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34–672 PDF 2007

COMMITTEE ON FOREIGN INVESTMENT

IN THE UNITED STATES (CFIUS),

ONE YEAR AFTER DUBAI PORTS WORLD

HEARING

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

FEBRUARY 07, 2007

Printed for the use of the Committee on Financial Services

Serial No. 110–2

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin, 

LINCOLN DAVIS, Tennessee 

ALBIO SIRES, New Jersey 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

TIM MAHONEY, Florida 

CHARLES WILSON, Ohio 

ED PERLMUTTER, Colorado 

CHRISTOPHER S. MURPHY, Connecticut 

JOE DONNELLY, Indiana 

ROBERT WEXLER, Florida 

JIM MARSHALL, Georgia 

DAN BOREN, Oklahoma 

SPENCER BACHUS, Alabama 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

RICK RENZI, Arizona 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MARSHA BLACKBURN, Tennessee 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III)

C O N T E N T S 

Page 

Hearing held on: 

February 7, 2007 .............................................................................................. 1

Appendix: 

February 7, 2007 .............................................................................................. 61

WITNESSES 

WEDNESDAY, FEBRUARY 7, 2007

Bartlett, Steve, President and CEO, Financial Services Roundtable .................. 45

Heyman, David, Director, Homeland Security Program, Center for Strategic 

and International Studies ................................................................................... 52

Lowery, Hon. Clay, Assistant Secretary, U.S. Department of the Treasury ...... 5

Malan, Todd M., President and CEO, Organization for International Investment ...................................................................................................................... 46

Marchick, David, partner, Covington and Burling ............................................... 48

Nichols, Robert S., President and COO, Financial Services Forum .................... 50

O’Hanlon, Michael, senior fellow, Foreign Policy Program, Brookings Institution ........................................................................................................................ 47

APPENDIX 

Prepared statements: 

Brown-Waite, Hon. Ginny ................................................................................ 62

Cleaver, Hon. Emanuel .................................................................................... 63

Putnam, Hon. Adam H. .................................................................................... 65

Pryce, Hon. Deborah ........................................................................................ 67

Waters, Hon. Maxine ........................................................................................ 69

Bartlett, Steve ................................................................................................... 74

Heyman, David ................................................................................................. 83

Lowery, Hon. Clay ............................................................................................ 88

Malan, Todd M. ................................................................................................ 93

Marchick, David ................................................................................................ 104

Nichols, Robert S. ............................................................................................. 132

O’Hanlon, Michael ............................................................................................ 163

(1)

COMMITTEE ON FOREIGN INVESTMENT 

IN THE UNITED STATES (CFIUS), 

ONE YEAR AFTER DUBAI PORTS WORLD 

Wednesday, February 7, 2007

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 10 a.m., in room 2128, 

Rayburn House Office Building, Hon. Barney Frank [chairman of 

the committee] presiding. 

Present: Representatives Frank, Waters, Maloney, Gutierrez, 

Velazquez, Watt, Sherman, Meeks, Moore of Kansas, Capuano, 

Clay, Baca, Green, Cleaver, Bean, Davis of Tennessee, Ellison, 

Klein, Mahoney, Wilson, Perlmutter, Donnelly, Wexler, Marshall, 

Boren; Bachus, Castle, Lucas, Paul, Jones, Biggert, Capito, Feeney, 

Hensarling, Garrett, Neugebauer, Davis of Kentucky, McHenry, 

Putnam, Blackburn, Bachmann, and Roskam. 

Also present: Representative Crowley. 

The CHAIRMAN. Today’s hearing of the Committee on Financial 

Services will now come to order. This is a hearing on the legislation 

that will establish statutorily the Committee on Foreign Investment in the United States. 

Let me ask unanimous consent that we limit opening statements 

to two and two. Two and two does not make three. There are three 

members of the committee here. 

We will limit opening statements, if there is unanimous consent, 

to no more than the chairman and the ranking member of the full 

committee, and the ranking member of the subcommittee or their 

designees. 

Is there any objection? 

The Chair hears none. In light of the sparsity of the other 

attendees—I think we may have worn out members’ capacity to sit 

in hearings, having sat from 10 a.m. to 6:30 p.m. yesterday on New 

Orleans—I would ask unanimous consent that our former colleague, who has moved on to better things, but decided to slum 

today and re-join us, be allowed to participate in the hearing, the 

gentleman from New York, Mr. Crowley 

Is there any objection? 

Hearing none, Mr. Crowley will be allowed to participate. 

With that, I’m going to turn to the ranking member, not of this 

subcommittee, but of the Subcommittee on Financial Institutions, 

Mrs. Maloney, who was the ranking member last year of the approVerDate 0ct 09 2002 15:46 May 01, 2007 Jkt 034672 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 K:\DOCS\34672.TXT HFIN PsN: TERRIE
2

priate subcommittee. She has done major work on this. I will turn 

to her for an opening statement. 

Mrs. MALONEY. I want to thank the chairman and ranking member for holding this hearing and for making it a priority, which it 

should be. I am delighted that we are moving forward with the bipartisan CFIUS reform bill, which protects national security and 

grows our economy by encouraging safe foreign investment. 

This bill, which I introduced in the last Congress with Representatives Price, Crowley, and Blunt, has strong bipartisan support, including the chairman and ranking member of this committee, as 

well as Chairman Thompson and Ranking Member King of the 

Homeland Security Committee. 

The Committee on Foreign Investment in the United States or 

CFIUS, an interagency group of 12 agencies headed by Treasury, 

were thrown into the spotlight by the Dubai Ports World debacle 

almost a year ago. 

Suddenly, Congress found out that management of six of our 

largest ports had been sold to the Government of Dubai without 

any senior political officer knowing anything about it. 

Clearly, the process by which foreign acquisitions in this country 

were reviewed lacked transparency and accountability. Our national security was not getting proper attention. 

At the same time, I, and the other sponsors of this bill, believed 

strongly in the benefits of safe foreign investment, jobs in the 

United States, and greater opportunities for American business 

abroad. 

The process for vetting foreign investments must not become so 

unwieldy or so uncertain that valuable foreign investment is needlessly discouraged, hampering economic growth. 

Many observers, both domestic and foreign, think our bill has 

struck this balance successfully. This legislation proposes several 

important changes to the current regulations governing foreign investment to improve national security. 

First, it will ensure that foreign-government-controlled entities 

will get special scrutiny. As we saw with Dubai Ports World, government-controlled entities may have agendas other than profit 

and may have access to funds far beyond those available to private 

companies to accomplish them. 

Second, it will ensure that the top level political appointees in 

each participating department review and sign off on transactions 

so that there is a better opportunity for the exercise of judgment 

and more accountability. 

There are also several aspects of the bill that provide greater certainty to the process, to improve the climate for safe foreign investment. 

First, we have preserved the 30-day timeline, which is similar to 

other reviews, such as the anti-trust reviews, which industry regards as critical for most deals. 

Second, the bill provides very restrictive rules for any re-opening 

of the CFIUS process. 

Finally, the bill requires greater reporting to Congress, but only 

of all completed actions by CFIUS. The bill does not require reporting during the process since that injects unnecessary political risk 

and would severely chill safe foreign investment. 

3

In sum, this bill is a sensible balanced approach to making sure 

foreign acquisitions do not jeopardize our national security while 

providing greater certainty and predictability to encourage safe foreign investment. 

I urge my colleagues to support H.R. 556, and I look forward to 

the testimony and welcome today Mr. Lowery. 

The CHAIRMAN. The Chair now recognizes the ranking member, 

the gentleman from Alabama. 

Mr. BACHUS. Thank you, Chairman Frank. I certainly appreciate 

you scheduling this important hearing. Let me also thank Representative Maloney for introducing this legislation so early in the 

110th Congress, and Representative Deborah Pryce, a member of 

our committee, for serving as an original co-sponsor. 

Chairman Frank and I are also original co-sponsors of H.R. 556, 

which is identical to the legislation that passed the House by a 

margin of 424–0 last year. I think some changes we will make next 

week will even strengthen that bill. 

Reform of the Nation’s foreign investment vetting process became 

an issue last year when the Committee on Foreign Investment in 

the United States received criticism for failing to question the safety and security implications stemming from Dubai Ports World’s 

purchase of commercial operations at several American ports. 

Mr. Chairman, the key issues we face transcend the Dubai Ports 

World deal or CFIUS. H.R. 556 meets our challenges by advancing 

three important objectives. 

The first objective is to encourage foreign investment in our economy. Legislation should do nothing to slow that investment or discourage it. The surest way to ensure that America remains strong 

and secure is to strengthen our economy and maintain global competitiveness. 

While we should never underestimate the threat to U.S. interests 

from economic espionage or from critical technologies falling into 

the wrong hands, we must also recognize that discouraging intentionally or unwittingly foreign investment or otherwise restricting 

global capital flows poses a serious threat to our economic security 

and prosperity. 

The second objective is transparency. Many Members of Congress 

learned of the Dubai Ports World situation from newspapers. This 

bill will ensure that as a matter of policy, CFIUS keeps Congress 

in the loop. 

Third, we need empowerment of experts best qualified to assess 

national security issues. To that end, this bill ensures that the Director of National Intelligence can provide important and timely 

input to CFIUS based on the most current intelligence available, 

and guarantees that the Department of Homeland Security will be 

a full participant in the process. 

Mr. Chairman, the world is a lot different than it was in 1975, 

when President Ford first created CFIUS. It is far different than 

in 1988, when the outline of the current review process was established. 

Terrorism requires us to exercise increased vigilance while the 

demands of a global economy necessitate that America compete aggressively for foreign investment capital. 

4

The ‘‘siren song’’ of protectionism is one that must be resisted if 

we are serious about maintaining America’s competitive standing 

in the world. 

This bill modernizes the way CFIUS does business, ensuring that 

both our security and economic needs are met. 

Once again, I congratulate the sponsors of this bill and look forward to working with them to move the legislation through our 

committee and through the House. 

Thank you. 

The CHAIRMAN. I’m a very strong supporter of this bill. I think 

it is a good thing that we have this bipartisan consensus. Foreign 

direct investment is a good thing for our economy. 

There has been some confusion. Unfortunately, in the current 

context, the word ‘‘foreign’’ sometimes gets people a little jittery. 

That is an indication of why we need to make progress in dealing 

with excessive inequality. This should not be at all controversial, 

but I can understand why some people fear it. 

If they look specifically at what we are talking about, it should 

be very clear that we are talking about people who do not live in 

America putting money here in direct investments, i.e., things that 

will create jobs. 

It is true that we had a problem with the Dubai Ports situation. 

That was due to a lapse in judgment on the part of people in this 

Administration. Someone should have said to the people from 

Dubai that they are very nice people with whom we have no particular quarrel, but they should not take it personally if we explain 

to them that in the current context in the world, having people 

from their part of the world controlling shipping was likely to cause 

more trouble than it was worth. They should have been steered 

into other investments. 

We should not allow that political misjudgment at the Administration level to cause us to skew a process which is on the whole 

good for us. Yes, there will be exceptional cases of national security, but they are exceptional. 

I must say that many of the arguments I have seen based on national security result from particular groups in society understandably, but inaccurately, identifying their own economic wellbeing 

with national security. 

We all like to think that our prosperity is somehow important, 

not just to us, but to society as a whole. That isn’t always the case. 

What we now have is a good set of rules that will allow us—the 

general rule will be to allow things in. 

It is also obviously the case that if someone were investing 

money in America, the notion that your investment is going to have 

to sit and become a political football before some Congressional 

committee or somebody else for some period of time, it is unlikely 

to encourage you to invest here. We do not want to interfere with 

that process. 

There have been amendments suggested that we are talking 

about. People should be on notice that we plan to mark up this bill 

in committee next week and have it on the Floor soon, I would 

hope, either next week or as soon as we come back from recess. 

We hope to send the rest of the world a signal that we regard 

this as a place where they should feel comfortable in investing. Our 

5

message to others in the world is bring us your money to create 

jobs and we will treat you and your money very nicely. That is the 

essential message of this legislation. 

Mr. BACHUS. Any members who wish to make an opening statement? 

The CHAIRMAN. We have one more statement available for the 

minority if anyone would like to make one, but it is not obligatory. 

We will now proceed with our witnesses. We will begin with the 

representative of the Treasury. Let me say that I have spoken to 

Secretary Paulson and Undersecretary Kimmitt. We understand 

this is something that is being considered at the highest levels at 

Treasury, and we appreciate that. 

The Treasury is represented here today by Clay Lowery, who is 

the Assistant Secretary for the Department of the Treasury. Mr. 

Lowery, please proceed. Your full statement will be, without objection, put into the record. 

STATEMENT OF THE HONORABLE CLAY LOWERY, ASSISTANT 

SECRETARY, U.S. DEPARTMENT OF THE TREASURY 

Mr. LOWERY. Thank you very much, Mr. Chairman, Ranking 

Member Bachus, Congresswoman Maloney, and the other distinguished members of the committee. 

Your opening statements are actually very close to my statement. 

I will try to be very brief. 

Today I am here to update the committee on the changes that 

we have made— 

The CHAIRMAN. That is probably a good model for Treasury to 

follow for the future. I mean the similarity, not the brevity. 

Mr. LOWERY. I want to update the committee on basically the 

process changes we have already made in the past year and how 

many of them reflect, actually, what is in the House bill. 

In the last Congress, this committee was instrumental in shaping 

a CFIUS reform bill which passed the House unanimously. We believe the goals of this bill, ‘‘to ensure national security while promoting foreign investment and the creation and maintenance of 

jobs’’, are consistent with the goals that the Administration has 

pursued in trying to strengthen the CFIUS process. 

Based largely on concerns that were raised by the Congress, the 

Administration has made a number of changes in the past year, 

and while the list of changes is too many to go through in my oral 

testimony, I would like to highlight three of them in particular that 

came out of the Dubai Ports World transaction. 

First, we have improved our communications with Congress. 

CFIUS now provides briefing materials on every single case for 

which action is concluded under the Exxon-Florio amendment. In 

addition, CFIUS provides periodic briefings to its oversight committees describing the cases investigated. 

Second, to strengthen accountability, every case is now briefed 

up to the highest levels within CFIUS agencies, and only individuals who have been presidentially appointed and Senate confirmed 

can certify the conclusion of a CFIUS investigation. 

Third, the role of the intelligence community has been formalized 

and enhanced. The Director of National Intelligence, using the 16 

different intelligence agencies, examines every transaction, particiVerDate 0ct 09 2002 15:46 May 01, 2007 Jkt 034672 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\34672.TXT HFIN PsN: TERRIE
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pates in all CFIUS meetings, and provides a broad and comprehensive threat assessment to the committee. 

The legislation introduced by Congresswomen Maloney and Pryce 

and others covers many of these reforms. Last year in its newsletter, the Administration outlined concerns with the House and 

Senate bills, and my written testimony covers many of those issues. 

Overall, we were very impressed by the efforts of the House in 

structuring a balanced bill that was done in such a bipartisan manner. 

In my oral testimony, I would only want to point out two concerns that we have. As you will hear from your next panel, investors like clarity and certainty, which this bill helps provide. 

However, some specific provisions could cause unnecessary bureaucratic delays that would extend investigations beyond the 

timeline set in the legislation. 

For instance, not allowing the delegation of authority beyond the 

top two officials in an agency to conclude transactions on even the 

most routine cases is a recipe for delaying investigations based 

more on the rigidity of clearance processes than on the merits of 

a case. 

In addition, such a formula will focus the attention of the most 

senior level officials on everything as opposed to having them focus 

on those priority cases that are of most concern. 

Secondly, we agree that foreign-government-controlled cases 

should be given higher scrutiny by CFIUS. By requiring a potential 

75-day investigation on all foreign-government-controlled cases, the 

legislation could take routine transactions that have little to do 

with national security and subject them to a drawn out process 

that could divert resources from other cases that need attention. 

As members of this committee know, it is important that we get 

this right. Today, many firms and countries in the world are watching this process, and they are asking: ‘‘Is the United States closing 

its borders to investment and competition? Should we put our 

money and talent elsewhere? If the United States has a high process barrier to investment, we certainly can make ours even more 

onerous, or should we even take retaliatory action against U.S. 

firms in our countries if they take action against ours?’’ 

We all realize that our primary goal is to protect national security, but we also need to protect open investment in the United 

States. 

Traditionally, the United States has been one of the most open 

and attractive climates for investors to put their money. This openness creates competition, jobs, and wealth, and is the underpinning 

of our economic success. 

To sum it up, we should never forget that a domestic climate conducive to foreign investment is also one of the keys to strengthening our national security. 

Thank you very much. I will take any questions you have. 

[The prepared statement of Hon. Clay Lowery can be found on 

page 88 of the appendix.] 

The CHAIRMAN. Thank you, Mr. Lowery. We appreciate the conversations we have been having about those amendments. I believe 

we are going to be able to work out agreements on many of these 

issues. 

7

I will now turn to Mrs. Maloney to begin the questioning. 

Mrs. MALONEY. I appreciate your testimony, your meetings, the 

meeting of Secretary Paulson and others on this issue. I join the 

chairman in wanting to respond and work with you. 

This bill was originally introduced because we were concerned 

that the CFIUS process did not adequately protect national security. I want to talk about national security just for a moment. 

The Washington Post reported last Friday that Dubai Ports 

World, through its subsidiary, had bought the Hotel Washington on 

15th Street. As you know, if you have been to the roof, it is only 

a stone’s throw from the second floor residence of the White House. 

I was struck by this because this is exactly the scenario that the 

Administration used last year as an example of a foreign government purchase that would be outside of CFIUS’ review. 

When I was urging them to take a broader view of the national 

security right after the Dubai Ports World, they said, well, we will 

look at ports, but we will not look at hotels. Yet this hotel is very 

close to the White House. 

To my mind, I think this example illustrates exactly the criticism 

that the GAO has leveled at CFIUS in its October 5th report. They 

said that CFIUS took too narrow a view of national security by 

only focusing on defense-related sectors. 

I am concerned that attitude encouraged companies not to submit deals to CFIUS, including deals that should have been reviewed. For example, when I urged CFIUS to review the purchase 

of the second largest voting machine company in the United States 

by a Venezuelan company, the company, SmartMatic, publicly took 

the position that they did not have to go through the CFIUS review, because a deal involving voting machines just was not a 

CFIUS issue period. I feel otherwise. I feel voting machines are 

part of our national security. As you know, this went on for 

months. 

In this day and age, there are really no sectors that we can rule 

out as never posing a national security issue. I was glad to see that 

CFIUS gave the SmartMatic deal a careful review and the company has withdrawn its application and is selling Sequoia. 

I am not saying that the Hotel Washington deal does pose an 

issue. I am sure you are on top of it. I think it does show that we 

need to have a broad and flexible definition of national security and 

not exclude any specific sector. 

My question is what approach is CFIUS taking to this issue now? 

How does the committee define ‘‘national security’’ for purposes of 

its review? Are there any sectors that you now consider that are 

out of bounds? 

Mr. LOWERY. Thank you for the question. The GAO, in 2005, part 

of its study, they believed that the CFIUS body and actually particularly the Treasury Department, was defining ‘‘national security’’ way too narrowly, and just doing it on defense issues. 

We think the GAO had some points there. We are not sure we 

completely agree. Right now, if you look at the cases that CFIUS 

has taken on over the last year, there were 113 filings last year, 

which is basically the most since 1991, of those cases, roughly 25 

percent of them were in the defense industry. About 60 percent 

probably were in what would best be described as a broad category 

8

of critical infrastructure, including things like voting machines, 

ports, energy companies, and so forth. 

We actually have tried to take a fairly flexible view. I can honestly say that in terms of national security, since the definitions of 

‘‘national security’’ have clearly changed over time, 9/11 showed 

how much it can change, I think CFIUS has tried to change with 

that. 

I think the GAO study was a good point of reference for us to 

make sure that we look at our procedures as carefully as possible. 

We agree with you that a broad and flexible view of national security is necessary, and that is how we are trying to do things 

within CFIUS. 

Mrs. MALONEY. What is Treasury’s view of the evergreen provisions? 

Mr. LOWERY. I think the evergreen provision, which you will 

hear about clearly a lot on your next panel, is quite controversial. 

I think our view is just like the legislation has, basically there 

needs to be procedural hurdles to putting something like that in 

place. It is a tough provision. I think that the legislation tries to 

get at that fairly well. That is how we are trying to view it within 

the Administration, which is it should be used in very rare circumstances. 

I think that what we need to keep in mind is the importance of 

a good open investment climate, and I think the business community can talk about that better than I can. 

Thirdly, and we do really need to reflect on this, what does it 

mean for our companies abroad. There are countries that look at 

certain provisions that we put in place or certain processes that we 

put in place and do they then submit our companies through the 

same processes. 

I think our overall view is it should be used rarely and make 

sure that we have procedural steps to put a high hurdle in the legislation attempts to get at most of those issues. 

The CHAIRMAN. The gentlewoman’s time has expired. The gentleman from Alabama. 

Mr. BACHUS. Thank you, Assistant Secretary. 

Looking at this bill, it is the same text that was introduced and 

went to the Floor and passed last year. Are you aware that at least 

two of the sections dealing with the Director of National Intelligence—one seems to give 30 days and one seems to give a different time period? 

Have you corresponded about what you think would be the right 

approach on that? 

Mr. LOWERY. We think that the bill did a good job of making sure 

that we formalize the process of the Director of National Intelligence. The Director of National Intelligence provides input into 

every single CFIUS transaction. 

The only place we are worried about it is if it starts stepping into 

the policy role. I do not think the intelligence community thinks 

that is appropriate, and I do not think we think it is appropriate. 

The second area is there is a provision in the bill about having 

a minimum of 30 days for the intelligence community to look at the 

reviews. I think this was an important attempt by Congress, and 

9

I know the Homeland Security Committee, in particular, was interested in this issue. 

The only problem with it, it was the right thing to do, the right 

attempt, but the only problem with it was that by putting in that 

minimum 30 days, you actually could undermine the structure of 

the bill, which is to try to clear out transactions within 30 days. 

We have talked to the intelligence community. They actually 

right now are providing—it takes them roughly about 20 days to 

provide their intelligence assessment. Sometimes, a little less. 

Sometimes, a little more. That allows the CFIUS people to review 

what the intelligence community looks at, which is the threats of 

a transaction. 

I think if we can provide a little more flexibility on that, that 

would be helpful, and we would be happy to work with the committee on that. 

Mr. BACHUS. Take out one of the sections? 

Mr. LOWERY. Yes. We would be happy to work with you on how 

to structure that better. 

Mr. BACHUS. In the past, there have been concerns from some 

that the Treasury Department has ignored security related input 

from other CFIUS agencies in favor of encouraging foreign investment. 

Was that ever true? Is it possible for the Department of the 

Treasury to overrule the views of the Defense Department? It’s 

been reported. 

Mr. LOWERY. The answer is no, in terms of overruling the Defense Department. Each agency basically can continue the investigation of a transaction if they have any concerns with that transaction, whether it is Defense, Justice, Homeland Security, or Treasury, for that matter. 

Treasury takes national security concerns very seriously. Obviously, we want open investment in this country. I think people at 

the Department of Defense would say they want open investment 

in this country. 

When I heard about this, I found it almost laughable that this 

was being applied, given the fact that a bunch of people at the 

Treasury Department are going to explain to the Secretary of Defense or the Defense Deputy Secretary what ‘‘national security’’ 

means. 

It’s incomprehensible. I do not know how we would be able to do 

it. 

Instead, what we tried to do is chair the committee, but work as 

a team, together with Defense. 

Mr. BACHUS. It seems like some of the legislation that was proposed last year is more protectionism than it is security related. It 

almost was trying to turn CFIUS into protectionist legislation as 

opposed to security related legislation. 

Mr. LOWERY. That is our greatest concern. I will say that I felt 

the House did a very good job of trying to balance those issues. Obviously, we have a few small concerns. In general, I think the 

House tried to, in my view at least, stay away from those protectionist sentiments that could be there. I understand them. 

You are right. National security is what we should be focused on, 

not protectionism. 

10

Mr. BACHUS. There was a dramatic increase in CFIUS filings in 

2006. Were all those necessary? Was there an unnecessary strain 

on your resources from all these filings? 

Mr. LOWERY. I think the answer is that probably not all of them 

were necessary. I think there was an increase in the case filings 

for a few reasons. 

First, frankly, the U.S. economy is going pretty well and people 

want to invest in the United States. Second, it kind of goes to Congresswoman Maloney’s point, which is that we have a more flexible 

and broad definition of ‘‘national security.’’ 

Third, obviously, Dubai Ports World brought in a lot of attention 

to the CFIUS process, which increased a lot of filings, and finally 

fourth, by the nature of your question, you are right. There were 

some filings that were probably more defensive than anything else, 

filing for the sake of filing. 

Obviously, that does stretch the resources more just because you 

have to look at every single case. We are trying to address that by 

increasing our resources. That is a concern and hopefully as we 

provide more clarity and certainty through a legislative process and 

through an executive order process at some point, that will help 

firms. 

Mr. BACHUS. I do think the key is that Dubai really threw the 

foreign investment community into a lot of uncertainty. I think it 

restricted investment in the United States. 

Mr. LOWERY. I agree with you. That is something that we have 

to be very careful about. 

The CHAIRMAN. Thank you. There are three seats in the front 

row, and I am very much in favor of the public being able to sit. 

Since we do not expect to get any more witnesses, if people who 

are standing up want to come sit down, please feel free to do so. 

I regret the fact that the size of this committee restricts the availability of seats for the public. Essentially, given the way we finance 

the Congress, I will quote Ronald Reagan, ‘‘You paid for these 

chairs, you the taxpayers, you might as well sit in them.’’ 

Now I will go to the gentlewoman from California. 

Ms. WATERS. Thank you very much, Mr. Chairman, members, 

and Congresswoman Maloney. I came over today, even though I 

have two committee hearings, because I wanted to make sure that 

I heard everything about this investment oversight, and whether or 

not Congress is doing enough to ensure that we are protected 

against terrorist threats. 

I am particularly concerned about this issue. I think it was just 

yesterday that it was revealed that one of the members of the Iraqi 

Government was discovered to have been involved in terrorist activities. 

What does that have to do with this? It simply says that if we 

are to fight terrorism, and if this is the number one issue of this 

Administration, we have to do it in every way possible, and we 

have to consider all that we do in terms of making our ports and 

any of our assets available in any way to any other countries, and 

any other investment opportunities. 

I just want to make sure that we are doing our job and that we 

are raising the right kinds of questions. For example, is what we 

11

are doing adequate and will this bill that is being proposed close 

the loopholes? 

Mr. LOWERY. Let me try to answer that. We think that we have 

improved the process and strengthened it enormously over the last 

year. We think that the bill tries to draw the right balance between 

making sure that we protect national security and that we have an 

open investment process. 

As to some of the holes that you mentioned, we think we have 

filled them pretty well. We are addressing a lot of the issues that 

Congresswoman Maloney raised in her points earlier about having 

a broad and flexible definition of national security. 

I think the answer is yes, obviously, we need some tweaks here 

or there, but I think in general, we are filling the holes that you 

have identified. 

Ms. WATERS. Let me just say that in reading over parts of your 

testimony, you indicate that foreign investment is key to our economic expansion and development. I want to make sure that foreign direct investment does not trump safety. 

Mr. LOWERY. We agree completely. 

Ms. WATERS. When you consider that we need, we want, and we 

encourage foreign investment, how far are you willing to go? 

Mr. LOWERY. I think that is the process that CFIUS tries to address. We try to view the transactions that are of a national security concern, and the ones that are of the most national security 

concern, we try to address through either a very, very rigorous investigation, tough mitigation agreements in cases where we are 

trying to take risks, or potentially even not allowing those transactions to happen. 

It is done on a case-by-case basis, which I think is best because 

otherwise you can get into an area where you start chilling foreign 

investment from coming into this country. 

Ms. WATERS. Mr. Chairman, it appears that our ports are the 

most vulnerable in this war on terrorism and that the containers 

that come into this country are still not examined either in our 

ports or foreign ports. It is still a very, very limited operation. 

How do we view foreign investment in relation to the lack of the 

technology and the ability to x-ray these containers? 

Mr. LOWERY. You are probably going a little beyond my expertise. In terms of doing security on ports, that is the responsibility 

of our Port Authority, Customs, and Coast Guard. It actually is not 

the responsibility of investors. 

The investors obviously have to do security at their fence line 

and things like that. I think what our Homeland Security Department is trying to do is trying to make sure that security does not 

start just at the U.S. border, but overseas. 

I know they have worked very hard around the world with a 

number of countries, including the United Arab Emirates, to try to 

make sure that we have as secure a system as possible to prevent 

those very dangers that you are worried about. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

The CHAIRMAN. Mr. Neugebauer. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. 

I was glad to hear you talk about the impact of foreign investment on our country. Secretary Lowery also talked about the imVerDate 0ct 09 2002 15:46 May 01, 2007 Jkt 034672 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 K:\DOCS\34672.TXT HFIN PsN: TERRIE
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pact on investment that U.S. companies are making in other countries. 

I think it is important for us all to remind ourselves that those 

create jobs in the United States in both ways. A lot of companies 

that are investing in foreign countries make those U.S. companies 

grow and certainly in the investment here. 

Certainly, we want to make sure that this process does protect 

our national security, but also our economic security, and hopefully, 

I think this bill does it. 

Mr. Secretary, I want to go to a point that you made, a couple 

of points you made. One was that you were concerned about the 

process that the top two agency folks had to be involved in that 

process. 

Does this bill require them to be involved in it or just sign off 

on it? Would you elaborate on that a little bit? 

Mr. LOWERY. Yes. That is a good question. The Secretary of the 

Treasury and the Deputy Secretary of Treasury, who are obviously 

my bosses, are involved in every single transaction. They are 

briefed. They are provided information. 

What the bill does is go one step beyond that, and basically make 

them certify when we close out a transaction; they need to certify 

it. That is the only part we are a little worried about. The reason 

is because 30 days is a tight timeframe. We have always said that. 

That is what the GAO said in 2005. 

We need to work through those processes as best we can, and 

keep the highest level officials informed, but we think that we can 

still get the accountability that Congress wants by having Senate 

confirmed officials, assistant secretaries, undersecretaries, and 

sometimes deputy secretaries sign off on all the transactions. 

Our major focus is that we want to make sure that, in my case, 

my secretary and deputy secretary’s time is most focused on those 

transactions that rise up to the largest concern, and not the routine 

cases. 

We think a small adjustment could be made in the bill which allows for that to happen, but at the same time, makes sure that our 

highest level officials are still informed about what is going on. 

Mr. NEUGEBAUER. Have you submitted some proposed language 

for that? 

Mr. LOWERY. I am not sure if we have, but we would be happy 

to. 

Mr. NEUGEBAUER. If you would, either to the ranking member or 

myself, we would be glad to take a look at that. 

The reason I think that was important—I was wondering if in 

that language, it would be appropriate for the CFIUS Board itself 

to develop some criteria of when they think it is necessary that the 

higher level windows review those cases that are more routine. 

I guess the second part of my question is, once a company has 

gone through that process, would you not think that would lower 

the—not necessarily lower the standard but in other words, 

streamline, I would call it a repeat customer. 

Is that built into the flexibility in this bill, do you think? 

Mr. LOWERY. Yes, actually, I do think that is the case. We do 

have a number of companies around the world that make a lot of 

investments in the United States and in areas—there are a numVerDate 0ct 09 2002 15:46 May 01, 2007 Jkt 034672 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 K:\DOCS\34672.TXT HFIN PsN: TERRIE
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ber of U.K. firms, for instance, that invest in what I would say is 

defense production issues around the country. 

They come through CFIUS on numerous occasions. They know 

the process very well. They understand it. I think all they want to 

do is make sure there is as much certainty as possible so they can 

understand why concerns arise, and as long as we can talk to them 

about it. I think the bill does build that in already; yes. 

Mr. NEUGEBAUER. One of the things we were talking about a 

while ago is that one of the concerns is if we make our process too 

onerous, some countries might take an attitude that maybe they 

need to make it just as difficult for us to invest in their countries. 

Have you seen since this whole Dubai Ports World thing, some 

other countries take—maybe not retaliatory—just stepping up their 

processes in some ways? 

Mr. LOWERY. Yes. I think the next panel will be able to address 

it better than me. I do know that a number of countries around the 

world started looking at their own processes and actually, frankly, 

making them slightly more onerous. 

I know that Russia has been basing some of its legislation on 

what has been going on in Congress, as well as Mexico, India, and 

a number of others. Even Canada, which is a country that is very 

open to investment, has been looking at some of its legislation. 

As I said in my opening statement, the world is watching us. 

There is no question about that. 

Mr. NEUGEBAUER. Thank you. 

The CHAIRMAN. Next, Ms. Velazquez. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. 

Mr. Secretary, while the CFIUS process is becoming more efficient, many cases have undergone long review time periods, including a few hot publicity cases, that lasted several months. 

Do you think small businesses involved with the process can survive lengthy review periods given the fact that more than one-third 

of the patents are held by small businesses in the area of high 

tech? 

Mr. LOWERY. Actually, that is a very good point. We do have to 

be careful because some of these long reviews cost money. They 

cost money because the firms that are being acquired and the acquiring firms have to spend resources on attorneys. They have to 

spend resources on investment advisors. They have to be careful 

about when the transactions close. 

It falls upon us to make sure that we are doing our work as efficiently, effectively, and clearly as possible. I think that is what 

businesses want. They just want to know that what we are doing 

makes sense and does not sound arbitrary to them. 

I think that is what we are trying to strive for, but I am not sure 

we have completely gotten it right. That is what we are trying to 

strive for. 

Ms. VELAZQUEZ. Would you recommend any particular tools or 

policies that would expedite cases involving small businesses? 

Mr. LOWERY. I think that the main thing we need to do is have 

a set process for everyone, and that process needs to have as little 

chance for bureaucratic delays as possible. 

I think you will see the changes that we have suggested to the 

House bill try to get at that issue, to try to get rid of the bureauVerDate 0ct 09 2002 15:46 May 01, 2007 Jkt 034672 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 K:\DOCS\34672.TXT HFIN PsN: TERRIE
14

cratic delays while at the same time meet the goals that the Congress has set out. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman from Oklahoma. 

Mr. LUCAS. Thank you, Mr. Chairman. 

Mr. Secretary, considering the challenging world we live in at the 

present time, remind me for just a moment, if you would, about 

some of the factors that CFIUS typically considers when analyzing 

these transactions we have been talking about? 

Mr. LOWERY. The first factor we look at is—we look at it from 

two forms. One, the threat of the actual investment. You are really 

looking at the nature of the acquirer, what is their link to the government they are coming from? What is the government’s position 

on things like non-proliferation or on export controls, or on terrorism, and what is the company’s relationship to those issues? A 

lot of them have obviously history here in the United States. 

The second thing we try to look at is the vulnerabilities of the 

transaction itself, so we look at the assets that are being purchased. Are those assets in any way—can they undermine our national security? 

Then we combine that together to figure out what is the overall 

risk of the transaction and can that risk be mitigated or not mitigated. That is what we are doing during our investigation process. 

The types of transactions we usually look at are defense-related, 

like production. Some of the critical infrastructure areas, ports, obviously being a recent example. Some investment technology and 

communications’ areas, and sometimes energy-related assets. 

Mr. LUCAS. The reason I asked that, since the companies voluntarily seek this process, and we have had examples here today of 

the potential voting machine companies and hotels and those sorts 

of things, I guess my question is how many people does it take to 

provide the kind of scrutiny that we have touched on briefly at different times today, what kind of resources do you have now and 

with the increase in filings, are you able, in a timely fashion, under 

present law to do what you are doing, and where does this take us? 

Mr. LOWERY. It is very tough. The number of filings rose by 75 

percent last year, and my prediction is that it will go up again this 

year. 

We want to look at transactions that are of the most national security concern. We need to be careful that we are not creating some 

sort of a screening process for foreign investors into areas that 

frankly do not raise national security issues. 

That is why we have tried to be as clear as possible when we can 

be on the process and what we are talking about in terms of the 

substance. 

In terms of our resources at Treasury, we have increased resources by, I would guess, threefold, in this area. What we have 

done is we have taken resources from other areas, but we wanted 

to make sure that we got this right. 

The Dubai Ports World was a problem. Frankly, we do not feel 

like we handled it very well. We have talked to Congress about 

that extensively, and we want to make sure we do it better. 

15

I know some of the other agencies, like Homeland Security and 

the Justice Department and Defense, have beefed up what they are 

doing as well. 

I think we are getting there, but at some point there might be 

a call for more resources. 

Mr. LUCAS. Thank you, Mr. Chairman. I yield back the balance 

of my time. 

The CHAIRMAN. Next, the gentleman from Missouri, Mr. Cleaver. 

Mr. CLEAVER. Thank you, Mr. Chairman. Mr. Secretary, thank 

you for being here. 

I have some concern over the fact that there are over 80,000 Missouri jobs with subsidiaries that would fall in the category of overseas entities. It is a very difficult balancing act when you place national security alongside our economic and global interests. 

Can you give what you might view as an adequate balancing of 

those two? In addition to what you mentioned in your statement, 

the Congressional notification and working with the committees of 

jurisdiction and so forth. 

Mr. LOWERY. I can try. I agree that foreign investment in this 

country is very important to job creation, and frankly, to greater 

productivity. The jobs usually have a much higher salary. 

What we have tried to do is to strive to keep those factors in 

mind while knowing that the most important factor is protecting 

our national security. 

I think what we have tried to do is put reforms in place that 

make sense from an Executive Branch point of view in terms of 

keeping up processes in 30 days, which I think basically allows foreigners to invest in our country without being discriminated 

against because they just happen to be foreigners. 

Basically, in the domestic sense, domestic investors have to invest—when they invest, they go through the Hart-Scott-Rodino 

process, which takes 30 days. Foreigners go through that, too, but 

now they also go through CFIUS. 

If we can keep them kind of linked up together, you do not have 

any discrimination against foreigners from a time perspective, 

which is obviously important for investors, but at the same time, 

we can still take a look at the national security. 

It is those types of balances we are trying to reflect. I think the 

House bill does a very good job of that. As I said in my statement 

earlier, we have a few tweaks that we think will help. I agree with 

you. It is a very tough balance and we want to get it right. 

Mr. CLEAVER. You are comfortable with the direction we are 

moving? 

Mr. LOWERY. Yes, sir. 

Mr. CLEAVER. Hallmark Cards, Sprint, or corporations in my 

home district, headquartered in my home district, both of whom 

are involved worldwide, I think the Dubai situation poisoned the 

atmosphere so that my constituents are concerned now about everything. They want to have greeting cards inspected, to see if 

there are any hidden messages about Christmas. 

We have to win back the confidence of the American public with 

regard to this whole issue of foreign investment. 

16

Mr. LOWERY. We agree. Actually, that is why I think we are very 

supportive of what the House and the Senate have been trying to 

do. We think, one, that will help win back the confidence. 

First, we have to win back our own confidence within the Executive Branch, then we have to win Congress’ confidence that we are 

doing the right things, and then finally and most importantly, we 

have to win the American people’s confidence that we are doing 

things right. 

I think that is why it is important that we continue to work with 

Congress on getting a very solid bill that protects national security 

but also ensures an open investment climate. 

I agree with you. I understand where your constituents are coming from. I think we can strike the right balance. 

Mr. CLEAVER. I yield back the balance of my time. 

The CHAIRMAN. I waive my time but I will just take one minute 

of it now, because I was intrigued by one thing you said, namely 

the process of winning back your own confidence. 

Did you buy a lot of self help books? How did the White House 

win back—it is sort of like how you got your groove back. I am just 

interested in how you won back your own confidence. 

Mr. LOWERY. Dubai Ports World, we did some things right but 

we clearly did some things wrong. It was tough. We went through 

that process. I think we wanted to make sure we put it—the reason 

why we reformed our internal processes, both within the Treasury 

Department and CFIUS as a body, was in many respects to get our 

own confidence back, so that we make sure that we are doing this 

right, so the President is confident that his people are doing the 

right things, so that the Cabinet members are confident. 

I stick by my statement even though it does sound a little 

strange. 

The CHAIRMAN. That is a more thoughtful answer than my question deserved, and I appreciate it. 

The gentlewoman from West Virginia. 

Ms. CAPUTO. Thank you, Mr. Chairman. 

Mr. Secretary, you sort of touched on this in your past statements. I think the reason that Members of Congress were so concerned about the Dubai Ports World was that the Administration 

seemed to be sort of back on their heels, and a lot of Members of 

Congress were caught unaware. 

I know you have made some changes in your remarks to try to 

alleviate that. What kind of changes have been made? Is it more 

communication with Congress? More public statements? 

Mr. LOWERY. There have been a number of changes. I think the 

three key ones that were probably the biggest criticism of Dubai 

Ports World, first, our communications with Congress were not 

there. They did not really exist. I think that we tried to improve 

that by making sure Congress is informed on every single transaction we do, and that we do periodic oral briefings. We have tried 

very hard to increase our communications. 

Secondly, to make sure that the accountability was right. One of 

the concerns was, in my case, Secretary Snow did not know about 

this transaction. We make sure that Secretary Paulson and Deputy 

Secretary Kimmitt are aware of every single transaction, and that 

17

a presidentially appointed Senate confirmed person has signed off 

and closed out a transaction. 

So that Congress knows it has accountability because those are 

the people who are most accountable to Congress, frankly. 

Third is getting the intelligence community involved. The intelligence community has always been involved in CFIUS but what 

we did was formalize the process, made sure they are involved in 

every transaction, and then we broadened it. 

By having the Director of National Intelligence bring in all the 

intelligence agencies, we think that we have made that process 

even more robust than it was before. 

Those are the three key ones. We have a bunch of other ones 

that are a little more procedural, but I think those are the key concerns that came out of the Dubai Ports World transaction. 

Ms. CAPUTO. Thank you. I have one additional question as to the 

process. When you are doing your reviews and you find you need 

to go to a second review, do you go back to the foreign investor and 

say there are certain mitigating issues here that you need to 

change or clarify? 

How does that procedure move forward? 

Mr. LOWERY. The way it works is basically we do an investigation during the first 30-day process. That includes the intelligence 

community looking at the threats for us, and all the agencies, particularly the ones with specific expertise, like if it is a defense production issue, the Department of Defense is going to play much 

more of a strong role, looking at the vulnerabilities. 

If at the end of that 30 days, we have not been able to answer 

all of our questions or there are concerns we have that frankly, we 

have not figured out how to address, that is when you will see us 

going into the second stage of the investigation. 

During that second stage, sometimes all it is, is just asking a lot 

more questions to make sure we are comfortable. A lot of times 

what it is, is that one of the lead agencies, like Defense or Homeland Security, will take a negotiating role with the companies on 

doing mitigation agreements, because they see a risk and they 

want to figure out how do you mitigate that. That is what those 

mitigation agreements are all about. 

That is basically what happens. 

Ms. CAPUTO. Thank you. Thank you, Mr. Chairman. 

The CHAIRMAN. Mr. Davis. 

Mr. DAVIS OF TENNESSEE. Thank you, Mr. Chairman. 

I live in rural central Tennessee and part of east Tennessee. We 

have had a lot of investment there in manufacturing that is certainly welcomed. 

When the Dubai Ports World situation arose, it became pretty 

much a political issue in our State, as well as in all States across 

this Nation, and a concern, were we really guarding the hen’s nest 

from the fox? 

When I look at that investment, I sometimes wonder exactly how 

many dollars are flowing into America percentage-wise of investment, job creation, real estate assets of America, and then I wonder 

also how much investment are we making as Americans in other 

countries, how much are we investing of our dollars into foreign assets in other countries? I have never been given a figure. Could you 

18

somehow relate to me approximately what percentage of investment in America is being made by foreign investors? 

I know when you look at debt, we have a lot of investment being 

made by several countries into our debt in this country, which kind 

of frightens me a little bit. 

I also have a concern in exactly how much assets percentage-wise 

of America assets are owned by foreign investors, and then on the 

other hand, how many dollars do we have, how much do we invest 

in other countries percentage-wise from corporate America? 

Mr. LOWERY. Off the top of my head, there are different ways of 

investing, obviously. There is foreign direct investment and there 

is portfolio investment and investing in debt markets. 

I do not have all the numbers off the top of my head. Frankly, we can get those for you. Right now, there is probably $100- to 

$150 billion of foreign direct investment that comes into the United 

States. This goes in bits and pieces. It is much more than it was 

at earlier points in the 1990’s. It increased as the stock market increased back in early 2000. You kind of see flows that go up. 

Overall, the United States’ firms on a stock basis, I believe, have 

$2.5 trillion, I want to say, of assets abroad, and foreigners have, 

I think, about $1.9- or $2 trillion of assets here in the United 

States. That is on a stock basis. 

We can get you some of the numbers. There are different ways 

of measuring it, FDI, equity investments, and then debt investments. 

Mr. DAVIS OF TENNESSEE. Roughly $1.9 trillion of investments in the country and we invest roughly $2.5 trillion outside of our country? 

Mr. LOWERY. On a stock basis, direct investment. 

Mr. DAVIS OF TENNESSEE. What are our total assets in the country? 

Mr. LOWERY. That is where I need to get back to you on that one. 

The answer is foreign companies employ in the United States 

about, I think, 5 percent of our workforce through direct investment. That kind of gives you a rough idea of what is going on. 

Mr. DAVIS OF TENNESSEE. I have been reading lately where 

many investment firms, some that deal with pensions and otherwise, have been investing more in foreign investments from our 

country assets here, the stock market in New York. 

Do we have something to fear there, what is happening there? 

Do you have an answer on how we reverse that? 

Mr. LOWERY. I think having foreigners invest in our stock market or in our debt markets is an important thing. Our markets are 

extremely deep, very liquid. There has sometimes been concern 

about whether or not foreign governments own too many T-bills. 

I think if you look at the numbers, the numbers are pretty overwhelming on how much is going actually on, on a daily basis, in 

terms of turnover, so that it is very hard to see how any country 

could cause major disruptions. 

At the same time, it is something that we keep an eye on very 

closely at the Treasury Department. It is not my area, but we do 

have people at Treasury who look at it very carefully. 

In the end, it is good that people invest in this country. That is 

why we have a fairly large capital accounts surplus. 

19

Mr. DAVIS OF TENNESSEE. In the last 6 years, a $3.7 trillion increase in national debt, a lot purchased by foreign countries, and 

that does frighten me. I think it does a lot of people who live in 

this country who are following what is going on in the country. 

I have also always been concerned that when I look at the auto 

industry, for instance—we are able to build an automobile in America, make a profit, whether it is Nissan, that is in my district, very 

welcome, do a wonderful job, and employees are excited about having a great job with them. 

Is there some way you can enlighten me? How can foreign automobile manufacturers and in high tech come to this country, pay 

roughly the same for jobs, earn a profit, continue to sell automobiles, and America automobile companies cannot? 

Is there something I am missing there? Are there some breaks 

for foreign investors? What is going on? 

Mr. LOWERY. I think you are getting beyond my expertise. I 

think a lot of companies that have invested in your district and 

other districts and have brought their expertise and their technology over here, they make products that are good products, and 

people in the United States want to consume those products. 

I am not saying that—Ford and GM also make very good products, but different tastes and things like that. 

I do not think that if somebody buys a Nissan car from your district, I do not think they are necessarily making a judgment that 

they like Japan greater than the United States. They just happen 

to think that car is a better car than whatever the other cars were 

they were looking at. 

Mr. DAVIS OF TENNESSEE. Thank you, Mr. Chairman. Thank you, 

Mr. Lowery. 

The CHAIRMAN. I would just ask unanimous consent that the 

ranking member and I may speak out of order for a minute. With 

no objection, Ranking Member Bachus. 

Mr. BACHUS. Thank you. If I could just ask for a unanimous consent request. I would like to say for the record, someone needs to 

say during this hearing that Dubai, the country of Dubai, in fact 

the United Arab Emirates, the Emirates are our allies. They are 

our strong allies. 

They are our allies at great risk to their own national security. 

I, for one—I cannot speak for the other members of this committee—strongly welcome and encourage their investments in the 

United States. 

In our attempts to maintain—my third point—in our attempts to 

maintain friendly and good relations with the Middle Eastern countries, I believe their investments in the United States are key and 

are very beneficial. 

One of my regrets in the Dubai Ports’ deal is there are some, not 

only in the Arab countries, but around the world, who are questioning our commitment to open investment and to a cooperative 

spirit and a competitive environment. 

Thank you. 

The CHAIRMAN. I would just join the gentleman in that my own 

view was that it was a mistake to let Dubai purchase ports, but 

in fact, they should be encouraged to buy other things. I would say 

20

personally myself, I would have no objection to them buying a 

hotel. 

A reasonable question, we should be clear. Nothing in our law 

gives foreign direct investment any advantage or exemption from 

American law. If you are a foreign company and you invest in 

America, you are clearly governed by every law, every environmental regulation, and every State law. There is no exemption in 

that regard. 

We are not talking about a policy which gives any favored treatment to foreign investment. They are fully covered by every local, 

State, and Federal statute and regulation. There is no diminution 

of the reach of American law. 

Now we go to the gentlewoman of Tennessee. 

Ms. BLACKBURN. Thank you, Mr. Chairman. Mr. Secretary, 

thank you for your time. I appreciate your succinct responses to the 

questions, whether they pertain to the legislation or not. I also appreciate your recognition of the fact that political freedom and economic freedom are inextricably linked. Indeed, in our constituents’ 

minds, national security and economic security are linked. 

You answered one of my questions with Mr. Neugebauer. I will 

look forward to seeing the language that you submit. 

I will add just as a point of reference, I do agree with you that 

the world is watching what we do. I was talking with one of my 

constituent companies yesterday who is working to do something in 

another country. They noted to me the amount of due diligence 

that was now being required and that was indeed a change. 

I also think it is important to note that while we appreciate the 

involvement that is there from a committee and a panel, it is important to note that our constituents want our eyes on this matter 

because they do think that national security is of prime importance 

and protecting the environment that we have here, and hopefully, 

as you mentioned earlier, there will be additional clarity and also 

some certainty to the process as we go through codifying something 

and placing it into law. 

I want to give you an opportunity just to briefly make one statement, if you will; this is on recommendations. The process that we 

go through with CFIUS at this point, the President can still override that. You may want to talk about the difference between a recommendation and something that is binding. 

Mr. LOWERY. Thank you. Yes. The way the process works is the 

only person who can actually order either the divestment or the 

blocking of a transaction is the President. 

Obviously, you want to use it in the most rare circumstances, 

where there is a national security threat that simply just cannot 

be addressed or mitigated. 

The bill has done a good job of structuring the process, kind of 

a layer of responsibility, which is in the 30-day process, that is 

where all the transactions will happen, and you should have accountability, but it does not have to be, obviously, the President. 

We would argue that it can be presidentially appointed Senate confirmed positions. 

However, it also does mean that all CFIUS agencies, not just the 

Treasury Department, have responsibilities to make sure if there 

21

are concerns that cannot be mitigated, they need to be prepared to 

put it into the second stage of investigation. 

In the second stage of investigation, we believe that you can have 

the deputy secretaries and the secretaries. That is where they need 

to focus their attention, if there were concerns about a transaction, 

and those are the ones that were having to scrub even harder than 

the first set. 

Finally, and the bill again does a good job on this, going to the 

President, you only go to the President basically in two types of circumstances. 

The first is if you are saying our recommendation to the President is that we divest this or block this transaction from happening, and the second is if there is a split vote, frankly. Some 

agencies believe this and some believe that. We just need the President to work that out. 

At that point, if the President gets involved and does that, there 

will be always a report sent to Congress at the end of his period 

of reflection. He is the one who makes the ultimate decision on the 

most difficult transactions. I do not know if I answered your question but I tried to. 

Ms. BLACKBURN. Yes, you did. I think it is important to note just 

for the understanding of our constituents who watch the hearing 

and are concerned about these issues that we are discussing a recommendation process. 

I thank you for the additional clarification. I yield back. 

The CHAIRMAN. I thank the gentlewoman. We now will recognize 

the gentleman from Florida, Mr. Klein. 

Mr. KLEIN. Thank you, Mr. Chairman. Thank you for being here 

today. 

I represent South Florida, which has two major ports in my district, and of course, the Port of Miami is in the region. There was 

a lot of concern last year about the impact of the Dubai Ports 

World transaction in that part of the State, that part of the country. 

A lot of the confusion, of course, came from ownership issues, operations issues, threat issues, and strategic assessments of exactly 

how this would play out and what impact it would have on port operations, what was coming into the port, what was going out of the 

port, and all those kinds of things. 

We understand that there is the foreign investment side, and obviously, we are an open country that does rely on this, and a lot 

of foreign companies operate in South Florida and other parts of 

the country, where they employ a lot of people. 

There is this balance. Again, what I would like is a little more 

information from you. 

If you can address us as to how the Administration is helping 

balance the concern for the foreign investment side versus what, in 

our local communities we believe are issues, whether it happens to 

be in Washington or in our home communities, when you have a 

port, a large port in a community, with fuel farms and lots of 

things coming and going, cargo is coming and going out of the ports 

and onto the highways, the rail systems, right in residential communities and businesses. 

22

How can we balance that, and how can we get to the point where 

people feel truly that there is an assessment going on that will not 

create a threat to the local communities? 

Mr. LOWERY. That is an excellent question. It is the thing that 

we have to be most focused on. I actually hate saying that there 

is a balance between national security and foreign investment. I 

say it all the time. I hate saying it. 

There is no balance. It is national security as our foremost concern. 

I believe that open investment helps increase economic growth 

which I think is also in our national security interest, so it is not 

a balance, it is part of it. 

In terms of how we actually address security concerns, there are 

lots of different methods. CFIUS is only a small portion of them, 

frankly. 

For instance, let’s talk about ports. Ports are secured not by the 

foreigners who invest in those ports. They cannot be, because if you 

look around the country, most ports have terminal operators that 

are foreign based. That is just a fact. 

That is because our ports are not secured by them. Our ports are 

secured by Customs, by the Port Authorities, and then by the Coast 

Guard. That is how we are trying to—I am not an expert on this. 

That is how you try to address the port security. 

You do not try necessarily to secure it through the CFIUS process, which is about mergers and acquisitions. Instead, CFIUS basically looks at a transaction that is going to happen and then takes 

a look and figures out if there is a national security concern, and 

if there is one, how do we address that national security concern. 

In terms of actual day-to-day security, that is being done by lots 

of different factors, but usually by local, sometimes by Federal or 

State Governments. 

Mr. KLEIN. Mr. Chairman and Mr. Lowery, the issue, I think, for 

many people is the sharing of information. We understand that 

whether it is the Coast Guard or whether it is other military services that are providing Customs or some of the strategic things, the 

issue is foreign companies, foreign interests, who may not necessarily—maybe today, they are in the right hands and maybe tomorrow you have interests that own these companies or have access to information from these companies that may be shared from 

the Port of Miami to somewhere overseas in terms of what is coming, what is going, what the assets are going in and out, and what 

the testing and the security procedures are. 

These are the breakdowns that I think people are concerned 

about. To the extent that this information could be shared, obviously, the Customs people are communicating with the port operators. It is not like they are doing it in a vacuum. They are communicating how it is working, what the processes are, and how we, as 

a Nation, are securing our ports. 

To the extent that this information is shared with interests that 

today may be favorable to the United States, tomorrow, you may 

have a group of people out there who are taking this information 

and using it against the United States and against our local security interests. 

23

It is the snapshot today that the CFIUS procedure looks at and 

that can change in a matter of days or months or years. 

Mr. LOWERY. I think those are good questions. You are asking 

somebody, unfortunately, who does not know how completely Customs does its job and the Coast Guard does their job. 

I imagine that while they do share certain information, they 

have to talk to the port operators that are handling the business, 

they actually—because they are very security conscious or they mix 

things up, they make sure—they are only seeing a window of what 

is actually happening. 

I think that obviously these are questions that people at Customs 

can answer much better than I can. 

Mr. KLEIN. Mr. Chairman, my point would be that you and your 

colleagues should understand the process by which security works 

at the airports, what information is actually shared in terms of 

strategies of security with port operators. 

If you are considering a transaction and saying it is good or it 

is not good, and you do not understand what the procedures are for 

what information is actually shared and what could be at risk, I 

think we have a problem. 

That is where you need to be fully knowledgeable and the process we have needs to be one in which there is full knowledge before 

you can say this transaction should go forward or not. 

Mr. LOWERY. That is a good question. That is why, by the way, 

CFIUS is an interagency process. You have 12 agencies. Six of 

them are the Commerce Department, the State Department, the 

Department of the Treasury, the Justice Department, the Department of Homeland Security, and the Defense Department. Let me 

just talk about Defense and Homeland Security for a second. 

The CHAIRMAN. Quickly. 

Mr. LOWERY. The Defense Department actually takes every 

transaction and submits it to 22 different groups within Defense—

all three of the Service branches plus all the different types of people who worry about things at Defense. Homeland Security, which 

looks over Customs and the Coast Guard, submits anything that 

has to do with a port to Customs and the Coast Guard. The idea 

is to have the real national security experts look at those transactions. I am a Treasury Department official. 

The CHAIRMAN. Mr. Lowery, we have a mark-up on this bill in 

a week. I think it would be very helpful if you and your colleagues 

would send to every member of this committee a mock-up of how 

a request that might implicate national security would be handled—give us all the process. 

Secondly, I am going to offer some free investment advice to foreigners. If somebody tries to sell you a port, save your time and 

money and go buy something else. Nobody is selling anybody any 

ports in America for a long time to come. Go buy something else. 

I think it would be helpful, as you were starting to explain orally, 

to show us how that would work. I think that would be very helpful 

to members of the committee. 

Mr. Roskam is next, the gentleman from Illinois. 

Mr. ROSKAM. Thank you, Mr. Chairman. 

Can you give me the benefit of the current criterion that you use 

in CFIUS and how that contrasts to the proposed bill? 

24

Mr. LOWERY. The criterion for how we view a transaction? 

Mr. ROSKAM. Right. What would be a transaction that would rise 

to the level of concern? 

Mr. LOWERY. What we try to do, as I said earlier, is try to focus 

on the threats of a transaction. What we do there is we are looking 

at who is acquiring it or what is their relationship to the government of that country. What is the government’s relationship to the 

United States? Does this company or country have something in 

their past that gives us concerns in terms of things like non-proliferation, terrorism, or export control violations? That is where we 

use this interagency process that I was mentioning, plus our intelligence community to look at those types of things. 

Mr. ROSKAM. Is there a list? Is that an identified criterion, A, B, 

C, D, and E? 

Mr. LOWERY. Some of the list is actually in the actual legislation. 

Some of it is in just the practice that we use, whether it is our intelligence community or whether it is the actual agencies and how 

they are looking at transactions. 

They are usually going through a set of criteria about, as I said, 

who is the acquirer, but also what are the assets that are being acquired, and what is the vulnerability of those assets. 

Each agency brings different types of expertise to the table, and 

it depends obviously on the specific transaction that is being done, 

as to which agency probably has the most types of expertise. 

If it was a port transaction, people at Customs are going to know 

a lot more than the rest of us are going to know, and the Coast 

Guard is going to know a lot more. 

Those are the type of criteria. In terms of the overall criteria, we 

are looking at many areas revolving around defense, plus some 

critical infrastructure areas, things like ports and energy assets, 

and then also things around telecommunications and information 

technology, just because of the way it works on such a global basis. 

Mr. ROSKAM. Things like food safety, for example? Is that in the 

mix? 

Mr. LOWERY. I am trying to think if there has ever been something like that that I have seen. It could be technically. For instance, there are lots of purchases that happen of food manufacturers or frankly restaurants or something like that from abroad that 

probably would not go through CFIUS. 

If there was something that got into food safety, or if we saw a 

transaction that got into food safety, I could see us getting involved. That could be considered critical infrastructure. 

Mr. ROSKAM. Animal feed production, that kind of stuff. 

Mr. LOWERY. I think so. It is rare. I remember a couple of times. 

One thing, CFIUS has 12 agencies, but we can bring other agencies 

with expertise to the table. I do know of a couple of times where 

we brought the Department of Agriculture in to take a look at 

something because we were not completely sure, or the Department 

of Health and Human Services because of those types of issues. 

Mr. ROSKAM. If CFIUS has been implemented, or being contemplated under this bill that we are discussing today, is there a 

review process, like a subsequent review process? 

In other words, I would assume, maybe I am incorrectly assuming, but I would assume that once somebody sort of gets the lamiVerDate 0ct 09 2002 15:46 May 01, 2007 Jkt 034672 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\34672.TXT HFIN PsN: TERRIE
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nated get out of jail free card that says come on in, you are free 

to do whatever you want, do we review that? Do we audit that? Do 

we follow up at any level? How does that work? 

Mr. LOWERY. If the transaction was passed through the system 

and closed, and there was no mitigation measures in place, then 

the review—there would not be further reviews and audits and 

things like that. That would take up a ton of resources. 

However, if there is a case where there was a risk that had been 

identified and one of the agencies had put in place a mitigation 

agreement to mitigate those risks, we do monitor those transactions. 

We are monitoring basically that mitigation agreement, to make 

sure that there are no violations of the agreement, that they are 

living up to what they are doing. That is done through audits and 

reports and spot checks and things like that. 

Mr. ROSKAM. Last question. Does it make any sense in the environment where there is not a mitigation agreement, let’s say, you 

know, they connected all the dots, they crossed every ‘‘t,’’ they dotted every ‘‘i,’’, and they checked off every box and everybody said 

okay, but there is just something about it. 

Is there something, is there a process by which that can be reviewed or once it is gone, you sort of lose jurisdiction and it has 

to be subsequently renewed? 

Mr. LOWERY. It goes to the chairman’s point earlier, which is 

that the companies are still subject to all the U.S. laws and regulations if they are here in this country. 

If they get a get out of jail free card, you will hear people call 

it the safe harbor, then CFIUS is basically done. 

That does not mean that the companies are not subject to all the 

laws and regulations that still go on in this country and that all 

our enforcement agencies can do things depending on what happens with that company. 

Mr. ROSKAM. I understand. In terms of the purposes of CFIUS, 

it is over, and it is not going to be—there is not a reach back provision? 

Mr. LOWERY. There is not a reach back provision except for—I 

cannot remember who asked me earlier, I think it was the ranking 

member—the evergreen provision. It is used in extremely rare circumstances, and there is a little bit of reach back in that. 

As you will hear from the business community, it is something 

that is very controversial and should be used in rare circumstances. 

I think the legislation has tried to address that circumstance. 

The CHAIRMAN. If the gentleman would yield. The other point 

would be this, and I think this is relevant, if in fact the later information led you to conclude there had been an incomplete furnishing of information originally, that would justify going back, 

that is you would then not be changing your position, but you 

would be able to assert that the original certification was invalid. 

I assume we have that power. 

Mr. LOWERY. That is correct. 

The CHAIRMAN. If you found something out that they had not 

fully revealed or that would have been relevant at the time, then 

you would in fact have the right, I think, to invalidate the transaction without any liability. 

26

Mr. ROSKAM. This is all a voluntary filing right now; is that correct? 

Mr. LOWERY. That is correct. 

Mr. ROSKAM. What is the hammer? 

Mr. LOWERY. The hammer on not filing? The major hammer is 

the fact that you put at risk your own transaction, and the risk is 

that CFIUS—the Executive Branch has the ability to go to any particular transaction that did not go through the process. 

We follow the mergers and acquisitions press pretty carefully, 

but if there was a transaction that we did not catch, we can always 

go back to that transaction and basically pull them into CFIUS. 

Remember, at that point you have this kind of ultimate club of a 

potential divestment which for a company is extremely onerous. 

Mr. ROSKAM. Huge. 

Mr. LOWERY. You always have that club. It is always in the best 

interest of companies to file. Obviously, if it has nothing to do with 

national security, it does not make sense to file. There are issues 

that evolve around national security which are mainly outlined in 

the legislation, which I think most companies understand. 

The CHAIRMAN. Will the gentleman yield? There is no right to 

buy. You do not have to file, but by not filing, you do not immunize 

yourself from a finding that the transaction could be canceled on 

security grounds. 

Mr. ROSKAM. By filing and getting a clean bill of health, so to 

speak, is there estoppel against subsequent action from an agency? 

Mr. LOWERY. I’m sorry? 

Mr. ROSKAM. In other words— 

The CHAIRMAN. The gentleman from Illinois wants to hear you 

use a specific legal term, and we are going to provide him with an 

interpreter for non-lawyers. We are going to give him some help 

here. 

Mr. ROSKAM. Okay. Here’s the question. 

The CHAIRMAN. Are you legally prevented from going back to it? 

Mr. LOWERY. CFIUS would not go back to a transaction, but if 

there was something that was a problem—outside of what the 

chairman said about material omission or co-mission, then CFIUS 

could not go back to that transaction. However, again, other agencies might take an action against it for other enforcement reasons. 

Mr. ROSKAM. You answered that question. Here’s the real question. If CFIUS signs off on it, if it is materially complete and there 

is no fraud, there is no deception, and CFIUS signs off on it, let’s 

say you have some person 6 months later who is reviewing a transaction related to it at the Commerce Department, for example, who 

says, ‘‘Oh, my goodness, I cannot believe this went through. This 

is outrageous.’’ 

Subsequently, it goes up the food chain. It is, in fact, outrageous. 

Does the fact that it has gone through CFIUS and it has the 

CFIUS intimater, does this prevent the Executive Branch from 

pursuing something, or does it just make it awkward? 

Mr. LOWERY. No. It does not make it awkward nor does it prevent— 

Mr. ROSKAM. It would make it awkward but hopefully— 

27

Mr. LOWERY. Not necessarily. It depends on what that issue was. 

If it is Commerce, and I know you are just using it as an example, 

it is more along the lines of an export control violation. 

Remember that CFIUS, the way the law reads is that CFIUS is 

actually kind of a stop gap. We should be using every single law 

and regulation that exists, and only if we don’t have something do 

you use CFIUS. 

The CHAIRMAN. I appreciate these questions. I think the answer 

is that you can always run into the unscramble the egg question, 

but I think the fact that you have been through CFIUS in legal 

terms neither adds to nor detracts from a subsequent ability to 

deal with it. 

The other thing you said, would it be awkward? No, I think it 

would be one more occasion where they would get their confidence 

back and be able to recover. 

I think the gentleman’s questions were quite helpful. Now we go 

to the gentleman from Colorado. 

Mr. PERLMUTTER. Thank you, Mr. Chairman. You answered a lot 

of my questions with your conversations with Representative Klein 

and Representative Roskam. 

I have a couple of questions. First, where are you in the chain 

of command in one of these processes? 

Mr. LOWERY. I chair basically the committee on what we call—

I do not know if it means anything—the policy level, which is basically the assistant secretary level. 

I report directly to the Deputy Secretary and the Secretary of 

Treasury. 

Mr. PERLMUTTER. Do you get involved in determining whether a 

transaction is appropriate or not appropriate? Are you in that decision process? 

Mr. LOWERY. Yes, but I am one of hundreds. 

Mr. PERLMUTTER. I am on one of the committees in Homeland 

Security. We have had some questions on a number of toll roads 

across the country are in financial distress. 

There are various countries and companies from around the 

world looking at buying or managing or doing both with respect to 

the toll roads. 

Would that be a subject area for this process of review? 

Mr. LOWERY. It could be. For instance, the Dulles Toll Road is 

owned or operated by an Australian firm. I do not think we looked 

at that; I do not think, frankly, that there was any reason for us 

to look at it. 

You could see something where there could be a national security 

reason. 

Mr. PERLMUTTER. It has come up in Homeland Security because 

a number of these toll roads, for instance, in my area in Colorado, 

one toll road is right near a big base that controls all our spy satellites. That would be the kind of thing that might trigger a review 

by your group? 

Mr. LOWERY. That is correct. Homeland Security does look and 

think about those issues very carefully. All of the agencies are very 

involved in our process. Homeland Security is probably the most 

engaged agency by far. 

28

Mr. PERLMUTTER. Thank you, Mr. Chairman. I yield back my 

time. 

The CHAIRMAN. Thank you. Ms. Bachmann. 

Ms. BACHMANN. Thank you, Mr. Chairman. Thank you, Mr. Secretary, for being here. I have learned a lot today. This has been 

wonderful and I appreciate your responsiveness to the questions. 

One question that I had is that it is my understanding that the 

Director of National Intelligence is not a member of CFIUS. Could 

you comment, Mr. Secretary, on the current role that the Director 

of National Intelligence plays and specifically, does he have sufficient time to be able to review some of the transactions that come 

before CFIUS? 

Mr. LOWERY. It is a very good question. The Director of National 

Intelligence is involved in every transaction as what was best described as an input valve. They give us information on what the 

intelligence community believes are the threats of a particular 

transaction. 

They are not involved on the policy role and they are not making 

the final decisions. They would tell you, I think, not to speak for 

them, and I have talked to them about this, do they have enough 

time, and the answer is yes. There is a reason why. 

First, and this was actually before Dubai Ports, we made a 

change in our processes to go out to the community that kind of 

handles CFIUS—there is a kind of CFIUS community out there—

and told them it makes the most sense to come in as early as possible to do filings and actually do pre-filings. 

In other words, you do not give us all the information but you 

give us a certain amount of information. That allows the intelligence community to start doing its process. 

The intelligence community just yesterday was telling me that 

they basically need 15 to 20 days of time to do a transaction. That 

way, they can go out to all 16 intelligence community agencies, and 

get input. Usually, they basically meet amongst themselves and 

discuss the case, and then provide the reaction to the committee as 

a whole. 

They are extremely well involved. I think they have enough time. 

We need to be careful, as I said in my testimony, one of the worries 

we had in the legislation is that there is a minimum requirement 

of 30 days. We do not think that is necessary, even though we 

agree with the intent of what the legislation was trying to do. 

Ms. BACHMANN. That goes to my second question. I wonder if you 

could comment on the current legislation that is before the committee now, what you believe that process should be. 

The other thing I wondered is just on a pragmatic/practical point 

of view, do you feel that has been the best valve of information for 

you, the Director of National Intelligence? Do you feel that you 

have gotten everything that you need to have in order for CFIUS 

to make its best decision? 

The other question would be commenting on the current legislation before you. This is the best time to have input in the process. 

I think this committee would benefit from hearing what you have 

to say. 

Mr. LOWERY. In terms of whether the intelligence community is 

the best valve, the answer is yes. Because the intelligence commuVerDate 0ct 09 2002 15:46 May 01, 2007 Jkt 034672 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 K:\DOCS\34672.TXT HFIN PsN: TERRIE
29

nity has fingers in lots of different areas, they can give us great 

information on the country and the company that are involved in 

these transactions, and they can tell us about the threats of that 

transaction. 

They do not do figuring out the vulnerabilities of the assets that 

are being acquired. That is where the other agencies get involved, 

to the Congressman’s question earlier, the expertise at Defense or 

Homeland Security, and that is why these agencies farm it out all 

over the place in their agencies, because they have expertise all 

over. 

In terms of the legislation, we thought that the legislation did a 

good job of formalizing the role of the DNI. We think the two areas 

that probably the legislation could be improved on, and I think we 

can work with the committee on this, is first it was the point I 

mentioned about the 30-day requirement. 

We do not think you need to have a minimum of 30 days because 

basically you can actually countermand the rest of the legislation 

about setting the process up. 

The second area is there is a small provision in there about 

where after the committee has acted, if the intelligence community, 

and I am not going to get the words wrong, basically thinks it 

should be sent into a second stage investigation, then it should do 

that. 

The only worry we have is that we have now moved the intelligence community from information and input into a policy level 

role. We would be a little concerned about that part. 

Other than that, we thought the legislation was very good on 

this. 

Ms. BACHMANN. Mr. Chairman and Mr. Secretary, I am wondering if you could elaborate on your final point on moving the 

DNI, the Director of National Intelligence, from strictly information 

to policy. 

Could you make a recommendation to this committee so that the 

legislation—the premise of my question is this. I am just concerned 

that we are not creating additional bureaucracy so that we feel 

good about ourselves. I want to make sure that what we are doing 

actively is going to have a positive impact on national security. 

The American public are jittery after what happened with Dubai. 

We just want to make sure that we are doing our part, but that 

we are not overreacting, and we are not creating something that 

will actually end up having an inverse reaction on America’s security. 

Mr. LOWERY. I think the best thing for me to do is to get you 

some language changes which we think—we agree with everything 

you just said. I think the best thing for us to do is get you some 

language changes so I do not put my foot in it here. 

The CHAIRMAN. As a practical matter, I do not think anyone 

thinks that if the DNI were to tell you that this needs more information, that anybody would ignore that in this context. You might 

as well formalize that in some way. 

We all agree, as a practical matter, that if the Director of National Intelligence says, ‘‘I am worried about this, you have to look 

at it again’’, nobody is going to ignore that. 

Mr. LOWERY. Agreed. 

30

The CHAIRMAN. Next we have the gentleman from Florida, Mr. 

Mahoney. 

Mr. MAHONEY. I have no questions. 

The CHAIRMAN. The gentleman from Georgia, Mr. Marshall. 

Mr. MARSHALL. Thank you, Mr. Chairman. 

Have you had an opportunity to look at the written testimony 

submitted by Mr. Heyman with CSIS and Michael O’Hanlon with 

Brookings? 

Mr. LOWERY. No, I have not. I’m sorry, sir. 

Mr. MARSHALL. There is an interesting tension that commonly 

exists here between the interests of the market and business community, etc., and the interests of those who are concerned about security. 

In 1988, 1990, and 1999, a couple of Chinese colonels, senior colonels, wrote a book called ‘‘Unrestricted Warfare.’’ That book was 

obtained by us and translated. It is really an interesting read. It 

is tedious. It is too long. In sum, it covers a wide range of possible 

ways in which China, specifically, could go about hurting the 

United States, essentially bankrupting the United States. 

I know I am picking on China at the moment, but this would 

apply to any country or any non-nation state entity interested in 

harming us. 

The ways in which that can occur, and I know you all have 

thought about this, goes so far beyond what we thought about 20 

years ago. It is rather remarkable. 

I am wondering in light of the fact that we now are quite concerned about these non-nation state threats, what kind of adjustments has CFIUS made to its process, to its standards? 

I am not so much interested in the specific process that has been 

suggested by this particular bill; it seems reasonable to me. We 

could modify it. I am more interested in a broad brush, where are 

we now with regard to this on the one hand, and we do not want 

to undermine our economy. 

That steps right into one of the things that these Chinese colonels recommended—to attack the underlying economy of the 

United States. 

On the other hand, we do not want to make it easy for these nonnation state actors to hit the United States in ways in which we 

will be forced to take action that closes our borders and damages 

our economy and the world economy. 

Mr. LOWERY. First of all, I am a Treasury official. Sometimes everybody thinks that all I care about is open investment. There is 

nothing further from the truth as far as I am concerned. 

What CFIUS has tried to do is basically improve its processes, 

but improve its substance over the last few years, frankly, a decade. With 9/11 came a different way of thinking about the world. 

Part of that is an answer that the Administration and Congress 

worked on, which is creating the Department of Homeland Security. The Department of Homeland Security was never part of, 

there was no department, it was not part of CFIUS. It is now a 

major part of CFIUS. 

When every transaction is looked at, the intelligence and national security experts from our Coast Guard, Navy, Army, and Air 

Force, plus all of the experts within the civilian branches of the DeVerDate 0ct 09 2002 15:46 May 01, 2007 Jkt 034672 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 K:\DOCS\34672.TXT HFIN PsN: TERRIE
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fense Department and Homeland Security, as well as people at the 

Justice Department, and the FBI, are taking very careful looks at 

these transactions. 

The Commerce Department—when CFIUS started, it was mainly 

about the commerce export controls and in the Defense Department, defense production. It is now much more about defense, but 

also critical infrastructure issues, telecommunications, which has 

become much more globalized than it was 10 years ago, and we 

look at those transactions very carefully and we have the right 

types of expertise. 

Some of the processes that are in the legislation and that we 

have been pushing are about making a more certain process so that 

we still take national security as our foremost concern, but at the 

same time, making it so it is not onerous on the business community. 

Mr. MARSHALL. I want to move away from the process here and 

just look at the substance of how we make our decisions. 

When CFIUS was first founded, and in its early years, a decade 

or so, the concern was losing control over natural resources that 

were critically important to our economy and to our defense, etc., 

and technologies. Those were the two principal focuses. 

Has that changed? One of the arguments, and apparently there 

is a little bit of a difference of opinion between O’Hanlon and 

Heyman, on whether or not ownership makes a difference. 

Heyman takes the position that ownership does not make a difference, period, end of discussion. Dubai Ports World was an absolute debacle, because it missed the appropriate focus. 

Are ownership concerns greater now? 

Mr. LOWERY. I think that we do look at the ownership, and that 

is a concern. CFIUS came out of a variety of different reasons. It 

came out in the late 1980’s because the Japanese were investing 

in a lot of transactions. The Japanese are not much of a major concern to the United States these days. We obviously are good friends 

and good colleagues with the Japanese. 

I have not read their testimony, so I cannot comment on that. I 

can comment on this. If we, in the United States, base our security 

on who owns and operates ports, then we are making a mistake. 

We do it instead on our Customs, our Coast Guard, and our Port 

Authorities. They are the ones that are securing the ports. 

That is what we should be doing. Those are the right officials to 

ask. I think they are doing a pretty good job. 

We cannot do it based on how somebody invests their money and 

which country they come from, because by doing that, I think that 

we would drive investors away. We have to be very careful. 

Ownership matters, and that is what CFIUS looks at, in the end, 

there is probably a balance between the two, but I have not read 

their testimonies. 

The CHAIRMAN. I certainly hope the Japanese will not be discouraged from coming back as in the 1980’s and substantially overpaying us for trophy properties. We would offer them the chance 

once again to do that. I think we benefitted greatly from that. 

Mr. LOWERY. I agree. 

The CHAIRMAN. The gentleman from Delaware. 

Mr. CASTLE. Thank you, Mr. Chairman. 

32

You made the suggestion, I think, Mr. Chairman, that it would 

be helpful if the Secretary sent us a summary of the process and 

how they review these transactions, with which I agree. 

I am also very interested in your views on the expertise of the 

various people at the table: I have a rough idea of who they are, 

but I think it would be helpful to know exactly what they each 

bring to the table. 

The one area or question I had was whether or not there is a definition of ‘‘national security’’ or if that is just formed by different 

decisions which have been made. 

It seems to me you could make the argument that almost any ongoing establishment, be it a business or a publicly owned circumstance, such as perhaps sports or whatever, in the United 

States, has some sort of national security. 

I think the gentleman from Illinois, Mr. Roskam, raised the issue 

about food, for example. I think General Foods is a possible transaction that may take place at some point. 

Would this be part of national security? How does one know 

that? How does a foreign entity trying to buy something in America 

make that definition? I realize it is a bit of a guess and it is on 

a voluntary basis. 

My question is what would they look to for that, and what should 

we think about in terms of what you believe ‘‘national security’’ is? 

Mr. LOWERY. It is a very tough question and it does pop up a lot. 

It is hard for me to define ‘‘national security.’’ In the Executive 

Branch, we obviously have to start with the President defining ‘‘national security’’ for us. 

There is a reason why ‘‘national security’’ has never really been 

well-defined through legislation for a long period of time, and that 

is because it is an evolving concept. 

I think, probably, if you looked at September 10, 2001, and September 12, 2001, there are different definitions of what ‘‘national 

security’’ would actually mean. 

I think that what we are trying to do is define it as well as we 

can in that context, and avoid doing, I think, what your question 

I think is, which is creating a national screening process so that 

every foreign transaction has to be looked at. We just need to look 

at the ones that definitely rise to national security. 

I think most people think of national security and they think of 

defense. Obviously, there are critical infrastructure issues that can 

arise, and there are some telecommunications issues, as well. 

I think as case law—those are the wrong words because I am not 

a lawyer—as case precedents go on, I think the investment community gets a better understanding, and that is why legislation is 

helpful because it provides even more clarity to that community. 

In terms of what you asked about the expertise that people 

have—the main thing we try to do is to bring in experts from 

around our government who can have 10, 20, or 30 years of experience on national security type issues. 

We do that at the career level and then at the political level. My 

direct boss is a war hero, and he has been doing national security 

issues for the U.S. Government for 20 or 30 years, I guess. That 

is Deputy Secretary Kimmitt. 

33

We bring very good expertise to the table. It does not mean we 

always get it completely right, but I think from a national security 

perspective, it is hard for me to think of a case where we have ever 

gotten it wrong. 

Mr. CASTLE. That is good to hear. To me, it is sort of indefinite. 

It seems to me that a lawyer worth his salt at all could make the 

argument that virtually anything is national security in this day 

and age, which may not be correct, or which may be, in some cases, 

correct. 

I think you do need to keep an eye on that in the balance, and 

I appreciate your answers. I yield back, Mr. Chairman. 

The CHAIRMAN. An important point I would say again de facto, 

that is the case. If you are a foreign entity with money to invest, 

legally challenging the designation of ‘‘national security’’ is probably not a very promising thing. 

If the U.S. Government were to invoke national security, I think 

the likelihood that you would go to court and have that overturned 

and buy the property anyway is nil. De facto. I think ‘‘national security’’ is whatever the people in charge say it is, and that would 

have the effect of canceling this particular transaction, which may 

be reassuring to people in that sense. 

Again, it is an unwinable lawsuit, I would think, especially since 

the government would then announce, as they often do when they 

have a weak case, that it is a big secret and they cannot tell the 

judge, and then the case has to be thrown out. 

We next have the gentleman from New York who has joined us. 

Mr. CROWLEY. I thank the chairman and I appreciate you allowing me to participate in today’s hearing. I know, Mr. Chairman, 

you made reference to me ‘‘slumming’’ here at the committee today. 

I would never use that terminology, ‘‘slumming here.’’ 

The CHAIRMAN. The slummer rarely does. 

Mr. CROWLEY. I’m moving back to the old neighborhood is what 

I am doing here. It is great to be back here with the chairman. 

Thank you for once again showing your leadership, and your commitment to this process. 

I think it is important to point out for historical purposes that 

last year, just about 90 days after what I call the debacle of the 

Dubai Ports’ deal, this committee acted unanimously to support the 

same legislation we have before us today, as well as the House of 

Representatives supporting unanimously in both the committee 

and on the Floor, unanimously and in a bipartisan way this legislation to deal with what seemed at the time as the ceiling falling in 

on us. 

I think it showed how Congress can, even in an election year, 

work together in a bipartisan way when we understand the importance and the impact of our actions here in the House. 

I said back then and I say again today—no bill was better than 

passing the Senate bill. I think that we were working in a much 

better way and a more productive way of producing legislation that 

I think would have both the impact of creating better nets of security and at the same time keeping open the doors for foreign investment here in the States. 

Mr. Lowery, let me just ask you if you can give us your reason 

as to why you think there was such a dramatic increase in filings 

34

and withdrawings, investigations, and mitigation agreements last 

year? 

For example and specifically, DHS required more mitigation 

agreements last year than they did within the previous 3 years. 

Do you believe there was a dramatic increase in deals that raised 

national security issues last year, or was it just that the bureaucracy was just going into a hyper cautious mode? 

Mr. LOWERY. I am trying to come up with the right answer. I 

think the reason why we have seen an increase in filings, and I 

kind of went through it before, but basically it is that a strong 

economy leads to more investment, which means it leads to a 

stronger economy. 

Secondly, there is no question the Dubai Ports World brought a 

lot of stature—that is not the right word—a lot of— 

Mr. CROWLEY. Notoriety? 

Mr. LOWERY. Notoriety to the process. That probably led to more 

filings. Some were defensive. 

I think, in terms of the mitigation agreements, that Homeland 

Security takes its role very seriously. It goes to Congressman Marshall’s points earlier. There has been an increase last year over the 

last few years, although if you go back and look, since Homeland 

Security came onto the committee, you have seen this steady increase. I think part of that goes to a lot of what has been discussed 

today, which is the flexible nature and broader nature of national 

security issues. 

It has gotten into areas that CFIUS really was not covering in 

the 1990’s all that much. With Homeland Security there, I think 

what they see is risks that maybe others had not been able to see 

in the past, so they want to make sure they mitigate those risks 

and do it in a way that best protects the homeland. 

Probably part of that is a little bit of bureaucratic reflex, but I 

think a lot of that is just kind of the way and nature of national 

security in our country. 

Mr. CROWLEY. Mr. Lowery, what is the cost of deals that do not 

implicate national security but end up going through the entire 

CFIUS process, and can we end up having too many deals in the 

barrel, in the pipeline, that will be distracting to CFIUS and distracting CFIUS away from those deals that need the maximum 

amount of attention? 

Mr. LOWERY. Yes. That is why you will see some of our issues 

to address in the bill to try to get at those issues, so we can make 

sure, especially my Secretary and Deputy Secretary, are most focused on issues that are of most concern and not just focused on 

every single transaction. 

It is something we have to be careful about. I think as we get 

more clarity in the process through legislation, through the Executive Branch doing its thing, we will see that level out. 

If you go back and look at CFIUS when it was first created in 

1988 in terms of looking at transactions, there was a huge number 

of transactions every single year. I was not around, obviously. My 

guess is some of them were nonsense. 

Then you see this big tailing off during the 1990’s and early 

2000, and you saw a big giant increase last year, and I think that 

is revolving around certainty. 

35

I think as we get certainty, there is probably an increase over 

what used to be the case, but it will probably plateau out. 

Mr. CROWLEY. Thank you. Thank you, Mr. Chairman. I thank 

the gentlelady from New York for her leadership. 

The CHAIRMAN. The Chair is now pleased to recognize the gentleman from North Carolina to say whatever he wants for 5 minutes. 

Mr. MCHENRY. Thank you, Mr. Chairman. I am sorry to hear 

that you are under the weather today. It would be very unfortunate 

if you lost your voice. 

The CHAIRMAN. I will not lose my gavel. 

Mr. MCHENRY. Nor your wit. 

Thank you for testifying. I am going to ask probably the same 

questions you have been asked 18 times, maybe 20. 

Let’s go through the basic process here, just so we have a good 

understanding. The Committee on Foreign Investment, who is a 

member of the committee? 

Mr. LOWERY. The committee is made up of 12 agencies. There 

are six departments: The chair is the Treasury Department, and 

the others consist of the Justice Department, the Homeland Security Department, the Defense Department, the Commerce Department, and the State Department. Then there are six White House 

agencies: the National Security Council, the National Economic 

Council, the Council on Economic Advisors, the Office of Management and Budget, the Office of Science and Technology Policy, and 

the U.S. Trade Representative. 

Mr. MCHENRY. They all sit on the committee? 

Mr. LOWERY. That is correct. 

Mr. MCHENRY. Are they just designated by the agencies or is 

someone appointed by the President for that purpose? 

Mr. LOWERY. Each particular agency assigns somebody to look at 

the case. A case comes in. What Treasury does is basically takes 

the case and just farms it out and tries to flag any specific issues 

that we see. 

Every now and then, there might be an energy issue, so we 

would invite the Department of Energy in. Then the intelligence 

community sits off to the side as sort of an input valve into this 

whole thing. 

Each department basically has sort of a lead CFIUS office that 

is responsible for making sure they come to the meetings, for farming it out within their departments because there is different expertise from each department, and then presenting the views that 

are provided. 

As cases rise up and get closer to the assistant secretary level, 

and then finally, every now and then, the deputy secretary level 

and then obviously, the most sensitive cases go to the Cabinet. 

Mr. MCHENRY. Roughly a dozen cases a month, let’s say. 

Mr. LOWERY. That is about right. 

Mr. MCHENRY. How many of these are actually seen by Cabinet 

level officials for sign off? 

Mr. LOWERY. For sign off. I can speak for Treasury most easily, 

obviously. Every single transaction is seen by the Secretary or Deputy Secretary of Treasury on an information basis. On a closing out 

36

the transactions cases, that is done by a Senate confirmed official, 

which can be an assistant secretary or an undersecretary. 

Mr. MCHENRY. Since Treasury chairs CFIUS, I would like the 

answer for all the other agencies as well. 

Mr. LOWERY. To my knowledge, each of the—I can speak easier 

for the departments than I can for the White House agencies, but 

the departments, to my knowledge, are briefing up to the highest 

levels on each case. Transactions are usually being cleared at Senate confirmed levels. 

We usually get an e-mail that says the Department of Homeland 

Security has cleared off on this transaction. That comes through a 

staff level contact, but that person has cleared it within their own 

building. 

In fact, we were sending out a weekly, within our building, and 

recently, we have started sending it out to other agencies, just to 

try to help. 

The Department of Defense and the Department of Justice got 

mad at us because they are like, look, we are briefing our deputy 

attorney general or the undersecretary or the Cabinet, and you are 

confusing them, because our briefings will say something slightly 

different than theirs. 

I know basically all the senior level officials are being briefed on 

each case. 

Mr. MCHENRY. I would hope so, especially after the publicity of 

really a boneheaded and ill-conceived process with the Dubai Ports, 

which I think burned a lot of people. 

It appeared to me that the process was handled at a staff level, 

with a number of e-mails being exchanged for sign-off, and there 

was actually no serious look at these roughly 100-some cases that 

flow through. 

What you have is staffers handling this process and then the 

President gets blamed. It seems also with 12 agencies being involved that no one is in charge, even though Treasury is supposed 

to chair this. 

Perhaps we have too many people sitting on this committee, and 

there is no responsibility falling on anyone. 

Mr. LOWERY. We have said that we agreed that in Dubai Ports, 

agencies did not brief up well enough. Secretaries and deputy secretaries were not aware of these transactions or this transaction. 

That was a flaw on our part and we have corrected that. 

In terms of accountability, a number of us have testified over the 

last year many, many times on Dubai Ports, on CFIUS reform, and 

on other cases, so I think in terms of accountability, we are actually on top of this. 

We actually have our Senate-confirmed people looking at every 

single transaction, plus we have expertise within the Civil Service 

Branch, which in many respects are our real experts who are looking very carefully at transactions. Sometimes it is hundreds of people that look at a transaction. 

I think that is what the American people would want, which is 

to make sure that people who have real national security credentials are very much looking at these transactions. 

Mr. MCHENRY. Thank you, Mr. Chairman. In closing, I think it 

is important that we have a fair and open process, that we allow 

37

for foreign investment but we do not overburden the Administration with too many filings, and that we have an efficient process 

for the private sector to get the answers quickly and efficiently. 

Mr. LOWERY. Thank you. We agree. 

The CHAIRMAN. The gentleman from California. 

Mr. SHERMAN. I know in the Federal Government, you cannot 

really lose your job for stupidity, but did anyone lose their job as 

a result of the mistaken initial approval of the Dubai Ports’ deal? 

Mr. LOWERY. Not to my knowledge. 

Mr. SHERMAN. I could only guess how big a mistake somebody 

would have to make. 

Mr. LOWERY. Sir, the mistakes are—there were two mistakes. 

Mr. SHERMAN. Reclaiming my time. I think the American people 

are really clear that you made enormous mistakes. 

Mr. LOWERY. I did not say that we did not. 

Mr. SHERMAN. I think the American people are really aware that 

incredible stupidity cannot get you to lose your job in the Federal 

Government, although sometimes it has that effect in elected service. 

Rube Goldberg used to do these great cartoons and he stopped 

publishing them. I thought that he had passed on. Apparently, the 

rumors of his death were exaggerated. He seems to have designed 

the current CFIUS system, as the gentleman from Florida pointed 

out. 

You have what, six agencies plus another six agencies, and you 

have testified with pride that sometimes hundreds of people look 

at a single transaction. 

I would venture to say that where hundreds of people are responsible, no one is responsible. 

I would like to shift to another issue. Last March, we had hearings at the subcommittee, and Mr. Manzullo pointed out that in the 

Dubai Ports’ transaction, the Administration had simply ignored 

the law. 

I just got out of Foreign Affairs where it is apparent that the Administration simply ignores the Iran-Libya Sanctions Act, simply 

refuses. 

Is it the policy of this Administration to simply ignore laws that 

major economic interests feel are inconvenient? I will ask you to respond to that for the record. That was more of a rhetorical question. 

Mr. LOWERY. No. 

Mr. SHERMAN. I would venture to say that the handling of Dubai 

Ports, the handling of the Iran-Libya Sanctions Act, now the Iran 

Sanctions Act, demonstrate convincingly to the contrary. 

Deciding whether we are going to allow foreign direct investment, particularly in the areas critical to our national security, I 

believe this investment is a privilege of the investor. You do not 

have a right to own American ports. 

Do we consider whether the entity involved is following the boycott against Israel and announced by several Arab states? Is that 

a factor? 

Mr. LOWERY. We look at many factors. That could be a factor in 

specific transactions. 

38

Mr. SHERMAN. If it is not on the checklist, is it just a capricious 

decision by one of the people involved, or is it identified as a factor 

that is looked at? 

Mr. LOWERY. What we do is the agencies with expertise, including in this case the State Department, is part of the CFIUS process 

and can weigh in. 

Mr. SHERMAN. As far as you know, there is not a single one of 

these thousands of transactions where that has ever been officially 

raised by State or any other agency. Had it been raised, had it 

been on the checklist for Dubai Ports, you would have saved yourself a lot of problems. 

Mr. LOWERY. That would have been a dispositive factor, if that 

is what you are suggesting. 

Mr. SHERMAN. Not when you really look at their actions; no. You 

need to perhaps check with State as to what the Emirates actually 

does. 

I will yield back. 

The CHAIRMAN. The gentleman from Kentucky. 

Mr. DAVIS OF KENTUCKY. Thank you, Mr. Chairman. 

The whole issue with Dubai Ports, I think, brings up some interesting questions. I think oftentimes, the governmental process and 

even the legislative process has been known to overreact or create 

more rules, to treat the symptom rather than the root cause. 

To your point on foreign investment, I think a proactive partner 

of foreign investment is very valuable in the creation of jobs and 

the perpetuating of our economy, particularly our export market. 

My district hosts the headquarters, the North American headquarters, of Toyota, which has been a tremendous benefit to the 

midwestern United States, certainly to Kentucky. 

They put their plant in shortly before the original CFIUS legislation came into being. 

One of the questions I would like to ask, because I think there 

can be an overreaction to have a narrow group of say deputy secretaries or secretaries to provide final review, they are ultimately 

going to be dependent on staff, but there is a bigger issue that I 

see in play in the Federal Government, particularly related to national security. 

That is, the interagency process is fundamentally broken. We 

have agencies, six agencies, multiplying staff, dead ends in communication, political agendas, surprisingly might intrude upon the decisions to efficiently process information. 

I am wondering if you might comment first on a need for, let’s 

say, rejuvenation by statutory change to allow a more network-centric process to assess these needs. 

Dubai Ports, you know, showed this symptom. There were plenty 

of reasons to raise the question of no communication with Congress. I think a lot of that has been remedied. 

At the root of it, I wonder if we can do something in the issue 

of assessing trade in the interagency process along the lines of 

what we have done with the National Counterterrorism Center. 

We took agencies that did not communicate with each other, put 

them all at the table working together professionally incenting 

them, and have had a dramatic improvement in information security on that side. 

39

Would you comment on that from your seat there at Treasury? 

Mr. LOWERY. I think what we try to do to build up good interagency communications is one, we have established this year just 

having frankly a weekly meeting where we discuss the cases that 

are before us, and then as cases rise up in the concern level, then 

frankly, those weekly meetings become frankly slightly more often, 

and also might get up to the highest levels of our government in 

terms of conference calls or what have you. 

We are trying to basically build the network by using what is 

available to us, which is bringing the agencies together. 

Congressman Sherman, I know, was complaining about hundreds 

of people looking at transactions. It is because you are trying to 

farm it out to the right experts. 

Mr. DAVIS OF KENTUCKY. I would like to reclaim my time. He 

was a CPA. I came from the manufacturing process world. We encounter professionally both sides of the same thing. 

I think having a lot of people look at it does not necessarily make 

it a more effective process. 

Coming back to the issue, I go back to the NCTC example. They 

actually shrunk down dramatically the number of folks who looked 

at it and had less inventory in the process, if you will, 12 transactions a month is pretty minimal. 

They actually improved their productivity and were able to more 

quickly identify potential threats and deal with them. 

Mr. LOWERY. I agree with the point that just having more people 

look at it does not mean anything. I think having people come together as representing an agency, which has different types of expertise within that agency, and providing a view of that agency, so 

that somebody from a Homeland Security department provides a 

view that this is Homeland Security’s view on this specific transaction. 

The Treasury Department as chair is making sure they capture 

the different views that are out there. 

That is the type of process we have. I think we are open to other 

suggestions as to improvements on that process. 

I think that what we have tried to do is it sounds like semi-close 

to what you are doing on NCTC. I do not know the issue that well. 

We are bringing people together on a basis where they actually 

have to speak for their agencies as opposed to speak for specific 

parts of their agencies, which does lead to lots of confusion. 

Mr. DAVIS OF KENTUCKY. The one concern that I have is that the 

people representing the agencies may be defending their agencies’ 

interest, particularly watching in an election year last year. I think 

I have certainly seen this from a political perspective myself. 

One of the things that occurred was all of a sudden there were 

no more problems relating to CFIUS issues until after the election. 

Certain agencies can certainly slow the process down to assure 

there is not only risk but also a political situation can be over studied and mitigated at risk to legitimate investment for the Nation. 

I come back to the issue. I would like to correspond with you and 

suggest you talk to the Deputy Secretary about this. I have great 

personal respect for him. We have discussed the interagency issue 

a number of times, and perhaps adapt some form of that model to 

simplify the information process that addresses a legitimate secuVerDate 0ct 09 2002 15:46 May 01, 2007 Jkt 034672 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 K:\DOCS\34672.TXT HFIN PsN: TERRIE
40

rity concern that many of us were aware of that apparently never 

got vetted in that process. 

At the same time, allow the proper oversight from Congress and 

also protecting our national security interests. 

I yield back my time. 

The CHAIRMAN. The gentleman from Texas. 

Mr. GREEN. Thank you, Mr. Chairman. Thank you, Mr. Assistant 

Secretary, for appearing today. 

Sir, the protocol having been established, please allow me to go 

right to a question. I am looking at section three of the bill. Section 

three, as I understand it, is being opposed by the Administration. 

Section three provides for the vice chairs of the committee to be 

the secretaries of Homeland Security, as well as Commerce. There 

is also a provision for executive office members. 

Can you explain why the Administration would be opposed to 

this, if indeed this is the circumstance? 

Mr. LOWERY. I think the Administration just views that it is better to have flexibility than to put that into the statute. 

In terms of White House agencies, obviously, the Executive Office 

of the President should be run by the President’s Office. In terms 

of the specifics of who should be the vice chair and who should be 

the chair, we just think that is something that the Executive 

Branch can work out, although obviously we respect very much the 

advice of Congress on those issues. 

I think that is our major issue. 

Mr. GREEN. While this may not be of paramount importance now, 

I am sure you agree that we live in a world where it is not enough 

for things to be right; they must also look right. 

The perception that the public has with this Dubai deal is that 

things just did not look right. They may have been right, but there 

was the appearance of something less than a perfect circumstance 

emerging from that transaction. 

How would you have us, without having some sort of opportunity 

prior to transactions, how would you have us maintain the public’s 

trust and respect if we do not go to the extent that we are trying 

to with this legislation? 

Mr. LOWERY. That is a terrific question. The chairman made fun 

of me earlier for kind of talking about getting our confidence back. 

Mr. GREEN. Do not feel badly about that. The chairman makes 

fun of me all the time. 

Mr. LOWERY. That is what we are trying to do. First of all, let 

me just state that the legislation, we thought, was very good. There 

are some parts of it we would like to change, not surprisingly. 

We think that having that type of legislation will help build confidence with Congress that we are trying to do the right things. We 

are not sure it will help that this group or that group is the chair 

or vice chair, as long as Congress understands what the Executive 

Branch is doing in terms of how it is doing its work, and that is 

the only thing. 

We agree completely that we need to build your confidence up 

more so that you can help us make sure that the American people’s 

confidence is built up. 

Mr. GREEN. Thank you, Mr. Chairman. I yield back the balance 

of my time. 

41

The CHAIRMAN. I appreciate it. I would just say to the gentleman, so he does not think I do not always respect his opinion, 

in regard to the first question he asked, I do not think the Administration’s objections are going to carry an enormous amount of 

weight in this situation, so I think the provision the gentleman 

talked about is likely to remain in the bill. 

The gentleman from New Jersey. 

Mr. GARRETT. Thank you, Mr. Chairman. 

Before I begin, just taking off the page of the gentleman from 

Texas’ comment, I think you hit it on the nose as far as that perception is reality in these situations. Sometimes that is good and 

sometimes it can have the obvious difficulties that we have here. 

I come from the great State of New Jersey, where we live in the 

shadow of the Twin Towers. The various ports that we have that 

my constituents work for, whether it is across the river in New 

York, or here in New Jersey, although none in my district, but a 

number of our folks certainly make their livelihood out of them, 

and the goods that are shipped through them, and come through 

those ports obviously impact upon our economy. 

You can imagine the perception aspect of going back to the Dubai 

Ports’ situation and how it would impact upon our district. 

I should say that was before the Dubai situation, and after I 

have had the opportunity both in my current capacity as a Congressman to visit the ports, and to meet with the folks who run 

them, both before 9/11 and after. 

I do just take this time to compliment the folks who are running 

these ports, both from a public perspective, the government officials, and also the private sector as well. Their heart and soul is 

on the same thing as the American public—the security of those 

ports. 

Some of that, I think, was lost to their detriment in the light of 

everything that came out in the media. Some of them, I think, got 

a sense that we were looking at them and the way they were performing their job, whether in the public sector or the private sector, 

and that really should not have occurred after that. 

That goes back to the comment that perception is reality. 

Just two comments. I have been listening to your testimony, and 

with regard to the number of people involved, I think I would just 

want you to elaborate, as far as the farming-out aspect to say, and 

correct me if I am wrong, you are really delegating it. 

We have 100 people here, but you are not saying you are going 

to have the 100 people here doing it, you are going to identify these 

2, 6, or 12. Is that right, when you are making reference to hundreds of people? 

Mr. LOWERY. Yes. I do not mean to cause confusion with that. 

Each agency has their own processes for trying to figure out a 

transaction. There are different experts within the agencies. What 

I mean by hundreds of people is that the Department of Defense, 

for instance, has 22 different agencies that look at these things. 

Not every one of them has expertise on a particular transaction. 

It is the ones that have expertise that are the ones that are going 

to be most important, and they are going to be the ones that inform 

the Department of Defense leader on this issue. 

42

The Department of Defense has to come with a view. That view 

is going to be briefed up within their department so that either the 

Secretary, Deputy Secretary, or Undersecretary of Defense is aware 

of the transaction, understands it, understands the concerns of his 

experts or not their concerns, and is able to give judgment. 

That is how we do things. I do not want to confuse people with 

the hundreds of people. It is just that we have lots of different experts within our government, and we want to make sure they have 

a chance to look at something, although the final decisions are 

being made at a presidentially appointed Senate approved level. 

Mr. GARRETT. My second question goes to, I guess, what I will 

call the burden of proof. I think the gentleman on the other side 

of the aisle made the comment, if I am not mistaken, that companies and individuals do not have necessarily the right to come in 

and control these companies. 

In a court of law, obviously, you are presumed innocent until 

proven guilty in most instances, unless you are dealing with the 

I.R.S. You are innocent and the burden of proof is on the State or 

the government to prove it. 

Is it appropriate to attach that analogy to this situation as well, 

if a company comes in or an individual and wants to purchase this, 

where actually in the whole process is the burden of proof? 

In other words, is it on you and the government to say everything checks off, you are good, or is the burden of proof on them 

really to say well, we should be here because everything is appropriate? Where you have that burden of proof, I think, can affect potentially the outcome of these decisions. 

Mr. LOWERY. That is a terrific question, but I am not sure how 

to answer it. 

Mr. GARRETT. I hope the chairman notes that. 

Mr. LOWERY. It is a terrific question because I think the burden 

of proof is on both. The burden of proof is on the Government of 

the United States because we have to show why there is a problem 

with this transaction. 

Remember, we are welcoming a foreign investment. It says in the 

law that we have to be looking at national security concerns and 

whether there is a threat. That seems like our burden of proof. 

On the other hand, we have to get the most up-to-date and honest trustworthy information from the companies themselves, so we 

ask a lot of questions. Sometimes these companies, and you will 

hear about this, do not like it. 

At the same time, we are trying to get as much information as 

we possibly can so we can answer the questions that have come up 

from our experts about a specific transaction. 

In many respects, the burden of proof is on both. 

The CHAIRMAN. I am going to give the gentleman a bonus question for his ‘‘terrificness’’, and he may ask another question if he 

would like. 

Mr. GARRETT. May I reserve that for another time? 

The CHAIRMAN. No. 

Mr. GARRETT. If I may just ask a follow-up question on that, 

since I cannot reserve that and carry that over, is that appropriate 

because they do not have the right to come in here, should not we 

be putting—this is what my constituents will ask me at my next 

43

town hall—should we not be putting the burden on them to be 

forthcoming, not only forthcoming, because I know that is part of 

the process, should not the burden be extra on their side as opposed to on both or one side or the other? 

Mr. LOWERY. To a degree, yes. I think frankly there is a burden 

on them. If you were investing and you were born in a foreign 

country and you were investing in the United States in an area 

that raised national security issues, you have a greater burden on 

you than a domestic firm. 

The CHAIRMAN. As I said before, de facto. If you are a foreign investor thinking about putting your money here, if the U.S. Government opposes you, I do not care where the burden of proof is and 

what the likelihood is of you ultimately winning in court, that is 

the end of the deal. 

You can likely use your money to go to court and fight that fight, 

and we know there is the possibility that there might be a Congressional hearing on the investment, we are told, and I think accurately, is enough to discourage it. 

I think de facto the burden of proof is very much on the people 

who want to come here, and the very fact of a serious controversy 

will almost always put an end to the deal. 

The gentleman from Texas. I should explain to the gentleman 

from New Jersey that it is not reservable because we are probably 

not going to be on the same side that often. 

Mr. GARRETT. You never know. 

Mr. HENSARLING. Thank you, Mr. Chairman. 

I do think this is an important hearing, one that unfortunately 

I have missed much of due to appearing at a Budget Committee 

hearing. No matter how many terms I have served, I have yet to 

master being in three places at once. 

The CHAIRMAN. You should have been here. This one is going to 

be real. 

Mr. HENSARLING. Mr. Chairman, given that your party is in 

charge now, I will share that. 

The concern I had as we approached this hearing was that this 

particular legislation, which may be good, it certainly has the goal 

of increased disclosure, and increased accountability, but since coming to Congress, I have seen very often where the cloak of national 

security is used to frankly hide a protectionist agenda. 

The debate about trade has been around since the dawn of man, 

and I have particularly strong opinions on one side. I believe it is 

the right of an American if he wants to purchase a shirt produced 

in Costa Rico, that ought to be part of his economic liberties. Clearly, there are people strongly on the other side. 

Having said that, like many issues we approach here, it is a 

question of balance. There are legitimate national security concerns. We may be plowing a little bit of old ground here. 

The first question I have, coming from the perspective of Treasury, under current law is, is it possible to override the concerns of 

the Pentagon, and of the Department of Homeland Security? How 

do we know that their voices are receiving the concern they are 

due? 

Mr. LOWERY. No, it is not possible. As the chair of CFIUS, my 

folks do a very good job on some very tough issues, but in many 

44

respects, we serve largely as a secretariat function, to make sure 

that everybody is informed of every single transaction. 

The Departments of Homeland Security, Defense, Justice, and 

other agencies are very vigorous in how they submit their reviews. 

If there is a specific concern of the agencies on a transaction, the 

investigation will be extended. If that concern cannot be addressed 

at the end of the day and while other agencies, including Treasury, 

might have a different viewpoint, that could go to the President of 

the United States and only the President would make that decision. 

Mr. HENSARLING. Right now, as part of this debate, there is a 

discussion as far as redefining the concept of ‘‘national security.’’ 

How does Treasury feel about that? Forgive me. I missed your testimony. 

Mr. LOWERY. That is quite all right. It is very difficult to define 

‘‘national security’’ because it is an evolving process. It is an evolving concept, actually. 

I think Congresswoman Maloney talked earlier about the idea of 

having broad and flexible definitions, and that is what we try to 

do. 

As I said earlier, if you looked at national security and thought 

about it on September 10, 2001, and then on September 12, 2001, 

you would have come up with different definitions. 

I think that is how we have tried to evolve. When CFIUS was 

created, it was mainly about defense production issues and export 

controls. We now look at a lot more types of transactions, some of 

them are in critical infrastructure, and some of them are in telecommunications. 

It is an evolving concept and we are always being informed by 

people within the Executive Branch, but also people in Congress. 

Mr. HENSARLING. Again, generally, I view direct foreign investment as tending to be a good thing. I believe that there are millions of American jobs that are dependant upon it, some of which 

are in my Congressional district. Those jobs tend to be at wage 

rates higher than the national median. 

There is some discussion in this debate about making CFIUS 

submissions mandatory as opposed to voluntary. What is Treasury’s position on that and what impact might that have on increased direct foreign investment? 

Mr. LOWERY. We think that is a terrible idea. The reason we 

think it is a terrible idea is because if it was mandatory, there are 

probably anywhere between, I do not know, 700 and 1,100 transactions a year that happened in the United States from foreign acquisitions. They are very important to our growth. They are very 

important to job creation. They are very important to wealth creation. 

CFIUS looks at roughly 10 to 20 percent, which is basically reflective of what types of transactions are happening in the national 

security field. 

We want foreign investment to be open. We do not want to create 

a national screening process. If you move towards mandatory filings, you are moving much closer to a national screening process 

as opposed to a national security process. 

45

The CHAIRMAN. We have kept you, but we have another panel. 

I just want to thank the Assistant Secretary. You have been very 

forthright and patient, and the Department should be well pleased 

with your presentation. 

We have asked you for some further things which we think will 

be helpful, and you are now excused, and the next panel will please 

assemble quickly. 

We now have our second panel. We will begin. My advice to the 

panel would be that you might want to particularly address some 

of those issues that you heard being discussed. 

I think you have a generally favorable disposition on this committee. We passed this bill unanimously last year. 

If I were a witness, I would try to address some of the particular 

points. Whether or not all of the members are here, the information 

will get to them. 

We will begin with our former colleague, a former member of this 

committee from Texas, Mr. Bartlett, who is the president and CEO 

of The Financial Services Roundtable. 

STATEMENT OF STEVE BARTLETT, PRESIDENT AND CEO, THE 

FINANCIAL SERVICES ROUNDTABLE 

Mr. BARTLETT. Given the lateness of the hour, and the full and 

robust discussion by the previous panel and by the committee, I 

will submit my testimony for the record and offer just a couple of 

comments. 

First, The Financial Services Roundtable and our members support H.R. 556, and we urge its early passage into law. Given that 

there are both national security interests and international relations’ interests, we urge that it be brought up under either a suspension or some form of restricted rule to avoid amendments that 

could damage national security or international relations. 

Second, we do urge two changes in the legislation as it is currently proposed. One is that there be no requirement of a mandatory review unless both it involves both a foreign government and 

a national security interest. We do not think it should be a simple 

test of either/or. 

We urge you to disallow the so-called ‘‘evergreen’’ action by 

CFIUS, in which an approval of a purchase could occur and then 

after the ownership has been transferred and the money put in the 

bank, if you will, then CFIUS reopened the process. We think there 

are adequate national security laws to protect national security and 

reopening an ownership that has previously been approved would 

not be in the best interests of the United States of America. 

In conclusion, we urge prompt passage of this legislation. 

[The prepared statement of Mr. Bartlett can be found on page 74 

of the appendix.] 

Mrs. MALONEY. [presiding] I thank the gentleman for his testimony. Going right along to Todd Malan, president and CEO, Organization for International Investment. 

46

STATEMENT OF TODD M. MALAN, PRESIDENT AND CEO, 

ORGANIZATION FOR INTERNATIONAL INVESTMENT 

Mr. MALAN. Good morning. My name is Todd Malan and I am 

the president and CEO of the Organization for International Investment. 

OFII is the organization that represents the largest group of foreign investors in the United States. We have 150 member companies who basically form the customer base of CFIUS. Therefore, I 

am very happy to be able to testify this morning. 

We talked a little bit about the benefits of foreign direct investment this morning and I wanted to go over some of the facts and 

figures about that. 

5.1 million Americans work for U.S. subsidiaries of foreign-based 

companies. Those companies pay on average about $64,000 in 

wages per employee, which is 32 percent higher than all other jobs 

in the United States. 

One fact that is sort of counter intuitive about these companies 

is they are not just here for this market. They are, in fact, exporting from the United States. About 19 percent of U.S. exports are 

created by foreign companies that have operations here in the 

United States. 

Two other facts that I think are interesting for the committee to 

consider: 94 percent of total assets owned by foreign companies are 

from OECD member nations, other countries that have similar 

standards as the United States; and 98 percent of U.S. foreign direct investment is from private sector firms (and only 2 percent are 

from government-controlled companies). 

There are a number of things beyond statistics, the story about 

in-sourcing in the United States is compelling. We have done a 

study that looks at every State and how they benefit from foreign 

direct investment (FDI). If you would like to look at your State and 

how it benefits from FDI, go to ofii.org. 

One thing I felt would be beneficial is for me to reflect some of 

my member companies’ concerns about the current CFIUS process 

after the Dubai Ports World situation that we have talked so much 

about this morning. 

I think it is important for members to think about it in a postSeptember 11th era; obviously, protecting national security is clearly the priority. 

When functioning properly, CFIUS should act as a triage doctor 

would in an emergency room, quickly analyzing and approving nonsensitive transactions in which the buyer does not pose a threat or 

the target does not involve national vulnerability. This leaves the 

process able to focus on transactions where the national security 

risk is significant. In other words, it is just as important that 

CFIUS clear transactions that do not implicate national security as 

it is that they drill down deeply into those that do. 

A recent study published by the National Foundation of American Policy showed that in the last year, the number of CFIUS filings has increased by 73 percent; the number of investigations 

jumped by 350 percent; and the number of companies withdrawing 

their filings from CFIUS grew by 250 percent. Also, there were 

more second stage investigations last year than during the previous 

47

5 years of the entire Bush Administration, and more than in 1991 

to 2000. 

The number of mitigation agreements or conditions imposed on 

companies more than tripled in the year. More specifically, the Department of Homeland Security required an average of 4.5 mitigation agreements per year between 2003 and 2005. Last year, DHS 

required mitigation agreements in 15 transactions. 

While unofficial data suggests there was growth in foreign investment in 2006, it is hard for me to imagine that in 2006, there 

was suddenly a much larger number of transactions that truly implicated national security. Rather, I suspect that CFIUS bureaucracy went into a hyper cautious mode. Caution is warranted in national security focus and cannot be compromised. However, we cannot let CFIUS get bogged down by transactions that do not have 

anything to do with an increased risk profile. 

OFII is also concerned that some agencies are taking undue advantage of the leverage inherent in CFIUS. CFIUS should not be 

a fishing expedition for a single agency to address comprehensive 

industry objectives on a ‘‘catch is as catch can’’ basis, merely because they have leverage over one industry participant. 

CFIUS should not be a way for the government to avoid open 

and deliberative processes of creating rules under normal rulemaking procedures in which public comment and Congressional accountability are present. 

For example, if the Department of Homeland Security perceives 

a vulnerability in our telecommunications infrastructure, it should 

address that vulnerability across the sector, without regard to the 

ownership of firms. 

We all know that large chemical plants present a possible risk 

of attack. Would it make sense for security standards or government protections to only apply to a Dupont facility but not to 

BASF? Of course not. 

We should not approach national security vulnerabilities in a 

piecemeal fashion. 

Mr. Chairman, we are very happy to support the legislation that 

the committee is considering. We have made a few small suggestions in regard to that. 

We look forward to working with you and the committee to advance that legislation. 

[The prepared statement of Mr. Malan can be found on page 93 

of the appendix.] 

The CHAIRMAN. Thank you. 

Mr. Michael O’Hanlon, senior fellow in the Foreign Policy Program, Brookings Institution. 

STATEMENT OF MICHAEL O’HANLON, SENIOR FELLOW, 

FOREIGN POLICY PROGRAM, BROOKINGS INSTITUTION 

Mr. O’HANLON. Thank you, Congressman. I will try to follow the 

example and be quick myself. 

I think it is important that there is this consultation with Congress that is being enhanced. Let me just say one word about why 

and leave it at that for my remarks. 

48

I think when you imagine the importance—we have not talked 

a lot about the substance of how you evaluate a proposed deal. We 

have talked a lot about process today. 

Congressman Marshall mentioned the need for focus on substance. You have to do scenario analysis. You have to evaluate 

what could go wrong with this deal and think it through in some 

level of detail, and it is going to be an inherently judgmental and 

subjective process in some cases, which is why I think Congress’ 

opinion is always going to be worthwhile. 

I will just mention two very quick examples and be done. One 

was Dubai Ports World. The reason why I was skeptical of that 

deal at the time is because I took note of the fact that we did not 

allow citizens of the United Arab Emirates to come to the United 

States through the VISA waiver program at that time. 

We felt that the UAE’s processes for evaluating its own citizens’ 

trustworthiness to come to the United States, like with most countries in the world, were not good enough that we could simply give 

a blank check or a blind eye to whoever would be coming to the 

United States, and yet we were prepared to let this same country 

or a company from this same country have access to learn potentially about some of the strategic vulnerabilities in what I would 

call sort of part of our strategic national underbelly, the ports of 

our Nation. 

Scenario analysis led one to conclude there is a possibility that 

certain practices would become well known to citizens of the UAE 

and then they would realize what our strategic vulnerabilities 

were, therefore, I think it was appropriate that deal was scrutinized and in the end, opposed. 

You and Congresswoman Maloney talked about the hypothetical 

of a hotel near the White House being in the hands of a foreign 

government. I think you have to do scenario analysis on that, because I think there is the possibility of a worry in that kind of a 

situation myself. 

I have not thought through which one of you I agree with. I 

sensed a slight difference of opinion between the two of you. 

You need to have that kind of scenario analysis to figure out 

whether a deal makes sense or not, and simply constructing a process does not guarantee that the right judgment will be reached 

once you do that analysis. 

I want to commend Congress for the fact that this bill requires 

greater consultation. You are always going to need multiple smart 

people looking at the same deal and using their best judgment to 

know if it makes sense. 

Thank you. 

[The prepared statement of Mr. O’Hanlon can be found on page 

163 of the appendix.] 

The CHAIRMAN. Thank you. Thank you for your directness. 

Mr. David Marchick, a partner with Covington and Burling. 

STATEMENT OF DAVID MARCHICK, PARTNER, COVINGTON 

AND BURLING 

Mr. MARCHICK. Thank you very much, Mr. Chairman. Thank you 

for the opportunity to be here. I will be very brief as well. I see 

that we are losing interest in this subject. 

49

The first point I would like to make is that the CFIUS process 

has already changed. 

The CHAIRMAN. It is not that people are losing interest. It is that 

they figure at this point, they may not be gaining knowledge. 

Mr. MARCHICK. Hopefully, I can add a little to the debate. 

The CFIUS process has changed and changed significantly. Todd 

went through the data. There was suddenly a huge increase in filings, withdrawals, investigations, and mitigation agreements in 

2006. 

Some of it, I think, is that the bureaucracy took the wrong signal 

about Dubai Ports. Whereas the concern about Dubai Ports was in 

large part about communication with Congress, I think the bureaucracy has taken that signal and said that we need to scrutinize 

every single transaction when, in fact, the important thing is to 

scrutinize those transactions that really raise national security 

issues. 

The second point is that timing and certainty matter. The process and the political issues relating to Dubai Ports has created uncertainty in the marketplace. Uncertainty about when companies 

should file, uncertainty about how long the process should take, 

uncertainty about whether there will be a mitigation agreement, 

and with the Alcatel-Lucent transaction, uncertainty about whether a transaction will be reopened at some point in the future. 

Uncertainty in the timing to close is very important. I will just 

give you a quick example. If I were selling my house and Mr. 

Malan was bidding against Mr. Nichols, and Mr. Malan and Mr. 

Nichols both bid the same amount, but Mr. Malan could close in 

30 days, and Mr. Nichols could close in 90 days, and the bank put 

all kinds of conditions on Mr. Nichols’ bid, and on top of that, there 

was the possibility that the transaction could be unwound 3 years, 

5 years, or 10 years in the future, I am going to go with Mr. Malan 

any time. That same concept applies to transactions going through 

the CFIUS process. 

The third issue is the bill. I really commend Ms. Maloney and 

the bipartisan team that put the bill together. It is a very good bill. 

I do recommend a few tweaks. 

One tweak would be the DNI provision, which has been discussed at length. I will not talk about that again. 

The second would be government ownership. There should be additional scrutiny of acquisitions by government-owned entities, but 

not all acquisitions by government-owned entities create a national 

security risk. The time for a review does not equal scrutiny or the 

level of scrutiny in a review. 

Just to give you a simple example. Late last year, the Ontario 

Teachers Pension Fund bought four or five ports in the United 

States. Some of those ports were exactly right next door to the 

ports that were going to be purchased by Dubai. 

It is hard to see how an acquisition by a bunch of Ontario teachers and their pension fund could raise national security issues. 

That transaction did not need to go through an investigation. 

If the bill were in place last year, that would have taken 90 days, 

and that could have knocked their bid out and made it less competitive. 

50

If you force all of these transactions into the process, even if 

there are no national security issues related to them, then you are 

going to divert CFIUS’ attention from those transactions that matter. I would encourage a few adjustments there. 

The final point is that on mitigation agreements, I would encourage some principle in the bill that mitigation agreements should 

only focus on the marginal increase in risk as a result of a transaction, as opposed to a general security issue that exists related to 

a particular sector, like the telecommunications sector. 

Finally, mitigation agreements should only be put in place if 

other laws or regulations do not adequately protect national security. 

The final point is that one never knows whether the bill, which 

is a very good bill, will become law. Last year, you passed this bill 

434–0. The Senate had a different bill. The bills were not reconciled. 

I would hope that with your blessing, the Executive Branch could 

put out an Executive Order that adopts some of the concepts in the 

bill, just in case the bill does not become law, so there is something 

in place as an insurance policy in case this bill is not reconciled 

with the Senate and the President does not sign it. 

I think you have a very good bill. With a few tweaks, it will be 

a great bill. I really appreciate the opportunity to be here today. 

[The prepared statement of Mr. Marchick can be found on page 

104 of the appendix.] 

The CHAIRMAN. Mr. Robert Nichols, president and chief operating officer of the Financial Services Forum. 

STATEMENT OF ROBERT S. NICHOLS, PRESIDENT AND COO, 

FINANCIAL SERVICES FORUM 

Mr. NICHOLS. Thank you, Mr. Chairman. Thank you, Congresswoman, for introducing H.R. 556, and for your leadership both in 

this and the previous Congress. 

I am here representing the Financial Services Forum, which is 

an economic and public policy organization representing the CEOs 

of 21 of the largest financial services firms doing business in America. 

Today we are talking about two goals, protecting national security and encouraging vital foreign investment. These goals, we believe, are harmonious. 

The financial services industry is acutely aware of the serious 

threats faced by our Nation and the need for Congress to consider 

all aspects of national security in its decisionmaking. 

Addressing threats to U.S. national security must be undertaken 

with absolute resolve and come second to no other priority. 

We also strongly believe that protecting U.S. national security 

and advancing America’s global economic leadership are compatible 

and reinforcing goals. Indeed, we cannot achieve one without pursuing the other. 

In an increasingly interconnected world, the health and vitality 

of the U.S. economy, and therefore American jobs, depends on open 

markets and the free flow of capital. 

U.S. investments abroad support economic growth at home, access to resources, and in turn, national security. 

51

Similarly, foreign investment in the United States brings trillions of dollars of capital, new ideas, and techniques and methodologies, all of which promote U.S. economic growth and enhance 

our competitive position in the global marketplace, and help create 

millions of American jobs, as Todd discussed. 

Unfortunately, in the wake of the Dubai Ports World controversy 

last year, securing approvals within the process of foreign investments, the CFIUS process of foreign investments, has become more 

difficult and is taking longer. That is not good news for the U.S. 

economy. 

Limiting the pool of potential investors in buying of American assets undermines the value of those assets, harming business owners, their workers, the interest of shareholders, and Americans 

with money invested in stocks, mutual funds, and 401(k) retirement and pension funds. 

With these concerns in mind, we respectfully urge Congress to 

reject unwise and unnecessary new restraints on open markets and 

the free flow of capital, as it considers reforms to the CFIUS process. 

Any changes should result from a thoughtful, considerate, and 

fact-based assessment, and should seek to restore confidence, certainty, and predictability to the prospect of investing in America. 

Certainty and predictability are fundamental ingredients to the 

success of our capital markets. Your important legislation will help 

restore that needed certainty. 

Before I close, let me touch briefly on some brand new data regarding public support for foreign investment. When supplied with 

the facts, Americans clearly value the benefits of foreign investment, according to a survey we, at the Financial Services Forum, 

commissioned just 2 weeks ago. 

We found that support for foreign investment has risen since the 

Dubai Ports’ controversy. Now, 51 percent of Americans have a favorable view of foreign investment compared to 47 percent last 

April. Americans also have a more favorable view of foreign investment when they know the facts. Sixty-one percent have a more favorable view when they understand that foreign investment creates 

5 million jobs compared to 52 percent in the previous survey. That 

number has grown. 

Knowing that, 57 percent of Americans we surveyed are concerned about legislation that might stifle foreign investment. 

Considering all of the rhetoric and debate surrounding foreign investment in the last 12 months, I think these figures suggest a 

pretty sophisticated American public when it comes to this issue. 

Speaking of surveys, when we asked our 21 member CEO’s to 

rank 10 potential threats to the continued expansion of the U.S. 

economy, in a survey the Forum conducted this past October, they 

ranked protectionism as the most serious threat to continued economic expansion over terrorism. 

Mr. Chairman, as reform alternatives are further deliberated, we 

urge Congress to take a platform measured approach, and be mindful of the critical importance to America and to the world of thriving global trading relationships. 

We cannot expect other countries to keep their doors open to U.S. 

investment if we close our doors to foreign investment here. KeepVerDate 0ct 09 2002 15:46 May 01, 2007 Jkt 034672 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 K:\DOCS\34672.TXT HFIN PsN: TERRIE
52

ing our country open for business is in the best interest of America, 

and to keep our doors open, we need to maintain predictability, as 

I said, and certainty, hallmarks of the U.S. capital markets. 

Thank you very much for your time. Mr. Chairman, Secretary 

Evans sends his regards. 

[The prepared statement of Mr. Nichols can be found on page 132 

of the appendix.] 

The CHAIRMAN. Mr. David Heyman, who is the director of the 

Homeland Security Program at the Center for Strategic and International Studies. 

STATEMENT OF DAVID HEYMAN, DIRECTOR, HOMELAND SECURITY PROGRAM, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES 

Mr. HEYMAN. Thank you, Mr. Chairman, Congresswoman 

Maloney, and Congressman Jones. 

I was asked to present a context from a national security and 

global terrorism perspective for which members might consider reforms to the CFIUS legislation, and to do that, I would like to 

make three main points. 

First, the security landscape has changed and we must understand the nuances of those changes to consider what should or 

should not change with regard to CFIUS. 

Second, in particular, we must understand al-Qaeda’s interest in 

undermining the U.S. economy and bin Laden’s ‘‘lead to bankruptcy’’ strategy. 

Third and finally, Dubai Ports. This was a transaction that finally put port security on the map, but from a national security 

perspective, it was in my mind a debacle. Nonetheless, the lesson 

should serve as a model for good and bad. 

Let me start with the considerable changes in the security landscape since 9/11. In terms of who we fight, how we fight, where we 

fight, and who does the fighting, we have come to view national security in a brand new light today. 

Let me elaborate on each of those briefly. First, our adversaries 

are no longer principally nation states but now include non-state 

actors or terrorists. 

Second, the front lines of war are no longer predominately 

trenches across political boundaries. They are in the streets and 

buildings of our cities and States, at curbside check in’s at airports, 

at turnstiles in stadiums, and in emergency rooms in hospitals. 

Third, our battles are no longer fought solely by airmen, soldiers, 

sailors, and Marines. They are also fought by epidemiologists, fire 

fighters, citizens, and police. 

Fourth, the weapons we wield to wage war are not just tanks, 

missiles, and rifles, but also satellites, computer algorithms, vaccines, sensors, and databases. 

These changes raise a fundamental question about what constitutes national security concerns in the CFIUS national security 

review. This is the substance of the review. 

In particular, would, for example, foreign ownership of critical infrastructure of vital services that sustain our lives pose a new risk 

to national security in light of global terrorism? Are we at risk of 

53

handing terrorists the keys to securing our house by allowing foreign direct investment in critical infrastructure? 

This was in the end the fear and frankly the underlying question 

during the debate of Dubai Ports. 

We have to be careful here when we talk about risks, when we 

assess risks. There are components to it. There is a difference between a threat and a vulnerability. Threat has to do with the adversary’s means and goals of the attack. Vulnerability is the target 

of attack and the protected means in place. 

In Dubai Ports, Dubai Ports was not a threat but the ports were 

extremely vulnerable. There is a difference there. CFIUS will not 

fix that vulnerability, only new safeguards will. 

The second point I want to make has to do with understanding 

that our economy is a target of a threat. Contrary to what most 

Americans believe, al-Qaeda’s intent is not to destroy the United 

States through direct confrontation, through direct attacks, but 

rather to provoke America to destroy itself. 

Bin Laden’s own words, which I will not go into because it is in 

my testimony, refer to his experience in Afghanistan against the 

Soviets, and he talks about bleeding Russia over 10 years until it 

went bankrupt and was forced to withdraw. 

This is a model that he seeks to replicate with America. Yes, we 

must continue to protect against future attacks, no question, but 

we must also have an eye on the economy and avoid self-inflicted 

wounds, which brings us to Dubai Ports. 

Dubai Ports was a self-inflicted wound. In effect, we denied direct foreign investment to the United States by an UAE firm because of an unfounded fear of an unsubstantiated terrorist threat. 

Worse, we had a unique opportunity to improve national security 

and we lost it. 

By squashing the deal, what we got, and what we have today, 

is worse port security than it would have been had the deal gone 

through. I can elaborate in the questions. 

Four lessons of Dubai Ports and how the CFIUS process worked. 

Number one, foreign ownership does not and should not be assumed to automatically infer additional vulnerability on a business. 

Number two, a firm from a country where there has been known 

sources of terrorism should not automatically disqualify it from investing in the United States. 

Number three, the threshold tests for the CFIUS national security reviews should be based on two assurances. One, that security 

of business transactions meet U.S. standards, and two, that the 

U.S. Government has the ability and authority to audit and verify 

that security. 

The last point, the CFIUS process must remain confidential, but 

it must also become much more transparent to key Members of 

Congress who are responsible for oversight. 

I would like to revise and extend my comments. 

[The prepared statement of Mr. Heyman can be found on page 

83 of the appendix.] 

The CHAIRMAN. Thank you. Thank you all for the brevity. As you 

know, we now have about 18 or 20 minutes to get over there to 

vote. I think we can do the questions now. 

54

Mr. Nichols, one suggestion. I know all organizations do this. 

People spend money on polls and they come tell Members of Congress what the polls say. Members of Congress take their own 

polls. I do not know a single Member of Congress who cares what 

a national poll says; what we care about is what they say in our 

districts. 

The fact that you went from 47 to 51 percent, which may or may 

not be within a margin of error, is not going to buy us much. I hope 

you guys are doing other things to help us get the votes. I know 

you are. 

Secondly, to Mr. Heyman, I cannot resist, if you are going to pick 

a fight, you have to be careful. On page one, look at the third paragraph of your testimony, in which you say, ‘‘So with all do respect 

to the members of the committee, it’s the economy, stupid.’’ That 

would have had more force if you had not misspelled ‘‘due.’’ When 

you misspell a three letter word, do not call people stupid. I think 

that is probably a good lesson for the future. 

With that, I will recognize the gentleman from North Carolina. 

Mr. JONES. Mr. Chairman, thank you very much. I am sorry I 

could not be here for the testimony of the witnesses before Mr. 

Nichols, I believe. 

My interest, and I want to thank the chairman for holding this 

hearing, is I realize that we live, as you said, and you said in your 

testimonies, we live in a global world, a global economy. 

When you come from a State like I do, North Carolina, where 

even as late as last week, hundreds of manufacturing jobs are 

going overseas, and I think Mr. Nichols, as the chairman made reference to, polling numbers. 

You might hear those polling numbers from the country club, but 

you are not hearing those numbers from the average working man 

or woman. 

When I look at the fact that prior to NAFTA, we did not have 

a trade deficit with Mexico, but since NAFTA, now the trade deficit 

is somewhere around $60 million. 

I know in this world we live in, there are people who have money 

and people who do not have money. At the level of many of those 

who support you and others, and I am not being critical, I wish I 

was there, but what I see, and I have been in Congress for 12 

years, going on 13 years, and what I see happening every day is 

the rich and the have not’s and the have not’s have been working 

for 20 and 30 years of their life, the have not’s are having less. 

What do you say to a Congressman who has had hundreds of 

jobs, not only from the State, but from his district, go overseas, and 

then as Mr. Frank said, it is God’s will, the people’s will, I can live 

with it. 

When I see what is happening to this great Nation because what 

I think the word is, is not from you gentlemen, I want to make that 

clear, ‘‘greed’’ is destroying this country. I know I have not asked 

a specific question, but I have put some thoughts out, maybe not 

worthwhile, but I put some thoughts out. 

I would like to hear you respond to my thoughts. 

Mr. NICHOLS. I take many of your points and I share many of 

them as well. One subject that I know the chairman will have 

other hearings about and that we have discussed participating in 

55

is talking about some of those who have been dislocated by 

globalization, talking about those who are not feeling the full benefits, and those who are not left behind. 

There are a lot of things that both the public and private sector 

need to do to help those people, your constituents and in other 

pockets of our country. 

While I am a passionate supporter of trade and the benefit it 

brings to the global economy, you make very, very thoughtful 

points that we will be exploring under the chairman’s direction. 

The CHAIRMAN. If the gentleman would yield, I take it, and I 

share much of what the gentleman said, but when we are talking 

about foreign direct investment, we are talking about the flip side 

of that. That is, we are talking about money invested here, not in 

financial instruments, but in real things, so that the impact is job 

creating here as opposed to whatever you people might think in 

other places. 

Mr. MALAN. I would just add to that. The flip side of the coin is 

exactly right. North Carolina, more than any other State, really is 

out there trying to attract more of my member companies to come 

into the State and operate in the State. 

198,000 people in the State work for U.S. subsidiaries of foreignbased companies. You have GlaxoSmithKline. You have companies 

like Kidde Aerospace, which just opened a new plant in the State—

700 new jobs and a $40 million investment. 

That, to me, is this aspect of the global economy that your constituents can look at—bricks and mortar—and say ah, new plant, 

came in from the U.K., new people going to work there, that is part 

and parcel of having a rules based trading system that people will 

want to come to the United States and take advantage of what is 

a very solid workforce. 

North Carolina is as competitive as any State in attracting foreign direct investment. 

Mr. JONES. I appreciate that. I think I have a couple more minutes. I do not disagree with what you are saying or what the chairman is saying. 

I will tell you what is really missing. Maybe the chairman when 

he holds these hearings, maybe we will find a fix to it, but what 

is happening is yes, the Research Triangle is striving. Even the 

town in my district, Greenville, North Carolina, where East Carolina University is located, and some other towns, they are beginning to see the re-investment from other countries. There is no 

question about it. 

I do not know how we are going to address this. There is a growing gap. We have a great community college system in North Carolina. It has a great reputation. It does a lot of good, but some of 

these companies that are coming back, they cannot replace the job 

that has been lost. They can replace a job but cannot replace all 

the jobs. 

I am for the globalization. I understand we need to have this exchange in investment in other countries, but I think America quite 

frankly, and you cannot fix this, but when I looked at the fact that 

we are going to allow Chinese luxury cars to come into this country, and I put a bill in, Mr. Chairman, it was not going anywhere 

because of WTO, but we are going to charge them, and I might be 

56

a little bit off, to sell the Chinese cars in this country a tariff of 

about 2.5 percent, and yet we send our cars to China, and they are 

going to charge us 27 percent. 

This is where there might be some who benefit greatly from this 

exchange of investments. The average citizen in this country is not 

benefitting. Maybe he or she will in time. In my humble opinion, 

right now, they are not. 

The CHAIRMAN. Will the gentleman yield? I agree on most of 

that. We are going to be focusing—I think you have hit the number 

one issue that faces this country today, and that is disparity. We 

do intend to deal with it. 

Mr. JONES. Thank you, sir. I yield back. 

The CHAIRMAN. Mr. Malan, I was impressed with you telling him 

how many jobs there were in North Carolina. Do you have that for 

every member of the committee or do you have to look it up? 

Mr. MALAN. I do not have it here, Mr. Chairman. 

The CHAIRMAN. Very impressive. The gentlewoman from New 

York, and then we are going to go vote. 

Mrs. MALONEY. I thank the gentleman from North Carolina for 

his comments. I feel you made a very important statement. 

I thank our chairman for holding this hearing and really moving 

the CFIUS legislation forward as a priority of the Democratic Congress. I think it is very important to business, and I think it is very 

important to economic security and national security. 

It is one of his first hearings, and I appreciate it. We are having 

a mark-up so the chairman tells me next week, and I think that 

is important. 

I would like to quickly ask Mr. Bartlett, what is so magical about 

the 30-day review process? I have heard that from some of my constituents, stick to the 30 days, is if it is some type of magical number. I know it is the same as the anti-trust. Why is that number 

so important to business? 

Very quickly, I would like to ask Mr. Malan and Mr. Marchick, 

you mentioned that you want the transparency and the predictability, but you also mentioned that the current version of CFIUS 

should be amended so that the applications by government-owned 

entities that do not raise a national security issue can be dealt with 

quickly. 

I would like your ideas on how we do that. Some members of 

Treasury have suggested that a chair or deputy secretary sign off 

on it and move it forward. I would like your comments on that. 

I would like to come back, I think Mr. Bartlett and others have 

raised the question that you were in opposition to a provision in 

section six of the current CFIUS reform bill that would allow for 

a lead agency in monitoring the mitigation agreement, to make 

modifications to that agreement. 

I understand your arguments for predictability and certainty 

when it comes to the process, but if we do not allow for a modification to an agreement, how would we address situations where there 

is a substantial change in circumstances that some agency heads 

may feel is a problem? 

I would just open it up to all of you. 

The CHAIRMAN. I should note, she has really been a leader in 

this. We do think it is very important, particularly on our side of 

57

the aisle, to show that the concerns that many of us have over equity and protection of citizens’ rights in society are fully compatible 

with support for the legitimate role that business plays in obviously creating prosperity. 

The time constraint is unfortunately not there, so I can insist 

that you speed up. Go right ahead. 

Mr. BARTLETT. Mr. Chairman, I will speed up. The 30 days is important, first of all, because it is certain and it is so relatively 

quick. All of the agencies have testified they can meet the 30 days 

easily. In fact, the testimony was more that they would get their 

work done in 15 or 16 days, which gives some extra time. 

This legislation is a balance between national security interests 

and economic interests of Americans. Remember, direct investment 

creates jobs in the United States. Restrictions of direct investment, 

if you restricted it, by 60 days or 90 days, that means you would 

lose jobs and lose economic benefit to Americans. 

Second is the need for it to have a certainty to it. Whether it is 

30 days or 29 days or 31 days, it should not be arbitrary. I think 

the committee knows what happens when the Executive Branch is 

given the ability to be arbitrary in their decisions, and then 10 

years from now or longer, bad things will happen. 

As far as the modification, that really is a comment on arbitrariness. We are a nation of laws. If a company goes through a process, 

any process, that makes a determination that they are ‘‘allowed’’ to 

invest $10 billion, to pick a number, of their money to buy an asset, 

then that sort of provision should stand. 

There are adequate national security laws, environmental laws, 

all kinds of other laws on the books, if something changes in the 

national security area, to take care of it at that point, but I do not 

think you should have the uncertainty of an overhang of a transaction involving literally billions of dollars hanging over it indefinitely. 

There is also a provision in your legislation that does allow for 

the two parties to extend the time if they withdraw and then continue discussions, if more information is needed. 

If additional information crops up, then any of these agencies 

would be allowed to deal with it. 

Under the current provisions of section six, under the current 

provision of this modification or this ‘‘evergreen,’’ the modification 

could be done by an individual agency, so it would not have to go 

back through the CFIUS process, which we think sort of doubles 

or trebles or quadruples the risk to the economic system. 

All and all, have the CFIUS review, either approve or disprove 

the deal, the transaction, and let it go forward. 

Mrs. MALONEY. Would anyone else like to comment on the questions? 

Mr. MALAN. Let me just point out that I think it goes back to 

the analogy of buying a house. We care about the 30 days because 

it would potentially disadvantage one of my member companies 

making a purchase in the United States vis-a-vis a U.S. company 

that would face a Hart-Scott-Rodino review of about 30 days. 

The reality of how it works is if there is a CFIUS agency that 

does not think they have enough time, they go to the company and 

say, guess what, we do not have enough time. We need more time. 

58

As a way for the market to look at the two systems and say 30 

days here, 30 days here, there is a parity there. That is kind of 

why we care about how the time is set. 

Rest assured, if an agency does not think they have enough time, 

they tell people to go back to the beginning or do not file or whatever. I think that is the real reason why we care so much about 

30 days. 

Under government-owned companies, I think there is clearly a 

lot of concern among members of the committee and Congress that 

on government-owned entities, maybe we are going through the 

process a little bit too quickly post-Dubai Ports World. 

Obviously, you have moved to address that. I understand that. 

I think one thing you might want to think about doing is providing 

a little bit of a fast track for those government-owned entities that 

do not present a concern, and that would therefore not junk up the 

system. 

If VW, which is maybe 20 percent owned by the Bavarian state, 

would qualify as a foreign-government-owned entity, maybe you 

have some sort of device that allows them to get 30 day review because they are not the same as CITGO Petroleum, which is an arm 

of the Venezuelan Government. 

Mr. MARCHICK. Let me just add a couple of quick points. On the 

government-owned company issue, I think one other concern is that 

foreign governments start discriminating against our governmentowned entities, which include Calpers, which include pension funds 

in New York, Massachusetts, Alabama. Alabama’s pension fund 

last year was the largest shareholder of U.S. Airways. 

If they bought a foreign airline in another country or if they 

bought an asset in another country and that process took longer 

than it would for a private sector company, that would be discriminating against them, and that would potentially kick them out of 

the bidding process. 

One possibility that we have discussed with you privately is the 

idea that if there is a government-owned transaction that does not 

raise a national security issue—take a Canadian pension fund buying a toll road, it is hard to imagine that Canadians are going to 

block someone from getting on a toll road. I do not know what the 

national security issue would be—you could have the Secretary or 

Deputy Secretary of Treasury or other agencies certify that they 

have looked at this and there is no national security issue. Put 

their name on the line. Create accountability. 

Timing does not equal scrutiny and not all transactions require 

60 or 90 days. 

The only other thing I would add on the ‘‘evergreen’’ provision is 

that if someone violates an agreement, they should be punished. If 

a foreign person uses a domestic company to spy, they should go 

to jail. We have very strong espionage laws. 

If they violate export control laws, there are criminal or civil 

sanctions. Those should be used and they should be tough as nails. 

The ‘‘evergreen’’ provision actually punishes passive shareholders, my 401(k), government pension funds, because it creates 

uncertainty. 

Let’s say there is a problem with Alcatel-Lucent in 10 years. 

There is a move to unwind. Even one agency proposing that, even 

59

if it is not a serious proposal. That stock is going to drop immediately. It is going to hurt passive shareholders. They should punish the individuals or punish the company if they do something 

wrong, but do not punish passive investors. 

Mrs. MALONEY. Thank you very much. Thank you, Mr. Chairman. 

The CHAIRMAN. I want to thank you all. As you know, we plan 

to vote on this in committee in a week. 

Any particular further suggestions, and I know there have been 

some conversations about some changes, some of which were alluded to, but anything specific, obviously get them to us right 

away. I expect this to be voted on in committee next week and to 

be on the Floor when we come back from recess. 

People should be on notice that this is going to be moving along. 

Again, I will say to the gentlelady from New York that even 

though she has moved from one subcommittee ranking membership 

to the chairmanship of another, she has sort of taken this portfolio 

with her, and will continue to be our lead person on it. 

The hearing is adjourned. 

[Whereupon, at 1:09 p.m., the hearing was adjourned.] 

(61)

A P P E N D I X

February 7, 2007

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