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27–371 PDF 2006

S. HRG. 109–378

NOMINATIONS OF: MATTHEW SLAUGHTER,

KATHERINE BAICKER, ORLANDO J. CABRERA,

CHRISTIANE GIGI HYLAND AND RODNEY E. HOOD

HEARING

BEFORE THE

COMMITTEE ON

BANKING, HOUSING, AND URBAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

ON

NOMINATIONS OF:

MATTHEW SLAUGHTER OF NEW HAMPSHIRE, TO BE A MEMBER OF

THE COUNCIL OF ECONOMIC ADVISERS

KATHERINE BAICKER OF NEW HAMPSHIRE, TO BE A MEMBER OF

THE COUNCIL OF ECONOMIC ADVISERS

ORLANDO J. CABRERA OF FLORIDA, TO BE ASSISTANT SECRETARY

FOR PUBLIC AND INDIAN HOUSING, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

CHRISTIANE GIGI HYLAND OF VIRGINIA, TO A MEMBER OF

THE NATIONAL CREDIT UNION ADMINISTRATION BOARD

RODNEY E. HOOD OF NORTH CAROLINA, TO BE A MEMBER OF

THE NATIONAL CREDIT UNION ADMINISTRATION BOARD

OCTOBER 25, 2005

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

MARK OESTERLE, Counsel

PEGGY R. KUHN, Senior Financial Economist

MARK A. CALABRIA, Senior Professional Staff Member

AARON D. KLEIN, Democratic Economist

JONATHAN MILLER, Democratic Professional Staff

JENNIFER FOGEL-BUBLICK, Democratic Counsel

LYNSEY N. GRAHAM, Democratic Counsel

JOSEPH R. KOLINSKI, Chief Clerk and Computer Systems Administrator

GEORGE E. WHITTLE, Editor

(II)

CONTENTS

TUESDAY, OCTOBER 25, 2005

Page

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

Opening statements, comments, or prepared statements of:

Senator Dole ...................................................................................................... 2

Senator Martinez .............................................................................................. 3

WITNESSES

John Warner, a U.S. Senator from the State of Virginia ..................................... 4

Prepared statement .......................................................................................... 25

Richard Burr, a U.S. Senator from the State of North Carolina ......................... 5

NOMINEES

Matthew Slaughter, of New Hampshire, to be a Member of the Council

of Economic Advisers ........................................................................................... 7

Biographical sketch of nominee ....................................................................... 27

Response to written questions of Senator Sarbanes ...................................... 68

Katherine Baiker, of New Hampshire, to be a Member of the Council of

Economic Advisers ............................................................................................... 8

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

Response to written questions of Senator Sarbanes ...................................... 71

Orlando J. Cabrera, of Florida, to Assistant Secretary for Public and Indian

Housing, U.S. Department of Housing and Urban Development .................... 8

Biographical sketch of nominee ....................................................................... 47

Response to written questions of Senator Sarbanes ...................................... 73

Christiane Gigi Hyland, Of Virginia, to be a Member of the National Credit

Union Administration Board ............................................................................... 10

Biographical sketch of nominee ....................................................................... 56

Response to written questions of:

Senator Sarbanes ...................................................................................... 75

Senator Allard ........................................................................................... 79

Rodney E. Hood, of North Carolina, to be a Member of the National Credit

Union Administration Board ............................................................................... 12

Prepared statement .......................................................................................... 25

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

Response to written questions of:

Senator Sarbanes ...................................................................................... 80

Senator Allard ........................................................................................... 84

(III)

(1)

NOMINATIONS OF:

MATTHEW SLAUGHTER, OF NEW HAMPSHIRE,

AND

KATHERINE BAICKER, OF NEW HAMPSHIRE,

TO BE A MEMBER OF

THE COUNCIL OF ECONOMIC ADVISERS

ORLANDO J. CABRERA, OF FLORIDA

TO BE ASSISTANT SECRETARY FOR

PUBLIC AND INDIAN HOUSING

U.S. DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

CHRISTIANE GIGI HYLAND, OF VIRGINIA

AND

RODNEY E. HOOD, OF NORTH CAROLINA

TO BE A MEMBER OF

THE NATIONAL CREDIT UNION

ADMINISTRATION BOARD

TUESDAY, OCTOBER 25, 2005

U.S. SENATE,

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS,

Washington, DC.

The Committee met at 10:09 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.

We have several nominees this morning. I appreciate the willingness of the nominees to appear before the Committee today.

Today’s witnesses are Dr. Matthew Slaughter, who has been

nominated by the President to be a Member of the Council of Economic Advisers; Dr. Katherine Baicker, to be a Member of the

Council of Economic Advisers—of course, nominated by the President; Mr. Orlando J. Cabrera, to be Assistant Secretary for Public

and Indian Housing at the Department of Housing and Urban Development; Ms. Christiane Gigi Hyland, to be a Member of the National Credit Union Administration Board; and Mr. Rodney E.

2

Hood, to be a Member of the National Credit Union Administration

Board.

Dr. Matthew Slaughter and Dr. Katherine Baicker are nominated, as I said, to be Members of the President’s Council of Economic Advisers. The Council of Economic Advisers was established

by the Employment Act of 1946, and it provides the President with

economic analysis and advice on the development and implementation of domestic and international policy issues.

Dr. Slaughter is currently a Professor of Business Administration

at the Tuck School of Business at Dartmouth College. Previously,

he was a Fellow at the National Bureau of Economic Research and

has served as a Consultant to the National Foreign Trade Council,

the World Bank, the Federal Reserve, and the IMF.

Dr. Baicker is currently a Professor at the School of Public Affairs at UCLA. She was previously a Professor at Dartmouth College. Dr. Baicker is also a Fellow at the National Bureau of

Economic Research and was a Senior Economist at the Council of

Economic Advisers from 2001 to 2002.

Mr. Orlando Cabrera has been nominated to be Assistant Secretary for Public and Indian Housing at the U.S. Department of

Housing an Urban Development. Mr. Cabrera is currently Executive Director of the Florida Housing Finance Corporation.

Mr. Rodney Hood and Ms. Christiane Gigi Hyland are both nominated to be Members of the Board of Directors of the National

Credit Union Administration. The National Credit Union Administration, as we all know, is an independent agency, deriving its powers under the Federal Credit Union Act. The NCUA is responsible

for chartering and ensuring the safety and soundness of the 5,500

Federal credit unions under the Act. The NCUA also administers

the National Credit Union Share Insurance Fund.

After we administer the oath, this morning’s nominees will have

an opportunity to make their opening statement, and you can introduce at that time any members of your family. But first we will

recognize our colleagues that are here.

Senator Dole.

STATEMENT OF SENATOR ELIZABETH DOLE

Senator DOLE. Thank you, Chairman Shelby.

This morning we are considering, as you have said, five outstanding nominees, and I am pleased to introduce to the Committee Mr. Rodney E. Hood, a fellow North Carolinian who has

been nominated by President Bush to serve as a Member of the

National Credit Union Administration Board.

Mr. Hood has an impressive background in housing and financial

services and has received a strong endorsement by the North Carolina Credit Union League for this position. In September 2004, Mr.

Hood was appointed by President Bush to serve as Associate Administrator of the Rural Housing Service, RHS. RHS, an agency

within Rural Development at the U.S. Department of Agriculture,

is one of the Federal Government’s largest direct lenders. In this

position, Mr. Hood has managed a housing portfolio of more than

$43 billion and has administered the Agency’s Housing and Community Development programs.

3

Previous to his appointment to RHS, Mr. Hood was an executive

with North Carolina Mutual Life Insurance Company in Durham,

where he directed the company’s group insurance marketing and

sales efforts. He also held management posts with Bank of America, where he served as a CRA Officer, and with Wells Fargo,

where he served as Division Manager for Community Development

Lending and, later, as the National Director of the Affordable

Housing Lending Group. Mr. Hood also served on the Wells Fargo

Housing Foundation Board, where he managed the Foundation’s

relationship with nonprofit housing providers, including Neighborhood Housing Services, Habitat for Humanity, and the National

Council of La Raza.

Among Mr. Hood’s best attributes are his good, strong North

Carolina roots and his ongoing involvement in public service. A native of Charlotte, he graduated from the University of North Carolina at Chapel Hill, where he served on the Board of Visitors. He

currently serves on the Board of Trustees of the North Carolina

School of the Arts and on the Board of Directors of the Caring

House, a living facility for cancer patients receiving treatment at

Duke University.

Mr. Hood recently received the Triangle Business Journal’s 40

Under 40 Leadership Award, which recognizes the best of the best

of Raleigh-area young professionals for the community service and

their career accomplishments.

Unfortunately, Mr. Chairman, I will not be able to stay for this

important hearing, but I hope the Committee will take into account

my good friend and colleague Richard Burr’s comments, and mine,

and give strong support to Mr. Hood’s nomination.

Thank you, Mr. Chairman.

Chairman SHELBY. Thank you.

Senator Martinez.

STATEMENT OF SENATOR MEL MARTINEZ

Senator MARTINEZ. Mr. Chairman, thank you very much. I am

here today to have the great pleasure and honor of introducing to

the Committee a good friend, a great Floridian, Orlando Cabrera.

I am proud that Orlando is among a number of very talented Floridians that this Administration has tapped for service, even at

HUD. The President and Secretary Jackson have chosen a great

person to serve our country as Assistant Secretary for Public and

Indian Housing. I believe Orlando is extremely well-qualified to

succeed in this position.

You know, Mr. Chairman, the demands of the Secretary of Public

and Indian Housing at HUD are great. The challenges are terrific,

and it takes a person of great integrity, management skill, and also

a good deal of patience to work through the many problems that

affect our public housing. I know Mr. Cabrera will be well-suited

to that. As the Executive Director of the Florida Housing Finance

Corporation, Mr. Cabrera led the fourth-largest housing finance

agency in the United States to help Floridians obtain safe, decent,

and affordable housing. Orlando worked diligently to ensure that

our State’s housing programs were well-managed to meet the needs

of Floridians. His commitment to coordinating housing policy at all

levels of Government will be a great asset to the Agency.

4

As the son of Cuban immigrants, Orlando knows first-hand that,

for many families, homeownership is the key to the American

Dream. He recognizes and understands the struggles that are

present for people moving through the housing continuum because

of his experiences at Florida Housing and his participation on

many housing-related boards, Orlando is also aware of the conflict

that often arises between State and Federal housing regulations. I

am confident that he will use a combination of personal and professional knowledge to guide the Department in making sound public

policy.

On a personal note, I recognize that from time to time people are

willing to make a mistake. His family, when they first came here

from Cuba about the same time that mine did, they settled in a

very cold part of New York. And since then, they have recognized

that error and have moved back to the balmier surroundings of

Florida—although today that wisdom may be in question. But I

have known Orlando for several years, have had the pleasure of

working with him—during my time at HUD particularly—and I

know and have always appreciated and respected him for his work.

He is a man of great character and competence and he is also a

man committed to his faith and his wonderful family, many of

whom are here with him today.

I know he will approach this position with the same kind of dedication and diplomacy that he has carried with him throughout his

entire professional career. And I know that Orlando will serve our

country well in this position. So, I would urge my colleagues in the

Senate to join me in a swift confirmation of Mr. Cabrera.

Thank you, sir.

Chairman SHELBY. Thank you.

Senator Warner, you arrived just in time. I recognize you for any

comments you would like to make before the Committee.

STATEMENT OF JOHN WARNER

A U.S. SENATOR FROM THE STATE OF VIRGINIA

Senator WARNER. Thank you very much, Mr. Chairman, and my

colleagues. I am chairing a hearing of our Armed Services Committee just below you here, but I did want to take the time to come

up and talk about this extraordinary nominee by the President.

And I want to thank our distinguished colleague, Senator Harry

Reid, who had a lot to do with this nomination and counseled me

on it.

We have a fellow Virginian, Gigi Hyland, down there, I think,

somewhere.

Ms. HYLAND. Here I am.

Senator WARNER. Right here.

[Laughter.]

And I, just by coincidence, met her and talked to her. She is very

modest, and expressed some interest in public service. And her

family, her father is very active in public service and her mother

was at one time. It is a distinguished family of professionals. So,

I invited her in, and I tell you—and I am not easily swept off, but

she swept me away. She is really an extraordinary individual, and

her accomplishments in life and a wealth of experience. I would

like to put this into the record, Mr. Chairman——

5

Chairman SHELBY. Without objection, your entire statement will

be made part of the hearing record.

Senator WARNER. —and just say that this is a proud American

family and serving in public service in many capacities, and she

would be a very strong person on this post to which our President

has appointed her.

Chairman SHELBY. Thank you, Senator Warner. We know you

are chairing the Armed Services Committee.

Senator WARNER. Thank you.

Chairman SHELBY. Senator Richard Burr from North Carolina,

welcome to the Committee.

STATEMENT OF RICHARD BURR

A U.S. SENATOR FROM THE STATE OF NORTH CAROLINA

Senator BURR. Thank you, Mr. Chairman. It is indeed an honor

to be here. I know that all five nominees are more than qualified,

or they would not have been nominated by the President. But I am

here specifically also to introduce Rodney Hood of Durham, North

Carolina, who has been nominated to the National Credit Union

Administration Board.

Rodney is well-prepared for the position for which he has been

nominated. A graduate of the University of North Carolina at

Chapel Hill—which it pains a Wake Forest graduate to say—he

has spent a career in finance and housing. Perhaps more importantly, though, is his commitment to community service, whether

in Washington or North Carolina. He has been an active volunteer

in the community, having served the North Carolina Low Income

Housing Coalition, Boys and Girls Clubs in Raleigh, the North

Carolina School of the Arts, the Duke Ellington School of the Arts

in the District, and the Folger Shakespeare Library. This is a

downside to Rodney’s confirmation. When confirmed, he will have

to step down from many of his current service commitments.

Speaking for North Carolina, though, Mr. Chairman, I can say

that North Carolina’s loss is the Nation’s gain with this nomination. The same drive to serve and succeed he has shown throughout

his career will be a tremendous benefit to the National Credit

Union Administration Board and the credit unions it oversees. I

think this is particularly true of the credit unions serving low- and

middle-income members. Rodney’s career to date, as mentioned,

has focused on finance and housing with a focus on affordable

housing and community development, particularly in underserved

areas. By extension, he has invested a great deal of time in the financial literacy and education programs, including programs on

ownership. This background, with its close connection to the individual, will serve credit unions and their members well.

Mr. Chairman, Rodney Hood is successful because he sees the

human face behind the issues. I believe, with this nomination, he

will not forget that human face that he represents. I believe the

Committee will be pleased by his qualifications for the post. I urge

the Committee to approve Rodney’s nomination, and I can honestly

say I think this Committee will be proud of the vote in favor of

Rodney Hood’s confirmation.

I thank the Chair.

Chairman SHELBY. Thank you, Senator Burr.

6

What I would like to do now is ask all of the nominees to stand,

raise your right hand, and be sworn.

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

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

help you God?

Mr. SLAUGHTER. I do.

Ms. BAICKER. I do.

Mr. CABRERA. I do.

Ms. HYLAND. I do.

Mr. HOOD. I do.

Chairman SHELBY. Do you agree to appear and testify before any

duly-constituted committee of the Senate?

Mr. SLAUGHTER. I do.

Ms. BAICKER. I do.

Mr. CABRERA. I do.

Ms. HYLAND. I do.

Mr. HOOD. I do.

Chairman SHELBY. Thank you.

Dr. Slaughter, we will start with you. Your written testimony

will be made part—all of your written testimony will be made part

of the hearing record in its entirety. If you have—I will pose this

question to all of you and start with Dr. Slaughter—do you have

any family members you want to recognize at this hearing today?

Mr. SLAUGHTER. I do, Mr. Chairman.

Chairman SHELBY. It is an important hearing. It is your day.

Mr. SLAUGHTER. Thank you, yes. We have a large and very close

extended family, starting with my wife Lindsey and our two little

boys, Nicholas and Jacob. With school and obligations, they are

back home in New Hampshire, but with me here today is one of

my brothers, Steve Slaughter, from Chicago, Illinois.

Chairman SHELBY. Okay. Dr. Baicker, do you have anybody you

want to recognize?

Ms. BAICKER. Yes. Thank you very much for the opportunity, Mr.

Chairman. I would like to introduce my husband, who is also an

economist, Alan Durell, and my exceedingly proud parents, Maxine

and Joseph Baicker, who are here from New Jersey.

Chairman SHELBY. Good. Mr. Cabrera, do you have anybody you

want to recognize?

Mr. CABRERA. Yes, Mr. Chairman, I have a big contingent here.

Chairman SHELBY. You go ahead.

Mr. CABRERA. I have my wife, Betty Cabrera; my sons, Orly and

Stefan; my mom and dad, Orlando Cabrera and Carmen Cabrera;

my sister, Rosie; my nephew and niece——

[Laughter.]

—Alex and Giovanna. And my two best friends, Ron Weiner and

Nick Schufer.

Chairman SHELBY. Well, that is great.

Ms. Hyland, do you have somebody you want to recognize?

Ms. HYLAND. Yes, Mr. Chairman, I do, and I appreciate the opportunity. To my left is my dear aunt, Auntie Alba Colonne Whitt,

and my dear friend Shirley Robson, and then my wonderful father,

Fairfax County Supervisor for Mount Vernon, Gerry Hyland.

Chairman SHELBY. Thank you.

Mr. Hood, do you have anyone you want to recognize?

7

Mr. HOOD. Yes, Mr. Chairman, I have family members. They are

having flight delays getting out of North Carolina, but fortunately

I have a few friends who are all visiting with me today, friends

from USDA, Wells Fargo, Bank of America, and other social friends

from here in Washington. Thank you all who are here.

Chairman SHELBY. Thank you.

Dr. Slaughter, we will start with you, if you will sum up whatever you want to say.

STATEMENT OF MATTHEW SLAUGHTER

OF NEW HAMPSHIRE, TO BE A MEMBER OF

THE COUNCIL OF ECONOMIC ADVISERS

Mr. SLAUGHTER. Thank you, Mr. Chairman.

Chairman Shelby, Senator Sarbanes, and Members of the Committee, I am deeply honored to appear before you today as a nominee to become a Member of the President’s Council of Economic

Advisers.

Since its creation in 1946, the Council of Economic Advisers has

provided the President with sound, objective advice on the full

range of economic policy issues facing our country. On many measures, today the U.S. economy is among the world’s strongest,

thanks to the foundation of all the men and women that make up

our highly productive work force. At the same time, today the U.S.

economy faces important economic challenges. The rise of countries

such as China and India, the costs of energy and health care, the

demographic shift of an aging population, and the need to best educate our children. All the challenges, and more, will require careful,

constructive policies to help ensure rising living standards for both

ourselves and future generations of Americans. If I am fortunate

enough to be confirmed to Council membership, I will devote my

full energies to helping the Council work with all of you on meeting

these challenges.

Past Council Members have drawn on their experiences in research, teaching, and related activities. My experience include a

wide range of policy-related work in international trade and finance, with a particular interest in how international commerce

helps shape national economic outcomes, such as productivity and

wages. I am currently an Associate Professor of Business Administration at the Tuck School of Business at Dartmouth, a tenured position that I have held since 2002. I am also currently a Research

Associate at the National Bureau of Economic Research and a Visiting Fellow at the Institute for International Economics. In recent

years, I have also enjoyed the opportunity to be a Visiting Scholar

at the Federal Reserve Board and the International Monetary

Fund, a Consultant at the World Bank, and a Term Member on the

Council on Foreign Relations. I hope that the breadth and depth

of these work experiences would serve me well at the Council of

Economic Advisers.

Let me close by thanking you again both for the privilege of appearing before this Committee and for your timely consideration of

my nomination. I look forward to answering any questions that you

may have.

Thank you.

Chairman SHELBY. Dr. Baicker.

8

STATEMENT OF KATHERINE BAICKER

OF NEW HAMPSHIRE, TO BE A MEMBER OF

THE COUNCIL OF ECONOMIC ADVISERS

Ms. BAICKER. Chairman Shelby and Members of the Committee,

it is a great honor to appear before you today as the President’s

nominee to be a Member of the Council of Economic Advisers.

For almost 60 years, Members of the Council have had both the

opportunity and the responsibility of providing the President with

objective advice on issues ranging from education to health care to

trade to welfare. Members of the CEA strive to bring the best scientific thinking from the broader economics community to bear on

these often difficult questions.

My previous experience includes work in both the academic and

policy arenas. Since receiving my Ph.D., I have served on the faculty in both the Economics Department at Dartmouth and at the

Center for the Evaluative Clinical Sciences and the Department of

Community and Family Medicine at Dartmouth Medical School. I

recently joined the Department of Public Policy in the School of

Public Affairs at the University of California at Los Angeles. I am

a Research Associate in the Public Economics Program at the National Bureau of Economic Research. My research focuses on health

economics, welfare, and public finance, with a particular emphasis

on financing health insurance, spending on public programs, and

fiscal federalism. I have also had the privilege, several years ago,

of serving as a Senior Economist at the Council of Economic Advisers, where I experienced first-hand the Council’s vital role in providing sound economic advice to inform the policymaking process.

I hope that my experiences will allow me to continue this strong

tradition.

In the coming years, our strong and growing economy will also

be faced with many challenges, including mounting pressures on

both public and private health care spending and the education

and training of workers with the skills and flexibility required in

the modern labor market. If I am fortunate enough to be confirmed,

I look forward to working with you on all of these important issues.

Thank you again for considering my nomination and for the

privilege of appearing before the Committee. I look forward to answering any questions you might have.

Chairman SHELBY. Mr. Cabrera.

STATEMENT OF ORLANDO J. CABRERA

OF FLORIDA, TO BE ASSISTANT SECRETARY

FOR PUBLIC AND INDIAN HOUSING,

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Mr. CABRERA. Mr. Chairman, Senator Sarbanes, Senator Martinez, a good friend whom I greatly admire——

Chairman SHELBY. He has gone to vote, where we can continue

this hearing. He will be back.

Mr. CABRERA. I know. But I am grateful for his wonderful comments and for his friendship.

Members of the Committee, thank you for allowing me the opportunity to address the Committee today.

First, I would like to thank President Bush and Secretary Jackson for giving me the opportunity to serve our country as Assistant

9

Secretary for Public and Indian Housing. I am humbled at having

been asked, and honored to serve however I best may. I would also

like to thank all of you for your time and graciousness in meeting

with me these last few weeks—and your staff, all of whom have

been wonderful. Hurricane Katrina has impacted all of our lives,

and I appreciate each of you accommodating me into your busy

schedules.

I would very much like to thank Governor Jeb Bush for having

appointed me Executive Director of Florida Housing and for allowing me to serve the people of the State of Florida. As a still waxing

Floridian, I am grateful for all of his support.

I sit before you today in profound gratitude of a lot of people.

These people provided me with support and encouragement

throughout my life, and particularly in the case of my parents,

under sometimes difficult circumstances. I would likely not be here

before you but for their constant love, support, and counsel.

I would also like to thank the rest of my family and all of my

friends, particularly Bill and Tracy Cowden, who have been lifelong

friends but also have put me up for the last 2 months. And the

staff of——

[Laughter.]

Chairman SHELBY. That is a real friend, is it not?

Mr. CABRERA. Yes, it is. And the staff and Board of Directors of

the Florida Housing Finance Corporation for all of their encouragement and support. I wish I could mention all of them by name, but

then we would need to order cots and make arrangements for dinner, and I do not know if everyone on the Committee likes Cuban

food.

I have always had a home. I know how fortunate I am to actually

make that statement, especially because my parents were exiles in,

and later immigrants to, our country. Our home always had those

things that we would like to think are provided to all people from

their childhood through that day when one leaves and makes one’s

own home. Like my parents before us, when my wife and I started

our lives together, we initially rented and then purchased a home.

We can affirmatively state that we have realized the American

Dream of homeownership and we understand its importance to all

Americans.

Our family’s experience is what most Americans hope is

prototypical. Nonetheless, I am keenly aware that not every American is on that same housing continuum that our family followed.

As a former Director, Vice Chairman, Chairman, and finally Executive Director of Florida Housing, my work really focused on making

that continuum more possible for all Floridians. During my tenure

at Florida Housing, we financed the construction of a lot of units

for both homeownership and rental, to make that continuum as accessible as it could be for Floridians.

While at Florida Housing, I had the honor to lead an organization that financed the construction of thousands of affordable housing units. Most of the units we financed went to Floridians that

earned 60 percent of area median income and below, during my

tenure we made great strides toward financing the construction of

units for Floridians earning 30 percent of area median income and

below. In my 5-year involvement, we developed more units for exVerDate 11-MAY-2000 17:49 May 18, 2006 Jkt 025856 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 27371.TXT SBANK4 PsN: SBANK4
10

tremely low-income Floridians than had ever been developed in the

previous 20 years, and that is an achievement I am extremely

proud of.

Happenstance being what it is, I was Florida Housing’s Executive Director during five hurricanes and one tropical storm. We responded to the needs created by those storms by realigning State

subsidies in order to make funds available to local governments for

storm recovery, making our Federal subsidy available to fund tenant-based rental assistance and home repair, and by creating incentives for developers to construct units in storm-affected areas as

quickly as possible.

As unquestionable as our commitment to recovery from Katrina

is—and hopefully Wilma will be kinder; although from news reports from my long-time home, Miami, it does not seem that it has

been—the Office of Public and Indian Housing would address more

day-to-day programmatic concerns. Public housing authorities hold

a wealth of assets and ideas that are becoming more and more important to the sustainability of the housing continuum I mentioned

above. If I am confirmed, I will work to develop policies so it will

make it possible for PHA’s to work more independently while maintaining fiscal soundness.

Finally, on the issue of Indian housing, if confirmed, the Office

of Public and Indian Housing will reach out to the various tribes,

groups, and corporations to ensure we are addressing their needs

as well as we can. Ongoing outreach and maintaining strong relations with stakeholders will be a significant focus of our efforts

with respect to Indian and public housing.

In closing, if confirmed, I look forward to serving our country, the

President, Secretary Jackson, and HUD by looking for answers and

taking opportunities wherever we may find them to make safe, decent, affordable housing available to all Americans.

Thank you, Mr. Chairman, Senator Sarbanes, Senator Martinez,

and all Members of the Committee for your time and consideration

of my nomination. I stand ready to answer any questions you may

have.

Chairman SHELBY. Thank you.

Ms. Hyland.

STATEMENT OF CHRISTIANE GIGI HYLAND

OF VIRGINIA, TO A MEMBER OF

THE NATIONAL CREDIT UNION ADMINISTRATION BOARD

Ms. HYLAND. Thank you very much, Mr. Chairman, Senator Sarbanes, and Members of the Committee. Let me begin by thanking

Senator John Warner for his gracious introduction in support. I

also want to extend my gratitude to the Senate Minority Leader,

Senator Harry Reid, for submitting my name to the White House

for consideration. I am especially grateful to President Bush for

nominating me to be a Member of the National Credit Union Administration Board. I am deeply honored to be asked to enter into

public service, and if confirmed I will do everything that I can to

merit the trust that the President has placed in me.

I also want to extend my thanks to NCUA Chairman JoAnn

Johnson for her encouragement, my fellow nominee Rodney E.

Hood, for his patience, and the professional staff at NCUA, who

11

provided me thorough briefings and insights on many of the issues

facing this independent Agency.

I have already introduced the family members that I have with

me today. Their unceasing love, support, and encouragement have

sustained me through this process and I extend to them my heartfelt thanks.

Mr. Chairman, if confirmed, I will bring to the NCUA Board over

14 years of credit union system experience. For 7 years, I was in

private practice in my family’s law firm, Hyland & Hyland, in Alexandria, Virginia. There, I represented natural person credit unions,

particularly in the areas of regulatory and consumer lending compliance, residential real estate transactions, and credit union account lending and employment policies and procedures. While at

the firm, I graduated from the Credit Union Development Education Program, a program that explores the inherent power of the

cooperative structure and the ability of financial cooperatives to facilitate ‘‘people helping people,’’ both domestically and internationally.

For the next 5 years, I served concurrently as Executive Director

of the Association of Corporate Credit Unions and Vice President

of Corporate Credit Union Relations with the Credit Union National Association. While at ACCU and CUNA, I spearheaded corporate credit union participation in the creation of the Community

Investment Fund, the CIF, the National Credit Union Foundation’s

primary funding mechanism for local, State, and national credit

union development activities. The funds in the CIF are earmarked

specifically for development initiatives that increase credit unions’

capacity to impact the financial lives of consumers. This includes

education, small credit union programming, community outreach,

and international development. In addition, I worked to involve

corporate credit unions in the settlement of affordable and safe

international remittances through the IRnet program established

by the World Council of Credit Unions. In my current role as Senior Vice President/General Counsel to Empire Corporate Federal

Credit Union in Albany, New York, I provide independent legal advice and counsel to Empire’s management and board on initiatives,

contracts, and projects.

With all of this credit union experience, can I serve as an effective, independent regulator? Yes. I believe that my career in the

credit union system enhances my ability to balance safety and

soundness considerations with the needs of the institutions regulated. I believe credit unions serve as a critical component of the

financial services sector, providing products and services cooperatively to benefit their member-owners.

If confirmed, Senator, I will strive to be a fair and thoughtful

regulator, mindful of the stated Congressional findings and purposes of the original enabling legislation. I will work to foster credit

unions’ sense of responsibility to serve all segments of their membership, particularly working people, youth, and others who are not

being served by traditional financial institutions. If confirmed, I

will work closely with Members of this Committee and Members of

Congress to ensure the financial integrity and vitality of credit

unions in an ever-changing environment.

12

Thank you, Mr. Chairman and Members of the Committee, for

the opportunity to appear before you today. I look forward to answering any questions you might have.

Chairman SHELBY. Thank you.

Mr. Hood.

STATEMENT OF RODNEY E. HOOD

OF NORTH CAROLINA, TO BE A MEMBER OF

THE NATIONAL CREDIT UNION ADMINISTRATION BOARD

Mr. HOOD. Thank you, Mr. Chairman. Thank you for the opportunity to meet with you on behalf of my nomination to serve on the

Board at the National Credit Union Administration.

I would like to express my deep appreciation to President Bush

for nominating me to this position. I would also like to thank Senator Elizabeth Dole and Senator Richard Burr for their generous

remarks. I am humbled by their kind and gracious words and

would like to acknowledge and applaud their great leadership and

service for my home State, North Carolina.

While my parents are not here today in person, I feel the warmth

of their presence as they watch from Heaven. I am thankful to

them for bequeathing to me a strong value system, a value system

that reflects humility, honesty, hard work, and compassion. I believe that these values have helped me make a difference in the

lives of many people during my 17 years in the private sector and

in public service.

If confirmed by the Senate, I look forward to fulfilling the duties

and responsibilities of an NCUA Board Member. I am committed

to listening carefully, working hard, and doing my level best to ensure the safety and soundness of the Nation’s 8,800 federally insured credit unions.

I have a profound appreciation for community empowerment,

which was developed early on in my youth as a missionary in Africa. There in a rural landscape, I saw the hard work, struggle, and

resilient character of people who made their living from farming.

I learned and saw that strong, struggling people were at the heart

of what any country is about. That is why I am pleased to now be

in a position where I can continue to serve my country by overseeing the institutions that give hardworking people access to capital.

President Bush said it best when he said, ‘‘The true measure of

compassion is more than good intentions, it is good results.’’ I have

been blessed and fortunate to work at some of America’s most respected financial institutions, which sought to empower stability

and prosperity in our local communities. While at North Carolina

Mutual and Wells Fargo, I held management posts that allowed me

to promote community development and outreach in underserved

communities. I served on the board at the Wells Fargo Housing

Foundation and managed public-private partnerships with resultsoriented housing providers such as the Neighborhood Reinvestment

Corporation, Habitat for Humanity, and the National Council of La

Raza. Having served as a Community Reinvestment Act Officer at

Bank of America and the National Director of Affordable Housing

at Wells Fargo, I have been both an advocate and provider of affordable housing and small business lending. In those positions, I

13

oversaw loan programs, managed teams of regional community development managers, and worked with both our internal Credit

Policy Group and the Office of the Comptroller of Currency to review credit risk.

At USDA, I helped administer a $43 billion loan portfolio comprised of over 400,000 loans—loans to individuals seeking homeownership, private entities to provide affordable rental housing,

and to local government entities to fund schools, hospitals, and first

responder services.

These experiences have directly exposed me to the importance of

financial soundness, risk management, and regulatory review. I

come to NCUA with a mindset based on the following tenets: First,

I will work hard to ensure that credit unions remain safe and

sound financial institutions; second, I will strive to be recognized

as a fair and thoughtful regulator, one who realizes the value and

necessity of regulation while being cognizant of the impact of arduous regulations; third and finally, I understand the importance of

disclosure and transparency and will work closely with the Members of this Committee and all Members of Congress to ensure the

financial integrity of credit unions in a rapidly changing environment.

Since joining the Federal Government at USDA, I have been honored to work side-by-side with and lead some of the most capable

and talented career staff around. And should I be honored by your

confidence, I look forward to doing so at NCUA as well.

Mr. Chairman, thank you for the honor of appearing before you

this morning. And I thank you for your courtesy and consideration.

I welcome any questions you may have.

Thank you.

Chairman SHELBY. Thank all of you.

Dr. Slaughter, I will start with you and Dr. Baicker.

Rather, the impact of higher prices for oil and other goods on the

economy. There has been much speculation as to how our economy

will adapt to the aftermath of hurricanes Katrina and Rita. It now

appears concern has shifted back to the dangers of inflation, particularly in the energy market. What will be the impact, in your

judgment, of continued high oil prices on the economic expansion

in the United States, and what particular policy options will you

recommend to the President to enable our economy to manage the

reconstruction of the Gulf Coast area?

I will start with you and then go to Dr. Baicker.

Mr. SLAUGHTER. Thank you, Mr. Chairman. That is an excellent

question that raises an important set of issues. The price of oil and

oil-based products we all see while at the gasoline station to fuel

up our cars. Many of us are going to see——

Chairman SHELBY. It affects everybody.

Mr. SLAUGHTER. It affects everybody in many different ways. To

this point, we all have seen the sharp rise and price increases for

the gasoline we buy. We will see it in home heating oil prices and

natural gas prices. Fortunately, the U.S. economy in the past few

decades has become much more energy efficient. Thanks to a lot of

technology innovations and the broad guidance of policy regulators,

today the U.S. economy produces our goods and services needing a

lot less energy than it did in the past. So one of the implications

14

of that, when we think about the important issue you raise of the

impact on broader prices in the U.S. economy, is that, relative to

previous oil price increases in the 1970’s, for example, we think

there will be a much more muted impact on broader prices of goods

and services in the U.S. economy.

That remains to be seen, but thus far the oil price increases and

gasoline price increases have been contained.

Chairman SHELBY. Natural gas is factored in there, too?

Mr. SLAUGHTER. Natural gas as well, absolutely. But the broader

prices of goods and services——

Chairman SHELBY. ‘‘Has been contained’’—what do you mean by

that?

Mr. SLAUGHTER. It has been contained to those sectors and those

particular immediate products.

Chairman SHELBY. In other words, it has not gone everywhere

else?

Mr. SLAUGHTER. Exactly. It has not gone broader to goods and

services that we buy at the grocery store and——

Chairman SHELBY. Or wages.

Mr. SLAUGHTER. Or wages thus far. Exactly.

So the policy challenge going forward, I think, is twofold. One is

to think about a possible impact on a broader range of prices in the

U.S. economy and, more importantly, to the extent that some of the

underlying forces driving oil price increases are based on growth in

the United States and in other countries around the world—China

being a prominent example. These high prices for oil and related

products are likely to persist for quite some time, and so the policy

challenges we will be thinking about: What broad sets of frameworks could allow American households and American businesses

to best respond.

Chairman SHELBY. Dr. Baicker.

Ms. BAICKER. To follow up on what my colleague has mentioned,

fortunately core inflation in the United States is relatively low and

stable, which has meant that the shock to oil prices has not had

a wider effect.

Chairman SHELBY. Would you, just for the audience, define generally what you mean by ‘‘core inflation’’?

Ms. BAICKER. Energy prices and food prices in general are more

volatile than prices in the broader economy. Sometimes when we

look at how inflation is evolving over the longer-run——

Chairman SHELBY. In other words, they are volatile, they are up

and down?

Ms. BAICKER. They are up and down a lot more.

Chairman SHELBY. But they have mainly been up, haven’t they?

Ms. BAICKER. Well, lately oil prices certainly have been up. We

want to think about those as an important factor affecting all

Americans, from heating expenses to transportation expenses and

the like. But we also want to look at other elements of inflation

that may evolve more stably over time to give us a sense of what

the underlying pressures on wages and broader inflation are. If you

look at the prices of things excluding energy and food, which move

around more rapidly, we see that those prices do remain low and

stable, unlike in the 1970’s. The pressures that you brought up

15

that we would all be worried about, on wages and on inflation more

broadly, are mitigated by those other prices being more stable.

That said, as you correctly brought up, oil prices and refined

product prices have been high and do not appear to be going down

anytime in the immediate future. So that creates challenges for the

economy, but also the opportunity to develop alternative sources of

energy that may become cost-effective where they were not before.

And to that end, it seems that refining capacity is likely to grow

over the next 10 to 15 years, as is the capacity to import liquefied

natural gas, which will provide alternatives as well.

Chairman SHELBY. Does the current account imbalance bother either one of you, the way it has grown in recent years?

Mr. SLAUGHTER. Mr. Chairman, that is an issue of great concern

that you raise. By any measure, the current account imbalance

that the United States runs today is large by historical standards

of the United States and by standards of other countries. So, I

think a broad policy challenge for the United States in the coming

years will be trying to understand the underlying causes of the current account imbalance, thinking about its consequences, and

thinking about possible ways that that imbalance could be brought

down.

I think a lot of analysis has gone into the current account deficit

the United States is running. It is clear that at least some of the

causes of the current account imbalance today actually reflect underlying strengths of the United States economy, one example

being that the United States has enjoyed much faster rates of economic growth than have most of our trading partners in recent

years. Countries like Japan, Germany, and France, which are the

bulk of our trading, have been going much more slowly.

Chairman SHELBY. Is some of that because we have more of a

flexible labor market? Is that factored in there?

Mr. SLAUGHTER. I think there is a lot of evidence now that the

underlying flexibility of labor markets in the United States of capital markets and product markets as well, allows the deployment

of people and capital to industries to grow more quickly when new

opportunities arise. I think you are exactly right. But in terms of

the current account implication, it means that we tend to be importing a lot more from them, thanks to our growth, than they import from us.

So that is one of the underlying causes. There are others.

Chairman SHELBY. That is an unhealthy situation economically

over time, is it not?

Mr. SLAUGHTER. It is. And I think a broad policy challenge that

this Administration and others have been working hard on is working with policymakers in these other countries, like Japan and Germany, to try to think about the macro- and micro-economic reforms, kind of big-level and down at the level of individual companies, that would allow those countries to grow more quickly.

Chairman SHELBY. Dr. Baicker, do you have any comments?

Ms. BAICKER. Certainly. I would share your concern as well, and

I defer to my colleague’s greater expertise on issues of international

commerce. That said, even things that are good for the economy

overall may not benefit all workers in the U.S. economy in the

same way. Some people may be hurt by trade while others are

16

helped. And there are lots of policy opportunities to make sure that

those workers who may be displaced by trade or lose their jobs because of other changes in the U.S. economy have every opportunity

to get retrained and have income support they need to weather

those changes.

Chairman SHELBY. To both of you, what is your take on the longterm—or let us say the next 20 years, if you can look that far out—

the economic implications to the United States economy and to the

workers of the U.S. facing a rising Chinese growth economy and

perhaps India and so forth. Do you view that as a concern, as an

opportunity, as a challenge, or all of it?

Ms. BAICKER. Certainly it raises the importance of ensuring that

workers have access to education when they are young and training and retraining once they enter the labor market. A more rapidly evolving economy, where some sectors grow quickly but others

shrink, necessitates making sure that retraining is available to

move workers into sectors that are growing or into parts of the

country that are growing. Giving them the flexibility to make those

decisions about what training they need in the sad event that they

do lose jobs to other sectors of the U.S. economy or to foreign countries is of vital importance to ensuring that all Americans enjoy the

benefits of growing commerce across the United States and across

other countries.

Chairman SHELBY. Dr. Slaughter.

Mr. SLAUGHTER. To build on what Dr. Baicker has said, I think

there is a real opportunity for the United States, with the growth

that has been going on and that is expected to go on in countries

like China and India, for American-based companies. The fact

today is that about 95 percent of the world’s population lives outside of the United States so for U.S.-based companies, when they

think about growth opportunities, countries like China and India

present a tremendous opportunity.

That said, I do have some concerns about the magnitude of the

policy challenges that we all face with integrating China and India

into the market-based world economy that we would like to see

them continue to move into. There are a lot of policy challenges.

One I will highlight is support for enforcement of intellectual property rights. One of the strengths of the U.S. economy for a long

time has been intellectual property creation, knowledge-based activities, things like information technology, life sciences, and finance. Those are things that American firms are particularly good

at. And ensuring that the institutions and legal regimes develop in

countries like China and India to afford our companies those opportunities, I think, is a real challenge going forward that will require

a lot of diligent and ongoing policy work.

Chairman SHELBY. Dr. Baicker, you have done some work, as I

understand, in the health care area. We have a great challenge in

dealing with Medicare, Medicaid, among other things. How do we

meet that challenge in the future? Maybe you will win a Nobel

Prize if you come up with that.

Ms. BAICKER. That would be great.

[Laughter.]

17

I agree with you that these are the primary forces affecting U.S.

long-run spending growth that we should get under control now before they swallow the entire Federal budget.

Chairman SHELBY. Is that a combination of demographics and

politics, perhaps?

Ms. BAICKER. It is certainly a combination of both demographics

and of the increasing expenditures per person on health care. The

reason Medicare expenditures are growing so much more quickly

than Social Security expenditures is that the same aging population that is consuming more Social Security resources is consuming even more health care per person. If you look at the Medicare budget over a 30- or 50-year horizon, the growth in excess of

GDP is almost entirely driven by the excess growth of health

spending relative to GDP growth and relative to wage growth.

So what do we do about that? Well, it is all well and good to say

we should spend less on health care, but we have one of the premier health systems in the world and we develop lots of new health

technologies. It is important that any policies do not stifle that innovation that has served us all well. That said, our health resources do not seem to be going where they achieve the greatest

gains. We spend a lot of our Medicare resources on people in the

last 6 months of life getting care that neither prolongs their life nor

improves their quality of living nor makes them more satisfied with

the health care they receive.

Chairman SHELBY. What percentage, roughly, of our health care

costs are incurred in the last couple of months or so of someone——

Ms. BAICKER. In the Medicare program, about 20 percent of expenditures go to people in their last 6 months of life, I believe

which is a lot of spending and, interestingly, highly variable across

different areas of the country. So in some parts of the country,

twice as many Medicare beneficiaries die in the intensive care unit

than in other parts of the country. And this is not because those

people are sicker or older or have different stated preferences for

receiving care at home or receiving care in the hospital. It is just

that medicine is practiced more intensively and more expensively

in those areas in ways that do not seem to pay off in the beneficiary’s well-being physically, psychologically, or in any way we

can measure.

The challenge is to understand what is driving those higher expenditures and what makes low expenditure/high-satisfaction areas

different, and try to implement that in different areas. CMS, the

Centers for Medicare and Medicaid Services, has gone a long way

in developing quality measures and best practices guidelines that

would help areas of the country that lag behind in quality and

excel in expenditure in adopting some of the better practices that

are done in other areas of the country. And there is a strong role

for the transmission of information to all those hospitals.

Chairman SHELBY. Would both of you economists deem this economy we have today a strong growing economy still?

Mr. SLAUGHTER. I would, Mr. Chairman. In a lot of the basic

measures we look at, the U.S. economy, in spite of the challenges

it has faced in recent years with a lot of shocks, has been performing quite well. If you look at GDP growth this year, it is on

track to be an——

18

Chairman SHELBY. Especially since 2001, you know.

Mr. SLAUGHTER. Absolutely. With the terrorist attacks, with the

downturn in U.S. equity markets, with the uncertainty that faced

a lot of businesses in terms of accounting reform, that natural disasters’ as we have seen in recent months, unfortunately. That flexibility we were speaking of, I think, has served the economy well.

GDP growth is on track to be about 3.5 percent this year. Unemployment is now below 5 percent in the U.S. economy. And as we

were discussing——

Chairman SHELBY. But in a lot of areas, 3 percent, 2.8—in my

State of Alabama recently it was 3.8 percent unemployment—I

mean hired worker performance, low unemployment.

Mr. SLAUGHTER. Absolutely, there are pockets where I think the

firms are trying to find the people they need to help them build the

houses and man the——

Chairman SHELBY. Well, that is a good sign, is it not?

Mr. SLAUGHTER. It is a good sign. And again, the broad policy

goal is trying to have those good outcomes be shared as broadly as

possible.

Chairman SHELBY. I know that our deficits, because of the hot

economy and we have had more tax receipts and so forth, have

been going down better than they were a year ago. But does the

deficit and then the ensuing debt concern either one of you? It concerns most Americans.

Mr. SLAUGHTER. Absolutely. I am concerned about the deficits,

not just today but, as we were discussing, when you look out on

the coming generation, you mentioned the demographic changes

facing the U.S. economy, and the reality is, for example, that we

have a labor force that is going to grow a bit more slowly in the

coming years than it has in previous decades because of the fact

that there are not as many baby busters as will replace the baby

boomers that are at the leading edge of retirement. And so I think

the real fiscal challenges going forward, as we have discussed, are

issues of Social Security, Medicare, and Medicaid spending. Innovative thinking on both the spending side and also the taxation side

will be warranted and in that regard, I think we all look forward

to hearing the recommendations of the President’s Tax Reform

Panel and the ideas that they may bring to the table to help facilitate these discussions.

Chairman SHELBY. Dr. Baicker, do you have a comment?

Ms. BAICKER. Yes, I share your concern as well. And the ability

to run deficits in times of natural disaster, war, or high unemployment is a real asset to the economy. But we are now on a path to

reducing the deficit by 50 percent over 5 years, ideally, and that

puts us on the right path, I think. Taxes are only half the equation,

as my colleague mentioned. Entitlement growth that we were just

speaking of Social Security and Medicare is eating up an increasing

fraction of discretionary spending. So getting those programs on a

more efficient track would go a long way toward alleviating those

problems.

Chairman SHELBY. Mr. Cabrera, I will go to you now, if I could,

because we have a vote on the floor and Senator Martinez, I hope,

will vote and get back here where we can continue the hearing

without recessing.

19

Could you share briefly with the Committee the role that the

Florida Housing Finance Corporation has played in rebuilding after

hurricanes in Florida? What role do you all have there?

Mr. CABRERA. Florida Housing, essentially, allocated a good

amount of resources to people who needed tenant-based rental assistance, and most of that resource went to public housing authorities. They stepped in in order to make it as easy as possible for the

funds that are necessary for people to find homes to utilize them.

The second thing that Florida Housing did was create a pool fund

so people can begin repairing their homes, or alternatively, allow

them to borrow so they can buy a new home.

The other aspect that Florida Housing helped with was helping

our sister agencies. Our sister agencies, particularly DCA, Department of Community Affairs, was mostly charged with hurricane recovery tasks at the State level, and our largest role was supporting

them.

Chairman SHELBY. We wish you well over there at HUD. You

have a great challenge, which you follow in some big shoes and

Senator Martinez. I think the Cuban Americans can play a big role

there, and you will.

Mr. CABRERA. Thank you, sir.

Chairman SHELBY. I congratulate you.

Mr. CABRERA. Thank you.

Chairman SHELBY. Ms. Hyland and Mr. Hood—Ms. Hyland first.

You spent the last several years working in the credit union industry. You know a lot about it.

Ms. HYLAND. Yes, sir.

Chairman SHELBY. If you were to be confirmed, which I predict

you will be, your responsibilities would change from that of an industry advocate—you know, working in the industry—to that of a

safety and soundness regulator. Two different roles, as you well

know. Could you give us some insight in what you believe would

be the appropriate role of the regulator is in relation to the industry, that is, the credit union you would regulate? To what extent

should a regulator be concerned about appearing as an industry advocate? In other words, I do not think you can do both.

Ms. HYLAND. Certainly.

Chairman SHELBY. I am not saying you would, but, you know,

you come——

Ms. HYLAND. Certainly, Mr. Chairman. I guess there are two

points I would like to make. Number one is that, by virtue of the

Federal Credit Union Act and the parameters that are laid out for

the Board, there is a line to be drawn in terms of listening to the

interests of the industry and listening to the professional staff at

NCUA, and as a board member, then, exercising independent judgment and being able to balance those concerns so that the credit

union system is protected by a strong safety and soundness regulator.

Chairman SHELBY. That should be number one, shouldn’t it?

Ms. HYLAND. Correct.

Chairman SHELBY. The strong safety and soundness of the credit

union system.

Ms. HYLAND. Absolutely. Secondarily, I would like to emphasize,

as I said in my statement, that I believe credit unions play a vital

20

role in the larger financial services sector. So to the extent that

that safety and soundness can be balanced with regulatory flexibility to allow credit unions to continue to serve the Congressionally mandated mission of serving people of smaller means, I believe

that also should be pursued and monitored by the regulator.

Chairman SHELBY. Mr. Hood, could you briefly tell us any trends

that you may have picked up, either credit union-specific or generally, that would be applicable to the financial system, that in

your opinion pose a threat to the safety and soundness of credit

unions?

Mr. HOOD. Well, yes, sir, Mr. Chairman. I think that one trend

that I am seeing that could potentially pose a threat is the view

that taxation should be imposed on our credit unions. When the

credit unions were chartered, they were chartered to be tax exempt, democratically controlled entities that would provide for

the——

Chairman SHELBY. I have not introduced any legislation.

[Laughter.]

Mr. HOOD. Thank you for that, Mr. Chairman. But I recognize

that that is potentially a trend. And I believe, sir, that if it were

to reach fruition, it would have such an adverse effect on the credit

unions’ ability to serve the needs of low- to moderate-income individuals. And that is something that I think we really will probably

want to address, in the sense that it would, one, fundamentally

change the scope of the charter, and I think that is something that

is really out there on the horizon that, if confirmed, I would like

to address with you and your staff.

Chairman SHELBY. I have a number of questions for the record.

I know Senator Sarbanes and others that are in other hearings will

have questions for the record. But we would like to get all of you

confirmed, have a markup, move you out as soon as possible. But

I have a number of questions for the record myself, and we will ask

those and get in touch.

We are voting on the Senate floor. Senator Martinez is back. I

am going to give the chair to him and let him close up the hearing.

Senator MARTINEZ. [Presiding.] Thank you all very much for your

indulgence. We have votes going on and so that requires the coming and going that you have seen. So a busy time in the life of a

Senator.

Mr. Cabrera, I wanted to ask you a couple of questions relating

to public housing, an area that I know well from my time at

HUD—I wanted to just ask of you—and some of this may already

have been asked, but what do you see as the major challenges in

terms of providing affordable housing, the challenges of the Section

8 program, the future of HOPE VI, which has been perceived differently by the Administration than some here in the Congress.

Frankly, I was conflicted greatly as a member of the Administration and what I believed to be a positive program in HOPE VI and

it had done a lot of good, while at the same time I understand too

often that there is not enough benefit to the entirety of it.

What are your thoughts on some of those issues, if you could just

in general?

Mr. CABRERA. I think that public housing has a few challenges.

The initial challenge it has is to become a better manager of valuVerDate 11-MAY-2000 17:49 May 18, 2006 Jkt 025856 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 27371.TXT SBANK4 PsN: SBANK4
21

able resources. And I think it is doing just that. It has made great

strides in the last few years to become a better manager, certainly

with the help of this Congress. And that infrastructure, that rubric

has to be put in place and executed upon.

As to the issue of HOPE VI, I think it has had its successes. It

certainly has successfully demolished a lot of severely distressed

units. But it has had its challenges as well in terms of trying to

get units built. I think that a lot of my time, if confirmed, will be

spent on trying to improve the rough edges of HOPE VI.

Senator MARTINEZ. One of the things that I hope we can do is

to think about the future differently. You know, HOPE VI accomplished what it did, obviously many lessons that could be learned

from the positive as well as some of the things that maybe did not

work as well. Nevertheless, there is a need for us to do something

to continue to modernize public housing, to continue to improve the

stock of public housing, to reinvent it, if you will, in a different concept and a different vision—more mixed ownership, you know, just

a rethinking of the concept. And I wonder if you have any impetus,

or is there any impetus in the Administration that you know of, to

come back to Congress with some new ideas on a program that

might not be HOPE VI—maybe HOPE VII—but something new

and different that would accomplish some of the goals of HOPE VI

while at the same time bringing about some of the lessons learned.

Mr. CABRERA. I think that certainly SLHFA is a good place to

start the discussion. The idea of having flexibility at the PHA level,

I think, is a good one so long as you can guard or enhance fiscal

soundness. I think giving PHA’s the ability to go and compete for

a variety of resources—because they have significant assets—in

order to replenish units is good policy. I think that would be a good

start. In Florida, we recently amended Chapter 421 of the Florida

Statutes, which is a statute that essentially administers or enables

PHAs, and now PHAs in Florida have a wider breadth of options

in terms of how to conduct their activities, at least in the State of

Florida. I think that is a good thing.

Senator MARTINEZ. I do not mean to neglect the rest of you but,

as you can tell, this is a little more in my vein. So, I will continue

here for another minute or two.

One of the things that I known distressed me greatly during my

time at HUD was the morning news clips when it got to Public and

Indian Housing, the multiplicity of indictments, convictions, fraud,

waste, abuse that was kind of the daily fare. You know, we have—

I do not remember now the exact number, but I think some 2,600

housing authorities across the country. And a number of these, the

number of people associated with them, from time to time would

stray from the straight and narrow. And I find that disappointing

because I always thought it was really interfering with the ability

of some needy person to live in a safe and decent place. It was really not stealing from that impersonal Government, but it was really

stealing from the neighbor next door or someone living in public

housing.

I wonder what you think about the status of that situation? I

know Michael Liu, the fellow you will be succeeding, worked diligently in this area. We stressed it a great deal. We made some

progress, but I am not sure we turned the tide. I just wonder how

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you might view that aspect of things—unfortunately a negative aspect, but nevertheless one that needs to be dealt with.

Mr. CABRERA. I think Secretary Liu made great strides on that.

I think he did a terrific job. I also think that there are other things

that we can do in order to minimize those incidences. One of the

things is to more methodically approach troubled agencies, and specifically agencies that HUD has put into receivership, in order to

better deal with the business aspects that one has to content with

when you have a troubled agency. Simple things: Marshalling assets, paying liabilities, and getting people in place to properly run

a PHA. I think that would go a long way to helping circumstances.

Senator MARTINEZ. One last area, and this is more related to

your prior job but it would help me in carrying out my responsibilities toward the State. I have been impressed how, over the last,

I would say, 3 years, what I did not perceive to be a crisis in affordability of housing in Florida has become that, and accentuated each

and every day. And of course, as we see the devastation of the latest hurricane, this only destroys more of the basic stock of housing

for many, whether it be farm workers, whether it be retirees in a

mobile home park.

What, as you depart from that world, are your recommendations

in terms of creating more affordability of housing opportunities for

people in the State of Florida? Frankly, these lessons really are nationwide; it is not unique to Florida. But what are your thoughts

on housing affordability, how to bring housing as affordable to

more and more people?

Mr. CABRERA. When I was asked this question in Florida, the

first thing I stated—and I think particularly my colleagues to the

right would agree—is patience. Because markets are funny things,

and markets change. But that is not a very satisfying answer on

a practical level. On a practical level, I think that the Low-Income

Housing Tax Credit is a remarkable devise to have the private sector essentially construct units and manage them. And when I say

‘‘private sector,’’ I do not just mean for-profit entities. I also include

nonprofit entities. I am just saying——

Senator MARTINEZ. Nongovernmental sector.

Mr. CABRERA. —other than Government.

Senator MARTINEZ. Right.

Mr. CABRERA. And it has been a remarkably helpful thing from

the perspective of unit production. Now, how does that relate to

public housing? It does increasingly because many public housing

authorities are beginning to become more entrepreneurial, which

is, I think, good. And they have assets—mainly land—that can be

developed. In many cases, that land is the only affordable land that

is viable, where one can develop units. So that is another aspect

that would be helpful.

I think the market, as markets change, the private activity bond

allocation, which is currently probably under-utilized nationwide, is

going to become very, very important to the production of units.

But those are the strongest production devices I believe we have,

and I think we should utilize them to their fullest extent.

Senator MARTINEZ. Let me ask other panel members if you might

have any thoughts you want to share on the issue of affordability

of housing. In addition to that, maybe the other issue related to

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that, which is housing bubble, whether the possibility of us having

an overheated housing market that may create some disruptions.

Ms. Baicker, I notice some interest in you in this topic.

Ms. BAICKER. I agree with Mr. Cabrera that vouchers are a really flexible tool to use to get people into housing that they might not

otherwise be able to afford. I know there have been many experiments at both the State and Federal level with vouchers that are

larger for people with lower income and phase out as people’s income grows, and gives them the opportunity to live in housing that

otherwise would not be accessible and does not have some of the

disadvantages of housing that is designated only for low-income

people, which often then has problems that you do not see in the

wider housing community. So, I share the hope that that kind of

program, with flexibility built in for people to take the vouchers to

the housing that suits them best, would really give people that opportunity.

Senator MARTINEZ. I think Single-Family Housing Tax Credits

would also be a good idea. You know, we have done it for multifamily; it seems to me that it only makes sense to do it in singlefamily housing as well.

Any other comments on that?

Mr. SLAUGHTER. Senator, I think this issue of the increase in

home prices, especially in particular communities—on the coasts,

for example, in recent years—-there is legitimate concern about

that rate of increase and whether in some sense those prices have

gone too high and, going forward, whether price growth will moderate or even turn negative and prices will actually decline.

This very important issue of housing affordability has longer

time horizons that are important as well. In addition to the immediate concerns, one issue that I always think about is that affordability depends not just on the price of the homes, but also on the

earnings power of the families involved. And so a broad policy challenge, I think, is continuing to ensure income gains for as many

American households as possible, to allow them to achieve that

dream that a lot of people have, which is having their own home.

Senator MARTINEZ. Yes, a dream which we share.

Ms. Hyland.

Ms. HYLAND. Senator Martinez, I would suggest that credit

unions certainly can play a seminal role in that through individual

development accounts to allow low-income and working people to

essentially build toward that American Dream as well as offering

affordable mortgage products through efforts from the National

Credit Union Foundation and others that really strive to reach out

to people that need to build wealth in order to put their first down

payment on a home. And I believe that credit unions can serve a

seminal role in doing that. And partnering with other entities, both

Government as well as other not-for-profits to help that.

Mr. HOOD. Yes, Senator Martinez, I would agree with my colleague and also say it is important to create public/private partnerships. And I was pleased when Mr. Cabrera said that there are

other community stakeholders who are getting involved now with

affordable housing. I think it is equally important for us to really

note the importance of analyzing applicants, in terms of having to

look outside the box when it comes to qualifying them.

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Senator MARTINEZ. Traditional, right.

Mr. HOOD. Looking outside of traditional credit and trying to

really find innovative ways of advancing the dreams of homeownership. That is one of the things I think we are going to see more

of if we really are going to create more affordable homeownership

opportunities.

Senator MARTINEZ. I think we have seen that over the last several years. There are financing companies moving out of the

straightjacket of looking at an applicant in a single way, but the

more diverse population we have.

Mr. HOOD. Exactly.

Senator MARTINEZ. Frankly, it gets into other issues that I really

do not care to open the box, of the whole issue of illegals that seek

to finance a home and what happens with all of that. But anyway,

we will save that for another day.

I want to just thank all of you for your indulgence of the Committee and myself. I know that Ranking Member Senator Sarbanes

had an interest in being here and questioning the panel. I am done

with the questions that I had, and so at this point let me seek some

counsel as to how we might approach this.

Senator Sarbanes’s questions will be asked in writing and you

can submit them for the record. And so with that, I will bring the

hearing to an end. And thank you very much for your participation.

We wish you all luck.

Mr. SLAUGHTER. Thank you.

Ms. BAICKER. Thank you.

Ms. HYLAND. Thank you, Senator.

Senator MARTINEZ. The hearing is adjourned.

[Whereupon, at 11:17 a.m., the hearing was adjourned.]

[Prepared statements, biographical sketches of nominees, and response to written questions supplied for the record follow:]

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PREPARED STATEMENT OF JOHN WARNER

A U.S. SENATOR FROM THE STATE OF VIRGINIA

OCTOBER 25, 2005

Chairman Shelby, Senator Sarbanes, and my other distinguished colleagues on

the Senate’s Banking, Housing and Urban Affairs Committee, I thank you for holding this confirmation hearing.

Today, I am pleased to introduce a fellow Virginian, Gigi Hyland, who has been

nominated to serve as a Member on the National Credit Union Administration

Board. She is joined today by her father Gerry Hyland, who serves as the Fairfax

County Supervisor for Mount Vemon, and her aunt Alba Colon Whitt.

Gigi Hyland has a wealth of experience with the business of credit unions. She

currently serves as Senior Vice President and General Counsel for the Empire Corporate Federal Credit Union in Albany, New York, where she is responsible for advising Empire on its compliance with the NCUA, the Department of the Treasury,

Federal Reserve, Securities and Exchange Commission, and other Federal and State

legal and regulatory requirements.

Prior to joining Empire, Ms. Hyland worked concurrently as the Vice President

for Corporate Credit Union Relations for the Credit Union National Association,

Inc., and as the Executive Director of the Association of Corporate Credit Unions

in Washington, DC. In her distinguished positions, she managed the development,

coordination, and execution of a regulatory, legislative, public relations, and political

advocacy program for the benefit of the corporate credit union network.

Before she began her career in the credit union industry, Ms. Hyland earned her

BA from the College of William and Mary in Williamsburg, Virginia, and her JD

from the George Mason University School of Law in Arlington, Virginia.

Mr. Chairman, Gigi Hyland’s impressive credentials makes her highly qualified

to serve as a Member on this Board, and I am certain that she will be a strong

asset for the National Credit Union Administration.

I urge my colleagues to support her nomination.

—————

PREPARED STATEMENT OF RODNEY E. HOOD

MEMBER-DESIGNATE, NATIONAL CREDIT UNION ADMINISTRATION

OCTOBER 25, 2005

Chairman Shelby, Senator Sarbanes, and distinguished Members of the Committee, thank you for the opportunity to meet with you on behalf of my nomination

to serve on the Board of the National Credit Union Administration.

I would like to express my deep appreciation to President Bush for nominating

me to this position. I would also like to thank Senator Elizabeth Dole and Senator

Richard Burr for their generous remarks. I am humbled by their kind and gracious

words and would like to acknowledge and applaud their great leadership and service

for my home State of North Carolina.

While my parents are not here today in person, I feel the warmth of their presence as they watch from Heaven. I am thankful to them for bequeathing to me a

strong value system. A value system that reflects humility, honesty, hard work, and

compassion. I believe that these values have helped me make a difference in the

lives of many people during my 17 years in the private sector and in public service.

If confirmed by the Senate, I look forward to fulfilling the duties and responsibilities of a NCUA Board Member along with my new colleagues. I am committed to

listening carefully, working hard, and doing my best to ensure the safety and soundness of the Nation’s 8,800 federally insured credit unions.

Now in existence for more than 150 years, credit unions play an important role

as a financial partner for 84 million people. As not-for-profit financial cooperatives,

the charter of these institutions centers on servicing the financial needs of their

members and empowering Americans from all walks of life to achieve financial stability.

I have a profound appreciation for community empowerment which was developed

early on in my youth as a missionary in Africa. There, in the rural landscape, I saw

the hard work, struggle, and resilient character of people who made their living

from farming. I learned and saw that strong, struggling people are at the heart of

what any country is about. That is why I am pleased to now be in a position where

I can continue to serve my country by overseeing the institutions that give hardworking people access to capital.

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I realize that credit unions are a critical element in helping families achieve the

American Dream of homeownership; assisting entrepreneurs in creating small businesses; and providing the trusted mechanisms for families to save for the future.

President Bush said it best when he said, ‘‘The true measure of compassion is

more than good intentions, it is good results.’’ I have been blessed and fortunate to

work at some of America’s most respected financial institutions which sought to empower stability and prosperity in our local communities. While at North Carolina

Mutual and Wells Fargo, I held management posts that allowed me to promote community development and outreach initiatives to underserved communities. I served

on the board of the Wells Fargo Housing Foundation, and managed public-private

partnerships with results-oriented housing providers such as the Neighborhood Reinvestment Corporation, Habitat for Humanity, and the National Council of La

Raza. Having served as a Community Reinvestment Act (CRA) Officer at Bank of

America and the National Director of Affordable Housing at Wells Fargo, I have

been both an advocate and provider of affordable housing and small business lending. In those positions, I oversaw loan programs, managed teams of regional community development managers and community development loan specialists, and

worked with our credit policy group to evaluate and manage credit risks. I have also

provided financial education to underserved communities by conducting seminars on

homebuyer education, small business lending, and credit repair. In addition, I

worked with regulators from the Office of the Comptroller of Currency to review the

bank’s lending activities, credit quality, and community development outreach efforts. These experiences directly exposed me to the importance of regulatory review,

financial soundness, and risk management.

At USDA, I help administer a $43 billion dollar loan portfolio comprised of over

400,000 loans—to individuals seeking homeownership, private entities to provide affordable rental housing, and to local government entities to fund schools, hospitals,

and first responder services. Throughout my career, I have nurtured and developed

the core competencies that I will rely upon in assessing the safety and soundness

of America’s credit unions.

I come to NCUA with a mindset based on the following tenets:

• First, I will work hard to ensure that credit unions remain safe and sound financial institutions.

• Second, I will strive to be recognized as a fair and thoughtful regulator—one who

realizes the value and necessity of regulation while being cognizant of the impact

of arduous regulation.

• Third, I will bring focused leadership and management to NCUA while seeking

to ensure efficient operations and prudent use of resources.

• Fourth and finally, I understand the importance of disclosure and transparency

and will work closely with the Members of this Committee, and all Members of

Congress, to ensure the financial integrity of credit unions in a rapidly changing

environment.

Since joining the Federal Government as Associate Administrator for the Rural

Housing Service at USDA, I have been honored to work side-by-side with and lead

some of the most dedicated and hard working career staff around. And should I be

honored by your confidence, I look forward to doing so at NCUA as well.

Mr. Chairman and the Members of the Committee, I am honored to appear before

you this morning and would like to thank you again for your courtesy and consideration. I welcome any questions you may have.

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RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES

FROM MATTHEW SLAUGHTER

Q.1. The U.S. current account deficit reached a record $666 billion

last year and is on pace to reach $800 billion this year. As a percentage of GDP, the current account deficit is now over 6 percent

and growing. Federal Reserve Chairman Greenspan has stated that

‘‘countries that have gone down this path invariably have run into

trouble, and so would we. Eventually, the current account deficit

will have to be restrained.’’ And just last week in testimony before

the Joint Economic Committee, CEA Chairman Bernanke acknowledged that the ‘‘Current account deficit presents some economic

challenges. Gradually reducing the current account deficit over

time would be desirable.’’ What is your view on the current account

deficit? Do you believe that this imbalance presents a serious potential threat to the Nation’s economic health? If you believe that

it should be reduced, what policies, beyond promoting economic

growth, would you advise the President to undertake?

A.1. I am very concerned about the U.S. current-account deficit

today, which by any measure has grown quite large. This deficit

merits careful analysis for causes, consequences, and possible transitions. It is now well-established that at least some of the causes

of this current-account deficit are the underlying strengths of the

US. economy. One in particular is the fact that U.S. economy has

for many years now been growing much more rapidly than have

the economies of our biggest trade partners such as Japan, Germany, and France. Our faster growth has meant that our demand

for their exports has been growing faster than has their demand

for our exports.

At the same time, some of the other underlying causes of the current-account deficit are more worrisome. One in particular is the

decline in savings by American households, a decline which began

nearly a generation ago. In 2004, U.S. personal savings as percentage of disposable personal income was just 1.8 percent. Policy initiatives that can encourage greater personal savings will benefit

not just American families but also the broader U.S. economy by

helping reduce our current-account deficit.

Q.2. Many countries, notably China, Korea, and other Asian countries have been experiencing stronger economic growth than the

United States, while their bilateral trade imbalances with the

United States have widened significantly. It would appear that

many of these countries also pursue policies of actively managing

their currencies to promote competitive trade advantages. What

has been the relationship between these countries’ trade and exchange rate policies and the underlying U.S. current account deficit?

A.2. Bilateral trade imbalances between any two countries tend to

reflect a number of forces, including their underlying patterns of

comparative advantages. With the United States having strong capabilities in producing knowledge-intensive goods and services, we

benefit from international commerce when we import labor-intensive goods and services from countries well-suited to those activities. Bilateral imbalances can also be affected by currency values

as well.

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Q.3. What policies do you think should be taken with regard to a

country that has been found to be manipulating its currency to

gain an unfair competitive trade advantage with the United

States?

A.3. The Treasury Department currently has responsibility for all

issues involving the value of the U.S. dollar. I will defer here to

their established rules and procedures. More generally, it is important to encourage all countries to move toward more open, marketbased systems—including for capital markets. Flexible capital markets generate a number of benefits for countries, including support

for trade in goods and services.

Q.4. The prices of oil and gas have risen dramatically over the past

year. In a July 3 article, The Washington Post reported that, ‘‘Morgan Stanley economist Andy Xie (Zee) warned of an ‘oil bubble’ and

said much of the recent run-up has been driven not by supply and

demand but by speculative energy traders at big investment firms

that have grown increasingly dependent on returns from their trading profit.’’ Do you see any evidence of Mr. Zee’s findings?

A.4. Recent oil-price increases have been much more gradual than

those of earlier decades, and seem to have been driven by rising demand rather than sudden supply shocks. And current prices, although high, have not reached the historic peaks (in real terms) of

the early 1980’s. Major countries driving this demand growth have

included China and the United States, thanks to their strong economic growth. New production and refining capacity are expected

to emerge in future years, but ongoing demand growth is expected

to mean high prices for some time.

Q.5. The Bureau of Labor Statistics reported that the Consumer

Price Index, the main inflation gauge, rose by 1.2 percent in September and has risen 4. 7 percent over the last 12 months. Real

wages for working Americans continue to fall. According to the

Labor Department, the average weekly earnings of nonsupervisory

workers—who constitute about 80 percent of the workforce—fell by

1.2 percent in September and have fallen in 8 of the past 12

months.

However, some have argued that inflation is not such a significant issue because the so-called ‘‘core inflation’’ measures, those

that do not include energy or food prices, have remained relatively

stable. A recent New York Times article entitled, If You Don’t Eat

or Drive, Inflation’s No Problem summarized that line of thinking:

‘‘Many economists urged Americans to remain calm and to focus on

the so-called core CPI—the inflation measure that excludes the

volatile costs of energy and food. The core rate rose just 0.1 percent

in September, and is up only 2 percent in the last 12 months.’’ The

article concluded, ‘‘The dueling numbers seem to offer a classic case

of how economists and consumers view the world differently. If

only we lived in some futuristic biosphere where we did not need

energy or food, inflation wouldn’t matter.’’

As a Member of the President’s Council of Economic Advisers,

would you be concerned about increases in the costs of energy and

food, or would you focus principally on core-inflation? Given the decline in real wages, what is the impact of the increase in the costs

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of basic necessities, such as gasoline, heating oil, and food on working Americans?

A.5. I am concerned about increases in both core and overall rates

of consumer-price inflation. Overall inflation rates are intended to

capture the full basket of goods and services consumed by the typical American, and as such measure the price pressures facing all

working Americans. Rising prices of energy and food impose real

costs: Without commensurate increases in income, many Americans

need to reduce spending on other goods and services.

Thus far, the recent sharp increases in the prices of energy have

not been passed through to the broad set of nonenergy (and

nonfood) prices captured by core inflation rates. For the first 9

months of 2005, consumer prices excluding food and energy have

been rising at an annual rate of just 2.0 percent. This lack of

strong pass-through of energy prices is thanks in part to sizable

gains in energy efficiency throughout the U.S. economy in recent

decades, and it helps contain the impact of rising energy prices on

both firms and families.

Q.6. According to the U.S. Census Bureau, in 2004, the top quintile

of households held more than half of America’s total income, which

is a record level. In an editorial on the report, The New York Times

finds that ‘‘as the very rich get even richer, their gains can mask

the stagnation and deterioration at less lofty income levels.’’

Dr. Slaughter, in an 1998 article, Globalization and Wages: A

Tale of Two Perspectives, you wrote that, ‘‘Tens of millions of

American workers have experienced stagnation or even absolute

declines in their real earnings for over 25 years. For many lessskilled workers, the declines have been staggering and largely unprecedented this century. . . Combined with sluggish growth in

real wages of all workers, rising wage inequality has meant absolute stagnation or even declines in real wages for the majority of

the U.S. labor force.’’

Federal Reserve Chairman Greenspan has also expressed concern with the growing income inequality in the United States. In

his Semi-Annual Monetary Report to this Committee in July of this

year, Chairman Greenspan called the growing inequality in income

and wealth ‘‘a very disturbing trend.’’ Do you agree that income inequality is growing in America and that this is a serious problem,

and if so, how would you address it?

A.6. I do agree that income inequality is growing in America, and

that this trend is a serious problem in need of concerted policy effort. On many measures, income inequality has been rising in the

United States for decades. In 1975, households at the 90th percentile of the national income distribution had incomes that were

8.5 times as high as households at the 10th percentile. By 1990,

this ratio had risen to 10.1, and last year it stood at 11.1. At the

individual level, one of the main force behind rising inequality is

the increasing importance of education. In 2004, the average

annual earnings of U.S. high-school graduates was $30,640, in contrast to $115,292 for Americans with advanced professional degrees.

Rising inequality means that the strong rates of productivity

growth the U.S. economy has enjoyed in recent years are not

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shared equally across all workers and families. The broad policy

challenge is to equip more Americans with the skills necessary to

command high and rising earnings in our increasingly global labor

market. Improved education and retraining at all levels are essential. For example, President Bush’s new Community-Based Job

Training Grants aim to strengthen the vital role that community

colleges play—in conjunction with local businesses—in skills development.

RESPONE TO WRITTEN QUESTIONS OF SENATOR SARBANES

FROM KATHERINE BAICKER

Q.1. I am interested in your thoughts on the minimum wage. The

minimum wage today is $5.15, which is far below where it has

been in the past, when adjusted for inflation. Earning the minimum wage is not even close to enough to support a family. The

U.S. Census Bureau reports that for a person with a family of four

to reach the poverty line that person would need to earn $9.65 per

hour, a rate that is almost twice the minimum wage. Increasing

the minimum wage, in my opinion, is one powerful tool that we

have to increase the incomes of working Americans. There are

some who argue against increasing the minimum wage, due to concerns about its effect on employment. However, there is much academic research, including a study by economist Alan Krueger, that

suggests that increasing the minimum wage has little effect on employment. What are your views with respect to increasing the minimum wage above its current level of $5.15?

A.1 Raising the minimum wage merits serious consideration. In

setting the Federal minimum wage, however, it is important to balance those advantages against the potential unemployment that it

might generate and the efficiency of how well the minimum wage

targets low-wage families. Evidence on the unemployment likely to

be created by increasing the minimum wage is mixed, and effects

may be larger for small businesses, and larger in a time of increasing health insurance and benefits costs. About half of the approximately 2 million minimum wage workers are under age 25. An

alternate policy for increasing the living standards of low-income

workers is the Earned Income Tax Credit, which has been successful at increasing the living standards of low-income working parents.

Q.2. The prices of oil and gas have risen dramatically over the past

year. In a July 3 article, The Washington Post reported that, ‘‘Morgan Stanley economist Andy Xie (Zee) warned of an ‘oil bubble’ and

said much of the recent run-up has been driven not by supply and

demand but by speculative energy traders at big investment firms

that have grown increasingly dependent on returns from their trading profit.’’ Do you see any evidence of Mr. Zee’s findings?

A.2. Recent oil price increases have been much more gradual than

those of the 1970’s and 1980’s, and seem to have occurred in response to increased demand in the face of tight supply, rather than

in response to sudden supply shocks. This increased demand comes

along with strong economic growth in the global economy. Concerns

about security of supply may have contributed to some of the recent increases in crude oil prices, but current prices, although high,

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have not reached the highs of the 1980’s. Although new capacity

is expected to keep pace with increasing demand, we are likely to

face tight crude oil markets and no decrease in prices for several

years.

Q.3. The Bureau of Labor Statistics reported that the Consumer

Price Index, the main inflation gauge, rose by 1.2 percent in September and has risen 4.7 percent over the last 12 months. Real

wages for working Americans continue to fall. According to the

Labor Department, the average weekly earnings of nonsupervisory

workers—who constitute about 80 percent of the workforce—fell by

1.2 percent in September and have fallen in 8 of the past 12

months. However, some have argued that inflation is not such a

significant issue because the so-called ‘‘core inflation’’ measures,

those that do not include energy or food prices, have remained relatively stable. A recent New York Times article entitled, If You

Don’t Eat or Drive, Inflation’s No Problem summarized that line of

thinking: ‘‘Many economists urged Americans to remain calm and

to focus on the so-called core CPI—the inflation measure that excludes the volatile costs of energy and food. The core rate rose just

0.1 percent in September, and is up only 2 percent in the last 12

months.’’ The article concluded, ‘‘The dueling numbers seem to offer

a classic case of how economists and consumers view the world differently. If only we lived in some futuristic biosphere where we did

not need energy or food, inflation wouldn’t matter.’’

As a Member of the President’s Council of Economic Advisers,

would you be concerned about increases in the costs of energy and

food, or would you focus principally on core-inflation? Given the decline in real wages, what is the impact of the increase in the costs

of basic necessities, such as gasoline, heating oil, and food on working Americans?

A.3. Rising food and energy prices have real effects on American

families and deserve careful attention. Energy prices in particular

rose sharply in 2005. These price increases do not, however, seem

to have passed through to the prices of other goods (with core inflation low and stable at 2 percent), thanks in part to increased

energy efficiency, which mitigates the effect of the increases on consumers. Policies that promote continued strong economic growth

and productivity gains will help ensure that Americans can enjoy

increasing standards of living.

Q.4. According to the U.S. Census Bureau, in 2004, the top quintile

of households held more than half of America’s total income, which

is a record level. In an editorial on the report, The New York Times

finds that ‘‘As the very rich get even richer, their gains can mask

the stagnation and deterioration at less lofty income levels.’’ Federal Reserve Chairman Greenspan has also expressed concern with

the growing income inequality in the United States. In his SemiAnnual Monetary Report to this Committee in July of this year,

Chairman Greenspan called the growing inequality in income and

wealth ‘‘a very disturbing trend.’’ Do you agree that income inequality is growing in America and that this is a serious problem,

and if so, how would you address it?

A.4. I share these concerns about the growing income inequality in

the United States. Recent increases are part of a long-run trend,

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with the income of high-income households growing more quickly

than low-income households since the 1970’s. One of the main contributors to this increase in inequality is the increasing importance

of education: In 1980 the average high school graduate earned 28

percent more per year than workers without high school degrees,

but in 2004 the difference was 49 percent. Workers with college degrees earn 31 percent more (in real terms) than they did in 1980,

while workers with less than a college degree have seen little real

increase. Policies that promote educational attainment, such as increased accountability for primary and secondary schools and increased grants to support access to community colleges, would go

a long way toward improving the economic well-being of low-income

Americans.

RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES

FROM ORLANDO J. CABRERA

Q.1. Mr. Cabrera, do you commit to providing this Committee with

any and all requested data and information in a complete and

timely manner?

A.1. Yes. If confirmed, I will commit to providing Congress with requested information in a complete and timely manner, to the best

of my ability. I look forward to working with Congress to fulfill

HUD’s mission and encouraging a positive working relationship.

Q.2. Disabled advocacy groups are concerned that vouchers that

have been designated for the disabled do not retain this designation upon renewal. Do you commit to looking at what HUD can do

to ensure that vouchers for the disabled continue to be used for this

population?

A.2. Yes. If confirmed, I am committed to assuring that vouchers

continue to be available to the disabled population. The Section 811

Program, Housing for Persons with Disabilities, provides assistance

to expand the supply of housing with the availability of supportive

services for persons with disabilities. In 2005, Congress appropriated funding for both new vouchers and renewal of vouchers in

this program. HUD remains committed to ensuring that these

vouchers continue to serve the disabled population.

In addition, HUD has issued a notice (PIH 2005–5) that directs

Public Housing Agencies (PHA’s) to reissue vouchers to the targeted nonelderly disabled population upon turnover. This applies to

both 5-year and 1-year mainstream vouchers and other special purpose vouchers intended to serve nonelderly disabled families. The

Department has started tracking the use of these vouchers in the

Public Housing Information System (PIC).

Q.3. Many PHA’s around the country opened their doors to Katrina

victims by providing vouchers and vacant public housing units to

evacuees. Do you support reimbursing PHA’s for these expenses,

and will HUD reimburse housing agencies for these expenses, incurred prior to the announcement of the FEMA/HUD housing assistance programs, including for families who were not previously

assisted by HUD?

A.3. Yes, unless they are being directly assisted by FEMA or otherwise prohibited by law. The Department has already notified PHA’s

nationwide that it will reimburse them for any Housing Assistance

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Payment and administrative costs retroactive to September 1, 2005

under the Katrina Disaster Housing Assistance Program but only

for those families that were previously assisted by HUD and homeless families. The Department has obligated all funds provided in

calendar year 2005 in accordance with the Conference Report to

the Consolidated Appropriations Act, 2005 and has no additional

budgetary resources to assist families that were not previously assisted by HUD. These families are generally assisted by FEMA

under their Individual Assistance or Public Assistance programs

pursuant to the Stafford Act.

Q.4.a. Substantial increases in utility costs—about 1/3 in fuel oil

and nearly 50 percent in natural gas—are anticipated in 2006.

These cost increases will create substantial hardship for public

housing agencies and the seniors, people with disabilities, and families with children that they assist through the public housing and

housing voucher programs, unless Federal funding is increased to

help meet these costs. How will you ensure that PHA’s can meet

these increased costs without diverting funding from other critical

needs?

A.4.a. Existing regulations for the Housing Choice Voucher (HCV)

program and Public Housing program at 24 CFR 982.517 require

PHA’s to review utility allowances at least once a year if there is

a change in utility costs that exceeds 10 percent. This assures that

any large increases in utility costs are taken into account when calculating utility allowances for various unit types and sizes. Having

said that, it is important to note that the Consolidated Appropriations Act for fiscal year 2005 changed the way the HCV program

is funded from a unit-based to a budget-based program. The Conference Report specifically states that, ‘‘PHA’s are expected to manage utility costs, decreased tenant contributions, and protect the

most at-risk within these budgets.’’ PHA’s have been provided with

100 percent of their budgetary allocations in 2005 and most have

at least 1 week of reserves that they may utilize to offset increased

utility costs by increasing payment standards. It may, however, become necessary for PHA’s to delay the issuance of vouchers upon

turnover if increasing payment standards would preclude the PHA

from managing within its budgetary allocation.

It is also important to note that Public and Indian Housing has

an ongoing aggressive energy conservation program to assist PHA’s

in managing their operating costs relative to utilities consumption

and cost and ensure residents decent, safe and sanitary housing.

PIH is assisting PHA’s in their efforts to control costs and meet the

energy crisis brought about by Katrina in four crucial ways: (1)

PIH is conducting outreach and education directed to PHA’s and

specifically residents as end users; (2) PIH is providing technical

assistance for installing energy systems directed to PHA’s to

streamline procurement and facilitate financing options; (3) PIH

provides incentives to PHA’s that enable them to use savings to

amortize energy costs, so as not to divert the use of capital funds

from more emergent capital projects; and (4) PIH is promoting

partnerships with other agencies to leverage resources. For example, HUD has worked with Department of Energy and State-sponsored energy programs to promote and fund weatherization and enVerDate 11-MAY-2000 17:49 May 18, 2006 Jkt 025856 PO 00000 Frm 00078 Fmt 6602 Sfmt 6602 27371.TXT SBANK4 PsN: SBANK4
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courage the use of Energy Star equipment replacements. Low-income residents have also used the Low Income Home Energy Assistance Program (LIHEAP) through the Department of Health and

Human Services to help pay energy bills.

In addition, PIH recently published a special Katrina energy

newsletter reaching out to PHA’s, resident groups, and Indian

Housing in anticipation of higher utility costs this winter. PIH will

continue to explore ways and means to mitigate the impact from

escalating utility cost.

Q.4.b. Will you submit to this Committee within 2 weeks of your

confirmation an estimate of the additional funding needed in 2006

to meet these extreme increases in utility costs?

A.4.b. I will be happy to work with the Senate in an effort to assess the level of funding that may be needed.

RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES

FROM CHRISTIANE GIGI HYLAND

Q.1. On Wednesday, October 19, the NCUA presented its budget

briefing at which it proposed a budgetary increase for 2006 of just

1.9 percent. The proposed budget would also reduce the staff by

three positions, a 10-year low for the agency. Do you believe that

NCUA has sufficient budget and staffing resources to effectively

fulfill its duties?

A.1. Although I have been briefed by agency staff on the budget

process, I have not had the opportunity to analyze the data used

to develop the proposed budget. I understand examiner resources

assessment development is robust, with initial resource needs presented by the field credit union examiners. If confirmed prior to the

November NCUA Board Meeting, I intend to assess the adequacy

of proposed resources as they relate to the budget package and

ensure those resources are sufficient to achieve the objective of

maintaining a safe and sound credit union system and meeting the

strategic and annual plans developed by the agency.

Q.2. It has been brought to our attention that banks appear to be

providing better outreach to communities than credit unions. In a

2003 report on the financial condition of credit unions, the GAO reported that its analysis suggested that ‘‘credit unions served a

slightly lower proportion of low- and moderate-income households

than banks.’’ (GAO Report, ‘‘Financial Conditions Has Improved,

but Opportunities Exist to Enhance Oversight and Share Insurance

Management,’’ October 2003.) How do you believe that credit

unions can increase their outreach to the communities they are intended to serve?

A.2. I am aware credit unions have aggressively pursued expansions into underserved areas since Congress enacted the 1998

Credit Union Membership Access Act, which permitted credit

unions to maintain their current field of membership while expanding into these underserved areas. With more credit unions using

this expanded authority I expect they will further demonstrate

their outreach to all segments of society.

As mentioned in my testimony, I spearheaded corporate credit

union participation in the creation of the Community Investment

Fund, which is the National Credit Union Foundation’s primary

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funding mechanism for development activities by credit unions.

These funds—collected from credit unions throughout the country—are being utilized to enhance the credit unions’ outreach to

communities and further improve the financial well being of all

consumers, with a focus on those in low- and moderate-income communities. As more of these funds are made available for initiating

innovative products and services, credit unions best practices will

be identified and shared throughout the credit union system on the

most effective means of enhancing outreach.

Credit unions are also actively adopting international remittance

services through the IRnetTM program established by the World

Council of Credit Unions to provide safe and affordable remittances

to those within their field of membership. This service offered by

credit unions will provide many within the immigrant community

an introduction into the financial industry in the United States,

with the hope they will become active participants in the credit

union system.

I have also seen the results of the outreach programs conducted

by NCUA, as well as the State and national trade organizations,

to present to the credit union participants opportunities available

to credit unions to further expand their outreach to all segments

of the population. Credit unions have responded to these programs

by partnering with community development organizations and committing funds for low- and moderate-income loan programs. A recent example is the commitment—in excess of $110 million—by

several of the largest credit unions in New York to provide mortgage funding to minority and low- and moderate-income individuals.

I strongly believe that credit unions must continue these community outreach efforts.

Q.3.a. Since the passage of the 1998 Credit Union Membership Access Act, credit union fields of membership have been expanding

significantly, in large part through the expansion of the requirement for credit unions to serve members who have a ‘‘common

bond’’ or ‘‘community bond.’’ As credit unions serve increasingly

large geographic areas, questions have been raised about the extent to which they are distinguishable from traditional banks.

Under the Federal Credit Union Act, the credit union system was

established ‘‘to make more available to people of small means credit for provident purposes through a national system of cooperative

credit.’’ Credit unions have been given favorable regulatory treatment for that purpose. As credit unions behave more and more like

traditional banks, why should they continue to be regulated differently?

A.3.a. Credit unions are held to almost all of the same regulatory

requirements as other federally insured depository institutions

while remaining restricted in the loan rates they may charge, the

individuals they may serve and the manner by which they raise

capital. Credit unions continue to maintain their cooperative structure where members retain their democratic principles of one person one vote and the Federal credit unions’ boards of directors

remain volunteer member representatives. Credit unions continue

to offer the financial services their members have come to expect,

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while adopting the innovations of service delivery now available

through improved technology in an increasingly competitive financial services marketplace.

With the continual changes of financial services and products occurring in the financial industry, credit unions have remained an

affordable alternative to other financial institutions.

Q.3.b. What are your views on membership expansion of the common bond requirement and the implication for credit unions and

their competitors?

A.3.b. Membership expansion into underserved areas has provided

credit unions an opportunity to retain their occupational field of

membership while affording them the ability to expand into underserved community areas determined by the Department of the

Treasury. Prior to the Credit Union Membership Access Act in

1998 this ability was not statutorily authorized. I understand that

over 620 Federal credit unions have availed themselves of this expansion authority.

The ability of credit union members to change their type of field

of membership maintains the viability of the credit union system,

diversifies risk, and allows credit unions to effectively deal with

any adverse impact on occupation-based credit union may encounter due to economic challenges faced by the credit union’s sponsoring organization or business.

The growth of credit unions does not appear to have impacted

other institutions within the mainstream financial industry. I understand federally insured credit unions account for less than 7

percent of the federally insured deposits within the United States.

With record profits being reported in the banking industry, credit

unions do not appear to have adversely impacted these institutions.

As credit unions further increase their service in underserved

areas, I expect that the alternative lending services, such as check

cashers and payday lenders, may be challenged to provide less costly services which will benefit consumers.

Q.4. There have been a number of proposals to allow credit unions

to perform an increasing amount of member business lending, getting credit unions more involved in the traditional business of commercial banks.

Arguments have been made that the more credit unions move

into the areas of traditional commercial banks and offer a wider variety of services such as business lending, the more they should be

regulated like traditional banks. Do you believe that the expansion

of member business lending has implications on the distinction between credit unions and banks and the types of services they provide?

A.4. No, I do not. Credit unions have been involved in member

business lending since the beginning of the last century. In New

York, credit unions have been the primary provider of loans to purchase New York City taxi medallions since the 1920’s. Many credit

unions in the Midwest were formed as agricultural lenders, providing funding for the seeds and farm implements.

Credit unions have generally been the first source of capital for

sole proprietor and small business owners in obtaining equipment

and vehicles for their business. This lending has assisted individVerDate 11-MAY-2000 17:49 May 18, 2006 Jkt 025856 PO 00000 Frm 00081 Fmt 6602 Sfmt 6602 27371.TXT SBANK4 PsN: SBANK4
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uals whose lending needs may not have been deemed large enough

for commercial lenders.

The cooperative structure of credit unions remains constant, with

members determining the services and products credit unions provide, including member business loans.

Q.5.a. Some banks and other financial institutions are providing

their customers with a service that is being referred to as ‘‘bounce

protection’’ or ‘‘courtesy pay.’’ This is a service that covers drafts

that would otherwise have bounced, so that when a consumer overdrafts his or her account by writing a check, or using a debit or

ATM card, the financial institution will pay to cover the overdraft.

Often substantial fees are then charged when the service is activated. This differs from standard overdraft protection, which draws

funds from a customer’s savings account or other credit line to

cover an overdrawn check.

In addition, unlike overdraft protection, which consumers generally must sign up for, bounce protection is often offered automatically, so the member may not even be aware that they have this

service. I am concerned about reports of aggressive marketing tactics that lead consumers to overdraw their checking accounts and

use ATM’s to withdraw more cash than they have available. Do you

believe that bounce protection is a practice in which credit unions

should be engaging?

A.5.a. Credit union products and services are member driven. To

the extent that credit union members ask and want this service

from their credit unions, credit unions should be providing it.

Q.5.b. If so, what should the NCUA do to ensure that bounce protection is offered in a manner so that it provides a valuable service

to members, rather than encouraging irresponsible behavior?

A.5.b. I understand NCUA has joined most of the other FIRREA

agencies in issuing a ‘‘best practices’’ paper on the implementation

of this type of program. I believe it important that clear disclosure

is provided to members relating to these types of programs. If confirmed I will assess the guidance provided by the NCUA to credit

unions and determine whether additional guidance or regulation is

warranted.

Q.6. The GAO has suggested that there is limited follow-up to determine whether credit unions, after having been chartered, are

successfully serving their fields of membership. The GAO reported

that ‘‘[w]hile NCUA has stated its commitment to ensuring that

credit unions provide financial services to all segments of society,

NCUA has not developed indicators to determine if credit union

services have reached the underserved.’’ (GAO Report, ‘‘Financial

Conditions Has Improved, but Opportunities Exist to Enhance

Oversight and Share Insurance Management,’’ October 2003.) What

do you believe that the NCUA should be doing to ensure that credit

union services are successfully reaching the underserved?

A.6. If confirmed I will review what the NCUA has done to address

the findings in the GAO report mentioned and determine whether

additional data collection and reporting is necessary. This may also

include regular follow-ups with credit unions that received community charters or added underserved communities to their fields of

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membership to document the challenges and successes of their

plans to serve the underserved.

In addition, I have received information from the NCUA which

provided me the average and median share and loan balances of all

credit unions based on recent financial call report information.

These balances compared very favorably to those 1,000 credit

unions that are designated low income.

To obtain this designation, these low-income designated credit

unions demonstrated to the NCUA that they served a membership

with more than 50 percent of the members being at or below 80

percent of the national median household income.

Q.7. The Senate Banking Committee has been concerned about the

level of noncompliance by financial institutions with necessary

anti-money laundering and counter-terrorist financing measures.

One important response was the issuance by the Federal Financial

Institutions Examination Council of interagency anti-money laundering examination guidelines. Can you assure us that NCUA will

fully adhere to those guidelines with respect to the institutions it

supervises?

A.7. Yes. As SVP, General Counsel of Empire Corporate FCU, one

of my key responsibilities is to ensure compliance with the Bank

Secrecy Act and other anti-money laundering measures. If confirmed I will ensure NCUA maintains its commitments to the

FFIEC and FinCEN, the primary enforcement agency, and will review the examination guidelines developed by the agency to address the anti-money laundering and counter-terrorist financing

measures.

RESPONSE TO WRITTEN QUESTIONS OF SENATOR ALLARD

FROM CHRISTIANE GIGI HYLAND

Q.1. Do you believe it can be appropriate for a credit union to offer

loans to a member when that applicant has impaired credit?

A.1. Credit unions have been in the forefront in offering loans to

members who have found themselves in financial difficulties, with

loan consolidations being a historic part of the credit unions’ loan

portfolio. In assessing the loan applications from members, credit

unions have practiced the three ‘‘C’’s of underwriting when determining the approval of a loan; that being character of the member,

capability to repay, and collateral offered. When offering loans to

members who have found themselves in financial difficulty credit

unions need to ensure they are continuing to practice their due diligence when acting on loans while following their historic precepts.

Q.2. Do you believe it can be appropriate for a credit union to hire

a vendor to perform lending activities such as loan origination and

servicing, and to what degree should they be monitored?

A.2. Credit unions have long utilized third-party vendors for operational activities. This has allowed credit unions to provide services

their members want and need while containing costs. However, I

believe that these activities need to be effectively monitored by the

credit union’s officials and staff who are ultimately responsible for

the safety and soundness of the credit union. I believe it is critical

the officials thoroughly understand the program and any potential

risk, and then establish clear oversight responsibilities to ensure

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the activity is providing the expected results in a safe and sound

manner.

Q.3. As an incoming NCUA board member, you will benefit from

an executive staff with significant experience. To what extent do

you see yourself involved in setting NCUA policy? To what extent

do you see yourself involved in the day-to-day management of the

NCUA?

A.3. As stated in statute, it is the Board’s responsibility to establish sound policy and procedures for the credit union system and

then ensure the staff of the NCUA implements the established policies. I believe it important that the NCUA Board establish clear

oversight and monitoring over the operations of the NCUA. As I

have seen in credit unions, it is important that staff understand

their roles and are held accountable without micromanagement

from the policymakers.

Q.4. As a new NCUA board member, will you consider ongoing

compliance actions to be your responsibility, or will you engage

only in matters raised after your confirmation?

A.4. If confirmed, I plan on delving into all current and pending

activities of the NCUA. There is ongoing focus on BSA, anti-money

laundering, fair lending, and other compliance issues that the credit union system is challenged with. I will ensure each is assessed

and the Agency continues to pursue its objective of ensuring the

continued safe and sound operations of the credit union system.

RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES

FROM RODNEY E. HOOD

(1).

Budget

Providing resources to achieve mission objectives, particularly

the safety and soundness of credit unions is, in my view, a critical

responsibility of the NCUA Board. Based on discussions with

NCUA staff, it is their belief that the proposed NCUA 2006 budget

they will present to the Board in November is appropriate for its

mission requirements. However, I have not had an opportunity to

fully assess the budget submission in relation to the defined mission objectives and any contingencies that may arise. If confirmed,

that will be one of my first, and continuing, priorities as a Board

Member.

While NCUA staffing levels will be at their lowest in 10 years,

it should be noted that the number of Federally insured credit

unions has decreased from 10,500 in 1995 to 8,800 in 2005. Additionally, during 2003 NCUA restructured its central and regional

operations that allowed for greater staffing efficiencies and other

savings. In my review of the proposed budget, I will work to ensure

that NCUA’s operations are not compromised by inadequate budget

and staffing resources. It is crucial that the strong financial reputation now enjoyed by credit unions be maintained. Critical to avoiding reputation and systemic risks is well trained and motivated examiner and support staff properly equipped to perform their jobs.

It will be my direction and guidance that the current staffing level

must achieve this standard, with an emphasis on ensuring the

safety and soundness of credit unions in a changing environment.

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In addition, the agency’s resources must allow it to take into consideration future events, such as the increasing complexity of credit

unions, asset growth, new regulatory requirements such as Bank

Secrecy Act, and other emerging areas such as indirect lending and

member business loans.

(2).

GAO Report

Having worked in the community development arena for almost

17 years, I believe that credit unions can increase their outreach

to their local communities by providing financial education seminars, creating strategic partnerships, and leveraging the resources

of the Federal Government.

At Wells Fargo, I managed our bank’s financial education partnership with the American Library Association where we were able

to provide homebuyer education and credit repair workshops in

public libraries located in low-to-moderate income census tracts. By

working with the American Library Association, Wells Fargo was

given free space to educate its current and prospective customers

in the comfort of the local library. Credit Unions should consider

partnering with the American Library Association to create a similar partnership to provide financial education and outreach.

In addition to providing financial education, I believe that it is

important that credit unions create partnerships with results-oriented nonprofit organizations. Partnering with community stakeholders such as the Neighborhood Reinvestment Corporation,

Neighborhood Housing Service, National Council of La Raza, Local

Initiatives Support Corporation, National Urban League, and Operation Hope, credit unions can create community development loan

programs and loan consortia using the experiences and best practices of some of the country’s preeminent practitioners in community development. In my previous positions at Bank of America and

Wells Fargo, I found that our partnerships with some of the aforementioned groups provided us with great tools for identifying, assessing, and meeting the credit needs of underserved communities.

I am aware NCUA and credit unions already partner with some of

these groups and support continuing these efforts.

In my role as Associate Administrator at USDA, I spend a great

deal of time meeting with financial service providers to inform

them about our Guaranteed Rural Housing (GRH) loan product.

Lender-approved loans to low-income borrowers can receive a

USDA loan guarantee up to 90 percent of the loan amount. The

GRH portfolio has 180,000 loans with an aggregate loan amount of

$13 billion dollars. While there are 2,400 lenders using our GRH

product, fewer than 100 credit unions have a relationship with

USDA. I would like to see more credit unions use USDA’s product

to meet the homeownership needs of its low-income members and

to further meet safety and soundness requirements. Because GRH

loans insured by the Federal Government, participating credit

unions do not have to allocate risks to the guarantee loan portion.

By using the GRH product, credit unions will be able to leverage

their loan portfolio by offering a higher number of loans to low-income borrowers. In addition to USDA, the SBA and HUD also offer

loan guarantees for affordable housing and small business lending.

All of these Federal guarantees should be used by credit unions beVerDate 11-MAY-2000 17:49 May 18, 2006 Jkt 025856 PO 00000 Frm 00085 Fmt 6602 Sfmt 6602 27371.TXT SBANK4 PsN: SBANK4
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cause these programs create win-win situations—both for the consumer and the credit union.

If confirmed, I understand that in my capacity as a NCUA Board

Member, I will be asked to speak at a large number of credit union

events—seminars, symposia, workshops, etc. I will look forward to

using upcoming speaking opportunities to provide credit unions

with information about financial education, strategic partnerships,

and Federal Government loan guarantees as important ways they

can fulfill their mission.

(3) (a) Should Credit Unions be Regulated Differently

Since their inception in the 1900’s, credit unions have provided

financial products to meet the needs of their membership. Designed

as tax-exempt, democratically controlled, and later as Federally insured entities, credit unions still operate under the same charter

and remain critical in meeting the financial needs of low-to-moderate income individuals. They assist families in achieving the

American dream of homeowners hip, entrepreneurs in creating viable, small businesses, and provide the trusted mechanisms for families to save for the future.

While credit unions now offer a greater selection of financial

products, they do so not to compete with banks, but to serve the

evolving needs of their membership. Credit unions of today are, in

my opinion, no different than they were yesterday. Today’s consumers value one-shop stops for obtaining credit cards, mortgages,

checking accounts, savings accounts, and equity loans. Given my

commitment to ensuring safety and soundness, I also believe that

with product diversification comes less concentration of risks for

the credit unions.

Unlike traditional banks, credit unions operate in an environment where they cannot provide financial services to individuals

outside their field of membership. Banks are not restricted in defining their customer base. In addition, banks have a plethora of options for raising capital. While stock-issuance is the method most

often preferred, they, unlike credit unions, do not have to rely solely on retained earnings for meeting its capital needs. Given the

profound differences that exist between credit unions and banks, I

believe that credit unions should continue to operate based on their

traditional statutory role.

(3)(b) Membership Expansion of Credit Unions

I will look forward to examining the membership expansion

trend that is taking place in the credit unions industry. It is my

understanding that the current trend in credit union membership

expansion stems from expansions to incorporate underserved communities and some conversions of credit unions serving occupational and associational common bonds to community charters.

Given my track record in working to serve underserved communities, I will take a close look at the new expansions and monitor

the results to see if credit unions are continuing to reach a greater

penetration of low-to-moderate income individuals. This can be

tracked through call reports, HMDA analysis, and through mere

observation of average loan, mortgage, and savings & share draft

account balances.

(4). Member Business Lending

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I believe that credit unions should have the flexibility and ability

to meet the needs of their members. Unlike traditional banks that

have no business lending penetration caps, it is my understanding

that credit unions have a 12.25 percent (of capital base) member

business lending cap. While there are a handful of larger credit

unions engaged in large business transactions, they are doing so

based on the current regulatory mandates.

As a trained commercial loan officer, I recognize that complex

member business loan transactions require special underwriting

and loan servicing expertise. Because it is my paramount responsibility to ensure that credit unions remain safe and sound institutions, I, as a regulator, will set clear expectations that credit

unions engaged in member business lending have well-trained,

competent staff involved in atypical member business loan transactions.

In addition, I will work to ensure that credit unions participate

in the SBA’s guaranteed loan program. This will further allow the

credit unions to engage in member business lending while adhering

to the principles of safety and soundness.

(5) (a) Bounce Protection

If clearly described and articulated to credit union members,

Bounce Protection can be a benefit that provides credit unions with

a vehicle for adding to its product mix. When used properly,

Bounce Protection should save individuals from the embarrassment

one would experience if a check to a local merchant, school, or grocery store bounced. While it was designed as a convenience, I am

concerned that many credit union members, especially the low-income members, have not fully understood the fee structure of using

the product. I will review this issue with a goal on ensuring reasonable disclosures to fully protect credit union members. I will also

work to develop procedures to determine the extent to which credit

unions are conforming to published guidance on this issue.

(5) (b) Bounce Protection

As a regulator, I would propose that credit unions playa more

visible and active role in providing disclosures that clearly discuss

Bounce Protection and its fee structures. I would also suggest that

our examiners look closely at credit unions using Bounce Protection

products. I understand that in February 2005, the NCUA, jointly

with the Board of Governors of the Federal Reserve System, the

Federal Deposit Insurance Corporation, and the Office of the

Comptroller of the Currency issued joint guidance to assist insured

depository institutions in the disclosure and administration of overdraft protection programs. I would be willing to work with the Senate Banking Committee and my counterparts at other regulatory

agencies to ascertain further best practices and/or ideas that

should be shared with our examiners in providing them with a tool

for gauging proper use of the products. Once creating an assessment tool, I would then suggest that NCUA take corrective action

against any credit union that does not clearly disclose and market

the products.

(6) How to Ensure Credit Unions Reach the Underserved

Having served as a CRA officer, I recognize the importance of assessing and measuring a financial institution’s community development penetration. It is my understanding that NCUA receives

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quarterly call reports and from information contained in them can

review how credit unions are serving their members, including the

underserved. For other quantifiable methods to assess community

development impact in underserved communities, I would propose

that HMDA data and other available data be examined to assess

mortgage lending to minorities and low-to-moderate income individuals. Other suggestions would include examining credit unions’

average loan, checking & savings account, and credit card balances

over 3,5, and 7 year time periods to look for trends by income segment. One would expect average loan sizes and balances to decrease as credit unions attract additional low-to-moderate income

members.

As mentioned in my Senate testimony, I want to be a regulator

who is cognizant of the impact of arduous regulations. To that end,

it will be my desire to create assessment tools that do not materially detract from the credit union’s core mission of providing affordable financial products to its membership. I will be delighted to

work with the Senate Banking Committee to further explore additional community development assessment techniques that can

NCUA can consider.

(7) Money Laundering and Bank Secrecy Act

As a regulator, I will go beyond the call of duty in assuring the

Senate Banking Committee that Federally insured credit unions

are in compliance with the Bank Secrecy Act. I will make sure that

our regulators recognize that this is extremely important for both

the safety and soundness of credit unions and of the United States.

9/111eft an indelible mark in my life, as it did for many of us.

Every effort should be made to prevent future attacks, and this is

clearly one regulatory act that makes America safer.

RESPONSE TO WRITTEN QUESTIONS OF SENATOR ALLARD

FROM RODNEY E. HOOD

Q.1. Do you believe it can be appropriate for a credit union to offer

loans to a member when that applicant has impaired credit?

A.1. Yes, there are some circumstances where it is appropriate for

individuals with impaired credit to have access to credit. As a regulator, the safety and soundness of credit unions would be of paramount importance. In my view, however, credit unions can offer

loans to members with impaired credit in combination with promoting financial education, offering risk-based pricing, and employing certain guaranteed loan products.

Great strides are being made now to assist people with impaired

credit. In today’s environment, financial education has helped borrowers understand the importance of managing their credit wisely.

More informed borrowers can handle credit in more reasonable

manners. At Wells Fargo, I managed a financial education partnership with the American Library Association where we provided

homebuyer education and credit repair workshops in public libraries. In my previous positions in both Wells Fargo and Bank of

America, we offered risked-based pricing to compensate the banks

for the risk of lending to impaired borrowers. As the borrowers continued to pay off their loans, the banks were able to lower interest

rates and reward the customers for financial responsibility. In addition to offering risk-based pricing, I would encourage credit

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unions to offer guaranteed loan products from USDA and HUD to

underserved borrowers.

Q.2. Do you believe it can be appropriate for a credit union to hire

a vendor to perform lending activities such as loan origination and

servicing, and to what degree should they be monitored?

A.2. Yes, hiring a vendor to perform lending-related activities can

be a way for credit unions to serve members more effectively. The

vendor may bring expertise or economies of scale that the credit

union lacks. Due diligence and ongoing monitoring are very important, however. For example, outsourcing brings increased risk to

the credit union, including reputation, compliance, credit, and

transaction risk. I am aware that NCUA does not have vendor

exam authority and the need for this is an issue that I would review if confirmed as an NCUA board member. I would also review

whether there should be regulatory limits on the concentration of

third party loan origination or servicing per credit union.

Q.3. As an incoming NCUA board member, you will benefit from

an executive staff with significant experience. To what extent do

you see yourself involved in setting NCUA policy? To what extent

do you see yourself involved in the day-to-day management of the

NCUA?

A.3. As a President-appointed and Senate-confirmed member of a

three-member board, our responsibility is to set policy for NCUA.

If confirmed as NCUA board member, I will delegate day-to-day activities to competent staff but policy decisions firmly rest with

NCUA board members. In doing so, I will work with the excellent,

experienced staff and executive leadership to achieve effective and

efficient uses of agency resources.

Q.4. As a new NCUA board member, will you consider ongoing

compliance actions to be your responsibility, or will you engage

only in matters raised after your confirmation?

A.4. As a new NCUA board member, I will consider ensuring the

safety and soundness of federally insured credit unions to be an ongoing activity. It is the focus both now and in the future and has

been since 1934, when the Federal Credit Union Act was signed

authorizing the formation of federally chartered credit unions in

the United States.