    [Senate Hearing 117-736]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 117-736

                        NOMINATIONS OF MARTIN GRUENBERG,
            TRAVIS HILL, JONATHAN MCKERNAN, AND KIMBERLY ANN MCCLAIN

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

                                    HEARING

                                   before the

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

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                NOMINATIONS OF:

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

                                   __________

     TRAVIS HILL, OF MARYLAND, TO BE A MEMBER AND VICE CHAIRPERSON OF THE
        BOARD OF DIRECTORS OF THE FEDERAL DEPOSIT INSURANCE CORPORATION

                                   __________

        JONATHAN MCKERNAN, OF TENNESSEE, TO BE A MEMBER OF THE BOARD OF
             DIRECTORS OF THE FEDERAL DEPOSIT INSURANCE CORPORATION

                                   __________

      KIMBERLY ANN MCCLAIN, OF MARYLAND, TO BE AN ASSISTANT SECRETARY OF
                         HOUSING AND URBAN DEVELOPMENT

                                   __________

                               NOVEMBER 30, 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

    53-443 PDF                WASHINGTON : 2023

                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

                                  ----------

                          WEDNESDAY, NOVEMBER 30, 2022

                                                                       Page

    Opening statement of Chairman Brown..............................     1
            Prepared statement.......................................    36

    Opening statements, comments, or prepared statements of:
        Senator Toomey...............................................     3
            Prepared statement.......................................    37

                                    NOMINEES

    Martin Gruenberg, of Maryland, to be a Member and Chairperson of
      the Board of Directors of the Federal Deposit Insurance
      Corporation....................................................     7
        Prepared statement...........................................    38
        Biographical sketch of nominee...............................    40
        Responses to written questions of:
            Chairman Brown...........................................    76
            Senator Toomey...........................................    80
            Senator Scott............................................    89
            Senator Tillis...........................................    94
            Senator Hagerty..........................................   100
            Senator Warnock..........................................   101
            Senator Tester...........................................   104
    Travis Hill, of Maryland, to be a Member and Vice Chairperson of
      the Board of Directors of the Federal Deposit Insurance
      Corporation....................................................     9
        Prepared statement...........................................    47
        Biographical sketch of nominee...............................    48
        Responses to written questions of:
            Chairman Brown...........................................   108
            Senator Cortez Masto.....................................   118
            Senator Scott............................................   126
            Senator Tester...........................................   128
            Senator Warren...........................................   132
            Senator Warnock..........................................   134
    Jonathan McKernan, of Tennessee, to be a Member of the Board of
      Directors of the Federal Deposit Insurance Corporation.........    10
        Prepared statement...........................................    54
        Biographical sketch of nominee...............................    55
        Responses to written questions of:
            Chairman Brown...........................................   135
            Senator Cortez Masto.....................................   142
            Senator Scott............................................   149
            Senator Tester...........................................   151
            Senator Warren...........................................   154
            Senator Warnock..........................................   155

                                     (iii)

    Kimberly Ann McClain, of Maryland, to be an Assistant Secretary
      of Housing and Urban Development...............................    11
        Prepared statement...........................................    66
        Biographical sketch of nominee...............................    67
        Responses to written questions of:
            Chairman Brown...........................................   157
            Senator Toomey...........................................   159
            Senator Cortez Masto.....................................   162
            Senator Sinema...........................................   164
            Senator Smith............................................   165
            Senator Warnock..........................................   166

                  Additional Material Supplied for the Record

    Memorandum Opinion, FDIC.........................................   167

                        NOMINATIONS OF MARTIN GRUENBERG,
            TRAVIS HILL, JONATHAN MCKERNAN, AND KIMBERLY ANN MCCLAIN

                                  ----------

                          WEDNESDAY, NOVEMBER 30, 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, Hon. Sherrod Brown, Chairman of
    the Committee, presiding.

               OPENING STATEMENT OF SENATOR SHERROD BROWN

        Chairman Brown. The Senate Committee on Banking, Housing,
    and Urban Affairs will come to order. Good to see Senator
    Corker, who used to sit over there, over there wherever he sat,
    depending on the situation. So nice to see you.
        This hearing is in a hybrid format. Our witnesses are in
    person. Members have the option to appear either way.
        The Committee meets today to consider four nominations: the
    Honorable Martin Gruenberg to be a Member and Chairperson of
    the Board of Directors of the Federal Deposit Insurance
    Corporation; Mr. Travis Hill to be a Member and Vice Chair of
    the FDIC; Ms. Jonathan McKernan to be a Member of the Board of
    Directors of the FDIC; and Dr. Kimberly McClain to be Assistant
    Secretary for Congressional and Intergovernmental Relations at
    the Department of Housing and Urban Development.
        Welcome, all of you. We thank the nominees for appearing.
    We thank them for their willingness to serve our country. We
    welcome their family and friends who are in attendance as well
    as those watching from home.
        FDIC is responsible for ensuring deposits and supervision
    of some 5,000 banks and savings associations. The agency is
    governed by a board of directors which Congress has authorized
    to fulfill its mission to, quote, ``maintain stability and
    public confidence in the Nation's financial system.'' All five
    members of the board are appointed by the President, confirmed
    by the Senate. The board is tasked with governing the FDIC.
        Today our Committee will consider three of these five seats
    on the board, including the Chair and Vice Chair nominees.
        Marty Gruenberg is the President's nominee to serve as FDIC
    Chair. He is exceptionally well qualified. He has dedicated his
    career to serving the public, ensuring that our banking system
    is safe and strong. Since 2005, he has served as a Nation of
    the FDIC board of directors in various capacities, as Chair, as
    Acting Chair, as Vice Chair, as a Member. The Senate has
    unanimously--unanimously--confirmed Mr. Gruenberg five times.
        During his tenure on the FDIC board he has been a fierce
    defender of consumers and taxpayers and small businesses, the
    people who make this country run. He has also seen our banking
    system at its highest and its lowest points. He has helped
    ensure the stability of this system through the great 2008
    recession. Under his leadership, the agency has put in place
    important safeguards following the financial crisis, taken
    steps to strengthen the Community Reinvestment Act. He has
    worked with banks to prepare for the risks that pose threats to
    our financial system, like cyberthreats and climate change.
        He has the experience and dedication we need. If confirmed,
    he will continue working to protect our financial systems so
    that when Americans place their money in FDIC-insured banks
    they know their money will be protected. At his nomination
    hearing to be Chair more than decade ago, Senator Sarbanes,
    whom Mr. Gruenberg staffed on this very dais, said, quote,
    ``Marty is extremely well prepared to serve as its Chair. He
    would bring, right from the beginning, stability and continuity
    to the work of the FDIC.'' Those words actually ring even more
    strongly today.
        It has been only a few weeks since you last appeared before
    us, Mr. Gruenberg. Welcome.
        Travis Hill is nominated to serve as Vice Chair of the
    FDIC. More recently, Mr. Hill served as Senior Advisor to the
    former Chair of the FDIC, Jelena McWilliams, and Deputy the
    Chair for Policy. Before joining FDIC in 2018, he worked on the
    staff of this Committee, for Senator Shelby and Senator Crapo,
    both of whom are here at the beginning of the hearing. Thank
    you.
        Jonathan McKernan is nominated to serve as a Member of the
    Board of Directors at FDIC. Since 2019, Mr. McKernan has served
    as the Financial Housing Finance Agency. He is currently on
    detail from FHFA to Ranking Member Toomey's Banking and Housing
    Committee staff. Prior to joining FHFA, Mr. McKernan served at
    the Treasury Department. Before Treasury, he worked for our
    former colleague, Senator Corker. Early in his career, Mr.
    McKernan worked in private law practice here in Washington.
        Mr. Hill and Mr. McKernan, if confirmed as the two newest
    Nations, will be joining the agency at a critical time as the
    country emerges from the pandemic and the banking system faces
    new challenges. I would like to hear from the two of you how
    you will approach working with Mr. Gruenberg as the Chair. He
    has been in your position for years also so he knows both ends
    of that, how you will protect consumers, serve all Americans,
    and stay ahead of risks to our financial system. I expect
    financial regulators to demonstrate that they are committed to
    serving Main Street, not Wall Street. You know how this
    Committee has changed under this chairmanship.
        Finally, our last nominee before the Committee is Dr.
    Kimberly McClain, President Biden's nominee to serve as
    Assistant Secretary for Congressional and Governmental
    Relations at the Department of Housing and Urban Development.
    HUD's programs help create equal access to opportunity for all
    through responsible access to housing, credit, promotion of
    fair housing assistance to help renters and those experiencing
    homelessness to find safe and stable homes and support for
    States, tribes, local governments as they address their housing
    and community development challenges. If confirmed, Dr. McClain
    will manage an office responsible for coordinating with
    congressional offices and Federal, State, and local government
    agencies.
        Dr. McClain is an Air Force veteran. She serves currently
    as Deputy Assistant Secretary for Lege Affairs at the
    Department of Veterans Affairs. She possesses some 30 years of
    combined legislative, international affairs, and policy
    experience. Before joining the VA, Dr. McClain worked as
    Director for Congressional Strategy at the Air Force. Welcome,
    Dr. McClain. Thank you for your years of dedicated service to
    this country also.
        Ranking Member Toomey.

                 STATEMENT OF SENATOR PATRICK J. TOOMEY

        Senator Toomey. Thank you, Mr. Chairman. I, too, would like
    to welcome back our former colleague, Senator Corker. Great to
    see you back at the Committee again.
        As you pointed out, we are here today to consider four
    nominations--Mr. Gruenberg, Mr. Hill, Mr. McKernan, and Ms.
    McClain, to the posts that you listed.
        The FDIC nominations represent a long-overdue return to
    normal order. The agency has not been governed by a full, five-
    member board since 2015, and has not had a Vice Chairman for
    over 4 years. But more troubling, after former Chairman Jelena
    McWilliams was virtually forced out in February, the board has
    been comprised of only three members, all of the same political
    party, and two of whom served in an acting capacity.
        While I commend the Biden administration for finally
    nominating a full slate of FDIC directors, including a
    permanent Chairman and a Vice Chairman, I have several concerns
    with Acting Chairman Gruenberg's nomination to again serve in
    that role permanently, based on his previous actions. Last
    year, Mr. Gruenberg helped to lead a partisan power grab at the
    FDIC board, under which he and his fellow Democrat board
    members disregarded nearly 90 years of agency precedent of
    allowing the Chair to set the agency's agenda. Until this coup,
    which forced out Chairman McWilliams, all FDIC board members,
    Democrat and Republican, had followed this precedent.
        During the Obama administration, the Department of Justice
    and financial regulators launched the now-infamous Operation
    Choke Point. This program attempted to coerce banks into
    denying services to lawful yet politically disfavored
    businesses, such as firearm manufacturers and payday lenders.
    The FDIC's own inspector general found that FDIC personnel
    targeted these businesses, and I quote, ``consistent with a
    widely held understanding that the highest levels of the FDIC
    disfavored these types of banking services,'' end quote.
        Well, the highest levels of the FDIC, of course, included
    Mr. Gruenberg, who led the FDIC from 2011 through mid-2018.
        And we know from court documents, in Operation Choke Point-
    related litigation, that Mr. Gruenberg and his team played a
    role in directing banks to cease relationships with payday
    lenders. I remain concerned that some of the left still believe
    in Choke Point's central tenet, that financial regulators
    should misuse their regulatory apparatus to debank or limit
    credit to lawful yet politically disfavored businesses. As we
    have seen in word and deed from other nominees, this is a very
    real threat to businesses, especially in the traditional energy
    sector.
        I worry that this pattern of pressuring banks not to
    provide services to lawful but disfavored businesses may be
    again emerging at Mr. Gruenberg's direction. Earlier this year,
    my office received whistleblower reports that the FDIC has been
    deterring banks from doing business with crypto-related
    companies. I understand that one paused activity is custody of
    crypto assets. While this activity has not disappeared but
    rather has simply migrated to less-regulated companies, often
    in foreign jurisdictions with weaker regulatory regimes. And we
    have recently seen how that can end.
        Finally, based on Mr. Gruenberg's 9 months as Acting Chair
    as well as the events that led to his time in that role, I am
    concerned that he may continue to politicize the agency. On his
    very first day as Acting Chair, Mr. Gruenberg announced that
    the FDIC would join the Network for Greening the Financial
    System. This is an international group committed to denying
    capital to carbon-emitting industries. Now while I appreciate
    his recent acknowledge that, and I quote, ``credit allocation
    decisions are responsibilities of financial institutions,'' end
    quote, the statement appears to be in conflict with this
    action. If confirmed, I urge Mr. Gruenberg to depoliticize the
    agency's work and restore the FDIC's independence.
        Today we will also hear from Travis Hill and Jonathan
    McKernan. Both nominees are extremely well qualified to serve
    on the FDIC board. Mr. Hill's significant experience in both
    the Legislative and Executive branches will deepen the FDIC's
    board's expertise and enhance the quality of its deliberations.
    As Senior Counsel on the Banking Committee he worked on several
    pieces of bipartisan legislation, over several Congresses, and
    during his time as an advisor to former FDIC Chair McWilliams
    he spearheaded numerous policy initiatives, worked
    constructively with agency career staff, and other board
    members. I commend him for his public service and I look
    forward to hearing how he will approach his role as FDIC Vice
    Chair.
        In a few moments Senator Corker will introduce Mr.
    McKernan, an exceptional nominee with valuable private sector
    experience and a commitment to public service. I have
    personally worked with Jonathan during his time has an FHFA
    attorney detailed to the Banking Committee. I know firsthand
    that his knowledge of banking and housing finance issues will
    equip him well to serve on the FDIC board, and in addition to
    his substantive expertise I have been impressed by his
    diligence and character, and I look forward to supporting his
    nomination.
        Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Toomey.
        Senator Van Hollen will introduce the Chairman, the
    Chairman designee, Senator Crapo will then introduce the Vice
    Chair designee Hill, and then Senator Corker will introduce the
    third nominee. So Senator Van Hollen.
        Senator Van Hollen. Thank you, Mr. Chairman, Ranking Member
    Toomey, colleagues. Senator Corker, great to see you.
        I am really pleased and privileged to say a few words on
    behalf of the President's nominee to serve as Chairman of the
    FDIC, Mr. Gruenberg. Now I know Mr. Gruenberg is well known to
    Members of this Committee. He has served with great
    distinction. He has been the longest-serving member of the
    board of the FDIC. He served as Vice Chair and Chair. He played
    a critical role as Vice Chair in response to the global
    financial crisis, and then as Chair overseeing the recovery of
    the financial industry under the jurisdiction of the FDIC.
        What many may not know, although I know some do, is that
    Marty Gruenberg also served with great distinction for over 20
    years as a staff member on this Committee for a former Maryland
    Senator, Paul Sarbanes, somebody who I respected greatly. And
    at that time I also served as a staff member for another
    Maryland Senator, in the late 1980s--we are dating ourselves,
    Marty--Mac Mathias, a liberal Republican Senator from Maryland.
        And so Marty Gruenberg and I overlapped during that period
    of time. I later worked as a staff member on the Senate Foreign
    Relations Committee. And I can tell you this, and I think you
    know this. You can disagree with Marty Gruenberg on issues, but
    I daresay nobody can question his integrity and his commitment
    to public service, his determination to listen to all sides
    before making up his mind and reaching a decision, and that is
    exactly the kind of person we want as Chair of the FDIC.
        So it is great to see you again, Marty Gruenberg, and I
    commend his nomination and confirmation to all my colleagues.
    Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Van Hollen.
        Senator Crapo will introduce Mr. Hill.
        Senator Crapo. Thank you very much, Mr. Chairman, and
    Senator Corker, it is great to see you back here in the room. I
    appreciate the opportunity I had to serve with you. Senator
    Toomey, thank you also for your remarks.
        I have the privilege of introducing Travis Hill today, a
    former staffer of mine and no stranger to the Members who have
    been on this Committee over the past several years. Travis
    joined the Senate Banking Committee in 2013, and worked on a
    bipartisan basis on some very difficult, complex issues, from
    housing finance reform to legislation to right-size regulation
    for financial institutions, serving under both then-Chairman
    Shelby and myself as Chairman.
        Travis worked diligently on the Economic Growth, Regulatory
    Relief, and Consumer Protection Act, or S. 2155, which tailored
    regulation to risk for financial institutions in order to
    promote economic lending, and also made it easier for consumers
    to obtain credit, and increased important protections for
    veterans, senior citizens, victims of fraud, and those who fall
    on hard financial times.
        This bill was the product of a thorough, robust process and
    honest bipartisan negotiations, and Travis worked closely with
    many Members of this Committee and their staff, from beginning
    to finish. His intellect, integrity, and deep understanding of
    the financial services legal and regulatory landscape have
    earned him the respect of all who have had the pleasure of
    working with him. Travis understands the need to balance safety
    and soundness while enabling a vibrant, growing economy, and
    has demonstrated this understanding at the FDIC, as the agency
    faced unprecedented challenges during the pandemic.
        As financial markets and the economy experienced
    significant stress and volatility, he played a key role in
    implementing measures to mitigate the impact of the pandemic on
    the U.S. financial system and to support American households,
    communities, and small businesses.
        Travis has the experience and the qualifies to do this job
    well, and I am confident that he will bring the same diligence,
    work ethic, expertise, and respect for Congress that he
    exemplified during the time he worked here for me. I am proud
    to support his nomination and look forward to seeing him
    confirmed promptly.
        Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Crapo.
        And Senator Corker will introduce Mr. McKernan. Bob,
    welcome.
        Senator Corker. Mr. Chairman and Ranking Member, Members of
    the Committee, it is quite an honor, if you can imagine, to be
    here, and a privilege to serve with all of you. Thank you for
    what you continue to do. I know a couple of Members are
    leaving. Just for what it is worth, it is not that bad on this
    side of the dais. So anyway, I thought it would be.
        Jonathan grew up in East Tennessee. He stayed there for
    college, studying at University of Tennessee, where he received
    a bachelor's and master's degree in economics and graduated at
    the top of his undergraduate class. After college, he studied
    in Moscow, Russia, as a National Security Education Program
    Boren Fellow, and then attended law school at Duke University,
    where he graduated with high honors.
        Jonathan has since spent the last 15 years focused on
    financial services, regulation, and policy. He started as a
    banking lawyer in private practice, first at the law firm of
    Hogan & Hartson and then at Wilmer Hale, where he advised
    community banks and other financial institutions on a wide
    range of issues under the Federal and State banking laws.
        Jonathan has spent almost 6 years in Government service. He
    got his start in Government as a financial services policy
    advisor to our office, and in that role he supported our
    bipartisan effort with several Members of this Banking
    Committee, on both sides of the aisle, to negotiate housing
    finance reform legislation, which I know there is still work to
    do there. Jonathan then went to work as a policy advisor at the
    Department of Treasury and to the FHFA, and has been on detail
    from FHFA to the Banking Committee's minority staff since
    January 2021.
        I know all of you know the great pride in being able to
    support someone's nomination that you have worked and served
    with, and I do not know of anyone who has greater intellectual
    curiosity and desire to get to the right answer. It was an
    honor to serve with him. He will be an outstanding director at
    the FDIC, if confirmed. I hope that is the case.
        It is a privilege to be here. Thank you for this time. I
    know I do not have to leave but I cannot stay here, so thank
    you. Thank you so much.
        [Laughter.]
        Chairman Brown. Well said. Thank you, Bob, for being here
    and for the generous introduction of your friend.
        Would the four nominees come forward and please stand and I
    will administer the oath.
        Please raise your right hands.
        Do you swear or affirm the testimony you are about to give
    is the truth, the whole truth, and nothing but the truth, so
    help you God?
        Mr. Gruenberg. I do.
        Mr. Hill. I do.
        Mr. McKernan. I do.
        Ms. McClain. I do.
        Chairman Brown. Do you agree to testify before any duly
    constituted committee of the Senate?
        Mr. Gruenberg. I do.
        Mr. Hill. I do.
        Mr. McKernan. I do.
        Ms. McClain. I do.
        Chairman Brown. Thank you. Please be seated.
        We will begin with Mr. Gruenberg. Any of the four of you,
    if you want to introduce family members or friends with you
    today, please do that at the beginning of your testimony.
        Mr. Gruenberg, please begin.

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

        Mr. Gruenberg. Thank you very much, Chairman Brown, Ranking
    Member Toomey, Members of the Committee. It is my honor to
    appear before you as the President's nominee to serve as
    Chairman and Member of the Board of the Federal Deposit
    Insurance Corporation. I would like to thank President Biden
    for the honor of this nomination, and Chairman Brown and
    Ranking Member Toomey for scheduling this confirmation hearing.
    I would also like to thank Senator Van Hollen for his very kind
    introduction.
        I have had the privilege of serving as a member of the FDIC
    board since August 2005, and as Vice Chairman, Chairman, and
    Acting Chairman during that period. I served as Vice Chairman
    during the global financial crisis of 2008 and its immediate
    aftermath, and as Acting Chairman and Chairman during the post-
    crisis recovery period.
        Prior to joining the FDIC, I worked for Senator
        Sarbanes on the staff of the Senate Committee on Banking,
    Housing, and Urban Affairs from January 1987 to August 2005.
    During that period, I had the opportunity to work on major
    legislation including FIRREA, FDICIA, the Riegle-Neal
    Interstate Banking Act, the Gramm-Leach-Bliley Act, and the
    Sarbanes-Oxley Act.
        A reasonable question to ask is why, after serving on the
    FDIC board for such a long period, I would seek nomination to
    serve as Chairman again?
        The answer is pretty straightforward. My parents, who were
    Holocaust survivors from Poland, gave me the gift of being born
    in this country. Public service is a calling that has always
    been most meaningful to me. The FDIC is a great agency of our
    Government, whose mission of maintaining public confidence and
    stability in our financial system is critical to our country's
    well-being. The opportunity to serve on the FDIC board and to
    provide leadership as Chairman has been the greatest honor of
    my career, and I can think of no opportunity that would have
    greater meaning to me than the chance to continue to serve.
        As I indicated in testimony before this Committee 2 weeks
    ago, the banking industry enters the current period of economic
    uncertainty in a position of significant strength. The industry
    is experiencing strong loan growth and continued good asset
    quality measures, and remains well-capitalized and highly
    liquid. However, it continues to face significant downside
    risks, from inflation, rising market interest rates, and
    geopolitical uncertainty. Taken together, these risks may
    reduce profitability, weaken credit quality and capital, and
    limit loan growth in coming quarters. These will be matters of
    ongoing supervisory attention by the FDIC for the near term.
        In my testimony I also outlined key priorities for the FDIC
    for the remainder of this year and next, including maintaining
    a strong Deposit Insurance Fund, strengthening the Community
    Reinvestment Act, addressing the financial risks of climate
    change, reviewing the bank merger process, evaluating the risks
    of crypto assets to the banking system, and finalizing the
    Basel III capital rules.
        In addition, I highlighted the FDIC's efforts to support
    minority depository institutions and community development
    financial institutions, promote a diverse and inclusive
    workplace at the FDIC, and strengthen cybersecurity and
    information security within the banking industry. If I may, I
    would like to conclude my statement with two acknowledgements.
        First, the last time I appeared before this Committee for a
    confirmation hearing I had the honor of being introduced by
    Senator Sarbanes. Most of what I know about public service I
    learned from him and from serving on the staff of this
    Committee. His integrity, intelligence, and judgment were such
    that not a day that goes by that I do not ask myself, ``What
    would Senator Sarbanes do?''
        Finally, I would like to acknowledge the dedication and
    extraordinary capabilities of the employees of the FDIC who
    have performed with such distinction during my tenure at the
    agency, especially during times of crisis. They are deeply
    committed to the FDIC's mission and serve our country well
    every day.
        That concludes my statement, and I would be glad to respond
    to your questions.
        Chairman Brown. Thank you, Mr. Gruenberg, especially your
    comments about the staff, who does not get nearly the credit
    they should from this institution.
        Mr. Hill, welcome. Please proceed. Thank you.

    STATEMENT OF TRAVIS HILL, OF MARYLAND, TO BE A MEMBER AND VICE
     CHAIRPERSON OF THE BOARD OF DIRECTORS OF THE FEDERAL DEPOSIT
                               INSURANCE
                              CORPORATION

        Mr. Hill. Thank you Chairman Brown, Ranking Member Toomey,
    and Members of the Committee. It is an honor to have been
    nominated by the President to serve as a member of the Board of
    Directors at the Federal Deposit Insurance Corporation, and to
    appear before you today.
        Joining me this morning are my wife Lauren and my son
    Wesley, while my daughter Whitney is having more fun at
    daycare. I am continually grateful for all their love and
    support. I am also joined by my parents, John and Nicole, who
    have traveled here from New York, and from whom I have learned
    the importance of hard work, responsibility, and too many life
    lessons to list.
        Public service is something I do not take lightly. All four
    of my grandparents arrived in this country as immigrants,
    including two who were German Jews escaping the Nazis. Both of
    my grandfathers subsequently volunteered to fight in World War
    II, and in the ensuing years one of them rose to manage a chain
    of restaurants despite never having attended high school, while
    the other started a company importing minerals from India. I
    grew up with a deep appreciation for all this country has to
    offer.
        I spent 5\1/2\ years working as a staff member for this
    Committee. I am extremely grateful to Senators Crapo and Shelby
    for the opportunity. During my time on the Committee, I worked
    on a number of bipartisan bills, including the Economic Growth,
    Regulatory Relief, and Consumer Protection Act, commonly
    referred to as S. 2155, which was signed into law in May 2018.
    I spent countless hours working with staff members on both
    sides of the aisle. Through my experience on the Committee, I
    developed a deep understanding of the ins and outs of banking
    laws and regulations, the importance of bipartisan cooperation,
    and the vital oversight role Congress plays in holding
    Government agencies accountable to the American people.
        After leaving Capitol Hill, I worked at the FDIC as an
    advisor to Chairman Jelena McWilliams and as her deputy for
    policy. In this role, I was involved in a range of FDIC
    policymaking initiatives, represented the agency in a number of
    different venues, and helped lead the agency through the COVID-
    19 pandemic. This experience reinforced my appreciation of the
    important role the FDIC plays in promoting the safety and
    soundness of banks and the stability of the banking system,
    while ensuring that hardworking Americans have a safe,
    accessible place to leave their savings. I also saw firsthand
    the exceptional expertise and experience of the FDIC staff. I
    remember my time at the FDIC with great fondness, and am
    excited about the potential opportunity to return, if
    confirmed.
        Throughout my career I have seen the importance of a well-
    tailored regulatory framework that promotes economic growth,
    innovation, and broad access to credit, while ensuring our
    Nation's banks remain safe, sound, and resilient to shocks. I
    have also grown to deeply appreciate the value of a banking
    sector with institutions of all different sizes and business
    models, including community banks and minority depository
    institutions that play a crucial role in their communities.
        If confirmed, I look forward to working with Members of
    this Committee to ensure the FDIC continues to fulfill its
    critical mission, as it has done for the past 89 years.
        Thank you, and I look forward to your questions.
        Chairman Brown. Thank you, Mr. Hill.
        Mr. McKernan, welcome.

    STATEMENT OF JONATHAN MCKERNAN, OF TENNESSEE, TO BE A MEMBER OF
        THE BOARD OF DIRECTORS OF THE FEDERAL DEPOSIT INSURANCE
                              CORPORATION

        Mr. McKernan. Chairman Brown, Ranking Member Toomey, and
    Members of this Committee, it is an honor to appear before you
    today. I am humbled to have been nominated to be a member of
    the Board of Directors of the Federal Deposit Insurance
    Corporation. I am grateful to the President for entrusting me
    with this nomination, to Senator Corker for giving me my first
    job as a Senate staffer, and to Ranking Member Toomey for
    giving me another opportunity to continue public service here
    in the Senate.
        My wife, Sapna Sharma, is here with me today. She and I met
    on the Hill when we were both starting out as congressional
    staffers. Despite serving on different sides of the aisle,
    Sapna and I quickly found common ground in our shared passion
    for the ideals that make this country great. Five years later,
    we have two boys, 20-month-old Patrick, and 4-month-old
    Jonathan, and I hope that together we will instill in our
    children a love of country and public service, while also
    teaching them to find common ground with others who have
    different world views.
        My parents, Patrick and Victoria, are here today from East
    Tennessee. My father is a former Navy pilot and sales
    representative. My mother is a retired schoolteacher and
    homemaker. From my parents I learned the importance of hard
    work and perseverance, as well as an attachment to reading and
    learning, that together have provided a solid foundation for
    life. My brother, Paul, and his wife Kensie are here today as
    well. Both are also former Senate staffers, having met while
    working for Senator Alexander. My brother, Jason, and sister,
    Christine, also are with us virtually.
        I believe my 15 years in financial services law,
    regulation, and policy have prepared me well to support the
    FDIC in its work to maintain stability and public confidence in
    the Nation's financial system. My first role in Government was
    as an advisor to Senator Corker on banking matters, including
    this Committee' s bipartisan S. 2155 reform legislation and the
    Senator's efforts to negotiate bipartisan housing finance
    reform legislation. I then served as an advisor at the
    Department of the Treasury and the Federal Housing Finance
    Agency, and am now on detail from FHFA to this Committee. I
    have immensely valued my time here and believe this Committee
    represents the best of those in public service.
        Before joining Senator Corker's staff, I worked for more
    than 9 years as a banking lawyer. My time in private practice
    began just as the 2008 financial crisis was beginning. We all
    watched as hundreds of billions of taxpayer dollars were spent
    bailing out ``too big to fail'' financial institutions,
    millions of homeowners were wiped out by foreclosures, and
    almost every American family suffered in some way through the
    economic fallout that followed. The aftershocks of the crisis
    still reverberate 15 years later. Many American families will
    never recover the lost generational wealth. Many others remain
    convinced the system is rigged against them.
        That experience left me with an enduring conviction that we
    as a society must have a strong financial regulatory system
    that ensures we do not repeat the mistakes of the past. The
    FDIC's mission, therefore, resonates deeply with me, and if
    confirmed, I would be strongly committed to ensuring the FDIC
    does its part to maintain a resilient financial system.
        I thank you for your consideration and look forward to your
    questions.
        Chairman Brown. Thank you, McKernan.
        Dr. McClain, welcome.

       STATEMENT OF KIMBERLY ANN MCCLAIN, OF MARYLAND, TO BE AN
                ASSISTANT SECRETARY OF HOUSING AND URBAN
                              DEVELOPMENT

        Mr. McClain. Chairman Brown, Ranking Member Toomey, and
    Members of the Committee, joining me today is Ambassador Cindy
    Courville. I thank her for her presence. Joining me virtually
    are my mother, Ms. Laurie Freeman, my husband, Stephen McClain,
    and our four children--Stephen II, Kenyata, Darrien, and
    Patrick, who is hopefully enjoying school and not watching
    television.
        Thank you once again for the opportunity to appear before
    you today. I would first like to thank President Biden for
    nominating me to serve as Assistant Secretary for Congressional
    and Intergovernmental Relations at the U.S. Department of
    Housing and Urban Development. I would also like to thank
    Secretary Fudge for her support of my nomination. Thank you
    also to this Committee for holding today's hearing and meeting
    with me over the past few weeks.
        I look forward to working with this Committee on our
    Nation's housing issues.
        If confirmed, you have my pledge that I will bring to bear
    the same commitment to service and nonpartisanship that has
    guided my 30-year career in the United States military,
    private, and public sectors.
        For the last 22 months, I have been blessed to serve my
    fellow veterans, their caregivers, and their survivors as
    Deputy Assistant Secretary for Congressional and Legislative
    Affairs at the U.S. Department of Veterans Affairs. I am proud
    to support VA's work on access to benefits and care for all
    veterans and their families.
        I bring to this role a deep knowledge of Government and
    understand how to work across large organizations, agencies,
    and Congress to tackle challenges and deliver results. My
    leadership experience has provided me with the unique
    background to serve in this role. But just as important, I have
    seen firsthand the positive impact of access to affordable
    housing and economic mobility on people's lives.
        You see, my childhood was filled with fond memories of
    going to my paternal grandmother's home on weekends. When my
    Grandma Freeman could no longer live in her home due to health
    issues she moved into a subsidized neighborhood in Rockford,
    Illinois, called ``The Terrace.'' That same neighborhood became
    home to my maternal grandmother after the death of my
    grandfather, from cancer. My Grandma Williams transitioned from
    being a lifelong stay-at-home mother to a high school and
    college graduate, and ultimately a librarian. The Terrace
    provided my grandmothers with a sense of dignity and
    independence in the midst of major life changes.
        Life happens to all of us, and as life is happening, nobody
    should have to wonder where they will lay their head down at
    night. I am keenly aware of the struggles that homeowners and
    renters are facing today. I am committed to working with
    Congress and the constituents it serves. If confirmed, I will
    do everything within my power to ensure that those who are most
    in need have an advocate and a voice at HUD.
        The Office of Congressional and Intergovernmental Relations
    serves as an important force multiplier for HUD and a critical
    conduit for communicating HUD's initiatives, programs, and
    priorities to Congress, State and local elected officials,
    Tribal leaders, and the Senate and House Committees with
    jurisdiction over HUD.
        To successfully accomplish HUD's missions, if confirmed, I
    will focus on three areas: first, ensuring that the Office of
    Congressional and Intergovernmental Relations is empowered and
    equipped to be agile and responsive; second, increasing the
    capacity and continuity of the Office's workforce to deliver
    exceptional customer service; and finally, developing strong,
    trusted relationships through consistent communication and
    engagement.
        I am ready to take on the HUD mission and work alongside
    HUD teammates in service to our Nation. If confirmed, I will
    lead as I did during my career in public service and as an Air
    Force officer--Integrity First, Service Before Self, and
    Excellence in All I Do.
        Chairman Brown, Ranking Member Toomey, and Members of the
    Committee, thank you once again for the privilege to appear
    before you and the opportunity to serve my country. I look
    forward to answering your questions.
        Chairman Brown. Thank you, Dr. McClain, and Dr. McClain,
    thank you for your work for Ohio veterans on the PACT Act and
    on other issues you have worked on at the VA. You will be
    joining, I hope, once confirmation is done, you will be working
    with a friend of mine, a notable Ohioan, Secretary Fudge, so
    thank you for joining us.
        Mr. Hill, I will start with you. Is there public purpose to
    crypto right now?
        Mr. Hill. Senator, I think right now most of the public
    promise of crypto is for the future. Most engagement with
    crypto today has been speculative investments in nature. But I
    do think that there are a number of crypto projects that are
    intended to try to make aspects of our financial system more
    efficient, but I think as of today most of that is theoretical
    and not part of everyday life.
        Chairman Brown. Thank you, and I appreciate your
    consistency from our discussion yesterday and your answer
    today. We simply--and I know you mostly subscribe to what I am
    about to say--we cannot let thousands of risky and volatile
    assets that are used only for speculation and sanctions evasion
    into our banking system. And we know that it is a national
    security issue when you look at what is happening with
    sanctions. So thank you for that response.
        Mr. McKernan, this Committee, for too long, was just
    referred to in these halls and by many as the Senate Banking
    Committee, because it was mostly about Wall Street. You have
    spent much of your career representing big banks, siding with
    Wall Street. Now your job, should you be confirmed, will be
    that of a regulator. Regulators, as you know and as you have
    publicly said, serve the American people.
        If confirmed, convince me your actions at FDIC will reflect
    that commitment to serve all people and communities, not just
    Wall Street.
        Mr. McKernan. Senator, if confirmed, I will, of course, be
    committed to ensuring the--doing my part that the FDIC performs
    its mission. That is all about stability and confidence in the
    Nation's financial system. If the FDIC cannot do that, then it
    is Main Street that is primarily going to bear the burden of
    that. Wall Street is going to be fine at the end of the day if
    we have another bailout, or another financial crisis. At the
    end of the day I am going to stay focused on the mission,
    making sure we do not ever have a repeat of the financial
    crisis.
        Chairman Brown. Thank you for that answer.
        Mr. Hill and Mr. McKernan together, both of you said you
    want to work with Chair Gruenberg on the final Basel III
    capital rules. Former Vice Chair of Supervision Quarles said
    these rules should be implemented without increasing capital
    requirements, while Fed Vice Chair for Supervision Barr is
    committed to taking a fresh look at enhanced regulatory capital
    requirements.
        So as brief of an answer as possible, yes or no, Mr. Hill
    and Mr. McKernan, do you agree with Vice Chair Barr?
        Mr. Hill. Senator, without wanting to prejudge, I certainly
    would go into the position, if confirmed, with an open mind,
    and I do not think there is any down side to doing a holistic
    review of the current capital standards.
        Chairman Brown. Thank you. Mr. McKernan.
        Mr. McKernan. Chairman, I similarly support a holistic
    review.
        Chairman Brown. OK. Thank you both.
        Mr. Gruenberg, you have served at FDIC in different
    capacities under administrations of both parties. Your record
    is bipartisan. Talk about, just walk through if you would, in
    the last minute and a half or so of my time, how you have
    worked collaboratively with Republican independent board
    members to achieve the FDIC mission.
        Mr. Gruenberg. Well, thank you, Mr. Chairman. First of all,
    I learned some lessons working for this Committee, for Senator
    Sarbanes, on the importance of working on a bipartisan basis to
    move forward the public interest, and I try to bring that
    experience to the FDIC.
        As you know, I served as Vice Chairman under Chairman
    Sheila Bair during the global financial crisis, and we worked,
    if I may say, hand in hand through an extraordinary period to
    try to deal with the genuine risks of financial collapse in the
    United States. And after I succeeded Sheila as Acting Chairman
    and then Chairman, I worked on a daily basis with all of the
    members of our board to try to bring the board together on the
    issues that the agency was responsible for dealing with.
        I would note that during the time I was Chairman--we went
    back and checked the record on this--there were 773 board votes
    taken. Of those 773 votes, there were 7 dissents. The rest were
    unanimous, and of those 7 dissents they were all by 4-1 votes,
    which means that even on those votes they were bipartisan given
    the composition of our board.
        So I think the agency functions best when you can bring the
    board together. I am deeply committed to working with all the
    members of our board, hopefully to reach agreement and even if
    we do not, to agree to disagree and be able to continue to work
    together.
        Chairman Brown. Thank you. My high school math would say
    that is greater than 99 percent of the votes. Thank you.
    Senator Toomey.
        Senator Toomey. Thank you, Mr. Chairman. Mr. Gruenberg,
    when you spoke with my staff last week you expressed support
    for providing other FDIC board members with the resources
    necessary for them to hire staff, including staff from outside
    the FDIC. In fact, you noted that in your previous tenure as
    Chairman you had allowed an FDIC board member to hire a non-
    FDIC employee to advise him, and you remarked that this
    arrangement was positive, both for the member and for the board
    as a whole.
        So if you are confirmed, will you commit to providing all
    other FDIC board members with similar resources and hiring
    flexibility?
        Mr. Gruenberg. Yes. Yes, Senator.
        Senator Toomey. I appreciate that because I know you
    recognize the importance that staff play in the decision-making
    process, so I appreciate that commitment.
        It is my understanding that the FDIC has an internal policy
    that requires that meeting materials be circulated to FDIC
    board members at least 2 weeks prior to the board meetings. Now
    I understand that has not always been observed in practice but
    that is the policy. Can you commit to abiding by this deadline,
    including on interagency matters, to make sure that all board
    members have the opportunity to review relevant material before
    board consideration?
        Mr. Gruenberg. Senator, I will certainly commit to doing
    our best on that. We generally meet that deadline. If we do
    not, we consult with the other members of the board, and
    frankly, if there is ever an issue with a board member feeling
    they have not had sufficient time to consider a matter then we
    would, if necessary, delay action on it until all the members
    of the board feel comfortable that they have had a full
    opportunity to consider the matters that the board has to act
    upon.
        Senator Toomey. Well, I appreciate that and I hope you will
    be able to stick to that because it becomes--as you know, it
    can be impossible to properly evaluate and cast the decision
    about an important matter. The things you deal with are so
    complex and have so many nuances that it just requires that
    time for preparation.
        Still with Mr. Gruenberg, now your involvement in forcing
    out former FDIC Chair McWilliams was very disturbing to me, as
    you know. I have talked to you about this. Are you aware of a
    single previous instance in the FDIC's nearly 90-year history
    in which non-chairman board members sought to take control of
    the agency's agenda?
        Mr. Gruenberg. We certainly have had instances when I was
    Chairman when other members of the board put forward proposals,
    and there have been instances in the past in which other
    members of the board have proposed cases at a board meeting.
    And it is common practice at board meetings, at the conclusion
    of board meetings, for the Chairman to ask the other members of
    the board if there are any other matters that members would
    like to raise. So----
        Senator Toomey. Let me--go ahead.
        Mr. Gruenberg. So I think the general practice is to defer
    to the Chairman on setting the agenda, but every member of the
    board is obviously an independent member with the ability, and
    to a certain degree responsibility, to put forward proposals
    that they believe are in the public interest.
        Senator Toomey. OK. But my actual question was, was there a
    time when the board members took control of the agenda against
    the will of the Chair, overruling, essentially, the will of the
    Chair? And we have done the research and we cannot find any
    such time. In fact, in 2018, the board consisted of you as
    Acting Chairman, and two Republicans, Joseph Otting and Mike
    Mulvaney. I am pretty sure there must have been occasions where
    those two Republicans disagreed with you on various matters.
    But again, there has never been an occasion where they took
    control of the agenda, overruled you, and pursued their own
    agenda.
        So I am concerned that what you and some of your colleagues
    did really undermines the FDIC and could have lasting
    implications.
        Let me move on quickly here to your announcement on the
    very first day as Acting Chairman at the FDIC, that the FDIC
    would join the so-called Network for the Greening of the
    Financial System. Now this group has an explicit mission to,
    and I quote, ``mobilize mainstream finance to support the
    transition toward a sustainable economy,'' end quote. In other
    words, their stated goal is to allocate capital in such a way
    as to accelerate a transition to a low-carbon economy.
        Now you recently acknowledged that capital allocations
    decisions should be made by banks. So do you believe it would
    be appropriate for the FDIC to seek to play a role in
    determining the pace of the transition of our economy to a
    lower-carbon economy?
        Mr. Gruenberg. That is not our responsibility, Senator.
        Senator Toomey. I am glad to hear that, but I want to
    remind you that that is exactly what the mission of the Network
    for the Greening of the Financial System is. So we have U.S.
    financial regulators acknowledge the indisputable fact that
    they do not have the authority to set climate policy but then
    they join an organization that is dedicated to doing exactly
    that. So I would suggest withdrawing from the group as a way to
    acknowledge the limited nature of the powers of the FDIC.
        I have got very little time remaining but very quickly, Mr.
    Hill, this is, of course, a multimember, bipartisan board, if
    you are confirmed. Could you briefly talk about some of the
    bipartisan work that you have done in the past that prepares
    you for this role?
        Mr. Hill. Sure. Thank you, Senator.
        Senator Toomey. And then I would like to ask Mr. McKernan
    essentially the same question, if you can answer the same
    question.
        Mr. Hill. When I was a staff member for the Senate Banking
    Committee I participated in the work on a number of bipartisan
    bills. When I first started working for the Committee we were
    working on the FDA Solvency Act, which was marked up and
    approved by the Committee, I believe, by a 23-1 vote. I then
    did a lot of work on the Johnson-Craping Housing Finance Reform
    legislation, which also was marked up by the Committee and
    passed by a bipartisan vote. And, of course, there was S. 2155,
    which also was signed into law with a bipartisan vote.
        Mr. McKernan. Senator, briefly, similarly, some work on S.
    2155 when I was working for Senator Corker, and perhaps also of
    note, there was a lot of bipartisan effort, led by Senator
    Corker's office, on housing finance reform office. I think at
    some part we had, as part of our working group on this, staff
    from six Republican offices and six Democratic offices on this
    Committee. So I think there was a lot of creative problem
    solving there and learning how to work on a bipartisan basis.
        Senator Toomey. Thank you, and I want to thank all of the
    witnesses for their public service and willingness to serve.
        Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Toomey.
        Senator Reed, of Rhode Island, is recognized.
        Senator Reed. Well, thank you very much, Mr. Chairman.
    First let me acknowledge Senator Corker, one of the most
    principled and decent colleagues that I have had the privilege
    to work with. And despite our party differences we always saw
    eye to eye, for obviously reasons.
        I also want to thank Dr. McClain for her extraordinary
    service in the United States Air Force. Thank you very much.
        And finally, I want to commend Wesley for his composure and
    patience, which is unusual around here.
        Mr. Gruenberg, we have had the privilege of working
    together for many, many years, and we share in common a great
    admiration for Paul Sarbanes and public service, and you, I
    think, have tried to continue in that tradition. I commend you
    for that.
        What we discovered during the pandemic is that our
    community banks were very much more effective in helping small
    business than the larger institutions, and much more vital to
    the communities than, again, the larger institutions. FDIC has
    the principal responsibility for these banks. Could you give
    comment on the state of community banking, the challenges it
    faces? Please.
        Mr. Gruenberg. Thank you, Senator. The FDIC, as you know,
    is the lead Federal supervisor for the majority of community
    banks in the United States. So not only the supervision but
    maintaining a strong community bank sector in the U.S. banking
    and financial systems we view as really central to the FDIC's
    mission. And community banks play role in our financial system
    that is really critical and not replaceable. They consistently
    punch above their weight in terms of their impact on our
    financial system as a whole.
        Most obviously, community banks today as the FDIC defines
    them account for about 12 percent of all the banking assets in
    the United States. They also provide nearly 40 percent of all
    the small loans to businesses and farms in the United States,
    and their ability to serve a small business and small farms,
    which are, as you know, very labor intensive in terms of
    providing financial services to, is really the core of the
    business model of the community bank, which the larger
    institutions really do not have a similar interest in serving.
    And we know the importance of small business and small farms to
    the economy. So the sustaining of viable community bank sector
    in the United States is really quite critical.
        And to the other point you raised, community banks have
    continued to perform quite well in the period since the global
    financial crisis and during the pandemic, and played a
    particular and leading role in terms of implementing the PPP
    program, to get loans out to small businesses. So the basic
    business model of a community bank, which is careful
    relationship lending, funded by stable core deposits, focused
    on the local community that the bank understands well, has
    actually held up and proven to be quite competitive, and it
    remains critically important to the financial system, and is
    the central responsibility of the FDIC.
        Senator Reed. Thank you very much.
        Mr. Hill and Mr. McKernan, I have been trying to expand the
    Military Lending Act, which caps interest to servicemembers at
    36 percent, to all Americans. I think 36 percent, in this
    climate, is a rather generous interest rate. Would you be
    supportive of such a proposal, since I would assume most of the
    FDIC insured institutions charge much less interest rate than
    that? Mr. Hill, first.
        Mr. Hill. Senator, I appreciate all the work that you have
    done in this area. I do think it is critically important that
    banks treat their customers fairly and that loans that banks
    make to consumers are loans that are affordable and that
    consumers can repay.
        With respect to the interest rate cap, I think we always
    want to be careful in how we balance affordability with access
    to credit, but would be happy to consider taking a look at the
    legislation, and certainly if it was passed would implement it
    as required.
        Senator Reed. Mr. McKernan, please.
        Mr. McKernan. Yes, Senator. In my time working for Senator
    Corker I had a number of conversations with folks at the Pew
    Trust on some of the creative thinking in that area. And one
    thing I did take from that is that it is a complex issue. I
    understand what you are trying to get at there. It is an
    important issue. And I would be very eager, if confirmed, to
    work with you and your staff to provide technical assistance on
    your work there.
        Senator Reed. Thank you very much. And Dr. McClain, good
    luck. Thank you.
        Chairman Brown. Thanks, Senator Reed.
        Senator Shelby, of Alabama, is recognized.
        Senator Shelby. Thank you, Mr. Chairman.
        First of all, congratulations to all of you, and as we say,
    your willingness to serve in the public sector. A lot of you
    had experience there over the years. I am sure all of you are
    qualified, highly qualified.
        I am here specifically to laud Travis Hill. He worked as a
    senior counsel on this Committee, as has been said, and he
    served us with honor and distinction. He is highly qualified.
    He is highly educated--Duke, Georgetown. He has a lot to offer,
    and I congratulate the President in nominating all of you, but
    especially Mr. Hill.
        Mr. Gruenberg I have known a long time. I have worked with
    him on the Committee when I was Ranking, with Chairman
    Sarbanes, and when I was Chairman, and so forth, and we worked
    together in a bipartisan way on a lot of things. But I have to
    associate myself with some of the concerns that Senator Toomey
    has made, when went on at the FDIC that more than bothered a
    lot of us, because it was unprecedented, and so forth. And
    maybe, Marty, you have learned something there. I do not know.
    But those reservations are with some of us on some of the
    things that you were involved in there.
        I know you are highly qualified, by experience off this
    Committee and as Chairman and Ranking over at the FDIC. But
    those are real concerns, something that you and others ought to
    be thinking about deeply before that ever happens again.
        Other than that I congratulate all of you, wish you well,
    hope the Chairman will expedite these things where we can talk
    more about you and for you on the floor. Thank you very much.
        Chairman Brown. Thank you, Senator Shelby.
        Senator Menendez is recognized, from New Jersey.
        Senator Menendez. Thank you, Mr. Chairman. Congratulations
    to all the nominees.
        The collapse of several crypto asset platforms this year
    has highlighted the growing economic risks of unregulated
    digital assets. We have also seen the potential for contagion
    when these firms collapse under the weight of risky behavior,
    and bring down other firms with them. As an example, last week
    New Jersey-based crypto lender BlockFi filed for bankruptcy due
    to its exposure to FTX. If digital assets become further
    integrated with the traditional economy and financial system
    that contagion risk could be amplified.
        So Mr. Hill and Mr. McKernan, if confirmed, how will you
    ensure that FDIC-supervised institutions are shielded from
    inappropriate risk in the digital asset space?
        Mr. Hill. Senator, I guess I would start by saying I think
    it is important to distinguish between different types of
    crypto-related activities that banks can potentially get
    involved in. I think there is a big difference between a bank
    providing custody services for crypto-related activity versus a
    bank using its balance sheet to engage in speculative
    investments.
        But I think generally the responsibility of the FDIC and
    the other banking agencies is to ensure that to the extent
    activities are legally permissible that they are done in a safe
    and sound way.
        Senator Menendez. Mr. McKernan.
        Mr. McKernan. Senator, if confirmed, the way I would
    approach crypto-related activities within the banking system is
    really threefold. First, any crypto-related activities at an
    FDIC-regulated bank need to be performed in a safe and sound
    manner. Second, those activities need to be in compliance with
    consumer protection and other law. And third, the activities
    cannot pose a risk to financial stability.
        I maybe might just amplify a bit the second point,
    compliance with law. I would want to study this issue further,
    if confirmed, but as I understand it there are some significant
    open questions as to what is a permissible activity when it
    comes to crypto at a bank. So I think that is something I would
    want to understand better. And second, I do think there is a
    role for the market regulators to play in continuing to define
    the rules of the road in this space, and the banks will need to
    similarly comply with that law.
        But at a high level it is about safety and soundness,
    compliance with law, and risk to financial stability.
        Senator Menendez. All right. In order to manage this risk
    it is important for Congress to have as much information as
    possible. In April, the FDIC issued a financial institution
    letter directing its supervisees to notify the FDIC of any
    activity they currently engage in, or intend to engage in,
    related to crypto assets.
        Mr. Gruenberg, will you commit to keeping Congress up to
    date on the findings of your research and the integration of
    digital assets into the traditional financial system?
        Mr. Gruenberg. Yes, Senator.
        Senator Menendez. Thank you. I appreciate the caution FDIC
    has thus far shown with regard to digital assets, and I expect
    the nominees before us today to continue the scrutiny if you
    are confirmed.
        Chair Gruenberg, Mr. Hill, and Mr. McKernan, the latest
    data from the FDIC shows that just 4 percent of the agency's
    executive managers are Hispanic, virtually the same number as
    the year before. Furthermore, the agency employs the lowest
    number of Hispanics relative to other regulators, such as the
    OCC and the NCUA, both in overall workforce and in senior
    positions. This is a community that has a $1.8 trillion
    domestic marketplace impact. It needs to be represented in our
    financial institutions.
        So why has the FDIC lagged behind its counterparts in
    hiring Hispanic and Latino staff and leadership?
        Mr. Gruenberg. Senator, you raised a very important point
    that has been a focus of attention and priority for us. As a
    general matter among minority employees, the FDIC has generally
    been at or above the civilian labor force, but that has not
    been the case for Hispanic employees. We have been
    significantly below, as you pointed out. And for us that has
    been a focus of attention in terms of our efforts to ensure
    diversity and inclusion at the FDIC.
        Earlier this year we established, at the FDIC, an
    interdivisional task force focused on Hispanic employment,
    because it really is within our diversity issues that most
    significant challenge. And we are focusing, in particular, on
    recruitment and hiring as well as training and promotion at the
    agency. And I assure you this will be an ongoing priority, and
    we will be glad to stay in touch with you and your staff.
        Senator Menendez. Well, this is a priority for the
    Senator--it has been for some time--and, you know, the problem
    is we make no progress. So I hear all the things about, you
    know, we are going to recruit, we are going to do this, we are
    going to do that, but we make no progress. So I would like to
    ask the three nominees to the FDIC, are you committed to having
    a diverse workforce, and will you work to achieve it if you are
    confirmed?
        Mr. Gruenberg. Yes, Senator.
        Mr. Hill. Yes, Senator.
        Mr. McKernan. Yes, Senator.
        Senator Menendez. And Mr. Chairman, with your indulgence, a
    very quick question, a provincial question, to Dr. McClain.
        Under previous administrations HUD removed key multifamily
    housing staff from its office in Newark, transferred them to
    the New York regional office. HUD has not had a Region 2
    administrator from New Jersey in over a quarter of a century.
    Now as a former mayor and a State legislator I know that
    presents a challenge for residents and property owners and
    managers. New York and New Jersey have very different housing
    needs and issues. So it is critical that we have HUD staff in
    the State that are familiar with our unique needs.
        Will you ensure, if confirmed, that the Newark office has
    the staff it needs and New Jersey remains a priority at HUD?
        Mr. McClain. Senator, thank you for the question.
    understand that this has been an ongoing conversation between
    your staff and HUD, and it also came up in my conversation with
    your staff. If confirmed, I am committed to continuing to work
    with you and your staff on the issue surrounding New Jersey,
    and will make that a priority as we continue to move forward,
    sir.
        Senator Menendez. OK. Continuing the work is nice, but
    making a difference is nicer. I have said this to the
    Secretary, who I was very supportive of. If it continues that
    we do not have the appropriate staff in New Jersey then I will
    not support future HUD nominees, no matter how qualified they
    are. Thank you very much.
        Chairman Brown. Thank you, Senator Menendez.
        Senator Tillis, of North Carolina, is recognized.
        Senator Tillis. Thank you, Mr. Chairman. Congratulations to
    all of you for your nominations. Mr. Hill, Mr. McKernan, and
    Dr. McClain, I look forward to supporting your nominations. I
    want to thank you for your service in the Air Force. And Mr.
    McKernan, I was glad to hear that you attended Duke. I am sad
    you did not have the grades to get into Chapel Hill. I always
    have to dig Duke.
        Mr. Gruenberg, I did not take any pleasure in the comments
    that I made a couple of weeks ago on what I consider to be a
    serious problem with what occurred last year. And on April 7,
    2017, when President Trump was calling on Senate Republicans to
    nuke the filibuster, I signed on to a letter specifically
    saying, with 61 other members, that we would not do that
    because it would destroy this institution. Four years later we
    had five signatories from this Committee who voted to try and
    nuke the filibuster. This sort of bipartisan framework that we
    work within is hard, but it is necessary.
        The apolitical framework that has been the history of the
    FDIC, with 20 chairmen, 9 of those chairmen, including you,
    serving on a board that had a majority of the other party. I am
    sure they always did not agree on matters, but they always
    agreed on trying to maintain the apolitical nature of the FDIC.
    So this is an unprecedented action and one that concerns me.
        I know you are seeking bipartisan support, but this is not
    about your credentials. I have spoken with a number of people
    and I agree with Senator Shelby that you have the experience
    and you have a lot of people who respect you for your technical
    expertise. This has to do with leadership decision that you
    conscious made that gives me concern, particularly in these
    times where we are looking for ways to work together.
        In a document on December 9th, you issued a request for
    public comment on the Bank Merger Act, in coordination with Mr.
    Chopra. This document, alleging to initiate rulemaking changes
    at the FDIC, was posted to the CFPB website against the wishes
    of, at that time, Chair McWilliams. I would assume since this
    document was posted publicly and your name was attached, you
    are knowledgeable about its origins and contents.
        So my question to you is can you provide to me the names,
    positions, and the agency affiliations of the individuals who
    drafted the document?
        Mr. Gruenberg. I believe so, Senator.
        Senator Tillis. And can I get that as a follow-up or do you
    have any off the top of your head now, that you can share with
    us?
        Mr. Gruenberg. I would be glad to do it as a follow-up.
        Senator Tillis. OK. So you will commit to making any of the
    staff organizations, you will make it available to us prior to
    your confirmation.
        Mr. Gruenberg. Yes, sir.
        Senator Tillis. OK. I also assume when you considered
    precedent when determining whether to issue the document, you
    have been at the FDIC since 2005. Is that correct?
        Mr. Gruenberg. Yes, sir.
        Senator Tillis. So you are familiar with the FDIC
    regulatory history since then. During your tenure, can you
    identify for me other instances when another agency publicly
    posted FDIC policy updates against the wishes of the FDIC
    Chair?
        Mr. Gruenberg. No, Senator.
        Senator Tillis. OK.
        Moving beyond your tenure, the FDIC's first board was sworn
    in on September 11, 1933. While the CFPB had yet to be
    established, the FDIC's other sister agency, the OCC, was on
    the FDIC board from its inception. Can you provide me with
    instances through the 89-year history when an alleged official
    action of the FDIC was posted onto the OCC website or into
    their public record against the objection of the FDIC Chair?
        Mr. Gruenberg. We will certainly check the record on that.
    I am not aware of any, but we will check the record.
        Senator Tillis. I think you are going to find that it is
    not--and again, as Senator Shelby indicated, I want to
    associate myself with comments made by Senator Toomey. But
    again, this comes down to leadership, and I feel like, in the
    same way that if we voted to nuke the filibuster here, you
    cannot unring that bell. So I have great concerns about how the
    FDIC is going to operate in the future. Thank you.
        Chairman Brown. Thank you, Senator Tillis.
        Senator Tester, from Montana, is recognized.
        Senator Tester. Thank you, Mr. Chairman, and thank you all
    for being here at the hearing. Congratulations to all of you on
    your nomination, and thank you for your service, Marty. Travis
    and Jonathan, thank you for coming in to my hideaway and having
    a nice visit. I do not intend to ask you three any questions. I
    am going to focus on Dr. McClain, if I might, so you guys can
    smoke if you have got them. OK?
        Dr. McClain, you have impressive experience working in
    congressional relations in the public and private sector,
    including most recently for Department of Veterans Affairs and
    the Air Force. In addition to your 30-year career in
    congressional affairs you serve as an officer in the Air Force
    Reserve. Thank you for that.
        It is very clear that you are more than qualified for the
    role for which you have been nominated. I especially appreciate
    your leadership as Deputy Assistant Secretary for Congressional
    and Legislative Affairs at VA. You and your team did a great
    job of handling the transition after the election and
    responding to an unprecedented number of inquiries from
    Congress about priorities such as the Sergeant First Class
    Heath Robinson Honoring our PACT Act that was just passed last
    summer.
        Given your track record I have no doubt that you will do a
    great job at HUD and will work to ensure that Congress gets
    timely and accurate information, which is critical in the
    capacity you hopefully will be confirmed for. But if confirmed,
    can you tell me, in this job, what are going to be your top
    priorities?
        Mr. McClain. Thank you, Senator Tester. One of the things
    that I have learned over the course of my last 30 years,
    regardless of whether it is in a congressional affairs
    organization or in an international affairs organization, is
    really focusing on, one, my staff, understanding, if confirmed,
    what the needs are of the congressional and intergovernmental
    relations team so that they are empowered to be able to go
    forth and do their job and that I am there as a resource for
    them. My second priority is ensuring that there is a consistent
    flow of information to and from not just Congress but also our
    State and local leaders. Because through that partnership that
    really allows us to be able, at HUD, again, if confirmed, to be
    able to understand what the constituent needs and address them,
    because through those needs that allows us to make more
    informed policy decisions.
        And third, if confirmed, really understanding what the
    capacity needs are, not just from a physical perspective,
    growing the number of full-time equivalents, but really
    understanding what the additional physical needs are of the
    team. Because again, if people are empowered, they have the
    resources to be able to do their jobs, that allows us to be
    able to serve the American public.
        Senator Tester. Thank you for that answer. What lessons
    will you bring from your career in the Air Force?
        Mr. McClain. Wow. I would say three things and then I will
    expand upon them--humble, credible, and approachable. Being
    humble enough to admit when you are wrong and when you make a
    mistake. It does not matter where you are at. Credible, taking
    the time that if you do not know something go learn it, whether
    it is from the person that is the correspondence clerk to the
    person who is your general counsel. Everyone has something to
    learn and something to give to all of us.
        And last but not least, Senator, being approachable. Being
    approachable to me means having an open-door policy, to be
    willing to listen, whether it is something related directly to
    what is going on, the hot topic for that moment, or whether
    that it is something that is important to that individual. We
    all spend most of our time at work, so having an environment
    where you have a leader that is humble enough to admit
    mistakes, credible enough to understand the issues and to be
    able to help guide and provide a north star, and approachable
    enough to be able to have conversations. That is what makes a
    great workforce to me.
        Senator Tester. I appreciate those answers and hopefully we
    will move you out of Committee quickly because I think you will
    be a tremendous asset to HUD, as you have been to the VA, so we
    thank you.
        I do have 20 seconds left so I am just going to ask a
    really quick question. Crypto has come up a lot since the FTX
    issue, and I took it up with both Travis and Jonathan when they
    were in my office. I am going to phrase the question a little
    bit different because I do not think crypto passes the smell
    test. At least in my book it does not. And I do not want to
    give it credibility by regulation.
        So if we put forth regulations on crypto how do you stop
    that from inherently just giving crypto credibility? Any of the
    three of you can answer that.
        Mr. Gruenberg. That is something we have really tried to be
    thought about, Senator, because I agree with you. From a
    prudential banking regulator perspective, our first
    responsibility is the safety and soundness of the institutions
    and the consumers that the institution serves. And so our
    approach has been to identify the activities, to understand
    them well, and the risks, and to make judgments in terms of the
    safety and soundness, consumer protection, BSA, AML, and even
    potentially financial stability to ensure we understand what we
    are doing before we allow the insured banking institutions to
    get engaged in the activity. And any approach to regulation, it
    seems to me, should start with that premise.
        Senator Tester. Any further comment to that, Mr. Hill or
    Mr. McKernan.
        Mr. Hill. I would just agree that I think from the FDIC's
    perspective the focus is on the safety and soundness of the
    institutions that the FDIC oversees and ensuring that they are
    acting in compliance with all laws and regulations. I think
    there are broader questions related to crypto that Congress and
    perhaps other agencies might have on their agenda, but I think
    from the banking regulator's perspective it is really just
    about safety and soundness and the core risks to the banking
    system.
        Senator Tester. Jonathan?
        Mr. McKernan. I thought the chairman and Travis put it very
    well. I would just echo, amplify the importance that any
    activity, including any crypto activity, has to be done in a
    safe and sound manner.
        Senator Tester. Thanks. I look forward to supporting all
    four of you. Thank you.
        Chairman Brown. Thank you, Senator Tester.
        Senator Lummis, from Wyoming, is recognized.
        Senator Lummis. Thank you, Mr. Chairman.
        As I look at these nominees to the FDIC board I am really
    scratching my head because for all the talk of diversity and
    inclusion that Members of this Committee have championed and
    that the White House has championed, I am not seeing that kind
    of diversity that seems to dominate the thinking about nominees
    in front of us today.
        Further, I am actually kind of angry that you, Mr.
    Gruenberg, forced the resignation of your predecessor as FDIC
    Chair, a first-generation American immigrant who was a woman.
    So my question is this. Are there any women currently nominated
    or serving on the FDIC board, Mr. Gruenberg?
        Mr. Gruenberg. No, Senator.
        Senator Lummis. Do you feel your nomination advances
    diversity on the FDIC board?
        Mr. Gruenberg. Not in that sense, no, Senator.
        Senator Lummis. But so many on this Committee think it is
    important to send the signal, and many qualified candidates
    have been passed over by this Administration for other roles
    because they are not sufficiently diverse. So why you?
        Mr. Gruenberg. Well, it is a little over my pay grade,
    Senator. All I can say is I have served at the FDIC, I believe
    deeply in its mission, I have tried to serve it well, and I
    think I have the capability to continue to provide leadership,
    and it is a very important agency.
        Senator Lummis. Why did you force the FDIC chair out?
        Mr. Gruenberg. I would, if I may, Senator, the issue goes
    to the authority of the agency, and under the Federal Deposit
    Insurance Act the authority of the agency explicitly is vested
    in the board of directors, and a majority of the board has the
    authority to place items before the board----
        Senator Lummis. But never had until this.
        Mr. Gruenberg. No. Actually, Senator, there----
        Senator Lummis. On a chair? On a chair? You have forced out
    chairs? When there was a change of administration in the past,
    was the chair forced out? Ever, before this one? I would
    challenge the conclusion that this was not a unique situation.
        I want to turn next to Dodd-Frank. 12 U.S.C. 1812(a)(1)
    requires that the FDIC board have one member with ``State bank
    supervisory'' experience. That is a quote. State bank
    supervisor to defined in that same statute as being an officer
    of a State with primary regulatory authority over State banks.
    So this is not merely a Federal regulator that oversees State
    banks.
        So neither Mr. Hill nor Mr. McKernan have experience as a
    State bank regulator. Mr. Gruenberg, have you worked as a State
    bank regulator, for a State banking agency?
        Mr. Gruenberg. I have not worked for a State banking
    agency, Senator.
        Senator Lummis. Have you ever written a report of
    examination or issued an exam rating to a community bank, the
    things that would give you a good understanding of how fair a
    bank's exam rate is, for example?
        Mr. Gruenberg. Well, I would point out that the FDIC
    supervises, as you know, State-chartered institutions----
        Senator Lummis. Have you ever written a report of
    examination?
        Mr. Gruenberg. No. I am not an examiner. I have just served
    on the board of the agency, Senator.
        Senator Lummis. Do you think someone should have been
    nominated to the FDIC board with State bank supervisory
    experience? Because most banks in our dual banking system are
    State chartered.
        Mr. Gruenberg. They are the majority of the institutions. I
    understand why you asked the question, Senator, and that is
    also above my pay grade. It is a judgment for the White House
    in terms of the nomination.
        Senator Lummis. Well, the statute requires someone who has
    actually served as a State bank regulator. That is not you or
    any other nominee here. So I think it is pretty clear that the
    White House and this Committee think it is OK to ignore the
    clear text of Dodd-Frank. And I do not think this Committee
    should move forward with these nominations until we start
    following the law.
        Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Lummis.
        Senator Cortez Masto, from Nevada, is recognized.
        Senator Cortez Masto. Thank you, Mr. Chairman.
    Congratulations. Welcome to all the nominees and all of the
    family members here today.
        Dr. McClain, let me start with you. My office has worked
    closely with HUD staff to improve and reauthorize the largest
    affordable housing block grant program, called HOME. If you are
    confirmed to this position, will you commit to working closely
    with my office to improve the HOME program?
        Mr. McClain. Senator Cortez Masto, thank you very much for
    the question. If confirmed, I will commit to working with your
    staff.
        Senator Cortez Masto. Thank you. And this Congress has
    invested hundreds of billions of dollars to build really
    hundreds of thousands of affordable homes. Will you ensure that
    we receive State-level data about these investments?
        Mr. McClain. Senator, if confirmed, I will work with the
    appropriate administrative office and program office to ensure
    that your staff gets the data that it is looking for.
        Senator Cortez Masto. Thank you. And if you have not
    surmised by now, affordable housing is a key issue in the State
    of Nevada, and I want to make sure we are doing everything we
    can, at a Federal level, to support our State and local
    partners, and private partners, to make sure we are building
    that affordable housing. So thank you.
        Let me turn to Mr. Hill and Mr. McKernan and our Acting
    Chair, Mr. Gruenberg. Mr. Hill, if confirmed to this position
    what will you do to expand on the good work of the FDIC through
    its BankOn collaborations and other approaches to ensure that
    banks provide affordable and accessible basic banking services
    to residents of their communities.
        Mr. Hill. Thank you, Senator. I think financial inclusion
    is an important part of what the FDIC does. The FDIC, as you
    know, has done a lot of work with BankOn to promote low-cost
    deposit options for consumers. I believe that there are
    hundreds of banks that now offer BankOn products, and if
    confirmed, I would certainly plan to engage with other members
    of the board and the staff to learn more about what the FDIC is
    doing and what more can be done.
        Senator Cortez Masto. Thank you. And Mr. McKernan, if you
    are confirmed to the FDIC board, how will you ensure that
    changes to the Community Reinvestment Act preserve branch
    banking so that people can open and maintain bank accounts?
        Mr. McKernan. Senator, thank you. Let me just say, as
    someone from East Tennessee with maybe a little bit more
    experience of the unique aspects of living in rural America,
    the Community Reinvestment Act really resonates personally with
    me. It is critical that banks support all segments of their
    community, rural and otherwise.
        And so I think, you know, while there is open rulemaking
    out there and I cannot prejudge the specifics, I commit to
    certainly working with the Chair and the staff to make sure
    that the implementing rule fully achieves that statutory
    mandate.
        Senator Cortez Masto. Thank you. And in many of our rural
    communities in Nevada there are a lot of indigenous people and
    Tribal lands. So how would you address the limited banking
    service for our Tribal communities as well? I am just curious.
        Mr. McKernan. Senator, I think the Community Reinvestment
    Act and implementing it will have a role to play there as well.
        Senator Cortez Masto. Thank you. I appreciate that.
        Mr. Gruenberg, first of all let me just say thank you for
    your timely response to the letter that Senators Romney,
    Sinema, and myself sent regarding the industrial loan
    companies, which are important to Nevada's financial sector.
        In your testimony before the House Financial Services
    Committee you spoke about the FDIC's work on contending with a
    range of risks to ensure resiliency in our banking system. Do
    you have anything to add regarding risks to the financial
    sector posed by other nonbank sectors, or other issues?
        Mr. Gruenberg. I think it is a key risk factor for the
    agency to focus on. Bank relationships with nonbank third
    parties and bank financial companies really is a significant
    source of risk to our insured depository institutions, and our
    supervision of those relationships and ensuring that the bank
    understands that when it engages and partners with a third
    party, in effect, if that third party is providing services on
    behalf of the bank, from a supervisory standpoint it is as if
    the bank itself is directly providing those services and the
    bank is accountable for the provision of those services. So the
    bank really has to manage the relationship in a way that it
    ensures compliance with its basic supervisory responsibilities.
        Senator Cortez Masto. Thank you. And then just touching on
    a separate topic, can you just elaborate for me, I have heard a
    lot of concerns from my Republican colleagues. But can you
    elaborate for me? Apparently there was a DOJ slip opinion that
    was responding to a question regarding whether the Chairperson
    of the FDIC has the authority to prevent a majority of the FDIC
    board from presenting items to the board for a vote and
    decision. Can you talk about how that came about?
        Mr. Gruenberg. Yes. It was requested by the general counsel
    of the FDIC in order to get clarity around that issue, Senator.
        Senator Cortez Masto. And the clarity is, from my
    understanding of this opinion, that really the Chair cannot
    prevent the other board members, if they so choose as a
    majority, to present items before the board. Is that correct?
        Mr. Gruenberg. That is correct, Senator.
        Senator Cortez Masto. Thank you. Thank you again to all of
    the nominees. Congratulations.
        Chairman Brown. Thank you, Senator Cortez Masto.
        Senator Hagerty, of Tennessee, is recognized.
        Senator Hagerty. Thank you, Chairman Brown and Ranking
    Member Toomey. It is good to be back with you after
    Thanksgiving.
        I wanted to start just by recognizing one of the nominees
    here today, Jonathan McKernan, a fellow Tennessean, someone who
    has wonderful credentials, both in the practice of private law
    and working in the public sector. Mr. McKernan, I am delighted
    to see you here representing Tennessee so well. Congratulations
    on your nomination to this important position.
        I would like to turn my question to Mr. Gruenberg. Mr.
    Gruenberg, on April 7th, the FDIC sent a financial institution
    letter to all FDIC-supervised entities, requiring them to
    notify your agency of their crypto-related activities. So my
    first question for you is if you can walk me through the
    process that FDIC-supervised institutions have to undergo to
    accomplish this.
        Mr. Gruenberg. Thank you for the question, Senator. We were
    trying to, as a starting point, to understand the engagement of
    our insured institutions with crypto-related activities. It
    does not require an application. So as a starting point for us
    we wanted to find out which of our insured institutions that we
    supervise are either engaging in crypto-related activities or
    considering it.
        Senator Hagerty. What form does the notification take then?
        Mr. Gruenberg. So we issued a financial institution letter,
    making the request of the institutions the FDIC supervises,
    that if they engage in crypto-related activities or planning
    to, to notify us. And they can notify us in a letter, they can
    call our regional office. And if they are engaging or planning
    to do so we ask them to provide, in some detail, the nature of
    the activity so that we can evaluate it from a standpoint of
    safety and soundness, consumer protection, BSA and AML
    compliance, and then provide supervisory feedback to the
    institution.
        It was a way for us to do a couple of things. One, see
    which of our institutions were engaging and planning to engage,
    and if they were, to try to understand, with some detail, what
    they were doing. Because these are generally new activities,
    both for the institution, and frankly, for us as a regulator to
    understand.
        Senator Hagerty. The technology has great promise.
    Institutions in my home State of Tennessee are engaging in this
    right now. As a person who has invested in and been an
    executive in small businesses, I can tell you that the
    technology poses great potential, and I am concerned about any
    activity that might chill it.
        You and your agency continue to cite financial stability
    and consumer protection as the motivation behind these sorts of
    policies. You are establishing a precedent that requires
    businesses to notify their supervising regulators of
    involvement in sectors that you have deemed high risk. Is that
    correct? Is that how you have justified this, as a high?
        Mr. Gruenberg. I mean, this financial institution letter
    was specific to crypto-related activities, and yes, I think in
    our financial institution letter we identified, as background,
    the risks we saw from a safety and soundness, potential from a
    safety and soundness standpoint, consumer protection, BSA, AML,
    financial stability.
        Senator Hagerty. I think you can understand my concern.
    whether it Operation Choke Point, whether it is the creation of
    new merchant category codes for firearm and ammunition
    purchases, whether it is the debanking of the oil and gas
    industry, our financial system is increasingly becoming
    politicized. It is becoming weaponized to achieve partisan aims
    that certainly would not survive a vote here in the Senate.
        I am concerned that this letter that you put forward may
    certainly be the FDIC simply testing the waters to see how
    other industries like this Administration might be affected,
    other industries that the Administration may be ideologically
    opposed to.
        So my next question, Mr. Gruenberg, is whether there are
    any other specific sectors of our economy that FDIC-insured
    entities that are going to be required to disclose their
    involvement in, and if not--well, let me ask you that first.
    Are there any other sectors that you have got targeted, that
    you are going to send a similar letter to, to get them to
    disclose their involvement?
        Mr. Gruenberg. No, Senator.
        Senator Hagerty. Well, that is good to hear. Then I would
    like to know if you can commit to me here today that the FDIC
    will not institute similar practices, for the oil and gas
    industry, for example, for the firearms and ammunition
    industry, or any other politically sensitive industry that
    might become a target of this Administration?
        Mr. Gruenberg. I agree with that, Senator.
        Senator Hagerty. OK. I am glad to hear that. Thank you.
    Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Hagerty.
        Senator Van Hollen is recognized.
        Senator Van Hollen. Thank you, Mr. Chairman, and
    congratulations to all of you on your nominations. I think we
    have three Marylanders and one from Tennessee. Congratulations
    all.
        Let me start with you, Mr. Gruenberg, and just first of all
    follow up briefly because you and I have had conversations
    about the FDIC's role within its domain to assure that we have
    prudent banking practices, including looking at the risk of
    crypto. So I would say in light of recent developments in the
    meltdown of FTX, your inquiry from members of the FDIC, which
    of course, are federally insured depository institutions, is a
    worthwhile and necessary endeavor. So I appreciate you taking
    that precaution, just to get a sense of what is out there.
        Just to follow up on the CRA question, and I think that was
    raised in response to Senator Cortez Masto's questions. Where
    are we on the timeline with respect to the new CRA rulemaking?
        Mr. Gruenberg. As you know, Senator, we issued a notice of
    proposed rulemaking in May. It had a 90-day comment period,
    which closed on August 5th, I believe. We got quite a few
    comment letters, over 1,000. The staff have been working
    through them, and we are in the process of developing a final
    rulemaking.
        I can tell you it is the top priority of the FDIC to
    complete this rulemaking, and I think our goal is to get it
    done as soon as we can, if I had to guess, the early part of
    next year. But it is also an ambitious rulemaking. Believe me,
    we are very much focused on getting it done.
        Senator Van Hollen. I appreciate that. If you were to
    identify, say, three top priorities, and I know there are lots
    of pieces to it, but what would the three be? And also I have
    this question. Our latest look showed that about 50 percent of
    uninsured personal lending comes from online operations that
    are not subject to FDIC overview, and of course, therefore, not
    subject to CRA. And as more and more of lending goes offline, I
    assume you agree that we would also hope that those lenders
    would not discriminate based on who they are lending to.
        So first, if you could just identify some of the core, key
    pieces of the current CRA proposal but also how we should think
    about addressing all the pieces that are outside that
    jurisdiction.
        Mr. Gruenberg. That is a large question, Senator. I think
    from the standpoint of the CRA proposed rulemaking, which is an
    ambitious proposal, I think the core provision is dealing with
    the fact that currently CRA is limited to the branch network of
    banks, and the so-called assessment areas, which are evaluated
    for CRA, are tied to their physical branch network. And as we
    know, and you pointed out, an increasing portion of lending by
    banks is not tied to their branches but may be done on an
    online basis, and they could involve significant lending in
    communities where they may not have a physical presence.
        So in some sense the key challenge for the rulemaking was
    to deal with this evolution in the banking industry, which I
    think is only going to proceed further down this line, and in a
    sense the core proposal in the rulemaking is to identify new,
    what we call retail lending assessment areas, where a bank may
    be having significant lending activity but does not have a
    physical branch. And we have metrics to identify that if
    certain thresholds are met----
        Senator Van Hollen. So, Mr. Gruenberg, my time is running
    short.
        Mr. Gruenberg. Yes. Sorry.
        Senator Van Hollen. So you are making the point why we have
    to update the CRA. It also raises that broader question I had
    about everybody who is not under the jurisdiction.
        Mr. Gruenberg. I think if we are talking about lending by
    nonbank financial institutions it is outside of our authority,
    and at the end of the day to extend some community investment
    obligation would be a matter for Congress to consider.
        Senator Van Hollen. Right. I mean, it does, obviously,
    create responsibilities for FDIC-insured institutions that are
    not applied to others, which some may argue would actually
    incentivize more people to go online and outside that
    jurisdiction.
        I thank all of you for testifying. I look forward to
    supporting all your nominations. And Dr. McClain I had hoped to
    get a couple of questions to you but I will follow up. I look
    forward to working with you on the housing issues. I also serve
    on the Appropriations Subcommittee that oversees HUD, so I look
    forward to working with you on some priorities there.
        Chairman Brown. Thank you, Senator Van Hollen.
        Senator Daines, of Montana, is recognized.
        Senator Daines. Chairman, thank you.
        Mr. Gruenberg, on December 9, 2021, you and Director Chopra
    issued a joint statement that the FDIC voted in favor of a
    request for information and comment on the bank merger process.
    This vote never happened. Instead, these actions began the
    process of upending an 88-year tradition of the FDIC board
    working collaboratively with its Chairman, and allowing that
    Chairman to set the agency's agenda. Accordingly, then Chair
    McWilliams resigned, and you became the FDIC's Acting Director.
    In a letter to President Biden just last year, my Republican
    colleagues and I detailed our concerns about the consequences
    of these actions.
        I simply want to start this morning by stating that I think
    it is inappropriate for a director to continue serving on the
    FDIC board long after the expiration of his term in order to
    undermine its Senate-confirmed leader.
        I wanted to state that, and now I want to turn to my
    questions. Mr. Gruenberg, Operation Choke Point was implemented
    under your leadership of the FDIC. Federal regulators at the
    FDIC and DOJ used their authorities to intimidate banks into
    shunning lawful but politically disfavored industries,
    including firearms and ammunition dealers. You are now being
    nominated to the same position. My question is, will you commit
    here today, in front of this Committee, that you will actively
    prevent your employees at the FDIC from criticizing,
    discouraging, or prohibiting banks from lending or doing
    business with any industries or customers that are operating in
    accordance with the law?
        Mr. Gruenberg. Yes, Senator, and that has been the policy
    of the FDIC.
        Senator Daines. Thank you.
        Dr. McClain, you spent nearly 2 years as Deputy Assistant
    Secretary for VA's Office of Congressional and Legislative
    Affairs, working to fulfill Secretary McDonough's promise to
    provide Congress with quick responses and accurate information.
    So I have got two questions for you this morning.
        First, for Dr. McClain, do you agree with Secretary
    McDonough's belief that, quote, ``The lifeblood of any well-
    functioning organization is accurate and timely data''?
        Mr. McClain. Senator, I agree that it is critical to be
    able to provide that information in an accurate and timely
    manner, and if not, to be able to communicate when that
    information would be available.
        Senator Daines. Second, what have you learned from your
    leadership experience at the VA that you would be applying at
    HUD, if confirmed?
        Mr. McClain. Senator, one of the things that I have learned
    in my nearly 2 years at VA is truly the depth and breadth of
    benefits and care that the Department of Veteran Affairs
    provides to veterans, their families, their caregivers. But
    even more importantly, the necessity for really not just
    getting the information from our constituents, which I have
    been blessed to be able to work with a number of offices
    directly in taking care of constituent issues, but being able
    to take that information and bring it back to the broader VA
    enterprise to be able to inform some of the decisions that we
    make. That is invaluable, and if confirmed, you can expect that
    I will continue to work not just with the Members of this
    Committee but members and staff across, to be able to really
    understand what is going on locally there, within your States,
    and with your constituents, so that we can better serve the
    American public.
        Senator Daines. Dr. McClain, thank you. Mr. Chairman.
        Chairman Brown. Thank you, Senator Daines.
        Senator Warren, of Massachusetts, is recognized.
        Senator Warren. Thank you, Mr. Chairman, and
    congratulations to our nominees.
        So I just want to take a minute to respond to the baseless
    attacks against Acting Chairman Gruenberg. My Republican
    colleagues continue to accuse him of wrongdoing after the
    previous FDIC Chair, Jelena McWilliams, tried to block a vote
    to get public feedback on bank merger rules last year.
    McWilliams simply announced that she was blocking the request
    of the board majority without citing any legal basis
    whatsoever. And when she was asked to produce a legal basis,
    she resigned.
        Now that seems clear enough that McWilliams was in the
    wrong, but for those who insist on relitigating the issue it
    turns out that the Department of Justice's Office of Legal
    Counsel released a legal opinion on it in July of this year.
        Mr. Hill, you worked for the previous FDIC Chair, Ms.
    McWilliams, so let me ask you. In its July memo, did the Office
    of Legal Counsel determine that a majority of the FDIC board
    had the authority to bring items before the board for a vote?
        Mr. Hill. I believe that was the opinion of the Department
    of Justice in that memo.
        Senator Warren. Thank you. That is exactly what the OLC
    opinion states. In fact, it says, quote, ``The Chairperson of
    the Federal Deposit Insurance Corporation does not have the
    authority to prevent a majority of the FDIC board from
    presenting items to the board for a vote and decision,'' end
    quote, and that is exactly what Ms. McWilliams tried to do. In
    other words, the former FDIC Chair broke the law when she
    blocked a vote to help hold big banks accountable, and she got
    caught, and she resigned.
        So Mr. Chairman, I would like to enter into the record the
    OLC opinion that makes it clear that Acting Chairman Gruenberg
    and the other current FDIC board members were following the
    law, while the previous Republican FDIC Chair unlawfully
    exceeded her authority.
        Chairman Brown. Without objection, so ordered.
        Senator Warren. Thank you.
        Now that we have that cleared up let me turn to another
    issue, and that is crypto. The implosion of crypto platform FTX
    revealed that one of the industry's major players was not much
    more than a handful of magic beans. And now thousands of mom-
    and-pop investors have lost their savings, and many more are
    being squeezed by the contagion that FTX's collapse has
    triggered throughout the crypto industry.
        Mr. McKernan, your current job is advising Republicans on
    the Senate Banking Committee, so I assume you have been
    watching this closely. From what you can tell so far, has the
    contagion that has spread through the crypto industry shaken
    our traditional banking system.
        Mr. McKernan. No, Senator.
        Senator Warren. No, and that is the good news. But it did
    not happen by accident. Our banks stayed safe even as crypto
    imploded because many of President Biden's regulators, like
    Acting Chairman Gruenberg, fought to keep crypto from becoming
    dangerously intertwined with our banks, and he did this despite
    the Trump administration's and crypto boosters' aggressive
    efforts to bring crypto and all its risks into traditional
    banking.
        So Acting Chairman Gruenberg, if the crypto boosters had
    gotten their wish and a bunch of banks that the FDIC insures
    were all in on crypto, for example, holding FTX's tokens on
    their balance sheets or accepting crypto tokens as collateral
    for loans, would our banking system be less safe than it is
    today?
        Mr. Gruenberg. I would think so, Senator.
        Senator Warren. Do you want to expand on that a little?
        Mr. Gruenberg. Well, I mean, the evidence is clear now. We
    had companies that were engaging in highly speculative
    activity, highly leveraged, and vulnerable to a loss of
    confidence in a run. They did not have direct exposures to the
    insured financial institutions, and as a result the failure of
    those firms was really limited to the crypto space and it ended
    up not impacting the insured banking system.
        Senator Warren. So this tells us the power of keeping a
    strong line between the traditional banking system and the
    crypto world.
        You know, more than $1 trillion worth, and counting, of
    crypto has just gone up in smoke so far this year, and reports
    piled on top of reports have shown that the crypto industry is
    powered by fraud and money laundering. Even some industry
    boosters still argue that these toxic crypto assets should be
    more integrated into the real banking system, which would mean
    that the next time crypto stumbles, taxpayers would be on the
    hook to bail out these banks. No thanks on that one.
        Thank you, Mr. Chairman. I have done my questions.
        Chairman Brown. Thank you, Senator Warren.
        Senator Ossoff is recognized from his office.
        Senator Ossoff. Thank you, Mr. Chairman, and thank you to
    our panel. Congratulations on your nominations. Thank you for
    your ongoing service.
        Mr. Gruenberg, I would like to begin with you please, sir.
    What do you view to be the most significant threats to U.S. and
    global financial stability?
        Mr. Gruenberg. That is a pretty large question, Senator. I
    think the changing environment relating to the conduct of
    monetary policy and the efforts of the Fed to respond to
    inflation by raising interest rates. That is an action that is
    not limited to the central bank in the United States but to the
    central banks in other major jurisdictions of the world. I
    think the risk there and effect of global tightening to deal
    with inflationary pressures does also carry the risk of
    significant consequence for the economies of those countries
    and risks to the financial systems of those respective
    jurisdictions. And if you are looking at the potential for
    financial stability risks, I think that is something that we,
    in this country, and I think on a global basis, are going to
    have to keep a very close eye on.
        Senator Ossoff. Thank you, Mr. Gruenberg. But what would be
    the most concerning potential channels or mechanisms of action
    by which higher rates, in your view, could threaten financial
    stability? Which are the markets, the sectors, the assets, the
    trades that you believe are most vulnerable to unwinding or
    failing in a higher-rate environment at a scale such that there
    could be contagion to the overall financial system?
        Mr. Gruenberg. Probably two points I would make. One, I
    think the banking system itself in the United States does have
    significant exposure to interest rate risk. A lot of our banks
    have made longer-term loans that are now susceptible to rising
    interest rates, and there is an overhang of unrealized losses
    on the books of our banks that is very substantial and that
    could be problematic, depending on how the economy evolves.
        And then outside of the banking system, in the nonbank
    financial sector, we have a less clear line of sight, and the
    potential for significant leverage accumulating there, and I
    think that is a matter of attention for us. It has been a focus
    of priority for the FSOC, the Financial Stability Oversight
    Council, and the FDIC has been participating in that work,
    along with the other Federal financial regulators.
        Senator Ossoff. Thank you. Within the commercial banking
    system can you please characterize in more detail that
    overhang, to use your term, to which you refer? Where is the
    most significant leverage that poses the most significant risk?
    Who are the borrowers?
        Mr. Gruenberg. Well, it is actually securities that are
    being held on the balance sheets of our banks, longer-term
    securities, that banks accumulated during the prolonged period
    of very low interest rates. They accumulated longer-term
    securities on their balance sheets to try to manage a narrow
    interest rate environment. But as rates are now rising, those
    securities actually have a negative value on the balance sheets
    of the institutions. The most recently quarterly banking
    profile that the FDIC released, we noted that there is about
    $470 billion of unrealized losses on the balance sheets of our
    institutions. We are going to release the QBP tomorrow for this
    third quarter, and I can tell you now that number has
    increased.
        So that is an overhang. Right now our banks have strong
    liquidity so they should not have to dispose of those assets.
    But as the market evolves and banks may need to dispose of
    those assets, there are substantial unrealized losses that
    could impact our institutions.
        Senator Ossoff. Thank you, Mr. Gruenberg. Final question.
    Chair Powell, Secretary Yellen, Chair Gensler have all
    expressed varying levels of concern about liquidity in Treasury
    markets. What is your assessment of the level of risk there and
    how might liquidity concerns in Treasury markets translate to
    issues that could impact depositors and those you are entrusted
    with protecting? Thank you.
        Mr. Gruenberg. Well, if I may say, in the first instance on
    matters such as that I defer to the Treasury Secretary and the
    Fed Chair.
        Senator Ossoff. Mr. Gruenberg, you must have a view on
    whether, as a member of the FSOC and given your current
    responsibilities, you must have a view on whether liquidity in
    Treasury markets is a matter of concern for financial stability
    and for the depositors that you defend. Yes?
        Mr. Gruenberg. No, I think it is an issue. It has been
    raised by the officials you reference. I think it has been
    principally--so there is an issue there. I think it has
    principally been driven by the volatility in the financial
    markets and the economic uncertainty that I think is the
    impetus for that volatility. And it is an issue for the Fed and
    the Treasury that I know they are very focused on.
        I think in terms of the banking industry, Treasury
    securities are important. The industry holds large amounts of
    it on their balance sheet, and it goes back to the point I just
    raised in terms of the possible risks on the balance sheet of
    our banks from holding those securities with unrealized losses.
        Senator Ossoff. Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Ossoff.
        Senator Toomey, we will close. Senator Toomey has a few
    remarks, then I will make a few remarks.
        Senator Toomey. Thank you, Mr. Chairman. I will be brief
    but I just feel the need to respond. Chair McWilliams, the past
    Chair of the FDIC, was the subject of what I think are really
    outrageous allegations, and I want to make it very clear that
    she is a highly reputable person who operated and served at the
    FDIC with the highest legal and ethical standards, the utmost
    integrity. And in the incidents that we have discussed this
    morning, she was exercising the authority that every Chair of
    the FDIC has had and exercised for 90 years.
        And let me just say a brief word about crypto because that
    has come up a lot as well. I think there is a danger that some
    of us confuse bad behavior by individual people with the
    instruments they use to conduct their bad behavior. There is
    nothing that I am aware of, and I have studied this pretty
    closely, about what happened at FTX that requires us to blame
    crypto. It was the misuse of customer accounts by an individual
    who controlled them, and that could have been done, and in fact
    has been done, in conventional, non-crypto financial
    institutions many, many times.
        I think it is much more useful to think about these various
    crypto projects as operating systems, software protocols on
    which we are likely to see amazingly powerful apps that will
    solve problems for everyday Americans, in the ordinary physical
    economy, across a very, very wide range, much of which we
    cannot imagine today any more than many of us were able to
    imagine with the beginning of the internet, the Amazons and
    Googles and Ubers and all the other apps that have completely
    changed America's economy.
        Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Toomey, and I obviously
    respectfully disagree. The concern about crypto increasingly is
    our national security, and what we are seeing with people that
    are trying to evade sanctions. And I think we have not shown a
    real public purpose for crypto, especially contrasted with the
    potential danger.
        Briefly on the McWilliams incident, FDIC, it has never been
    the tradition for a Chair to refuse to put an item on the
    agenda. Mr. Gruenberg and others made several attempts to work
    with the former Chair in good faith, and she chose to resign.
    That is the important point there.
        Thank you to our nominees for being here. We will work
    together as a Committee to move forward quickly on the
    nominations. For Senators who wish to submit questions, they
    are due at close of business Monday, December 5th, at noon. To
    nominees, we would like to have your responses by Friday,
    December 9th, at 5 p.m.
        Thank you again for your willingness to serve the public,
    all four of you. The meeting is adjourned.
        [Whereupon, at 11:57 a.m., the hearing was adjourned.]
        [Prepared statements, biographical sketches of nominees,
    responses to written questions, and additional material
    supplied for the record follow:]
                  PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
        The Committee meets today to consider four nominations:
        The Honorable Martin Gruenberg to be a Member and Chairperson of
    the Board of Directors of the Federal Deposit Insurance Corporation, or
    FDIC.
        Mr. Travis Hill to be a Member and Vice Chairperson of the FDIC.
        Mr. Jonathan McKernan to be a Member of the Board of Directors of
    the FDIC.
        Finally, Dr. Kimberly McClain to be Assistant Secretary for
    Congressional and Intergovernmental Relations at the Department of
    Housing and Urban Development.
        We thank the nominees for appearing here today and for their
    willingness to serve our country at this important time, and we welcome
    their families and friends who are in attendance as well as those
    watching from home.
        The FDIC is responsible for insuring deposits and supervision of
    over 5,000 banks and savings associations. The agency is governed by a
    Board of Directors, which Congress has authorized to fulfill its
    mission to, ``maintain stability and public confidence in the Nation's
    financial system.''
        All five members of the Board are appointed by the President and
    confirmed by the Senate, and the Board is tasked with governing the
    FDIC.
        Today, our Committee will consider three of the five FDIC seats on
    the Board, including the Chair and Vice Chair nominees.
        Marty Gruenberg is the President's nominee to serve as Chair of
    FDIC. Mr. Gruenberg is exceptionally well-qualified and has dedicated
    his career to serving the public and ensuring that our banking system
    is safe and strong.
        Since 2005, Mr. Gruenberg has served as a member of the FDIC Board
    of Directors in various capacities: Chairman, Acting Chairman, Vice
    Chairman, and Member. The Senate has unanimously confirmed Mr.
    Gruenberg five times.
        During his tenure on the FDIC Board, Mr. Gruenberg has been a
    fierce defender of consumers, taxpayers, and small businesses--the
    people that make this country run. He has also seen our banking system
    at its highest and lowest points--and helped ensure the stability of
    our financial system through the 2008 Great Recession.
        Under his leadership, the agency has put in place important
    safeguards following the financial crisis, taken steps to strengthen
    the Community Reinvestment Act, and worked with banks to prepare for
    the risks that pose threats to our financial system--like cyberthreats
    and climate change.
        He has the experience and dedication we need at the FDIC. If
    confirmed as Chair, Mr. Gruenberg will continue working to protect our
    financial system so that when Americans place their money in FDIC-
    insured banks, they know their money will be protected.
        At Mr. Gruenberg's nomination hearing to be Chairman of the FDIC
    more than a decade ago, Senator Sarbanes, who Mr. Gruenberg staffed on
    this very dais, said that, ``Marty is extremely well prepared to serve
    as its [FDIC] Chairman. He would bring right from the beginning
    stability and continuity to the work of the FDIC.''
        Those words still ring true today.
        It has been only a few weeks since you last appeared before us, Mr.
    Gruenberg. Welcome back.
        Travis Hill is nominated to serve as Vice Chairman of the FDIC.
    Most recently, Mr. Hill served as Senior Advisor to the former Chair of
    the FDIC, Jelena McWilliams, and Deputy to the Chairman for Policy.
    Before joining the FDIC in 2018, he worked on the staff of this
    Committee for Chairmen Shelby and Crapo.
        Welcome back to the Committee, Mr. Hill.
        Jonathan McKernan is nominated to serve as a Member of the Board of
    Directors at the FDIC. Since 2019, Mr. McKernan has served at the
    Federal Housing Finance Agency, or FHFA. He is currently on detail from
    FHFA to Ranking Member Toomey's Banking and Housing Committee staff.
        Prior to joining FHFA, Mr. McKernan served at the Treasury
    Department. Before serving at the Treasury Department, he worked for
    our former colleague, Senator Bob Corker from Tennessee. Earlier in his
    career, Mr. McKernan worked in private law practice here in Washington.
        Welcome, Mr. McKernan.
        Mr. Hill and Mr. McKernan, if confirmed as the two newest board
    members, you will be joining the agency at a critical time as the
    country emerges from the coronavirus pandemic and the banking system
    faces new challenges.
        I would like to hear about how you will approach working with Mr.
    Gruenberg and the other FDIC board members to protect consumers, serve
    all Americans, and stay ahead of risks to our financial system. I
    expect financial regulators to demonstrate that they are committed to
    serving Main Street, not Wall Street.
        Finally, our last nominee before the Committee today is Dr.
    Kimberly McClain--President Biden's nominee to serve as Assistant
    Secretary for Congressional and Intergovernmental Relations at the
    Department of Housing and Urban Development.
        HUD's programs help create equal access to opportunity for all
    through responsible access to housing credit, promotion of fair
    housing, assistance that helps renters and those experiencing
    homelessness to find safe, stable homes, and support for States,
    tribes, and local governments as they address their housing and
    community development needs.
        If confirmed, Dr. McClain will manage an office responsible for
    coordinating with congressional offices and Federal, State, and local
    government agencies.
        Dr. McClain is an Air Force veteran who currently serves as the
    Deputy Assistant Secretary for Legislative Affairs at the Department of
    Veterans Affairs, or VA. She possesses over 30 years of combined
    legislative, international affairs, and policy experience.
        Before joining the VA, Dr. McClain worked as the Director for
    Congressional Strategy at the Air Force. Dr. McClain has also
    previously served at the Department of Defense and other defense
    agencies in legislative affairs and policy positions.
        Welcome, Dr. McClain, and thank you for your many years of devoted
    service to our country.
        Thank you, again, to all the nominees for being here today.
                                     ______

                PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
        Thank you, Mr. Chairman. We're here today to consider four
    nominations: Marty Gruenberg to be FDIC Chairman; Travis Hill to be
    FDIC Vice Chairman; Jonathan McKernan to be an FDIC Board Member; and
    Kimberly Ann McClain to be HUD Assistant Secretary for Congressional
    and Intergovernmental Relations.
        The FDIC nominations represent a long overdue return to normal
    order. The agency has not been governed by a full, five-member board
    since 2015 and has not had a vice chairman for over 4 years. But more
    troubling, after former Chairman Jelena McWilliams was virtually forced
    out in February, the Board has been comprised of only three members--
    all of the same political party and two of whom serve in an acting
    capacity.
        While I commend the Biden administration for finally nominating a
    full slate of FDIC Directors--including a permanent chairman and a vice
    chairman--I have several concerns with acting Chairman Gruenberg's
    nomination to again serve in that role permanently based on his
    previous actions. Last year, Mr. Gruenberg helped to lead a partisan
    power grab at the FDIC Board under which he and his fellow Democrat
    Board members disregarded nearly 90 years of agency precedent of
    allowing the chair to set the agency's agenda. Until this coup, which
    forced out Chairman McWilliams, all FDIC Board members--Democrat and
    Republican--had followed this precedent.
        During the Obama administration, the Department of Justice and
    financial regulators launched the now-infamous ``Operation Choke
    Point.'' This program attempted to coerce banks into denying services
    to lawful yet politically disfavored businesses, such as firearm
    manufacturers and payday lenders. The FDIC's own Inspector General
    found that FDIC personnel targeted these businesses ``consistent with a
    widely held understanding that the highest levels of the FDIC
    disfavored these types of banking services.'' The highest levels of the
    FDIC included Mr. Gruenberg, who led the FDIC from 2011 through mid-
    2018. And we know from court documents in Operation Choke Point-related
    litigation that Mr. Gruenberg and his team played a role in directing
    banks to cease relationships with payday lenders. I remain concerned
    that some of the Left still believe in Choke Point's central tenant:
    that financial regulators should misuse the regulatory apparatus to de-
    bank or limit credit to lawful, yet politically disfavored businesses.
    As we've seen in word and deed from other nominees, this is a very real
    threat to businesses in the traditional energy sector.
        I worry that this pattern of pressuring banks not to provide
    services to lawful but disfavored businesses may be again emerging at
    Mr. Gruenberg's direction.
        Earlier this year, my office received whistleblower reports that
    the FDIC has been deterring banks from doing business with crypto-
    related companies. I understand that one ``paused'' activity is custody
    of crypto assets. This activity has not disappeared, but rather has
    simply migrated to less regulated companies, often in foreign
    jurisdictions with weaker regulatory regimes. And we've just once again
    seen how that ends.
        Finally, based on Mr. Gruenberg's 9 months as Acting Chair--as well
    as the events that led to his time in that role--I'm concerned that he
    will continue to politicize the agency. On his very first day as Acting
    Chair, Mr. Gruenberg announced that the FDIC would join the ``Network
    for the Greening the Financial System,'' an international group
    committed to denying capital to carbon-emitting industries. While I
    appreciate his recent acknowledgment that ``credit allocation decisions
    are responsibilities of financial institutions,'' this statement
    appears to be in conflict with his actions. Just two months into his
    tenure, Mr. Gruenberg reversed commonsense changes to the FDIC's
    supervisory appeals process that provided banks with due process. The
    change overhauled the independent Office of Supervisory Appeals
    established by his predecessor and reinstated the previous process
    under which agency insiders would hear appeals. This decision raises
    questions about whether the process can operate fairly and impartially.
        If confirmed, I urge Mr. Gruenberg to depoliticize the agency's
    work and restore the FDIC's independence.
        Today, we will also hear from Travis Hill and Jonathan McKernan.
    Both nominees are extremely well qualified to serve on the FDIC Board.
        Mr. Hill's significant experience in both the legislative and
    executive branch will deepen the FDIC Board's expertise and enhance the
    quality of its deliberations. As senior counsel on the Banking
    Committee, he worked on several pieces of bipartisan legislation over
    several Congresses. And during his time as an advisor to former FDIC
    Chairman McWilliams, he spearheaded numerous policy initiatives,
    working constructively with agency career staff and other Board
    members. I commend him for his public service, and I look forward to
    hearing how he will approach his role as FDIC Vice Chair.
        In a few moments, Senator Corker will introduce Mr. McKernan, an
    exceptional nominee with valuable private sector experience and a
    commitment to public service.
        I have personally worked with Jonathan during his time as an FHFA
    attorney detailed to the Banking Committee. I know firsthand that his
    knowledge of banking and housing finance issues will equip him well to
    serve on the FDIC Board. In addition to his substantive expertise, I
    have been impressed by his diligence and character, and I look forward
    to supporting his nomination.
                                     ______

                     PREPARED STATEMENT OF MARTIN GRUENBERG
    To Be a Member and Chairperson of the Board of Directors of the Federal
                         Deposit Insurance Corporation
                               November 30, 2022
        Chairman Brown, Ranking Member Toomey, Members of the Committee, it
    is my honor to appear before you as the President's nominee to serve as
    Chairman and Member of the Board of the Federal Deposit Insurance
    Corporation.
        I would like to thank President Biden for the honor of this
    nomination, and Chairman Brown and Ranking Member Toomey for scheduling
    this confirmation hearing. I would also like to thank Senator Van
    Hollen for his kind introduction.
        I have had the privilege of serving as a member of the FDIC Board
    since August 2005, and as Vice Chairman, Chairman, and Acting Chairman
    during that period. I served as Vice Chairman during the Global
    Financial Crisis of 2008 and its immediate aftermath, and as Acting
    Chairman and Chairman during the post-crisis recovery period.
        Prior to joining the FDIC, I worked for Senator Sarbanes on the
    staff of the Senate Committee on Banking, Housing, and Urban Affairs
    from January 1987 to August 2005. During that period, I had the
    opportunity to work on major legislation including FIRREA, FDICIA, the
    Riegle-Neal Interstate Banking Act, the Gramm-Leach-Bliley Act, and the
    Sarbanes-Oxley Act.
        A reasonable question to ask is why, after serving on the FDIC
    Board for such a long period, I would seek nomination to serve as
    Chairman again?
        The answer is pretty straightforward. My parents, who were
    Holocaust survivors from Poland, gave me the gift of being born in this
    country. Public service is a calling that has always been most
    meaningful to me. The FDIC is a great agency of our Government, whose
    mission of maintaining public confidence and stability in our financial
    system is critical to our country's well-being. The opportunity to
    serve on the FDIC Board and to provide leadership as Chairman has been
    the greatest honor of my life. I can think of no opportunity that would
    have greater meaning to me than the chance to continue to serve.
        As I indicated in testimony before this Committee two weeks ago,
    the banking industry enters the current period of economic uncertainty
    in a position of significant strength. The industry is experiencing
    strong loan growth and continued good asset quality measures, and
    remains well-capitalized and highly liquid. However, it continues to
    face significant downside risks from inflation, rising market interest
    rates, and geopolitical uncertainty. Taken together, these risks may
    reduce profitability, weaken credit quality and capital, and limit loan
    growth in coming quarters. These will be matters of ongoing supervisory
    attention by the FDIC for the near-term.
        In my testimony I also outlined key policy priorities for the FDIC
    for the remainder of this year and next including maintaining a strong
    Deposit Insurance Fund, strengthening the Community Reinvestment Act,
    addressing the financial risks of climate change, reviewing the bank
    merger process, evaluating the risks of crypto-assets to the banking
    system, and finalizing the Basel III capital rules.
        In addition, I highlighted the FDIC's efforts to support Minority
    Depository Institutions and Community Development Financial
    Institutions, promote a diverse and inclusive workplace at the FDIC,
    and strengthen cybersecurity and information security within the
    banking industry.
        I would like to conclude this statement with two acknowledgements.
        First, the last time I appeared before this Committee for a
    confirmation hearing I had the honor of being introduced by Senator
    Sarbanes. Most of what I know about public service I learned from him,
    and from serving on the staff of this Committee. His integrity,
    intelligence, and judgment were such that not a day that goes by that I
    don't ask myself, ``What would Senator Sarbanes do?''
        Finally, I would like to acknowledge the dedication and
    extraordinary capabilities of the employees of the FDIC who have
    performed with such distinction throughout my tenure at the agency,
    especially during times of crisis. They are deeply committed to the
    FDIC's mission and serve our country well every day.
        That concludes my statement. I would be glad to respond to your
    questions.

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                       PREPARED STATEMENT OF TRAVIS HILL
     To Be a Member and Vice Chairperson of the Board of Directors of the
                     Federal Deposit Insurance Corporation
                               November 30, 2022
        Thank you Chairman Brown, Ranking Member Toomey, and Members of the
    Committee. It is an honor to have been nominated by the President to
    serve as a member of the Board of Directors at the Federal Deposit
    Insurance Corporation, and to appear before you today.
        Joining me this morning are my wife Lauren and my son Wesley, while
    my daughter Whitney is watching from afar. I am continually grateful
    for all their love and support. I am also joined by my parents, John
    and Nicole, who have traveled here from New York, and from whom I have
    learned the importance of hard work, responsibility, and too many life
    lessons to list.
        Public service is something I do not take lightly. All 4 of my
    grandparents came to this country as immigrants, including two who were
    German Jews escaping the Nazis. Both of my grandfathers subsequently
    volunteered to fight in World War II, and in the ensuing years, one of
    them rose to manage a chain of restaurants despite never having
    attended high school, while the other started a company importing
    minerals from India. I grew up with a deep appreciation for all this
    country has to offer.
        I spent 5\1/2\ years working as a staff member for this Committee.
    I am extremely grateful to Senators Crapo and Shelby for the
    opportunity. During that time, I worked on a number of bipartisan
    bills, including the Economic Growth, Regulatory Relief, and Consumer
    Protection Act, commonly referred to as S. 2155, which was signed into
    law in May 2018. I spent countless hours working with staff on both
    sides of the aisle. Through this experience, I developed a deep
    understanding of the ins and outs of banking laws and regulations, the
    value of bipartisan cooperation, and the vital oversight role Congress
    plays in holding Government agencies accountable to the American
    people.
        After leaving Capitol Hill, I worked at the FDIC as an advisor to
    Chairman Jelena McWilliams and as her deputy for policy. In this role,
    I was involved in a range of FDIC policymaking initiatives, represented
    the agency in a number of different venues, and helped lead the agency
    through the COVID-19 pandemic. This experience reinforced my
    appreciation of the critical role the FDIC plays in promoting the
    safety and soundness of banks and the stability of the banking system,
    and ensuring that American workers and families have a safe, accessible
    place to leave their hard-earned savings. I also saw firsthand the
    exceptional expertise and experience of the FDIC staff. I look back on
    my time at the FDIC with great fondness, and am excited about the
    opportunity to return if confirmed.
        Over the course of my career, I have seen the importance of a well-
    tailored regulatory framework that promotes economic growth,
    innovation, and broad access to credit, while ensuring our Nation's
    banks remain safe, sound, and resilient to shocks. I have also grown to
    deeply appreciate the value of a banking sector with institutions of
    many different sizes and business models, including community banks and
    minority depository institutions that play a crucial role in their
    local communities.
        If confirmed, I look forward to working with Members of this
    Committee to ensure the FDIC continues to fulfill its critical mission,
    as it has done for the past 89 years.
        Thank you, and I look forward to your questions.

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                    PREPARED STATEMENT OF JONATHAN MCKERNAN
        To Be a Member of the Board of Directors of the Federal Deposit
                             Insurance Corporation
                               November 30, 2022
        Chairman Brown, Ranking Member Toomey, and Members of the
    Committee, it is an honor to appear before you today. I am humbled to
    have been nominated to be a member of the Board of Directors of the
    Federal Deposit Insurance Corporation (FDIC). I am grateful to the
    President for entrusting me with this nomination, to Senator Corker for
    giving me my first job as Senate staffer, and to Ranking Member Toomey
    for giving me another opportunity to continue public service here in
    the Senate.
        My wife, Sapna Sharma, is here with me today. She and I met on the
    Hill when we were both starting out as congressional staffers. Despite
    serving on different sides of the aisle, Sapna and I quickly found
    common ground in our shared passion for the ideals that make this
    country great. Five years later, we have two boys, 20-month-old Patrick
    and 4-month-old Jonathan. I hope that together we will instill in our
    children a love of country and public service, while also teaching them
    to find common ground with others who have different worldviews.
        My parents, Patrick and Victoria, are here today from East
    Tennessee. My father is a former Navy pilot and sales representative.
    My mother is a retired schoolteacher and homemaker. From my parents I
    learned the importance of hard work and perseverance, as well as an
    attachment to reading and learning, that together have provided a solid
    foundation for life. My brother Paul and his wife Kensie are here today
    as well. Both are also former Senate staffers, having met while working
    for Senator Alexander. My brother Jason and sister Christine also are
    with us virtually.
        I believe my 15 years in financial services law, regulation, and
    policy have prepared me well to support the FDIC in its work to
    maintain stability and public confidence in the Nation's financial
    system. My first role in Government was as an advisor to Senator Corker
    on banking matters, including this Committee's bipartisan S.2155 reform
    legislation and the Senator's efforts to negotiate bipartisan housing
    finance reform legislation. I then served as an advisor at the
    Department of the Treasury and the Federal Housing Finance Agency
    (FHFA), and am now on detail from FHFA to this Committee. I have
    immensely valued my time here and believe this Committee represents the
    best of those in public service.
        Before joining Senator Corker's staff, I worked for more than 9
    years as a banking lawyer. My time in private practice began just as
    the 2008 financial crisis was beginning. We all watched as hundreds of
    billions of taxpayer dollars were spent bailing out ``too big to fail''
    financial institutions, millions of homeowners were wiped out by
    foreclosures, and almost every American family suffered in some way
    through the economic fallout that followed. The aftershocks of the
    crisis still reverberate 15 years later. Many American families will
    never recover the lost generational wealth. Many others remain
    convinced the system is rigged against them.
        That experience left me with an enduring conviction that we as a
    society must have a strong financial regulatory system that ensures we
    do not repeat the mistakes of the past. The FDIC's mission therefore
    resonates deeply with me. If confirmed, I would be strongly committed
    to ensuring the FDIC does its part to maintain a resilient financial
    system. I thank you for your consideration and look forward to your
    questions.

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                   PREPARED STATEMENT OF KIMBERLY ANN MCCLAIN
         To Be an Assistant Secretary of Housing and Urban Development
                               November 30, 2022
        Chairman Brown, Ranking Member Toomey, and Members of the
    Committee: Thank you for the opportunity to appear before you today. I
    would first like to thank President Biden for nominating me to serve as
    Assistant Secretary for Congressional and Intergovernmental Relations
    at the U.S. Department of Housing and Urban Development (HUD). I would
    also like to thank Secretary Fudge for her support of my nomination.
    Thank you also to this Committee for holding today's hearing and
    meeting with me over the past few weeks. I look forward to working with
    this Committee on our Nation's housing issues. If confirmed, you have
    my pledge that I will bring to bear the same commitment to service and
    nonpartisanship that has guided my 30-year career in the United States
    military, private, and public sectors.
        For the last 22 months, I have been blessed to serve my fellow
    Veterans, their caregivers, and their survivors as Deputy Assistant
    Secretary for Congressional and Legislative Affairs at the U.S.
    Department of Veterans Affairs (VA). I am proud to support VA's work on
    access to benefits and care for all Veterans and their families.
        I bring to this role a deep knowledge of Government and understand
    how to work across large organizations, agencies, and Congress to
    tackle challenges and deliver results. My leadership experience in the
    nonprofit, private, and public sectors has provided me with the unique
    background to serve in this role. But just as important, I have seen
    firsthand the positive impact of access to affordable housing and
    economic mobility on people's lives.
        My childhood was filled with fond memories of going to my paternal
    grandmother's home on weekends. When my Grandma Freeman could no longer
    live in her home due to health issues she moved into a subsidized
    duplex in a Rockford, Illinois, neighborhood called, ``The Terrace''.
    That same neighborhood became home to my maternal grandmother after the
    death of my grandfather. My Grandma Williams transitioned from being a
    lifelong stay at home mother to a high school and college graduate, and
    ultimately a librarian. The Terrace provided my grandmothers with a
    sense of dignity and independence in the midst of major life changes.
        Life happens to all of us. And as life is happening, nobody should
    have to wonder where they will lay their head down at night. I am
    keenly aware of the struggles that homeowners and renters are facing. I
    am committed to working with Congress and the constituents it serves.
    If confirmed, I will do everything within my power to ensure that those
    who are most in need have an advocate and a voice at HUD.
        The Office of Congressional and Intergovernmental Relations serves
    as an important force multiplier for HUD and a critical conduit for
    communicating HUD's initiatives, programs, and priorities to Congress,
    State, and local elected officials, Tribal leaders, and the Senate and
    House Committees with jurisdiction over HUD. To successfully accomplish
    HUD's missions, if confirmed, I will focus on three core areas:

        First, ensuring that the Office of Congressional and
            Intergovernmental Relations is empowered and equipped to be
            agile and responsive,
        Second, increasing the capacity and continuity of the
            Office's workforce to deliver exceptional customer service; and
            finally,
        Developing strong, trusted relationships through consistent
            communication and engagement.

        I am ready to take on the HUD mission and work alongside HUD
    teammates in service to our Nation. If confirmed, I will lead as I did
    during my career in public service and as an Air Force officer . . .

            Integrity First, Service Before Self, and Excellence in All I
            Do

        Chairman Brown, Ranking Member Toomey, and Members of the
    Committee, thank you once again for the privilege to appear before you
    and the opportunity to serve my country.
        I look forward to answering your questions.

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                  Additional Material Supplied for the Record
                            MEMORANDUM OPINION, FDIC

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