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82–475 PDF 2002

S. HRG. 107–743

NOMINATION OF WAYNE A. ABERNATHY

HEARING

BEFORE THE

COMMITTEE ON

BANKING, HOUSING, AND URBAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

ON

NOMINATION OF WAYNE A. ABERNATHY, OF VIRGINIA, TO BE ASSISTANT

SECRETARY OF THE TREASURY FOR FINANCIAL INSTITUTIONS

SEPTEMBER 12, 2002

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

(

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

PAUL S. SARBANES, Maryland, Chairman

CHRISTOPHER J. DODD, Connecticut

TIM JOHNSON, South Dakota

JACK REED, Rhode Island

CHARLES E. SCHUMER, New York

EVAN BAYH, Indiana

ZELL MILLER, Georgia

THOMAS R. CARPER, Delaware

DEBBIE STABENOW, Michigan

JON S. CORZINE, New Jersey

DANIEL K. AKAKA, Hawaii

PHIL GRAMM, Texas

RICHARD C. SHELBY, Alabama

ROBERT F. BENNETT, Utah

WAYNE ALLARD, Colorado

MICHAEL B. ENZI, Wyoming

CHUCK HAGEL, Nebraska

RICK SANTORUM, Pennsylvania

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

JOHN ENSIGN, Nevada

STEVEN B. HARRIS, Staff Director and Chief Counsel

WAYNE A. ABERNATHY, Republican Staff Director

MARTIN J. GRUENBERG, Senior Counsel

JOSEPH R. KOLINSKI, Chief Clerk and Computer Systems Administrator

GEORGE E. WHITTLE, Editor

(II)

CONTENTS

THURSDAY, SEPTEMBER 12, 2002

Page

Opening statement of Chairman Sarbanes ........................................................... 1

Opening statements, comments, or prepared statements of:

Senator Gramm ................................................................................................ 2

Senator Shelby .................................................................................................. 6

Senator Hagel ................................................................................................... 6

Senator Bunning ............................................................................................... 6

NOMINEE

Wayne A. Abernathy, of Virginia, to be Assistant Secretary of the Treasury

for Financial Institutions ..................................................................................... 3

Prepared statement .......................................................................................... 6

Biographical sketch of nominee ....................................................................... 8

Response to written question of Senator Akaka ............................................ 15

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

Letter to Senator Paul S. Sarbanes from Neil Milner, President and CEO,

Conference of State Bank Supervisors, dated September 11, 2002 ................. 16

Letter to Senator Paul S. Sarbanes from William J. Donovan, Senior Vice

President and General Counsel, National Association of Federal Credit

Unions, dated September 11, 2002 ..................................................................... 17

Letter to Senator Paul S. Sarbanes from Daniel A. Mica, President and

CEO, Credit Union National Association, Inc., dated September 12, 2002 .... 18

(III)

(1)

NOMINATION OF

WAYNE A. ABERNATHY, OF VIRGINIA

TO BE ASSISTANT SECRETARY OF THE

TREASURY FOR FINANCIAL INSTITUTIONS

THURSDAY, SEPTEMBER 12, 2002

U.S. SENATE,

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS,

Washington, DC.

The Committee met at 2:45 p.m., in room SD–538 of the Dirksen

Senate Office Building, Senator Paul S. Sarbanes (Chairman of the

Committee) presiding.

OPENING STATEMENT OF CHAIRMAN PAUL S. SARBANES

Chairman SARBANES. The Committee will come to order.

This afternoon, we will first hold a hearing on the nomination of

Wayne A. Abernathy to be Assistant Secretary of the Treasury for

Financial Institutions.

Upon the completion of that hearing, the Committee will then

proceed to a mark-up session to consider the FHA Downpayment

Simplification Act, the Native American Housing Assistance and

Self-Determination Act, and to consider the nomination of Mr.

Wayne A. Abernathy, whose hearing would have been completed

shortly before.

I will just be very brief in my opening statement here.

Wayne Abernathy is well known to all Members of the Committee. He has faithfully and loyally served the Committee with

distinction since July 1981, more than 20 years now, in a variety

of positions, including Full Committee Staff Director, Minority

Staff Director, Staff Director of the Securities Subcommittee, an

economist for the Subcommittee on International Finance and Policy, the Republican Economist on the Committee—I always thought

that was Senator Gramm, but it was really Wayne Abernathy.

[Laughter.]

Wayne has been involved in every major piece of legislation

which has been considered by the Committee since 1981. Some of

those in which he has had the most direct impact include Gramm–

Leach–Bliley, the National Securities Markets Improvement Act,

revisions to the Export Administration Act, the Securities Litigation Reform Act, and I could just go through the entire list.

He has been very intimately involved with the legislative product

of this Committee. Throughout his career, he has had a deep interest in international trade and finance issues, and I am proud to

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say, he is a graduate of Johns Hopkins University and the Johns

Hopkins School of Advanced International Studies.

I think it is a fair to say that he is a consummate professional,

straightforward, honest, loyal to his principles and his party. He is

smart, hard-working. He has always fulfilled his duties in a fashion

that I think exemplifies the highest traditions of the Senate.

I regard him as very well qualified to be the Assistant Secretary

of Treasury for Financial Institutions. That office, of course, coordinates the Department’s efforts regarding financial institutions and

securities markets and their regulation. It also coordinates the Department’s efforts on financial education, on which this Committee

has placed a great deal of emphasis.

We look forward to working with Wayne in his capacity as the

Assistant Secretary for Financial Institutions.

We will miss him here on the Committee, but obviously, I wish

him well in his new job.

Senator Gramm.

STATEMENT OF SENATOR PHIL GRAMM

Senator GRAMM. Well, thank you, Mr. Chairman. I do not quite

know what I can say about this good man, other than a famous

philosopher once said—in no way can you get a keener insight into

the nature of a leader than by looking at the people with whom he

surrounds himself.

I have always been very proud to have people judge me by

Wayne Abernathy.

The plain truth is that everyone who has ever been in the Senate

knows that often the Senator is simply the front guy. And for all

practical purposes, when I was Chairman, Wayne Abernathy was

Chairman of the Committee.

All of the daily details, all of the work, he was always on top of

everything. I can say that in all the years that I worked with

Wayne, I have never heard him say or seen him do anything that

was not honorable.

So, I am very excited about this opportunity for him to serve. I

have no doubt that he will reflect well on the Administration. I

have no doubt that he will do a great job. And I am just grateful

that I had an opportunity to work with Wayne.

Wayne, I want to thank you for the great job you did as the Staff

Director and Minority Staff Director and all these other positions.

In fact, Wayne started here as an intern.

Just one other thing I would like to say. I probably ought not

to say this. My mother will hear it and I will hear no end of it.

But when the FBI agent came to ask me about Wayne, his first

question was: Can you tell me something about Wayne’s moral

character?

And so, I thought a minute and I started my answer by saying,

I never knew Jesus.

[Laughter.]

But Wayne Abernathy is about as close in terms of character as

I have come.

Mr. ABERNATHY. Thank you, Senator.

Chairman SARBANES. Well, that is a heavy thing to hang on

somebody.

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[Laughter.]

Senator BUNNING. That is heavy.

[Laughter.]

Senator SCHUMER. Vote, Mr. Chairman. What more can be said?

[Laughter.]

Chairman SARBANES. Before we go to the nominee’s statement,

as he well knows, it is the custom in this Committee to place our

nominees under oath. I am going to ask him to stand and take

the oath.

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

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

help you God?

Mr. ABERNATHY. I do.

Chairman SARBANES. Do you agree to appear and testify before

any duly-constituted committee of the U.S. Senate?

Mr. ABERNATHY. I do.

Chairman SARBANES. Thank you very much. We would be happy

to hear your statement.

STATEMENT OF WAYNE A. ABERNATHY, OF VIRGINIA

TO BE ASSISTANT SECRETARY OF THE TREASURY

FOR FINANCIAL INSTITUTIONS

Mr. ABERNATHY. If I could, Mr. Chairman, I would like to begin

by introducing my family, most of which is here today.

Chairman SARBANES. We would love for you to do that.

Mr. ABERNATHY. My wife, Cindy. And she has brought two of my

daughters and two of my sons with her. My second-oldest daughter

is Cindy, named for her mother. My daughter Katie. And my son

Joseph. And my son Peter, who is being very good today.

[Laughter.]

Chairman SARBANES. Terrific.

Mr. ABERNATHY. My oldest daughter would have been here, but

she is in Provo, Utah right now where she is a sophomore at

Brigham Young University.

We are going to tape this and send it to her.

Chairman Sarbanes, Senator Gramm, and Members of the Committee, by custom, my first task should be to thank you for holding

this hearing on my nomination, and for doing so in an expedited

fashion—and I am indeed grateful for that—but I would like to

take the liberty to depart from that custom. I would begin by

thanking you and the Members of this Committee for the privilege

I have had over the last 20 years to serve you and the many other

Senators who have also been Members of this Committee, and to

thank you for the many considerations that you have extended to

me during that time. I would tender that appreciation also to my

colleagues on the staff, from my first staff director, Chairman Jake

Garn’s Chief of Staff, Danny Wall, to Steve Harris today, and to

the many talented and dedicated professionals who have worked

with us during that time.

I am reminded of a frequent comment that one of my colleagues

on Senator Jake Garn’s staff used to make. She liked to say to us

that it was such a privilege to work for the U.S. Senate that we

should be working for free. I understood the power of her sentiment, but I resisted her prescription.

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[Laughter.]

Senator Gramm has taken that concept a step further. He occasionally remarks to the staff that we are learning so much here in

the Senate that we should be paying tuition.

[Laughter.]

Again, there is great force in that idea, and again, I resist the

implications.

[Laughter.]

I have been in Senator Gramm’s graduate program now for 15

years. And until today, I have been able to avoid graduation. And

there is no possibility that I could ever cover the value of the education that I have received.

It was Senator Gramm who said, ‘‘If you are willing to tackle the

tough issues, you do not need to worry about stepping on anyone’s

toes; they will stand aside and shove you to the front.’’ It has been

a real pleasure working with Senator Gramm on the tough issues.

The Senate, in addition to many things, is a great academy. It

is as much a place of learning as it is a place of doing. And it is

the learning and the doing that I believe qualify me for the next

step before me.

And so I express my gratitude to President Bush, with a mixture

of pride and humility, for extending to me the opportunity to serve

the people of this Nation in a new and challenging capacity.

I am eager to begin work with this Administration and the team

of outstanding people that President Bush has brought together. I

am grateful for the support that I have received from Treasury Secretary O’Neill, from Deputy Secretary Dam, and from Under Secretary Fisher. Having worked from the late 1970’s until now on the

making of laws affecting our financial institutions, I feel prepared

to become involved in the administration of those laws, with the

keen insight of experience into the intentions of the Congress in

the making of those laws.

In one of the several interviews that I went through for this job,

the discussion moved to my feelings about the Congress. My

thoughts turned to a time, when I was just a young, rather junior

member of the staff of this Committee. I was thinking of a warm

evening, when I had left the Capitol building to walk back to my

office. Rather than going underground, I walked outside. The Senate had just ended the day, passing legislation that I had been

working on—I think that it was a bill amending the Export Administration Act—we are still working on that.

[Laughter.]

It was one of those beautiful nights, with the white dome of the

Capitol shining against the dark sky—we have all seen that. And

while I was charmed by the beauty of that scene, I was even more

exhilarated by the experience I had just left. I was thrilled by the

thought, by the overwhelming sense of the power of the Constitution, that it works, that 100 men and women, from all parts of the

country, elected by their fellow citizens to represent their various

States, had come together here and made a decision that was now

the law of the land for over 200 million people. That thought still

exhilarates and charms me. It has been a privilege to have lent a

hand in that process.

5

With this deep and broad experience behind me, I believe that

I am ready for duty at Treasury, with a full, deep understanding

of the interaction of the Executive and Legislative Branches and

how they work together to meet the needs, the concerns, and the

interests of the people who elected our leaders and whom we are

called upon to serve.

The job of Treasury’s Assistant Secretary for Financial Institutions is particularly well-suited for such a background. Nearly all

of our financial institutions are overseen by regulators with varying degrees of institutional independence, placed somewhere between the two branches of Government. I believe they have been

so situated to meet two very important goals—to minimize political

influence in the regulation of our financial institutions while retaining adequate accountability over the regulators. That accountability can best be maintained, then, in cooperation between the

two branches, addressing the issues on the basis of principles and

sound policies. And while that may seem nice to say in theory, it

has been my experience that it works that way in practice. And if

confirmed, it is my intention to continue that productive tradition.

Thank you again for holding this hearing, and now I would be

pleased to respond to any questions you may have.

Chairman SARBANES. Well, thank you very much for a very

thoughtful statement.

Ordinarily, we subject nominees to policy questions and so forth.

But I think transcending that is to take a measure of people’s character and commitments to the workings of our democratic institutions. We have had more than ample opportunity to do that in

Wayne Abernathy’s case. For myself, I am quite prepared to move

forward without any questions. And I will defer to any of my colleagues who may have questions.

[No response.]

If not, Wayne, we thank you very much and we will excuse you,

and we will move on to our mark-up.

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

Chairman SARBANES. We are delighted to have seen your family

and to have them here with you.

Mr. ABERNATHY. Thank you.

[Applause.]

[Whereupon, at 3 p.m., the Committee concluded the nomination

hearing of Wayne A. Abernathy.]

[Prepared statements, biographical sketch, response to written

questions, and additional material supplied for the record follow:]

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PREPARED STATEMENT OF SENATOR RICHARD C. SHELBY

Mr. Chairman, I want to commend you for facilitating the Committee’s rapid consideration of Wayne Abernathy’s nomination for the position of Assistant Secretary

of the Treasury for Financial Institutions.

It is not very often that we consider a nominee with whom we are as familiar

as we are with Wayne. For years now, I, as well as the other Members of the Committee, have had a firsthand opportunity to observe his efforts as a member of the

Committee staff. Through his tenure, he has demonstrated that he possesses a significant intellect, considerable wisdom, strong character, and a tremendous work

ethic. Wayne’s service to the Committee has been outstanding and I would like to

commend and thank him for it. Needless to say, someone with Wayne’s qualities

will be truly missed on Capitol Hill. However, our loss is the Administration’s gain.

I am supremely confident that he will provide President Bush and Secretary O’Neill

with the same level of excellent service that he afforded Senators Garn, Gramm and

all the Members of the Committee.

Again, I want to thank Wayne for his contributions as a member of the Committee staff, and to wish him good luck on his next endeavor.

—————

PREPARED STATEMENT OF SENATOR CHUCK HAGEL

I strongly support the nomination of Wayne Abernathy to be Assistant Secretary

of the Treasury for Financial Institutions. The expedited process to confirm Wayne

is a testament to the respect he has gained from colleagues and Senators.

Wayne’s staff leadership on the Senate Banking Committee over the past 3 years

has been marked with significant accomplishments—from the substantial Financial

Services Modernization Act, to dozens of trade, banking, and housing bills. Through

Senator Gramm, Wayne has been a great defender of the free markets. The Department of the Treasury will greatly benefit from his experience and wise command.

We have all benefitted from Wayne’s guidance over the years. His presence will

be missed at the Senate Banking Committee.

—————

PREPARED STATEMENT OF SENATOR JIM BUNNING

Thank you Mr. Chairman, I want to thank you for holding this hearing on the

nomination of Wayne A. Abernathy, and quickly moving on the President’s nominee.

I also want to thank you for the mark-up of the important housing bills we will

move today. I would like to welcome Wayne this afternoon, and not only thank him

for his service to this Committee, but also for his willingness to continue to answer

the call to public service. Obviously, we all know Wayne very well. Although his departure will be a great loss to the Banking Committee, he will be a great asset to

the President at the Treasury Department.

You have been nominated for a big job. But I am more than confident that you

are up to it. Your service to this Committee speaks for itself. I believe the President

could not have picked a better man for the job. You are well deserving. As I said

in our meeting earlier this week, anyone who has worked for Senator Phil Gramm

as long as you have deserves something good.

I am also glad we are going to be marking up these small, but important housing

bills. I am a proud cosponsor S. 2239, the FHA Down Payment Simplification Act.

I believe S. 2239 will help get more people into their homes, a goal we all support.

I will also support S. 1210 the Native American Housing Assistance and Self-Determination Act. I look forward to hearing from our good friend Wayne Abernathy and

trust the Committee will support his nomination and these important housing bills.

Thank you, Mr. Chairman.

—————

PREPARED STATEMENT OF WAYNE A. ABERNATHY

NOMINEE FOR ASSISTANT SECRETARY OF THE

TREASURY FOR FINANCIAL INSTITUTIONS

SEPTEMBER 12, 2002

Chairman Sarbanes, Senator Gramm, Members of the Committee, by custom, I

should thank you for holding this hearing on my nomination, and for doing so in

such an expedited fashion—and I am indeed grateful for that—but I would like to

take the liberty to depart from that custom. I would begin by thanking you and the

7

Members of the Committee for the privilege I have had for some 20 years to serve

you and the many other Senators who have been Members of this Committee, and

to thank you for the many considerations that you have extended to me during that

time. I would tender that appreciation also to my colleagues on the staff, from my

first staff director, Danny Wall—Chairman Jake Garn’s Chief of Staff—to Steve

Harris today, and to the many talented and dedicated professionals who have

worked with us.

I am reminded of a frequent comment of one of my colleagues from the staff of

Senator Jake Garn. She liked to say to us that it was such a privilege to work for

the Senate that we should be working for free. While I understood the power of her

sentiment, I resisted her prescription.

Senator Gramm has taken that concept a step further. He has occasionally remarked to the staff that we are learning so much that we should pay tuition. Again,

there is great force in that idea, and again, I resist the implications. I have been

in Senator Gramm’s graduate program for 15 years (and until today avoided graduation), and there is no way that I could cover the value of that education.

It was Senator Gramm who said, ‘‘If you are willing to tackle the tough issues,

you do not need to worry about stepping on anyone’s toes; they will stand aside and

shove you to the front.’’ I have enjoyed working with Senator Gramm on the tough

issues.

The Senate, in addition to many things, is a great academy. It is as much a place

of learning as it is a place of doing. And it is the learning and the doing that I believe qualify me for the next step before me.

And so now I express my gratitude to President Bush for extending to me the opportunity to serve the people of this Nation in a new and challenging capacity. I

am eager to begin working in his Administration, with the team of outstanding people he has brought together. I am grateful for the support that I have received from

Treasury Secretary O’Neill, Deputy Secretary Dam, and Under Secretary Fisher.

Having worked from the late 1970’s until now on the making of laws affecting our

financial institutions, I feel prepared to become involved in the administration of

those laws, with the keen insight of experience into the intentions of the Congress

in their making.

In one of the several interviews I went through for this job, the discussion moved

to my feelings about the Congress. My thoughts turned to a time, when I was just

a young, rather junior member of the staff of this Committee. I was thinking of a

warm evening, when I had left the Capitol building to walk back to my office. The

Senate had just ended the day, passing legislation that I had been working on—

I think it was a bill amending the Export Administration Act. It was one of those

beautiful nights, with the white dome of the Capitol gleaming against the dark sky.

While charmed by the beauty of the scene, I was even more exhilarated by the experience I had just left. I was thrilled by the thought, the overwhelming sense of the

power of our Constitution, that it works, that 100 men and women, from all parts

of the country, elected by their fellow citizens to represent their States, had come

together here and made a decision that was now the law of the land for over 200

million people. That thought still exhilarates and charms me. It has been a privilege

to lend a hand in that process.

And now, with this deep and broad experience behind me, I believe that I am

ready for duty in the Treasury Department, with a full, deep understanding of the

interaction of the Executive and Legislative Branches and how they work together

to meet the needs, concerns, and interests of the people who elected our leaders and

whom we are called upon to serve.

The job of Treasury’s Assistant Secretary for Financial Institutions is particularly

well-suited for such a background. Nearly all of our financial institutions are overseen by regulators with varying degrees of institutional independence, placed somewhere between the two branches of Government. I believe that they have been so

situated to meet two important goals: to minimize political influence in the regulation of our financial institutions while retaining adequate accountability over the

regulators. That accountability can best be maintained, then, in cooperation between

the two branches, addressing the issues on the basis of principles and sound policies. And while that may seem nice to say in theory, it has been my experience that

it works that way in practice. And if confirmed, it is my intention to continue that

productive tradition.

I would be pleased to answer any questions that you may have.

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RESPONSE TO WRITTEN QUESTION OF SENATOR AKAKA

FROM WAYNE ABERNATHY

Q.1. As you know, financial literacy is a subject of great importance to many Members of the Banking Committee. Please describe

your thoughts on the importance of financial literacy, describe the

appropriate role for the Department of the Treasury to increase the

financial literacy of the public, and what will you do to improve the

financial literacy efforts of the Department of the Treasury?

A.1. I know from several public remarks made by Treasury

Secretary O’Neill that he shares the concern that you, Chairman

Sarbanes, and other Members of the Committee have for promoting

financial literacy. I share that interest as well. Early in my career

on the staff of Senator Jake Garn I was frequently dismayed when

I heard of serious financial problems in which people found themselves that I believed could have been avoided had they had a better understanding of basic economic and financial matters.

In my service with Senator Gramm I became acquainted with the

excellent financial and investor literacy program designed by the

Texas State Securities Board. The Texas State Securities Board

has been very successful in introducing their Teaching Guide in

high schools throughout the State, with over 2,000 copies of the

guide placed in schools so far. This, and similar programs, can be

models for efforts elsewhere.

I have had the opportunity of guest lecturing at schools at the

elementary, middle school, and high school levels, and I have always found the children eager to learn. These are matters that

they can understand, that they want to learn, and that our children need to know in order to be successful adults.

I believe that high school is the best (though not the only) place

to target our efforts. It is where we can have the greatest results.

High school students are thinking about financial matters. Many

have jobs; virtually all are considering what their careers will be.

They worry about whether they will have the finances for college

and other post high school education. They are eager and able to

learn. Basic financial and economic education after high school can

be important as well, but in many cases we are already at that

point talking about remedial education, working with people who

have already gotten into financial difficulties that could have been

avoided or who have established habits that are difficult to leave.

Perhaps most significant as a measure of the emphasis of the

Treasury on financial and economic education has been the creation of the institutional support for an ongoing, sustainable effort.

In May, Secretary O’Neill announced the establishment in the

Treasury of the Office of Financial Education, led by a Deputy Assistant Secretary. That Office organized a panel discussion with national youth education groups in May to explore the opportunities

and obstacles associated with integrating financial education into

math and reading curricula, and will be releasing a White Paper

on the topic soon. I am pleased that, if I am confirmed, this Deputy

Assistant Secretary will report to me. I look forward to working

closely with her and with the Congress, and with the many excellent private sector programs, to achieve accelerated progress in our

efforts.

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