    [Senate Hearing 117-343]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 117-343

     NOMINATIONS OF MICHAEL S. BARR, JAIME E. LIZARRAGA, AND MARK TOSHIRO
                                     UYEDA

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

                                    HEARING

                                   BEFORE THE

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

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                NOMINATIONS OF:

      MICHAEL S. BARR, OF MICHIGAN, TO BE A MEMBER AND VICE CHAIRMAN FOR
      SUPERVISION OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
                                   __________

        JAIME E. LIZARRAGA, OF VIRGINIA, TO BE A MEMBER, SECURITIES AND
                              EXCHANGE COMMISSION
                                   __________

       MARK TOSHIRO UYEDA, OF CALIFORNIA, TO BE A MEMBER, SECURITIES AND
                              EXCHANGE COMMISSION
                                   __________

                                  MAY 19, 2022
                                   __________

      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

    48-337 PDF                 WASHINGTON : 2022

                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                         SHERROD BROWN, Ohio, Chairman

    JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
    ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
    JON TESTER, Montana                  MIKE CRAPO, Idaho
    MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
    ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
    CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
    CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
    TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
    KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
    JON OSSOFF, Georgia                  JERRY MORAN, Kansas
    RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                         STEVE DAINES, Montana

                         Laura Swanson, Staff Director

                     Brad Grantz, Republican Staff Director

                           Elisha Tuku, Chief Counsel

                     Dan Sullivan, Republican Chief Counsel

                          Cameron Ricker, Chief Clerk

                          Shelvin Simmons, IT Director

                            Pat Lally, Hearing Clerk

                                      (ii)

                                C O N T E N T S

                                  ----------

                             THURSDAY, MAY 19, 2022

                                                                       Page
    Opening statement of Senator Tester..............................     1
        Prepared statement...........................................    41

    Opening statements, comments, or prepared statements of:
        Senator Toomey...............................................     3
            Prepared statement.......................................    42

                                   WITNESSES

    Nancy Pelosi, Speaker of the U.S. House of Representatives.......     5
    Debbie Stabenow, a U.S. Senator from the State of Michigan.......     6
    Gary Peters, a U.S. Senator from the State of Michigan...........     7

                                    NOMINEES

    Michael S. Barr, of Michigan, to be a Member and Vice Chairman
      for Supervision of the Board of Governors of the Federal
      Reserve System.................................................     9
        Prepared statement...........................................    43
        Biographical sketch of nominee...............................    45
        Responses to written questions of:
            Chairman Brown...........................................   115
            Senator Toomey...........................................   117
            Senator Menendez.........................................   130
            Senator Tester...........................................   131
            Senator Warnock..........................................   132
            Senator Crapo............................................   133
            Senator Scott............................................   137
    Jaime E. Lizarraga, of Virginia, to be a Member, Securities and
      Exchange Commission............................................    11
        Prepared statement...........................................    90
        Biographical sketch of nominee...............................    92
        Responses to written questions...............................    57
            Chairman Brown...........................................   138
            Senator Menendez.........................................   141
            Senator Tester...........................................   142
            Senator Warnock..........................................   143
            Senator Scott............................................   144
            Senator Hagerty..........................................   144
            Senator Moran............................................   145
    Mark Toshiro Uyeda, of California, to be a Member, Securities and
      Exchange Commission............................................    12
        Prepared statement...........................................   102
        Biographical sketch of nominee...............................   103
        Responses to written questions...............................    57
            Chairman Brown...........................................   146
            Senator Menendez.........................................   154
            Senator Tester...........................................   154
            Senator Warnock..........................................   156
            Senator Scott............................................   156

                  Additional Material Supplied for the Record

    Letters submitted in support of Nominee Mark Toshiro Uyeda.......   158
    Letter submitted by SIFMA and BPI................................   171

                                     (iii)

     NOMINATIONS OF MICHAEL S. BARR, JAIME E. LIZARRAGA, AND MARK TOSHIRO
                                     UYEDA

                                  ----------

                             THURSDAY, MAY 19, 2022

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Committee met at 10 a.m., via Webex and in room 538,
    Dirksen Senate Office Building, the Hon. Jon Tester presiding.

                OPENING STATEMENT OF SENATOR JON TESTER

        Senator Tester. Good morning, everybody. This is a day that
    will live in infamy because I am Chairman of the Banking
    Committee, but only temporarily, OK. Only temporarily.
        Today's hearing is in a hybrid format. Our witnesses are in
    person, but Members have the option to appear both in person or
    virtually.
        The Committee meets today to consider the nominations of
    three important Presidential nominees. First, the Honorable
    Michael Barr to be a Member and Vice Chairman for Supervision
    of the Board of Governors of the Federal Reserve; next, Mr.
    Jaime Lizarraga to be a Member of the Securities and Exchange
    Commission; and finally, Mr. Mark Uyeda to be a Member of the
    Securities and Exchange Commission.
        We thank the nominees for appearing here today, and welcome
    their families and their friends who are in attendance as well
    as those watching at home.
        I also want to extend a warm welcome to Speaker Pelosi who
    is going to be here, if not already here, to introduce Mr.
    Lizarraga and Senators Stabenow and Peters, our great Michigan
    Senators, will introduce Mr. Barr. And my friend, Senator
    Toomey, will introduce Mr. Uyeda.
        To our nominees, I want to thank you for your willingness
    to serve in these important roles.
        We are here today to consider three nominees who, if
    confirmed, will have a lasting impact on our economy. We know
    who powers our economy. It is small businesses, folks on Main
    Street who create jobs and prosperity for our communities. And
    it is workers. It is our job as Members of this esteemed body
    to support an economy that actually rewards their work.
        The nominees before the Committee today will play important
    roles in our efforts to support workers, small businesses, and
    American families.
        Michael Barr is the President's nominee to be Vice Chair
    for Supervision. Mr. Barr is a well-respected expert on
    financial regulation who currently serves as the dean for
    public policy and a professor of law at the University of
    Michigan. From 2009 to 2010, Mr. Barr served as Assistant
    Secretary for Financial Institutions at the Department of
    Treasury, where he played a key role in helping the Obama
    administration work with Congress to craft and enact the Dodd-
    Frank Act.
        Mr. Barr previously served at the White House, and earlier
    in his career, in the Treasury and State Departments under
    President Clinton.
        Mr. Barr, I want to thank you for your willingness to serve
    our country again.
        Mr. Lizarraga and Mr. Uyeda have been nominated by the
    President to be Commissioners at the Securities and Exchange
    Commission. If confirmed, they will join the SEC at a critical
    time.
        Jaime Lizarraga has worked on financial services policy in
    Congress and played a key role in some of the most impactful
    pieces of capital markets legislation passed by Congress to
    support working families and our country's middle class. The
    son of Mexican immigrants, he understands the important role
    the SEC plays in protecting consumers.
        He currently serves as a senior adviser to Speaker Pelosi,
    who is here today to support his nomination. Prior to joining
    the Speaker's office, Mr. Lizarraga served in senior level
    positions on the House Financial Service Committee.
        Mr. Lizarraga also served at the Treasury Department, as
    well as the SEC, where he worked as the Deputy Director of
    Legislative Affairs.
        Mr. Lizarraga, we want to thank you for your willingness to
    serve our country.
        Mr. Uyeda has served at the SEC since 2006, and is
    currently working on Ranking Member Toomey's staff helping our
    Committee navigate some of the greatest financial challenges in
    recent American history. At the SEC, Mr. Uyeda has served as
    counsel for Commissioners Paul Atkins and Michael Piwowar. He
    also served as a Senior Adviser to my good friend, Jay Clayton.
        Earlier in his career, Mr. Uyeda worked in private law
    practice, as well as for the California Department of
    Corporations.
        Thank you, Mr. Uyeda, for your willingness to continue to
    serve.
        Look folks, these positions are really, really, really
    important. If confirmed, you all will be on the front lines at
    a critical point in our Nation's history. We are facing
    challenges that are unique, they are unprecedented, and we need
    folks serving our country who will always put the needs of our
    country before any personal or political ideology.
        Hopefully the worst of the pandemic is behind us, but our
    economy is not where it needs to be in terms of its recovery.
    Families are seeing higher costs from the gas pump to the
    grocery store, and while unemployment is at a record low, small
    businesses in Montana and across the country are having trouble
    finding and keeping workers.
        This Committee, under the leadership of Chairman Brown and
    Ranking Member Toomey, has confirmed a host of folks to
    critical positions charged with guiding the economy back from
    the brink. If confirmed, the three of you, that are here today,
    will immediately join in that work.
        But before these folks can do their jobs, we have to do
    ours. Our institutions have to be fully staffed if they are
    going to do their jobs and meet the challenges of our country.
        We have a lot more work to do here to support workers, to
    support small businesses, to lower costs for working families,
    to increase transparency in the marketplace and to hold bad
    actors accountable. So let us get to it.
        Ranking Member Toomey, you are now recognized for your
    opening statement.

             OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

        Senator Toomey. Thank you, Mr. Chairman.
        We are here to consider three nominations: Michael Barr to
    be Fed Vice Chair for Supervision, and Mark Uyeda and Jaime
    Lizarraga to be SEC Commissioners. These nominations remind us
    of the importance of financial regulators abiding by their
    respective statutory mandates. This principle really should be
    nonpartisan.
        A fundamental aspect of a properly functioning democratic
    society is that important public policy decisions should be
    made by elected, accountable representatives. Otherwise, what
    is the point of the elections?
        Unfortunately, I am deeply concerned that financial
    regulators, including the Fed and the SEC, are increasingly
    straying into contentious political issues wholly unrelated to
    their mandates and expertise. These include issues like what to
    do about global warming, social justice, and even education
    policy. No doubt, these are important issues, but they are
    wholly unrelated to the limited statutory mandates and
    expertise of financial regulators.
        The Fed, for instance, has been weighing in on every one of
    these contentious issues. Some intend to use the Fed's expected
    climate scenario analysis to steer capital away from carbon-
    intensive industries.
        All 12 of the reserve banks have sponsored a ``Racism in
    the Economy'' series where invited speakers advocated
    particularly politically controversial ideas, including race-
    based reparations and defunding the police. And the Minneapolis
    Fed has been actively lobbying to change Minnesota's
    constitution on the issue of K-12 education.
        Does anyone truly think these activities are within the
    Fed's statutory mandates? Of course not.
        In February, we held a hearing to consider Sarah Raskin's
    nomination to be the Fed Vice Chair for Supervision. At that
    hearing, I cautioned that the hearing was not just about
    vetting Ms. Raskin. I noted that it was a referendum on the
    independence of the Fed in the face of pressure from some on
    the left who wanted to use the central bank to allocate capital
    to address global warming.
        Addressing contentious issues like global warming requires
    political decisions involving tradeoffs, like how expensive
    should credit be for oil drillers in order to make gas more
    scarce and costlier for motorists? And if we limit domestic oil
    and gas production, causing energy prices to rise and consumers
    to pay more, how much more is appropriate?
        In a democratic society, those tradeoffs must be made by
    elected representatives who are accountable to the American
    people, not unelected central bankers. Ms. Raskin's prior
    advocacy that unelected financial regulators should use their
    powers to address global warming led to the Senate's bipartisan
    rejection of her nomination. That rejection sends a powerful
    message to Fed nominees, including Professor Barr, and that is
    that all Fed Governors must commit to not exceed the Fed's
    limited statutory mandates and by doing so help to ensure the
    continuing independence of the Fed.
        The need for a Fed that is focused on its mandates is
    especially critical with inflation at a 40-year high. Even
    though wages are rising, prices are rising much faster, and
    that is causing workers, especially lower-income workers, to
    fall further and further behind.
        I hope Professor Barr will acknowledge today that inflation
    is severe and commit to doing ``whatever it takes'' to bring
    inflation back down.
        Professor Barr certainly has an impressive background and
    relevant experience to serve as the Fed Vice Chair for
    Supervision. However, some of his previous work raises some
    concerns and questions about his views on financial regulation.
        Professor Barr strongly opposed the bipartisan S. 2155 bill
    that Senators Tester and Warner helped to craft, which merely
    enacted modest and sensible reforms to Dodd-Frank. He has also
    argued that ``climate change presents severe long-term risks to
    the economy and financial stability that must be urgently
    addressed today.'' As I have discussed, there is no systemic
    risk to the banking system posed by the gradual changes in the
    Earth's average temperature.
        I will be interested in hearing Professor Barr describe the
    actions he believes the Fed should take to address these
    supposed risks.
        Keeping financial regulators apolitical and independent is
    as important now as it has ever been. To my Democratic
    colleagues who favor using financial regulators to address
    contentious political issues, I ask, how would you feel about a
    future Republican administration, under the pretense of
    ``financial stability'' risk, using the Fed to allocate capital
    toward maybe increased defense spending, or financing a border
    wall, or offshore oil development?
        Once the precedent is set, the potential for further abuse,
    by both political parties, is limitless.
        In addition to Professor Barr, today we will also hear from
    two nominees for the SEC. Mr. Lizarraga has worked on financial
    services issues on Capitol Hill for many, many years. I commend
    him for his longstanding commitment to public service.
        And, in a few moments, I will introduce Mr. Uyeda, who is
    exceptionally well qualified to serve as an SEC Commissioner. I
    look forward to hearing from all three of our nominees.
        Senator Tester. Thank you, Senator Toomey.
        We will now have the introductions of today's nominees.
    First, Speaker Pelosi, it is an honor to have you in front of
    the Senate Banking Committee, and you may introduce Mr.
    Lizarraga.

        STATEMENT OF NANCY PELOSI, SPEAKER OF THE U.S. HOUSE OF
                            REPRESENTATIVES

        Ms. Pelosi. Good morning, Mr. Chairman. Good morning,
    Ranking Member. I have great respect for the work of this
    Committee, having served on the Banking Committee when it was
    called the Banking Committee, before it became Financial
    Services in the House, Banking, Housing, and Urban Affairs. I
    take great pride in the fact that Mr. Toomey and Sherrod Brown
    both came from the House of Representatives and now serve on
    this great Committee. And thank you, Mr. Tester, Senator
    Tester, for your leadership. I congratulate you and Mr. Moran,
    Senator Moran, for your announcement the other day for our
    veterans. The bipartisan nature of it is pretty exhilarating.
        Today I here, as has been mentioned, with the greatest,
    again, official respect for the work of this Committee, and it
    is my privilege to introduce a devoted champion of working
    families, a respected expert on financial services, and a
    lifelong public servant, Jaime Lizarraga. He has served in my
    office, the Office of the House Speaker and Leader for nearly
    15 years, and for a long time as the highest senior advisor.
        Every single day his brilliant, strategic mind, wide-
    ranging expertise, and unending compassion have been central to
    much of the work of the Congress, and if confirmed as a
    Commissioner he will be an invaluable asset to the Securities
    and Exchange Commission and its independent work.
        One of the most important roles of the SEC is to secure
    that the policies we enact in Congress protect consumers in
    their everyday lives. Jaime is uniquely positioned to succeed
    in this task, understanding how to transform legislation into
    implementation, as was mentioned by Senator Tester, having
    served on House Financial Services Committee, the Treasury
    Department, and as a staffer at the SEC.
        As Speaker, it has been my privilege to witnessed firsthand
    his masterful leadership. Because of his immense talent and
    vast knowledge, his portfolio has grown more expansive in the
    Speaker's office as he played an integral role in crafting and
    enacting some of the most consequential economic legislation in
    a generation.
        There are many things to say about him but one of them was
    the troubled Asset Relief Program that we worked in a
    bipartisan way with the Bush administration on, the Dodd-Frank
    reform, the Financial Crisis Inquiry Commission, restructuring
    Puerto Rico's debt and reforming our immigration system, among
    other things, and multiple relief packages that we worked, in
    large measure, in a bipartisan way to advance.
        And so with that I again just say that Jaime is known and
    adored by all as a family man. He comes here today strengthened
    and inspired by the love of his family. The son of immigrants
    from Mexico, as you mentioned, Senator Tester, he has never
    forgotten his parents' hard work and sacrifices to give him and
    his sister a brighter future. His story is the story of the
    American dream. His parents, Esther and Enrique, and his
    sister, Maria Esther, are beaming with pride as they watch this
    hearing from home in California. And today Jaime is joined this
    morning by his loving wife of 22 years, Kelly, his darling
    children, Victoria, Diego, Elena, Samuel, and Alexandra, and
    his dear mother-in-law, Paula.
        While he would be deeply missed by Members of Congress,
    this is a bittersweet moment for me, and he will be missed by
    our colleagues who depend on him. If confirmed, Jaime would be
    a powerful voice for families like his own at the SEC.
        Thank you again for the opportunity to appear before you
    and to introduce the nominee for SEC Commission, Jaime
    Lizarraga. I do so with great pride and confidence that he will
    do a great job, and I thank you for your leadership, all of
    you, and for this opportunity to be here today.
        Thank you, Mr. Chairman.
        Senator Tester. Madam Speaker, we are honored with your
    presence and we thank you for that introduction, and please
    know you are certainly welcome to stay for the entire hearing
    if you are not too busy.
        [Laughter.]
        Ms. Pelosi. I would like to do that, except that we have
    the Prime Minister of Sweden and the President of Norway here
    to talk about their entry into NATO. Only that would take me
    away from this important hearing.
        Senator Tester. We will give you that excuse. Thank you,
    Madam Speaker.
        Ms. Pelosi. Thank you.
        Senator Tester. Next up we have two Senators from another
    great M State, the great State of Michigan, to introduce Mr.
    Barr. Senator Stabenow.

    STATEMENT OF DEBBIE STABENOW, A U.S. SENATOR FROM THE STATE OF
                                MICHIGAN

        Senator Stabenow. Well good morning, and Mr. Chairman, I
    was thinking the last time we were together in a committee room
    I was chairing the Agriculture Committee and you were
    testifying about really important legislation. So it is great
    to be back with you and Ranking Member Toomey and the entire
    Committee. I appreciate the opportunity to be here also with my
    partner from Michigan in the Senate, Senator Peters.
        And I am really honored today to introduce Michael Barr, a
    fellow Michigander whom President Biden nominated to serve as
    Vice Chair for the Supervision of the Federal Reserve. I have
    known Michael for many years. He is exactly the person we need
    at the Federal Reserve as our Nation recovers from the pandemic
    and rebuilds for the future.
        Professor Barr has stellar credentials. He is currently
    dean of the Gerald R. Ford School of Public Policy at the
    University of Michigan. You would think that would keep him
    busy enough but he is also a Frank Murphy Collegiate Professor
    of Public Policy, Roy F. and Jean Humphrey Proffitt Professor
    of Law at the University of Michigan Law School, and the
    founder and faculty director of the University of Michigan
    Center on Finance, Law, and Policy.
        He has also taught financial regulation and international
    finance. He cofounded the International Transactions Clinic and
    cofounded the Detroit Neighborhood Entrepreneurs Project, which
    is a wonderful program that has helped launch more than 115
    small businesses in Michigan, and primarily owned by women. And
    so it is exciting to see what is happening.
        Giving small businesses and families the tools they need to
    succeed really is nothing new for Michael Barr. His entire
    career has been focused on protecting consumers and building an
    economy that helps our entire Nation thrive.
        And he is no stranger to the Senate, having previously been
    confirmed on a bipartisan basis during the Obama
    administration, and we so appreciated his service at that time.
    He played an important role in creating the Consumer Financial
    Protection Bureau and was a key architect of Dodd-Frank.
        Professor Barr deeply understands how the 2008 financial
    crisis hurt workers and families and businesses and
    communities, particularly in Michigan. I am confident that in
    this role he will work day and night to ensure that it never
    happens again.
        It is my honor to introduce Professor Barr, and I urge the
    Members of the Committee to vote yes on this important
    nomination. Thank you.
        Senator Tester. Thank you, Senator Stabenow. We appreciate
    the introduction and we appreciate your leadership. Thanks for
    being in front of the Banking Committee. Senator Peters.

      STATEMENT OF GARY PETERS, A U.S. SENATOR FROM THE STATE OF
                                MICHIGAN

        Senator Peters. Thank you, Chairman Tester and Ranking
    Member Toomey. It is wonderful to be here before your
    Committee. And I join my colleague, Senator Stabenow, in
    introducing Professor Michael Barr to the Committee, and I
    think it shows how qualified he is, how we know him as an
    individual, and the strong support that we have for him in this
    nomination.
        There is no question Federal Reserve Governors are meant to
    lead an important agency with a long tradition of nonpartisan
    decisionmaking based on simply what is best for the economy. It
    is imperative that any nominee to join the Federal Reserve is
    able to make sound decisions based on evidence, without
    partisan bias, and the best interests of the American people.
        Thankfully, Michigan's own Michael Barr has the experience
    and the leadership needed to help strengthen our economy,
    support our families across our State and our country, and it
    is without reservations that I am proud to recommend him as
    President Biden's nominee to serve as Vice Chair of Supervision
    at the Federal Reserve.
        I am confident that Professor Barr has the professional
    qualifications, the independence, and the knowledge to protect
    the stability of our economy, to make him worthy of the
    Senate's favorable consideration.
        As Senator Stabenow mentioned, Professor Barr has a rich
    history of professional service, serving in both the Clinton
    and Obama administrations in a variety of different roles. One
    that I worked with him in particular with personally was in
    2009, when President Obama was trying to navigate out of the
    Great Recession. He nominated Professor Barr to serve as the
    Department of Treasury's Assistant Secretary for Financial
    Institutions. He was unanimously confirmed by this body to
    serve in that position. And as Assistant Secretary for
    Financial Institutions Professor Barr was responsible for
    developing and coordinating Treasury policies on legislative
    and regulatory affairs affecting financial institutions.
        Most notably, he was the key architect of the Dodd-Frank
    Wall Street Reform and Consumer Protection Act of 2010, which I
    was very proud to work with him. I was a member of that
    conference committee, as a freshman in the House, and I can
    tell you that Professor Barr played a central role in
    developing the Consumer Financial Protection Bureau and
    policies to expand access particularly for small businesses
    across the country.
        In 2017, as a fitting recognition of his extensive
    experience in developing, enacting, and implementing public
    policies, Michael Barr was approved as the dean of the
    University of Michigan's Gerald R. Ford School of Public
    Policy, and in this role Professor Barr has committed to
    helping the Ford School become even more inclusive, even more
    collaborative with colleagues all across the university, and
    even more engaged in making a policy impact at both the local,
    the State, and national, and even global levels. The school is
    certainly very lucky to have him serving as dean.
        Throughout his career, Professor Barr has been an exemplary
    public servant, a molder of young minds, and has worked hard to
    serve the people of Michigan and across the State.
        So, in conclusion, I am proud to recognize Professor Barr
    today for his many, many professional achievements and for the
    expertise that I know he will bring to the Federal Reserve.
    Thank you again for this opportunity to recognize an
    outstanding nominee.
        Senator Tester. Senator Peters, thank you for that
    introduction and thank you for your hard work. We appreciate
    the Michigan delegation being here today in front of the
    Banking Committee. Thank you both.
        Senator Peters. Thank you.
        Senator Tester. Finally, Ranking Member Toomey will
    introduce Mr. Uyeda.
        Senator Toomey. Thank you, Mr. Chairman. It is my privilege
    to introduce Mark Uyeda today. In nominating Mr. Uyeda,
    President Biden has chosen someone who is exceptionally well
    qualified to serve as an SEC Commissioner.
        Mark is a dedicated public servant and an extremely
    talented securities lawyer. He has over 25 years of experience
    in securities and corporate law. That includes experience of
    regularly preparing prospectuses and 10Ks for public companies
    filed with the SEC, which I am told is something that no other
    current SEC Commissioner has done.
        For nearly two decades Mark Uyeda has worked as a State and
    Federal securities regulator, including the last 15 years as a
    career attorney with the SEC. During his career, Mark has been
    recognized with multiple SEC awards for his work, including the
    SEC Chairman's Award for Excellence and the SEC Capital Markets
    Award.
        Having personally worked with Mark during his time as an
    SEC attorney detailed to the Banking Committee, I know
    firsthand that the depth of his knowledge on securities and
    markets is unrivaled. Beyond his impressive credentials and
    expertise, Mark is a smart, fair, diligent, and humble
    colleague.
        Given his exemplary record and reputation it is no wonder
    that he has received multiple letters of support for his
    nomination. These include letters from seven former SEC
    Commissioners who have worked personally with Mark, three
    former chief securities regulators for the State of California,
    whom he directly advised, and multiple Asian American legal
    groups.
        Throughout his career, Mr. Uyeda has generously volunteered
    his time to help promote diversity at the SEC and throughout
    the legal community. For example, he previously served as the
    Chairman of the SEC Asian Pacific American Employees Committee
    and the President of the Asian Pacific American Bar Association
    of the Greater Washington, DC, Area.
        And Mark Uyeda's nomination is historic for the SEC. If
    confirmed, he will be the first Asian Pacific American to serve
    as an SEC Commissioner in the agency's 88-year history.
        I am very confident that as an SEC Commissioner he will
    faithfully carry out the agency's critical mission of
    protecting investors, maintaining fair, orderly, and efficient
    markets, and facilitating capital formation.
        Our loss here on the Committee will be investors' across
    America's gain. I am thrilled to support Mr. Uyeda's nomination
    and I know he is destined to do great things. I hope he can be
    swiftly confirmed.
        Thank you, Mr. Chairman.
        Senator Tester. Senator Toomey, thank you for that
    introduction. I would ask the panelists to step up, the
    nominees to step up. No need to sit down because we are going
    to administer the oath.
        So will you please 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. Barr. I do.
        Mr. Lizarraga. I do.
        Mr. Uyeda. I do.
        Senator Tester. Let the record reflect that they all
    answered in the affirmative.
        Do you also agree to appear and testify before any duly
    constituted committee of the Senate?
        Mr. Barr. I do.
        Mr. Lizarraga. I do.
        Mr. Uyeda. I do.
        Senator Tester. Let the record reflect that they all
    answered in the affirmative. Thank you. You may take your
    seats.
        If you would like to introduce your family members or
    friends that are with you today I would invite you to do that
    before beginning your testimony.
        We will start with you, Mr. Barr, and we will just go right
    down the line. Mr. Barr, you are now recognized to begin your
    testimony.

    STATEMENT OF MICHAEL S. BARR, TO BE A MEMBER AND VICE CHAIRMAN
       FOR SUPERVISION OF THE BOARD OF GOVERNORS OF THE FEDERAL
                             RESERVE SYSTEM

        Mr. Barr. Thank you, Senator Tester, Senator Toomey, and
    other Members of the Committee. It is my honor to appear before
    you today for this hearing. I am grateful to President Biden
    for nominating me to serve as Vice Chair for Supervision and a
    Governor of the Federal Reserve Board.
        My wife of 28 years, Hannah Smotrich, joins me today in the
    hearing room. I am grateful as well to be joined by my three
    children--Etai is here with us in person, and Avital and Dani
    are joining us online. I am thankful for their love and their
    support. My parents, David and Debbie Barr, imbued in me the
    deepest values of integrity and public service, and they are
    here with us in spirit today.
        For over 25 years, I have been working to help make the
    financial system safer, fairer, and better focused on the needs
    of businesses and households.
        I began my Government career at the U.S. Department of
    State, where I worked on international economic matters. I then
    spent 6 years at the U.S. Department of the Treasury, helping
    to strengthen the Community Reinvestment Act, build community
    development financial institutions, support fair lending and
    combat predatory lending abuses, and help bank the unbanked. I
    also worked at the Office of Management and Budget, where I ran
    an interagency task force advancing economic development in
    Washington, DC.
        I joined the faculty at the University of Michigan over 20
    years ago, following the advice of my mentor and friend, Ned
    Gramlich, former Director of the University of Michigan's
    School of Public Policy and longtime Governor of the Federal
    Reserve Board. At Michigan, I have taught domestic and
    international financial regulation, conducted research about a
    wide range of issues in finance, and coauthored a leading
    textbook on financial regulation, law, and policy. Along the
    way, I have also developed programs to help small business
    owners in our local communities in Michigan.
        In the wake of the global financial crisis of 2008, I
    served as Assistant Secretary of the Treasury for Financial
    Institutions, and I helped to develop and work with Congress to
    enact the Dodd-Frank Wall Street Reform and Consumer Protection
    Act of 2010. That basic framework is still with us today, and
    it has helped make the financial system stronger and work
    better for everyone. With the economy battered by the financial
    crisis, my team and I also worked to support struggling small
    businesses and households and community development financial
    institutions.
        After my time at Treasury, I stayed engaged in critical
    issues affecting both national and international financial
    policy, while also deepening my commitment to our local
    communities in Michigan, working with community banks and
    learning from advising private sector institutions.
        For the last 5 years, I have served as dean of the Gerald
    R. Ford School of Public Policy at the University of Michigan.
    I have loved serving our community, and have worked hard to
    advance bipartisan engagement, listening and talking to one
    another across our differences in a way that can deepen our
    democracy and get practical things done.
        If confirmed as Vice Chair for Supervision, I would be
    strongly committed to the Federal Reserve's responsibilities to
    ensure that the financial system is robust and resilient, that
    innovation flourishes with clear rules of the road, and that
    the financial system operates fairly.
        Additionally, an important part of the roles for which I
    have been nominated is to serve on the Federal Open Market
    Committee. Inflation is running far too high, hurting
    communities all across our country. I would be strongly
    committed to bringing down inflation to the Federal Reserve's
    target, consistent with the Federal Reserve's dual mandate of
    maximum employment and price stability.
        If confirmed, I look forward to working with all of you on
    this Committee, where I have spent much time learning from you
    and collaborating with you on critical issues for our country.
        I would be honored to be confirmed as Vice Chair for
    Supervision and Governor. Thank you for your consideration, and
    I look forward to your questions.
        Senator Tester. Thank you for your testimony, Michael Barr.
        Next we will go to Mr. Lizarraga. Please begin your
    testimony.

        STATEMENT OF JAIME E. LIZARRAGA, TO BE A MEMBER OF THE
                   SECURITIES AND EXCHANGE COMMISSION

        Mr. Lizarraga. Chairman Brown, Ranking Member Toomey,
    distinguished Members of the Committee, thank you for the
    opportunity to appear before you today. It is an honor to be
    nominated by President Joe Biden to serve as a Commissioner of
    the Securities and Exchange Commission.
        I would also like to thank House Speaker Nancy Pelosi for
    introducing me. I am proud to have been part of her team for
    nearly 15 years. Witnessing her extraordinary leadership up
    close, and her dedication to building a more prosperous future
    for America's working families has been the privilege of a
    lifetime. It has also prepared me well for the role of SEC
    Commissioner.
        At its core, the SEC's mission is about the aspirations of
    all working families to secure a prosperous financial future,
    with the confidence that their interests will always be
    protected.
        To me, the SEC's mission is also deeply personal, dating
    back to my days growing up in a Southern California working-
    class community. Neither of my parents graduated from high
    school. They immigrated from Mexico and began their life in the
    United States as farm workers in California's Central Valley.
    Like millions of families in our country, they sought
    opportunity wherever they could.
        In the absence of stable job prospects, my parents decided
    to run a Mexican food business out of our home. On nights and
    weekends, my sister and I helped them prepare the food, mostly
    Mexican-style sandwiches called tortas. My father then sold the
    food from his car at soccer games and at community shopping
    centers.
        Growing up, my father always encouraged me to study the
    newspaper's financial pages. He taught me the importance of
    saving and investing for long-term financial security. In those
    years, and unlike now, access to safe and mainstream investment
    opportunities was virtually nonexistent. This limited my
    parents' wealth-building potential and their ability to grow
    their small business into a more established enterprise.
        My parents were also unable to save for retirement and
    faced constant financial strains. Their goal was for my sister
    and me to get an education. What little they had, they invested
    in us. I often asked how our financial system could have served
    their needs better.
        This life experience inspired me to pursue a career in
    public service. I focused on financial services policy, where
    issues of investor protection, financial stability, and
    economic security all come together.
        In more than three decades of public service, both as a
    House leadership and committee staffer, I played key roles in
    all financial regulatory legislation moving through Congress,
    from the Sarbanes-Oxley Act to the Dodd-Frank Act, and more. I
    also served as a Presidential appointee at the U.S. Treasury
    and at the SEC, working to ensure congressional mandates were
    effectively implemented.
        A key lesson from my long experience is that fair and
    transparent markets benefit everyone, whether a pension plan
    participant, a retail investor, or parents investing in their
    children's future education.
        The most enduring lesson is from the 2008 financial crisis:
    poorly regulated markets can have devastating consequences for
    working families and for the broader economy.
        If confirmed, I look forward to bringing my experience and
    unique perspective to the SEC. It would be an honor to work
    with the agency's talented staff and with my fellow
    Commissioners to uphold and strengthen the SEC's mission of
    protecting investors, promoting fair, orderly, and efficient
    markets, and facilitating capital formation.
        I would approach the SEC's vital mission through the eyes
    of working families like my own and work with my fellow
    Commissioners to make sure congressional mandates are robustly
    implemented. I would focus on making sure our regulations keep
    pace with rapid technological changes in our markets. And I
    would focus on facilitating capital formation for our job-
    creating small businesses, particularly in underserved areas.
        Our country's future prosperity depends on robust oversight
    of our capital markets. To me, this means safe and transparent
    markets that foster a level playing field for all market
    participants, meaningful protections for investors, and broad-
    based access to capital.
        As the Speaker noted, my parents are here in spirit, and
    are watching from home in California, and I am also proud to be
    joined by my family today, behind me, my wife of 22 years,
    Kelly Lizarraga, and our five children--Victoria, Diego, Elena,
    Samuel, and Alexandra. Also joining us is my mother-in-law,
    retired Reverend Paula Werner.
        Thank you again for the opportunity to speak today, and I
    look forward to answering your questions.
        Senator Tester. Thank you, Jaime Lizarraga, and I
    appreciate your testimony.
        Next we will go to Mr. Uyeda.

        STATEMENT OF MARK TOSHIRO UYEDA, TO BE A MEMBER OF THE
                   SECURITIES AND EXCHANGE COMMISSION

        Ms. Uyeda. Mr. Chairman, Ranking Member Toomey, and Members
    of the Committee, thank you for the opportunity to appear
    before you today. With me in the hearing room is my wife,
    Masae, and watching remotely from California are my parents,
    sister, and extended family.
        I greatly appreciate the kind words of Ranking Member
    Toomey in introducing me to the Committee.
        I am honored to have been nominated by the President to
    serve as a member of the Securities and Exchange Commission. I
    have a deep commitment to its mission to protect investors,
    maintain fair, orderly, and efficient markets, and facilitate
    capital formation.
        My first job was spending summers on my grandfather's
    produce route in Southern California. He drove a small truck,
    and I would help him pull cartons of fruits and vegetables off
    the truck to deliver them to small restaurants and retailers.
    It was a family business, run by him and his two younger
    brothers.
        My grandfather kept up this physical labor well into his
    70s. Every day, even during the hot summers, he would always
    wear a collared, buttoned-down shirt and work trousers, which
    were always neatly ironed. To me, that image of him has always
    represented the dignity of work.
        My grandfather had to build his business twice. First, in
    the 1930s, when he dropped out of high school to support his
    five younger siblings after both of his parents died. The
    second time was after World War II, when he and his family,
    including my mother, lost nearly everything when they were
    forcibly incarcerated in internment camps pursuant to Executive
    Order 9066 just because they were Americans of Japanese
    descent. At the same time, my uncle was fighting in Europe with
    the U.S. Army's segregated 442nd Regimental Combat Team, where
    he was awarded the Bronze Star and served in Company ``E''
    alongside future Senator Daniel Inouye.
        Finding startup capital was difficult for my grandfather,
    particularly in an era where racial discrimination was common.
    Yet he persevered and accomplished the American dream. The
    story of the immigrant family business has been often repeated
    in the Asian American community--whether it is a restaurant,
    dry cleaner, nail salon, or donut shop--and that perspective
    has helped shape my views on the need for startup financing and
    capital formation.
        Since graduating law school in 1995, I have continuously
    practiced corporate and securities law, spending the vast
    majority of that time in public service. During my career, I
    have advised on, and helped to implement, major securities
    legislation, including the National Securities Markets
    Improvement Act, the Private Securities Litigation Reform Act,
    the Sarbanes-Oxley Act, the Dodd-Frank Act, and the JOBS Act.
        In 2004, I became the chief advisor to California's
    securities regulator, where we pursued an investor protection
    agenda and worked with the SEC and other State regulators. If
    confirmed, I would be one of the few State securities
    regulators ever to serve as a member of the SEC.
        During my past 15 years as an SEC civil servant, I have had
    the privilege of advising Commissioners and Chairmen as part of
    the executive staff and have been part of the Division of
    Investment Management.
        Since January of last year, I have been detailed by the SEC
    to serve as securities counsel to Ranking Member Toomey as part
    of this Committee, where it has been an honor to work with
    staff on both sides of the aisle, including Chairman Brown's
    staff.
        Before I close, I want to express my gratitude to the
    support and well wishes that I have received from my SEC
    coworkers on this nomination. Their efforts to protect
    investors have, and will continue to, inspire me every day.
        Thank you and I look forward to your questions.
        Senator Tester. Mark Uyeda, thank you very much for your
    testimony. We will now proceed to questions, and please know
    that some of the folks that are going to be asking questions
    are on virtually, so you can work with that.
        Mr. Barr, I am going to start with you. I want to thank you
    for your willingness to serve. I appreciated the opportunity to
    sit down with you in my office to hear more about your views
    and priorities. I asked you about Fed's independence. The
    Ranking Member talked about the Fed's independence in his
    opening statement. Can you describe to me why the Fed's
    independence is so important?
        Mr. Barr. Thank you, Senator, for that question. The
    Federal Reserve's independence is longstanding, and I think
    quite critical to its effectiveness as a nonpartisan
    institution, an institution that can make judgments purely
    based on the evidence, the facts in front of it. That is
    especially important with respect to its monetary policy
    duties. The market needs to have confidence that the Federal
    Reserve's decisions are made based solely on the evidence, and
    the American public needs to have confidence that those
    decisions are based solely on the evidence in front of it. So
    its independence dramatically enhances its effectiveness.
        I think you have seen, as other countries around the world
    have moved to a model of independent central banking, that that
    has also helped in their institutions as well.
        Senator Tester. So why would it be a mistake to allow
    politics to influence the Nation's monetary policy?
        Mr. Barr. Thank you, Senator. If politics were to get
    involved in monetary policy it would dramatically reduce the
    effectiveness of what the Federal Reserve does and what it
    says. It would reduce the effectiveness of what it does in the
    sense that it could lead to wild swings in policy that are
    based on politics rather than the evidence in front of it. And
    it would affect the effectiveness of what the Federal Reserve
    says because people would lose confidence that the judgments
    that are being made are based on the evidence in front of it.
        If confirmed as Vice Chair and Governor I absolutely assure
    you that I am and will be firmly committed to the independence
    of the Federal Reserve.
        Senator Tester. In the last Administration, the President
    got on TV and tried to influence the Chairman of the Fed. What
    would you do if that were to happen now?
        Mr. Barr. Thank you, Senator. I would ignore that.
        Senator Tester. That is good enough for me.
        Mr. Barr, I am very proud of the work that was done on
    2155. I think it struck the right balance, and quite frankly
    and maybe unfortunately, it was tested very, very quickly with
    the pandemic. And, quite frankly, I think it showed that we
    struck the right balance. I think the work that community banks
    and the credit unions did across Montana, and I think across
    the country, was exemplary.
        So what is your view on the impact that S. 2155 has had on
    our financial system?
        Mr. Barr. Thank you, Senator. During the passage of S.
    2155, I supported aspects of the legislation. I was concerned
    about other aspects of it. I think the community bank
    provisions of that legislation are quite good and strong, and I
    also thought other protections added to the legislation on
    veterans and servicemembers were spot on. And I think those
    community bank provisions worked well, both at the time and
    since.
        I did have some concerns that I expressed as the bill was
    being drafted that some aspects of the bill could weaken
    capital or liquidity rules for larger firms. Some of the
    concerns that I had were related to credit card banks and the
    large U.S. operations of foreign firms.
        A number of the concerns I had with the bill were actually
    addressed by a manager's amendment that came in that, for
    example, clarified that the U.S. operations of foreign firms
    would still be required to have intermediate holding companies.
        So overall, with the bill, I thought it was really quite
    admirable the way Republicans and Democrats worked together on
    that legislation, and I think if you look at the capital and
    liquidity in the financial system today they are quite strong.
        Senator Tester. All right. Thank you very much. I am going
    to turn to Ranking Member Toomey now, but before I do that I
    just want to express what a pleasure it has been working with
    you, Ranking Member Toomey, during this Banking hearing.
        Senator Toomey. And for so long.
        [Laughter.]
        Senator Toomey. Thank you, Mr. Chairman.
        Professor Barr, thanks for meeting yesterday. I appreciate
    your acknowledgment then and again this morning that inflation
    is way too high. During our discussion you said that if
    inflation persists you will do, and I quote, ``whatever it
    takes,'' end quote, to get inflation under control. Even if it
    were to unfortunately trigger a recession, which I know no one
    wants or could precisely predict, and I hope is quite unlikely,
    but just for the record this morning is that a fair
    characterization of your view of fighting inflation?
        Mr. Barr. Thank you, Senator. Yes, it is. I strongly
    believe that inflation is far too high today, and I am
    committed to bringing it down to the Federal Reserve's target
    of 2 percent.
        Senator Toomey. Great. Thank you. Now there are folks who
    have openly argued that climate change poses such an
    existential threat to humanity that we simply have to dispense
    with democratic norms and use financial regulatory powers to
    accelerate the transition to a lower carbon economy.
        So Professor Barr, my question for you is, does the Fed's
    mandate permit the Fed to use its power to accelerate the
    transition to a lower carbon economy?
        Mr. Barr. Senator, thank you for that question. The Federal
    Reserve's authorities here are important but quite limited,
    quite narrow.
        Senator Toomey. Right.
        Mr. Barr. And those are to assess risks to the financial
    system from all sources, including climate.
        Senator Toomey. I understand, Professor. I have got very
    limited time.
        Mr. Barr. Sorry.
        Senator Toomey. So I understand what the Fed's powers are.
    My question is do you believe that the Fed's mandate allows it
    to use its power to decide to accelerate the transition to a
    low-carbon economy?
        Mr. Barr. No, Senator. I think that the Federal Reserve is
    not able to allocate credit, should not be in the business of
    telling financial institutions to lend to a particular sector
    or not to lend to a particular sector.
        Senator Toomey. Thank you for that. So would you agree that
    that extends to the fact that the Fed does not have the
    authority to use climate-related stress tests for the purpose
    of penalizing banks for lending to energy companies, for
    instance?
        Mr. Barr. Thank you, Senator, for that question. The only
    purpose of the Federal Reserve's scenario analysis or other
    measures should be to understand risks that climate might pose
    to the financial system and to work with financial institutions
    on measures to manage those risks.
        Senator Toomey. Great. Thank you. There have been, in some
    quarters, a great deal of hostility to bank mergers, especially
    in recent months where there appeared to be a de facto
    moratorium on approving mergers that would result in a bank of
    more than $100 billion in assets. Now it is clear to me that
    bank regulators have no statutory authorization to impose a
    universal moratorium on bank mergers. So do you agree that the
    Fed does not have the authority to impose a blanket moratorium
    on bank mergers?
        Mr. Barr. Thank you, Senator. I am not aware of any
    authority with respect to a blanket moratorium on bank mergers.
        Senator Toomey. Yeah. I think if there were such an
    authority I think you would be aware of it. I think that is
    because there is no such authority.
        But I do want to point out, I am concerned, Acting
    Comptroller of the Currency, Michael Hsu, has proposed
    conditional regional bank mergers on their commitment to meet
    what would otherwise be inapplicable regulatory standards and
    requirements. To me this is an attempt to establish this
    requirement. This attempt exceeds the OCC's authority. And
    ironically, making it more difficult for regional banks to
    merge could actually decrease competition within the banking
    industry by preventing larger regional banks from being able to
    compete with very large banks.
        So let me ask you this. Do you agree that regional bank
    mergers can, in some circumstances, actually increase
    competition in the banking industry by better enabling them to
    compete with larger banks?
        Mr. Barr. Thank you, Senator. I think that bank mergers can
    have positive effects or negative effects on both competition,
    convenience, and needs. Financial stability, I do not have an a
    priori view. I think the merger reviews should be conducted
    based on the evidence.
        Senator Toomey. OK. Thank you. I do want to talk a little
    bit about the SLR also. The Fed announced, in March of last
    year, I think, that it would consider modifications to the SLR,
    and the idea was to ensure that it serves as a backstop, not
    the primary driver of capital requirements. So that is over a
    year now and we have not seen a proposal, I think in part
    because the seat to which you have been nominated had not been
    filled.
        If you are confirmed, would you commit to expeditiously
    issuing a proposal to ensure that banks are not penalized for
    holding risk-free assets like deposits at central banks?
        Mr. Barr. Senator, I see that time has expired. May I
    answer the question?
        Senator Toomey. Sure.
        Mr. Barr. Thank you. What I would like to do, if confirmed
    as Vice Chair, is to come in and take a look at capital and
    liquidity in the system, broadly speaking, to look at the SLR,
    to look at the Basel III, so-called end game rules that need to
    be proposed, and to try and take a look at this as a whole,
    rather than piece by piece.
        Senator Toomey. OK. Thank you, Mr. Chairman.
        Senator Menendez. [presiding]. Senator Brown has asked me
    to preside for a while so we will do that. I am going to
    recognize myself.
        Mr. Barr, there is a serious diversity problem at the
    Federal Reserve. Latinos are the Nation's largest minority.
    They make up 20 percent of the United States population, yet
    they have no representation in Fed leadership. I have raised
    this issue many times with nominees and sitting members of the
    Federal Reserve, I have heard extensively about what the Fed is
    supposedly doing, and I can just tell you right now that is
    just not sufficient.
        Sixty-two million Hispanic Americans in the United States
    with a $2 trillion domestic marketplace impact deserve a seat
    at the table where our Nation's most important economic
    decisions are made. It is the reason that I voted against
    Chairman Powell.
        So I am eager to hear how you would deal with this
    question. If confirmed, what steps would you take to improve
    minority representation, particularly Latino representation in
    leadership roles at the Fed?
        Mr. Barr. Thank you, Senator, for that question. I agree
    with you that diversity and equity and inclusion are important
    goals for the Federal Reserve to pursue. In my experience in
    prior jobs at the Treasury Department and at the Gerald R. Ford
    School of Public Policy those have been really quite important
    goals of mine as well.
        And what I have been doing in my own work is to try and
    build a pipeline of people who can then come in, get
    increasingly senior jobs, positions. It starts in our work at
    the Ford School, for example, we start in high schools now,
    going out into high schools and educating students about the
    opportunities of public policy. We run a summer program for
    juniors in college to get them engaged in public policy and
    prepare them for graduate training. We do a lot of work to
    build out the graduate pool. We then work on the postdoctoral
    pool, the faculty pool. And so really kind of a holistic
    approach.
        Senator Menendez. I appreciate that and preparing the
    pipeline, obviously, is a one element. But the problem is there
    are many qualified individuals now who could enter into the
    Fed's system. There are qualified individuals who should be on
    the regional banks. So will you commit to working with my
    office to increase Latino representation at the Fed?
        Mr. Barr. Yes, sir. I would be delighted to work with your
    office on these issues.
        Senator Menendez. You also have an important role to play
    in the selection process for presidents and members of the
    board of directors of the 12 Federal Reserve banks, which in
    its 108-year history has never had a Latino sitting on it.
    Would you commit to working to ensure that diverse candidates
    are considered for these positions?
        Mr. Barr. Yes, Senator. I think that is a quite important
    goal for the Federal Reserve, and I would be delighted to work
    on that.
        Senator Menendez. And it is not just to do the right thing.
    Study after study shows us that the more diverse boards, the
    greater the profitability on the bottom line.
        Mr. Lizarraga, congratulations on your nomination. If
    confirmed, you would be the only Latino currently serving on
    the SEC Commission or Senate-confirmed Federal financial
    regulator, for that matter. And Mr. Uyeda, congratulations to
    you as well in your historic nomination.
        The asset management and investment advisory industries are
    overwhelmingly White and male. Studies consistently show that
    greater diversity leads to greater profitability, as I just
    suggested. So in an effort to improve performance and thereby
    benefit retail investors the SEC's Asset Management Advisory
    Committee unanimously recommended that the SEC take concrete
    actions to improve diversity in these industries.
        So I want to ask both Mr. Uyeda and Mr. Lizarraga, can you
    commit to bringing these recommendations before the Commission
    for a vote so that we can bring transparency and diversity to
    the industry and ultimately deliver better outcomes for
    investors?
        Mr. Lizarraga. Thank you, Senator, for that question, and I
    embrace diversity and inclusion as fundamental values, and I am
    proud of the work that I have done in Congress on that issue,
    including in the setting up of the historic House Diversity
    Office that serves the entire House of Representatives.
        I am also aware that this is an issue that has received a
    lot of attention in the shareholder proposals, and it is
    something that, if confirmed, I intend to stay very active on.
        Senator Menendez. All I am looking for is a vote. You guys
    can vote it down if you want to. But the SEC Management
    Advisory Committee unanimously--and this is a very broad
    spectrum of individuals--made this recommendation. So all I am
    looking for is a vote before the SEC. If you all do not think
    it is a good idea you can vote it down. If you think it is good
    idea you can support it.
        So will you seek, if you are confirmed, to have a vote
    before the SEC on this advisory committee's recommendations?
        Mr. Lizarraga. If confirmed, I look forward to exploring
    that possibility, recognizing that I would need to look into
    the details of the process. But I agree with the sentiment that
    is expressed by the advisory committee.
        Senator Menendez. Mr. Uyeda.
        Mr. Uyeda. When I was on the SEC staff, I had the privilege
    of helping to stand up the Asset Management Advisory Committee.
    I have seen the incredible amount of work they have put in on
    these recommendations, and all of them, not only just for AMAC
    but the other advisory committees, the recommendations seem to
    be taken very, very seriously by the Commission. If confirmed,
    I will commit to considering any item that Chair Gensler, who
    oversees what items go on the agenda, are put up, on diversity,
    and improving inclusion in the asset management area.
        Senator Menendez. You are both learning your time in
    Congress to be very cautious in your answers. I am going to
    submit questions for the record. I would like to support both
    of your nominations. But I just simply want to hear a yes or
    no. If Chairman Gensler puts it up then, you know, you can be
    advocates to Chairman Gensler to put it on, right? You are not
    just stoic figures there. You have a role to play if you are
    ultimately confirmed.
        Senator Rounds is next.
        Senator Rounds. Thank you, Mr. Chairman. First of all,
    thank you all for placing yourselves within the nomination
    process. This is very important that we have the opportunity to
    look and to consider. My questions will primarily be to Mr.
    Barr.
        Mr. Barr, I have appreciated the opportunity to visit with
    you in my office this week. This is an opportunity to review a
    little bit of that. And I just wanted to begin, Senator Toomey
    touched on this already, but just to clarify, and this will
    save me from putting a question for the record in front of you,
    it sounds like you are agreeing to considering permanent
    modifications to the SLR. When do you think we could expect to
    see action on that? I think this is really important that we
    address it. We know that we have got other members on the board
    that have already committed, but we would like to hear a
    commitment that we move forward with this consideration.
        Mr. Barr. Thank you, Senator Rounds, for that question. It
    was wonderful to spend time with you in your office earlier.
        As I said to Senator Toomey, what I would like to do is to
    come into this position, if confirmed, and wrap my arms around
    the whole capital and liquidity picture--that includes the SLR.
    It includes the Basel III end game and stress testing and the
    like--to make sure I understand the full package of potential
    issues. I want to make sure that I understand how the
    institutions are doing with respect to emergent risks as well.
        Senator Rounds. Well, let us cut to the chase on that part
    because even right now, in the middle of what is significant
    inflation, the Federal Reserve has written, in its most recent
    supervision and regulation report that was released on Friday,
    and I will quote it, ``The banking system remains strong
    overall with robust capital and liquidity and improved asset
    quality.'' That would seem to point to the fact that the system
    right now is working, and what we are suggesting is that the
    modification to the SLR would be appropriate as well. We are
    just hoping that--I guess what I am asking is that you would
    move forward fairly quickly to address the SLR issue.
        Mr. Barr. Thank you, Senator Rounds. I agree with you that
    capital and liquidity in the system today is quite strong. But
    what I would really like to do, and I think makes sense, is not
    to think about the capital rule as piecemeal but to understand
    them as a group.
        Senator Rounds. But if you are talking about a long-term
    study you are talking an extended period of time. I just want
    to clarify that this is not going to take years to get done.
        Mr. Barr. Senator, it will not take years to get done.
        Senator Rounds. Will it take months to get done?
        Mr. Barr. I cannot specify the exact time period, Senator.
    I promise that I take the issues seriously. They are the reason
    that I am focused on the resilience of the financial system,
    and I promise to address the issues in a serious way.
        Senator Rounds. OK. Just a few minutes ago as we were
    looking at this, Senator Tester had started out and he talked
    about the success that we had with 2155. You and I spoke about
    2155 and the fact that I had questions whether or not you would
    have supported a number of the changes that were in there.
        Part of what 2155 did and focused on was the ability to
    tailor based upon the size of the different banks and so forth.
    Let's go back into that a little bit. It sounds like you still
    feel that tailoring based on size and a risk profile is good
    for banks, and it sounds specifically that, in particular,
    community banks, but what about regional banks as well? It
    seems to me that if you are tailoring, can you not apply that
    to regional banks as well?
        Mr. Barr. Thank you, Senator. Yes, I think that tailoring
    or a graduated approach, a tiered approach makes sense for the
    financial system. You want the strictest rules for the very
    largest institutions, and you want gradually less restrictive
    rules as you get to simpler, less complex, less risky
    institutions. And you particularly want, with respect to
    community banks, the simplest of rules given the potential for
    regulatory burden being very high for them----
        Senator Rounds. What about banks $50 billion and over,
    regional banks?
        Mr. Barr. I think that same principle of tailoring, or I
    think of it as tiered approaches to regulation, make sense at
    each of the kinds of size levels. I strongly agree with the
    principle of a tiered approach. Where I had disagreement was on
    whether that approach was exactly, you know, what I would have
    done for each of those institutions. Obviously, Congress has
    spoken on that.
        Senator Rounds. Well, tailoring recognizes that you can
    modify it based on the size.
        Let me ask this, just in turning to another topic. I have
    long pushed our U.S. representatives at the International
    Association of Insurance Supervisors to advocate in favor of
    the aggregation method as an alternative method to the ICS.
    Before confirmation, Governor Brainard indicated unequivocal
    support for this position and noted that the Fed continues to
    advocate for the aggregation method internationally.
        Mr. Barr, if confirmed, will you commit to the position
    outlined by Governor Brainard in defending the use of the
    aggregation method and the State-based system of insurance
    regulation? This is a very important question.
        Mr. Barr. Senator Rounds, I agree with Governor Brainard
    about that approach.
        Senator Rounds. Thank you. Thank you, Mr. Chairman.
        Senator Menendez. I understand Senator Warner is with us
    virtually.
        Senator Warner. I am, Senator Menendez. Thank you so much,
    and I say to my colleague, Senator Rounds, one of the reasons
    we have tailoring is because we did the reforms in 2155. And
    while Mr. Barr may not agree on exactly where the cut lines
    should be, and there was some arbitrariness on that, I do think
    it is the right approach.
        Mr. Barr, I am going to start with you on CRA. This is a
    topic I know you have written a lot about and talked a lot
    about. I think you made a thoughtful review in 2019. The Fed,
    FDIC, and OCC's recent proposal is extensive. How much have you
    reviewed that so far? How do you think it will stand the test
    of time? Are there areas that you would like to see moving
    further on? Give us your take on CRA.
        Mr. Barr. Thank you, Senator Warner, very much for that
    question. I think that the draft proposal from the three
    banking agencies is a good one. There was an enormous amount of
    work that has been put into that, and I think it shows in the
    proposal.
        I was especially glad to see the three agencies working
    together after there was a period of time where there was not
    that kind of alignment. I think that the certainty that that
    provides for the financial sector and for communities is really
    important.
        There are a few areas I just want to continue to review in
    the rule, and I also look forward to reading, if confirmed, the
    public comments that come in on that rule. I would like to be
    sure that the rule is appropriately taking on issues of
    financial inclusion. The rule has some tiering with respect to
    application of rules. I would like to make sure that that also
    is taking into account the needs of community banks in the
    process.
        But I was very much encouraged by what I read in the rule.
        Senator Warner. Did I just disappear? Folks, did I--whoops.
        Senator Smith. There you go. We can hear you. We can see
    you.
        Senator Warner. Am I looking as washed out? I think my
    battery is running down, and it is a little embarrassing since
    I invented cell phones, that I cannot figure out how to work a
    computer.
        Senator Toomey. I will send you some makeup.
        Senator Smith. You are looking a little peaked, Senator.
        Senator Warner. No matter how much kind of heckling from my
    colleagues--Mr. Barr, CRA, in my mind, fits in with racial
    wealth gap. It fits in with the whole questions of access to
    capital. This is a topic that I have talked with you about and
    every member of the Fed about how we can be more engaged with
    CDFIs and MDIs. You know, everybody gives me ``Attaboy, I
    agree, I agree, I agree.'' Frankly, the reality of the Fed
    moving in a meaningful way on these questions I think has been
    less than the rhetoric. There has not been as much there,
    there. And I would point out again I think the first round of
    PPP, while well-intentioned, showed huge lack of take-up by
    minority-owned businesses. I know Senator Cortez Masto, this is
    something she has worked on, Senator Van Hollen has worked on.
        I really am going to need--you know, I look forward to
    supporting you, but I think the Fed is going to really need to
    lean in, and particularly from the regulatory standpoint,
    regulatory supervision. There are lots of banks in the chain
    who, even beyond CDFIs, that say they would like to do more.
    And my fear, at times, is that you guys say one level comment
    at the national level, and that never translates down to the
    examiners. The examiners are still dinging institutions that do
    not dot every I and cross every T, particularly when we are
    trying to deal with underbanked communities.
        So in my last minute can you put a little more meat on the
    bones about when you get confirmed what you will do on this
    access to capital issue for underserved communities and
    particularly how CDFIs and MDIs can play a role.
        Mr. Barr. Thank you, Senator, very much for that question.
    I very much look forward to continuing to work with you on
    these issues, if confirmed. I think that community development
    based financial institutions and minority depository
    institutions and other community banks have played critical
    roles in expanding access to capital for underserved
    communities, for low- and moderate-income communities, for
    minority communities. And that, to my mind, is a critical role.
        I think the Federal Reserve can play an important role, as
    you suggest, in supervision and in regulation. And I have had
    the same experience that you indicate about the disconnects
    between Washington and the field I would be quite attentive to.
        Senator Warner. I know my time is up. I just want to again
    say thank you to so many of my Republican colleagues, frankly
    led by Senator Crapo, who helped really work to get that $12
    billion. It was the first time we put our money where our mouth
    is in terms of support for CDFIs and MDIs.
        Thank you, Senator Menendez.
        Senator Smith [presiding]. Thank you, Senator Warner. And
    now we will hear from Senator Moran for 5 minutes.
        Senator Moran. Chairwoman, thank you. A couple of questions
    for our SEC nominees, and thank you all for your willingness to
    serve, and I look forward to developing a solid working
    relationship with each of you.
        For Mr. Lizarraga and Mr. Uyeda, this I hope is a yes-or-no
    answer so I can get to other questions as well. Mr. Lizarraga,
    do you agree that any change to the disclosure rules, which
    would more than double the current cost of disclosures, with an
    outsized impact on smaller companies should be subjected to
    robust public debate, including in front of this Committee
    before those rules are finalized?
        Mr. Lizarraga. Yes.
        Senator Moran. Mr. Uyeda.
        Mr. Uyeda. Yes.
        Senator Moran. Thank you. Mr. Lizarraga, do you support
    competition among asset managers and believe that investment
    firms should compete to manage investors' money?
        Mr. Lizarraga. Senator, I believe in competition in all
    segments of our markets.
        Senator Moran. I will ask both of you, but let me add a
    little to that question. It is related to the following. Do you
    believe that smaller firms, such as those with less than $500
    billion in assets, which seems less than small to me, should
    have the same opportunities as the multitrillion-dollar firms
    to list exchange-traded products in order to compete and serve
    investors?
        Mr. Lizarraga. I am not sure I understood the last part of
    your question, sir.
        Senator Moran. Do you believe that smaller firms should
    have the same opportunities as multitrillion-dollar firms to
    list exchange-traded products in order to compete and serve
    investors?
        Mr. Lizarraga. Thank you, sir. I believe small firms, small
    issuers should be treated fairly, just like all market
    participants should be. So yes, I agree that they should be
    equitably treated.
        Senator Moran. This is not a trick question. There is not
    anything I am trying to capture here other than to make certain
    that what I have seen where small firms have been excluded from
    the ability to compete with larger firms due to decisions made
    by regulators. I want to make certain that you have an
    appreciation, that both of you have an appreciation for those
    smaller firms and will not do anything to disadvantage them and
    their capability of attracting and managing funds for clients
    as compared to those large, multitrillion-dollar firms.
        Mr. Lizarraga. Yes, sir. I agree with that principle,
    generally, yes.
        Senator Moran. Thank you. Mr. Uyeda.
        Mr. Uyeda. Yes. And, in fact, I would point out that
    consideration of competition is statutorily mandated by
    Congress that the SEC consider. So efficiency, competency,
    capital formation are three factors that, by law, the SEC must
    consider in any rulemaking. In addition, the SEC has a mandate,
    under the Regulatory Flexibility Act, to look at the impact on
    small entities, and a number of those definitions, particularly
    in the asset management space, I think are potentially outdated
    and need to be looked at.
        The current small entity definition is just $25 million of
    assets under management or less, which, as you noted, $500
    billion these days seems like quite a small amount, so that
    would be something to think about updating those limits.
        Senator Moran. Thank you both for your answer. The follow-
    up to that, which I think--I will ask you if you will commit to
    working with this Committee to ensure that smaller firms have
    the opportunities and necessary infrastructure to compete with
    largest management firms by allowing them to offer exchange-
    listed products.
        Mr. Lizarraga. Yes, sir. I commit to working with this
    Committee on all issues before us today.
        Senator Moran. That is a good answer.
        Mr. Uyeda. Yes. I also commit to working with this
    Committee on consideration of those issues.
        Senator Moran. Mr. Barr, in June of 2020, you stated that
    the continued reluctance of the Fed to force banks to preserve
    capital in the face of global pandemic and economic collapse.
    You talked about those circumstances. It seems that throughout
    the pandemic and now capital liquidity levels in the banking
    sector have been a key strength for our economy, and my
    question is, does that fact, if you agree with that does that
    fact lend credence to the banking sector being adequately
    prepared for the next recession?
        Mr. Barr. Thank you, Senator, for that question. The
    statement I made was in the context of the global pandemic
    having just hit the United States, and before Congress and the
    Federal Reserve took the really extraordinary actions they took
    to protect our economy, I was concerned that the paying out of
    dividends and permitting the cash repurchase of shares was
    dissipating capital when it needed to be preserved. But I agree
    with you that capital and liquidity today is quite strong.
        Senator Moran. Thank you. And I am out of time. Thank you.
        Senator Smith. Thank you, Senator Moran.
        We will next hear from Senator Cortez Masto, who is joining
    us virtually, I believe.
        Senator Cortez Masto. Thank you, Madam Chairwoman.
    Congratulations to all three of the nominees. I so appreciate
    your willingness to serve.
        Let me start with Mr. Uyeda and Mr. Lizarraga. Thank you,
    as well, for everything that you have done in the past
    supporting [inaudible] committed to. Let me ask you this, and
    this is a concern that I think many of us have. We have seen
    social media play a growing role in market manipulation, and
    the SEC has actually fined civil fines over tweets in the past
    as a result of this.
        So I am curious, for the two of you, what are your thoughts
    about market manipulation on social media, and what role should
    the SEC take to curb this practice? And Mr. Uyeda, let us start
    with you.
        Mr. Uyeda. So the SEC has longstanding authority to pursue
    enforcement actions for manipulation of the securities markets.
    Social media is definitely one avenue in which that
    manipulation can occur. But the use of the internet to
    manipulate prices, including in pump-and-dump schemes, is
    nothing new. In fact, I think it was a couple of decades ago
    when the first enforcement actions were brought for the use of
    internet bulletin boards, as they were called during the time,
    to disseminate false and misleading information.
        My experience at the SEC is that there is an ever-expanding
    set of technological tools to identify manipulative behavior,
    and if confirmed, that is something that I would be interested
    in working with to make sure that the hard-working staff have
    all the tools at their disposal to investigate potential market
    manipulation.
        Senator Cortez Masto. Thank you. Mr. Lizarraga.
        Mr. Lizarraga. Thank you, Senator, for your question. I
    think robust enforcement of our securities laws lowers the risk
    in our capital markets, protects investors, and lowers the cost
    of capital. To the extent that there is fraud and market
    manipulation, wherever it occurs, I think the SEC has an
    obligation to pursue that.
        Social media does facilitate, in some instances, these
    violations of the law, and I believe in prioritizing
    enforcement actions that address that. Recently, as you may be
    aware, Chairman Gensler added some resources to the Enforcement
    Division to address some issues related to the digital space,
    which may also include monitoring what happens on social media.
        Senator Cortez Masto. Thank you. Mr. Barr, let us talk
    cybersecurity. We have not had a chance to talk that yet. As
    you well know, banks and our other financial institutions in
    many ways are on the front lines of the growing rise of crime
    happening in cyberspace. Our Nation's banks must take
    appropriate risk mitigation from incursions from bad actors,
    both domestically and abroad.
        So can you talk a little bit about your experience in
    cybersecurity and data privacy and safety, and what role
    cybersecurity plays in fostering stability, integrity, and
    efficiency in our economy?
        Mr. Barr. Thank you very much for that question, Senator.
    Cybersecurity is really essential for risk mitigation, risk
    management in the financial system. Cyberrisk is a very urgent
    risk. It is with us today. And I think it is quite critical
    that both the Federal Reserve and the other Federal regulatory
    agencies, and the financial sector itself, continue to invest
    and try and stay ahead of the curve. It is a constant process.
        My own experience with cybersecurity relates to my work at
    the U.S. Treasury Department where I oversaw, among other
    things, the Office of Critical Infrastructure Policy. And I
    have also done work with firms engaged in antifraud and other
    measures, and I have written about the need for international
    coordination on efforts to address risks from cybersecurity in
    a way that continues competition and advances the ability of
    financial institutions to serve countries around the world. So
    it is an issue that is quite central and I would be focused on.
        Senator Cortez Masto. Great. I am glad to hear that. Thank
    you. Thank you again and congratulations.
        Senator Smith. Thank you, Senator Cortez Masto.
        We will now turn to Senator Daines for 5 minutes.
        Senator Daines. Thank you much. Professor Barr, you have
    previously voiced concerns regarding the regulatory relief put
    in place following the enactment of Dodd-Frank. Specifically,
    you were a very vocal critic of Senate Bill 2155. That was the
    2018 Dodd-Frank rollback that thankfully passed the Senate with
    overwhelming support. It had strong bipartisan support by a
    more than 2-to-1 margin.
        You stated at the time that passing the bill would be,
    quote, ``a significant mistake.'' You mentioned earlier in this
    hearing that many of your concerns were addressed by a
    manager's amendment. My question is, do you still think that
    passing that bill was a mistake?
        Mr. Barr. Thank you, Senator Daines. As you mentioned, a
    number of my concerns were addressed by the passage of a
    manager's amendment as well as subsequent regulation, for
    example, that made it clear that the custody bank provision
    could only genuinely be used by custody banks, which was an
    area of concern.
        Senator Daines. Looking back, do you still believe passing
    that bill was a mistake?
        Mr. Barr. I think, you know, on balance, again, I would
    have chosen a different balance. I think reasonable people can
    disagree about that. It obviously garnered widespread support
    in the Congress, and I would be quite committed to implementing
    the law as written by the Congress in doing that.
        And when you look at overall capital and liquidity level in
    the system today, as I have said previously, it is quite
    strong.
        Senator Daines. Now what are your views on the regulatory
    tailoring provisions that were included in that bill, 2155, and
    how would you approach these provisions in terms of
    implementation at the Fed?
        Mr. Barr. Thank you, Senator, for that question. As I
    indicated earlier, in response to Senator Rounds, I think a
    tiered approach, a tailored approach to regulation makes a lot
    of sense. I think the strictest rules ought to be applied to
    the largest institutions, and there should be a graduated
    approach below that. And especially care ought to be taken with
    respect to community banks who have difficulty meeting the
    regulatory burden.
        So I am a strong supporter of the principle of tiered
    regulation.
        Senator Daines. I want to turn to CFPB for a moment. With
    regard to the CFPB, you have stated, and I quote, ``A tax on
    its structure, budget, director, and authorities are pretext
    for weakening consumer protections, in general.'' You have also
    stated that Republican opposition to the CFPB during the Dodd-
    Frank debate was, and I quote you, ``all about not wanting
    consumer regulation.''
        Do you stand by those very partisan views?
        Mr. Barr. Senator Daines, when I hear those remarks I think
    they are exactly the kinds of things I tell my students not to
    do. I think they were intemperate remarks, and I do not think
    that is a good way to engage in productive dialogue with people
    you disagree with, so I regret them.
        Senator Daines. Thanks. In light of the Supreme Court's
    decision, the CFPB's original governance structure, which you
    helped to design, was unconstitutional. Do you acknowledge that
    Republican concerns may have had some merit?
        Mr. Barr. Thank you, Senator. My concern about the
    constitutionality was not about whether the particular choice
    was a good choice or a bad choice. It was about who gets to
    decide, and my strong view is Congress gets to decide. So you
    get to decide if you want to structure a Federal agency with a
    commission or a board or a single director. I think Congress
    ought to be given a great deal of deference in that by the
    Judicial branch. And in history Congress has used a wide
    variety of techniques to establish agencies. I think that is
    the right approach.
        Senator Daines. I want to switch to the issue of climate
    change. Do you believe that climate change is among the top
    three threats to financial stability, because we have heard
    that from witnesses here at this Committee in the past? What
    are your views? Is it one of the top three threats?
        Mr. Barr. I think climate change is an interesting example
    because it is a very long-term issue, but we need to figure out
    how to wrap our arms around it today.
        Senator Daines. Would it rise, as you assess priorities and
    thinking through the lens of which you will, if confirmed,
    governed, do you believe it is one of the top three threats to
    financial stability?
        Mr. Barr. Senator, I have not thought about a priority
    ranking of the threats facing the financial sector. I think the
    job of the Vice Chair, if confirmed, is to think about the
    range of emergent threats to the financial system and then to
    design a regulatory approach and work with financial
    institutions so you can have a consistent risk management
    framework.
        You know, if you think back before the global pandemic, the
    global pandemic was not on anybody's list of the next threat to
    the financial sector. So I think it is just important to be
    humble about our understanding of those sets of risks.
        Senator Daines. All right. Thank you.
        Senator Smith. Thank you, Senator Daines.
        We will now hear from Senator Reed for 5 minutes.
        Senator Reed. Thank you very much, Madam Chairman.
        Mr. Uyeda and Mr. Lizarraga--I think I am close on both
    scores--the SEC has recently proposed a rule for public
    companies that would require cybersecurity expertise on the
    board or some mechanism to ensure that cybersecurity is taken
    into consideration. And starting with Mr. Lizarraga, do you
    believe that is critical and should be implemented quickly?
        Mr. Lizarraga. Thank you, Senator, for that question. I
    think it is essential to bolster cybersecurity at the SEC and
    its regulated entities as a matter of principle, yes.
        Senator Reed. Thank you. Mr. Uyeda.
        Mr. Uyeda. Yes, that is correct, Senator Reed. So without
    prejudging the current proposal, which is out for public
    comment, just generally I think cybersecurity is a very
    critical threat, particularly facing the financial service
    industry. There can be very significant fallout and
    consequences from a breach, and the SEC has an obligation,
    particularly for the broker dealers, transfer agents, clearing
    firms, investment companies that it oversees, to ensure that
    there is appropriate efforts to protect against cybersecurity
    threats.
        And I would also add it is very important for the SEC
    itself, as an agency, to bolster its cybersecurity defenses.
    The SEC, during my time there, has been subject to various
    intrusion effects and the information clearing process, for
    instance, that the EDGAR system provides is significant, and if
    there was an outage that could have market consequences.
        Senator Reed. Well thank you very much, both of you.
        Mr. Barr, cryptocurrencies have been in the news recently.
    Do you have concerns that they are inherently vulnerable to
    crises like we are seeing? There has been a huge meltdown.
    Could you give us an idea of your perspective on
    cryptocurrencies?
        Mr. Barr. Thank you, Senator Reed. I think advances in
    technology, including cryptocurrency, have some potential for
    upside in terms of economic benefit, and then also some
    significant risks. And I think of those risks in functional
    terms, depending on the particular kind of use that the
    cryptocurrency is being undertaken for. So for example, with
    respect to cryptoassets generally that are invested in as an
    asset class, the primary concern is investor protection, and
    that really is the responsibility of other agencies.
        But an issue such as stablecoins, there could be financial
    stability risks, and I think it is quite important that
    Congress and regulatory agencies wrap their arms around those
    financial stability risks and regulate so that we do not have
    situations where people are holding an asset that they believe
    is a cash instrument but it actually is not. That can have both
    significant investor protection problems but also financial
    stability risk, run risk.
        Senator Reed. The Federal Reserve, I understand, has been
    exploring whether to introduce a central bank digital currency
    to facilitate the ability of people to make digital payments,
    which are quite popular. Have you given any thought to that
    issue?
        Mr. Barr. Thank you, Senator. I think the development of a
    central bank digital currency requires a lot more thought and
    study. I think that the Federal Reserve's discussion paper on
    this is a good starting point.
        As Chair Powell previously indicated, if this is an area
    that the Federal Reserve decides makes sense to move forward
    on, it really should be with the buy-in of the Congress and the
    Executive branch, not something undertaken lightly, and I think
    that is the right view. If confirmed, that is the view I would
    take as well.
        Senator Reed. Thank you very much, Mr. Barr. Gentlemen,
    thank you.
        Senator Smith. Thank you, Senator Reed.
        Senator Tillis is recognized virtually for 5 minutes.
        Senator Tillis. Thank you, and thanks to the witnesses.
    Congratulations on your nominations.
        I want to start, very quickly, with having the SEC nominees
    pronounce their names. I have got a little crisis of confidence
    since I have heard four or five different pronunciations.
        Mr. Lizarraga. My name is Jaime Lizarraga.
        Senator Tillis. Lizarraga.
        Mr. Uyeda. And my name is Mark Uyeda.
        Senator Tillis. Uyeda. Thank you. OK. I got the phonetics
    right. I just wanted to make sure they were the right ones.
        I am going to come back to you all but I want to start with
    Mr. Barr. Mr. Barr, I actually want to start where Senator
    Daines did on Senate Bill 2155. I have heard your comments and
    how some of the amendments allayed some of your concerns. I
    played an active role in getting that bill passed and getting
    strong bipartisan support. What aspects of the bill do you--and
    I also heard you say that you would faithfully implement the
    strong bipartisan support will of Congress. But what areas of
    the bill are areas of concern for you as you move forward to
    confirmation?
        Mr. Barr. Thank you, Senator, for that question. Really, I
    would like to take a look at capital and liquidity in the
    system as a whole. I do not think it makes sense to be
    backward-looking and analyzing, you know, this or that change
    in the law from the past. What I would like to do, if
    confirmed, is to look at capital and liquidity as a whole. And
    as I said, capital and liquidity in the system today, I think,
    is quite strong.
        Again, I agree with the basic principles of the
    legislation, the idea of tiering, a financial regulation based
    on risk and based on size, and that is an approach that I would
    bring to the implementation of that law, if confirmed.
        Senator Tillis. OK. Another area I want to touch on relates
    to climate. Are you aware of the Federal Reserve Bank of New
    York, I believe it was a staff research paper that was titled,
    ``How Bad Are Weather Disasters for Banks?'' Are you familiar
    with that staff report?
        Mr. Barr. Yes, sir, I am familiar with it.
        Senator Tillis. Do you recall the main takeaways of that
    report?
        Mr. Barr. It has been a while since I have looked at it,
    but I think the main takeaway was that in the last couple
    decades or so there have not been any weather events that have
    led to the failure of a bank.
        Senator Tillis. Yeah. I think the ones that stick in my
    mind are the takeaway that larger banks were barely affected.
    Smaller banks showed minor impact but nothing large enough to
    even remotely threaten bank solvency. And then postdisaster, an
    actual increase in loan demand.
        So we have got two pieces. We have customers of banks who
    probably have to look at it and see their own exposures, but
    the banks themselves seem to be relatively safe against
    disasters, at least in this story, and I think that has to be
    instructive when we have regulators talking about climate
    change being a major factor in future regulations. So that is
    just a point of information. I am happy to let you comment. But
    that is something I think we should take into account as we
    weave in climate change in any regulatory regimen for the
    banks.
        And with that, Mr. Lizarraga and Mr. Uyeda, I want to ask
    you all a little bit about resources. I know that the SEC is on
    a really fast pace now--25-plus proposals this year, hundreds
    of pages per proposal, with almost just as many questions,
    coupled with short comment periods. It is moving very, very
    quickly, so I have a question for you all on two fronts.
        Number one, how would the SEC have the bandwidth and staff
    support to get these proposals done right? So that is an
    internal SEC question in resourcing. And just with the sheer
    number of proposals, how can we make sure that some of the
    smaller entities that would like to weigh into the process with
    these abbreviated comment periods, how can we be sure that we
    get the resource balance right, both at the SEC and among those
    who have something to say about the proposed regulations?
        Mr. Lizarraga. Thank you, Senator. With regards to the
    first part of your question I have not been privy to the
    internal decisionmaking so I am not in a position to comment on
    that. But I do think that it is important for stakeholders to
    have an opportunity to comment on these proposals.
        In some instances, smaller issuers do have some relief
    included for them. But as a general matter I believe in the
    principle of stakeholders having an opportunity, a meaningful
    opportunity, to comment on these proposals.
        Senator Tillis. Mr. Uyeda.
        Mr. Uyeda. Yes. I believe that the ability of all
    stakeholders, whether large or small, to comment as part of the
    Administrative Procedure Act notice and comment process is
    critical to make informed decisions and have the rational basis
    for those decisions as required by law.
        Senator Tillis. Thank you. I do believe there has been some
    positive discussions with the SEC to discuss this issue, and I
    am going to continue to look at that. I have spoken with
    Members on the other side of the aisle who share the concern.
        Mr. Uyeda, thank you for your comments. Congratulations
    again to all three of you for your nominations.
        Senator Smith. Thank you, Senator Tillis.
        Senator Warren is recognized for 5 minutes.
        Senator Warren. Thank you, Madam Chairman.
        Before I dive into my questions I would like to briefly
    address the ethical standards to which we hold our Government
    officials.
        Mr. Barr, you are nominated to serve as one of the Nation's
    most powerful regulators. Ethics rules require you to divest
    your holdings in stocks and other investments, which include
    investments in at least half a dozen cryptorelated companies,
    if you are confirmed.
        But I previously asked you if you would go further and make
    the same historic ethics commitments that several other Fed
    nominees have made. Will you commit not to seek employment or
    compensation, including as a result of board service, from any
    company that has a matter before the Fed or any financial
    services company for 4 years after you leave Government
    service?
        Mr. Barr. Thank you, Senator Warren. I have committed to
    doing that, and I will do that.
        Senator Warren. I very much appreciate that. You know,
    these commitments are important because one of the key
    challenges that all three of you will face, if confirmed, is
    crypto. Last week, the cryptocurrency market tanked, again. The
    latest crash was triggered by a run on Terra, until recently
    the third-largest so-called stablecoin by market cap. It turns
    out it was not so stable. If you put $1,000 into Terra USD 10
    days ago, while it was still being promoted as a safe bet,
    today you would get $90 back.
        And Terra is not alone. A thousand dollars invested in
    Bitcoin in November would be worth $438 today. In fact, the
    average investor who put money into this can't-miss investment
    since last fall is underwater, a fact that the celebrity
    endorsers seem to have skipped over.
        But let us talk about who really lost money--not the rich
    folks, not the insider. No, it is ordinary investors. Online
    investor forums have been flooded with harrowing posts by
    people who feel they have nothing left and no way out, some
    with their life savings wiped out, and it smells a lot like
    2008.
        So what I would like to do is run through protections for
    ordinary investors in the cryptomarket and how they compare to
    protection in other financial markets. So Mr. Barr, if I can,
    let us start with you. If I bought a company's stock, even the
    most hyped-up, junkiest one listed on the New York Stock
    Exchange, could I be reasonably confident that the company is
    following basic rules that protect against fraud, insider
    trading, and sloppy cybersecurity protocols?
        Mr. Barr. Thank you, Senator Warren. The area of
    jurisdiction obviously is within the expertise of the SEC, but
    I think that is a reasonable basis for concluding that.
        Senator Warren. OK. So there would be that protection,
    because right now stablecoin and cryptotoken users are not
    getting that same protection. Now some stablecoin boosters
    claim they are safe because their stablecoins are backed by
    real assets like treasuries and cash, not fake tokens and an
    algorithm. But during last week's market turmoil Tether, the
    world's largest stablecoin market cap, broke its dollar peg,
    and that was scary, because it is an open secret that Tether is
    not actually backed one-to-one by treasuries and cash, like it
    claims.
        So Mr. Lizarraga, let me turn to you. If you invested in a
    money market fund would you generally have confidence that the
    fund was actually backed by the liquid, high-quality assets
    that it claimed it was?
        Mr. Lizarraga. Thank you, Senator. Yes. SEC rules require
    money market funds to disclose their assets and to have those
    disclosures audited by independent third parties.
        Senator Warren. All right. And now let us compare that to
    stablecoins. Are stablecoins currently providing audited
    disclosures that allow verification that they are backed by
    quality assets?
        Mr. Lizarraga. To the best of my knowledge, no.
        Senator Warren. No. And, in fact, asked why they would not
    produce audited financial disclosures, Tether's executive said
    it is because they do not want to spill their, quote, ``secret
    sauce.'' I believe them. Tether does not want investors to know
    what is and what is not backing up this so-called stablecoin,
    and that is a gigantic red flag.
        So I am going to do this really fast. Let me do one more.
    Mr. Uyeda, if you wanted to buy stock for a company listed on
    the New York Stock Exchange, could you be reasonably confident
    that the Exchange was not trading against you or had other
    conflicts of interest that could put you at a disadvantage?
        Mr. Uyeda. Yes. Exchanges have to have policies to mitigate
    or eliminate any conflicts of interest.
        Senator Warren. OK. Very much unlike what happens in
    stablecoins.
        So, you know, any investment involves risk. That is how
    markets work. But a market without rules is theft, and right
    now regular investors in stablecoins and crypto are not getting
    the baseline protections available in other financial markets.
    Count the ways that consumers can be cheated. No basic
    protections to protect against fraud. No review of
    cybersecurity. No audited financial disclosures. No protection
    against conflicts of interest. No cop on the beat to police
    market manipulation. There is not even any assurance that the
    other person on the end of the transaction is not a terrorist,
    a money launderer, or a Russian oligarch on the sanctioned
    list.
        I understand the three of you may differ on how to regulate
    the cryptomarket, but addressing these kinds of risks will be
    your responsibility. So while Congress is working to set up
    guardrails on crypto, I urge you to use the tools you already
    have at your disposal to protect investors, to protect our
    financial system, and to protect our economy overall.
        Thank you.
        Senator Smith. Thank you, Senator Warren.
        Senator Kennedy is recognized for 5 minutes.
        Senator Kennedy. Thank you, Madam Chair. Congratulations,
    gentlemen.
        Professor Barr, you worked for Secretary Geithner. And
    would it be fair to say that the two of you and others, as a
    result of the meltdown in '07 and '08, you rewrote the rules
    for Wall Street?
        Mr. Barr. Senator, thank you for that question. I would say
    that as a result of the meltdown Congress rewrote the rules for
    Wall Street, and the regulators have been implementing those
    rules since Congress rewrote them.
        Senator Kennedy. I am not trying to put words in your
    mouth, and I am not trying to trick you. You and Secretary
    Geithner sort of provided the roadmap. Is that accurate?
        Mr. Barr. Thank you, Senator. The Treasury Department
    issued a white paper in the spring of the year after the
    financial crisis, and that roadmap we then translated into
    draft legislation, which we shared with the Hill.
        Senator Kennedy. Professor Barr, do not stall me. I have
    got a lot of other questions.
        After you and Secretary Geithner rewrote the rules for Wall
    Street, and Secretary Geithner left Government, where did he
    go?
        Mr. Barr. Senator, I believe that he went to work for a
    private equity company.
        Senator Kennedy. He is at Wall Street, right?
        Mr. Barr. I will let you define what that is, sir.
        Senator Kennedy. And I believe you just committed to
    Senator Warren that you would not do that.
        Mr. Barr. Senator, when I left the Government before I went
    back to academia, and that is my plan, to return back to
    academia.
        Senator Kennedy. I appreciate that. Do we still have banks
    that are too big to fail?
        Mr. Barr. Senator, I think the answer to that question is
    always a work in progress. I think capital and liquidity in the
    system is very strong. The rules that Congress put in place
    after the financial crisis make it much less likely that such a
    financial firm could get itself into trouble in a way that
    would cause problems for the broader economy.
        Senator Kennedy. Well, if you are confirmed, if JPMorgan
    came to you and said, ``We are going down,'' would you bail
    them out?
        Mr. Barr. Senator, that is not an available option after
    the financial crisis rulebook was put in place. They would be
    put into orderly liquidation under the rules that Congress laid
    out.
        Senator Kennedy. OK. Do you consider yourself a Keynesian?
        Mr. Barr. Senator, I am not an expert either in
    macroeconomics or in Keynesianism, but I would suggest that I
    follow normal, modern rules of macroeconomics, including the
    teachings of Keynes.
        Senator Kennedy. Well, Professor Keynes said that in order
    to get out of a recession he recommended having the Government
    deficit spend in order to stimulate your economy. Do I have
    that right?
        Mr. Barr. That is one of the lessons, yes, sir, of his
    history.
        Senator Kennedy. OK. And a lot of people stop there. They
    do not read the next page. He also said that once your economy
    is recovering you should stop deficit spending, did he not?
        Mr. Barr. Yes. I think the basic idea is that deficit
    spending can be used to bolster the economy in bad times and
    that Government debt should be reduced in good times.
        Senator Kennedy. And we have not done that, have we?
        Mr. Barr. It has been a very long time since the Congress
    has reduced spending in line with expenditures.
        Senator Kennedy. And I believe on the next page, after the
    next page, in Professor Keynes' seminal work and others, he
    said when the economy is recovering, not only do you stop
    deficit spending, I believe he recommended paying the money
    back, did he not?
        Mr. Barr. Senator, I am not sure I can go page by page with
    the precision you have.
        Senator Kennedy. But he said once you stop deficit spending
    in the economy's recovery you eliminate the deficits, did he
    not?
        Mr. Barr. The basic idea, as I said, and I think it is
    consistent with what you are saying, is in good times you
    should be paying things down.
        Senator Kennedy. Yeah. We do not do that either, do we?
        Mr. Barr. As I said, it has been a very long time since
    Congress has had expenditures and revenues aligned.
        Senator Kennedy. Right. All right. And we have got coming
    soon a $250 billion bill--it may be more--to subsidize bit
    tech. Lord have mercy.
        Tell me what the community banks did wrong in '07 and '08.
    You guys punished them pretty hard, and I never have been able
    to figure out what they did wrong in the meltdown.
        Mr. Barr. Thank you, Senator. I am not aware of community
    banks doing something wrong in the financial crisis. There were
    community bank failures----
        Senator Kennedy. Why did you all regulate them so much? Why
    did you put the hammer down on them? I mean, it was the larger
    financial institutions that caused the meltdown, and I might
    add, you all did not put anybody in jail among that group. But
    in doing so, you really heightened regulation on community
    banks, and I am just asking what they did wrong. Was that just
    one of those Chicago drive-by shootings, or what?
        Mr. Barr. Thank you, Senator. I have been always a strong
    proponent of trying to protect community banks from excessive
    regulation, and to work on the safety and soundness of the
    community banking system. I think it is one of the things that
    makes our financial system vibrant and diverse.
        Senator Kennedy. Thank you, Madam Chair.
        Senator Smith. Thank you, Senator Kennedy.
        I now recognize Senator Ossoff virtually, from his office.
        Senator Ossoff. Thank you, Madam Chair, and congratulations
    to the nominees. Thank you for joining us.
        Mr. Barr, have you given any consideration to, and what is
    your assessment of, the distributional effects of monetary
    policy decisions?
        Mr. Barr. Thank you, Senator Ossoff, for that question. I
    think that the Federal Reserve's tools with respect to monetary
    policy are pretty simple ones, and they operate in pretty
    simple ways, broadly, in the economy. So when the Federal
    Reserve is getting its job done right, the economy is working
    well for everyone. And that is especially true if you are a
    low- and moderate-income worker who might be late to the job
    market. If the Federal Reserve is able to, with price
    stability, maintain lower rates, then that is helpful to you.
    And conversely, if the Federal Reserve is not able to do that
    and unemployment is too high or if inflation gets too high and
    inflation begins to erode wage gains, as it is doing today,
    then that is also harmful to working Americans.
        Senator Ossoff. What is the impact on asset valuations of a
    dovish stance by the Fed?
        Mr. Barr. Well, in general, when interest rates are quite
    low, asset prices tend to rise, and when asset prices tend to
    rise those who have more assets have a greater ability to take
    advantage of that opportunity. And conversely, when interest
    rates tend to rise, asset prices tend to be more muted.
        But the overall point is that with respect to monetary
    policy if the Federal Reserve is getting its job done right the
    economy is working for everybody, and I think that is the main
    goal of monetary policy.
        Senator Ossoff. Why, since 2007 and 2008, has the posture
    of not just the Fed but many central banks, necessarily been
    low rates and a lot of extraordinary bond buying that were not
    previously normal policy tools? Why have monetary policymakers,
    in your opinion, taken that posture or felt they needed to take
    that posture in OECD economies, Western economies, since the
    recession of '07, '08?
        Mr. Barr. Thank you, Senator, for that question. In
    general, when rates have been low and central banks have been
    pursuing asset purchases, it is generally speaking for two main
    reasons. One is to mitigate against financial stability risks
    facing the economy at that time, and the second is to
    effectuate an accommodative monetary policy.
        Senator Ossoff. I guess my question is why, in your
    opinion, has it been necessary, in the judgment of central
    bankers for the last 15 or 20 years, to maintain such an
    accommodative monetary policy, or to put it another way, what
    has changed about the structure of the U.S. and the world
    economy such that in order to achieve its dual mandate the Fed
    has deemed it necessary to sustain lower rates than the
    historical norm and more sustained bond buying than the
    historical norm, which, as we have just discussed, one of the
    impacts of that has been to pump up asset valuations, which has
    distributional effects that we have discussed. Why has that
    needed to be or been the posture for the last 15 years? What
    has changed?
        Mr. Barr. Thank you, Senator Ossoff. In general, there have
    been a couple of periods where interest rates were rising, but
    in general, when rates were low during those periods and when
    bond buying was important it was because either financial
    stability concerns facing the economies at those times or
    because of the need for monetary policy accommodation given the
    weakness of the economies during those times----
        Senator Ossoff. Forgive me. I am not in the room so I do
    not mean to interrupt you in a rude way. But my question is
    what has changed structurally about our economy such that in
    order to maintain financial stability and in order to sustain
    what central bankers deem to be adequate aggregate demand it
    has been necessary for rates to be aberrantly low and for bond
    buying to be aberrantly high? Why has that been necessary in
    the last 15 or 20 years, where it was not before? What changed
    in the structure of our economy does that suggest or represent?
        Mr. Barr. Thank you, Senator, and sorry for not
    understanding the nature of your question before. But there is
    significant debate in the academic literature about the answer
    to your question. Some of it has to do with changing
    demographics in advanced industrial economies. Some of it has
    to do, likely, with perceived overall lower extent of potential
    investment returns. Some of it has to do with a very high
    savings rate in most but not all of the advanced industrial
    economies. And people believe, academics believe that those
    factors and others may have, for a long period of time, muted
    effectively what the neutral interest rate it.
        So that is a long answer to your question.
        Senator Ossoff. Madam Chair, could I have the indulgence of
    one more minute?
        Senator Smith. Without objection.
        Senator Ossoff. Thank you. Please proceed, Mr. Barr,
    concluding the answer to that question, and then, just if you
    would, answer the following question. How would you, or should
    you, on the Open Market Committee consider the market effects,
    the impact on asset valuations of your decisions? And I think
    the answer cannot be not at all, because it is at least a
    mechanism of action for monetary policy. But to what extent
    should the Fed consider whether, for example, violating forward
    guidance will have effects on volatility? Should that be part
    of your decisionmaking calculus? How will it be?
        So again, in sum, please finish the analysis, which I found
    very interesting and I think the Committee needs to hear on why
    rates have had to be low and bond buying has needed to be so
    aggressive, and then talk to me about how you will think about
    the markets when you make your decisions. And that will be my
    final question.
        Mr. Barr. Thank you, Senator. Very briefly, I think, again,
    the tools of monetary policy are relatively simple and they
    affect the economy primarily through the Federal Reserve's
    targeting of the Federal funds rate, and secondarily through
    adjustments to the balance sheet of the Federal Reserve, and a
    third way through expression of forward guidance.
        And the primary goal of all these efforts is to bring
    inflation down to the target level of 2 percent. Again, it is,
    I think, a pretty simple goal. It is hard to achieve, but being
    clear about that objective I think is quite important.
        Senator Smith. Thank you, Senator Ossoff.
        I now recognize Senator Hagerty for 5 minutes.
        Senator Hagerty. Thank you, Madam Chair and Ranking Member
    Toomey. Thank you. And to our nominees, welcome.
        I would like to start with you, Mr. Lizarraga, about SEC
    rulemaking. Over the years we have seen the Commission propose
    rules that interact with one another on outstanding proposals.
    For instance, the Securities Lending Rule, the Securities-Based
    Swap Rule, and the Short Disclosure Rule all impact similar
    markets, but they were proposed individually by the Commission.
        With such an interconnected financial system it is
    important, I believe, to understand how these rules interact
    with one another. I am first curious, do you believe, like I
    do, that it is important to consider how rules interact with
    one another when they are proposed by the Commission?
        Mr. Lizarraga. Thank you, Senator. That is a good question,
    and as a general principle I do believe that it is important to
    assess whether there is any overlap among rulemaking without
    prejudging anything that is pending currently. But if
    confirmed, I do look forward to working with the Commission
    staff on assessing just the overall makeup of the current
    rulemaking.
        Senator Hagerty. Yeah. I would encourage the Commission,
    and if you are confirmed, your leadership on the Commission to
    make certain that proper due diligence is undertaken, because
    markets are highly interactive and the rules do overlap as they
    touch various components of the market, but it needs to be
    taken with a more holistic view, many times. And so I would
    encourage you, and hope I could get your commitment to carry
    out proper due diligence on the intersection of rules when they
    occur, to make certain that they achieve the proper goal when
    taken together.
        Mr. Lizarraga. Sir, I am happy to take a deeper dive into
    this question, if confirmed.
        Senator Hagerty. Thank you. I appreciate it.
        Mr. Barr, can I turn to you to talk about bank capital?
    Looking back on the spring of 2020, when the economy was truly
    in dire straits, our banking system weathered the storm, I
    think, remarkably well. The Federal Reserve characterized the
    banking sector at that point as, quote, ``a source of strength
    in an otherwise tumultuous period.''
        Mr. Barr, my question to you, in your answer earlier to
    Senator Moran you seemed to agree that 2020 provided real-world
    evidence that capital levels in our banking system were
    sufficient. And my question now is will you commit to relying
    on data and not ideology when assessing adding to regulatory
    requirements from capital to liquidity and beyond?
        Mr. Barr. Thank you, Senator. Yes, I would commit to being
    evidence-driven, data-driven in my approach to capital and
    liquidity regulation and in regulation more broadly.
        Senator Hagerty. I think that is absolutely essential for
    certainty in our marketplace. Having been on the other side of
    this, having been regulated in the banking environment and
    beyond, that is terribly important for certainty. So I
    appreciate your answer to that question.
        Next I would like to turn to an area that has just,
    frankly, troubled me for some time, and it is an area that you
    had a great deal to do with in a prior role, and that is
    regarding the CFPB. And as a key author of the legislation that
    created the CFPB you designed it in a way that made the Bureau,
    in my view, accountable to the American people because you
    placed it within the Fed and outside of the appropriations
    process.
        I serve on the Appropriations Committee. I appreciate very
    much how this structure has actually shielded the CFPB from
    necessary oversight, and it has allowed the CFPB, I think, to
    become a politically polarizing body, perhaps one of the most
    in Federal Government.
        So I would like to hear your thoughts on why you believe
    that the CFPB should be exempt from the appropriation process,
    or do you have a different thought at this point in time?
        Mr. Barr. Thank you, Senator, very much for that question.
    I think there is always a balance in regulatory agencies
    between fostering accountability and fostering independence,
    and it is a judgment that Congress gets to make, and Congress
    chose, in this particular case, exactly how to structure the
    agency--the choices about placement, the choices about
    approach.
        Congress can make a different choice, but if you look at
    the Federal Reserve, if you look at the OCC, if you look at the
    FDIC, those institutions also are outside of the appropriations
    process and that----
        Senator Hagerty. Indeed, but they are very different type
    of institutions, and the approach and the result has been quite
    different. I will follow up given the lack of time, with
    further questions for the record on this, but I would be very
    interested in your perspective and thoughts because I am very
    unhappy with the way things are working right now.
        Thank you. Thank you, Chair.
        Senator Smith. Thank you, Senator Hagerty.
        So the Chair now recognizes herself for 5 minutes, and I am
    going to be brief because I know it has been a long morning.
    Congratulations to all of you and thank you so much for being
    here.
        Mr. Barr, I am going to direct my questions to you. I want
    to follow up on the conversations that you and I had when we
    met around CRA. I think, as I indicated, and as we spoke, I was
    very happy to see the Fed and the FDIC and the OCC come
    together earlier this month, I think it was, to propose new
    rules for implementing the Community Reinvestment Act. I think
    this is long overdue, something that is very important to do.
        And I want to just follow up on this. You know, I think the
    pandemic has really shown us how stark the need is and how the
    challenges of our economy have not fallen disproportionately on
    everybody in our economy because of the pandemic, that it is
    rural and majority minority communities that have had the
    greatest impact, which is what the CRA was designed to really
    address.
        So could you talk to me a little bit, talk to us a little
    bit, about if you were confirmed, you would be joining the Fed
    midway through the rulemaking progress. I would like to
    understand a little bit about what your focus would be and what
    your priorities would be with regard to CRA implementation?
        Mr. Barr. Thank you very much, Senator. I appreciate the
    question. I think the Community Reinvestment Act has played an
    important role in helping banks and thrifts around the country
    over the years to serve all their communities, and I was very
    encouraged by the Community Reinvestment Act draft rule. If
    confirmed as Vice Chair and as a Governor I would be working
    with my colleagues, both at the Fed and at the other agencies,
    to seek and to understand and to evaluate all the public
    comment that I hope the agencies get, to understand the effects
    on the banking sector and the effects on communities and civil
    rights organizations. I think all of that public comment would
    be very helpful.
        And then, again, if confirmed, my thought would be to work
    with colleagues to get that rule in place expeditiously.
        Senator Smith. And do you think that the current economic
    conditions that we are seeing, the challenges that they
    present, do you think that elevates the urgency and the need to
    modernize our approach with implementing the CRA?
        Mr. Barr. Thank you, Senator. Yes, I do think that when
    there is greater economic uncertainty, when there is greater
    difficulty for people navigating the financial system, it is
    important to have certainty in these areas.
        Senator Smith. Thank you very much.
        In the interest of time I am going to cede back my time,
    and I recognize Senator Lummis for 5 minutes.
        Senator Lummis. Thank you very much, Madam Chairman, and
    during the course of my 5 minutes I would like to invite
    members of the families of our nominees to take a breath,
    remove your masks for 5 minutes if you wish. I know it can be a
    long haul with those masks on.
        Mr. Uyeda, great to see you again. Thanks for being here.
    Congratulations on your nomination.
        The SEC recently released Accounting Bulletin 121. This is
    the SEC staff. And they stated that reporting companies, and
    most importantly, their custodians should hold digital assets
    as an on-balance-sheet liability. I am really concerned about
    that because I think that actually weakens investor protections
    because in the event of insolvency customer assets are safer
    from creditors being held off balance sheets and further
    segregated from the company's assets.
        Do you have any thoughts on this?
        Mr. Uyeda. Thank you for your question on this. So am
    familiar with the Staff Accounting Bulletin, or SAB as they
    like to call them, the SAB 121, just at a very high level, and
    have not had time to become well-versed in the details or to
    have discussions with the SEC staff about it.
        I will note it was a staff position. It was not approved by
    a vote of the members of the Commission. There has been a
    tremendous amount of concern raised, that I have seen in the
    past week alone, about it. And so if confirmed, it is something
    that I would want to look much more into and have a discussion
    with the staff.
        One of the other concerns, I think, is we have a process
    for whenever there is any new rule of general applicability or
    you attack new conditions or requirements on existing rules to
    approve those through the notice and comment process under the
    Administrative Procedure Act. And when you have something that
    is effectively a rule that calls into question whether it
    should go through that process--and that also raises questions
    about the ability of this Committee to engage in oversight
    under the Congressional Review Act of any rule.
        So if confirmed, I would want to talk with the staff. I
    would also want to talk with the Federal and State banking
    regulators as to how this interplays with their regulatory
    regimes. And then, lastly I would just note that the SAB, the
    bulletin itself expressly states that it is just the position
    of the staff. It is not a rule of the Commission nor has it
    received the official approval of the SEC.
        Senator Lummis. Thank you for your response. I would note
    that the Securities Industry and Financial Markets Association
    and Bank Policy Institute sent me a really detailed letter this
    morning, concerned about the lack of public comment around this
    big shift in policy, and highlighting how this guidance could
    weaken important safeguards around custody of client assets.
        Madam Chairman, I ask for unanimous consent that it be
    entered into the record.
        Senator Smith. Without objection.
        Senator Lummis. And I urge everyone to take a look at it.
    Thank you for your response.
        Mr. Barr, switching to you, good to see you against too. My
    question for you is, do the Basel III capital standards
    establish a separate prudential capital treatment relating to
    on-balance-sheet custody accounts?
        Mr. Barr. Senator, there are particular rules, yes, in the
    Basel framework. Capital treatment is different for customer
    accounts, in general.
        Senator Lummis. It is my understanding that with regard to
    the capital standards at Basel III regarding this subject that
    they do not, but we can discuss that at another time. And that
    is because custody accounts are generally off balance sheet,
    from an accounting perspective. Correct?
        Mr. Barr. Yes, that is correct.
        Senator Lummis. Are you familiar with the Bank for
    International Settlements' proposed prudential treatment of
    cryptoasset exposures?
        Mr. Barr. I have not read the BIS proposal in this area.
        Senator Lummis. OK. Well, I will let you know. To my
    knowledge it is correct that this proposed capital framework
    explicitly declined to create prudential requirements for
    custody of digital assets, and we would be happy to just send
    that to you. If U.S. bank regulators were to impose separate
    requirements around bank custody activities for digital assets
    or if they were required to be accounted for as a liability on
    a bank's balance sheet, that would be different from
    international norms, as I understand them. And so I worry that
    that might make them uncompetitive.
        Can you commit to discussing this further with me?
        Mr. Barr. Yes. I would be happy to discuss this further
    with you, Senator.
        Senator Lummis. Thank you. Thank you, Madam Chairman. I
    urge all Members to look at this important issue as we might
    need to address at this some point. But to all of our nominees,
    again, congratulations. Thank you.
        Senator Smith. Thank you, Senator Lummis.
        So thank you to our nominees for being here today and
    providing testimony. I do not believe we have any other
    Senators who are present and wanting to ask questions. I hope
    that we can work together as a Committee to move forward
    quickly on these nominations of today's nominees.
        For Senators who wish to submit questions for the hearing
    record these questions are due close of business on Monday, May
    23rd, at 5 p.m. To the nominees, we would like to have your
    responses on Tuesday, May 31st, at 5 p.m.
        Thank you again for your testimonies today, and with that
    this hearing is adjourned.
        [Whereupon, at 12:10 p.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 SENATOR JON TESTER
        Good morning, everyone.
        Today's hearing is in a hybrid format. Our witnesses are in-person,
    but Members have the option to appear both in-person or virtually.
        The Committee meets today to consider the nominations of three
    important Presidential nominees:
        First, the Honorable Michael Barr to be a Member and Vice Chairman
    for Supervision of the Board of Governors of the Federal Reserve
    System.
        Next, Mr. Jaime Lizarraga to be a Member of the Securities and
    Exchange Commission.
        And finally, Mr. Mark Uyeda to be a Member of the Securities and
    Exchange Commission.
        We thank the nominees for appearing here today, and welcome their
    families and friends who are in attendance as well as those watching
    from home.
        I also want to extend a warm welcome to Speaker Pelosi who is here
    to introduce Mr. Lizarraga and Senators Stabenow and Peters who will
    introduce Mr. Barr.
        Senator Toomey will introduce Mr. Uyeda.
        To our nominees, thank you for your willingness to serve in these
    important roles.
        We are here today to consider three nominees who, if confirmed,
    will have a lasting impact on our economy.
        We know who powers our economy. It's small businesses, folks on
    main street who create jobs and prosperity for our communities.
        And it's workers.
        It's our job as Members of this esteemed body to support an economy
    that actually rewards their work.
        The nominees before the Committee today will play important roles
    in our efforts to support workers, small businesses, and American
    families.
        Michael Barr is the President's nominee to be Vice Chair for
    Supervision.
        Mr. Barr is a well-respected expert on financial regulation who
    currently serves as the dean for public policy and a professor of law
    at the University of Michigan.
        From 2009 to 2010, Mr. Barr served as Assistant Secretary for
    Financial Institutions at the Department of Treasury, where he played a
    key role in helping the Obama administration work with Congress to
    craft and enact the Dodd-Frank Act.
        Mr. Barr previously served at the White House, and earlier in his
    career, in the Treasury and State Departments under President Clinton.
        Mr. Barr, thank you for your willingness to serve our country
    again.
        Mr. Lizarraga and Mr. Uyeda have been nominated by President Biden
    to be Commissioners at the Securities and Exchange Commission. If
    confirmed, they will join the SEC at a critical time.
        Jaime Lizarraga has worked on financial services policy in Congress
    and played a key role in some of the most impactful pieces of capital
    markets legislation passed by Congress to support working families and
    our country's middle class. The son of Mexican immigrants, he
    understands the important role the SEC plays in protecting consumers.
        He currently serves as a senior adviser to Speaker Pelosi, who is
    here today to support his nomination. Prior to joining the Speaker's
    office, Mr. Lizarraga served in senior level positions on the House
    Financial Service Committee.
        Mr. Lizarraga also served at the Treasury Department, as well as
    the SEC, where he worked as the Deputy Director of Legislative Affairs.
        Thank you, Mr. Lizarraga, for your willingness to continue to
    serve.
        Mr. Uyeda has served at the SEC since 2006 and is currently working
    on Ranking Member Toomey's staff helping our committee navigate some of
    the greatest financial challenges in recent American history. At the
    SEC, Mr. Uyeda has served as counsel for Commissioners Paul Atkins and
    Michael Piwowar. He also served as a Senior Adviser to my good friend,
    Chair Jay Clayton.
        Earlier in his career, Mr. Uyeda worked in private law practice, as
    well as for the California Department of Corporations.
        Thank you, Mr. Uyeda, for your willingness to continue to serve.
        Look folks, these positions are really, really important.
        If confirmed, you all will be on the front lines at a critical
    point in our Nation's history. We are facing challenges that are unique
    and unprecedented, and we need folks serving our country who will
    always put the needs of our country before personal or political
    ideology.
        Hopefully the worst of the pandemic is behind us, but our economy
    is not where it needs to be in terms of its recovery.
        Families are seeing higher costs from the gas pump to the grocery
    store, and while unemployment is at a record low, small businesses in
    Montana and across the country are having trouble finding and keeping
    workers.
        This Committee, under the leadership of Chairman Brown and Ranking
    Member Toomey has confirmed a host of folks to critical positions
    charged with guiding the economy back from the brink. If confirmed, the
    three of you here today will immediately join in that work.
        But before these folks can do their jobs, we have to do ours. Our
    institutions have to be fully staffed if they're going to do their jobs
    and meet the challenges facing our country.
        We have a lot more work to do here to support workers, to support
    small businesses, to lower costs for working families, to increase
    transparency in the market place and to hold bad actors accountable.
        Let's get to it.
        Ranking Member Toomey.
                                     ______

                PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
        Thank you, Mr. Chairman.
        We're here today to consider three nominations: Michael Barr to be
    Fed Vice Chair for Supervision, and Mark Uyeda and Jaime Lizarraga to
    be SEC Commissioners.
        These nominations remind us of the importance of financial
    regulators abiding by their respective statutory mandates. This
    principle should be nonpartisan.
        A fundamental aspect of a properly functioning democratic society
    is that important public policy decisions should be made by elected,
    accountable representatives. Otherwise, what's the point of the
    elections?
        Unfortunately, I'm deeply concerned that financial regulators,
    including the Fed and SEC, are increasingly straying into contentious
    political issues wholly unrelated to their mandates and expertise.
    These include issues like what to do about global warming, social
    justice, and even education policy.
        No doubt, these are important issues. But, they're wholly unrelated
    to the limited statutory mandates and expertise of financial
    regulators.
        The Fed, for instance, has been weighing in on every one of these
    contentious issues. Some intend to use the Fed's expected climate
    scenario analysis to steer capital away from carbon intensive
    industries.
        All 12 Reserve Banks have sponsored a ``Racism in the Economy''
    series where invited speakers advocated for race-based reparations and
    defunding the police. And the Minneapolis Fed has been actively
    lobbying to change Minnesota's constitution--on the issue of K-12
    education policy.
        Does anyone truly think these activities are within the Fed's
    statutory mandates? Of course not.
        In February, we held a hearing to consider Sarah Raskin's
    nomination to be Fed Vice Chair for Supervision. At that hearing, I
    cautioned that the hearing was not just about vetting Ms. Raskin. I
    noted that it was a referendum on the independence of the Fed in the
    face of pressure from the left to use the central bank to allocate
    capital to address global warming.
        Addressing contentious issues like global warming requires
    political decisions involving tradeoffs, like how expensive should
    credit be for drillers in order to make gas scarcer and costlier for
    motorists? And if we limit domestic oil and gas production, causing
    energy prices to rise and consumers to pay more, how much more is
    appropriate? And if we limit production but other countries do not,
    warming won't slow--but should we do it anyway?
        In a democratic society, those tradeoffs must be made by elected
    representatives, who are accountable to the American people--not
    unelected central bankers.
        Ms. Raskin's prior advocacy that unelected financial regulators
    should misuse their powers to address global warming led to the
    Senate's bipartisan rejection of her nomination. That rejection sends a
    powerful message to Fed nominees like Professor Barr: all Fed Governors
    must commit to not exceed the Fed's limited statutory mandates and by
    doing so help to ensure the continuing independence of the Fed.
        The need for a Fed that's focused on its mandates is especially
    critical with inflation at a 40-year high. Even though wages are
    rising, prices are rising faster, which is causing workers-especially
    lower-income workers-to fall further and further behind.
        I hope Professor Barr will acknowledge that inflation is severe and
    commit to doing ``whatever it takes'' to bring inflation back down.
        Professor Barr certainly has an impressive background and relevant
    experience to serve as the Fed Vice Chair for Supervision. However,
    some of his previous work raises some concerns about his views on
    financial regulation.
        He strongly opposed the bipartisan S. 2155 bill that Senators
    Tester and Warner helped craft, which merely enacted modest and
    sensible reforms to Dodd-Frank. For example, Professor Barr was
    critical of a provision meant to relieve financial institutions from
    having to retain capital on deposits at central banks. But, after all,
    central bank deposits are risk free.
        He has also argued that ``climate change presents severe long-term
    risks to the economy and financial stability that must be urgently
    addressed today.'' As I've discussed, there is no systemic risk to the
    banking system posed by gradual changes in the Earth's average
    temperature.
        I'll be interested in hearing Professor Barr describe the actions
    he believes the Fed should take to address these supposed risks.
        Keeping financial regulators apolitical and independent is as
    important now as it has ever been. To my Democratic colleagues who
    favor using financial regulators to address contentious political
    issues, I ask: how would you feel about a future Republican
    administration, under the pretense of ``financial stability'' risk,
    using the Fed to allocate capital toward defense spending, financing a
    border wall, or offshore oil development?
        But once the precedent is set, the potential for further abuse--by
    both political parties--is limitless.
        In addition to Professor Barr, today, we'll also hear from two
    nominees for the SEC. Mr. Lizarraga has worked on financial services
    issues on Capitol Hill for many years. I commend him for his
    longstanding commitment to public service.
        And, in a few moments, I will introduce Mr. Uyeda, who is
    exceptionally well qualified to serve as an SEC Commissioner. I look
    forward to hearing from both of them.
                                     ______

                     PREPARED STATEMENT OF MICHAEL S. BARR
       To Be a Member and Vice Chairman for Supervision of the Board of
                    Governors of the Federal Reserve System
                                  May 19, 2022
        Chairman Brown, Ranking Member Toomey, and other Members of the
    Committee, it is my honor to appear before you today for this
    confirmation hearing. I am grateful to President Biden for nominating
    me to serve as Vice Chair for Supervision and a Governor of the Federal
    Reserve Board.
        My wife of 28 years, Hannah Smotrich, joins me today in the hearing
    room. I'm grateful as well to be joined by my three children--Etai is
    here with us in person, and Avital and Dani are joining us online. I'm
    thankful for their love and support. My parents, David and Debbie Barr,
    imbued in me the deepest values of integrity and public service, and
    they are here with us in spirit today.
        For over 25 years, I have been working to help make the financial
    system safer, fairer, and better focused on the needs of businesses and
    households.
        I began my Government career at the U.S. Department of State, where
    I worked on international economic matters. I then spent 6 years at the
    U.S. Department of the Treasury, helping to strengthen the Community
    Reinvestment Act, build community development financial institutions,
    support fair lending and combat predatory lending abuses, and help bank
    the unbanked. I also worked at the Office of Management and Budget,
    where I ran an interagency task force advancing economic development in
    Washington, DC.
        I joined the faculty of the University of Michigan over 20 years
    ago, following the advice of my mentor and friend Ned Gramlich, former
    Director of the University of Michigan's School of Public Policy and
    longtime Governor of the Federal Reserve Board. At Michigan, I've
    taught domestic and international financial regulation, conducted
    research about a wide variety of issues in finance, and coauthored a
    leading textbook on financial regulation, law, and policy. Along the
    way, I've also developed programs to help small business owners in our
    local communities in Michigan.
        In the wake of the global financial crisis of 2008, I served as
    assistant secretary of the Treasury for financial institutions, and I
    helped to develop and work with Congress to enact the Dodd-Frank Wall
    Street Reform and Consumer Protection Act of 2010. That basic framework
    is still with us today, and it has helped make the financial system
    stronger and work better for all of us. With the economy battered by
    the financial crisis, my team and I also worked to support struggling
    small businesses and households and community development financial
    institutions.
        After my time at Treasury, I stayed engaged in critical issues
    affecting both national and international financial policy, while also
    deepening my commitment to our local communities in Michigan, working
    with community banks in the region, and learning from advising private
    sector institutions.
        For the last 5 years, I've served as dean of the Gerald R. Ford
    School of Public Policy at the University of Michigan. I've loved
    serving our community, and have worked hard to advance bipartisan
    engagement, listening and talking to one another across our differences
    in a way that can deepen our democracy and get practical things done.
        If confirmed as Vice Chair for Supervision, I would be strongly
    committed to the Federal Reserve's responsibilities to ensure that the
    financial system is robust and resilient, that innovation flourishes
    with clear rules of the road, and that the financial system operates
    fairly.
        Additionally, an important part of the roles for which I have been
    nominated is to serve on the Federal Open Market Committee. Inflation
    is running far too high, affecting communities all across our country.
    I would be strongly committed to bringing down inflation to the Federal
    Reserve's target, consistent with the Federal Reserve's dual mandate of
    maximum employment and price stability.
        If confirmed, I look forward to working together with all of you on
    this committee, where I have spent much time learning from you and
    collaborating with you on critical issues for our country.
        I would be honored to be confirmed as Vice Chair for Supervision
    and Governor. Thank you for your consideration, and I look forward to
    your questions.

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                    PREPARED STATEMENT OF JAIME E. LIZARRAGA
               To Be a Member, Securities and Exchange Commission
                                  May 19, 2022
        Chairman Brown, Ranking Member Toomey, distinguished Members of the
    Committee: Thank you for the opportunity to appear before you today. It
    is an honor to be nominated by President Joe Biden to serve as a
    Commissioner of the Securities and Exchange Commission.
        I would also like to thank House Speaker Nancy Pelosi for
    introducing me. I am proud to have been part of her team for nearly 15
    years.
        Witnessing her extraordinary leadership up close, and her
    dedication to building a more prosperous future for America's working
    families, has been the privilege of a lifetime. It has also prepared me
    well for the role of SEC Commissioner.
        At its core, the SEC's mission is about the aspirations of all
    working families to secure a prosperous financial future, with the
    confidence that their interests will always be protected.
        To me, the SEC's mission is also deeply personal--dating back to my
    days growing up in a southern California working-class community.
        Neither of my parents graduated from high school. They immigrated
    from Mexico and began their life in the United States as farm workers
    in California's Central Valley.
        Like millions of families in our country, they sought opportunity
    wherever they could.
        In the absence of stable job prospects, my parents decided to run a
    Mexican food business out of our home. On nights and weekends, my
    sister and I helped them prepare the food, mostly Mexican-style
    sandwiches called tortas. My father then sold the food from his car at
    soccer games and at community shopping centers.
        Growing up, my father always encouraged me to study the newspaper's
    financial pages. He taught me the importance of saving and investing
    for long-term financial security.
        In those years, and unlike now, access to safe and mainstream
    investment opportunities was virtually nonexistent. This limited my
    parents' wealth-building potential and their ability to grow their
    small business into a more established enterprise.
        My parents were also unable to save for retirement and faced
    constant financial strains. Their goal was for my sister and me to get
    an education. What little they had, they invested in us. I often asked
    how our financial system could have served their needs better.
        This life experience inspired me to pursue a career in public
    service. I focused on financial services policy, where issues of
    investor protection, financial stability, and economic security all
    come together.
        In more than three decades of public service, both as a House
    leadership and committee staffer, I played key roles in all financial
    regulatory legislation moving through Congress--from the Sarbanes-Oxley
    Act to the Dodd-Frank Act, and more. I also served as a presidential
    appointee at the U.S. Treasury and at the SEC, working to ensure
    congressional mandates were effectively implemented.
        A key lesson from my long experience is that fair and transparent
    markets benefit everyone--whether a pension plan participant, a retail
    investor, or parents investing in their children's future education.
        The most enduring lesson is from the 2008 financial crisis: poorly
    regulated markets can have devastating consequences for working
    families and for the broader economy.
        If confirmed, I look forward to bringing my experience and unique
    perspective to the SEC.
        It would be an honor to work with the agency's talented staff and
    with my fellow commissioners to uphold and strengthen the SEC's mission
    of protecting investors, promoting fair, orderly, and efficient
    markets, and facilitating capital formation.
        I would approach the SEC's vital mission through the eyes of
    working families like my own and work with my fellow commissioners to
    make sure congressional mandates are robustly implemented. I would
    focus on making sure our regulations keep pace with rapid technological
    changes in our markets. And I would focus on facilitating capital
    formation for our job-creating small businesses, particularly in
    underserved areas.
        Our country's future prosperity depends on robust oversight of our
    capital markets. To me, this means safe and transparent markets that
    foster a level playing field for all market participants, meaningful
    protections for investors, and broad-based access to capital.
        While my parents, Esther and Enrique Lizarraga, and my sister,
    Maria Esther, were unable to be here in person today, they're with me
    in spirit and are watching at home in California.
        I am proud to be joined today by my wife of 22 years, Kelly
    Lizarraga, and our five children--Victoria, Diego, Elena, Samuel, and
    Alexandra. Also joining us is my mother-in-law, retired Rev. Paula
    Werner.
        Thank you again for the opportunity to speak today, and I look
    forward to answering your questions.

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                    PREPARED STATEMENT OF MARK TOSHIRO UYEDA
               To Be a Member, Securities and Exchange Commission
                                  May 19, 2022
        Chairman Brown, Ranking Member Toomey, and Members of the
    Committee, thank you for the opportunity to appear before you today.
    With me in the hearing room is my wife Masae and watching remotely from
    California are my parents, sister, and extended family.
        I am honored to have been nominated by the President to serve as a
    member of the Securities and Exchange Commission (SEC). I have a deep
    commitment to its mission of protecting investors, maintaining fair,
    orderly, and efficient markets, and facilitating capital formation.
        My first job was spending summers on my grandfather's produce route
    in Southern California. He drove a small truck, and I would help him
    pull cartons of fruits and vegetables off the truck to deliver them to
    small restaurants and retailers. It was a family business, run by him
    and his two younger brothers.
        My grandfather kept up this physical labor well into his 70s. Every
    day, even during the hot summers, he would wear a collared, button-down
    shirt and work trousers, which were always neatly ironed. To me, that
    image of him has always represented the dignity of work.
        My grandfather had to build his business twice. First, in the
    1930s, he dropped out of high school to support his five younger
    siblings after both of his parents died. The second time was after
    World War II, when he and his family--including my mother--lost nearly
    everything when they were forcibly incarcerated in internment camps
    pursuant to Executive Order 9066 because they were Americans of
    Japanese ancestry. At the same time, my uncle was fighting in Europe
    with the U.S. Army's segregated 442nd Regimental Combat Team, where he
    was awarded the Bronze Star and served in Company ``E'' alongside
    former Senator Daniel Inouye.
        Finding startup capital was difficult for my grandfather,
    particularly in an era where racial discrimination was common. Yet he
    persevered and accomplished the American dream. The story of the
    immigrant family business has been often repeated in the Asian American
    community--whether a restaurant, dry cleaner, nail salon, or donut
    shop--and that perspective has helped shape my views on the need for
    start-up financing and capital formation.
        Since graduating law school in 1995, I have continuously practiced
    corporate and securities law, spending the vast majority of this time
    in public service. During my career, I have advised clients on, and
    helped to implement, major securities legislation, including the
    National Securities Markets Improvement Act, the Private Securities
    Litigation Reform Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, and
    the JOBS Act.
        In 2004, I became chief advisor to California's securities
    regulator, where we pursued an investor protection agenda and worked
    with the SEC and other State regulators. If confirmed, I would be one
    of the few State securities regulators ever to serve as a member of the
    SEC.
        During my past 15 years as an SEC civil servant, I have had the
    privilege of advising Commissioners and Chairmen as part of the
    executive staff and have been part of the Division of Investment
    Management.
        Since January of last year, I have been detailed by the SEC to
    serve as securities counsel to Ranking Member Toomey as part of this
    Committee, where it has been an honor to work with staff on both sides
    of the aisle, including Chairman Brown's staff.
        Before I close, I want to express my gratitude to the support and
    well-wishes that I have received from my SEC coworkers on this
    nomination. Their efforts to protect investors have, and will continue
    to, inspire me every day.
        Thank you and I look forward to your questions.

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            RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                          FROM MICHAEL S. BARR

    Q.1. Where have you excelled in past positions in attracting,
    hiring, and promoting people of color in positions in your
    organization? Where might there be room for improvement?

    A.1. In my role as Dean of the Gerald R. Ford School of Public
    Policy, I have taken a holistic approach to diversity, equity,
    and inclusion, including making it a top priority to attract,
    hire, retain, and promote people of color, while adhering to
    Michigan and Federal law. We expanded our pipeline approach,
    including working with local high schools, expanding our
    programs for juniors in college, recruiting in our
    undergraduate and graduate programs, developing predoctoral and
    postdoctoral diversity programs, diversifying our Ph.D.
    program, and hiring diverse faculty and staff. I took a similar
    approach in my roles at the United States Department of the
    Treasury, where during both the Clinton and Obama
    administrations I prioritized diverse hiring, starting with
    internships and working all the way through senior policy
    positions. There is always room for improvement in this work.

    Q.2. What specific measures will you use to evaluate the
    success of the Federal Reserve in understanding and addressing
    the needs of Black, Indigenous, and people of color (BIPOC)?
    And, will you work with the Chair and Board to keep Congress
    apprised, as appropriate, on the progress being made on these
    measures?

    A.2. If confirmed, I will work with Chair Powell and other
    members of the Board to keep Congress apprised, as appropriate,
    on the progress being made to understand and address the needs
    of BIPOC communities. When evaluating the Federal Reserve's
    success in understanding and addressing the needs of BIPOC
    communities, I will consider measures of employment and price
    stability, fair lending enforcement, financial inclusion, staff
    hiring and retention, diverse leadership at the Board and
    Reserve Banks, outreach to civil rights and community
    organizations, and other measures to ensure that Federal
    Reserve policies help all Americans.

    Q.3. What is your plan for creating an inclusive working
    environment for employees within your office?

    A.3. If confirmed, I would continue my long-standing commitment
    to a holistic approach to diversity, equity, and inclusion,
    including through staff hiring and retention, research, public
    engagement, and other activities.

    Q.4. With global uncertainty because of Putin's illegal
    invasion of Ukraine, increased cybersecurity risk, the rise in
    highly volatile and unregulated cryptoassets, and the
    existential threat of climate change--understanding the
    interconnectedness of our global financial system is critical.
        Do you agree we need to make sure global systemically
    important banks are prepared to weather all types of economic
    shocks with strong capital requirements and stress tests?

    A.4. Yes.

    Q.5. How will you ensure that risky bets by Wall Street
    megabanks do not end up hurting workers and businesses on Main
    Street?

    A.5. I think it is critical that large, complex financial
    institutions have strong capital and liquidity positions, are
    well supervised, and operate within clear rules of the road.
    Stress testing and living wills, together with requirements for
    total loss absorbing capacity and orderly liquidation
    procedures, help to reduce the risks that such large, complex
    institutions might pose to workers and businesses on Main
    Street.

    Q.6. As Assistant Treasury Secretary for Financial Institutions
    following the 2007-2008 financial crisis, you saw firsthand
    that when regulators do not proactively limit risks to the
    entire financial system and keep Wall Street firms in check,
    workers, homeowners, and consumers pay the price. What are the
    biggest risks to our financial system right now, and what will
    be your approach to addressing them?

    A.6. There are a wide variety of potential risks to the
    financial system including cyberrisk, Russia's invasion of
    Ukraine and the accompanying global risks to commodities, food,
    and energy, disruptions to global supply chains from the
    pandemic, inflation, and measures to combat inflation,
    fragilities in Treasury markets, the rise of cryptoassets,
    including stablecoins, potential declines in asset prices
    across a wide range of asset classes including housing and
    commercial real estate, nonbank financial intermediation
    including money market mutual funds and nonbank mortgage
    servicing, risks associated with climate change, and other
    factors. If confirmed, my approach would be to focus on the
    need for humility about our ability to predict such events and
    how they would stress the system; therefore, I would focus on
    the resiliency of the financial system in the face of evolving
    uncertainties.

    Q.7. I have long been concerned about the risks of shadow firms
    that provide products and services like banks, but don't play
    by the same tough rules that promote fair competition and
    protect consumers. Stablecoins have been billed as ``safe'' and
    ``innovative'' ways to invest in volatile cryptoassets, but as
    we've seen time and again, it's another wild speculation scheme
    that ends in disaster. What parallels do you see between the
    risky derivatives that led to the subprime mortgage crisis and
    the growing risks to our financial system from crypto,
    stablecoin, and decentralized finance?

    A.7. When new innovations arise in the financial sector,
    financial regulators and the market are often slow to
    understand emerging risks. Our fragmented system of regulation
    means that financial innovation can arise in unregulated or
    lightly regulated spaces in the cracks between existing
    financial regulation. New technologies are creating financial
    products and services that do not fit easily into existing
    regulatory categories. If confirmed, I would be highly focused
    on keeping abreast of financial innovations and determining
    appropriate ways in collaboration with interagency partners to
    mitigate financial risks while fostering innovation.

    Q.8. A recent OIG Report found weaknesses in the Federal
    Reserve's approach to fair lending enforcement. And over the
    years, we see story after story of another Wall Street bank
    that is discriminating against Black and Brown borrowers and
    customers. If confirmed, what are your plans to strengthen the
    Fed's oversight and ensure that the Nation's banks are not
    engaging in discrimination? What are your plans to improve the
    Fed's fair lending examination and enforcement program to
    ensure compliance with all fair lending and antidiscrimination
    laws?

    A.8. If confirmed, I would work with Chair Powell and other
    members of the Board to ensure fair lending enforcement is a
    top priority. Regulators need to improve best practices in
    supervision and enforcement, and advance cooperation across the
    regulatory agencies and the Department of Justice.

    Q.9. During his January 2022 nomination hearing before the
    Committee, in response to a question from Senator Tester about
    the importance of maintaining Federal Reserve independence,
    Chairman Powell stated, ``it's essential that we work for all
    Americans, and that's what we do. And it's essential that we do
    that without regard to political considerations like the
    election cycles or particular political party's views on issues
    that are outside our mandate. You know, we have to focus on the
    job Congress has given us, which is maximum employment and
    price stability and also the payment system and financial
    stability and other things.''
        Do you agree with Chairman Powell?

    A.9. Yes, I agree with Chair Powell.

    Q.10. Please describe why Federal Reserve independence is
    important.

    A.10. Independence is critical for the Federal Reserve to
    effectively carry out its congressional mandate to promote
    maximum employment and price stability. Politics should play no
    role in setting monetary policy. If politics were to come into
    play in Federal Reserve decision making, it could undermine
    effective and objective policy making, and both the market and
    the public would lose confidence in the Federal Reserve. I am
    committed, if confirmed, to adhere strictly to a nonpolitical,
    data-driven, independent approach to policymaking.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
                          FROM MICHAEL S. BARR

    Q.1. Monetary Policy--Federal Open Market Committee (FOMC)
    participants have reevaluated their views on the appropriate
    path of policy in light of recent inflation. In the March 2022
    Summary of Economic Projections, all participants see inflation
    slowing. The median FOMC participant sees headline PCE
    inflation falling to 4.3 percent this year. However, the median
    FOMC participant only projects raising the Federal funds rate
    to 1.9 percent by year end. In real terms, interest rates would
    still be sharply negative. While these projections are not a
    committee forecast, these numbers suggest that participants
    generally believe that inflation will fall despite real
    interest rates remaining in negative territory.
        How can the Fed curtail inflation when real interest rates
    remain negative?
        Does this imply that the neutral interest rate is now
    negative, and so a less negative rate can be contractionary?

    A.1. Inflation remains far too high, and that's hurting
    families and businesses across the country. If confirmed, I am
    fully committed to bringing inflation down to the Federal
    Reserve's target of 2 percent. Changes to the Federal funds
    rate, as well as forward guidance, and reductions to the
    Federal Reserve's balance sheet, affect market interest rates
    across the yield curve and financial conditions more broadly.
    Tighter financial conditions, which help bring down demand,
    will put downward pressure on inflation. Easing of supply
    constraints would also tend to put downward pressure on
    inflation. While there is academic debate about the precise
    level of the neutral interest rate, and uncertainty about the
    precise rate at any given point in time, that rate is positive
    over the long term.

    Q.2. In August 2020, the FOMC revised its ``Statement on
    Longer-Run Policy Goals and Monetary Policy Strategy'' to adopt
    flexible average inflation targeting. \1\ This policy entails
    that, ``following periods when inflation has been running below
    2 percent, appropriate monetary policy will likely aim to
    achieve inflation moderately above 2 percent for some time.''
    Inflation now far exceeds the Fed's 2 percent target and has
    hit a 40-year high. CPI inflation was 8.3 percent over the past
    12 months. Over the past 3 years, CPI inflation has averaged
    about 4 percent. In your testimony, you acknowledged that this
    inflation is not consistent with the Federal Reserve's
    congressional mandate. In January 2022, despite this tremendous
    failure, the FOMC unanimously reaffirmed its ``Statement on
    Longer-Run Goals and Monetary Policy Strategy''. The reaffirmed
    statement is identical to the version initially adopted in
    August 2020.
    ---------------------------------------------------------------------------
         \1\ ``2020 Statement on Longer-Run Policy Goals and Monetary
    Policy Strategy'', Board of Governors of the Federal Reserve System,
    available at https://www.federalreserve.gov/monetarypolicy/review-of-
    monetary-policy-strategy-tools-and-communications-statement-on-longer-
    run-goals-monetary-policy-strategy.htm.
    ---------------------------------------------------------------------------
        What should the Fed have done differently in 2020 and 2021?
        How would you modify the Fed's framework so that it
    produces outcomes consistent with the dual mandate?

    A.2. In retrospect, the FOMC should have tightened monetary
    policy sooner. If confirmed, I would be fully committed to
    bringing inflation down to the Federal Reserve's target of 2
    percent. The FOMC's framework was developed during a time of
    persistent low inflation, and during which time inflation
    consistently came in lower than the Fed's forecasts despite
    accommodative monetary policy. It may be appropriate to revisit
    the framework after a review of the current inflationary
    environment and the effectiveness of the Fed's response to it.
    If confirmed, I would look forward to ensuring that the Fed's
    framework is best suited to achieve the dual mandate in a
    variety of economic circumstances.

    Q.3. Roughly how much of the 8.3 percent CPI inflation over the
    past 12 months was due to the Fed keeping monetary policy too
    loose for too long? For example, how much, if any, was due to
    the Fed keeping overnight rates at zero and buying bonds long
    after the economic emergency had passed?

    A.3. It is difficult to apportion the causes of inflation
    across monetary policy, fiscal policy, supply constraints, the
    pandemic, the war in Ukraine, and other factors. If confirmed,
    I would be committed to using the Federal Reserve's monetary
    policy tools to bring inflation down to the Federal Reserve's
    target of 2 percent.

    Q.4. Bank Capital Requirements--In April 2020, the Federal
    Reserve temporarily amended the supplementary leverage ratio
    (SLR) to allow banks to continue taking deposits, lending, and
    conducting other financial intermediation during the COVID-
    related period of stress. \2\ That relief expired on March 31,
    2021, and, as a result, banks cannot exclude central bank
    deposits or U.S. Treasury securities from the denominator of
    the SLR. In conjunction with announcing the expiration of the
    relief, on March 19, 2021, the Federal Reserve announced that
    it would ``soon be inviting public comment on several potential
    SLR modifications.'' \3\
    ---------------------------------------------------------------------------
         \2\ https://www.federalreserve.gov/newsevents/pressreleases/
    bcreg20200401a.htm
         \3\ https://www.federalreserve.gov/newsevents/pressreleases/
    bcreg20210319a.htm
    ---------------------------------------------------------------------------
        Over 1 year later, the Federal Reserve still has not issued
    this proposal. At the same time, the Federal Reserve purchased
    trillions of dollars of securities, flooding the banking system
    with reserves. It appears that without adjustments the SLR is
    serving as a binding capital constraint and restricting banks'
    ability to accommodate customer deposits and intermediate in
    Treasury markets. The Federal Reserve has long believed that
    leverage capital requirements should serve as a backstop to
    risk-based capital requirements, a position adopted by both
    Chair Jerome Powell \4\ and then-Governor Daniel Tarullo, \5\
    among others.
    ---------------------------------------------------------------------------
         \4\ https://www.federalreserve.gov/newsevents/speech/
    powell20170623a.htm
         \5\ https://www.federalreserve.gov/newsevents/press/bcreg/
    bcreg20140408a-tarullo-statement.htm
    ---------------------------------------------------------------------------
        Do you agree that leverage capital requirements, including
    the SLR, should serve as a backstop to risk-based capital
    requirements?
        If so, do you believe the SLR should be modified to ensure
    that it does not serve as the binding capital constraint?

    A.4. Yes, leverage capital requirements, including the SLR,
    should serve as a backstop to risk-based capital requirements.
    With the significant rise of reserves in the system in the wake
    of the global pandemic, the SLR has become more binding than
    when the SLR was finalized. If confirmed, I commit to
    undertaking an evidence-based approach to U.S. capital rules. I
    would review the SLR promptly, together with other capital and
    liquidity rules, to ensure that the rules are efficient,
    effective, and keep capital in the system strong.

    Q.5. During the hearing, you expressed the intent to ``look at
    [capital and liquidity] as a whole rather than piece by piece''
    and noted that this holistic review would include both the SLR,
    stress testing, and the Basel III ``end game.''
        Given your view that current capital in the banking system
    is ``quite strong,'' will you commit that any changes to these
    regulations will seek capital neutrality?
        If non-U.S. jurisdictions implement a less stringent
    version of Basel III, do you believe that U.S. regulators
    should adjust their rules accordingly to maintain the
    competitiveness of U.S. banks?

    A.5. Capital in the banking system today is quite strong. I
    commit to undertaking an evidence-based approach to U.S.
    capital rules. While considering what other jurisdictions are
    doing, the United States should implement capital rules that
    make sense for the United States and keep our financial system
    vibrant and strong.

    Q.6. Stablecoins--In April 2022, I released a discussion draft
    of a bill that would establish a new regulatory framework for
    payment stablecoins. \6\ Specifically, the bill would authorize
    three different regulatory options for payment stablecoin
    issuers: (1) a bank charter, (2) a State-based money
    transmitter or similar license under State law, and (3) a new
    Federal license designed specifically for payment stablecoins.
    In addition, the bill would establish new, standardized public
    disclosure requirements for all three categories of issuers,
    including what assets back the payment stablecoin.
    ---------------------------------------------------------------------------
         \6\ https://www.banking.senate.gov/newsroom/minority/toomey-
    announces-legislation-to-create-responsible-regulatory-framework-for-
    stablecoins
    ---------------------------------------------------------------------------
        Do you believe that stablecoins offer potential benefits
    for consumers? If so, please describe those benefits.
        Do you agree that it is possible to design a regulatory
    framework for payment stablecoins without requiring all issuers
    to be insured depository institutions?

    A.6. Properly regulated stablecoins might provide benefits for
    consumers by facilitating settlement of transactions,
    effectuating crossborder, crosscurrency trade transactions, or
    other use cases. At the same time, stablecoins present investor
    protection and financial stability risks that require a
    comprehensive regulatory framework. The President's Working
    Group report on stablecoins provides a reasonable basis for
    discussion of these issues, although other approaches might be
    possible that would meet core regulatory objectives.

    Q.7. Cryptocurrencies Central Bank Digital Currencies--In
    November 2021, the Federal Reserve, FDIC, and OCC stated that
    they intend to provide banks greater clarity around a series of
    cryptorelated activities by 2022. If confirmed, do you commit
    to working with the FDIC and OCC in fulfilling this commitment
    by the end of 2022?

    A.7. If confirmed, I commit to working with fellow regulators
    to provide banks with greater clarity on cryptorelated
    activities as soon as is practicable.

    Q.8. Central Bank Digital Currencies--If the Federal Reserve
    receives authorization from Congress for the creation of a
    CBDC, there will still be many crucial decisions that the Fed
    will have to make regarding its design and implementation. If a
    CBDC is not adaptable, poorly designed, or excessively
    manipulated by the Government, the public will have other
    options to secure their privacy and ensure low-cost payment
    services.
        Could well-regulated, privately issued stablecoins serve as
    a check on the design and management of any American CBDC?

    A.8. I view well regulated, privately issued stablecoins and a
    central bank digital currency (CBDC) as complementary products,
    rather than substitutes, for a number of possible use cases. It
    would be important to get the design issues right for
    regulation of stablecoins and for the development of a CBDC
    regardless of the presence or absence of the other product. I
    think a CBDC requires significant additional study and
    research. I agree with Chair Powell that the Federal Reserve
    should only move forward with a CBDC with the buy-in of
    Congress and the Executive branch.

    Q.9. Do you think that the Federal Reserve should provide
    direct retail accounts to individual Americans for use with a
    CBDC, or for any other purpose?

    A.9. I think the Federal Reserve's discussion paper on CBDC,
    which focuses on an intermediated model, is an appropriate
    focus for further research and development.

    Q.10. In a 2020 paper that you cowrote, you stated that
    ``Emerging technologies from virtual currencies to mobile
    payments and QR codes present opportunities for central banks
    to advance'' important work on reversing ``troubling
    inequality,'' reducing ``fragmentation,'' and eliminating
    ``predatory practices.'' \7\ Your paper specifically discusses
    central bank digital currencies (CBDCs) as an example of such
    an emerging technology. The paper identifies the activities of
    the People's Bank of China (PBOC) in digital financial
    transactions as potential models to use CBDCs to enhance
    financial inclusion.
    ---------------------------------------------------------------------------
         \7\ M. Barr, A. Harris, L. Menard, and W. Xu, titled ``Building
    the Payment System of the Future: How Central Banks Can Improve
    Payments to Enhance Financial Inclusion'' (Jul. 31, 2020).
    ---------------------------------------------------------------------------
        Should the Federal Reserve use the activities of the PBOC
    and the Chinese Government as a model for financial inclusion
    and a CBDC? Please explain why or why not.

    A.10. No. The Chinese model is not a useful starting point for
    the United States. We have very different political and
    economic systems, and the Chinese model raises privacy and
    other concerns.

    Q.11. Community Reinvestment Act (CRA)--During the hearing, you
    expressed support for the recent proposed rule issued by the
    Federal Reserve, FDIC, and OCC to update the regulations
    implementing the CRA. \8\
    ---------------------------------------------------------------------------
         \8\ https://www.federalreserve.gov/consumerscommunities/files/cra-
    npr-fr-notice-20220505.pdf
    ---------------------------------------------------------------------------
        Will you commit to ensure that any changes to the CRA
    regulations provide clarity, transparency, and objectivity to
    supervised institutions?
        Will you commit to work with me to increase the
    transparency of any CRA-related agreements between banks and
    community groups reached in connection with pending bank
    mergers? If so, will you incorporate those transparency
    measures into any final rule implementing the CRA regulations?

    A.11. Yes, if confirmed, I would commit to working with my
    fellow governors and colleagues at the OCC and FDIC in pursuing
    CRA regulations that provide clarity, transparency, and
    objectivity to supervised institutions and communities. I would
    be pleased to work with your office with respect to the
    transparency of CRA-related agreements reached in connection
    with pending bank mergers.

    Q.12. Consumer Banking and Credit Fees--In a paper entitled,
    ``Behaviorally Informed Regulation'', you and your coauthors
    proposed allowing financial firms to ``deter consumers from
    paying late or going over their credit card limits with
    whatever fees they deemed appropriate, but the bulk of such
    fees would be placed in a public trust to be used for financial
    education and assistance to troubled borrowers.'' \9\
    ---------------------------------------------------------------------------
         \9\ M. Barr, S. Mullainathan, and E. Shafir, ``Behaviorally
    Informed Regulation'' (2012).
    ---------------------------------------------------------------------------
        Why should financial firms have a ``bulk'' of the fees they
    charge for servicing consumer accounts confiscated by the
    Federal Government so that the Government bureaucrats can use
    that money to pursue their social goals?
        Do you still support this proposal?
        If confirmed, will you use your position at the Federal
    Reserve to try to advance this proposal?

    A.12. My paper was a thought experiment with illustrative
    examples designed to highlight how various issues in the
    consumer marketplace could be addressed. The particular thought
    experiment in the paper was designed to highlight the
    difference between the behavioral effects of contingent fees
    and the revenue-generating effects. I would not seek to advance
    this thought experiment as a policy proposal if confirmed to
    the Federal Reserve.

    Q.13. Financial Stability Oversight Council (FSOC) Secondary
    Market Review--Section 10 of the Federal Reserve Act (12 U.S.C.
    242) provides that ``[t]he Vice Chairman for Supervision shall
    develop policy recommendations for the Board [of Governors of
    the Federal Reserve System] regarding supervision and
    regulation of depository institution holding companies and
    other financial firms supervised by the Board, and shall
    oversee the supervision and regulation of such firms.'' Section
    113 of the Dodd-Frank Act authorizes FSOC to determine that a
    U.S. nonbank financial company shall be supervised by the Board
    of Governors of the Federal Reserve System.
        Under what circumstances should FSOC determine under
    section 113 of the Dodd-Frank Act that Fannie Mae or Freddie
    Mac (each a GSE or Enterprise) should be supervised by the
    Board of Governors of the Federal Reserve System?

    A.13. It would not be appropriate for me to comment on the
    possibility of designation of any particular firm or firms.

    Q.14. On September 25, 2020, FSOC released a statement on its
    activities-based review of the secondary mortgage market. Do
    you agree with FSOC's finding in that statement that ``any
    distress at the Enterprises that affected their secondary
    mortgage market activities, including their ability to perform
    their guarantee and other obligations on their MBS and other
    liabilities, could pose a risk to financial stability, if risks
    are not properly mitigated''?

    A.14. Given their scale and centrality to home mortgage
    markets, the GSEs are vitally important to the U.S. financial
    system and national economy. It is therefore essential that the
    GSEs be properly regulated and supervised, including with
    strong capital and liquidity rules.

    Q.15. FSOC's statement also affirmed the overall quantity and
    quality of the regulatory capital required by the Federal
    Housing Finance Agency's (FHFA) June 30, 2020, proposed rule to
    establish a new regulatory capital framework for the GSEs.
    Specifically, FSOC stated that ``risk-based capital
    requirements and leverage ratio requirements that are
    materially less than those contemplated by the proposed rule
    would likely not adequately mitigate the potential stability
    risk posed by the Enterprises.'' FSOC also concluded ``it is
    possible that additional capital could be required for the
    Enterprises to remain viable concerns in the event of a
    severely adverse stress.'' (emphasis added [Ed.--not added.)
    FSOC committed to ``continue to monitor . . . FHFA's
    implementation of the regulatory framework to ensure potential
    risks to financial stability are adequately addressed.'' On
    December 17, 2020, FHFA finalized the regulatory capital
    framework for the GSEs largely along the lines of the June 30,
    2020, proposed rule.
        Do you accept each of the findings and recommendations made
    in the FSOC statement? If not, please identify each finding or
    recommendation with which you disagree and your rationale for
    the disagreement.
        In particular, do you accept FSOC's finding that ``risk-
    based capital requirements and leverage ratio requirements that
    are materially less than those contemplated by the proposed
    rule would likely not adequately mitigate the potential
    stability risk posed by the Enterprises''?
        Do you accept FSOC's finding that ``[t]he alignment of
    market participants' credit risk capital requirements across
    similar credit risk exposures would mitigate risk to financial
    stability by minimizing market structure distortions''?
        Do you accept FSOC's recommendation that ``FHFA and other
    regulatory agencies . . . coordinate and take other appropriate
    action to avoid market distortions that could increase risks to
    financial stability by generally taking consistent approaches
    to the capital requirements and other regulation of similar
    risks across market participants, consistent with the business
    models and missions of their regulated entities''?

    A.15. It is essential for the GSEs to have strong capital and
    liquidity rules. The GSEs had woefully inadequate capital going
    into the global financial crisis of 2008, and that lack of
    capital caused widespread disruption.

    Q.16. Reduction in the GSE Capital Requirements--On September
    27, 2021, FHFA proposed amendments that would have materially
    reduced the GSEs' regulatory capital requirements. On February
    25, 2022, FHFA finalized those amendments largely as proposed.
    The amendments reduced the tier 1 capital that must be
    maintained by a GSE to avoid restrictions on capital
    distributions from 4 percent to roughly 3 percent of the GSE's
    adjusted total assets. The amendments also reduced Freddie
    Mac's combined capital requirements from 4 percent to 3.6
    percent as of September 30, 2021, with further reductions
    likely to follow due to continued house price appreciation,
    among other things. Fannie Mae's combined capital requirements
    also could further decline as it reverts to prepandemic levels
    of credit risk transfer coverage (about twice the year-end 2021
    levels according to its annual reports on Form 10-K).
        What steps do you think FSOC should take with respect to
    FHFA's now-finalized amendments to fulfill FSOC's commitment to
    ``continue to monitor . . . FHFA's implementation of the
    regulatory framework to ensure potential risks to financial
    stability are adequately addressed''?
        In light of FSOC's commitment, does the absence of any
    comment by FSOC on FHFA's now-finalized amendments pose a risk
    to the credibility of FSOC or risk politicizing FSOC?
        Do you agree that these new risk-based capital requirements
    and leverage ratio requirements, as amended by FHFA, are
    ``materially less than those contemplated by the proposed
    rule'' and are not adequate to ``mitigate the potential
    stability risk posed by the Enterprises''?

    A.16. Given their scale and centrality to home mortgage
    markets, the GSEs are vitally important to the U.S. financial
    system and national economy. It is therefore essential that the
    GSEs be properly regulated and supervised, including with
    strong capital and liquidity rules.

    Q.17. GSE Resolution Framework--FSOC's statement on its
    activities-based review of the secondary mortgage market
    encouraged FHFA to continue its efforts to enhance the GSEs'
    regulatory framework, including resolution planning
    requirements. In May 2021, FHFA finalized a rule that requires
    each GSE to develop a plan to facilitate its rapid and orderly
    resolution in the event FHFA is appointed receiver. These
    resolution plans are intended to, among other things,
    ``foster[] market discipline by making clear that no
    extraordinary Government support will be available to indemnify
    investors against losses or fund the resolution of an
    Enterprise.'' Specifically, ``[i]n developing a resolution
    plan, each Enterprise shall: . . . [n]ot assume the provision
    or continuation of extraordinary support by the United States
    to the Enterprise to prevent either its becoming in danger of
    default or in default (including, in particular, support
    obtained or negotiated on behalf of the Enterprise by FHFA in
    its capacity as supervisor, conservator, or receiver of the
    Enterprise, including the Senior Preferred Stock Purchase
    Agreements entered into by FHFA and the U.S. Department of the
    Treasury on September 7, 2008, and any amendments thereto).''
    Related to this, Treasury's Housing Reform Plan released in
    September 2019 recommended that ``[a] credible resolution
    framework can ensure that shareholders and unsecured creditors
    bear losses, thereby protecting taxpayers against bailouts,
    enhancing market discipline, and mitigating moral hazard and
    systemic risk.''
        In light of the risks to financial stability that could be
    posed by a future insolvency event at GSE, do you agree with
    the recommendation in Treasury's September 2019 Housing Reform
    Plan that ``[a] credible resolution framework can ensure that
    shareholders and unsecured creditors bear losses, thereby
    protecting taxpayers against bailouts, enhancing market
    discipline, and mitigating moral hazard and systemic risk''?
        Do you agree with FHFA's requirement that ``each Enterprise
    shall: . . . [n]ot assume the provision or continuation of
    extraordinary support by the United States to the Enterprise to
    prevent either its becoming in danger of default or in default
    (including . . . the Senior Preferred Stock Purchase Agreements
    entered into by FHFA and the U.S. Department of the Treasury on
    September 7, 2008, and any amendments thereto)''?

    A.17. I agree that a credible resolution plan for the GSEs
    should ensure that shareholders and unsecured creditors bear
    losses and that the GSEs should not assume the provision of
    extraordinary support by the United States in developing such a
    credible resolution plan.

    Q.18. As Secretary Yellen noted in her hearing opening
    statement on May 10, 2022, FSOC has issued a statement to
    express support for the Securities and Exchange Commission's
    efforts to reform money market funds and its work to consider
    potential reforms of open-end funds. Given FHFA's policy that,
    notwithstanding the PSPAs, unsecured creditors of each GSE
    should be at risk of loss upon an insolvency event affecting
    the GSE, do you think the Securities and Exchange Commission's
    regulations governing money market mutual funds, registration
    requirements, or other market activity should continue to give
    the GSEs special treatment (e.g., by treating them as
    Government securities for certain purposes)?

    A.18. This is a matter that is squarely within the purview of
    the SEC.

    Q.19. Credit Risk Capital Requirements for Securitization
    Exposures--The Federal Reserve is considering amendments to the
    regulatory capital requirements for Federal Reserve-regulated
    banks and bank holding companies in connection with the Basel
    III ``End Game'' effort. The Federal Reserve's current capital
    requirements impose operational criteria for securitization
    exposures that are in some respects stricter than those
    required under the Basel III standards, as well as minimum
    credit risk capital requirements (minimum risk weights) that
    are greater than those required under the Basel III standards.
        As part of the Federal Reserve's Basel III ``End Game''
    rulemakings, will you commit to revisiting the operational
    criteria and minimum credit risk capital requirements for the
    securitization exposures of Federal Reserve-regulated
    institutions?

    A.19. If confirmed, I commit to taking an evidence-based
    approach to capital and liquidity standards, including with
    respect to securitization exposures.

    Q.20. Related to this, FHFA has finalized amendments to the
    regulatory capital requirements for the GSEs that adopted,
    relative to the Federal Reserve's requirements, a more lax
    approach to the operational criteria, and a smaller minimum
    credit risk capital requirement (a 5 percent risk weight), for
    the securitization exposures of the GSEs (known as retained
    credit risk transfer exposures under FHFA's framework).
        In light of FSOC's finding in its statement on its
    activities-based review of the secondary mortgage market that
    ``[t]he alignment of market participants' credit risk capital
    requirements across similar credit risk exposures would
    mitigate risk to financial stability by minimizing market
    structure distortions,'' would you also commit to assessing the
    stability or other risks that might arise out of the Federal
    Reserve finalizing stricter operational criteria or greater
    minimum credit risk capital requirements for securitization
    exposures than those applied by FHFA to the retained credit
    risk transfer exposures of the GSEs?

    A.20. I agree with the general principle that similar risks
    should be treated in similar ways. If confirmed, I commit to
    taking an evidence-based approach to capital and liquidity
    standards, including with respect to securitization exposures.

    Q.21. Records Requests--I made a series of records requests
    approximately one year ago to the Federal Reserve Banks of San
    Francisco, Boston, Atlanta, and Minneapolis seeking records
    pertaining to some of these Federal Reserve Banks' activities
    that are outside the Fed's mandate.\10\ \11\ In response to my
    records requests, none of these four Federal Reserve Banks have
    produced even a single requested record to date.
    ---------------------------------------------------------------------------
         \10\ ``Toomey Expands Review of Woke Mission Creep by Regional
    Federal Reserve Banks'', Senate Banking Committee (May 24, 2021),
    https://www.banking.senate.gov/newsroom/minority/toomey-expands-review-
    of-woke-mission-creep-by-regional-federal-reserve-banks.
         \11\ ``Toomey Launches Review of Mission Creep by Regional Federal
    Reserve Banks'', Senate Banking Committee (Mar. 29, 2021), https://
    www.banking.senate.gov/newsroom/minority/toomey-launches-review-of-
    mission-creep-by-regional-federal-reserve-banks.
    ---------------------------------------------------------------------------
        Do you think it is appropriate for a Fed Regional Bank to
    stonewall legitimate Congressional records requests? Please
    answer ``yes'' or ``no.''
        If ``yes,'' please explain fully explain your answer.
        If ``no,'' what steps will you take, if confirmed, to
    ensure that the Fed Regional Banks are responsive to
    Congressional records requests?

    A.21. I think the Federal Reserve should respond promptly to
    congressional record requests. If confirmed, I would work with
    Chair Powell and fellow governors, as well as the presidents of
    the Reserve Banks, on this important issue.

    Q.22. Politicization of the Fed--In 2019, Neel Kashkari, the
    President of the Minneapolis Fed, initiated a grassroots
    lobbying effort to support the ``Page Amendment''--a proposed
    amendment to Minnesota's State constitution dealing with
    education policy. President Kashkari has utilized--and
    continues to utilize--Minneapolis Fed resources to lobby for
    this amendment.
        These political lobbying activities of President Kashkari
    and the Minneapolis Fed obviously jeopardize the Fed's
    independence and, moreover, are prohibited by the Minneapolis
    Fed's own code of conduct, which forbids Minneapolis Fed
    employees from engaging in political activity in their official
    capacities or using Minneapolis Fed resources. \12\
    ---------------------------------------------------------------------------
         \12\ https://www.banking.senate.gov/imo/media/doc/ranking-member-
    toomey-letter-to-minneapolis-fed-president-kashkari.pdf
    ---------------------------------------------------------------------------
        Do you believe it is appropriate for the Minneapolis Fed--
    or any component of the Federal Reserve System--to be engaged
    in political lobbying activities, such as lobbying for an
    education amendment to a State constitution? Please answer
    ``yes'' or ``no.'' If your answer is ``yes,'' please explain
    fully explain your answer.
        If confirmed, will you commit to using your position as
    Vice Chair of Supervision at the Fed to rein in the Minneapolis
    Fed's political lobbying activities? Please answer ``yes'' or
    ``no.'' If your answer is ``no,'' please explain fully explain
    why you will not do so. If your answer is ``yes,'' what steps
    will you commit to take to rein in the Minneapolis Fed's
    political lobbying activities?

    A.22. No, I do not think it is appropriate for the Federal
    Reserve to engage in political lobbying activities. If
    confirmed, I would work with Chair Powell and my fellow
    governors, as well as the presidents of the Reserve Banks, on
    this important issue.

    Q.23. All 12 Regional Fed Banks have been sponsoring a ``Racism
    and the Economy Series'' since October 2020 to ``examine the
    ways in which structural racism manifests in America and
    advance actions to dismantle structural racism.'' According to
    the Minneapolis Fed's website, this series is premised upon the
    subjective opinion that ``[r]acism forms the foundation of
    inequality in our society.'' \13\
    ---------------------------------------------------------------------------
         \13\ ``Racism and the Economy'', Federal Reserve Bank of
    Minneapolis (accessed Feb. 4, 2022), https://www.minneapolisfed.org/
    policy/racism-and-the-economy.
    ---------------------------------------------------------------------------
        Is it appropriate for the ostensibly independent and
    nonpartisan Federal Reserve to espouse divisive political
    rhetoric like the subjective opinion that ``racism forms the
    foundation of inequality in our society''? Please fully explain
    your answer.
        If confirmed, will you use your position at the Federal
    Reserve to ensure that the Federal Reserve System is not
    spending its time and resources focused on divisive,
    politicized events like the Racism and the Economy series?
    Please fully explain your answer.

    A.23. I believe that the Federal Reserve System should be able
    to engage in independent research on a wide range of topics
    consistent with the Federal Reserve's mandates.

    Q.24. If confirmed, will you commit to protecting the
    independence of the Fed by using your position as Fed Governor
    to rein in any and all political advocacy that is currently
    taking place across the Federal Reserve System? Please answer
    ``yes'' or ``no.''
        If your answer is ``yes,'' what steps do you plan to take
    to rein in any and all political advocacy that is currently
    taking place across the Federal Reserve System?
        If your answer is ``no,'' fully explain your answer.

    A.24. I do not think it is appropriate for the Federal Reserve
    to engage in political lobbying activities. If confirmed, I
    would work with Chair Powell and my fellow governors, as well
    as the presidents of the Reserve Banks, on this important
    issue.

    Q.25. Recent Public Statements--On June 2, 2020, you issued a
    public statement as Dean of the Ford School of Public Policy
    that ``it is important to acknowledge that the violence and
    inequality in our systems are the result of centuries of laws,
    policies, and institutions that entrenched and enforced racist
    inequality.'' \14\
    ---------------------------------------------------------------------------
         \14\ Michael Barr, ``Dean Michael Barr Addresses Racist
    Violence'', Ford School of Public Policy at the University of Michigan
    (Jun. 2, 2021), https://fordschool.umich.edu/news/2020/dean-michael-
    barr-addresses-racial-violence.
    ---------------------------------------------------------------------------
        What role can and should the Federal Reserve play in
    addressing the U.S. systems and institutions that you have
    identified as having ``entrenched and enforced racist
    inequality''?
        If confirmed, what specifically do you intend to do at the
    Federal Reserve, if anything, to address the U.S. systems and
    institutions that you have identified as having ``entrenched
    and enforced racist inequality''?

    A.25. The Federal Reserve has an important, but clearly defined
    set of responsibilities, and other parts of Government and
    society are responsible for policies to address issues related
    to inequality. The Federal Reserve has a role to play by
    conducting monetary policy in pursuit of its dual mandate of
    price stability and maximum employment, which benefits the
    economy as a whole, enforcing fair lending and related laws,
    and seeking to diversify the staff and leadership of the
    Federal Reserve Board and Banks.

    Q.26. In that same public statement from June 2, 2020, you
    wrote that ``in the aftermath [of George Floyd's killing by a
    police officer] many, many police officers and departments
    engaged in violent confrontations all over the country. \15\
    ---------------------------------------------------------------------------
         \15\ Id.
    ---------------------------------------------------------------------------
        What did you mean by your statement that ``many, many
    police officers and departments engaged in violent
    confrontations all over the country''?
        Were you asserting by this statement that ``violent
    confrontations'' during the protests and riots that occurred in
    the United States in the aftermath of George Floyd's murder
    were instigated by police officers and police departments?
    Please answer ``yes'' or ``no.''
        If your answer is ``yes,'' please provide the evidence you
    are relying on to justify your belief that ``many, many police
    officers and departments'' were the ones instigating violent
    confrontations all over the country.

    A.26. These issues are not within the mandate of the Federal
    Reserve, and I would not be working on them if confirmed. At
    the time I wrote the statement, in the wake of George Floyd's
    death and the massive protests that ensued, police officers
    faced enormous challenges in their roles of protecting public
    safety, speech, and assembly.

    Q.27. While serving as the dean of the University of Michigan's
    Gerald R. Ford School of Public Policy (Ford School), on
    September 26, 2020, you tweeted that ``I join @umich
    @DrMarkSchlissel & Provost Susan Collins in condemning White
    House's recent Executive order'' aimed at combating critical
    race theory and race and sex stereotyping in Federal
    contracting and the Federal workforce (E.O. 13950). \16\ You
    then elaborated that ``@fordschool, we teach about systemic &
    structural racism because in order to form a more perfect
    union, one has to acknowledge its flaws & work every day to
    correct them.''
    ---------------------------------------------------------------------------
         \16\ Tweet of Michael Barr, Twitter (Sept. 26, 2020).
    ---------------------------------------------------------------------------
        Given that Section 10(b) of the Executive order explicitly
    provides that ``Nothing in this order shall be construed to
    prohibit discussing, as part of a larger course of academic
    instruction, the divisive concepts listed in section 2(a) of
    this order in an objective manner and without endorsement,''
    \17\ how specifically did the Executive order affect the Ford
    School, if at all?
    ---------------------------------------------------------------------------
         \17\ Section 2(a) of E.O. 13950 states: ``(a) `Divisive concepts'
    means the concepts that (1) one race or sex is inherently superior to
    another race or sex; (2) the United States is fundamentally racist or
    sexist; (3) an individual, by virtue of his or her race or sex, is
    inherently racist, sexist, or oppressive, whether consciously or
    unconsciously; (4) an individual should be discriminated against or
    receive adverse treatment solely or partly because of his or her race
    or sex; (5) members of one race or sex cannot and should not attempt to
    treat others without respect to race or sex; (6) an individual's moral
    character is necessarily determined by his or her race or sex; (7) an
    individual, by virtue of his or her race or sex, bears responsibility
    for actions committed in the past by other members of the same race or
    sex; (8) any individual should feel discomfort, guilt, anguish, or any
    other form of psychological distress on account of his or her race or
    sex; or (9) meritocracy or traits such as a hard work ethic are racist
    or sexist, or were created by a particular race to oppress another
    race. The term `divisive concepts' also includes any other form of race
    or sex stereotyping or any other form of race or sex scapegoating.''
    ---------------------------------------------------------------------------
        Section 5 of the order requires the recipient of a Federal
    grant to certify that it will ``not use Federal funds to
    promote the concepts that (a) one race or sex is inherently
    superior to another race or sex; (b) an individual, by virtue
    of his or her race or sex, is inherently racist, sexist, or
    oppressive, whether consciously or unconsciously; (c) an
    individual should be discriminated against or receive adverse
    treatment solely or partly because of his or her race or sex;
    (d) members of one race or sex cannot and should not attempt to
    treat others without respect to race or sex; (e) an
    individual's moral character is necessarily determined by his
    or her race or sex; (f) an individual, by virtue of his or her
    race or sex, bears responsibility for actions committed in the
    past by other members of the same race or sex; (g) any
    individual should feel discomfort, guilt, anguish, or any other
    form of psychological distress on account of his or her race or
    sex; or (h) meritocracy or traits such as a hard work ethic are
    racist or sexist, or were created by a particular race to
    oppress another race.''
        Do you believe it is appropriate for the Ford School or any
    recipient of Federal funds to use Federal funds to promote any
    of the above concepts? Please fully explain your answer.

    A.27. I support the tradition of free academic debate in higher
    education, which is a long-standing tradition in American
    discourse.

    Q.28. Congressional Oversight--If confirmed, do you intend to
    respond to information requests differently depending on who is
    making the Congressional information request (whether it's the
    chair of the Congressional committee, the Ranking Member, or
    another member of Congress)? Please answer ``yes'' or ``no.''
    If your answer is ``yes,'' please explain.

    A.28. If confirmed, I look forward to working with you and all
    Members of Congress on information requests.

    Q.29. Will you commit that, if confirmed, you will respond in a
    timely manner and fully comply with all information requests
    from me? Please answer ``yes'' or ``no.'' If your answer is
    ``no,'' please explain.

    A.29. If confirmed, I look forward to working with you and all
    Members of Congress on information requests.

    Q.30. Will you commit that, if confirmed, you will make
    yourself and any other employee of the Federal Reserve
    expeditiously available to provide oral testimony (including
    but not limited to briefings, hearings, and transcribed
    interviews) to the Committee on any matter within its
    jurisdiction, upon the request of either the Chairman or
    Ranking Member? Please answer ``yes'' or ``no.'' If your answer
    is ``no,'' please explain why.

    A.30. If confirmed, I look forward to working with you and all
    Members of Congress on information requests.

    Q.31. Answering Questions for the Record--Please describe with
    particularity the process by which you answered these questions
    for the record, including identifying who assisted you in
    answering these questions along with a brief description of
    their assistance.

    A.31. I drafted all answers myself. I shared my draft answers
    with Federal Reserve and interagency staff for review.

    Q.32. Did any person on the board of, or employed by, a
    501(c)(4) organization, provide advice to you, oral or written,
    on your responses to these questions? If so, please list those
    individuals and organizations.

    A.32. No.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                 SENATOR MENENDEZ FROM MICHAEL S. BARR

    Q.1. If confirmed as Vice Chair for Supervision you would be a
    key figure in implementing overdue regulations, such as the CRA
    update and an incentive-based executive compensation rule.
        If confirmed, will you make it a top priority to work with
    the other financial regulators to finalize and implement the
    new CRA rule recently proposed by the Fed, OCC, and FDIC?
        Will you also commit to working with the other financial
    regulators to develop and swiftly implement a strong incentive-
    based compensation rule, as required by the Dodd-Frank Act?

    A.1. Yes, if confirmed I will make it a top priority to work
    with the other financial regulators to finalize and implement
    Community Reinvestment Act regulations. I will also work with
    the other financial regulators to develop incentive-based
    compensation rules as required by the Dodd-Frank Act.

    Q.2. The Class B Directors at the Federal Reserve Banks are by
    statute supposed to represent the public, but they are
    predominantly White, male, and come from banks and large
    businesses. Part of the problem is that the selection process
    for these directors lacks transparency, and therefore the
    predominately White, male, and corporate-centered member banks
    that choose Fed Directors continue to select people that look
    and think like they do.
        Given that Class B directors are supposed to represent the
    public, would you support changing the process for selecting
    these directors to solicit greater public input, including but
    not limited to (a) timely public notification of general
    selection criteria and estimated timeline, (b) engagement with
    minority professional organizations, when it comes to public
    notification of vacancies and general selection criteria, (c)
    opportunity for the public to submit comments on the overall
    process?
        If confirmed will you commit to working with my office to
    bring greater transparency and public input the Class B
    selection process?

    A.2. If confirmed, I will prioritize increasing diversity
    across the Federal Reserve system, including at the Federal
    Reserve Banks. Under the Federal Reserve Act, Class B directors
    of the Reserve Banks are nominated and elected by the member
    banks in each district. I would be pleased to work with your
    office on potential ways to bring greater transparency and
    public input into the Class B director selection process.

    Q.3. The Federal Reserve just finalized a rule governing its
    payment service FedNow. I've heard a lot of concerning stories
    of fraud and scams running rampant on Zelle, an instantaneous
    payment service owned and operated by some of the Nation's
    largest banks, and I've seen consumer groups raising similar
    concerns about FedNow.
        How will you ensure users of FedNow are adequately
    protected from scams and fraud?

    A.3. Consumer confidence and trust are essential for the
    effective functioning of financial markets and payments
    infrastructure. If confirmed, I would be committed to learning
    more about the work carried out thus far in developing FedNow
    and working with the Federal Reserve staff and my fellow
    governors to discuss approaches to FedNow that would protect
    consumers from scams and fraud.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER
                          FROM MICHAEL S. BARR

    Q.1. Risks to Economic Stability--It is critically important
    that both the Fed and the SEC continue to gather as much
    information as possible on the risks to our financial system.
    It's critical for the safety and soundness of the institutions
    the Fed and the SEC regulates, our economy, and protecting the
    American taxpayer. Cybersecurity and cyberattacks will be among
    many risks you, if confirmed, will need to track and evaluate
    in these positions,
        How will you work to address cyberthreats? How will you
    evaluate when new risks are arising and how to address them?

    A.1. I agree that cyberrisk is a critically important risk for
    the financial sector and financial regulators to understand and
    address. If confirmed, I will make cyberrisk a top priority for
    Federal Reserve supervisors. Together with Chair Powell and
    other members of the Board, I will ensure that the Federal
    Reserve coordinates with private financial institutions, other
    financial regulators, Treasury, the FBI, the National Security
    Agency, the Department of Homeland Security, global
    coordinating bodies, and other cybersecurity experts to
    understand and mitigate these risks.

    Q.2. Innovation--As new financial products and technologies are
    developed and existing products evolve the Federal Reserve and
    the Securities and Exchange Commission will have opportunities
    to shape the ecosystem around cryptocurrencies and other
    ``FinTech'' products and companies, and as regulators have a
    responsibility to provide adequate protections for our
    financial system and consumers.
        What is your view of the current regulation and oversight
    in this space? What do you believe works well and what would
    you change?

    A.2. When innovations arise in the financial sector, they offer
    potential benefits, but financial regulators and the market can
    be slow to understand emerging risks, including consumer and
    investor protection, financial stability, cybersecurity, and
    illicit finance. Our fragmented system of regulation means that
    financial innovation can arise in unregulated or lightly
    regulated spaces in the cracks between existing financial
    regulation. If confirmed, I would be highly focused on keeping
    abreast of financial innovations and determining appropriate
    ways in collaboration with interagency partners to mitigate
    financial risks while fostering innovation.

    Q.3. Community Banks--What more should be done to make sure
    that community banks can serve the Main Street businesses,
    workers, and families in their communities?

    A.3. I think a tiered approach to regulation makes a lot of
    sense. The strictest rules ought to be applied to the largest
    and riskiest institutions, and there should be a graduated
    approach below that. Especially, care ought to be taken with
    respect to community banks, which have difficulty meeting
    regulatory burdens. It is critically important that the Federal
    Reserve look at ways to reduce regulatory burden on community
    banks, while fostering safety and soundness in the community
    banking system. The wide diversity of sizes of banks in our
    financial system is a source of strength, helping to foster
    financial stability, competition, and service to Main Street
    businesses and households.

    Q.4. Generally, what is your view and approach to the
    regulatory responsibilities of the Federal Reserve Board?

    A.4. If confirmed, I would focus on maintaining the resilience
    of the financial system; ensuring appropriate regulation of
    financial innovation that balances risks and benefits of new
    technologies; and promoting fairness so that our financial
    system works better for all of us.
                                    ------

           RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                          FROM MICHAEL S. BARR

    Q.1. The Boston Fed has reported that Black, Hispanic, and
    Asian borrowers were significantly less likely to refinance to
    take advantage of the large decline in interest rates spurred
    by the Federal Reserve's large-scale mortgage-backed security
    purchase program during the Covid-19 pandemic, which
    potentially widened the racial home ownership and wealth gaps.
    If confirmed, does the Fed have a plan to mitigate these
    discrepancies? What tools does the Fed currently have to extend
    these benefits to these groups of homeowners?

    A.1. The racial home ownership and wealth gaps are critically
    important issues facing our country. When the Federal Reserve
    does its monetary policy job right, it helps the economy grow
    for everyone. The Federal Reserve can also play a role by
    fostering financial inclusion, advancing financial education,
    enforcing fair lending and related laws, conducting outreach
    with civil rights and community organizations, finalizing
    Community Reinvestment Act rules, and helping ensure the
    financial system is operating safely and fairly for all
    households. If confirmed, I would be committed to advancing
    these policies.

    Q.2. According to U.S. Bureau of Economic Analysis, post-tax,
    corporate profits have increased 25 percent year over year. To
    what extent do you believe corporate behavior has contributed
    to the upward price pressure faced by American consumers? How
    has this behavior affected low-income Americans?

    A.2. Inflation is far too high, and that's hurting families and
    businesses across the country. Low-income Americans face rising
    prices that in many cases are rising much faster than wages,
    making it much harder to make ends meet. With demand for goods
    and services far outstripping supply, prices have risen
    significantly, which is especially hard on low-income
    Americans. If confirmed to the Federal Reserve Board, I am
    fully committed to bringing inflation down to the Federal
    Reserve's target of 2 percent.

    Q.3. If confirmed, how will you promote and grow the Fed's
    racial equity policies? Will this impact how you approach the
    scheduled regulatory updates to the Community Reinvestment Act
    (CRA)?

    A.3. For over 25 years, I have worked to make the financial
    system safer and fairer, and better focused on serving
    households and businesses, including through my academic
    research and work at the United States Treasury Department on
    the Community Reinvestment Act, community development financial
    institutions, fair lending, financial inclusion, and other
    policies. If confirmed, I look forward to working with my
    fellow governors as well as the OCC and the FDIC to finalize
    Community Reinvestment Act regulations, which include important
    provisions relating to fair lending, minority depository
    institutions, and the provision of financial services in low-
    to-moderate income communities. The Community Reinvestment Act
    was put in place to combat a history of redlining in the United
    States and to encourage banks and thrifts to meet the needs of
    all communities, including low- and moderate-income
    communities, and I look forward if confirmed to updating these
    rules.
        In addition, the Federal Reserve has an important role to
    play in helping the economy work well for everyone, by
    conducting monetary policy in pursuit of its dual mandate,
    through its monetary and financial regulatory policies,
    enforcement of fair lending and related laws, as well as
    seeking diversity in Federal Reserve Board and Bank staff and
    leadership, fostering financial inclusion, and advancing
    financial education.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO
                          FROM MICHAEL S. BARR

    Q.1. Before withdrawing her nomination, Governor Raskin
    received criticism for advocating that regulators act to
    counter climate-change risk and called for the Fed to pressure
    financial institutions to ``choke off'' credit to traditional
    energy companies. As I am sure you know, ``choking off'' credit
    to industries viewed as unfavorable and controlling the
    allocation of capital is not a new concept. We can recall
    Operation Choke Point from the Obama administration years.
        Do you share this same view, that the Fed should pressure
    financial institutions to ``choke off'' credit to counter
    climate change risk? How do your views differ from Raskin's?

    A.1. No, it is not appropriate for the Federal Reserve to
    prohibit financial institutions from lending to particular
    firms or sectors, or to require financial institutions to lend
    to particular firms or sectors. Those business decisions should
    be made by the private sector.

    Q.2. Through regulation and so-called risk assessments,
    Treasury and probably the Fed are looking for reasons to find
    risks to financial stability from climate change. Some of those
    risks are self-created, such as risks to companies that
    Government officials have strongly suggested should disappear,
    such as oil and gas or ``extractive'' industries.
        Banks have also, using shareholder activism, been pressured
    into choking off credit to legal industries that may be
    disfavored by activist groups, such as gun manufacturers.
        It appears that there is a high risk of having Federal
    regulators and certain activists' pressure banks and other
    providers of capital into withholding lending and capital to
    industries or activities that are disfavored by some according
    to their political views.
        That means, effectively, that financial regulators are
    working with politically active groups to engineer yet another
    round of Operation Chokepoint.
        Would you use Fed regulation to channel credit or choke off
    credit to companies and industries that engage in legal
    activities, but may do things that are disfavored by certain
    groups based on their individual political and social
    preferences?

    A.2. No, it is not appropriate for the Federal Reserve to
    prohibit financial institutions from lending to particular
    firms or sectors, or to require financial institutions to lend
    to particular firms or sectors. Those business decisions should
    be made by the private sector.

    Q.3. In March, the SEC issued for comment proposed rule changes
    that would require all publicly traded companies to include
    certain climate-related risk disclosures in their registration
    statements and periodic reports. There is speculation that the
    Fed may soon follow suit and encourage the use of ESG data to
    explore climate change exposure as a part of stress tests for
    banks.
        The actions taken by the SEC are a clear attempt to
    influence U.S. energy policy through regulation and is beyond
    the scope of the agency. If confirmed would you encourage
    similar action by the Fed?

    A.3. The Federal Reserve has an important but narrow role with
    respect to climate risk. The primary responsibility in the
    Government for addressing climate change rests with elected
    officials. If confirmed, I would be focused on identifying
    potential risks to the financial system from all sources,
    including climate-related risks. If the Federal Reserve were to
    conduct climate scenario analyses, in my view the purpose
    should be to understand risks that climate might pose to the
    financial system and to work with financial institutions on
    managing those risks.

    Q.4. You have been critical of the Economic Growth, Regulatory
    Relief and Consumer Protection Act, or S. 2155. The primary
    purpose of S. 2155 was to spur economic growth by right-sizing
    regulations for financial institutions, including community
    banks and credit unions, midsized banks, and regional banks so
    that they could redirect important financial resources to
    individuals, households and businesses. Since the enactment of
    Dodd-Frank over a decade ago, these institutions had been
    crushed under undue regulation.
        Vice Chair Quarles implemented S. 2155 in a pretty
    straightforward way, do you agree?
        Do you plan to make changes to any enhanced prudential
    regulations or standards that S. 2155 amended?
        What are your views on Total Loss Absorbing Capacity (TLAC)
    for regional banks? Michael Hsu (Acting OCC Comptroller) has
    stated (most recently at a UPenn Wharton speech) that the
    regulators should implement TLAC for regional banks. Is this
    something you agree with?

    A.4. I support important elements of S. 2155, particularly with
    respect to easing regulatory burden on community banks. I also
    support the principle of tiered regulation so that the largest,
    most complex firms are subject to the strictest oversight, and
    gradually less restrictive rules apply as to smaller, simpler,
    less complex firms. At the time, I was concerned that the draft
    legislation went too far in relaxing oversight of larger firms;
    many of those concerns were addressed in a manager's amendment
    and in subsequent Federal Reserve rulemakings.
        If confirmed, I commit to faithfully implement the laws
    that Congress passes. I would be forward-looking toward
    emerging risks and work to support the continued resiliency of
    our financial system. With respect to your question regarding
    TLAC, I have not had the opportunity to carefully study the
    ideas contained in Acting Comptroller Hsu's speech.

    Q.5. In the FDIC's release of its RFI regarding bank merger
    transactions, the FDIC appears intent on creating a role for
    the CFPB in approving bank M&A transactions that do not
    otherwise exist under the Bank Merger Act. In fact, when the
    CFPB was created, this was not the congressional intent or the
    purpose of the CFPB. Rather, this would broaden the CFPB's
    scope.
        Do you think that the CFPB should have a role in bank
    merger approval?

    A.5. I think it would be appropriate for the Federal Reserve
    and other agencies to review the existing interagency bank
    merger guidelines, which have not been updated since 1995. I
    have not had the opportunity to consider the role of other
    agencies, if any, in the bank merger review process.

    Q.6. In December, CFPB Director Chopra and FDIC Director
    Gruenberg issued a joint statement that the FDIC approved a
    Request for Information (RFI) on bank mergers. However, shortly
    thereafter, the FDIC clarified that no such document had been
    approved by the FDIC and that there was no valid vote by the
    FDIC board. This hostile action by Directors Chopra and
    Gruenberg undercut the integrity of the FDIC board and resulted
    in the resignation of Chairwoman McWilliams.
        What is your view of the actions taken by Directors Chopra
    and Gruenberg?

    A.6. I do not have any comment on the FDIC. With respect to the
    Federal Reserve, if confirmed, I would be committed to
    preserving its long tradition of collegial, collaborative, and
    apolitical decision-making.

    Q.7. During Dodd-Frank, you supported the creation of the CFPB,
    an agency with no accountability to Congress. What are your
    views on transparency and accountability to Congress?
        Will you confirm that you will be responsive and
    transparent in your responses to this Committee?

    A.7. Yes. I strongly believe in transparency and accountability
    to Congress and if confirmed I will be responsive and
    transparent in my responses to this committee.

    Q.8. What are your views on inflation and do you believe in
    modern monetary theory?

    A.8. Inflation is far too high today, and I am committed to
    bringing inflation down to the Federal Reserve's target of 2
    percent. Generally, I believe traditional macroeconomic
    analysis provides a good basis for understanding macroeconomic
    issues, and that existing tools provide an adequate basis for
    conducting monetary policy. I am strongly committed to the
    independence of the Federal Reserve from fiscal policy.

    Q.9. There are significant concerns about a Central Bank
    Digital Currency (CBDC), including privacy and Fed control of
    payments.
        It is hard to see how a CBDC housed at the Fed could
    overcome privacy concerns, and it would not be appropriate to
    have a Federal agency have access to transactions histories of
    private citizens.
        There is also a concern about a CBDC with the digital
    currency possibly having smart contracting features. A clear
    risk would be that users of a CBDC could be prevented, through
    smart contracts programmed into the currency, from making
    transactions that may be legal but not favored by political
    interests. That is, CBDC could be a high-tech way for the
    Government to engage in something like what we saw with
    Operation Chokepoint.
        Do you support a CBDC and, if so, how would you propose to
    address privacy issues and risks of things like Operation
    Chokepoint?

    A.9. I think a CBDC requires significant additional study and
    research. The Federal Reserve's discussion paper on this is a
    good starting point, including its analysis of privacy and
    other policy issues. I do not think a CBDC should be used to
    prohibit or require financial institutions to conduct business
    with particular firms or sectors. I agree with Chair Powell
    that the Federal Reserve should only move forward with a CBDC
    with the buy-in of Congress and the Executive branch.

    Q.10. Your July 31, 2020, paper with A. Harris, L. Menard, and
    W. Xu, titled ``Building the Payment System of the Future: How
    Central Banks Can Improve Payments to Enhance Financial
    Inclusion'' discusses central bank digital currency, and uses
    efforts at the People's Bank of China (PBOC) as one example.
    The paper argues that: ``Emerging technologies from virtual
    currencies to mobile payments and QR codes present
    opportunities for central banks to advance'' important work on
    reversing ``troubling inequality,'' reducing ``fragmentation,''
    and eliminating ``predatory practices.'' While many of those
    terms have loose definitions, enhancement of financial
    inclusion via central bank accounts ought not to involve
    unacceptable sacrifices of privacy and allowances for
    Government monitoring and control of private citizens'
    financial accounts and transactions. The paper appears to
    highlight PBOC activities in digital financial transactions, in
    the interest of identifying potential models to enhance
    financial inclusion via central bank digital currencies, but
    does not appear to have much to say about privacy concerns with
    PBOC activities.
        Do you believe that China and the PBOC provide a useful
    model for the Federal Reserve to use to pursue individual
    Federal Reserve officials' beliefs about financial inclusion?

    A.10. No, the Chinese model is not a useful starting point for
    the United States. I share your privacy concerns about the
    Chinese model, among other concerns.

    Q.11. A 2012 paper with S. Mullainathan and E. Shafir, titled
    ``Behaviorally Informed Regulation'', discusses a proposal from
    you and your coauthors where financial ``firms could deter
    consumers from paying late or going over their credit card
    limits with whatever fees they deemed appropriate, but the bulk
    of such fees would be placed in a public trust to be used for
    financial education and assistance to troubled borrowers.'' The
    proposal, in effect, would have the Government mandate maximum
    percentages of late or over-limit fees that financial firms
    could ``retain,'' with the remainder taken by Government
    regulators for whatever they deem to be appropriate social
    goals.
        Do you continue to support a proposal to allow financial
    firms to ``retain'' a Government-determined fraction of costs
    they incur in servicing accounts in order to allow penalties to
    have ``behavioral'' effects, with the remaining fraction
    socialized and used for Government- or regulator-preferred
    social programs?

    A.11. My paper was a thought experiment with illustrative
    examples designed to highlight how various issues in the
    consumer marketplace could be addressed. The particular thought
    experiment in the paper was designed to highlight the
    difference between the behavioral effects of contingent fees
    and the revenue-generating effects. I would not seek to advance
    this thought experiment as a policy proposal if confirmed to
    the Federal Reserve.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT
                          FROM MICHAEL S. BARR

    Q.1. As you are likely aware, banks that calculate capital
    using the standardized approach may not recognize the capital
    benefits of collateral securing an extension of credit if a
    bank's right to foreclose on the collateral may be stayed or
    avoided under applicable insolvency law. The U.S. Bankruptcy
    Code broadly applies an automatic stay with few exceptions.
    This means that U.S. banks using the standardized approach
    cannot recognize the capital benefits of collateral securing
    many loans, even if the banks have a first priority, perfected
    security interest in high quality collateral that would,
    therefore, be at the top of the creditor stack.
        This treatment of collateralized transactions deviates from
    the approach in place in other jurisdictions (e.g., U.K., EU)
    and adopted by the Basel Committee on Banking Supervision. As
    such, U.S. banks subject to the standardized approach may be at
    a competitive disadvantage.
        If confirmed, are you willing to review the current
    framework and, as may be necessary, propose technical
    adjustments to ensure that high quality collateral securing
    extensions of credit receive the same capital treatment across
    regulated entities to appropriately account for the underlying
    risk?

    A.1. If confirmed, I would be attentive to the issues that you
    raise, and I would take a holistic approach to bank capital and
    liquidity standards to ensure that the framework provides a
    consistent, transparent, competitive, and strong approach to
    resiliency in the financial system.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                        FROM JAIME E. LIZARRAGA

    Q.1. Where have you excelled in past positions in attracting,
    hiring, and promoting people of color in positions in your
    organization? Where might there be room for improvement?

    A.1. In my 31-year career in public service, diversity and
    inclusion have served as fundamental values guiding my work. I
    am proud to have been involved in, among other efforts, the
    historic establishment of a House Office of Diversity and
    Inclusion that now serves the entire House of Representatives,
    House diversity and inclusion initiatives that preceded it, and
    changes to House Democratic Caucus rules to promote House staff
    diversity. I worked closely with other House leadership
    offices, the Congressional Hispanic Caucus, other House
    Caucuses, House staff associations, and outside stakeholders on
    all these initiatives
        In my role as Director of Member Services in the Speaker's
    office and in the Office of the House Democratic Leader (2008-
    2018), I led a team that served as a resource to new Member
    offices in their recruitment of staff. Our team maintained an
    internal resume bank and advised incoming Member offices
    regarding best practices on diversity and inclusion.
        As a House Financial Services Committee staff member, I was
    involved in initiatives to promote diversity and inclusion in
    the financial services industry and at financial regulatory
    agencies. In 2006, I oversaw efforts to recruit diverse staff
    for senior Committee positions.
        I currently serve as a member of the Congressional Hispanic
    Staff Association advisory board, and routinely mentor
    congressional staff on career advancement and best practices
    for workplace success.
        In December 2020, I received an award from the
    Congressional Hispanic Caucus Institute Alumni Association for
    my leadership and commitment to advancing diversity and
    inclusion on Capitol Hill.
        In my experience, awareness of the value of diversity and
    inclusion on Capitol Hill has increased markedly in recent
    years, but more work remains to be done. If confirmed, I intend
    to work closely with the Commission's Office of Minority and
    Women Inclusion to ensure the SEC consistently upholds the
    values of diversity and inclusion in its hiring practices.

    Q.2. What specific measures will you use to evaluate the
    success of the Securities and Exchange Commission in
    understanding and addressing the needs of Black, Indigenous,
    and people of color (BIPOC)? And, will you work with the Chair
    and other Commissioners to keep Congress apprised, as
    appropriate, on the progress being made on these measures?

    A.2. If confirmed, I plan to review the agency's most recent
    efforts to meet the needs of Black, Indigenous, and people of
    color. I plan to engage with the Office of Minority and Women
    Inclusion to measure progress in fulfilling the Dodd-Frank
    Act's mandates of fostering diversity and inclusion in the
    SEC's workforce and at SEC-regulated entities, and in promoting
    expanded opportunities for BIPOC businesses.
        I also plan to review progress in achieving the goals of
    the Diversity and Inclusion Strategic Plan and the SEC's
    benchmarks for measuring progress on these goals.
        A rule on corporate board diversity is on the SEC's
    Regulatory Flexibility agenda, and I want to be careful not to
    prejudge any future rulemaking. However, if confirmed, I look
    forward to working with my fellow Commissioners, Commission
    staff, and Congress to ensure that the principles of diversity,
    inclusion and equity are being fully integrated into the
    agency's mission.

    Q.3. What is your plan for creating an inclusive working
    environment for employees within your office?

    A.3. If confirmed, and consistent with my long-standing
    commitment to diversity and inclusion, I intend to hire and
    retain a diverse workforce and to foster an inclusive work
    environment in my own office.

    Q.4. Please describe your general views on enforcement and
    detail what the SEC can do to better protect savers and
    investors from risks in volatile markets.

    A.4. Robust SEC enforcement reduces risk in our capital
    markets, protects investors, and lowers the cost of capital. It
    is crucial to prioritize enforcement actions that shape market
    behavior and, critically, deter fraud and other future bad
    behavior.
        Enforcement actions should be brought to hold individuals
    accountable. Consistent with the SEC's authorities, the agency
    should seek tough penalties, like admissions and bars, for
    those who engage in wrongdoing. Lastly, it is important to me
    that the agency prioritize tackling affinity fraud--wrongdoing
    against seniors, servicemembers, retail investors, small
    businesses, and other vulnerable populations. If confirmed, I
    commit to following the law and the facts and to working
    closely with the agency's capable professional enforcement
    staff to ensure the robustness of the SEC's enforcement
    program.

    Q.5. The SEC has a role to play in ensuring that its reporting
    requirements are broadly aligned with workable, effective and
    broadly supportive standards, when such existing standards
    exist. Not only does this help provide consistency and
    comparability for investors and other stakeholders, but
    especially for companies that are publicly listed in multiple
    jurisdictions, this can also alleviate additional costs of
    complying with different requirements. In examples of SEC rules
    where the U.S. standard is considered to be far weaker than
    that of the prevailing international standard, would you
    consider steps to align the U.S. reporting requirements with
    the international standard?

    A.5. It is essential for the SEC to engage in robust dialogue
    and coordination with international standards-setting bodies,
    such as the Financial Stability Board and the International
    Organization of Securities Commissioners. Harmonization and
    convergence of standards play important roles in fostering
    investor access to comparable and consistent data and leveling
    the playing field for all market participants. Where
    international standards differ from current SEC rules, I
    believe it merits assessing whether and how aligning our rules
    can advance the SEC's mission. Moreover, lessons from other
    jurisdictions' experiences can enhance our own expertise in
    crafting our own rules. In assessing these issues, I will be
    guided by the fact that U.S. capital markets are unique and
    vibrant, and I will do all I can to ensure they remain the
    deepest and most liquid in the world. If confirmed, I look
    forward to engaging actively on these issues and in working
    with Congress and the SEC's Office of International Affairs.

    Q.6. Over a decade ago, the U.S. led the world in the fight
    against corruption in the extractives industries. Implementing
    the bipartisan Cardin-Lugar amendment to the Dodd-Frank Act, a
    landmark transparency provision, the SEC developed a
    significant new disclosure standard for payments made to
    Governments by mining, oil, and gas companies that catalyzed
    global change in combating corruption. As a result, over thirty
    countries adopted nearly identical public reporting
    requirements for project-level payments and the international
    Extractive Industries Transparency Initiative, now being
    implemented by 56 countries, uses that same reporting standard.
    This has resulted in unprecedented transparency, with many
    companies publicly disclosing project-level payments to
    Governments each year. But under the Trump administration much
    of this progress was reversed. Despite many years of reporting
    by companies outside the U.S., U.S.-listed companies remain
    among the least transparent as they still are not reporting
    project-level payments. Indeed, after years of delay, the SEC
    put out a new, substantially weaker version of the rule in 2020
    that fell far short of the standard already being implemented
    around the world. The rule goes against the weight of evidence
    in the record in its failure to promote international
    transparency, in its failure to ensure consistent reporting
    obligations for companies, its inability to effectively fight
    corruption, and its failure to protect investors. In its
    current form, it does not satisfy the underlying statute's
    anticorruption and accountability purposes. Will you recommit
    the SEC to fulfilling the leadership role in combating
    corruption as Congress intended when it adopted new statutory
    transparency standards, and ensure consistency and
    comparability in reporting standards to better protect
    investors?

    A.6. I support the Cardin-Lugar amendment's overall goal of
    promoting market transparency through the disclosure of
    decision-useful information to investors on payments to
    Governments by resource extraction issuers. A rule on
    disclosure of payments by resource extraction issuers is on the
    SEC's Regulatory Flexibility Agenda, and I want to be careful
    not to prejudge any matter that might come before me. That
    said, I believe this congressional mandate should be robustly
    implemented. I look forward to reviewing the staff's
    recommendations on the issue, and I will be guided by the
    general principle that any rule remain faithful to the mandate
    in the Dodd-Frank Act and congressional intent.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                SENATOR MENENDEZ FROM JAIME E. LIZARRAGA

    Q.1. Corporate America has a diversity problem-boards and
    executive offices across the U.S. do not look like the people
    of this country. The SEC's 2009 diversity disclosure rule fails
    to address this problem or even define ``diversity.''
    Leadership diversity has been shown by McKinsey and others to
    lead to greater profitability for shareholders.
        Do you agree that the demographic breakdown of a company's
    executive board, as well as what policies the company has in
    place for promoting diversity, is material information that
    should be disclosed to shareholders?

    A.1. I agree that women and people of color remain
    underrepresented in the management of public companies. A rule
    on corporate board diversity is on the SEC's Regulatory
    Flexibility agenda, and I want to be careful not to prejudge
    any future rulemaking. However, given strong investor interest
    as demonstrated by the increasing number of shareholder
    proposals on corporate board diversity, I believe this is an
    area in which the SEC should consider acting. If confirmed, I
    look forward to engaging with my fellow Commissioners and
    Commission staff on this matter generally and to reviewing
    stakeholder comments in any future rulemaking.

    Q.2. Political spending is another area where disclosure
    standards need to be improved. More than 1.2 million securities
    experts, institutional and individual investors, and members of
    the public have pressed the SEC for a political spending
    disclosure rule.
        Do you agree that political contributions made by publicly
    traded companies are material information that should be
    disclosed to shareholders of those companies?

    A.2. The lack of transparency in corporate political disclosure
    precludes investors from knowing whether corporate management
    is spending shareholder money in a way that diverges from
    shareholder interests. Investors see disclosure of this
    information as material for their investment decisions, as
    evidenced by the fact that proposals on the subject are
    regularly among the top at annual meetings. That said, as a
    long-time congressional staffer, I deeply respect the role of
    Congress and congressional directives. If Congress were to lift
    the appropriations rider barring the SEC from engaging in any
    rulemaking on corporate political disclosures, I believe it
    would be appropriate for the SEC to consider acting to provide
    investors the information they have been seeking on this
    matter.

    Q.3. On July 7, 2021, the SEC's Asset Management Advisory
    Committee unanimously issued four recommendations that would
    help promote diversity among asset managers and thereby lead to
    greater returns for investors. \1\
    ---------------------------------------------------------------------------
         \1\ https://www.sec.gov/files/amac-recommendations-di-
    subcommittee-070721.pdf
    ---------------------------------------------------------------------------
        If confirmed, would you support holding a vote to consider
    these recommendations?

    A.3. Yes. I was particularly struck by the AMAC's finding that
    less than 1 percent of the $70 trillion of global assets under
    management is managed by women- and minority-owned asset
    management firms. This glaring underrepresentation of women and
    people of color in ownership interests and in boards and senior
    management of asset management firms is very concerning. This
    is an issue that I first examined nearly 20 years ago as a
    House Financial Services Committee staffer and it is
    disheartening to see relatively little progress since then.
        If confirmed, and without prejudging a matter that may come
    before me, I look forward to working with Commission staff to
    carefully evaluate the AMAC's recommendations, which I believe
    are critically important to advancing diversity and inclusion
    in the asset management industry. I also look forward to
    working with my fellow commissioners and the Chair, who
    controls the regulatory agenda of the agency, to consider a
    vote on the staff's recommendations.

    Q.4. Section 13(d) of the Securities Exchange Act of 1934
    requires investors who become the beneficial owners of more
    than 5 percent of an issuer's equity securities to report
    certain identifying information to the SEC. While I appreciate
    that the Commission issued a proposed rule to modernize these
    requirements in February, enforcement of these rules needs to
    be a priority.
        How would you propose to strengthen SEC enforcement in this
    area to make sure that investors who acquire significant stakes
    in a company are reporting their ownership accurately and in a
    timely fashion?

    A.4. The SEC has proposed a rule that, among other things,
    would accelerate the filing deadlines for beneficial ownership
    reports under Section 13(d) which is designed to notify the
    public and target companies when an investor rapidly acquires a
    substantial stake in the company. Without prejudging this
    proposed rule, any time the SEC determines that a violation of
    Section 13(d) has occurred, I believe the violator should be
    held to account under applicable law--including, where
    applicable, potential criminal referrals under Section 32 of
    the Exchange Act. If confirmed, I would work with my fellow
    Commissioners and Commission staff to review the data to
    identify violations of Section 13(d) and take proper
    enforcement steps.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER
                        FROM JAIME E. LIZARRAGA

    Q.1. Risks to Economic Stability--It is critically important
    that both the Fed and the SEC continue to gather as much
    information as possible on the risks to our financial system.
    It's critical for the safety and soundness of the institutions
    the Fed and the SEC regulates, our economy, and protecting the
    American taxpayer. Cybersecurity and cyberattacks will be among
    many risks you, if confirmed, will need to track and evaluate
    in these positions,
        How will you work to address cyberthreats? How will you
    evaluate when new risks are arising and how to address them?

    A.1. If confirmed, I look forward to working with my fellow
    Commissioners, Commission staff, and Congress in advancing
    policies that protect our capital markets and the SEC from
    cyberattacks. I believe it is essential to exercise every
    authority available to the Commission to bolster cybersecurity
    at SEC-regulated entities, and at the SEC itself--a persistent
    target of cyberattacks. I also commit to working with Congress
    to fill any gaps in the SEC's current authorities in order to
    empower the agency in the effective fight against cyberthreats.
        In its 2021 annual report, the Financial Stability
    Oversight Council (FSOC) highlighted cybersecurity as a
    priority for addressing U.S. financial system risks and
    vulnerabilities. While I will not prejudge the two
    cybersecurity disclosure rules pending before the SEC, I
    strongly agree with the FSOC's conclusions and recommendations.

    Q.2. Innovation--As new financial products and technologies are
    developed and existing products evolve the Federal Reserve and
    the Securities and Exchange Commission will have opportunities
    to shape the ecosystem around cryptocurrencies and other
    ``FinTech'' products and companies, and as regulators have a
    responsibility to provide adequate protections for our
    financial system and consumers.
        What is your view of the current regulation and oversight
    in this space? What do you believe works well and what would
    you change?

    A.2. As a matter of principle, I believe that as digital asset
    markets mature and evolve, it is essential for financial
    regulators to ensure a regulatory environment that encourages
    innovation while also ensuring investors have full access to
    the information they need to make informed investment
    decisions. I also believe that it is important to aggressively
    root out fraud and misconduct in these markets. To the extent
    that certain digital assets are securities, I believe the SEC's
    authorities are clear.
        If confirmed, I would work with my fellow Commissioners and
    Commission staff in evaluating the empirical evidence to
    identify gaps in current oversight and regulation efforts. I
    deeply respect the role of Congress and if congressional action
    is necessary to better protect investors or to better promote
    innovation, I would be happy to serve as a resource if and when
    legislation is considered.
                                    ------

           RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                        FROM JAIME E. LIZARRAGA

    Q.1. How do you respond to concerns that SEC's proposed changes
    to Rule 10b5-1 would expose markets to unintended risks by
    limiting the flexibility for businesses to return capital to
    shareholders efficiently through repurchases?

    A.1. Adopted nearly 22 years ago, SEC Rule 10b5-1 provides a
    safe harbor from liability to corporate insiders with knowledge
    of material nonpublic information when they conduct trades
    under certain circumstances. I also understand that companies
    sometimes rely on 10b5-1 plans to effectuate stock buybacks.
    Without prejudging the SEC's recent proposal to modernize this
    rule, I believe effective oversight of our capital markets
    warrants revisiting rules that may be outdated to assess
    whether they merit appropriate updates that align them with
    current market realities.
        As a matter of principle, to the extent the current rule
    provides an advantage to corporate insiders to trade on
    material, nonpublic information before shareholders have access
    to that same information, I believe addressing that disparity
    would promote market transparency and protect investors. While
    stock buybacks are a common method for companies to return
    capital to shareholders, I believe it is important that
    buybacks be carried out transparently. If confirmed, I would
    evaluate the SEC's proposed changes to Rule 10b5-1 through the
    prism of investor protection, market transparency, and ensuring
    a level playing field for all market participants.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT
                        FROM JAIME E. LIZARRAGA

    Q.1. The retail investor has never been better served by the
    U.S. capital markets that it is today, and that's in large part
    due to the robust role of active management. Investors who are
    incentivized to uncover fundamental value of public companies
    make our markets safer and stronger. Several recent SEC
    proposals threaten the role of active management in today's
    markets.
        Can you assure the Committee that if confirmed, you will
    prioritize rulemaking which promotes--not obstructs--the
    ability for investors to conduct market research and take
    positions based on such research?

    A.1. The ability of investors, including active managers, to
    conduct independent research about public companies is critical
    to market efficiency and integrity. Without prejudging any
    proposed rule, I believe the SEC, consistent with congressional
    mandates, should carefully consider the impact that rulemakings
    have on investors' ability to conduct such market research and
    encourage proper price discovery.
                                    ------

           RESPONSES TO WRITTEN QUESTIONS OF SENATOR HAGERTY
                        FROM JAIME E. LIZARRAGA

    Q.1. The U.S. capital markets system has two important pillars:
    the public markets and the private markets. Congress has long-
    recognized that both play a critical role in capital formation
    and job creation.
        There are many types of businesses and many types of
    investors. Private funds and mutual funds are both integral to
    our markets, but they are not the same. The recently proposed
    Private Fund Adviser rulemaking seeks to treat sophisticated
    institutional investors as though they are retail investors. A
    distinction between the groups exists for a reason, as does the
    distinction between private and public markets. If confirmed,
    will you commit to upholding the strength of this diversity and
    not treat all markets and all investors with a one-size-fits-
    all approach?

    A.1. The Federal framework of securities laws that has been in
    place for nearly a century has resulted in the deepest, most
    efficient, fairest, and most innovative public markets the
    world has ever seen. I agree that the distinction between
    public and private markets exists for good reasons and that
    rules appropriate for a large public company, for example, are
    not necessarily appropriate for a small, private one.
        Both public and private markets have an important role to
    play in capital formation, and a careful balance between the
    two is essential to ensuring that companies can raise capital
    and that investors can also have access to the information they
    need to make informed investment decisions.
        For a variety of reasons, we have seen the emergence of
    deeper private markets in recent years, and companies are
    staying private much longer than they once did. I believe
    empirical evidence regarding the growth of private markets and
    the effect of SEC rules on these markets, especially since a
    decade has elapsed since the enactment of the JOBS Act, should
    inform the work of the Commission.
        Additionally, I also support the SEC considering how the
    cost of going public can be lowered without sacrificing key
    investor protections.
        If confirmed, I would work with my fellow Commissioners and
    Commission staff in assessing the appropriate balance between
    private and public markets and how key provisions in the JOBS
    Act--such as the on-ramp, revenue tests, and others--are
    meeting the needs of issuers and investors alike.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
                        FROM JAIME E. LIZARRAGA

    Q.1. Earlier this year, SEC Chair Gensler proposed a rule which
    would entirely upend the ability of many investors to access
    diversified investments in their portfolios. It seeks to
    mandate the terms of a private business arrangement between
    institutional investors and asset managers, and to prohibit
    practices relied upon by pensions, endowments, and foundations.
    This rule--the private fund adviser rule--is described by Chair
    Gensler as a transparency measure and a cost-saving measure. It
    is anything but. Not only will it harm institutional investors,
    it will impose insurmountable barriers to entry for emerging
    managers, many of whom are woman- and minority-owned.
        Can you assure this Committee that you will carefully
    evaluate any proposal's potential cost, not only in terms of
    compliance cost, but in terms of opportunity cost,
    diversification, and competition?

    A.1. Without prejudging this proposed rule, I believe robust
    economic analysis is an essential component of the agency's
    rulemaking process. The law requires the SEC to consider
    whether its rules will promote efficiency, competition, and
    capital formation, and Federal courts have held the SEC has an
    obligation to conduct economic analysis in its rulemakings. It
    is important to keep in mind that in conducting this economic
    analysis, some qualitative aspects of a particular issue
    addressed in a rulemaking may not lend themselves to readily
    quantifiable metrics. That said, if confirmed, I would engage
    with the Division of Economic and Risk Analysis in informing my
    thinking on the economic analysis underpinning SEC rules,
    including the private fund adviser rule.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                        FROM MARK TOSHIRO UYEDA

    Q.1. Where have you excelled in past positions in attracting,
    hiring, and promoting people of color in positions in your
    organization? Where might there be room for improvement?

    A.1. During my time at the SEC, I chaired the SEC's employee
    affinity group for Asian Pacific Americans for several years.
    In that role, I helped organize internal panels for SEC
    employees who were persons of color on how to advance their
    careers. I have represented the SEC at conferences and other
    events to recruit persons of color, both professionals and
    students, for careers in public service, particularly at the
    SEC.
        Through my longstanding involvement with Asian Pacific
    American bar associations, including as president of the Asian
    Pacific American Bar Association of the Greater Washington, DC,
    area, I assisted numerous persons of color who were interested
    in pursuing careers at the SEC, including explaining the type
    of work done by SEC staff and helping them prepare for
    interviews.
        If confirmed, I would work with the SEC's Office of
    Minority and Women Inclusion, the Office of Human Resources and
    the SEC's employee affinity groups to further efforts to
    promote opportunities to attract, hire, and promote persons of
    color. In my view, the SEC could further improve efforts to
    prepare persons of color for promotional opportunities within
    the agency. Personal outreach and relationship-building are
    paramount for recruiting, and retaining, persons of color who
    may be interested in an SEC career. Should I be confirmed, I
    hope to set an example for other SEC employees by continuing to
    personally meet with persons of color who may be interested in
    SEC career opportunities.

    Q.2. What specific measures will you use to evaluate the
    success of the Securities and Exchange Commission in
    understanding and addressing the needs of Black, Indigenous,
    and people of color (BIPOC)? And, will you work with the Chair
    and other Commissioners to keep Congress apprised, as
    appropriate, on the progress being made on these measures?

    A.2. If confirmed, I would start with the annual report to
    Congress from the SEC's Office of Minority and Women Inclusion.
    I would also look to data from the triennial Survey of Consumer
    Finances conducted by the Board of Governors of the Federal
    Reserve System with respect to the accumulation of wealth,
    savings, and investments by BIPOC households.
        If confirmed, I will work with the Chair and other
    commissioners to keep Congress apprised, as appropriate, on the
    progress being made on these measures.

    Q.3. What is your plan for creating an inclusive working
    environment for employees within your office?

    A.3. Each SEC Commissioner has a small staff of four persons
    plus a confidential assistant. If confirmed, I intend to make
    staffing decisions on a case-by-case basis and, in doing so, I
    would seek out opportunities to hire a diverse staff. To
    maximize potential applicants, I intend to have openings posted
    both internally within the SEC and externally on the SEC
    website. I would further request that the SEC's social media
    feeds (i.e., Twitter, Facebook, and LinkedIn) publicize the
    openings.
        During my SEC career, I spent significant periods of time
    working for two different commissioners. Both commissioners
    ensured that professional opportunities and projects were made
    available on an equitable basis to their staff and consistent
    with their subject matter expertise. If confirmed, I intend to
    create a similar environment for my staff, with opportunities
    for professional growth and development.

    Q.4. In recent years, there have been severe disruptions in the
    market for U.S. Treasury securities and related instruments.
    Experts have expressed concerns about regulatory fragmentation
    and recommended specific regulatory reforms, including
    mandatory central clearing for Treasury securities and
    repurchase transactions and additional data collection. Do you
    believe that the current regulatory framework for oversight of
    the Treasury market is adequate? If not, what changes do you
    believe should be made?

    A.4. Various components of the Treasury cash and futures
    markets are overseen by the SEC, the Financial Industry
    Regulatory Authority (FINRA), the Department of the Treasury,
    the Federal Reserve System, other banking regulators, and the
    Commodity Futures Trading Commission. Recent Treasury market
    events suggest that there may be a number of areas of
    structural vulnerability. One potential contributing factor is
    the rapid growth of the market size relative to dealers'
    intermediation and market-making capacity.
        My view is that a comprehensive review of the Treasury cash
    and futures markets should be undertaken, including
    identification of potential changes to the regulatory
    framework. If confirmed, I would encourage the SEC staff and
    other commissioners to evaluate ideas to strengthen the
    resiliency of the Treasury markets, which could include
    increasing market-making capacity, examining the role of
    central clearing, improving market transparency and monitoring,
    and studying whether additional safeguards and existing
    exemptions for Treasury securities are warranted.

    Q.5. Do you believe bitcoin is correctly identified as a
    commodity? Why, or why not? If yes, do you think it's likely
    other cryptoassets can achieve that status?

    A.5. The conventional view is that bitcoin is a commodity and
    not a security because it fails the Supreme Court's Howey
    investment contract test. If that view is correct and no other
    provision of the definition of ``security'' in the Federal
    securities laws is applicable, then it is likely that other
    cryptoassets can achieve a similar status if they are factually
    indistinguishable from bitcoin.
        In a July 2018 speech, a senior SEC staff member indicated
    that bitcoin was not a security but he was expressing his
    personal view and not speaking on behalf of the SEC. The SEC
    itself has not taken a position on bitcoin. SEC Chairman Gary
    Gensler declined to comment on bitcoin's status in testimony
    before the House Financial Services Committee in October 2021.
    Because the SEC may subsequently vote on bitcoin's status as a
    security, I will refrain from prejudging the merits of that
    issue.

    Q.6. Please describe in detail what the SEC can do to bring
    greater investor protection to the cryptoasset market.

    A.6. The SEC could provide additional clarity as to which
    cryptoassets are securities and which are not. If a cryptoasset
    is a security, then it falls within the SEC's jurisdiction and
    is subject to the investor protection provisions of the Federal
    securities laws. Some of these investor protections include:
    (a) any offering of a security must be registered with the SEC
    or satisfy the conditions of an applicable exemption from
    registration; (b) brokers who transact in a security are
    regulated by FINRA and subject to SEC rules; and (c) any
    trading venue that trades a security must either register with
    the SEC or qualify for an exemption from registration (like
    Regulation ATS).
        It can be difficult to make a definitive determination as
    to whether a particular cryptoasset is a security under the
    Supreme Court's Howey investment contract test. If the SEC were
    to make a ``security'' determination about a cryptoasset
    earlier in the process, then investors might benefit from
    additional protections under applicable Federal securities
    laws.

    Q.7. Stablecoins in recent weeks have suffered volatility,
    including the loss of the dollar peg by an algorithmic
    stablecoin. The President's Working Group (PWG) report
    recommended that all stablecoin issuers should be insured
    depository institutions. Do you think stablecoin issuers should
    be required to be insured depository institutions? Please
    explain.

    A.7. The November 2021 PWG report recommended that Congress
    pass legislation to establish a Federal regulatory framework
    for stablecoins. I agree with the report's acknowledgment that
    responsibility for clarifying whether and to what extent
    Federal agencies have jurisdiction over stablecoins, rests with
    Congress.
        I am skeptical about requiring all stablecoin issuers to be
    insured depository institutions (IDI). First, stablecoin
    issuers have different business models than banks. To the
    extent that a stablecoin issuer does not engage in bank-like
    activities like taking deposits and making loans, it would not
    seem appropriate to regulate it as a bank. Second, such a
    requirement could stifle innovation. Third, among stablecoin
    issuers, there are a range of different business models,
    including some for which a conventional bank charter may be
    appropriate but for others, less so. Fourth, some stablecoins
    may have attributes much more similar to securities than
    banking products, which may make them not be appropriate for
    issuance by an IDI.

    Q.8. According to reports, since the start of the year, the
    cryptomarket has suffered close to $1 trillion in losses. And
    in recent weeks, we have witnessed the collapse of stablecoin
    TerraUSD. Do you believe significant losses in the cryptomarket
    present risks to traditional markets and financial stability?
    If not, how sure are you?

    A.8. Whether significant losses in the cryptomarket present
    financial stability risks depends on the extent of
    interconnectedness to the traditional markets. TerraUSD is a
    specific cryptocurrency that had little to no
    interconnectedness and exposure to traditional financial
    markets. TerraUSD can be described as an ``algorithmic''
    stablecoin. Speaking generally about ``algorithmic''
    stablecoins, my understanding is that they are tied to other
    cryptoassets without anything specific to support their value.
    In other words, an ``algorithmic'' stablecoin's value is solely
    tied to holder confidence. If holders of stablecoins not
    connected to traditional markets have significantly high risk
    tolerances to bear losses, then risks to financial stability
    will be relatively lower. On the other hand, to the extent that
    cryptoassets are significantly intertwined with the traditional
    financial markets, risks to financial stability may be
    relatively higher.

    Q.9. In recent years, studies have shown that board diversity
    correlates with enhanced performance. In February 2021, Senator
    Toomey wrote the SEC to request that it reject the NASDAQ
    listing proposal that required NASDAQ listed companies to
    disclose or comply with racial and gender diversity standards
    for boards of directors. Ranking Member Toomey previously
    commented on the proposal, stating, ``A quasi-regulatory body
    like NASDAQ should not be creating and enforcing social policy
    in America.'' \1\ Despite Ranking Member Toomey's opposition,
    many groups wrote the SEC in support of the rule. For example,
    the National Asian Pacific American Bar Association, which
    represents approximately 50,000 legal professionals, wrote,
    ``[w]e are encouraged that the proposal may lead to more
    opportunities for numerous talented women, individuals who
    self-identify as Black, African American, Hispanic, Latino,
    Asian, Pacific Islander, Native American, Native Hawaiian, or
    Alaska Native, or who self-identify as gay, lesbian, bisexual,
    or transgender to join corporate boards.'' \2\ Do you believe a
    disclose or comply standard is social policy? If yes, please
    explain.
    ---------------------------------------------------------------------------
         \1\ https://www.banking.senate.gov/newsroom/minority/toomey-gop-
    banking-members-urge-sec-to-block-nasdaqs-proposed-diversity-quota
         \2\ https://www.sec.gov/comments/sr-nasdaq-2020-081/
    srnasdaq2020081-8204244-227431.pdf

    A.9. While I have not reached an informed judgment on whether a
    disclose or comply standard is social policy, some may view it
    as such depending on the facts and circumstances. For example,
    in 2015, the U.S. Court of Appeals for the District of Columbia
    Circuit struck down an SEC disclosure regime for conflict
    minerals, required by the Dodd-Frank Act, on First Amendment
    grounds, and its opinion discussed how the disclosure was
    intended to achieve social benefits rather than economic
    benefits to investors. In my view, the guiding principle for
    disclosure is materiality. Materiality often depends on the
    particular facts and circumstances. It is important for public
    companies to provide material disclosures that investors,
    particularly retail investors, need to make informed investment
    decisions. If confirmed, I intend to consult with SEC staff,
    review public comments, and discuss with the other
    commissioners before reaching any decision on proposed
    disclosure requirements while faithfully abiding by all
    ---------------------------------------------------------------------------
    constitutional and statutory obligations imposed on the SEC.

    Q.10. The recent SEC climate proposal asks public companies to
    describe and quantify risks, without prohibiting any business
    activities. In fact, the proposed rule does not dictate to
    investors which risks to take and which risks not to take.
    Investors have increasingly wanted to know the climate risk of
    companies whose stocks they own or might want to buy. Why
    shouldn't investors benefit from more complete and more
    comparable types of disclosures?

    A.10. Because the SEC climate proposal is pending, I will
    refrain from addressing the specifics of that proposal to avoid
    any issue of prejudgment. As a general matter, investors can
    benefit from more complete and more comparable types of
    disclosures. One important factor in considering a disclosure
    requirement is materiality. Materiality often depends on the
    particular facts and circumstances. As described by Justice
    Thurgood Marshall in TSC Industries v. Northway, an omitted
    fact is material if ``there is a substantial likelihood that a
    reasonable shareholder would consider it important in deciding
    how to vote.'' Justice Marshall also warned that simply burying
    ``shareholders in an avalanche of trivial information'' is
    ``hardly conducive to informed decisionmaking.''
        The potential benefits provided to investors from
    disclosure is an important factor in the economic analysis
    conducted as part of a rulemaking. However, the analysis also
    requires consideration of costs. Further, the SEC is required
    by law to consider the effects on competition, efficiency, and
    capital formation. Thoughtful consideration of all factors are
    needed to provide a rational basis under the Administrative
    Procedure Act to support any final decision.

    Q.11. Do you have concerns about the ``gamification'' of stock
    trading?

    A.11. Before offering an answer, I would want to review the
    materials gathered by the SEC and the public comments submitted
    to the SEC in response to its August 27, 2021, information
    request on the use of digital engagement practices by broker-
    dealers and investment advisers. The request covered behavioral
    prompts, differential marketing, and game-like features,
    commonly referred to as gamification. The SEC received a
    significant number of comment letters in response, which have
    been posted to the SEC website at https://www.sec.gov/comments/
    s7-10-21/s71021.htm. However, I have not had an opportunity to
    review all of these comments in detail. If confirmed, I would
    discuss the concerns identified in the public comment letters
    with the SEC staff and obtain their reactions to develop a
    better understanding of this issue.

    Q.12. To the extent the SEC wants to regulate gamification of
    trading, how should it go about doing it? What tools does it
    have in its disposal?

    A.12. The SEC has multiple tools to address gamification. For
    example, the SEC has rulemaking authority under the Securities
    Act of 1933 and the Securities Exchange Act of 1934 (Exchange
    Act). The SEC could also provide interpretive guidance, which
    could be issued after a public notice and comment period. The
    SEC could issue a report of investigation under Section 21(a)
    of the Exchange Act. The SEC could also request that FINRA
    consider its own rulemaking as a self-regulatory organization.
    SEC staff could provide subregulatory guidance and no-action
    letters addressing gamification. SEC staff could engage in
    research and investor testing with respect to gamification and
    investor behavior. SEC staff could also undertake investor
    education efforts with respect to the costs of frequent and
    rapid trading.

    Q.13. In 2019 and in 2021, House of Representatives voted 410
    to 13 and 350 to 75, respectively, in favor of the Insider
    Trading Prohibition Act, which would codify current principles
    of insider trading jurisprudence while also fixing gaps in the
    law that were highlighted by recent appellate court and Supreme
    Court cases and clarifying liability for insider trading
    derived from information obtained through a cyberbreach or
    hack. Do you support the changes the Insider Trading
    Prohibition Act would make?

    A.13. The SEC has a critical role to play in enforcing insider
    trading law to help protect investors. As a general matter,
    insider trading law could benefit from legislation, rather than
    being developed piecemeal through judicial case law. For
    example, existing insider trading law has limits that make it
    difficult to bring cases with respect to cyberbreaches and
    hacks. As a nominee to the SEC, it is not my place to endorse
    specific pieces of legislation. I defer to the judgment of
    Congress on what legislation to enact, if any. However, if
    Congress does enact the Insider Trading Prohibition Act and I
    am confirmed, I would work with the SEC staff and the other
    commissioners to faithfully implement and enforce the act.

    Q.14. What type of risk does cybersecurity present to markets
    and are there tools in the SEC's toolkit to respond to this
    type of risk?

    A.14. Cybersecurity is a critical threat to the U.S. economy
    and the financial markets are particularly vulnerable. Because
    there are open SEC rulemaking proposals on cybersecurity--one
    for public companies and one for investment advisers--I will
    refrain from discussing specifics of those proposals.
    Generally, I view the SEC's responsibility as divided into
    three areas: regulated entities (e.g., broker-dealers, transfer
    agents, clearing firms, investment advisers, and investment
    companies), public companies, and the SEC itself. Each area
    represents a different context in which to consider
    cybersecurity. For instance, with respect to regulated
    entities, the SEC could increase its efforts to serve as an
    information clearinghouse to inform regulated entities promptly
    about emerging cybersecurity threats. For cybersecurity,
    proactive efforts to thwart breaches can offer significantly
    more investor protection as compared to retrospective
    postbreach enforcement actions.
        If confirmed, I would encourage the SEC staff to coordinate
    with other Federal efforts to improve defenses against
    cyberthreats, including efforts by the Federal Financial
    Institutions Examination Council, the Department of the
    Treasury's Office of Cybersecurity and Critical Infrastructure
    Protection, the National Institute of Standards and Technology,
    and the Department of Homeland Security.

    Q.15. We have seen sophisticated financial services firms
    engage in misconduct and pay fine after fine, including
    recently an asset manager pleading guilty to securities fraud
    and paying a multibillion dollar fine. What can the SEC, and
    other regulators for that matter, do to encourage better
    compliance?

    A.15. The SEC and other financial regulators could pursue more
    enforcement actions, including seeking civil penalties, against
    the individuals responsible for the misconduct or negligence.
    These enforcement actions could deter future misconduct by
    others and encourage better compliance with the law. In my
    experience, the SEC often imposes significant civil penalties
    and other remedies on financial service firms while not
    pursuing any enforcement actions against corporate executives
    to hold them accountable. Settlements with the firms identify
    the specific individuals as ``Executive No. 1'' or ``Trader No.
    1.'' It would not be surprising for the responsible individuals
    to quietly leave the sanctioned firm, only to find a position
    at another financial service firm without the public--or even
    their new employer--knowing the full scope of their culpability
    at the prior firm.

    Q.16. The SEC has a role to play in ensuring that its reporting
    requirements are broadly aligned with workable, effective and
    broadly supportive standards, when such existing standards
    exist. Not only does this help provide consistency and
    comparability for investors and other stakeholders, but
    especially for companies that are publicly listed in multiple
    jurisdictions, this can also alleviate additional costs of
    complying with different requirements. In examples of SEC rules
    where the U.S. standard is considered to be far weaker than
    that of the prevailing international standard, would you
    consider steps to align the U.S. reporting requirements with
    the international standard?

    A.16. Yes, if confirmed, I would consider whether it is
    appropriate to align U.S. reporting requirements with foreign
    standards. The identification and evaluation of reasonable
    alternatives is an important component of the SEC's internal
    guidance on economic analysis. The benefits and costs
    associated with respect to existing foreign standards can be
    informative when considering standard-setting efforts in the
    United States. Differences in reporting and liability regimes
    in foreign countries may need to be taken into account. For
    instance, foreign countries may not have comparable private
    class action liability or personal liability on executives for
    corporate disclosures under Sections 302 and 906 of the
    Sarbanes-Oxley Act, which can significantly increase the costs
    to produce disclosure in the United States relative to other
    countries.

    Q.17. Over a decade ago, the U.S. led the world in the fight
    against corruption in the extractives industries. Implementing
    the bipartisan Cardin-Lugar amendment to the Dodd-Frank Act, a
    landmark transparency provision, the SEC developed a
    significant new disclosure standard for payments made to
    Governments by mining, oil, and gas companies that catalyzed
    global change in combating corruption. As a result, over thirty
    countries adopted nearly identical public reporting
    requirements for project-level payments and the international
    Extractive Industries Transparency Initiative, now being
    implemented by 56 countries, uses that same reporting standard.
    This has resulted in unprecedented transparency, with many
    companies publicly disclosing project-level payments to
    Governments each year. But under the Trump administration much
    of this progress was reversed. Despite many years of reporting
    by companies outside the U.S., U.S.-listed companies remain
    among the least transparent as they still are not reporting
    project-level payments. Indeed, after years of delay, the SEC
    put out a new, substantially weaker version of the rule in 2020
    that fell far short of the standard already being implemented
    around the world. The rule goes against the weight of evidence
    in the record in its failure to promote international
    transparency, in its failure to ensure consistent reporting
    obligations for companies, its inability to effectively fight
    corruption, and its failure to protect investors. In its
    current form, it does not satisfy the underlying statute's
    anticorruption and accountability purposes. Will you recommit
    the SEC to fulfilling the leadership role in combating
    corruption as Congress intended when it adopted new statutory
    transparency standards, and ensure consistency and
    comparability in reporting standards to better protect
    investors?

    A.17. With respect to the resource extraction rules mandated by
    the Dodd-Frank Act, the SEC conducted notice and comment
    rulemaking procedures three times under the Administrative
    Procedure Act. First, the SEC issued final rules in 2012, but
    the U.S. District Court for the District of Columbia vacated
    them. Second, the SEC promulgated final rules in 2016, but they
    were disapproved by a joint resolution of Congress pursuant to
    the Congressional Review Act in 2017. Third, the SEC adopted
    final rules in 2020 under a statutory restriction imposed by
    the Congressional Review Act that prevents an agency from
    reissuing a disapproved rule in ``substantially the same form''
    or further issue a new rule that is ``substantially the same''
    as the disapproved rule.
        Although the 2020 rules are in effect, they contemplate a
    two-year implementation period and the compliance deadline has
    not yet passed. If confirmed, I would want to have discussions
    with SEC staff to understand the types of disclosures being
    filed by early adopters of the 2020 rules and request the
    staff's views as to whether the disclosures are providing
    transparency, consistency, and comparability in accordance with
    the Dodd-Frank Act and the Congressional Review Act.

    Q.18. Will you commit that, if confirmed, you will respond in a
    timely manner and fully comply with all information requests
    from me? Please answer ``yes'' or ``no.'' If your answer is
    ``no,'' please explain.

    A.18. Yes.

    Q.19. Please describe with particularity the process by which
    you answered these questions for the record, including
    identifying who assisted you in answering these questions along
    with a brief description of their assistance.

    A.19. The responses I have provided are my own. As a part of
    the process of finalizing my responses, they were reviewed by
    White House, SEC, and congressional staff.

    Q.20. Did any person on the board of, or employed by, a
    501(c)(4) organization, provide advice to you, oral or written,
    on your responses to these questions? If so, please list those
    individuals and organizations.

    A.20. No.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                SENATOR MENENDEZ FROM MARK TOSHIRO UYEDA

    Q.1. On July 7, 2021, the SEC's Asset Management Advisory
    Committee unanimously issued four recommendations that would
    help promote diversity among asset managers and thereby lead to
    greater returns for investors. \1\
    ---------------------------------------------------------------------------
         \1\ https://www.sec.gov/files/amac-recommendations-di-
    subcommittee-070721.pdf
    ---------------------------------------------------------------------------
        If confirmed, would you support holding a vote to consider
    these recommendations?

    A.1. Yes, I would support holding a vote to consider these
    recommendations.

    Q.2. Section 13(d) of the Securities Exchange Act of 1934
    requires investors who become the beneficial owners of more
    than 5 percent of an issuer's equity securities to report
    certain identifying information to the SEC. While I appreciate
    that the Commission issued a proposed rule to modernize these
    requirements in February, enforcement of these rules needs to
    be a priority.
        How would you propose to strengthen SEC enforcement in this
    area to make sure that investors who acquire significant stakes
    in a company are reporting their ownership accurately and in a
    timely fashion?

    A.2. Determining beneficial ownership for compliance with
    Section 13(d) can be difficult, including detecting whether a
    ``group'' exists for purposes of filing Schedule 13D. It can
    also be difficult to determine easily whether a Schedule 13G
    filer is complying with the requirement that it is not acting
    with the purpose or effect of changing or influencing the
    control of the issuer. As defined by Rule 12b-2, ``control'' is
    ``the possession, direct or indirect, of the power to direct or
    cause the direction of management and policies of a person.''
        Better enforcement of Regulation 13D-G may serve as a
    deterrent to future noncompliance. The SEC's incentives for
    whistleblowers, including monetary rewards, may also be helpful
    in providing tips and evidence that could lead to enforcement
    actions. If confirmed, I would ask the SEC staff whether there
    are additional measures that could strengthen SEC enforcement
    in this area.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER
                        FROM MARK TOSHIRO UYEDA

    Q.1. Risks to Economic Stability--It is critically important
    that both the Fed and the SEC continue to gather as much
    information as possible on the risks to our financial system.
    It's critical for the safety and soundness of the institutions
    the Fed and the SEC regulates, our economy, and protecting the
    American taxpayer. Cybersecurity and cyberattacks will be among
    many risks you, if confirmed, will need to track and evaluate
    in these positions,
        How will you work to address cyberthreats? How will you
    evaluate when new risks are arising and how to address them?

    A.1. Cybersecurity is a critical threat to the U.S. economy and
    the financial markets are particularly vulnerable. Because
    there are open SEC rulemaking proposals on cybersecurity--one
    for public companies and one for investment advisers--I will
    refrain from discussing specifics of those proposals.
    Generally, I view the SEC's responsibility as divided into
    three areas: regulated entities (e.g., broker-dealers, transfer
    agents, clearing firms, investment advisers, and investment
    companies), public companies, and the SEC itself. Each area
    represents a different context in which to consider
    cybersecurity. For instance, with respect to regulated
    entities, the SEC could increase its efforts to serve as an
    information clearinghouse to inform regulated entities promptly
    about emerging cybersecurity threats. For cybersecurity,
    proactive efforts to thwart breaches can offer significantly
    more investor protection as compared to retrospective
    postbreach enforcement actions.
        If confirmed, I would encourage the SEC staff to coordinate
    with other Federal efforts to improve defenses against
    cyberthreats, including the efforts of the Federal Financial
    Institutions Examination Council, the Department of the
    Treasury's Office of Cybersecurity and Critical Infrastructure
    Protection, the National Institute of Standards and Technology,
    and the Department of Homeland Security. I would consider the
    views of the SEC staff experts to evaluate new risks and how to
    address them.

    Q.2. Innovation--As new financial products and technologies are
    developed and existing products evolve the Federal Reserve and
    the Securities and Exchange Commission will have opportunities
    to shape the ecosystem around cryptocurrencies and other
    ``FinTech'' products and companies, and as regulators have a
    responsibility to provide adequate protections for our
    financial system and consumers.
        What is your view of the current regulation and oversight
    in this space? What do you believe works well and what would
    you change?

    A.2. Generally, the existing principles-based securities laws
    have worked well to adapt to new financial products and
    technologies over time. For example, when I was a first-year
    law firm associate in 1995, whether a faxed signature page was
    valid was not universally settled law. In later years,
    questions arose regarding electronic signatures. Regulators,
    assisted by legislation in some cases, were able to adapt to
    new developments and make adjustments to protect investors.
        The term ``FinTech'' and cryptocurrencies encompass a broad
    range of products, services, and technologies, some of which
    fall within the SEC's current jurisdiction and others that do
    not. The SEC has had a longstanding ability to provide
    exemptive relief from provisions in Federal securities laws if
    doing so is necessary or appropriate in the public interest and
    consistent with the protection of investors. Exemptive
    authority permits the SEC to allow new innovations to move
    forward but with appropriate conditions and guardrails to
    protect investors. For example, the SEC granted an exemptive
    order for the first exchange-traded fund (ETF) in 1993. Today,
    ETFs represent a significant amount of the investment products
    purchased by retail investors and the SEC's experience with ETF
    exemptive orders eventually led to a general rule.
        The SEC's jurisdiction over cryptocurrency depends on
    whether it is a security. However, determining whether a
    particular cryptocurrency is a security under the Supreme
    Court's Howey investment contract test can be difficult. This
    is an area where Congressional legislation could be helpful.
    The lack of clarity can at times negatively affect investor
    protection.
        If a cryptoasset is a security, then it falls within the
    SEC's jurisdiction and is subject to the investor protection
    provisions of the Federal securities laws. Some of these
    investor protections include: (a) any offering of a security
    must be registered with the SEC or satisfy the conditions of an
    applicable exemption from registration; (b) brokers who
    transact in a security are regulated by FINRA and subject to
    SEC rules; and (c) any trading venue that trades a security is
    subject to SEC jurisdiction and must either register or qualify
    for an exemption from registration (like Regulation ATS).
                                    ------

           RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                        FROM MARK TOSHIRO UYEDA

    Q.1. How do you respond to concerns that SEC's proposed changes
    to Rule 10b5-1 would expose markets to unintended risks by
    limiting the flexibility for businesses to return capital to
    shareholders efficiently through repurchases?

    A.1. Because the SEC's proposed changes to Rule 10b5-1 are
    currently an open rulemaking, I can only provide a general
    response to avoid a potential prejudgment issue under the
    Administrative Procedure Act. Current Rule 10b5-1 was adopted
    in 2000 and it is appropriate for the SEC to engage in a
    retrospective review to determine whether the rule is operating
    effectively and as intended. I appreciate the public comments
    on the proposal, which have identified various concerns,
    including the concern that you have raised in your question. If
    confirmed, I would carefully consider these public comments and
    discuss them with the SEC staff, outside stakeholders, and the
    other commissioners before reaching any conclusion.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT
                        FROM MARK TOSHIRO UYEDA

    Q.1. The retail investor has never been better served by the
    U.S. capital markets that it is today, and that's in large part
    due to the robust role of active management. Investors who are
    incentivized to uncover fundamental value of public companies
    make our markets safer and stronger. Several recent SEC
    proposals threaten the role of active management in today's
    markets.
        Can you assure the Committee that if confirmed, you will
    prioritize rulemaking which promotes--not obstructs--the
    ability for investors to conduct market research and take
    positions based on such research?

    A.1. Yes, if confirmed, I will consider the ability for
    investors to conduct market research and take positions based
    on such research in rulemakings. A core investor protection is
    efficient price discovery. Fundamental research as to the value
    of public companies plays a significant role in the price
    discovery mechanism.
                  Additional Material Supplied for the Record

           LETTERS SUBMITTED IN SUPPORT OF NOMINEE MARK TOSHIRO UYEDA

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                       LETTER SUBMITTED BY SIFMA AND BPI

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