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S. HRG. 111–919 

NOMINATION OF NEAL WOLIN 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

ON THE

NOMINATION OF 

NEAL WOLIN, TO BE DEPUTY SECRETARY OF THE TREASURY 

MAY 8, 2009 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

BLANCHE L. LINCOLN, Arkansas 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

CHUCK GRASSLEY, Iowa 

ORRIN G. HATCH, Utah 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

JOHN ENSIGN, Nevada 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

RUSSELL SULLIVAN, Staff Director 

KOLAN DAVIS, Republican Staff Director and Chief Counsel 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1 

Grassley, Hon. Chuck, a U.S. Senator from Iowa ................................................. 3 

CONGRESSIONAL WITNESS 

Lieberman, Hon. Joseph, a U.S. Senator from Connecticut ................................. 5 

ADMINISTRATION NOMINEE 

Wolin, Neal, nominated to be Deputy Secretary of the Treasury, Department 

of the Treasury, Washington, DC ....................................................................... 6 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 19 

Grassley, Hon. Chuck: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 21 

Lieberman, Hon. Joseph: 

Testimony .......................................................................................................... 5 

Schumer, Hon. Charles E.: 

Prepared statement .......................................................................................... 23 

Wolin, Neal: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 24 

Biographical information ................................................................................. 27 

Responses to questions from committee members ......................................... 36 

(III) 

(1) 

NOMINATION OF NEAL WOLIN, TO BE 

DEPUTY SECRETARY OF THE TREASURY, 

U.S. DEPARTMENT OF THE TREASURY, 

WASHINGTON, DC 

FRIDAY, MAY 8, 2009 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10:10 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Cantwell and Grassley. 

Also present: Democratic Staff: Bill Dauster, Deputy Staff Director and General Counsel; Cathy Koch, Chief Tax Counsel; Ayesha 

Khanna, International Trade Counsel; and Mary Baker, IRS 

Detailee. Republican Staff: Kolan Davis, Staff Director and Chief 

Counsel; Mark Prater, Deputy Chief of Staff and Chief Tax Counsel; Jim Lyons, Tax Counsel; and Nick Wyatt, Tax Research Assistant. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The committee will come to order. 

The author, Georges Bernanos said, ‘‘A thought which does not 

result in an action is nothing much, and an action which does not 

precede from a thought is nothing at all.’’ 

Today we have before us Neal Wolin, whom President Obama 

has nominated to be Deputy Secretary of Treasury. Mr. Wolin, in 

your new role you must be ready to both think and to act. 

These difficult economic times demand action, but as Bernanos 

said, this action must be based on thought: creative thought, careful thought, deliberate thought. It must be based on thought that 

incorporates the lessons of the past and thought that envisions the 

potential of the future. 

Mr. Wolin, you have shown yourself to be a thinker. You have 

spent several years in public service, both at the White House and 

as Deputy General Counsel and General Counsel at the Treasury. 

During this time you examined complicated financial, tax, and economic issues. You helped to guide Treasury through economic 

storms and economic growth. As Deputy Secretary, you must bring 

all of this experience to the table. This experience must guide your 

thinking, and this thinking must guide your actions. 

2 

Your thoughts and actions will have a direct effect on how quickly our country recovers its economic strength. As Deputy Secretary, 

you will help oversee our financial recovery. You must ensure that 

these plans are sound. You must also ensure that these plans are 

transparent. The American people deserve to know the purposes for 

which their taxpayer dollars are being used, and they must believe 

that their hard-earned money is being put to good use. 

Your thoughts and actions will help to guide the Internal Revenue Service. We owe it to all Americans to ensure that all taxpayers pay their fair share of tax and file their returns in a timely 

manner. That is the only way we can begin to close the tax gap, 

which has been estimated at $345 billion every year. 

During these challenging economic times when demands on the 

budget are so great, the IRS must first collect all of the revenues 

that it is legally owed, we must pursue those who evade their taxes 

by improperly moving their assets offshore, and we should consider 

opportunities to reform the tax code in a fair and responsible way. 

Your thoughts, your actions, along with those of this committee 

and this Congress, will help determine how to reform the tax 

code—no small matter. This week, as part of its budget, the administration announced several international tax proposals that will 

directly affect American multinational corporations. These proposals would change American companies’ abilities to defer tax on 

foreign earnings, the calculation of foreign tax credits, the classification of foreign businesses, and the use of offshore tax havens by 

individuals. 

As these proposals demonstrate, our international tax system is 

complex. We must approach fundamental changes to our tax code 

with thought and with care. We need to ensure that our tax policies are fair and support American businesses. We must design 

these policies to encourage economic growth and create jobs that 

Americans need and deserve. 

Your thoughts and your actions will help drive America’s international economic policy. Finding global solutions to our global crisis is as important as ever, whether coordinating recovery and regulatory efforts or using market-based reforms and sustainable 

growth. 

Our economic relationship with China must top this international agenda, and its success requires sustained and energetic 

efforts by Secretary Geithner and at every level at the Treasury. 

We also need to reassess our relationship with Cuba. As Deputy 

Secretary, you will oversee the Office of Foreign Assets Control, 

otherwise known as OFAC. Despite Congress’s clear intent to facilitate sales of American agricultural products to Cuba, OFAC continues to adhere to obsolete regulations that make it difficult for 

American farmers and ranchers to sell their products in a market 

just 90 miles from our shore. 

Next week I plan to introduce a bill that will correct these policies and ensure that Montana’s farmers and ranchers have reliable 

access to that market, and I hope you will work with me to further 

this important goal. 

Mr. Wolin, the road ahead is difficult, but I believe that you will 

be able to navigate it. I expect you to do so with innovative and 

deliberative thought. Think before you act, and it is my hope and 

3 

belief that your thought will result in successful and decisive action. 

Senator Grassley? 

OPENING STATEMENT OF HON. CHUCK GRASSLEY, 

A U.S. SENATOR FROM IOWA 

Senator GRASSLEY. Yes. Thank you, Mr. Chairman. 

I would begin, Mr. Wolin, by repeating something that I said to 

Secretary Geithner during his nomination hearing. I told Secretary 

Geithner that his Department possesses a great deal of power even 

in ordinary times, and that in these extraordinary times that position is even more powerful. So, I repeat that, because the same 

holds true for everything you are going to be doing as Deputy Secretary. 

Mr. Wolin, if confirmed, you will potentially have a hand in everything Treasury does. Many of those policy areas are of special 

concern to this committee, but public debt, tariffs and trade, terrorist financing, as well as tax policy are all issues of great concern 

to the 23 of us on this committee. Of course, this is in addition to 

this committee’s fundamental responsibility to exercise oversight 

over the Treasury Department. You probably are capable of the 

very steep learning curve that goes with this job, but there is one, 

and not much time to climb it. 

This committee’s oversight responsibilities and public debt concerns have converged in the TARP program, proving the need for 

strong oversight. From its creation, the TARP program was originally sold to Congress by the previous administration as a tonic to 

heal our economy by purchasing troubled assets, but instead became a toxin to free enterprise, as money was arbitrarily distributed without much transparency. A few months ago some were saying that the $700-billion TARP 

program could actually make money for taxpayers; however, in 

January of this year the Congressional Budget Office put a price 

tag on TARP of $189 billion, but by late March revised that number upward to $356 billion. I would not be surprised to see this 

number climb in the future, but already taxpayers seem to be losing more than half of their investment in the TARP program. 

The massive and growing cost of the TARP program, combined 

with the cost of the economic stimulus package, have led to increased concern about the size of our deficit and our inability to 

budget responsibly. A common response to these concerns is to 

blame the previous administration, and there is some validity to 

that. The last administration did create a perilous budget situation 

and left a large budget deficit behind. But despite that, we are expected to end the current fiscal year with a deficit of $1.7 trillion, 

according to our own Congressional Budget Office. 

I think we can all agree that running large deficits is bad, but 

it simply does not follow that the remedy is to run even larger deficits. That $1.7 trillion amounts to around 12 percent of GDP. To 

put that into perspective, the highest deficit level in the post-World 

War II period was 7.2 percent in 1946, and 6 percent in 1983. We 

are not just pushing the envelope when it comes to running a large 

deficit, but we are going into what I would consider uncharted territory, and I am not sure that we will be able to find our way back 

4 

to fiscal responsibility. I hope that reflating and inflation is not the 

response to accomplishing that. 

I raised concerns about deficits in my written questions to Dr. 

Krueger, who was confirmed Wednesday as Treasury Assistant 

Secretary for Economic Policy. His response read, in part, ‘‘At 12.3 

percent of GDP in FY2009, the budget deficit does reach a very 

high level, but the administration projects that the growing economy and the end of temporary spending measures and other policy 

developments will cause the deficit to decline sharply going forward.’’ 

Leaving aside the question of whether our recent spending spree 

will actually be temporary, I am concerned that relying on the 

economy to grow us out of the deficit may not be realistic given our 

approach to the Federal Government’s revenues. As I have already 

said, Federal revenues—or what most people would call taxes—are 

a large part of this committee’s jurisdiction, and we are approaching a crisis. 

In addition to the usual constellation of tax provisions that expire on an annual basis, at the end of 2010 most of the bipartisan 

tax relief enacted in 2001 and 2003 will expire. President Obama 

has indicated that he supports making many parts of 2001 and 

2003 tax relief permanent, but this is not the case on lower rates 

on capital gains and dividends. 

So I come to the conclusion that, if we expect our economy to 

have any chance to grow us out of our deficit, we cannot penalize 

saving or investment. Furthermore, the stated willingness of the 

administration to raise taxes on taxpayers earning more than 

$250,000 a year could be a serious blow to small business. Finally, 

any cap-and-trade tax would likely lead to massive increases in energy prices that would impact everybody, regardless of income 

level. 

I am very concerned that the Nation’s tax policy is being driven 

by a ravenous hunger for revenues rather than by a desire to promote economic growth. This hunger is, itself, derived from massive 

budget deficits and runaway spending that in many cases, as with 

the TARP program, are subject to a completely inadequate amount 

of oversight. 

So it is imperative that you, as our next Deputy Secretary of the 

Treasury, assist Congress in conducting appropriate oversight into 

the TARP program, along with all other activities the Treasury Department is engaged in. This role was assigned to Congress by our 

U.S. Constitution, and the people I work for expect me to carry out 

that constitutional responsibility. 

So I hope more serious thought is given to the short- and longterm budget and revenue pictures as well. I worry, and I am not 

the only one who worries that, instead of solving the problems we 

now have, we are creating more problems that will take generations to solve. Thank you for your willingness to serve the people 

of this country. 

The CHAIRMAN. Thank you, Senator Grassley, very much. 

I would now like to introduce our witness, but I see that we are 

joined by the Honorable Senator from Connecticut, Joe Lieberman, 

who would like to introduce the nominee. We are very honored to 

5 

have you here, Senator. Why don’t you proceed and introduce the 

witness? 

STATEMENT OF HON. JOSEPH LIEBERMAN, 

A U.S. SENATOR FROM CONNECTICUT 

Senator LIEBERMAN. Thank you very much, Mr. Chairman, Senator Grassley, Senator Cantwell. I am honored to be here to introduce Neal Wolin to this committee. He, in turn, will introduce his 

wonderful—and I might say large—family, those magnificently 

present today. 

In the role for which Neal has been nominated, Deputy Secretary 

of the Treasury, he is coming to the Department, if confirmed, obviously, at a most critical time in its history. The Treasury Department is at the epicenter of our government’s efforts to get our economy back on track, to get it creating jobs again, and restoring national and international confidence in our markets. 

Just yesterday afternoon the Treasury Department released the 

much-anticipated results of the so-called ‘‘stress test’’ performed on 

some of the country’s largest financial institutions. The good news 

is that most of the financial institutions have passed the stress 

test. I am sure we would all agree it is too early for them to go 

off their Lipitor, and probably particularly too early—perhaps they 

should never contemplate going back to the life of excess and overindulgence and lack of discipline that put them in the condition 

that they have been in. 

The Treasury Department will play a major role in the coming 

year in managing our Nation’s finances, reducing budget deficits, 

bringing levels of public debt down to manageable levels, and providing the materials from which we here in Congress, with your 

leadership, can enact health care and, from other committees, energy and education reforms. 

Mr. Chairman and Senator Grassley, you have stated a series of 

challenges that the Department faces. These are no small tasks. 

There is significant work to be done. I am proud to say, based on 

personal knowledge of the nominee, that President Obama, Secretary Geithner, and the entire country would be well-served by 

the impressive public and private sector experience that Neal 

brings to this position. 

I would also add that there is a tendency among some to think 

that this Department is dominated by people in the Treasury Department whose experience begins and ends on Wall Street and 

who are separated from the lives of average Americans. Neal 

Wolin’s story is a classic American story. His grandparents were 

immigrants. His grandfather was a shoemaker, grew up in a home 

where, as in our homes, he was instructed, if you work hard, you 

can go far in this country. His father is a lawyer. 

He himself worked hard, went to Yale College, got a Master’s at 

Oxford, graduated from Yale Law School, and almost immediately 

began a career in public service. He was Special Assistant to three 

Directors of the Central Intelligence Agency: William Webster, Robert Gates, and Jim Woolsey, also an Executive Assistant to the National Security Advisor, and then Deputy National Security Advisor 

during the Clinton administration. I think his national security 

background is unusual, but I think it can be a vital asset in helpVerDate Nov 24 2008 15:44 Mar 22, 2011 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 R:\DOCS\64723.000 TIMD
6 

ing, in many ways, the Secretary to respond to the twin responsibilities of working internationally within the financial community, but also in combatting terrorist financing. 

In addition to his impressive record in public service—and I 

apologize, I failed to mention, he went from all that to becoming 

Deputy General Counsel in the Treasury Department from 1995 to 

1999 before being nominated by President Clinton and confirmed 

as General Counsel of the Treasury Department, a position he held 

from 1999 to 2001. 

In 2001, he came to Connecticut, in which capacity I really got 

to know him better and more personally. He has worked at the 

Hartford Financial Services Group, serving first as executive VP 

and general counsel, but then, as has been the case throughout his 

career, Neal rose to become president and chief operating officer for 

property and casualty operations. That is a significant operation 

and gave him extraordinary management experience, which I think 

will serve him well in his leadership responsibilities at Treasury, 

if he is confirmed to be the Deputy. 

In sum, Mr. Chairman, Senator Grassley, Neal Wolin would 

bring to this position an extraordinary intellect, remarkable public 

service experience, great integrity, tremendous work habits, and 

what I take to be an excellent capacity to work well with people 

in times that are stressful and times that are not, all of which 

should really enable him to serve our country in exactly the way 

we need him to do now. So, needless to say, I hope you will, after 

considering him fully, recommend him for confirmation to the full 

Senate. 

I thank you for giving me this honor of introducing him to you 

this morning. 

The CHAIRMAN. Thank you, Senator, very much. That was a very 

complete, comprehensive introduction, which we deeply appreciate. 

Mr. Wolin, it is now customary for anybody nominated to introduce his family, so we would love to have you do so. 

Mr. WOLIN. Thank you, Mr. Chairman. My wife, Nicole Elkon, 

and our son, Ethan Wolin, behind me. My other son, Oliver, I guess 

has left. My parents, Doris and Harry Wolin, and my in-laws, Mimi 

Liebeskind and Andre Elkon. Thank you so much for being here. 

The CHAIRMAN. Why don’t you all stand so we can all give you 

a round of applause and thank you for your contribution here, including Ethan. [Applause.] 

STATEMENT OF NEAL WOLIN, NOMINATED TO BE DEPUTY 

SECRETARY OF THE TREASURY, U.S. DEPARTMENT OF THE 

TREASURY, WASHINGTON, DC 

Mr. WOLIN. Chairman Baucus, Ranking Member Grassley, Senator Cantwell, it is an honor to come before you today. I want to 

thank President Obama and Secretary Geithner for the opportunity 

they have offered me to serve in the Department that is at the center of the administration’s efforts to address this historic economic 

crisis. 

If confirmed, I look forward to working closely with this committee, its staff, and the Congress as the Treasury Department implements the President’s economic program and as we work toVerDate Nov 24 2008 15:44 Mar 22, 2011 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 R:\DOCS\64723.000 TIMD
7 

gether to heal our economy, modernize the regulatory system, and 

return America to the path of prosperity. 

President Obama and Secretary Geithner have taken bold steps 

to revive our economy, stabilize the housing market, and increase 

the flow of credit to families, entrepreneurs, and small businesses. 

They are also committed to building a comprehensive regulatory 

framework that supports the dynamism of our economy, while ensuring that the American people are not again forced to suffer the 

consequences of a preventable catastrophe. 

I look forward, if confirmed, to helping Secretary Geithner keep 

the Treasury Department running smoothly during these extraordinary times. The Treasury Department is a complex organization, 

and its 12 bureaus and more than 100,000 employees deserve 

strong management support as they work tirelessly on behalf of the 

American people on issues as diverse as domestic and international 

economic policy, tax policy and administration, consumer protection, national security, law enforcement, and more. 

Please allow me to provide some brief background. I first entered 

public service during the administration of President George H.W. 

Bush as Special Assistant to Directors of Central Intelligence William Webster, Robert Gates, and Jim Woolsey. Under President 

Clinton, I served at the National Security Council, and later as 

Deputy General Counsel and General Counsel at the Department 

of the Treasury. 

In 2001, I moved to the Hartford Financial Services Group, first 

as general counsel and subsequently as president and chief operating officer of the company’s property and casualty insurance operations, where the companies I led delivered strong, profitable results. 

I also had the privilege of managing the companies’ relationships 

with the thousands of small businesses and entrepreneurs that are 

the backbone of the property and casualty industry. Working with 

those entrepreneurs on Main Street was the part of the job I enjoyed most, and it reinforced my deep appreciation for small businesses and the challenges and pressures they face. 

Having had the privilege of serving under Presidents of both parties and of managing large organizations in the public and the private sectors, I hope to put that experience to work once more in 

the service of the public during these challenging times. 

American taxpayers must have confidence in the Department of 

the Treasury, confidence that decisions are transparent, that taxpayers’ concerns are heard, and that Treasury officials are accountable to the American people and to their elected representatives. 

Above all, Treasury must maintain the highest standards of integrity and embrace the best values of public service. Seeing that happen will be my highest priority. 

I recognize that American prosperity does not spring from the actions of the Treasury Department, but from the hard work and inspiration of millions of individuals and businesses. Treasury’s place 

is not to micromanage America’s economy, but to help foster an 

economic climate within which the American people can flourish. 

In closing, Mr. Chairman, Ranking Member Grassley, Senator 

Cantwell, it is my great hope to have the privilege of returning to 

the Department of the Treasury and offering my hardest work and 

8 

best efforts to the President and the Secretary, to the Congress, 

and to the American people. 

Thank you very much for considering my nomination. I would be 

happy to take your questions. 

[The prepared statement of Mr. Wolin appears in the appendix.] 

The CHAIRMAN. Thank you, Mr. Wolin, very much. 

I have three questions which are obligatory, that we ask of all 

nominees. 

First, is there anything that you are aware of in your background 

that might present a conflict of interest with the duties of the office 

to which you have been nominated? 

Mr. WOLIN. No, Mr. Chairman. 

The CHAIRMAN. Do you know of any reason, personal or otherwise, that would in any way prevent you from fully and honorably 

discharging the responsibilities of the office to which you have been 

nominated? 

Mr. WOLIN. I do not, Mr. Chairman. 

The CHAIRMAN. Do you agree, without reservation, to respond to 

any reasonable summons to appear and testify before any duly constituted committee of Congress—— 

Mr. WOLIN. Absolutely, Mr. Chairman. 

The CHAIRMAN. If you are confirmed. 

Mr. WOLIN. If I am confirmed. 

The CHAIRMAN. Thank you. You are eager, that is good. 

I would like to ask a little bit about the President’s recently announced proposals to reform U.S. international tax law, including 

changes to deferral, check the box regulations, and foreign tax 

credits. Many in the business community say these changes will actually drive U.S. businesses offshore—very detrimental to U.S. 

business. What do you believe will be the effect those proposals will 

have on U.S. businesses and the degree to which they will tend to 

encourage U.S. business to move offshore? 

Mr. WOLIN. Mr. Chairman, thank you for that question; a very, 

very important issue. I think the competitiveness of U.S. business 

is multifactoral. Clearly, the tax rates are one issue, but so is technology, the cost of health care, and other issues as well. The President, as he announced these proposals earlier this week, made 

clear that he is very committed to the competitiveness of U.S. business, but wants to make sure that the framework within which our 

tax code operates does not overly incent businesses to move jobs 

and business investment overseas. 

So, Mr. Chairman, if I am confirmed in this role, I would be very 

interested in working with you, the committee, and your staff to try 

to get the balance right, to make sure that American business is 

both in a position to be highly competitive vis-a`-vis the rest of the 

world, but also to make sure that the tax code does not create incentives to move jobs overseas or investment overseas. 

The CHAIRMAN. But what about these particular proposals? What 

do you think the net effect of those standing alone will be? 

Mr. WOLIN. I think, Mr. Chairman, that these proposals are not 

ones that take away deferral overall, so that principle is left in 

place, but make sure that the kinds of incentives that are solely 

based on the tax code to move jobs overseas are addressed. I think 

that within that context, as I said, and as the President made 

9 

clear, it is very important to address competitiveness issues, and 

that is something that I would want to work with you on, whether 

it is relating to issues about foreign tax credits or, for that matter, 

deferral of expenses. 

The CHAIRMAN. But again, do you think these proposals, standing alone, have a net effect of increasing American competitiveness 

overseas or decreasing it? 

Mr. WOLIN. I think, Mr. Chairman, the net effect of these proposals is to try to make sure that businesses do not move jobs overseas. I think on a competitiveness basis, if you look at the President’s program in its totality with respect to what he wants to do 

with health care, making the R&E tax credit permanent, and so 

forth, I think the competitiveness issues are clearly something that 

he is very, very much focused on. 

The CHAIRMAN. What is the effect of a couple of countries—I am 

thinking of the U.K. now—changing from a worldwide system to a 

territorial system? What will the effect be, and what, on the margin, will the effect be in the United States? Why has Britain made 

that change? 

Mr. WOLIN. Mr. Chairman, I think the effects are ones that we 

will have to see as they develop. The statutory corporate tax rates, 

obviously, in the United States are higher than they are overseas, 

but, if you look at the effective rates, including all of the proposals 

that the President is putting forward, it is roughly competitive with 

most of the corporate rates in the OECD. Exactly how the British 

move to territoriality will resolve itself, I think is too early to tell. 

The CHAIRMAN. I think the answer to the question is that Britain 

thinks it will help Britain vis-a`-vis other countries in the world, 

and that is why they are making the change. That is why countries 

are moving from worldwide to territorial, and that is basically why 

many American companies think that they are at a significant disadvantage, where other countries have a territorial system and the 

United States is worldwide, which means that a U.S.-based company pays taxes twice, both in the other country as well as the 

United States, whereas countries that are territorial pay only one 

tax, and that is in the country where they are doing business. 

So I strongly urge you to take a very, very close look at that. I 

do not know, to be honest, whether this was thought through as 

well as it could and should have been with respect to American 

competitiveness, and I urge you to, as I said in my opening statement, think before you act. 

Mr. WOLIN. Thank you, Mr. Chairman. 

The CHAIRMAN. I have many more questions, but my time is 

about expired. 

Senator Grassley? 

Senator GRASSLEY. Thank you. 

I have a couple of questions that are more on process than on 

policy, and, if I have time, I will get to a couple of policy questions. 

I usually take 2 or 3 minutes to explain my philosophy about oversight. I am not going to do that, but, if you have any questions, 

other people can tell you. 

As you may be aware, I am active in that area. The primary way 

I conduct oversight is to write letters asking detailed questions and 

requesting Department documents. While Secretary Geithner has 

10 

assured me that he will respond to my inquiries in a full and timely manner, I would hope to get the same assurance from you. Can 

I have that commitment today? 

Mr. WOLIN. Yes, Senator, you have my commitment. 

Senator GRASSLEY. Thank you. 

I have 3 pages of recommendations I am not going to read from 

the Special Inspector General for TARP on TARP transparency. I 

just want to read a few of them, and then I have some questions— 

not just about the recommendations I mention, but the whole process of IG recommendations. 

Treasury would require all TARP recipients to: report on how 

they used TARP funds; mitigate significant fraud risk imposed by 

allowing participants in the Troubled Asset Loan Facility to post 

mortgage-backed securities as collateral by security-by-security 

screening; reject collateral if underlying loans backing an MBS do 

not meet underwriting criteria; mitigate risk of waste, fraud, and 

abuse in Public-Private Investment Partnerships by imposing strict 

conflict of interest rules; et cetera, et cetera. 

Mr. Wolin, the Special Inspector General for TARP, in his most 

recent quarterly report, made a number of recommendations to improve transparency, mitigate risk of loss of taxpayer dollars, and 

reduce waste, fraud, and abuse. These seem like good, commonsense recommendations to me. 

Generally, do you agree? If you do not feel comfortable making 

a flat-out statement, then answer in writing. But if you have 

looked at them and can answer that—let me—before you answer, 

do you agree—can you tell me what you would do to make sure 

that the Treasury Department adopts those recommendations? 

Mr. WOLIN. Senator, I think that the Special Inspector General 

for TARP is an important partner of the Department’s in running 

that program. I think Secretary Geithner believes that very, very 

much, and I know he is viewed at the Treasury as a partner in that 

effort. Senior Treasury officials, including those running the TARP, 

meet with him on a regular basis to work through the recommendations he has put forward and to make sure that, with respect to some of the issues that you mentioned, Senator, transparency, conflicts of interest, making sure that the programs are 

structured in a way that has integrity, that he is a partner in all 

of those efforts. 

Senator GRASSLEY. You probably are acquainted enough with 

Federal bureaucracy to know that a lot of Inspectors General encounter resistance from their departments. I hope with the President’s commitment from his campaign—and I have not seen him 

detract from that since he has been President—for more transparency in government, that cooperation with Inspectors General is 

one way to have more transparency in government. 

I would ask about the cost of bail-outs. In his latest report, the 

Special Inspector General indicates that the total projected funding 

subject to his oversight as of March 31 is $2.5 trillion, and that 

number does not appear to include any capital assistance that 

Treasury expects to provide to those institutions who fail the stress 

test. 

From January to March this year, the cost of the $700 billion TARP program rose from $189 billion to $356 billion. Chrysler said 

11 

they do not intend to pay back their money. The fair market values 

of all three Maiden Lane LLCs that the New York Fed created to 

bail out Bear Stearns and AIG have dropped. So, Mr. Wolin, I 

would like your opinion as to whether we will actually get back any 

of this money. I would also like to know how Treasury expects to 

monitor the effectiveness of these programs. This is the last part 

of it: are there quantifiable benchmarks to determine the success 

or failure of these programs? 

Mr. WOLIN. Senator, Secretary Geithner, I think, has spoken 

forcefully about the importance of making sure that these programs 

are structured in a way that protects absolutely as much as possible the taxpayers’ interests. I think that exactly how these financial institutions and other TARP recipients do is something we will 

have to see, but the programs are structured in such a way that 

we have clarity about how lending is going by those institutions. 

The Treasury has put up a website, for example, financialstability.gov, that puts out monthly reports with respect to the 

lending levels by category of these financial institutions. That kind 

of transparency and the kind of accountability that comes with it 

is something that I know the Treasury Department is very much 

focused on, and I expect that that will be something that Treasury 

will continue to work on. If confirmed, I would certainly want to 

be very much involved in that effort. 

Senator GRASSLEY. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Senator Cantwell? 

Senator CANTWELL. Thank you, Mr. Chairman. I want to underscore your comments made earlier about thinking through these 

issues of America’s competitiveness and making sure that the policies that are put forth really do consider the full spectrum of how 

businesses are working in today’s global economy. 

Mr. Wolin, first of all, congratulations on your nomination. It is 

great to have your family with you today; I am sure they are very, 

very proud of you. I know that we urgently need people over at the 

Department of the Treasury. But I also want to bring up the fact 

that the TARP legislation required Congress to receive a report 

from the administration by April 30th on changes that they would 

like to see, or changes necessary on the regulatory side of the equation. We still have not gotten that report. 

My concern is, I want to try to understand where you are on this 

issue on the regulatory side, what you support or do not support, 

because I obviously think we need more transparency in addition 

to, obviously, capital adequacy and enforcing regulations against 

fraud. 

But we had a previous instance where former Securities and Exchange Commissioner Arthur Levitt, Secretary for the Treasury 

and National Economic Council Chairman Larry Summers—that is 

when he was—and Federal Reserve Chairman Alan Greenspan all 

opposed the Commodities Future Trading Commission’s attempts 

to regulate over-the-counter derivatives. Basically they all supported a 2000 law that blocked nearly all regulation of derivatives. 

Now, I understand you were General Counsel at Treasury when 

then-Secretary Summers endorsed that legislation. Since then, Mr. 

Levitt has called it basically a regulatory system that failed to 

12 

adapt to the new financial instruments. I know that Mr. Greenspan 

told Congress that he, too, now believes that deregulating the credit default swaps market was a mistake. So would you agree that 

exempting the default swaps and other derivatives has turned out 

to be a huge mistake? 

Mr. WOLIN. Senator, there is no question that the derivatives 

markets, credit default swaps, and the other instruments that you 

referred to require substantially more robust regulation. It is something that I understand the Treasury is focused on right now and, 

if confirmed, I would absolutely be engaged in working on that 

more robust regulation of those markets, both the dealers who deal 

in those instruments, but also the markets themselves. 

Senator CANTWELL. So was it a mistake? 

Mr. WOLIN. I think there is no question but that these are markets that need to be regulated, and to the extent that that did not 

do that, we have certainly learned that lesson. 

Senator CANTWELL. All right. I just want to be clear, because 

there are certainly a lot of different opinions floating around. In 

fact, the previous nominee for your position, Mr. Cohen, recently 

told a crowd in New York, ‘‘As far as I’m concerned, I am far from 

convinced there was something inherently wrong with this system.’’ 

So I want to get it clear. There are a few people in the administration who still cannot say that it was a mistake, and these are 

the same people I think who are slow-walking, thinking that we 

are all going to forget about the regulatory reform that is needed. 

I can assure you, we are not going to forget what is needed. My 

patience is running out with the administration having to take 5 

months to say that some of these things ought to be regulated, and 

how they ought to be regulated. 

Mr. WOLIN. Senator, I do not want to be unclear at all. There is 

no question but that these markets need better and more robust 

regulation, and, if confirmed, I would look to be part of that effort. 

Senator CANTWELL. All right. So do you think that all the derivatives and credit default swaps should be moved onto regulated exchanges? 

Mr. WOLIN. Senator, I think this is not something I have been 

involved in, but I certainly support the testimony that Secretary 

Geithner gave in his confirmation hearing with respect to moving 

standardized instruments onto clearinghouses, onto regulated markets, and so forth. 

Senator CANTWELL. Yes. I am not clear where the Secretary really is on that issue, because in a private conversation after the hearing he said he did not mean exactly what he said at the hearing, 

and since then he has said to a group of colleagues that the administration still has not come out with their policy. So, that is why 

we are trying to get to the heart of this matter. So, do you support 

aggregate position limits on all contracts? 

Mr. WOLIN. I think position limits are absolutely part of the approach that is appropriate here, Senator. Yes. 

Senator CANTWELL. So putting all these instruments on regulated exchanges and having position limits and having regulatory 

oversight, organizations like ICE and others that are currently not 

regulated exchanges? 

13 

Mr. WOLIN. I think the regulation of dealers in these instruments, I think standardized contracts on exchanges and through 

clearinghouses, position limits, transparency so that the market 

can understand what is being traded with price transparency and 

so forth, are all elements of the proper approach. 

Senator CANTWELL. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

I would like to talk a little bit about the IRS. What went wrong? 

Why did the IRS not discover Bernie Madoff’s scam earlier? 

Mr. WOLIN. Mr. Chairman, I do not know precisely why they did 

not discover Bernie Madoff earlier. What I would say to you is that 

it is very important for IRS enforcement capabilities and resources 

and efforts to be focused. It is something that the administration 

is committed to that I would, if confirmed, be very much committed 

to, both from the perspective of sort of the tax gap, but also from 

the compliance perspective. 

I think part of what the President put forward earlier this week 

with respect to international tax compliance and tax haven kinds 

of proposals would help in this regard—more transparency, more 

information reporting—and allow the Internal Revenue Service to 

better police those kinds of circumstances. 

The CHAIRMAN. Well, I know your heart is in the right place, 

there is no doubt about that. The question is, how do we measure 

success here? As you well know, often benchmark metrics are needed to measure success to see if we can make any headway or 

progress at all. The one that comes to my mind is this tax gap. 

What thoughts do you have, and what will you do with the IRS 

to very significantly reduce that tax gap? Those are brave words, 

wonderful words, we are going to work on that. That is one thing. 

I do not want to hear those words. I want to hear what specifically 

you are going to do, and what the metrics are, and what the standards will be by which we will know whether we are successful or 

not. 

Mr. WOLIN. Mr. Chairman, I think the first thing I would do is 

sit down with Commissioner Shulman and work through a set of 

metrics that we could put in place; exactly what those are, I am 

not sure. But I would want to work with you and your staff and 

be very clear with Commissioner Shulman about, what is it that 

we can put in place that would allow us to measure our progress 

in the tax gap. It is obviously a challenging issue and one that people have been at work at for a long time. 

But I think the establishment of clear metrics, and then accountability around achieving progress on those metrics, and transparency about how we are doing, transparency with you and this 

committee, and more broadly the American people. Precisely what 

those metrics are, I think I would want to be able to work through 

with the Commissioner and with this committee. 

The CHAIRMAN. What is a reasonable period of time within which 

you can develop those and report back to this committee? 

Mr. WOLIN. I do not know precisely, Mr. Chairman, but I would 

be interested in doing that aggressively and in a focused way, and 

as quickly as we could do it. 

The CHAIRMAN. Well, I am going to give you a date. I am giving 

you, first, a chance to give me a date. So, I will throw it back to 

14 

you. What is a reasonable date by which you think you can do this? 

If you do not give me a date, I will give you one. I will give you 

one if I do not think yours is reasonable. [Laughter.] 

Mr. WOLIN. I would hope, by Labor Day, Mr. Chairman, we could 

come back with some—— 

The CHAIRMAN. That is a little late. That is a little late. I am 

going to give you 2 months. Two months. Two months from today, 

because this is huge. I mean, it is $300-some billion a year. We talk 

about cutting programs, and that is often important. We talk about 

raising revenue, and that is often important. But it seems to me 

the first target should be the $345 billion of taxes that are legally 

owed but not collected. My gosh, American taxpayers are subsidizing those who are not paying their taxes. 

Mr. WOLIN. Absolutely. 

The CHAIRMAN. That is not right. I just urge you to attack that 

aggressively. 

Mr. WOLIN. Absolutely, Mr. Chairman. 

The CHAIRMAN. Like a mean, junkyard dog. 

Mr. WOLIN. Will do. 

The CHAIRMAN. Good. 

Senator Cantwell? 

Senator CANTWELL. Thank you, Mr. Chairman. 

I guess I kind of have a similar time question, because last September, in front of the Senate Banking Committee when they were 

talking about TARP legislation, the SEC Chairman, Chris Cox, 

said that ‘‘there should be a great sense of urgency to regulate 

credit default swaps to fill the regulatory black hole.’’ 

Do you agree that there should be a sense of urgency at Treasury 

on this? 

Mr. WOLIN. I think there is no question, Senator, that with respect to the wide range of regulatory reform issues in the financial 

services sector—the President has spoken to it, the Secretary has— 

that we need to get something done, and we need to put in place 

a framework much sooner than later. 

Senator CANTWELL. Well, you have already missed one deadline 

by legislation, which was due April 30th. So what is your sense of 

when that can happen? 

Mr. WOLIN. Senator, I do not know. If confirmed, I certainly 

would want to understand where the Treasury Department is in 

this process and to urge that it be completed absolutely as quickly 

as possible. You would have my commitment. 

Senator CANTWELL. And what do you think that time frame 

could be? I do not have the power of the chairmanship so I cannot 

commit—— 

The CHAIRMAN. Yes, you do, Senator. [Laughter.] 

Yes, you do. We will work it out, what you want. 

Mr. WOLIN. With respect to the report, Senator, or the regulation 

of—— 

Senator CANTWELL. It has taken us 5 months now of this administration to say clearly, in an articulate fashion, in writing: this is 

what the problems with credit default swaps were and this is how 

we believe they should be regulated. You had 13 OPEC countries 

basically saying to the administration, we need this. The global 

15 

economy needs this regulation. We need the United States to be 

clear that you are not going to let this happen again. 

These statements are not that hard to make, but when the 

Treasury Secretary comes up here and says this is what I mean, 

and then later says, no, no, that is not what I meant, and then 

later tells members of Congress, we have not even decided yet what 

we are going to do, it clearly gives everybody the indication that 

the administration is slow-walking what are needed requirements 

for regulatory oversight for something that has caused the biggest 

financial crisis in America in the last several decades. The fact that 

it has taken this long to articulate that—it is not that hard to articulate. What you are going to find is, Congress is going to articulate it and do so very quickly. 

Mr. WOLIN. Senator, I will certainly commit my best efforts to 

getting this articulated absolutely as quickly as possible. 

Senator CANTWELL. So, if you had to give a date, just like on the 

previous—— 

The CHAIRMAN. Well, let us do it this way. Senator, why don’t 

you and I consult, and we will send a letter to the nominee today 

in order to get a response before the confirmation vote. 

Senator CANTWELL. Thank you, Mr. Chairman. I thank you. That 

is a good suggestion. 

Thank you very much. Thank you, Mr. Wolin. 

The CHAIRMAN. Executive compensation. Your thoughts? It is a 

huge issue. To be honest, I do not know that Wall Street understands the anger in the country over executive compensation abuse. 

There were all the bonus payments, especially for TARP recipients, 

when companies were going down the drain and they were getting 

all this taxpayer money. They get paid these big bonuses, and they 

seem to be insensitive to the American public, hardworking Americans—I do not want to overstate that point, but it is true—who are 

paying taxes and are very incensed. I do not think Wall Street gets 

it. 

On the other hand, I am not sure that Washington really understands some of the exigencies of compensation and the well running of banks and other firms in the country. But the main point 

is, we need limits on executive compensation. I know Secretary 

Geithner is working on coming out with guidelines. 

The haunting or echo of what Senator Cantwell is saying—that 

was supposed to be some time ago, and we still have not heard it 

yet. I know he has worked with Senator Dodd, the chairman of the 

Banking Committee, on those limits. But just talk to us a little bit 

about executive compensation and what you think the limits should 

be, especially companies that receive taxpayers’ money, or even 

companies that do not receive taxpayers’ money, in order to get a 

sense of confidence in this country that certain people are not ripping off the bulk of other people in the country. Your thoughts? 

Mr. WOLIN. Mr. Chairman, an enormously important issue. I 

thank you for raising the question. There is no question that the 

levels of executive compensation have gotten untethered from what 

seems appropriate. This is an issue on which I know the President 

and the Secretary have articulated principles. 

But it seems to me that compensation needs to be more transparent, it needs to be much more related to success, to alignment 

16 

with shareholder interests, or in the case when government assistance is involved, to taxpayer interests. It needs to be based on performance, the idea that compensation should be linked to success, 

and success should be thought of in longer-term periods than just 

this quarter’s or this year’s sales results, but to the real creation 

of value. 

So I think those are the principles that are appropriate to executive compensation, particularly, as you say, in circumstances where 

government assistance has been provided, but even more generally 

the idea of alignment to value and performance and payment for 

success and not for failure, I think, are key elements of how we 

ought to be approaching executive compensation and how, as I understand it, the Treasury Department is approaching it as they 

seek to put forward implementing rules for the language in the Recovery Act that deal with executive compensation. 

The CHAIRMAN. Well, I urge you to look at this aggressively because, if you are confirmed—you will be confirmed—as Deputy Secretary, you are going to have a lot of operating authority in making 

sure that people are working on this very aggressively and very 

forthrightly. Patience is wearing a little thin. I urge you, a word 

to the wise, just follow through and do the best you can, because 

we have to nail that one down. 

I would like to ask a couple, few questions about China. I believe 

that the management of our relationship with China will very 

much determine the well-being of the American people in 5, 10, 15, 

20 years from now, as well as that of the Chinese people, and perhaps many other people in the world. We have to get this managed. 

We have to manage this right. Like most things that are very important, it takes effort, it takes a creative thought, it takes a lot 

of work, it takes a lot of focus. I compliment Secretary Paulson for 

putting together the strategic economic dialogue. I thought it was 

a good start, but it was only a start. I think it can be much more 

focused, more aggressive, more comprehensive than it has been. 

Next, is here in Washington. I think it is in June. I am not sure 

of the exact date. In the first strategic dialogue, Wu Yi was the 

main Chinese leader. She is a tough lady. She was pretty good. But 

she has been replaced by Wang Qishan, as well as Dai Bingguo, 

and I urge you to give a lot of thought to make sure that is put 

together very well and very comprehensively, but also with the 

Congress. 

We are a non-parliamentary form of government—and that is 

why we are having this hearing—in many respects. So when you 

put your plan together, I urge you to also have separate meetings 

between the Congress and the Chinese counterpart, because they 

have to learn from us, because we are one of the three branches 

of government. We write the laws. As a non-parliamentary form of 

government, we write them, not the administration. We have to 

learn from them, and they from us. So, it is just, get ahead of the 

game and do the very best you can to focus on a strong relationship, in my judgment, with China. 

I also want to remind you that, because of scheduling conflicts, 

many Senators who were interested in your nomination were unable to attend, but they will nevertheless have questions that they 

will want to submit to you. I urge them to have their questions in 

17 

by 5 p.m. this afternoon, and I also urge you to respond to those 

questions as quickly as you possibly can so we can take up your 

nomination vote on the Senate floor very quickly. 

I guess my final point is just to impress upon you how important 

it is for you and Secretary Geithner—but I am talking about you 

because you are here—to be forthright—very forthright—and to 

work with us and not surprise us. 

With all due, full respect, your opening statement reminded me 

of what I call the Justice Sandra Day O’Connor statement. I was, 

a few years ago, on the Judiciary Committee and, prior to her, 

many nominees would give long, involved statements about the 

law, and so on and so forth. When she testified, she said nothing, 

absolutely nothing. She said, basically, thank you, and that was it. 

I was very disappointed, and I thought it was a cop-out. I thought 

it was just a dodge. 

I thought it was just, here she is, she has been nominated to one 

of the most honorable positions in the U.S. Government, and she 

just sat there. It was a tactic to just avoid any difficult statement 

that you might otherwise make. And with all due respect, your 

statement was a little short, too. So what I am saying is, we are 

a separate branch of government, and we care too, just like you do. 

Theoretically we are in the same political party. So, you should 

err on the side of working with us, err on the side of calling us up, 

calling me up and saying, hey, we have a problem here, hey, this 

is something we need to work on, this is coming up, and that kind 

of thing—advanced notice of things. You will find us very willing 

to want to work with you. On the other hand, if you do not, things 

tend to fall apart. 

So I just urge you very, very strongly to just think, maybe once 

a week, what can I tell them down there that is important and constructive? What information do I have to get from them? I meet 

weekly with Secretary Geithner. Excuse me. I meet weekly with 

Mr. Summers; I meet monthly with Secretary Geithner. It is locked 

in. I just encourage you to, in your calendar, just think of the appropriate people that you need to lock in, and once a week, every 

other week or something, just make a telephone call or something. 

Just keep those lines of communication open. Just keep working on 

them. 

Mr. WOLIN. You have my commitment on that, Mr. Chairman. 

The CHAIRMAN. Good. All right. Good luck. 

Mr. WOLIN. Thank you, sir. 

The CHAIRMAN. And I wish your family good luck. It is a tremendous undertaking. It is a great honor that you are pursuing, and 

I wish you the very best luck. 

Mr. WOLIN. Thank you, Mr. Chairman, very much. 

The CHAIRMAN. The hearing is adjourned. 

[Whereupon, at 11:06 p.m., the hearing was concluded.] 

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