U.S. GOVERNMENT PUBLISHING OFFICE

37–106 PDF WASHINGTON : 2019

S. HRG. 116–38 

NOMINATIONS OF THOMAS PETER FEDDO, NAZAK 

NIKAKHTAR, IAN PAUL STEFF, MICHELLE BOWMAN, PAUL SHMOTOLOKHA, AND ALLISON 

HERREN LEE 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED SIXTEENTH CONGRESS 

FIRST SESSION 

ON 

NOMINATIONS OF: 

THOMAS PETER FEDDO, OF VIRGINIA, TO BE ASSISTANT SECRETARY, TREASURY

FOR INVESTMENT SECURITY

NAZAK NIKAKHTAR, OF MARYLAND, TO BE UNDER SECRETARY, COMMERCE

FOR INDUSTRY AND SECURITY

IAN PAUL STEFF, OF INDIANA, TO BE ASSISTANT SECRETARY OF COMMERCE

AND DIRECTOR GENERAL, UNITED STATES AND FOREIGN COMMERCIAL SERVICE

MICHELLE BOWMAN, OF KANSAS, TO BE A MEMBER, BOARD OF GOVERNORS

OF THE FEDERAL RESERVE SYSTEM

PAUL SHMOTOLOKHA, OF WASHINGTON, TO BE FIRST VICE PRESIDENT, 

EXPORT–IMPORT BANK OF THE UNITED STATES

ALLISON HERREN LEE, OF COLORADO, TO BE A MEMBER, SECURITIES AND

EXCHANGE COMMISSION

JUNE 5, 2019 

Printed for the use of the Committee on Banking, Housing, and Urban Affairs 

( 

Available at: https://www.govinfo.gov/ 
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

MIKE CRAPO, Idaho, Chairman 

RICHARD C. SHELBY, Alabama 

PATRICK J. TOOMEY, Pennsylvania 

TIM SCOTT, South Carolina 

BEN SASSE, Nebraska 

TOM COTTON, Arkansas 

MIKE ROUNDS, South Dakota 

DAVID PERDUE, Georgia 

THOM TILLIS, North Carolina 

JOHN KENNEDY, Louisiana 

MARTHA MCSALLY, Arizona 

JERRY MORAN, Kansas 

KEVIN CRAMER, North Dakota 

SHERROD BROWN, Ohio 

JACK REED, Rhode Island 

ROBERT MENENDEZ, New Jersey 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

ELIZABETH WARREN, Massachusetts 

BRIAN SCHATZ, Hawaii 

CHRIS VAN HOLLEN, Maryland 

CATHERINE CORTEZ MASTO, Nevada 

DOUG JONES, Alabama 

TINA SMITH, Minnesota 

KYRSTEN SINEMA, Arizona 

GREGG RICHARD, Staff Director 

MARK POWDEN, Democratic Staff Director 

JOE CARAPIET, Chief Counsel 

KRISTINE JOHNSON, Professional Staff Member 

ELISHA TUKU, Democratic Chief Counsel 

LAURA SWANSON, Democratic Deputy Staff Director 

PHIL RUDD, Democratic Legislative Assistant 

CAMERON RICKER, Chief Clerk 

SHELVIN SIMMONS, IT Director 

CHARLES J. MOFFAT, Hearing Clerk 

JIM CROWELL, Editor 

(II)
C O N T E N T S 

WEDNESDAY, JUNE 5, 2019 

Page 

Opening statement of Chairman Crapo ................................................................. 1 

Prepared statement .......................................................................................... 32 

Opening statements, comments, or prepared statements of: 

Senator Brown .................................................................................................. 2 

Prepared statement ................................................................................... 33 

NOMINEES 

Thomas Peter Feddo, of Virginia, to be Assistant Secretary, Treasury for 

Investment Security ............................................................................................. 5 

Prepared statement .......................................................................................... 34 

Biographical sketch of nominee ....................................................................... 36 

Responses to written questions of: 

Senator Brown ........................................................................................... 91 

Senator Toomey ......................................................................................... 93 

Senator Perdue .......................................................................................... 93 

Senator Tillis ............................................................................................. 94 

Senator Warner ......................................................................................... 95 

Nazak Nikakhtar, of Maryland, to be Under Secretary, Commerce for Industry and Security ................................................................................................... 6 

Prepared statement .......................................................................................... 41 

Biographical sketch of nominee ....................................................................... 43 

Responses to written questions of: 

Senator Brown ........................................................................................... 97 

Senator Perdue .......................................................................................... 99 

Senator Moran ........................................................................................... 101 

Senator Menendez ..................................................................................... 102 

Senator Warner ......................................................................................... 104 

Senator Cortez Masto ................................................................................ 107 

Ian Paul Steff, of Indiana, to be Assistant Secretary of Commerce and Director General, United States and Foreign Commercial Service .......................... 8 

Prepared statement .......................................................................................... 50 

Biographical sketch of nominee ....................................................................... 52 

Responses to written questions of: 

Senator Menendez ..................................................................................... 110 

Michelle Bowman, of Kansas, to be a Member, Board of Governors of the 

Federal Reserve System ...................................................................................... 10 

Prepared statement .......................................................................................... 60 

Biographical sketch of nominee ....................................................................... 61 

Responses to written questions of: 

Senator Brown ........................................................................................... 111 

Senator Rounds ......................................................................................... 120 

Senator Tillis ............................................................................................. 121 

Senator Menendez ..................................................................................... 125 

Senator Warren ......................................................................................... 126 

Senator Cortez Masto ................................................................................ 127 

(III)
Paul Shmotolokha, of Washington, to be First Vice President, Export–Import 

Bank of the United States ................................................................................... 11 

Prepared statement .......................................................................................... 69 

Biographical sketch of nominee ....................................................................... 70 

Responses to written questions of: 

Senator Brown ........................................................................................... 132 

Senator Warner ......................................................................................... 134 

Senator Cortez Masto ................................................................................ 135 

Senator Sinema ......................................................................................... 137 

Allison Herren Lee, of Colorado, to be a Member, Securities and Exchange 

Commission ........................................................................................................... 13 

Prepared statement .......................................................................................... 79 

Biographical sketch of nominee ....................................................................... 80 

Responses to written questions of: 

Senator Rounds ......................................................................................... 138 

Senator Menendez ..................................................................................... 139 

Senator Warner ......................................................................................... 140 

Senator Warren ......................................................................................... 143 

Senator Cortez Masto ................................................................................ 145 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

Letter submitted by Senator Bob Dole in support of Thomas Peter Feddo ........ 148 

Letter submitted by the Independent Community Bankers of America in 

support of Michelle Bowman ............................................................................... 149 

(IV)
(1) 

NOMINATIONS OF THOMAS PETER FEDDO, 

NAZAK NIKAKHTAR, IAN PAUL STEFF, 

MICHELLE BOWMAN, PAUL SHMOTOLOKHA, 

AND ALLISON HERREN LEE 

WEDNESDAY, JUNE 5, 2019 

U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. 

The Committee met at 9:52 a.m., in room SD–538, Dirksen Senate Office Building, Hon. Michael Crapo, Chairman of the Committee, presiding. 

OPENING STATEMENT OF CHAIRMAN MIKE CRAPO 

Chairman CRAPO. This hearing will come to order. 

First of all, I want to thank our six nominees who are here to 

serve in five different agencies. As you are well aware, we have had 

votes scheduled today at eleven o’clock. So we are trying to adjust 

how we move along, and we have changed the instructions to you 

several times this morning. 

Let me tell you how we will proceed. At one point, we had asked 

you to just forego your opening statements to give us more time for 

Senators to ask questions. The Senators have indicated that they 

would like to have you make your opening statements, if you would 

like to make one, and so any of you who would like to—and I invite 

you to—can make your opening statements. 

We will then proceed normally from there. We are going to ask 

everybody here to help us move along quickly with answers and 

questions, and hopefully, we will get through this with no difficulty. 

With that, this morning, we have first Mr. Thomas Peter Feddo. 

He is nominated to be the Assistant Secretary of Treasury for Investment Security. 

Next, the Honorable Nazak Nikakhtar. Did I get it right? Where 

are you? There you are. 

Then next, Mr. Ian Paul Steff. 

By the way, Nazak is to be the Under Secretary of Commerce for 

Industry and Security. 

Next, Mr. Ian Paul Staff to be the Assistant Secretary of Commerce and Director General of the United States and Foreign Commercial Service. 

Then we have the Honorable Michelle Bowman to be a member 

of the Board of Governors of the Federal Reserve System. 
2 

We next have Mr. Shmotolokha—I got it pretty close—who has 

been nominated to serve as the First Vice President and Vice 

Chairman of the Export–Import Bank of the United States. 

And, finally, we have Ms. Allison Lee, who is nominated to serve 

as a Member of the Securities and Exchange Commission. 

I welcome all of you to the hearing today. 

I see friends and family behind you, and I welcome you to introduce them, if you would like to do so as well, when we turn the 

time over to you. 

At this point, I am going to forego any further statement of my 

own so that we can move on more quickly. 

Senator Brown does have a statement, and let me turn to you, 

Senator Brown. 

OPENING STATEMENT OF SENATOR SHERROD BROWN 

Senator BROWN. Thank you, Chairman Crapo, and thanks to all 

of you, and welcome to your families. 

I know even though this hearing may be truncated, we do not 

want that to happen. So I want you to do whatever you want to 

say in your opening statements, and do not feel pressured in time 

in terms of answering questions or anything else. 

Your family is here. It is a big moment for them. It is a big moment for you. If for reasons of votes—and the Chairman and I have 

talked. He has not agreed to this, but if we do need to bring you 

back for questions, if Members do not get a chance to ask questions 

because of the floor votes—I would also just mention the frustration on this side of the aisle that all this Senate seems to be doing 

is the Majority Leader just wants to jam through as many possible 

judges as possible as he can get through the Senate. That is why 

we have many of these votes today, especially considering the number of judges that the Majority Leader blocked in the Obama administration and now is trying to fill all these with very young 

judges. 

So it is a power move from the Majority Leader. My relationship 

with the Chairman has been great, and we will continue to work 

together. We disagree on some of the bigger picture issues. We 

want to move on all of you, if we can. Some of you, I am happier 

with than others, as your public records and all. 

But I want to just speak and with my opening statement give 

some thoughts, and then we will move forward. But these are all 

really important jobs, all six of you, and I do not think it is fair 

to you or to Members in both parties to get anything but a chance 

to do full questioning. Just the fact that there are six of you here 

is frankly too many—that is our decision, not yours—to bring you 

all together, considering the importance of your jobs and considering that all of us have questions, multiple questions for many of 

you, far beyond our 5 minutes. That is why it is rare to do six together and why I am not wild about doing six together. I understand the crunch of time, but that crunch of time is often artificially squeezed. 

Let me say a few things. Mr. Feddo, thank you for joining us, 

first nominee to be Assistant Secretary of the Treasury for Investment Security, a position we created under the Foreign Investment 
3 

Risk Review Modernization Act of 2018, the bipartisan legislation 

that came out of this Committee. We are thrilled you are here. 

We created this new position because of the critical role that 

CFIUS plays promoting U.S. national security from increasing 

threats from certain foreign investments. Yesterday we heard 

about how China has adopted new tactics to acquire American 

technology in sectors vital to our national security. It is why we 

passed this bill. It is why your job is so, so important. 

Mr. Feddo currently serves as Deputy Assistant Secretary for Investment Security. He has played a key role in formulating the reforms last year and is now working to carry out the technical and 

structural changes under FIRRMA, including finishing the rulemaking to expand CFIUS’s scope. 

If confirmed, Mr. Feddo, you will need to continue this critical 

work. I know you have made progress. I look forward to hearing 

from you about next steps. 

Ms. Nikakhtar, welcome. Nice that you are here. You have been 

nominated to serve as Under Secretary of Commerce for Industry 

and Security, responsible for a set of key U.S. national security, 

foreign policy, and economic objectives through application of effective U.S. and multilateral export controls and treaty compliance. 

Although Ms. Nikakhtar has extensive experience in international 

trade, she has more limited experience in national security and export control matters. If confirmed, she will be responsible for administering critical U.S. export control laws and regulations that 

cover all kinds of sensitive technology. 

I hope you will work with your colleagues to navigate, Ms. 

Nikakhtar, the complex national security and political concerns 

that surround the export of sophisticated U.S. technology. 

Mr. Steff is nominated to be Assistant Secretary of Commerce for 

Global markets and Director General of the U.S. and Foreign Commercial Service. Welcome. He will be responsible in that role for 

the ITA’s work to advance U.S. business overseas and promote U.S. 

exports and fair trade rules. His current experience as Deputy Secretary for Manufacturing at Commerce and his prior experience 

working on economic development, providing an understanding of 

how to strengthen the competitiveness of U.S. industry. We count 

on you for that. 

Ms. Bowman, welcome. Good to see you again. She is nominated 

to be a member of the Board of Governors for a full 14-year term, 

expiring in 2034. As a former State bank commissioner, she serves 

in the role designated for a Fed Governor with community bank experience. 

At her first nomination hearing, I was concerned that Ms. Bowman would be a rubber stamp for Wall Street. I think I was right 

to be concerned about that. This Administration looks like a retreat 

for Wall Street executives. Far too many people with Wall Street 

connections and Wall Street bias have been nominated by this Administration to key regulatory positions. 

I know you possess a deep understanding of community banks 

and are being nominated for a full 14-year term. I am concerned 

that you have too often taken the side on the Fed, the side of big 

banks and Wall Street, doing favors for Wall Street by relaxing 

capital standards and weakening stress tests and other postcrisis 
4 

safeguards. That Federal Reserve and the Trump nominees seem 

to have a collective amnesia about what happened in this country 

10 years ago and the number of people that lost savings, lost lifetime savings, lost their jobs, lost their home. 

I hope you will do, if confirmed, all that you can to ensure the 

regulatory system works for community banks, but for our financial 

system and protecting all consumers. So far, you have fallen short. 

I am hoping you will do better. 

Mr. Shmotolokha is the nominee to be First Vice President of the 

EXIM Bank. 

For 4 years, I have pushed EXIM to be fully reopened. The Vice 

President, apparently, and a handful of Republicans on this Committee have blocked the Export–Import Bank, costing thousands of 

manufacturing jobs in my State and tens of thousands, maybe hundreds of thousands of jobs around the United States because they 

have blocked—they have not seen fit to do what this Congress used 

to do bipartisanly, almost unanimously to support the Export–Import Bank. 

We are counting on you to push back when they try to slow it 

and stop it and cripple that agency. Your work is especially important as the final nominee to the bank’s board to be before this 

Committee. 

Ms. Lee, welcome. She has been nominated to be Commissioner 

of SEC. If confirmed, she would return to the SEC at a critical 

time. I expect Ms. Lee to draw on her SEC enforcement experience 

while considering rules that would affect investor rights and remedies against wrongdoers and when weighing penalties in misconduct cases. 

Your work is especially important in light of what I said earlier 

that this Administration has such a strong bias toward the most 

privileged in this country, whether it is Wall Street, whether it is 

corporations that ship jobs overseas, whether it is special interests 

that take advantage of people. We really count on you, Ms. Lee, in 

that job. 

Thank you, Mr. Chairman. 

Chairman CRAPO. Thank you, Senator Brown. 

I know I said I was not going to make an opening statement, but 

I do need to respond to two things that you said. 

Senator Brown and I do have an excellent working relationship. 

I just want to make it clear that there is plenty of precedent, both 

in this Committee as well as others, to have six nominees before 

us. Frankly, especially, I do not know of any significant controversy 

about any of the nominees before us today. 

Second, with regard to the comments you made about us being 

jammed by unreasonable pressure to push votes on the floor for 

nominations of judges, I guess this is one where we are just going 

to have to continue to disagree. I think that the reason we are having these kinds of extensive votes is because we have been stopped 

from having votes in what I consider to be a reasonably and orderly 

process for the last 21⁄2 years, and we are now moving forward with 

more votes because we have been in a battle, if you will, on the 

floor the Senate over getting two votes. 

So, anyway, we have had this debate for many months and will 

continue to have it. 
5 

With that, before we proceed to the nominees, I do need to administer the oath to you. So would each of you please rise and raise 

your right hands. 

Do you swear or affirm that the testimony you are about to give 

is the truth, the whole truth, and nothing but the truth, so help 

you God? 

Mr. FEDDO. I do. 

Ms. NIKAKHTAR. I do. 

Mr. STAFF. I do. 

Ms. BOWMAN. I do. 

Mr. SHMOTOLOKHA. I do. 

Ms. LEE. I do. 

Chairman CRAPO. And do you agree to appear and testify before 

any duly constituted committee of the Senate? 

Mr. FEDDO. I do. 

Ms. NIKAKHTAR. I do. 

Mr. STAFF. I do. 

Ms. BOWMAN. I do. 

Mr. SHMOTOLOKHA. I do. 

Ms. LEE. I do. 

Chairman CRAPO. All right. Thank you. You may sit down. 

With that, we will proceed in the order that I introduced you earlier, and so, Mr. Feddo, please make any remarks or introductions 

you would like to make. 

TESTIMONY OF THOMAS PETER FEDDO, OF VIRGINIA, TO BE 

ASSISTANT SECRETARY, TREASURY FOR INVESTMENT SECURITY 

Mr. FEDDO. Chairman Crapo, Ranking Member Brown, and distinguished Members of the Committee, I am honored to appear before you today. I am humbled to be nominated by the President to 

serve as Assistant Secretary of the Treasury for Investment Security, a new position created by the Foreign Investment Risk Review 

Modernization Act of 2018. 

Last August, FIRRMA was enacted with overwhelming bipartisan support from this Committee, both houses of Congress, and 

the Administration. In creating this position, specifically through 

an amendment by Chairman Crapo, the statute recognizes the need 

for dedicated, accountable leadership of the critical national security function executed by the Committee on Foreign Investment in 

the United States. I am confident that my professional background 

affords me the experience and knowledge to lead CFIUS and to effectively and faithfully implement FIRRMA over the coming 

months. 

I grew up with two younger sisters and attended public school 

near Buffalo, New York. We had a full-time mom and a dad who 

served in the Marine Corps and then worked for the local electric 

company for nearly 25 years. My dad worked long hours to make 

sure that our family had all that we needed and a little more than 

he had as a child. He suddenly passed away just months after seeing me graduate college, but I know that he would be pleased were 

he here today. My mom dedicated herself to building a warm and 

loving home for us, and she is watching the hearing from Buffalo. 

I am deeply grateful to my parents for laying the foundation that 
6 

has brought me to this point. By example, they instilled the virtues 

in my sisters and me, and we came to know the value of hard 

work, loyalty, and family. 

I would not be here today without my extraordinary wife, Muffet. 

She has been an unwavering source of support and encouragement, 

while selflessly devoting her many talents to raising our three wonderful children, who are dispersed through the crowd, Emma, Kay, 

and Gus. 

Early in high school, I decided that I would serve our Nation in 

the military and sought to attend the Naval Academy, and I am 

honored to have my two Academy roommates in attendance today. 

Since taking the oath of office at Annapolis 33 years ago, it has 

been my privilege to spend literally half of my life in public service, 

including first as a lieutenant on a nuclear submarine and then 

with the Naval Criminal Investigative Service. 

After law school, I served as a counsel with the House Energy 

and Commerce Committee, before stints as an attorney at the Pentagon, and a civil servant at the Treasury Department. I have 

served in all three branches of the Federal Government, with nearly 20 years in a national security-related capacity. 

In the private sector, I practiced law as a patent and trademark 

litigator and most recently as a partner in a large firm’s international trade group. 

By virtue of these professional experiences, I understand the importance of protecting American innovators’ intellectual property, 

our Nation’s vital economic engine. 

And as a Navy submariner, educated and trained as an engineer, 

I experienced firsthand how America’s superior technology ensures 

our warfighting edge. 

As an attorney representing global businesses, large and small, 

I have gained a true appreciation for the importance of foreign investment to our strong and vibrant economy, as well as the benefits of regulatory certainty to business transactions. 

If I am confirmed, you have my unqualified commitment that I 

will work closely with this Committee and Congress as a whole to 

continue what I have been doing over the last year as Deputy Assistant Secretary, faithfully and transparently implementing 

FIRRMA, ensuring our national security is protected while foreign 

investment is fostered, and serving with humility and a deep and 

abiding respect for our dedicated and talented career professionals 

at Treasury and across the Government who diligently execute the 

CFIUS mission. 

Thank you again for the privilege and opportunity to appear before you today. I am happy to answer any questions that you may 

have. 

Chairman CRAPO. Thank you, Mr. Feddo. 

Ms. Nikakhtar. 

TESTIMONY OF NAZAK NIKAKHTAR, OF MARYLAND, TO BE 

UNDER SECRETARY, COMMERCE FOR INDUSTRY AND SECURITY 

Ms. NIKAKHTAR. Mr. Chairman, Ranking Member Brown, and 

Members of the Committee, thank you for the opportunity to appear before you today. 
7 

In 2018, I was honored to be confirmed as the Assistant Secretary for Industry and Analysis at the Department of Commerce, 

and today I am extremely honored to be nominated for the position 

of Under Secretary for Industry and Security. 

With me today are my husband, Gene Degnan, and my mother, 

Dr. Manijeh Nikakhtar. My father Bijan Nikakhtar passed away 

several months ago, but he would have been beaming with pride 

if he were here today, as an amateur political historian and one of 

the greatest American patriots I have ever known. I am proud to 

say that my parents and my husband have served our Government 

as Federal employees for many years. 

My husband served for over a decade at the Department of Commerce, and my parents served for over 40 years collectively as physicians at the VA hospital, taking care of our Nation’s veterans. 

My brother, Nersi Nikakhtar, also a physician at the VA hospital, had work obligations today. 

I am proud to be part of a family that honors Government service. 

I immigrated to America with my family 39 years ago. I can remember from a very young age how proud I was to be an American 

and how I marveled at American innovation and ingenuity. I knew 

at an early age that I wanted to be part of the narrative of American growth. 

This is what prompted me to study law and economics after college. I obtained my Juris Doctor and Master’s in Economics from 

Syracuse University, and in 2002, I began my career at the Commerce Department, first at the Bureau of Industry and Security 

and subsequently at the International Trade Administration. 

At the Department, I worked with and learned from incredibly 

smart and talented civil servants. Many of those dedicated professionals are still there today, and they are the pillars that shape our 

Government from Administration to Administration. I have great 

respect for them, and I am privileged to work with them again. 

I joined the private sector several years later as a trade and export control lawyer, representing industries in aerospace and steel 

sectors, in aquaculture, high-tech goods, chemicals, and minerals. 

In private practice, I worked to level the playing field for U.S. 

industries, and on exports, I conducted internal investigations to 

enforce clients’ compliance agreements with the U.S. Government 

to address U.S. national security concerns. 

My training and experience, both as a lawyer and an economist, 

have given me the expertise to protect U.S. national security and 

simultaneously advance the economic interests of U.S. industries. 

Today national security no longer begins and ends with military 

strength. It is a fact in today’s world that national security is dependent on our economic strength and our technological leadership. 

Yet advancements in technology and the interconnectedness of our 

economies make our national security challenges more complex 

than ever before. 

Economic integration has emboldened some foreign Nations to 

behave in ways that undermine our national security, expecting 

that the threats of economic retaliation will weaken our resolve to 

act. They have increased illicit procurement of items to build weap-
8 

ons of mass destruction and transshipped those items to terrorist 

organizations and regimes. 

We are witnessing illegal acquisitions of sensitive technologies to 

weaponize dual-use items and oppress millions of innocent citizens, 

and we have seen for years how rampant intellectual property theft 

has displaced U.S. industries, stifled innovation, and enabled the 

advancement of strategic competitors. 

The key to our success is maintaining U.S. technological superiority and economic interests through multilateral coordination that 

is more forward leaning, better use of intelligence analytics, robust 

enforcement of our laws, and tightly coordinated whole-of-Government approach that includes more proactive engagement with Congress. 

Time is of the essence, and during my 31⁄2 months at the Bureau, 

I have been leading the Department’s efforts to update our regulations to incorporate ECRA reforms and address global threats. 

We are engaging with industry to identify emerging technologies 

that undermine our national security. 

I have begun an initiative to work with like-minded allies on better export control coordination and wider end-use checks. It is imperative that we better coordinate multilateral policies on sensitive 

technology so U.S. companies can compete globally while Governments prevent technologies from being misused by adversaries. 

At the Bureau, I challenge my colleagues every day to rethink 

how we can modernize policies to stay ahead of new threats, and 

I have made it a priority to seek industry input, as today’s complex 

challenges cannot be solved without close engagement with U.S. 

businesses. Our policies must advance America’s technological and 

economic leadership. 

My parents immigrated to America knowing that this is the 

greatest country in the world, and as an American, it is my responsibility and honor to preserve this Nation’s security for future generations. 

I thank you again for the opportunity to be here in front of this 

Committee, and I look forward to your questions. 

Chairman CRAPO. Thank you, Ms. Nikakhtar. 

Mr. Steff. 

TESTIMONY OF IAN PAUL STEFF, OF INDIANA, TO BE ASSISTANT SECRETARY OF COMMERCE AND DIRECTOR GENERAL, 

UNITED STATES AND FOREIGN COMMERCIAL SERVICE 

Mr. STEFF. Chairman Crapo, Ranking Member Brown, Members 

of the Committee, it is the greatest of honors to sit before you 

today. 

If confirmed, it would be my privilege to serve as the Assistant 

Secretary of Commerce for Global Markets and Director General of 

the U.S. and Foreign Commercial Service. 

I thank President Trump for this nomination. So, too, I am grateful for the continued support of Vice President Pence, both in my 

former capacities in Indiana and now in Washington, DC. 

Speaking of Hoosiers, I am proud to be joined by my wife, Brittany. I remain forever grateful for your incredible encouragement, 

compassion, and flexibility as we serve the Nation we love and 

raise our two little stars, Daniel and Owen. 
9 

I am also joined by my parents, Wayne and Lisa. Our childhood 

home was filled with love, faith, respect, hard work, and an enduring sense of service to one’s country. Thank you, Mom, Dad, Gram, 

Aunt Lori, Aaron, and to all those family members, friends, and 

teachers who helped me along the way. 

My story started under a few feet of snow, 30 miles south of Buffalo, New York, on my grandparents’ dairy farm. My two younger 

brothers, Eric and Levi, often reflect on the comradery we developed shoveling that never-ending lake-effect byproduct, raising our 

pet ducks, and commiserating over our beloved Buffalo Bills. Childhood summers encompassed exploring the pastures and woods, 

working on our neighbor’s berry and plant farm, and waiting for 

the rumble of Dad’s cycle as he returned home from his job in highway maintenance. This is a glimpse of our small slice of country 

and my upbringing in rural America. 

Rural? Yes. Encouraged to dream big? Every step of the way, and 

dream we did. I devoted nearly every penny earned on the farm to 

my stamp and coin collection. Years later, as I arrived at American 

University to begin my academic career in international affairs, I 

knew unequivocally that my future involved fostering relations 

with foreign markets and the people personified in that postage 

and currency I had accumulated. That dream and future continue 

here today. 

If confirmed, I would be incredibly honored to lead a world-class 

team of professionals providing export counseling to small- and medium-sized businesses, while identifying new foreign markets for 

their products and services; advocate on behalf of U.S. companies 

competing for foreign Government procurements; attract foreign direct investment, while working to grow the U.S. manufacturing 

base; and reduce, remove, and prevent foreign trade barriers that 

impede market access for U.S. goods in a free, fair, and reciprocal 

fashion. 

As the Deputy Assistant Secretary of Commerce for Manufacturing since June of 2017, I have seen the impact the Global Markets team has on U.S. manufacturers and service providers. This 

vast network of more than 1,300 trade and investment specialists 

in headquarters and the U.S. field, combined with the presence of 

the Foreign Commercial Service in over 70 markets deliver daily. 

Simply put, I have come to know the Global Markets team as a 

team that works, a team that chooses to compete, and a team that 

delivers. These professionals deliver one deal at a time and have 

a tremendous impact measured at over $120 billion in fiscal year 

2018 in the areas I outlined. 

In my former professional capacities, I accrued experience in economic development, executive leadership, and trade policy. In my 

past economic development roles, I worked successfully to attract 

foreign direct investment. 

SelectUSA, which would be under my purview, if confirmed, is a 

valued economic development partner to many States. 

Likewise, during my time in the semiconductor industry, I witnessed the contributions of the Commerce Department to ensure 

foreign market access. I regularly engaged with the Commerce 

team while managing the leading chip industry association’s international engagements and technology programs for a decade. I 
10 

have seen the challenges posed by unfair foreign trade measures 

and massive market-distorting practices that have crippled companies looking to compete internationally. 

Earlier in my professional career, I worked on the Trade Subcommittee of the House Ways and Means Committee. I have a profound appreciation for the vital role of Congress when it comes to 

ensuring the global competitiveness of U.S. industry. 

While my stamp and coin collection are now the responsibility of 

my two young Hoosiers, I have no doubt that they and our country 

have a limitless and prosperous future based on the unparalleled 

accomplishments of the Global Markets team at Commerce. I aspire to help this team continue to achieve its mission. If confirmed, 

I will devote every working moment to its success on behalf of our 

Nation’s exporters. 

Distinguished Members of the Committee, thank you for your 

consideration. 

Chairman CRAPO. Thank you, Mr. Steff. 

Ms. Bowman. 

TESTIMONY OF MICHELLE BOWMAN, OF KANSAS, TO BE A 

MEMBER, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 

Ms. BOWMAN. Chairman Crapo, Ranking Member Brown, and 

Members of the Committee, it has been just over a year since this 

Committee first recommended my nomination as a Federal Reserve 

Board Governor. 

While I am not the first community banker to serve on the 

Board, I am humbled by the opportunity you gave me to serve as 

the first Governor to fill the role Congress designated for someone 

with community banking experience on the Federal Reserve Board. 

I am deeply honored the President has renominated me to serve 

in that capacity. Thank you for the honor of this hearing today. 

I am also grateful to my family for their continued support. My 

husband, Wes, and our children, Jack and Audrey, are here with 

me today. The rest of my family are watching from home in Kansas. 

Since my confirmation last year, I have worked to fulfill my 

unique role on the Board by traveling widely and listening closely 

to community bankers, to consumers, small business owners, and 

community leaders. I have visited with farmers, workers, and business leaders from across the country to discuss the economy. I am 

making sure these unique perspectives are represented in the Federal Reserve’s deliberations and decision making on both monetary 

policy and regulatory matters. 

During my time at the Board, I have also drawn on my experience as a community banker and regulator to ensure that our work 

is guided by a deep understanding of the practical realities confronting bankers and the communities they serve across the country. The work done after the crisis to address the weaknesses of the 

U.S. financial system and ensure its future resilience was essential. 

However, during my time in my family’s community bank, I saw 

firsthand how the regulatory changes created in the aftermath of 

the crisis impacted community financial institutions. Small, solid 

institutions like this one are essential to so many of our citizens 
11 

and communities. As regulators, we need to ensure that we are not 

imposing unnecessary burdens on community banks. That is why 

one of my priorities as a Governor has been to appropriately tailor 

our supervision and regulation to the size, complexity, capacity, 

and risks posed by an institution. 

To further this effort, I recently formed a working group of experts from across the Federal Reserve System to launch a comprehensive review of our supervisory work with smaller regional 

and community banks. While serving as the Kansas State Bank 

Commissioner, I was committed to treating every consumer and institution fairly and respectfully and fostering open communication. 

This working group will follow those same principles. We are looking for ways to optimize our supervision and regulation to ensure 

it adapts to the on-the-ground realities of an evolving industry and 

changing consumer expectations while maintaining the safety and 

soundness of our banking system. 

Let me close by saying a few words about monetary policy and 

the Federal Reserve’s dual mandate. As a community banker, it 

was my job to support local businesses and consumers. I draw upon 

this experience often when thinking about monetary policy because 

it has given me a personal and practical understanding of how the 

Federal Reserve’s goals of fostering maximum employment and stable prices directly affects individuals as well as the broader financial system and economy. 

The Congress has given the Federal Reserve independence to 

pursue these goals because our work is critical to our economy, to 

businesses, to families, and to communities, and I am deeply committed to fulfilling this mandate. 

If confirmed by the Senate, I will continue the important work 

I have begun and be committed to accountability, transparency, 

and clear communication in all of my responsibilities at the Federal 

Reserve. 

Thank you for the honor of this hearing, and I look forward to 

answering the Committee’s questions 

Chairman CRAPO. Thank you, Ms. Bowman. 

Mr. Shmotolokha. 

TESTIMONY OF PAUL SHMOTOLOKHA, OF WASHINGTON, TO 

BE FIRST VICE PRESIDENT, EXPORT–IMPORT BANK OF THE 

UNITED STATES 

Mr. SHMOTOLOKHA. Chairman Crapo, Ranking Member Brown, 

and distinguished Members of the Committee, thank you for considering my nomination to serve as First Vice President of the Export–Import Bank of the United States. 

I am deeply thankful to President Trump for selecting me and 

humbled by the obligations that this role brings to American workers and taxpayers. 

I would like to introduce some family members who are with me 

today; first, my parents, Stephen and Christine, who made the trip 

from California. They came to America as child refugees of World 

War II, and I am always inspired by their contributions to our 

country. 

My father worked as an engineer in the defense industry for 

more than 40 years, and my mother served tirelessly as a nurse. 
12 

I am also joined by my wife and best friend, Dania, who guided 

the family through multiple international moves and extensive 

overseas travels, and Max, my son, who is entering his senior year 

in college. 

My brother Adrian and many of my friends, family, and coworkers from around the world are also watching online. 

I sit before you as somebody who has spent the past 16 years in 

the front lines of global trade, with a strong record in growing 

American exports. I also bear the battle scars of leadership in a 

time of unparalleled competition in global markets. 

I am here out of a sense of duty, honor, and the wish to use my 

experience to serve a wider grouping of American businesses to 

grow their exports, and I am also paying back a debt for all this 

country has given to my family. 

It is not simple for any manufacturer to export. They must overcome political risks, economic hazards, and many nontariff barriers. Sometimes they also need extra financial support, especially 

when there are over 100 export credit agencies that are upping the 

ante and creating new incentives for the end customer. 

I have experienced firsthand the circumstances requiring an ECA 

like EXIM to finance deals in a timely and relevant fashion when 

the private sector cannot. 

My deep commitment and my international experience on both 

the buying and the selling side of international trade over the last 

30 years will allow me to contribute strongly to the team at EXIM. 

EXIM’s mission is to help support and create jobs. I have experienced firsthand the thrill of walking assembly lines in Georgia and 

in Washington State and meeting the newest workers putting together products for export, thanks to deals that my team closed. 

These are some of my best experiences. My legacy and value as a 

business person comes from the people that I mentor and the jobs 

that I help create. 

By working with the president of the Bank, my fellow board 

members, and the talented staff at EXIM, I believe I can best serve 

America to multiply the job creation effects of EXIM. 

Having served on numerous private-sector boards in various capacities, I understand board responsibilities of proper corporate 

governance, the need for transparency, and how good strategic 

guidance and a positive leadership attitude can enable organizations to realize their full productive potential. 

The EXIM board needs to make sure it does not lose sight of its 

role as an important source for small businesses. Many of its financial products in this area resonate with those who are looking to 

expand to new markets. 

As an entrepreneur, I have worked in small companies and faced 

the pressure of making payroll. Speed to market and effective financing can make or break these companies. I built a significant 

export business in a medium-sized U.S. manufacturer that, while 

a very successful domestic business, had yet to find its legs overseas. 

All companies—small, medium, and large—need help at times in 

leveling the playing field in today’s global economy. 

If confirmed, I will bring a fresh perspective and a fiercely competitive mindset to the Bank. My experience as an officer in the 
13 

United States Army taught me to lead from the front, and I will 

work tirelessly to support the Made in America brand that we all 

share and support. I will ensure that American companies have full 

access to and understanding of the programs authorized by Congress to maximize their global reach and competitiveness. 

To this end, I would paraphrase Vince Lombardi. Winning is not 

everything; it is the only thing for American business and American workers. And I pledge to bring a can-do winning attitude and 

to win responsibly for the American taxpayer. 

Thank you for your consideration. I would be pleased to answer 

any questions. 

Chairman CRAPO. Thank you, Mr. Shmotolokha. 

Ms. Lee. 

TESTIMONY OF ALLISON HERREN LEE, OF COLORADO, TO BE 

A MEMBER, SECURITIES AND EXCHANGE COMMISSION 

Ms. LEE. Chairman Crapo, Ranking Member Brown, and distinguished Members of the Committee, it is a tremendous privilege to 

appear before you today and to be considered for the position of 

Commissioner at the Securities and Exchange Commission, an 

agency in whose mission and dedicated staff I believe deeply. 

I am very fortunate today to be supported by a large contingent 

of family. I would like to introduce them: my husband, Jay Brown; 

four of the five children in our blended family, Tess, Beth, Josh, 

and Zoey. Also our granddaughter, Emerson, is here, and our sonin-law Colin, my sister Laurie, my brother Wil, my niece Emily, 

and my brothers-in-law, Jeff and Chris. Unfortunately, my mother 

could not be here today, but I know she will be watching. 

I have spent the bulk of my legal career at the SEC for a very 

simple reason. The SEC has a mission that is vital to the economic 

well-being of Americans and American businesses. It navigates the 

critical intersection between these two—between everyday Americans striving to build savings to buy a home, to send children to 

college, and eventually retire, and American businesses that need 

capital to grow and prosper. This reciprocal relationship must be 

nourished from both sides. 

We are a Nation of investors, both retail and institutional, and 

it is the SEC’s job to protect them. This is especially important as 

we continue the shift away from employer pensions toward individual plans in which people must fund and select their own retirement assets and, importantly, manage their own risk. 

The SEC works to ensure that investors are taking the kinds of 

risk they sign up for, business and economic risk, not the risk of 

fraud and not the risk of poorly structured or opaque markets that 

may disadvantage investors. This instills confidence which in turn 

promotes capital formation. 

Beyond instilling investor confidence, the SEC works to ensure 

that American businesses of all sizes can access the capital they 

need to grow their businesses and thus create the kinds of opportunities that investors want and need. These businesses deserve thoroughly researched, well-tailored, and clear rules. 

I have seen, experienced, and understood this interdependence 

between investors and business from nearly every angle. I have 

worked in the oil business at both private and public companies. 
14 

I have owned and run my own small business. Since law school, I 

have worked for over two decades as a securities lawyer, first in 

private practice as a litigator and partner, and then I was privileged to work on the staff of the SEC. 

Like many Americans, I have worn a lot of hats and juggled a 

lot of priorities, working my way through college and eventually 

through law school, raising children, paying the bills, and investing 

my savings for retirement. If I have the honor of being confirmed, 

I will bring all of these perspectives to bear in my role as commissioner, and I will reach out and listen to all constituencies served 

by the SEC to further its critical mission. 

Thank you for the opportunity to appear before you today, and 

I am happy to answer questions. 

Chairman CRAPO. Thank you, Ms. Lee. 

And in the interest of time, I am going to forego my questions. 

We will go immediately to Senator Brown. 

Senator BROWN. Thanks, Mr. Chairman. 

Mr. Shmotolokha, thank you. Thanks for sharing your story and 

your experience with us. 

Explain why U.S. companies in the technology and telecommunications sector look to EXIM to expand their sales abroad, and as 

you answer that, if you would also answer if EXIM is unavailable, 

assistance is unavailable, are companies able to complete foreign 

sales. 

Mr. SHMOTOLOKHA. If I could touch on the second one first? 

Senator BROWN. Sure. 

Mr. SHMOTOLOKHA. In my own experiences, self-financing is the 

first thing any company looks for. It is the easiest, the quickest, 

and when you are doing a deal with somebody, you are looking to 

see if you can consummate it in the speediest of fashions and receive your payables. 

But next, I turn to private sector, and when you look to EXIM, 

that is largely when you start really expanding your business. You 

are looking at countries that have a higher degree of political risk 

or economic risk or legal systems in which you cannot recuperate 

your receivables. 

Probably the biggest challenge, though, that we face today is the 

fact that other ECAs or ECA-like institutions in several countries, 

specifically in the BRICS that are non-OECD countries, are using 

additional finance vehicles, especially long-term ones. So where we 

came up against this was in the telecommunications industry. Certain global vendors today create extremely attractive medium- to 

long-term financing situations for the same clients for which we are 

competing. Sometimes those clients do not have to even make a 

payment the first 2 years. They get extremely low interest rates, 

and it makes it very attractive for them just simply from a capital 

perspective where quality, trust, and good customer service sometimes are overcome. 

So, at that point, being able to seek institutions that can help 

bring about medium- to longer-term financing when sometimes private-sector institutions are not comfortable in many of those locations. I would add that today a lot of the game or a lot of the opportunities are actually in emerging markets. There are tremendous 

infrastructure builds going on in those markets. So to compete in 
15 

the first-world markets, it can be relatively level, but today the opportunities are in Latin America, Africa, and parts of Asia. So that 

makes it a real challenge. 

And then having sort of the sense of approval of EXIM behind 

you makes many in those countries extra comfortable with a vendor. 

Senator BROWN. Right. 

Mr. SHMOTOLOKHA. So that combination of public and private 

with those loan guarantees that EXIM does is sometimes very useful. 

Senator BROWN. Thank you very much. 

Ms. Bowman, thank you for your service in Kansas and at the 

Federal Reserve. 

You have said that community banks, quote, ‘‘were significantly 

affected by the global financial crisis, a crisis they did not cause.’’ 

I think every member of this Committee on both sides would agree 

with that. 

Recently, though, the Fed has issues many rules that would 

weaken requirements for the largest U.S. and foreign banks, the 

same Wall Street banks that made risky bets and crushed the 

economy. 

I have a couple of yes or no questions. Have you voted against 

any of the Fed’s proposals that weaken the rules for the largest 

Wall Street banks? 

Ms. BOWMAN. I would not characterize them as necessarily weakening the rules. I voted in favor of those proposals, but I would disagree with your characterization that they have weakened the requirements for banks. 

Senator BROWN. They have scaled back the requirements. You 

would not disagree with that? 

Ms. BOWMAN. I would say that we have targeted the requirements more to the risk of the banks as they pose them. 

Senator BROWN. This is another yes or no question. Does weakening rules for Wall Street banks help community banks? Putting 

aside how you voted, does actually weakening the rules, scaling 

back rules for Wall Street banks, does that help community banks? 

Ms. BOWMAN. I think with respect to community banks, it is important that we understand the risks that they pose to the system 

and target the regulations and rules that they are required to 

abide by to their risks that they pose, the size, the complexity, and 

the risks that they pose to the system. They are a separate category of banks from Wall Street banks, the largest of—— 

Senator BROWN. We are not arguing that the community banks 

pose—even in the aggregate pose much risk. It is the larger banks 

where this Fed and the FDIC have weakened rules. It is not the 

community banks that we focus on. 

Let me ask you another question. You said community banks are 

a priority, but the Fed’s actions weakening the rules for Wall 

Street, opening the door for shadow banks and for Silicon Valley. 

The Fed is also considering a merger between two regional banks, 

each with over $200 billion in assets. They say it is too difficult for 

them to compete with the biggest banks’ investment in technology. 
16 

I hear from community bankers, some of your friends, I am sure, 

in my State and across the country that this leads to more consolidation making it harder for small banks to compete. 

So my question is, Do you believe that consolidation of the banking industry has an adverse effect on community banks? 

Ms. BOWMAN. As consolidation applies in the community banking 

space, my concern is more that the investment in the local communities are distributed instead of located where the charter was 

originally held, so as branches are acquired in rural communities 

that home investment in the community tends to be dissipated. 

Senator BROWN. Real quick, Mr. Chairman. 

Yes or no. Will you support Fed actions and the FDIC votes in 

this too, such as approval of BB&T and SunTrust merger? Would 

you vote for that? 

Ms. BOWMAN. It would depend on how the outcome of the review 

of the application is. We have several statutory factors that we 

must consider as we are reviewing that application. 

If the statutory factors are met and a recommendation is for approval, I would certainly consider that, as I would cast a vote. 

Senator BROWN. OK. Thanks. 

Chairman CRAPO. Thank you. 

Senator Toomey. 

Senator TOOMEY. Thank you very much, Mr. Chairman. I appreciate this hearing, and I want to thank our witnesses for testifying 

today and coming before us. 

Ms. Nikakhtar, am I pronouncing that right? 

Ms. NIKAKHTAR. Yes, Senator. 

Senator TOOMEY. Thank you. 

I would like to start with you. My understanding is in your recent position as Assistant Secretary for Industry and Analysis at 

Commerce, you played a lead role in the Commerce Department’s 

investigation into whether auto and auto part imports threaten 

U.S. national security. 

As you no doubt know, that report is still being kept a secret 

from the American public, but we now know that it contained an 

affirmative finding that foreign car imports and part imports were 

deemed to be a national security threat. 

First of all, it is highly objectionable to me that this report has 

not been disclosed to Congress and the American public. 

If Toyotas and Volkswagens really pose a national security threat 

to the United States so great that we have to tax my constituents 

when they purchase one, I think the American people ought to 

know why. 

So my first question to you, Ms. Nikakhtar, are you aware that 

Federal law and regulations actually require that the auto 232 report be made public? 

Ms. NIKAKHTAR. Yes, Senator. It is in the statute. 

Senator TOOMEY. Yes. So do you know why it has not been made 

public? 

Ms. NIKAKHTAR. Senator, when we completed the report and we 

delivered it to the Secretary and then to the President, it sits with 

the White House right now, and per the statute, it is up to the 

President to determine when he wants to release it and when the 

timing for that. 
17 

Senator TOOMEY. Well, let me just say the post to which you 

have been nominated obviously has a very significant national security component. Your signature recent effort in this space is that 

report, and it is hard for me to understand how Senators can properly judge your qualifications without being able to read that report. 

I understand that is not in your direct control, but it is important. 

The President’s May 29th proclamation repeatedly states that— 

and I quote this phrase—‘‘American-owned producers,’’ end quote, 

must be able to increase R&D spending in order to, quote, ‘‘developing cutting-edge technologies that are critical to the defense industry.’’ And, as such, the proclamation reaches the conclusion 

that, quote, ‘‘Domestic conditions of competition must be improved 

by reducing imports.’’ 

So the conclusion that Toyotas and Volkswagens are a threat to 

our national security seems to be premised on the notion that the 

sales of those vehicles precludes sales that would otherwise occur 

at American-owned producers, which would then lead to additional, 

presumably sufficient R&D investment. 

So let me ask a factual question here. So despite the fact that 

foreign-headquartered auto companies have invested hundreds of 

billions of dollars in the U.S., building plants, hiring tens of thousands—hundreds of thousands of American workers, is it true that 

auto report considers, quote, ‘‘American-owned’’ to include only GM, 

Ford, and Tesla? 

Ms. NIKAKHTAR. Senator, I should put that in a little bit more 

context. 

Yes, American-owned is GM, Ford, and Tesla. 

Senator TOOMEY. OK. I am going to run out of time here. So you 

are confirming that it is only those three. 

So for the purpose of considering the R&D investment of American-owned companies, did you include in your analysis the investment made by companies like Google and Apple and Uber into the 

space, into especially automation of vehicles? Was that included in 

your analysis? 

Ms. NIKAKHTAR. Yes, Senator. A large part of our research did 

include that. 

Senator TOOMEY. Thank you. 

It would be nice to be able to see that. 

This very narrow definition of ‘‘American-owned’’, even accepting 

that definition for this purpose, between Tesla, GM, and Ford, my 

understanding is in 2017, they spent a combined investment of $17 

billion in R&D alone. NASA’s budget, by way of comparison, is 

about $16 billion. If the $17 billion is inadequate, what is the correct number? What do the people at the Defense Department tell 

you they need American-owned car companies to invest in R&D in 

order to be able to defend America adequately? 

Ms. NIKAKHTAR. Senator, what I was trying to get at earlier was 

the fact that the—to your point about the investments that foreignmade auto—foreign-headquartered automakers have made in the 

United States, without question, those contributions are significant. 
18 

But because we allow for an open-investment climate, which we 

absolutely encourage—and we have the SelectUSA Summit forthcoming at the Department of Commerce—that is not the point. The 

point is the excessive imports have basically—the closed U.S. market now is being shared by American-owned and foreign-owned producers, and that is fine. We have lost market share here, but we 

have been unable to make up those lost sales in foreign markets 

when less than 1 percent of autos sold in Japan, for example, are 

from the United States, let alone American-owned. 

Senator TOOMEY. OK, OK. But we—— 

Ms. NIKAKHTAR. That is the focus, and that is the R&D, erosion 

of the R&D that the report—— 

Senator TOOMEY. But the R&D is at a record level. It is $17 billion, and my question is, What did the Defense Department folks 

tell you they need for American-owned car producers to invest in 

R&D in order to be able to safeguard the United States? 

Ms. NIKAKHTAR. The Defense Department did not provide us a 

number. We looked at our shrinking share of R&D vis-a-vis Europe 

and Japan and our global competitors, and based on that, the Secretary’s assessment was that we needed to increase R&D. 

And I should incidentally note that all of the surveys that we 

issued to all automakers and armored vehicle producers had inquired about their levels of R&D, and we took all of that information into account. 

Senator TOOMEY. Thank you, Mr. Chairman. 

Chairman CRAPO. Senator Tester. 

Senator TESTER. Thank you, Mr. Chairman, Ranking Member, 

and I want to thank all the folks who are here today on the panel. 

I appreciate it very much. 

I am going to start with you, Ms. Bowman. The 2018 farm bill 

decriminalized hemp and took it from the Controlled Substances 

List. It is now as legal as soybeans or wheat to be able to grow on 

the farms. 

Producers in Montana are hitting the fields. Some has been 

planted. It is kind of wet. Some has yet to be planted. The problem 

is they still face barriers to access the financial system, and not 

only the farms themselves who grow the hemp, but also input suppliers are facing barriers if they supply inputs for the growing of 

hemp as well as equipment dealers. 

I understand that FinCEN will have to update their guidelines, 

and I sent a letter to Director Blanco to tell him to get moving on 

it. 

As the primary regulators of our financial institutions, can you 

give me an update on what you are telling banks and credit unions 

today that will help them be able to do business in the hemp sector? 

Ms. BOWMAN. Senator, this is an important issue that when I 

meet with bankers from across the country, many States have engaged heavily in this crop for growth, and when we visit with them 

and speak with them about the treatment by the prudential regulators, the Federal Reserve, in particular, we refer them to BSA/ 

AML guidance to ensure that they are understanding the risks of 

the customers that they face, and that those decisions about who 
19 

they are working with or who they choose to serve as customers 

are appropriately vetted according to their business. 

Senator TESTER. So are you telling them they can bank them, or 

are you telling them to go ahead, but you might end up upsidedown? 

Ms. BOWMAN. No, we absolutely tell them that it is not our job 

or our role to tell them who their customers should be, and that 

they should understand what their business strategies and risks 

are with respect to any customer that they have. 

We do recognize that this is a challenging regulatory environment based on the relationship with—— 

Senator TESTER. When the Montana bankers were in a monthand-a-half ago, they said that they could not bank them because 

the regulators told them they could not bank them. Have you told 

them they could bank? 

Ms. BOWMAN. We have not told them that they cannot bank 

them. We have told them that there are regulations in place. 

Senator TESTER. Let us be proactive about it because we decriminalized it in the farm bill. And this is not pot; this is hemp. Why 

not just tell them they can do it? Because, quite frankly, I would 

just tell you prices are in the tank. These tariffs are killing production of agriculture. I am not saying hemp is going to bail anybody 

out, because it is not, but it gives them another option. 

But they are not going to do it. I would not do it. If you cannot 

get the dough, you are not going to do it, and this economic time 

for production in ag, they need the banks, so—— 

Ms. BOWMAN. I would agree with you, and we would not discourage banks from banking these types of customers. 

Senator TESTER. OK. Well, maybe we are saying the same thing, 

but I am not sure bankers are hearing the same thing, OK? 

Ms. BOWMAN. We will try to clarify that. Hemp is not an illegal 

crop. 

Senator TESTER. Right. That is what I wanted to hear. 

Thank you very, very much. 

Mr. Feddo, good to have you here. Under the current structure 

of CFIUS, you have been able to review—or the body has been able 

to review several large agribusiness transactions in recent years, 

including a biggie when Bayer acquired Monsanto. And I would 

just tell you, unequivocally, this company plays a huge role in production of agriculture across this country. I believe that food security is equivalent to national security. I do not think there is any 

debate about that. 

So do you believe CFIUS currently does enough to protect our 

food systems here in the U.S. 

Mr. FEDDO. Senator Tester, I do. With respect to any transaction 

that implicates national security, we bring in the appropriate member agencies to assist us in that analysis. 

Senator TESTER. So do you agree that food security and national 

security go hand-in-hand? 

Mr. FEDDO. It can. It depends on the facts and circumstances. 

Yes. 

Senator TESTER. So if you have got people starving to death, do 

you think that is good for national security? If you have got people 

starving to death, do you think that is good for national security? 
20 

Mr. FEDDO. Sir, we take a look at who the investor is. 

Senator TESTER. Yeah, yeah, yeah. That is not the question. 

If you do not have adequate food supply, it is my contention that 

you have turned your national security on its ear. That is why 

these mergers are so critically important. 

And let me give you a statistic. Currently, with the merger, 

Bayer, Monsanto, whatever you want to call them, controls 25 percent of the seed supply, which if you control the seed, you control 

the food, and 23 percent of the chemicals. 

The question, does CFIUS think about this stuff? And then I will 

kick it back, but does CFIUS think about this stuff? Because it is 

real, and if for a second that I thought we were offshoring our food 

security to a foreign country, that is what it appears to me. 

Now, in retrospect, they may have offshored a lot of liability, but 

the truth is when it happened, we did not know that. 

Mr. FEDDO. We do think about that. It is part of our risk-based 

analysis. We look at the threat from the actor, from the investor. 

That is the intent and capacity to exploit a weakness in our national security as well as the vulnerability of the U.S. business. So 

we look at both of those factors to determine the risk to national 

security. 

Senator TESTER. Well, I would just say I think 25 percent is a 

lot. I mean, we are talking the whole shebang here, and so I would 

just ask for you to specifically ask some tough questions to the 

folks on that, OK? 

Thank you very, very much. 

Mr. FEDDO. I will. 

Chairman CRAPO. Senator Tillis. 

Senator TILLIS. Thank you, Mr. Chairman. 

Mr. Feddo, I am going to—first off, I share some of Senator Tester’s concerns. I am not going to ask you questions. 

I am going to do a couple of questions for the record for you specifically around U.S.–controlled private funds, particularly when 

they are controlled by U.S. persons, because I have a concern about 

some scoping and focus there, but we will do that for the record. 

Mr. Steff, in your opening statement, you said you had pet ducks 

and a coin collection. I had a pet rooster named Pete and a coin 

collection. So I am glad to see we share—in the rural areas, so I 

am glad we share a common bound there. 

Ms. Bowman, I am going to spend most of my time talking with 

you, and some of this is—I do not normally speak from notes, but 

this is something important for us to get on the record because it 

is a priority that I hope I can get your commitment, and it has to 

do with interaffiliate margins. 

Number one, I think that we are out of step with the European 

Union, Japan, and most other G–20 jurisdictions. Number two, I 

think that we have a record across Administrations on the issue. 

In 2013, we had the CFTC chair provide an exemption. In 2015, 

we had the CFTC chair provide an exemption. And now we have 

a situation where the Fed has not provided an exemption from the 

initial margin from the 2016 rules, and I think as a result, U.S. 

banking entities collected nearly $50 billion in initial margin from 

their own affiliates. That is capital that could be deployed that 

right now is sitting on the sidelines. 
21 

In 2017, the Treasury noted that this rule puts U.S. firms at a 

disadvantage, both domestically and internationally, recommending 

that your agencies provide an exemption consistent with the margin requirements of the CFTC. 

Do you agree that an initial exemption—an exemption from initial margin is appropriate for interaffiliate transactions? 

Ms. BOWMAN. Senator Tillis, we are very aware of this issue and 

aware of your concern with respect to this issue. 

We are actively reviewing the application of margin requirements for interaffiliate transactions. 

Senator TILLIS. I would like to get—and we can follow up and 

maybe give you an opportunity to respond to a question for the 

record, but I would like to get a commitment to prioritize the rule, 

to provide an exemption. And I think that it can be done expeditiously. I do not think it has to necessarily be done with Regulation 

W rewrite, which can take a couple of years. I think it is something 

that can be done relatively quickly. 

For the record, we will go through mechanically how we think we 

can get it done, and I would like to get your specific response. We 

have been talking about this for a while. We have met with a lot 

of the other Fed regulators. Everybody seems to think it is a good 

idea. It has been a policy that has transcended Administrations. So 

I do not think it is politically volatile, and I would like to figure 

out a way to expeditiously move and not have this be a 2- or 3- 

year matter. I think putting $50 billion back into play is something 

that is helpful and will let us continue our economic growth. 

The last thing I want to talk with you about has to do with the 

Fed payments proposal. It is another area where, again, I am going 

to honor the time commitment. It is another area where we will 

probably just submit context for the record, but I do not believe 

that we need two systems. I think that we have emerging opportunities that are in play with the private sector. I think it is something that the Fed should think seriously about not spending their 

time and resources on. 

And I have gotten mixed responses. It feels like when you go to 

a public hearing and you talk to some of the regulators, they say, 

‘‘Thank you very much for your input,’’ and move on, but it gives 

me a sense that they are going to move in that direction. And I 

think they should step back and really decide if that is a good use 

of their resources. 

I will give you a few minutes to respond, and then we will put 

that as a question for the record for a more fulsome response. 

Ms. BOWMAN. Senator, this is an issue that has been active within the Federal Reserve since 2014 when we had a working group 

focused on this issue. 

The Fed has had historically a strong role in payments since its 

inception. This is something that we think is very important, and 

we issued questions last fall so that we could consider the comments back from the public regarding the appropriate place and 

structure for this type of initiative. 

We are continuing to review the work of the working group and 

the comments that we have received through that publication, and 

at this point, no decision has been made, but I would be happy to 

answer your question for the record. 
22 

Senator TILLIS. Thank you. 

This is something our office will spend a significant amount of 

time on. 

Thank you all very much. I look forward to supporting all of your 

confirmations. 

Chairman CRAPO. Thank you. 

Senator Jones. 

Senator JONES. Thank you, Mr. Chairman, and thank you to all 

the witnesses that are here today. And thank you for your service. 

Mr. Feddo, I would like to talk to you a little bit about CFIUS. 

I think Congress last year passed FIRRMA because of some concerns, especially the rise of the way China has been doing business 

in this country. I think Ms. Nikakhtar—and I apologize for bumbling that—talked about that in her role. 

I want to raise a transaction that occurred last year and ask you 

about this, and when I do this, I am not making—casting any aspersions, but something that troubles me because it has an impact 

on Alabama and also I think national security implications. 

2018, a Chinese steel company formed a joint venture with an 

American company that is known for its supply of highly specialized stainless steel, which is used across defense and aerospace sectors. 

Now, stainless steel is a very technology-sensitive industry. 

There are a lot of different recipes, and there was no question that 

China was lacking in their ability to produce high-quality stainless 

steel. 

Given everything that we know about the Chinese practices, it 

seems pretty clear that at least some portion of this transaction 

was done simply to acquire manufacturing technology and know 

how by the Chinese, but there is no evidence whatsoever that 

CFIUS reviewed this transaction before it was closed. 

Again, I am not casting aspersions, but it seems—even though 

this deal was slightly before FIRRMA passed, can you confirm that 

this is actually the same kind of joint venture deal that CFIUS had 

the authority to review for whatever reason, resources or something did not? But this seems like the exact kind of thing that they 

had the authority to review. Can you confirm that for me? 

Mr. FEDDO. Senator, so as you alluded to, I cannot comment in 

this venue on a particular transaction or whether a review occurred 

or a pending review is under way. 

I can talk about accomplished or completed reviews with you in 

a closed setting with classified information as well. 

But more to your point, though, it is important to protect America’s critical technology. 

On the joint venture front, CFIUS can and does look at joint ventures when there is a U.S. business involved. We have the ability 

to look at investments in U.S. businesses engaged in interstate 

commerce. This is something that was talked about a great deal 

during the build-out of FIRRMA with respect to outbound joint 

ventures and where CFIUS might have a gap. 

Senator JONES. Can we do a look-back? If, for instance—and I 

can talk to you in a different setting. If CFIUS did not review this, 

can we do a look-back and review something that occurred last 

year if it now comes to your attention? 
23 

Mr. FEDDO. As a general matter, we do have the opportunity and 

ability to look back at transactions that have already been consummated and were not reviewed by the Committee. We call those 

‘‘non-notifieds’’, and we certainly do that often. 

The one point I would make is that some joint ventures that do 

not contribute a U.S. business are more appropriately tackled 

through the export controls process, but I am happy to continue—— 

Senator JONES. Well, I will get with you on that. 

Ms. Nikakhtar, I want to follow up on Senator Toomey’s questions because I am exactly where he is on this automobile tariff 

stuff. My State is sitting on edge right now, waiting to determine 

whether or not the 60,000 jobs in Alabama are going to go away 

because of these tariffs. 

And did I understand your testimony earlier that with regard to 

national security, the Commerce Department did not contact or ask 

the Defense Department anything about the security implications 

for foreign automobiles and foreign auto parts? 

Ms. NIKAKHTAR. No, Senator. Well, thank you for that question. 

The response only was in terms of the quantitative level of R&D 

that we actually had a lot of proprietary information from survey 

results. So we did not need to ask them about that, but we have 

worked very closely, hand in glove, with the Department of Defense 

all past summer for months and months, and we had a really wonderful working relationship with them to understand the interconnectedness between the commercial and the defense needs for 

innovation. 

Senator JONES. Did the Defense Department believe that these 

foreign automobiles, the Volkswagens and the Mercedes-Benzes 

and the Toyotas, posed a national security threat? 

Ms. NIKAKHTAR. The Secretary of Defense submitted a letter to 

the Secretary of Commerce noting the importance of the commercial auto sector and the innovations they provide for the defense 

sector. 

Senator JONES. All right. Well, it sounded to me, with all due respect—and I agree with Senator Toomey that without having seen 

that in the analysis that went through that, it seems to me—because a lot of your answer was purely market driven. I mean, a lot 

of the answer that you gave Senator Toomey was about the markets, and I do not know how many foreign—I do not know how 

many American automobiles it would take in Japan to make it not 

a national security threat. 

But, with all due respect, it sounded to me in your answer that 

somebody said, ‘‘We need to use this as leverage to get our market 

share up, and so let us find a way to make this national security.’’ 

I hope I am wrong about that, and I hope I get to look at that report. I would love to be able to look at that report before your nomination comes to the vote here or certainly before the Senate, and 

I would encourage you to talk to the Secretary of Commerce and 

the President of United States to release that report to us, even in 

a closed setting that we can look at it before your nomination. 

Ms. NIKAKHTAR. And, Senator, I just wanted to assure you that 

trade leverage, none of that constituted any of our thinking when 

we were drafting the report. We used publicly available data, and 
24 

all of that was corroborated by confidential survey information we 

received. 

Senator JONES. All right. Well, thank you. 

Thanks, Mr. Chairman. 

Chairman CRAPO. Senator McSally. 

Senator MCSALLY. Thank you, Mr. Chairman. Thanks for holding 

this hearing today to consider these nominations for many critical 

positions at a number of agencies. 

I do want to specifically focus on Governor Bowman’s renomination to continue to be a member of the Federal Reserve Board. You 

are off to a good start representing community banks and being a 

voice to them, and I really appreciate that. 

Community banks are really vital for us in Arizona. By extending credit and other services to especially small businesses, they 

really reach a lot of rural and underserved populations that are 

just critical for our economy and continuing to support people that 

I represent. 

And we really feel the presence along the border of the importance of community banks, and when they close, the impact is severe. And the financial services that they provide are just very critical for us in Arizona. So I am pleased that you are providing that 

voice at the Federal Reserve Board with your perspective, and I 

hope you will continue to do so. 

Can you walk me through some problems you see that community banks are currently facing, even with some of the reforms that 

we have made and adjustments, and what the Federal Reserve is 

doing to make sure that regulations are properly tailored? 

Ms. BOWMAN. Senator McSally, thank you for that. Community 

banks are clearly important to our community, to our businesses, 

our families, and our communities. 

Let me first say that one of the first priorities for the Federal Reserve is to implement the provisions of S. 2155. So through my 

chairmanship of the Smaller Regional Bank and Community Bank 

Subcommittee at the Federal Reserve, we are working very diligently to finalize the CBLR, the Community Banking Leverage 

Ratio proposal, which simplifies capital requirements for community banks. 

We have revisited that proposal, reengaged our State bank supervisors for their input and participation in that process as well 

since I came on board. 

That proposal was issued prior to my joining the Board of Governors, so it is something that we are taking another close look at. 

We are also looking closely at the call report reduction, the burden for call report reduction and reduction of those burdens. That 

is a priority for our subcommittee as well. 

So there are many things that we are looking at. One thing that 

is probably important to your community banks is the BSA and 

AML procedure. So that is something that is on our agenda as well 

to look at examination procedures and see where we can find some 

efficiencies. 

Senator MCSALLY. Great. Thank you. 

When Chairman Powell testified before our Committee, we spent 

a lot of time talking about the rural–urban divide and what is 

going on economically in the country. Again, I represent a lot of 
25 

rural communities. So from your perspective, what does access to 

banking—or are there other factors that you think are really causation for that divide and the challenges for rural communities? 

Ms. BOWMAN. The differences between rural communities and 

urban communities is often vast. Ninety-seven percent of our country is rural. I am from a rural community as well. I recognize many 

of these economic challenges that we face in those rural communities. 

The importance of community banks in those communities is 

leadership that is provided to the community. It is access to credit 

for consumers and for small businesses. It is an important cornerstone of many of those communities. 

One of the concerns that we discussed earlier with Ranking 

Member Brown was the consolidation of those rural institutions 

and the continued commitment of the remaining entity in the community that they are serving. 

Senator MCSALLY. Great. Thank you. 

We also have some unique cross-border challenges right at the 

border that are impacting our communities there, and we have 

talked a lot about this on the Committee already. But we need to 

continue to work across multiple agencies to make sure that our legitimate cross-border commerce still has access to banking. 

I do not know if you have any comments on specifically the border elements of that, but it is not just rural but also the cross-border. 

Ms. BOWMAN. Yes. We recognize that those are challenges for the 

banks that are on the border. 

I was recently in El Paso, Texas, and in Deming, New Mexico, 

where we were able to observe some of those and visit with bankers on the border. I would be happy to visit with you further about 

that and continue to work with you on those issues. 

Senator MCSALLY. Great. Thank you. 

Yield back. 

Ms. BOWMAN. Thank you. 

Chairman CRAPO. Senator Cortez Masto. 

Senator CORTEZ MASTO. Thank you, Mr. Chair. 

Ms. Bowman, let me follow up on some of the conversation. You 

just said you were in Texas. 

I am curious. Friday, the regulators closed Enloe State Bank in Texas. I think it was a $36 million bank. What went wrong? 

Ms. BOWMAN. My understanding—that was an FDIC-regulated 

bank—was that there was fraud on behalf of one of the management, representatives of management. 

Senator CORTEZ MASTO. OK. And my understanding is that the 

cost to the FDIC because of this closure is about $27 million. 

I guess my question to you, if this community bank had more assets, would the loss have been such as great? 

Ms. BOWMAN. I think the challenges when you are dealing with 

the closure of an institution, as I mentioned when I was testifying 

last May before this Committee as well, I closed a similar situation, 

institution in Kansas during my time as the State bank commissioner. 

When you have fraud that is resident in the institution, oftentimes it only comes to light during an examination. My under-
26 

standing is that the call report information that was filed indicated 

that the bank was in good condition, and it was revealed when the 

FDIC came to do an examination that that was not the case. 

Senator CORTEZ MASTO. But the intent is—and I guess this is my 

concern. Community banks, many have record profits, but the goal 

here is to ensure that if there is a fraud of if there is something 

happening, they have access, they have efficient capital or assets 

for just this very reason, so that there is not a big hit, and they 

have the ability to cover those costs. 

So I guess my concern with this process that is happening right 

now, in all due respect to the Chairman, there is no way I am 

going to get to ask every single one of you a question, but here is 

what I do know. Last time you were before us, we had a short, limited time to ask questions, and when I did not get the answers, I 

actually submitted questions for the record. But your questions 

that you responded to me were similar, word for word, to another 

individual that was on the panel at the same time. 

So I guess my concern is I do not have enough time to ask you 

questions the way this has been presented here, and this is ridiculous to me. These are important positions for every single one of 

you, and to not even be able to have 5 minutes with all of you, let 

alone a second, is outrageous to me. 

And let me jump over here. For the last 2 years, the Export–Import Bank has not been filled. We are finally filling these positions, 

and I will tell you the Export–Import Bank is important to Nevada. 

We have 21 firms that export electrical equipment, machinery, 

minerals, and other products to other Nations like Mexico, Turkey, 

and India, and we are now just putting in place individuals that 

can help finalize and start moving this forward. 

I think, Mr. Chairman, with all due respect, this is no way to 

conduct our business long term in the Senate. It is time for us to 

start working together and start putting people in positions but 

making sure we get the right people in these positions and not 

crowd everybody in because there is no way I am going to be able 

to ask everybody that is before us a question that is important for 

my State. 

So I appreciate you all being here, but at the same time, I am 

frustrated with how this process is moving forward. And I just do 

not think it does a service to anybody here in Congress, let alone 

the people that represent—are in my State that I am supposed to 

represent or any of the States that we are supposed to be represent. This is not how we should be doing business. 

Chairman CRAPO. Senator Menendez. 

Senator MENENDEZ. Let me echo the Senator from Nevada’s concerns. I expressed this to the Ranking Member as well. 

Six people, major positions, in one hearing is almost an impossibility to get what you need, but I am going to try to get some of 

it. But I doubt I am going to get all of it. 

So let me start off with Ms. Nikakhtar. I appreciated your visit 

with me. 

Are you aware that 3D gun blueprints are already available online? 

Ms. NIKAKHTAR. Yes, Senator, and I understand that it is currently the subject of litigation. 
27 

Senator MENENDEZ. So my concern is, my understanding of the 

department which you have been nominated to takes the position 

that once something has been published, it can no longer seek to 

control it. So what will you do to allay the concerns of Americans 

who are worried about the Administration’s actions that could 

make 3D gun blueprints more widely available? 

And if you cannot control the release of those designs under existing regulations, will you commit to changing those regulations or 

simply change the proposed transfer to leave such technical information under the purview of the State Department? 

Ms. NIKAKHTAR. Senator, I very much enjoyed our conversation 

yesterday. Thank you for taking the time. 

What you are referring to, it is the Cats I, II, III transfer from 

the Munitions List to the Commerce Control List. Once that happens—and I want to go on record saying it here and as I communicated to you—I am committed to working with every single Member of Congress to the extent that they would like to engage with 

me and my bureau to make sure that we are developing and implementing sound policies with respect to our export controls, rules, 

and procedures 

Senator MENENDEZ. Well, I appreciate that, but that does not answer my question. 

So when it comes to 3D guns specifically, because of my understanding of the regulations as they exist, since they are supposedly 

published in some entity, they no longer can be controlled. But we 

do not need the widespread distribution of this. 

So I hope that you will do something, and I would like to see an 

answer in writing from you as to what you will do. 

As I will repeat to you what I said in private, it is no value, your 

offer to me, which I appreciate, to be engaged on transactions if I 

do not know the transaction exists. If I have no notification that 

you are in the midst of considering an arms sale to some entity, 

if I do not know it, unless I find out through some other source, 

I cannot comment on it. So there has to be some way, if this goes 

through, in which you, if confirmed, ultimately engage us in letting 

us know, at least a simple notification, so we can comment and 

take value of your offer. Otherwise, your offer is of no value. So I 

hope you understand it in that respect. 

Mr. Feddo, one of the provisions that I offered in FIRRMA was 

to require CFIUS to develop regulations to ensure that Stateowned entities are declaring their transactions with CFIUS and not 

using complex financial structures to conceal their ownership or 

evade CFIUS review. 

We saw this situation at work in December when the Wall Street 

Journal reported that a firm owned by China’s Ministry of Finance 

was able to use offshore subsidiaries to purchase a U.S. satellite 

firm and was thereby allegedly able to access information that may 

have been restricted under U.S. export controls. 

Do you agree that CFIUS needs to do more to evaluate the extent of foreign Government control or influence over foreign firms 

seeking to invest in the United States? And, second, will you commit to implementing this provision, which is law, of FIRRMA so 

that foreign Governments seeking to invest in critical American industries are required to file declarations with CFIUS? 
28 

Mr. FEDDO. Sir, I absolutely commit to implementing that provision. I think it is a very important piece of FIRRMA with respect 

to State-owned entities. 

As you are well aware, there is a real challenge in discerning ultimate beneficial owners, and so we are taking a great deal of energy and attention to building out a team to look at non-notified 

transactions and identify ultimate beneficial owners when appropriate. 

I cannot comment about the specific transaction that you raise, 

but I am absolutely committed to implementing this provision. 

Senator MENENDEZ. Well, I appreciate it and look forward to 

working with you on that. 

Mr. Shmotolokha—— 

Mr. SHMOTOLOKHA. ‘‘Shmotolokha.’’ 

Senator MENENDEZ. ‘‘Shmotolokha.’’ Thank you very much. 

I have always been a strong supporter of the Export–Import 

Bank. Given in your experience in the private sector, how important is it that we reauthorize a bank and do not let it—to shut it 

down as we did in 2015? 

Mr. SHMOTOLOKHA. It is critical, sir. 

Senator MENENDEZ. And do you believe it is appropriate for Congress to increase the bank’s exposure cap, the amount of loans it 

can finance in light of the increased resources some economic competitors like China are giving to their export credit agencies? 

Mr. SHMOTOLOKHA. Yes, sir. 

Senator MENENDEZ. If everybody gave me answers like that, I 

could get through the whole process. 

[Laughter.] 

Senator MENENDEZ. I have one last question, if I may, Mr. Chairman, I would like to ask Ms. Lee. 

I appreciate the conversation we had yesterday in my office. 

Do you believe that tough penalties are a successful deterrent for 

future lawbreakers? I am concerned that we often seem to have at 

the SEC a reticence to pursue the type of enforcement and penalties that are a deterrent and ultimately pursue what we want, 

which is conformance with the rules. Should such an effective enforcement strategy incorporate tough penalties as part of its strategy to prevent harm, deter bad actors, and punish wrongdoers? 

Ms. LEE. Yes. Thank you, Senator. 

I actually think that compliance is the overall goal of enforcement, and the best way to get at compliance is deterrence. I think 

that includes tough penalties where they are warranted on a caseby-case basis, but I do support strong penalties in the right case 

because I do think that has the best deterrent value. 

Senator MENENDEZ. I have other questions, Mr. Chairman. My 

time has expired. 

Chairman CRAPO. Senator Van Hollen. 

Senator VAN HOLLEN. Thank you, Mr. Chairman. 

Thank all of you for your testimony. 

Governor Bowman, you and I have spoken about this. I think the 

fact that the United States does not have a real-time payment system is an embarrassment, and it is costing millions of Americans 

billions of dollars, especially Americans who do not have big balances in their bank accounts. 
29 

Now, I heard some questions from Senator Tillis along these 

lines. I just want to point out to you an article by Thomas Hoenig, 

a former vice chair of the FDIC and former president of the Federal Reserve Bank of Kansas City, who wrote a recent editorial regarding this issue stating, and I quote, ‘‘The needs of consumers 

and businesses and the depository institutions nationwide that provide them services will be best served by the Federal Reserve continuing to play its role as a payments processor.’’ He goes on to say, 

‘‘The alternative is to award the clearinghouse a de facto monopoly 

resulting in a less competitive and less efficient market for immediate payments.’’ Are you aware of that editorial? 

Ms. BOWMAN. Senator Van Hollen, I am familiar with the editorial, and I have read it. It is consistent with some of the comments that we have received during our request for comment on 

the questions we issued last fall. 

Senator VAN HOLLEN. And do you share some of those concerns? 

Ms. BOWMAN. There are many factors that are in consideration 

as we are deliberating this issue within the Federal Reserve System. It is a live discussion, and we are actively in the process of 

considering all of the comments that we have received. 

Senator VAN HOLLEN. All right. So part of your job, of course, is 

to look out for the community banks—— 

Ms. BOWMAN. Yes, sir. 

Senator VAN HOLLEN. ——and the concerns expressed about giving this monopoly to the clearinghouse come from community 

banks in large measure. You are aware of that, right? 

Ms. BOWMAN. Yes. I have heard from community banks about 

this issue. 

Senator VAN HOLLEN. So, Ms. Nikakhtar, let me just follow up 

on the use of Section 232 because, in my view, it has been sort of 

a gross abuse of claims of national security when we use that to 

place tariffs on our allies like Canada and others. 

So count me in with those other Members who have said we really want to get this report with respect to Section 232 and automobiles. 

Where I do agree with some of the actions the Administration 

has taken is where I think we face a real strategic threat, which 

is China’s theft of a lot of our IP and technology. So I supported 

the efforts that you at the Commerce Department took last year 

with respect to ZTE after it was found in violation of our sanctions. 

I was incredibly disappointed that the President then tweeted out 

that he is going to reverse the blocking order because he wanted 

to help his, quote, ‘‘friend,’’ President Xi. 

So now we have your measure putting Huawei on the entities list 

because of 5G, and as I read the explanation for that—and I think 

this is a move in the right direction, lots of complicated issues, but 

a move in the right direction—it was based not only on the finding 

that they violated the Iran sanctions but also other findings that 

they pose a national security threat. Is that right? 

Ms. NIKAKHTAR. Senator, yes, that is what we have indicated. 

Senator VAN HOLLEN. OK. So I am with you in addressing this 

issue. 

What I am concerned about is you are trading off something that 

you agree is a national security issue as part of concessions over 
30 

a tariff fight. Can you tell this Committee that you will not tradeoff 

legitimate national security concerns in order to get some better 

deal in a tariff fight with China? 

Ms. NIKAKHTAR. Senator, you raise very important points. If it 

is up to me, I want to make sure that we do everything we can to 

protect national security. Trade is not in my jurisdiction, national 

security. 

With respect to ZTE, I completely get your points. Under the 

compliance agreement, ZTE now is the most monitored company in 

the world. 

My commitment is to make sure that we never, ever compromise 

national security threats, and to the extent that you ever have any 

concerns, I am happy to engage with you or your staff directly to 

make sure those concerns are addressed. 

Senator VAN HOLLEN. Right. 

And so the actions that you have taken with respect to the 

Huawei and 5G are a result of your conclusion that it poses a national security threat. Is that correct? 

Ms. NIKAKHTAR. A national security threat and undermining foreign policy interests of the United States. 

Senator VAN HOLLEN. So I am going to be watching very carefully to see if we somehow are trading off that legitimate national 

security issue to try to get a better deal on some tariff issues. Not 

only do I think it is wrong in compromising our national security, 

it totally undermines our credibility when foreign countries think 

that we are using national security concerns as leverage in some 

other area like trade because that is a very, very dangerous path 

to go down. Would you agree with that? 

Ms. NIKAKHTAR. You have my commitment, and I want to go on 

the record that my singular focus is national security. That is the 

purview of my job, and that is what I am committed to. 

Senator VAN HOLLEN. Thank you. 

Chairman CRAPO. Thank you, Senator Van Hollen. 

That concludes our questioning for today’s hearing. For Senators 

who wish to submit questions for the record, those questions are 

due to the Committee by the end of the day on Friday, June 7th. 

And we ask that our nominees respond to those questions no 

later than the close of business on Friday, June 14th. 

Senator MENENDEZ. Mr. Chairman, may I make one remark before we close? 

Chairman CRAPO. Yes. Yes, you may. 

Senator MENENDEZ. I have other questions. I am going to submit 

them for the record. I would like to get substantive answers. If I 

do not get substantive answers, then I will do everything possible 

on the floor to impede the nominations moving forward. Since we 

do not have time to go through a second round here or have enough 

time, I would like to get substantive answers to those questions. 

Chairman CRAPO. That is a fair request. 

We would like to thank our nominees for being here today. 

Thank you again for your willingness to serve. We have got a vote 

that is already 15 minutes under way, so we are going to wrap this 

up and leave quickly. 
31 

I just want to again extend to each of you our thanks for your 

willingness to help keep our Country strong and to serve in your 

respective capacities. 

With that, this hearing is adjourned. 

[Whereupon, at 11:21 a.m., the hearing was adjourned.] 

[Prepared statements, biographical sketches of nominees, responses to written questions, and additional material supplied for 

the record follow:] 
32 

PREPARED STATEMENT OF CHAIRMAN MIKE CRAPO 

This morning we will hear testimony on six nominees to serve at five different 

agencies. Welcome, all of you. 

I see friends and family behind you, and I welcome them here today as well. 

If confirmed, I look forward to working with each of these nominees on many important issues within each of their respective policy areas, including: continuing efforts from last Congress to right-size regulations, making it easier for consumers to 

get mortgages and obtain credit; encouraging capital formation, reducing burdens 

for smaller businesses and improving corporate governance; exploring the proper 

role of the Export–Import Bank in providing finance in response to foreign Governments, like China, that provide aggressive subsidies and place U.S. exporters at a 

disadvantage; and preserving the technological edge and national security of the 

United States while also preserving an open U.S. investment environment and ability of our industry to export its products through the implementation of FIRRMA 

and export control rule. 

First we have, Mr. Thomas Peter Feddo, to be an Assistant Secretary of the 

Treasury for Investment Security. 

This is an important national security job that protects our most critical technology companies from foreign takeovers and influence. 

He currently leads the U.S. Department of the Treasury’s Office of Investment Security in executing Treasury’s statutory role as the Chair of CFIUS. 

He also spent 7 years at the Treasury Department’s Office of Foreign Assets Control implementing and enforcing U.S. economic sanctions. 

As a graduate of the U.S. Naval Academy, Mr. Feddo served as a lieutenant in 

the Navy’s nuclear submarine force and as an officer at the Navy Antiterrorist Alert 

Center. 

Next, The Honorable Nazak Nikakhtar, to be Under Secretary of Commerce for 

Industry and Security. 

She was previously confirmed by voice vote to be an Assistant Secretary of Commerce for Industry and Analysis 

She is currently serving as the Acting Under Secretary, evaluating and promulgating effective regulation of emerging U.S. technologies. 

She comes to the Bureau of Industry and Security from her role as Assistant Secretary for Industry and Analysis for the International Trade Administration, or ITA. 

While at ITA, she worked on policies to strengthen the competitiveness of U.S. 

companies globally. 

Previously, she was a trade attorney at several high profile Washington law firms 

and an industry analyst at the Bureau of Industry and Security. 

Next, we have Mr. Ian Paul Steff, to be Assistant Secretary of Commerce and Director General of the United States and Foreign Commercial Service. 

Mr. Steff’s job is to open markets and sell whatever Mr. Feddo and Ms. Nikahktar 

do not control, which is about 98 percent of what America makes. 

Mr. Steff currently serves as Deputy Assistant Secretary for Manufacturing at the 

U.S. Department of Commerce’s International Trade Administration. 

In that role, he oversees approximately 1,400 trade and investment professionals 

based in more than 100 U.S. cities and 70 markets around the world. 

Prior to joining the U.S. Department of Commerce, he worked as vice president 

of global policy and technology partnerships for the Semiconductor Industry Association for nearly a decade and he started his professional career as staff on the U.S. 

House of Representatives Committee on Ways and Means. 

Next, we have the Honorable Michelle Bowman, to be a Member of the Board of 

Governors of the Federal Reserve. 

Governor Bowman currently serves as a Governor on the Federal Reserve Board 

and is the first person to fill the Federal Reserve’s community banking seat after 

her confirmation last year by a bipartisan vote of 64 to 34. 

While Governor Bowman’s current 14-year term expires January 31, 2020, President Trump has renominated her to the same position for a full 14-year term. 

Prior to serving as a Governor, she was the State bank commissioner of Kansas 

from January 2017 to November 2018, served as vice president of a Kansas-based 

community bank, Farmers & Drovers Bank, between 2010 and 2017, and served in 

a number of Government roles. 

Next, we have Mr. Shmotolokha, who has been nominated to serve as First Vice 

President and Vice Chairman of the Export–Import Bank of the United States. 

As President Trump and other senior officials in his Administration have noted, 

a fully functioning Export–Import Bank has the ability to provide financing and 

level the playing field in response to Governments, like China, which can provide 
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almost limitless subsidies from its Treasury, which places U.S. exporters at a disadvantage. 

His career in the private sector has focused on international business and trade, 

particularly in the fields of telecommunications, technology and renewable energy. 

He currently leads the international division for Alpha Technologies. 

Finally, we have Ms. Allison Lee who is nominated to serve as a Member of the 

Securities and Exchange Commission. 

As an SEC Commissioner, Ms. Lee would be responsible for helping the SEC fulfill its mission of protecting investors; maintaining fair, orderly and efficient markets; and facilitating capital formation. 

Ms. Lee is currently a consultant with Congress Park Consulting where she teaches courses on U.S. corporate and securities law in Spain and Italy, and works as 

a contributing author on treatises in corporate and securities law. 

She previously served as Senior Counsel in the Division of Enforcement’s Complex 

Financial Instruments Unit, and as counsel to former Commissioner Kara Stein. 

Thank you all for your willingness to serve and for appearing before our Committee today. 

PREPARED STATEMENT OF SENATOR SHERROD BROWN 

Thank you, Chairman Crapo, for holding today’s hearing on the nominations of 

Mr. Thomas Feddo, Ms. Nazak Nikakhtar, Mr. Ian Steff, Ms. Michelle Bowman, Mr. 

Paul Shmotolokha, and Ms. Allison Lee. I look forward to hearing their views and 

would like to welcome their families to the Committee. 

Mr. Feddo is the first nominee to be Assistant Secretary of the Treasury for Investment Security, a position created under the Foreign Investment Risk Review 

Modernization Act of 2018—the bipartisan legislation from this Committee that 

made major reforms to the Committee on Foreign Investment in the United States. 

We created this new position because of the critical role CFIUS plays protecting 

U.S. national security from increasing threats from certain foreign investments. 

Yesterday we heard about how China has adopted new tactics to acquire American 

technology in sectors that are vital to our national security. It’s why we passed this 

bill, and it’s why this job will be so important. 

Mr. Feddo is currently serving as deputy assistant secretary for investment security, he played a key role in formulating the reforms last year, and is now working 

to carry out the technical and structural changes required under FIRRMA, including 

finishing the rulemakings to expand CFIUS’s scope, and filling new staff positions 

necessary for enhanced review of potential investments that could pose risks to national security. 

If confirmed, Mr. Feddo, you will need to continue this critical work. I know 

you’ve made progress, and I look forward to hearing from you about next steps. 

Ms. Nikakhtar has been nominated to serve as Under Secretary of Commerce for 

Industry and Security, responsible for a set of key U.S. national security, foreign 

policy, and economic objectives through application of effective U.S. and multilateral 

export controls and treaty compliance. Although Ms. Nikakhtar has extensive experience in international trade, including at the International Trade Administration, 

she has more limited experience in national security and export control matters. 

If confirmed, Ms. Nikakhtar will be responsible for administering critical U.S. export control laws and regulations that cover emerging, foundational, and other 

forms of sensitive technology—an area of increasing importance. 

Ms. Nikakhtar, I hope that you will work with your colleagues to navigate the 

complex national security and political concerns that surround the export of sophisticated U.S. technology. 

Mr. Steff is nominated to be Assistant Secretary of Commerce for Global Markets 

and Director General of the United States and Foreign Commercial Service. In that 

role, he will be responsible for the International Trade Administration’s work to advance U.S. business overseas and to promote U.S. exports and fair trade rules. 

Mr. Steff’s current experience as Deputy Assistant Secretary for Manufacturing 

at Commerce, and his prior experience working on economic development, in particular focusing on innovation and technology, provide him with an understanding 

of how to strengthen the competitiveness of U.S. industry, which ultimately should 

support American manufacturing and jobs. That’s good for the economy and for 

workers. 

Ms. Bowman was renominated to be a Member of the Board of Governors of the 

Federal Reserve System for a full 14-year term, expiring in 2034. 

As a former State bank commissioner, Ms. Bowman serves in the role designated 

for a Fed Governor with community bank experience. 
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At her first nomination hearing, I was concerned that Ms. Bowman would be a 

rubber stamp for Wall Street. I was right to be concerned. 

Ms. Bowman, I know you possess a deep understanding of community banks and 

are being nominated for a full 14-year term based, in part, on that understanding. 

But, time and again, you have taken the side of the big banks as the Fed has 

done favors for Wall Street by relaxing capital standards and weakening stress tests 

and other postcrisis safeguards meant to protect taxpayers and the financial system. 

If you are confirmed to a full term, I expect that you will do all you can to ensure 

that the regulatory system works for community banks and protects their customers. 

Mr. Shmotolokha is the nominee to be First Vice President of the Export–Import 

Bank. 

For nearly 4 years, I have pushed for the EXIM to be fully reopened, and with 

the confirmation of three board members last month, the Bank is finally running 

at full capacity. To stay competitive as they pursue business abroad American manufacturers need a reliable Export–Import Bank that is authorized for the long term. 

Mr. Shmotolokha is the final nominee to the Bank’s board to appear before our 

Committee. The full Senate needs to consider his nomination and the nomination 

of Claudia Slacik, who our Committee reported with overwhelming bipartisan support, so they can provide their expertise as the Bank resumes full operations. 

If confirmed, he would bring significant private sector experience in the export of 

U.S. products to the global telecommunications industry. When the EXIM Bank was 

fully functioning, it supported more than 164,000 jobs a year. I look forward to hearing how we can expand on the number of U.S. jobs supported by the Bank. 

Ms. Lee has been nominated to be a Commissioner of the Securities and Exchange 

Commission. If confirmed, Ms. Lee would return to the SEC at a critical time. The 

agency is considering several issues that will define the rights and protections for 

both individual and institutional investors. 

I expect Ms. Lee to draw on her SEC enforcement experience when considering 

rules that could affect investors’ rights and remedies against wrongdoers and when 

weighing penalties in misconduct cases. 

The SEC needs to promote integrity and fairness in the capital markets so that 

investors can trust the markets and have faith in the regulator. 

I look forward hearing from all of you. 

Thank you, Chairman Crapo. 

PREPARED STATEMENT OF THOMAS PETER FEDDO 

TO BE ASSISTANT SECRETARY, TREASURY FOR INVESTMENT SECURITY

JUNE 5, 2019 

Chairman Crapo, Ranking Member Brown, and distinguished Members of the 

Committee, I am honored to appear before you today. I am humbled to be nominated by the President to serve as Assistant Secretary of the Treasury for Investment Security, a new position created by the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). 

Last August, FIRRMA was enacted with overwhelming, bipartisan support from 

this Committee, both houses of Congress, and the Administration. In creating this 

position—specifically through an amendment by Chairman Crapo—the statute recognizes the need for dedicated, accountable leadership of the critical national security function executed by the Committee on Foreign Investment in the United States 

(CFIUS). I am confident that my professional background affords me the experience 

and knowledge to lead CFIUS, and to effectively and faithfully implement FIRRMA 

over the coming months. 

I grew up with two younger sisters, and attended public school near Buffalo, New 

York. We had a full-time mom, and a dad who served in the Marine Corps and then 

worked for the local electric company for nearly 25 years. My dad worked long hours 

to make sure that our family had all that we needed, and a little more than he had 

as a child. He suddenly passed away just months after seeing me graduate college, 

but I know that he would be pleased were he here today. My mom dedicated herself 

to building a warm and loving home for us. I am deeply grateful to my parents for 

laying the foundation that has brought me to this point—by example, they instilled 

the virtues in my sisters and me, and we came to know the value of hard work, 

loyalty, and family. 

I would not be here today without my extraordinary wife Muffet. She has been 

an unwavering source of support and encouragement, while selflessly devoting her 

many talents to raising our three wonderful children. 
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Early in high school, I decided that I would serve our Nation in the military, and 

sought to attend the Naval Academy. Since taking the oath of office at Annapolis 

33 years ago, it has been my privilege to spend literally half of my life in public 

service—including first as a lieutenant on a nuclear submarine, and then with the 

Naval Criminal Investigative Service. After law school, I served as a counsel for the 

House Energy and Commerce Committee, before stints as an attorney at the Pentagon, and a civil servant at the Treasury Department. I have served in all three 

branches of the Federal Government—with nearly 20 years in a national security 

related capacity. In the private sector, I practiced law as a patent and trademark 

litigator, and most recently as a partner in a large firm’s international trade group. 

By virtue of these professional experiences, I understand the importance of protecting American innovators’ intellectual property—our Nation’s vital economic engine. And as a Navy submariner, educated and trained as an engineer, I experienced firsthand how America’s superior technology ensures our warfighting edge. 

As an attorney representing global businesses large and small, I have gained a 

true appreciation for the importance of foreign investment to our strong and vibrant 

economy, as well as the benefits of regulatory certainty to business transactions. 

If I am confirmed, you have my unqualified commitment that I will work closely 

with this Committee, and Congress as a whole, to continue what I have been doing 

as Deputy Assistant Secretary over the past year: faithfully and transparently implementing FIRRMA; ensuring our national security is protected while foreign investment is fostered; and serving with humility, and a deep and abiding respect for 

our dedicated and talented career professionals at Treasury and across the Government who diligently execute the CFIUS mission. 

Thank you again for the privilege and opportunity to appear before you today. I 

am happy to answer any questions that you may have. 
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PREPARED STATEMENT OF NAZAK NIKAKHTAR 

TO BE UNDER SECRETARY, COMMERCE FOR INDUSTRY AND SECURITY

JUNE 5, 2019 

Mr. Chairman, Ranking Member Brown, and Members of the Committee, thank 

you for the opportunity to appear before you today. In 2018, I was honored to be 

confirmed as the Assistant Secretary for Industry and Analysis at the Department 

of Commerce, and today I am extremely honored to be nominated for the position 

of Under Secretary for Industry and Security. 

With me today are my husband Gene Degnan and my mother Manijeh Nikakhtar. 

My father Bijan Nikakhtar passed away several months ago, but he would have 

been beaming with pride if he were here today, as an amateur political historian 

and one of the greatest American patriots I have ever known. I am proud to say 

that my parents and my husband have served our Government as Federal employees for many years. My husband served for over a decade at the Department of 

Commerce, and my parents served for over 40 years collectively as physicians at the 

VA hospital taking care of our Nation’s veterans. My brother, Nersi Nikakhtar, also 

a physician at the VA hospital, had work obligations today. I am proud to be part 

of a family that honors Government service. 

I immigrated to America with my family 39 years ago. I can remember from a 

very young age how proud I was to be an American and how I marveled at American innovation and ingenuity. I knew at an early age that I wanted to be part of 

the narrative of American growth. 

This is what prompted me to study law and economics after college. I obtained 

my Juris Doctor and Master’s in Economics from Syracuse University and, in 2002, 

I began my career at the Department of Commerce, first at the Bureau of Industry 

and Security and subsequently at the International Trade Administration. At the 

Department, I worked with, and learned from, the incredibly smart and talented 

civil servants. Many of those dedicated professionals are still there today, and they 

are the pillars that shape our Government from Administration to Administration. 

I have great respect for them and am privileged to work with them again. 

I joined the private sector several years later as a trade and export control lawyer, 

representing industries in the aerospace and steel sectors, in aquaculture, high-tech 

goods, chemicals, and minerals. In private practice, worked to level the playing field 

for U.S. industries and, on exports, I conducted internal investigations to enforce 

compliance agreements that clients with the U.S. Government to address the Government’s national security concerns. 

My training and experience as both a lawyer and an economist have given me the 

expertise to determine how to protect U.S. national security and simultaneously advance the economic interests of U.S. industries. 

Today, national security no longer begins and ends with military strength. It is 

a fact in today’s world that our national security is dependent on our economic 

strength and technological leadership. 

Yet, advancements in technology and the interconnectedness of our economies 

make our national security challenges more complex than ever before. Economic integration has emboldened some foreign Nations to behave in ways that undermine 

our national security, expecting that threats of economic retaliation will weaken our 

resolve to act. They have increased illicit procurement of items to build weapons of 

mass destruction and transshipped those items to terrorist organizations and regimes. We are witnessing illegal acquisitions of sensitive technologies to weaponize 

dual-use items and oppress millions of innocent citizens. And we’ve seen for years 

how rampant intellectual property theft displaces U.S. industries, stifles innovation, 

and enables the advancement of strategic competitors. 

The key to our success is maintaining U.S. technological superiority and economic 

interests through multilateral coordination that is more forward leaning, better use 

of intelligence data and analytics, robust enforcement of our laws, and a tightly coordinated whole-of-Government approach, that includes more proactive engagement 

with Congress. 

Time is of the essence, and during my 31⁄2 months at the Bureau of Industry and 

Security, I have been leading the Department’s efforts to update our regulations to 

incorporate ECRA reforms and address global threats. We are engaging with industry to identify emerging technologies that can undermine our national security. In 

addition, I have begun an initiative to work with like-minded allies on better export 

control coordination and wider end-use checks. It is imperative that we better coordinate multilateral policies on sensitive technology so U.S. companies can compete 

globally while Governments prevent those technologies from being misused by adversaries. 
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At the Bureau, I challenge my colleagues every day to rethink how we can modernize our policies to stay ahead of new threats. And I have made it a priority to 

seek industry input, as today’s complex challenges cannot be solved without close 

engagement with U.S. businesses; our policies must maintain and advance America’s technological and economic leadership. 

My parents immigrated to America knowing that this is the greatest country in 

the world. As an American, it is my responsibility and honor to preserve this Nation’s security for future generations. I thank you again for the opportunity to be 

here in front of this Committee. I look forward to your questions. 
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PREPARED STATEMENT OF IAN PAUL STEFF 

TO BE ASSISTANT SECRETARY OF COMMERCE AND DIRECTOR GENERAL, UNITED

STATES AND FOREIGN COMMERCIAL SERVICE

JUNE 5, 2019 

Good morning, Chairman Crapo and Ranking Member Brown, Members of the 

Committee. It is the greatest of honors to sit before you today. If confirmed, it would 

be my privilege to serve as the Assistant Secretary of Commerce for Global Markets 

and Director General of the United States and Foreign Commercial Service. I thank 

President Trump for this nomination. So too, I am grateful for the continued support of Vice President Pence, both in my former capacities in my home State of Indiana, and now in Washington, DC. 

Speaking of Hoosiers, I am proud to be joined by my wife, Brittany. I remain forever grateful for your incredible encouragement, compassion, and flexibility as we 

serve the Nation we love and raise our two little stars, Daniel and Owen. I am also 

joined by my parents, Wayne and Lisa. Our childhood home was filled with love, 

faith, respect, hard work, and an enduring sense of service to one’s country. Thank 

you, Mom, Dad, Gram, Aunt Lori, Aaron, and to all those family members, friends, 

and teachers who helped me along the way. 

My story started under a few feet of snow, thirty miles south of Buffalo, New 

York, on my grandparents’ dairy farm. My two younger brothers, Eric and Levi 

often reflect on the comradery we developed shoveling that never-ending lake-effect 

byproduct, raising our pet ducks, and commiserating over our beloved Buffalo Bills. 

Childhood summers encompassed exploring the pastures and woods, working on our 

neighbor’s berry and plant farm, and waiting for the rumble of Dad’s cycle as he 

returned home from his job in highway maintenance. This is a glimpse of our small 

slice of country and my upbringing in rural America. 

Rural? Yes. Encouraged to dream big? Every step of the way. And dream we did. 

I devoted nearly every penny earned on the farm to my stamp and coin collection. 

Years later, as I arrived at American University to begin my academic career in 

international affairs, I knew unequivocally that my future involved fostering relations with the foreign markets and the people personified in the postage and currency I accumulated. That dream and future continue to be realized. 

If confirmed, I would be incredibly honored to lead a world-class team of professionals that provide export counseling to small- and medium-sized businesses, while 

identifying new foreign markets for their products and services; advocate on behalf 

of U.S. companies competing for foreign Government procurements; attract foreign 

direct investment, while working to grow the U.S. manufacturing base; and reduce, 

remove, and prevent foreign trade barriers that impede market access for U.S. goods 

in a free, fair, and reciprocal fashion. 

As the Deputy Assistant Secretary of Commerce for Manufacturing since June of 

2017, I’ve seen the impact the Global Markets team has on U.S. manufacturers and 

service providers. This vast network of more than 1,300 trade and investment specialists in headquarters and the U.S. Field, combined with the presence of the Foreign Commercial Service in over 70 foreign markets, deliver daily. 

Simply put, I have come to know the Global Markets team as: ‘‘A Team that 

Works, a Team that Chooses to Compete, and a Team that Delivers.’’ These professionals deliver ‘‘one deal at a time’’ and have a tremendous impact measured at over 

$120 billion in FY2018 in the areas outlined above. 

In my former professional capacities, I accrued experience in economic development, executive leadership, and trade policy. In my past economic development 

roles, I worked successfully to attract foreign direct investment. SelectUSA, which 

would be under my purview if confirmed, is a valued economic development partner 

to States. 

Likewise, during my time in the semiconductor industry, I witnessed the contributions of the Commerce Department to ensure foreign market access. I regularly engaged with the Commerce team while managing the leading chip industry association’s international engagements and technology programs for a decade. I have seen 

the challenges posed by unfair foreign trade measures and massive market distorting practices that crippled companies looking to compete internationally. 

Earlier in my professional career, I worked on the Trade Subcommittee staff of 

the House Ways and Means Committee. I have a profound appreciation for the vital 

role of Congress when it comes to ensuring the global competitiveness of U.S. industry. 

While my stamp and coin collections are now the responsibility of my two young 

Hoosiers, I have no doubt that they and our country have a limitless and prosperous 

future based on the unparalleled accomplishments of the Global Markets team at 
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Commerce. I aspire to help this team continue to achieve its mission. If confirmed, 

I will devote every working moment to its success on behalf of our Nation’s exporters. Distinguished Members of the Committee, thank you for your consideration. 
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PREPARED STATEMENT OF MICHELLE BOWMAN 

TO BE A MEMBER, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

JUNE 5, 2019 

Chairman Crapo, Ranking Member Brown, and Members of the Committee, it has 

been just over a year since this Committee first recommended my nomination as a 

Federal Reserve Board Governor. While I am not the first community banker to 

serve on the Board, I am humbled by the opportunity you gave me to serve as the 

first Governor to fill the role the Congress designated for someone with community 

banking experience on the Federal Reserve Board. I am deeply honored the President has renominated me to serve in that capacity. 

I am also grateful to my family for their continued support. My husband, Wes, 

and our children, Jack and Audrey, are here with me today. The rest of my family 

are watching from home in Kansas. 

Since my confirmation last year, I have worked to fulfill my unique role on the 

Board by traveling widely and listening closely to community bankers, consumers, 

small business owners, and community leaders. I have visited with farmers, workers, and business leaders from across the country to discuss the economy. I am making sure these unique perspectives are represented in the Federal Reserve’s deliberations and decision making on both monetary policy and regulatory matters. 

During my time at the Board, I have also drawn on my experience as a community banker and regulator to ensure that our work is guided by a deep understanding of the practical realities confronting bankers and the communities they 

serve across the country. The work done after the crisis to address the weaknesses 

in the U.S. financial system and ensure its future resilience was essential. However, 

during my time at my family’s community bank, I saw firsthand how the regulatory 

changes created in the aftermath of the crisis impacted community financial institutions. Small, solid institutions like this one are essential to so many of our citizens 

and communities. As regulators, we need to ensure that we are not imposing unnecessary burdens on community banks. That is why one of my priorities as a Governor 

has been to appropriately tailor our supervision and regulation to the size, complexity, capacity, and risks posed by an institution. 

To further this effort, I recently formed a working group of experts from across 

the Federal Reserve System to launch a comprehensive review of our supervisory 

work with smaller regional and community banks. While serving as the Kansas 

State Bank Commissioner, I was committed to treating every consumer and institution fairly and respectfully and fostering open communication. This working group 

will follow those same principles. We are looking for ways to optimize our supervision and regulation to ensure it adapts to the on-the-ground realities of an evolving industry and changing consumer expectations while maintaining the safety and 

soundness of our banking system. 

Let me close by saying a few words about monetary policy and the Federal Reserve’s dual mandate. As a community banker, it was my job to support local businesses and consumers. I draw upon this experience often when thinking about monetary policy, because it has given me a personal and practical understanding of how 

the Federal Reserve’s goals of fostering maximum employment and stable prices directly affects individuals as well as the broader financial system and economy. The 

Congress has given the Federal Reserve independence to pursue these goals, because our work is critical to our economy, to businesses, to families, and to communities. I am deeply committed to fulfilling this mandate. 

If confirmed by the Senate, I will continue the important work I have begun and 

be committed to accountability, transparency, and clear communication in all of my 

responsibilities at the Federal Reserve. Thank you for the honor of this hearing, and 

I look forward to answering the Committee’s questions. 
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PREPARED STATEMENT OF PAUL SHMOTOLOKHA 

TO BE FIRST VICE PRESIDENT, EXPORT–IMPORT BANK OF THE UNITED STATES

JUNE 5, 2019 

Chairman Crapo, Ranking Member Brown, and distinguished Members of the 

Committee, thank you for considering my nomination to serve as First Vice President of the Export–Import Bank of the United Sates. I am deeply thankful to President Trump for selecting me and humbled by the obligations that this role brings 

to American workers and taxpayers. 

I would like to introduce some family members who are with me today. First, my 

parents Stephen and Christine who made the trip from California. They came to 

America as child refugees of World War II and I am always inspired by their contributions to our country. My father worked as an engineer in the defense industry 

for more than 40 years and my mother served tirelessly as a nurse. I am also joined 

by my wife, and best friend, Dania, who guided the family through multiple international moves and extensive overseas travels and Max, my son, who is entering 

his senior year in college. My brother Adrian and many of my friends, family and 

coworkers from around the world are also watching online. 

I sit before you as someone who has spent the past 16 years on the front lines 

of global trade with a strong record in growing American exports. I also bear the 

battle scars of leadership in a time of unparalleled competition in global markets. 

It is not simple for any manufacturer to export. They must overcome political 

risks, economic hazards, import regulations and diverse marketing environments. It 

takes diplomacy and mutual respect to forge international customer relationships 

that help guide a business or an institution through the process of closing a successful deal. Sometimes it also takes extra financial support, especially when there are 

over 100 export credit agencies that are upping the ante and creating new incentives for the end customer. In my travels, I have seen firsthand how critical it is 

to support the current needs of the market and for EXIM to be able to finance deals 

in a timely and relevant fashion when the private sector cannot. My demonstrated 

commitment to this mission and my international experience on both the buying 

and the selling side of international trade over the last 30 years will allow me to 

contribute strongly to the team at EXIM. 

EXIM’s mission is to help support and create jobs. I have experienced firsthand 

the thrill of walking assembly lines in Georgia and in Washington State and meeting the newest workers putting together products for export, thanks to deals that 

my team closed. These are some of my best experiences. My legacy and value as 

a business person comes from the people that I mentor and the jobs that I help create. By working with the President of the Bank, my fellow board members and the 

talented staff at EXIM, I believe I can best serve America to multiply the job creation effects of EXIM. Having served on numerous private sector boards in various 

capacities, I understand board responsibilities of proper corporate governance, the 

need for transparency and how good strategic guidance and a positive leadership attitude can enable organizations to realize their full productive potential. I believe 

that every organization can do better and that constant advancements to American 

competitiveness should match changes in global market demand. 

The EXIM board needs to make sure it doesn’t lose sight of its role as an important source of support for small businesses. Many of its financial products in this 

area resonate with those looking to expand to new markets. As an entrepreneur, 

I have worked in small companies and faced the pressure of making payroll. Speed 

to market and effective financing can make or break opportunities for these companies. I built a significant export business in a medium-sized U.S. manufacturer that, 

while a very successful domestic business, had yet to find its legs overseas. All companies—small, medium, and large—all need help at times in leveling the playing 

field in today’s global economy. 

If confirmed, I will bring a fresh perspective and a fiercely competitive mindset 

to the Bank. My experience as an officer in the U.S. Army taught me to lead from 

the front and I will work tirelessly to support the ‘‘Made in America’’ brand that 

we all share and support. I will ensure that American companies have full access 

to and understanding of the programs authorized by Congress to maximize their 

global reach and competitiveness. To this end, I would paraphrase Vince Lombardi: 

‘‘Winning isn’t everything, it is the only thing’’ for American business and the American worker and I pledge to bring a ‘‘can do’’ winning attitude and to win responsibly for the American taxpayer. 

Thank you for your consideration. I would be pleased to answer any questions. 
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PREPARED STATEMENT OF ALLISON HERREN LEE 

TO BE A MEMBER, SECURITIES AND EXCHANGE COMMISSION

JUNE 5, 2019 

Chairman Crapo, Ranking Member Brown, and distinguished Members of the 

Committee. It is a tremendous privilege to appear before you today and to be considered for the position of Commissioner at the Securities and Exchange Commission, 

an agency in whose mission and dedicated staff I believe deeply. 

I’m very fortunate today to be supported by a large contingent of family. I’d like 

to introduce my husband Jay Brown, four of the five children in our blended family, 

Tess, Beth, Josh, and Zoey. Also, our granddaughter, Emerson, is here, and our sonin-law, Colin, my sister Laurie, my brother Wil, my niece Emily, and my brotherin-law, Jeff. Unfortunately, my mother could not be here today, but I know she will 

be watching. 

I have spent the bulk of my legal career at the SEC for one very straightforward 

reason: the SEC has a mission that is vital to the economic well-being of Americans 

and American businesses. It navigates the critical intersection between these two; 

between everyday Americans striving to build savings to buy a home, to send kids 

to college and eventually retire, and American businesses that need capital to grow 

and prosper. This reciprocal relationship must be nourished from both sides. 

We are a Nation of investors, both retail and institutional, protected by the SEC. 

This protection is especially important as we continue the shift away from employer 

pensions toward individual plans in which people must fund and select their own 

retirement assets and manage their own risk. 

The SEC works to ensure that investors are taking the kinds of risk they sign 

up for—business and economic risk—not the risk of fraud, and not the risk of poorly 

structured or opaque markets that may disadvantage investors. This instills confidence which, in turn, fosters capital formation. 

Beyond instilling investor confidence, the SEC works to ensure that American 

businesses of all sizes can access the capital they need to grow their businesses, and 

thus create the kinds of opportunities investors want and need. These businesses 

deserve thoroughly researched, well-tailored, and clear rules. 

I have seen, experienced, and understood this interdependence between investors 

and business from nearly every angle. I worked in the oil business, at both private 

and public companies. I’ve owned and run my own small business. Since law school, 

I’ve worked for over two decades as a securities lawyer, first in private practice as 

a litigator and partner, and then I was privileged to work on the staff of the SEC. 

Like many Americans, I’ve worn a lot of hats and juggled a lot of priorities, working my way through college and eventually through law school, raising children, 

paying the bills, and investing my savings for retirement. If I have the honor of 

being confirmed, I will bring all of these perspectives to bear in my role as a Commissioner, and I will reach out and listen to all constituencies served by the SEC 

to further its critical mission. 

Thank you for the opportunity to appear before you today, and I’m happy to answer questions. 
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN 

FROM THOMAS PETER FEDDO 

Q.1. One of the many reasons it was important to increase resources and staff at CFIUS with the FIRRMA reforms was to be 

able to better monitor information about completed mergers, acquisitions, or other investments where the parties to the transaction 

did not file with CFIUS. 

Has CFIUS been able to increase resources to this type of monitoring, and has it identified any non-notified transactions that need 

to be reviewed? How many transactions has CFIUS pulled into the 

process this way, and is this an increase over past efforts? Are you 

seeing any trends when it comes to companies that do not file with 

CFIUS but should? 

A.1. Since the enactment of FIRRMA, Treasury’s Office of Investment Security has established a new Office of Mitigation and Enforcement whose mandate includes full-time monitoring for non-notified and nondeclared transactions that could impact national security. This team has dedicated resources to accomplish its mission 

and is working with CFIUS member agencies to refine the processes for identifying potentially covered transactions that may pose 

national security concerns. As Treasury and CFIUS dedicate further resources to this mission, the number of non-notified and nondeclared transactions screened by CFIUS will likely rise; it is anticipated that the dedicated and increased screening will consequently result in additional transactions being pulled in for review. 

In some cases when CFIUS contacts parties to transactions identified through the non-notified process, the parties indicate that 

they are planning to file. Because CFIUS filings are largely voluntary, it can be difficult to determine which cases were ultimately 

filed as a result of CFIUS initiating engagement and which would 

have been filed even without CFIUS contact. It is too early to discern any post-FIRRMA trends with respect to non-notified transactions. Anecdotal evidence suggests that FIRRMA has served to 

elevate the public’s awareness both of CFIUS and emerging national security risks related to foreign direct investment. As a result, more companies may be filing transactions without contact 

from CFIUS, either as a declaration or a full notice, thereby allowing the non-notified screening to focus on transactions that in fact 

may be trying to evade CFIUS. The Office of Mitigation and Enforcement will help to ensure that CFIUS identifies and responds 

to any trends in parties attempting to evade CFIUS review. 

Q.2. The Government shutdown impacted CFIUS’s ability to implement important reforms. The shutdown stopped and/or slowed 

down work on rulewriting, hiring, and implementation of the pilot 

program to review foreign investments in critical technologies. 

What is your assessment of where CFIUS is on implementation 

of FIRRMA, including the pilot program? Are you seeing any other 

investment trends emerge, particularly from countries like China 

that the 2018 reforms do not address? 

A.2. Treasury’s Office of Investment Security is fully engaged with 

other CFIUS agencies in the rulemaking process necessary to implement FIRRMA. CFIUS has made substantial progress on the 
92 

implementation of FIRRMA. In October 2018, CFIUS promulgated 

regulations to implement, and make updates consistent with, certain provisions of FIRRMA that were immediately effective. In November 2018, CFIUS through regulations commenced a tailored 

pilot program related to noncontrolling, nonpassive foreign investments in certain U.S. businesses with critical technologies, and simultaneously initiated the use of FIRRMA’s declaration process, including the issuance of a standardized 5-page ‘‘short form’’ for the 

more efficient electronic submission of the declarations. PostFIRRMA, Treasury reorganized the Office of Investment Security 

into functional offices to execute the various mandates of the statute, including with respect to policy making and regulations writing, increased engagement with allies and partners, and enhanced 

mitigation and enforcement efforts. Since August 2018, CFIUS has 

timely submitted reports required by FIRRMA and conducted related briefings with Committee staff. Treasury is utilizing additional resources appropriated in FY2019, as well as FIRRMA’s special hiring authority, to ensure that the Office of Investment Security is appropriately staffed to carry out new CFIUS authorities; 

this includes nearly tripling the Office’s personnel to date, and 

commencing development of an end-to-end information technology 

infrastructure to support additional caseloads and related work 

streams. CFIUS member agencies are making similar resource upgrades and improvements to support the CFIUS mission. 

CFIUS anticipates publishing draft regulations for public comment in the coming months. The Office of Investment Security has 

engaged extensively with industry stakeholders throughout the implementation process, and this timeline will allow ample opportunity for public comment before these regulations become effective 

by February 2020. 

The pilot program, a tool provided by FIRRMA, was promptly implemented to confront CFIUS’s inability to review certain noncontrolling investments in critical technologies, given the rapid 

changes in those technologies. Since November 2018, the pilot program has allowed CFIUS to review transactions that it would not 

otherwise have had the opportunity to evaluate, as well as to more 

fully understand the nature of foreign direct investment as it relates to these critical technologies. Some pilot program transactions 

have in fact raised potential national security concerns that warranted the parties filing a full written notice. CFIUS has also been 

able to clear a number of transactions based upon the information 

provided in the declarations. The critical technology pilot program 

continues to inform the full implementation of FIRRMA as regulations are being drafted. 

CFIUS will be able to assess FIRRMA’s impact more fully including any resulting investment trends—after the legislation is fully 

implemented. One of the legislation’s greatest strengths is that it 

provides important flexibility to address new risks to U.S. national 

security as they emerge. 

Q.3. One of the few ways that Congress is able to understand and 

oversee foreign direct investment in the U.S., and the national security threats posed by certain investments is the CFIUS annual 

report. It is also why FIRRMA added new requirements in the annual report going forward. The Department of Treasury has not 
93 

submitted the CFIUS annual report to Congress since 2016 (covering transactions in 2015). 

Why have the annual reports been delayed, and if confirmed, 

what is your plan to ensure that annual reports are submitted to 

Congress in a timely manner going forward? What is your plan for 

submission of annual reports for years 2016, 2017, and 2018? 

A.3. I agree that timely submission of CFIUS’s annual report to 

Congress is important to its ability to understand and oversee 

CFIUS’s execution of its national security mission. I am fully committed to ensuring that annual reports are timely submitted to 

Congress going forward. Having joined the Office of Investment Security in mid-2018, it is my understanding that in the past case 

volume and complexity strained the limited resources of CFIUS 

member agencies, including Treasury. Shortly thereafter, I identified the need to remedy the delay in reporting, and directed my 

staff to dedicate resources to complete the 2016 and 2017 annual 

reports as soon as possible. Treasury anticipates submitting to 

Congress these reports as a combined document by the end of July 

2019. CFIUS anticipates submitting the 2018 annual report thereafter. The additional resources provided to implement FIRRMA will 

help to address this issue in the future. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY 

FROM THOMAS PETER FEDDO 

Q.1. During consideration of FIRRMA, Congress heard concerns 

that extended timelines for CFIUS procedures could change the economics of deals with U.S. companies, reduce their competitiveness, and shift investment overseas, undermining the pace of innovation in this country and possibly contributing to the speed of acquisition of sensitive technologies by our foreign adversaries. Regulations pursuant to FINSA and the ongoing pilot program temporarily implementing portions of FIRRMA require that CFIUS respond to notices and declarations ‘‘promptly.’’ 

What do you think is a reasonable amount of time to have 

elapsed before taking initial action on a notice or declaration? 

Would you direct your staff to write a regulation codifying that 

window? 

A.1. Section 1704 of FIRRMA requires that CFIUS provide comments on a draft or formal written notice or accept a formal written notice of a covered transaction no later than 10 business days 

after the date of submission of the draft or formal written notice. 

This requirement applies when parties stipulate that the transaction is a covered transaction. The regulations for FIRRMA will 

implement this requirement. More broadly, with the benefit of additional staff and resources, my goal is to respond to parties in a 

timely, efficient, and responsive manner on all written notices and 

declarations submitted to CFIUS. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR PERDUE 

FROM THOMAS PETER FEDDO 

Q.1. When implementing FIRRMA, Treasury needs to clarify how 

the foreign entity definition will apply to U.S.–controlled private 
94 

funds. I understand that much of the responsibility for implementing FIRRMA falls within your current position at Treasury. 

Do you agree with me that the final regulations should not treat 

a fund as a ‘‘foreign entity’’ if it is controlled by U.S. persons, even 

if a majority of the equity ownership is held by passive limited 

partners? Investments from such entities will not create a national 

security risk because of the nature of limited partners and structure of their passive investments. 

A.1. I agree that a fund that is organized and headquartered in the 

United States and is not controlled by a foreign person (as that 

term is defined in 31 CFR §800.216) should not be treated as a foreign person. 

With respect to CFIUS’s new jurisdiction over certain nonpassive, noncontrolling investments, FIRRMA includes a clarification 

for investment funds that addresses the practice of foreign limited 

partners serving as members of a fund’s advisory board or committee. FIRRMA clarifies that such membership does not, in and 

of itself, cause an investment by the fund to be subject to CFIUS 

jurisdiction. 

FIRRMA also carves out transactions involving investment funds 

that meet certain specified criteria from being subject to a mandatory declaration requirement. CFIUS is working to implement 

these provisions as part of the rulemaking to fully implement 

FIRRMA, and as part of this process, we are considering whether 

additional clarification would be appropriate. 

Q.2. Will you commit to meeting with me, my staff and industry 

representatives on this important issue and to follow up as necessary so we can get this issue addressed correctly to ensure that 

funds controlled by U.S. persons will not be considered ‘‘foreign entities’’ under the regulations? 

A.2. Since FIRRMA’s enactment, my staff and I have met and will 

continue to meet with various industry stakeholders regarding this 

issue, among others. I also look forward to the opportunity to meet 

with you and your staff. When Treasury issues the proposed regulations implementing FIRRMA in the coming months, the public 

will have the opportunity to provide formal comments for CFIUS’s 

consideration. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS 

FROM THOMAS PETER FEDDO 

Q.1. When implementing FIRRMA, Treasury needs to clarify how 

the foreign entity definition will apply to U.S.–controlled private 

funds. 

Do you agree that the final regulations should not treat a fund 

as a ‘‘foreign entity’’ if it is controlled by U.S. persons, even if a majority of the equity ownership is held by passive limited partners? 

Investments from such entities will not create a national security 

risk because of the nature of limited partners and structure of their 

passive investments. 

A.1. I agree that a fund that is organized and headquartered in the 

United States and is not controlled by a foreign person (as that 
95 

term is defined in 31 CFR §800.216) should not be treated as a foreign person. 

With respect to CFIUS’s new jurisdiction over certain nonpassive, noncontrolling investments, FIRRMA includes a clarification 

for investment funds that addresses the practice of foreign limited 

partners serving as members of a fund’s advisory board or committee. FIRRMA clarifies that such membership does not, in and 

of itself, cause an investment by the fund to be subject to CFIUS 

jurisdiction. 

FIRRMA also carves out transactions involving investment funds 

that meet certain specified criteria from being subject to a mandatory declaration requirement. CFIUS is working to implement 

these provisions as part of the rulemaking to fully implement 

FIRRMA, and as part of this process, we are considering whether 

additional clarification would be appropriate. 

Q.2. Will you commit to working with stakeholders and to follow 

up as necessary so that funds controlled by U.S. persons will not 

be considered ‘‘foreign entities’’ under the regulations? 

A.2. Since FIRRMA’s enactment, my staff and I have met and will 

continue to meet with various industry stakeholders regarding this 

issue, among others. I also look forward to the opportunity to meet 

with you and your staff. When Treasury issues the proposed regulations implementing FIRRMA in the coming months, the public 

will have the opportunity to provide formal comments for CFIUS’s 

consideration. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER 

FROM THOMAS PETER FEDDO 

Q.1. As Vice Chairman of the Senate Intelligence Committee, I see 

how our competitors are accessing critical U.S. technologies 

through legal and illegal means, stealing our intellectual property, 

and dulling America’s competitive advantage. This sustained, comprehensive, multiyear effort shows no sign of slowing, but is rather 

accelerating: we are seeing a ‘‘whole of society’’ effort on the part 

of some adversaries—cyberattacks to steal intellectual property 

that then mysteriously is fielded by our competitors, attempts to 

acquire critical technology companies, or, more recently, strategic 

investments that could be used to acquire technology. That is the 

threat we face. 

We are now 6-months into FIRRMA’s pilot program. What are 

your thoughts on the efficacy of the pilot program? 

A.1. The pilot program has benefited U.S. national security. Since 

November 2018, the pilot program has allowed CFIUS to review 

transactions that it would not otherwise have had the opportunity 

to evaluate, as well as to more fully understand the nature of foreign direct investment as it relates to the critical technologies falling within its scope. Some pilot program transactions have in fact 

raised potential national security concerns that warranted the parties filing a full written notice. CFIUS has also been able to clear 

a number of transactions based upon the information provided in 

the declarations. The critical technology pilot program continues to 
96 

inform the full implementation of FIRRMA as regulations are being 

drafted. 

CFIUS will be able to assess FIRRMA’s impact more fully including any resulting investment trends—after the legislation is fully 

implemented. One of the legislation’s greatest strengths is that it 

provides important flexibility to address new risks to U.S. national 

security as they emerge. 

Q.2. What is working and what challenges/gaps have come up? 

A.2. The critical technology pilot program has benefited U.S. national security. Since November 2018, the pilot program has allowed CFIUS to review transactions that it would not otherwise 

have had the opportunity to evaluate, as well as to more fully understand the nature of foreign direct investment as it relates to the 

critical technologies falling within its scope. The pilot program will 

terminate upon the full implementation of FIRRMA, but I anticipate that it will inform various substantive and administrative adjustments to the final regulations. 

Q.3. FIRRMA contains a requirement, based on an amendment I 

included, that Treasury exempt categories of investors from the expanded CFIUS screening of certain minority investments. As you 

know, the pilot program applies on a global basis and does not exclude categories of investors from the scope of the pilot. Is this authority being used to exempt investments made by investors from 

friendly countries? 

A.3. CFIUS appreciates the flexibility provided by FIRRMA’s 

‘‘country specification’’ authority. CFIUS is currently examining 

how best to use this authority to more effectively address national 

security concerns while maintaining the longstanding U.S. open investment policy. CFIUS developed the pilot program without exempting any country from the mandatory declaration requirement 

to comprehensively understand and examine the nature of foreign 

direct investment as it relates to critical technologies and the specified pilot program industries. CFIUS provided the public with an 

immediate opportunity to comment on the interim rule in the 30 

days prior to the pilot program’s effective date. The critical technology pilot program continues to inform the full implementation 

of FIRRMA as regulations are being drafted, including with respect 

to the country specification authority. 

Q.4. The pilot program identifies 27 ‘‘critical technologies’’ that if 

a U.S. business is involved with, would require a filing with CFIUS 

in the event of a foreign investment. Through the lifetime of the 

pilot program to date, has that list of technologies been sufficient 

in providing the Committee the jurisdiction necessary to protect 

U.S. national security? 

A.4. FIRRMA defined the scope of ‘‘critical technology’’ as it pertains to CFIUS, and provides future flexibility as ‘‘emerging and 

foundational’’ technologies are identified by the Department of 

Commerce. The 27 pilot program industries identified in Annex A 

to the pilot program regulations were carefully developed by the 

U.S. Government to narrowly scope the pilot program to include 

only those industries in which the threat of erosion of technological 

superiority from some foreign direct investment required imme-
97 

diate action. The critical technology pilot program continues to inform the full implementation of FIRRMA as regulations are being 

drafted, including whether adjustments need to be made to the 

scope of declarations for U.S. businesses with critical technology. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN 

FROM NAZAK NIKAKHTAR 

Q.1. Last year, there was bipartisan concern that when it came to 

ZTE the Administration allowed trade, economic and political considerations to drive what should have been exclusively law enforcement and national security decisions. ZTE had clearly repeatedly 

and willfully violated our export control laws, and Commerce enforcement officials in the Government had inflicted major punishments that were then reversed by the President. 

Many in Congress are concerned that we are preparing to see the 

same thing on Huawei, with the Administration making certain 

trade concessions to China in return for not pressing our national 

security concerns, including in developing 5G systems around the 

world. 

What is your view on this question? Do you think these concerns 

are justified? What should Congress be doing to reinforce our concern that law enforcement and national security considerations 

should be treated as separate—and paramount—in these situations? 

A.1. When an action taken by the Bureau of Industry and Security 

(BIS or the Bureau) is based on law enforcement or national security concerns, then that action should only be amended if the enforcement and security concerns which prompted that action are 

addressed by that amendment. In the case of ZTE, the 2018 superseding settlement agreement that replaced the denial order contained three interlocking elements, each in place for a decade and 

all of them enabling the Bureau to protect U.S. national security: 

a suspended denial order; $400 million in escrow (in addition to the 

criminal and administrative penalties paid by the company in 2017 

and the additional $1 billion penalty to the U.S. Treasury in the 

2018 superseding settlement agreement); and a special compliance 

coordinator selected by and accountable to the Department of Commerce. 

The facts and circumstances pertaining to the entity listing of 

Huawei are different from ZTE, and any change to Huawei’s listing 

status will need to ensure that the national security and foreign 

policy concerns that led to the listing are no longer applicable or 

are addressed by the change. As a national security arm of the U.S. 

Government, BIS’s mission—and my priority—is to protect the 

United States’ national security interests at all times. 

Q.2. One of the most significant changes in last year’s export control reforms required the President to establish an interagency 

process to identify emerging and foundational technologies critical 

to U.S. national security—areas like artificial intelligence, advanced computing, certain forms of biotechnology, and the like. 

Commerce then was to establish a licensing policy for those items. 

That is moving forward. 
98 

What do you think the Committee should be looking for in the 

coming months as we assess whether these lists are targeting the 

right technologies, and appropriately balancing critical national security concerns vs. commercial considerations? What has been the 

reaction of industry to the preliminary lists already published? 

A.2. The Bureau is working with interagency partners (including 

the Department of Defense, Department of Energy, Department of 

State, and the intelligence community) to identify emerging and 

foundational technologies that are essential to U.S. national security interests. As part of this work, BIS has also been consulting 

with U.S. industry, research facilities, and universities, and will be 

seeking input from its Emerging Technology Technical Advisory 

Committee (ETTAC) this summer. I also welcome engagement with 

Congress to ensure that the Bureau is targeting the right technologies. 

Additionally and consistent with the requirements of the Export 

Control Reform Act of 2018, as well as the Bureau’s mandate to encourage technological innovation while also protecting U.S. national 

security, the Bureau has been evaluating the impact of export controls on such technologies. Our evaluation includes the identification of any foreign sources of such technologies both in like-minded 

countries and countries of concern, and the effectiveness of various 

types of controls on these technologies. 

The public comments in response to the Advanced Notice of Proposed Rulemaking (ANPRM), which were collected from November 

2018 through January 2019, generally supported the need to address national security threats arising from emerging technologies. 

However, commenters stressed that national security concerns 

should be balanced by the impact that controls may have on innovation, the United States’ competitive position globally, foreign direct investment in the United States, and the United States’ ability 

to achieve multilateral controls. These important factors are informing our analysis. 

On the latter point, I have been actively working on a multilateral initiative with like-minded allies to implement controls on 

emerging technologies in a consistent manner. This is particularly 

important, given that export controls are most effective and better 

able to promote the growth of innovation when applied with the 

same rigor across Nations. 

Finally, BIS will be publishing an ANPRM for foundational technologies in a few weeks. Our analysis of controls on foundational 

technologies will also be informed by the above outlined considerations. 

Q.3. If confirmed, you will be part of the interagency CFIUS review 

process. As you know, CFIUS is able to look at joint ventures when 

there is a U.S. business involved. In the confirmation hearing, Senator Jones asked Mr. Feddo about a Chinese steel company that 

formed a joint venture with an American stainless steel component 

parts company key to U.S. national defense and aerospace sectors. 

If a joint venture results in the Chinese company gaining access 

to sensitive steel manufacturing technology and trade secrets important for U.S. national security, and it potentially disrupts the 

U.S. supply chain, should CFIUS review it? If the same company’s 
99 

request for a Section 232 tariff exclusion was denied, is that information relevant to the CFIUS review? What experience and perspective would you bring to CFIUS on matters similar to this one 

and as well as others considered by the Committee? 

A.3. In my current role performing the nonexclusive duties and 

functions of the Under Secretary for Industry and Security and as 

the current Assistant Secretary for Industry and Analysis, I am 

deeply involved in the Department’s CFIUS work, leading a team 

of industry and policy experts at both BIS and the International 

Trade Administration (ITA) that reviews CFIUS transactions to 

analyze their impact on U.S. national security. As part of the interagency CFIUS team, we work collaboratively with the Department 

of the Treasury (chair) and the Departments of State, Defense, Justice, Energy, and Homeland Security, as well as the Office of the 

United States Trade Representative and the White House Office of 

Science and Technology Policy, to analyze each transaction and understand the potential national security risks involved. 

Further, I have encouraged the BIS and ITA CFIUS teams to review transactions not only through the lens of presently identifiable national security risks but also by accounting for potential 

risks that may result from those transactions. This analytical exercise requires that the Department of Commerce, in partnership 

with other CFIUS agencies, keep abreast of developments in U.S. 

supply chains, monitor influence by foreign adversaries over the development of international standards, and identify predatory patterns of investment that may impede the growth of the domestic 

industrial base and thereby threaten U.S. national security. 

These considerations underscore the important role that CFIUS 

reviews play, and the need to ascertain all relevant information 

about each transaction under review. The transaction described in 

the question raises national security concerns, and I am committed 

to ensuring that the U.S. Government has the tools to, and does, 

effectively respond to all transactions that pose national security 

risks. All relevant information should be considered in a U.S. Government review. 

CFIUS is one of my most important responsibilities at the Department of Commerce, and I am committed to ensuring that we 

continue to be forward-leaning in our analysis. The U.S. Government must continue to encourage an open investment climate in 

the United States, but we must also proactively bring all transactions that undermine our national security interests under 

CFIUS review. My combined experiences at BIS and ITA, as well 

as my experiences as a lawyer and economist, provide me with a 

comprehensive understanding of how to assess foreign investments 

in the United States while protecting national security so that the 

United States can continue to attract capital to support technological advancements and the growth of our industries. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR PERDUE 

FROM NAZAK NIKAKHTAR 

Q.1. USML to CCL Transition—Ms. Nikakhtar, as I’m sure you are 

aware, the previous Administration implemented the transfer of export licensing authority for dual-use items from the U.S. Munition 
100 

List to Commerce Control List to modernize our cold-war era export licensing controls to enhance our national security and to improve the ability of U.S. companies to better compete in an increasingly global marketplace, increasing the amount of U.S. exports 

and creating more American jobs. One of the ECR’s objectives was 

to rationalize the control lists and pursuant to its authority under 

the Arms Export Control Act, transfer export licensing authority 

for commercial or dual-use items to the Commerce Department— 

Bureau of Industry Security (BIS) and its Commerce Control List 

(CCL) from the State Department’s Directorate of Defense Trade 

Controls (DDTC) and its U.S. Munitions List. The prior Administration moved commercial and dual-use products covered in 18 of 

the 21 USML’s categories to the BIS’s CCL. 

However, 3 of the 21 categories—USML categories I, II, and III 

(commercial and sporting firearms and ammunition products)— 

were purposely singled out by the past Administration for transparent political reasons and have not realized the benefits of the 

USML to CCL Initiative. I am very concerned of the impact this 

is having on our small businesses and national security. Each day 

that passes with no action taken on Categories I, II, and III American businesses are at a competitive disadvantage and our national 

security is at risk because the State Department is having to dedicate time on commercial articles rather than on controlling those 

sensitive articles with national security implications. Approximately 25 percent of DDTC’s current export licensing workload 

now involves Category I products like the single shot bolt action .22 

caliber rifle that are used at summer camps. I know that several 

of my colleagues from both sides of the aisle share these same concerns, and 29 Senators and 145 members of the House sent bipartisan letters to Secretary Ross and then-Secretary Tillerson urging 

the completion of the ECR initiative. BIS published the proposed 

rule on May 24, 2018, which was then opened up for public comment. The congressional committees of jurisdiction received formal 

30-day Section 38(f) notification in February of the final rules, and 

it was our understanding that the final rules were expected to be 

published in about mid-March. 

It is now June 5th—more than a year after the proposed rules 

were published and 3 months since Congress received notification. 

When can we expect the final rules to be published to transfer to 

BIS the export licensing responsibility for commercial and sporting 

products currently on the USML categories I, II, and III? I am 

looking for a date certain by which the final rules will appear in 

the Federal Register. 

A.1. The finalization of these rules is dependent on a White Houseled interagency review that is still under way. Because this process 

is not under BIS’s jurisdiction, I am regrettably unable to give you 

a firm date for publication. 

Q.2. If confirmed by the Senate, will you commit to having the 

Commerce Department expeditiously as possible publish the final 

rule to transfer from the State Department to the Commerce Department the export licensing responsibility of dual-use, commercial and sporting firearms and ammunition products currently on 

the USML categories I, II, and III? 
101 

A.2. Yes, as noted above, I will work to quickly bring the final rule 

into effect, once the White House-led interagency review is finalized. 

Q.3. What steps will BIS take to work with members of the firearms and ammunition industry to ensure a smooth transition to 

BIS from DDTC? It is my understanding that the industry’s trade 

association, the National Shooting Sports Foundation, has done 

joint seminars and industry outreach with BIS, to ensure a smooth 

transition. Can you commit that BIS will continue those public–private cooperative efforts that work toward achieve compliance with 

the legal and regulatory requirements under the Export Administration Regulations (EAR)? 

A.3. BIS will work with industry to make the transition from the 

DDTC to BIS seamless and efficient. Once the transition occurs, 

training on these Commerce-controlled items will become part of 

BIS’s regular outreach activities, which includes direct engagement 

with industry through seminars as well as online training. Moreover, like with other industries with items subject to the EAR, BIS 

will support joint training events with private industry upon request and consistent with Federal ethics rules to continue its longstanding practice of public–private cooperation to promote compliance with the EAR. It is one of BIS’s primary responsibilities to ensure that industries comply with our export control laws and regulations. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN 

FROM NAZAK NIKAKHTAR 

Q.1. This Committee shepherded to passage the Export Control Reform Act (ECRA), which enjoyed a strong bipartisan consensus due 

to its careful approach toward pursuing important U.S. national security objectives while preserving U.S. leadership in technological 

innovation. The Commerce Department is now leading implementation of export control reforms for emerging and foundational technologies called for in the legislation. 

If confirmed as Under Secretary, what steps will you take to ensure that any new export controls do not undermine the ability of 

U.S. companies to innovate and compete on at the frontiers of technology? 

A.1. This question touches the core of BIS’s mission, which is to 

counter national security threats while protecting the United 

States’ ability to innovate. Innovation, in turn, results from global 

competition and the accumulation of revenue that is invested to develop next-generation technologies. I have represented many industries in my career and I understand the direct relationship between 

access to global markets and its impact on remaining at the forefront of technological innovation. At the same time, I appreciate 

and fully support the need for controlling exports to prevent adversaries from using U.S. technologies to threaten our national security. This is why BIS regulations must be carefully developed, and 

encourage multilateral support, to protect U.S. national security 

and foreign policy interests without impeding U.S. technological 
102 

leadership. At the intense pace of global competition, U.S. companies cannot afford to take any step backwards. 

This reality underscores the importance of establishing controls 

on emerging and foundational technologies with the support of key 

allies and partners. My approach for a multilateral framework consists of three critical components: (1) the identification of dual-use 

technologies that pose significant national security risks when misused by adversaries, (2) the implementation of controls (e.g., licensing requirements) that are multilateral to the maximum extent 

possible, and (3) fulsome information sharing among allies to minimize potential circumvention and to maximize the enforcement of 

controls. These three components are key to a successful export 

control system, and further advance the creation of an efficient and 

secure trading ecosystem among like-minded allies and partners. 

By establishing a secure ecosystem for trade and research in 

emerging technologies, the United States and its partners will be 

able to continue to make significant strides in technological advancements while impeding our adversaries’ attempts to exploit 

differences in control frameworks among countries to obtain controlled items. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR MENENDEZ FROM NAZAK NIKAKHTAR 

Q.1. If export control of the technical information to produce handguns using 3D printers is transferred from the jurisdiction of the 

Department of State to the Department of Commerce, can the Bureau of Industry and Security prevent the posting of such information on the Internet by U.S. persons without a license from BIS? 

If not, why not? 

A.1. Under BIS’s Export Administration Regulations (EAR) as currently written, information posted on the Internet on a site available to the public is considered ‘‘published’’ and thus not subject to 

the EAR. Since I began my role at BIS, I have discussed this provision and other provisions of the EAR with my colleagues across the 

U.S. Government to determine how to best conform the EAR to the 

Export Control Reform Act of 2018, how to use the export control 

regulations of other U.S. Government agencies to complement the 

EAR, and, importantly, how to modernize our regulations to keep 

pace with emerging national security threats. I welcome your office’s perspective on improvements to our export control authorities 

to ensure that we are keeping pace with all national security risks. 

Q.2. If the Export Administration Regulations prevent that—especially if someone has previously, illegally, posted such information—why won’t BIS seek to change such regulations? 

A.2. As set forth above, I am actively engaged in an effort to modernize our regulations to keep pace with existing and emerging national security threats. I am also mindful of my obligation to ensure that BIS’s regulations are consistent with U.S. law. To this 

end, I would welcome your office’s input on the effectiveness of our 

regulatory authorities. 

Q.3. Should U.S. law be changed in order for BIS to maintain control in all instances? 
103 

A.3. It is my responsibility at BIS to ensure that our regulations 

on export controls are fully compliant with U.S. law, including the 

statutory requirements of the Export Control Reform Act of 2018. 

I am also committed to working through the interagency process to 

provide input to Congress on any amendments it proposes to update U.S. export control laws. 

Q.4. If BIS will not be able to maintain positive export controls 

over such information in all instances, then why does Commerce 

seek to acquire regulatory control over such information if it ultimately cannot control it? Isn’t that effectively the decontrol of such 

3D gun printing information? 

A.4. In May 2018, an announcement was made to transfer firearms 

under the International Traffic in Arms Regulations’ U.S. Munitions List (USML)—Categories I–III including 3D gun printing 

technology—to the Commerce Control List (CCL). That transfer is 

ongoing and, once the transfer occurs, BIS will not be seeking to 

decontrol the technology. Pursuant to the current regulatory framework under the EAR, BIS will control and license technology for 

the development, production, operation, installation, maintenance, 

repair, overhaul, or refurbishing of firearms that are moved from 

the USML to the CCL. In addition, EAR license requirements will 

apply to the export of firearms themselves. 

Q.5. The Export Control Reform Act states that the Secretary of 

Commerce shall control emergent technology for national security 

purposes, and in a public notice for comment last year in the Federal Register, identified 3D printing or ‘‘additive manufacturing’’ as 

an example of an emergent technology. So, shouldn’t the use of 

such an emergent technology to produce lethal weapons be controlled in all instances? If not, why not? 

A.5. 3D printing and ‘‘additive manufacturing’’ are activities currently being reviewed closely as part of the process of identifying 

emerging technologies that may warrant control as required by the 

Export Control Reform Act of 2018. This review is ongoing, and 

BIS notes that discussions are presently underway with partner 

countries on where multilateral controls are warranted. As noted 

above in the response to Question 4, BIS, under current regulations, would regulate ‘‘technology’’ for the ‘‘production’’ of firearms, 

as well as the other elements of ‘‘technology’’ that are subject to the 

EAR. 

Q.6. The Congress has acted to place heightened oversight over the 

sale of lethal firearms to ensure that they are not going to dangerous or unreliable end-users. They have also been subject to a 

decades-long informal process of consultation, which has in the 

past prevented just such sales. BIS could inform the Congress, specifically the Senate Foreign Relations Committee, which has jurisdiction over the export of lethal arms abroad, before licenses are 

granted, if it chooses to do so. Will you so inform us? 

A.6. In May 2018, at the time of the Department of Commerce’s 

and the Department of State’s publication of the proposed rules to 

transfer firearms and related items from the USML to the CCL, 

the Export Administration Act (EAA) did not include a Congressional notification requirement for firearms, nor did any other gov-
104 

1The China 2025 ten priority sectors are: (1) new advanced information technology; (2) automated machine tools and robotics; (3) aerospace and aeronautical equipment; (4) maritime 

equipment and high-tech shipping; (5) modern rail transport equipment; (6) new-energy vehicles 

and equipment; (7) power equipment; (8) agricultural equipment; (9) new materials; and (10) 

biopharma and advanced medical products. 2The 14 categories were: (i) biotechnology; (ii) artificial intelligence; (iii) Position, Navigation, 

and Timing (PNT) technology; (iv) microprocessor technology; (v) advanced computing technology; (vi) data analytics technology; (vii) quantum information and sensing technology; (viii) 

logistics technology; (ix) additive manufacturing; (x) robotics; (xi) brain-computer interfaces; (xii) 

hypersonics; (xiii) advanced materials; and (xiv) advanced surveillance technologies. 

erning statute. On August 13, 2018, the President signed the National Defense Authorization Act for Fiscal Year 2019, which included the Export Control Reform Act of 2018. Congress did not include in the Act a specific requirement for Congressional notification for firearms and related items exports. Should Congress wish 

to issue such a requirement, BIS will certainly comply. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER 

FROM NAZAK NIKAKHTAR 

Q.1. As Commerce compiles its emerging and foundational technologies list, are there sectors concerned may not receive enough 

coverage or inclusion? 

What areas of China’s Made in China 2025 priority list or in 

terms of the gaps in their military capabilities development are not 

covered? 

A.1. China’s Made in China 2025 strategy contains a broad swath 

of technologies, some of which are more easily identifiable as military-related or military-enabling. 1 To initiate the review of emerging and foundational technologies mandated by the Export Control 

Reform Act of 2018, BIS published a November 2018 Federal Register notice that listed 14 emerging technology categories for which 

the Bureau sought industry input on controls. 2 This list was developed after receiving technical insight from interagency colleagues 

based on subject matter experts’ evaluation of technology categories 

that were considered to be most critical to U.S. national security 

interests, for example due to potential uses as conventional weapons, conduits for intelligence collection, use as weapons of mass destruction, or facilitators of terrorist activities. Technologies that 

could potentially provide the United States with a qualitative military or intelligence advantage were also identified. Many of these 

technology categories fall under one of China’s 2025 priority sectors. 

At the same time, BIS recognizes that the technologies listed in 

the Federal Register notice do not, by themselves, represent the full 

range of emerging technologies that warrant control. There are numerous additional technologies on the China 2025 priority list that 

also may warrant evaluation for control. Further to this point, China’s civil–military integration strategy is a national strategy that 

incentivizes virtually the entire civilian sector to enter the defense 

market. This whole-of-Government effort by China now informs 

BIS’s analysis of dual-use emerging technologies and how commercial technologies may be used as weapons. Of course, China is not 

the only country that poses this type of technological threat 

through the integration of its civil and military sectors. 
105 

Given these realities, we are actively engaging with U.S. industry, interagency colleagues, and academia, as well as ETTAC members, to assess the full range of emerging technologies that warrant 

control and their potential commercial and military applications. 

We are also assessing the level of development of each of these 

technologies in the United States and in foreign countries to determine when those technologies are expected to mature into real-use 

applications. Finally, we are analyzing potential harmful uses of 

these technologies by foreign adversaries. 

We are mindful of the fact that our identification of emerging 

technologies is a complex exercise, and so we have been actively 

collaborating with industry, interagency colleagues, and academia 

to obtain all pertinent information for our analysis. The answers 

we are pursuing will help us determine the range of technologies 

that warrant control, and given the nature of each technology, the 

most effective mode of control. We encourage engagement with all 

members of the Legislative Branch to ensure that we are able to 

benefit from Congress’ insight as well. 

Q.2. What steps should be considered to address the problem of 

companies seeking to redefine the technologies or products to skirt 

review? 

A.2. Since my start at BIS, I have stressed the need to modernize 

our mechanisms for control. In light of the ever-changing nature of 

technology, controls must be implemented in ways that adapt to 

technological advancements over time. For example, we have seen 

adversaries forego the acquisition of high-tech items subject to controls and opt for lower-tech items that fall outside of current controls but can be used to create the functional equivalent of the controlled item. While we intend to define controls with sufficient 

specificity to allow industry to identify what is regulated from what 

is not, controls on technologies need to be better fashioned with 

flexibility to avoid loopholes or circumvention of the controls. 

Of course, the manner by which each control is defined is dependent on the particular type of technology, but I am confident 

that with continued and proactive engagement on this issue, BIS 

is developing effective controls that keep pace with the evolution of 

technology. Just as important, we must make every effort to ensure 

that our controls are implemented multilaterally so that U.S. industries are able to complete on a global playing field that is level. 

I have already begun proactive engagement with foreign-Government counterparts to secure multilateral cooperation on emerging 

technologies. 

Q.3. As one of the most persistent critics of Huawei’s concerning 

relationship with the Chinese Government and its pattern of behavior, I was pleased to see the Trump administration finally take 

steps to place Huawei on the Entity List. 

At the same time, I have concerns that this move reflects a haphazard and not-coherent approach to these issues—particularly 

when we see the President suggest that the designation could simply be a bargaining chip, to be trade away in the context of a trade 

deal. Huawei represents a real—not speculative—security risk and 

one that will not be resolved in the context of a trade agreement. 
106 

We see a number of technology companies that boast unusually 

intimate relationships with the Chinese Government, are instrumental in domestic efforts within China to harness technology to 

conduct in censorship, surveillance and social control, and that receive significant support—in the form of digital infrastructure 

grants and loans—to help China export its model of tech-enabled 

authoritarianism abroad. We even see municipalities in the U.S. 

buying security cameras from companies like Hikvision because— 

as in the case of Huawei—it’s artificially priced below products 

from legitimate vendors. 

Would you support entity list designations with other technology 

providers, such as Hikvision and Dahua, that are engaged in activities that are contrary to the U.S. national security and U.S. foreign 

policy interests? 

A.3. BIS continually evaluates information from multiple sources to 

assess possible additions to the Entity List that meet the criteria 

specified in part 744 (Control Policy: End-User and End-Use Based) 

of the EAR. When BIS or any other member of the End-User Review Committee (ERC) identify activities by a party that meet the 

criteria set forth in Section 744.11(b) of the EAR (acting contrary 

to the national security or foreign policy interests of the United 

States) and a majority of ERC members approve its addition, BIS 

will add that party to the Entity List. 

Q.4. Given the pattern of behavior we’ve seen from a company like 

Huawei—with well-documented allegations of a concerted effort to 

evade sanctions on Iran, a longstanding and comprehensive strategy of IP theft from U.S. companies, and a close relationship with 

the Chinese Communist Party and Chinese military—would it be 

appropriate for the President to roll back the Entity List designation in exchange for minor trade concessions by the Chinese Government? 

A.4. When an action taken by the Bureau of Industry and Security 

(BIS or the Bureau) is based on law enforcement or national security concerns, then that action should only be amended if the enforcement and security concerns which prompted that action are 

addressed by that amendment. 

Huawei and its affiliates were added to BIS’s Entity List (Supplement No. 4 to part 744 of the EAR) on the basis of activities 

that were contrary to U.S. national security or foreign policy concerns. Any change to Huawei’s listing status will need to ensure 

that the national security and foreign policy concerns that led to 

the listing are no longer applicable or are addressed by the change. 

As a national security agency, BIS’s mission is to uphold the 

United States’ national security and foreign policy interests; that 

is and will continue to be our focus specific to the Huawei listing. 

Q.5. What is your view on the scope of the Temporary General License the Trump administration issued with respect to Huawei? 

Are there areas where a more relaxed policy would be warranted? 

A.5. BIS implemented the Temporary General License to provide 

U.S. companies impacted by the listing time to adjust and BIS continues to evaluate the scope of the Temporary General License 

based on information from a variety of sources, including input 
107 

from U.S. companies and other potentially affected parties. We 

want to ensure the scope of the Entity List listing and Temporary 

General License are appropriate to address the national security 

and foreign policy concerns and are well-understood by industry. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR CORTEZ MASTO FROM NAZAK NIKAKHTAR 

Q.1. Would you agree that trade and international cooperation 

have a direct impact on tourism? 

A.1. Fostering long-term mutually beneficial trade relations and cooperation with Nations has been one of my priorities as a U.S. Government official and, as we seek to expand jobs in our economy, we 

have been intimately aware of the impact that international travel 

and tourism has had on this objective. In 2018, international visitors supported 1.2 million American jobs and spent a record-breaking $255.5 billion experiencing the United States, an increase of 

nearly 2 percent when compared to the previous record set in 2017. 

Additionally, these travel trade exports accounted for 31 percent of 

total U.S. services exports and 10 percent of all U.S. exports, goods 

and services alike. Spending by international visitors who stay one 

night or more in the United States for leisure, business, education, 

or medical purposes is counted as a U.S. travel and tourism export. 

Our two largest visitor markets (defined by country of residence) 

both increased last year: Canadian visitation to the United States 

was up 4.9 percent and visitation from Mexico increased 3.9 percent. Despite the fact that the number of Chinese visitors to the 

United States decreased last year by 5.7 percent, visitation from 

western European countries—France, Spain, the U.K., and Italy— 

also increased between 3.9 and 6.0 percent. In 2018, the United 

States finished the year with a trade in travel surplus of more than 

$69 billion. As we forge closer trade ties with our allies, we expect 

to see continued increases in inbound tourism numbers and greater 

positive contributions to the U.S. economy. I am committed to encouraging such growth. 

Q.2. What specifically will you do on a regular basis in this role 

to help expand the interests of bringing international visitors to 

one of America’s best destinations for both indoor and outdoor activities, namely Nevada—where we saw over eight million international visitors in Las Vegas alone in 2016, accounting for $11 billion in spending? 

A.2. Having grown up in California, Nevada was a frequent travel 

destination for my family, friends, and me. Through many frequent 

visits, I have watched Nevada flourish as a tourist destination for 

international travelers. Nevada’s bourgeoning tourism industry has 

not only boosted U.S. economic growth, but it has also encouraged 

a greater understanding of U.S. culture and values, which are important components of fostering better international cooperation between the United States and its global partners. 

During my time at the International Trade administration, I 

worked to support the long-term growth and competitiveness of the 

travel and tourism sector and to encourage more international visitors to the United States. I worked with my colleagues across the 
108 

agency to connect U.S. companies and destinations to opportunities 

in growth markets of interest to Nevada and other U.S. destinations. For example, while in India, my staff at the National Travel 

and Tourism Office (NTTO) met with Herb Santos, Jr., Nevada 

Tourism Commissioner, and Carson City Culture and Tourism Authority Executive Director David Peterson, to discuss a number of 

issues important to the State of Nevada. 

Additionally, in 2018, I personally worked with U.S. Customs 

and Border Protection to resolve an issue related to the country of 

residence data it was collecting so that ITA NTTO’s statistical program could provide the most accurate traveler data to U.S. businesses in order to improve their competitiveness and effectiveness 

in the international travel marketplace. Many State tourism offices 

and convention and visitors’ bureaus are dependent upon the program as the source for comparable State and city visitation and 

international traveler trend information. In my former ITA role 

and current BIS role, I continue to be committed to advancing policies that will encourage tourism across the United States, including 

the State of Nevada. 

Q.3. Can you provide us a sense of how we can continue to improve 

our outreach worldwide? 

A.3. The Department of Commerce proactively examines all export 

markets to identify opportunities for future growth. The Department’s NTTO and U.S. Foreign Commercial Service Officers (including professionals in embassies worldwide) work together as a 

focused travel and tourism team, to increase U.S. exports in the 

travel and tourism sector. 

One particular example is India. Under the U.S.–India Commercial Dialogue, we have a travel and tourism work stream where the 

NTTO and India’s Ministry of Tourism collaborate on opportunities 

to increase tourism between our Nations. The Department of Commerce also works directly with the private sector both in the 

United States and in our source markets to support efforts to secure more business for companies and destinations across the 

United States. 

Q.4. During your consideration by the Senate Commerce Committee last Congress, you stated in your response to me the importance of ‘‘initiatives that facilitate travel to the United States, such 

as aviation liberalization, the streamlining of visa application processes, improvements to customer service at ports of entry, and the 

enhancement of passenger screening.’’ How do you reconcile that 

statement with the lack of progress in these areas under the current Administration, even going so far to employ the questionable 

tactic of moving passenger screeners from the Transportation Security Administration (TSA) to the southern border where they have 

not been trained and are vacating their security posts at our Nation’s airports and surface transportation outlets? 

A.4. The Department of Commerce welcomes international visitors 

and forward-thinking policies that may be implemented to increase 

travel and tourism to the United States. An example of a recent 

initiative that ITA has undertaken to facilitate the travel process 

is its work with CBP to develop a pilot a biometric entry and exit 

system that, once fully deployed, will help create a more secure and 
109 

seamless travel experience. To this end, the United States Travel 

and Tourism Advisory Board, an advisory committee established 

pursuant to the Federal Advisory Committee Act and overseen by 

ITA, is tasked with providing recommendations on how the public 

and private sectors can collaborate to accelerate progress on the 

implementation of the biometric entry and exit system at U.S. 

ports of entry. The Board provided recommendations on this topic 

in April 2019, and Department officials are reviewing them with 

interagency partners to determine how to best implement the recommendations. We welcome further engagement with your office on 

initiatives that the Department may pursue to further facilitate 

travel to the United States. 

Q.5. While I received your assessment during consideration of your 

nomination last Congress, can you please provide an update to the 

trends we are currently seeing in international tourism given the 

rhetoric and policies toward some Nations or groups, of this Administration? 

A.5. International visitation and international visitor spending 

both set records in 2018. A record 79.6 million international visitors enjoyed the United States and spent a record-setting $255.5 

billion. International tourism supports 1.2 million jobs in the 

United States. Thirty-one percent of all services exports in 2018 

were travel and tourism-related and travel and tourism accounted 

for 10 percent of all exports, goods and services alike, in 2018. In 

terms of growth in visitation by residents from specific markets, 

the United States saw increases from the two biggest visitor markets, Canada (4.9 percent) and Mexico (3.9 percent). South America 

was up 8.5 percent with Brazil up 15.5 percent and Colombia up 

12 percent, among our biggest gainers. Western Europe saw increases in several key markets—U.K. (3.9 percent), France (6 percent), Spain (6 percent), and Italy (4 percent). Visitation by residents of countries in Asia was mixed. Down markets included 

China (5.7 percent), South Korea (5.3 percent) and Japan (2.8 percent). Visitation from India increased by 7.2 percent. 

Q.6. I also previously asked you for your thoughts on the Federal 

Brand USA program, for which I didn’t receive a specific answer 

to whether you supported Federal funding of this specific successful 

program? 

A.6. The Administration understands the value of travel and tourism to the economy. The Department continues to be very engaged 

with Brand USA; the Secretary has appointed the Brand USA 

board of directors, approved Brand USA’s annual objectives, and 

transmitted the Brand USA annual report to Congress. The Department is committed to exploring all ways to increase travel and 

tourism to the United States. 

Q.7. In your previous response on Brand USA, you stated ‘‘I will 

commit to being a strong advocate for public–private partnerships 

that promote the United States as a tourist destination, and will 

do so based on the Administration’s and Congress’ approved budgets and policies.’’ From that statement, please help me reconcile 

what your position will be toward that program as the Trump ad-
110 

ministration has again proposed to cut funding for Brand USA in 

their FY20 budget? 

A.7. For the reasons described above, the Department and I fully 

support travel and tourism to the United States, and we will continue to advocate for the economic growth that such tourism brings, 

including through private–public partnerships. I will faithfully execute the budget that Congress passes and that the President signs 

into law, and should that budget include funding for Brand USA 

or some other type of public–private partnership, I and the Department will support Brand USA and continue to work to leverage all 

possible resources to maximize international travel to the United 

States. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR MENENDEZ FROM IAN PAUL STEFF 

Q.1. The Foreign Commercial Service is critical to many U.S. exporters who struggle to navigate complex foreign markets and need 

advocates on the ground to help them succeed. I’ve been disheartened to see President Trump propose to slash this trade office’s 

funding in the last couple of budgets. This office deserves a leader 

who will advocate for its programs and staff, and communicate its 

importance to Administration leadership and the public. 

Do you believe in the mission of Foreign Commercial Service? 

A.1. If confirmed, I would be incredibly honored to lead the U.S. 

and Foreign Commercial Service, with its global network of more 

than 1,300 international trade and inward-investment professionals at our U.S. Embassies and Consulates in 76 countries and 

108 cities across the United States. I wholeheartedly believe in 

their mission to help business create jobs and grow our economy 

through exports and inward investment. I also know unequivocally 

that our U.S. and Foreign Commercial Service is unique and the 

only group in the U.S. Government that is equipped, experienced, 

and capably dedicated to lead the charge on behalf of U.S. exporters, particularly small- to medium-sized companies, into a future of 

increasingly aggressive and competitive global business. I have the 

utmost respect for this global team of professionals who deliver 

daily on behalf of our Nation’s exporters. I also know that in terms 

of value, no organization within the U.S. Government has a greater 

return on its investment on behalf of U.S. exporters than the U.S. 

and Foreign Commercial Service. I believe in their mission, and I 

plan to help grow that value. 

Q.2. Can you commit to me today to work toward strengthening 

the office and fight against the President’s budget cuts? 

A.2. I stand behind the President’s budget and will direct the use 

of our appropriation to its maximum efficiency and effectiveness for 

our exporters. I commit to working with you and your colleagues 

throughout the budget and appropriations process. My top priority 

will be to dedicate those allocated resources to make the U.S. and 

Foreign Commercial Service the strongest advocate it can be for 

U.S. companies doing business in an increasingly competitive 

world, while equipping the team with the tools they need to compete. 
111 

Q.3. Building stronger economic links with our neighbors in Latin 

America has always been a priority of mine. The region presents 

tremendous opportunity for the U.S. to develop export markets and 

to form partnerships to boost our Nation’s competitiveness as we 

look to compete in the global economy with China and others. 

If confirmed, will you prioritize developing relationships with our 

partners in Latin America? 

A.3. I share your view that Latin America presents many important growth opportunities for the United States. The Commerce 

Department has led productive engagements, talks, and visits with 

their respective counterparts in the region, enhancing our commercial and economic relationship. The fact that the United States has 

sought to bring the NAFTA into the 21st century by way of the 

new U.S.–Mexico–Canada agreement, demonstrates a strong commitment to the Americas. Modernizing and rebalancing our trade 

relationship with Mexico will foster a better investment climate for 

reciprocal trade, that supports high-paying jobs for Americans and 

will grow the overall North American economy. 

Creating a more level playing field for American workers to boost 

our Nation’s competitiveness is an important first step in expanding opportunities for U.S. exports in Latin America, and as we look 

to compete in the global economy with China and others. In addition, I look forward to continuing Global Markets’ strong focus on 

Latin America through our advocacy and Select USA efforts. We’ve 

seen many strong delegations from Latin America looking to invest 

in the United States. 

Q.4. Will you commit to expanding the Foreign Commercial Service’s footprint in the region? 

A.4. I recognize that the increasing heat of global competition faced 

by our U.S. exporters is right in our back yard in Latin America. 

Over the last decade, many of our exporters have lost ground to 

Government-supported foreign competitors in Latin America and 

other markets around the world. We cannot afford to cede further 

ground, and we need to show our trading partners around the 

world that we choose to compete, and that we mean business on 

behalf of our Nation’s exporters. 

If confirmed, I will strategically allocate those resources available 

to us to ensure our companies pursue opportunities to compete for 

and gain back market share and win new business in Latin America and around the world. I commit to working with you and your 

colleagues to find opportunities where we can further strengthen 

our effectiveness and services in the region, while supporting a 

multitude of action oriented commercial dialogues in Latin America. Likewise, I look forward to working with the private sector to 

grow our commercial relationship in sectors of mutual interest in 

the region. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN 

FROM MICHELLE BOWMAN 

Q.1. Please provide to the Committee a detailed list of all meetings 

with individuals or groups not directly affiliated with the agency 
112 

you serve, from the date of your confirmation by the Senate to 

present. 

A.1. 
113 
114 
115 

Q.2. In a recent speech entitled ‘‘Community Banking in the Age 

of Innovation’’, you explained that ‘‘FinTech firms originate a larger 

share of personal loans than banks,’’ but ‘‘we should not simply assume that gains by FinTech lenders are necessarily at the expense 

of banks.’’ You highlight the opportunities for community banks to 

partner with fin tech firms. 

Do you support these same FinTech firms competing directly 

with community banks through industrial loan company (ILC) 

charters or OCC special purpose national bank charters? 

A.2. I support innovations in financial services because I believe it 

can benefit consumers and small businesses through expanded access to financial services, greater efficiency, increased convenience, 

or potentially reduced transaction costs. The question of FinTech 

companies operating through industrial loan company (ILC) charters requires careful consideration. As you know, the Federal Reserve does not supervise ILCs or their holding companies. 

The Office of the Comptroller of the Currency’s (OCC) proposed 

special purpose national bank charter raises interpretive and policy 

issues for the Federal Reserve Board (Board), for example, questions relating to Federal Reserve membership, status under the 

Bank Holding Company Act, access to Federal Reserve accounts 

and services, or access to the discount window. The Board would 

have to analyze these issues closely if any FinTech firm was to obtain a special purpose national bank charter. 

Q.3. During your testimony, in response to my question about consolidation making it harder for small banks to compete, you said 

that your concern was investment in local communities and that as 

branches are acquired in rural communities, home investment in 

the community tends to be dissipating. 

What actions is the Fed taking to ensure that acquiring banks 

continue to invest in communities where all acquired branches are 

located? 

How will you ensure that banks distribute their investments in 

all communities, not only the location in which the charter is held? 

Would you support requirements for banks to continue to invest 

in these communities after an acquisition? 

A.3. My interest is to see credit flowing to consumers and businesses in all communities consistent with safe and sound lending. 

This includes meeting credit needs in low- and moderate-income 

areas and furthering economic development and financial inclusion. 

The Community Reinvestment Act (CRA) is one of the tools we 

have to accomplish this goal. The CRA encourages banks to serve 

their entire community, in particular the credit needs of low- and 

moderate-income communities. To ensure that this is accomplished, 

the Federal Reserve evaluates the records of State member banks 

in helping to meet the credit needs of their communities. The CRA 

regulations define a bank’s ‘‘assessment area’’—the area within 

which we evaluate their CRA performance—as those areas around 

the bank’s branches and deposit taking ATMs. We are currently in 

discussions with the OCC and Federal Deposit Insurance Corporation (FDIC) regarding possible revisions to the CRA regulations. 

One aspect of the regulation that we are discussing is a better way 

to delineate the community served by a bank to provide better in-
116 

centives for providing credit in every assessment area, not just its 

major markets. 

When two banks merge, we evaluate the CRA performance of the 

resulting bank in all the areas where they retain a branch presence. In evaluating the convenience and needs of the communities 

to be served following a merger, an institution’s most recent CRA 

performance evaluation is a particularly important consideration in 

the applications process because it represents a detailed on-site 

evaluation of the institution’s performance under the CRA by its 

appropriate Federal supervisor. In addition to CRA performance, 

Federal Reserve System staff considers recent actions taken to improve CRA performance, comments submitted by interested parties 

and the applicant’s response to those comments, and the potential 

effects of the proposal on the convenience and needs of the communities to be served. 

Q.4. In your remarks at the Conference of State Bank Supervisors 

in April, you said that ‘‘we must continue to ensure that the institutions we supervise are proactively managing their risks to remain strong’’ and that ‘‘it’s the [financial supervisors’] job to identify emerging risks to community banks and to ensure bankers are 

identifying and managing their risks appropriately.’’ 

What are the emerging risks to community banks today? 

A.4. Despite generally favorable economic and financial conditions, 

community banks continue to manage a moderate level of risk. 

Some emerging risks include cybersecurity, deposit competition, 

and agricultural and commercial real estate ( CRE) lending. 

Cybersecurity continues to be an area of elevated risk across the 

banking system as threats evolve and the banking industry continues to face challenges in establishing and maintaining adequate 

cyberdefenses. Threat actors are active and innovative in seeking 

ways to exploit weaknesses in people, processes, and technology. 

Agricultural-based lending remains an area of concern. Net farm 

income has declined since 2012 and continues to be an issue. Low 

commodity prices, trade uncertiainty, and recent unfavorable 

weather conditions in the Midwest have added to an already challenging situation. Lower incomes and increasing debt-servicing 

costs are impacting borrowers management of operational debt. 

Weaknesses in credit at agricultural banks can be seen in the form 

of carryover debt from prior operating years, increasing levels of 

nonperforming assets, and modest increases in the number of problem banks with significant agriculture-related exposure. 

CRE risk is an area of elevated risk, mainly due to the widening 

gap between real estate values and property income used to service 

outstanding debt. For most property types, the primary driver of 

price appreciation appears to be new investor demand rather than 

increasing rents or other property-level fundamentals. 

Q.5. Please describe what specific proactive measures the Fed is 

taking to ensure that banks are managing these risks. 

A.5. With respect to these risks, the Federal Reserve has adopted 

common work programs to help examiners assess overall IT operations, including cybersecurity of community banks. The Federal 

Reserve also has included mandatory training for all community 

bank examiners in the area of IT in order to consistently identify 
117 

and provide feedback to the banks supervised by the Federal Reserve. 

Building on earlier supervisory guidance on managing agricultural lending, the Federal Reserve has sponsored a number of 

training and educational opportunities for examiners. In addition, 

the Federal Reserve closely monitors and provides updates on 

farming conditions and agricultural lending conditions to examiners. 

As discussed in SR letter 19-9, Bank Exams Tailored to Risk 

(BETR), the Federal Reserve has revised its procedures for credit 

and liquidity risk to better identify risk and tailor exam procedures 

based on the risk profile of a particular bank. CRE concentrations 

and a bank’s use of volatile funding sources are among the factors 

that examiners consider in determining whether a bank’s activity 

is low, moderate, or high risk, which will determine the procedures 

examiners will complete during the examination. 

Q.6. What additional steps should the Fed take to address these 

risks? 

A.6. With respect to cybersecurity, we continue to review our program and have placed a high priority on building our expertise to 

ensure we and the institutions we supervise understand and manage the associated risk. With respect to agriculture lending, the 

Federal Reserve will continue to gather current information on industry factors that (1) affect the ability of farm producers to repay 

loans, (2) influence collateral values, and (3) affect the ability of 

producers and banks to hedge potential losses. We will continue to 

focus on examining banks with concentrations in agricultural lending, with particular emphasis on ensuring banks hold capital commensurate with their portfolio compositions. And, as mentioned, 

with respect to CRE concentrations, this remains to be an area of 

focus. 

Q.7. In your capacity as community bank designee, what is your 

definition of a community bank? 

What is the largest firm, by assets, that you consider to be a 

community bank? 

In how many States can a bank operate and still be considered 

a community bank? 

Are there any financial activities that you think disqualify a firm 

from inclusion as a community bank? 

What is the maximum number of distinct subsidiaries and affiliates at a bank or bank holding company that you would still consider to be a community bank? 

A.7. There are a number of statutory definitions for community 

banking organizations, but the Board uses $10 billion in total assets as the threshold for its supervisory and regulatory purposes. 

It is my view that $10 billion is a reasonable ceiling. However, various statutes tailor requirements for community banks using differing threshold. For example, the Small Bank Holding Company 

policy statement provides relief for firms under $3 billion, while 

banks under $10 billion would be eligible for Community Bank Leverage Ratio. 

While no formal restriction on financial activities exists that 

would disqualify a firm from being considered a community bank, 
118 

community banks tend to have more traditional, low-risk banking 

operations. Additionally, there is no formal limit on the number of 

subsidiaries and affiliates a community bank may have and no restrictions exist on the number of subsidiaries and affiliates, according to the Federal Reserve’s current operating practices. That said, 

as noted above, community banks tend to have simpler banking operations than large banks. 

In general, I do not believe a community bank should be defined 

by the number of States in which it operates. Rather, a bank’s size, 

risk profile, capacity, and complexity, tend to be more important 

factors. 

Q.8. If confirmed to a full 14-year term, what will be your top priorities as a member of the Board of Governors that serves as the 

community bank designee? 

A.8. My top priority as a member of the Board of Governors will 

continue to be fulfilling the vital responsibilities Congress has 

given us: to support full employment and stable prices, regulate 

and supervise the banking system to ensure it remains safe and 

sound, enforce consumer protection laws that require everyone be 

treated fairly, and carry out the Board’s important payments-related responsibilities. 

As the first governor to fill the role the Congress designated for 

someone with community banking experience on the Board, I will 

continue to travel widely and listen closely to community bankers, 

consumers, small-business owners, and community leaders. I will 

make sure these diverse perspectives are represented in the Federal Reserve’ s deliberations and decision making on both monetary 

policy and regulatory matters. 

As I noted in my testimony, I firmly believe that, as regulators, 

we need to ensure that we are not imposing unnecessary burdens 

on community banks. That is why one of my priorities as governor 

has been to tailor appropriately our supervision and regulation to 

the size, complexity, and capacity and risks posed by an institution. 

To further this effort, I recently formed a working group of experts 

from across the Federal Reserve System to launch a comprehensive 

review of our supervisory work with smaller, regional and community banks. 

In carrying out each of my responsibilities, I am committed to accountability, transparency, and clear communication. 

Q.9. Systemic regulatory failures, like the savings and loan crisis 

and 2008 financial crisis, have been the largest contributors to 

community bank failures over the last 30 years. What actions are 

you taking to ensure that excessive risk-taking in corporate debt 

will not result in harm to the financial sector broadly and community banks specifically? 

A.9. Widespread failures of community banks are indeed risks to 

economic growth, particularly in the communities they serve. The 

wave of community bank and savings and loan failures in the late 

1980s and early 1990s was a strong headwind to the economy, requiring coordinated action by Congress and bank regulatory agencies. We absolutely want to avoid the need for such extraordinary 

measures in the future. 
119 

Community banks emerged from the financial crisis substantially 

more resilient than they were in the precrisis period. Their regulatory capital ratios are higher, and they now rely more on capital 

instruments with greater loss absorbency. There is no substitute 

for high quality capital in limiting stress on institutions from the 

risks they take in the normal course of the bank. The use of wholesale funding—another source of pressure during stressful periods— 

by community banks remains significantly below the levels that 

were typical prior to the financial crisis. We continue to closely 

monitor the solvency and liquidity risks among community banks. 

Community banks traditionally have little exposure to leveraged 

loans, and legal lending limits combined with the minimum participation sizes would limit most banks of that size from becoming significantly active in that market. Community banks are exposed to 

the small business sector as well as unincorporated businesses 

through traditional commercial and industrial lending. The current 

credit performance in the small business sector is quite strong, and 

during the past two downturns, small business lending has not 

generated outsized losses after accounting for the size of the economic contraction. We also closely monitor community banks that 

do have high concentrations of business-related debt to ensure they 

have appropriate risk management processes in place. 

That said, some community banks do have significant concentrations of CRE loans. We pay close attention to this sector, because 

it has played a role in previous episodes of widespread banking 

stress. The Commercial Real Estate Guidance issued in 2007 includes expectations that banks with concentrations in CRE have in 

place enhanced risk management programs, and the fraction of 

banks with large CRE concentrations is much lower than it was 

heading into the 2008 financial crisis. Moreover, our financial stability assessment highlights the attention we have given to CRE 

prices and lending standards. We will continue to closely monitor 

this sector as well as supervised banks with concentrated exposure 

to CRE. 

Q.10. Are you concerned that the deregulation of foreign banking 

organizations (FBOs) as proposed in April will create additional 

competitive pressures on community banks? Are FBOs direct competitors with community banks in activities like small business and 

residential mortgage lending? If not, what activities do FBOs engage in that distinguish their business and risk profile from community banks? 

A.10. Most branches and agencies of foreign banks are not direct 

competitors of community banks, as foreign banking organizations 

(FBOs) tend to have a wholesale business model focused on large 

borrowers and home country customers operating in the U.S. FBOs 

generally engage in limited residential mortgage lending, most of 

which flows to employees of the bank. 

Some U.S. commercial banks owned by FBOs may directly compete with community banks. Of the 4,751 commercial banks operating in the U.S. as of year-end 2018, FBOs operate 39 of them. 
120 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS 

FROM MICHELLE BOWMAN 

Q.1. The community bank leverage ratio (CBLR) created pursuant 

to S. 2155 is of paramount interest to community banks in South 

Dakota. I am particularly concerned about how the CBLR was created because the current CBLR includes changes to the Prompt 

Corrective Action framework that would effectively eliminate any 

relief achieved from the creation of the leverage ratio. I’ve heard 

from several institutions in my State that they will decline to take 

advantage of the CBLR as a result. 

Why was 9 percent chosen for the community bank leverage 

ratio? 

A.1. The Federal banking agencies jointly issued a proposal that 

would allow community banking organizations that meet certain 

qualifying criteria to opt into a simple, leverage-based capital 

framework. Firms that opt into the framework would not be subject 

to the capital rule’s risk-based capital requirements. 

Under the proposal, a qualifying community banking organization may elect to use the community bank leverage ratio (CBLR) 

framework if its CBLR is greater than 9 percent. A 9 percent 

CBLR should generally maintain the current level of capital held 

by these banking organizations, while supporting the banking 

agencies’ goals of reducing regulatory burden for community banking organizations and retaining safety and soundness in the banking system. Before finalizing the CBLR rule, I, along with my Federal Reserve Board (Board) colleagues will consider all public comments received as well as the input received from State bank supervisors. 

Q.2. S. 2155 required Federal regulators to engage in a dialogue 

with State banking regulators regarding how the leverage ratio 

should be set. How did the Federal Reserve fulfill this requirement? 

A.2. The banking agencies have worked closely with State bank supervisors over the past several months to inform the rulemaking 

process, and are considering their constructive input and feedback 

as we work to finalize the CBLR framework. 

Q.3. What changes will be made to the community bank leverage 

ratio so that community banks can actually avail themselves of this 

relief? 

A.3. The banking agencies are still considering the public comments received on the proposal as well as the input received from 

State bank supervisors. Moving forward in the rulemaking process, 

the banking agencies will strive to develop a CBLR framework that 

is consistent with congressional intent. 

Q.4. I am honored to be the sponsor of the Financial Stability 

Oversight Council Improvement Act of 2019, which would require 

FSOC to determine whether potential nonbank threats to financial 

stability could be better solved by allowing companies to work with 

their primary regulator or through the development of a risk reduction plan. This legislation is important because most FSOC members are banking regulators and applying banking regulations to 
121 

nonbank companies would be harmful to our capital markets and 

to Main Street investors. 

Do you agree that FSOC should focus on empowering primary 

regulators so that true systemic risks can be addressed? 

A.4. I believe that the Financial Stability Oversight Council 

(FSOC) should work closely with the relevant primary regulators 

when addressing systemic risks, and my understanding is that the 

proposed activities-based approach to nonbank designation 

strengthens such coordination. 

Q.5. Do you agree that it’s important for FSOC to consult with primary regulators before voting on a SIFI designation? 

A.5. Yes, I agree on the importance of consultation with primary 

regulators before any FSOC vote on a systemically important financial institution designation to leverage the expertise of that regulator and explore alternative solutions to mitigate systemic risk. 

The activities-based approach envisions close cooperation between 

the FSOC and the relevant regulators. 

Q.6. Do you agree that addressing nonbank risk does not always 

have to include a SIFI designation? 

A.6. Yes, I believe that there are ways to address nonbank risks 

other than through designating firms as systemically important. 

Indeed, it is my understanding that the proposed amendments to 

the nonbank designation guidance are intended to capture instances where designating an entity may not effectively address the 

risk to the system. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS 

FROM MICHELLE BOWMAN 

Q.1. The Federal Reserve’s (Fed) regulatory approach to interaffiliate margin transactions is an outlier. The margin requirements 

have the effect of locking up capital that could otherwise be used 

for economic growth and they discourage centralized risk management practices among firms. In addition, the current approach results in the movement of collateral out of the U.S. insured depository institutions. These are all suboptimal policy outcomes. Regulatory authorities in the European Union, Japan, and most other 

G20 jurisdictions each currently provide such an exemption for 

these transactions. You have indicated you are aware of the issue 

but, to date, I’ve seen no official action from the Fed to fix the problem. 

The recognition for the need for an exemption began under regulators nominated by President Obama. In 2013, CFTC Chairman 

Gary Gensler provided an exemption for central clearing and trade 

execution. In 2015, CFTC Chairman Tim Massad provided an exemption, determining that initial margin was not warranted and it 

was a ‘‘very costly and not very effective way’’ to enhance risk management. Yet, the Fed did not provide an exemption from initial 

margin in the 2016 margin rules, and as a result, as of the end of 

last year, U.S. banking entities collected nearly $50 billion in initial margin from their own affiliates. In 2017, the Treasury Department noted that this rule puts U.S. firms at a disadvantage both 

domestically and internationally, recommending that your agencies 
122 

provide an exemption consistent with the margin requirements of 

the CFTC. 

Do you agree that an exemption from initial margin is appropriate for interaffiliate transactions? 

A.1. The Board is actively discussing this aspect of the rule with 

the other prudential regulators. The goal is to assess what, if any, 

changes can be made consistent with the statutory directive that 

margin requirements help ensure the safety and soundness of covered swap entities and are appropriate for the risk associated with 

noncleared swaps. 

Q.2. Will you prioritize a rule to provide an exemption for interaffiliate transactions, separate from any broader regulatory effort 

such as a Regulation W rewrite? 

Please provide an explicit timeline for when the Fed will take action. 

A.2. Discussions with the other prudential regulators as mentioned 

above are separate and apart from any broader regulatory efforts. 

While I am not able to provide a specific timeline for you, we will 

strive to address the issue as soon as possible as we coordinate 

with other relevant agencies. 

Q.3. The reason a ‘‘Reg W’’ rewrite is suboptimal is that it will be 

counterproductive and slow. Most believe it will take 5 to 6 years 

to complete. This capital needs to be released soon because we have 

geopolitical risk emerging over the world that could destabilize 

markets. If we have a Brexit, the number of entities will double 

and more capital will be unfairly sequestered. With potential trade 

volatility, Middle East uncertainty, and other risks, our banks need 

to be able to use capital for risk management, not have it trapped 

for no reason. 

Could a Reg W action be done outside of providing an exemption? 

A.3. The swap margin rule, codified in the Board’s Regulation KK, 

is different than and separate from Regulation W. I understand 

this question to be asking about the treatment of interaffiliate 

transactions in the swap margin rule. The swap margin rule requires that a covered swap entity collect initial margin from an affiliate. If the Board were to change this requirement, it would do 

so through the normal public notice and comment rulemaking process consistent with the Administrative Procedure Act. 

Q.4. Please explain any reasoning for not allowing this exemption 

this year. 

A.4. While we are actively discussing this aspect of the rule with 

the other prudential regulators, I am not able to confirm a timeline 

on the result of our collaboration. I understand the importance of 

moving as quickly as possible. 

Q.5. In October of last year, the Fed issued a request for public 

comment on ‘‘actions the Federal Reserve could take to support 

faster payments in the United States.’’ We understand the Fed has 

been working collaboratively with the banks and other private sector stakeholders for years on how best to facilitate faster payments. 

As Chairman Powell noted at a recent press conference, the Fed 

has thus far been ‘‘more of a convener, bringing industry and the 

public and public interest groups . . . around the table and . . . 
123 

playing a constructive role’’ in encouraging the private sector in 

this area. In October, however, the Fed issued a request for public 

comment indicating that ‘‘it will probably enter the market for faster payments as a direct competitor of the private sector solutions 

with its own Real-Time Gross Settlement’’ (RTGS) system. 

Is it possible the Fed’s proposal could hamper and delay, rather 

than facilitate, the arrival of real-time payments? 

A.5. In its 2018 Federal Register Notice (2018 Notice) request for 

public comment, the Board of Governors (Board) requested feedback on the impact of Federal Reserve action(s) in faster payments 

settlement. In particular, the 2018 Notice specifically asked whether Federal Reserve action would help or hinder adoption of faster 

payment services by the financial services industry. This matter is 

still pending before the Board, and we are carefully reviewing the 

comments received. 

Q.6. Please explain why the Fed is proposing the creation of a Government-run real-time payments system when the private sector 

has already created one that is up and running? 

A.6. The Federal Reserve has not committed to any action at this 

time. Any decision made by the Board will consider carefully the 

importance of the views of the private sector on this issue. 

Q.7. The Fed’s own policy statement on ‘‘The Federal Reserve in 

the Payments System’’ requires that the Fed satisfy three conditions before proposing a new service. 

Among those is a finding that the private sector ‘‘cannot be expected to provide such service with reasonable effectiveness, scope, 

and equity.’’ Has the Fed made this finding, and, if so, on what 

grounds was it made? 

A.7. The Board has not made a determination at this time. However, throughout the Board’s deliberations, it will adhere to the requirements of the Federal Reserve Act, the Monetary Control Act 

(MCA), and longstanding Federal Reserve policies and processes. 

Q.8. How long would it take for the Fed to create its real-time system? 

A.8. At this time, the Federal Reserve has not committed to any 

action. If the Board determines to pursue a Real-Time Gross Settlement (RTGS) service for faster payments, a subsequent Federal 

Register notice would be issued that outlines additional details of 

the proposed service. 

Q.9. Would the Fed’s proposed RTGS and the existing private sector real-time payments network be interoperable and, if so, why— 

specifically—do you believe that will be the case? 

A.9. The Board’s request for comment asked for feedback on several areas, including interoperability with existing or potentially 

new Real-Time Gross Settlement (RTGS) service providers. Various 

commenters responded to such questions. The Board is assessing 

these comments and seriously taking them into account. 

Q.10. If you believe the systems would interoperate, would such 

interoperability require the private sector system to significantly 

alter its current design? 
124 

A.10. As I mentioned above, the Board is reviewing the comments 

received on the proposal, including those comments on interoperability, and will take this feedback into account throughout its deliberation. 

Q.11. My understanding is that the Fed seeks to justify this potential action in part on a perceived need for ‘‘resiliency’’. The notion 

that having two systems would provide resiliency necessarily assumes that every bank in the country (or at least an overwhelming 

majority of them) would have to connect to two systems: the private sector system and the yet-to-be-built Government-run system, 

which would create enormous inefficiencies and impose needless 

costs on the American taxpayer and the private sector. 

Have you done any cost-benefit analysis, particularly in light of 

the other faster payment options currently in the market that already serve as near substitutes, like payments over the card networks, same-day ACH, PayPal, Venmo, Zelle, Fedwire Funds Service itself, to determine whether or not this proposal makes any 

sense? 

A.11. The Board is considering the comments of the broad range 

of stakeholders throughout its deliberation, including the points 

you raise on resiliency and costs. We note that the Monetary Control Act of 1980 requires that Federal Reserve services must be 

priced to recover actual expenses associated with providing the 

services as well as certain imputed costs, including the taxes and 

cost of capital that would be paid by a private sector competitor. 

Importantly, the Board is considering the comments from the broad 

range of stakeholders throughout its deliberation. 

Q.12. Doesn’t the Fed already regulate and supervise the private 

sector real-time payments operator, which we understand has an 

impressive track record for resiliency, operating with multiple data 

centers, redundant systems, etc? Are you contending that your regulatory and supervisory powers over the private sector operator are 

deficient in terms of your supervising the private sector’s plans to 

ensure resiliency? 

A.12. The Board does not have plenary regulatory or supervisory 

authority over the U.S. payment system. Rather, the Board has 

limited authority to influence the operations of private sector retail 

payment services providers in certain circumstances and pursuant 

to specific laws. For example, assuming the private sector operator 

is subject to the Bank Service Company Act (BSCA), the Board and 

other Federal banking agencies would have authority to regulate 

and exam third party service providers that perform certain services for depository institutions that the agencies regulate. The 

BSCA, however, does not grant enforcement authority to the Board 

or other Federal banking agencies over the third party service providers. 

Q.13. In light of the recent Fedwire Funds outage, which we understand came at a critical part of the day when private sector settlement relies on Fedwire, should the Fed’s resiliency focus perhaps 

be on the Fedwire Funds system, which has vital systemic importance, rather than committing time and resources to standing up 

new infrastructure that may or may not provide resiliency? 
125 

A.13. I recognize the critical role that the Fedwire Funds Service 

plays in the financial system. Maintaining and enhancing the resilience of this service is, and will continue to be, an area of focus for 

the Board. The Board, through its oversight of the Reserve Banks, 

holds the Fedwire Funds Service to the standards included in Part 

1 of the Federal Reserve Policy on Payment System Risk, which include robust operational resilience expectations. These expectations 

are consistent with the international standards applicable to systemically important financial market infrastructures operated by 

the private sector. The Federal Reserve Banks strive to not just 

meet these standards, but to continuously strengthen Fedwire 

Funds’ resiliency posture, and doing so will remain an ongoing area 

of focus. 

The Fedwire Funds Service has historically provided a very high 

level of operational reliability. Having responded to the outage’s 

immediate cause, efforts are underway to identify, understand, and 

respond to the outage’s proximate causes so that the same high levels of operational reliability continue going forward. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR MENENDEZ FROM MICHELLE BOWMAN 

Q.1. My home State of New Jersey is moving toward legalization 

of recreational marijuana, and I have concerns that these new businesses as well as existing medical marijuana businesses in the 

State will continue to find themselves shut out of the banking system. And when these businesses are forced to operate exclusively 

in cash, they create serious public safety risks in our communities. 

I’ve already heard support from Chair Powell and Comptroller 

Otting on this issue, but I’d also like to know if you agree that financial institutions need legislative clarity on this issue? 

A.1. Yes, I do. However, only Congress can provide financial institutions legislative clarity on the conflict between Federal and some 

State laws on the legalization of marijuana and whether banks can 

service marijuana businesses that are legal under State law. The 

Federal Reserve is monitoring the various legislative proposals 

Congress is considering to resolve this issue. 

Q.2. Closely related to the provision of banking services is the ability for such businesses to access insurance products, a necessity for 

those looking to secure financing. Would it be helpful for Congress 

to also consider the role of insurance companies as States move toward legalization? 

A.2. Access to insurance products is an important aspect of commerce. If Congress decides to address the conflict between Federal 

laws and some State laws on the legalization of marijuana and 

whether banks can service State legal marijuana businesses, it 

would likely be helpful to also address any similar issues related 

to insurance companies and products. 
126 

1See https://www.federalreserve.gov/publications/files/stakeholder-feedback-on-modernizingthe-community-reinvestment-act-201906. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN 

FROM MICHELLE BOWMAN 

Q.1. The Federal Reserve Board of Governors is engaged in an 

interagency process to rewrite the Community Reinvestment Act 

(CRA) rules. 

In your view, what is problem with the current Community Reinvestment Act (CRA) regulations? 

A.1. The Federal Reserve Board of Governors (Board) takes our 

Community Reinvestment Act (CRA) responsibilities seriously and 

strives to conduct meaningful CRA evaluations. There has been 

considerable change since the time the regulations implementing 

the law were last revised. The Board supports modernizing CRA to 

improve the clarity, consistency, and predictability of how CRA performance is assessed, as well as the predictability of which community development investments and loans qualify for CRA consideration. While there is a lot that is good about the current regulations, many stakeholders have said that they are too complicated 

and that if they were made simpler and more transparent both 

banks and communities would benefit. 

I believe that the regulations should recognize that banks serve 

communities with different credit needs. Additionally, the regulations should be tailored to evaluate a bank’s CRA performance in 

light of its size, business strategy, capacity, and constraints as well 

as its community’s demographics, economic conditions, and credit 

needs and opportunities. I also understand the need to update assessment areas to reflect how technology and other advancements 

have significantly changed how financial services are accessed and 

delivered. 

My Board colleagues and I support working with the Federal Deposit Insurance Corporation and the Office of the Comptroller of 

the Currency (OCC) to modernize CRA and believe the agencies 

should find a way to preserve this statutory intent in any future 

update of the regulation. We are continuing to evaluate public 

input from a wide range of stakeholders on ways to modernize the 

CRA, including through the OCC’s Advanced Notice of Proposed 

Rulemaking and the roundtables that the Federal Reserve held 

across the country from October 2018 through January of this 

year. 1

Q.2. Currently, more than 98 percent of banks pass their CRA examinations but lending discrimination and banking deserts still 

exist in communities all across the country. Does this suggest that 

CRA examinations are too early? 

A.2. The CRA regulations are very specific with respect to the criteria necessary to achieve a ‘‘Satisfactory’’ or ‘‘Outstanding’’ rating. 

In general, banks work to avoid poor CRA ratings, which can lead 

to community relations and public reputational issues, result in 

more frequent CRA evaluations, and pose a significant barrier to 

any future plans for expansion. Ratings also are made public, giving banks additional incentives to establish effective CRA pro-
127 

grams. Given these factors, I believe that our CRA examination 

process is robust and rigorous. 

Q.3. More than half of mortgages are now made by nonbank mortgage companies. Should these nonbank lenders have CRA or other 

similar obligations to serve the whole communities in which they 

are located? 

A.3. I have heard this concern expressed in my meetings with community bankers. As you know, decisions about which financial institutions to exempt from certain laws or rules are a matter for 

Congress or, if granted the authority by Congress, by the regulator 

with responsibility for promulgation of regulations, which in this 

case is the Consumer Financial Protection Bureau. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR CORTEZ MASTO FROM MICHELLE BOWMAN 

Q.1. I am very concerned about climate-related financial risks. The 

most recent National Climate Assessment said the U.S. Southwest 

could lose $23 billion per year in region-wide wages as a result of 

extreme heat. Since you joined the Federal Reserve Board, what 

have you done to prepare community banks for long-term shifts in 

climate patterns, like increasing extreme heat and more severe and 

more frequent storms? 

A.1. Congress has placed the responsibility to address climate 

change within other agencies. The Federal Reserve Board’s (Board) 

supervisory framework guides supervisors in their work with these 

institutions on a wide range of risk management practices, including those around severe weather events. To supplement that broad 

framework, the Board also has issued guidance on lending to sectors where assessments of severe weather-related risks are especially critical, such as agriculture and energy lending. I can assure 

you that I appreciate the distinct concerns of community banks in 

this space, because of both their size and their important social 

role; I will continue to urge Federal Reserve examiners and supervisors to do the same in their daily work. 

Q.2. In March, Glenn Rudebusch published an economic paper on 

Climate Change and the Federal Reserve. The paper notes that 

droughts, floods, and hurricanes amplified by climate change could 

result in more infrastructure damage, agricultural losses, and commodity price spikes. Rudebusch notes that ‘‘some have advocated 

that central banks use their balance sheet to support the transition 

to a low-carbon economy, for example, by buying low-carbon corporate bonds.’’ 

Do you think Congress should consider changing the law to support ‘‘green’’ quantitative easing as an option for the Fed? 

A.2. The Federal Reserve conducts monetary policy to promote its 

statutory goals of maximum employment and stable prices. Decisions about how to foster new technologies, new industries, or 

about channeling credit to particular sectors of the economy inevitably involve competing political interests. The Congress and the 

Administration are in the best position to make judgments balancing those interests on behalf of the U.S. taxpayer. 
128 

Q.3. Which other Central Banks allow green quantitative easing? 

Do you believe those models could translate to the American financial system and economy? 

A.3. I am not aware of any advanced-economy central bank that 

has a ‘‘green quantitative easing’’ program. As I noted in my response to Question 2, Congress and the Administration are in the 

best position to evaluate this question. 

Q.4. In the Federal Reserve’s Supervisory Report released November, there was a section on merger and acquisition risks. The banking law passed last year changed the asset threshold for a small 

bank holding company from $1 billion to $3 billion. It also reduced 

capital requirements and other rules for banks above $50 billion. 

We have seen more bank mergers since the law passed. 

Do you expect to see more bank mergers this year and next year 

than in previous years? 

How much of merger activity is due to changes from S. 2155 and 

other regulatory actions? 

A.4. Merger activity is affected by a number of factors, including 

economic environment, industry outlook, and factors unique to particular institutions or business models. As such, I am not able to 

draw conclusions on the effect of S. 2155 or other regulatory actions at this time. Following the implementation of S. 2155, we 

have not seen a significant change in applications for bank acquisitions and mergers submitted to the Federal Reserve System to 

date. In fact, the number of these types of applications submitted 

to the Board is lower now than in the years before the financial crisis. 

Between May 24, 2018, the enactment date of S. 2155, and December 31, 2018, the Federal Reserve System received 113 applications for the proposed merger and acquisition of banking organizations under the Bank Holding Company Act, the Bank Merger Act, 

and the Home Owners Loan Act. This number is lower than the 

number of merger and acquisition applications submitted during 

the same period for each year from 2006 to 2017. 

Q.5. What do you see as the risks from mergers and acquisitions 

beyond the impacts on the customer? 

A.5. Like any firm, a variety of risks are always present, but when 

firms merge or make acquisitions, the chief risk is operational. 

Operational risk could present during the integration of systems 

related to risk management, information technology, Bank Secrecy 

Act/Anti–Money Laundering, and the Community Reinvestment 

Act. In reviewing bank merger and acquisition proposals, the Federal Reserve considers the applicant’s plans for implementing the 

proposal and its capacity to do so effectively. 

Q.6. What are the risks to communities when banks merge? 

A.6. Congress has given the Federal Reserve a set of statutory factors to use during the evaluation of a merger or acquisition application, one of which is the convenience and needs of the communities 

to be served and public benefits. Furthermore, the Federal Reserve 

also must analyze the competitive effects of the proposal, including 

whether the proposal would substantially lessen competition in any 

section of the country. In addition, the Board considers the appli-
129 

1Section 42 of the Federal Deposit Insurance Act (12 U.S.C. §183 1r-1), as implemented by 

the Joint Policy Statement Regarding Branch Closings (64 FR 34,844 (1999)). The Joint Policy 

Statement Regarding Branch Closings states that the Federal banking agencies will examine 

institutions for compliance with branch closure requirements in accordance with each agency’s 

consumer compliance examination procedures. 

cant institution’s business model, its marketing and outreach 

plans, and the institution’s plans following consummation of the 

proposal. I take this role seriously and intend to be thorough in my 

review of all current and future applications. 

Q.7. Are you concerned about a loss of branches? Types of products? Jobs? 

A.7. I understand and am sympathetic to the concerns raised with 

respect to the potential loss of branches, products and services and 

jobs following financial institution mergers. In evaluating convenience and needs factors in bank acquisition and merger proposals, 

the Board considers all relevant information, including the addition 

of new products, extended hours of service, or additional branch locations that will be subsequently available to the public. With respect to branch closures, banks are required to adhere to Federal 

Deposit Insurance Act public notice requirements 1 before closing 

branches, which include the following: 

• The bank is required to provide reasons and other supporting 

data for the closure, consistent with the institution’s written 

policy for branch closings. 

• For branches to be closed in low- or moderate-income geographies, affected persons have the ability to request a public 

meeting to explore the feasibility of obtaining adequate alternative facilities and services for the area. 

• The bank also is required to provide the public with at least 

30 days’ notice, and the appropriate Federal supervisory agency with at least 90 days’ notice, before the date of a proposed 

branch closing. 

A pattern of branch closures in minority communities also may 

be relevant in determining whether a bank is in compliance with 

fair lending laws. For example, it may be a consideration in determining whether a bank is engaging in redlining. Branching is one 

of the factors that is considered in a redlining analysis, along with 

the bank’s CRA assessment area, lending, marketing, and outreach 

practices. In evaluating branching for these purposes, we analyze 

whether there are bank branches in majority–minority census 

tracts. 

The Federal Reserve considers applicants’ plans for products and 

services to be offered by the combined institution, including significant anticipated changes to products and services currently offered 

by the individual institutions and plans to offer new, replacement, 

or enhanced products and services. Many acquiring banks plan to 

offer the products and services of both the acquiring bank and the 

target bank throughout the footprint of the combined bank, resulting in increased availability of products and services for customers 

of each bank. 

The Federal Reserve reviews applications for consistency with 

the applicable statutory factors. These factors include the applicant’s current and pro forma financial condition and future pros-
130 

pects, managerial resources, the convenience and needs of the communities to be served and public benefits, the competitive effects 

of the merger or acquisition, and impact of the proposal on financial stability. 

Q.8. At a time when community banks are earning record profits, 

why have you voted repeatedly to lower the amount of regulatory 

capital they hold? 

A.8. The Board has not acted on any proposals to lower capital levels for community banks. However, as I stated in my testimony, as 

regulators, we need to ensure that we are not imposing unnecessary burdens on community banks. This is why I believe we must 

tailor our supervision and regulation to the size, complexity, capacity, and risks posed by an institution. Community banks are critical to so many local economies, which is why it is important to 

adapt our approach to supervision and regulation as the industry 

evolves. 

Q.9. Why have you never joined Governor Brainard in a dissent of 

all these deregulatory actions, including those that weakened rules 

for the biggest banks? 

A.9. As I stated in my testimony, the core reforms that resulted 

from the crisis were crucial to ensure the resilience of the U.S. financial system. At the same time, I believe that our regulatory and 

supervisory framework should be tailored according to banking 

firms’ size, complexity, and risk profile, in a way that minimizes 

costs and is consistent with statutory provisions. I have appreciated the value placed on getting a broad range of external and 

internal views throughout our deliberative process. 

Q.10. How does your support for revising the capital and liquidity 

requirements for large banks help community banks? 

A.10. One of the key goals of the recent tailoring proposals is to 

better reflect the differences in risk profiles between firms that 

qualify as U.S. global systemically important banks and other large 

banking organizations. U.S. firms with the most significant risk 

profiles would remain subject to the most rigorous existing requirements under the proposals. These proposals build on the Board’s 

existing efforts to tailor its rules and experience implementing 

those rules, and account for changes to the enhanced prudential 

standards made by S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act. 

Q.11. How does your support for weakened stress test regimes for 

large banks help community banks? 

A.11. I believe that a strong, resilient financial sector is important 

to banking institutions regardless of their size. Stress testing remains a core tool for the Federal Reserve. Our proposal aligns compliance requirements for firms with less risk while maintaining 

more stringent requirements for firms with more risk and more 

systemic importance. The proposal also provides banking organizations with additional transparency, so that they can better comply 

with the tests. 
131 

Q.12. How does your support for changing the formula for derivatives so that less capital is held against derivative positions help 

community banks? 

A.12. The Board, the Federal Deposit Insurance Corporation 

(FDIC), and the Office of the Comptroller of the Currency (OCC) 

(together, the agencies), estimate that the proposal would not significantly change the amount of regulatory capital in the banking 

system. The proposal updates standards for how large banking organizations measure counterparty credit risk posed by derivative 

contracts under the agencies’ regulatory capital rules. The proposed 

changes are designed to better reflect the current derivatives market and incorporate risks observed during the 2007–2008 financial 

crisis. The new approach, called the ‘‘standardized approach for 

measuring counterparty credit risk’’, or SA–CCR, is intended to 

better reflect the current derivatives market and to provide important improvements to risk sensitivity, resulting in more appropriate capital requirements for derivative contracts exposure. The 

proposal would require large banks to adopt SA–CCR, but permit 

smaller firms to use the existing current exposure methodology 

(CEM). 

While the agencies recognized that the proposed implementation 

of SA–CCR would offer several improvements to CEM, it may require, particularly for firms with relatively small derivatives portfolios, internal systems enhancements and other operational modifications that could be costly and present additional burden. 

Q.13. How does your support for reducing resolution plans for big 

banks from once a year to every 4 or 6 years help community 

banks? 

A.13. Changing the frequency of resolution plan submissions for 

large firms will not have an impact on community banks. Community banks have total assets of $10 billion or less and therefore, are 

not subject to the Dodd–Frank Wall Street Reform and Consumer 

Protection Act (Dodd–Frank Act) resolution planning requirement. 

The change in resolution plans is consistent with the Board’s 

broader efforts to tailor supervisory expectations to the size and 

complexity of our supervised firms. 

Q.14. How does your support to end risk-reducing margin requirements for derivatives transactions between affiliates of large complex banks help community banks? 

A.14. The banking agencies have not taken action on this matter. 

However, I believe it is sensible to review our regulatory requirements periodically to assess whether they can be made more efficient, consistent with the Dodd–Frank Act and considering other 

regulatory requirements applicable to the firm. 

If the U.S. prudential regulators (the Board, FDIC, OCC, Farm 

Credit Administration, and Federal Housing Finance Agency) propose to eliminate interaffiliate margin requirements, that change 

would likely have limited effects on community banks because community banks are already exempt from the swap margin rule. Community banks and other small financial institutions do not have to 

post margin for their noncleared swap transactions. On August 1, 

2016, the prudential regulators announced their final rules exempting banks, savings associations, Farm Credit System institutions, 
132 

and credit unions with $10 billion or less in total assets from the 

OTC margin requirements under the Dodd–Frank Act. This relief 

is designed to allow such firms to use OTC derivatives to hedge 

normal business activity as they have done in the past (e.g., hedging the interest rate risk of loans). 

Q.15. If a fair lending exam detects a violation after a bank has 

been graded for its Consumer Reinvestment Act exam, do you 

think the bank should receive a retroactive downgrade? 

A.15. I find discriminatory and other illegal credit practices unacceptable and they have no place in civil society. Moreover, such 

practices can have a negative effect on a bank’s CRA rating. The 

Board’s current regulation is explicit about how to consider illegal 

credit practices when assigning ratings. Consistent with the regulation, our process entails a fact-specific review of the matter before 

deciding whether it should prompt a downgrade of a CRA rating, 

including the nature of the practices, any corrective actions taken 

to address them, and the policies and procedures in place to prevent them. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN 

FROM PAUL SHMOTOLOKHA 

Q.1. As First Vice President of the Export–Import Bank (EXIM), 

how will you work to assist Congress in reauthorizing EXIM’s charter, which expires on September 30, 2019? 

A.1. If confirmed, I will work with Congress on any issue of concern and provide insight from 30 years of business experience in 

export and managing overseas market conditions and customers. If 

confirmed, I would participate in areas where I have the most prior 

experience, so I would seek to ensure that the small business perspective is considered as well as the views of the international customer base. I would advocate a sense of urgency for having the 

Bank be fully able to fulfill its mission of creating American jobs, 

and follow the direction of the Chairman in my work. 

Q.2. EXIM President Kimberly Reed has pledged to make reforms 

to improve the Bank’s operations and to address certain concerns 

with regard to credit assistance offered by the Bank, such as ensuring that EXIM does not compete with private financing. 

As the Bank pursues reforms, whether through proposals for action by EXIM’s board of directors or a proposal for reauthorization 

of the Bank’s charter, will you pledge to provide transparency in 

reform efforts? 

A.2. Yes, I would provide transparency in reform efforts within the 

parameters of the position of First Vice President and in accordance with EXIM’s Charter and Bylaws, as well as with my experience of best business practices. 

Q.3. If confirmed, are there any specific policies or procedures of 

the Export–Import Bank that you would work to alter or change? 

A.3. If confirmed, I look forward to reviewing EXIM’s policy and 

practices and to reviewing implementation of all reforms previously 

mandated by Congress and to ensure that EXIM complies with all 

provisions in the Charter and Bylaws. As I do not currently have 
133 

access to internal EXIM information concerning policies and procedures, I do not currently have specific proposals to alter EXIM’s 

policies or procedures. If confirmed, I am interested in looking 

closely at what can be done to improve small business application 

processes to potentially reduce turnaround times while maintaining 

or even improving EXIM’s risk management practices. Additionally, given my background, I would be interested in reviewing business development, operations efficiency, customer service, brand 

perception and values, product management, performance metrics 

and goal setting, ethical standards, transparency, strong risk management practices, and maintenance of client confidentiality at appropriate times during a deal cycle. I would also like to support 

EXIM’s strategic plan and work collaboratively to chart a new future for the Bank. 

In order to make recommendations, I expect that my colleagues 

and I on the Board of Directors would conduct a review process 

that could involve congressional and EXIM staff meetings, a review 

of EXIM-related GAO reports, surveys of U.S. manufacturers (including those who are not clients of EXIM), private sector financing 

sources (including community banks, regional, and multinational 

banks), foreign EXIM customers, United States Foreign Commercial Service staff in key markets and U.S. and International Development Banks. 

Q.4. Do you believe it is important to seek public comment from 

EXIM customers and the general public before making any changes 

that would significantly affect the availability of credit from EXIM 

for certain products or economic sectors? 

A.4. Yes, I believe that listening to the ‘‘voice of the customer’’ is 

a critical tool to ensure best practices are being followed in any organization. Public comments from American manufacturers, international customers and taxpayers add value in any decision-making process and I would seek to combine that with input from Congress and the Administration before making any changes that 

would significantly affect the availability of credit from EXIM for 

certain products or economic sectors. 

Q.5. If confirmed, will you publicly defend the Export–Import Bank 

against false or misleading charges of fraud? 

A.5. Yes, I would publicly defend EXIM Bank against false or misleading charges of fraud. 

Q.6. Do you see a need to impose an upper limit on doing business 

with any particular industry or commercial sector, like aerospace 

manufacturing, that has previously relied heavily on EXIM to access foreign markets? Or should EXIM’s lending be driven by demand from qualified applicants, to the extent permitted by the 

Bank’s charter? 

A.6. If confirmed, I will faithfully execute all laws consistent with 

the intent of Congress and within the authority of my office. I will 

review each transaction independently, on its merits, and in accordance with the EXIM Charter established by the Congress, the 

Bylaws approved by EXIM’s Board, and other policies and procedures established by the Bank for review of individual transactions. 

It is my understanding that Congress has established EXIM to 
134 

serve as a demand-driven institution. EXIM must also consider the 

risks associated with individual transactions and its overall portfolio. If transactions meet the requirements as laid out in the 

Bank’s Charter and the risks can be appropriately managed, I do 

not see the need currently to put a limitation on financing for sectors that support American jobs. 

Q.7. If confirmed, would you work to ensure that the comment 

process for environmental and social impacts from projects is properly structured and adequately resourced to ensure that comments 

from concerned parties are meaningfully considered? 

A.7. Yes, I would work with fellow Board members and EXIM staff 

to ensure that the comment process for environmental and social 

impacts from projects is properly structured and resourced to ensure that comments are meaningfully considered. 

Q.8. If confirmed, do you commit to providing all documents and 

materials that the Office of Inspector General requests? 

A.8. Yes. I believe that Inspector General requests are critical to 

good governance, transparency, and ensuring compliance. I would 

provide all documents and materials that the Office of Inspector 

General requests of me. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER 

FROM PAUL SHMOTOLOKHA 

Q.1. The EXIM Bank is one of the most underutilized tools in our 

toolkit for supporting U.S. exports and protecting our national security interests. As of 2017, the export credit agencies of Japan and 

Korea had $187 billion in medium and long-term exposures; Canada, Germany, France, Italy, and the United Kingdom had $306 

billion; and China had an estimated $363 billion. 

By comparison, America’s EXIM has an exposure of about $70 

billion—about one dollar for every five of China’s. 

Do you agree that the EXIM Bank is an important piece of our 

trade infrastructure that will help us compete with foreign ECAs? 

A.1. Yes, EXIM Bank is a critical part of our trade infrastructure 

and it should assist in levelling the playing field. 

Q.2. Do you agree that the lack of a quorum at the EXIM Bank 

over the past several years has had significant negative consequences for U.S. competitiveness in markets like nuclear energy 

and aerospace? 

A.2. Yes, working for a company that was a supplier to large power 

generation manufacturers I have personally observed the negative 

consequences of the lack of a quorum at EXIM and the inability to 

approve transactions over $10 million. 

Q.3. As we go into reauthorization at the end of 2019, what are 

your top priorities for the Bank? 

A.3. Should I be confirmed, I expect that my top priorities will include, but not be limited to: compliance with the mandates in the 

Charter and Bylaws of the Bank and implementing reforms mandated by Congress. I would also expect to focus on improving transparency, reviewing the existing pipeline of deals, and ensuring that 
135 

EXIM is available to provide financing that will help support and 

create jobs across the country. 

In order to do so, I believe outreach to small, medium, and large 

businesses and building closer cooperation with regional and community banks will be necessary to revitalize the brand and confidence in EXIM as a stable partner both inside and outside the 

USA. Constant improvement is necessary to improve EXIM’s relationships and support for small business. Should I be confirmed, I 

would expect to explore how cooperation with other funding sources 

such as regional or national development banks can help American 

business win supply contracts in emerging markets, especially for 

infrastructure projects that may require closer cooperation with 

private sector lenders. 

Finally, should I be confirmed I would be interested in working 

with the business divisions of the Bank to develop more medium 

term financing opportunities, and examining what can be done to 

improve small business application processes to potentially reduce 

turnaround times while maintaining or even improving EXIM’s 

risk management practices. I believe EXIM can continue to 

strengthen efforts to educate owners, finance teams, and management at more American manufacturers on EXIM products in order 

to respond to more aggressive tactics being used by foreign competition. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR CORTEZ MASTO FROM PAUL SHMOTOLOKHA 

Q.1. Can you give me a few examples of U.S. companies you 

worked with that financed deals with the Export–Import Bank? 

A.1. While being respectful of business confidentiality considerations, I can share the following anecdotes. 

A regional cable TV company owned by a media group in Brazil 

wanted to purchase quality American-made products and turned to 

a global distributor of broadband network products located in Florida, who worked with EXIM and put together financing for a basket of products from several American manufacturers. Financing 

from a private bank coupled with a medium-term (5-year) loan 

guarantee from EXIM allowed the company to source American 

products, including powering equipment from my current employer, 

Alpha Technologies. This Florida-based company is working to secure contracts for additional opportunities in South America. Those 

transactions will require financing from a Government-backed export credit agency because the private sector is unwilling to finance 

such transactions in certain markets. 

In my own circumstances at Alpha Technologies, we had decided 

to turn to EXIM Bank in 2017 for export financing support. In 

order to continue to grow our export business, we needed to balance the growing demand for our products with the risks of exporting to certain fast-growing emerging markets in Central and South 

America, Africa, and Asia. Private sector export insurance was not 

readily available. Alpha had two options: require that customers 

pay in advance of shipment or offer to finance the transactions at 

lower values and assume all the risk. An export credit insurance 

policy could have helped Alpha offer more competitive terms at less 
136 

risk to the company’s bottom line and would have increased deal 

sizes significantly. Ultimately, due to an unrelated issue, Alpha’s 

internal resources were diverted from this initiative and foreign 

buyers either purchased fewer products or moved to other suppliers. 

As a manufacturer of critical back up power systems for large 

capital equipment, we sold these systems to a U.S. manufacturer 

who then bundled it into their multimillion dollar solutions that 

they marketed worldwide, often with EXIM financing. In 2015, 

when EXIM lost its ability to provide financing over $10 million, 

we noticed that the U.S. manufacturer moved some of its procurement sourcing locations overseas and utilized the export credit 

agencies of other countries. We lost some sales to foreign competitors as a result of these developments. 

In my work in international sales, I have also been informed by 

a number of leading international telecommunications companies 

who, despite a desire to purchase U.S. goods, have made purchases 

from other countries, including China, because of the financing 

made available. 

Q.2. Now that we have President Reed, and Commissioners Bachus 

and Pryor, the board has a functioning quorum. How quickly do 

you think the Export–Import Bank can finance the backlog of 

sales—about $40 billion—that have been delayed over the past 4 

years? 

A.2. As my nomination is still pending and I am not involved in 

EXIM’s internal decision making, I cannot give an exact timeline. 

To answer this question, I would need to know more about the 

quality of the transactions in the pipeline and the status of the 

deals as they have been in suspension for some time. What I can 

say is that working through a large backlog takes a solid plan 

based on resource availability and priorities but no business has 

anything more important than customers waiting for their products 

or services. Should I be confirmed, I would seek to ensure that the 

Bank is being diligent in its underwriting of current and new 

transactions and is processing transactions efficiently, while being 

mindful of the statutory obligations of EXIM’s financing and our 

role as responsible stewards of taxpayer dollars. I would also be 

mindful of my own experience: that customers are impatient and 

the market is efficient, and that suppliers may turn to other means 

that are not necessarily in the American worker’s best interests. 

Q.3. At any given time, the bank can have only $135 billion in 

loans, loan guarantees, and other types of financing assistance outstanding. After 4 years of restricted operations, it has about $60 

billion in credit out, leaving about $75 billion available. The Export–Import Bank needs to be reauthorized by September 30 of this 

year. Do you think Congress should raise the credit exposure cap? 

A.3. As I said when I testified before the Committee, I do think 

that Congress should raise the overall financing authority of the 

Bank. The exposure cap should be set at a level that is based on 

forecasted need and that enables EXIM to meet its statutory mandate to support U.S. jobs by facilitating exports, to level the playing 

field for U.S. exporters, and to supplement private sector capital. 

Regardless of where the exposure cap is set, EXIM must maintain 
137 

its robust risk management procedures and be responsible stewards of taxpayer dollars. 

Q.4. There are more than 100 foreign export credit agencies providing their companies with billions of financing. What have you 

learned about how other Nations assist their companies with exporting goods that we should emulate? 

A.4. The most significant development that I have seen is the increased provision of medium-term loans at terms that are extremely aggressive. I believe it is worthwhile for EXIM to consider 

how its medium-term program can continue to be enhanced while 

maintaining alignment with the Organization for Economic Cooperation and Development’s Arrangement on Officially Supported 

Export Credits. Globally, I have observed an increase in large scale 

funding for infrastructure projects that is then tied to exports. 

Should I be confirmed, I look forward to learning more about the 

ways in which other countries are using export financing and how 

EXIM can best fulfill its mission of supporting U.S. jobs through 

exports. Should I be confirmed, I believe it will continue to be important to partner with like-minded countries to ensure companies 

are competing on the price and quality of the product rather than 

the terms of Government-backed financing. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA 

FROM PAUL SHMOTOLOKHA 

Q.1. What ideas do you have to improve EXIM’s visibility and outreach to small businesses? If confirmed, what metrics would you 

use to measure the Bank’s success in doing so? 

A.1. In my personal experience, the EXIM network of outreach professionals performs an admirable job with their resources. I have 

personally been marketed at trade shows, and through in-person 

visits to our company and via digital means. I cannot provide ideas 

to my fullest extent to improve EXIM’s visibility and outreach to 

American small business without having the benefit of working internally with the staff. However, should I be confirmed I would set 

this goal as a priority and advocate for the proper allocation of resources to succeed. Based on my own experience, I believe that any 

strategy should include outreach to both the U.S. and international 

customer base. The education of EXIM product features and benefits should be amplified through cooperation with export promotion 

agencies such as U.S. Trade Development Agency and U.S. Foreign 

Commercial Service. 

Education needs to reach more small business owners, salespeople, and finance teams. All those stakeholders have to buy into 

the need to invest the time, energy, and resources in order to engage effectively. Most companies do a great job in marketing their 

products, but focusing on the customers’ ‘‘why’’ and linking that to 

EXIM’s products and services increases the chance for success. In 

my experience, a focus on digital marketing can be the best multiplier to reach wide-ranging customer base nationally and globally. 

I would also advocate that EXIM continue to enhance its efforts to 

work with community and regional banks as multipliers as they 

are closer to local businesses. 
138 

Metrics development and measurement is an essential tool for 

achieving success, especially for specific initiatives or campaigns. 

Metrics should be linked to strategic plans and annual goal setting. 

Should I be confirmed, I would make it a priority to understand 

which, if any, Customer Relationship Management (CRM) platforms or tools are being used so that we can improve visibility of 

the customer among EXIM’s units, measure organizational performance, and help staff gain key insights about which businesses 

could benefit from utilizing EXIM’s financial tools. These platforms 

can also be used to make course corrections or adjustments without 

having to wait for lengthy research and reports. The power is at 

the keyboard and the data is the data. 

Without internal EXIM information available to me, based on my 

previous experience, I expect there are several metrics that could 

be used to measure the Bank’s success in tracking its outreach and 

visibility to small businesses. These include: measurement from the 

source of the lead generation, lead assignment, qualifying leads 

from follow up and indication of interest, total applications submitted, total approved applications, total nonapproved applications 

(and reasons why), status of lead before closing, total number of 

transactions closed, reasons transactions are not closed, and customer surveys at the end of any successful or unsuccessful process. 

Should I be confirmed, I would also be interested in tracking the 

timeline from lead generation to close, and application submission 

to close. Having different metrics by product, size of company and 

approvals process, will help Bank staff assess where changes ought 

to be made. Average deal size, average number of employees per 

transaction or dollar deployed, analysis by product, specific market 

segment targets, geographic spread and reach, and many other customer oriented metrics can be added. 

Accurate metrics tracking can help EXIM ensure it is meeting its 

congressional mandate to support small business exports, could 

help identify areas where product improvements can be made, and 

could also be helpful in new lead generation (defined as new leads 

from existing accounts or new account leads). 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS 

FROM ALLISON HERREN LEE 

Q.1. I am pleased to be the sponsor of the Financial Stability Oversight Council Improvement Act of 2019, which would require FSOC 

to determine whether potential nonbank threats to financial stability could be better solved by allowing companies to work with 

their primary regulator or through the development of a risk reduction plan. The SEC is the only FSOC member that focuses on capital markets. In order to protect investor access to our markets, the 

SEC must guard against a blunt SIFI designation when other more 

appropriate methods of remediation are available. 

Do you agree that the SIFI designation process needs to be reformed to prevent unnecessary designations? 

A.1. The Financial Oversight Stability Council was created in the 

aftermath of the 2008 financial crisis in part to help identify and 

reduce systemic risks confronting the financial system. 
139 

I agree that the improper designation of a nonbank SIFI unnecessarily imposes heightened regulatory oversight without necessarily reducing systemic risk. It is the Chair of the Commission 

who acts as the voting member from the SEC on FSOC, and if confirmed, I would be interested in understanding his and others’ 

views as to whether changes could be made to reduce any risk of 

an improper designation while continuing to adequately protect 

against systemic risk. I am open to considering all facts and data, 

and to hearing from and working with you, your staff, Members of 

this Committee and all relevant constituencies on this issue. 

Q.2. Do you agree that it’s important for FSOC to consult with primary regulators before voting on a SIFI designation? 

A.2. In general, yes. It is likely that primary regulators will have 

significant information and expertise relevant to a SIFI determination. Moreover, it is my understanding that FSOC rules provide for 

such a consultation. 

Q.3. Do you agree that addressing nonbank risk does not always 

have to include a SIFI designation? 

A.3. A SIFI designation, and the consequences that flow therefrom, 

represent one method of addressing systemic risk in the financial 

system. Primary regulators overseeing nonbank institutions may 

also be in a position to implement certain changes that can address 

systemic risk. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR MENENDEZ FROM ALLISON HERREN LEE 

Q.1. I worked to include the honest broker provision in the Wall 

Street Reform law, and Congress’ clear intent was for the SEC to 

establish a uniform standard of conduct. However, the SEC’s ‘‘best 

interest’’ proposal fails to establish a uniform standard of conduct 

for broker-dealers and investment advisers, and it puts the burden 

on the retail investors to understand the difference between brokers and investment advisers. Moreover, the SEC’s own Investor 

Advisory Committee recommended in November that everyone—investment advisers and brokers—be held to a uniform standard. 

Do you believe the average retail investor understands the difference between brokers and investment advisers? 

A.1. No. I agree with Chairman Clayton who stated ‘‘it has long 

been recognized that many investors do not have a firm grasp of 

the important differences between [broker-dealers] and [investment 

advisers]—from differences in the variety of services that they offer 

and how investors pay for those services, to the regulatory frameworks that govern their relationship.’’ 

Q.2. Do you believe retail investors should bear the burden of trying to decipher complex legal relationships to understand whether 

they are making good investment decisions? 

A.2. No. I believe that both investors and registered entities deserve rules that clearly delineate the nature and extent of requirements regarding their relationship. Retail investors should receive 

a full, fair, and simple explanation of these requirements, includ-
140 

ing, among other items, how any differing standards compare to 

one another, so as to allow them to make well-informed choices. 

Q.3. Do you believe the SEC can do more to encourage brokers to 

put retail investor’s interest first? 

A.3. Yes. In my view, there are approaches the SEC can consider 

to encourage brokers, where needed, to focus on ensuring that retail investors’ interests are paramount. These can include, among 

others, working closely with FINRA in implementing and interpreting Regulation BI in a manner that optimizes the protection of 

retail investors, and focusing enforcement efforts through programs 

such as the Enforcement Division’s Retail Strategy Task Force. 

Q.4. In its post-mortem of the financial crisis, the Financial Crisis 

Inquiry Commission concluded that ‘‘compensation structures were 

skewed all along the mortgage securitization chain, from people 

who originated mortgages to people on Wall Street who packaged 

them into securities.’’ 

What is your view on the impact of incentive-based compensation 

structures in the years leading up to the financial crisis? 

A.4. In my view, compensation structures at financial institutions 

in the period leading up to the financial crisis in 2008 often 

incentivized and rewarded short-term results, with little accountability for long-term success. This encouraged the creation of excessive levels of risk that later proved damaging to these financial institutions and, in some cases, to the entire financial system. 

Q.5. If confirmed as Commissioner, would you push the SEC to finish the incentive-based compensation rule required by Dodd– 

Frank? 

A.5. Yes. If confirmed, I would work with the Chairman, the other 

Commissioners, the staff and, where appropriate, other regulatory 

agencies to encourage completion of the Joint Agency Proposed 

Rule on Incentive-Based Compensation Arrangements. 

Q.6. If so, what you think this rule should look like? 

A.6. Given the pending rulemaking, I do not want to prejudge the 

final rule. That said, the areas I would want to consider closely in 

any final rule would include, among others (a) whether the rule is 

broad enough to cover the appropriate institutions, the appropriate 

persons within those institutions, and the appropriate types of compensation; (b) whether the rule is appropriately tiered and tailored 

between smaller and larger institutions; (c) whether restrictions on 

excessive compensation are adequate and clearly defined; (d) 

whether enhanced requirements at larger institutions are adequate 

with respect to areas such as downward adjustments, deferrals, forfeitures, clawbacks, and various other limitations; (e) whether the 

rule adequately addresses governance and compliance issues such 

as board oversight, control, policies, and recordkeeping. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER 

FROM ALLISON HERREN LEE 

Q.1. In an article published in 2016 in the Cornell Law Review, 

Professor Urska Velikonja called the SEC enforcement measures 

deeply flawed. She identified numerous problems, including double 
141 

or triple counting of enforcement actions and defendants and counting tangential or follow on proceedings that do not meaningfully reflect a separate action, etc. Given your extensive experience at the 

SEC and background in enforcement, do you believe the SEC consistently follows the same policies and procedures with respect to 

enforcement statistic reporting, from year to year? 

A.1. I believe that enforcement statistics should be gathered, analyzed, and reported in a consistent and transparent manner that 

provides a depth of information on the nature, extent, and success 

of enforcement activities. Such an approach supports well-informed 

internal assessments at the SEC, and equally important, public assessment and accountability. I have read Professor Velikonja’s article on SEC enforcement statistics, and if confirmed, would look forward to hearing the staff’s views and exploring the areas she has 

highlighted as potentially revealing inconsistencies, as well as considering more broadly whether changes that increase consistency 

should be made. 

Q.2. Could the SEC could improve the quality, reliability, and consistency of its enforcement statistics? 

A.2. Improvement in each of these areas merits careful attention 

and consideration. Identifying and understanding the nature of, 

and trends in, enforcement over time is critical to instilling investor confidence. Moreover, consistent and reliable data is necessary 

to support the public’s confidence in regulators, and to aid Congress in its oversight responsibilities. If confirmed, I would look forward to hearing from the staff, you, your staff, Members of this 

Committee, and all interested constituencies on how improvements 

may be made to the quality, reliability, and constituency of SEC 

enforcement statistics. 

Q.3. If confirmed, will you commit to looking closely at this issue 

and to the extent possible, work with the GAO—which is conducting a study on this issue at my request—to provide more transparency into enforcement statistic reporting? 

A.3. Yes. 

Q.4. As you know, on June 5, 2017, the Supreme Court in Kokesh 

v. Securities Exchange Commission (SEC) ruled that the SEC only 

has 5 years to bring disgorgement claims against bad actors to try 

to compensate harmed Main Street investors. The practical effect 

of this Supreme Court decision for retail investors who have been 

harmed in fraud, pump-and-dump schemes, and other malicious activity is significant. The SEC, in its 2018 annual enforcement report, said that with respect to matters already filed by the Commission, ‘‘the court’s ruling in Kokesh may cause the Commission 

to forgo up to approximately $900 million in disgorgement, of which 

a substantial amount likely could have been returned to retail investors.’’ As you know, I have a bill with Senator Kennedy that 

would address this problem by giving the SEC new authority to 

seek restitution for harmed investors, subject to a statute of limitations of 10 years. 

I understand that you can’t comment directly on the legislation, 

but I am interested to get your views—as a former enforcement attorney—regarding the impact of the Kokesh case on the Commis-
142 

sion’s ability to effectively carry out its mission to protect investors? 

A.4. The ruling in Kokesh has significantly diminished the SEC’s ability to recover and return funds to investors. The $900 million 

in forgone disgorgement is money left in the hands of fraudsters 

that will never be returned to their victims. By its nature, fraud 

is often well concealed for many years, thus under this ruling, some 

serious misconduct will go unaddressed. For example, while at the 

SEC, I helped bring a case against a broker who had been paying 

secret cash kickbacks to a State treasurer in exchange for business 

over a 6-year period. The misconduct was by its nature hidden, and 

not uncovered until years after the scheme ended. 

Accordingly, most of the misconduct had occurred more than 5 

years prior. The SEC was able to obtain a judgment requiring the 

broker to disgorge all of the profits from kickback scheme, but likely could not have done so had it been subject to a 5-year statute. 

In addition, during my time in the Enforcement Division, I spent 

many hours meeting with and talking to the victims of fraud—people who were tricked into emptying their retirement accounts, 

maxing out their credit cards and even taking out a second mortgage on their homes on the false promise of high returns. I once 

spoke at length with a couple, a retired teacher and a retired insurance agent, who had to take jobs in a fast food restaurant just to 

keep a roof over their heads after being defrauded in a ponzi 

scheme. The statistics on foregone disgorgement are striking, and 

the real-world stories behind those numbers are equally jarring. 

Q.5. One of my top SEC priorities is improving public disclosures 

around human capital management. I’ve had a good dialogue with 

the Chairman on this issue, specifically around improving Reg SK disclosures to require public companies to provide more qualitative and quantitative information regarding their human capital 

management policies and practices. 

Do you believe there’s value to be gained by investors to have additional information on human capital management and practices 

at reporting companies? 

A.5. Yes. Increasingly, the value of public companies is driven by 

the nature, quality, and skill of their workforces. Understanding 

human capital management policies and practices can thus provide 

an important basis for investors to assess the nature of, and risks 

associated with, a company’s business. Indeed, investors have indicated strong interest in additional information regarding human 

capital. As Chairman Clayton has noted, ‘‘the historical approach 

of disclosing only the costs of compensation and benefits often is 

not enough to fully understand the value and impact of human capital on the performance and future prospects of an organization.’’ 

In addition, Regulation S-K contains no specific obligation to disclose this type of information other than the number of employees 

at a company. While periodic reports also must include information 

deemed material to investors, this requirement generally has not 

led to human capital disclosures that are sufficiently robust, consistent, or comparable. 

Q.6. If confirmed, would you push for the SEC to dedicate resources to explore this topic or otherwise undertake a rulemaking? 
143 

A.6. Yes, if confirmed, I will work with the Chairman, the other 

Commissioners, and the staff to identify methods of improving the 

quality, extent, and comparability of human capital disclosures, including potential rulemaking. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN 

FROM ALLISON HERREN LEE 

Q.1. On the June 5, 2019, the Securities and Exchange Commission 

(SEC) voted to adopt new rules on standards of conduct for investment advisers and broker dealers. 

How would you have voted on this rule package had you been a 

Commissioner on the SEC? 

Why? 

A.1. I have not had the benefit of discussions with the Chairman, 

other Commissioners, or staff on the choices made in this rule 

package, or their views and analysis of the voluminous comments 

filed. That said, based on my reading of the final rule, I do have 

serious concerns. 

They include, among others, the adequacy of the standard for 

broker-dealers. I am concerned that the new, but undefined, ‘‘best 

interest’’ standard fails to establish a higher standard of conduct 

than that which was required of broker-dealers before the rule. The 

reason for the rulemaking was to improve on the prior standard 

which experience had shown often led to increased costs to retail 

investors. In my view, and depending on how the new rule is interpreted and implemented, it appears that the undefined standard 

may not improve the prior standard to a measurable degree. 

My concerns also include the Commission interpretation related 

to the standards applicable to investment advisers, and specifically 

the removal of proposed language that interpreted the duty of loyalty as requiring investment advisers to put their client’s interest 

first. In addition, I am concerned that Form CRS may fail to adequately inform investors regarding all relevant conflicts, and lacks 

comparative information regarding the types of choices investors 

have. The information on Form CRS should provide relevant, 

meaningful, and understandable information to investors at a critical juncture in their decision-making process. 

Q.2. In a departure from the proposed rule, which described current law as ‘‘require[ing] an investment adviser to put its client’s 

interest first,’’ the final rule said an investment adviser ‘‘must not 

place its own interest ahead of its client’s interest.’’ Do you understand there to be a meaningful difference between those two standards? Which do you think better describes the standards of conduct 

in place before the new rule was finalized on June 5? 

A.2. I am concerned that the changed language could be read as 

meaningfully different and used by some to justify practices that 

are not in the best interest of investors. 

As to the standard in place prior to the final rule package, in my 

view, the state of the law, as well as its interpretation by many, 

supported the concept that investment adviser fiduciaries must put 

their clients’ interests first. If confirmed, I would look forward to 

obtaining a better understanding of the staff’s views regarding the 
144 

changed language, including how the SEC will enforce compliance 

with the standard. 

Q.3. Based on your understanding of the new standards of conduct 

for broker-dealers, are there any instances that would have been 

permissible under the previous standards that are now unlawful? 

A.3. As suggested by the concerns expressed in your July 20, 2018, 

letter to FINRA, the interpretation and enforcement of the new 

rule will be a pivotal factor in achieving a higher standard for 

broker-dealers. Based on my reading of the rule, I believe there are 

areas where the new rule could accommodate such an outcome, including, among others, precluding some types of sales contests, requiring mitigation of certain conflicts, and requiring certain disclosures related to conflicts. If confirmed, I would support efforts to 

interpret and enforce the new rule in a manner that would preclude certain types of conduct that were previously permitted 

under the suitability standard. 

Q.4. The SEC uses fines to punish companies for violating the law 

and deter future bad behavior. According to a recent report in the 

Wall Street Journal, the SEC had only collected 55 percent of fines 

assessed from 2013–2018 and 60 percent of fines for the previous 

5 years. Apparently ‘‘unpaid fines are written off as uncollectable 

after 2 years.’’ 

How would you ensure that fines are collected from people of 

companies that have violated the law? 

A.4. I share the concerns indicated by your question. Maximizing 

the collection of disgorgement and penalties at the SEC is essential. This is particularly important because the funds collected 

come straight out of the hands of bad actors, and a substantial 

amount can go straight to harmed investors. Few endeavors could 

be more worthwhile in terms of fairness, accountability, and deterrence. If confirmed, I would look forward to working with the 

Chairman, the other Commissioners, and the staff to better understand what factors contribute to difficulties in collections and to develop approaches that could increase the collection rate. Staffing 

levels and expertise in the collections area must meet current 

needs. Collection difficulties also arise when, as can frequently 

occur, fraudsters hide or dissipate assets. The use, where feasible, 

of asset freezes, contempt motions, and whistleblowers may help 

increase the availability of funds to be collected after a judgment 

has been obtained. 

Q.5. Who at the SEC is responsible for collecting delinquent fines? 

A.5. My understanding is that there is a specific group of attorneys 

and staff tasked with the job of collecting and disbursing, either to 

investors or to the U.S. Treasury, penalties and disgorgement from 

enforcement matters. Ultimately, however, it is the Commission 

that is responsible for maximizing the collection of these funds. 

Q.6. What tools does the SEC have to pursue delinquent fines? 

A.6. It is my understanding that the SEC can and does institute 

legal proceedings to seek property liens against, and seize certain 

assets of, those owing disgorgement and/or penalties. If confirmed, 

I would look forward to learning more about additional specific 

tools and approaches that can be taken. As fraudsters often dis-
145 

sipate or hide assets, there may be steps that staff can take that 

could help reduce collections issues. I know, for example, that SEC 

Enforcement Division staff works hard to seek, where appropriate, 

orders freezing ill-gotten gains in the early stages of an investigation, but courts rightly require a high standard of proof in order 

to grant such requests. Careful monitoring of asset freezes that are 

granted, and seeking contempt motions where violations occur 

could, in some cases, further prevent dissipation. In addition, whistleblowers can often provide assistance in preventing asset dissipation and locating hidden or improperly transferred assets. If confirmed, I would work with the Chairman to ensure that staff has 

the resources and support they need to maximize collections. 

Q.7. Are there any additional authorities or resources that would 

be helpful for the SEC to have in pursuing companies that owe 

fines? 

A.7. If confirmed, I would look forward to gaining a deeper understanding from the staff as to whether greater resource allocation 

and/or specialized staff training could be of help. I would welcome 

the opportunity to work with you, your staff, and Members of this 

Committee to identify any additional authorities or resources that 

may assist in the collections effort. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR CORTEZ MASTO FROM ALLISON HERREN LEE 

Q.1. Last week, Stephen Brandon Anderson, who previously ran 

River Source Wealth Management LLC, agreed to pay about 

$405,000 in disgorgement and another $100,000 in civil fines. The 

SEC has a critical role to holding people accountable who cheat or 

lie to investors. I’m worried about recent press articles that only a 

bit over half of the fines assessed in settlements or court judgments 

is collected by the SEC. Why do you think the SEC has had trouble 

collecting fines? 

A.1. I am aware of the recent press articles, and I share your concerns. Maximizing the collection of disgorgement and penalties at 

the SEC is essential. This is particularly important because the 

funds collected come straight out of the hands of bad actors, and 

a substantial amount can go straight to harmed investors. Few endeavors could be more worthwhile in terms of fairness, accountability, and deterrence. As a former enforcement attorney, I know 

that collection difficulties can arise when, as can frequently occur, 

fraudsters hide or dissipate assets. And I would want to ensure 

that SEC staffing levels and expertise in the collections area meet 

current needs. If confirmed, I would look forward to working with 

the Chairman, the other Commissioners, and the staff to better understand what factors contribute to difficulties in collections and to 

develop approaches that could increase the collection rate. 

Q.2. If you are confirmed as an SEC Commissioner, what can you 

do to ensure fines assessed are fines collected and paid to victims 

of fraudsters? 

A.2. If confirmed, I would look forward to gaining a deeper understanding as to what specific factors contribute to collection difficulties so that solutions can be well-tailored toward improvement. For 
146 

example, I would be interested in understanding whether greater 

resource allocation and/or specialized staff training could be of 

help. Further, fraudsters often dissipate or hide assets so there 

may be steps that staff can take that could help reduce collections 

issues. I know, for example, that SEC Enforcement Division staff 

works hard to seek, where appropriate, orders freezing ill-gotten 

gains in the early stages of an investigation, but courts rightly require a high standard of proof in order to grant such requests. 

Careful monitoring of asset freezes that are granted, and seeking 

contempt motions where violations occur could, in some cases, further prevent dissipation. In addition, whistleblowers can often provide assistance in preventing asset dissipation and locating hidden 

or improperly transferred assets. If confirmed, I would work with 

the Chairman to ensure that staff has the resources and support 

they need to maximize collections. 

Q.3. Do you think the newly enacted Regulation Best Interest appropriately protects retail investors from being overcharged by 

their financial advisors? Would you support a fiduciary standard? 

A.3. I have not had the benefit of discussions with the Chairman, 

other Commissioners, or staff on the choices made in Regulation 

BI, or their views and analysis of the voluminous comments filed. 

That said, based on my reading of the final rule, I do have serious 

concerns. They include, among others, the adequacy of the standard for broker-dealers. I am concerned that the new, but undefined, 

‘‘best interest’’ standard may fail to establish a higher standard of 

conduct than that which was required of broker-dealers before the 

rule. The reason for the rulemaking was to improve on the prior 

standard which experience had shown often led to increased costs 

to retail investors. In my view, and depending on how the new rule 

is interpreted and implemented, it appears that the undefined 

standard may not improve the prior standard to a measurable degree. 

A fiduciary standard, on the other hand, could have relied on 

longstanding legal precedent that traditionally emphasizes placing 

the interests of investors over those of fiduciaries. Such a standard 

would need to be carefully considered, weighing all costs and all 

benefits, but could lead to better, less costly and less conflicted financial advice for retail investors. 

Q.4. The hiring freeze at the SEC has led to a 10 percent reduction 

in staff and an inadequate number of administrative judges. What 

do you recommend to ensure adequate staffing at the SEC? 

A.4. Although an agency’s efficiency and use of assets cannot be 

judged solely on the basis of a headcount, I am nonetheless concerned that the SEC’s resource requests and allocations keep pace 

with the vast complexity, technological advances and resources in 

the specific markets it oversees. Moreover, a hiring freeze can subject the agency to arbitrary changes in resource allocations overall, 

and between and among divisions, that flow from random attrition. 

While I am pleased to see that the Congress’ recent funding of the 

SEC allowed it to lift the hiring freeze, if confirmed, I would look 

forward to obtaining a better understanding as to how the budget 

requests are developed and supported, and would support efforts to 

ensure that any decisions regarding such requests are based on a 
147 

careful analysis of the facts related to specific needs in each division. 

Q.5. Are you concerned about the decline in SEC enforcement actions, the lower monetary settlements and low average settlement 

amount in the past 2 years? If so, what will you do to ensure bad 

actors are held accountable? 

A.5. An effective enforcement program requires both a sufficient 

number, as well as sufficient quality and scope, of actions. Effective 

enforcement is critical to the SEC’s mission because it instills investor confidence, ensures accountability, and deters misconduct. 

During my time working in Enforcement at the SEC, I spent many 

hours meeting with and talking to the victims of fraud—people who 

were tricked into emptying their retirement accounts, maxing out 

their credit cards, and even taking out a second mortgage on their 

homes on the false promise of high returns. In my view, the broader goal of compliance with the securities laws, and thus deterring 

potential bad actors, is critical. Individual accountability for misconduct is an important deterrent, and should be carefully considered and actively sought, particularly in cases involving fraud. This 

can involve a number of approaches including, among others: (1) efforts to work closely with cooperating companies to identify and 

gather evidence relating to culpable individuals; (2) working to sustain and, where possible, improve the whistleblower program which 

can often be a vital component in uncovering evidence of individual 

culpability; (3) shifting resources toward litigation in certain cases 

when a settlement with a culpable individual cannot be reached; 

and (4) in certain cases, accepting greater litigation risk. 
148 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

LETTER SUBMITTED BY SENATOR BOB DOLE IN SUPPORT OF THOMAS 

PETER FEDDO 
149 

LETTER SUBMITTED BY THE INDEPENDENT COMMUNITY BANKERS 

OF AMERICA IN SUPPORT OF MICHELLE BOWMAN 
150