[Senate Hearing 110-924]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 110-924
                   DIANE FARRELL, WILLIAM S. JASIEN, 



                               before the

                              COMMITTEE ON
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION


                            nominations of:

    Bijan Rafiekian, of California, to be a Member of the Board of 
                     Directors, Export-Import Bank


     Diane Farrell, of Connecticut, to be a Member of the Board of 
                     Directors, Export-Import Bank


 William S. Jasien, of Virginia, to be a Director, Securities Investor 
                         Protection Corporation


 Mark S. Shelton, of New Jersey, to be a Director, Securities Investor 
                         Protection Corporation


 William H. Heyman, of New York, to be a Director, Securities Investor 
                         Protection Corporation


                        WEDNESDAY, JULY 11, 2007


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               CHRISTOPHER J. DODD, Connecticut, Chairman
TIM JOHNSON, South Dakota            RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York         WAYNE ALLARD, Colorado
EVAN BAYH, Indiana                   MICHAEL B. ENZI, Wyoming
THOMAS R. CARPER, Delaware           CHUCK HAGEL, Nebraska
ROBERT MENENDEZ, New Jersey          JIM BUNNING, Kentucky
DANIEL K. AKAKA, Hawaii              MIKE CRAPO, Idaho
SHERROD BROWN, Ohio                  JOHN E. SUNUNU, New Hampshire
ROBERT P. CASEY, Pennsylvania        ELIZABETH DOLE, North Carolina
JON TESTER, Montana                  MEL MARTINEZ, Florida

                      Shawn Maher, Staff Director
        William D. Duhnke, Republican Staff Director and Counsel
                       Dean V. Shahinian, Counsel
               Joseph L. Hepp, Professional Staff Member
                    Justin Daly, Republican Counsel
                    Andrew Olmem, Republican Counsel
   Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator
                         George Whittle, Editor

                            C O N T E N T S


                        WEDNESDAY, JULY 11, 2007


Opening statement of Chairman Dodd...............................     1

Opening statements, comments, or prepared statements of:
    Senator Allard...............................................     4


Bijan Rafiekian, of California, to be a Member of the Board of 
  Directors, Export-Import Bank..................................     6
    Prepared statement...........................................    20
    Biographical sketch of nominee...............................    21
    Response to written questions of:
        Senator Brown............................................    66
Diane Farrell, of Connecticut, to be a Member of the Board of 
  Directors, Export-Import Bank..................................     7
    Prepared statement...........................................    33
    Biographical sketch of nominee...............................    35
William S. Jasien, of Virginia, to be a Director, Securities 
  Investor Protection Corporation................................     9
    Prepared statement...........................................    43
    Biographical sketch of nominee...............................    45
Mark S. Shelton, of New Jersey, to be a Director, Securities 
  Investor Protection Corporation................................    10
    Prepared statement...........................................    49
    Biographical sketch of nominee...............................    51
William H. Heyman, of New York, to be a Director, Securities 
  Investor Protection Corporation................................    11
    Prepared statement...........................................    55
    Biographical sketch of nominee...............................    58
    Response to written questions of:
        Senator Dodd.............................................    67

                            NOMINATIONS OF:



                     DIANE FARRELL, OF CONNECTICUT,



                    WILLIAM S. JASIEN, OF VIRGINIA,

                           TO BE A DIRECTOR,


                    MARK S. SHELTON, OF NEW JERSEY,

                           TO BE A DIRECTOR,


                    WILLIAM H. HEYMAN, OF NEW YORK,

                           TO BE A DIRECTOR,



                        WEDNESDAY, JULY 11, 2007

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 9:05 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Christopher J. Dodd (Chairman of 
the Committee) presiding.


    Chairman Dodd. The Committee will come to order.
    Good morning everyone and welcome to the Banking Committee. 
I am going to ask the hearing will come to order.
    I expect to maybe have one or two other members show up 
here but I want to welcome you all here this morning and offer 
my congratulations to you on your nominations.
    We are meeting in open session to conduct a nomination 
hearing that is a crucial part of this Committee's oversight 
responsibilities and I would like to thank our witnesses for 
their willingness to appear before the Committee, for their 
service, and again congratulations on your nomination.
    On our panel we have two nominees for the Board of 
Directors at the Export-Import Bank of the United States and 
three nominees for the Board of Securities Investor Protection 
Corporation, SIPC.
    The Eximbank is the official export credit agency of the 
United States. Eximbank's mission is to assist U.S. companies 
large and small and financing the export of U.S. goods and 
services to international markets.
    Our first witness is Bijan Rafiekian. Did I pronounce that 
    Mr. Rafiekian. Yes, sir.
    Chairman Dodd. Mr. Rafiekian has been serving on the Board 
of Directors at the Eximbank since October of last year. He has 
testified previously before this Committee and has been 
renominated for a new 4-year term expiring in the year 2011.
    Mr. Rafiekian was formerly the Director of the State of 
California Office of Foreign Investment, which was that State's 
leading office for attraction, retention, and expansion of 
foreign direct investment. He also previously served on the 
Board of the California Housing Finance Authority and as 
President of Globetel, an international telecommunications 
company based in San Diego. In addition, he was the principal 
in Global Capital Markets, Inc.
    Our next nominee for a 4-year term as Director of the 
Eximbank is Diane Farrell. I have known Diane for many years 
and I have been impressed, obviously, with her intelligence, 
her tenacity and her overriding commitment on behalf of the 
people that she has represented in Connecticut and the work she 
has done.
    As a former First Selectwoman of Westport, Connecticut, 
Diane Farrell displayed her leadership skills by working with 
business, government, and community leaders to solve a variety 
of problems. After being elected with over 70 percent of the 
vote--a stunning number, I might add, an enviable number for 
all of us in public life--Diane began finding more solutions to 
local issues by actively reaching out and working cooperatively 
with business leaders and through organizations like the 
Business Council and local Chamber of Commerce. Additionally, 
she was able to hone her business and managerial skills by 
serving on Westport's Board of Finance.
    Her financial experience and desire to work in partnership 
with businesses both large and small led her to work as Chair 
of the Fairfield County Metropolitan Organization, as well as a 
leadership role in the Connecticut Conference of 
    Like Mr. Rafiekian, her experience and desire to work on a 
national level with U.S. exporters as they pursue export 
opportunities is commendable and exactly what we need on the 
Board of Directors for the Export-Import Bank. I look forward 
to hearing from her testimony this morning, as well.
    Next we have the three nominees to serve as Directors of 
the Board of the Securities Investor Protection Corporation, 
better known as SIPC. SIPC was created by Congress in 1970 to 
give investors certain protections against losses resulting 
from the failure of their stock brokerage firms. SIPC requires 
broker-dealers to contribute to the SIPC fund and helps 
investors whose securities and cash are held by failed brokers 
to recover those assets.
    In order to maintain investor confidence in the securities 
markets and their brokerage firms, SIPC must operate in a 
manner that is effective, efficient and fair. This involves 
maintaining fund balances that are adequate and liquid so that 
SIPC can pay out investor claims equitably and quickly. This 
requires appropriate corporate governance practices so that 
SIPC has adequate internal financial controls, transparent 
contracting protocols and appropriate executive compensation 
practices, and its board members avoid conflicts of interest.
    It also requires educating investors broadly about the role 
of SIPC and the extent of SIPC's coverage so they will know 
what it will and will not cover. In addition, it entails 
working cooperatively with the Securities and Exchange 
Commission and with the self-regulatory organizations.
    The first of the nominees is Mark Shelton, who has been 
nominated for a term expiring December 31, 2008. Mr. Shelton is 
General Counsel for UBS Financial Services, a securities firm 
where he had worked since 2003. Previously he was a partner in 
the firm of Wilmer, Cutler and Pickering where he worked from 
1997 to 2003 and taught as an adjunct professor of law at 
Georgetown University Law Center.
    From 1995 to 1996 he served as Deputy Counsel, General 
Counsel, for the Dole-Kemp 1996 Presidential campaign. Prior to 
this position he served at the Securities and Exchange 
Commission and clerked for the U.S. Court of Appeals for the 
Eighth Circuit.
    Next on our panel we have William Stephen Jasien, who has 
been nominated for the term expiring December 31, 2009. Mr. 
Jasien is a Senior Vice President for the Distribution and 
Administration of Public Pension Plans at ING Financial 
Advisors, a broker-dealer where he has worked since 1993.
    Previously, from 1991 to 1993, he served in the United 
States Department of Treasury as Deputy Assistant Secretary, 
Budget Procurement and Human Resource Administration. From 1989 
to 1991 Mr. Jasien served at the Resolution Trust Corporation 
Oversight Board as a Director of Public and Industry Affairs. 
He also worked as Deputy Campaign Controller for the George 
Bush for President Campaign from 1987 to 1989 and for the 
United States Senator Paula Hawkins from 1985 to 1987.
    Our final nominee for the Board is William Heyman who has 
been nominated for two terms, the first expiring at the end of 
this year and the second expiring on December 31, 2010.
    Mr. Heyman is currently serving as Vice Chairman and Chief 
Investment Officer for the Travelers Companies, Inc. From 1995 
to 2002 he worked for Citigroup and its predecessor, Travelers 
Group, Inc., in various positions including Chairman of 
Citigroup Investments. Prior to that position he worked from 
1993 to 1995 for Salomon Brothers, Inc. as Managing Director 
and head of the Private Investment Department. From 1991 to 
1993 at the Securities and Exchange Commission, as Director of 
the Division of Market Regulation.
    He has also worked for brokerage firms and private law 
firms. He's a member of the Board of Governors for the National 
Association of Securities Dealers. Mr. Heyman, I thank you for 
being here.
    I look forward to the testimony of all of our witnesses 
here this morning.
    Let me, first of all, do what we normally do here. Let me 
ask each of you if you have family here in the room, and I know 
some of you do. And why don't you recognize them and introduce 
them for the purposes of the record so they can actually say 
they were here. So some day when they say you did not show up 
for my confirmation, you can say in the record I was here. Mr. 
    Mr. Rafiekian. Thank you, Mr. Chairman.
    I have my wife of 25 years, Gissou, who is a banker. Also 
here with me, my daughter Christine, who is a sophomore at 
American University studying international studies and law and 
society, and my daughter Alexandria, who will be a freshman at 
Winston Churchill High School.
    Chairman Dodd. Terrific. That is very good. Thank you. 
Thanks for joining us this morning.
    Ms. Farrell. Mr. Chairman, I am most honored to introduce 
to you my husband, some would say long-suffering, of 29 years, 
Win Farrell, who has really and truly made all of this possible 
for me. And I am going to publicly say thank you, for the 
    Chairman Dodd. Thank you very much. Win, nice to see you. 
Good to have you with us this morning.
    Mr. Jasien.
    Mr. Jasien. Mr. Chairman, I am pleased to introduce my 
family: my wife Kathy, our daughter Ally, our son Hunter, and 
other son Chapman. Our oldest son could not be here. He is off 
at wrestling camp.
    Chairman Dodd. Very good. We will note where he is in the 
    Mr. Jasien. And they are thrilled to be here.
    Chairman Dodd. Thanks for coming here this morning.
    Mr. Shelton.
    Mr. Shelton. Mr. Chairman, my family could not be here 
today but I still would like to recognize my wife April and my 
sons, Spencer and Hewitt.
    Chairman Dodd. Absolutely, very good.
    Mr. Heyman.
    Mr. Heyman. My family could not be here either, but I would 
like to recognize my wife Wendy and my stepson Jack.
    Chairman Dodd. Terrific, very, very good.
    Since we are recognizing family, I should recognize my wife 
is here, Jackie. For the record, for truth in advertising here, 
Jackie was a member of the Board and Vice Chairman of the Board 
at the Eximbank for a number of years and Chief of Staff down 
there, as well. She has a strong interest and knows Diane well, 
obviously. But in addition to that, she has some pretty good 
knowledge about Eximbank and wanted to come by this morning and 
hear the testimony.
    Let me turn to my colleague, Senator Allard.


    Senator Allard. Mr. Chairman, I would like to thank you for 
convening the Banking Committee this morning to consider the 
pending nominations. I appreciate the opportunity to learn more 
about the nominees' background as well as their intentions for 
their agencies.
    First, I would like to welcome Mr. Rafiekian, who is 
nominated to the Board of the Export-Import Bank. It is 
important to have strong leadership in place and his prior 
leadership on the board, I think, will be very, very helpful.
    I would also like to welcome Diane Farrell. I am sure her 
background, especially in advertising, will be helpful to the 
Export-Import Bank.
    Next, I would like to welcome William Herbert Heyman, 
William Jasien, and Mark Shelton, all of whom are nominated to 
the Board of Directors of the Securities Investor Protection 
    The Securities Investor Protection Corporation has 
recovered $15.7 billion in assets for 626,000 investors when 
brokerage firms closed to bankruptcy or other financial 
problems. SIPC estimates that no fewer than 99 percent of 
persons who are eligible have been made whole in the failed 
brokerage firm cases it has handled to date.
    Our nominees bring outstanding private sector credentials 
to their positions and I appreciate their willingness to enter 
or remain in public service. I encouraged them to remain 
focused on results and outcomes rather than processes. One of 
the best ways to do this is through familiarity and compliance 
with the Government Performance and Results Act and the 
Administration's PART analysis.
    Thank you for being here today and I look forward to your 
    Thank you, Mr. Chairman.
    Chairman Dodd. With that let me, if I can, ask our 
witnesses to please stand and raise your right hand, if you 
    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. Rafiekian. I do.
    Ms. Farrell. I do.
    Mr. Heyman. I do.
    Mr. Jasien. I do.
    Mr. Shelton. I do.
    Chairman Dodd. And do you agree to appear and testify 
before any duly constituted Committee of the United States?
    Mr. Rafiekian. I do.
    Ms. Farrell. I do.
    Mr. Heyman. I do.
    Mr. Jasien. I do.
    Mr. Shelton. I do.
    Chairman Dodd. I thank you very much. Please be seated.
    Before you begin, let me assure all of you here that your 
written testimony will be included in the record in full, and 
any other supporting documents you may want the Committee to 
have for purposes of the nomination.
    I say that and also, as my colleague knows, we will leave 
the record open here for any statements other members of the 
Committee want to make regarding the nominees or any questions 
they may have for you, which I will ask that they produce 
promptly so that you can respond promptly so that we can try 
and get this confirmation done, barring any other unforeseen 
circumstance, before the August break. That is my attention 
anyway, to try and get you out of here. We have got some 
markups for this Committee planned for this month here and I 
would like to be able to include your nominations as part of 
    So again, as custom would have it, members are not all 
here. They may want some questions to be raised with you and I 
want to give them the opportunity to do that. But I will insist 
that they do it promptly and that you respond promptly, as 
well. Any delay in that obviously runs the risk of delaying 
your nomination going forward. So we will try and make that as 
quick as we can.
    With that, let me begin with you, Mr. Rafiekian, and any 
opening statement you have. I will just work down the line here 
with you and then I have some questions for you.


    Mr. Rafiekian. Thank you, Chairman Dodd, Senator Allard.
    I am most grateful to President Bush for renominating me 
and granting me the greatest honor of my life, with the 
opportunity to serve my country, the United States of America, 
as a member of the Board of Directors of the Export-Import Bank 
of the United States.
    With 9 months of service in this capacity, I have developed 
an understanding of the Bank's operations and mission. I have 
been fortunate to work closely with the most talented dedicated 
professional staff at the Eximbank. I would like to express my 
appreciation for their hard work in support of American 
exporters and their contribution to maintaining and expanding 
U.S. jobs through exports.
    Serving together with my distinguished colleagues on the 
Board of Directors in carrying out the policies articulated in 
by the Congress of the United States has been a privilege and a 
point of personal pride for me.
    Mr. Chairman, when I came before this honorable committee 
in September of 2006, I testified that if confirmed I would do 
my very best to carry out the prudential and fiduciary 
responsibilities of the office I was nominated to serve. It is 
with humility and a great sense of appreciation for the trust 
and confidence you placed in me, and it is with personal pride 
that I am here today to present to you that I have kept my 
promise in my capacity as a member of the Board of Directors of 
Eximbank. I applied my experience with diligence to make 
certain that as we eagerly and aggressively fulfill our mission 
to support American exporters and U.S. jobs, the interest of 
U.S. taxpayers are protected.
    In addition to carrying out the duties of the office I 
serve on the Board of Directors, I have also served as the 
Chairman of the Audit Committee of the Board, together with my 
colleagues, members of the Audit Committee, overseeing the work 
of independent internal and external auditors. I have made 
certain that we provide continuous examination and scrutiny of 
the adequacy of safeguards and systems of internal control to 
ensure the continuity of safety and soundness of the operation 
of the Bank in an independent fashion.
    In addition to my work on the Board of Directors and my 
responsibility as Chairman of the Audit Committee, I also serve 
as an ex-officio member of the Credit Committee of the Bank, 
representing the Board. My work on this Committee has afforded 
me the opportunity to observe the competence and dedication of 
professional staff members and the opportunity to apply my 
experience and contribute to work of this Committee.
    I have worked closely with our Small Business Division to 
expand our reach and support for small businesses and have 
actively participated in expanding our city state partnerships 
in support of small business. I have also worked with my 
colleagues at the Department of Commerce and Trade Development 
Agency to do more for the services sector within the frame of 
our charter and authorizations.
    Mr. Chairman, Senator Allard, I am here today to testify 
that if confirmed I shall continue my work in carrying out the 
responsibilities of the office I am designated to serve with 
the same degree of diligence, care, and dedication and with the 
same vigor as I have in the past 9 months.
    I am here to testify that if confirmed I shall uphold the 
highest standards of integrity and prudence consistent with the 
honor and responsibility of the office I am designated to 
serve. I am grateful to you, sir, for giving me this great 
honor to come before you today. In respect for your time, I 
keep my remarks brief and I welcome the opportunity to answer 
your questions. Thank you.
    Chairman Dodd. Thank you very much, Mr. Rafiekian.
    Ms. Farrell.


    Ms. Farrell. Mr. Chairman, Mr. Allard, and individuals here 
to witness the hearing this morning, it is a great honor to 
appear before you as a nominee to the Board of the Export-
Import Bank of the United States.
    I am grateful to President Bush for this nomination, to 
Senator Harry Reid for his support, and most especially to my 
great friend, Chairman Dodd, for convening this hearing. Chris, 
you have represented our State and led the Nation on so many 
issues vital to our citizenry.
    It is equally an honor to have my friend, Jackie Clegg 
Dodd, here in attendance. As former Vice Chair of the Export-
Import Bank, her knowledge of international trade and export 
finance has been an invaluable resource.
    As important as all who are in this room are important, the 
most to me is my husband of 25 years whom I have introduced. I 
should also say, since everyone has mentioned their children 
and I do not want to catch grief at home, we do miss our two 
daughters, Hillary and Margaret. I have to tell you that 
without my family's support this would never have happened and 
I cannot say thank you enough.
    When the opportunity to serve as Director of the Export-
Import Bank was first raised, I was instantly excited. The 
principle of partnership and a personal philosophy that 
government should act in an assisting role to the marketplace 
whenever possible helped to guide my years as the chief elected 
official of my community. In 8 years in office, I worked 
closely in a supportive role with commercial interests of all 
    Fairfield County, Connecticut is home to numerous Fortune 
500 companies as well as small business. The Business Council 
of Fairfield County and the Chambers of Commerce in the cities 
and towns in our area are proactive organizations that eagerly 
reached out to area elected officials as a means to 
multidimensionally strengthen the region. Cooperative efforts 
including transportation, housing, homeland security, and 
infrastructure improvement are some of the more prominent 
initiatives that I was involved in during my tenure in office.
    Should I be confirmed to the Board of Directors at the 
Eximbank, I would intend to carry forward the public-private 
partnership philosophy as part of the Eximbank's leadership.
    I had the opportunity to attend the Eximbank's annual 
meeting this past April and was very impressed to see the 
cooperative spirit between government and the private sector. 
Having come from the account management side of advertising 
prior to my years in public service, I was pleased to see such 
strong efforts on behalf of the Bank to actively market its 
products to lending institutions and their clients.
    I would expect to employ the skills I honed in the 
advertising industry as a Director of the Bank on behalf of the 
Eximbank where I can be helpful. Acknowledging the emphasis 
that Congress has asked the Eximbank to place on small business 
support, I would hope to play a leadership role in that effort.
    Having managed a municipality for 8 years well suits me to 
understand the complexities and unique nature of government 
institutions. Prior to becoming the First Selectwoman, I served 
on the Board of Finance. These two experiences in combination 
give me both the perspectives of management and oversight.
    As one of the non-managing members of the Board, I will be 
serving as part of the Audit Committee. This is a very familiar 
role for me, as it was a function of our Board of Finance. I 
take special note the Bank will, for the first time--thank you, 
Senator--have an inspector general. Independent internal audit 
functions can be extremely helpful to management and I would 
lend my support to assist and support the additional oversight 
sought by Congress.
    What perhaps attracts me most to the Eximbank is its 
mission to promote U.S. commercial interests in the global 
marketplace with the priority of retaining jobs here at home. 
The issue of losing jobs overseas is ever present in the minds 
of our country's citizens and leadership. To be able to 
actively help companies compete to retain jobs and promote new 
industries will be a most rewarding and satisfying endeavor.
    There is a wonderful motto that I learned in Girl Scouts 
many years ago: ``A Girl Scout leaves a place better than she 
found it.'' It may sound a bit too folksy here in such August 
surroundings but it speaks volumes to the kind of person I have 
always tried to be--to make a difference.
    Should I be confirmed, I look forward to putting my 
experience, training, and energy to work on behalf of the 
Export-Import Bank. I am eager to make a positive contribution. 
It would be a great honor to serve my country in this capacity.
    Mr. Chairman, Mr. Allard, thank you again for the 
opportunity to seek your support of my nomination. I look 
forward to any questions you may have for me.
    Thank you.
    Chairman Dodd. Thank you very much. Mr. Jasien.


    Mr. Jasien. Good morning, Mr. Chairman, Senator Allard, my 
name is Bill Jasien and I am honored to be nominated by 
President Bush to serve on the SIPC Board of Directors.
    I want to re-emphasize how pleased I am to have my family 
here with me today supporting me for this great honor.
    I believe I am well-qualified to serve on the SIPC Board 
based on my financial expertise and background in the 
securities and wealth management industries. I am a Certified 
Retirement Plan Administrator and currently head of Business 
Development for ING Financial Advisors. This division of ING is 
focused on the defined contribution retirement planning 
    I take great pride in my affiliation with ING and its 
global focus on serving the needs of savers and investors 
through our banking, investments, insurance and asset 
management business lines.
    Beyond ING, I am active in various charitable 
organizations, including INFRE, the International Foundation 
for Investor Education, the Washington Chapter of the American 
Red Cross, and the United States State Department Overseas 
Scholastic Advisory Council.
    I am the former Vice Rector of the Board for my alma mater, 
James Madison University, and have participated in a variety of 
private sector boards and commissions throughout my career.
    I am honored to have served in various capacities in the 
Government. Here as a staffer on Capitol Hill, as Director of 
Public Affairs for the Oversight Board of the Resolution Trust 
Corporation, and as Deputy Assistant Secretary at the U.S. 
Department of Treasury.
    As a registered NASD principal with a SIPC member broker-
dealer, I very much appreciate the important role SIPC plays in 
the securities industry. Although the securities industry is 
quite complex, it can be distilled down to a few key 
principles: education, risk, and confidence. Throughout its 
history, SIPC has had a meaningful influence on each of these 
components, Components which ensure market transparency, 
investor protection, and ultimately a thriving capital markets 
    SIPC's efforts in educating and protecting the rights of 
investors have resulted in an unparalleled record of success. 
The work of SIPC alongside of that of the SEC, self-regulatory 
organizations, and State regulators is critical in maintaining 
investor confidence.
    As you know, SIPC was established back in 1970 to help 
restore public confidence in the securities markets. This was a 
turbulent time in our financial history with hundreds of 
broker-dealers merging or going out of business. Since its 
formation it has effectively executed on its mission of 
restoring funds to investors with assets in the hands of 
bankrupt or otherwise financially troubled brokerage firms. 
Over this period, they have protected no fewer than 99 percent 
of eligible persons and have advanced $505 million in order to 
recover $15.7 billion for an estimated 626,000 investors.
    In conclusion, the brokerage business is a highly 
competitive environment with increasingly tough regulatory 
requirements. These dynamics will require firms to invest in 
their infrastructure in order to realize required efficiencies 
and a sound operating model.
    Should I be fortunate enough to be confirmed by the Senate, 
I am committed to diligently working with this Committee, the 
Board, and the professional staff at SIPC to closely monitor 
and anticipate the challenges in the securities industry and 
secure sufficient but responsible funding to perpetuate the 
important mission of the corporation. There should be no 
question in investors' minds that SIPC is well run, operating 
with a stable financial structure, and prepared to execute on 
its legislative mandates.
    Mr. Chairman and Senator Allard, that concludes my remarks 
and I look forward to answering any questions you may have. 
Thank you for your attention and your consideration.
    Chairman Dodd. Thank you very much. Mr. Shelton.


    Mr. Shelton. Good morning, Mr. Chairman, Senator Allard.
    I am honored to come before you today to seek your consent 
as the President's nominee to serve as a Director of the 
Securities Investor Protection Corporation. In private practice 
at Wilmer, Cutler and Pickering, I provided legal advice to 
broker-dealers regarding compliance with financial responsible 
rules designed to prevent customer securities and cash balances 
from being put at risk if a broker-dealer were to fail.
    I presently serve as General Counsel of the U.S. Wealth 
Management Business for UBS. UBS is a leading global wealth 
manager, top tier investment bank, and one of the largest 
global asset managers. Wealth Management U.S. provides 
brokerage, advisory, banking, and trust services to its 
    At UBS, I have had the opportunity to help investors 
understand how our securities markets work and to prepare 
employees to speak about the rights and protections available 
to investors when they advise clients. I believe my background 
and the relevant legal framework and focus on investor 
education and protection will be helpful if I am confirmed.
    SIPC plays an important role for investors. Every investor 
should understand that rewards from investing in securities are 
only possible with market risk. But investors should be able to 
expect that their funds and securities will be there if their 
brokerage firm fails. SIPC gives investors confidence that if a 
firm were to fail and securities were stolen, misplaced, or put 
at risk for other reasons, help is available to them.
    If confirmed as a Director of SIPC, I promise the 
President, this Committee, and the investing public that I will 
use my knowledge, experience, and skills combined with 
commitment and enthusiasm to maintain and strengthen SIPC's 
effectiveness for investors.
    Thank you for your time and consideration and I will be 
happy to answer any questions you may have.
    Chairman Dodd. Thanks, Mr. Shelton. Mr. Heyman.


    Mr. Heyman. Good morning, Mr. Chairman, Senator Allard. My 
name is William Heyman and I am Vice Chairman and Chief 
Investment Officer of the Travelers Companies, a major U.S. 
property and casualty insurer. I am also a member of the Board 
of Governors and of the Executive Committee of the NASD.
    I am honored to have been nominated by President Bush to be 
a Director of the Securities Investor Protection Corporation.
    From 1991 to 1993, when I served as Director of the 
Division of Market Regulation of the Securities and Exchange 
Commission, I was the SEC's observer on the SIPC Board. So I am 
especially pleased at the prospect of renewing that 
    Since the creation of SIPC in 1970, industry consolidation 
and the advancement of back-office technology have largely 
eliminated the paperwork problems from which SIPC was born, 
with the result that some very large brokerage firms have 
failed without requiring SIPC involvement. The incidence of 
broker-dealer failures has been further limited by vigorous 
enforcement of two SEC rules. The Net Capital Rule provides 
early warnings of broker-dealers' financial distress. The 
Customer Protection Rule requires firms to reduce the 
possession and control fully paid or excess margin customer 
securities and to segregate cash in a reserve account roughly 
equal to net amount owed customers.
    The number of ongoing SEC liquidation proceedings is now at 
a record low of 21 firms and the customers in those proceedings 
have, with very few exceptions, been satisfied. Most of the 
work in open cases relates to recovery of residual assets of 
failed firms.
    Still, small numbers of broker-dealers regularly fail under 
conditions requiring SIPC involvement. These failures generally 
result not from adverse market conditions but rather from 
failure to operate competently or honestly. About half are so-
called introducing firms, which should not have been handling 
customer assets in the first place.
    So SIPC still has an important role as a limited safety net 
for the individual investor whose protection is at the heart of 
our securities laws. If confirmed as a Director, I pledged to 
use my experience in both the securities and insurance 
industries to ensure that SIPC continues to meet its 
responsibilities as expeditiously, professionally, and fairly 
as possible and without recourse to the taxpayers.
    I thank you for your consideration and I will be pleased to 
answer any questions.
    Chairman Dodd. Thank you very much. Thank all of you for 
that. Congratulations to all of you, again, for your 
nomination. I will just take a couple of minutes and then I 
will turn to my colleague for any questions he may have as well 
    Some of these are just pretty straightforward questions.
    Ms. Farrell, let me just begin with you, and I thank you 
for your opening comments and your focus of attention here.
    One of the key things over the years in my experience here, 
beginning when I first arrived in the Senate, is that the 
Export-Import Bank was almost the exclusive domain of several 
large corporations that used the Export-Import Bank to expand 
their opportunities overseas.
    Over the years, under various administrations and various 
directors, the Export-Import Bank has expanded that to include 
a lot of smaller businesses, as well. And I think we have all 
benefited from that.
    In fact, I think it has become the backbone of our economy. 
Obviously, in many ways, small businesses is most important, 80 
percent I think is the number of their jobs are small 
businesses. I wonder if you might just share with us some 
thoughts you have on what role you can play in maintaining this 
focus on smaller businesses and any ideas you might have to 
share with us about how you expand those?
    Ms. Farrell. I think that is a wonderful question and I 
actually look at my qualifications as being particularly strong 
in that area, simply because having worked at the local level 
these have been the individuals that I have been worrying 
about, caring for, and advocating on behalf of at every level, 
whether it is locally, whether it has been regionally, or 
statewide or federally.
    As I mentioned in my opening remarks, I was very pleased to 
see the marketing efforts that were taking place, as evidenced 
by the Bank's annual meeting back in April.
    I was also very pleased to read in the annual report this 
year that there has been a greater effort at improving the 
Bank's online capabilities, because there is no question in 
this world of Internet immediacy, the more the Bank can do to 
streamline the process and make it available online, it is 
going to be that much easier for smaller groups who just do not 
have staff resources or have the ability to have a direct 
contact with the Bank to access.
    One of the other things that I like about the whole notion 
of focusing on small business, and I do think it was 
appropriate that in the reauthorization there were certain 
specific levels set by the Congress in order to assure that it 
remains a focus of the Bank, including requiring that there be 
a separate division that reports directly to the Chairman, is 
to make sure that we are providing the kinds of tools that are 
easy to understand and that we are reaching out.
    So toward that end, I certainly intend to provide the kind 
of oversight but also the kind of advice that I can give in 
terms of how I think we can best communicate and reach out.
    So I am very excited about that. And you are 100 percent 
correct, when you look a growth factors in terms of U.S. 
business, small business is extremely important, especially as 
it relates to women-owned businesses and minority business, as 
    Chairman Dodd. Good. I look forward to working with you on 
    Mr. Rafiekian let me ask you, you have been at the Bank 
obviously and an ongoing issue is always how we compete more 
effectively in these emerging markets. And it is a challenge 
all the time. Let me raise, if I can, a couple of questions 
with you in the context of that and ask you to comment on how 
you think we can more aggressively level the playing field that 
we have to compete in in these emerging markets.
    I particularly want to raise the issue of China, if I can, 
with you here. The Bank focuses obviously on doing business in 
emerging markets, including China. The Banking Committee has 
conducted, this Committee, several hearings on our trade policy 
with China.
    Senator Shelby and I have introduced some legislation on 
the issue pertaining to China's currency manipulation and 
denial of access to its markets by U.S. financial service 
firms. I am sure you are aware of all of this. What do you 
think the Eximbank can do to expand opportunities for U.S. 
exporters in China?
    Mr. Rafiekian. Thank you, Mr. Chairman. That is a very 
important question, sir, and I certainly understand the 
interest and the focus on emerging markets and the significance 
of emerging markets.
    When it comes to the particular market of China there are 
realities that we must consider in providing financing for 
exporters to China. We had the Chairman of China Eximbank as a 
speaker at our annual conference to directly learn the views 
and he had an opportunity, Chairman Li, to express his views.
    As we look at China, we see the opportunities for American 
exporters there. We also see the challenges that we might 
consider in making these difficult decisions. At all times the 
portion of the responsibility that deals with the financing 
part, which is really our mission, is going to remain our 
    I would like to borrow a few words from my good colleague, 
who is the Chairman of the Bank, that said we do whatever we 
can in what makes the most sense to help the exporters in all 
markets. We are active in 91 markets and our portfolio reflects 
150 countries, and we continue that support for the exporters 
with an eye of caution on what is also taxpayers' interest.
    Chairman Dodd. Let me, in a related matter, you are 
familiar with the tied aid issue. I know my colleague from 
Colorado does as well here, the question. We have a war chest, 
I want to call it that, I guess, at the Bank here to provide an 
opportunity for the United States to compete. A number of 
nations who compete with us in these markets, of course, 
provide grant assistance for various projects. And we have 
allowed, at least when that occurs, for us to be able to 
compete on a level playing field.
    I gather it has been some time since that war chest has 
been used at all, the tied aid program. I wonder if you might 
share with us what is your knowledge about that? Is there any 
reason why there is a reluctance and hesitancy?
    Obviously, we would all like--we would like the playing 
field to be leveled to the point where you did not have to have 
grant aid coming in. But as you and I both know, there are 
nations out there who play by a different set of rules when it 
comes to competing in these emerging markets.
    So the tied aid idea was to give us the opportunity to 
respond when those nations used grant aid as a way of winning 
some of these contracts over our businesses who had a vested 
interest obviously in winning those contracts.
    Why has there been such a reluctance to use the war chest? 
I gather it has been some time since we used the tied aid 
package to assist U.S. businesses.
    Mr. Rafiekian. Thank you, Mr. Chairman. That is a very 
important question. When it comes to tied aid among the 
difficult situations that we face, the decisions that we have 
to make as members of the Board of Directors, tied aid 
questions are amongst those questions.
    I must express to you, sir, that my first sensitivity is to 
the exporter. I see my role as being assigned the duty of 
supporting the exporter in any way we can in what makes the 
most sense. And when it comes to tied aid, my sympathies are 
with the exporter. I would like to do whatever we can and I 
would like to see whatever Eximbank can to make that export 
possible so American jobs are protected and American jobs are 
    Having said that, we work very close with the Department of 
Treasury on this issue to make sure that within all the rules 
within OECD, which we do have a membership, and there are 
product rules, there are country rules, there are 
concessionality rules that have to be followed. This is a very 
important issue when it comes to tied aid, as you said, in 
leveling the playing field not all players in this marketplace 
of global market play by the rules. We realize that outside of 
the sandbox that we operate in there is a world and there are 
those who have other systems that do not always play by the 
    Chairman Dodd. Do you know when the last time was we used 
the war chest? Do you have any idea when the last time was?
    Mr. Rafiekian. I do not have that information, Mr. 
Chairman, right now but I am aware that the tied aid is not 
used regularly.
    Chairman Dodd. Would you let the Committee know? For my 
purpose, I would like to know when the last time it was used. 
It would be helpful to us to get some idea.
    And if there is some reluctance beyond the hesitancy that 
we all have, but beyond that, I would like to know whether or 
not there is something broader going on in terms of the use of 
that fund, if you could do that for me.
    Mr. Rafiekian. Mr. Chairman, if I may, I will return to 
your office with that information. I will be happy to get that 
    Chairman Dodd. I appreciate that.
    Let me turn to my colleague and then I will have a few 
questions for our SIPC nominees.
    Senator Allard. Thank you, Mr. Chairman. I just have a few 
questions myself that I want to follow up with.
    Both Mr. Rafiekian and Ms. Farrell, I want to thank you for 
wanting to serve on the Export-Import Bank. We have worked hard 
to try and get an inspector general in place and I would like 
to hear both your comments as to how you feel you may be able 
to work with the new inspector general. I know that Ms. Farrell 
made some comments in that regard in her opening statement. But 
particularly I would like to hear what you have to say, Mr. 
    Mr. Rafiekian. Thank you, Senator Allard.
    Senator, when I came before you in September 2006, I 
particularly appreciated the emphasis that was placed on the 
presence of an inspector general at the agency I serve. I am 
very pleased, sir, and I would like to thank you for your 
efforts and now we have an inspector general. And I look 
forward to the arrival of the inspector general. I look forward 
to working closely with the inspector general.
    I have had a brief conversation with him and as it turns 
out, Senator Allard, upon arrival I was asked to take on the 
responsibility to work on the Audit Committee as the Chairman 
of the Audit Committee. We have been, together with my 
colleagues on this Committee, very diligent on the issues that 
I know are very important to you, sir, and to the members of 
this Committee.
    I value very much the presence of the inspector general at 
the agency and I can speak on behalf of my colleagues on the 
Audit Committee and my colleagues on the Board of Directors. 
They are all welcoming this opportunity, sir, and thank you for 
your efforts in helping to get the inspector general to our 
    Senator Allard. Ms. Farrell.
    Ms. Farrell. I am a big believer in internal audits. When I 
was the First Selectwoman of Westport we were constantly 
auditing because we were doing major construction projects that 
required certain audits, et cetera. But there is no question 
that I think there is a benefit to management, even if they 
initially resist the idea that there is someone else looking 
over the shoulder.
    There is an assurance to the taxpayer that things are being 
properly monitored. I think there are benefits, as I mentioned, 
to management, because I think there are opportunities to point 
out, anomalies, difficulties, challenges, whatever they happen 
to be. And I think that the autonomy of the individual is very, 
very important.
    So I certainly supported, as I was reading through the 
legislation that was proposed and ultimately passed by the 
Congress, the notion of doing this.
    And as I mentioned, having been on both sides, having 
served on the Board of Finance and having to have the auditors 
directly report to me, but having that distance or independence 
from management. And then going over to management, I felt it 
was extremely important to have understood both sides.
    So I think in my role as a non-management member of the 
Board, I will have that sensitivity and empathy for both sides 
and certainly will be supportive of both. But in the name of 
the taxpayer, I think it was a very important step for the 
Congress to initiate and for the Bank to adopt.
    Senator Allard. The next question I just pose to the entire 
panel. The Congress, in the early 1994-1995 passed what we call 
the Government Performance and Results Act. The Clinton 
administration would begin to put that in place. The current 
administration, Bush, has continued to work it. He has called 
it the PART program. You can access the PART program on the 
Internet if you go to ExpectMore.gov.
    I will look at that from time to time to see how the 
various agencies are performing. They will rate the agencies 
according to whether they are effective, somewhat effective, 
ineffective or are not trying to measure--there is no result 
    The Export-Import Bank is rated as moderately effective, so 
there is room for improvement. I suspect that the shortfall or 
most of that moderately effective comes because they are 
looking at the small business goals. The Chairman mentioned the 
importance of small business, you have looked at that.
    So I just hope that you look at that very closely. And I 
just wonder if you have any ideas on what we can do on the 
small business side to make those goals achievable?
    Mr. Rafiekian. Senator Allard, I recognize how important 
small businesses are. As a former small business owner, I know 
the challenges of a small business first-hand. I lived that 
life and tried to create jobs and tried to maintain them and 
explore new markets. It is very difficult for a small 
businessperson because the small businessperson is always faced 
with challenges of scarcity of resources in a different scale 
than I mentioned that would be comprehended by those with 
bigger resources.
    When it comes to small business authorizations, I am very 
pleased to report, as it has been reported before, that last 
year 26 percent of our total authorizations were comprised of 
support for exporters and small businesses. When it came to 
numbers, 84 percent of our authorizations were dedicated to 
small business.
    Today the small business portfolio, under the direction of 
my colleague Director Conlin, who is also the Vice Chair of the 
Bank, is placing ever greater focus on this issue with reaching 
out to small businesses, conferences, seminars, working with 
other agencies to reach out.
    I am very pleased to say, Senator, that I got a chance to 
participate in support of the portfolio for small business and 
traveled to other States to meet with the small businesses to 
understand their needs and do what we can to expand our city-
state partnerships, which plays an important role as a conduit 
to small businesses for us. And that emphasis and focus is 
continuing in importance.
    I would like to thank you and members of the Committee for 
focusing our attention on this issue.
    Senator Allard. Thank you.
    On the SIPC Corporation, your efforts and what you are 
doing is obviously very, very important. And when we looked at 
your listing on the PART, they do not list you. I think it will 
be just a matter of time before you will be reviewed by OMB. 
That is the independent agency that will review all these as to 
whether you are compliant.
    I assume that you are setting goals and objectives that are 
measurable and, if not, perhaps maybe encourage you to, as 
being responsible for the oversight on that, to encourage the 
Corporation to go ahead and set up measurable goals and 
objectives so you can determine how your outcomes are coming 
and everything else.
    You seem to have a very good record right now. I think that 
is good. That is perhaps maybe why somebody has not taken a 
closer look at you at this particular point.
    But I do think that, again, an important part of that is 
the relationship between the Securities Investors Protection 
Corporation and the State regulators. The States play a key 
role in regulation of the security brokers.
    I would like to have you talk a little bit about how you 
see that relationship and how you might build that into 
measurable goals and objectives.
    Mr. Heyman. If you look at the menu of SIPC liquidations, 
many of the firms in recent years have been small firms with 
highly localized businesses. And the result is that, in many 
cases, they are repeat offenders with whom State regulators are 
much more familiar than SIPC could be. And SIPC has cooperated 
vigorously with State regulators in sorting out the firms, 
recovering customer assets and, in several cases, in State 
enforcement actions.
    My guess is going forward firms in liquidation will 
continue to be mostly firms of that character.
    Senator Allard. Any other comments?
    Mr. Shelton. I think the State regulators play a very 
important role in prosecuting fraud. I think the Federal 
regulation is also very important for the books and records. 
And the cooperation with the SEC and with the SROs, to be able 
to have the books and records available to prove that customer 
funds and securities, where they are, and that they have not 
been used improperly in the business has been a very important 
part of SIPC's protections.
    Senator Allard. Mr. Jasien.
    Mr. Jasien. Senator, in your opening comments you talked 
about results over process and that is done through familiarity 
and compliance. I could not agree more. Also with your comments 
around setting milestones.
    As a board, I eagerly look forward to engaging with the 
issues of the Board, looking at some of the milestones that we 
could set for the Board. One of the things I am most impressed 
with in talking to staff at the SIPC is their focus on 
education. I think that is a gap right now in the general 
public's understanding of SIPC and brokerage firms' 
understanding the role of SIPC. So I look forward to working 
with the Board and this Committee in setting those milestones, 
particularly around education.
    Senator Allard. Mr. Chairman, my time has run over a little 
bit here by 3 minutes. I have one more question.
    Chairman Dodd. Go ahead.
    Senator Allard. This has to do with the financial markets 
moving more to global issues and how they are faced. More and 
more of our national trade and everything is becoming more 
global. So I see that this is going to create some perhaps 
problems as the SIPC protection is concerned.
    Do you see SIPC protection--obviously, it does not apply in 
all cases--but do you believe that their mission and coverage 
should be re-examined in light of the expanded global nature of 
our financial markets? Or do you believe it is appropriate as 
they are currently structured?
    Mr. Heyman. I think that the mission of SIPC as it is 
currently defined is capable of being carried out in an 
environment in which the investments of U.S. individuals are 
increasingly global in nature. SIPC applies to identifiable 
customer assets in certificated form which can be U.S. or non-
U.S. issuers.
    And I think the statute and the function of the 
organization are pretty robust.
    Senator Allard. Anyone want to add to that? Mr. Shelton or 
Mr. Jasien.
    Mr. Shelton. I agree that so long as SIPC's protections are 
limited to the assets that are readily identifiable that are 
with a U.S. broker-dealer, I think that it is perfectly 
adequate and that it is not significant that some of those 
assets may be foreign assets.
    Mr. Jasien. I agree that we certainly have the proper 
infrastructure today. But as I stated in my opening comments, I 
think it is important for us to make sure we monitor the 
outlook of the securities industry. There is certainly an 
exciting global evolution going on that we need to keep a very 
close eye on to see if that does impact funding needs for SIPC 
and other matters that are just not on the radar screen at this 
    Senator Allard. Mr. Chairman, that concludes my questions. 
Thank you.
    Chairman Dodd. Thank you very much, Senator. Let me thank 
you for the questions.
    I want to just raise a couple of issues if I can for you, 
and these are pretty fundamental but I would like to have you 
on record for them.
    This is a part-time appointment and I understand that all 
of you will probably be continuing in your day jobs here as you 
fulfill this obligation and responsibility. What I am asking is 
whether or not you have had discussions with SIPC on how to 
handle possible conflicts of interest in this regard that might 
arise because of your current employment or board memberships, 
including circumstances which may require your recusal because 
of those conflicts?
    Previous SIPC directors have signed conflict of interest 
agreements with SIPC. Is it your intention, I would ask all 
three of you, to do so as well?
    Mr. Heyman. Yes.
    Mr. Jasien. Yes.
    Mr. Shelton. Yes.
    Chairman Dodd. You are all nodding affirmatively.
    A key issue to the effectiveness of SIPC is maintaining the 
adequacy of the SIPC fund reserve. As of December 31st, the 
reserves were almost $1.4 billion for securities firms that 
hold some $3 trillion in investor securities. Now that is a 
wide gap obviously here.
    But there have been very few failures in recent years. And 
even in those cases most of the securities and cash have been 
recovered. So while the gap seems large, I think many assume 
that that number has actually been fairly adequate given recent 
past history. But I think it is important to monitor the 
adequacy of SIPC fund reserves in light of the contemporary 
market conditions.
    From time to time SIPC has commissioned studies analyze the 
adequacy of the fund reserves. Let me ask all three of you 
whether or not you would undertake to have SIPC continue to 
review the adequacy of the fund periodically? I presume you 
    Mr. Heyman. Yes.
    Mr. Jasien. Yes.
    Mr. Shelton. Yes.
    Chairman Dodd. You are nodding affirmatively on that, as 
    We have also--these internal financial controls at SIPC, 
there were some issues that GAO reported on. I do not know if 
you brought this up or not. But the GAO in 2004 raised some 
issues concerning SIPC and stated that the SEC found that SIPC 
had inadequate internal controls over the fees and expenses 
awarded to trustees and their counsel.
    Now since then SIPC has done a good job of cleaning that 
up. I just point that out. That was the report back in 2004. 
    As directors here, I am going to ask you whether or not you 
would seek to maintain strong internal financial controls at 
SIPC? Many organizations have voluntarily taken additional 
steps and I am asking you, if confirmed, would you consider 
whether it would be beneficial to have SIPC management annually 
prepare a report assessing the effectiveness of SIPC's internal 
control procedures and to have the auditor attest to the 
adequacy of internal controls and to publish those in SIPC's 
annual report? Would you be willing to do that?
    Mr. Heyman. Yes.
    Mr. Jasien. Yes.
    Mr. Shelton. Yes.
    Chairman Dodd. Thanks very much for that.
    We have raised the education issue here, as well. And 
again, I would just take it from your answers that you support 
the importance to inform investors about the scope of SIPC 
coverage and enforcement efforts to protect investors from 
misleading advertisements. There have been several here.
    I think I have a pretty good idea in here what qualifies as 
the kind of thing you want to avoid and things that do not fall 
under your jurisdiction. Making a bad bet is making a bad bet. 
That is not what we are talking about here. We are talking 
about the kind of activities that can draw people in under 
false pretenses.
    So I presume you will continue to work at that and look at 
that, as well?
    Mr. Heyman. Yes.
    Mr. Jasien. Certainly.
    Mr. Shelton. Yes.
    Chairman Dodd. Thank you very much.
    And again, I will heave the record open for a few days here 
so our colleagues may have some additional questions. But 
again, I congratulate all of you on your nominations. It is 
very nice to have your families here with us on a day like 
this, as well.
    These are high honors to receive a Presidential nomination 
and confirmation by the Senate. And again, we will try and get 
this done as quickly as we can for you. My hope is to have you 
confirmed by--I think in your case, Mr. Rafiekian, you have got 
an August 1----
    Mr. Rafiekian. Mr. Chairman, my commission expires on July 
    Chairman Dodd. July 20. We have got to get moving here so 
we do not have to have you show up as a volunteer down there at 
the Bank. So we will try and move quickly on this to get it 
    But again, I thank you for being here. I thank you for your 
comments. We will leave the record open for, I think, a couple 
of days anyway, two or 3 days here for any additional questions 
that will come in.
    The Committee stands adjourned.
    [Whereupon, at 10:01 a.m., the hearing was adjourned.]
    [Prepared statements, biographical sketches of the nominee, 
and responses to written questions supplied for the record 



Q.1. Could you please explain the rationale for why the Bank 
would agree to put forward an application to finance a project 
that would export machines to China which would be used to 
manufacture products that would directly compete with a U.S. 
industry already under pressure from Chinese import 

A.1. Ex-Im Bank is a demand driven institution, In this case, 
the Bank is simply responding to an application for financing 
submitted by a U.S. exporter seeking help in making a sale of 
metal-stamping machines into China.
    As part of the Bank's legislative mandate, whenever the 
Bank receives a case over $10 million involving potential 
economic impact, the Bank is required to notify Congress and 
the public of the existence of such an application and to 
request any comments. That notification is part of an inclusive 
search for information which could contribute to the most 
knowledgeable decision possible.
    Ex-Im Bank staff has not yet completed its evaluation of 
this application. This transaction is subject to a detailed 
economic impact analysis which will assess the likely net 
impact of this transaction on the U.S. economy,

Q.2. What factors does the Bank take into consideration in its 
economic impact assessments for proposed projects?

A.2. The economic impact procedures put transactions through a 
series of screens to determine the extent of analysis required. 
The relevant factors that Bank takes into consideration 

      Trade Measures--All transactions are screened to 
determine the applicability of trade measures.

      Substantial Injury--For transactions valued 
greater than $10 million, Ex-Im Bank determines if the new 
foreign production meets the Congressionally-defined threshold 
for substantial injury. The substantial injury threshold is met 
if the new foreign production capacity is 1% or more of current 
U.S. production of the same, similar, or competing good. 
Transactions that meet the substantial injury threshold are 
subject to a detailed economic impact analysis. This analysis 

          A. Global oversupply--an evaluation of the 
        current global supply/demand balance of the new foreign 

          B. Trade flow impact--a determination as to 
        whether the new foreign production would compete in the 
        same markets where U.S. producers sell their 

          C. Public comments in response to a Federal 
        Register notice which is posted to inform the public of 
        a proposed transaction under consideration by the Bank.

          D. Comments from other U.S. government 

Q.3. Does the Bank consider potential job loss as a result of 
the project?

A.3. I consider potential job loss in all decisions brought to 
the Board and, moreover, I believe it would be irresponsible 
not to have said consideration for U.S. jobs. The economic 
impact process of the Bank is built around the issue of 
identifying whether a transaction involves a net job loss to 
the country. As case information available to the Bank is all 
in monetary or output terms, the Bank uses analysis of such 
variables as proxy measurements for the net employment impact 
of the transaction.

Q.4. Does the Bank consider the effect that the goods produced 
as a result of the financing may have on sensitive U.S. 

A.4. Yes. Pursuant to its Charter, Ex-Im Bank developed 
procedures to recognize industries that have particular trade 
sensitivities. Specifically:
    (1) The Bank established in April 2007 a ``Sensitive 
Commercial Sectors and Product List'' which consists of a 
combination of sectors/products and transaction characteristics 
that reflect recent Ex-Im Bank experience with economic impact 
analyses where economic impact considerations were relevant and 
Ex-Im Bank financing did not materialize. Transactions that 
will establish or expand production of items included on this 
list are subject to significant scrutiny. While Ex-Im Bank 
support is not prohibited, applicable transactions have a lower 
likelihood of receiving Ex-Im Bank support and the case 
processing time is likely to be prolonged.
    (2) As referenced above, the Bank takes trade measures into 
account For example, transactions that support the production 
of a product subject to an anti-dumping and/or countervailing 
duty orders are likely to be denied Ex-Im Bank financing.

Q.5. When do you expect to make a final ruling on this proposed 

A.5. As Ex-Im Bank staff is still involved in gathering and 
evaluating information on this case, no date has been set for 
when the transaction will be put before the Ex-Im Bank Board of 
Directors for a decision. Board action is not imminent.
    You have every assurance that I am most sensitive to the 
issues you have raised and that the mission of the Bank is to 
help sustain and grow U.S. jobs. Moreover, I am aware that not 
all countries in the global economy strictly observe the rules, 
making leveling the playing field all the more difficult. This 
along with the mission of the Bank focuses my attention to make 
certain that the process is conducted based on transparency, 
consistency and fairness at all times.


    As part of your testimony under oath, please respond in 
writing to each of the following numbered questions:
    In 2003, the SEC brought major enforcement actions against 
Citigroup and against Citigroup stock analyst Jack Grubman for 
violating Federal securities laws. The SEC's complaints 
recounted misconduct that involved, in part, the issuance of 
misleading stock recommendations, including a very positive 
recommendation of AT&T stock. The Complaint recounted that AT&T 
objected to the CEO of Citigroup, Mr. Weill, about Mr. 
Grubman's ratings of AT&T and that Mr. Weill some time 
thereafter asked Mr. Grubman to take a ``fresh look'' at the 
rating. Mr. Grubman told Mr. Weill that he wanted his children 
admitted to a prestigious preschool. According to the 
Complaint, after further communications between the two, Mr. 
Grubman upgraded his recommendation on AT&T stock from a 3 
(Neutral) to a 1 (Buy) rating, Mr. Weill made contact with the 
preschool and approved a charitable donation by Citigroup for 
$1,000,000 to the preschool, and Mr. Grubman's children were 
admitted. The Complaint stated ``After issuing the report, 
Grubman told an analyst who reported to him and an 
institutional investor, in separate conversations, that he 
upgraded AT&T to help get his children into the 92nd St. Y 
preschool.'' The Complaint added that Mr. Grubman sent an e-
mail saying that Mr. Weill ``needed [the AT&T CEO's] vote on 
our board to nuke [John] Reed in showdown.''
    The SEC Complaint cited part of an e-mail entitled ``AT&T 
and the 92nd Street Y'' dated November 5, 1999 from Mr. Grubman 
to Mr. Weill in which he ``outlined the future steps he would 
take to reexamine the company . . . [and] sought Weill's 
assistance in getting his children admitted to the 92nd Street 
Y preschool.'' The original e-mail included the following 
    ``Attached is the list of the Board of Directors from the 
92nd Street Y . . . if you feel comfortable and know some of 
these board members well enough, I would greatly appreciate it 
if you could ask them to use any influence they feel 
comfortable in using to help us as well. I noticed Bill Heyman 
is on the board and I think he works somewhere in the Citigroup 
corporate structure but I don't really know Bill.
    ``Anyway, anything you could do Sandy would be greatly 
appreciated. As I mentioned, I will keep you posted on the 
progress with AT&T which I think is going well.''

Q.1. During this period, did you serve on the Board of 
Directors of the 92nd Street Y?

A.1. Technically, no. I was at that time and am currently 
listed on the 92nd Street Y's letterhead, to which I assume Mr. 
Grubman's memorandum referred, as an ``Honorary Director'', a 
designation given to a handful of former directors who had 
served as directors for long periods of time (decades). 
Honorary directors may attend board meetings (I did not), but 
do not vote.

Q.2. Did anyone contact you regarding Mr. Grubman's desire to 
have his children admitted to the 92nd Street Y? If so, please 
describe the people involved, the nature of the contact, your 
response, and any subsequent actions.

A.2. I was never contacted by anyone regarding this matter.

Q.3. Please describe any efforts you made with respect to the 
admission of Mr. Grubman's children to the 92nd Street Y.

A.3. I made no efforts on the behalf of Mr. Grubman's children 
regarding their admission to the 92nd Street Y.

Q.4. Were you aware or informed that Mr. Grubman might raise 
his rating on AT&T if his children were admitted to the 92nd 
Street Y?

A.4. No.

Q.5. A letter dated September 14, 2000 on the letterhead of the 
Citigroup Foundation, under the signature of Stephanie Hochman, 
to Mr. Sol Adler, Executive Director of the 92nd Street Y, 
states that it is transmitting the first installment of a 
$1,000,000 pledge to the 92nd Street Y. The letter notes that a 
copy was sent to ``William Heyman.''
    Did you receive a copy of this letter?

A.5. I was recently shown a copy of this letter. While, almost 
7 years later, I do not specifically recall it, I certainly 
cannot say that I did not see it.

Q.6. At what time did you become aware of the contribution?

A.6. Assuming that in fact I did receive the letter, I would 
have become aware upon seeing it. I received no other 
communication, from anyone at Citigroup, on this subject, 
either before or later. (For that matter, I recall no 
communication from the 92nd Street Y, either.)
    I believe it was customary for the Citigroup Foundation, in 
transmitting any grant (large or small) to any organization, to 
copy, as a courtesy, any Citigroup employee known to be 
involved with the organization.

Q.7. In what ways, if any, did you participate in the 
solicitation or transmission of the $1,000,000 Citigroup 
contribution to the 92nd Street Y or of its use by the 92nd 
Street Y?

A.7. I did not participate in any way whatsoever in this 

Q.8. If you participated in soliciting or transmitting this 
contribution, were you aware or under the impression that the 
donation was being given in return for admitting Mr. Grubman's 
children for which he might publish or had published a research 
report that raised the rating on AT&T stock or would violate 
the Federal securities?

A.8. As I did not participate in either the solicitation or the 
transmission of the contribution, I was not under any such