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S. HRG. 109–901

NOMINATIONS OF: JAMES LAMBRIGHT,

ARMANDO J. BUCELO, JR., TODD S. FARHA,

JOHN T. RYMER, JOHN W. COX, AND WILLIAM

HARDIMAN

HEARING

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

ON

NOMINATIONS OF:

JAMES LAMBRIGHT, OF MISSOURI, TO BE PRESIDENT OF

THE EXPORT-IMPORT BANK OF THE UNITED STATES

ARMANDO J. BUCELO, JR., OF FLORIDA, TO BE CHAIRMAN OF

THE SECURITIES INVESTOR PROTECTION CORPORATION

TODD S. FARHA, OF FLORIDA, TO BE MEMBER OF THE BOARD OF DIRECTORS

OF THE SECURITIES INVESTOR PROTECTION CORPORATION

JON T. RYMER, OF TENNESSEE, TO BE INSPECTOR GENERAL OF THE FEDERAL

DEPOSIT INSURANCE CORPORATION

JOHN W. COX, OF TEXAS, TO BE CHIEF FINANCIAL OFFICER OF

THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

WILLIAM HARDIMAN, OF MICHIGAN, TO BE MEMBER OF THE BOARD OF

DIRECTORS OF THE NATIONAL INSTITUTE OF BUILDING SCIENCES

MAY 16, 2006

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

Available at: http://www.access.gpo.gov/congress/senate/senate05sh.html 

(

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

RICHARD C. SHELBY, Alabama, Chairman

ROBERT F. BENNETT, Utah 

WAYNE ALLARD, Colorado 

MICHAEL B. ENZI, Wyoming 

CHUCK HAGEL, Nebraska 

RICK SANTORUM, Pennsylvania 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

JOHN E. SUNUNU, New Hampshire 

ELIZABETH DOLE, North Carolina 

MEL MARTINEZ, Florida 

PAUL S. SARBANES, Maryland 

CHRISTOPHER J. DODD, Connecticut 

TIM JOHNSON, South Dakota 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

EVAN BAYH, Indiana 

THOMAS R. CARPER, Delaware 

DEBBIE STABENOW, Michigan 

ROBERT MENENDEZ, New Jersey

KATHLEEN L. CASEY, Staff Director and Counsel 

STEVEN B. HARRIS, Democratic Staff Director and Chief Counsel 

ANDREW OLMEM, Counsel 

JUSTIN DALY, Counsel 

JONATHAN V. GOULD, Counsel 

DEAN V. SHAHINIAN, Democratic Counsel 

AARON KLEIN, Democratic Economist 

PATIENCE R. SINGLETON, Democratic Counsel 

JOSEPH R. KOLINSKI, Chief Clerk and Computer Systems Administrator 

GEORGE E. WHITTLE, Editor

(II)

CONTENTS

TUESDAY, MAY 16, 2006

Page

Opening statement of Chairman Shelby ................................................................ 1

Opening statements, comments, or prepared statements of: 

Senator Sarbanes .............................................................................................. 2

Senator Crapo ................................................................................................... 4

Senator Martinez .............................................................................................. 4

Senator Dodd .................................................................................................... 10

Senator Allard ................................................................................................... 11

Prepared statement ................................................................................... 29

WITNESS 

Kit Bond, A U.S. Senator from the State of Missouri .......................................... 5

NOMINEES 

James Lambright, of Missouri, to be President of the Export-Import Bank 

of the United States ............................................................................................. 6

Biograpical sketch of nominee ......................................................................... 32

Armando J. Bucelo, Jr., of Florida, to be Chairman of the Securities Investor 

Protection Corporation ......................................................................................... 12

Biograpical sketch of nominee ......................................................................... 40

Todd S. Farha, of Florida, to be Member of the Board of Directors of the 

Securities Investor Protection Corporation ........................................................ 14

Biograpical sketch of nominee ......................................................................... 54

Jon T. Rymer, of Tennessee, to be Inspector General of the Federal Deposit 

Insurance Corporation ......................................................................................... 21

Prepared statement .......................................................................................... 29

Biograpical sketch of nominee ......................................................................... 60

John W. Cox, of Texas, to be Chief Financial Officer of the U.S. Department 

Of Housing And Urban Development ................................................................. 21

Prepared statement .......................................................................................... 30

Biograpical sketch of nominee ......................................................................... 67

William Hardiman, of Michigan, to be Member of the Board of Directors 

of the National Institute of Building Sciences ................................................... 22

Biograpical sketch of nominee ......................................................................... 74

(III)

(1)

NOMINATIONS OF: 

JAMES LAMBRIGHT, OF MISSOURI,

TO BE PRESIDENT,

EXPORT-IMPORT BANK OF THE UNITED STATES; 

ARMANDO J. BUCELO, JR., OF FLORIDA,

TO BE MEMBER,

BOARD OF DIRECTORS, SECURITIES INVESTOR 

PROTECTION CORPORATION; 

TODD S. FARHA, OF FLORIDA,

TO BE MEMBER,

BOARD OF DIRECTORS, SECURITIES INVESTOR 

PROTECTION CORPORATION; 

JOHN T. RYMER, OF TENNESSEE,

TO BE INSPECTOR GENERAL,

FEDERAL DEPOSIT INSURANCE CORPORATION; 

JOHN W. COX, OF TEXAS,

TO BE CHIEF FINANCIAL OFFICER,

U.S. DEPARTMENT OF HOUSING AND URBAN 

DEVELOPMENT 

WILLIAM HARDIMAN, OF MICHIGAN,

TO BE MEMBER, BOARD OF DIRECTORS,

NATIONAL INSTITUTE OF BUILDING SCIENCES 

TUESDAY, MAY 16, 2006

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS, 

Washington, DC.

The Committee met at 10:43 a.m., in room SD–538, Dirksen Senate Office Building, Senator Richard C. Shelby (Chairman of the 

Committee) presiding. 

OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY 

Chairman SHELBY. The hearing will come to order. 

This morning, we will consider several nominations, and I appreciate the willingness of the nominees to appear before the Committee today. Today’s hearing will consist of three panels. Our first 

panel will consist of Mr. James Lambright, who has been nomiVerDate 0ct 09 2002 17:18 May 31, 2007 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\DOCS\35500.TXT SBANK4 PsN: KEVIN
2

nated to be President of the Export-Import Bank. Mr. Lambright 

is currently the Acting President and Chairman of the Export-Import Bank. Prior to assuming his current position, he served as the 

Bank’s Executive Vice President and Chief Operating Officer. Mr. 

Lambright came to the Bank in 2001 from Credit Suisse-First Boston, where he was Vice President of Private Equity. A native of St. 

Louis, Missouri, Mr. Lambright graduated from Harvard Law 

School and received a bachelor’s degree from Stanford University. 

Our second panel will consist of Mr. Armando Bucelo and Mr. 

Todd Farha, who have been nominated to be Directors of the Securities Investor Protection Corporation. Mr. Bucelo is being renominated to serve as a director. He was first appointed to the Board 

in 2002, and earlier this year, President Bush appointed him 

Chairman of the Board. Mr. Bucelo is an attorney at his own firm 

in Coral Gables, Florida. He earned his law and bachelor’s degrees 

from the University of Miami. 

Mr. Farha is currently the President and Chief Executive Officer 

of WellCare Health Plans, Inc., a leading multistate provider of 

managed health care services. A native of Wichita, Kansas, Mr. 

Farha received his bachelor’s degree from Trinity University and 

his MBA from Harvard Business School. 

Our third panel will consist of three nominees, Mr. Jon T. 

Rymer, who has been nominated to be Inspector General of the 

Federal Deposit Insurance Corporation. Mr. Rymer is currently on 

active duty in the Ohio Army National Guard, serving as Command Sergeant Major of the 155th Chemical Battalion. Mr. Rymer 

previously served as a Director of KPMG, LLP and as Executive 

Vice President for Bank America of Arkansas. Mr. Rymer received 

his bachelor’s degree from the University of Tennessee and his 

MBA from the University of Arkansas. 

Mr. John Cox has been nominated to be the Chief Financial Officer at the U.S. Department of Housing and Urban Development. 

He began his professional career as an accountant with Ernst & 

Young, LLP. He also served as the Chief Financial Officer and 

Chief Accounting Officer for BMC Software. 

Mr. William Hardiman has been nominated to be a Member of 

the Board of Directors of the National Institute of Building 

Sciences. Currently, Mr. Hardiman represents the 29th District in 

the Michigan State Senate. Previously, he served 10 years as the 

Mayor of Kentwood, Michigan. We look forward to hearing from 

each of you later. 

Senator Sarbanes. 

STATEMENT OF SENATOR PAUL S. SARBANES 

Senator SARBANES. Mr. Chairman, thank you very much. I join 

you in welcoming the nominees before the Committee this morning. 

I obviously hold public service in high esteem, and I congratulate 

all of the nominees, and I appreciate their willingness to serve the 

Nation. 

Let me just say first of all about Jim Lambright, who has been 

nominated to serve as Chairman and President of the Export-Import Bank. He has been at the Bank now for a number of years, 

and he brings a very substantial background to this work. He is 

no stranger to the Committee. He has testified on more than one 

3

occasion, including on the pending reauthorization of the ExportImport Bank, and I understand that there is going to be a full 

Committee hearing on this reauthorization in the near future. 

Chairman SHELBY. Absolutely. 

Senator SARBANES. I do want to express my very strong concern 

that there are currently three empty seats on the five-person board 

of the Export-Import Bank, and in fact, the Bank is only able to 

achieve a quorum in order to conduct its business because Mr. 

Lambright is serving in an acting capacity under the Vacancies 

Act. In February of this year, the Bank came close to losing a 

quorum of three Board members altogether, and I simply want to 

take this opportunity to urge the Administration to move immediately to fill the other vacancies. 

Chairman SHELBY. Absolutely. 

Senator SARBANES. We ought not to have this situation. It is not 

good for the Bank. It is not good for the country. 

The second panel, the Securities Investor Protection Corporation, 

which, of course, was created by Congress to give investors certain 

protections against losses relating from the failure of their securities brokerage firms. Under SIPC, broker-dealers contribute to the 

fund, which helps customers of failed brokers recover their cash 

and securities, with limits of $500,000 per customer; cash claims 

are limited to $100,000. It is a very important part of the whole 

picture to maintain investor confidence, and we need SIPC to operate in an effective, efficient, and fair manner. I welcome the two 

nominees who will be before us on the second panel, and I look forward to hearing from them, Mr. Bucelo and Mr. Farha. 

The third panel is a mix of offices, Jon Rymer to be the Inspector 

General of the FDIC; John Cox to be Chief Financial Officer of the 

Department of Housing and Urban Development, and Bill 

Hardiman to be a Member of the Board of the National Institute 

of Building Sciences. I want to emphasize the importance of the position for which Mr. Rymer has been nominated. He brings important experience in internal auditing and consulting for the banking 

industry. I am pleased to see that. The FDIC’s Office of Inspector 

General is an independent unit that conducts audits, investigations, and other reviews of the FDIC’s programs and operations. 

I think it makes an important contribution to the stability of and 

public confidence in the Nation’s financial system. One of the main 

responsibilities of the Inspector General’s office is to inform the 

FDIC Chairman and Congress of problems in the FDIC programs 

and operations and the necessity for and progress of corrective actions. It also conducts criminal investigations in coordination with 

the Justice Department and U.S. Attorneys throughout the country, the FBI, the IRS, and State and local enforcement agencies. An 

acting Inspector General responsible for overseeing the operations 

of the office has been in place since January 2005. That is 15, 16 

months ago. And so, I am relieved, and I guess in a sense pleased, 

although I am displeased that it has not come sooner, that the 

President is now filling this important position. 

Now, Mr. Cox, who comes to the job of Chief Financial Officer of 

HUD, has had important previous experience that is relevant to 

this work. This is a very important position. In fact, the Department has consistently had difficulty managing its financial and 

4

program systems. I see Senator Bond nodding his head. This has 

been a problem for many years across many administrations, I 

would note. 

These financial systems are crucial tools that managers at the 

Department should be able to use to help evaluate the programs 

they oversee. Current and accurate financial information is important, should be available to HUD and here on Capitol Hill. This position has remained vacant for over a year. I mean, HUD has a 

budget of about $30 billion in annual appropriations, oversees $400 

million in FHA insurance, so finally, this position is being filled. 

Finally, I want to thank Mr. Hardiman. He actually serves on a 

volunteer basis at the Board of the National Institute of Building 

Sciences, which seeks to improve the building regulatory environment and facilitate the introduction of new and existing products 

and technology. 

Mr. Chairman, I look forward to hearing from our nominees 

today. 

Chairman SHELBY. Thank you. 

Senator SARBANES. And I welcome all of them before the Committee. 

Chairman SHELBY. Senator Crapo. 

STATEMENT OF SENATOR MIKE CRAPO 

Senator CRAPO. Thank you very much, Mr. Chairman, and I will 

be brief, but I do want to thank you for bringing the nomination 

of Mr. Lambright forward promptly and for what I hope will be expedited treatment of this nomination. 

I am a strong supporter of Jim Lambright to be the Chairman 

and President of the Export-Import Bank. His expertise and his experience is going to be very helpful to both us on the Committee 

as well as the Bank itself as we move forward with reauthorization 

of the Export-Import Bank. As Senator Sarbanes has indicated, he 

is no stranger to this room. He has testified twice before our Subcommittee on International Trade and Finance to discuss the reauthorization of the Ex-Im Bank, and I think he has shown that he 

has earned a reputation of working with all sides and I believe enjoys wide support and respect both in and out of Congress. I cannot 

think of a better choice, and I am hopeful that we can expedite this 

process. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Martinez, do you have an opening 

statement? 

STATEMENT OF SENATOR MEL MARTINEZ 

Senator MARTINEZ. Mr. Chairman, I have an opening statement 

for panel two if I could. 

Chairman SHELBY. Thank you. 

Senator MARTINEZ. Thank you very much. 

Chairman SHELBY. Senator Bond, we welcome you to our Committee for any statement you want to make on behalf of the nominee. 

5

STATEMENT OF KIT BOND

A U.S. SENATOR FROM THE STATE OF MISSOURI 

Senator BOND. Mr. Chairman, Members of the Committee, it is 

good to be back in this room in which we spent many hours. I 

worked in this room with you, Senator Sarbanes, on the problems 

of HUD, and I have since had the dubious distinction of being either the member or the Chairman of the Appropriations Subcommittee who has dealt with that problem for many years, and 

I think Senator Sarbanes’ understatement was that we have not 

yet gotten financial controls over that very important Department. 

But we are here today on another matter, and this one gives me 

a great honor and pleasure to introduce James Lambright to this 

Committee, reintroduce him as President-Designate for the ExportImport or Ex-Im Bank. I have known Jim’s family for decades, 

since before I first ran for Governor in Missouri back in the early 

1970’s. I am very proud that Jim is a native of St. Louis. As you 

said, Mr. Chairman, he graduated with honors from Harvard Law 

School, received a bachelor of arts in linguistics from Stanford. He 

is a term member of the Council on Foreign Relations and a Henry 

Crown Fellow of the Aspen Institute. 

Presently, as you know, he is Acting President of Ex-Im, having 

been elevated to that role from his position as the Bank’s Executive 

Vice President and Chief Operating Officer in July 2005 by President Bush. Before that, Jim created and ran the Credit and Risk 

Management Group, overseeing risk assessment activities for the 

Bank’s transaction flow of nearly $1 billion per month. He came to 

Ex-Im in 2001 from Credit Suisse-First Boston in Los Angeles, 

where he was Vice President for Private Equity. While there, he 

specialized in the underwriting and negotiation of real estate and 

venture capital transactions. Thus, in addition to being eminently 

qualified for the position of President of the Bank, Jim is a man 

of energy, commitment, and integrity, who will bring all those good 

qualities of character to the Bank. 

Throughout his career, Jim has had a reputation for creativity 

and competence. I am confident that he will approach his job at the 

Bank with the same intelligence and enthusiasm he has brought 

to all of his other endeavors. The new President must have leadership skills to run such a large agency. Let me assure you that what 

I know about him, Jim Lambright is the right man for this job, and 

with the important upcoming reauthorization, I trust that the Committee can move quickly to consider this nomination, and I would 

urge your favorable consideration. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Mr. Lambright, will you stand and be sworn? 

[Witness sworn.] 

Senator SARBANES. Mr. Chairman. 

Chairman SHELBY. Yes. 

Senator SARBANES. Senator Stabenow wanted to be here this 

morning to welcome and introduce Mr. William Hardiman who is 

from Michigan and has been nominated to be a Member of the 

Board of Directors of the National Institute of Building Sciences. 

Regrettably, she has a direct conflict with another Committee of 

hers. 

6

Chairman SHELBY. Okay. Any written statement will be made 

part of the hearing record on her behalf. 

Senator SARBANES. Certainly. Thank you very much. 

Chairman SHELBY. Thank you, Senator. 

Mr. Lambright, do you have any family members you want to introduce? 

STATEMENT OF JAMES LAMBRIGHT, OF MISSOURI,

TO BE PRESIDENT,

EXPORT-IMPORT BANK OF THE UNITED STATES 

Mr. LAMBRIGHT. Yes, I would like to recognize my father, Steve 

Lambright. 

Chairman SHELBY. Thank you. 

Mr. LAMBRIGHT. Thank you. 

Chairman SHELBY. You proceed as you wish. 

Mr. LAMBRIGHT. Thank you, Mr. Chairman. 

Mr. Chairman, Senator Sarbanes, Members of the Committee, I 

am pleased to come before you today as you consider my nomination to be President of the Export-Import Bank of the United 

States. I would like to thank Senator Bond for his kind introduction. I want to thank President Bush for the confidence he has 

shown in me by nominating me to lead an organization I hold in 

such high regard. 

Reflecting on my nearly 5 years at Ex-Im Bank, I am struck by 

the good fortune I have enjoyed working for three leaders, each of 

whom achieved a high degree of private sector success and demonstrated a deep commitment to public service. 

In 2001, I came to Washington from investment banking to work 

for the Bank’s then-Chairman, John Robson. In the short time that 

we served together before his untimely passing, Chairman Robson 

showed through his attitude and actions that there is no canvas as 

big to paint on as that offered by public service. Then, under Vice 

Chairman Eduardo Aguirre, I was able to take on increasing levels 

of responsibility and assist him in applying best practices from private sector banking to the Bank’s operations. 

Most recently, I served under Chairman Philip Merrill, to whom 

I owe a tremendous debt of gratitude for his trust and confidence 

in providing me an opportunity to assume a senior leadership role. 

If confirmed, I hope to continue this line of service and leadership in a way that best positions Ex-Im Bank to fulfill the important mandate given it by Congress, to create and sustain American 

jobs by helping to finance export transactions that would not otherwise go forward. 

To be clear, if confirmed, my focus will be U.S. exporter competitiveness. My top priorities will be: Pursuing the successful reauthorization of the Bank; institutionalizing recent changes to our 

small business program, which included the creation of a dedicated 

small business division; and preparing the Bank to face nontraditional competition emerging within the evolving global economy. 

During my tenure at the Bank, and particularly in my capacity 

as Acting President over the last 9 months, I have come to see the 

primary job of the Bank’s President as navigating the Bank between two beacons established in our charter. One beacon represents our customers, America’s exporters, to whom we owe our 

7

aggressive support. The other beacon represents our shareholders, 

the U.S. taxpayers, to whom we owe our prudent stewardship. I 

have found that the smoothest course between these beacons can 

best be chartered through cooperation with all stakeholders. 

To that end, I have worked closely with Members of Congress on 

their concerns about particular cases, changes to our small business program, and other issues relating to the Bank’s current reauthorization. I have made a concerted effort to reach out to our customers, large and small, to understand better their views of how 

Ex-Im Bank can deliver its services more effectively and efficiently. 

And, I have maintained strong relationships with my fellow Board 

members, Linda Conlin and Senator Max Cleland. 

If confirmed, I will continue to manage the Bank in a way that 

pays close attention to the concerns of Members of Congress, the 

Bank’s customers, and my fellow Board members as we all work 

together to support U.S. exporter competitiveness. 

Mr. Chairman, Senator Sarbanes, Members of the Committee, it 

is with great respect that I ask for favorable consideration of my 

nomination. I will be pleased to respond to your questions. Thank 

you. 

Chairman SHELBY. Thank you, Mr. Lambright. 

Mr. Lambright, if confirmed, which I believe you will be, you will assume significant responsibilities. Ex-Im authorized nearly $14 

billion in financing last year and has approximately 400 employees. 

Your management will have a decisive impact on how effectively 

Ex-Im utilizes these resources to support American exports. What 

do you see as the most significant management issues facing ExIm, and how do you plan to confront them? You have been there 

awhile. You are the acting now. 

Mr. LAMBRIGHT. I think of them in terms of shorter range versus 

longer range challenges. In the short-term, we need to get the 

Bank through reauthorization and implement the guidance Congress gives us, and part of that will be finding the right organizational structure and devotion of resources to maximize our support 

for small businesses that export. But in the longer range, there is 

a lot going on in the world of export credit that the Bank will need 

to adjust to in the future. There is an emergence of competitors 

that are not parties to our OECD agreements that govern much of 

our behavior. I am thinking of Brazil, India, and China in particular, and figuring out how the Bank can best support exporters 

in the face of this new competition. This is the biggest challenge. 

Chairman SHELBY. The Export-Import Bank is required by law 

to allocate 20 percent of its aggregate loan guarantee and insurance authority for financing exports to small businesses in America. Since this mandate was enacted, it is my understanding that 

Ex-Im has never met that goal of 20 percent. If confirmed, what 

actions will you take to ensure or try to meet that 20 percent small 

business mandate, which I think is important to the country. 

Mr. LAMBRIGHT. I agree with you that it is very important, Mr. 

Chairman. Upon assuming my current position, nothing has received more attention than our efforts to increase support for small 

business exporters. We have already made a number of changes, 

including the creation of an Outreach Division, focused exclusively 

on reaching small business exporters, headed by a new Senior Vice 

8

President. We have designated specialists within each of the business units who will handle just small business applications, and I 

am sure that there is more we can do, and if confirmed, I will continue to focus on exploring new and creative ways to support small 

businesses. 

Chairman SHELBY. Ex-Im’s mission is to provide export financing 

when the private sector is unable or unwilling to do so. By providing export financing to exports to developing countries which 

private banks are unwilling to provide, Ex-Im facilitates the development of new markets for U.S. exports, for business. 

In your view, can Ex-Im do more to expand the U.S. exports to 

developing countries, and can it safely assume the additional risk 

that financing exports to these countries would involve some risk, 

as you know? 

Mr. LAMBRIGHT. There certainly is more that we can do. Ex-Im 

Bank is a provider of a service, and like any service provider, we 

can do more, and we can do it better. So we are looking at a lot 

of ways that we can do what we do more efficiently and more effectively. We have a new online application program that will be 

launched next month that should make it a lot easier for our customers to apply and will also help us manage the credit risk, which 

touches on the second point you raised about protecting the taxpayer from exposing them to too much risk. 

Chairman SHELBY. Many foreign export credit agencies have entered into what they call co-financing agreements that you are very 

familiar with by which they agree to jointly support exports from 

each of their respective nations. Co-financing helps exporters 

around the world work together to compete for large transactions. 

How many co-financing agreements has Ex-Im entered into, and do 

you think that Ex-Im needs to enter into any additional co-financing agreements? Do you have any opinion on that? 

Mr. LAMBRIGHT. Yes, we currently have five co-financing agreements. The last one was an agreement I signed a few months ago 

with Atradius, the Dutch export credit agency, but I do think that 

there is more we can do. The Europeans are ahead of us in this 

respect, largely because the European market is so integrated by 

currency and production, but there is more that U.S. Ex-Im can do 

on the co-financing front to help our exporters. 

Chairman SHELBY. The Export-Import Bank Reauthorization Act 

of 2002, Mr. Lambright, mandated that Ex-Im implement technology improvements to improve its small business outreach and to 

enhance the tracking of all of Ex-Im’s pending transactions. One of 

those initiatives to meet this mandate was Ex-Im Online. Despite 

having 4 years to meet this, however, Ex-Im, to my understanding, 

has still not finished developing the Ex-Im Online. When do you 

expect that to be operational? 

Mr. LAMBRIGHT. June 1. 

Chairman SHELBY. June 1. That is good news. 

Senator Sarbanes. 

Senator SARBANES. Thank you very much, Mr. Chairman. 

I wanted to ask you about these vacancies on the Export-Import 

Board, which I mentioned in my opening statement, but it is an 

issue that has me very concerned. Chairman Merrill’s term expired 

on January 20, 2005. The term of the Vice Chairman, April Foley, 

9

expired on the same date, and the term of Joe Grandmaison expired on that date, January 20, 2005. That is about slightly over 

15 months ago. 

Now, under the terms of the Export-Import Bank structure, they 

can stay on for 6 months, which they did in each instance, and 

then, they have to leave the Board altogether, so you have a vacancy. So the Board was without a quorum. I mean, it had only two 

members, not three. 

Now, they used the Vacancies Act to put you in there on an acting basis, thereby giving it a quorum, but is this not a problem? 

What is your view on these—so many vacancies and the ability of 

the Board to function in a normal, rational way? 

Mr. LAMBRIGHT. It is an important concern, Senator Sarbanes. 

Fortunately, as you know, we were able to have a quorum, and so, 

since the terms expired, we have not had to interrupt the regular 

meetings of our Board to provide authorizations for export credits 

to our customers. But you correctly note that we might have had 

a problem with that. 

Senator SARBANES. You do not get the benefit of the advice and 

counsel of a full Board. Furthermore, the way the statute is written, two of the five Members have to come from the party other 

than the President’s party, and I think the thinking behind that 

was that you would get a balanced board. It would help to take the 

Ex-Im Bank out of politics, not thrust it into politics, which I think 

is a very important consideration. 

But obviously, that balance can be affected by having these 

empty seats. And it seems to me that the objective should be to 

have a fully appointed Board, not just enough to constitute a bare 

quorum, which can transact business, but if that is going to be, 

maybe you should change it to a three-member Board instead of a 

five-member Board. I mean, the rationale for a five-member Board 

I think is pretty good but begins to collapse if these seats are allowed to go unfilled. 

Now, obviously, you do not make the nominations, but as the 

prospective Chairman of the Board, you are going to have a heavy 

responsibility in making sure the Bank works right. 

Chairman SHELBY. He is going to want them. 

Senator SARBANES. And it seems to me, I want to just energize 

you on this particular issue. Mr. Chairman, I think it is very important. In fact, I have some hesitation moving ahead on these Export-Import nominations until the Administration comes through 

with its other nominees. You know, they are partly crippled, in my 

perception. 

Chairman SHELBY. They should be at full strength. 

Senator SARBANES. Strength, yes. 

Chairman SHELBY. Senator Sarbanes, if you want to, we can 

work together and maybe contact the Administration and tell them 

how important this is, not to just us but to the operation of the 

Bank as well. 

Senator SARBANES. Yes, I think that is very helpful. I mean, Mr. 

Grandmaison has been down there. He has done a good job, from 

all accounts, but he is out there in the wings, I guess, just waiting 

around, and we need a nominee for Ms. Foley. In fact, she is going 

10

to have a hearing here very shortly. She has been nominated by 

the President to be the Ambassador to Hungary. 

Chairman SHELBY. Senator Martinez, do you have any questions? 

Senator MARTINEZ. No, sir. 

Chairman SHELBY. Not of these nominees? 

Senator MARTINEZ. Only to comment that I think Mr. Lambright 

is an eminently qualified individual, and I look forward to his confirmation. 

Chairman SHELBY. Senator Dodd. 

Senator SARBANES. Mr. Martinez is anxious to get to these Florida nominees. 

Chairman SHELBY. Absolutely. 

[Laughter.] 

Senator MARTINEZ. It is a couple of friends from Florida who are 

here, sir, and I thought I would talk about them when the time 

came, but I am patiently awaiting. 

Senator SARBANES. We understand. 

Senator Dodd. 

STATEMENT OF SENATOR CHRISTOPHER J. DODD 

Senator DODD. Thank you, Mr. Chairman. I apologize getting 

here a little bit late, and as the Chairman and Senator Sarbanes 

know, I have a particular interest in how well the Export-Import 

Bank does. My spouse is a former Vice Chair of the Bank, Chief 

of Staff of the Bank. 

Senator SARBANES. A very good one, too. 

Senator DODD. And she had a wonderful experience; still raves 

and talks about the friendships she developed down there and what 

a terrific job this institution—I think one of the smallest if not the 

smallest of our Federal agencies; there may be a smaller one, but 

I am not aware of what it would be and just does a remarkable job. 

It is such a unique place and performs a very unique function. I 

mean, there are very few places where job creation really can 

occur, and the Bank has had some remarkable leaders over the 

years and is doing some very exciting things in environmental, 

small businesses, and making credit more available under difficult 

circumstances and been a real engine for growth and success. 

And so, I bring a strong bias in support of this institution and 

on the few occasions I have had a chance to meet people at the 

Bank who have dedicated themselves with careers at the Bank and 

really made a wonderful contribution. And I just want to underscore what Senator Sarbanes and Senator Shelby have said here, 

and I intended to raise the same issue, and that is I know in the 

past, there have been Chairs who frankly would have probably preferred a smaller Board, maybe no Board at all in some cases, given 

the fact that boards can be unruly from time to time, and they do 

not necessarily all agree. And I know there are some heated discussions from time to time on whether or not a certain proposal should 

go forward or not. 

But until we statutorily change, and that is a decision to make, 

and I am not sure we ought to, but that is a legitimate question, 

but in the meantime, we should try and fill these positions to have 

the full complement. And so, I would underscore what has been 

said and would join the Chairman and Senator Sarbanes in any 

11

communication they might share with the White House or others 

about sending these names up. And I gather, in the case of Joe 

Grandmaison that there has been White House support for that decision. We just have not seen any documentation. At least I am led 

by the memos I have from my staff that that is the case, and if 

it is not the case, then, we should know that as well, but I underscore what Senator Sarbanes has said. I think the general impression I had was that Joe did a pretty terrific job at the Bank and 

really was very knowledgeable and tremendously helpful in his position as a Member of the Board. 

So, I would hope, Mr. Chairman, that you could communicate 

however you want to communicate but add my voice to that communication as well. 

Senator SARBANES. Absolutely. 

Senator DODD. And it is important that we get people in place, 

and the Acting Chair is a new creation, I think, if I am not mistaken. There has never been an Acting Chair before. We either had 

a Chair or did not have a Chair. 

Mr. LAMBRIGHT. I am not aware of a precedent for it. 

Senator DODD. I think that is a precedent setting move. Creative, 

in a sense, I must say, and I understand why, but my hope would 

be that we would fill these seats as soon as we can. 

Chairman SHELBY. Senator Dodd, you make an excellent point. 

We will work on that together. 

Senator DODD. Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Allard. 

STATEMENT OF SENATOR WAYNE ALLARD 

Senator ALLARD. Mr. Chairman, I just want to follow up on one 

area. I just want to put a statement in the record. 

Chairman SHELBY. Without objection, the full statement will be 

made part of the hearing record. 

Senator ALLARD. And I just want to thank Mr. Lambright for 

taking on the responsibilities that he has already begun to assume 

and raise a question about how he is getting along with the Inspector General. You know, we reauthorized the Export-Import Bank, 

and during that deliberation, I pushed to have an Inspector General for the Export-Import Bank, because this is the only institution we had out there, as I understood it, that gave direct loans or 

gave loan guarantees that did not have an inspector general there, 

and I just wanted to know how you viewed your relationship with 

him and if that is helpful or not. Do you find him helpful at this 

particular point in time? 

Mr. LAMBRIGHT. Well, since 2002 at the last reauthorization, this 

was the first fiscal year that we were appropriated funds for an Office of Inspector General. 

Senator ALLARD. That is right. 

Mr. LAMBRIGHT. And this is another position where we are waiting for a nomination for filling the spot. 

Senator ALLARD. Another one of those vacancies, Mr. Chairman, 

that we maybe should visit, because the Inspector General is the 

eyes and ears——

Chairman SHELBY. The Administration needs to fill them, and 

we need to confirm them. 

12

Senator ALLARD. Yes. It is the eyes and ears of this Committee 

and the Members of Congress, and we need to get the input, and 

we need to get him on board. So, I would encourage you and the 

Ranking Member, if you would, to also bring that up. 

Chairman SHELBY. Absolutely. 

Senator ALLARD. Thank you very much. 

Do you think it is going to be helpful to you to have an Inspector 

General? 

Mr. LAMBRIGHT. I think that there is a lot that an Inspector General would add to our operations. We have a strong system of internal controls with an Audit Committee currently, but we are already 

in the process of making preparations to receive the Inspector General and have a fully functioning Office of Inspector General as 

soon as possible. 

Senator ALLARD. Thank you very much, Mr. Chairman. 

Chairman SHELBY. Mr. Lambright, we appreciate your willingness to serve, and we will try to expedite this nomination. Thank 

you very much. 

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

Chairman SHELBY. We are going to call up the second panel, if 

you will take your seats. 

[Witnesses sworn.] 

Chairman SHELBY. Your written testimony will be made a part 

of the record. If you will just briefly sum up your testimony here 

this morning, and if you have any members of your family you 

want to introduce, you proceed. 

STATEMENT OF ARMANDO J. BUCELO, JR., OF FLORIDA

TO BE CHAIRMAN,

SECURITIES INVESTOR PROTECTION CORPORATION 

Mr. BUCELO. Thank you, Mr. Chair. With me today is my wife, 

Beatrice, and my son, Alex. Senator Sarbanes, if you remember, 4 

years ago, I brought Alex as a 9-year-old before you. 

Senator SARBANES. He has come back again; all right. 

Mr. BUCELO. And you interrogated him as far as his baseball 

ability. He has won two batting titles since 2002. 

Senator SARBANES. Good. 

Mr. BUCELO. And he is glad to be back. 

Chairman SHELBY. I think Senator Sarbanes has been waiting 

here. I mean, Senator Sarbanes has been waiting. Senator Martinez is really waiting. 

[Laughter.] 

Chairman SHELBY. Go ahead. 

Mr. BUCELO. Would you like me to make my opening statement? 

Chairman SHELBY. Yes, sir, you may proceed. 

Mr. BUCELO. Mr. Chairman, Senator Sarbanes, Members of the 

Committee, I am pleased to appear before the Committee today as 

SIPC’s Chairman. With me today is also SIPC’s President Stephen 

Harbeck and SIPC’s General Counsel, Josephine Wang. Not with 

me today is my daughter, Alexis. She is a 20-year-old graduate of 

the University of Miami. She will be entering law school next year 

and my son A.J. He is a 19-year, second-year student at MiamiDade Community College, which is the largest college in the country and of which I am a trustee appointed by Governor Bush. 

13

And if I may just take a second, also not with me today is my 

father. He is 87. He is not doing very well. I am eager to get back 

to him, and I just wanted to mention his name. Thank you very 

much. 

It is an honor to serve as SIPC Chairman, and I look forward to 

a full term in that capacity. I joined the SIPC Board in 2002 as 

a Director and Vice Chairman, and since the appointment of SIPC’s 

Chairman Tim Timken as Ambassador to Germany in late 2005, I 

have served as its Chairman. 

I am very proud of my association with SIPC, Mr. Chairman, 

which, as we all know, serves to protect investors in the event of 

brokerage firm failures, as Senator Sarbanes previously mentioned. 

During the years I have served on the Board, I have had the opportunity to see for myself that this segment of the investor safety net 

is functioning very well. 

A brief background of SIPC will be useful to the Committee in 

measuring how far investor protection has gone since SIPC’s inception. In 1969 and 1970, as we all know, customer losses mounted 

as the rate of stockbroker failures accelerated. Congress responded 

by enacting the Securities Investor Protection Act, SIPA. SIPA had 

many purposes: Mainly to protect individual investors from financial hardship, to insulate the economy from the disruption which 

can follow the failure of a major financial institution, and obviously 

to achieve a general upgrading of financial responsibility requirements of brokers and dealers, to eliminate, as much as possible, the 

risks which lead to customer loss. SIPA also created SIPC at that 

time, and among other things, established procedures for liquidating financially troubled broker-dealers who are members of 

SIPC. 

I am proud to report that SIPC is about to conclude the largest 

brokerage firm liquidation in its 36-year history. MJK Clearing 

Corporation was a prominent regional brokerage firm in Minneapolis that failed when a fraudulent stock loan scheme completely depleted its cash reserves. In the troubled period of late 

September 2001, that was before my time, SIPC and a trustee appointed to liquidate the firm returned control of customer assets to 

175,000 customers in approximately one week. SIPC advanced 

$177 million in returned cash and securities to those investors. I 

am extremely pleased to report to the Committee that as the case 

comes to a close, as a result of rigorous litigation efforts to recover 

missing customers’ assets, all customers, all creditors, all lenders 

and SIPC have been paid, Mr. Chairman, 100 cents on the dollar 

plus interest. SIPC’s board and staff are very proud of this achievement. As the only attorney on the Board, I have come to appreciate 

the complexity of the legal issues that SIPC faces with regard to 

bankruptcy and securities law. I can report to the Committee that 

investors have benefited from SIPC’s vigorous pursuit of those who 

are responsible for any particular brokerage firm failure. 

I am also pleased to report at this time to the Committee that 

the regulatory system is preventing brokerage firm failure in the 

first place. Only one small brokerage firm failed in 2005. Only one 

small firm has failed this year. This is an incredible record. We attribute these outstanding results to the Securities and Exchange 

Commission, the State regulatory authorities, and the securities inVerDate 0ct 09 2002 17:18 May 31, 2007 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 S:\DOCS\35500.TXT SBANK4 PsN: KEVIN
14

dustry self-regulatory organizations that monitor, in fact, the financial health of the securities brokerage industry. As I noted in 

SIPC’s 2005 Annual Report, investor confidence in the securities 

markets is enhanced when investors know that the brokerage firm 

failure is a rare event. 

Our Board is committed to maintaining adequate resources to 

fulfill SIPC’s statutory mission. SIPC’s fund now stands at well 

over $1.3 billion, a historic high. As Chairman, I have initiated a 

Board-level Investment Committee to make sure that SIPC continues the prudent management of the fund. No taxpayers funds, 

I repeat no taxpayer funds, have ever been used in the SIPC program, and the Board continually monitors the adequacy of SIPC 

funding. 

Investor education has been my number one priority since I have 

been Chairman. The statute that created SIPC is, by the very nature of bankruptcy and securities laws, a complex and technical 

law. We have also undertaken a continuing public interest media 

campaign to make sure investors know what SIPC protects, and 

equally important, Mr. Chairman, what it does not protect. 

Finally, SIPC is preparing for the future and the inevitable problems we have not faced in the past. We have tested a business continuity program, complete with an emergency alternative work facility. We are also preparing for the possibility of brokerage firm 

failure that crosses international borders. SIPC has executed 

memoranda of understanding at this stage with its counterparts in 

Canada and the United Kingdom. Others will follow. 

In summary, SIPC is very robust financially, fulfilling its statutory mission and preparing for the future. I am very pleased to be 

its Chairman, and I am honored to be here. Thank you. 

Chairman SHELBY. Do you have any family members you want 

to introduce? 

STATEMENT OF TODD S. FARHA, OF FLORIDA,

TO BE MEMBER OF THE BOARD OF DIRECTORS,

SECURITIES INVESTOR PROTECTION CORPORATION 

Mr. FARHA. No, sir. 

Chairman SHELBY. You can proceed as you wish. 

Mr. FARHA. Good morning, Chairman Shelby, Senator Sarbanes, 

and distinguished Members of the Committee. My name is Todd S. 

Farha, and it is my pleasure to appear before you as a candidate 

for the Board of Directors of the Securities Investor Protection Corporation. I am honored to be nominated to serve on the SIPC Board 

and look forward to my public service if confirmed by the Senate. 

I understand you have been informed of my background, so I will 

only highlight my qualifications and why I am pleased by the opportunity to serve on the SIPC Board of Directors. 

I am a native of Wichita, Kansas. I received my bachelor’s degree 

in economics magna cum laude from Trinity University and my 

MBA with distinction from Harvard Business School. 

As you know, I am the President and CEO of WellCare Health 

Plans, headquartered in Tampa, Florida. WellCare is one of the 

largest providers of managed care services, targeted to governmentsponsored healthcare programs, such as Medicare and Medicaid. 

We are pleased to be participating in the groundbreaking Medicare 

15

Part D program, and with enrollment of over 800,000 Medicare 

Part D members today, WellCare now ranks among the top five 

prescription drug plans in the country, filling close to 100,000 prescriptions per day for Medicare beneficiaries in all 50 States. 

I am pleased to have the opportunity to serve on the Board of 

Directors of the Securities Investor Protection Corporation. SIPC 

serves a vital role to strengthen investor confidence in our capital 

markets. SIPC has a demonstrated track record of recovering $14.2 

billion in assets for an estimated 624,000 investors. 

As a Board member, my priority is ensuring that SIPC remains 

focused on continuing to execute its mission. I will hold the organization accountable for the results of its efforts, and I will work 

closely with SIPC’s management to support their continuing daily 

responsibilities. I know Chairman Armando Bucelo has made tremendous progress in advancing SIPC’s mission during his tenure, 

and I would look forward to working with him to continue this 

progress. 

As the CEO of a public company, I have experience in issues of 

corporate governance, compliance, public disclosure, and SarbanesOxley implementation. I take seriously all aspects of these responsibilities and the need to ensure the utmost discipline and integrity 

in every area of corporate governance. 

I seek your support of my nomination to the Board of Directors 

of SIPC. If confirmed, I believe my experience as a CEO of a public 

company as well as my prior experience and education, will prove 

valuable to SIPC. 

Thank you very much, and I look forward to answering any questions or clarifying any comments I made. 

Chairman SHELBY. Thank you. 

We will start with you, Mr. Bucelo. The Securities Investor Protection Act, the 1970 legislation that created the Securities Investor 

Protection Corporation, has been substantially amended only once, 

in 1978. In your estimation, does the Act need to be modernized or 

amended in any way, or do you want to withhold that? 

Mr. BUCELO. At this time, Mr. Chairman, I do not believe that 

there is any need for any major legislative changes. We are in direct conversation; as a matter of fact, I will be meeting with Chairman Cox on Friday. 

Chairman SHELBY. Good. 

Mr. BUCELO. There are a few issues that are pending on the 

table, but at this time, there is nothing as far as any major 

changes. 

If I may also at this time report to Senator Sarbanes, 4 years 

ago, your marching instructions to me, sir, were to make sure that 

SIPC was adequately funded, and we are. As a matter of fact, what 

we have done is made it a topic at virtually every SIPC Board 

meeting since I appeared before you in 2003 after the most expensive brokerage firm failure, the one I previously mentioned. Senator Sarbanes, SIPC commissioned, the latest in a long series of 

independent studies, and that study concluded that a loss in excess 

of $500 million is expected once every 100 years. Using what they 

call the Ruin Theory analysis, an early study indicated that there 

was a 1 in 40,000 chance that SIPC would not have sufficient 

funds. We now have a commercial line of credit of $1 billion, plus 

16

the backing of the Federal Government of $1 billion, so we are 

okay. We feel very confident. And I know you made it a point, Senator Sarbanes, 4 years ago to make sure that I did that as thenVice Chairman. 

Chairman SHELBY. It is very important. 

Mr. BUCELO. Yes, I think it is incredibly important. 

Chairman SHELBY. The number of brokerage firm liquidations 

are at an all-time low. You have only had one customer protection 

proceeding this year is my understanding. 

Mr. BUCELO. That is correct, sir. 

Chairman SHELBY. There were only two last year and one in 

2004. In your view, why have there been so few? 

Mr. BUCELO. I do not know, and I really do not want to know. 

[Laughter.] 

Chairman SHELBY. That is good news. 

Mr. BUCELO. That is very good news. When I became a member 

of the Board 4 years ago, I was Acting Chairman for a number of 

months pending the confirmation of Chairman Timken, I insisted 

that one of my major goals as Vice Chairman was to make sure 

that the public was well-informed. And again, when I was appointed to the Board of SIPC, in Miami, people said you received 

a Presidential appointment. They said what to? SIPC. What was 

that? I mean, a lot of people know the FDIC. The answer is I believe we are informing the investor, and based on that, we are 

proud to report that we have only had one case this year. 

Chairman SHELBY. That is wonderful. The Corporation’s financial health appears to be strong. Are there any challenges or potential problems that you know about that may lay ahead and that we 

need to know about? 

Mr. BUCELO. No, sir, none, Mr. Chairman. 

Chairman SHELBY. Some people have suggested that the fund 

should also be allocated to cover fraud at brokerage firms. The classic example would be a pump-and-dump case. What is your view 

regarding the Securities Investor Protection Corporation reimbursing investors for market losses? 

Mr. BUCELO. There are strong arguments against protecting 

against fraud. The first thing that comes to my mind when I hear 

fraud is a stockbroker with a potential victim saying go ahead and 

do it; invest here and there, and if anything goes wrong, SIPC will 

pay for it. 

Chairman SHELBY. That is right. It could be open-ended, could 

it not? 

Mr. BUCELO. That is right, it could open up a Pandora’s box. Irrespective of the fact that it would need Congressional authorization, I would never recommend that. 

Chairman SHELBY. I did not suggest that. I just asked about it. 

Mr. BUCELO. Oh, okay. 

Chairman SHELBY. Yes, sorry. 

Mr. BUCELO. Yes, I think definitely, Congress should not make 

any change without considering the policy concerns and costs, and 

I am very concerned, so my gut feeling would be no. 

Chairman SHELBY. I have several questions, one question for 

you. To fund the operation, 6,000 members pay a flat annual fee 

of $150 is my understanding. This has been the funding arrangeVerDate 0ct 09 2002 17:18 May 31, 2007 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 S:\DOCS\35500.TXT SBANK4 PsN: KEVIN
17

ment since 1996. But over 25 years prior to that, the Corporation 

had assessed fees on a sliding scale based on net operating revenues. Why should the smallest broker-dealer pay the same fee as 

the large Wall Street firms? Just a question. 

Mr. FARHA. Mr. Chairman, a very good question and one that I 

will not represent that I am expert in. I have been briefed by the 

SIPC leadership team on the general issues regarding SIPC. I 

think your question exposes an interesting issue that perhaps we 

should evaluate at SIPC and determine if a sliding scale is appropriate based on whatever study——

Chairman SHELBY. I do not know myself, but I just suggest to 

you that you should maybe look at it. 

Mr. FARHA. Clearly merits evaluation and a very good question. 

Chairman SHELBY. Senator Sarbanes. 

Senator SARBANES. Thank you very much, Mr. Chairman. 

Mr. Bucelo, how long have you been Chairman now? 

Mr. BUCELO. Since Chairman Timken was appointed Ambassador to Germany; late 2005. 

Senator SARBANES. How long was there a vacancy in the Chairmanship? Do you recall? 

Mr. BUCELO. When I became a member of the Board of Directors, 

and I was appointed Vice Chairman, I was Acting Chairman for 

about 7, 8 months pending the confirmation of Chairman Timken. 

Senator SARBANES. Right. 

Mr. BUCELO. Then, Chairman Timken was made U.S. Ambassador to Germany in late 2005, at which time, I became Acting 

Chairman. And then, I was nominated by President Bush and 

made Chairman. 

Senator SARBANES. In a relatively short period of time? 

Mr. BUCELO. Yes, yes, Senator. 

Senator SARBANES. I am relieved to hear that. I do not like these 

positions being in a floating status. 

Mr. BUCELO. No, sir. 

Senator SARBANES. I do not think it is good for the workings of 

the institution. 

Mr. BUCELO. No, sir. 

Senator SARBANES. The GAO, in a 2004 report, concerning the 

Securities Investor Protection Corporation, stated that the SEC, 

and I am now quoting the GAO, ‘‘found that SIPC had inadequate 

internal controls over the fees and expenses awarded to trustees 

and their counsel.’’

And then, the GAO added, to address SEC’s concerns, SIPC is in 

the process of enhancing its controls for reviewing and assessing 

fees. Now, obviously, these internal controls are important for any 

organization. How have you progressed on this concern expressed 

by the SEC? This is now not quite a couple of years ago. 

Mr. BUCELO. Although not personally involved as a member of 

the Board, I know for a fact that President Harbeck and the entire 

administration has thoroughly looked into that, and I know that 

changes have been made, and as far as I am concerned now, we 

are back on track, and not that we ever deviated, in my opinion, 

but they had some concerns, and we addressed them. 

Senator SARBANES. If you could go back, I understand that you 

have instituted a number of changes with respect to this which 

18

have tightened up your procedures, but given that the GAO raised 

this concern in its report, if you could go back and take another 

look at this, we would appreciate that. 

Mr. BUCELO. We will do so. 

Senator SARBANES. I am not going to go into this proposal that 

SIPC submitted to raise compensation of its Board Members. That 

has been withdrawn, as I understand it. 

Mr. BUCELO. That is correct, Senator. 

Senator SARBANES. It does, however, lead to a question about the 

salaries that are being paid to the SIPC employees, which are, I 

think it is fair to say, fairly high-end, and how much attention is 

the SIPC Board paying to these compensation levels? 

Mr. BUCELO. Very much so, and——

Senator SARBANES. When you compare it with the SEC, it is 

quite a contrast, actually. 

Mr. BUCELO. The SIPC staff contains a high degree of specialized 

professionals, in my opinion, and they definitely discourage a revolving door type of procedure in and out. We have had employees 

there for—well, our President has been there close to 30 years. And 

they benefit—I believe SIPC benefits from the lengthy tenure of 

these professionals. 

I am of the opinion—this is one voice speaking—that salaries are 

definitely below those in the private sector and in some instances 

substantially less than other financial services professionals in government, and as such, we did a little bit of a study, and if you will, 

for example, the Municipal Securities Rulemaking Board, its executive makes—it is a package in excess of $1 million; the ABA Securities Association, same thing, American Bankers Association. 

So in order for us, Senator Sarbanes, to keep the level of professionalism and competency that we have, I sincerely and truly do 

not believe that we are overpaying anybody. As a matter of fact, 

I think, for example, you take our highest, the CEO, our President, 

his salary is under $300,000, which I believe is not competitive at 

all. He has a full package of approximately $400,000, which, I believe, is quite low when you compare it to the NASD and other institutions comparable to SIPC. 

But nevertheless, we as a Board do in fact regulate that and 

keep an eye on it, and I will do whatever you indicate me to do 

as——

Senator SARBANES. It is always a challenge, and I think you have 

outlined it fairly well, the balancing act that has to take place. 

Mr. BUCELO. That is correct. 

Senator SARBANES. So, I do not think we can ever anticipate that 

the salaries in the public sector will reach those that exist in the 

private sector, particularly in the financial sector. 

Mr. BUCELO. That is correct. 

Senator SARBANES. Actually, a lot of concerns are now being 

raised about the private sector compensation. 

Mr. BUCELO. Yes, sir. 

Senator SARBANES. Every day, you read the business section of 

The Wall Street Journal or The New York Times, there is another 

major story on that issue, but I think it is important for the SIPC 

Board to keep this matter in focus. 

Mr. BUCELO. We do. 

19

Senator SARBANES. I wanted to just ask one question: How old 

were you when you came to the United States from Cuba? 

Mr. BUCELO. 1960—my God, I am so old now; 3, 4 years old. 

Senator SARBANES. All right; well, you have had a very impressive life story, and I mentioned that before when you were here. 

Mr. BUCELO. Yes, thank you; I appreciate that. 

Senator SARBANES. I wanted to recognize my respect for you. 

Mr. BUCELO. Coming from you, it is an honor. 

Senator SARBANES. Mr. Farha, I want to put just one question 

to you. I am drawn to do so. It is like a dangling bait before a fish 

or something. 

[Laughter.] 

Mr. FARHA. Thank you, Senator. 

Senator SARBANES. You say in your statement as the CEO of a 

public company, I have had experience in issues of corporate governance, compliance, public disclosure, and Sarbanes-Oxley implementation. How has your experience been with Sarbanes-Oxley implementation? 

[Laughter.] 

Mr. FARHA. Absolutely. 

It is interesting: We took our company public in 2004, so that 

makes us a relatively young New York Stock Exchange-listed company, and the process of complying with Sarbanes-Oxley, and in 

our first year, we did fully comply with no reservations from our 

auditors, which we thought was quite an accomplishment; I think 

it had a number of positive impacts on the company. It enhanced 

our focus on process and internal controls and processes for managing and verifying those controls. 

And I mentioned that I take very seriously the compliance, and 

quite frankly, as I sign the reports that are required under your 

Act, I do so with the cognizance of the liability that it creates. So, 

I think it has been a definite positive on our company. I would 

mention to you that the cost of compliance is meaningful, both in 

terms of our auditors as well as other professional staff, but I think 

a balanced approach would clearly say it has had a positive impact 

on the company. 

Senator SARBANES. Okay; and I guess the costs are in some respects like an investment in capital goods. I mean, once you put 

the systems in place and everything, it is, I guess, reasonable to 

assume in subsequent years, the costs will not run at that level; 

is that a fair assumption, do you think? 

Mr. FARHA. In fact, that is an accurate assumption, and as we 

have gone through our recent Audit Committee, the hours of our 

auditors allocated for year two review of our 404 compliance are reduced. So, I think your statement is definitely accurate. 

Senator SARBANES. Okay; thank you very much. I appreciate 

that. 

Chairman SHELBY. Senator Martinez? I want to know who got 

here first. 

Senator MARTINEZ. I think I did. I was older when I got here, 

first of all, I should say. 

Mr. BUCELO. He is a lot older. 

[Laughter.] 

20

Senator SARBANES. The Committee is obviously going to have to 

look into this Florida monopoly of this SIPC Board. 

[Laughter.] 

I think that is a question for us and not for you. 

Senator MARTINEZ. But I am delighted to be here to welcome 

these Floridians to the Committee and very honored to have an opportunity to speak on both of their behalves, Mr. Chairman. I am 

not going to have a lot of questions for them. I am basically here 

to say how pleased I am as the Senator from Florida that we have 

these dedicated people who offer themselves to public service. I am 

particularly impressed with Mr. Farha’s comments on SarbanesOxley; well done, sir. 

But Mr. Bucelo and I share a common background, as Senator 

Sarbanes indicated, and a shared bond of our life experience as 

Cuban-Americans making it in this wonderful land. And so, I am 

very pleased and proud to welcome him here. He is someone who 

also shares a legal background, which we both have, he as a Miami 

Hurricane and me as a Florida State Seminole, but nonetheless——

Chairman SHELBY. You are friends other than that. 

Senator MARTINEZ. Other than that, we get along very well. 

I was recently at Miami-Dade Community College. You mentioned being on the Board, and this is one of the many community 

activities that I know Armando is a part of and a remarkable college and a great institution that is serving the community so well. 

And so, I am just delighted, Mr. Chairman, to welcome him here. 

I know he has done a great job in his Vice Chair position; will do 

equally as well in the future, and Alex, I am proud of your batting 

prowess, buddy. I may have to get you with Andrew, who is 12 and 

cannot hit the curve ball. But anyway. 

[Laughter.] 

Mr. BUCELO. Neither can he. 

Senator MARTINEZ. Todd Farha is a good friend and also someone 

who I believe is a very innovative person in the area of health care. 

I am so glad, Todd, that you mentioned your involvement with 

Medicare Part D and the success that you have had in implementing that. His company is innovative in the managed health 

care area in Tampa, Florida; very strong and rising entrepreneur 

in our State and someone that we also have a lot of pride in his 

contributions to our State. So, I am delighted that they are both 

going to be serving in this capacity and very pleased to be able to 

welcome to the Committee and look forward, Mr. Chairman, to a 

swift vote on their nominations and again, a confirmation in the 

full Senate in the near future. 

Mr. FARHA. Thank you, Senator. 

Mr. BUCELO. Thank you, Senator. 

Chairman SHELBY. Mr. Farha, did you start this company? 

Mr. FARHA. No, I acquired it as a leveraged buyout in 2002. 

Chairman SHELBY. And you are doing well with it. 

Mr. FARHA. Thank you very much. 

Chairman SHELBY. What we need in health care is more competition and I hope ultimately some market forces involved. 

Mr. FARHA. Absolutely. Thank you, Senator. 

21

Chairman SHELBY. We thank you both for appearing. We will try 

to expedite your nominations as soon as possible. And we feel good 

about your nominations. 

Mr. BUCELO. Thank you, Mr. Chairman. 

Mr. FARHA. Thank you, Mr. Chairman. 

Chairman SHELBY. We are going to call up the third panel if we 

can: Jon Rymer, Inspector General-designee, Federal Deposit Insurance Corporation; John W. Cox, Chief Financial Officer-designee, Department of Housing and Urban Development; William 

Hardiman, Member of the Board of Directors nominee, National Institute of Building Sciences. 

[Witnesses sworn.] 

Chairman SHELBY. Mr. Rymer, we will start with you. I will tell 

all of you that without objection, all of your written testimony will 

be made part of the hearing record, and if you will just briefly sum 

up what you basically want to say; before then, if you have any 

family members you want to introduce, you may. Mr. Rymer, we 

will start with you. 

STATEMENT OF JON T. RYMER, OF TENNESSEE,

TO BE INSPECTOR GENERAL,

FEDERAL DEPOSIT INSURANCE CORPORATION 

Mr. RYMER. Thank you, Mr. Chairman. I would like to introduce 

my wife, Deb, and my son, Thomson, who are with me here today. 

Chairman SHELBY. I think that is always wise to introduce your 

wife. 

Mr. RYMER. Yes, sir, it is, absolutely. And sir, you do have my 

opening statement and I would like to include it in the record. 

Chairman SHELBY. It has been made a part of the record. 

Mr. RYMER. And so, I will forego that and be prepared to answer 

any questions you may have, sir. 

Chairman SHELBY. Thank you. 

Mr. Cox. 

STATEMENT OF JOHN W. COX, OF TEXAS,

TO BE CHIEF FINANCIAL OFFICER,

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

Mr. COX. Yes, sir, Mr. Chairman, I am happy to introduce my 

wife, Sally. 

Chairman SHELBY. Absolutely. You all are smart men. 

Mr. COX. And my daughter, Kate. I also have my mother and father. 

Chairman SHELBY. Point them out to us, your wife here and your 

daughter. 

Mr. COX. My daughter, Sally. 

Chairman SHELBY. Good. 

Mr. COX. I also have my mother and father from Texas. 

Chairman SHELBY. Absolutely. 

Mr. COX. And my in-laws here are from Virginia. 

Chairman SHELBY. That is good. 

Mr. Cox, do you have anything to say other than your opening 

statement? 

Mr. COX. No, sir, I do not. 

22

Chairman SHELBY. Okay; Mr. Hardiman, do you have any family 

here? 

STATMENT OF WILLIAM HARDIMAN, OF MICHIGAN,

TO BE MEMBER OF THE BOARD OF DIRECTORS,

NATIONAL INSTITUTE OF BUILDING SCIENCES 

Mr. HARDIMAN. I do not, Mr. Chairman. 

Chairman SHELBY. You will pay for that later, will you not? 

Mr. HARDIMAN. I probably will. I do acknowledge that my wife 

is such an important part of my life. 

Chairman SHELBY. Absolutely. 

Mr. HARDIMAN. But she could not make it today. 

Chairman SHELBY. Sure. 

Mr. Hardiman, do you have any oral statement? Your written 

statement will be made a part of the record? 

Mr. HARDIMAN. Thank you, Mr. Chairman. I just want to say 

that I am just honored to be here. It is really a pleasure. I serve 

in the Michigan State Senate, so I do understand that brevity 

is——

Chairman SHELBY. That is where I started, too, in the Alabama 

Senate. 

Mr. HARDIMAN. Oh, wonderful. 

Chairman SHELBY. Good experience. 

Mr. HARDIMAN. Maybe there is hope for me as well. 

Chairman SHELBY. You will be here if you want to be. Maybe you 

will go into other things. 

Mr. HARDIMAN. Thank you. 

I do want to say that I am honored to be appointed by President 

Bush to serve on the Board of Directors for the National Institute 

of Building Sciences. You have seen my background. I think I have 

some things to add to the Board. 

Chairman SHELBY. Absolutely. 

Mr. HARDIMAN. And I would be pleased to answer any questions 

you have. 

Chairman SHELBY. We like all of these nominees. We want to 

move them as soon as we can, but we have to do our duty up here 

to go through. Mr. Rymer, I have several questions here for you, 

if I could for the record. 

Mr. RYMER. Yes, sir. 

Chairman SHELBY. In your view, what is the appropriate relationship of the Inspector General to the FDIC, and how does the 

Office of the Inspector General contribute to the safety and soundness of the banks the FDIC regulates? 

Mr. RYMER. A two-part question, sir, and I would answer it this 

way, the first of which is that the relationship between any Inspector General, the Board, and the Chairman is one of advice. I mean 

advice in the sense that the IG must maintain a significant degree 

of independence from policymaking and direct activities within that 

organization. 

And, a successful IG has to be viewed as a part of the leadership 

team. So as policies are developed, they can be developed in such 

a way that they address any potential risks that may be associated 

with the new policy and that those risks are identified and the policies modified as needed. 

23

Chairman SHELBY. Absolutely. Your professional experience includes the Army, an accounting firm, and several banks. You have 

a good background. Can you elaborate on how these past experiences will contribute to your effectiveness as Inspector General? 

Mr. RYMER. Yes, sir, certainly. I began my career, and the majority of my civilian career, as a banker, and spent about 16 years in 

positions of increasing responsibility. I understand how banks operate. I understand the interface between a bank or bank executives 

and a regulatory body, particularly such as the FDIC. 

I understand that the cooperation of banks is critical for the 

FDIC to complete its mission, so the fact that I bring that banking 

experience, I think, is very important. The other thing is as a banker, I spent a significant amount of time dealing with customer 

issues, fairness issues, and how a bank would interface with its 

customers, so I am very aware of the role that the FDIC plays in 

upholding consumer rights as they use financial services. 

Second, I would say that obviously, my experience as an auditor 

with a Big Four accounting firm was very valuable and that all of 

my audit experience was focused in the financial services community, large banks down to small thrifts and savings and loans. I 

spent a lot of time there understanding credit policy as it was developed, and as you are well aware, Mr. Chairman, if the FDIC experiences problems with a member bank, it will inevitably start 

with credit. So, I have spent a great deal of time auditing credit 

processes in banks. 

And then, last, I think what I have learned as a soldier is the 

discipline and the pride and the honor in serving the United 

States. That is why I decided rather than to go back into public accounting, with the Senate’s approval, sir, I would like to continue 

my Government service as an Inspector General. 

Chairman SHELBY. Do you anticipate any specific challenges in 

your office as Inspector General? 

Mr. RYMER. Well, sir, from what I can see, from the public information I have reviewed, I see no specific challenges. I think any 

new manager or leader has a responsibility to evaluate programs 

once he or she assumes office, whether it is funding levels, staffing 

levels, organization structure, but at this point, sir, I am not aware 

of any specific problems. 

Chairman SHELBY. In its April 2006 audit report just a few 

weeks ago, the Office of Inspector General noted certain deficiencies in the methods employed by the FDIC to calculate the reserve ratio of the Bank Insurance Fund. Accurate reporting of the 

reserve ratio is basically essential to ensure the continued viability 

of the insurance fund, which we deal with here. Are you aware of 

this report, and if you have not been, will you get into it and its 

recommendations? Where are you on that? 

Mr. RYMER. Yes, sir, I have read the report as published on the 

OIG’s Website. As I would summarize the report as an auditor, I 

would view the issue that the report raises as one of significance 

of decisions or degree of governance: Should that decision to have 

basically not changed the calculation method for Oakar deposits 

come before the full Board or not, and I think as an outsider——

Chairman SHELBY. It is a very important area. 

24

Mr. RYMER. Yes, sir. I think as an outsider, it probably should 

have received more Board attention than it did. 

Chairman SHELBY. You will look into it seriously, though. 

Mr. RYMER. Yes, sir, I will. 

Chairman SHELBY. Mr. Cox, financial controls. 

Mr. COX. Yes, sir. 

Chairman SHELBY. GAO has stated that HUD’s financial management systems cannot currently provide the day-to-day information needed by its managers to effectively manage and to monitor 

the Department’s programs. A lot of us believe it is critical that 

HUD have reliable financial and accounting systems. It is key. Are 

you familiar with the problems confronting HUD’s financial management systems, and have you faced or resolved similar systems 

probably in your previous private sector experience? 

Mr. COX. Yes, sir, I have. I have reviewed those issues in the 

GAO reports and been briefed by the staff at the Department. 

Chairman SHELBY. That is a big challenge there. 

Mr. COX. It is a very big challenge. My experience in the private 

sector dealt very much with these similar type of issues, and taking 

large, complex IT environments, many of which are ancient in 

terms of their technology, and bringing them into a common standard; the Department is close to making an acquisition decision on 

bringing that up to speed with a common, off the shelf technology 

solution, which they have already successfully implemented at 

FHA. I am very comfortable that my experience, I can help them 

guide through that if I am confirmed. 

Chairman SHELBY. FHA’s single family mortgage insurance is 

the subject. GAO has for some time considered FHA single family 

mortgage insurance a high risk to the Federal Government, to the 

taxpayers. 

Mr. COX. That is right. 

Chairman SHELBY. For instance, GAO has stated that, ‘‘HUD’s 

system for rating the underwriting quality of loans does not adequately assess the risks that the loans pose to the agency’s insurance fund.’’

With the Administration’s proposing to expand the range of its 

current underwriting, some of us are concerned that HUD is moving forward without knowing the real risk posed. Have you had the 

opportunity to discuss with FHA’s underwriting standards and assure that the program’s true risk is reflected on HUD’s financial 

statements? I think it has to be stated some way. 

Mr. COX. Yes, sir, I have, and clearly, I am not on board yet, and 

if I am confirmed, I will be very much involved with that issue, but 

what I can tell you is that for the current fiscal year, it is my understanding that the estimation of the loan loss reserves is very 

close to the actual experience. So the actuarial work that has to be 

done to estimate that, there have been improvements made in 

those models in the current year, and we will continue to make improvements there. And as you said, with the current FHA proposals on the table for a risk-based premium, that has to be part 

of that mix as well. 

Chairman SHELBY. I am concerned that HUD’s current acquisition practices leave the Department vulnerable to theft and to 

fraud. For instance, GAO has reported that HUD lacks adequate 

25

supporting documentation and effective controls over its computer 

purchases. GAO found that HUD did not consistently report purchases or even inspect the quantity or quality of its purchases. I 

know you are not there yet. Are you aware of any of these deficiencies? And if so, what is your plan to get your hands around 

that? 

Mr. COX. Yes, sir, I have actually been briefed on that specific 

topic, and there are specific control mechanisms in place. The Office of Administration at HUD now specifically has a plan of internal control to monitor those physical assets. So we have made improvements since that report was issued. 

Chairman SHELBY. If you can do that, you will do a great job for 

the country. 

Mr. COX. Thank you. 

Chairman SHELBY. Improper payments subject. 

I believe it is also vital in all of HUD’s program that payments, 

be they to local governments, housing authorities, or contractors, 

be accurate and timely. Congress took a major step in addressing 

this problem in 2002 with the Improper Payments Information Act. 

In the past, HUD has had considerable errors in its payment systems, particularly with the Section 8 Rental Assistance program. 

Are you aware of this issue, and what are some of the methods 

that you used in the private sector to guarantee that payments 

were accurate and timely? I think it is just financial management. 

Mr. COX. It is good management, and I am actually pleased to 

tell you that from the period of 2001 to 2004, HUD reduced its estimated improper payments by 62 percent and was the first cabinetlevel agency to report green on the President’s——

Chairman SHELBY. But you can reduce it more, I hope. 

Mr. COX. Absolutely; 62 percent means I have still got 38 percent 

out there that needs to be reduced. I will use my private sector experience to reduce those payments. One thing we are doing, particularly, you mentioned Section 8, is we are involved in income 

verification. That has had a big impact on reducing improper payments, and there is more work to do, some of which we can do at 

the Department; some of which may require some legislative fixes. 

Chairman SHELBY. A lot of that is bordering on fraud, too, is it 

not? 

Mr. COX. That is right. But having the income verification 

through the HHS systems allows us to prevent that fraud before 

it occurs. 

Chairman SHELBY. If you could bring some of the basic, fundamental private sector systems to HUD, you will be doing a great 

service to the taxpayer. 

Mr. COX. I will do my best, sir. 

Chairman SHELBY. Federal financial management improvement. 

It has been 10 years since Congress passed the Federal Financial 

Management Improvement Act, which requires an agency’s underlying financial systems and individual financial transactions to 

meet Federal financial standards. This past September, GAO reported that HUD’s external auditor concluded that HUD is still not 

compliant with the Act’s requirements. Are you aware of HUD’s 

current lack of compliance on a transactional level? 

26

Mr. COX. I am aware of that, and that is part of the IT projects 

that we are working on. 

Chairman SHELBY. Do you believe the relation to have a strong 

accounting or transaction base in relation to the overall accuracy 

of the agency’s financial statements? In other words, you have to 

have accuracy here. 

Mr. COX. Absolutely, and more importantly, you have to have 

that information so the program heads can use that information to 

run the Department. 

Chairman SHELBY. Thank you, Mr. Cox. 

Mr. Hardiman, disaster-resistant construction: I am not sure 

whether you had an opportunity to visit the Gulf States, Alabama, 

Florida, Louisiana, Mississippi, and, of course, Texas. One thing 

that continues to strike me is that newer structures often withstand natural disasters when the older structures do not. It depends on the standard of building, I suppose. What role do you see 

by the NIBS, which is very important, I think, having in developing safer, more disaster-resistant building technologies? 

Mr. HARDIMAN. Mr. Chairman, I have not visited the Gulf States 

since the hurricane, but I have prior to that. But I believe my experience in the past—I served as mayor of a very fast growing community prior to going to the Senate. I believe that experience will 

help me in working with not only the building trades but also engineers and architects. We work with all of them to build safe structures. 

Chairman SHELBY. It basically pays to build strong structures. 

Mr. HARDIMAN. Absolutely. 

Chairman SHELBY. It is just common sense. 

Mr. HARDIMAN. So, I think we have to work together and listen 

to each other. I think that is going to help us move a long way in 

making sure that our structures are safe and that our regulations 

are obeyed but something that can be obeyed by the building 

trades. 

Chairman SHELBY. Community partnerships. 

Mr. HARDIMAN. Absolutely. 

Chairman SHELBY. As you are very aware, building regulations 

are almost exclusively decided at the local or State level. Hence, 

much of the important research conducted at NIBS is dependent 

upon adoption by the State and local governments. I believe that 

your own experience as a mayor, public sector at the State and 

local level, can increase this collaboration, because you understand, 

you have been where it works or does not work. 

Mr. HARDIMAN. Absolutely. 

Chairman SHELBY. Would you share with the Committee any insights that you have as a locally elected official and serving as one 

that could increase this level of collaboration or understanding between the NIBS and the local governments? 

Mr. HARDIMAN. Absolutely, Mr. Chairman. 

As I mentioned, I served as Mayor of Kentwood for about 10 

years, and that was one of the fastest growing cities in the State 

of Michigan. Many times, I saw that some of the officials had one 

opinion, and the builders, architects, had another. And I believe 

that my ability, and I love doing this, of drawing people together, 

let us sit down and talk this through and work on a better solution 

27

was very helpful in meeting the demands not only of the market 

but also meeting the safety demands that government should really 

enforce. And so, I would love to take that same type of bridge 

building to the National Institute of Building Sciences. 

Chairman SHELBY. Another important concern is seeing that the 

opportunity to own a home is available to all Americans. We all 

think that is important. One of the obstacles to homeownership for 

many families is simply the high cost of housing today. Part of this 

high cost is sometimes driven by land use regulations. What role 

do you see for the National Institute of Building Sciences in helping to reduce some of the regulatory burden placed on home construction to moderate the high cost of construction materials? How 

can we make some progress there? 

Mr. HARDIMAN. I really believe that sometimes, there are regulations that are promulgated that may be good in someone’s eyes, but 

sometimes, they are not necessary. Sometimes, the regulators do 

not realize what it does to the cost of housing, and without that 

communication, that public-private partnership, they are certainly 

not perhaps working out a better way to bring about the safety but 

keep the costs down. So once again, I think that having a meeting 

of the minds, bringing people together is a good way to try to do 

that. 

In Kentwood, we looked very hard at land use, obviously, because 

we are a growing city. And I think we had a wonderful master 

plan, which we executed. But we also worked very hard to avoid 

unnecessary regulations. I remember being approached by the 

homebuilders about a change in the regulation in the width of a 

stairway that was put into one of the series of regulations, and we 

took a good look at it, realized that the cost that it would have to 

all homeowners or home purchasers, and made a change but still 

had very safe housing. 

I think having that dialogue is very important, and I would work 

to do that if confirmed by the Senate. 

Chairman SHELBY. Let me get into disaster modeling with you 

just a little. In addition to building technologies, the National Institute of Building Sciences also helps develop technologies to estimate the impact on natural disasters. One of these projects is the 

NIBS Multi-Hazard Loss Estimation Model. This technology could 

help localities plan appropriate mitigation activities in order to reduce the future losses from natural disasters. 

Could you share with the Committee some of the activities you 

witnessed at the local level in terms of disaster mitigation? I know 

you are not coming from the hurricane area. You might have tornadoes up in Michigan; I am not sure. Are there additional tools that 

could be developed by NIBS which could help communities plan for 

natural disasters? 

Mr. HARDIMAN. Mr. Chairman, I believe that various regions 

have different threats, and certainly, we do have those in Michigan 

as well, and there are those threats all across the United States. 

I believe a real key is utilizing the information that is available, 

and certainly, the National Institute of Building Sciences provides 

good information that can help municipalities. But I also believe 

that a key, and we did this in Kentwood, was we would go through 

and exercise every year to make sure that we were prepared. And 

28

then, the key is to execute, once there is a disaster, and I believe 

that emphasizing that, emphasizing the communication between 

the State, the county, and the local governments as well as the 

Federal Government in making sure that that will be executed 

when there is a disaster is also very key. 

Chairman SHELBY. That is good. 

Gentlemen, I do not have any other questions. We have two votes 

coming up on the Senate floor. I appreciate your appearance. I appreciate your willingness to serve. It is a great honor, and we will 

try to expedite your nominations out of the Committee to the Senate floor as soon as possible. The hearing is adjourned. 

[Whereupon, at 12:05 p.m., the hearing was adjourned.] 

[Prepared statements, biographical sketches of nominees, and additional material supplied for record:] 

29

PREPARED STATEMENT OF SENATOR WAYNE ALLARD 

I would like to thank Chairman Shelby for convening the Committee this morning 

to consider pending nominations. I appreciate the opportunity to learn more about 

the nominees’ backgrounds, as well as their intentions for their agencies. 

First, I would like to welcome James Lambright, who is nominated to be President of the Export-Import Bank. With this Committee currently considering reauthorization of the Export-Import Bank, it is especially important to have strong 

leadership in place, and his experience will be helpful. 

Next, I would like to welcome Armando Bucelo and Todd Farha, both of whom 

are nominated to the Board of Directors of the Securities Investor Protection Corporation. The Securities Investor Protection Corporation has recovered $14.2 billion 

in assets for 624,000 investors when brokerage firms closed due to bankruptcy or 

other financial problems. 

Finally, I would like to welcome our third panel, comprised of Jon Rymer, nominated to be the Inspector General for the FDIC; John Cox, nominated to be the CFO 

for HUD; and William Hardiman, nominated to be on the Board of Directors for the 

National Institute of Building Sciences. As Chairman of the Housing Subcommittee, 

I am particularly interested in the position of CFO at HUD. HUD administers billions of taxpayer dollars, and I have been concerned by the length of time that this 

key position has remained vacant. 

Our nominees bring outstanding private sector credentials to their positions, and 

I appreciate their willingness to enter or remain in public service. I encourage them 

to remain focused on results and outcomes, rather than processes. I look forward 

to your testimony. 

—————

PREPARED STATEMENT OF JON T. RYMER

INSPECTOR GENERAL-DESIGNATE

FEDERAL DEPOSIT INSURANCE CORPORATION

MAY 16, 2006

Chairman Shelby, Ranking Member Sarbanes, and Members of the Committee, it 

is my great honor to have been nominated by President Bush for the position of Inspector General (IG) of the Federal Deposit Insurance Corporation (FDIC). I am 

privileged and humbled by the opportunity to appear before this Committee today. 

I would like to thank the Members of the Committee and their staffs who met with 

me as I prepared for this hearing. I would also like to thank former FDIC Chairman 

Powell for his expression of confidence in me. Finally, and importantly, I want to 

acknowledge and offer my heartfelt thanks to my wife and son for their commitment 

and support during my career. 

Mr. Chairman, as you and the Members of the Committee are well aware, the responsibilities of Inspectors General are defined by the Inspector General Act of 

1978, as amended. This Act requires all Inspectors General to supervise and coordinate audit and investigative activities; prevent and detect fraud and abuse in agency programs; and make recommendations to senior management aimed at improving 

the economy, efficiency, and effectiveness of programs and operations. Additionally, 

the Inspector General at the FDIC investigates fraudulent activities associated with 

FDIC-supervised institutions, federally insured financial institution failures, and 

the recovery of assets after insured institutions fail. The FDIC IG is also responsible 

for keeping the Congress, the FDIC Chairman, and the Board of Directors informed 

of problems and corrective actions within the Corporation. If confirmed, I will use 

my experience as a banker, an auditor, and a soldier to fulfill these responsibilities 

to the best of my ability. 

As a banking executive, I have held leadership roles in projects and activities 

ranging from running major business units to mergers and divestitures, systems 

conversions, and business and strategic planning. Along with many of these positions came management and leadership responsibilities for hundreds of employees. 

During my years with a big four accounting firm, I provided services to scores of 

banking clients on matters of process improvement, assurance processes, and internal auditing. My clients ranged from international banks to community banks, 

thrifts, and credit unions. As a result, I understand banking operations and am familiar with the concerns of bankers and customers alike. 

I also take pride in my 25 years of service in the active and reserve components 

of the U.S. Army. I have learned that it is a special privilege and honor to serve 

30

the United States. I have also learned that it is a serious duty requiring vigilance 

and integrity. 

I appreciate the vital role that the FDIC plays in insuring deposits and helping 

ensure the safety and soundness of our banking system. I am also keenly aware of 

the growing globalization and complexity of the financial services industry, the importance of protecting consumers, and the many challenges and potential threats to 

the stability of the banking system. If confirmed, I will capitalize on my past experience and commit to providing the strong, independent oversight of the FDIC envisioned by the IG Act. I will also look forward to working with the Congress and the 

other leaders of the FDIC to preserve the public trust and confidence in the banking 

system that has endured since the Corporation’s creation in 1933. 

In closing, Mr. Chairman, I thank you and the Members of the Committee again 

for allowing me to appear here today. This concludes my prepared statement. I 

would be pleased to respond to any questions that you or other Members of the 

Committee may have. 

—————

PREPARED STATEMENT OF JOHN W. COX

CHIEF FINANCIAL OFFICER-DESIGNATE,

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

MAY 16, 2006

Chairman Shelby, Senator Sarbanes, and distinguished Members of the Committee, my name is John Cox. I thank you for the privilege to appear before the 

Committee today as it considers my nomination to serve as Chief Financial Officer 

of the U.S. Department of Housing and Urban Development. I want to thank you 

and all the Members of the Committee and your staffs who have met with me over 

the past weeks. 

I would like to thank President Bush and Secretary Jackson for giving me the 

opportunity to serve our country. I am humbled and honored by this appointment. 

Second, I want to thank my family, many of whom are here today. I want to recognize my wife Sally and daughter Kate who have been very supportive of me in this 

process. I want to also recognize my mother and father, Jo and Wallace Cox. We 

are blessed to have other family members and friends who have traveled to be here 

today. 

My great-grandparents moved to Texas in the late 1800’s. They were sheepherders and lived first in a dirt dugout. They moved to my hometown of Haskell, 

Texas and purchased a home in the early 2000’s. My grandfather purchased his first 

home for $2,500 in the late 1920’s. I vividly recall my grandmother telling me how 

she was in tears when she learned that he had borrowed funds to purchase their 

first home. She was concerned that she had not been frugal enough with the family 

budget. My father paid $6,500 for their first home in 1963 and was advised by the 

banker that, no offense, but he was the proud owner of a $4,000 lot and a $2,500 

home. I purchased a home in Houston that was guaranteed by FHA. Mr. Chairman, 

I only wish I could say that in 2006 I found a similarly priced home in the district! 

I graduated from Texas A&M University with a bachelor’s degree in accounting. 

My first job was for Ernst & Young LLP. Subsequently, my 15-year career at BMC 

Software in Houston, Texas prepared me well for the role I hope to assume at HUD. 

BMC is a New York Stock Exchange company with $1.5 billion in revenue and operations in fifty countries. My team prepared and monitored expense budgets and 

sales forecasts, prepared and reviewed audited financial statements, prepared and 

presented quarterly management scorecards to the board of directors, and managed 

a billion dollar securities portfolio. As the Chief Financial Officer at BMC, I was responsible for the implementation of Section 404 of the Sarbanes-Oxley Act of 2002. 

As Chairman of the Audit Committee of the Board of Benchmark Electronics, Inc., 

I had the fiduciary responsibility of ensuring that our shareholders could take comfort in knowing that Benchmark’s internal controls were adequate. I have also 

served on Benchmark’s nominations and governance and compensation committees. 

Benchmark is a New York Stock Exchange company with annual sales in excess of 

$2 billion. 

If confirmed, I will ensure that as the Department moves toward implementation 

of OMB Circular A–123 (the Federal Government equivalent of Sarbanes-Oxley Section 404), our focus is on improving the process and efficiency of government. I am 

confident my experience as an executive sponsor on numerous large, complex IT 

projects shows that I can manage projects effectively, within scope and on budget. 

31

Updated, modernized financial systems are critical to HUD’s success in meeting the 

President’s management agenda. 

My goals for HUD include working to improve internal controls, improving the 

timeliness and effectiveness of our financial reporting leading to both ‘‘clean’’ financial statements as well as improved decisionmaking by the Department’s program 

heads, implementing FFMIA compliant financial systems and improving HUD’s 

metrics on the President’s management agenda. There is a lot of work to do and, 

if confirmed, I look forward to getting started. 

In closing, I realize that Washington can be a very partisan city. But HUD’s goals 

of providing Americans opportunities to increase homeownership, promoting decent 

affordable housing, and strengthening communities are issues that all of us can support, regardless of party. If confirmed, I look forward to working with the President, 

Secretary Jackson, and Congress to ensure that this mission is accomplished. I am 

proud to do what I can in public service. 

Thank you, Mr. Chairman, Senator Sarbanes, and all Members of the Committee 

for your time and consideration of my nomination. 

I am pleased to answer any questions you may have.

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