[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




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                 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.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                   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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