residents of countries in Asia was mixed. Down markets 
included China (5.7 percent), South Korea (5.3 percent) and 
Japan (2.8 percent). Visitation from India increased by 7.2 
percent.

Q.6. I also previously asked you for your thoughts on the 
Federal Brand USA program, for which I didn't receive a 
specific answer to whether you supported Federal funding of 
this specific successful program?

A.6. The Administration understands the value of travel and 
tourism to the economy. The Department continues to be very 
engaged with Brand USA; the Secretary has appointed the Brand 
USA board of directors, approved Brand USA's annual objectives, 
and transmitted the Brand USA annual report to Congress. The 
Department is committed to exploring all ways to increase 
travel and tourism to the United States.

Q.7. In your previous response on Brand USA, you stated ``I 
will commit to being a strong advocate for public-private 
partnerships that promote the United States as a tourist 
destination, and will do so based on the Administration's and 
Congress' approved budgets and policies.'' From that statement, 
please help me reconcile what your position will be toward that 
program as the Trump administration has again proposed to cut 
funding for Brand USA in their FY20 budget?

A.7. For the reasons described above, the Department and I 
fully support travel and tourism to the United States, and we 
will continue to advocate for the economic growth that such 
tourism brings, including through private-public partnerships. 
I will faithfully execute the budget that Congress passes and 
that the President signs into law, and should that budget 
include funding for Brand USA or some other type of public-
private partnership, I and the Department will support Brand 
USA and continue to work to leverage all possible resources to 
maximize international travel to the United States.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
              SENATOR MENENDEZ FROM IAN PAUL STEFF

Q.1. The Foreign Commercial Service is critical to many U.S. 
exporters who struggle to navigate complex foreign markets and 
need advocates on the ground to help them succeed. I've been 
disheartened to see President Trump propose to slash this trade 
office's funding in the last couple of budgets. This office 
deserves a leader who will advocate for its programs and staff, 
and communicate its importance to Administration leadership and 
the public.
    Do you believe in the mission of Foreign Commercial 
Service?

A.1. If confirmed, I would be incredibly honored to lead the 
U.S. and Foreign Commercial Service, with its global network of 
more than 1,300 international trade and inward-investment 
professionals at our U.S. Embassies and Consulates in 76 
countries and 108 cities across the United States. I 
wholeheartedly believe in their mission to help business create 
jobs and grow our economy through exports and inward 
investment. I also know unequivocally that our U.S. and Foreign 
Commercial Service is unique and the only group in the U.S. 
Government that is equipped, experienced, and capably dedicated 
to lead the charge on behalf of U.S. exporters, particularly 
small- to medium-sized companies, into a future of increasingly 
aggressive and competitive global business. I have the utmost 
respect for this global team of professionals who deliver daily 
on behalf of our Nation's exporters. I also know that in terms 
of value, no organization within the U.S. Government has a 
greater return on its investment on behalf of U.S. exporters 
than the U.S. and Foreign Commercial Service. I believe in 
their mission, and I plan to help grow that value.

Q.2. Can you commit to me today to work toward strengthening 
the office and fight against the President's budget cuts?

A.2. I stand behind the President's budget and will direct the 
use of our appropriation to its maximum efficiency and 
effectiveness for our exporters. I commit to working with you 
and your colleagues throughout the budget and appropriations 
process. My top priority will be to dedicate those allocated 
resources to make the U.S. and Foreign Commercial Service the 
strongest advocate it can be for U.S. companies doing business 
in an increasingly competitive world, while equipping the team 
with the tools they need to compete.

Q.3. Building stronger economic links with our neighbors in 
Latin America has always been a priority of mine. The region 
presents tremendous opportunity for the U.S. to develop export 
markets and to form partnerships to boost our Nation's 
competitiveness as we look to compete in the global economy 
with China and others.
    If confirmed, will you prioritize developing relationships 
with our partners in Latin America?

A.3. I share your view that Latin America presents many 
important growth opportunities for the United States. The 
Commerce Department has led productive engagements, talks, and 
visits with their respective counterparts in the region, 
enhancing our commercial and economic relationship. The fact 
that the United States has sought to bring the NAFTA into the 
21st century by way of the new U.S.-Mexico-Canada agreement, 
demonstrates a strong commitment to the Americas. Modernizing 
and rebalancing our trade relationship with Mexico will foster 
a better investment climate for reciprocal trade, that supports 
high-paying jobs for Americans and will grow the overall North 
American economy.
    Creating a more level playing field for American workers to 
boost our Nation's competitiveness is an important first step 
in expanding opportunities for U.S. exports in Latin America, 
and as we look to compete in the global economy with China and 
others. In addition, I look forward to continuing Global 
Markets' strong focus on Latin America through our advocacy and 
Select USA efforts. We've seen many strong delegations from 
Latin America looking to invest in the United States.

Q.4. Will you commit to expanding the Foreign Commercial 
Service's footprint in the region?

A.4. I recognize that the increasing heat of global competition 
faced by our U.S. exporters is right in our back yard in Latin 
America. Over the last decade, many of our exporters have lost 
ground to Government-supported foreign competitors in Latin 
America and other markets around the world. We cannot afford to 
cede further ground, and we need to show our trading partners 
around the world that we choose to compete, and that we mean 
business on behalf of our Nation's exporters.
    If confirmed, I will strategically allocate those resources 
available to us to ensure our companies pursue opportunities to 
compete for and gain back market share and win new business in 
Latin America and around the world. I commit to working with 
you and your colleagues to find opportunities where we can 
further strengthen our effectiveness and services in the 
region, while supporting a multitude of action oriented 
commercial dialogues in Latin America. Likewise, I look forward 
to working with the private sector to grow our commercial 
relationship in sectors of mutual interest in the region.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                      FROM MICHELLE BOWMAN

Q.1. Please provide to the Committee a detailed list of all 
meetings with individuals or groups not directly affiliated 
with the agency you serve, from the date of your confirmation 
by the Senate to present.

A.1.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Q.2. In a recent speech entitled ``Community Banking in the Age 
of Innovation'', you explained that ``FinTech firms originate a 
larger share of personal loans than banks,'' but ``we should 
not simply assume that gains by FinTech lenders are necessarily 
at the expense of banks.'' You highlight the opportunities for 
community banks to partner with fin tech firms.
    Do you support these same FinTech firms competing directly 
with community banks through industrial loan company (ILC) 
charters or OCC special purpose national bank charters?

A.2. I support innovations in financial services because I 
believe it can benefit consumers and small businesses through 
expanded access to financial services, greater efficiency, 
increased convenience, or potentially reduced transaction 
costs. The question of FinTech companies operating through 
industrial loan company (ILC) charters requires careful 
consideration. As you know, the Federal Reserve does not 
supervise ILCs or their holding companies.
    The Office of the Comptroller of the Currency's (OCC) 
proposed special purpose national bank charter raises 
interpretive and policy issues for the Federal Reserve Board 
(Board), for example, questions relating to Federal Reserve 
membership, status under the Bank Holding Company Act, access 
to Federal Reserve accounts and services, or access to the 
discount window. The Board would have to analyze these issues 
closely if any FinTech firm was to obtain a special purpose 
national bank charter.

Q.3. During your testimony, in response to my question about 
consolidation making it harder for small banks to compete, you 
said that your concern was investment in local communities and 
that as branches are acquired in rural communities, home 
investment in the community tends to be dissipating.
    What actions is the Fed taking to ensure that acquiring 
banks continue to invest in communities where all acquired 
branches are located?
    How will you ensure that banks distribute their investments 
in all communities, not only the location in which the charter 
is held?
    Would you support requirements for banks to continue to 
invest in these communities after an acquisition?

A.3. My interest is to see credit flowing to consumers and 
businesses in all communities consistent with safe and sound 
lending. This includes meeting credit needs in low- and 
moderate-income areas and furthering economic development and 
financial inclusion. The Community Reinvestment Act (CRA) is 
one of the tools we have to accomplish this goal. The CRA 
encourages banks to serve their entire community, in particular 
the credit needs of low- and moderate-income communities. To 
ensure that this is accomplished, the Federal Reserve evaluates 
the records of State member banks in helping to meet the credit 
needs of their communities. The CRA regulations define a bank's 
``assessment area''--the area within which we evaluate their 
CRA performance--as those areas around the bank's branches and 
deposit taking ATMs. We are currently in discussions with the 
OCC and Federal Deposit Insurance Corporation (FDIC) regarding 
possible revisions to the CRA regulations. One aspect of the 
regulation that we are discussing is a better way to delineate 
the community served by a bank to provide better incentives for 
providing credit in every assessment area, not just its major 
markets.
    When two banks merge, we evaluate the CRA performance of 
the resulting bank in all the areas where they retain a branch 
presence. In evaluating the convenience and needs of the 
communities to be served following a merger, an institution's 
most recent CRA performance evaluation is a particularly 
important consideration in the applications process because it 
represents a detailed on-site evaluation of the institution's 
performance under the CRA by its appropriate Federal 
supervisor. In addition to CRA performance, Federal Reserve 
System staff considers recent actions taken to improve CRA 
performance, comments submitted by interested parties and the 
applicant's response to those comments, and the potential 
effects of the proposal on the convenience and needs of the 
communities to be served.

Q.4. In your remarks at the Conference of State Bank 
Supervisors in April, you said that ``we must continue to 
ensure that the institutions we supervise are proactively 
managing their risks to remain strong'' and that ``it's the 
[financial supervisors'] job to identify emerging risks to 
community banks and to ensure bankers are identifying and 
managing their risks appropriately.''
    What are the emerging risks to community banks today?

A.4. Despite generally favorable economic and financial 
conditions, community banks continue to manage a moderate level 
of risk. Some emerging risks include cybersecurity, deposit 
competition, and agricultural and commercial real estate ( CRE) 
lending.
    Cybersecurity continues to be an area of elevated risk 
across the banking system as threats evolve and the banking 
industry continues to face challenges in establishing and 
maintaining adequate cyberdefenses. Threat actors are active 
and innovative in seeking ways to exploit weaknesses in people, 
processes, and technology.
    Agricultural-based lending remains an area of concern. Net 
farm income has declined since 2012 and continues to be an 
issue. Low commodity prices, trade uncertiainty, and recent 
unfavorable weather conditions in the Midwest have added to an 
already challenging situation. Lower incomes and increasing 
debt-servicing costs are impacting borrowers management of 
operational debt. Weaknesses in credit at agricultural banks 
can be seen in the form of carryover debt from prior operating 
years, increasing levels of nonperforming assets, and modest 
increases in the number of problem banks with significant 
agriculture-related exposure.
    CRE risk is an area of elevated risk, mainly due to the 
widening gap between real estate values and property income 
used to service outstanding debt. For most property types, the 
primary driver of price appreciation appears to be new investor 
demand rather than increasing rents or other property-level 
fundamentals.

Q.5. Please describe what specific proactive measures the Fed 
is taking to ensure that banks are managing these risks.

A.5. With respect to these risks, the Federal Reserve has 
adopted common work programs to help examiners assess overall 
IT operations, including cybersecurity of community banks. The 
Federal Reserve also has included mandatory training for all 
community bank examiners in the area of IT in order to 
consistently identify and provide feedback to the banks 
supervised by the Federal Reserve.
    Building on earlier supervisory guidance on managing 
agricultural lending, the Federal Reserve has sponsored a 
number of training and educational opportunities for examiners. 
In addition, the Federal Reserve closely monitors and provides 
updates on farming conditions and agricultural lending 
conditions to examiners.
    As discussed in SR letter 19-9, Bank Exams Tailored to Risk 
(BETR), the Federal Reserve has revised its procedures for 
credit and liquidity risk to better identify risk and tailor 
exam procedures based on the risk profile of a particular bank. 
CRE concentrations and a bank's use of volatile funding sources 
are among the factors that examiners consider in determining 
whether a bank's activity is low, moderate, or high risk, which 
will determine the procedures examiners will complete during 
the examination.

Q.6. What additional steps should the Fed take to address these 
risks?

A.6. With respect to cybersecurity, we continue to review our 
program and have placed a high priority on building our 
expertise to ensure we and the institutions we supervise 
understand and manage the associated risk. With respect to 
agriculture lending, the Federal Reserve will continue to 
gather current information on industry factors that (1) affect 
the ability of farm producers to repay loans, (2) influence 
collateral values, and (3) affect the ability of producers and 
banks to hedge potential losses. We will continue to focus on 
examining banks with concentrations in agricultural lending, 
with particular emphasis on ensuring banks hold capital 
commensurate with their portfolio compositions. And, as 
mentioned, with respect to CRE concentrations, this remains to 
be an area of focus.

Q.7. In your capacity as community bank designee, what is your 
definition of a community bank?
    What is the largest firm, by assets, that you consider to 
be a community bank?
    In how many States can a bank operate and still be 
considered a community bank?
    Are there any financial activities that you think 
disqualify a firm from inclusion as a community bank?
    What is the maximum number of distinct subsidiaries and 
affiliates at a bank or bank holding company that you would 
still consider to be a community bank?

A.7. There are a number of statutory definitions for community 
banking organizations, but the Board uses $10 billion in total 
assets as the threshold for its supervisory and regulatory 
purposes. It is my view that $10 billion is a reasonable 
ceiling. However, various statutes tailor requirements for 
community banks using differing threshold. For example, the 
Small Bank Holding Company policy statement provides relief for 
firms under $3 billion, while banks under $10 billion would be 
eligible for Community Bank Leverage Ratio.
    While no formal restriction on financial activities exists 
that would disqualify a firm from being considered a community 
bank, community banks tend to have more traditional, low-risk 
banking operations. Additionally, there is no formal limit on 
the number of subsidiaries and affiliates a community bank may 
have and no restrictions exist on the number of subsidiaries 
and affiliates, according to the Federal Reserve's current 
operating practices. That said, as noted above, community banks 
tend to have simpler banking operations than large banks.
    In general, I do not believe a community bank should be 
defined by the number of States in which it operates. Rather, a 
bank's size, risk profile, capacity, and complexity, tend to be 
more important factors.

Q.8. If confirmed to a full 14-year term, what will be your top 
priorities as a member of the Board of Governors that serves as 
the community bank designee?

A.8. My top priority as a member of the Board of Governors will 
continue to be fulfilling the vital responsibilities Congress 
has given us: to support full employment and stable prices, 
regulate and supervise the banking system to ensure it remains 
safe and sound, enforce consumer protection laws that require 
everyone be treated fairly, and carry out the Board's important 
payments-related responsibilities.
    As the first governor to fill the role the Congress 
designated for someone with community banking experience on the 
Board, I will continue to travel widely and listen closely to 
community bankers, consumers, small-business owners, and 
community leaders. I will make sure these diverse perspectives 
are represented in the Federal Reserve' s deliberations and 
decision making on both monetary policy and regulatory matters.
    As I noted in my testimony, I firmly believe that, as 
regulators, we need to ensure that we are not imposing 
unnecessary burdens on community banks. That is why one of my 
priorities as governor has been to tailor appropriately our 
supervision and regulation to the size, complexity, and 
capacity and risks posed by an institution. To further this 
effort, I recently formed a working group of experts from 
across the Federal Reserve System to launch a comprehensive 
review of our supervisory work with smaller, regional and 
community banks.
    In carrying out each of my responsibilities, I am committed 
to accountability, transparency, and clear communication.

Q.9. Systemic regulatory failures, like the savings and loan 
crisis and 2008 financial crisis, have been the largest 
contributors to community bank failures over the last 30 years. 
What actions are you taking to ensure that excessive risk-
taking in corporate debt will not result in harm to the 
financial sector broadly and community banks specifically?

A.9. Widespread failures of community banks are indeed risks to 
economic growth, particularly in the communities they serve. 
The wave of community bank and savings and loan failures in the 
late 1980s and early 1990s was a strong headwind to the 
economy, requiring coordinated action by Congress and bank 
regulatory agencies. We absolutely want to avoid the need for 
such extraordinary measures in the future.
    Community banks emerged from the financial crisis 
substantially more resilient than they were in the precrisis 
period. Their regulatory capital ratios are higher, and they 
now rely more on capital instruments with greater loss 
absorbency. There is no substitute for high quality capital in 
limiting stress on institutions from the risks they take in the 
normal course of the bank. The use of wholesale funding--
another source of pressure during stressful periods--by 
community banks remains significantly below the levels that 
were typical prior to the financial crisis. We continue to 
closely monitor the solvency and liquidity risks among 
community banks.
    Community banks traditionally have little exposure to 
leveraged loans, and legal lending limits combined with the 
minimum participation sizes would limit most banks of that size 
from becoming significantly active in that market. Community 
banks are exposed to the small business sector as well as 
unincorporated businesses through traditional commercial and 
industrial lending. The current credit performance in the small 
business sector is quite strong, and during the past two 
downturns, small business lending has not generated outsized 
losses after accounting for the size of the economic 
contraction. We also closely monitor community banks that do 
have high concentrations of business-related debt to ensure 
they have appropriate risk management processes in place.
    That said, some community banks do have significant 
concentrations of CRE loans. We pay close attention to this 
sector, because it has played a role in previous episodes of 
widespread banking stress. The Commercial Real Estate Guidance 
issued in 2007 includes expectations that banks with 
concentrations in CRE have in place enhanced risk management 
programs, and the fraction of banks with large CRE 
concentrations is much lower than it was heading into the 2008 
financial crisis. Moreover, our financial stability assessment 
highlights the attention we have given to CRE prices and 
lending standards. We will continue to closely monitor this 
sector as well as supervised banks with concentrated exposure 
to CRE.

Q.10. Are you concerned that the deregulation of foreign 
banking organizations (FBOs) as proposed in April will create 
additional competitive pressures on community banks? Are FBOs 
direct competitors with community banks in activities like 
small business and residential mortgage lending? If not, what 
activities do FBOs engage in that distinguish their business 
and risk profile from community banks?

A.10. Most branches and agencies of foreign banks are not 
direct competitors of community banks, as foreign banking 
organizations (FBOs) tend to have a wholesale business model 
focused on large borrowers and home country customers operating 
in the U.S. FBOs generally engage in limited residential 
mortgage lending, most of which flows to employees of the bank.
    Some U.S. commercial banks owned by FBOs may directly 
compete with community banks. Of the 4,751 commercial banks 
operating in the U.S. as of year-end 2018, FBOs operate 39 of 
them.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                      FROM MICHELLE BOWMAN

Q.1. The community bank leverage ratio (CBLR) created pursuant 
to S. 2155 is of paramount interest to community banks in South 
Dakota. I am particularly concerned about how the CBLR was 
created because the current CBLR includes changes to the Prompt 
Corrective Action framework that would effectively eliminate 
any relief achieved from the creation of the leverage ratio. 
I've heard from several institutions in my State that they will 
decline to take advantage of the CBLR as a result.
    Why was 9 percent chosen for the community bank leverage 
ratio?

A.1. The Federal banking agencies jointly issued a proposal 
that would allow community banking organizations that meet 
certain qualifying criteria to opt into a simple, leverage-
based capital framework. Firms that opt into the framework 
would not be subject to the capital rule's risk-based capital 
requirements.
    Under the proposal, a qualifying community banking 
organization may elect to use the community bank leverage ratio 
(CBLR) framework if its CBLR is greater than 9 percent. A 9 
percent CBLR should generally maintain the current level of 
capital held by these banking organizations, while supporting 
the banking agencies' goals of reducing regulatory burden for 
community banking organizations and retaining safety and 
soundness in the banking system. Before finalizing the CBLR 
rule, I, along with my Federal Reserve Board (Board) colleagues 
will consider all public comments received as well as the input 
received from State bank supervisors.

Q.2. S. 2155 required Federal regulators to engage in a 
dialogue with State banking regulators regarding how the 
leverage ratio should be set. How did the Federal Reserve 
fulfill this requirement?

A.2. The banking agencies have worked closely with State bank 
supervisors over the past several months to inform the 
rulemaking process, and are considering their constructive 
input and feedback as we work to finalize the CBLR framework.

Q.3. What changes will be made to the community bank leverage 
ratio so that community banks can actually avail themselves of 
this relief?

A.3. The banking agencies are still considering the public 
comments received on the proposal as well as the input received 
from State bank supervisors. Moving forward in the rulemaking 
process, the banking agencies will strive to develop a CBLR 
framework that is consistent with congressional intent.

Q.4. I am honored to be the sponsor of the Financial Stability 
Oversight Council Improvement Act of 2019, which would require 
FSOC to determine whether potential nonbank threats to 
financial stability could be better solved by allowing 
companies to work with their primary regulator or through the 
development of a risk reduction plan. This legislation is 
important because most FSOC members are banking regulators and 
applying banking regulations to nonbank companies would be 
harmful to our capital markets and to Main Street investors.
    Do you agree that FSOC should focus on empowering primary 
regulators so that true systemic risks can be addressed?

A.4. I believe that the Financial Stability Oversight Council 
(FSOC) should work closely with the relevant primary regulators 
when addressing systemic risks, and my understanding is that 
the proposed activities-based approach to nonbank designation 
strengthens such coordination.

Q.5. Do you agree that it's important for FSOC to consult with 
primary regulators before voting on a SIFI designation?

A.5. Yes, I agree on the importance of consultation with 
primary regulators before any FSOC vote on a systemically 
important financial institution designation to leverage the 
expertise of that regulator and explore alternative solutions 
to mitigate systemic risk. The activities-based approach 
envisions close cooperation between the FSOC and the relevant 
regulators.

Q.6. Do you agree that addressing nonbank risk does not always 
have to include a SIFI designation?

A.6. Yes, I believe that there are ways to address nonbank 
risks other than through designating firms as systemically 
important. Indeed, it is my understanding that the proposed 
amendments to the nonbank designation guidance are intended to 
capture instances where designating an entity may not 
effectively address the risk to the system.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS
                      FROM MICHELLE BOWMAN

Q.1. The Federal Reserve's (Fed) regulatory approach to 
interaffiliate margin transactions is an outlier. The margin 
requirements have the effect of locking up capital that could 
otherwise be used for economic growth and they discourage 
centralized risk management practices among firms. In addition, 
the current approach results in the movement of collateral out 
of the U.S. insured depository institutions. These are all 
suboptimal policy outcomes. Regulatory authorities in the 
European Union, Japan, and most other G20 jurisdictions each 
currently provide such an exemption for these transactions. You 
have indicated you are aware of the issue but, to date, I've 
seen no official action from the Fed to fix the problem.
    The recognition for the need for an exemption began under 
regulators nominated by President Obama. In 2013, CFTC Chairman 
Gary Gensler provided an exemption for central clearing and 
trade execution. In 2015, CFTC Chairman Tim Massad provided an 
exemption, determining that initial margin was not warranted 
and it was a ``very costly and not very effective way'' to 
enhance risk management. Yet, the Fed did not provide an 
exemption from initial margin in the 2016 margin rules, and as 
a result, as of the end of last year, U.S. banking entities 
collected nearly $50 billion in initial margin from their own 
affiliates. In 2017, the Treasury Department noted that this 
rule puts U.S. firms at a disadvantage both domestically and 
internationally, recommending that your agencies provide an 
exemption consistent with the margin requirements of the CFTC.
    Do you agree that an exemption from initial margin is 
appropriate for interaffiliate transactions?

A.1. The Board is actively discussing this aspect of the rule 
with the other prudential regulators. The goal is to assess 
what, if any, changes can be made consistent with the statutory 
directive that margin requirements help ensure the safety and 
soundness of covered swap entities and are appropriate for the 
risk associated with noncleared swaps.

Q.2. Will you prioritize a rule to provide an exemption for 
interaffiliate transactions, separate from any broader 
regulatory effort such as a Regulation W rewrite?
    Please provide an explicit timeline for when the Fed will 
take action.

A.2. Discussions with the other prudential regulators as 
mentioned above are separate and apart from any broader 
regulatory efforts. While I am not able to provide a specific 
timeline for you, we will strive to address the issue as soon 
as possible as we coordinate with other relevant agencies.

Q.3. The reason a ``Reg W'' rewrite is suboptimal is that it 
will be counterproductive and slow. Most believe it will take 5 
to 6 years to complete. This capital needs to be released soon 
because we have geopolitical risk emerging over the world that 
could destabilize markets. If we have a Brexit, the number of 
entities will double and more capital will be unfairly 
sequestered. With potential trade volatility, Middle East 
uncertainty, and other risks, our banks need to be able to use 
capital for risk management, not have it trapped for no reason.
    Could a Reg W action be done outside of providing an 
exemption?

A.3. The swap margin rule, codified in the Board's Regulation 
KK, is different than and separate from Regulation W. I 
understand this question to be asking about the treatment of 
interaffiliate transactions in the swap margin rule. The swap 
margin rule requires that a covered swap entity collect initial 
margin from an affiliate. If the Board were to change this 
requirement, it would do so through the normal public notice 
and comment rulemaking process consistent with the 
Administrative Procedure Act.

Q.4. Please explain any reasoning for not allowing this 
exemption this year.

A.4. While we are actively discussing this aspect of the rule 
with the other prudential regulators, I am not able to confirm 
a timeline on the result of our collaboration. I understand the 
importance of moving as quickly as possible.

Q.5. In October of last year, the Fed issued a request for 
public comment on ``actions the Federal Reserve could take to 
support faster payments in the United States.'' We understand 
the Fed has been working collaboratively with the banks and 
other private sector stakeholders for years on how best to 
facilitate faster payments. As Chairman Powell noted at a 
recent press conference, the Fed has thus far been ``more of a 
convener, bringing industry and the public and public interest 
groups . . . around the table and . . . playing a constructive 
role'' in encouraging the private sector in this area. In 
October, however, the Fed issued a request for public comment 
indicating that ``it will probably enter the market for faster 
payments as a direct competitor of the private sector solutions 
with its own Real-Time Gross Settlement'' (RTGS) system.
    Is it possible the Fed's proposal could hamper and delay, 
rather than facilitate, the arrival of real-time payments?

A.5. In its 2018 Federal Register Notice (2018 Notice) request 
for public comment, the Board of Governors (Board) requested 
feedback on the impact of Federal Reserve action(s) in faster 
payments settlement. In particular, the 2018 Notice 
specifically asked whether Federal Reserve action would help or 
hinder adoption of faster payment services by the financial 
services industry. This matter is still pending before the 
Board, and we are carefully reviewing the comments received.

Q.6. Please explain why the Fed is proposing the creation of a 
Government-run real-time payments system when the private 
sector has already created one that is up and running?

A.6. The Federal Reserve has not committed to any action at 
this time. Any decision made by the Board will consider 
carefully the importance of the views of the private sector on 
this issue.

Q.7. The Fed's own policy statement on ``The Federal Reserve in 
the Payments System'' requires that the Fed satisfy three 
conditions before proposing a new service.
    Among those is a finding that the private sector ``cannot 
be expected to provide such service with reasonable 
effectiveness, scope, and equity.'' Has the Fed made this 
finding, and, if so, on what grounds was it made?

A.7. The Board has not made a determination at this time. 
However, throughout the Board's deliberations, it will adhere 
to the requirements of the Federal Reserve Act, the Monetary 
Control Act (MCA), and longstanding Federal Reserve policies 
and processes.

Q.8. How long would it take for the Fed to create its real-time 
system?

A.8. At this time, the Federal Reserve has not committed to any 
action. If the Board determines to pursue a Real-Time Gross 
Settlement (RTGS) service for faster payments, a subsequent 
Federal Register notice would be issued that outlines 
additional details of the proposed service.

Q.9. Would the Fed's proposed RTGS and the existing private 
sector real-time payments network be interoperable and, if so, 
why--specifically--do you believe that will be the case?

A.9. The Board's request for comment asked for feedback on 
several areas, including interoperability with existing or 
potentially new Real-Time Gross Settlement (RTGS) service 
providers. Various commenters responded to such questions. The 
Board is assessing these comments and seriously taking them 
into account.

Q.10. If you believe the systems would interoperate, would such 
interoperability require the private sector system to 
significantly alter its current design?

A.10. As I mentioned above, the Board is reviewing the comments 
received on the proposal, including those comments on 
interoperability, and will take this feedback into account 
throughout its deliberation.

Q.11. My understanding is that the Fed seeks to justify this 
potential action in part on a perceived need for 
``resiliency''. The notion that having two systems would 
provide resiliency necessarily assumes that every bank in the 
country (or at least an overwhelming majority of them) would 
have to connect to two systems: the private sector system and 
the yet-to-be-built Government-run system, which would create 
enormous inefficiencies and impose needless costs on the 
American taxpayer and the private sector.
    Have you done any cost-benefit analysis, particularly in 
light of the other faster payment options currently in the 
market that already serve as near substitutes, like payments 
over the card networks, same-day ACH, PayPal, Venmo, Zelle, 
Fedwire Funds Service itself, to determine whether or not this 
proposal makes any sense?

A.11. The Board is considering the comments of the broad range 
of stakeholders throughout its deliberation, including the 
points you raise on resiliency and costs. We note that the 
Monetary Control Act of 1980 requires that Federal Reserve 
services must be priced to recover actual expenses associated 
with providing the services as well as certain imputed costs, 
including the taxes and cost of capital that would be paid by a 
private sector competitor. Importantly, the Board is 
considering the comments from the broad range of stakeholders 
throughout its deliberation.

Q.12. Doesn't the Fed already regulate and supervise the 
private sector real-time payments operator, which we understand 
has an impressive track record for resiliency, operating with 
multiple data centers, redundant systems, etc? Are you 
contending that your regulatory and supervisory powers over the 
private sector operator are deficient in terms of your 
supervising the private sector's plans to ensure resiliency?

A.12. The Board does not have plenary regulatory or supervisory 
authority over the U.S. payment system. Rather, the Board has 
limited authority to influence the operations of private sector 
retail payment services providers in certain circumstances and 
pursuant to specific laws. For example, assuming the private 
sector operator is subject to the Bank Service Company Act 
(BSCA), the Board and other Federal banking agencies would have 
authority to regulate and exam third party service providers 
that perform certain services for depository institutions that 
the agencies regulate. The BSCA, however, does not grant 
enforcement authority to the Board or other Federal banking 
agencies over the third party service providers.

Q.13. In light of the recent Fedwire Funds outage, which we 
understand came at a critical part of the day when private 
sector settlement relies on Fedwire, should the Fed's 
resiliency focus perhaps be on the Fedwire Funds system, which 
has vital systemic importance, rather than committing time and 
resources to standing up new infrastructure that may or may not 
provide resiliency?

A.13. I recognize the critical role that the Fedwire Funds 
Service plays in the financial system. Maintaining and 
enhancing the resilience of this service is, and will continue 
to be, an area of focus for the Board. The Board, through its 
oversight of the Reserve Banks, holds the Fedwire Funds Service 
to the standards included in Part 1 of the Federal Reserve 
Policy on Payment System Risk, which include robust operational 
resilience expectations. These expectations are consistent with 
the international standards applicable to systemically 
important financial market infrastructures operated by the 
private sector. The Federal Reserve Banks strive to not just 
meet these standards, but to continuously strengthen Fedwire 
Funds' resiliency posture, and doing so will remain an ongoing 
area of focus.
    The Fedwire Funds Service has historically provided a very 
high level of operational reliability. Having responded to the 
outage's immediate cause, efforts are underway to identify, 
understand, and respond to the outage's proximate causes so 
that the same high levels of operational reliability continue 
going forward.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
             SENATOR MENENDEZ FROM MICHELLE BOWMAN

Q.1. My home State of New Jersey is moving toward legalization 
of recreational marijuana, and I have concerns that these new 
businesses as well as existing medical marijuana businesses in 
the State will continue to find themselves shut out of the 
banking system. And when these businesses are forced to operate 
exclusively in cash, they create serious public safety risks in 
our communities.
    I've already heard support from Chair Powell and 
Comptroller Otting on this issue, but I'd also like to know if 
you agree that financial institutions need legislative clarity 
on this issue?

A.1. Yes, I do. However, only Congress can provide financial 
institutions legislative clarity on the conflict between 
Federal and some State laws on the legalization of marijuana 
and whether banks can service marijuana businesses that are 
legal under State law. The Federal Reserve is monitoring the 
various legislative proposals Congress is considering to 
resolve this issue.

Q.2. Closely related to the provision of banking services is 
the ability for such businesses to access insurance products, a 
necessity for those looking to secure financing. Would it be 
helpful for Congress to also consider the role of insurance 
companies as States move toward legalization?

A.2. Access to insurance products is an important aspect of 
commerce. If Congress decides to address the conflict between 
Federal laws and some State laws on the legalization of 
marijuana and whether banks can service State legal marijuana 
businesses, it would likely be helpful to also address any 
similar issues related to insurance companies and products.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
                      FROM MICHELLE BOWMAN

Q.1. The Federal Reserve Board of Governors is engaged in an 
interagency process to rewrite the Community Reinvestment Act 
(CRA) rules.
    In your view, what is problem with the current Community 
Reinvestment Act (CRA) regulations?

A.1. The Federal Reserve Board of Governors (Board) takes our 
Community Reinvestment Act (CRA) responsibilities seriously and 
strives to conduct meaningful CRA evaluations. There has been 
considerable change since the time the regulations implementing 
the law were last revised. The Board supports modernizing CRA 
to improve the clarity, consistency, and predictability of how 
CRA performance is assessed, as well as the predictability of 
which community development investments and loans qualify for 
CRA consideration. While there is a lot that is good about the 
current regulations, many stakeholders have said that they are 
too complicated and that if they were made simpler and more 
transparent both banks and communities would benefit.
    I believe that the regulations should recognize that banks 
serve communities with different credit needs. Additionally, 
the regulations should be tailored to evaluate a bank's CRA 
performance in light of its size, business strategy, capacity, 
and constraints as well as its community's demographics, 
economic conditions, and credit needs and opportunities. I also 
understand the need to update assessment areas to reflect how 
technology and other advancements have significantly changed 
how financial services are accessed and delivered.
    My Board colleagues and I support working with the Federal 
Deposit Insurance Corporation and the Office of the Comptroller 
of the Currency (OCC) to modernize CRA and believe the agencies 
should find a way to preserve this statutory intent in any 
future update of the regulation. We are continuing to evaluate 
public input from a wide range of stakeholders on ways to 
modernize the CRA, including through the OCC's Advanced Notice 
of Proposed Rulemaking and the roundtables that the Federal 
Reserve held across the country from October 2018 through 
January of this year. \1\
---------------------------------------------------------------------------
     \1\ See https://www.federalreserve.gov/publications/files/
stakeholder-feedback-on-modernizing-the-community-reinvestment-act-
201906.

Q.2. Currently, more than 98 percent of banks pass their CRA 
examinations but lending discrimination and banking deserts 
still exist in communities all across the country. Does this 
---------------------------------------------------------------------------
suggest that CRA examinations are too early?

A.2. The CRA regulations are very specific with respect to the 
criteria necessary to achieve a ``Satisfactory'' or 
``Outstanding'' rating. In general, banks work to avoid poor 
CRA ratings, which can lead to community relations and public 
reputational issues, result in more frequent CRA evaluations, 
and pose a significant barrier to any future plans for 
expansion. Ratings also are made public, giving banks 
additional incentives to establish effective CRA programs. 
Given these factors, I believe that our CRA examination process 
is robust and rigorous.

Q.3. More than half of mortgages are now made by nonbank 
mortgage companies. Should these nonbank lenders have CRA or 
other similar obligations to serve the whole communities in 
which they are located?

A.3. I have heard this concern expressed in my meetings with 
community bankers. As you know, decisions about which financial 
institutions to exempt from certain laws or rules are a matter 
for Congress or, if granted the authority by Congress, by the 
regulator with responsibility for promulgation of regulations, 
which in this case is the Consumer Financial Protection Bureau.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
           SENATOR CORTEZ MASTO FROM MICHELLE BOWMAN

Q.1. I am very concerned about climate-related financial risks. 
The most recent National Climate Assessment said the U.S. 
Southwest could lose $23 billion per year in region-wide wages 
as a result of extreme heat. Since you joined the Federal 
Reserve Board, what have you done to prepare community banks 
for long-term shifts in climate patterns, like increasing 
extreme heat and more severe and more frequent storms?

A.1. Congress has placed the responsibility to address climate 
change within other agencies. The Federal Reserve Board's 
(Board) supervisory framework guides supervisors in their work 
with these institutions on a wide range of risk management 
practices, including those around severe weather events. To 
supplement that broad framework, the Board also has issued 
guidance on lending to sectors where assessments of severe 
weather-related risks are especially critical, such as 
agriculture and energy lending. I can assure you that I 
appreciate the distinct concerns of community banks in this 
space, because of both their size and their important social 
role; I will continue to urge Federal Reserve examiners and 
supervisors to do the same in their daily work.

Q.2. In March, Glenn Rudebusch published an economic paper on 
Climate Change and the Federal Reserve. The paper notes that 
droughts, floods, and hurricanes amplified by climate change 
could result in more infrastructure damage, agricultural 
losses, and commodity price spikes. Rudebusch notes that ``some 
have advocated that central banks use their balance sheet to 
support the transition to a low-carbon economy, for example, by 
buying low-carbon corporate bonds.''
    Do you think Congress should consider changing the law to 
support ``green'' quantitative easing as an option for the Fed?

A.2. The Federal Reserve conducts monetary policy to promote 
its statutory goals of maximum employment and stable prices. 
Decisions about how to foster new technologies, new industries, 
or about channeling credit to particular sectors of the economy 
inevitably involve competing political interests. The Congress 
and the Administration are in the best position to make 
judgments balancing those interests on behalf of the U.S. 
taxpayer.

Q.3. Which other Central Banks allow green quantitative easing? 
Do you believe those models could translate to the American 
financial system and economy?

A.3. I am not aware of any advanced-economy central bank that 
has a ``green quantitative easing'' program. As I noted in my 
response to Question 2, Congress and the Administration are in 
the best position to evaluate this question.

Q.4. In the Federal Reserve's Supervisory Report released 
November, there was a section on merger and acquisition risks. 
The banking law passed last year changed the asset threshold 
for a small bank holding company from $1 billion to $3 billion. 
It also reduced capital requirements and other rules for banks 
above $50 billion. We have seen more bank mergers since the law 
passed.
    Do you expect to see more bank mergers this year and next 
year than in previous years?
    How much of merger activity is due to changes from S. 2155 
and other regulatory actions?

A.4. Merger activity is affected by a number of factors, 
including economic environment, industry outlook, and factors 
unique to particular institutions or business models. As such, 
I am not able to draw conclusions on the effect of S. 2155 or 
other regulatory actions at this time. Following the 
implementation of S. 2155, we have not seen a significant 
change in applications for bank acquisitions and mergers 
submitted to the Federal Reserve System to date. In fact, the 
number of these types of applications submitted to the Board is 
lower now than in the years before the financial crisis.
    Between May 24, 2018, the enactment date of S. 2155, and 
December 31, 2018, the Federal Reserve System received 113 
applications for the proposed merger and acquisition of banking 
organizations under the Bank Holding Company Act, the Bank 
Merger Act, and the Home Owners Loan Act. This number is lower 
than the number of merger and acquisition applications 
submitted during the same period for each year from 2006 to 
2017.

Q.5. What do you see as the risks from mergers and acquisitions 
beyond the impacts on the customer?

A.5. Like any firm, a variety of risks are always present, but 
when firms merge or make acquisitions, the chief risk is 
operational. Operational risk could present during the 
integration of systems related to risk management, information 
technology, Bank Secrecy Act/Anti-Money Laundering, and the 
Community Reinvestment Act. In reviewing bank merger and 
acquisition proposals, the Federal Reserve considers the 
applicant's plans for implementing the proposal and its 
capacity to do so effectively.

Q.6. What are the risks to communities when banks merge?

A.6. Congress has given the Federal Reserve a set of statutory 
factors to use during the evaluation of a merger or acquisition 
application, one of which is the convenience and needs of the 
communities to be served and public benefits. Furthermore, the 
Federal Reserve also must analyze the competitive effects of 
the proposal, including whether the proposal would 
substantially lessen competition in any section of the country. 
In addition, the Board considers the applicant institution's 
business model, its marketing and outreach plans, and the 
institution's plans following consummation of the proposal. I 
take this role seriously and intend to be thorough in my review 
of all current and future applications.

Q.7. Are you concerned about a loss of branches? Types of 
products? Jobs?

A.7. I understand and am sympathetic to the concerns raised 
with respect to the potential loss of branches, products and 
services and jobs following financial institution mergers. In 
evaluating convenience and needs factors in bank acquisition 
and merger proposals, the Board considers all relevant 
information, including the addition of new products, extended 
hours of service, or additional branch locations that will be 
subsequently available to the public. With respect to branch 
closures, banks are required to adhere to Federal Deposit 
Insurance Act public notice requirements \1\ before closing 
branches, which include the following:
---------------------------------------------------------------------------
     \1\ Section 42 of the Federal Deposit Insurance Act (12 U.S.C. 
183 1r-1), as implemented by the Joint Policy Statement Regarding 
Branch Closings (64 FR 34,844 (1999)). The Joint Policy Statement 
Regarding Branch Closings states that the Federal banking agencies will 
examine institutions for compliance with branch closure requirements in 
accordance with each agency's consumer compliance examination 
procedures.

    The bank is required to provide reasons and other 
        supporting data for the closure, consistent with the 
---------------------------------------------------------------------------
        institution's written policy for branch closings.

    For branches to be closed in low- or moderate-
        income geographies, affected persons have the ability 
        to request a public meeting to explore the feasibility 
        of obtaining adequate alternative facilities and 
        services for the area.

    The bank also is required to provide the public 
        with at least 30 days' notice, and the appropriate 
        Federal supervisory agency with at least 90 days' 
        notice, before the date of a proposed branch closing.

    A pattern of branch closures in minority communities also 
may be relevant in determining whether a bank is in compliance 
with fair lending laws. For example, it may be a consideration 
in determining whether a bank is engaging in redlining. 
Branching is one of the factors that is considered in a 
redlining analysis, along with the bank's CRA assessment area, 
lending, marketing, and outreach practices. In evaluating 
branching for these purposes, we analyze whether there are bank 
branches in majority-minority census tracts.
    The Federal Reserve considers applicants' plans for 
products and services to be offered by the combined 
institution, including significant anticipated changes to 
products and services currently offered by the individual 
institutions and plans to offer new, replacement, or enhanced 
products and services. Many acquiring banks plan to offer the 
products and services of both the acquiring bank and the target 
bank throughout the footprint of the combined bank, resulting 
in increased availability of products and services for 
customers of each bank.
    The Federal Reserve reviews applications for consistency 
with the applicable statutory factors. These factors include 
the applicant's current and pro forma financial condition and 
future prospects, managerial resources, the convenience and 
needs of the communities to be served and public benefits, the 
competitive effects of the merger or acquisition, and impact of 
the proposal on financial stability.

Q.8. At a time when community banks are earning record profits, 
why have you voted repeatedly to lower the amount of regulatory 
capital they hold?

A.8. The Board has not acted on any proposals to lower capital 
levels for community banks. However, as I stated in my 
testimony, as regulators, we need to ensure that we are not 
imposing unnecessary burdens on community banks. This is why I 
believe we must tailor our supervision and regulation to the 
size, complexity, capacity, and risks posed by an institution. 
Community banks are critical to so many local economies, which 
is why it is important to adapt our approach to supervision and 
regulation as the industry evolves.

Q.9. Why have you never joined Governor Brainard in a dissent 
of all these deregulatory actions, including those that 
weakened rules for the biggest banks?

A.9. As I stated in my testimony, the core reforms that 
resulted from the crisis were crucial to ensure the resilience 
of the U.S. financial system. At the same time, I believe that 
our regulatory and supervisory framework should be tailored 
according to banking firms' size, complexity, and risk profile, 
in a way that minimizes costs and is consistent with statutory 
provisions. I have appreciated the value placed on getting a 
broad range of external and internal views throughout our 
deliberative process.

Q.10. How does your support for revising the capital and 
liquidity requirements for large banks help community banks?

A.10. One of the key goals of the recent tailoring proposals is 
to better reflect the differences in risk profiles between 
firms that qualify as U.S. global systemically important banks 
and other large banking organizations. U.S. firms with the most 
significant risk profiles would remain subject to the most 
rigorous existing requirements under the proposals. These 
proposals build on the Board's existing efforts to tailor its 
rules and experience implementing those rules, and account for 
changes to the enhanced prudential standards made by S. 2155, 
the Economic Growth, Regulatory Relief, and Consumer Protection 
Act.

Q.11. How does your support for weakened stress test regimes 
for large banks help community banks?

A.11. I believe that a strong, resilient financial sector is 
important to banking institutions regardless of their size. 
Stress testing remains a core tool for the Federal Reserve. Our 
proposal aligns compliance requirements for firms with less 
risk while maintaining more stringent requirements for firms 
with more risk and more systemic importance. The proposal also 
provides banking organizations with additional transparency, so 
that they can better comply with the tests.

Q.12. How does your support for changing the formula for 
derivatives so that less capital is held against derivative 
positions help community banks?

A.12. The Board, the Federal Deposit Insurance Corporation 
(FDIC), and the Office of the Comptroller of the Currency (OCC) 
(together, the agencies), estimate that the proposal would not 
significantly change the amount of regulatory capital in the 
banking system. The proposal updates standards for how large 
banking organizations measure counterparty credit risk posed by 
derivative contracts under the agencies' regulatory capital 
rules. The proposed changes are designed to better reflect the 
current derivatives market and incorporate risks observed 
during the 2007-2008 financial crisis. The new approach, called 
the ``standardized approach for measuring counterparty credit 
risk'', or SA-CCR, is intended to better reflect the current 
derivatives market and to provide important improvements to 
risk sensitivity, resulting in more appropriate capital 
requirements for derivative contracts exposure. The proposal 
would require large banks to adopt SA-CCR, but permit smaller 
firms to use the existing current exposure methodology (CEM).
    While the agencies recognized that the proposed 
implementation of SA-CCR would offer several improvements to 
CEM, it may require, particularly for firms with relatively 
small derivatives portfolios, internal systems enhancements and 
other operational modifications that could be costly and 
present additional burden.

Q.13. How does your support for reducing resolution plans for 
big banks from once a year to every 4 or 6 years help community 
banks?

A.13. Changing the frequency of resolution plan submissions for 
large firms will not have an impact on community banks. 
Community banks have total assets of $10 billion or less and 
therefore, are not subject to the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (Dodd-Frank Act) resolution 
planning requirement. The change in resolution plans is 
consistent with the Board's broader efforts to tailor 
supervisory expectations to the size and complexity of our 
supervised firms.

Q.14. How does your support to end risk-reducing margin 
requirements for derivatives transactions between affiliates of 
large complex banks help community banks?

A.14. The banking agencies have not taken action on this 
matter. However, I believe it is sensible to review our 
regulatory requirements periodically to assess whether they can 
be made more efficient, consistent with the Dodd-Frank Act and 
considering other regulatory requirements applicable to the 
firm.
    If the U.S. prudential regulators (the Board, FDIC, OCC, 
Farm Credit Administration, and Federal Housing Finance Agency) 
propose to eliminate interaffiliate margin requirements, that 
change would likely have limited effects on community banks 
because community banks are already exempt from the swap margin 
rule. Community banks and other small financial institutions do 
not have to post margin for their noncleared swap transactions. 
On August 1, 2016, the prudential regulators announced their 
final rules exempting banks, savings associations, Farm Credit 
System institutions, and credit unions with $10 billion or less 
in total assets from the OTC margin requirements under the 
Dodd-Frank Act. This relief is designed to allow such firms to 
use OTC derivatives to hedge normal business activity as they 
have done in the past (e.g., hedging the interest rate risk of 
loans).

Q.15. If a fair lending exam detects a violation after a bank 
has been graded for its Consumer Reinvestment Act exam, do you 
think the bank should receive a retroactive downgrade?

A.15. I find discriminatory and other illegal credit practices 
unacceptable and they have no place in civil society. Moreover, 
such practices can have a negative effect on a bank's CRA 
rating. The Board's current regulation is explicit about how to 
consider illegal credit practices when assigning ratings. 
Consistent with the regulation, our process entails a fact-
specific review of the matter before deciding whether it should 
prompt a downgrade of a CRA rating, including the nature of the 
practices, any corrective actions taken to address them, and 
the policies and procedures in place to prevent them.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                     FROM PAUL SHMOTOLOKHA

Q.1. As First Vice President of the Export-Import Bank (EXIM), 
how will you work to assist Congress in reauthorizing EXIM's 
charter, which expires on September 30, 2019?

A.1. If confirmed, I will work with Congress on any issue of 
concern and provide insight from 30 years of business 
experience in export and managing overseas market conditions 
and customers. If confirmed, I would participate in areas where 
I have the most prior experience, so I would seek to ensure 
that the small business perspective is considered as well as 
the views of the international customer base. I would advocate 
a sense of urgency for having the Bank be fully able to fulfill 
its mission of creating American jobs, and follow the direction 
of the Chairman in my work.

Q.2. EXIM President Kimberly Reed has pledged to make reforms 
to improve the Bank's operations and to address certain 
concerns with regard to credit assistance offered by the Bank, 
such as ensuring that EXIM does not compete with private 
financing.
    As the Bank pursues reforms, whether through proposals for 
action by EXIM's board of directors or a proposal for 
reauthorization of the Bank's charter, will you pledge to 
provide transparency in reform efforts?

A.2. Yes, I would provide transparency in reform efforts within 
the parameters of the position of First Vice President and in 
accordance with EXIM's Charter and Bylaws, as well as with my 
experience of best business practices.

Q.3. If confirmed, are there any specific policies or 
procedures of the Export-Import Bank that you would work to 
alter or change?

A.3. If confirmed, I look forward to reviewing EXIM's policy 
and practices and to reviewing implementation of all reforms 
previously mandated by Congress and to ensure that EXIM 
complies with all provisions in the Charter and Bylaws. As I do 
not currently have access to internal EXIM information 
concerning policies and procedures, I do not currently have 
specific proposals to alter EXIM's policies or procedures. If 
confirmed, I am interested in looking closely at what can be 
done to improve small business application processes to 
potentially reduce turnaround times while maintaining or even 
improving EXIM's risk management practices. Additionally, given 
my background, I would be interested in reviewing business 
development, operations efficiency, customer service, brand 
perception and values, product management, performance metrics 
and goal setting, ethical standards, transparency, strong risk 
management practices, and maintenance of client confidentiality 
at appropriate times during a deal cycle. I would also like to 
support EXIM's strategic plan and work collaboratively to chart 
a new future for the Bank.
    In order to make recommendations, I expect that my 
colleagues and I on the Board of Directors would conduct a 
review process that could involve congressional and EXIM staff 
meetings, a review of EXIM-related GAO reports, surveys of U.S. 
manufacturers (including those who are not clients of EXIM), 
private sector financing sources (including community banks, 
regional, and multinational banks), foreign EXIM customers, 
United States Foreign Commercial Service staff in key markets 
and U.S. and International Development Banks.

Q.4. Do you believe it is important to seek public comment from 
EXIM customers and the general public before making any changes 
that would significantly affect the availability of credit from 
EXIM for certain products or economic sectors?

A.4. Yes, I believe that listening to the ``voice of the 
customer'' is a critical tool to ensure best practices are 
being followed in any organization. Public comments from 
American manufacturers, international customers and taxpayers 
add value in any decision-making process and I would seek to 
combine that with input from Congress and the Administration 
before making any changes that would significantly affect the 
availability of credit from EXIM for certain products or 
economic sectors.

Q.5. If confirmed, will you publicly defend the Export-Import 
Bank against false or misleading charges of fraud?

A.5. Yes, I would publicly defend EXIM Bank against false or 
misleading charges of fraud.

Q.6. Do you see a need to impose an upper limit on doing 
business with any particular industry or commercial sector, 
like aerospace manufacturing, that has previously relied 
heavily on EXIM to access foreign markets? Or should EXIM's 
lending be driven by demand from qualified applicants, to the 
extent permitted by the Bank's charter?

A.6. If confirmed, I will faithfully execute all laws 
consistent with the intent of Congress and within the authority 
of my office. I will review each transaction independently, on 
its merits, and in accordance with the EXIM Charter established 
by the Congress, the Bylaws approved by EXIM's Board, and other 
policies and procedures established by the Bank for review of 
individual transactions. It is my understanding that Congress 
has established EXIM to serve as a demand-driven institution. 
EXIM must also consider the risks associated with individual 
transactions and its overall portfolio. If transactions meet 
the requirements as laid out in the Bank's Charter and the 
risks can be appropriately managed, I do not see the need 
currently to put a limitation on financing for sectors that 
support American jobs.

Q.7. If confirmed, would you work to ensure that the comment 
process for environmental and social impacts from projects is 
properly structured and adequately resourced to ensure that 
comments from concerned parties are meaningfully considered?

A.7. Yes, I would work with fellow Board members and EXIM staff 
to ensure that the comment process for environmental and social 
impacts from projects is properly structured and resourced to 
ensure that comments are meaningfully considered.

Q.8. If confirmed, do you commit to providing all documents and 
materials that the Office of Inspector General requests?

A.8. Yes. I believe that Inspector General requests are 
critical to good governance, transparency, and ensuring 
compliance. I would provide all documents and materials that 
the Office of Inspector General requests of me.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                     FROM PAUL SHMOTOLOKHA

Q.1. The EXIM Bank is one of the most underutilized tools in 
our toolkit for supporting U.S. exports and protecting our 
national security interests. As of 2017, the export credit 
agencies of Japan and Korea had $187 billion in medium and 
long-term exposures; Canada, Germany, France, Italy, and the 
United Kingdom had $306 billion; and China had an estimated 
$363 billion.
    By comparison, America's EXIM has an exposure of about $70 
billion--about one dollar for every five of China's.
    Do you agree that the EXIM Bank is an important piece of 
our trade infrastructure that will help us compete with foreign 
ECAs?

A.1. Yes, EXIM Bank is a critical part of our trade 
infrastructure and it should assist in levelling the playing 
field.

Q.2. Do you agree that the lack of a quorum at the EXIM Bank 
over the past several years has had significant negative 
consequences for U.S. competitiveness in markets like nuclear 
energy and aerospace?

A.2. Yes, working for a company that was a supplier to large 
power generation manufacturers I have personally observed the 
negative consequences of the lack of a quorum at EXIM and the 
inability to approve transactions over $10 million.

Q.3. As we go into reauthorization at the end of 2019, what are 
your top priorities for the Bank?

A.3. Should I be confirmed, I expect that my top priorities 
will include, but not be limited to: compliance with the 
mandates in the Charter and Bylaws of the Bank and implementing 
reforms mandated by Congress. I would also expect to focus on 
improving transparency, reviewing the existing pipeline of 
deals, and ensuring that EXIM is available to provide financing 
that will help support and create jobs across the country.
    In order to do so, I believe outreach to small, medium, and 
large businesses and building closer cooperation with regional 
and community banks will be necessary to revitalize the brand 
and confidence in EXIM as a stable partner both inside and 
outside the USA. Constant improvement is necessary to improve 
EXIM's relationships and support for small business. Should I 
be confirmed, I would expect to explore how cooperation with 
other funding sources such as regional or national development 
banks can help American business win supply contracts in 
emerging markets, especially for infrastructure projects that 
may require closer cooperation with private sector lenders.
    Finally, should I be confirmed I would be interested in 
working with the business divisions of the Bank to develop more 
medium term financing opportunities, and examining what can be 
done to improve small business application processes to 
potentially reduce turnaround times while maintaining or even 
improving EXIM's risk management practices. I believe EXIM can 
continue to strengthen efforts to educate owners, finance 
teams, and management at more American manufacturers on EXIM 
products in order to respond to more aggressive tactics being 
used by foreign competition.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
           SENATOR CORTEZ MASTO FROM PAUL SHMOTOLOKHA

Q.1. Can you give me a few examples of U.S. companies you 
worked with that financed deals with the Export-Import Bank?

A.1. While being respectful of business confidentiality 
considerations, I can share the following anecdotes.
    A regional cable TV company owned by a media group in 
Brazil wanted to purchase quality American-made products and 
turned to a global distributor of broadband network products 
located in Florida, who worked with EXIM and put together 
financing for a basket of products from several American 
manufacturers. Financing from a private bank coupled with a 
medium-term (5-year) loan guarantee from EXIM allowed the 
company to source American products, including powering 
equipment from my current employer, Alpha Technologies. This 
Florida-based company is working to secure contracts for 
additional opportunities in South America. Those transactions 
will require financing from a Government-backed export credit 
agency because the private sector is unwilling to finance such 
transactions in certain markets.
    In my own circumstances at Alpha Technologies, we had 
decided to turn to EXIM Bank in 2017 for export financing 
support. In order to continue to grow our export business, we 
needed to balance the growing demand for our products with the 
risks of exporting to certain fast-growing emerging markets in 
Central and South America, Africa, and Asia. Private sector 
export insurance was not readily available. Alpha had two 
options: require that customers pay in advance of shipment or 
offer to finance the transactions at lower values and assume 
all the risk. An export credit insurance policy could have 
helped Alpha offer more competitive terms at less risk to the 
company's bottom line and would have increased deal sizes 
significantly. Ultimately, due to an unrelated issue, Alpha's 
internal resources were diverted from this initiative and 
foreign buyers either purchased fewer products or moved to 
other suppliers.
    As a manufacturer of critical back up power systems for 
large capital equipment, we sold these systems to a U.S. 
manufacturer who then bundled it into their multimillion dollar 
solutions that they marketed worldwide, often with EXIM 
financing. In 2015, when EXIM lost its ability to provide 
financing over $10 million, we noticed that the U.S. 
manufacturer moved some of its procurement sourcing locations 
overseas and utilized the export credit agencies of other 
countries. We lost some sales to foreign competitors as a 
result of these developments.
    In my work in international sales, I have also been 
informed by a number of leading international 
telecommunications companies who, despite a desire to purchase 
U.S. goods, have made purchases from other countries, including 
China, because of the financing made available.

Q.2. Now that we have President Reed, and Commissioners Bachus 
and Pryor, the board has a functioning quorum. How quickly do 
you think the Export-Import Bank can finance the backlog of 
sales--about $40 billion--that have been delayed over the past 
4 years?

A.2. As my nomination is still pending and I am not involved in 
EXIM's internal decision making, I cannot give an exact 
timeline. To answer this question, I would need to know more 
about the quality of the transactions in the pipeline and the 
status of the deals as they have been in suspension for some 
time. What I can say is that working through a large backlog 
takes a solid plan based on resource availability and 
priorities but no business has anything more important than 
customers waiting for their products or services. Should I be 
confirmed, I would seek to ensure that the Bank is being 
diligent in its underwriting of current and new transactions 
and is processing transactions efficiently, while being mindful 
of the statutory obligations of EXIM's financing and our role 
as responsible stewards of taxpayer dollars. I would also be 
mindful of my own experience: that customers are impatient and 
the market is efficient, and that suppliers may turn to other 
means that are not necessarily in the American worker's best 
interests.

Q.3. At any given time, the bank can have only $135 billion in 
loans, loan guarantees, and other types of financing assistance 
outstanding. After 4 years of restricted operations, it has 
about $60 billion in credit out, leaving about $75 billion 
available. The Export-Import Bank needs to be reauthorized by 
September 30 of this year. Do you think Congress should raise 
the credit exposure cap?

A.3. As I said when I testified before the Committee, I do 
think that Congress should raise the overall financing 
authority of the Bank. The exposure cap should be set at a 
level that is based on forecasted need and that enables EXIM to 
meet its statutory mandate to support U.S. jobs by facilitating 
exports, to level the playing field for U.S. exporters, and to 
supplement private sector capital. Regardless of where the 
exposure cap is set, EXIM must maintain its robust risk 
management procedures and be responsible stewards of taxpayer 
dollars.

Q.4. There are more than 100 foreign export credit agencies 
providing their companies with billions of financing. What have 
you learned about how other Nations assist their companies with 
exporting goods that we should emulate?

A.4. The most significant development that I have seen is the 
increased provision of medium-term loans at terms that are 
extremely aggressive. I believe it is worthwhile for EXIM to 
consider how its medium-term program can continue to be 
enhanced while maintaining alignment with the Organization for 
Economic Cooperation and Development's Arrangement on 
Officially Supported Export Credits. Globally, I have observed 
an increase in large scale funding for infrastructure projects 
that is then tied to exports. Should I be confirmed, I look 
forward to learning more about the ways in which other 
countries are using export financing and how EXIM can best 
fulfill its mission of supporting U.S. jobs through exports. 
Should I be confirmed, I believe it will continue to be 
important to partner with like-minded countries to ensure 
companies are competing on the price and quality of the product 
rather than the terms of Government-backed financing.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                     FROM PAUL SHMOTOLOKHA

Q.1. What ideas do you have to improve EXIM's visibility and 
outreach to small businesses? If confirmed, what metrics would 
you use to measure the Bank's success in doing so?

A.1. In my personal experience, the EXIM network of outreach 
professionals performs an admirable job with their resources. I 
have personally been marketed at trade shows, and through in-
person visits to our company and via digital means. I cannot 
provide ideas to my fullest extent to improve EXIM's visibility 
and outreach to American small business without having the 
benefit of working internally with the staff. However, should I 
be confirmed I would set this goal as a priority and advocate 
for the proper allocation of resources to succeed. Based on my 
own experience, I believe that any strategy should include 
outreach to both the U.S. and international customer base. The 
education of EXIM product features and benefits should be 
amplified through cooperation with export promotion agencies 
such as U.S. Trade Development Agency and U.S. Foreign 
Commercial Service.
    Education needs to reach more small business owners, 
salespeople, and finance teams. All those stakeholders have to 
buy into the need to invest the time, energy, and resources in 
order to engage effectively. Most companies do a great job in 
marketing their products, but focusing on the customers' 
``why'' and linking that to EXIM's products and services 
increases the chance for success. In my experience, a focus on 
digital marketing can be the best multiplier to reach wide-
ranging customer base nationally and globally. I would also 
advocate that EXIM continue to enhance its efforts to work with 
community and regional banks as multipliers as they are closer 
to local businesses.
    Metrics development and measurement is an essential tool 
for achieving success, especially for specific initiatives or 
campaigns. Metrics should be linked to strategic plans and 
annual goal setting. Should I be confirmed, I would make it a 
priority to understand which, if any, Customer Relationship 
Management (CRM) platforms or tools are being used so that we 
can improve visibility of the customer among EXIM's units, 
measure organizational performance, and help staff gain key 
insights about which businesses could benefit from utilizing 
EXIM's financial tools. These platforms can also be used to 
make course corrections or adjustments without having to wait 
for lengthy research and reports. The power is at the keyboard 
and the data is the data.
    Without internal EXIM information available to me, based on 
my previous experience, I expect there are several metrics that 
could be used to measure the Bank's success in tracking its 
outreach and visibility to small businesses. These include: 
measurement from the source of the lead generation, lead 
assignment, qualifying leads from follow up and indication of 
interest, total applications submitted, total approved 
applications, total nonapproved applications (and reasons why), 
status of lead before closing, total number of transactions 
closed, reasons transactions are not closed, and customer 
surveys at the end of any successful or unsuccessful process. 
Should I be confirmed, I would also be interested in tracking 
the timeline from lead generation to close, and application 
submission to close. Having different metrics by product, size 
of company and approvals process, will help Bank staff assess 
where changes ought to be made. Average deal size, average 
number of employees per transaction or dollar deployed, 
analysis by product, specific market segment targets, 
geographic spread and reach, and many other customer oriented 
metrics can be added.
    Accurate metrics tracking can help EXIM ensure it is 
meeting its congressional mandate to support small business 
exports, could help identify areas where product improvements 
can be made, and could also be helpful in new lead generation 
(defined as new leads from existing accounts or new account 
leads).
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                    FROM ALLISON HERREN LEE

Q.1. I am pleased to be the sponsor of the Financial Stability 
Oversight Council Improvement Act of 2019, which would require 
FSOC to determine whether potential nonbank threats to 
financial stability could be better solved by allowing 
companies to work with their primary regulator or through the 
development of a risk reduction plan. The SEC is the only FSOC 
member that focuses on capital markets. In order to protect 
investor access to our markets, the SEC must guard against a 
blunt SIFI designation when other more appropriate methods of 
remediation are available.
    Do you agree that the SIFI designation process needs to be 
reformed to prevent unnecessary designations?

A.1. The Financial Oversight Stability Council was created in 
the aftermath of the 2008 financial crisis in part to help 
identify and reduce systemic risks confronting the financial 
system.
    I agree that the improper designation of a nonbank SIFI 
unnecessarily imposes heightened regulatory oversight without 
necessarily reducing systemic risk. It is the Chair of the 
Commission who acts as the voting member from the SEC on FSOC, 
and if confirmed, I would be interested in understanding his 
and others' views as to whether changes could be made to reduce 
any risk of an improper designation while continuing to 
adequately protect against systemic risk. I am open to 
considering all facts and data, and to hearing from and working 
with you, your staff, Members of this Committee and all 
relevant constituencies on this issue.

Q.2. Do you agree that it's important for FSOC to consult with 
primary regulators before voting on a SIFI designation?

A.2. In general, yes. It is likely that primary regulators will 
have significant information and expertise relevant to a SIFI 
determination. Moreover, it is my understanding that FSOC rules 
provide for such a consultation.

Q.3. Do you agree that addressing nonbank risk does not always 
have to include a SIFI designation?

A.3. A SIFI designation, and the consequences that flow 
therefrom, represent one method of addressing systemic risk in 
the financial system. Primary regulators overseeing nonbank 
institutions may also be in a position to implement certain 
changes that can address systemic risk.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
            SENATOR MENENDEZ FROM ALLISON HERREN LEE

Q.1. I worked to include the honest broker provision in the 
Wall Street Reform law, and Congress' clear intent was for the 
SEC to establish a uniform standard of conduct. However, the 
SEC's ``best interest'' proposal fails to establish a uniform 
standard of conduct for broker-dealers and investment advisers, 
and it puts the burden on the retail investors to understand 
the difference between brokers and investment advisers. 
Moreover, the SEC's own Investor Advisory Committee recommended 
in November that everyone--investment advisers and brokers--be 
held to a uniform standard.
    Do you believe the average retail investor understands the 
difference between brokers and investment advisers?

A.1. No. I agree with Chairman Clayton who stated ``it has long 
been recognized that many investors do not have a firm grasp of 
the important differences between [broker-dealers] and 
[investment advisers]--from differences in the variety of 
services that they offer and how investors pay for those 
services, to the regulatory frameworks that govern their 
relationship.''

Q.2. Do you believe retail investors should bear the burden of 
trying to decipher complex legal relationships to understand 
whether they are making good investment decisions?

A.2. No. I believe that both investors and registered entities 
deserve rules that clearly delineate the nature and extent of 
requirements regarding their relationship. Retail investors 
should receive a full, fair, and simple explanation of these 
requirements, including, among other items, how any differing 
standards compare to one another, so as to allow them to make 
well-informed choices.

Q.3. Do you believe the SEC can do more to encourage brokers to 
put retail investor's interest first?

A.3. Yes. In my view, there are approaches the SEC can consider 
to encourage brokers, where needed, to focus on ensuring that 
retail investors' interests are paramount. These can include, 
among others, working closely with FINRA in implementing and 
interpreting Regulation BI in a manner that optimizes the 
protection of retail investors, and focusing enforcement 
efforts through programs such as the Enforcement Division's 
Retail Strategy Task Force.

Q.4. In its post-mortem of the financial crisis, the Financial 
Crisis Inquiry Commission concluded that ``compensation 
structures were skewed all along the mortgage securitization 
chain, from people who originated mortgages to people on Wall 
Street who packaged them into securities.''
    What is your view on the impact of incentive-based 
compensation structures in the years leading up to the 
financial crisis?

A.4. In my view, compensation structures at financial 
institutions in the period leading up to the financial crisis 
in 2008 often incentivized and rewarded short-term results, 
with little accountability for long-term success. This 
encouraged the creation of excessive levels of risk that later 
proved damaging to these financial institutions and, in some 
cases, to the entire financial system.

Q.5. If confirmed as Commissioner, would you push the SEC to 
finish the incentive-based compensation rule required by Dodd-
Frank?

A.5. Yes. If confirmed, I would work with the Chairman, the 
other Commissioners, the staff and, where appropriate, other 
regulatory agencies to encourage completion of the Joint Agency 
Proposed Rule on Incentive-Based Compensation Arrangements.

Q.6. If so, what you think this rule should look like?

A.6. Given the pending rulemaking, I do not want to prejudge 
the final rule. That said, the areas I would want to consider 
closely in any final rule would include, among others (a) 
whether the rule is broad enough to cover the appropriate 
institutions, the appropriate persons within those 
institutions, and the appropriate types of compensation; (b) 
whether the rule is appropriately tiered and tailored between 
smaller and larger institutions; (c) whether restrictions on 
excessive compensation are adequate and clearly defined; (d) 
whether enhanced requirements at larger institutions are 
adequate with respect to areas such as downward adjustments, 
deferrals, forfeitures, clawbacks, and various other 
limitations; (e) whether the rule adequately addresses 
governance and compliance issues such as board oversight, 
control, policies, and recordkeeping.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                    FROM ALLISON HERREN LEE

Q.1. In an article published in 2016 in the Cornell Law Review, 
Professor Urska Velikonja called the SEC enforcement measures 
deeply flawed. She identified numerous problems, including 
double or triple counting of enforcement actions and defendants 
and counting tangential or follow on proceedings that do not 
meaningfully reflect a separate action, etc. Given your 
extensive experience at the SEC and background in enforcement, 
do you believe the SEC consistently follows the same policies 
and procedures with respect to enforcement statistic reporting, 
from year to year?

A.1. I believe that enforcement statistics should be gathered, 
analyzed, and reported in a consistent and transparent manner 
that provides a depth of information on the nature, extent, and 
success of enforcement activities. Such an approach supports 
well-informed internal assessments at the SEC, and equally 
important, public assessment and accountability. I have read 
Professor Velikonja's article on SEC enforcement statistics, 
and if confirmed, would look forward to hearing the staff's 
views and exploring the areas she has highlighted as 
potentially revealing inconsistencies, as well as considering 
more broadly whether changes that increase consistency should 
be made.

Q.2. Could the SEC could improve the quality, reliability, and 
consistency of its enforcement statistics?

A.2. Improvement in each of these areas merits careful 
attention and consideration. Identifying and understanding the 
nature of, and trends in, enforcement over time is critical to 
instilling investor confidence. Moreover, consistent and 
reliable data is necessary to support the public's confidence 
in regulators, and to aid Congress in its oversight 
responsibilities. If confirmed, I would look forward to hearing 
from the staff, you, your staff, Members of this Committee, and 
all interested constituencies on how improvements may be made 
to the quality, reliability, and constituency of SEC 
enforcement statistics.

Q.3. If confirmed, will you commit to looking closely at this 
issue and to the extent possible, work with the GAO--which is 
conducting a study on this issue at my request--to provide more 
transparency into enforcement statistic reporting?

A.3. Yes.

Q.4. As you know, on June 5, 2017, the Supreme Court in Kokesh 
v. Securities Exchange Commission (SEC) ruled that the SEC only 
has 5 years to bring disgorgement claims against bad actors to 
try to compensate harmed Main Street investors. The practical 
effect of this Supreme Court decision for retail investors who 
have been harmed in fraud, pump-and-dump schemes, and other 
malicious activity is significant. The SEC, in its 2018 annual 
enforcement report, said that with respect to matters already 
filed by the Commission, ``the court's ruling in Kokesh may 
cause the Commission to forgo up to approximately $900 million 
in disgorgement, of which a substantial amount likely could 
have been returned to retail investors.'' As you know, I have a 
bill with Senator Kennedy that would address this problem by 
giving the SEC new authority to seek restitution for harmed 
investors, subject to a statute of limitations of 10 years.
    I understand that you can't comment directly on the 
legislation, but I am interested to get your views--as a former 
enforcement attorney--regarding the impact of the Kokesh case 
on the Commission's ability to effectively carry out its 
mission to protect investors?

A.4. The ruling in Kokesh has significantly diminished the 
SEC's ability to recover and return funds to investors. The 
$900 million in forgone disgorgement is money left in the hands 
of fraudsters that will never be returned to their victims. By 
its nature, fraud is often well concealed for many years, thus 
under this ruling, some serious misconduct will go unaddressed. 
For example, while at the SEC, I helped bring a case against a 
broker who had been paying secret cash kickbacks to a State 
treasurer in exchange for business over a 6-year period. The 
misconduct was by its nature hidden, and not uncovered until 
years after the scheme ended.
    Accordingly, most of the misconduct had occurred more than 
5 years prior. The SEC was able to obtain a judgment requiring 
the broker to disgorge all of the profits from kickback scheme, 
but likely could not have done so had it been subject to a 5-
year statute.
    In addition, during my time in the Enforcement Division, I 
spent many hours meeting with and talking to the victims of 
fraud--people who were tricked into emptying their retirement 
accounts, maxing out their credit cards and even taking out a 
second mortgage on their homes on the false promise of high 
returns. I once spoke at length with a couple, a retired 
teacher and a retired insurance agent, who had to take jobs in 
a fast food restaurant just to keep a roof over their heads 
after being defrauded in a ponzi scheme. The statistics on 
foregone disgorgement are striking, and the real-world stories 
behind those numbers are equally jarring.

Q.5. One of my top SEC priorities is improving public 
disclosures around human capital management. I've had a good 
dialogue with the Chairman on this issue, specifically around 
improving Reg S-K disclosures to require public companies to 
provide more qualitative and quantitative information regarding 
their human capital management policies and practices.
    Do you believe there's value to be gained by investors to 
have additional information on human capital management and 
practices at reporting companies?

A.5. Yes. Increasingly, the value of public companies is driven 
by the nature, quality, and skill of their workforces. 
Understanding human capital management policies and practices 
can thus provide an important basis for investors to assess the 
nature of, and risks associated with, a company's business. 
Indeed, investors have indicated strong interest in additional 
information regarding human capital. As Chairman Clayton has 
noted, ``the historical approach of disclosing only the costs 
of compensation and benefits often is not enough to fully 
understand the value and impact of human capital on the 
performance and future prospects of an organization.'' In 
addition, Regulation S-K contains no specific obligation to 
disclose this type of information other than the number of 
employees at a company. While periodic reports also must 
include information deemed material to investors, this 
requirement generally has not led to human capital disclosures 
that are sufficiently robust, consistent, or comparable.

Q.6. If confirmed, would you push for the SEC to dedicate 
resources to explore this topic or otherwise undertake a 
rulemaking?

A.6. Yes, if confirmed, I will work with the Chairman, the 
other Commissioners, and the staff to identify methods of 
improving the quality, extent, and comparability of human 
capital disclosures, including potential rulemaking.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
                    FROM ALLISON HERREN LEE

Q.1. On the June 5, 2019, the Securities and Exchange 
Commission (SEC) voted to adopt new rules on standards of 
conduct for investment advisers and broker dealers.
    How would you have voted on this rule package had you been 
a Commissioner on the SEC?
    Why?

A.1. I have not had the benefit of discussions with the 
Chairman, other Commissioners, or staff on the choices made in 
this rule package, or their views and analysis of the 
voluminous comments filed. That said, based on my reading of 
the final rule, I do have serious concerns.
    They include, among others, the adequacy of the standard 
for broker-dealers. I am concerned that the new, but undefined, 
``best interest'' standard fails to establish a higher standard 
of conduct than that which was required of broker-dealers 
before the rule. The reason for the rulemaking was to improve 
on the prior standard which experience had shown often led to 
increased costs to retail investors. In my view, and depending 
on how the new rule is interpreted and implemented, it appears 
that the undefined standard may not improve the prior standard 
to a measurable degree.
    My concerns also include the Commission interpretation 
related to the standards applicable to investment advisers, and 
specifically the removal of proposed language that interpreted 
the duty of loyalty as requiring investment advisers to put 
their client's interest first. In addition, I am concerned that 
Form CRS may fail to adequately inform investors regarding all 
relevant conflicts, and lacks comparative information regarding 
the types of choices investors have. The information on Form 
CRS should provide relevant, meaningful, and understandable 
information to investors at a critical juncture in their 
decision-making process.

Q.2. In a departure from the proposed rule, which described 
current law as ``require[ing] an investment adviser to put its 
client's interest first,'' the final rule said an investment 
adviser ``must not place its own interest ahead of its client's 
interest.'' Do you understand there to be a meaningful 
difference between those two standards? Which do you think 
better describes the standards of conduct in place before the 
new rule was finalized on June 5?

A.2. I am concerned that the changed language could be read as 
meaningfully different and used by some to justify practices 
that are not in the best interest of investors.
    As to the standard in place prior to the final rule 
package, in my view, the state of the law, as well as its 
interpretation by many, supported the concept that investment 
adviser fiduciaries must put their clients' interests first. If 
confirmed, I would look forward to obtaining a better 
understanding of the staff's views regarding the changed 
language, including how the SEC will enforce compliance with 
the standard.

Q.3. Based on your understanding of the new standards of 
conduct for broker-dealers, are there any instances that would 
have been permissible under the previous standards that are now 
unlawful?

A.3. As suggested by the concerns expressed in your July 20, 
2018, letter to FINRA, the interpretation and enforcement of 
the new rule will be a pivotal factor in achieving a higher 
standard for broker-dealers. Based on my reading of the rule, I 
believe there are areas where the new rule could accommodate 
such an outcome, including, among others, precluding some types 
of sales contests, requiring mitigation of certain conflicts, 
and requiring certain disclosures related to conflicts. If 
confirmed, I would support efforts to interpret and enforce the 
new rule in a manner that would preclude certain types of 
conduct that were previously permitted under the suitability 
standard.

Q.4. The SEC uses fines to punish companies for violating the 
law and deter future bad behavior. According to a recent report 
in the Wall Street Journal, the SEC had only collected 55 
percent of fines assessed from 2013-2018 and 60 percent of 
fines for the previous 5 years. Apparently ``unpaid fines are 
written off as uncollectable after 2 years.''
    How would you ensure that fines are collected from people 
of companies that have violated the law?

A.4. I share the concerns indicated by your question. 
Maximizing the collection of disgorgement and penalties at the 
SEC is essential. This is particularly important because the 
funds collected come straight out of the hands of bad actors, 
and a substantial amount can go straight to harmed investors. 
Few endeavors could be more worthwhile in terms of fairness, 
accountability, and deterrence. If confirmed, I would look 
forward to working with the Chairman, the other Commissioners, 
and the staff to better understand what factors contribute to 
difficulties in collections and to develop approaches that 
could increase the collection rate. Staffing levels and 
expertise in the collections area must meet current needs. 
Collection difficulties also arise when, as can frequently 
occur, fraudsters hide or dissipate assets. The use, where 
feasible, of asset freezes, contempt motions, and 
whistleblowers may help increase the availability of funds to 
be collected after a judgment has been obtained.

Q.5. Who at the SEC is responsible for collecting delinquent 
fines?

A.5. My understanding is that there is a specific group of 
attorneys and staff tasked with the job of collecting and 
disbursing, either to investors or to the U.S. Treasury, 
penalties and disgorgement from enforcement matters. 
Ultimately, however, it is the Commission that is responsible 
for maximizing the collection of these funds.

Q.6. What tools does the SEC have to pursue delinquent fines?

A.6. It is my understanding that the SEC can and does institute 
legal proceedings to seek property liens against, and seize 
certain assets of, those owing disgorgement and/or penalties. 
If confirmed, I would look forward to learning more about 
additional specific tools and approaches that can be taken. As 
fraudsters often dissipate or hide assets, there may be steps 
that staff can take that could help reduce collections issues. 
I know, for example, that SEC Enforcement Division staff works 
hard to seek, where appropriate, orders freezing ill-gotten 
gains in the early stages of an investigation, but courts 
rightly require a high standard of proof in order to grant such 
requests. Careful monitoring of asset freezes that are granted, 
and seeking contempt motions where violations occur could, in 
some cases, further prevent dissipation. In addition, 
whistleblowers can often provide assistance in preventing asset 
dissipation and locating hidden or improperly transferred 
assets. If confirmed, I would work with the Chairman to ensure 
that staff has the resources and support they need to maximize 
collections.

Q.7. Are there any additional authorities or resources that 
would be helpful for the SEC to have in pursuing companies that 
owe fines?

A.7. If confirmed, I would look forward to gaining a deeper 
understanding from the staff as to whether greater resource 
allocation and/or specialized staff training could be of help. 
I would welcome the opportunity to work with you, your staff, 
and Members of this Committee to identify any additional 
authorities or resources that may assist in the collections 
effort.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
          SENATOR CORTEZ MASTO FROM ALLISON HERREN LEE

Q.1. Last week, Stephen Brandon Anderson, who previously ran 
River Source Wealth Management LLC, agreed to pay about 
$405,000 in disgorgement and another $100,000 in civil fines. 
The SEC has a critical role to holding people accountable who 
cheat or lie to investors. I'm worried about recent press 
articles that only a bit over half of the fines assessed in 
settlements or court judgments is collected by the SEC. Why do 
you think the SEC has had trouble collecting fines?

A.1. I am aware of the recent press articles, and I share your 
concerns. Maximizing the collection of disgorgement and 
penalties at the SEC is essential. This is particularly 
important because the funds collected come straight out of the 
hands of bad actors, and a substantial amount can go straight 
to harmed investors. Few endeavors could be more worthwhile in 
terms of fairness, accountability, and deterrence. As a former 
enforcement attorney, I know that collection difficulties can 
arise when, as can frequently occur, fraudsters hide or 
dissipate assets. And I would want to ensure that SEC staffing 
levels and expertise in the collections area meet current 
needs. If confirmed, I would look forward to working with the 
Chairman, the other Commissioners, and the staff to better 
understand what factors contribute to difficulties in 
collections and to develop approaches that could increase the 
collection rate.

Q.2. If you are confirmed as an SEC Commissioner, what can you 
do to ensure fines assessed are fines collected and paid to 
victims of fraudsters?

A.2. If confirmed, I would look forward to gaining a deeper 
understanding as to what specific factors contribute to 
collection difficulties so that solutions can be well-tailored 
toward improvement. For example, I would be interested in 
understanding whether greater resource allocation and/or 
specialized staff training could be of help. Further, 
fraudsters often dissipate or hide assets so there may be steps 
that staff can take that could help reduce collections issues. 
I know, for example, that SEC Enforcement Division staff works 
hard to seek, where appropriate, orders freezing ill-gotten 
gains in the early stages of an investigation, but courts 
rightly require a high standard of proof in order to grant such 
requests. Careful monitoring of asset freezes that are granted, 
and seeking contempt motions where violations occur could, in 
some cases, further prevent dissipation. In addition, 
whistleblowers can often provide assistance in preventing asset 
dissipation and locating hidden or improperly transferred 
assets. If confirmed, I would work with the Chairman to ensure 
that staff has the resources and support they need to maximize 
collections.

Q.3. Do you think the newly enacted Regulation Best Interest 
appropriately protects retail investors from being overcharged 
by their financial advisors? Would you support a fiduciary 
standard?

A.3. I have not had the benefit of discussions with the 
Chairman, other Commissioners, or staff on the choices made in 
Regulation BI, or their views and analysis of the voluminous 
comments filed. That said, based on my reading of the final 
rule, I do have serious concerns. They include, among others, 
the adequacy of the standard for broker-dealers. I am concerned 
that the new, but undefined, ``best interest'' standard may 
fail to establish a higher standard of conduct than that which 
was required of broker-dealers before the rule. The reason for 
the rulemaking was to improve on the prior standard which 
experience had shown often led to increased costs to retail 
investors. In my view, and depending on how the new rule is 
interpreted and implemented, it appears that the undefined 
standard may not improve the prior standard to a measurable 
degree.
    A fiduciary standard, on the other hand, could have relied 
on longstanding legal precedent that traditionally emphasizes 
placing the interests of investors over those of fiduciaries. 
Such a standard would need to be carefully considered, weighing 
all costs and all benefits, but could lead to better, less 
costly and less conflicted financial advice for retail 
investors.

Q.4. The hiring freeze at the SEC has led to a 10 percent 
reduction in staff and an inadequate number of administrative 
judges. What do you recommend to ensure adequate staffing at 
the SEC?

A.4. Although an agency's efficiency and use of assets cannot 
be judged solely on the basis of a headcount, I am nonetheless 
concerned that the SEC's resource requests and allocations keep 
pace with the vast complexity, technological advances and 
resources in the specific markets it oversees. Moreover, a 
hiring freeze can subject the agency to arbitrary changes in 
resource allocations overall, and between and among divisions, 
that flow from random attrition. While I am pleased to see that 
the Congress' recent funding of the SEC allowed it to lift the 
hiring freeze, if confirmed, I would look forward to obtaining 
a better understanding as to how the budget requests are 
developed and supported, and would support efforts to ensure 
that any decisions regarding such requests are based on a 
careful analysis of the facts related to specific needs in each 
division.

Q.5. Are you concerned about the decline in SEC enforcement 
actions, the lower monetary settlements and low average 
settlement amount in the past 2 years? If so, what will you do 
to ensure bad actors are held accountable?

A.5. An effective enforcement program requires both a 
sufficient number, as well as sufficient quality and scope, of 
actions. Effective enforcement is critical to the SEC's mission 
because it instills investor confidence, ensures 
accountability, and deters misconduct. During my time working 
in Enforcement at the SEC, I spent many hours meeting with and 
talking to the victims of fraud--people who were tricked into 
emptying their retirement accounts, maxing out their credit 
cards, and even taking out a second mortgage on their homes on 
the false promise of high returns. In my view, the broader goal 
of compliance with the securities laws, and thus deterring 
potential bad actors, is critical. Individual accountability 
for misconduct is an important deterrent, and should be 
carefully considered and actively sought, particularly in cases 
involving fraud. This can involve a number of approaches 
including, among others: (1) efforts to work closely with 
cooperating companies to identify and gather evidence relating 
to culpable individuals; (2) working to sustain and, where 
possible, improve the whistleblower program which can often be 
a vital component in uncovering evidence of individual 
culpability; (3) shifting resources toward litigation in 
certain cases when a settlement with a culpable individual 
cannot be reached; and (4) in certain cases, accepting greater 
litigation risk.
              Additional Material Supplied for the Record
 LETTER SUBMITTED BY SENATOR BOB DOLE IN SUPPORT OF THOMAS PETER FEDDO
 
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  LETTER SUBMITTED BY THE INDEPENDENT COMMUNITY BANKERS OF AMERICA IN 
                       SUPPORT OF MICHELLE BOWMAN
                       
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