[Senate Hearing 115-349]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 115-349


 NOMINATIONS OF ELAD ROISMAN, MICHAEL R. BRIGHT, RAE OLIVER DAVIS, AND 
                            DINO FALASCHETTI

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

                                HEARING

                               BEFORE THE

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

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                                   ON

                            NOMINATIONS OF:


    Elad Roisman, of Maine, to be a Member, Securities and Exchange 
                               Commission

                               __________

   Michael R. Bright, of the District of Columbia, to be President, 
                Government National Mortgage Association

                               __________

 Rae Oliver Davis, of Virginia, to be Inspector General, Department of 
                     Housing and Urban Development

                               __________

   Dino Falaschetti, of Montana, to be Director, Office of Financial 
                  Research, Department of the Treasury

                               __________

                             JULY 24, 2018

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs
                                
                                
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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                      MIKE CRAPO, Idaho, Chairman

RICHARD C. SHELBY, Alabama           SHERROD BROWN, Ohio
BOB CORKER, Tennessee                JACK REED, Rhode Island
PATRICK J. TOOMEY, Pennsylvania      ROBERT MENENDEZ, New Jersey
DEAN HELLER, Nevada                  JON TESTER, Montana
TIM SCOTT, South Carolina            MARK R. WARNER, Virginia
BEN SASSE, Nebraska                  ELIZABETH WARREN, Massachusetts
TOM COTTON, Arkansas                 HEIDI HEITKAMP, North Dakota
MIKE ROUNDS, South Dakota            JOE DONNELLY, Indiana
DAVID PERDUE, Georgia                BRIAN SCHATZ, Hawaii
THOM TILLIS, North Carolina          CHRIS VAN HOLLEN, Maryland
JOHN KENNEDY, Louisiana              CATHERINE CORTEZ MASTO, Nevada
JERRY MORAN, Kansas                  DOUG JONES, Alabama

                     Gregg Richard, Staff Director

                 Mark Powden, Democratic Staff Director

                     Jonathan Gould, Senior Counsel

                          Matt Jones, Counsel

                 Elisha Tuku, Democratic Chief Counsel

            Laura Swanson, Democratic Deputy Staff Director

           Beth Cooper, Democratic Professional Staff Member

           Megan Cheney, Democratic Professional Staff Member

                       Dawn Ratliff, Chief Clerk

                      Cameron Ricker, Deputy Clerk

                     James Guiliano, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                  (ii)


                            C O N T E N T S

                              ----------                              

                         TUESDAY, JULY 24, 2018

                                                                   Page

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

Opening statements, comments, or prepared statements of:
    Senator Brown................................................     3

                                NOMINEES

Elad Roisman, of Maine, to be a Member, Securities and Exchange
  Commission.....................................................     5
    Prepared statement...........................................    37
    Biographical sketch of nominee...............................    38
    Responses to written questions of:
        Senator Brown............................................    79
        Senator Menendez.........................................    79
        Senator Warner...........................................    80
        Senator Cortez Masto.....................................    81
        Senator Jones............................................    83
Michael R. Bright, of the District of Columbia, to be President, 
  Government National Mortgage Association.......................     6
    Prepared statement...........................................    46
    Biographical sketch of nominee...............................    48
    Responses to written questions of:
        Senator Brown............................................    84
        Senator Moran............................................    88
        Senator Menendez.........................................    88
        Senator Cortez Masto.....................................    89
Rae Oliver Davis, of Virginia, to be Inspector General, 
  Department of Housing and Urban Development....................     8
    Prepared statement...........................................    57
    Biographical sketch of nominee...............................    58
    Responses to written questions of:
        Senator Brown............................................    90
        Senator Menendez.........................................    91
        Senator Warner...........................................    91
        Senator Cortez Masto.....................................    92
Dino Falaschetti, of Montana, to be Director, Office of Financial 
  Research, Department of the Treasury...........................     9
    Prepared statement...........................................    71
    Biographical sketch of nominee...............................    72
    Responses to written questions of:
        Senator Brown............................................    92
        Senator Rounds...........................................    94
        Senator Reed.............................................    95
        Senator Cortez Masto.....................................    95
        Senator Jones............................................    97

              Additional Material Supplied for the Record

Letter submitted in support of the nomination of Elad Roisman and 
  Dino Falaschetti...............................................    98
Letters submitted in support of the nomination of Michael R. 
  Bright.........................................................    99

                                 (iii)

 
 NOMINATIONS OF ELAD ROISMAN, MICHAEL R. BRIGHT, RAE OLIVER DAVIS, AND 
                            DINO FALASCHETTI

                              ----------                              


                         TUESDAY, JULY 24, 2018

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:04 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Mike Crapo, Chairman of the 
Committee, presiding.

            OPENING STATEMENT OF CHAIRMAN MIKE CRAPO

    Chairman Crapo. The Committee will come to order. I have 
been informed that Senator Brown will be here momentarily, but 
that it is OK for us to go ahead and get started.
    This morning we will consider the nominations of four more 
individuals to serve in key leadership posts in the 
Administration: Mr. Elad Roisman, to be a Member of the 
Securities and Exchange Commission; Mr. Michael Bright, to be 
President of the Government National Mortgage Association, or 
Ginnie Mae; Ms. Rae Oliver Davis, to be Inspector General of 
the U.S. Department of Housing and Urban Development; and Dr. 
Dino Falaschetti--did I get that right?
    Mr. Falaschetti. Yes, sir.
    Chairman Crapo. To be Director of the Office of Financial 
Research.
    Welcome to all of you this morning, and congratulations on 
your nominations to these very important offices. I see friends 
and family behind you today and welcome them here as well.
    Each of these nominees, if confirmed, will play an 
important role in supporting our financial system, ensuring it 
remains vibrant, safe, and sound for all Americans.
    I will start by recognizing Mr. Roisman, in particular, who 
continues to do outstanding work for this Committee as Chief 
Counsel. I can personally attest to Elad's impressive command 
of securities law, his keen intellect and work ethic, and his 
commitment to doing what is right.
    As many on this Committee know, Elad is intimately familiar 
with the inner workings of the SEC, having previously served as 
Counsel to Commissioner Daniel Gallagher and as Chief Counsel 
at the NYSE Euronext.
    Elad, thank you for being a trusted adviser and a resource 
to me and to the others on this Committee. If confirmed, I am 
confident that you will successfully execute the SEC's mission 
of protecting investors, maintaining fair, orderly, and 
efficient markets, and facilitating capital formation. We will 
be sad to see you go, but the SEC will have gained a tremendous 
asset from which our whole country will benefit.
    Michael Bright also has a distinguished career as a Senate 
staffer and is no stranger to many in this room. Over the last 
decade, Mr. Bright has established himself as a leading voice 
on housing finance policy.
    Most recently, over the past year-and-a-half, he has 
overseen all aspects of Ginnie Mae, including its nearly $2 
trillion portfolio of mortgage-backed securities, and has 
already taken significant action to protect taxpayers and help 
consumers.
    If confirmed, I know Mr. Bright will continue this 
important work, and I look forward to working with him on 
opportunities to address the last piece of unfinished business 
from the financial crisis: comprehensive housing finance 
reform.
    Rae Oliver Davis has dedicated her entire career to holding 
others accountable. As a former Assistant U.S. Attorney, Ms. 
Davis spent years investigating and prosecuting financial 
criminals, among other crimes.
    Over the past decade, she has turned her focus to holding 
the Government accountable, working for various Inspectors 
General within the United States Postal Service, the Troubled 
Asset Relief Program, or TARP, and HUD.
    If confirmed as HUD Inspector General, Ms. Davis will draw 
from this deep experience, working on behalf of taxpayers to 
eliminate fraud, waste, and abuse in our housing programs, and 
to make sure that those programs run as efficiently and as 
effectively as possible.
    Dino Falaschetti has had a distinguished career in 
economics that spans academia, the private sector, and public 
service--most recently as Chief Economist for the House 
Financial Services Committee.
    For many years, Dr. Falaschetti's expertise on finance, 
corporate law, business strategy, and economic policy has been 
widely sought out. In addition to holding faculty appointments 
at eight different universities, Dr. Falaschetti served as 
Senior Economist for the President's Council of Economic 
Advisers during the second Bush administration, where he worked 
directly under future Fed Chairman Ben Bernanke.
    At the Office of Financial Research, or OFR, Dr. 
Falaschetti will be charged with overseeing much of the 
research and data analysis that supports the work of the 
Financial Stability Oversight Council. If confirmed, he will be 
a trusted and valued resource for FSOC and the Treasury 
Department as he has been for Congress and many others.
    We have four highly qualified nominees before us, and I 
urge my colleagues to support them so that they can quickly get 
to work for the American people.
    Congratulations once again on your nominations, and thank 
you for your willingness to serve.
    Senator Brown.

           OPENING STATEMENT OF SENATOR SHERROD BROWN

    Senator Brown. Thank you, Mr. Chairman, for holding today's 
hearing on the nominations of Mr. Elad Roisman, Mr. Michael 
Bright, Ms. Rae Oliver, and Dr. Dino Falaschetti. Welcome to 
all of you. I look forward to meeting your families, and I want 
to welcome you to the Committee.
    Mr. Roisman has been nominated to be a Commissioner of the 
Securities and Exchange Commission. If confirmed, Mr. Roisman 
would return to the SEC and continue the public service he 
began there.
    His time at the SEC and on the Banking Committee provide 
him with an understanding of the challenges facing the agency 
and the markets. Although I expect Mr. Roisman to face many 
difficult issues, if he is confirmed, I hope he pays particular 
interest to the downward trend in enforcement actions and 
penalties. That is a serious problem.
    The SEC must emphasize integrity and fairness in the 
capital markets in order for investors to have faith in the 
markets and in the regulator.
    Market participants need to see meaningful efforts by the 
SEC to enforce the law and to punish bad actors. Ten years 
after the financial crisis, we are reminded that regulators 
have failed to hold any senior executives accountable for the 
widespread misconduct that devastated millions of families, and 
many, many, many of those families have not recovered.
    Tough enforcement policies can discourage wrongdoing and 
maybe even help avoid the practices that led to the last 
crisis. Mr. Roisman, I hope you will do everything you can to 
make strong enforcement a priority.
    Mr. Bright is a fellow Ohioan and is no stranger to this 
Committee. He advised Senator Corker on Committee issues for 4 
years, including proposals to reshape the housing finance 
system.
    He has held many roles in the housing finance industry, 
including his current position as the Executive Vice President 
and Chief Operating Officer of the agency he has been nominated 
to lead, Ginnie Mae.
    For 50 years, Ginnie Mae has facilitated access to 
affordable loans through the FHA, VA, and USDA mortgage 
programs by connecting federally insured loans to investors 
around the world. Today some 11 million households have access 
to affordable mortgage credit and rental housing because of 
Ginnie Mae.
    I have been encouraged that, under Mr. Bright's leadership, 
Ginnie Mae has strengthened its risk management and continued 
to adjust to an evolving home lending market.
    But I have questions for Mr. Bright about his work and the 
policies he advocated before his nomination and how this will 
inform his vision for Ginnie Mae.
    HUD's Office of Inspector General plays an important role 
in ensuring the integrity and effectiveness of HUD programs. 
The Inspector General serves as an independent check on the 
agency, working to ensure that HUD's programs and personnel are 
accountable to taxpayers and advance the mission that Congress 
has given HUD to assist our families and communities.
    If confirmed, Ms. Oliver would bring years of investigative 
experience to the role of Inspector General. I look forward to 
hearing her testimony today.
    Dr. Falaschetti has been nominated to be the Director of 
the Office of Financial Research. OFR was established by the 
Wall Street Reform Act to monitor and study emerging risks to 
the financial system and to support the work of FSOC.
    As both Congress and the regulators make changes to rules 
that roll back the strong post-crisis regulations, the OFR's 
analysis of market trends and potential gaps in regulators' 
view of risks is critical to financial stability.
    Dr. Falaschetti, I know you have been a skeptic of 
regulation in the past. If confirmed, I hope you will take 
OFR's mandate seriously. Hardworking Americans cannot afford 
another crisis. Too often the White House looks like a retreat 
for Wall Street executives. All of us on this Committee, at 
least on this side of the aisle, are concerned about that. 
Whatever OFR can do to monitor risks will benefit everyone.
    Not seeing the signs of the next crisis would be bad 
enough, but to miss them because the office created to study 
systemic risk does not have resources it needs is inexcusable.
    Mr. Chairman, I would like to also in closing mention the 
number of regulators that we have approved--that we have had 
hearings on and we have approved in this Senate contrasted to 
the last 2 years of 2015 and 2016 in the Obama administration. 
I do not lay that at your feet. I lay that at your party's feet 
and the Chairman before you. I was speaking yesterday to 
Governor Brainard, saying the only non-Trump nominee, the only 
non-Trump appointee at the Federal Reserve in 18 months because 
of Republican obstruction, because of Leader McConnell and 
Chairman Shelby, this Committee simply did not do its work, to 
block every possible Obama nominee they could, and we have 
simply not played that role on this side because we, in fact, 
do believe that the President is entitled to his nominations. I 
would hope that both parties would learn something from that.
    Thank you, Mr. Chairman.
    Chairman Crapo. Thank you, Senator Brown. And I do 
appreciate the fact that you have been willing to work with us 
on this Committee to move nominees through, and I recognize 
that as well. There has been a serious amount of obstruction on 
the floor, but I do not put that at your feet either.
    We will now administer the oath. Would the witnesses please 
stand? Would you all please raise your right hands? 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. Roisman. I do.
    Mr. Bright. I do.
    Ms. Davis. I do.
    Mr. Falaschetti. I do.
    Chairman Crapo. And so you agree to appear and testify 
before any duly constituted committee of the Senate?
    Mr. Roisman. I do.
    Mr. Bright. I do.
    Ms. Davis. I do.
    Mr. Falaschetti. I do.
    Chairman Crapo. Thank you. You may take your seats.
    Your written statements will be made a part of the record 
in its entirety. Before you begin your statement, I invite you 
to introduce your family, if you choose to do so, and we will 
proceed in the order you were introduced. So, Mr. Roisman, you 
may proceed.

TESTIMONY OF ELAD ROISMAN, OF MAINE, TO BE A MEMBER, SECURITIES 
                    AND EXCHANGE COMMISSION

    Mr. Roisman. Chairman Crapo, Ranking Member Brown, and 
Members of the Committee, I am honored to appear before you 
today as the President's nominee to serve as a Commissioner of 
the U.S. Securities and Exchange Commission. My professional 
experience as a securities lawyer at a global law firm, a chief 
counsel at NYSE Euronext, counsel to an SEC Commissioner, and 
now Chief Counsel on this Committee have afforded me a broad 
spectrum of experiences that would enable me to effectively 
serve the public and carry out the SEC's mission should I be 
confirmed.
    Mr. Chairman, I would like to introduce members of my 
family that are here with me today. My wife, Helaina Roisman, 
who is a social worker at George Washington University Hospital 
and, without question, my far better half. My parents, Hanna 
and Yossi Roisman, who taught me at an early age the importance 
of integrity and having the courage to do the right thing. My 
brother, Shalev Roisman, who showed me the importance of trying 
to understand the other side of every issue. My father- and 
mother-in-law, Larry and Laurie Bernstein, and my brother-in-
law, Jacob Bernstein, who have always been incredibly 
supportive over the years. Last, my daughters, Talia and Yael, 
are too young to come today, but remind me daily of what is 
most important in this life.
    As the child of two immigrants who moved to this country 
determined to pursue a better life for themselves and their 
children, I have a strong appreciation for the stability and 
security that our form of Government and financial markets 
provide. My parents did not have much when they came here. But 
what they did have was confidence--confidence in America and 
confidence in a financial system that would enable them to save 
and invest so that they could raise their family and help 
provide for their children's education. When I think about what 
gave them such confidence in a system that they barely knew, 
one thing stands out: public trust. While they may not have 
understood or appreciated the complex system of oversight and 
regulation that governs the conduct of market participants in 
our financial markets, they believed and expected that our 
markets would be regulated in a fair and orderly manner with 
requisite investor protection, transparency, and 
accountability.
    While serving as a chief counsel at NYSE Euronext, I saw 
firsthand the excitement and pride of entrepreneurs and 
innovators when they rung the opening bell as their companies 
went public, enabling them to grow their companies, invest in 
communities, and allow investors to share in their success. My 
belief in the importance of fair markets and the role they play 
in our country is what motivated me to move from New York to 
Washington, DC, to join the SEC. I wanted to utilize my 
insights and experiences from the private sector and passion 
for the securities markets to help further the SEC's important 
mission. As counsel to an SEC Commissioner, I worked with the 
SEC's expert staff and witnessed their dedication and 
determination to protect investors and enforce the law. And as 
a Chief Counsel on this Committee, I have developed the utmost 
respect for this institution and the critical role of 
congressional oversight. I believe my personal and professional 
experiences have prepared me well for the role for which I am 
being considered. I fully recognize and appreciate the critical 
role the SEC serves in the lives of investors so that families 
like mine can save for their children's education, pay for 
unexpected expenses, and retire with confidence.
    The U.S. capital markets are the envy of the world, and the 
importance of the SEC's role in this cannot be overstated. 
Throughout its history, the dedicated Commissioners and staff 
of the SEC have worked to preserve confidence as our markets 
grew and evolved. To continue this, the SEC must examine and 
reexamine its rules, regulations, and guidelines to ensure that 
they are still working as intended to accomplish the SEC's 
mission. This is most recently manifested in areas such as data 
protection and cybersecurity, as well as the emergence of new 
investments and technologies such as initial coin offerings and 
blockchain. It is essential that the SEC approach these new 
challenges in a fair and transparent manner, provide clarity 
and certainty to the markets and investors, and enforce the 
laws and regulations that hold market participants accountable.
    If confirmed, it would be an incredible privilege to rejoin 
the ranks of the SEC's dedicated public servants and further 
its mission.
    Thank you, and I look forward to your questions.
    Chairman Crapo. Thank you.
    Mr. Bright.

TESTIMONY OF MICHAEL R. BRIGHT, OF THE DISTRICT OF COLUMBIA, TO 
     BE PRESIDENT, GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

    Mr. Bright. Chairman Crapo, Ranking Member Brown, and 
distinguished Members of this Committee, thank you for inviting 
me here today. It is an honor to appear before you as the 
nominee to be the President of the Government National Mortgage 
Association, or Ginnie Mae.
    Let me take a moment to quickly thank my family who is 
here. I am joined by my wife, Maggie, and my son, Mac. My 
daughter, Margaux, who is 5, is at her grandparents' house in 
Florida, but probably watching on the computer. All three of 
them have been incredibly supportive of me since coming to 
Washington, and that comes despite the many nights of coming 
home tired, grumpy, and distracted with work. I know that I ask 
a lot of them, and I am always thankful for their love and 
support.
    In addition to being a father, for the past 12 months it 
has been my honor to serve as the Executive Vice President and 
Chief Operating Officer of Ginnie Mae. I would like to tell you 
a little about what I have learned and what I think still needs 
to be done.
    Ginnie Mae was created in 1968 when Congress spun off 
Fannie Mae as a Government-sponsored private company and 
retained Ginnie as a complementary Government corporation given 
the task of facilitating the securitization of certain 
mortgages with an explicit, transparent, and paid-for 
Government guarantee. Ginnie Mae has since evolved into a $2 
trillion Government security with a focus on facilitating 
lending to low- and moderate-income, rural, urban, and veteran 
borrowers.
    Today Ginnie Mae's bond and Ginnie Mae's brand are globally 
recognized as the most pristine mortgage security in the world. 
This is because of Ginnie Mae's track record of success and our 
robust process for ensuring the timely payment of principal and 
interest to security holders. Ginnie Mae has never missed a 
payment in its 50 years of existence, even during the financial 
crisis. That is exactly what an explicit Government guarantee 
is meant to provide, and delivering on that mission is what we 
do at Ginnie every single day.
    The day job of managing the roughly 150 employees of Ginnie 
Mae has been an incredibly rewarding experience for me over the 
past year. Ginnie has some of the most dedicated, 
knowledgeable, and mission-focused professionals I have ever 
worked with. They are squarely focused on the challenges of 
dealing both with Ginnie's growth and the evolving nature of 
the U.S. mortgage market.
    To address some of these challenges, over the past 12 
months we have launched a modernization campaign which we call 
``Ginnie 2020,'' a 3-year strategic plan that will have our 
data centers running on cutting-edge technology, realign our 
counterparty risk management framework, help bring in 
additional financing for mortgage servicing rights, and expand 
our investor base through outreach and education in dozens of 
countries around the globe. All these efforts are well 
underway, some are even nearing completion, and we are very 
excited about the promise they hold for the future of our 
organization.
    One issue that I have worked with many of you on this past 
year is that of so-called VA loan churning, or the rapid 
refinancing of VA loans with little or no benefit to the 
borrower, as well as the making of VA loans with interest rates 
higher than a veteran should be getting. I want to specifically 
thank Senators Tillis and Warren for their leadership on this 
issue. Between the work that we have done administratively at 
Ginnie as well as the language recently passed into law, we 
have taken a major step toward rooting out behavior that was 
threatening the very viability of the Ginnie security, and 
thereby the viability of the VA, USDA, and FHA programs that 
Ginnie supports. At Ginnie we will not tolerate this behavior, 
and we now know that Congress stands with us. Collectively, our 
efforts are working. We can already see that in the form of a 
better security price, which directly translates into lower 
rates for FHA, VA, and USDA borrowers.
    I did not begin my career in Washington. I came here after 
working in my twenties on mortgage trading desks in Los Angeles 
and Charlotte, including through the financial crisis. During 
that time, I learned thousands of lessons that I place into two 
thematic buckets:
    First, I learned that the mortgage market is incredibly 
technical and enormously complex. I feel honored to be able to 
use the technical knowledge I gained to serve a broader public 
policy mission that benefits all Americans.
    Second, I learned that greed and unbridled ambition can be 
dangerous realities, and if left unchecked in the housing 
market, the consequences can be disastrous. I came to 
Washington in large part to help ensure that we never repeat 
the 2008 financial crisis, and I wake up every day with that 
mindset still.
    I also want to say thank you to the Members and staff that 
I have been privileged to work with in the past, most 
especially Senator Corker. Working with Senator Corker, as well 
as Senators Warner, Crapo, and others as a staffer was a 
tremendous honor and an experience I still think about every 
single day.
    Going forward, my main goals for Ginnie Mae are to ensure 
that the agency is well run, and that the agency can continue 
to serve its statutory obligations to help ensure a stable U.S. 
housing market. There is much to be done, and I look forward to 
the task.
    Thank you.
    Chairman Crapo. Thank you.
    Ms. Davis.

  TESTIMONY OF RAE OLIVER DAVIS, OF VIRGINIA, TO BE INSPECTOR 
      GENERAL, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Ms. Davis. Thank you, Chairman Crapo, Ranking Member Brown, 
and Members of the Committee. It is an honor to appear before 
you as the nominee to serve as the Inspector General of the 
United States Department of Housing and Urban Development. I 
would like to thank my family, friends, and colleagues--some 
are here today--for their support. I would particularly like to 
thank my parents, Charles and Jerry Oliver, and my husband, 
Chris Davis, for their love and support. I would also like to 
thank my three stepchildren, Graham, Addy, and Liam, for 
inviting me into their lives and guaranteeing that I would 
never suffer a dull moment, including some here today as we all 
prepared to come join you.
    I am proud to have made a career in public service and 
oversight. As a young staff attorney, I cut my teeth working on 
the then-Senate Governmental Affairs Committee and the House 
Government Reform and Oversight Committee. I then joined the 
Tennessee Office of the Attorney General where I led consumer 
protection investigations that resulted in nationwide 
settlements with Fortune 500 companies. I aspired to be a 
Federal prosecutor and was fortunate to receive an offer with 
the U.S. Attorney's Office for the Western District of 
Tennessee in Memphis. I prosecuted a wide variety of cases in 
that office, including false tax claims and investment schemes 
to firearms and drug violations.
    After returning to our Nation's capital, I landed in the IG 
community, where I have happily spent the last decade of my 
career. I have worked in three unique and challenging agencies: 
the Postal Service, the Special Inspector General for the 
Troubled Asset Relief Program, and most recently HUD. I have 
been boots-on-the-ground conducting and leading investigations. 
I have also served in senior-level positions where I gained an 
appreciation for the tough decisions that IGs must make every 
day.
    In my most recent position with the HUD OIG's Office of 
Special Inquiry, our efforts have focused on senior official 
misconduct and enterprise-level risk to the Department. We have 
created a multidisciplinary team of attorneys, investigators, 
and auditors to address complex issues in a comprehensive 
manner.
    I would like to share with the Committee my personal 
constitution with respect to IG work and my vision for HUD OIG, 
if confirmed as Inspector General.
    The foundation of IG work is independence. It is the 
principle that protects our ability to shed light on the truth 
about Government. An independent IG cannot allow the department 
or the agency it oversees to direct its work in any way. And an 
independent IG cannot stand for obstruction or delay in agency 
access to records.
    I also believe the best IGs are strong communicators. IGs 
must have solid relationships with their authorizing and 
appropriating committees to ensure they are prioritizing the 
right work and keeping Congress informed. In my rounds with 
Senators and your staffs, I committed to ensuring that we 
conduct comprehensive investigations and deliver thorough 
reporting. I am aware that our work is also of significant 
interest to taxpayers. Shedding light on Government 
mismanagement and misconduct through our reports can be as 
effective as prosecutions and financial recoveries.
    To remain current in our efforts, we must communicate well 
with HUD. We can be independent in the direction of our work 
and our reporting while maintaining strong lines of 
communication about HUD's priorities, initiatives, and 
planning. I believe strongly that we must also be active in the 
IG community, through cross-cutting initiatives, training 
programs, and development of best practices.
    My vision and goal-setting for HUD OIG will focus on 
effectiveness. We can spark positive change by making hard-
hitting recommendations relating to HUD's top management 
challenges.
    HUD's mission is far-reaching, and there are many pressing 
issues in HUD programs that require attention. I am honored to 
be considered as the nominee for this important oversight 
position.
    I appreciate the opportunity to appear before this 
Committee today and to answer your questions. Thank you so much 
for your time.
    Chairman Crapo. Thank you.
    Dr. Falaschetti.

  TESTIMONY OF DINO FALASCHETTI, OF MONTANA, TO BE DIRECTOR, 
    OFFICE OF FINANCIAL RESEARCH, DEPARTMENT OF THE TREASURY

    Mr. Falaschetti. Chairman Crapo, Ranking Member Brown, and 
Members of the Committee, it is an honor to appear before you 
as the President's nominee to serve as Director of the Office 
of Financial Research.
    I want to introduce my wife, Suzanne, two rows behind me, 
and I want to acknowledge other incredible people who cannot be 
with us today.
    Betty, Suzanne's Mom, is packing up her home in Chicago for 
a move to Montana. She will be a great constituent for what 
many call ``the last best place.''
    My brother, Dominic, and his partner, Greg, are watching on 
the Committee's website; work in Chicago did not allow them to 
join us today.
    I also want to acknowledge several people who are no longer 
here, but continue to be a great source of love and wisdom: 
Suzanne's Dad, Rich, as well as my Mom and Dad, Myrna and 
Dominic.
    My parents are the reason I am here. Growing up in South 
Chicago, my grade school was a tough place. Tough enough that 
my Mom, a substitute teacher, and my Dad, a high school 
teacher, saw early on that I was headed down a dead end. 
Unfortunately, a better school district looked beyond my 
parents' reach.
    Mom and Dad decided to stretch their budget to the end, and 
then more, so that my brother and I could grow up in a much 
safer neighborhood and attend much better schools. They could 
not have pulled it off without the confidence of local bankers 
who provided the support necessary to enable my parents to do 
what was right for their family.
    My high school brought together kids from very different 
backgrounds. I sat between two young men: one would graduate 
and go on to Yale; the other was already in a gang.
    My experience growing up is a powerful illustration of the 
importance of a loving family and access to financial services. 
Absent either one, I could have easily continued down that dead 
end. With them, I was able to earn a business degree and a 
doctorate in economics that gave me access to a rewarding 
career.
    My work in business, research, and policy has prepared me 
to lead the Office of Financial Research and ensure that it 
efficiently and effectively provides the high-quality data and 
analysis that Congress intended. It is my upbringing that 
taught me why this mission is so important.
    If confirmed, I look forward to working with this Committee 
and with the other members of the Financial Stability Oversight 
Council to promote a more resilient financial sector so that 
all Americans, wherever they might have started, have reliable 
access to the kind of financial hand up that helped my parents 
realize their dreams.
    I am honored to be here today and look forward to 
addressing your questions.
    Chairman Crapo. Thank you very much. And I also want to 
thank each member of the panel for ending your testimony well 
within your time limits. Impressive.
    I will start with you, Mr. Roisman. While I recognize that 
the Chairman of the SEC sets the agenda for the Commission, can 
you please discuss two or three areas that you intend to focus 
on personally?
    Mr. Roisman. Thank you, Senator. What I would say is I 
think it is important to further the SEC's mission, and that 
entails promoting investor confidence in the markets as well as 
in the SEC itself. I have heard from Members of this Committee 
as well as from friends and family who believe that there is a 
perception that the markets are rigged against the little guy, 
and I think it is important for the SEC to try to dispel that 
notion. And one of the ways they can do that is by having a 
strong enforcement program, a program that holds regulated 
entities and individuals accountable.
    I also think it is important for the SEC to try and hear 
from folks that may not make it to Washington. There is a large 
part of the country that is represented by small business 
owners, investors that may not have as much as some of the 
people--as all people, I should say, or, you know, very rich 
people. But their perspectives are incredibly important, you 
know, in determining what the SEC is doing right and what it 
could improve on.
    And, finally, I think I would like to focus on improving 
capital formation and secondary market liquidity for smaller 
companies.
    Chairman Crapo. Well, thank you very much.
    And, Mr. Bright, could you go a little bit further into the 
activities you have been involved in in addressing the churning 
that has been going on with regard to the VA loans?
    Mr. Bright. Yes, thank you, Mr. Chairman. You know, we 
noticed--I noticed, actually, right when I came on that there 
was behavior in our security price that was sort of 
inexplicable. Ginnie Mae pricing had fallen for no rational 
reason, which tells you that investors were not buying our 
bonds. And so we started to dig into it and realized that 
investors were not buying the bonds because they were 
prepaying, meaning they pay some price for the security, and 
then 2 months later they get their par back, you know, get the 
principal back, and lost money on transaction costs and all 
these other things. And so the people were not buying the 
Ginnie security. If people do not buy the Ginnie Mae security, 
then you cannot make FHA, VA, and USDA loans. So we knew this 
was existential and something we had to go after.
    After we started researching it, we realized that veterans 
were being targeted with very misleading, very deceptive 
marketing materials, and in some cases they were being duped 
into refinancing their loan three, four, and even five times in 
a 12-month span. And all these refinancings, they were driving 
up the loan balance of the loan; they were causing a lot of 
consternation in the investors upon whom the security relies. 
And so we knew we needed to get our arms around it.
    So we began a dialogue with the CFPB, started sending them 
data, began a dialogue with the SEC as it related to 
whistleblowers who came forth. But, most importantly, we 
decided that actors who had behavior that was not explainable 
by anything rational would not be eligible to participate in 
our multi-issuer pool.
    So we actually took action and told a few lenders who had 
pools of loans that looked like there was behavior that you 
could not explain from rates. Borrowers were refinancing even 
though rates were not going down. We said that until you get 
your act in line with sort of your peers, you are not allowed 
in the multi-issuer pool, and it has had a positive effect on 
our program, which means it has had downward pressure on rates 
for FHA, VA, and USDA borrowers.
    Chairman Crapo. All right. Thank you very much.
    And, Ms. Davis and Dr. Falaschetti, I only have about 90 
seconds left, so could each of you take about 30 or 45 seconds 
and just tell me a couple of areas you intend to focus on in 
your new positions?
    Ms. Davis. Thank you. I hope to ensure that Americans 
continue to have access to safe and sanitary HUD housing by 
looking at important issues like lead paint and the 
circumstances in Alexander County. I hope to also conduct 
effective oversight of disaster relief by leveraged our in-
house expertise. These disasters are not new to the HUD OIG 
either. And, finally, I hope to ensure that Americans have 
trust in their Government by thoroughly investigating 
allegations of misconduct at the Department.
    Chairman Crapo. Thank you.
    Dr. Falaschetti.
    Mr. Falaschetti. Thank you, Chairman. If confirmed, my 
first goal is to provide FSOC and its member agencies with the 
firmly grounded and data-driven research they need to evaluate 
and address risks to financial stability. Fulfilling this goal 
is important for robust economic growth and taxpayer 
protections.
    My second goal is to build out OFR's foundational work to 
strengthen market discipline by increasing transparency to 
financial transactions. Work toward this goal promotes 
financial stability and strengthened economic growth as well.
    Chairman Crapo. Thank you very much.
    Senator Brown.
    Senator Brown. Thank you, Mr. Chairman.
    I want to talk about SEC enforcement. Mr. Roisman, you said 
something that did not exactly disturb me, but maybe piqued my 
interest. You said you wanted part of the role in this job is 
to dispel the notion that the financial system is rigged. That 
suggests you fundamentally believe the system is not rigged in 
any way. And when we see in this country banks making huge 
profits, getting a huge tax cut, especially the financial 
service industry, executive compensation from 2016 to 2017, the 
CEOs of the largest banks got a 22-percent raise on the 
average, and tellers still make $12.50 an hour--maybe a little 
bit more than that, it has gone up a tiny bit. Just as an 
important Government official trying to dispel the notion the 
system is not rigged I do not believe is the right way to look 
at that. So we need you to particularly be vigilant to make 
sure the system is not rigged against the middle class and 
against workers, because this Government clearly sings with an 
upper-class accent, and this Committee has collective amnesia 
about what happened 10 years ago, and it is pretty clear that 
the rich are doing better and better and better in this 
society, and the 80 percent of the rest of society has been 
left behind. So if that is not a rigged system, it is certainly 
a fundamental--there are fundamental problems in that system.
    Let me talk, though, about enforcement. We discussed in our 
one-on-one meeting--and I appreciated your coming by--
enforcement and the decline in completed cases and penalties. 
You mentioned individual responsibility. Is the SEC doing 
enough to hold bad actors responsible?
    Mr. Roisman. I think it certainly--that is the role of the 
Enforcement Division, and I think, if I may, I would like to 
just give you the kind of principles I have in terms of what 
strong enforcement----
    Senator Brown. Certainly, but let me ask a question to roll 
into that answer. Are the penalties meaningful enough to deter 
wrongdoers from violating the law?
    Mr. Roisman. I do not know if the actual--I cannot tell you 
the amounts because I just do not have them in front of me. 
What I will say is I think it is important for the SEC, if they 
have rules on the books, to enforce them. You know, each case 
is on a facts and circumstances basis, and it is important to 
hold individuals and regulated entities accountable.
    You know, I agree with what the Chairman has said, which is 
there is no place in our markets for bad actors.
    Senator Brown. Does the decline in enforcement cases bother 
you?
    Mr. Roisman. I do not necessarily gauge the success of the 
program based on numbers. I think it depends on the type of 
cases and, you know, the impact certainly on recidivism. I 
would say the Commission has been focusing on retail fraud, 
which is important to root out, as well as what I would call 
``market integrity cases.'' If confirmed, I look forward to 
speaking to the staff about what else they are focusing on.
    Senator Brown. I am going to request that the GAO examine 
the reliability and transparency of the SEC's enforcement 
statistics. If you are confirmed, I hope you will commit to 
working with Members of this Committee and your fellow 
Commissioners to ensure that the SEC's enforcement statistics 
are reliable and transparent so we can answer that question 
that you, understandably now, are unable to answer.
    Mr. Bright, welcome, a fellow Ohioan. In testimony before 
the House Financial Services Subcommittee on Housing and 
Insurance in November, almost a year ago, you said you 
``definitely were not walking away from the paper'' you 
coauthored with former FHFA Director DeMarco that would greatly 
expand the role of Ginnie Mae. You said you believed in the 
conclusions in the model even more than when the paper was 
written.
    Do you intend to continue to advance the proposal from your 
papers, including the proposals outlined in ``Toward a New 
Secondary Mortgage Market'', as the head of Ginnie Mae?
    Mr. Bright. No. I have a day job. And, in fact, the context 
of that answer was I think they kept asking me about housing 
finance reform, and I kept trying to talk to them about the day 
job of managing Ginnie Mae and, you know, said, ``Look, I am 
not walking away intellectually from some of the conclusions 
here, but I actually have a day job to manage.''
    I will say that, you know, in my day job, as it relates to 
housing finance reform, to have an explicit Government 
guarantee, if that is where policymakers decide to go, you 
know, one thing I have definitely learned in the last year is 
that you do not just put an American eagle stamp on a piece of 
paper and wave a magic wand and how the explicit guarantee 
works. So to have investors buy it, to have investor 
acceptance, to make sure that that capital is there requires a 
track record and requires an administrative process to ensure 
that P&I moves on time, and that is what Ginnie does. And I 
think that is really the heart of what I am saying in terms of 
I still believe in what Ginnie brings to housing finance reform 
if and when everybody gets to it. But that is not why I am 
here.
    Senator Brown. Briefly, Mr. Chairman. So you talked about 
your day job and walking away and you do not abandon your 
intellectual views. Do you still support the elimination of the 
affordable goals?
    Mr. Bright. For Fannie and Freddie?
    Senator Brown. The affordable housing goals that this 
Federal Government has stood for.
    Mr. Bright. I do not remember proposing completely getting 
rid of affordable housing goals. I think we have an 
affordability crisis in this country, and I am focused on using 
Ginnie to address it as much as possible. I think housing 
affordability continues to get away from us, and we need to 
have a comprehensive bipartisan approach to solving that.
    Senator Brown. But did your proposal not rescind the 
affordable housing goals without requiring that the new system 
would serve at least as many borrowers?
    Mr. Bright. That Ed DeMarco and I wrote? I think it--I know 
it had a Housing Trust Fund and a 10-basis-point strip. I think 
it retained a duty to serve. I think we were vague on the 
housing goals as far as, you know, the quantified way that they 
are using it now. But, I mean, I do not have a strong opinion 
right now actually on that. I have not thought about that paper 
in 2 years.
    I believe that I----
    Senator Brown. Well, I think you have because that was 9 
months ago that you testified, so you thought about it in 
November 2017 when you were asked about it.
    Mr. Bright. Well, listen, I am very focused on using the 
Ginnie Mae platform to support the vital FHA, VA, and USDA 
programs, and any other programs that Congress wants in our 
security to ensure that all Americans of all incomes and all 
geographies have access to an affordable mortgage.
    Senator Brown. And last statement, Mr. Chairman. I 
apologize. You do know this fact that 25 percent of renters in 
this country spend close to or more than half their income on 
housing----
    Mr. Bright. Yes, and I think it is a moral failing.
    Senator Brown. ----and what that means.
    Mr. Bright. I think we have to fix that.
    Senator Brown. OK. Thank you.
    Chairman Crapo. Senator Corker.
    Senator Corker. Thank you, and I thank all of you for your 
desire to serve our country in your nominated positions. I 
appreciate you being here.
    I am going to focus a little bit on Mr. Bright. I am glad 
his family is here, and I do appreciate all the public service 
he has been involved in here, and he has worked with many, many 
people who are on this side of the dais.
    You have effectively been running Ginnie Mae for the last 
year. Are there things that you have learned over this last 
year that, as the actual confirmed person, you would be able to 
overcome in this position, whereas over the last year you have 
been a place holder in many ways and not confirmed?
    Mr. Bright. Well, yes. For one thing, when we go global and 
we speak to investors, these are very high level meetings, and 
it would be nice to have the imprimatur of the U.S. Senate to 
say that they continue to support the Ginnie Mae program and 
they continue to have my--you know, I have their support when I 
go and I speak to heads of central banks, large pension funds, 
and regulators globally who buy our bonds. I mean, that is a 
big part of the job. I actually did not realize how big a part 
of the job that was. But the blessing of the Senate is a 
critically important piece of that because the fact--how the 
explicit guarantee works, the fact that it is legislative, it 
is not through some arrangement, you know, between Treasury and 
some other agency that could change, and that the U.S. Senate 
stands behind it, that does go a long way. So that would be 
very helpful, yes.
    Senator Corker. During your period of time here, there were 
numbers of attempts to try to do housing finance reform, and, 
again, you worked with people on both sides of the aisle. I 
know you used to convene staffers on both sides of the aisle 
and worked with many in a very constructive way.
    Without getting into the weeds, what was it you learned 
during that process?
    Mr. Bright. Well, I learned, of course, that the market is 
very complicated and that having this Committee do a financial 
restructuring exercise is a very difficult thing. You know, I 
would say that the bill that we introduced in 2013 was 155 
pages. It was the very first ever bipartisan comprehensive 
attempt at housing finance reform. I am proud of that as a 
starting point. We knew it was a starting point. We knew there 
was a lot that needed to be addressed. A lengthy process was 
undertaken subsequent, and it did not end up in a place that a 
lot of people liked. I was not part of, you know, the 
subsequent process after introduction, but I am proud of where 
we started.
    I have learned that Senators can get up to speed very 
quickly on the technicals, and I think that that was 
impressive. But in the last 5 years, there are aspects of 
conservatorship that I think have proven a bit more durable 
than we thought. That does not mean it is ideal. That does not 
mean you all should not do comprehensive reform. I think that 
that is important. But there has not been a blow-up, and in 
2013 people really were concerned what would happen. And in the 
last 5 years, I think housing affordability has continued to 
get away from low- and moderate-income Americans. And so if I 
were redoing the whole thing right now, I would start there.
    Senator Corker. And then as it goes into the future, 
assuming you are confirmed--and my sense is you will be 
overwhelmingly--what role would Ginnie Mae continue to play in 
housing finance reform?
    Mr. Bright. If Ginnie Mae is well-run, as I intend for it 
to be, and as it has been for 50 years, the process, as I said 
earlier, of ensuring that the explicit guarantee works, it is 
not pixie dust and a magic wand. It is an administrative 
process to track the payment of principal and interest from 
lenders through servicers into the bond administration platform 
and out to investors. And if there is a hiccup anywhere along 
the line, since the Federal Government has said this thing is 
guaranteed--in the case of Ginnie, $2 trillion worth of bonds--
then Ginnie's responsibility is to make sure that any shortfall 
is made up so that the investor gets their money every month on 
time. It is a very operationally intensive process. We do it 
well, and so I think leveraging those mechanics would be a very 
sensible thing to use going forward.
    The other thing that Ginnie, I have learned, does is we are 
already written into the investor guides of global investors, 
so, you know, think pension funds in Japan, insurance companies 
in Germany, you know, they have different risk weightings for 
Ginnie versus other securities. To just stamp, say, you know, 
conventional loans are going to have a guarantee, it would be 
at least a decades-long process of going around and explaining 
to everybody how that one would work; whereas, our process is 
proven in terms of the remittance of P&I and the brand 
acceptance. So I would advocate for leveraging that. And I do 
think that that is really when I was, you know, continuing to 
stand behind the paper that Ed and I wrote, that is something 
that we learned in between 2013 when we introduced that first 
bill and now.
    Senator Corker. And just to close on that note--my time is 
up, but I know there was some ambiguity in the affordable 
housing piece. But the fact is there were more resources than 
ever going to be allocated under both revisions, both bills, 
both the one in 2013 and the one that was recently written. 
There would have been more resources toward affordable housing 
by far than there is today. Is that correct?
    Mr. Bright. Yeah, I mean, I hope so. That was the idea. I 
would say that, you know, part of the think tank and 
legislative process is not that you just put your ideals down 
on paper, like if I had a magic wand and could redo the world, 
this is how I would do it. It is trying to say, you know, if 
someone has this principle but we also need to solve this 
problem, how do you solve it? And these were all attempts at 
doing that. But at its core, I think that continuing to solve 
affordability is critical, and the interest rate piece is only 
one component of it. We have a lot to solve.
    Senator Corker. Sorry. I thought I was going to get a 
``yes'' answer.
    Mr. Bright. Yes.
    [Laughter.]
    Chairman Crapo. Senator Reed.
    Senator Reed. Well, thanks very much, Mr. Chairman, and 
thank you all for your willingness to serve.
    Mr. Roisman, we had a very good discussion about 
cybersecurity, which is probably one of the most critical 
issues we face. As you know, along with Senators Collins, 
Warner, and McCain, I have legislation that would have a simple 
disclosure rule, and I can tell you, we would not be offended 
if you stepped in and by rule at the SEC adopted this. So feel 
free, OK? But, basically, this I think is the most serious 
issue systemwide we are facing. Can you just very briefly 
comment on how critical it is to get something like this 
disclosure on the books at the SEC?
    Mr. Roisman. Thank you, Senator, and thank you and Members 
of this Committee for raising this important issue. I think you 
have held several hearings talking about the importance of 
cybersecurity and the importance of revisiting these esteemed 
rules that the SEC has, whether companies are appropriately 
disclosing their cyber-risk profiles and risks to investors, 
and I think it is critical that the SEC continue to monitor 
what the cyberdisclosures are as well as the cyberprotections 
at regulated entities. And if confirmed, I look forward to 
working with you and others to see whether any additional 
changes need to be made.
    Senator Reed. Well, I would just point out that there are 
some companies, in fact, many companies that have stepped up. 
But the problem is it is the ones who are not, they are the 
most vulnerable typically or the least aware, and that is where 
the acts of attack usually take place. So I would urge you to 
have your colleagues move more aggressively on this front, in 
fact, adopt it as a rule before we get around to legislation. 
That would be very good.
    Mr. Bright, thank you for your service. Back in that 2016 
paper, you suggested that Ginnie Mae be spun off from HUD 
independently, which would deny HUD resources that they use for 
community development block programs. Do you still hold to that 
position? If so, how do we make up the difference in terms of 
funding?
    Mr. Bright. Thank you. I have actually been surprised at 
how good the working relationship has been between Ginnie and 
HUD. When we had this idea of leveraging the Ginnie Mae brand 
to operate as the explicit rep, there were a lot of people who 
said, ``Oh, you got to get out of HUD. You got to get out of 
HUD.'' These were people who had worked at HUD and Ginnie just 
recently at the time. And so we kind of took that as, you know, 
word and did it.
    I do not think that that was necessary. I think that what 
is necessary or what would be helpful would be a little bit of 
additional flexibility on Ginnie's part in terms of how it 
allocated its salary and expense resource. I am not saying more 
funds. I am just saying a little bit of flexibility for--you 
know, we have some very technical, competent employees who 
literally leave and go three blocks down to FHFA, and that is a 
problem that we have that we have to solve. But we do not need 
to go as far as we thought we did from the outside.
    Senator Reed. Thank you.
    Ms. Davis, just let me thank you for your professional 
service in so many different roles and the integrity you bring 
to your efforts. Thank you very much.
    I have limited time. Dr. Falaschetti, OFR was created to be 
analytical and apolitical, not political and ideological. And 
you have been vested personally as the Director with great 
independence. The language of Dodd-Frank: ``The Director shall 
have sole discretion in the manner in which the Director 
fulfills the responsibilities and duties and exercises the 
authorities describe in this subtitle.'' So I wanted to 
emphasize that to you.
    In fact, frankly, having been here with my colleagues 
present at the creation, as they would say, the hope was that 
OFR would be such a powerful analytical office with the 
strength to speak truth to power that you would be able to tell 
us where the next crisis is coming before it comes, not like 
2006 and 2007 and 2008 when we found out about it when we read 
about it in the newspaper.
    So, just quickly, what are the one or two areas you think 
are the weak points right now and that you will explore 
comprehensively when you are there?
    Mr. Falaschetti. Well, Senator, thank you for that 
question, and thank you for your work on OFR from the very 
start. I very much appreciate it, and I think it plays an 
important role in our economy.
    If I am confirmed, I can commit to, you know, throughout my 
career in academics, that is, to have data-driven, firmly 
grounded analytics. You mentioned 2006, for example. We were 
discussing some risks to financial stability at the Council of 
Economic Advisers in 2006, and I see that as--the fact that--
well, there were other economists at the time, prominent 
economists at the time. You may recall Raghu Rajan, for 
example, in the 2005 Jackson Hole conference, really, you know, 
called out what ultimately happened. And so the question is: 
Why didn't people listen? And that is where I see the power of 
OFR. It is a central place that is relying on firmly grounded 
research, data-driven. Theory does not always give you the 
answer. You need to look at the data to get those kinds of 
answers. And independent--the research is independent. You 
crafted it to be independent. It is a 6-year term, and it has 
that independence for the research task that it was given.
    Senator Reed. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Crapo. Thank you.
    Senator Rounds.
    Senator Rounds. Thank you, Mr. Chairman.
    Mr. Roisman, first of all, thank you for taking the time to 
visit with me in my office. As you will recall, we discussed 
the future of the fiduciary rule. I believe we both agreed that 
this rule was not originally intended to have been promulgated 
by the Department of Labor, and the Fifth Circuit Court of 
Appeals basically agreed, vacating the rule in June.
    In April the SEC proposed Regulation Best Interest, its 
proposal to address the fiduciary standard for broker-dealers 
providing investment advice to retail customers. Can you 
discuss your views on what a proper fiduciary standard should 
look like?
    Mr. Roisman. Thank you, Senator. As you noted, there is a 
proposed rulemaking, so I have got to be careful just not to 
prejudge, but I would like to try to answer your question as 
well as I can.
    I think, first of all, it is important for the SEC to have 
acted, and I think it is important also, now that they have a 
rulemaking out there, for interested parties to come meet with 
staff and Commissioners, and if confirmed, I would look forward 
to doing that as well as reviewing the very lengthy comment 
file, because they are going to be able to tell you what they 
got right and what could be improved. And I think generally it 
is important to think about things, whether the rule is 
appropriate, things such as ensuring access to financial advice 
as well as do investors understand the nature of the 
relationship with the financial service provider, including the 
conflicts, how those are addressed or mitigated, and obviously 
investor protection.
    I think another critically important thing to consider is 
whether the rule is business model neutral, meaning that the 
SEC is not picking winners and losers, and preserving investor 
choice and different types of services for consumers.
    Senator Rounds. The concern that many of us had with the 
fiduciary rule was that in demanding a certain level of 
professional advice and limitations, it was restricting the 
number of individuals who could actually offer services to 
clientele with smaller amounts of money to invest. Can you talk 
a little bit about the need for those small investors to have 
access to the equity markets?
    Mr. Roisman. I think it is critical, Senator. There is a 
large discussion about the retirement crisis that is looming, 
and in many areas there is only a set amount of financial 
services providers, and it is important to, you know, maintain 
the ability for people to get access to that.
    Senator Rounds. I think that is kind of the critical issue 
that many of us had, isn't it, the fact that the fiduciary rule 
made it very, very expensive for those individuals with small 
sums, yet very important sums, to be able to get access to the 
equity markets? Isn't that really behind a lot of the concern 
that was expressed with the fiduciary rule?
    Mr. Roisman. Yes, I believe so.
    Senator Rounds. OK. Thank you.
    Dr. Falaschetti, as you know, the Office of Financial 
Research, or OFR, has been the target of some criticism since 
its creation as a part of Dodd-Frank. The OFR has been accused 
of undermining consumer privacy by collecting data on the 
financial transactions of millions of Americans, being 
unaccountable to the Treasury and the Government as a whole, 
and not having any notable achievements.
    What do you believe needs to be done to make the OFR 
perhaps more accountable and yet maintain its independence with 
regard to accurate data?
    Mr. Falaschetti. Thank you for that question. As you know, 
the staffing levels and the budget is a conversation between 
the Director and the Treasury Secretary, so that is not 
independent. What is independent is the research--how do you 
carry out the research in service of the FSOC as well as long-
term priorities for financial stability.
    And in terms of the privacy, you know that OFR has subpoena 
power, for example, and just asking for that information, I 
mean, that is a lot of power. You can just walk in and say, 
``We want X, Y, and Z.'' And I think back to when I was in 
corporate finance and financial accounting where we had 
subsidiaries, we had businesses that were very different from 
each other and had different scales and different businesses, 
and we would see similar problems at these various businesses. 
But we would tailor the solution to their business model, and I 
think that is what needs to be done so that we do not create 
undue costs for financial services. My opening statement 
highlights how important it is for especially young families, 
community bankers. It is critical for those financial services 
to be affordable, and as you know, the funding for OFR comes 
from the banking sector.
    Senator Rounds. Thank you. My time has expired. Thank you, 
Mr. Chairman.
    Chairman Crapo. Thank you.
    Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman. Congratulations 
to all of you on your nominations.
    Mr. Roisman, I understand that you served as counsel to 
former Commissioner Gallagher, and I would like to ask you 
about enforcement. I think we can all agree that the SEC 
functions best with a strong Enforcement Division that stays 
ahead of the markets. Unfortunately, over the last 18 months, 
the SEC has taken steps to undermine its enforcement 
capabilities.
    In 2009 former Chair Schapiro expanded the investigative 
authorities of senior officials in the Enforcement Division, a 
critical post-crisis policy designed to assist the SEC in 
initiating investigations and going after the bad actors that 
ravaged investors and our economy.
    Last year former Acting Chair Piwowar revoked this 
substantial and investigative authority and limited it to the 
Director of the Enforcement Division, a decision which Chair 
Clayton has upheld.
    Since you were at the SEC when this stronger enforcement 
policy was in place, was this policy problematic, in your view?
    Mr. Roisman. Thank you, Senator. I am not sure I can answer 
that question since ultimately my role in determining the 
strength of the Enforcement Division was not something I was 
focused on. I did work on reviewing enforcement matters. I 
think this is just a concern folks have had in terms of 
employees just having the ability to issue subpoenas when there 
may be things like--there is an ongoing investigation in 
another office. So, for example, one of the benefits, I think, 
of having it at the Division Director level is they have line 
of sight into all enforcement cases. So----
    Senator Menendez. Well, let me ask you this: Do you think 
that the SEC's enforcement staff abused the rights that they 
had, the investigatory authorities?
    Mr. Roisman. I did not see that.
    Senator Menendez. Do you agree with the policy change of 
revoking investigatory authorities from senior enforcement 
analyst?
    Mr. Roisman. I do not know if I can speak to that. I can 
say I think there is merit in having it at senior officials, 
and one of the reasons I said is they might have line of sight 
about different enforcement cases. Also, there have been--when 
you have it at this Director level, you have the ability to 
have people who have issued or authorized subpoenas in multiple 
cases, and they know when it is appropriate or not.
    Senator Menendez. Well, that could be done in a senior 
investigatory--I mean, that is just a procedural safeguard that 
could be institutionalized, right? I am just wondering how 
limiting the authority to initiate and formalize investigations 
better protects investors and deters misconduct?
    Mr. Roisman. I guess what I would say is, if I am 
confirmed, what I would look forward to is talking to the SEC 
staff and Commissioners and see if they felt that this has 
inhibited their ability to investigate or bring cases.
    Senator Menendez. Let me ask you this: Senator Akaka and I 
worked to include Section 913 of Dodd-Frank that authorized the 
SEC to require broker-dealers to act in their clients' best 
interests. In simple terms, after seeing so many hardworking 
families duped into investing in products that lined the 
pockets of their brokers but did little to help them prepare 
for retirement or send their kids to college, we felt it was 
both common sense and past due time to require brokers to put 
their customers' interests instead of their own.
    Despite a 2011 SEC study recommending a uniform standard of 
conduct for brokers and investment advisers, the SEC's recent 
proposal fails to establish a uniform standard of conduct for 
broker-dealers and investment advisers and puts the burden on 
the customer to understand the difference between brokers and 
investment advisers, ignoring the SEC's own findings.
    So why should customers have to bear the burden of trying 
to decipher the complex legal relationships to understand 
whether they are making good investment decisions?
    Mr. Roisman. So, Senator, I note there is a pending 
rulemaking, and I am going to try to answer your question, but 
I need to----
    Senator Menendez. I did not ask you about the rule. I asked 
you about the greater view.
    Mr. Roisman. OK. So the greater view in terms of whether 
there should be a fiduciary standard that is uniform for 
investors?
    Senator Menendez. Yes.
    Mr. Roisman. So I think it is important for there to be 
investor choice in different types of services provided to 
investors, and I think it is important for investors to 
understand the nature of the relationship with a financial 
services provider. And I think one of the things that has been 
talked about in the debate for a long period of time is 
ensuring that, you know, if there are conflicts, that they are 
addressed. And I think whatever the SEC ultimately does or 
whatever the agency does, I think that is critical.
    Senator Menendez. Mr. Bright, last, housing finance. I read 
your most recent paper on this topic, and I just want to say 
that reading it, to generate funding for affordable home 
ownership and rental options, you propose a 10-basis-point user 
fee on all mortgages securitized in a new system, an idea that 
others have floated as well. But under your proposal, that fee 
would not even be available to support access and affordability 
until a certain reserve threshold had been met. Is that right?
    Mr. Bright. I think that that may have been right. 
Honestly, I have not read it in a couple years.
    Senator Menendez. OK. Well, it is your paper. How long 
under your proposal do you think it would take to meet the 
threshold requirement?
    Mr. Bright. So I believe that the current regime would have 
stayed in place during this time, and it would have taken maybe 
5 years to build that up, and then the additional funds would 
start kicking in at that point.
    Senator Menendez. Well, some say it takes 10 years under 
your proposal, which would make zero contributions to promote 
and fund affordable home ownership and rental options for a 
very long period of time. So I am not sure if you are still 
committed to this view, but it would be concerning to me, as 
someone who is concerned about affordable home ownership.
    Mr. Bright. I share your concern about affordable home 
ownership. I am not in any way here to advocate for anything in 
that paper. I am here to run the Ginnie Mae program so that we 
can continue to support FHA, VA, and USDA programs in as 
affordable a manner as possible. I agree with you we have an 
affordability crisis in this country. I am your partner in 
helping to solve that.
    Senator Menendez. Thank you, Mr. Chairman.
    Chairman Crapo. Senator Kennedy.
    Senator Kennedy. Thank you, Mr. Chairman.
    Mr. Bright, the National Flood Insurance Program is going 
to expire July 31st. If Congress allows it to expire, how will 
that impact Ginnie Mae's ability to guarantee mortgages?
    Mr. Bright. So we saw with the hurricanes last year that if 
properties are not in conveyable condition, then the servicer 
has difficulty filing a claim with the FHA. If and when that 
were to happen en masse, it would put pressure on the issuers. 
They could go insolvent. Then that puts Ginnie Mae at risk. So 
we certainly want and need homes to be conveyable, and if there 
is an insurance problem, which means the servicer and the 
homeowner had difficulty getting the property into conveyable 
condition, that absolutely has downstream pressure on Ginnie 
Mae.
    Senator Kennedy. If a homeowner is required to carry flood 
insurance and he declines, Ginnie Mae is not going to guarantee 
the mortgage, is it?
    Mr. Bright. If they are required to?
    Senator Kennedy. Yes.
    Mr. Bright. Yes, you need to follow all program guides. 
Those are set by the FHA.
    Senator Kennedy. But Ginnie Mae is not going to guarantee 
the mortgage.
    Mr. Bright. That is correct.
    Senator Kennedy. How does the FHA and Ginnie Mae ensure 
that flood insurance is kept in effect throughout the life of 
the mortgage?
    Mr. Bright. That is an FHA oversight responsibility, and at 
the time that a claim is filed, the FHA makes sure that 
everything has been in order.
    Senator Kennedy. They do at the time of the closing, but 
how about on a continuing basis?
    Mr. Bright. Actually, I am sorry. I do not know. I will 
find out, though.
    Senator Kennedy. OK. Would you and let me know?
    Mr. Bright. Absolutely, sir.
    Senator Kennedy. I think you are going to find out it is 
not going to be a long exercise. They do nothing.
    Mr. Roisman--am I saying that right?
    Mr. Roisman. Yes, sir.
    Senator Kennedy. You want to be on the SEC. Is that right?
    Mr. Roisman. I do, Senator.
    Senator Kennedy. You are going to regulate the Municipal 
Securities Rulemaking Board. Is that right?
    Mr. Roisman. That is correct, sir.
    Senator Kennedy. My understanding is the MSRB sort of self-
regulates the municipal securities market.
    Mr. Roisman. Yes, Senator.
    Senator Kennedy. OK. Kind of like Congress regulates 
itself.
    Mr. Roisman. Slightly different. The SEC has oversight of 
all self-regulatory organizations, including the MSRB.
    Senator Kennedy. All right. There are 21 members of the 
MSRB. Eleven of them are supposed to be public members; ten of 
them represent regulated entities. These public members, what 
does that mean? They represent the public, the consumer? Are 
they consumer advocates?
    Mr. Roisman. I apologize, Senator. I am not familiar with 
their rules in terms of how you define ``public.''
    Senator Kennedy. Well, let me tell you the problem, and 
Senator Warner and I have a bill to try to help with this. They 
are supposed to represent the public, and I am not saying they 
are not good people. I am just saying the whole thing is 
incestuous. If you go look at their resumes, they are all--
well, for example, these are the folks representing the public. 
One is a former managing director at Nuveen. The other one is a 
former executive director at JPMorgan. The other one is a 
former managing director at Artemis Capital. Another one is a 
former head of Vanguard's long-term municipal bond group. I am 
not saying they are not good men and women. I am just saying 
they are insiders who are representing the public.
    Do you know how the board is picked?
    Mr. Roisman. I do not, Senator.
    Senator Kennedy. I will tell you how it is picked. I am 
glad you asked.
    [Laughter.]
    Senator Kennedy. They pick themselves. It is a little club. 
And so when they need to add members, they all get together and 
decide who they want. It needs to be changed. It needs to be 
fixed. These folks regulate the entire municipal securities 
market. And I am not saying they are not all fine people. Some 
of them are friends of mine. Some of them are probably going to 
be former friends of mine. But it is a club, and it is 
incestuous. And I cannot figure out who on the thing really 
represents consumers.
    How is that for a bill? What do you think about that? 
Keeping in mind you are not confirmed yet.
    [Laughter.]
    Mr. Roisman. Given that it may require an SEC rulemaking, I 
do not want to prejudge the issue. But I understand your point, 
and I want to answer your question, which I think it is 
important for investors to have confidence in self-regulatory 
organizations, and this is something that many Commissioners 
have talked about. There needs to be greater accountability and 
transparency, and I am for that. I would be happy to work with 
whoever is interested to kind of further that discussion.
    Senator Kennedy. OK. Thank you.
    Chairman Crapo. Senator Tester.
    Senator Tester. Thank you, Mr. Chairman. Thank you, Ranking 
Member Brown. And, once again, congratulations to all of you 
for your nominations.
    I am going to start with you, Mr. Roisman. This is not a 
document that you wrote. This is a document that, if you get 
confirmed, one of your fellow SEC Commissioners wrote--Ms. 
Peirce. The piece is entitled, ``Laws against insider trading 
come with great cost,'' and in that is a quote that says--and I 
had to read this about six times to make sure I was reading 
what I said from an SEC Commissioner, but it said, ``Depriving 
the markets of the most informed traders harms market quality. 
The stock market would look a lot like a lottery if traders 
possessing nonpublic information had to wait for every other 
trader in the market to acquire the same information before 
trading.''
    That was said by an SEC Commissioner that you will serve 
with if you get confirmed.
    Ranking Member Brown talked about your statement about it 
appears that the system is rigged against the little guys. 
Would you agree with Ms. Peirce's perspective? And I do not 
want to pitch against Ms. Peirce, but it is a pretty amazing 
thing said by a SEC Commissioner, in my book.
    Mr. Roisman. Senator, I need to kind of--I do not have the 
context, and I appreciate hearing it at this time.
    Senator Tester. Well, basically, let me ask you this: Would 
you agree with the statement that said that traders possessing 
nonpublic information should not have to wait until every other 
trader in the market for the same information?
    Mr. Roisman. I do not want to be technical, but let me try 
to give the quick answer and then the longer answer so I am 
addressing your concern. I think what she was maybe saying is 
that there needs to be a certain duty under insider trading 
laws when you trade. But I think to your point, which I think 
we can all agree is--if people are using material nonpublic 
information to line their pockets at the expense of other 
investors when there are, you know, rules and regulations and 
laws prohibiting it, it needs to be quickly addressed and, you 
know, appropriate sanctions need to be taken.
    Senator Tester. OK. And people need to be held accountable.
    Mr. Roisman. Absolutely.
    Senator Tester. Would you oppose then any weakening of 
insider trading rules and regulations?
    Mr. Roisman. I would not, Senator.
    Senator Tester. You would not oppose----
    Mr. Roisman. I would not oppose weakening any insider 
trading--I would like to keep the insider trading law as 
vigorous as it is.
    Senator Tester. OK, good. Yes.
    Mr. Roisman. I got caught in a double negative.
    Senator Tester. That is all right.
    [Laughter.]
    Senator Tester. Wow. That is good. Thank you.
    Mr. Bright, when did you start as Acting Director?
    Mr. Bright. Twelve months ago.
    Senator Tester. Twelve months ago? When did you bring 
action against the bad actors that you spoke about, the folks 
that were refi'ing veterans and misleading veterans?
    Mr. Bright. We started about 10 months ago.
    Senator Tester. Ten months ago. So you were on the job for 
2 months. Were the sanctions permanent?
    Mr. Bright. Yes. I mean, the new rules that we have are 
absolutely permanent, especially now----
    Senator Tester. OK. So the actions you took against the bad 
actors who were charging more than--are permanent. Those guys 
are not going to be allowed in no matter what they do moving 
forward?
    Mr. Bright. They need to materially completely change their 
business. I mean, they are on the outs, yes.
    Senator Tester. OK. Thank you. And I would----
    Mr. Bright. And they are big.
    Senator Tester. Yeah. That is good. I would just commend 
you in that. Look, Michael, we had a chance to work together 
when you staffed with Corker, and I appreciate what you do, and 
the fact that you were on the job for 2 months and pulled the 
trigger is a very, very good thing.
    Mr. Bright. Thank you, Senator.
    Senator Tester. Thank you.
    Ms. Oliver Davis, you have an incredibly important role as 
IG of HUD. I guess the first question I have is: Who do you 
work for as IG of HUD?
    Ms. Davis. I work for the American people, sir, and I 
report certainly to the Secretary but without direction and 
also to the Congress.
    Senator Tester. OK. And so your independence is something 
that you very, very much respect?
    Ms. Davis. Oh, certainly it is. With my 10-year career in 
the IG community, that is all I know.
    Senator Tester. OK. So if somebody--let me go to a previous 
question here. If you guys were following a course that found 
that folks at HUD were not applying the rules on flood 
insurance, what would you do?
    Ms. Davis. Flood insurance.
    Senator Tester. Flood insurance on loans, if they were 
required and they were not being followed after the fact, do 
you have the ability to do that?
    Ms. Davis. Senator, I am going to have to study the flood 
insurance issue a bit. I will tell you we are always looking 
for FHA in particular with their practices to make sure they 
are benefiting borrowers. We are always looking at the risk 
management aspect of things, too, to make sure that HUD is 
being a good steward of the funds. But I do not have as much 
familiarity with flood insurance.
    Senator Tester. It is OK. I think the basic question here 
is that, if Senator Kennedy is correct, and we have lenders out 
there that are required to have flood insurance and they do 
not, there ought to be some sort of watchdog. And it would seem 
to me it would be the IG.
    Ms. Davis. I would be happy to look into that, sir, and be 
a resource to the Committee on this. If there is something that 
is not benefiting borrowers, something that is not being done 
correctly, or if it is not good for the platform, we certainly 
want to know about it.
    Senator Tester. OK, good. I just want to say thank you all 
very, very much. My time is up. Thank you.
    Chairman Crapo. Thank you.
    Senator Warren.
    Senator Warren. Thank you, Mr. Chairman. And thank you to 
the nominees for being here today.
    Mr. Bright, I want to thank you for your work over the last 
year at Ginnie Mae on VA loan refinancing. I sent you a letter 
last September expressing my concern that certain lenders were 
pressuring veterans to refinance their VA loans over and over, 
which generates lucrative fees for the lenders but hurts both 
the veterans and the taxpayers who help back up these loans. 
And in response, you set up a task force with the VA. You took 
quick action to hold some of the worst offenders accountable. 
You also worked with me and with Senator Tillis on our 
bipartisan bill to address this problem. I appreciate that, and 
I think that is exactly the kind of leadership we need at 
Ginnie Mae over the long term. And I look forward to supporting 
your nomination. So thank you for your work. I hope you see 
that it pays off here.
    Mr. Bright. Thank you, Senator.
    Senator Warren. You bet.
    Mr. Roisman, in my remaining time, I want to ask you about 
the conflicts of interest in the brokerage industry. As you 
know, these conflicts cost American families billions of 
dollars every year, draining their hard-earned savings.
    Now, in April the SEC proposed a rule that is supposed to 
address this problem. I have some serious concerns with the 
proposal, and I think it will not come close to eliminating the 
conflicts that hurt American families. I suspect that if I ask 
you to weigh in on the proposal, you are going to do what you 
just did with Senator Tester, and you are going to say you do 
not want to prejudge the issue. So what I am going to do is I 
am going to ask you some general questions that will help us 
all get a sense of your views on the issue, and I hope we can 
get some real answers unlike the ridiculous and insulting 
performance we saw from the CFPB nominee last week.
    So let me start here. In certain fields we simply prohibit 
conflicts of interest. If you are on Medicare, your doctor 
cannot get kickbacks from drug manufacturers in exchange for 
prescribing their drugs. Your lawyer cannot represent the 
opposing part in a lawsuit. So why should your broker be able 
to have serious conflicts of interest like receiving monetary 
rewards or other perks for recommending certain investments, 
even if those investments are not in the customer's best 
interest?
    Mr. Roisman. So I think I view this through the lens of--
well, first of all, I think the SEC has traditionally been a 
disclosure agency, and one of the things that you try to do is 
provide information to investors so they can make informed 
decisions. And I think it is important for them to have 
adequate disclosure and understand the nature of the 
relationship, including how conflicts of interest exist and how 
they can be addressed.
    Senator Warren. Mr. Roisman, that is not my question. My 
question is--it does not make any difference what disclosure 
you give. Your doctor cannot prescribe drugs in order to get 
kickbacks from drug companies. Your lawyer cannot represent a 
party on the other side in order to get double payments. The 
question I am asking is: Why should your investment adviser be 
able to get a kickback from a company for recommending a 
particular product that is not the best product for you? I just 
want to understand why that should ever be permitted.
    Mr. Roisman. So I would have concerns if someone is 
providing you a product that incentivizes themselves over that 
of the customer.
    Senator Warren. You would be concerned. So do you think 
sometimes they should be able to do it and sometimes not?
    Mr. Roisman. I would have to--I would like to speak to the 
people who, A, receive advice as well as provide it to have a 
better sense of what is actually happening in this space.
    Senator Warren. Well, we know what is happening in this 
space. We know that American families are losing more than $17 
billion a year because they are put into products that were not 
in their best interest. That $17 billion kind of sounds like a 
good starting point, and I am still not hearing an argument 
from you about why that should ever be permitted.
    You know, in 2013 the SEC put out a study on investment 
advice that said, ``In the interest of increasing investor 
protection and reducing investor confusion, the staff 
recommends that both broker-dealers and investment advisers 
should be held to a uniform fiduciary standard.'' A fiduciary 
standard, as you know, would require brokers to owe a duty of 
loyalty to their clients, meaning they do not get to put 
themselves first, no conflicts of interest.
    Do you agree or disagree with that recommendation of the 
SEC staff?
    Mr. Roisman. So I am familiar with the recommendation. I am 
also familiar with some of the--it was not an universally 
agreed upon view regarding that report or recommendation by the 
SEC Commissioners at the time. In fact, I think the----
    Senator Warren. I am not asking you how many other people 
agreed or disagreed. I am asking if you agree or disagree.
    Mr. Roisman. Sure.
    Senator Warren. You are the one who is trying to get this 
job.
    Mr. Roisman. Agreed, and I am going to try to answer again. 
This does kind of feed into the proposed rulemaking, and I am 
keeping an open mind. But what I do think is important is part 
of what the SEC staff even acknowledged in the report was that 
there was investor confusion, and it is important to maintain 
access to financial advice for most people.
    I know this is something you care passionately about, and 
you have talked about raising the bar so everyone has the same 
obligations to it. The concern I have had is, you know, first 
of all, I think the system currently works where we can all 
acknowledge--at least I hope we can acknowledge the amount of 
people who are doing wrong is small. We need to get them out, 
but it is not an entire industry.
    Senator Warren. The dollar damage we can also acknowledge 
is somewhere north of $17 billion every single year. I think 
there are a lot of American consumers who would not call that 
``small.''
    Your witness is going long here, Mr. Chairman. I just--
look, I just want to make the point here. The SEC has a 
proposal that is not tackling the central problem, and the 
central problem is nobody should be allowed when they are a 
broker to put their own interests ahead of the interests of the 
client. That is bad, and it is bad for American consumers. And 
the notion that somehow, oh, there will be a disclosure back on 
page 5 buried in fine print and tangled up in legalese and 
somehow people waived it does not work. And we know it does not 
work. And in other areas, we just say, ``You do not get to do 
that.'' We do not get to say, ``If you have got good lawyers, 
you can do it.'' We say you flatly do not get to do it. That is 
the position I want to see the SEC in. Your job is not to take 
care of the cheaters. It is supposed to be to take care of 
American investors.
    Chairman Crapo. Senator Shelby.
    Senator Shelby. Thank you, Mr. Chairman.
    First, I want to thank Mr. Roisman for his service to this 
Committee. When I was Chairman of the Committee, he came on. He 
served the Committee, I thought, and the Nation well. Under the 
chairmanship of Senator Crapo, he has now become the Chief 
Counsel of this Committee, which is an honor in itself and 
shows a lot of respect and also a lot of confidence by the 
Chairman and other Members of the Committee. You have a 
wonderful background, education, and experience before you came 
here.
    I am here to support all of the nominees. I have some 
questions, Mr. Roisman, and I will start with you. I have 
believed always that our financial regulators should conduct 
thorough cost-benefit analysis when writing rules. What is your 
view on that, not just the Securities and Exchange Commission 
but the Federal Reserve, the FDIC, and so forth? What is your 
view?
    Mr. Roisman. Thank you, Senator. I think cost-benefit 
analysis is a critical tool for all agencies. It enables them 
to determine what the costs and benefits of every rule are and 
then hopefully tailor to maximize benefits and minimize costs. 
It also provides an ability for the general public to have an 
understanding of how the agency came to its conclusion, 
thereby, you know, able to question the assumptions or 
conclusions and improving the overall rule. In many ways this 
is just what we were asked in math class to do, which is show 
our work.
    Senator Shelby. What ways could some of these rules, cost-
benefit rules, be implemented by the Securities and Exchange 
Commission, assuming you are confirmed and a member of the 
Commission?
    Mr. Roisman. So if confirmed, I look forward to working 
with the Division of Economic Analysis to see what could be 
improved. There are several Commissioners, Commissioners Peirce 
and Jackson, who have already talked about the importance of 
that division and the data that it provides, and I think as the 
SEC goes forward on rulemakings, it is important for them to 
continue to have a robust economic analysis.
    Senator Shelby. Your background, Mr. Roisman, you are an 
expert in securities law. Once confirmed, what will your 
priorities be as a Commissioner? And in what ways do you 
believe our capital markets can be strengthened to make it 
better and access to everybody?
    Mr. Roisman. I would say some of the priorities would be 
furthering the SEC's mission, promoting investor confidence 
both in the markets and in the SEC. In terms of capital 
formation, I would look to see how we can promote responsible 
capital formation and improving the secondary market liquidity 
for smaller companies and less liquid stocks. And what I said, 
I think a little inarticulately, previously what I tried to say 
was it is important for the SEC to hear from folks that may not 
make it to Washington, and they provide a valuable perspective 
on what the SEC is doing right and what could be improved. And 
things like the Small Business Advocate, which, you know, 
Congress passed and I hope will be filled very soon, will serve 
a critical role in that.
    Senator Shelby. Have you thought about what ways the SEC 
could make it easier for small- and medium-size business to 
access capital? Which I think is so important for job growth in 
this country.
    Mr. Roisman. I think it is important--so there have been a 
few studies and roundtables that the SEC has conducted about 
this, and I think it is important for the SEC to actually, as I 
said, go out there to States and talk to the folks who are 
trying to build their businesses. But I think, you know, 
potentially looking at things like reviewing crowdfunding and 
Reg A offerings and things that, you know, lend themselves to 
smaller companies would be very helpful.
    Senator Shelby. I will shift a little bit to Mr. Bright. 
Mr. Bright, you also have great experience in the private 
sector as well as the Government. What do you think will be 
your biggest challenge as President of Ginnie Mae?
    Mr. Bright. Thank you for the question. I think that it is 
possible that--you know, this credit cycle objectively has been 
running for a long time. Credit cycles do not run forever. So 
since I am paid to worry, the thing that I worry about is that 
the credit cycle run its course at a time when interest rates 
have already bottomed out and hit historical lows and so 
interest rates start to creep up. If both of those things 
happen at the same time, it could put a substantial amount of 
liquidity stress on our issuer base, especially nonbank 
issuers. I think nonbanks----
    Senator Shelby. Explain what you mean by this.
    Mr. Bright. In the Ginnie program, the issuer is a nonbank 
company. They are responsible for making principal and interest 
even if the borrower does not until they file a claim with the 
FHA. There is a multiple-year lag sometimes there. In that case 
they have to have liquidity to refund the P&I, and if they 
cannot, Ginnie has to step in on their behalf.
    Historically, when delinquencies go up, interest rates come 
down, and so you have a little bit of stress on the servicing 
side as a company. But you make up for it with some revenue 
from new originations, because you have kind of a refi boom. I 
think we could be entering a period where that is not the 
dynamic that we have, where you could have a little bit of 
stress in the rate in the form of higher delinquencies, but you 
do not have this refinance opportunity to generate a bunch of 
revenue. And we need to make sure that our issuers can 
withstand that type of stress.
    Senator Shelby. Would you just explain to the Committee and 
the people the difference, if any, between Freddie Mac, Fannie 
Mae, and Ginnie Mae? And are you competing in the market for 
similar stuff?
    Mr. Bright. I do not look at it as a competition for market 
share at all, to be clear on that. Ginnie is an explicit 
Government agency that actually has a complementary but 
different role in some ways than what Fannie and Freddie do. 
Fannie and Freddie are master servicers. They are issuers of 
their own security. They do bond administration for their own 
security. And they do not have an explicit guarantee. They have 
a PSPA with Treasury. We oversee with an explicit backing of 
the Federal Government the process of making sure that P&I 
moves where----
    Senator Shelby. Explicit backing, isn't it?
    Mr. Bright. Explicit backing.
    Senator Shelby. As opposed to implicit.
    Mr. Bright. That is correct.
    Senator Shelby. And what is the size of your portfolio?
    Mr. Bright. Two trillion dollars.
    Senator Shelby. Two trillion dollars. Do you feel confident 
that the portfolio is in pretty good shape right now?
    Mr. Bright. Well, I never let myself feel confident about 
anything. I am supposed to worry, so I do. But we are building 
a lot of infrastructure right now to keep up with the pace of 
growth, and I know that these are the right tools to be 
building. So we are doing a lot of monitoring on all of our 
issuer base. We are doing a lot of technology modernization. We 
are doing a lot of outreach. We are instituting stress testing; 
we are instituting living will requirements. These are a little 
bit different than the banks, but similar analogy. We are 
instituted a new risk committee. We are after this as much as 
we can.
    Senator Shelby. Thank you.
    Thank you, Mr. Chairman.
    Chairman Crapo. Senator Heitkamp.
    Senator Heitkamp. Thank you. Michael, there is no way 
denying that that is your son, by the way.
    [Laughter.]
    Senator Heitkamp. He looks just like you. He is even more 
handsome because he has red hair.
    [Laughter.]
    Mr. Bright. Has he been quiet?
    Senator Heitkamp. But you are boring him, I have to tell 
you. He has been rolling his eyes and putting his head down. 
But I just want your son to know what an important job his Dad 
is applying for and what a good job he has done so far.
    I want to build on Senator Shelby's line of reasoning on 
nonbank mortgages. Obviously the IG has issued a report that 
concludes that Ginnie has not done enough to respond to the 
changes in its issuer base. Just to give the context of this, 
in 2013 banks originated 70 percent of all new mortgages. This 
year nonbanks issued 60 percent, and you see the ads over and 
over and over again.
    Mr. Bright. Yes.
    Senator Heitkamp. So we are really concerned about how 
that--you talk about things that you should worry about. I 
think this is something you should worry about.
    So I just have a couple questions, maybe more open-ended 
than what they should be, but, number one, do you have enough 
resources to conduct oversight? In terms of volume, do you feel 
confident that you are properly equipped to handle a portfolio 
that is three times larger than it was in 2007? And what 
additional resources, if any, would you recommend in order for 
Ginnie to more effectively carry out its oversight, especially 
in the context that Senator Shelby just talked about, which is 
that this is an explicit guarantee?
    Mr. Bright. That is right. Thank you very much. So the 
number one challenge that I have in managing these employees is 
that we have a pay scale and a hiring process that is different 
than similar regulators and different than Fannie and Freddie.
    Senator Heitkamp. How do you fix that?
    Mr. Bright. We need a legislative solution. So we are in 
law required to--you know, we have limitations on compensation. 
Our funds are appropriated, but we can work with that. It is 
just that we have very talented, technically skilled employees 
who can go three blocks down to the street to the FHFA for 
$40,000, $50,000 more, and that has happened three times since 
I was senior manager, since I got here. They can go to Fannie 
or Freddie, which is a totally different set of compensation 
scales. They can go to the OCC, they can go to the Fed, who 
also has MSR risk management oversight.
    So these are technical skills, and I have no ability to 
kind of reward and retain that type of talent.
    Senator Heitkamp. So that is one thing that we could do, is 
help you retain talent. What else are you going to do to 
buildup the expertise in the agency?
    Mr. Bright. So we procured a few contracts to begin the 
process of stress testing our issuers. The procurement process 
is lengthy. Again, other regulators with similar challenges 
have some freedoms that we do not have. I am talking about, you 
know, just getting all the approvals and that process itself. 
It takes a little bit longer as a pure Government agency to do 
that. So there are some legislative solutions, if you are 
interested, that I would be happy to share on that.
    I do want to say that the Ginnie folks are incredibly 
talented and dedicated.
    Senator Heitkamp. I do not think anyone should take any of 
your comments here to mean that you are working with people who 
are subpar.
    Mr. Bright. Thank you.
    Senator Heitkamp. I want to just share Elizabeth's support. 
I think you have done a great job since you have been there. We 
are grateful that you are willing to take this on.
    Mr. Roisman, one of the things that we have worked on over 
the years has been small business, and you know that I feel 
very strongly about small business advisory within that 
securities frame. And I think you mentioned in your comments 
the Small Business Advocacy Act. We have yet to get a nominee. 
What can you do to help us to make that happen, assuming you 
are confirmed?
    Mr. Roisman. Thank you, Senator. I think it is a critically 
important position at the SEC, and you have said it before and 
I agree with it. There is a potential for them to be too small 
to succeed. I personally hope that the position will be filled 
by the time I am confirmed. But if it is not, I would be happy 
to work to try to get that filled as expeditiously as possible.
    Senator Heitkamp. In Fargo, for example, about a third of 
our startups identify accessing early stage funding as the 
greatest hurdle. We have a bill that hopefully within SBA would 
help get that done. But I think it is critical that you look 
not only at small business, but you look at small rural 
business. And so can I have your commitment that when you move 
over there, this will be a particular interest of yours and 
that we can call on you to make sure small businesses are being 
heard within the SEC?
    Mr. Roisman. I am happy to commit to that.
    Senator Heitkamp. Thank you.
    Thank you, Mr. Chairman.
    Chairman Crapo. Thank you. And you made it under time, too.
    Senator Heitkamp. That can make up for last week.
    Chairman Crapo. Senator Tillis. You should not have 
reminded me.
    [Laughter.]
    Senator Tillis. Thank you, Mr. Chairman. I may add that you 
can tell that these folks have experience on the Hill because, 
because of you all, I am getting to ask my questions 4 minutes 
early. I counted about 4 minutes that you all yielded back in 
your opening statements, so I appreciate that.
    Before I get started, Mr. Chair, I want to thank my staff, 
Tyler Williams here, who is moving on to a new job in the 
Department of Treasury, the domestic finance team. He has been 
great to work with. I know he has developed a great 
relationship with the Committee staff, working with Senator 
Warren on the bill that she mentioned earlier. So I just want 
to personally thank him for his contribution. Thank you.
    Chairman Crapo. Congratulations.
    [Applause.]
    Senator Tillis. Mr. Roisman, it looked like you wanted to 
finish the answer to Senator Warren on a sort of concept that 
everybody is a bad actor versus what I think you were trying to 
get at, is you want to go after the ones that we need to focus 
on most so we get the resources, get the lead on target, so to 
speak. Do you want to finish your thought on that?
    Mr. Roisman. I think you encapsulate it perfectly. I also 
think what I think is important is this all does tie in, you 
know, toward the proposed rulemaking that the SEC is doing. And 
I think it is important for the public to comment on this 
issue. She raises an important issue, which is: Do people think 
that the current differentiation of standards is appropriate? 
And this is one where the SEC needs to look at the comment file 
and meet with people and see what they got right and what could 
be improved. I think it is a good first step, but I look 
forward, if confirmed, to keeping an open mind and seeing if 
there are any changes that are necessary. But I appreciate the 
opportunity.
    Senator Tillis. Thank you, and I also thank you for the 
work that you have done on the Committee. You have got a great 
reputation, and I know you are going to serve us well in a new 
capacity.
    Mr. Bright, you may be one of the calmest worriers I have 
ever seen. But I thank you for the time that you spent in our 
office talking about how we could address a portion of your 
portfolio that was worrisome to you. With the passage of the 
bill, can you tell me a little bit about any of the immediate 
positive impacts it has had or what it is going to look like a 
year from now?
    Mr. Bright. Well, so strictly speaking from a purely 
antiseptic perspective, the securities are trading better in 
price, which means lower rates for FHA, VA, and USDA borrowers. 
And so our securities have improved about a point in price, 
which means a 25-basis-point, all else equal, lower borrowing 
rate for all the programs that Ginnie supports. So that is 
obviously a win.
    In the nonantiseptic space, my hope is that it is a signal 
that, you know, these borrowers are not, you know, there to be 
refinanced when they do not need it. That is not going to be 
tolerated. It is going to show up in the data somewhere, and we 
are not going to be OK with that.
    Senator Tillis. This was a pretty narrowly crafted bill. I 
always wonder anytime you pass a bill if you see any potential 
unintended consequences or other things we should look at or 
maybe a follow-on phase. Do you have any opinions on whether or 
not there are any areas that industry has expressed a concern?
    Mr. Bright. I think it was very--first of all, I think the 
provisions were exceptionally helpful. I think saying that 
Congress stands with us leads us so that we are not kind of 
hanging out on a limb. We know we have the political support we 
need to go after this problem.
    There was a slight difference, I think, in some of the 
wording that ended up meaning that we had put in place a reg in 
December that was a 6-month seasoning requirement, and the bill 
codified that reg. The way the bill was written, the 
codification I think ended up being a little bit more like a 7-
month seasoning. So if you wanted to perfectly align the 
language with the reg that we have, that would be a quick sort 
of technical fix. But it is working, writ large, at a macro 
level for sure.
    Senator Tillis. What about other priorities moving forward 
in terms of congressional priorities?
    Mr. Bright. A few folks have asked me, you know, what 
hamstrings Ginnie Mae, what resources we need, and as I have 
pointed out, we do lost talented employees to agencies in 
Washington, DC, that can compensate on a different scale. So 
that would require a legislative fix. If there is interest on 
that, as Ginnie has gotten very, very big, I would have great 
interest in working with you on looking for something that 
works.
    Senator Tillis. Thank you. We look forward to working with 
you.
    I am going to yield back the remainder of my time. I 
congratulate all the nominees and their families for the great 
job you have done on the Hill and the great job you will do in 
your new roles. Thank you.
    Chairman Crapo. Senator Cortez Masto.
    Senator Cortez Masto. Thank you. Welcome and 
congratulations to all of you as well, and welcome to your 
families.
    Mr. Bright, let me start with you. I understand from 2002 
to 2006 that you were a senior financial analyst and trader at 
Countrywide where you were responsible for modeling the value 
of mortgage servicing rights and hedging interest rate risk. Is 
that correct?
    Mr. Bright. That is correct.
    Senator Cortez Masto. And then from 2006 to 2008, you 
worked as an associate at Wachovia, where you worked in MBS 
trading. Is that correct?
    Mr. Bright. That is correct.
    Senator Cortez Masto. So can I ask you--I represent the 
State of Nevada, and obviously in 2007 we had the worst crisis 
we had ever seen and the recession. Can I ask you that during 
your time at Countrywide or Wachovia, during that time or 
after, did you raise any alarm bells about risky and abusive 
practices?
    Mr. Bright. Yes. And, in fact, I quit Countrywide in 2006 
because my wife and I decided that this was going to go under, 
that the behavior that we were seeing was unethical, 
unsustainable, that this was a bubble that was going to 
collapse. We wanted to get as far away from it as we could.
    Senator Cortez Masto. Were you vocal about it to others as 
well, or regulators, to let them know about the risky practices 
and things----
    Mr. Bright. Well, there was nothing to whistleblow in the 
sense of something illegal being done, but, yes, I was very 
vocal internally at Countrywide that I thought these ``Pick-a-
Pay's'' were a terrible, terrible product.
    Senator Cortez Masto. Then you went to work at PennyMac. Is 
that right?
    Mr. Bright. After.
    Senator Cortez Masto. And correct me if I am wrong. Was 
PennyMac a reincarnated version of Countrywide run by the same 
management?
    Mr. Bright. The managers there were managers who were also 
pushed out in 2006 and 2007.
    Senator Cortez Masto. They were pushed out of Countrywide?
    Mr. Bright. That is correct. There was a total split in 
the--first of all, I was an analyst. I spent my first couple 
years doing analyst type work. By the time I was, you know, 
smart enough to understand what was going on and realized that 
this thing was wrong, you could see that the company was 
splitting. You know, I am not in the C-suite. I am down in the, 
you know, bowels there. But the rumors are trickling. And you 
could see that the senior management was splitting, and some 
people were saying, ``This cannot go on. We have got to stop.'' 
And a lot of those folks were pushed out by the folks who won 
the day at the institution, at Countrywide, that said that is 
not right, keep going, keep hitting your EPS targets, keep 
going after more and more. And, you know, Stan, who was the CEO 
of PennyMac, was absolutely one of those folks. I was one of 
those people. And so there was a little bit of internal kind of 
tension. If I had seen anything illegal, of course, I would 
have flagged it. It was more the subjective, ``Do people know 
what this Pick-a-Pay thing means?'' You know, the sales folks 
were saying yes, and I was saying no, and so I left.
    I went to Wachovia, and the very first meeting I had at 
Wachovia, I told them, ``This is a terrible product. Stay away 
from it.'' Because they kind of wanted this Countrywide 
download, because everybody was trying to be as big as 
possible.
    A month after I was there, they bought Golden West, and 
that was it. That was the beginning of the end. The stock price 
went down. I lost my job in 2008. I did not lose any money. I 
did not get a golden parachute. I had been saying, ``Do not do 
it.'' But it was just a failing on every level.
    Senator Cortez Masto. So what have you learned that you 
carry with you today? And what will you carry with you from 
that as President of Ginnie Mae?
    Mr. Bright. That if you--a lot of things. If you make T-
shirts and you are very ambitious and you are greedy and you 
make T-shirts and your T-shirts do not work out, then the world 
is stuck with a bunch of bad T-shirts. If you are in the 
housing market and you are greedy and you are irrational with 
your ambition and you are not thinking about the fact that you 
are operating in an ecosystem where the Government is playing a 
large public policy role because we have deemed it as important 
to play this policy role--you do not take that serious, then 
the ramifications of the mistakes are catastrophic and they 
float around the globe, both economically and politically, and 
we are still living with that now.
    And so everybody in this market, in that mortgage market, 
needs to take seriously, in my view, the fact that they have 
signed up for something where this body has created a large 
role for Government, for public policy achievement, and we have 
to take that seriously. And so I want to fulfill that mission 
in my role at Ginnie, and I think that the industry needs to 
consistently do that introspection and self-reflection.
    Senator Cortez Masto. Thank you. And so can I get your 
commitment that lenders participating in the programs through 
Ginnie Mae will be appropriately scrutinized under your 
leadership?
    Mr. Bright. Absolutely.
    Senator Cortez Masto. Thank you.
    I notice my time is up. I have got about 20 seconds left, 
not enough time to go into further discussion. But, Mr. 
Roisman, thank you for meeting with me and our discussion on 
cryptocurrencies. I look forward to having conversation on my 
concerns, your concerns, in addressing these issues as well.
    Congratulations to the rest of you. Thank you.
    Mr. Roisman. Thank you, Senator.
    Chairman Crapo. Thank you very much, and that concludes our 
questioning. I want to again thank each of you for coming and 
participating today in our hearing and for your willingness to 
serve this country. Some of you got more questions than others, 
but you should take that as a positive. Mr. Roisman and Mr. 
Bright took most of the incoming today. But we are concluded 
with the hearing.
    For Senators, all questions for the record need to be 
submitted by Thursday, July 26th, the close of business. And 
for our witnesses, responses to those questions are due by 
Tuesday morning. So please respond quickly to the questions 
that you receive.
    With that, this hearing is adjourned.
    [Whereupon, at 11:50 a.m., the hearing was adjourned.]
    [Prepared statements, biographical sketches of nominees, 
responses to written questions, and additional material 
supplied for the record follow:]
               PREPARED STATEMENT OF CHAIRMAN MIKE CRAPO
    This morning we will consider the nominations of four more 
individuals to serve in key leadership posts in the Administration:
    Mr. Elad Roisman, to be a Member of the Securities and Exchange 
Commission; Mr. Michael Bright, to be President of the Government 
National Mortgage Association, or ``Ginnie Mae''; Ms. Rae Oliver Davis, 
to be Inspector General of the U.S. Department of Housing and Urban 
Development; and Dr. Dino Falaschetti, to be Director of the Office of 
Financial Research.
    Welcome to all of you this morning, and congratulations on your 
nominations to these very important offices.
    I see friends and family behind you, and welcome them here today as 
well.
    Each of these nominees, if confirmed, will play an important role 
in supporting our financial system, ensuring it remains vibrant, safe, 
and sound for all Americans.
    I will start by recognizing Mr. Roisman, in particular, who 
continues to do outstanding work for this Committee as Chief Counsel.
    I can personally attest to Elad's impressive command of securities 
law, his keen intellect and work ethic, and his commitment to doing 
what is right.
    As many on this committee know, Elad is intimately familiar with 
the inner-workings of the SEC, having previously served as Counsel to 
Commissioner Daniel Gallagher, and as Chief Counsel at the NYSE 
Euronext.
    Elad--thank you for being a trusted advisor and resource to me, and 
to others on this Committee.
    If confirmed, I am confident that you will successfully execute the 
SEC's mission of protecting investors, maintaining fair, orderly, and 
efficient markets, and facilitating capital formation.
    We will be sad to see you go, but the SEC will have gained a 
tremendous asset from which our whole country will benefit.
    Michael Bright also has a distinguished record as a Senate staffer, 
and is no stranger to many in this room.
    Over the last decade, Mr. Bright has established himself as a 
leading voice on housing finance policy.
    Most recently, over the past year-and-a-half, he has overseen all 
aspects of Ginnie Mae, including its nearly $2 Trillion portfolio of 
mortgage-backed securities, and has already taken significant action to 
protect taxpayers and help consumers.
    If confirmed, I know Mr. Bright will continue this important work, 
and I look forward to working with him on opportunities to address the 
last piece of unfinished business from the Financial Crisis: 
comprehensive housing finance reform.
    Rae Oliver Davis has dedicated her entire career to holding others 
accountable.
    As a former Assistant U.S. Attorney, Ms. Davis spent years 
investigating and prosecuting financial criminals, among other crimes.
    Over the past decade, she has turned her focus to holding the 
Government accountable, working for various Inspectors General within 
the United States Postal Service, the Troubled Asset Relief Program, or 
``TARP'', and HUD.
    If confirmed as HUD Inspector General, Ms. Davis will draw from 
this deep experience, working on behalf of taxpayers to eliminate 
fraud, waste and abuse in our housing programs, and to make sure that 
those programs run as efficiently and effectively as possible.
    Dino Falaschetti has had a distinguished career in economics that 
spans academia, the private sector, and public service--most recently 
as Chief Economist for the House Financial Services Committee.
    For many years, Dr. Falaschetti's expertise on finance, corporate 
law, business strategy, and economic policy has been widely sought out.
    In addition to holding faculty appointments at 8 different 
universities, Dr. Falaschetti served as Senior Economist for the 
President's Council of Economic Advisors during the second Bush 
administration, where he worked directly under future Fed Chairman Ben 
Bernanke.
    At the Office of Financial Research, or OFR, Dr. Falaschetti will 
be charged with overseeing much of the research and data analysis that 
supports the work of Financial Stability Oversight Council.
    If confirmed, he will be a trusted and valued resource for FSOC and 
the Treasury Department as he has been for Congress and many others.
    We have four highly qualified nominees before us, and I urge my 
colleagues to support them so that they can quickly get to work for the 
American people.
    Congratulations, once again, on your nominations, and thank you for 
your willingness to serve.
                                 ______
                                 
                   PREPARED STATEMENT OF ELAD ROISMAN
           To be a Member, Securities and Exchange Commission
                             July 24, 2018
    Chairman Crapo, Ranking Member Brown, and Members of the Committee, 
I am honored to appear before you today as the President's nominee to 
serve as a Commissioner of the U.S. Securities and Exchange Commission. 
My professional experience as a securities lawyer at a global law firm, 
a chief counsel at NYSE Euronext, counsel to an SEC commissioner, and 
now chief counsel on this Committee have afforded me a broad spectrum 
of experiences that would enable me to effectively serve the public and 
carry out the SEC's mission should I be confirmed.
    Mr. Chairman, I would like to introduce members of my family that 
are here with me today. My wife, Helaina Roisman, a social worker at 
George Washington University Hospital and, without question, my far 
better half. My parents, Hanna and Yossi Roisman, who taught me at an 
early age the importance of integrity and having the courage to do the 
right thing. My brother, Shalev Roisman, who showed me the importance 
of trying to understand the other side of every issue. My father- and 
mother-in-law, Larry and Laurie Bernstein, and my brother-in-law, Jacob 
Bernstein, who have all been incredibly supportive over the years. 
Lastly, my daughters, Talia and Yael, are too young to come today, but 
remind me daily of what is most important in this life.
    As the child of two immigrants who moved to this country determined 
to pursue a better life for themselves and their children, I have a 
strong appreciation for the stability and security that our form of 
Government and financial markets provide. My parents did not have much 
when they came here. But, what they did have was confidence--confidence 
in America, and confidence in a financial system that would enable them 
to save and invest so that they could raise their family and help 
provide for their children's education. When I think about what gave 
them such confidence in a system that they barely knew, one thing 
stands out--public trust. While they may not have understood or 
appreciated the complex system of oversight and regulation that govern 
the conduct of market participants in our financial markets, they 
believed and expected that our markets were regulated in a fair and 
orderly manner with requisite investor protection, transparency, and 
accountability.
    While serving as a chief counsel at NYSE Euronext, I saw firsthand 
the excitement and pride of entrepreneurs and innovators when they rung 
the opening bell as their companies went public, enabling them to grow 
their companies, invest in communities, and allow investors to share in 
their success. My belief in the importance of fair markets and the role 
they play in our country is what motivated me to move from New York to 
Washington, DC, and join the SEC. I wanted to utilize my insights and 
experiences from the private sector and passion for the securities 
markets to help further the SEC's important mission. As counsel to an 
SEC commissioner, I worked with the SEC's expert staff and witnessed 
their dedication and determination to protect investors and enforce the 
law. And, as a chief counsel on this committee, I have developed the 
utmost respect for this institution and the critical role of 
congressional oversight. I believe my personal and professional 
experiences have prepared me well for the role for which I am being 
considered. I fully recognize and appreciate the critical role the SEC 
serves in the lives of investors so that families like mine can save 
for their children's education, pay for unexpected expenses, and retire 
with confidence.
    The U.S. capital markets are the envy of the world and the 
importance of the SEC's role in this cannot be overstated. Throughout 
its history, the dedicated commissioners and staff of the SEC have 
worked to preserve confidence as our markets grew and evolved. To 
continue this, the SEC must examine and reexamine its rules, 
regulations and guidelines to ensure that they are still working as 
intended to accomplish the SEC's mission. This is most recently 
manifested in areas such as data protection and cybersecurity, as well 
as the emergence of new investments and technologies such as initial 
coin offerings and blockchain. It is essential that the SEC approach 
these new challenges in a fair and transparent manner, provide clarity 
and certainty to the markets and investors, and enforce the laws and 
regulations that hold market participants accountable.
    If confirmed, it would be an incredible privilege to rejoin the 
ranks of the SEC's dedicated public servants and further its mission. 
Thank you.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                PREPARED STATEMENT OF MICHAEL R. BRIGHT
       To be President, Government National Mortgage Association
                             July 24, 2018
    Chairman Crapo, Ranking Member Brown, and distinguished Members of 
this Committee, thank you for inviting me here today. It is an honor to 
appear before you as the nominee to be the President of the Government 
National Mortgage Association, or Ginnie Mae.
    Let me take a moment to quickly thank my family who is here. I'm 
joined by my wife, Maggie, and my son, Mac. My daughter Margaux, who is 
5, is at her grandparent's house in Florida, probably watching on the 
computer. All three of them have been incredibly supportive of me since 
coming to Washington, and that comes despite the many nights of coming 
home tired, grumpy, and distracted with work. I know that I ask a lot 
of them, and I am always thankful for their love and support.
    In addition to being a father, for the past 12 months it has been 
my honor to serve as the Executive Vice President and Chief Operating 
Officer of Ginnie Mae. I'd like to tell you a little about what I have 
learned, and what I think still needs to be done.
    Ginnie Mae was created in 1968 when Congress spun off Fannie Mae as 
a Government-sponsored private company and retained Ginnie as a 
complimentary Government corporation given the task of facilitating the 
securitization of certain mortgages with an explicit, transparent, and 
paid for Government guarantee. Ginnie Mae has since evolved into a $2 
trillion Government security with a focus on facilitating lending to 
low and moderate income, rural, urban, and veteran borrowers.
    Today, Ginnie Mae's bond and Ginnie Mae's brand are globally 
recognized as the most pristine mortgage security in the world. This is 
because of Ginnie Mae's track record of success and our robust process 
for ensuring the timely payment of principal and interest to security 
holders. Ginnie Mae has never missed a payment in its 50 years of 
existence, even during the financial crisis. That is exactly what an 
explicit Government guarantee is meant to provide and delivering on 
that mission is what we do every single day.
    The day job of managing the roughly 150 employees of Ginnie Mae has 
been an incredibly rewarding experience for me over the past year. 
Ginnie has some of the most dedicated, knowledgeable, and mission-
focused professionals I have ever worked with. They are squarely 
focused on the challenges of dealing with both Ginnie's growth and the 
evolving nature of the U.S. mortgage market.
    To address these challenges, over the past 12 months we have 
launched a modernization campaign called ``Ginnie Mae 2020,'' a 3-year 
strategic plan that will have our data centers running on cutting edge 
technology, realign our counterparty risk management framework, help 
bring in additional financing for mortgage servicing rights, and expand 
our global investor base through outreach and education in dozens of 
countries around the globe. All these efforts are well underway, some 
are even nearing completion, and we are very excited about the promise 
they hold for the future of our organization.
    One issue I have worked with many of you on this past year is that 
of so-called ``VA loan churning,'' or the rapid refinancing of VA loans 
with little or no benefit to the borrower, as well as the making of VA 
loans at interest rates higher than a veteran should be getting. I want 
to specifically thank Senators Tillis and Warren for their leadership 
on this issue. Between the work we have done administratively at Ginnie 
as well as the language recently passed into law, we have taken a major 
step towards rooting out behavior that was threatening the very 
viability of the Ginnie security, and thereby threatening the viability 
of the VA, USDA, and FHA programs we support. We will not tolerate this 
behavior, and we now know that Congress stands with us. Collectively, 
our efforts are working. We can already see that in the form of a 
better security price, which directly translates into lower rates for 
FHA, VA, and USDA borrowers.
    I didn't begin my career in Washington. I came here after working 
in my twenties on mortgage trading desks in Los Angeles and Charlotte, 
including through the financial crisis. During that time, I learned 
thousands of lessons that I place into two thematic buckets: First, I 
learned that the mortgage market is incredibly technical and enormously 
complex. I feel honored to be able to use the technical knowledge I 
gained to serve a broader public policy mission that benefits all 
Americans. Second, I learned that greed and unbridled ambition can be 
dangerous realities, and if left unchecked in the housing market, the 
consequences can be disastrous. I came to Washington in large part to 
help ensure we never repeat the 2008 financial crisis, and I wake up 
every day with that mindset still.
    I also want to say thank you to the Members and staff that I have 
been privileged to work with in the past, most especially Senator 
Corker. Working with Senator Corker, Senator Warner, Senator Crapo, and 
other Members of this Committee as a staffer was a tremendous honor and 
an experience I still think about every single day.
    Going forward, my main goals for Ginnie Mae are to ensure that the 
agency is well run, and that the agency can continue to serve its 
statutory obligations to help ensure a stable U.S. housing market. 
There is much to be done, and I look forward to the task.
    Thank you.
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                 PREPARED STATEMENT OF RAE OLIVER DAVIS
  To be Inspector General, Department of Housing and Urban Development
                             July 24, 2018
    Thank you, Chairman Crapo, Ranking Member Brown, and Members of the 
Committee. It is an honor to appear before you as the nominee to serve 
as the Inspector General (IG) of the United States Department of 
Housing and Urban Development (HUD). I would like to thank my family, 
friends, and colleagues for their support. In particular, I would like 
to recognize my parents, Charles and Jerry, and my husband, Chris, for 
their love and support. I would like to thank my three stepchildren, 
Graham, Addy, and Liam, for inviting me into their lives and 
guaranteeing that I would never suffer a dull moment.
    I am proud to have made a career in public service and oversight. 
As a young staff attorney, I cut my teeth working on the then-Senate 
Governmental Affairs Committee and the House Government Reform and 
Oversight Committee. I then joined the Tennessee Office of the Attorney 
General where I led consumer protection investigations that resulted in 
nationwide settlements with Fortune 500 companies. I aspired to be a 
Federal prosecutor and was fortunate to receive an offer with the U.S. 
Attorney's Office for the Western District of Tennessee in Memphis. I 
prosecuted a wide variety of cases in that office, including everything 
from false tax claims and investment schemes to firearms and drug 
violations.
    After deciding to return to our Nation's capital, I landed in the 
IG community, where I have spent the last decade of my career. I have 
worked in three unique and challenging agencies--the Postal Service, 
the Special Inspector General for the Troubled Asset Relief Program 
(SIGTARP), and most recently HUD. I have been boots-on-the-ground 
conducting and leading investigations. I have also served in two senior 
level positons where I gained an appreciation for the tough decisions 
IGs must make every day.
    In my most recent position with HUD OIG's Office of Special 
Inquiry, our efforts have focused on senior official misconduct and 
enterprise-level risk to the Department. We have created a 
multidisciplinary team of attorneys, investigators, and auditors to 
address complex issues in a comprehensive manner.
    I would like to share with the Committee my personal constitution 
with respect to IG work and my vision for HUD OIG, if confirmed as 
Inspector General.
    The foundation of IG work is independence. It is the principle that 
protects our ability to shed light on the truth about Government. An 
independent IG cannot allow the department or agency it oversees to 
direct its work in any way. And an independent IG cannot accept 
obstruction or delay in gaining access to agency records.
    I also believe the best IGs are strong communicators. IGs must have 
solid relationships with their authorizing and appropriating committees 
to ensure they prioritize the right work and keep Congress informed. In 
my rounds with Senators and your staffs, I committed to ensuring that 
we conduct comprehensive investigations and deliver thorough reporting. 
I am aware that our work is also of significant interest to American 
taxpayers. Shedding light on Government mismanagement and misconduct 
through our reports can be as effective as prosecutions and financial 
recoveries.
    To remain current in our efforts, we must communicate well with 
HUD. We can be independent in the direction of our work and reporting 
while maintaining strong lines of communication about HUD's priorities, 
initiatives, and planning. I believe strongly that we must also be 
active in the IG community, through cross-cutting initiatives, training 
programs, and development of best practices.
    My vision and goal-setting for HUD OIG will focus on effectiveness. 
We can spark positive change by making hard-hitting recommendations 
relating to HUD's top management challenges.
    HUD's mission is far-reaching and there are many pressing issues in 
HUD programs that require attention. I am honored to be considered as 
the nominee for this important oversight position.
    I appreciate the opportunity to come before this Committee and to 
answer your questions. Thank you for your time today.
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                 PREPARED STATEMENT OF DINO FALASCHETTI
    To be Director, Office of Financial Research, Department of the 
                                Treasury
                             July 24, 2018
    Chairman Crapo, Ranking Member Brown, and Members of the Committee, 
it is an honor to appear before you as the President's nominee to serve 
as Director of the Office of Financial Research.
    I want to introduce my wife, Suzanne, and want to acknowledge other 
incredible people who cannot be with us today.
    Betty, Suzanne's mom, is packing up her home in Chicago for a move 
to Montana. She will be a great constituent for what many call ``the 
last best place.'' My brother Dominic and his partner Greg are watching 
on the Committee's website; work in Chicago did not allow them to join 
us today.
    I also want to acknowledge several people who are no longer here, 
but continue to be a great source of love and wisdom--Suzanne's dad, 
Rich, as well as my mom and dad, Myrna and Dominic.
    My parents are the reason I am here. Growing up in South Chicago, 
my grade school was a tough place. Tough enough that my mom--a 
substitute teacher--and my dad--a high school teacher--saw early on 
that I was headed toward a dead end. Unfortunately, a better school 
district looked beyond my parents' reach.
    Mom and Dad stretched their budget to the end, and then more, so 
that my brother and I could grow up in a much safer neighborhood and 
attend much better schools. They could not have pulled it off without 
the confidence of local bankers who provided the support necessary to 
enable my parents to do what was right for their family.
    My high school brought together kids from very different 
backgrounds. I sat between two young men--one would graduate and go on 
to Yale, while the other was already in a gang.
    My experience growing up is a powerful illustration of the 
importance of a loving family and access to financial services. Absent 
either one, I easily could have have continued down a dead end. With 
them, I was able to earn a business degree and a doctorate in economics 
that gave me access to a rewarding career.
    My career in business, academia, and Government has prepared me to 
lead the Office of Financial Research, and to ensure that it 
efficiently and effectively provides the high-quality financial data 
and analysis that Congress intended. However, it is my upbringing that 
taught me why this mission is so important.
    If confirmed, I look forward to working with this Committee and 
with the other members of the Financial Stability Oversight Council to 
promote a more resilient financial sector so that all Americans, 
wherever they might have started, have reliable access to the kind of 
financial hand up that helped my parents realize their dreams.
    I am honored to be here today and look forward to addressing your 
questions.
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        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                       FROM ELAD ROISMAN

Q.1. You stated in your testimony that, ``Throughout its 
history, the dedicated Commissioners and staff of the SEC have 
worked to preserve confidence as our markets grew and evolved. 
To continue this, the SEC must examine and reexamine its rules, 
regulations, and guidelines to ensure that they are still 
working as intended to accomplish the SEC's mission.''
    SEC Rule 10b-18, which provides publicly traded companies a 
safe harbor when repurchasing their shares, was issued in 1982, 
and the practice of stock buybacks has evolved considerably 
since then. For example, for the 248 companies in the S&P 500 
continuously since 1981, share buybacks have gone from 
consuming 2 percent of their net income that year to nearly 
half of it in the period from 2004 to 2013. Moreover, in recent 
years, many of the large publicly traded companies have 
returned more than their net income to shareholders, in large 
part through significant stock buybacks.
    Given the dramatic increase in stock buybacks since Rule 
10b-18 was implemented, do you believe the rule merits 
reexamination to determine if it is still working as intended 
to accomplish the SEC's mission? If not, why?

A.1. As a general matter, I believe it is important for the SEC 
to review its rules to ensure that they are furthering the 
SEC's mission. As you note, the rule was first promulgated in 
1982 and was last updated in 2003. Stock buybacks have been 
shown to be an efficient way to return profits to investors and 
have been a tool used by companies for decades. One 
justification often used to support stock buybacks is that 
companies should return money to investors when they do not 
have a better use for that money, thus enabling investors to 
redeploy that capital into other investments. As you noted, 
stock buybacks have increased over the past several decades and 
some have argued that it has led to a decrease in a company's 
ability to innovate and invest for the future and is 
potentially also an area of abuse where executives 
inappropriately benefit rather than stockholders. The debate 
about the appropriate use of buybacks, whether it incentivizes 
short-termism or needs more disclosure is currently ongoing and 
robust.
    Given the time since the rule was updated, the change in 
the markets, additional data and research, as well as concerns 
raised about the rule, I believe there is merit to reexamining 
it. If confirmed, I would look forward to discussing this topic 
with my fellow Commissioners, the SEC's expert staff, and 
interested parties to see what, if any, changes they believe 
are appropriate for review.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
               SENATOR MENENDEZ FROM ELAD ROISMAN

Q.1. In 2009 the SEC adopted a rule requiring publicly traded 
companies to disclose more information on director selection 
and diversity. However, because the rule failed to actually 
define diversity, the disclosures are vague and provide little 
information on actual board diversity. Last year, the SEC's 
Advisory Committee on Small and Emerging Companies submitted 
recommendations to then Acting Chair Piwowar recommending that 
the Commission amend the rule to include ``disclosure regarding 
race, gender, and ethnicity of each board member/nominee as 
self-identified by the individual.'' In June, Chair Clayton 
told the House Financial Services Committee that he expects the 
SEC to move forward with a revised rule at some point in the 
future.
    Do you think the rule should be updated so that investors 
have access to more meaningful disclosures such as the racial, 
ethnic, and gender compositions as well as any efforts or 
strategies to improve board diversity?

A.1. I believe that diversity is important and benefits 
organizations. Without prejudging a potential rulemaking or 
other Commission action, which the Chairman indicated the SEC 
would move forward on in the future, I will note that I believe 
it is important for the SEC to review its disclosure rules to 
see whether they are providing material information to 
investors. If confirmed, I would like to meet with Director 
Pamela Gibbs, the head of the SEC's Office of Minority and 
Women Inclusion, to get her perspective on the issue and what 
she has seen as successful policies to promote diversity at the 
SEC as well as what she has learned from SEC regulated 
entities. I would also like to discuss this issue with the SEC 
staff and all interested stakeholders to see what changes they 
believe should be made to the existing diversity disclosure to 
provide investors more meaningful information.

Q.2. If confirmed, will you commit to looking into this issue?

A.2. If confirmed, I commit to looking into this issue.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                       FROM ELAD ROISMAN

Q.1. Consolidated Audit Trail (CAT): I have been a strong 
supporter of the SEC's creation of the Consolidated Audit Trail 
(CAT). I believe that, in order to properly oversee markets, it 
is vital that our regulators be able to reconstruct trading 
activity and discover weaknesses and nefarious activity. I have 
also been frustrated by the snail-like pace that this vital 
tool has been implemented, a frustration that Chairman Clayton 
recently echoed in March at a Securities Industry and Financial 
Markets Association (SIFMA) conference in Orlando, Florida. 
Chairman Clayton urged firms to comply with data sharing 
requirements and told the audience of stockbrokers that, ``the 
main markets regulator should have access to a forensic trail 
that enables us to access what happened if a market event 
occurred.''
    Do you believe CAT is a vital tool for the SEC?

A.1. I appreciate your leadership on this topic and share your 
belief that the SEC needs to have a tool to adequately oversee 
the markets and promote investor confidence. I agree that the 
CAT can be such a vital tool when it comes into existence. The 
SEC should never be in a position like it was after the Flash 
Crash where it took weeks, if not months, to ascertain the 
cause of market disruptions.

Q.2. How can the SEC or policymakers encourage firms to comply 
with the data sharing requirement of the CAT?

A.2. If confirmed, I would like to discuss this with the SEC 
staff and fellow Commissioners to see what they think could 
additionally be done to encourage firms to comply. I believe 
that the SEC, or the self-regulatory organizations, which 
submitted the CAT NMS Plan, have sufficient authority to 
require the trading information from firms, but would want to 
discuss further with the SEC staff if I am confirmed. I will 
note that there have been concerns raised about the collection 
of personally identifiable information as part of the data 
sharing requirement. If confirmed, I would like to discuss this 
topic with the staff and Commissioners to ensure that the CAT 
does not require information that is not necessary to further 
the SEC's mission and that the collected information can be 
protected.

Q.3. Human Capital Disclosure: As the global economy continues 
to transition to a 21st-century knowledge-based economy, 
effective human capital management will be increasingly 
critical to a firm's ability to innovate, adapt, and compete. 
Chairman Clayton reflected on the importance of adequate human 
capital disclosures in April 2018 at a House Appropriations 
Subcommittee on Financial Services and General Government 
hearing, where he stated that he ``would like to see more 
disclosure from public companies on how they think about human 
capital.'' Yet the SEC's Regulation SK requires few human 
capital management disclosures from public.
    Will you commit to working to increase human capital 
management disclosure requirements?

A.3. I believe, as you have previously stated, that the 
American workforce is one of the greatest assets in our 
economy. The American workforce, the rule of law, and American 
innovation are the reasons our markets are the greatest in the 
world and our economy is the strongest. I believe that it is 
important for the SEC to constantly review its disclosure 
regime to see what needs to be improved to provide investors 
with material information for them to make informed investment 
decisions. There is a concept release on updating Regulation 
SK, and I do not want to prejudge future Commission action with 
respect to human capital management disclosure. However, if 
confirmed, I would look forward to engaging with interested 
parties on such disclosure as well as reading the public 
comment suggestions on how to improve the existing disclosures 
on human capital management and other important matters.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
             SENATOR CORTEZ MASTO FROM ELAD ROISMAN

Q.1. Multiple rules mandated by Dodd-Frank remain incomplete, 
including rules pertaining to executive compensation, employee 
and director hedging, clawbacks, or incentive-based 
compensation for large financial institutions.
    If confirmed, will you support finishing rulemaking that is 
mandated by Wall Street Reform for the SEC?

A.1. I will support finishing such rulemakings. I believe that 
the SEC must complete all Congressional mandates including 
those mandated by the Dodd-Frank Wall Street Reform and 
Consumer Protection Act.

Q.2. While cryptocurrencies offer an innovative way to conduct 
transactions, I am concerned about the use of cryptocurrencies 
as an investment vehicle.
    Where do you foresee the SEC's involvement in overseeing 
cryptocurrency, particularly in conjunction with the CFTC?

A.2. I believe that the SEC should continue to work with the 
CFTC to help oversee the cryptocurrency markets. The SEC has 
regulatory authority over assets (e.g., exchange traded funds 
linked to cryptocurrencies) and initial coin offerings that are 
deemed securities. Additionally, the SEC has authority over 
market participants that transact in such securities (such as 
brokers, dealers, and investment advisers), market 
professionals that advise on such transactions, including 
securities lawyers and accountants, as well as certain 
platforms for trading digital assets. I believe it is important 
for the SEC and CFTC to have a collaborative approach to 
overseeing cryptocurrencies and related assets in order to 
provide clarity to investors, market participants, innovators, 
and the general public about the securities and commodities 
laws and regulations covering these commodities and assets. To 
date, the SEC and CFTC have (1) issued joint statements on 
cryptocurrencies and related assets to bring transparency and 
integrity to the markets, (2) highlighted the need to set and 
enforce rules that foster innovation while promoting market 
integrity and confidence, and (3) brought charges for 
violations of the law to prevent and stop fraud in the offer 
and sale of digital assets. Such work should continue, 
especially with respect to educating the public and enforcing 
the law. This ultimately furthers the SEC's mission to protect 
investors, maintain fair, orderly and efficient markets, and 
promote capital formation.

Q.3. Should cryptocurrencies have adequate disclosures and 
investor protections?

A.3. It is important that a security overseen by the SEC has 
adequate disclosures and investor protections, this includes 
cryptocurrencies and related products that are securities.
    The SEC has highlighted the importance of adequate 
disclosure and investor protections for digital assets in its 
DAO Report of Investigation Pursuant to Section 21(a) of the 
Securities Exchange Act of 1934, recent SEC enforcement actions 
involving digital assets, SEC investor alerts, and speeches and 
statements by staff and members of the Commission to help 
clarify what the SEC thinks are areas of concern. If confirmed, 
I would look forward to working with my fellow Commissioners 
and the SEC staff to continue to promote adequate disclosures 
and investor protections with respect to digital assets and 
cryptocurrencies. I would also work to continue to provide 
clarity to market participants so that they understand the 
rules that will be enforced, thus enabling innovation while 
promoting market integrity and confidence.

Q.4. Should cryptocurrencies have the same protections and 
rules against market manipulation and market fraud as bonds and 
stocks?

A.4. I believe that if a cryptocurrency asset is deemed a 
security, the investor protections and rules against market 
manipulation and fraud should be consistent with the existing 
rule set. I believe that it is important for the SEC to 
recognize new innovations in the markets and try to adapt its 
rules when appropriate. The SEC has been both educating the 
public about the rules and regulations that govern digital 
assets as well as bringing enforcement actions to ensure that 
bad actors, market manipulation, and fraud are being rooted 
out. It has also been working with state regulators and other 
agencies to try and target fraudulent initial coin offerings 
and crypto-asset investment products so that the public and 
fraudsters know that this is an area the SEC is focused on and 
takes seriously. This is important, and I would look forward to 
continuing this, if confirmed.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR JONES
                       FROM ELAD ROISMAN

Q.1. I introduced legislation earlier this year, the Expanding 
Access to Capital for Rural Job Creators Act, with my 
colleagues Senator Heller, Senator Heitkamp, and Senator 
Kennedy, focusing on capital formation for rural small 
businesses.
    The bill would expand upon the work of my colleagues to 
expand the work of the SEC's Small Business Advocate.
    What do you see as the unique challenges, or opportunities, 
for both small business owners and investors in rural 
businesses?

A.1. I believe that small business owners and investors are the 
backbone of this country, and I have been concerned about 
impediments to their sustainability and growth. Unfortunately, 
some of the challenges that these entrepreneurs and investors 
face is that many of the rules that they must comply with have 
a one-size fits all structure and do not take into account 
their business model. Additionally, and in some cases it can be 
more pronounced for rural businesses, access to capital can be 
much more limited. Given these challenges, I believe it is 
important for the SEC to review its rules to see whether they 
are appropriately taking into account the size, type, and 
resources of small businesses and see whether changes should be 
made with respect to SEC matters such as capital raises and 
debt financing, including as it relates to Crowdfunding and 
Regulation A offerings. If confirmed, I would look forward to 
meeting with rural business owners and investors, interested 
parties, the SEC's expert staff including the SEC's Small 
Business Advocate, once the position is filled, to hear their 
ideas on how to address the challenges facing rural businesses. 
This is a matter of particular interest to me, and I would be 
happy to work with you and others on this issue to ensure that 
the concerns about small businesses and in particular rural 
businesses are heard.

Q.2. The SEC recently moved forward with a proposal to 
potentially limit whistleblower payouts.
    Can you tell me if you believe whistleblowers have been a 
benefit to SEC enforcement?

A.2. Based on what I have reviewed from public SEC enforcement 
actions, I believe that whistleblowers have provided the SEC 
with important information which has led to cases against bad 
actors. There is a proposed rulemaking on this subject, so I do 
not want to prejudge the rulemaking. If confirmed, I would look 
forward to discussing the benefits of whistleblowers to the 
SEC's enforcement program with the SEC's staff, including the 
head of the SEC's Office of the Whistleblower, as well as my 
fellow Commissioners and all interested parties. Additionally, 
I would look forward to reviewing the comment file on the 
proposed whistleblower rule to learn from the public what 
people believe the SEC got right and what could be improved.

Q.3. Do you believe that strong financial incentives have 
helped entice whistleblowers in coming forward with highly 
sensitive information?

A.3. I believe that strong financial rewards incentivize 
whistleblowers to come forward, which can help root out fraud 
and illegal activity. As you noted, there is a proposed 
rulemaking on this subject, so I do not want to prejudge the 
rulemaking. If confirmed, I would look forward to discussing 
this topic with the SEC's staff, including the head of the 
SEC's Office of the Whistleblower, as well as my fellow 
Commissioners and all interested parties. I would also look 
forward to reviewing the comment file on the proposed 
whistleblower rule to learn from the public what people believe 
the SEC got right and what could be improved.

Q.4. Can you broadly describe your priorities for the SEC's 
investment advice rule will be?

A.4. Without prejudging the proposed Regulation Best Interest 
and related rulemakings, I believe that it is important for the 
SEC in finalizing a rule related to the provision of investment 
advice to look at issues such as whether the rule:

    Allows investors the ability to maintain and have 
        access to financial advice;

    Provides appropriate disclosure so investors 
        understand their relationships with financial advice 
        providers, including conflicts of interest and how 
        those are addressed;

    Is business model neutral, meaning that it permits 
        consumers to receive different types of services and 
        optionality, promoting investor choice and competition; 
        and

    Promotes the SEC's three part mission, including 
        protecting investors.

    Appropriately addressing these issues would be a priority 
for me. If confirmed, I would look forward to discussing the 
proposed rule with my fellow Commissioners, the SEC's staff, 
and all interested parties. Additionally, I would look forward 
to reviewing the comment file to see what the public believes 
the SEC got right in the proposed rulemaking and what could be 
improved.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                     FROM MICHAEL R. BRIGHT

Q.1. You served as a Senior Vice President at PennyMac from 
2015 to 2016. In 2017, PennyMac was Ginnie Mae's largest 
issuer, making up 11 percent of Ginnie Mae's total issuance. 
You are also a former employee of BlackRock, an affiliate of 
one of PennyMac's largest equity holders.
    If confirmed, how can we be certain that your previous 
employers will not unduly influence your decisions as President 
of Ginnie Mae?

A.1. For the past year, as Chief Operating Officer of Ginnie 
Mae, I have treated all issuers fairly and made decisions based 
on the agency's statutory responsibilities and the facts before 
me. My previous employers have never influenced my official 
actions before and I assure you they never will. If confirmed, 
that would continue to be my practice. I firmly understand that 
any perceived favorability would be detrimental to my ability 
to lead, and so I take great care to ensure that all issuers, 
investors and other stakeholders are treated the same, both in 
practice and in perception.
    My ethics agreement--which I signed upon my nomination--
further spells out some precise steps I must take to avoid any 
actual or apparent conflicts of interest if I am confirmed to 
the position of President of Ginnie Mae.

Q.2. Following a March 22, 2018, hearing in this Committee, I 
asked questions for the record of the Department of Housing and 
Urban Development (HUD) Secretary that still have not been 
answered more than 4 months later. I am concerned that this 
lack of responsiveness to the Committee's requests could become 
a pattern at HUD and throughout the Administration.
    If confirmed, will you provide timely, substantive 
responses to all Committee inquiries?

A.2. Yes, absolutely.

Q.3. In Ginnie Mae 2020, you outline three elements of your 
strategic plan for Ginnie Mae. The final element, a ``Strong 
Focus on Innovation'', states that Ginnie Mae is part of HUD 
discussions about whether to develop a loan-level credit risk 
transfer program or pilot. You state that any credit risk 
transfer program would have to be ``economically, legally and 
operationally feasible.''
    Is Ginnie Mae still actively pursuing a program or pilot to 
test new credit risk transfer options?
    What metric would Ginnie Mae use to determine that a credit 
risk transfer program is economically feasible?
    What impact would any credit risk transfer proposal have 
for homeowners and renters whose loans or rental units are 
financed through Ginnie Mae?
    Do you intend to engage with Members of Congress and 
relevant stakeholders, including financial institutions, 
investors, and consumer advocates, before you initiate a credit 
risk transfer program or pilot?

A.3. Many private institutions have come to Ginnie Mae and 
offered ideas for how some Federal programs in our security 
could leverage private credit risk transfer (CRT) to improve 
their financial risk conditions. Ginnie Mae itself collects 
only a 6-basis point guarantee fee, which would not be enough 
for Ginnie alone to engage in credit risk transfer. Other 
partner Federal agencies, however, have expressed some interest 
in concept, and Ginnie could conceivably play a facilitating 
role.
    For any CRT program to work, however, it would have to put 
both the Federal insuring agency, Ginnie Mae, and the borrower 
in a better financial condition and be equally available to 
lenders of all sizes. It is possible that some structures could 
meet these criteria, but we have not seen any yet.
    Any credit risk transfer program--pilot or otherwise--would 
follow a full regulatory rulemaking process and begin with 
substantial engagement between Ginnie Mae and Members of 
Congress.

Q.4. In your testimony before the Committee, you said that you 
thought that the papers you coauthored with former Federal 
Housing Finance Agency Acting Director Ed DeMarco were 
``vague'' on whether to maintain Fannie Mae and Freddie Mac's 
affordable housing goals. But in ``Affordable Rent and Access 
to Homeownership'', published in May 2017, you wrote that the 
affordable housing goals had ``shortcomings'' and proposed 
``alternatives'' (see p. 12). You also wrote that whether 
``those goals contributed to the financial crisis is 
controversial'' and cited to Peter Wallison's dissent to the 
Financial Crisis Inquiry Commission's report on the causes of 
the financial crisis (see p. 12). The paper then goes on to 
propose ``replacing the old regime and its many flaws'' (see p. 
13), though it does not require that a new regime serve as many 
households.
    Do you still support replacing the affordable housing 
goals?

A.4. Thank you for the follow up questions on the important 
topic of affordable housing. In the paper I coauthored with Ed 
DeMarco, we proposed some ways to improve upon the existing 
goals. I think that it's important to regularly evaluate how we 
can improve upon the programs we have to provide more effective 
and efficient access to affordable housing.
    I have never personally supported eliminating the 
affordable housing goals--and I do not support their outright 
elimination now.
    In the paper I noted that there are some implementation 
challenges with the current version of the housing goals that 
make them less effective at achieving their desired outcomes. 
Namely, Fannie Mae and Freddie Mac seller-servicers would often 
hold back pools of loans they knew to be ``goals rich'' in 
order to get premium pricing from the GSEs as the GSEs sought 
to meet their goals. This favorable pricing was then not passed 
on to borrowers, undermining the core purpose of the housing 
goals.
    While Ginnie Mae has no direct oversight of housing goals, 
in my time at Ginnie Mae as COO I am and will remain squarely 
focused on ensuring continued support for low-income access to 
affordable housing. I do that primarily by protecting the 
integrity of our program and the value of our security, which 
translates directly into lower rates for FHA, VA, and USDA 
borrowers.
    I believe there is an affordable housing crisis in this 
country and every Federal agency, including Ginnie Mae, should 
be thinking constructively about ways to address that crisis.

Q.5. Do you believe that the affordable housing goals were a 
primary cause of the financial crisis?

A.5. No, I do not believe that housing goals caused the 
financial crisis.

Q.6. The recent Ginnie Mae 2020 report outlines a number of 
steps that Ginnie Mae has taken or will take to manage evolving 
counterparty risks that were outlined by the HUD Inspector 
General and Ginnie Mae itself. However, Ginnie Mae 2020 does 
not address the staffing challenges at Ginnie Mae that were 
noted by a Ginnie Mae-commissioned KPMG audit, the Inspector 
General, and the Government Accountability Office.
    How many full-time equivalents (FTEs) does Ginnie Mae 
currently employ? Of those FTEs, how many are contractors and 
how many are staff?
    Do you believe that Ginnie has sufficient staff to 
adequately oversee its counterparty risks and daily operations?
    As noted in Ginnie Mae's Annual Report, Ginnie Mae's issuer 
base has changed significantly over the past 10 years. How will 
changes in the type and number of Ginnie Mae issuers as you 
continue to refine and strengthen Ginnie Mae's risk framework?

A.6. We have 150 full-time employees at Ginnie Mae, and 
approximately 400 contractors. The vast majority of our 
contractors are at two subservicers (Selene and Carrington) 
that subservice loans for a runoff portfolio of loans Ginnie 
Mae assumed during the financial crisis. That book of loans 
began at about $35 billion in unpaid principal balance. It is 
now at $4 billion and continues to decline. Our second largest 
contracting presence comes from Deloitte, which supports Ginnie 
Mae with data analytics. Additionally, Ginnie Mae relies on 
Bank of New York Mellon for some aspects of bond 
administration.
    As I mentioned during the hearing, Ginnie Mae would benefit 
from additional flexibility to reward highly technical staff, 
who we have difficulty retaining and attracting due to the 
differences in pay scale among Ginnie Mae, the Federal Housing 
Finance Agency, Fannie Mae, Freddie Mac, and bank regulators. 
Ginnie Mae is the only one of these institutions subject to the 
General Schedule payscale. We have a reasonable number of 
employees, but attracting and retaining technical talent is 
critical, and we have lost some just in the one year I have 
served as COO.
    Additionally, as discussed during the hearing and 
highlighted in a number of recent whitepapers, our shifting 
issuer profile means we need even more of our resources 
allocated to monitoring the financial health of our issuers 
(e.g., their ability to remit principal and interest). This 
includes keeping a close eye on the value of their mortgage 
servicing rights, which serve as Ginnie Mae's collateral in the 
event of an issuer default.

Q.7. Your current title at Ginnie Mae is Executive Vice 
President and Chief Operating Officer.
    Have you had any other title(s) while working at Ginnie 
Mae? If so, on what dates were those titles held?

A.7. I also held the title of Acting President while the 
Administration pursued candidates for the role of President. I 
ceased to hold that title when the Administration began the 
vetting process for me as a potential nominee. The dates I was 
Acting President were July 11, 2017, to November 16, 2017.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
                     FROM MICHAEL R. BRIGHT

Q.1. Thank you for addressing the IRRRL churn issue during the 
hearing. Beyond your stated comments, does the VA mortgage 
program have any unique risk characteristics that you are 
paying particular interest to?

A.1. The VA program only covers 25 percent of the loan balance, 
whereas FHA and USDA cover 100 percent. This additional risk, 
however, is counteracted by the fact that VA loans tend to 
demonstrate incredibly low delinquency rates, even during 
economic downturns.

Q.2. The VA mortgage program as an earned benefit for 
servicemembers, past and present, that has performed well over 
the years. In your view, is Ginnie Mae a partner to the VA in 
ensuring that our veterans and active-duty personnel are able 
to take full advantage of this benefit?

A.2. Ginnie Mae is absolutely an enthusiastic partner of the VA 
in helping to ensure veterans have access to this earned 
benefit. We also believe strongly that the actions we, 
Congress, and the VA have taken in recent months help ensure 
the VA loan program remains viable for future veterans.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
            SENATOR MENENDEZ FROM MICHAEL R. BRIGHT

Q.1. In your 2017 paper entitled ``Affordable Rent and Access 
to Homeownership'', you advocate for a 10-basis point user fee 
on all mortgages securitized in the new system to generate 
funding for affordable home ownership and rental options. \1\
---------------------------------------------------------------------------
     \1\ https://assets1c.milkeninstitute.org/assets/Publication/
Viewpoint/PDF/Affordable-Rent-and-Access-to-Homeownership2.pdf
---------------------------------------------------------------------------
    Is it true that under your proposal, the fee would not be 
available to support access and affordability until a certain 
reserve threshold has been met?
    How long would it take to meet that threshold?
    Wouldn't that actually make affordable rental housing worse 
off in the short term while we are building the reserve and 
during a crisis than the status quo, which at least gives 4.2 
basis points to the Housing Trust Fund and the Capital Magnet 
Fund?
    In your proposal, you state this structure would create a 
``natural countercyclical buffer'' where funding of affordable 
homes and home ownership options would be curtailed in a 
crisis. Please explain why we should wind down access and 
affordability in an economic downturn? Didn't the last crisis 
demonstrate that having a countercyclical source of affordable 
loans and refinancing options was critical to keeping the 
mortgage market afloat?

A.1. A great deal of research points to the fact that the 
portion of American incomes spent on housing continues to rise 
to what I believe are unsustainable levels. This is particulary 
true for low- and moderate-income Americans. I believe every 
Federal agency, including Ginnie Mae, has an obligation to 
examine what it can do to address this problem. That is what I 
have done for the past year at Ginnie Mae and that is what I am 
committed to continuing if I am confirmed.
    The paper I coauthored with Ed DeMarco included a 10-basis 
point access fee as one of its proposals to help ensure access 
to affordable home ownership and affordable rental housing for 
lower-income Americans. In contrast to the current 4.2 basis 
point fee in statute, which only applies one time at the 
origination of a new loan, our proposed fee would be applied 
annually. The larger fee and annual application of the fee 
would generate roughly 10 times the total revenue of today's 
one-time 4.2 basis point fee.
    Under our proposal, this 10-basis point annual fee was 
meant to augment a much-expanded duty to serve all markets at 
all times. In some ways, the paper was suggesting that there 
may be more robust ways of establishing rules for secondary 
market actors operating in a Government-subsidized system--
rules that would be explicitly designed to ensure that the 
focus on the system remained on low- and moderate-income 
Americans. We proposed robust ``anti-creaming'' rules as well.
    I have reread the paper since the hearing and I understand 
how it could leave the impression that the 4.2 basis point up-
front fee would not accrue during the build-up of the new 
system. That was never the intent, and I am happy to clarify 
that, if there were to be reform, these funds should continue 
to be available throughout the transition process.
    As for the countercyclical buffer in our paper, the reserve 
fund was intended to serve the function you describe--to keep 
the mortgage market afloat during a downturn. The Government 
could draw on the reserve fund during a downturn to stabilize 
the market. The reserve fund is a better alternative to 
increasing affordable housing fees or guarantee fees in a 
crisis because increased fees could exacerbate the downturn and 
reduce access to affordable housing.
    Addressing the affordable housing crisis is a priority of 
mine and I am ready to work as a partner with you to do all we 
can to solve it.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
          SENATOR CORTEZ MASTO FROM MICHAEL R. BRIGHT

Q.1. During your testimony during the Banking Committee, you 
testified on your tenure at Countrywide and Wachovia. You also 
testified that you would commit that lenders participating in 
programs through Ginnie Mae would be appropriately scrutinized 
under your leadership.
    How will you ensure that lenders whose mortgages are 
insured by Ginnie Mae are not engaging in predatory or abusive 
loan practices, like dual tracking, loan churning, or 
preventing refinancing?

A.1. Given Ginnie Mae's position in the value chain of mortgage 
production (e.g., securitization and bond administration after 
loans have been made) as well as the fact that we have no 
direct oversight authority over consumer credit law (that is, 
we cannot conduct on-site reviews of consumer protection 
issues), Ginnie Mae relies to a great degree on our partner 
Federal agencies to police bad behavior. However, when Ginnie 
Mae sees data suggesting behavior that might be questionable at 
best, we can and do make referrals to these partner agencies--
the Department of Agriculture (USDA), Veterans Administration 
(VA), and Federal Housing Administration (FHA)--as well as the 
Consumer Financial Protection Bureau (CFPB). Over the past 
year, we have communicated directly with all these agencies on 
matters that appear to imply a form of predatory behavior.
    What Ginnie Mae can do, and has done in the past year, is 
look at trailing data of the performance of loans in our 
securities. When an issuer has performance that is materially 
outside that of its peers and when that performance threatens 
the health of our security, we can and have removed those 
lenders from our so-called ``multi-issuer pools.'' When we did 
this, we were proactive in making our concerns knows to the VA, 
FHA, USDA, and CFPB and asked them for help.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                     FROM RAE OLIVER DAVIS

Q.1. The Administration is pursuing significant changes that 
would limit the use of the False Claims Act. How does the HUD 
Inspector General use the False Claims Act today and how would 
any changes impact your work?

A.1. The False Claims Act is an important tool in combating 
fraud against the Federal Government. The Department of Justice 
(DOJ) is the agency vested with authority to bring suit under 
the False Claims Act (FCA), but HUD OIG investigations may be 
conducted jointly with DOJ or serve as the basis for suits and/
or settlements advanced under a theory of liability under the 
FCA.
    HUD OIG will continue to conduct its work and refer matters 
to DOJ for appropriate action, regardless of any changes made 
to the way the FCA is used. With that said, if confirmed, I 
would seek a seat at the table with DOJ and HUD to discuss 
future utilization of the FCA to ensure that HUD OIG's 
perspective is represented adequately.

Q.2. There have been several allegations of ethics violations 
by Trump administration political appointees, including some at 
HUD under Secretary Carson's leadership. I am not asking for 
you to comment on any of these allegations, but I am interested 
in your willingness to act as an impartial investigator. Do you 
pledge, if confirmed, to conduct investigations into 
allegations of misconduct in an impartial manner, without 
regard to whether the subject is an appointee of the 
Administration?

A.2. Yes. If confirmed, I pledge to be an independent Inspector 
General that is impartial, unbiased, and objective in fact-
finding and reporting. As I stated in my opening statement 
before the Committee, if confirmed, I will not allow the 
Department to direct or obstruct my investigations. It is my 
firm belief that politics have no place in the decision making 
of an Inspector General. I will be independent and impartial in 
investigations of all HUD officials, including political 
appointees.

Q.3. The Office of Inspector General serves an important role 
in investigating allegations of misconduct and conducting 
audits. Often, these reviews are retrospective. In your view, 
can the Office of Inspector General play a role in proactively 
assisting HUD and its grantees, participants, counterparties, 
and partners to implement best practices? If so, how would you 
go about that?

A.3. Yes. I believe that IGs can be extremely effective by 
engaging proactively. Helping the Department avoid losses is 
the most efficient way to achieve the purposes of an IG. We can 
be effective proactively through communication and innovation. 
Engaging with HUD to ensure we are up to speed on issues 
arising in their programs is critical to doing meaningful, 
proactive work. For example, HUD OIG has recently done capacity 
reviews of grantees that will administer HUD CDBG-DR funds. If 
confirmed, I will seek to do more of these type of reviews of 
CDBG-DR grantees, but also in other HUD programs.
    I also believe we must find new ways to do our work so that 
we can effectuate change and push HUD forward towards success. 
Utilizing data and cutting-edge technology can help IGs move 
swiftly and focus our efforts. If confirmed, I will work to 
make HUD OIG a data-driven workforce that plans our work in 
areas where the data tells us we should be looking.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
             SENATOR MENENDEZ FROM RAE OLIVER DAVIS

Q.1. Since Secretary Carson was confirmed, there have been 
multiple allegations of HUD employees facing retaliation and 
reprisals for speaking out about various misconduct ranging 
from spending decisions to overpayments to contractors. If 
confirmed, will you commit to fully investigating and 
addressing any allegations of retaliation or reprisal directed 
at HUD employees?

A.1. I will. Whistleblowers are the life-blood of IGs. We rely 
on their courage and dedication and, if confirmed, I pledge 
that my office will be as dedicated and courageous in efforts 
to defend and protect whistleblowers. We can achieve this 
through thorough investigation of allegations of retaliation 
and effective communication and collaboration with the Office 
of Special Counsel. Equally important is our communication with 
whistleblowers and HUD employees about the laws applicable to 
whistleblower retaliation and the process available to report 
potential retaliation.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                     FROM RAE OLIVER DAVIS

Q.1. DATA Act: In November 2017, the Office of Inspector 
General completed a DATA Act Compliance Audit in accordance 
with the statutory requirements of the Digital Accountability 
and Transparency Act of 2014. That report made five 
recommendations to improve HUD's compliance with DATA Act 
requirements. While the Department has made progress in these 
efforts, would you continue to devote appropriate resources to 
fulfill your oversight responsibilities under the law?

A.1. Yes. If confirmed, I will ensure that our office has 
sufficient resources devoted to monitoring HUD's compliance 
with the DATA Act and all Federal laws. If confirmed, I plan to 
coordinate with HUD's leadership early on to identify ways HUD 
can implement open recommendations related to its top 
management challenges, including the DATA Act recommendations 
from our 2017 report.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
           SENATOR CORTEZ MASTO FROM RAE OLIVER DAVIS

Q.1. During the Trump administration, we've seen a number of 
Secretaries break ethics rules, including Secretary Carson. In 
addition to overspending taxpayer funds on redecorating, 
Secretary Carson has used his position to give his family 
members undue influence over policy decisions, and unfettered 
access to other Government officials, including those they have 
business before. I, along with several of my colleagues, have 
sent letters to the HUD OIG requesting investigation into 
Secretary Carson's actions during his tenure as Secretary.
    Given the important role you've been nominated to, can we 
expect you to stand up to powerful political interests, like 
Secretary Carson?

A.1. Absolutely. One of the priorities that I outlined to this 
Committee in my confirmation hearing was conducting thorough 
investigations of misconduct within, and affecting, HUD. This 
applies to any HUD employee, appointee, and individual or 
entity that is involved with or seeking involvement in HUD 
programs or platforms.

Q.2. Will you commit to respond in a timely manner to requests 
for information from Members of this Committee, and the Senate?

A.2. Yes. If confirmed, I will provide timely responses to 
every request made of HUD OIG.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                     FROM DINO FALASCHETTI

Q.1. In 2017, the House of Representatives passed the Financial 
CHOICE Act, H.R. 10. At the time, you served as Chief Economist 
for the House Financial Services Committee. Section 151 of the 
CHOICE Act repeals the Office of Financial Research. Do you 
think the Office of Financial Research should exist? If so, was 
Section 151 of the CHOICE Act a misguided provision in the 
bill?

A.1. I believe the OFR should exist, and has a critically 
important mission.
    If confirmed, I will work to fulfill the OFR statutory 
mission to support the Financial Stability Oversight Council in 
fulfilling its purposes and duties, and promoting a more 
resilient financial sector by providing the FSOC firmly 
grounded, and data-driven, research it needs to evaluate and 
address risks to financial stability.

Q.2. The Director of the Office of Financial Research has broad 
authority to set the budget and staffing levels at the agency. 
The agency is funded through assessments on systemically 
important financial institutions. The FY2018 and FY2019 OFR 
budgets drastically reduce the annual funding and staffing 
levels of the agency. Compared to FY2017 levels, the recent OFR 
budgets have cut funding by 25 percent and staffing by over 35 
percent. If confirmed, would you reverse these budget cuts?

A.2. I understand there are efforts underway to reorganize the 
OFR. If confirmed, I will review these reorganization efforts 
to ensure that the agency has the appropriate resources and 
staff necessary to fulfill its statutory mission and support 
the Financial Stability Oversight Council.

Q.3. In your confirmation hearing, you stated that the OFR 
Director does not have independence when it comes to setting 
the agency's budget and that the decision is a ``conversation 
with the Treasury Secretary.'' Section 152(c) and (d) of Dodd-
Frank states that the Director must consult with the Treasury 
Secretary when setting budget and staffing levels, but the 
final decision rests with the Director. Per your reading of 
Dodd-Frank, which official has final say over the OFR's budget? 
If you disagree with the Treasury Secretary regarding the 
agency's budget and staffing levels, will you defer to the 
Treasury Secretary or will you implement budget and staffing 
levels that you think are appropriate?

A.3. Section 152(c) of the Dodd-Frank Act states the 
``Director, in consultation with the Chairperson, shall 
establish the annual budget of the Office.'' Section 152(d) 
states that the ``Director, in consultation with the 
Chairperson, may fix the number of, and appoint and direct, all 
employees of the Office.'' If confirmed, and in consultation 
with the Chairperson--as directed by statute--I will implement 
a budget and make staffing decisions that allow the agency to 
fulfill its statutory mission and support the Financial 
Stability Oversight Council.

Q.4. The Office of Financial Research recently published a 
proposed rule to collect additional data on the repurchase 
agreement (repo) market. According to the proposed rule, 
regulators would only have access to data on roughly 50 percent 
of the repo market after the new data is collected. This short-
term funding market played a central role in the 2007-2008 
financial crisis, as a run on these liabilities helped bring 
down investment banks Bear Stearns and Lehman Brothers--while 
causing significant stress at countless other institutions. Ten 
years after the financial crisis, it is troubling that 
regulators do not have the data necessary to clearly evaluate 
this market. Do you commit to implementing the proposed data 
collection and expanding its scope to provide regulators with a 
clear picture on 100 percent of this systemically important 
funding market?

A.4. If confirmed, I will work with the other members of FSOC 
to evaluate data needs in order to fulfill OFR's statutory 
mission, including evaluating the potential need for additional 
data collection in the short-term funding market.
    I will also commit to reviewing the proposed rule to 
determine if the size and scope of the information proposed to 
be collected is appropriately calibrated, and allows the OFR to 
fulfill its mission and support the Financial Stability 
Oversight Council.

Q.5. One part of the OFR's mission is to conduct long-term 
research on emerging risks to the broader financial sector. The 
agency was designed to be an independent source of such 
research--driven by data, not politics. How will you set the 
agenda for OFR's research projects? Do you think OFR should 
take requests for research from the financial services 
industry? Do you commit to publishing rigorous, data-driven 
research, even if you may personally disagree with some of the 
conclusions?

A.5. OFR's core purpose is to serve FSOC and its member 
agencies. I believe the OFR's mission is critically important 
in promoting a more resilient financial sector by providing the 
FSOC with firmly grounded, and data-driven, research it needs 
to evaluate and address risks to financial stability. If 
confirmed I will determine what research is needed based on an 
assessment of what will best serve the FSOC in fulfilling this 
mission in both the short-term and the long-term.
    My academic career taught me the importance of not 
pretending to know the answer to important questions before 
seeing the facts. Instead one must apply rigorous empirical 
analysis to see what the real world data show.

Q.6. What will be your research priorities for the OFR, if 
confirmed?

A.6. If confirmed, my first goal is to provide FSOC and its 
member agencies with the firmly grounded and data-driven 
research they need to evaluate and address risks to financial 
stability. Fulfilling this goal is important for robust 
economic growth and taxpayer protections. My second goal is to 
build out OFR's foundational work to strengthen market 
discipline by increasing financial market transparency. Working 
toward this goal promotes financial stability and strengthens 
economic growth.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                     FROM DINO FALASCHETTI

Q.1. Do you agree that the recent rule proposal on cleared 
transactions in the repurchase agreement market (RIN 1505-AC58) 
is broader in scope and seeks data fields beyond what is 
necessary to inform the FSOC according to the stated purpose 
explained in the accompanying release to the proposal?

A.1. If confirmed, I will commit to reviewing the proposed rule 
to determine if the size and scope of the information proposed 
to be collected is appropriately calibrated, and allows the OFR 
to fulfill its mission and support the Financial Stability 
Oversight Council.

Q.2. Would you be open to industry comment on how this proposal 
could be made less burdensome to the industry by revisiting 
both the scope and implementation timing for the proposal?

A.2. According to the Federal Register, the OFR is receiving 
public comment on the rule until September 10, 2018.

Q.3. If confirmed, how will you reconcile any future OFR 
rulemakings with the Trump administration's efforts to 
streamline regulation and regulatory burdens? Further, if the 
OFR intends to collect additional data from the financial 
services industry given all the recent Government data 
breaches, how will you work to ensure privacy and appropriate 
security controls are in place around the data once received by 
OFR?

A.3. Data security is of the utmost importance to the mission 
of the OFR. If I am confirmed, rest assured that I will take 
this responsibility very seriously and will review the policies 
and procedures that are in place in order to determine if they 
are adequate to maintain the security of the data. Doing so is 
important to maintain the confidence of the entities from which 
the data are being collected and the confidence of the American 
people in our broader financial markets.
                                ------                                


         RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
                     FROM DINO FALASCHETTI

Q.1. As you know, OFR is designed not only to be an 
independent, data driven, deeply analytical, and apolitical 
research organization, but also to serve as an early warning 
system to identify risks before they snowball into another 
financial crisis.
    In a June 11, 2018, Yahoo! Finance article, the Chief 
Investment Officer of Global Fixed Income at Goldman Sachs 
Asset Management was quoted as saying the following:

        When the music stops I do think it's going to be pretty 
        ugly . . . We've sown the seeds for the next downturn 
        and there's a lot of similarities . . . After '08 
        everyone was like, `I can't believe we did all those 
        very stupid things.' But we're doing them all over 
        again.

    What are the one or two risks that you already know should 
be explored and will commit to explore comprehensively, if 
confirmed?

A.1. First, I would want to learn more about how OFR's own 
monitors and research rank such risks and the basis for those 
rankings. OFR employs a number of very capable researchers and 
support staff, and I would want to consult with the staff 
before providing any ranking.
    Second, we must always be vigilant about the potential 
buildup of risks to the financial system, such as the risks 
that could be posed by cybersecurity threats or overreliance on 
short-term wholesale funding.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
           SENATOR CORTEZ MASTO FROM DINO FALASCHETTI

Q.1. President Trump has supported cutting OFR's budget and 
staff by nearly 38 percent. \1\
---------------------------------------------------------------------------
     \1\ Savransky, Rebecca. ``Trump Slashing Staff, Budget at Office 
of Financial Research: Report''. The Hill. December 6, 2017. Available 
at: http://thehill.com/homenews/administration/363493-trump-slashing-
staff-budget-at-office-of-financial-research-report.
---------------------------------------------------------------------------
    Do you support these cuts?

A.1. I understand efforts are underway to reorganize the OFR. 
If confirmed, I will review these reorganization efforts to 
ensure that the agency has the appropriate resources and staff 
necessary to fulfill its statutory mission and support the 
Financial Stability Oversight Council.

Q.2. Since the beginning of the Trump administration, FSOC has 
voted to deregulate, or backed down on systemically important 
designations, including a designation for AIG and agreeing to 
dismiss the SIFI designation of MetLife. The Office of 
Financial Research is responsible for supporting FSOC in their 
activities, including analyzing data and performing long term 
research.
    Do you believe there are any current risks in our financial 
system that pose challenges to our short-term or long-term 
economic health? If so, what are they?

A.2. If confirmed, I will review data, and work with FSOC 
member agencies to identify possible sources of systemic risk 
that could impact our economic health, including potential 
cybersecurity risks and those related to overreliance on short-
term wholesale funding. I look forward to working with members 
of this Committee and your staff to outline these issues, 
including in OFR's Annual Report to Congress as required by 
statute.

Q.3. A recent report by the Treasury Department advised FSOC to 
make SIFI designations for nonbank financial institutions based 
on complex activity analysis, as opposed to utilizing the $50 
billion consolidated assets threshold. However, I am concerned 
by a recent New York Times article that highlighted gaps in 
regulators' awareness of the derivatives market, particularly 
in regards to American banks' exposure to foreign markets. \2\
---------------------------------------------------------------------------
     \2\ Flitter, Emily. ``Decade After Crisis, a $600 Trillion Market 
Remains Murky to Regulators''. New York Times. July 22, 2018. Available 
at: https://www.nytimes.com/2018/07/22/business/derivatives-banks-
regulation-dodd-frank.html.
---------------------------------------------------------------------------
    Do you support FSOC shifting away from asset threshold to 
activities analysis to inform SIFI designations?

A.3. Examining institutions based on activities will allow the 
FSOC to better understand the specific risks an institution may 
pose to the financial system, thus improving the process for 
monitoring risk to the financial system. If confirmed, I will 
work to provide the FSOC with firmly grounded, data-driven 
research that will aid in this process and allow them to 
evaluate and address risks to financial stability.

Q.4. Do you believe that current data reported to regulators 
accurately depicts nonbank financial institutions' risk 
exposure?

A.4. While I cannot speak for the specific data collection 
efforts of regulatory agencies, I believe the OFR's mission is 
critically important in promoting a more resilient financial 
sector by providing the FSOC with firmly grounded, data-driven 
research it needs to evaluate and address risks to financial 
stability. If confirmed I will determine what research is 
needed based on an assessment of what will best serve the FSOC 
in fulfilling this mission.

Q.5. Do you believe financial regulators have the staff and 
resources needed to request and analyze data on derivatives 
trades?

A.5. While I cannot speak for other regulatory agencies, if 
confirmed I will work in consultation with the Chairperson of 
FSOC to ensure that OFR has the appropriate resources and staff 
necessary to fulfill its statutory mission and support the 
Financial Stability Oversight Council.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR JONES
                     FROM DINO FALASCHETTI

Q.1. The work conducted by the Office of Financial Research has 
many audiences--academics, industry, policymakers, and the 
public.
    One of those critical roles is producing research that can 
help inform legislators as we examine financial markets, now a 
decade after the financial crisis.
    Having experience in Congress, what are some areas of 
opportunities you can see for OFR to expand its relationship 
with lawmakers, while maintaining its independence?

A.1. If confirmed, I look forward to working with you, other 
Members of Congress--especially those on the Senate Banking and 
House Financial Services Committees--and the other FSOC members 
to promote a more resilient financial sector. I sincerely look 
forward to building and maintaining a constructive dialogue 
with members of both chambers and both sides of the aisle while 
respecting OFR's statutory mission. As a Congressional staffer, 
I very much appreciate the role of Congress and the importance 
of keeping Congress informed about these important issues 
affecting Americans across the country.
              Additional Material Supplied for the Record
LETTER SUBMITTED IN SUPPORT OF THE NOMINATION OF ELAD ROISMAN AND DINO 
                              FALASCHETTI
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

  LETTERS SUBMITTED IN SUPPORT OF THE NOMINATION OF MICHAEL R. BRIGHT
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]