[Senate Hearing 109-378]
[From the U.S. Government Printing Office]
S. Hrg. 109-378
NOMINATIONS OF: MATTHEW SLAUGHTER,
KATHERINE BAICKER, ORLANDO J. CABRERA,
CHRISTIANE GIGI HYLAND AND RODNEY E. HOOD
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
ON
NOMINATIONS OF:
MATTHEW SLAUGHTER OF NEW HAMPSHIRE, TO BE A MEMBER OF
THE COUNCIL OF ECONOMIC ADVISERS
__________
KATHERINE BAICKER OF NEW HAMPSHIRE, TO BE A MEMBER OF
THE COUNCIL OF ECONOMIC ADVISERS
__________
ORLANDO J. CABRERA OF FLORIDA, TO BE ASSISTANT SECRETARY
FOR PUBLIC AND INDIAN HOUSING,
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
__________
CHRISTIANE GIGI HYLAND OF VIRGINIA, TO A MEMBER OF
THE NATIONAL CREDIT UNION ADMINISTRATION BOARD
__________
RODNEY E. HOOD OF NORTH CAROLINA, TO BE A MEMBER OF
THE NATIONAL CREDIT UNION ADMINISTRATION BOARD
__________
OCTOBER 25, 2005
__________
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
RICHARD C. SHELBY, Alabama, Chairman
ROBERT F. BENNETT, Utah PAUL S. SARBANES, Maryland
WAYNE ALLARD, Colorado CHRISTOPHER J. DODD, Connecticut
MICHAEL B. ENZI, Wyoming TIM JOHNSON, South Dakota
CHUCK HAGEL, Nebraska JACK REED, Rhode Island
RICK SANTORUM, Pennsylvania CHARLES E. SCHUMER, New York
JIM BUNNING, Kentucky EVAN BAYH, Indiana
MIKE CRAPO, Idaho THOMAS R. CARPER, Delaware
JOHN E. SUNUNU, New Hampshire DEBBIE STABENOW, Michigan
ELIZABETH DOLE, North Carolina ROBERT MENENDEZ, New Jersey
MEL MARTINEZ, Florida
Kathleen L. Casey, Staff Director and Counsel
Steven B. Harris, Democratic Staff Director and Chief Counsel
Mark Oesterle, Counsel
Peggy R. Kuhn, Senior Financial Economist
Mark A. Calabria, Senior Professional Staff Member
Aaron D. Klein, Democratic Economist
Jonathan Miller, Democratic Professional Staff
Jennifer Fogel-Bublick, Democratic Counsel
Lynsey N. Graham, Democratic Counsel
Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator
George E. Whittle, Editor
(ii)
C O N T E N T S
----------
TUESDAY, OCTOBER 25, 2005
Page
Opening statement of Chairman Shelby............................. 1
Opening statements, comments, or prepared statements of:
Senator Dole................................................. 2
Senator Martinez............................................. 3
WITNESSES
John Warner, a U.S. Senator from the State of Virginia........... 4
Prepared statement........................................... 25
Richard Burr, a U.S. Senator from the State of North Carolina.... 5
NOMINEES
Matthew Slaughter, of New Hampshire, to be a Member of the
Council of Economic Advisers................................... 7
Biographical sketch of nominee............................... 27
Response to written questions of Senator Sarbanes............ 68
Katherine Baiker, of New Hampshire, to be a Member of the Council
of Economic Advisers........................................... 8
Biographical sketch of nominee............................... 36
Response to written questions of Senator Sarbanes............ 71
Orlando J. Cabrera, of Florida, to Assistant Secretary for Public
and Indian Housing, U.S. Department of Housing and Urban
Development.................................................... 8
Biographical sketch of nominee............................... 47
Response to written questions of Senator Sarbanes............ 73
Christiane Gigi Hyland, Of Virginia, to be a Member of the
National Credit Union Administration Board..................... 10
Biographical sketch of nominee............................... 56
Response to written questions of:
Senator Sarbanes......................................... 75
Senator Allard........................................... 79
Rodney E. Hood, of North Carolina, to be a Member of the National
Credit Union Administration Board.............................. 12
Prepared statement........................................... 25
Biographical sketch of nominee............................... 61
Response to written questions of:
Senator Sarbanes......................................... 80
Senator Allard........................................... 84
(iii)
NOMINATIONS OF:
MATTHEW SLAUGHTER, OF NEW HAMPSHIRE,
AND
KATHERINE BAICKER, OF NEW HAMPSHIRE,
TO BE A MEMBER OF
THE COUNCIL OF ECONOMIC ADVISERS
ORLANDO J. CABRERA, OF FLORIDA
TO BE ASSISTANT SECRETARY FOR
PUBLIC AND INDIAN HOUSING
U.S. DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
CHRISTIANE GIGI HYLAND, OF VIRGINIA
AND
RODNEY E. HOOD, OF NORTH CAROLINA
TO BE A MEMBER OF
THE NATIONAL CREDIT UNION
ADMINISTRATION BOARD
----------
TUESDAY, OCTOBER 25, 2005
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10:09 a.m., in room SD-538, Dirksen
Senate Office Building, Senator Richard C. Shelby (Chairman of
the Committee) presiding.
OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY
Chairman Shelby. The hearing will come to order.
We have several nominees this morning. I appreciate the
willingness of the nominees to appear before the Committee
today.
Today's witnesses are Dr. Matthew Slaughter, who has been
nominated by the President to be a Member of the Council of
Economic Advisers; Dr. Katherine Baicker, to be a Member of the
Council of Economic Advisers--of course, nominated by the
President; Mr. Orlando J. Cabrera, to be Assistant Secretary
for Public and Indian Housing at the Department of Housing and
Urban Development; Ms. Christiane Gigi Hyland, to be a Member
of the National Credit Union Administration Board; and Mr.
Rodney E. Hood, to be a Member of the National Credit Union
Administration Board.
Dr. Matthew Slaughter and Dr. Katherine Baicker are
nominated, as I said, to be Members of the President's Council
of Economic Advisers. The Council of Economic Advisers was
established by the Employment Act of 1946, and it provides the
President with economic analysis and advice on the development
and implementation of domestic and international policy issues.
Dr. Slaughter is currently a Professor of Business
Administration at the Tuck School of Business at Dartmouth
College. Previously, he was a Fellow at the National Bureau of
Economic Research and has served as a Consultant to the
National Foreign Trade Council, the World Bank, the Federal
Reserve, and the IMF.
Dr. Baicker is currently a Professor at the School of
Public Affairs at UCLA. She was previously a Professor at
Dartmouth College. Dr. Baicker is also a Fellow at the National
Bureau of
Economic Research and was a Senior Economist at the Council of
Economic Advisers from 2001 to 2002.
Mr. Orlando Cabrera has been nominated to be Assistant
Secretary for Public and Indian Housing at the U.S. Department
of Housing an Urban Development. Mr. Cabrera is currently
Executive Director of the Florida Housing Finance Corporation.
Mr. Rodney Hood and Ms. Christiane Gigi Hyland are both
nominated to be Members of the Board of Directors of the
National Credit Union Administration. The National Credit Union
Administration, as we all know, is an independent agency,
deriving its powers under the Federal Credit Union Act. The
NCUA is responsible for chartering and ensuring the safety and
soundness of the 5,500 Federal credit unions under the Act. The
NCUA also administers the National Credit Union Share Insurance
Fund.
After we administer the oath, this morning's nominees will
have an opportunity to make their opening statement, and you
can introduce at that time any members of your family. But
first we will recognize our colleagues that are here.
Senator Dole.
STATEMENT OF SENATOR ELIZABETH DOLE
Senator Dole. Thank you, Chairman Shelby.
This morning we are considering, as you have said, five
outstanding nominees, and I am pleased to introduce to the
Committee Mr. Rodney E. Hood, a fellow North Carolinian who has
been nominated by President Bush to serve as a Member of the
National Credit Union Administration Board.
Mr. Hood has an impressive background in housing and
financial services and has received a strong endorsement by the
North Carolina Credit Union League for this position. In
September 2004, Mr. Hood was appointed by President Bush to
serve as Associate Administrator of the Rural Housing Service,
RHS. RHS, an agency within Rural Development at the U.S.
Department of Agriculture, is one of the Federal Government's
largest direct lenders. In this position, Mr. Hood has managed
a housing portfolio of more than $43 billion and has
administered the Agency's Housing and Community Development
programs.
Previous to his appointment to RHS, Mr. Hood was an
executive with North Carolina Mutual Life Insurance Company in
Durham, where he directed the company's group insurance
marketing and sales efforts. He also held management posts with
Bank of America, where he served as a CRA Officer, and with
Wells Fargo, where he served as Division Manager for Community
Development Lending and, later, as the National Director of the
Affordable Housing Lending Group. Mr. Hood also served on the
Wells Fargo Housing Foundation Board, where he managed the
Foundation's relationship with nonprofit housing providers,
including Neighborhood Housing Services, Habitat for Humanity,
and the National Council of La Raza.
Among Mr. Hood's best attributes are his good, strong North
Carolina roots and his ongoing involvement in public service. A
native of Charlotte, he graduated from the University of North
Carolina at Chapel Hill, where he served on the Board of
Visitors. He currently serves on the Board of Trustees of the
North Carolina School of the Arts and on the Board of Directors
of the Caring House, a living facility for cancer patients
receiving treatment at Duke University.
Mr. Hood recently received the Triangle Business Journal's
40 Under 40 Leadership Award, which recognizes the best of the
best of Raleigh-area young professionals for the community
service and their career accomplishments.
Unfortunately, Mr. Chairman, I will not be able to stay for
this important hearing, but I hope the Committee will take into
account my good friend and colleague Richard Burr's comments,
and mine, and give strong support to Mr. Hood's nomination.
Thank you, Mr. Chairman.
Chairman Shelby. Thank you.
Senator Martinez.
STATEMENT OF SENATOR MEL MARTINEZ
Senator Martinez. Mr. Chairman, thank you very much. I am
here today to have the great pleasure and honor of introducing
to the Committee a good friend, a great Floridian, Orlando
Cabrera. I am proud that Orlando is among a number of very
talented Floridians that this Administration has tapped for
service, even at HUD. The President and Secretary Jackson have
chosen a great person to serve our country as Assistant
Secretary for Public and Indian Housing. I believe Orlando is
extremely well-qualified to succeed in this position.
You know, Mr. Chairman, the demands of the Secretary of
Public and Indian Housing at HUD are great. The challenges are
terrific, and it takes a person of great integrity, management
skill, and also a good deal of patience to work through the
many problems that affect our public housing. I know Mr.
Cabrera will be well-suited to that. As the Executive Director
of the Florida Housing Finance Corporation, Mr. Cabrera led the
fourth-largest housing finance agency in the United States to
help Floridians obtain safe, decent, and affordable housing.
Orlando worked diligently to ensure that our State's housing
programs were well-managed to meet the needs of Floridians. His
commitment to coordinating housing policy at all levels of
Government will be a great asset to the Agency.
As the son of Cuban immigrants, Orlando knows first-hand
that, for many families, homeownership is the key to the
American Dream. He recognizes and understands the struggles
that are present for people moving through the housing
continuum because of his experiences at Florida Housing and his
participation on many housing-related boards, Orlando is also
aware of the conflict that often arises between State and
Federal housing regulations. I am confident that he will use a
combination of personal and professional knowledge to guide the
Department in making sound public policy.
On a personal note, I recognize that from time to time
people are willing to make a mistake. His family, when they
first came here from Cuba about the same time that mine did,
they settled in a very cold part of New York. And since then,
they have recognized that error and have moved back to the
balmier surroundings of Florida--although today that wisdom may
be in question. But I have known Orlando for several years,
have had the pleasure of working with him--during my time at
HUD particularly--and I know and have always appreciated and
respected him for his work. He is a man of great character and
competence and he is also a man committed to his faith and his
wonderful family, many of whom are here with him today.
I know he will approach this position with the same kind of
dedication and diplomacy that he has carried with him
throughout his entire professional career. And I know that
Orlando will serve our country well in this position. So, I
would urge my colleagues in the Senate to join me in a swift
confirmation of Mr. Cabrera.
Thank you, sir.
Chairman Shelby. Thank you.
Senator Warner, you arrived just in time. I recognize you
for any comments you would like to make before the Committee.
STATEMENT OF JOHN WARNER
A U.S. SENATOR FROM THE STATE OF VIRGINIA
Senator Warner. Thank you very much, Mr. Chairman, and my
colleagues. I am chairing a hearing of our Armed Services
Committee just below you here, but I did want to take the time
to come up and talk about this extraordinary nominee by the
President. And I want to thank our distinguished colleague,
Senator Harry Reid, who had a lot to do with this nomination
and counseled me on it.
We have a fellow Virginian, Gigi Hyland, down there, I
think, somewhere.
Ms. Hyland. Here I am.
Senator Warner. Right here.
[Laughter.]
And I, just by coincidence, met her and talked to her. She
is very modest, and expressed some interest in public service.
And her family, her father is very active in public service and
her mother was at one time. It is a distinguished family of
professionals. So, I invited her in, and I tell you--and I am
not easily swept off, but she swept me away. She is really an
extraordinary individual, and her accomplishments in life and a
wealth of experience. I would like to put this into the record,
Mr. Chairman----
Chairman Shelby. Without objection, your entire statement
will be made part of the hearing record.
Senator Warner. --and just say that this is a proud
American family and serving in public service in many
capacities, and she would be a very strong person on this post
to which our President has appointed her.
Chairman Shelby. Thank you, Senator Warner. We know you are
chairing the Armed Services Committee.
Senator Warner. Thank you.
Chairman Shelby. Senator Richard Burr from North Carolina,
welcome to the Committee.
STATEMENT OF RICHARD BURR
A U.S. SENATOR FROM THE STATE OF NORTH CAROLINA
Senator Burr. Thank you, Mr. Chairman. It is indeed an
honor to be here. I know that all five nominees are more than
qualified, or they would not have been nominated by the
President. But I am here specifically also to introduce Rodney
Hood of Durham, North Carolina, who has been nominated to the
National Credit Union Administration Board.
Rodney is well-prepared for the position for which he has
been nominated. A graduate of the University of North Carolina
at Chapel Hill--which it pains a Wake Forest graduate to say--
he has spent a career in finance and housing. Perhaps more
importantly, though, is his commitment to community service,
whether in Washington or North Carolina. He has been an active
volunteer in the community, having served the North Carolina
Low Income Housing Coalition, Boys and Girls Clubs in Raleigh,
the North Carolina School of the Arts, the Duke Ellington
School of the Arts in the District, and the Folger Shakespeare
Library. This is a downside to Rodney's confirmation. When
confirmed, he will have to step down from many of his current
service commitments.
Speaking for North Carolina, though, Mr. Chairman, I can
say that North Carolina's loss is the Nation's gain with this
nomination. The same drive to serve and succeed he has shown
throughout his career will be a tremendous benefit to the
National Credit Union Administration Board and the credit
unions it oversees. I think this is particularly true of the
credit unions serving low- and middle-income members. Rodney's
career to date, as mentioned, has focused on finance and
housing with a focus on affordable housing and community
development, particularly in underserved areas. By extension,
he has invested a great deal of time in the financial literacy
and education programs, including programs on ownership. This
background, with its close connection to the individual, will
serve credit unions and their members well.
Mr. Chairman, Rodney Hood is successful because he sees the
human face behind the issues. I believe, with this nomination,
he will not forget that human face that he represents. I
believe the Committee will be pleased by his qualifications for
the post. I urge the Committee to approve Rodney's nomination,
and I can honestly say I think this Committee will be proud of
the vote in favor of Rodney Hood's confirmation.
I thank the Chair.
Chairman Shelby. Thank you, Senator Burr.
What I would like to do now is ask all of the nominees to
stand, raise your right hand, and be sworn.
Do you swear or affirm that the testimony that you are
about to give is the truth, the whole truth, and nothing but
the truth, so help you God?
Mr. Slaughter. I do.
Ms. Baicker. I do.
Mr. Cabrera. I do.
Ms. Hyland. I do.
Mr. Hood. I do.
Chairman Shelby. Do you agree to appear and testify before
any duly-constituted committee of the Senate?
Mr. Slaughter. I do.
Ms. Baicker. I do.
Mr. Cabrera. I do.
Ms. Hyland. I do.
Mr. Hood. I do.
Chairman Shelby. Thank you.
Dr. Slaughter, we will start with you. Your written
testimony will be made part--all of your written testimony will
be made part of the hearing record in its entirety. If you
have--I will pose this question to all of you and start with
Dr. Slaughter--do you have any family members you want to
recognize at this hearing today?
Mr. Slaughter. I do, Mr. Chairman.
Chairman Shelby. It is an important hearing. It is your
day.
Mr. Slaughter. Thank you, yes. We have a large and very
close extended family, starting with my wife Lindsey and our
two little boys, Nicholas and Jacob. With school and
obligations, they are back home in New Hampshire, but with me
here today is one of my brothers, Steve Slaughter, from
Chicago, Illinois.
Chairman Shelby. Okay. Dr. Baicker, do you have anybody you
want to recognize?
Ms. Baicker. Yes. Thank you very much for the opportunity,
Mr. Chairman. I would like to introduce my husband, who is also
an economist, Alan Durell, and my exceedingly proud parents,
Maxine and Joseph Baicker, who are here from New Jersey.
Chairman Shelby. Good. Mr. Cabrera, do you have anybody you
want to recognize?
Mr. Cabrera. Yes, Mr. Chairman, I have a big contingent
here.
Chairman Shelby. You go ahead.
Mr. Cabrera. I have my wife, Betty Cabrera; my sons, Orly
and Stefan; my mom and dad, Orlando Cabrera and Carmen Cabrera;
my sister, Rosie; my nephew and niece----
[Laughter.]
--Alex and Giovanna. And my two best friends, Ron Weiner
and Nick Schufer.
Chairman Shelby. Well, that is great.
Ms. Hyland, do you have somebody you want to recognize?
Ms. Hyland. Yes, Mr. Chairman, I do, and I appreciate the
opportunity. To my left is my dear aunt, Auntie Alba Colonne
Whitt, and my dear friend Shirley Robson, and then my wonderful
father, Fairfax County Supervisor for Mount Vernon, Gerry
Hyland.
Chairman Shelby. Thank you.
Mr. Hood, do you have anyone you want to recognize?
Mr. Hood. Yes, Mr. Chairman, I have family members. They
are having flight delays getting out of North Carolina, but
fortunately I have a few friends who are all visiting with me
today, friends from USDA, Wells Fargo, Bank of America, and
other social friends from here in Washington. Thank you all who
are here.
Chairman Shelby. Thank you.
Dr. Slaughter, we will start with you, if you will sum up
whatever you want to say.
STATEMENT OF MATTHEW SLAUGHTER
OF NEW HAMPSHIRE, TO BE A MEMBER OF
THE COUNCIL OF ECONOMIC ADVISERS
Mr. Slaughter. Thank you, Mr. Chairman.
Chairman Shelby, Senator Sarbanes, and Members of the
Committee, I am deeply honored to appear before you today as a
nominee to become a Member of the President's Council of
Economic
Advisers.
Since its creation in 1946, the Council of Economic
Advisers has provided the President with sound, objective
advice on the full range of economic policy issues facing our
country. On many measures, today the U.S. economy is among the
world's strongest, thanks to the foundation of all the men and
women that make up our highly productive work force. At the
same time, today the U.S. economy faces important economic
challenges. The rise of countries such as China and India, the
costs of energy and health care, the demographic shift of an
aging population, and the need to best educate our children.
All the challenges, and more, will require careful,
constructive policies to help ensure rising living standards
for both ourselves and future generations of Americans. If I am
fortunate enough to be confirmed to Council membership, I will
devote my full energies to helping the Council work with all of
you on meeting these challenges.
Past Council Members have drawn on their experiences in
research, teaching, and related activities. My experience
include a wide range of policy-related work in international
trade and finance, with a particular interest in how
international commerce helps shape national economic outcomes,
such as productivity and wages. I am currently an Associate
Professor of Business Administration at the Tuck School of
Business at Dartmouth, a tenured position that I have held
since 2002. I am also currently a Research Associate at the
National Bureau of Economic Research and a Visiting Fellow at
the Institute for International Economics. In recent years, I
have also enjoyed the opportunity to be a Visiting Scholar at
the Federal Reserve Board and the International Monetary Fund,
a Consultant at the World Bank, and a Term Member on the
Council on Foreign Relations. I hope that the breadth and depth
of these work experiences would serve me well at the Council of
Economic Advisers.
Let me close by thanking you again both for the privilege
of appearing before this Committee and for your timely
consideration of my nomination. I look forward to answering any
questions that you may have.
Thank you.
Chairman Shelby. Dr. Baicker.
STATEMENT OF KATHERINE BAICKER
OF NEW HAMPSHIRE, TO BE A MEMBER OF
THE COUNCIL OF ECONOMIC ADVISERS
Ms. Baicker. Chairman Shelby and Members of the Committee,
it is a great honor to appear before you today as the
President's nominee to be a Member of the Council of Economic
Advisers.
For almost 60 years, Members of the Council have had both
the opportunity and the responsibility of providing the
President with objective advice on issues ranging from
education to health care to trade to welfare. Members of the
CEA strive to bring the best scientific thinking from the
broader economics community to bear on these often difficult
questions.
My previous experience includes work in both the academic
and policy arenas. Since receiving my Ph.D., I have served on
the faculty in both the Economics Department at Dartmouth and
at the Center for the Evaluative Clinical Sciences and the
Department of Community and Family Medicine at Dartmouth
Medical School. I recently joined the Department of Public
Policy in the School of Public Affairs at the University of
California at Los Angeles. I am a Research Associate in the
Public Economics Program at the National Bureau of Economic
Research. My research focuses on health economics, welfare, and
public finance, with a particular emphasis on financing health
insurance, spending on public programs, and fiscal federalism.
I have also had the privilege, several years ago, of serving as
a Senior Economist at the Council of Economic Advisers, where I
experienced first-hand the Council's vital role in providing
sound economic advice to inform the policymaking process. I
hope that my experiences will allow me to continue this strong
tradition.
In the coming years, our strong and growing economy will
also be faced with many challenges, including mounting
pressures on both public and private health care spending and
the education and training of workers with the skills and
flexibility required in the modern labor market. If I am
fortunate enough to be confirmed, I look forward to working
with you on all of these important issues.
Thank you again for considering my nomination and for the
privilege of appearing before the Committee. I look forward to
answering any questions you might have.
Chairman Shelby. Mr. Cabrera.
STATEMENT OF ORLANDO J. CABRERA
OF FLORIDA, TO BE ASSISTANT SECRETARY
FOR PUBLIC AND INDIAN HOUSING,
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Mr. Cabrera. Mr. Chairman, Senator Sarbanes, Senator
Martinez, a good friend whom I greatly admire----
Chairman Shelby. He has gone to vote, where we can continue
this hearing. He will be back.
Mr. Cabrera. I know. But I am grateful for his wonderful
comments and for his friendship.
Members of the Committee, thank you for allowing me the
opportunity to address the Committee today.
First, I would like to thank President Bush and Secretary
Jackson for giving me the opportunity to serve our country as
Assistant Secretary for Public and Indian Housing. I am humbled
at having been asked, and honored to serve however I best may.
I would also like to thank all of you for your time and
graciousness in meeting with me these last few weeks--and your
staff, all of whom have been wonderful. Hurricane Katrina has
impacted all of our lives, and I appreciate each of you
accommodating me into your busy schedules.
I would very much like to thank Governor Jeb Bush for
having appointed me Executive Director of Florida Housing and
for allowing me to serve the people of the State of Florida. As
a still waxing Floridian, I am grateful for all of his support.
I sit before you today in profound gratitude of a lot of
people. These people provided me with support and encouragement
throughout my life, and particularly in the case of my parents,
under sometimes difficult circumstances. I would likely not be
here before you but for their constant love, support, and
counsel.
I would also like to thank the rest of my family and all of
my friends, particularly Bill and Tracy Cowden, who have been
lifelong friends but also have put me up for the last 2 months.
And the staff of----
[Laughter.]
Chairman Shelby. That is a real friend, is it not?
Mr. Cabrera. Yes, it is. And the staff and Board of
Directors of the Florida Housing Finance Corporation for all of
their encouragement and support. I wish I could mention all of
them by name, but then we would need to order cots and make
arrangements for dinner, and I do not know if everyone on the
Committee likes Cuban food.
I have always had a home. I know how fortunate I am to
actually make that statement, especially because my parents
were exiles in, and later immigrants to, our country. Our home
always had those things that we would like to think are
provided to all people from their childhood through that day
when one leaves and makes one's own home. Like my parents
before us, when my wife and I started our lives together, we
initially rented and then purchased a home. We can
affirmatively state that we have realized the American Dream of
homeownership and we understand its importance to all
Americans.
Our family's experience is what most Americans hope is
prototypical. Nonetheless, I am keenly aware that not every
American is on that same housing continuum that our family
followed. As a former Director, Vice Chairman, Chairman, and
finally Executive Director of Florida Housing, my work really
focused on making that continuum more possible for all
Floridians. During my tenure at Florida Housing, we financed
the construction of a lot of units for both homeownership and
rental, to make that continuum as accessible as it could be for
Floridians.
While at Florida Housing, I had the honor to lead an
organization that financed the construction of thousands of
affordable housing units. Most of the units we financed went to
Floridians that earned 60 percent of area median income and
below, during my tenure we made great strides toward financing
the construction of units for Floridians earning 30 percent of
area median income and below. In my 5-year involvement, we
developed more units for extremely low-income Floridians than
had ever been developed in the previous 20 years, and that is
an achievement I am extremely proud of.
Happenstance being what it is, I was Florida Housing's
Executive Director during five hurricanes and one tropical
storm. We responded to the needs created by those storms by
realigning State subsidies in order to make funds available to
local governments for storm recovery, making our Federal
subsidy available to fund tenant-based rental assistance and
home repair, and by creating incentives for developers to
construct units in storm-affected areas as quickly as possible.
As unquestionable as our commitment to recovery from
Katrina is--and hopefully Wilma will be kinder; although from
news reports from my long-time home, Miami, it does not seem
that it has been--the Office of Public and Indian Housing would
address more day-to-day programmatic concerns. Public housing
authorities hold a wealth of assets and ideas that are becoming
more and more important to the sustainability of the housing
continuum I mentioned above. If I am confirmed, I will work to
develop policies so it will make it possible for PHA's to work
more independently while maintaining fiscal soundness.
Finally, on the issue of Indian housing, if confirmed, the
Office of Public and Indian Housing will reach out to the
various tribes, groups, and corporations to ensure we are
addressing their needs as well as we can. Ongoing outreach and
maintaining strong relations with stakeholders will be a
significant focus of our efforts with respect to Indian and
public housing.
In closing, if confirmed, I look forward to serving our
country, the President, Secretary Jackson, and HUD by looking
for answers and taking opportunities wherever we may find them
to make safe, decent, affordable housing available to all
Americans.
Thank you, Mr. Chairman, Senator Sarbanes, Senator
Martinez, and all Members of the Committee for your time and
consideration of my nomination. I stand ready to answer any
questions you may have.
Chairman Shelby. Thank you.
Ms. Hyland.
STATEMENT OF CHRISTIANE GIGI HYLAND
OF VIRGINIA, TO A MEMBER OF
THE NATIONAL CREDIT UNION ADMINISTRATION BOARD
Ms. Hyland. Thank you very much, Mr. Chairman, Senator
Sarbanes, and Members of the Committee. Let me begin by
thanking Senator John Warner for his gracious introduction in
support. I also want to extend my gratitude to the Senate
Minority Leader, Senator Harry Reid, for submitting my name to
the White House for consideration. I am especially grateful to
President Bush for nominating me to be a Member of the National
Credit Union Administration Board. I am deeply honored to be
asked to enter into public service, and if confirmed I will do
everything that I can to merit the trust that the President has
placed in me.
I also want to extend my thanks to NCUA Chairman JoAnn
Johnson for her encouragement, my fellow nominee Rodney E.
Hood, for his patience, and the professional staff at NCUA, who
provided me thorough briefings and insights on many of the
issues facing this independent Agency.
I have already introduced the family members that I have
with me today. Their unceasing love, support, and encouragement
have sustained me through this process and I extend to them my
heartfelt thanks.
Mr. Chairman, if confirmed, I will bring to the NCUA Board
over 14 years of credit union system experience. For 7 years, I
was in private practice in my family's law firm, Hyland &
Hyland, in Alexandria, Virginia. There, I represented natural
person credit unions, particularly in the areas of regulatory
and consumer lending compliance, residential real estate
transactions, and credit union account lending and employment
policies and procedures. While at the firm, I graduated from
the Credit Union Development Education Program, a program that
explores the inherent power of the cooperative structure and
the ability of financial cooperatives to facilitate ``people
helping people,'' both domestically and internationally.
For the next 5 years, I served concurrently as Executive
Director of the Association of Corporate Credit Unions and Vice
President of Corporate Credit Union Relations with the Credit
Union National Association. While at ACCU and CUNA, I
spearheaded corporate credit union participation in the
creation of the Community Investment Fund, the CIF, the
National Credit Union Foundation's primary funding mechanism
for local, State, and national credit union development
activities. The funds in the CIF are earmarked specifically for
development initiatives that increase credit unions' capacity
to impact the financial lives of consumers. This includes
education, small credit union programming, community outreach,
and international development. In addition, I worked to involve
corporate credit unions in the settlement of affordable and
safe international remittances through the IRnet program
established by the World Council of Credit Unions. In my
current role as Senior Vice President/General Counsel to Empire
Corporate Federal Credit Union in Albany, New York, I provide
independent legal advice and counsel to Empire's management and
board on initiatives, contracts, and projects.
With all of this credit union experience, can I serve as an
effective, independent regulator? Yes. I believe that my career
in the credit union system enhances my ability to balance
safety and soundness considerations with the needs of the
institutions regulated. I believe credit unions serve as a
critical component of the financial services sector, providing
products and services cooperatively to benefit their member-
owners.
If confirmed, Senator, I will strive to be a fair and
thoughtful regulator, mindful of the stated Congressional
findings and purposes of the original enabling legislation. I
will work to foster credit unions' sense of responsibility to
serve all segments of their membership, particularly working
people, youth, and others who are not being served by
traditional financial institutions. If confirmed, I will work
closely with Members of this Committee and Members of Congress
to ensure the financial integrity and vitality of credit unions
in an ever-changing environment.
Thank you, Mr. Chairman and Members of the Committee, for
the opportunity to appear before you today. I look forward to
answering any questions you might have.
Chairman Shelby. Thank you.
Mr. Hood.
STATEMENT OF RODNEY E. HOOD
OF NORTH CAROLINA, TO BE A MEMBER OF
THE NATIONAL CREDIT UNION ADMINISTRATION BOARD
Mr. Hood. Thank you, Mr. Chairman. Thank you for the
opportunity to meet with you on behalf of my nomination to
serve on the Board at the National Credit Union Administration.
I would like to express my deep appreciation to President
Bush for nominating me to this position. I would also like to
thank Senator Elizabeth Dole and Senator Richard Burr for their
generous remarks. I am humbled by their kind and gracious words
and would like to acknowledge and applaud their great
leadership and service for my home State, North Carolina.
While my parents are not here today in person, I feel the
warmth of their presence as they watch from Heaven. I am
thankful to them for bequeathing to me a strong value system, a
value system that reflects humility, honesty, hard work, and
compassion. I believe that these values have helped me make a
difference in the lives of many people during my 17 years in
the private sector and in public service.
If confirmed by the Senate, I look forward to fulfilling
the duties and responsibilities of an NCUA Board Member. I am
committed to listening carefully, working hard, and doing my
level best to ensure the safety and soundness of the Nation's
8,800 federally insured credit unions.
I have a profound appreciation for community empowerment,
which was developed early on in my youth as a missionary in
Africa. There in a rural landscape, I saw the hard work,
struggle, and resilient character of people who made their
living from farming. I learned and saw that strong, struggling
people were at the heart of what any country is about. That is
why I am pleased to now be in a position where I can continue
to serve my country by overseeing the institutions that give
hardworking people access to capital.
President Bush said it best when he said, ``The true
measure of compassion is more than good intentions, it is good
results.'' I have been blessed and fortunate to work at some of
America's most respected financial institutions, which sought
to empower stability and prosperity in our local communities.
While at North Carolina Mutual and Wells Fargo, I held
management posts that allowed me to promote community
development and outreach in underserved communities. I served
on the board at the Wells Fargo Housing Foundation and managed
public-private partnerships with results-oriented housing
providers such as the Neighborhood Reinvestment Corporation,
Habitat for Humanity, and the National Council of La Raza.
Having served as a Community Reinvestment Act Officer at Bank
of America and the National Director of Affordable Housing at
Wells Fargo, I have been both an advocate and provider of
affordable housing and small business lending. In those
positions, I oversaw loan programs, managed teams of regional
community development managers, and worked with both our
internal Credit Policy Group and the Office of the Comptroller
of Currency to review credit risk.
At USDA, I helped administer a $43 billion loan portfolio
comprised of over 400,000 loans--loans to individuals seeking
homeownership, private entities to provide affordable rental
housing, and to local government entities to fund schools,
hospitals, and first responder services.
These experiences have directly exposed me to the
importance of financial soundness, risk management, and
regulatory review. I come to NCUA with a mindset based on the
following tenets: First, I will work hard to ensure that credit
unions remain safe and sound financial institutions; second, I
will strive to be recognized as a fair and thoughtful
regulator, one who realizes the value and necessity of
regulation while being cognizant of the impact of arduous
regulations; third and finally, I understand the importance of
disclosure and transparency and will work closely with the
Members of this Committee and all Members of Congress to ensure
the financial integrity of credit unions in a rapidly changing
environment.
Since joining the Federal Government at USDA, I have been
honored to work side-by-side with and lead some of the most
capable and talented career staff around. And should I be
honored by your confidence, I look forward to doing so at NCUA
as well.
Mr. Chairman, thank you for the honor of appearing before
you this morning. And I thank you for your courtesy and
consideration. I welcome any questions you may have.
Thank you.
Chairman Shelby. Thank all of you.
Dr. Slaughter, I will start with you and Dr. Baicker.
Rather, the impact of higher prices for oil and other goods
on the economy. There has been much speculation as to how our
economy will adapt to the aftermath of hurricanes Katrina and
Rita. It now appears concern has shifted back to the dangers of
inflation, particularly in the energy market. What will be the
impact, in your judgment, of continued high oil prices on the
economic expansion in the United States, and what particular
policy options will you recommend to the President to enable
our economy to manage the reconstruction of the Gulf Coast
area?
I will start with you and then go to Dr. Baicker.
Mr. Slaughter. Thank you, Mr. Chairman. That is an
excellent question that raises an important set of issues. The
price of oil and oil-based products we all see while at the
gasoline station to fuel up our cars. Many of us are going to
see----
Chairman Shelby. It affects everybody.
Mr. Slaughter. It affects everybody in many different ways.
To this point, we all have seen the sharp rise and price
increases for the gasoline we buy. We will see it in home
heating oil prices and natural gas prices. Fortunately, the
U.S. economy in the past few decades has become much more
energy efficient. Thanks to a lot of technology innovations and
the broad guidance of policy regulators, today the U.S. economy
produces our goods and services needing a lot less energy than
it did in the past. So one of the implications of that, when we
think about the important issue you raise of the impact on
broader prices in the U.S. economy, is that, relative to
previous oil price increases in the 1970's, for example, we
think there will be a much more muted impact on broader prices
of goods and services in the U.S. economy.
That remains to be seen, but thus far the oil price
increases and gasoline price increases have been contained.
Chairman Shelby. Natural gas is factored in there, too?
Mr. Slaughter. Natural gas as well, absolutely. But the
broader prices of goods and services----
Chairman Shelby. ``Has been contained''--what do you mean
by that?
Mr. Slaughter. It has been contained to those sectors and
those particular immediate products.
Chairman Shelby. In other words, it has not gone everywhere
else?
Mr. Slaughter. Exactly. It has not gone broader to goods
and services that we buy at the grocery store and----
Chairman Shelby. Or wages.
Mr. Slaughter. Or wages thus far. Exactly.
So the policy challenge going forward, I think, is twofold.
One is to think about a possible impact on a broader range of
prices in the U.S. economy and, more importantly, to the extent
that some of the underlying forces driving oil price increases
are based on growth in the United States and in other countries
around the world--China being a prominent example. These high
prices for oil and related products are likely to persist for
quite some time, and so the policy challenges we will be
thinking about: What broad sets of frameworks could allow
American households and American businesses to best respond.
Chairman Shelby. Dr. Baicker.
Ms. Baicker. To follow up on what my colleague has
mentioned, fortunately core inflation in the United States is
relatively low and stable, which has meant that the shock to
oil prices has not had a wider effect.
Chairman Shelby. Would you, just for the audience, define
generally what you mean by ``core inflation''?
Ms. Baicker. Energy prices and food prices in general are
more volatile than prices in the broader economy. Sometimes
when we look at how inflation is evolving over the longer-run--
--
Chairman Shelby. In other words, they are volatile, they
are up and down?
Ms. Baicker. They are up and down a lot more.
Chairman Shelby. But they have mainly been up, haven't
they?
Ms. Baicker. Well, lately oil prices certainly have been
up. We want to think about those as an important factor
affecting all Americans, from heating expenses to
transportation expenses and the like. But we also want to look
at other elements of inflation that may evolve more stably over
time to give us a sense of what the underlying pressures on
wages and broader inflation are. If you look at the prices of
things excluding energy and food, which move around more
rapidly, we see that those prices do remain low and stable,
unlike in the 1970's. The pressures that you brought up that we
would all be worried about, on wages and on inflation more
broadly, are mitigated by those other prices being more stable.
That said, as you correctly brought up, oil prices and
refined product prices have been high and do not appear to be
going down anytime in the immediate future. So that creates
challenges for the economy, but also the opportunity to develop
alternative sources of energy that may become cost-effective
where they were not before. And to that end, it seems that
refining capacity is likely to grow over the next 10 to 15
years, as is the capacity to import liquefied natural gas,
which will provide alternatives as well.
Chairman Shelby. Does the current account imbalance bother
either one of you, the way it has grown in recent years?
Mr. Slaughter. Mr. Chairman, that is an issue of great
concern that you raise. By any measure, the current account
imbalance that the United States runs today is large by
historical standards of the United States and by standards of
other countries. So, I think a broad policy challenge for the
United States in the coming years will be trying to understand
the underlying causes of the current account imbalance,
thinking about its consequences, and thinking about possible
ways that that imbalance could be brought down.
I think a lot of analysis has gone into the current account
deficit the United States is running. It is clear that at least
some of the causes of the current account imbalance today
actually reflect underlying strengths of the United States
economy, one example being that the United States has enjoyed
much faster rates of economic growth than have most of our
trading partners in recent years. Countries like Japan,
Germany, and France, which are the bulk of our trading, have
been going much more slowly.
Chairman Shelby. Is some of that because we have more of a
flexible labor market? Is that factored in there?
Mr. Slaughter. I think there is a lot of evidence now that
the underlying flexibility of labor markets in the United
States of capital markets and product markets as well, allows
the deployment of people and capital to industries to grow more
quickly when new opportunities arise. I think you are exactly
right. But in terms of the current account implication, it
means that we tend to be importing a lot more from them, thanks
to our growth, than they import from us.
So that is one of the underlying causes. There are others.
Chairman Shelby. That is an unhealthy situation
economically over time, is it not?
Mr. Slaughter. It is. And I think a broad policy challenge
that this Administration and others have been working hard on
is working with policymakers in these other countries, like
Japan and Germany, to try to think about the macro- and micro-
economic reforms, kind of big-level and down at the level of
individual companies, that would allow those countries to grow
more quickly.
Chairman Shelby. Dr. Baicker, do you have any comments?
Ms. Baicker. Certainly. I would share your concern as well,
and I defer to my colleague's greater expertise on issues of
international commerce. That said, even things that are good
for the economy overall may not benefit all workers in the U.S.
economy in the same way. Some people may be hurt by trade while
others are helped. And there are lots of policy opportunities
to make sure that those workers who may be displaced by trade
or lose their jobs because of other changes in the U.S. economy
have every opportunity to get retrained and have income support
they need to weather those changes.
Chairman Shelby. To both of you, what is your take on the
long-term--or let us say the next 20 years, if you can look
that far out--the economic implications to the United States
economy and to the workers of the U.S. facing a rising Chinese
growth economy and perhaps India and so forth. Do you view that
as a concern, as an opportunity, as a challenge, or all of it?
Ms. Baicker. Certainly it raises the importance of ensuring
that workers have access to education when they are young and
training and retraining once they enter the labor market. A
more rapidly evolving economy, where some sectors grow quickly
but others shrink, necessitates making sure that retraining is
available to move workers into sectors that are growing or into
parts of the country that are growing. Giving them the
flexibility to make those decisions about what training they
need in the sad event that they do lose jobs to other sectors
of the U.S. economy or to foreign countries is of vital
importance to ensuring that all Americans enjoy the benefits of
growing commerce across the United States and across other
countries.
Chairman Shelby. Dr. Slaughter.
Mr. Slaughter. To build on what Dr. Baicker has said, I
think there is a real opportunity for the United States, with
the growth that has been going on and that is expected to go on
in countries like China and India, for American-based
companies. The fact today is that about 95 percent of the
world's population lives outside of the United States so for
U.S.-based companies, when they think about growth
opportunities, countries like China and India present a
tremendous opportunity.
That said, I do have some concerns about the magnitude of
the policy challenges that we all face with integrating China
and India into the market-based world economy that we would
like to see them continue to move into. There are a lot of
policy challenges. One I will highlight is support for
enforcement of intellectual property rights. One of the
strengths of the U.S. economy for a long time has been
intellectual property creation, knowledge-based activities,
things like information technology, life sciences, and finance.
Those are things that American firms are particularly good at.
And ensuring that the institutions and legal regimes develop in
countries like China and India to afford our companies those
opportunities, I think, is a real challenge going forward that
will require a lot of diligent and ongoing policy work.
Chairman Shelby. Dr. Baicker, you have done some work, as I
understand, in the health care area. We have a great challenge
in dealing with Medicare, Medicaid, among other things. How do
we meet that challenge in the future? Maybe you will win a
Nobel Prize if you come up with that.
Ms. Baicker. That would be great.
[Laughter.]
I agree with you that these are the primary forces
affecting U.S. long-run spending growth that we should get
under control now before they swallow the entire Federal
budget.
Chairman Shelby. Is that a combination of demographics and
politics, perhaps?
Ms. Baicker. It is certainly a combination of both
demographics and of the increasing expenditures per person on
health care. The reason Medicare expenditures are growing so
much more quickly than Social Security expenditures is that the
same aging population that is consuming more Social Security
resources is consuming even more health care per person. If you
look at the Medicare budget over a 30- or 50-year horizon, the
growth in excess of GDP is almost entirely driven by the excess
growth of health spending relative to GDP growth and relative
to wage growth.
So what do we do about that? Well, it is all well and good
to say we should spend less on health care, but we have one of
the premier health systems in the world and we develop lots of
new health technologies. It is important that any policies do
not stifle that innovation that has served us all well. That
said, our health resources do not seem to be going where they
achieve the greatest gains. We spend a lot of our Medicare
resources on people in the last 6 months of life getting care
that neither prolongs their life nor improves their quality of
living nor makes them more satisfied with the health care they
receive.
Chairman Shelby. What percentage, roughly, of our health
care costs are incurred in the last couple of months or so of
someone----
Ms. Baicker. In the Medicare program, about 20 percent of
expenditures go to people in their last 6 months of life, I
believe which is a lot of spending and, interestingly, highly
variable across different areas of the country. So in some
parts of the country, twice as many Medicare beneficiaries die
in the intensive care unit than in other parts of the country.
And this is not because those people are sicker or older or
have different stated preferences for receiving care at home or
receiving care in the hospital. It is just that medicine is
practiced more intensively and more expensively in those areas
in ways that do not seem to pay off in the beneficiary's well-
being physically, psychologically, or in any way we can
measure.
The challenge is to understand what is driving those higher
expenditures and what makes low expenditure/high-satisfaction
areas different, and try to implement that in different areas.
CMS, the Centers for Medicare and Medicaid Services, has gone a
long way in developing quality measures and best practices
guidelines that would help areas of the country that lag behind
in quality and excel in expenditure in adopting some of the
better practices that are done in other areas of the country.
And there is a strong role for the transmission of information
to all those hospitals.
Chairman Shelby. Would both of you economists deem this
economy we have today a strong growing economy still?
Mr. Slaughter. I would, Mr. Chairman. In a lot of the basic
measures we look at, the U.S. economy, in spite of the
challenges it has faced in recent years with a lot of shocks,
has been performing quite well. If you look at GDP growth this
year, it is on track to be an----
Chairman Shelby. Especially since 2001, you know.
Mr. Slaughter. Absolutely. With the terrorist attacks, with
the downturn in U.S. equity markets, with the uncertainty that
faced a lot of businesses in terms of accounting reform, that
natural disasters' as we have seen in recent months,
unfortunately. That flexibility we were speaking of, I think,
has served the economy well. GDP growth is on track to be about
3.5 percent this year. Unemployment is now below 5 percent in
the U.S. economy. And as we were discussing----
Chairman Shelby. But in a lot of areas, 3 percent, 2.8--in
my State of Alabama recently it was 3.8 percent unemployment--I
mean hired worker performance, low unemployment.
Mr. Slaughter. Absolutely, there are pockets where I think
the firms are trying to find the people they need to help them
build the houses and man the----
Chairman Shelby. Well, that is a good sign, is it not?
Mr. Slaughter. It is a good sign. And again, the broad
policy goal is trying to have those good outcomes be shared as
broadly as possible.
Chairman Shelby. I know that our deficits, because of the
hot economy and we have had more tax receipts and so forth,
have been going down better than they were a year ago. But does
the deficit and then the ensuing debt concern either one of
you? It concerns most Americans.
Mr. Slaughter. Absolutely. I am concerned about the
deficits, not just today but, as we were discussing, when you
look out on the coming generation, you mentioned the
demographic changes facing the U.S. economy, and the reality
is, for example, that we have a labor force that is going to
grow a bit more slowly in the coming years than it has in
previous decades because of the fact that there are not as many
baby busters as will replace the baby boomers that are at the
leading edge of retirement. And so I think the real fiscal
challenges going forward, as we have discussed, are issues of
Social Security, Medicare, and Medicaid spending. Innovative
thinking on both the spending side and also the taxation side
will be warranted and in that regard, I think we all look
forward to hearing the recommendations of the President's Tax
Reform Panel and the ideas that they may bring to the table to
help facilitate these discussions.
Chairman Shelby. Dr. Baicker, do you have a comment?
Ms. Baicker. Yes, I share your concern as well. And the
ability to run deficits in times of natural disaster, war, or
high unemployment is a real asset to the economy. But we are
now on a path to reducing the deficit by 50 percent over 5
years, ideally, and that puts us on the right path, I think.
Taxes are only half the equation, as my colleague mentioned.
Entitlement growth that we were just speaking of Social
Security and Medicare is eating up an increasing fraction of
discretionary spending. So getting those programs on a more
efficient track would go a long way toward alleviating those
problems.
Chairman Shelby. Mr. Cabrera, I will go to you now, if I
could, because we have a vote on the floor and Senator
Martinez, I hope, will vote and get back here where we can
continue the hearing without recessing.
Could you share briefly with the Committee the role that
the Florida Housing Finance Corporation has played in
rebuilding after hurricanes in Florida? What role do you all
have there?
Mr. Cabrera. Florida Housing, essentially, allocated a good
amount of resources to people who needed tenant-based rental
assistance, and most of that resource went to public housing
authorities. They stepped in in order to make it as easy as
possible for the funds that are necessary for people to find
homes to utilize them. The second thing that Florida Housing
did was create a pool fund so people can begin repairing their
homes, or alternatively, allow them to borrow so they can buy a
new home.
The other aspect that Florida Housing helped with was
helping our sister agencies. Our sister agencies, particularly
DCA, Department of Community Affairs, was mostly charged with
hurricane recovery tasks at the State level, and our largest
role was supporting them.
Chairman Shelby. We wish you well over there at HUD. You
have a great challenge, which you follow in some big shoes and
Senator Martinez. I think the Cuban Americans can play a big
role there, and you will.
Mr. Cabrera. Thank you, sir.
Chairman Shelby. I congratulate you.
Mr. Cabrera. Thank you.
Chairman Shelby. Ms. Hyland and Mr. Hood--Ms. Hyland first.
You spent the last several years working in the credit union
industry. You know a lot about it.
Ms. Hyland. Yes, sir.
Chairman Shelby. If you were to be confirmed, which I
predict you will be, your responsibilities would change from
that of an industry advocate--you know, working in the
industry--to that of a safety and soundness regulator. Two
different roles, as you well know. Could you give us some
insight in what you believe would be the appropriate role of
the regulator is in relation to the industry, that is, the
credit union you would regulate? To what extent should a
regulator be concerned about appearing as an industry advocate?
In other words, I do not think you can do both.
Ms. Hyland. Certainly.
Chairman Shelby. I am not saying you would, but, you know,
you come----
Ms. Hyland. Certainly, Mr. Chairman. I guess there are two
points I would like to make. Number one is that, by virtue of
the Federal Credit Union Act and the parameters that are laid
out for the Board, there is a line to be drawn in terms of
listening to the interests of the industry and listening to the
professional staff at NCUA, and as a board member, then,
exercising independent judgment and being able to balance those
concerns so that the credit union system is protected by a
strong safety and soundness regulator.
Chairman Shelby. That should be number one, shouldn't it?
Ms. Hyland. Correct.
Chairman Shelby. The strong safety and soundness of the
credit union system.
Ms. Hyland. Absolutely. Secondarily, I would like to
emphasize, as I said in my statement, that I believe credit
unions play a vital role in the larger financial services
sector. So to the extent that that safety and soundness can be
balanced with regulatory flexibility to allow credit unions to
continue to serve the Congressionally mandated mission of
serving people of smaller means, I believe that also should be
pursued and monitored by the regulator.
Chairman Shelby. Mr. Hood, could you briefly tell us any
trends that you may have picked up, either credit union-
specific or generally, that would be applicable to the
financial system, that in your opinion pose a threat to the
safety and soundness of credit unions?
Mr. Hood. Well, yes, sir, Mr. Chairman. I think that one
trend that I am seeing that could potentially pose a threat is
the view that taxation should be imposed on our credit unions.
When the credit unions were chartered, they were chartered to
be tax exempt, democratically controlled entities that would
provide for the----
Chairman Shelby. I have not introduced any legislation.
[Laughter.]
Mr. Hood. Thank you for that, Mr. Chairman. But I recognize
that that is potentially a trend. And I believe, sir, that if
it were to reach fruition, it would have such an adverse effect
on the credit unions' ability to serve the needs of low- to
moderate-income individuals. And that is something that I think
we really will probably want to address, in the sense that it
would, one, fundamentally change the scope of the charter, and
I think that is something that is really out there on the
horizon that, if confirmed, I would like to address with you
and your staff.
Chairman Shelby. I have a number of questions for the
record. I know Senator Sarbanes and others that are in other
hearings will have questions for the record. But we would like
to get all of you confirmed, have a markup, move you out as
soon as possible. But I have a number of questions for the
record myself, and we will ask those and get in touch.
We are voting on the Senate floor. Senator Martinez is
back. I am going to give the chair to him and let him close up
the hearing.
Senator Martinez. [Presiding.] Thank you all very much for
your indulgence. We have votes going on and so that requires
the coming and going that you have seen. So a busy time in the
life of a Senator.
Mr. Cabrera, I wanted to ask you a couple of questions
relating to public housing, an area that I know well from my
time at HUD--I wanted to just ask of you--and some of this may
already have been asked, but what do you see as the major
challenges in terms of providing affordable housing, the
challenges of the Section 8 program, the future of HOPE VI,
which has been perceived differently by the Administration than
some here in the Congress. Frankly, I was conflicted greatly as
a member of the Administration and what I believed to be a
positive program in HOPE VI and it had done a lot of good,
while at the same time I understand too often that there is not
enough benefit to the entirety of it.
What are your thoughts on some of those issues, if you
could just in general?
Mr. Cabrera. I think that public housing has a few
challenges. The initial challenge it has is to become a better
manager of valuable resources. And I think it is doing just
that. It has made great strides in the last few years to become
a better manager, certainly with the help of this Congress. And
that infrastructure, that rubric has to be put in place and
executed upon.
As to the issue of HOPE VI, I think it has had its
successes. It certainly has successfully demolished a lot of
severely distressed units. But it has had its challenges as
well in terms of trying to get units built. I think that a lot
of my time, if confirmed, will be spent on trying to improve
the rough edges of HOPE VI.
Senator Martinez. One of the things that I hope we can do
is to think about the future differently. You know, HOPE VI
accomplished what it did, obviously many lessons that could be
learned from the positive as well as some of the things that
maybe did not work as well. Nevertheless, there is a need for
us to do something to continue to modernize public housing, to
continue to improve the stock of public housing, to reinvent
it, if you will, in a different concept and a different
vision--more mixed ownership, you know, just a rethinking of
the concept. And I wonder if you have any impetus, or is there
any impetus in the Administration that you know of, to come
back to Congress with some new ideas on a program that might
not be HOPE VI--maybe HOPE VII--but something new and different
that would accomplish some of the goals of HOPE VI while at the
same time bringing about some of the lessons learned.
Mr. Cabrera. I think that certainly SLHFA is a good place
to start the discussion. The idea of having flexibility at the
PHA level, I think, is a good one so long as you can guard or
enhance fiscal soundness. I think giving PHA's the ability to
go and compete for a variety of resources--because they have
significant assets--in order to replenish units is good policy.
I think that would be a good start. In Florida, we recently
amended Chapter 421 of the Florida Statutes, which is a statute
that essentially administers or enables PHAs, and now PHAs in
Florida have a wider breadth of options in terms of how to
conduct their activities, at least in the State of Florida. I
think that is a good thing.
Senator Martinez. I do not mean to neglect the rest of you
but, as you can tell, this is a little more in my vein. So, I
will continue here for another minute or two.
One of the things that I known distressed me greatly during
my time at HUD was the morning news clips when it got to Public
and Indian Housing, the multiplicity of indictments,
convictions, fraud, waste, abuse that was kind of the daily
fare. You know, we have--I do not remember now the exact
number, but I think some 2,600 housing authorities across the
country. And a number of these, the number of people associated
with them, from time to time would stray from the straight and
narrow. And I find that disappointing because I always thought
it was really interfering with the ability of some needy person
to live in a safe and decent place. It was really not stealing
from that impersonal Government, but it was really stealing
from the neighbor next door or someone living in public
housing.
I wonder what you think about the status of that situation?
I know Michael Liu, the fellow you will be succeeding, worked
diligently in this area. We stressed it a great deal. We made
some progress, but I am not sure we turned the tide. I just
wonder how you might view that aspect of things--unfortunately
a negative aspect, but nevertheless one that needs to be dealt
with.
Mr. Cabrera. I think Secretary Liu made great strides on
that. I think he did a terrific job. I also think that there
are other things that we can do in order to minimize those
incidences. One of the things is to more methodically approach
troubled agencies, and specifically agencies that HUD has put
into receivership, in order to better deal with the business
aspects that one has to content with when you have a troubled
agency. Simple things: Marshalling assets, paying liabilities,
and getting people in place to properly run a PHA. I think that
would go a long way to helping circumstances.
Senator Martinez. One last area, and this is more related
to your prior job but it would help me in carrying out my
responsibilities toward the State. I have been impressed how,
over the last, I would say, 3 years, what I did not perceive to
be a crisis in affordability of housing in Florida has become
that, and accentuated each and every day. And of course, as we
see the devastation of the latest hurricane, this only destroys
more of the basic stock of housing for many, whether it be farm
workers, whether it be retirees in a mobile home park.
What, as you depart from that world, are your
recommendations in terms of creating more affordability of
housing opportunities for people in the State of Florida?
Frankly, these lessons really are nationwide; it is not unique
to Florida. But what are your thoughts on housing
affordability, how to bring housing as affordable to more and
more people?
Mr. Cabrera. When I was asked this question in Florida, the
first thing I stated--and I think particularly my colleagues to
the right would agree--is patience. Because markets are funny
things, and markets change. But that is not a very satisfying
answer on a practical level. On a practical level, I think that
the Low-Income Housing Tax Credit is a remarkable devise to
have the private sector essentially construct units and manage
them. And when I say ``private sector,'' I do not just mean
for-profit entities. I also include nonprofit entities. I am
just saying----
Senator Martinez. Nongovernmental sector.
Mr. Cabrera. --other than Government.
Senator Martinez. Right.
Mr. Cabrera. And it has been a remarkably helpful thing
from the perspective of unit production. Now, how does that
relate to public housing? It does increasingly because many
public housing authorities are beginning to become more
entrepreneurial, which is, I think, good. And they have
assets--mainly land--that can be developed. In many cases, that
land is the only affordable land that is viable, where one can
develop units. So that is another aspect that would be helpful.
I think the market, as markets change, the private activity
bond allocation, which is currently probably under-utilized
nationwide, is going to become very, very important to the
production of units. But those are the strongest production
devices I believe we have, and I think we should utilize them
to their fullest extent.
Senator Martinez. Let me ask other panel members if you
might have any thoughts you want to share on the issue of
affordability of housing. In addition to that, maybe the other
issue related to that, which is housing bubble, whether the
possibility of us having an overheated housing market that may
create some disruptions. Ms. Baicker, I notice some interest in
you in this topic.
Ms. Baicker. I agree with Mr. Cabrera that vouchers are a
really flexible tool to use to get people into housing that
they might not otherwise be able to afford. I know there have
been many experiments at both the State and Federal level with
vouchers that are larger for people with lower income and phase
out as people's income grows, and gives them the opportunity to
live in housing that otherwise would not be accessible and does
not have some of the disadvantages of housing that is
designated only for low-income people, which often then has
problems that you do not see in the wider housing community.
So, I share the hope that that kind of program, with
flexibility built in for people to take the vouchers to the
housing that suits them best, would really give people that
opportunity.
Senator Martinez. I think Single-Family Housing Tax Credits
would also be a good idea. You know, we have done it for
multifamily; it seems to me that it only makes sense to do it
in single-family housing as well.
Any other comments on that?
Mr. Slaughter. Senator, I think this issue of the increase
in home prices, especially in particular communities--on the
coasts, for example, in recent years---there is legitimate
concern about that rate of increase and whether in some sense
those prices have gone too high and, going forward, whether
price growth will moderate or even turn negative and prices
will actually decline.
This very important issue of housing affordability has
longer time horizons that are important as well. In addition to
the immediate concerns, one issue that I always think about is
that affordability depends not just on the price of the homes,
but also on the earnings power of the families involved. And so
a broad policy challenge, I think, is continuing to ensure
income gains for as many American households as possible, to
allow them to achieve that dream that a lot of people have,
which is having their own home.
Senator Martinez. Yes, a dream which we share.
Ms. Hyland.
Ms. Hyland. Senator Martinez, I would suggest that credit
unions certainly can play a seminal role in that through
individual development accounts to allow low-income and working
people to essentially build toward that American Dream as well
as offering affordable mortgage products through efforts from
the National Credit Union Foundation and others that really
strive to reach out to people that need to build wealth in
order to put their first down payment on a home. And I believe
that credit unions can serve a seminal role in doing that. And
partnering with other entities, both Government as well as
other not-for-profits to help that.
Mr. Hood. Yes, Senator Martinez, I would agree with my
colleague and also say it is important to create public/private
partnerships. And I was pleased when Mr. Cabrera said that
there are other community stakeholders who are getting involved
now with affordable housing. I think it is equally important
for us to really note the importance of analyzing applicants,
in terms of having to look outside the box when it comes to
qualifying them.
Senator Martinez. Traditional, right.
Mr. Hood. Looking outside of traditional credit and trying
to really find innovative ways of advancing the dreams of
homeownership. That is one of the things I think we are going
to see more of if we really are going to create more affordable
homeownership opportunities.
Senator Martinez. I think we have seen that over the last
several years. There are financing companies moving out of the
straightjacket of looking at an applicant in a single way, but
the more diverse population we have.
Mr. Hood. Exactly.
Senator Martinez. Frankly, it gets into other issues that I
really do not care to open the box, of the whole issue of
illegals that seek to finance a home and what happens with all
of that. But anyway, we will save that for another day.
I want to just thank all of you for your indulgence of the
Committee and myself. I know that Ranking Member Senator
Sarbanes had an interest in being here and questioning the
panel. I am done with the questions that I had, and so at this
point let me seek some counsel as to how we might approach
this.
Senator Sarbanes's questions will be asked in writing and
you can submit them for the record. And so with that, I will
bring the hearing to an end. And thank you very much for your
participation. We wish you all luck.
Mr. Slaughter. Thank you.
Ms. Baicker. Thank you.
Ms. Hyland. Thank you, Senator.
Senator Martinez. The hearing is adjourned.
[Whereupon, at 11:17 a.m., the hearing was adjourned.]
[Prepared statements, biographical sketches of nominees,
and response to written questions supplied for the record
follow:]
PREPARED STATEMENT OF JOHN WARNER
A U.S. Senator from the State of Virginia
October 25, 2005
Chairman Shelby, Senator Sarbanes, and my other distinguished
colleagues on the Senate's Banking, Housing and Urban Affairs
Committee, I thank you for holding this confirmation hearing.
Today, I am pleased to introduce a fellow Virginian, Gigi Hyland,
who has been nominated to serve as a Member on the National Credit
Union Administration Board. She is joined today by her father Gerry
Hyland, who serves as the Fairfax County Supervisor for Mount Vemon,
and her aunt Alba Colon Whitt.
Gigi Hyland has a wealth of experience with the business of credit
unions. She currently serves as Senior Vice President and General
Counsel for the Empire Corporate Federal Credit Union in Albany, New
York, where she is responsible for advising Empire on its compliance
with the NCUA, the Department of the Treasury, Federal Reserve,
Securities and Exchange Commission, and other Federal and State legal
and regulatory requirements.
Prior to joining Empire, Ms. Hyland worked concurrently as the Vice
President for Corporate Credit Union Relations for the Credit Union
National Association, Inc., and as the Executive Director of the
Association of Corporate Credit Unions in Washington, DC. In her
distinguished positions, she managed the development, coordination, and
execution of a regulatory, legislative, public relations, and political
advocacy program for the benefit of the corporate credit union network.
Before she began her career in the credit union industry, Ms.
Hyland earned her BA from the College of William and Mary in
Williamsburg, Virginia, and her JD from the George Mason University
School of Law in Arlington, Virginia.
Mr. Chairman, Gigi Hyland's impressive credentials makes her highly
qualified to serve as a Member on this Board, and I am certain that she
will be a strong asset for the National Credit Union Administration.
I urge my colleagues to support her nomination.
----------
PREPARED STATEMENT OF RODNEY E. HOOD
Member-Designate, National Credit Union Administration
October 25, 2005
Chairman Shelby, Senator Sarbanes, and distinguished Members of the
Committee, thank you for the opportunity to meet with you on behalf of
my nomination to serve on the Board of the National Credit Union
Administration.
I would like to express my deep appreciation to President Bush for
nominating me to this position. I would also like to thank Senator
Elizabeth Dole and Senator Richard Burr for their generous remarks. I
am humbled by their kind and gracious words and would like to
acknowledge and applaud their great leadership and service for my home
State of North Carolina.
While my parents are not here today in person, I feel the warmth of
their presence as they watch from Heaven. I am thankful to them for
bequeathing to me a strong value system. A value system that reflects
humility, honesty, hard work, and compassion. I believe that these
values have helped me make a difference in the lives of many people
during my 17 years in the private sector and in public service.
If confirmed by the Senate, I look forward to fulfilling the duties
and responsibilities of a NCUA Board Member along with my new
colleagues. I am committed to listening carefully, working hard, and
doing my best to ensure the safety and soundness of the Nation's 8,800
federally insured credit unions.
Now in existence for more than 150 years, credit unions play an
important role as a financial partner for 84 million people. As not-
for-profit financial cooperatives, the charter of these institutions
centers on servicing the financial needs of their members and
empowering Americans from all walks of life to achieve financial
stability.
I have a profound appreciation for community empowerment which was
developed early on in my youth as a missionary in Africa. There, in the
rural landscape, I saw the hard work, struggle, and resilient character
of people who made their living from farming. I learned and saw that
strong, struggling people are at the heart of what any country is
about. That is why I am pleased to now be in a position where I can
continue to serve my country by overseeing the institutions that give
hardworking people access to capital.
I realize that credit unions are a critical element in helping
families achieve the American Dream of homeownership; assisting
entrepreneurs in creating small businesses; and providing the trusted
mechanisms for families to save for the future.
President Bush said it best when he said, ``The true measure of
compassion is more than good intentions, it is good results.'' I have
been blessed and fortunate to work at some of America's most respected
financial institutions which sought to empower stability and prosperity
in our local communities. While at North Carolina Mutual and Wells
Fargo, I held management posts that allowed me to promote community
development and outreach initiatives to underserved communities. I
served on the board of the Wells Fargo Housing Foundation, and managed
public-private partnerships with results-oriented housing providers
such as the Neighborhood Reinvestment Corporation, Habitat for
Humanity, and the National Council of La Raza. Having served as a
Community Reinvestment Act (CRA) Officer at Bank of America and the
National Director of Affordable Housing at Wells Fargo, I have been
both an advocate and provider of affordable housing and small business
lending. In those positions, I oversaw loan programs, managed teams of
regional community development managers and community development loan
specialists, and worked with our credit policy group to evaluate and
manage credit risks. I have also provided financial education to
underserved communities by conducting seminars on homebuyer education,
small business lending, and credit repair. In addition, I worked with
regulators from the Office of the Comptroller of Currency to review the
bank's lending activities, credit quality, and community development
outreach efforts. These experiences directly exposed me to the
importance of regulatory review, financial soundness, and risk
management.
At USDA, I help administer a $43 billion dollar loan portfolio
comprised of over 400,000 loans--to individuals seeking homeownership,
private entities to provide affordable rental housing, and to local
government entities to fund schools, hospitals, and first responder
services. Throughout my career, I have nurtured and developed the core
competencies that I will rely upon in assessing the safety and
soundness of America's credit unions.
I come to NCUA with a mindset based on the following tenets:
First, I will work hard to ensure that credit unions remain
safe and sound financial institutions.
Second, I will strive to be recognized as a fair and
thoughtful regulator--one who realizes the value and necessity of
regulation while being cognizant of the impact of arduous
regulation.
Third, I will bring focused leadership and management to NCUA
while seeking to ensure efficient operations and prudent use of
resources.
Fourth and finally, I understand the importance of disclosure
and transparency and will work closely with the Members of this
Committee, and all Members of Congress, to ensure the financial
integrity of credit unions in a rapidly changing environment.
Since joining the Federal Government as Associate Administrator for
the Rural Housing Service at USDA, I have been honored to work side-by-
side with and lead some of the most dedicated and hard working career
staff around. And should I be honored by your confidence, I look
forward to doing so at NCUA as well.
Mr. Chairman and the Members of the Committee, I am honored to
appear before you this morning and would like to thank you again for
your courtesy and consideration. I welcome any questions you may have.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES
FROM MATTHEW SLAUGHTER
Q.1. The U.S. current account deficit reached a record $666
billion last year and is on pace to reach $800 billion this
year. As a percentage of GDP, the current account deficit is
now over 6 percent and growing. Federal Reserve Chairman
Greenspan has stated that ``countries that have gone down this
path invariably have run into trouble, and so would we.
Eventually, the current account deficit will have to be
restrained.'' And just last week in testimony before the Joint
Economic Committee, CEA Chairman Bernanke acknowledged that the
``Current account deficit presents some economic challenges.
Gradually reducing the current account deficit over time would
be desirable.'' What is your view on the current account
deficit? Do you believe that this imbalance presents a serious
potential threat to the Nation's economic health? If you
believe that it should be reduced, what policies, beyond
promoting economic growth, would you advise the President to
undertake?
A.1. I am very concerned about the U.S. current-account deficit
today, which by any measure has grown quite large. This deficit
merits careful analysis for causes, consequences, and possible
transitions. It is now well-established that at least some of
the causes of this current-account deficit are the underlying
strengths of the US. economy. One in particular is the fact
that U.S. economy has for many years now been growing much more
rapidly than have the economies of our biggest trade partners
such as Japan, Germany, and France. Our faster growth has meant
that our demand for their exports has been growing faster than
has their demand for our exports.
At the same time, some of the other underlying causes of
the current-account deficit are more worrisome. One in
particular is the decline in savings by American households, a
decline which began nearly a generation ago. In 2004, U.S.
personal savings as percentage of disposable personal income
was just 1.8 percent. Policy initiatives that can encourage
greater personal savings will benefit not just American
families but also the broader U.S. economy by helping reduce
our current-account deficit.
Q.2. Many countries, notably China, Korea, and other Asian
countries have been experiencing stronger economic growth than
the United States, while their bilateral trade imbalances with
the United States have widened significantly. It would appear
that many of these countries also pursue policies of actively
managing their currencies to promote competitive trade
advantages. What has been the relationship between these
countries' trade and exchange rate policies and the underlying
U.S. current account deficit?
A.2. Bilateral trade imbalances between any two countries tend
to reflect a number of forces, including their underlying
patterns of comparative advantages. With the United States
having strong capabilities in producing knowledge-intensive
goods and services, we benefit from international commerce when
we import labor-intensive goods and services from countries
well-suited to those activities. Bilateral imbalances can also
be affected by currency values as well.
Q.3. What policies do you think should be taken with regard to
a country that has been found to be manipulating its currency
to gain an unfair competitive trade advantage with the United
States?
A.3. The Treasury Department currently has responsibility for
all issues involving the value of the U.S. dollar. I will defer
here to their established rules and procedures. More generally,
it is important to encourage all countries to move toward more
open, market-based systems--including for capital markets.
Flexible capital markets generate a number of benefits for
countries, including support for trade in goods and services.
Q.4. The prices of oil and gas have risen dramatically over the
past year. In a July 3 article, The Washington Post reported
that, ``Morgan Stanley economist Andy Xie (Zee) warned of an
`oil bubble' and said much of the recent run-up has been driven
not by supply and demand but by speculative energy traders at
big investment firms that have grown increasingly dependent on
returns from their trading profit.'' Do you see any evidence of
Mr. Zee's findings?
A.4. Recent oil-price increases have been much more gradual
than those of earlier decades, and seem to have been driven by
rising demand rather than sudden supply shocks. And current
prices, although high, have not reached the historic peaks (in
real terms) of the early 1980's. Major countries driving this
demand growth have included China and the United States, thanks
to their strong economic growth. New production and refining
capacity are expected to emerge in future years, but ongoing
demand growth is expected to mean high prices for some time.
Q.5. The Bureau of Labor Statistics reported that the Consumer
Price Index, the main inflation gauge, rose by 1.2 percent in
September and has risen 4. 7 percent over the last 12 months.
Real wages for working Americans continue to fall. According to
the Labor Department, the average weekly earnings of
nonsupervisory workers--who constitute about 80 percent of the
workforce--fell by 1.2 percent in September and have fallen in
8 of the past 12 months.
However, some have argued that inflation is not such a
significant issue because the so-called ``core inflation''
measures, those that do not include energy or food prices, have
remained relatively stable. A recent New York Times article
entitled, If You Don't Eat or Drive, Inflation's No Problem
summarized that line of thinking: ``Many economists urged
Americans to remain calm and to focus on the so-called core
CPI--the inflation measure that excludes the volatile costs of
energy and food. The core rate rose just 0.1 percent in
September, and is up only 2 percent in the last 12 months.''
The article concluded, ``The dueling numbers seem to offer a
classic case of how economists and consumers view the world
differently. If only we lived in some futuristic biosphere
where we did not need energy or food, inflation wouldn't
matter.''
As a Member of the President's Council of Economic
Advisers, would you be concerned about increases in the costs
of energy and food, or would you focus principally on core-
inflation? Given the decline in real wages, what is the impact
of the increase in the costs of basic necessities, such as
gasoline, heating oil, and food on working Americans?
A.5. I am concerned about increases in both core and overall
rates of consumer-price inflation. Overall inflation rates are
intended to capture the full basket of goods and services
consumed by the typical American, and as such measure the price
pressures facing all working Americans. Rising prices of energy
and food impose real costs: Without commensurate increases in
income, many Americans need to reduce spending on other goods
and services.
Thus far, the recent sharp increases in the prices of
energy have not been passed through to the broad set of
nonenergy (and nonfood) prices captured by core inflation
rates. For the first 9 months of 2005, consumer prices
excluding food and energy have been rising at an annual rate of
just 2.0 percent. This lack of strong pass-through of energy
prices is thanks in part to sizable gains in energy efficiency
throughout the U.S. economy in recent decades, and it helps
contain the impact of rising energy prices on both firms and
families.
Q.6. According to the U.S. Census Bureau, in 2004, the top
quintile of households held more than half of America's total
income, which is a record level. In an editorial on the report,
The New York Times finds that ``as the very rich get even
richer, their gains can mask the stagnation and deterioration
at less lofty income levels.''
Dr. Slaughter, in an 1998 article, Globalization and Wages:
A Tale of Two Perspectives, you wrote that, ``Tens of millions
of American workers have experienced stagnation or even
absolute declines in their real earnings for over 25 years. For
many less-skilled workers, the declines have been staggering
and largely unprecedented this century. . . Combined with
sluggish growth in real wages of all workers, rising wage
inequality has meant absolute stagnation or even declines in
real wages for the majority of the U.S. labor force.''
Federal Reserve Chairman Greenspan has also expressed
concern with the growing income inequality in the United
States. In his Semi-Annual Monetary Report to this Committee in
July of this year, Chairman Greenspan called the growing
inequality in income and wealth ``a very disturbing trend.'' Do
you agree that income inequality is growing in America and that
this is a serious problem, and if so, how would you address it?
A.6. I do agree that income inequality is growing in America,
and that this trend is a serious problem in need of concerted
policy effort. On many measures, income inequality has been
rising in the United States for decades. In 1975, households at
the 90th percentile of the national income distribution had
incomes that were 8.5 times as high as households at the 10th
percentile. By 1990, this ratio had risen to 10.1, and last
year it stood at 11.1. At the individual level, one of the main
force behind rising inequality is the increasing importance of
education. In 2004, the average
annual earnings of U.S. high-school graduates was $30,640, in
contrast to $115,292 for Americans with advanced professional
degrees.
Rising inequality means that the strong rates of
productivity growth the U.S. economy has enjoyed in recent
years are not shared equally across all workers and families.
The broad policy challenge is to equip more Americans with the
skills necessary to command high and rising earnings in our
increasingly global labor market. Improved education and
retraining at all levels are essential. For example, President
Bush's new Community-Based Job Training Grants aim to
strengthen the vital role that community colleges play--in
conjunction with local businesses--in skills development.
RESPONE TO WRITTEN QUESTIONS OF SENATOR SARBANES
FROM KATHERINE BAICKER
Q.1. I am interested in your thoughts on the minimum wage. The
minimum wage today is $5.15, which is far below where it has
been in the past, when adjusted for inflation. Earning the
minimum wage is not even close to enough to support a family.
The U.S. Census Bureau reports that for a person with a family
of four to reach the poverty line that person would need to
earn $9.65 per hour, a rate that is almost twice the minimum
wage. Increasing the minimum wage, in my opinion, is one
powerful tool that we have to increase the incomes of working
Americans. There are some who argue against increasing the
minimum wage, due to concerns about its effect on employment.
However, there is much academic research, including a study by
economist Alan Krueger, that suggests that increasing the
minimum wage has little effect on employment. What are your
views with respect to increasing the minimum wage above its
current level of $5.15?
A.1 Raising the minimum wage merits serious consideration. In
setting the Federal minimum wage, however, it is important to
balance those advantages against the potential unemployment
that it might generate and the efficiency of how well the
minimum wage targets low-wage families. Evidence on the
unemployment likely to be created by increasing the minimum
wage is mixed, and effects may be larger for small businesses,
and larger in a time of increasing health insurance and
benefits costs. About half of the approximately 2 million
minimum wage workers are under age 25. An
alternate policy for increasing the living standards of low-
income workers is the Earned Income Tax Credit, which has been
successful at increasing the living standards of low-income
working parents.
Q.2. The prices of oil and gas have risen dramatically over the
past year. In a July 3 article, The Washington Post reported
that, ``Morgan Stanley economist Andy Xie (Zee) warned of an
`oil bubble' and said much of the recent run-up has been driven
not by supply and demand but by speculative energy traders at
big investment firms that have grown increasingly dependent on
returns from their trading profit.'' Do you see any evidence of
Mr. Zee's findings?
A.2. Recent oil price increases have been much more gradual
than those of the 1970's and 1980's, and seem to have occurred
in response to increased demand in the face of tight supply,
rather than in response to sudden supply shocks. This increased
demand comes along with strong economic growth in the global
economy. Concerns about security of supply may have contributed
to some of the recent increases in crude oil prices, but
current prices, although high, have not reached the highs of
the 1980's. Although new capacity is expected to keep pace with
increasing demand, we are likely to face tight crude oil
markets and no decrease in prices for several years.
Q.3. The Bureau of Labor Statistics reported that the Consumer
Price Index, the main inflation gauge, rose by 1.2 percent in
September and has risen 4.7 percent over the last 12 months.
Real wages for working Americans continue to fall. According to
the Labor Department, the average weekly earnings of
nonsupervisory workers--who constitute about 80 percent of the
workforce--fell by 1.2 percent in September and have fallen in
8 of the past 12 months. However, some have argued that
inflation is not such a significant issue because the so-called
``core inflation'' measures, those that do not include energy
or food prices, have remained relatively stable. A recent New
York Times article entitled, If You Don't Eat or Drive,
Inflation's No Problem summarized that line of thinking: ``Many
economists urged Americans to remain calm and to focus on the
so-called core CPI--the inflation measure that excludes the
volatile costs of energy and food. The core rate rose just 0.1
percent in September, and is up only 2 percent in the last 12
months.'' The article concluded, ``The dueling numbers seem to
offer a classic case of how economists and consumers view the
world differently. If only we lived in some futuristic
biosphere where we did not need energy or food, inflation
wouldn't matter.''
As a Member of the President's Council of Economic
Advisers, would you be concerned about increases in the costs
of energy and food, or would you focus principally on core-
inflation? Given the decline in real wages, what is the impact
of the increase in the costs of basic necessities, such as
gasoline, heating oil, and food on working Americans?
A.3. Rising food and energy prices have real effects on
American families and deserve careful attention. Energy prices
in particular rose sharply in 2005. These price increases do
not, however, seem to have passed through to the prices of
other goods (with core inflation low and stable at 2 percent),
thanks in part to increased
energy efficiency, which mitigates the effect of the increases
on consumers. Policies that promote continued strong economic
growth and productivity gains will help ensure that Americans
can enjoy increasing standards of living.
Q.4. According to the U.S. Census Bureau, in 2004, the top
quintile of households held more than half of America's total
income, which is a record level. In an editorial on the report,
The New York Times finds that ``As the very rich get even
richer, their gains can mask the stagnation and deterioration
at less lofty income levels.'' Federal Reserve Chairman
Greenspan has also expressed concern with the growing income
inequality in the United States. In his Semi-Annual Monetary
Report to this Committee in July of this year, Chairman
Greenspan called the growing inequality in income and wealth
``a very disturbing trend.'' Do you agree that income
inequality is growing in America and that this is a serious
problem, and if so, how would you address it?
A.4. I share these concerns about the growing income inequality
in the United States. Recent increases are part of a long-run
trend, with the income of high-income households growing more
quickly than low-income households since the 1970's. One of the
main contributors to this increase in inequality is the
increasing importance of education: In 1980 the average high
school graduate earned 28 percent more per year than workers
without high school degrees, but in 2004 the difference was 49
percent. Workers with college degrees earn 31 percent more (in
real terms) than they did in 1980, while workers with less than
a college degree have seen little real increase. Policies that
promote educational attainment, such as increased
accountability for primary and secondary schools and increased
grants to support access to community colleges, would go a long
way toward improving the economic well-being of low-income
Americans.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES
FROM ORLANDO J. CABRERA
Q.1. Mr. Cabrera, do you commit to providing this Committee
with any and all requested data and information in a complete
and timely manner?
A.1. Yes. If confirmed, I will commit to providing Congress
with requested information in a complete and timely manner, to
the best of my ability. I look forward to working with Congress
to fulfill HUD's mission and encouraging a positive working
relationship.
Q.2. Disabled advocacy groups are concerned that vouchers that
have been designated for the disabled do not retain this
designation upon renewal. Do you commit to looking at what HUD
can do to ensure that vouchers for the disabled continue to be
used for this population?
A.2. Yes. If confirmed, I am committed to assuring that
vouchers continue to be available to the disabled population.
The Section 811 Program, Housing for Persons with Disabilities,
provides assistance to expand the supply of housing with the
availability of supportive services for persons with
disabilities. In 2005, Congress appropriated funding for both
new vouchers and renewal of vouchers in this program. HUD
remains committed to ensuring that these vouchers continue to
serve the disabled population.
In addition, HUD has issued a notice (PIH 2005-5) that
directs Public Housing Agencies (PHA's) to reissue vouchers to
the targeted nonelderly disabled population upon turnover. This
applies to both 5-year and 1-year mainstream vouchers and other
special purpose vouchers intended to serve nonelderly disabled
families. The Department has started tracking the use of these
vouchers in the Public Housing Information System (PIC).
Q.3. Many PHA's around the country opened their doors to
Katrina victims by providing vouchers and vacant public housing
units to evacuees. Do you support reimbursing PHA's for these
expenses, and will HUD reimburse housing agencies for these
expenses, incurred prior to the announcement of the FEMA/HUD
housing assistance programs, including for families who were
not previously assisted by HUD?
A.3. Yes, unless they are being directly assisted by FEMA or
otherwise prohibited by law. The Department has already
notified PHA's nationwide that it will reimburse them for any
Housing Assistance Payment and administrative costs retroactive
to September 1, 2005 under the Katrina Disaster Housing
Assistance Program but only for those families that were
previously assisted by HUD and homeless families. The
Department has obligated all funds provided in calendar year
2005 in accordance with the Conference Report to the
Consolidated Appropriations Act, 2005 and has no additional
budgetary resources to assist families that were not previously
assisted by HUD. These families are generally assisted by FEMA
under their Individual Assistance or Public Assistance programs
pursuant to the Stafford Act.
Q.4.a. Substantial increases in utility costs--about 1/3 in
fuel oil and nearly 50 percent in natural gas--are anticipated
in 2006. These cost increases will create substantial hardship
for public housing agencies and the seniors, people with
disabilities, and families with children that they assist
through the public housing and housing voucher programs, unless
Federal funding is increased to help meet these costs. How will
you ensure that PHA's can meet these increased costs without
diverting funding from other critical needs?
A.4.a. Existing regulations for the Housing Choice Voucher
(HCV) program and Public Housing program at 24 CFR 982.517
require PHA's to review utility allowances at least once a year
if there is a change in utility costs that exceeds 10 percent.
This assures that any large increases in utility costs are
taken into account when calculating utility allowances for
various unit types and sizes. Having said that, it is important
to note that the Consolidated Appropriations Act for fiscal
year 2005 changed the way the HCV program is funded from a
unit-based to a budget-based program. The Conference Report
specifically states that, ``PHA's are expected to manage
utility costs, decreased tenant contributions, and protect the
most at-risk within these budgets.'' PHA's have been provided
with 100 percent of their budgetary allocations in 2005 and
most have at least 1 week of reserves that they may utilize to
offset increased utility costs by increasing payment standards.
It may, however, become necessary for PHA's to delay the
issuance of vouchers upon turnover if increasing payment
standards would preclude the PHA from managing within its
budgetary allocation.
It is also important to note that Public and Indian Housing
has an ongoing aggressive energy conservation program to assist
PHA's in managing their operating costs relative to utilities
consumption and cost and ensure residents decent, safe and
sanitary housing. PIH is assisting PHA's in their efforts to
control costs and meet the energy crisis brought about by
Katrina in four crucial ways: (1) PIH is conducting outreach
and education directed to PHA's and specifically residents as
end users; (2) PIH is providing technical assistance for
installing energy systems directed to PHA's to streamline
procurement and facilitate financing options; (3) PIH provides
incentives to PHA's that enable them to use savings to amortize
energy costs, so as not to divert the use of capital funds from
more emergent capital projects; and (4) PIH is promoting
partnerships with other agencies to leverage resources. For
example, HUD has worked with Department of Energy and State-
sponsored energy programs to promote and fund weatherization
and encourage the use of Energy Star equipment replacements.
Low-income residents have also used the Low Income Home Energy
Assistance Program (LIHEAP) through the Department of Health
and Human Services to help pay energy bills.
In addition, PIH recently published a special Katrina
energy newsletter reaching out to PHA's, resident groups, and
Indian Housing in anticipation of higher utility costs this
winter. PIH will
continue to explore ways and means to mitigate the impact from
escalating utility cost.
Q.4.b. Will you submit to this Committee within 2 weeks of your
confirmation an estimate of the additional funding needed in
2006 to meet these extreme increases in utility costs?
A.4.b. I will be happy to work with the Senate in an effort to
assess the level of funding that may be needed.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES
FROM CHRISTIANE GIGI HYLAND
Q.1. On Wednesday, October 19, the NCUA presented its budget
briefing at which it proposed a budgetary increase for 2006 of
just 1.9 percent. The proposed budget would also reduce the
staff by three positions, a 10-year low for the agency. Do you
believe that NCUA has sufficient budget and staffing resources
to effectively fulfill its duties?
A.1. Although I have been briefed by agency staff on the budget
process, I have not had the opportunity to analyze the data
used to develop the proposed budget. I understand examiner
resources assessment development is robust, with initial
resource needs presented by the field credit union examiners.
If confirmed prior to the November NCUA Board Meeting, I intend
to assess the adequacy of proposed resources as they relate to
the budget package and
ensure those resources are sufficient to achieve the objective
of maintaining a safe and sound credit union system and meeting
the strategic and annual plans developed by the agency.
Q.2. It has been brought to our attention that banks appear to
be providing better outreach to communities than credit unions.
In a 2003 report on the financial condition of credit unions,
the GAO reported that its analysis suggested that ``credit
unions served a slightly lower proportion of low- and moderate-
income households than banks.'' (GAO Report, ``Financial
Conditions Has Improved, but Opportunities Exist to Enhance
Oversight and Share Insurance Management,'' October 2003.) How
do you believe that credit unions can increase their outreach
to the communities they are intended to serve?
A.2. I am aware credit unions have aggressively pursued
expansions into underserved areas since Congress enacted the
1998 Credit Union Membership Access Act, which permitted credit
unions to maintain their current field of membership while
expanding into these underserved areas. With more credit unions
using this expanded authority I expect they will further
demonstrate their outreach to all segments of society.
As mentioned in my testimony, I spearheaded corporate
credit union participation in the creation of the Community
Investment Fund, which is the National Credit Union
Foundation's primary funding mechanism for development
activities by credit unions. These funds--collected from credit
unions throughout the country--are being utilized to enhance
the credit unions' outreach to communities and further improve
the financial well being of all consumers, with a focus on
those in low- and moderate-income communities. As more of these
funds are made available for initiating innovative products and
services, credit unions best practices will be identified and
shared throughout the credit union system on the most effective
means of enhancing outreach.
Credit unions are also actively adopting international
remittance services through the IRnet\TM\ program established
by the World Council of Credit Unions to provide safe and
affordable remittances to those within their field of
membership. This service offered by credit unions will provide
many within the immigrant community an introduction into the
financial industry in the United States, with the hope they
will become active participants in the credit union system.
I have also seen the results of the outreach programs
conducted by NCUA, as well as the State and national trade
organizations, to present to the credit union participants
opportunities available to credit unions to further expand
their outreach to all segments of the population. Credit unions
have responded to these programs by partnering with community
development organizations and committing funds for low- and
moderate-income loan programs. A recent example is the
commitment--in excess of $110 million--by several of the
largest credit unions in New York to provide mortgage funding
to minority and low- and moderate-income individuals.
I strongly believe that credit unions must continue these
community outreach efforts.
Q.3.a. Since the passage of the 1998 Credit Union Membership
Access Act, credit union fields of membership have been
expanding significantly, in large part through the expansion of
the requirement for credit unions to serve members who have a
``common bond'' or ``community bond.'' As credit unions serve
increasingly large geographic areas, questions have been raised
about the extent to which they are distinguishable from
traditional banks. Under the Federal Credit Union Act, the
credit union system was established ``to make more available to
people of small means credit for provident purposes through a
national system of cooperative credit.'' Credit unions have
been given favorable regulatory treatment for that purpose. As
credit unions behave more and more like traditional banks, why
should they continue to be regulated differently?
A.3.a. Credit unions are held to almost all of the same
regulatory requirements as other federally insured depository
institutions while remaining restricted in the loan rates they
may charge, the individuals they may serve and the manner by
which they raise capital. Credit unions continue to maintain
their cooperative structure where members retain their
democratic principles of one person one vote and the Federal
credit unions' boards of directors
remain volunteer member representatives. Credit unions continue
to offer the financial services their members have come to
expect, while adopting the innovations of service delivery now
available through improved technology in an increasingly
competitive financial services marketplace.
With the continual changes of financial services and
products occurring in the financial industry, credit unions
have remained an affordable alternative to other financial
institutions.
Q.3.b. What are your views on membership expansion of the
common bond requirement and the implication for credit unions
and their competitors?
A.3.b. Membership expansion into underserved areas has provided
credit unions an opportunity to retain their occupational field
of membership while affording them the ability to expand into
underserved community areas determined by the Department of the
Treasury. Prior to the Credit Union Membership Access Act in
1998 this ability was not statutorily authorized. I understand
that over 620 Federal credit unions have availed themselves of
this expansion authority.
The ability of credit union members to change their type of
field of membership maintains the viability of the credit union
system, diversifies risk, and allows credit unions to
effectively deal with any adverse impact on occupation-based
credit union may encounter due to economic challenges faced by
the credit union's sponsoring organization or business.
The growth of credit unions does not appear to have
impacted other institutions within the mainstream financial
industry. I understand federally insured credit unions account
for less than 7 percent of the federally insured deposits
within the United States. With record profits being reported in
the banking industry, credit unions do not appear to have
adversely impacted these institutions.
As credit unions further increase their service in
underserved areas, I expect that the alternative lending
services, such as check cashers and payday lenders, may be
challenged to provide less costly services which will benefit
consumers.
Q.4. There have been a number of proposals to allow credit
unions to perform an increasing amount of member business
lending, getting credit unions more involved in the traditional
business of commercial banks.
Arguments have been made that the more credit unions move
into the areas of traditional commercial banks and offer a
wider variety of services such as business lending, the more
they should be regulated like traditional banks. Do you believe
that the expansion of member business lending has implications
on the distinction between credit unions and banks and the
types of services they provide?
A.4. No, I do not. Credit unions have been involved in member
business lending since the beginning of the last century. In
New York, credit unions have been the primary provider of loans
to purchase New York City taxi medallions since the 1920's.
Many credit unions in the Midwest were formed as agricultural
lenders, providing funding for the seeds and farm implements.
Credit unions have generally been the first source of
capital for sole proprietor and small business owners in
obtaining equipment and vehicles for their business. This
lending has assisted individuals whose lending needs may not
have been deemed large enough for commercial lenders.
The cooperative structure of credit unions remains
constant, with members determining the services and products
credit unions provide, including member business loans.
Q.5.a. Some banks and other financial institutions are
providing their customers with a service that is being referred
to as ``bounce protection'' or ``courtesy pay.'' This is a
service that covers drafts that would otherwise have bounced,
so that when a consumer overdrafts his or her account by
writing a check, or using a debit or ATM card, the financial
institution will pay to cover the overdraft. Often substantial
fees are then charged when the service is activated. This
differs from standard overdraft protection, which draws funds
from a customer's savings account or other credit line to cover
an overdrawn check.
In addition, unlike overdraft protection, which consumers
generally must sign up for, bounce protection is often offered
automatically, so the member may not even be aware that they
have this service. I am concerned about reports of aggressive
marketing tactics that lead consumers to overdraw their
checking accounts and use ATM's to withdraw more cash than they
have available. Do you believe that bounce protection is a
practice in which credit unions should be engaging?
A.5.a. Credit union products and services are member driven. To
the extent that credit union members ask and want this service
from their credit unions, credit unions should be providing it.
Q.5.b. If so, what should the NCUA do to ensure that bounce
protection is offered in a manner so that it provides a
valuable service to members, rather than encouraging
irresponsible behavior?
A.5.b. I understand NCUA has joined most of the other FIRREA
agencies in issuing a ``best practices'' paper on the
implementation of this type of program. I believe it important
that clear disclosure is provided to members relating to these
types of programs. If confirmed I will assess the guidance
provided by the NCUA to credit unions and determine whether
additional guidance or regulation is warranted.
Q.6. The GAO has suggested that there is limited follow-up to
determine whether credit unions, after having been chartered,
are successfully serving their fields of membership. The GAO
reported that ``[w]hile NCUA has stated its commitment to
ensuring that credit unions provide financial services to all
segments of society, NCUA has not developed indicators to
determine if credit union services have reached the
underserved.'' (GAO Report, ``Financial Conditions Has
Improved, but Opportunities Exist to Enhance Oversight and
Share Insurance Management,'' October 2003.) What do you
believe that the NCUA should be doing to ensure that credit
union services are successfully reaching the underserved?
A.6. If confirmed I will review what the NCUA has done to
address the findings in the GAO report mentioned and determine
whether additional data collection and reporting is necessary.
This may also include regular follow-ups with credit unions
that received community charters or added underserved
communities to their fields of membership to document the
challenges and successes of their plans to serve the
underserved.
In addition, I have received information from the NCUA
which provided me the average and median share and loan
balances of all credit unions based on recent financial call
report information. These balances compared very favorably to
those 1,000 credit unions that are designated low income.
To obtain this designation, these low-income designated
credit unions demonstrated to the NCUA that they served a
membership with more than 50 percent of the members being at or
below 80 percent of the national median household income.
Q.7. The Senate Banking Committee has been concerned about the
level of noncompliance by financial institutions with necessary
anti-money laundering and counter-terrorist financing measures.
One important response was the issuance by the Federal
Financial Institutions Examination Council of interagency anti-
money laundering examination guidelines. Can you assure us that
NCUA will fully adhere to those guidelines with respect to the
institutions it supervises?
A.7. Yes. As SVP, General Counsel of Empire Corporate FCU, one
of my key responsibilities is to ensure compliance with the
Bank Secrecy Act and other anti-money laundering measures. If
confirmed I will ensure NCUA maintains its commitments to the
FFIEC and FinCEN, the primary enforcement agency, and will
review the examination guidelines developed by the agency to
address the anti-money laundering and counter-terrorist
financing measures.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR ALLARD
FROM CHRISTIANE GIGI HYLAND
Q.1. Do you believe it can be appropriate for a credit union to
offer loans to a member when that applicant has impaired
credit?
A.1. Credit unions have been in the forefront in offering loans
to members who have found themselves in financial difficulties,
with loan consolidations being a historic part of the credit
unions' loan portfolio. In assessing the loan applications from
members, credit unions have practiced the three ``C''s of
underwriting when determining the approval of a loan; that
being character of the member, capability to repay, and
collateral offered. When offering loans to members who have
found themselves in financial difficulty credit unions need to
ensure they are continuing to practice their due diligence when
acting on loans while following their historic precepts.
Q.2. Do you believe it can be appropriate for a credit union to
hire a vendor to perform lending activities such as loan
origination and servicing, and to what degree should they be
monitored?
A.2. Credit unions have long utilized third-party vendors for
operational activities. This has allowed credit unions to
provide services their members want and need while containing
costs. However, I believe that these activities need to be
effectively monitored by the credit union's officials and staff
who are ultimately responsible for the safety and soundness of
the credit union. I believe it is critical the officials
thoroughly understand the program and any potential risk, and
then establish clear oversight responsibilities to ensure the
activity is providing the expected results in a safe and sound
manner.
Q.3. As an incoming NCUA board member, you will benefit from an
executive staff with significant experience. To what extent do
you see yourself involved in setting NCUA policy? To what
extent do you see yourself involved in the day-to-day
management of the NCUA?
A.3. As stated in statute, it is the Board's responsibility to
establish sound policy and procedures for the credit union
system and then ensure the staff of the NCUA implements the
established policies. I believe it important that the NCUA
Board establish clear oversight and monitoring over the
operations of the NCUA. As I have seen in credit unions, it is
important that staff understand their roles and are held
accountable without micromanagement from the policymakers.
Q.4. As a new NCUA board member, will you consider ongoing
compliance actions to be your responsibility, or will you
engage only in matters raised after your confirmation?
A.4. If confirmed, I plan on delving into all current and
pending activities of the NCUA. There is ongoing focus on BSA,
anti-money laundering, fair lending, and other compliance
issues that the credit union system is challenged with. I will
ensure each is assessed and the Agency continues to pursue its
objective of ensuring the continued safe and sound operations
of the credit union system.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES
FROM RODNEY E. HOOD
(1).
Budget
Providing resources to achieve mission objectives,
particularly the safety and soundness of credit unions is, in
my view, a critical responsibility of the NCUA Board. Based on
discussions with NCUA staff, it is their belief that the
proposed NCUA 2006 budget they will present to the Board in
November is appropriate for its mission requirements. However,
I have not had an opportunity to fully assess the budget
submission in relation to the defined mission objectives and
any contingencies that may arise. If confirmed, that will be
one of my first, and continuing, priorities as a Board Member.
While NCUA staffing levels will be at their lowest in 10
years, it should be noted that the number of Federally insured
credit unions has decreased from 10,500 in 1995 to 8,800 in
2005. Additionally, during 2003 NCUA restructured its central
and regional operations that allowed for greater staffing
efficiencies and other savings. In my review of the proposed
budget, I will work to ensure that NCUA's operations are not
compromised by inadequate budget and staffing resources. It is
crucial that the strong financial reputation now enjoyed by
credit unions be maintained. Critical to avoiding reputation
and systemic risks is well trained and motivated examiner and
support staff properly equipped to perform their jobs. It will
be my direction and guidance that the current staffing level
must achieve this standard, with an emphasis on ensuring the
safety and soundness of credit unions in a changing
environment. In addition, the agency's resources must allow it
to take into consideration future events, such as the
increasing complexity of credit unions, asset growth, new
regulatory requirements such as Bank Secrecy Act, and other
emerging areas such as indirect lending and member business
loans.
(2).
GAO Report
Having worked in the community development arena for almost
17 years, I believe that credit unions can increase their
outreach to their local communities by providing financial
education seminars, creating strategic partnerships, and
leveraging the resources of the Federal Government.
At Wells Fargo, I managed our bank's financial education
partnership with the American Library Association where we were
able to provide homebuyer education and credit repair workshops
in public libraries located in low-to-moderate income census
tracts. By working with the American Library Association, Wells
Fargo was given free space to educate its current and
prospective customers in the comfort of the local library.
Credit Unions should consider partnering with the American
Library Association to create a similar partnership to provide
financial education and outreach.
In addition to providing financial education, I believe
that it is important that credit unions create partnerships
with results-oriented nonprofit organizations. Partnering with
community stakeholders such as the Neighborhood Reinvestment
Corporation, Neighborhood Housing Service, National Council of
La Raza, Local Initiatives Support Corporation, National Urban
League, and Operation Hope, credit unions can create community
development loan programs and loan consortia using the
experiences and best practices of some of the country's
preeminent practitioners in community development. In my
previous positions at Bank of America and Wells Fargo, I found
that our partnerships with some of the aforementioned groups
provided us with great tools for identifying, assessing, and
meeting the credit needs of underserved communities. I am aware
NCUA and credit unions already partner with some of these
groups and support continuing these efforts.
In my role as Associate Administrator at USDA, I spend a
great deal of time meeting with financial service providers to
inform them about our Guaranteed Rural Housing (GRH) loan
product. Lender-approved loans to low-income borrowers can
receive a USDA loan guarantee up to 90 percent of the loan
amount. The GRH portfolio has 180,000 loans with an aggregate
loan amount of $13 billion dollars. While there are 2,400
lenders using our GRH product, fewer than 100 credit unions
have a relationship with USDA. I would like to see more credit
unions use USDA's product to meet the homeownership needs of
its low-income members and to further meet safety and soundness
requirements. Because GRH loans insured by the Federal
Government, participating credit unions do not have to allocate
risks to the guarantee loan portion. By using the GRH product,
credit unions will be able to leverage their loan portfolio by
offering a higher number of loans to low-income borrowers. In
addition to USDA, the SBA and HUD also offer loan guarantees
for affordable housing and small business lending. All of these
Federal guarantees should be used by credit unions because
these programs create win-win situations--both for the consumer
and the credit union.
If confirmed, I understand that in my capacity as a NCUA
Board Member, I will be asked to speak at a large number of
credit union events--seminars, symposia, workshops, etc. I will
look forward to using upcoming speaking opportunities to
provide credit unions with information about financial
education, strategic partnerships, and Federal Government loan
guarantees as important ways they can fulfill their mission.
(3) (a) Should Credit Unions be Regulated Differently
Since their inception in the 1900's, credit unions have
provided financial products to meet the needs of their
membership. Designed as tax-exempt, democratically controlled,
and later as Federally insured entities, credit unions still
operate under the same charter and remain critical in meeting
the financial needs of low-to-moderate income individuals. They
assist families in achieving the American dream of homeowners
hip, entrepreneurs in creating viable, small businesses, and
provide the trusted mechanisms for families to save for the
future.
While credit unions now offer a greater selection of
financial products, they do so not to compete with banks, but
to serve the evolving needs of their membership. Credit unions
of today are, in my opinion, no different than they were
yesterday. Today's consumers value one-shop stops for obtaining
credit cards, mortgages, checking accounts, savings accounts,
and equity loans. Given my commitment to ensuring safety and
soundness, I also believe that with product diversification
comes less concentration of risks for the credit unions.
Unlike traditional banks, credit unions operate in an
environment where they cannot provide financial services to
individuals outside their field of membership. Banks are not
restricted in defining their customer base. In addition, banks
have a plethora of options for raising capital. While stock-
issuance is the method most often preferred, they, unlike
credit unions, do not have to rely solely on retained earnings
for meeting its capital needs. Given the profound differences
that exist between credit unions and banks, I believe that
credit unions should continue to operate based on their
traditional statutory role.
(3)(b) Membership Expansion of Credit Unions
I will look forward to examining the membership expansion
trend that is taking place in the credit unions industry. It is
my understanding that the current trend in credit union
membership expansion stems from expansions to incorporate
underserved communities and some conversions of credit unions
serving occupational and associational common bonds to
community charters. Given my track record in working to serve
underserved communities, I will take a close look at the new
expansions and monitor the results to see if credit unions are
continuing to reach a greater penetration of low-to-moderate
income individuals. This can be tracked through call reports,
HMDA analysis, and through mere observation of average loan,
mortgage, and savings & share draft account balances.
(4). Member Business Lending
I believe that credit unions should have the flexibility
and ability to meet the needs of their members. Unlike
traditional banks that have no business lending penetration
caps, it is my understanding that credit unions have a 12.25
percent (of capital base) member business lending cap. While
there are a handful of larger credit unions engaged in large
business transactions, they are doing so based on the current
regulatory mandates.
As a trained commercial loan officer, I recognize that
complex member business loan transactions require special
underwriting and loan servicing expertise. Because it is my
paramount responsibility to ensure that credit unions remain
safe and sound institutions, I, as a regulator, will set clear
expectations that credit unions engaged in member business
lending have well-trained, competent staff involved in atypical
member business loan transactions.
In addition, I will work to ensure that credit unions
participate in the SBA's guaranteed loan program. This will
further allow the credit unions to engage in member business
lending while adhering to the principles of safety and
soundness.
(5) (a) Bounce Protection
If clearly described and articulated to credit union
members, Bounce Protection can be a benefit that provides
credit unions with a vehicle for adding to its product mix.
When used properly, Bounce Protection should save individuals
from the embarrassment one would experience if a check to a
local merchant, school, or grocery store bounced. While it was
designed as a convenience, I am concerned that many credit
union members, especially the low-income members, have not
fully understood the fee structure of using the product. I will
review this issue with a goal on ensuring reasonable
disclosures to fully protect credit union members. I will also
work to develop procedures to determine the extent to which
credit unions are conforming to published guidance on this
issue.
(5) (b) Bounce Protection
As a regulator, I would propose that credit unions playa
more visible and active role in providing disclosures that
clearly discuss Bounce Protection and its fee structures. I
would also suggest that our examiners look closely at credit
unions using Bounce Protection products. I understand that in
February 2005, the NCUA, jointly with the Board of Governors of
the Federal Reserve System, the Federal Deposit Insurance
Corporation, and the Office of the Comptroller of the Currency
issued joint guidance to assist insured depository institutions
in the disclosure and administration of overdraft protection
programs. I would be willing to work with the Senate Banking
Committee and my counterparts at other regulatory agencies to
ascertain further best practices and/or ideas that should be
shared with our examiners in providing them with a tool for
gauging proper use of the products. Once creating an assessment
tool, I would then suggest that NCUA take corrective action
against any credit union that does not clearly disclose and
market the products.
(6) How to Ensure Credit Unions Reach the Underserved
Having served as a CRA officer, I recognize the importance
of assessing and measuring a financial institution's community
development penetration. It is my understanding that NCUA
receives quarterly call reports and from information contained
in them can review how credit unions are serving their members,
including the underserved. For other quantifiable methods to
assess community development impact in underserved communities,
I would propose that HMDA data and other available data be
examined to assess mortgage lending to minorities and low-to-
moderate income individuals. Other suggestions would include
examining credit unions' average loan, checking & savings
account, and credit card balances over 3,5, and 7 year time
periods to look for trends by income segment. One would expect
average loan sizes and balances to decrease as credit unions
attract additional low-to-moderate income members.
As mentioned in my Senate testimony, I want to be a
regulator who is cognizant of the impact of arduous
regulations. To that end, it will be my desire to create
assessment tools that do not materially detract from the credit
union's core mission of providing affordable financial products
to its membership. I will be delighted to work with the Senate
Banking Committee to further explore additional community
development assessment techniques that can NCUA can consider.
(7) Money Laundering and Bank Secrecy Act
As a regulator, I will go beyond the call of duty in
assuring the Senate Banking Committee that Federally insured
credit unions are in compliance with the Bank Secrecy Act. I
will make sure that our regulators recognize that this is
extremely important for both the safety and soundness of credit
unions and of the United States. 9/111eft an indelible mark in
my life, as it did for many of us. Every effort should be made
to prevent future attacks, and this is clearly one regulatory
act that makes America safer.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR ALLARD
FROM RODNEY E. HOOD
Q.1. Do you believe it can be appropriate for a credit union to
offer loans to a member when that applicant has impaired
credit?
A.1. Yes, there are some circumstances where it is appropriate
for individuals with impaired credit to have access to credit.
As a regulator, the safety and soundness of credit unions would
be of paramount importance. In my view, however, credit unions
can offer loans to members with impaired credit in combination
with promoting financial education, offering risk-based
pricing, and employing certain guaranteed loan products.
Great strides are being made now to assist people with
impaired credit. In today's environment, financial education
has helped borrowers understand the importance of managing
their credit wisely. More informed borrowers can handle credit
in more reasonable manners. At Wells Fargo, I managed a
financial education partnership with the American Library
Association where we provided homebuyer education and credit
repair workshops in public libraries. In my previous positions
in both Wells Fargo and Bank of America, we offered risked-
based pricing to compensate the banks for the risk of lending
to impaired borrowers. As the borrowers continued to pay off
their loans, the banks were able to lower interest rates and
reward the customers for financial responsibility. In addition
to offering risk-based pricing, I would encourage credit unions
to offer guaranteed loan products from USDA and HUD to
underserved borrowers.
Q.2. Do you believe it can be appropriate for a credit union to
hire a vendor to perform lending activities such as loan
origination and servicing, and to what degree should they be
monitored?
A.2. Yes, hiring a vendor to perform lending-related activities
can be a way for credit unions to serve members more
effectively. The vendor may bring expertise or economies of
scale that the credit union lacks. Due diligence and ongoing
monitoring are very important, however. For example,
outsourcing brings increased risk to the credit union,
including reputation, compliance, credit, and transaction risk.
I am aware that NCUA does not have vendor exam authority and
the need for this is an issue that I would review if confirmed
as an NCUA board member. I would also review whether there
should be regulatory limits on the concentration of third party
loan origination or servicing per credit union.
Q.3. As an incoming NCUA board member, you will benefit from an
executive staff with significant experience. To what extent do
you see yourself involved in setting NCUA policy? To what
extent do you see yourself involved in the day-to-day
management of the NCUA?
A.3. As a President-appointed and Senate-confirmed member of a
three-member board, our responsibility is to set policy for
NCUA. If confirmed as NCUA board member, I will delegate day-
to-day activities to competent staff but policy decisions
firmly rest with NCUA board members. In doing so, I will work
with the excellent, experienced staff and executive leadership
to achieve effective and efficient uses of agency resources.
Q.4. As a new NCUA board member, will you consider ongoing
compliance actions to be your responsibility, or will you
engage only in matters raised after your confirmation?
A.4. As a new NCUA board member, I will consider ensuring the
safety and soundness of federally insured credit unions to be
an ongoing activity. It is the focus both now and in the future
and has been since 1934, when the Federal Credit Union Act was
signed authorizing the formation of federally chartered credit
unions in the United States.