U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

80–698 PDF 2013

S. HRG. 113–13 

NOMINATIONS OF: RICHARD CORDRAY AND 

MARY JO WHITE 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

ON 

NOMINATIONS OF: 

RICHARD CORDRAY, OF OHIO, TO BE DIRECTOR OF THE BUREAU OF CONSUMER

FINANCIAL PROTECTION

MARY JO WHITE, OF NEW YORK, TO BE A MEMBER OF THE SECURITIES AND

EXCHANGE COMMISSION

MARCH 12, 2013 

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

( 

Available at: http://www.fdsys.gov/ 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

TIM JOHNSON, South Dakota, Chairman 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

ROBERT MENENDEZ, New Jersey 

SHERROD BROWN, Ohio 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

KAY HAGAN, North Carolina 

JOE MANCHIN III, West Virginia 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

MIKE CRAPO, Idaho 

RICHARD C. SHELBY, Alabama 

BOB CORKER, Tennessee 

DAVID VITTER, Louisiana 

MIKE JOHANNS, Nebraska 

PATRICK J. TOOMEY, Pennsylvania 

MARK KIRK, Illinois 

JERRY MORAN, Kansas 

TOM COBURN, Oklahoma 

DEAN HELLER, Nevada 

CHARLES YI, Staff Director 

GREGG RICHARD, Republican Staff Director 

LAURA SWANSON, Deputy Staff Director 

GLEN SEARS, Deputy Policy Director 

CATHERINE GALICIA, Counsel 

GREG DEAN, Republican Chief Counsel 

MIKE PIWOWAR, Republican Chief Economist 

DAWN RATLIFF, Chief Clerk 

RIKER VERMILYE, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

(II)

(III) 

C O N T E N T S 

TUESDAY, MARCH 12, 2013 

Page 

Opening statement of Chairman Johnson ............................................................. 1 

Opening statements, comments, or prepared statements of: 

Senator Crapo ................................................................................................... 2 

NOMINEES 

Richard Cordray, of Ohio, to be Director of the Bureau of Consumer Financial 

Protection .............................................................................................................. 7 

Prepared statement .......................................................................................... 37 

Biographical sketch of nominee ....................................................................... 40 

Responses to written questions of: 

Senator Crapo ............................................................................................ 69 

Senator Menendez ..................................................................................... 73 

Senator Vitter ............................................................................................ 78 

Senator Johanns ........................................................................................ 81 

Senator Kirk .............................................................................................. 83 

Senator Moran ........................................................................................... 113 

Senator Coburn ......................................................................................... 114 

Mary Jo White, of New York, to be a Member of the Securities and Exchange 

Commission ........................................................................................................... 8 

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

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

Responses to written questions of: 

Chairman Johnson and Senator Crapo ................................................... 132 

Senator Crapo ............................................................................................ 132 

Senator Reed .............................................................................................. 137 

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

Senator Brown ........................................................................................... 141 

Senator Warner ......................................................................................... 151 

Senator Hagan ........................................................................................... 151 

Senator Warren ......................................................................................... 153 

Senator Vitter ............................................................................................ 162 

Senator Johanns ........................................................................................ 165 

Senator Toomey ......................................................................................... 165 

Senator Moran ........................................................................................... 169 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

Letter submitted by Representative Steve Stivers of Ohio .................................. 171 

(1) 

NOMINATIONS OF: 

RICHARD CORDRAY, OF OHIO, 

TO BE DIRECTOR, 

BUREAU OF CONSUMER FINANCIAL PROTECTION; 

MARY JO WHITE, OF NEW YORK, 

TO BE A MEMBER, 

SECURITIES AND EXCHANGE COMMISSION 

TUESDAY, MARCH 12, 2013 

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

The Committee met at 10:04 a.m., in room SD–538, Dirksen Senate Office Building, Hon. Tim Johnson, Chairman of the Committee, presiding. 

OPENING STATEMENT OF CHAIRMAN TIM JOHNSON 

Chairman JOHNSON. I call this hearing to order. 

Today we consider the President’s nominees to head the CFPB 

and the SEC. In response to the financial crisis, the Wall Street 

Reform Act charged these two agencies with leading roles in restoring consumer and investor confidence in our financial system. 

Richard Cordray has been nominated to lead the CFPB and has 

served as Director since January 2012. Prior to that, Director 

Cordray was Chief of Enforcement at the CFPB. He has a long history of public service, including serving as Ohio’s attorney general, 

State treasurer, State representative, and Solicitor General. We 

will hear more about Director Cordray when Senator Brown introduces him. 

Since his first confirmation hearing in September 2011, Director 

Cordray has appeared before this Committee more than any other 

financial regulator. During that time, he has proved to be a strong 

leader of the CFPB. He has completed many of the rules required 

by Wall Street reform, including a well-received final QM rule. He 

listens and has crafted strong rules that take into account all sides 

of an issue. He has laid the groundwork for nonbank regulation. He 

has brought to light the financial challenges faced by students, elderly Americans, servicemembers, and their families. He has taken 

important enforcement actions against banks that took advantage 

of customers. So I ask what more can Richard Cordray do to deserve an up-or-down vote? I hope we can move forward with Richard Cordray’s confirmation. 

2 

Mary Jo White has been nominated to be a member of the SEC 

and will be formally introduced by Senator Schumer. As Members 

of this Committee have begun to get to know her in the past few 

weeks, it is clear Ms. White has an impressive resume. As the U.S. 

Attorney for the Southern District of New York, she was tough and 

respected. As a lawyer at Debevoise, she has an understanding of 

the complex issues facing the financial system. 

This is a critical time in the SEC’s history as it works on a range 

of rules and policy issues. These include the Volcker Rule, derivatives, credit rating agencies, hedge funds, standards for brokerdealers and investment advisers, corporate disclosures, market 

structure, the JOBS Act, and money market funds, just to name a 

few. Wall Street reform increased the SEC’s duties to better protect 

investors and oversee the market, but Congress has not increased 

the Commission’s budget enough to keep up. I look forward to 

learning more from Ms. White on how she will approach these challenging issues. 

As we mark the 5-year anniversary of Bear Stearns’ failure this 

month, we are reminded why we need strong cops on the beat enforcing our investor and consumer protection laws. I am pleased 

that the President has nominated Mary Jo White to lead the SEC 

and Richard Cordray to continue leading the CFPB. Both are wellqualified, thoughtful leaders who bring law enforcement experience 

to the job. As such, I hope we can move these nominees through 

the Committee in a timely manner. 

I now turn to Ranking Member Crapo for his opening statement. 

STATEMENT OF SENATOR MIKE CRAPO 

Senator CRAPO. Thank you, Mr. Chairman. I appreciate your 

holding today’s hearing on the nominations to lead the Securities 

and Exchange Commission and the Consumer Financial Protection 

Bureau. Both agencies are highly visible, complex, and were given 

very broad jurisdiction by Congress to act in their areas of expertise. In addition, each agency expends hundreds of millions of dollars every year to fulfill their respective missions. 

Mr. Cordray appeared before us last year at his nomination hearing, so we have already had a chance to get to know him. And Ms. 

White has extensive experience in our financial markets, both as 

a highly regarded U.S. Attorney in New York and as a securities 

law practitioner. I look forward to hearing from both nominees. 

Both the SEC and the CFPB were created after significant 

downturns in the financial markets. Nearly 80 years ago, Congress 

established the SEC to restore investor confidence in our capital 

markets and to ensure orderly markets for stock trading and investing. 

The CFPB was established more recently as a part of the DoddFrank Act and is intended to sweep all the consumer disclosure 

laws into one entity while leaving core prudential banking regulation with the other respective banking regulators. However, the 

SEC and the CFPB are administered in quite different ways. 

When established in 1934, Congress decided to create the Securities and Exchange Commission based upon the structure of corporate lords. Congress set forth that the SEC would be comprised 

of five Commissioners. Each Commissioner would be selected for a 

3 

5-year term and no more than three Commissioners from any one 

party. 

Around this same time, Congress also established the Federal 

Deposit Insurance Corporation. Again, Congress established the 

FDIC with a board structure. 

Both the SEC and the FDIC have survived nearly 80 years, and 

the board structure has provided sufficient transparency and openness so that Congress and the general public have a very good understanding of each agency’s mission and operation. 

Unfortunately, the CFPB lacks this transparency and openness 

regarding its operations, budget, and intended activities, its intended mission. The Dodd-Frank Act specifically elevated the Director of the CFPB so that he or she holds unique power to determine the agency’s budget and mission priorities without any public 

debate or input from Congress. 

For example, in fiscal year 2012, the CFPB spent more than $150 million on contracts and support services, which is more than 

the agency spent on employees. This is nearly half of the money 

that the CFPB received from the Federal Reserve last year. There 

is no public accounting on how these monies on contracts and support services are being spent. 

To alleviate these and other concerns, I believe that the structural changes to the CFPB that we have recommended are essential. Moving from a single Director to a board format is one of the 

important steps that will bring about the transparency and openness that now exists with the SEC. 

In addition, the agency needs to be put on the Federal appropriations process so that Congress knows how the monies are being 

spent, especially on items such as contracts and outside services. 

And, finally, the prudential regulators need to have more than 

just informal input into the CFPB’s policy and rulemaking decisions. 

With regard to the President’s recess appointment to the CFPB 

last year, my opinion has not changed. I continue to believe that 

the recess appointment was unconstitutional. The recent court case 

involving the National Labor Relations Board found that those recess board appointments violated the Constitution. Since the CFPB 

recess appointment was made on the same day, to me the same result should apply. 

Recently, members of the Republican Caucus sent a letter to the 

President objecting to the confirmation of the head of the CFPB unless these structural changes are made to the agency. Structural 

and other changes to the agency are, I believe, areas where we can 

work together to improve the operation of the CFPB and to improve accountability. 

Mr. Chairman, I look forward to hearing from Ms. White and Mr. 

Cordray on their qualifications to head the SEC and the CFPB, 

and, again, I appreciate the chance to work with you on these 

nominations. 

Chairman JOHNSON. Thank you, Senator Crapo. 

Does anyone else wish to make a short opening statement before 

we turn to the nominees for their testimony? 

Senator SCHUMER. Mr. Chairman. 

Chairman JOHNSON. Please withhold. 

4 

We will now proceed to witness introductions. Senator Schumer 

will now introduce Ms. White. Senator Schumer. 

Senator SCHUMER. Thank you, Mr. Chairman, and thank you 

and Senator Crapo for holding this hearing so quickly. It is my 

great privilege to introduce Mary Jo White, the nominee to be the 

next Chairman of the SEC. 

Mary Jo was not born in New York but, like millions of others 

through the years, found her way to New York, found in New York 

her hopes, her dreams, and a place to call home. 

Ms. White’s long and distinguished career as a public servant 

and as one of the most well respected and hardest working lawyers 

in the country leaves no doubt that she is well qualified to undertake the task that awaits the next Chairman of the SEC. She is 

competent and dedicated, tough and fair. 

From 1993 to 2002, she served as the U.S. Attorney for the 

Southern District of New York. She remains the only woman to 

have held that position in the 200-plus-year history that the office 

has existed. Prior to becoming U.S. Attorney for the Southern District, she served as the First Assistant U.S. Attorney and Acting 

U.S. Attorney in the Eastern District of New York from 1990 to 

1993. She famously put ‘‘The Teflon Don,’’ John Gotti, behind bars 

and prosecuted the terrorists responsible for the 1993 World Trade 

Center bombing, including Ramzi Yousef and the ‘‘Blind Sheik,’’ 

Omar Abdel Rahman. 

Her case against the Trade Center terrorists bears special mention because it shows her creativity and determination as a lawyer. 

She dusted off a Civil War era seditious conspiracy statute to prosecute the case, a move considered risky at the time but that ultimately proved successful. 

She also prosecuted numerous white-collar crimes, including insider trading and securities fraud cases, establishing a track record 

that leaves no doubt she will vigorously pursue the SEC’s enforcement agenda. 

She has also had a long and distinguished career in the private 

sector where she earned her reputation as one of the hardest working and most well respected attorneys in the country. She won a 

litany of awards from a diverse group of institutions. I will just 

name a few. In addition to the George W. Bush Award for Excellence in Counterterrorism and the Agency Seal Medallion given by 

the CIA, she also received the Woman of Power and Influence 

Award given by the National Organization of Women and the Sandra Day O’Connor Award for Distinction in Public Service. 

Now, Mr. Chairman, most of the attention on her personality is 

focused on her toughness and her aggressiveness, and with good 

reason. She apparently indulged a fondness for motorcycle riding 

and, despite her physical stature, was a fierce competitor in the 

women’s basketball league in New York. The same toughness she 

showed playing basketball she will show as SEC Chair. She will 

score many points and not commit too many fouls. 

And if anyone—if anyone—questions her loyalty or patriotism, I 

am told that on those rare occasions when she does relax and takes 

a break from putting terrorists in jail, she likes to crack open a 

cold Bud. 

5 

But she has a warm and fuzzy side, too. In 2011, she was elected 

Chair of the ASPCA, the American Society for the Prevention of 

Cruelty to Animals. 

So all accomplishments and accolades aside, the moment of truth 

for me came when I discovered that, despite being born in Kansas 

City and raised in Virginia, she was a diehard Yankees fan. I hope 

that will not deter the Senator from Ohio in his deliberations. I 

know he hates the Yankees. What is your Web site? OK, some antiYankee thing is his call name. 

Anyway, I am confident she will leave an indelible mark on the 

SEC and will continue the task of restoring the public’s trust in the 

agency by challenging the agency to live up to her own standard 

of excellence, a standard unmatched by almost any nominee who 

has come before this Committee during my time here. 

U.S. capital markets have been and remain the envy of the 

world. A huge reason why is the reputation the SEC has established over the decades for robust investor protection. Over the last 

dozen years, the reputation has taken some hits: Enron, 

WorldCom, and, of course, Bernie Madoff and the 2008 financial 

crisis. But Mary Jo is the right person at the right time to build 

on the efforts of her immediate predecessors and re-establish the 

SEC as the premier securities regulator in the world. 

I wholeheartedly support Ms. White’s nomination to be the next 

Chairman of the SEC, and I am confident that after an appropriately thorough vetting process my colleagues will as well. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you, Senator Schumer. 

Senator Brown will introduce Mr. Cordray. Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. And my understanding is that Rich Cordray loves dogs and cats, too. 

[Laughter.] 

Senator BROWN. We all do. 

Senator SCHUMER. What about the Yankees? 

Senator BROWN. I could show you our dog, Franklin, who we 

named after Franklin Roosevelt, and my daughter commented after 

we got this dog that I finally got the son I always wanted. But I 

will leave that alone. Thank you, Chuck, Chuck you noticed also 

got Iowa and Ohio mixed up, which happens far too often in this 

institution, and Idaho, Ranking Member Crapo. So thank you, 

Chuck. 

Mr. Chairman, thank you, and Ranking Member Crapo, thank 

you for holding this hearing and moving quickly on this. September 

2011 was a previous confirmation hearing on this same nominee 

and this same Bureau. It was my privilege to introduce Rich 

Cordray and introduce Peggy, and joined here by their twins, 

Danny and Holly, who are a year and a half bigger, so good to see 

them here today. 

I have known Rich Cordray for 20-plus years. His parents served 

as strong advocates for people with developmental disabilities. He 

was raised to advocate on behalf of people who were too often 

pushed to the margins of our society. And during his service as 

Ohio State treasurer—he had been a county treasurer; he had 

clerked for U.S. Supreme Court Justice Kennedy. And during his 

6 

time as the State treasurer and later attorney general in Ohio, he 

fought for Ohioans who struggled to stay in their homes. 

He remains the right person to head the Consumer Financial 

Protection Bureau. Under his leadership, CFPB helped 

servicemembers and veterans and military families understand 

their benefits. He has helped students plan for their futures and 

has helped baby boomers plan for retirement. 

He has had a role, a major role in refunding some $425 million 

to consumers who were victims of fraudulent financial practices, 

and CFPB has handled more than 130,000 complaints from consumers in all of our States. 

Mr. Chairman, we already had our fight over the structure of the 

CFPB. A bipartisan majority in the Senate created the CFPB in 

2010 to help ensure that Americans have access to safe and transparent financial products and services, including credit cards and 

loans. But in the U.S. Senate, a vocal minority is pledging to hold 

up the appointment of a qualified nominee. No one I have heard 

says anything less about Rich Cordray’s qualifications than that he 

is superbly qualified for this job. 

The legislation created CFPB as the law of the land, but some 

here want to nullify the legislation creating our Nation’s consumer 

watchdog. 

Rich Cordray has been supported by CEOs of Ohio companies. 

He has won praise from Ohio bankers whom I have spoken with 

over the years. But for the first time in Senate history—or actually 

it is the second time because this happened with the same nominee 

and the same Bureau just over the last couple of years. And I 

asked the Senate historian about this. Senators are blocking a 

nominee because they simply do not like the agency that he will 

lead. 

For CFPB to thrive, it must have sound leadership, a leader who 

is able to work with institutions and individuals to prevent insidious schemes from wreaking havoc on our communities, on our 

families, on the citizens of this great country. Now is the time to 

consider Rich Cordray’s qualifications, not keep fighting old political battles. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you, Senator Brown. 

I would also like to take this opportunity to submit a letter from 

our colleague Congressman Stivers, who could not be here today 

but wished for his support to be known. 

We will now swear in the nominees. Will the nominees please 

rise and raise your right hand? 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. CORDRAY. I do. 

Ms. WHITE. I do. 

Chairman JOHNSON. Do you agree to appear and testify before 

any duly constituted Committee of the Senate? 

Mr. CORDRAY. I do. 

Ms. WHITE. I do. 

Chairman JOHNSON. Please be seated. 

7 

Please be assured that your written statement will be part of the 

record. I invite you to introduce your family and friends in attendance before beginning your statements. 

Mr. Cordray, please proceed. 

STATEMENT OF RICHARD CORDRAY, OF OHIO, TO BE DIRECTOR OF THE BUREAU OF CONSUMER FINANCIAL PROTECTION 

Mr. CORDRAY. Chairman Johnson, Ranking Member Crapo, and 

Members of the Committee, I am honored to be here once again as 

the nominee to serve as the Director of the Consumer Financial 

Protection Bureau. I am grateful to the President for the confidence 

he has shown in me and for giving me the opportunity to continue 

serving our country in this role. If confirmed, I pledge to continue 

to carry out and enforce the law that Congress passed to protect 

consumers and restore confidence in consumer finance markets. 

Over the past 2 years, I have come to understand how your Committee exercises great responsibility that affects the lives of all 

Americans. It is a pleasure to appear before you frequently in my 

current role, and we have seen that our relationship can be cooperative and fruitful. If confirmed, I look forward to working closely 

with you to see that the people and families whom we serve are 

treated fairly in the essential marketplace for consumer finance. 

As you had suggested, Mr. Chairman, I am glad once again to 

have my wife, Peggy, and my twins, Danny and Holly, with me 

here today. Like many of you, I commute back and forth from a 

long distance to do this work. My family has been willing to make 

real sacrifices, without complaint, because they believe in what I 

am doing to serve our country. They know how deeply I appreciate 

their steadfast support. 

From childhood, my parents taught me the value of work that 

seeks to improve the lives of others. My dad, Frank, who turned 

95 just last month, spent his entire career in programs that served 

children and adults with developmental disabilities. My mom, 

Ruth, who died of cancer when I was in college, founded the first 

foster grandparent program for the developmentally disabled in 

Ohio, in addition to doing all the many and various things that a 

mother does to raise three fairly rambunctious boys. 

My approach to the role of Director is deeply informed by their 

influence. It is also deeply informed by more than two decades in 

public service. I have served in the Ohio Legislature, as Ohio’s first 

Solicitor General, as the Franklin County Treasurer, and as State 

Treasurer. Most recently, before joining the Bureau, I was Ohio’s 

Attorney General. Out of hard lessons learned through these experiences, I developed a resolve to address the kinds of financial difficulties and challenges that confront our communities. I learned 

there is no such thing as a one-size-fits-all solution as we seek to 

aid those who want to do the right thing and, when necessary, to 

thwart those who seek to take advantage of others. And I learned 

that creative strategies to find solutions can benefit consumers and 

honest businesses, which share many common interests. 

When I became the Director of the Consumer Bureau last year, 

I resolved to do everything in my power to make the Bureau accountable to American consumers, to American businesses, and to 

8 

the Congress. Although our work is still in the early stages, we 

have been busy. In addition to supervising the country’s largest financial institutions, we have also begun to protect consumers and 

markets that previously received no Federal supervision at all. 

Consumers now have someone looking out for them as they deal 

with residential mortgages, payday loans, private student loans, 

credit reporting, and debt collection. This affects millions of people 

across this country—people who are your constituents as well as 

the consumers we seek to serve. 

At the same time, we are coming to a better understanding about 

how to use the other tools Congress provided to address the problems and challenges facing consumers. We have adopted new rules 

for the mortgage market to ensure that the excessive and irresponsible practices that helped precipitate our Nation’s financial calamity cannot be repeated. 

In the credit card market, we are implementing and overseeing 

the extensive positive changes that Congress enacted in the CARD 

Act. For consumers who have been deceived by credit card companies, we have worked closely with our fellow regulators to put $425 

million back in pockets of 6 million consumers. 

In the student loan market, we have teamed up with the Department of Education to create products like the Financial Aid Shopping Sheet. So far, we are pleased to see that 644 colleges are voluntarily adopting it. 

Perhaps the most direct example of addressing problems in the 

consumer finance markets is our consumer response function. To 

date, we have handled more than 130,000 complaints. People have 

contacted us about specific problems with consumer financial products and services, ranging from improper charges on credit cards 

to mortgage payments that were wrongly applied. These consumers 

have come to us from every State; many of those have been referred by you, and we thank you for forwarding them to us. 

Along with these initiatives, Congress directed us to focus on the 

unique problems that confront special populations of consumers. 

Assistant Director Skip Humphrey and his team have targeted the 

financial exploitation of older Americans, helping seniors get sound 

information and advice about their retirement finances. Assistant 

Director Holly Petraeus and her dedicated team have identified 

and are resolving distinctive issues that affect our servicemembers, 

veterans, and their families. 

So these are the kinds of issues that the Consumer Bureau is already addressing on behalf of 313 million Americans. Of course, 

there is much more to do in each of these points, and we are determined to continue making progress. 

Thank you, Mr. Chairman, again, and Members of the Committee, for the opportunity to be with you here today. I look forward to your questions. 

Chairman JOHNSON. Thank you. 

Ms. White, please proceed. 

STATEMENT OF MARY JO WHITE, OF NEW YORK, TO BE A 

MEMBER OF THE SECURITIES AND EXCHANGE COMMISSION 

Ms. WHITE. Thank you, Mr. Chairman, Ranking Member Crapo, 

and Members of the Committee, it is my privilege to appear before 

9 

you today as President Obama’s nominee to be the 31st Chair of 

the Securities and Exchange Commission. 

Before I begin my remarks, let me thank Senator Schumer for 

his kind introduction, and I also want to introduce my husband, 

John White, who is here today, and thank him for being here and 

for his support. Our son and his wife are law students and are attending class, so they are somewhere else today. Thank you, 

though. 

There is no higher calling, in my view, than public service. As 

the United States Attorney for the Southern District of New York 

for almost 9 years, I worked very hard on behalf of the American 

people investigating, prosecuting, and punishing those who committed crimes. From white-collar criminals to terrorists, regardless 

of the complexity of the case or the identity of the defendant, we 

always strove to do the right thing and to vigorously enforce the 

law. Today I am honored by the prospect of potentially returning 

to public service as the Chair of the SEC to help carry out its essential mission. 

While I served as United States Attorney, our office worked 

closely with the SEC prosecuting violations of the Federal securities laws by both companies and individuals. Through that experience, I became a strong admirer of the expertise, independence, 

and commitment of the Commission and its staff. I fully appreciate 

the critical role the SEC plays as the primary regulator of our capital markets and as a strong advocate on behalf of investors. Today, 

in the wake of the financial crisis and in the midst of implementing 

the substantial legislative mandates of Dodd-Frank and the JOBS 

Act, the SEC’s importance and scope of responsibilities are greater 

than ever. 

If confirmed, I will vigorously carry out the SEC’s mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. This mission has a tripartite mandate, 

but the component parts should not be viewed as in conflict with 

each other. It is the responsibility of the Chair and the Commission 

to take the long-term view, balance the objectives when necessary, 

and seek to fulfill all parts of the critical mission. 

As was true when Chairman Schapiro was here before you for 

the first time in 2009, this too is a critical time for the SEC. Although the worst of the recent financial crisis may be behind us, 

none of us can be complacent. Under the leadership of Chairman 

Schapiro and Chairman Walter, the SEC has made significant 

strides to strengthen its examination and enforcement functions, 

improve its capacity to assess risks, and enhance its technology. 

But fast-paced and constantly changing markets require constant 

monitoring and analysis, and when issues are identified, the investing public deserves appropriate and timely regulatory and enforcement responses. 

I am acutely aware that the position of Chair of the SEC carries 

with it heavy responsibilities and many challenges. But, if confirmed, I will work tirelessly and do everything in my power to effectively lead the SEC in fulfilling its mission. Let me just very 

briefly highlight a few early priorities. 

First, I would work with the staff and my fellow Commissioners 

to finish, in as timely and smart a way as possible, the rulemaking 

10 

mandates contained in the Dodd-Frank Act and JOBS Act. The 

SEC needs to get these rules right, but it also needs to get them 

done. To complete these legislative mandates expeditiously must be 

an immediate imperative for the SEC. 

With respect to rulemaking, rigorous economic analysis should 

inform and guide the decisions that are made. Although challenging—particularly in the quantification of benefits—in my view, 

the SEC should seek to assess, from the outset, the economic impacts of the contemplated rulemaking. 

Second, if confirmed, it will be a high priority throughout my tenure to further strengthen the enforcement function of the SEC. It 

must be fair, but it also must be bold and unrelenting. Investors 

and all market participants need to know that the playing field of 

our markets is level and that all wrongdoers—individual and institutional, of whatever position or size—will be aggressively and successfully called to account by the SEC. Strong enforcement is necessary for investor confidence and is essential to the integrity of 

our markets. Proceeding aggressively against wrongdoers is not 

only the right thing to do; it also will serve to deter the unlawful 

practices of others who must be made to think twice—and stop in 

their tracks—rather than risk discovery, pursuit, and punishment 

by the SEC. 

Third, the SEC needs to fully understand all aspects of today’s 

high-speed, high-tech, and dispersed marketplace so that it can be 

optimally and wisely regulated. High-frequency trading, complex 

trading algorithms, dark pools, and intricate new order types raise 

many questions and concerns. The experts and studies to date have 

not been consistent or definitive in their observations and findings 

about whether our modern market is causing harm or the extent 

of that harm to investors. There must be a sense of urgency 

brought to addressing these issues to understand the impact on investors and the quality of our markets so that, again, appropriate 

regulatory responses can be made. If confirmed, I will work to ensure that the SEC has the cutting-edge technology and expertise 

necessary to enable it to keep pace with the markets and its responsibilities to monitor, regulate, and enforce the securities laws. 

There are, of course, many other important areas within the jurisdiction of the Commission—from money market funds to credit 

rating agencies, from the appropriate standards and regulations 

governing the conduct of broker-dealers and investment advisers 

when providing investment advice to retail customers, to how to 

make public issuer disclosures more meaningful and understandable for investors, just to name a very few. If confirmed, I would 

focus on these and all of the many challenges facing the SEC. 

In conclusion, it would be my privilege and honor to carry out 

and help carry out the SEC’s mission. Thank you for considering 

me to serve in this capacity and for the opportunity to appear before you today. I would be happy to answer your questions. 

Chairman JOHNSON. Thank you for your testimony. 

If any Member has any questions for the record for either of our 

nominees, I ask that you please submit them by noon on Thursday, 

March 14. I also ask that the nominees respond to the QFRs quickly so that we can move the nominations forward. 

11 

We will now begin asking questions of our witnesses. Will the 

clerk please put 5 minutes on the clock for each Member? 

Mr. Cordray, South Dakota’s community banks and credit unions 

continue to raise concerns about regulatory burden. How has the 

CFPB addressed the concerns of small institutions while maintaining effective protections for consumers? And what additional steps 

do you plan to take? 

Mr. CORDRAY. Thank you, Mr. Chairman. I recall the visit to 

South Dakota with you in which we met with local financial executives, and we have made it a point to do that around the country. 

I believe we have met with more than 40 community banker organizations or credit union organizations in the last 6 months alone, 

so we have been very accessible to them. I will be speaking before 

the Independent Community Bankers of America tomorrow and 

spoke at a meeting of the Credit Union National Association last 

month. 

We also created, at my initiative, a Credit Union Advisory Council and a Community Banker Advisory Council, so we can hear regularly, and specifically, from them about what is on their mind, 

about their concerns, whether about us or about the marketplace, 

whatever it may be. I think that that outreach and the listening 

that we have done has informed work that we have done. It affected our qualified mortgage rule. It affected our escrow rule. It 

affected our servicing rule, where we put into practice what I have 

said here many times—that community banks and credit unions 

did not engage in practices that caused the financial crisis, and the 

regulatory response should take account of that fact and protect 

and preserve their traditional model of lending, which is a very responsible model and good for many communities across this country, like the community I grew up in in Ohio, and live. 

Chairman JOHNSON. Ms. White, if confirmed, what steps will you 

take to address potential conflicts of interest between your duties 

as SEC Chairman and the past work on behalf of clients, as well 

as potential conflicts with respect to your husband’s work? How 

will these steps affect your ability to participate in the Commission’s enforcement actions or other SEC matters? 

Ms. WHITE. Thank you, Mr. Chairman. Before I agreed to be 

nominated for this position, I detailed to the White House, the 

Independent Office of Government Ethics, and the career SEC ethics official the nature and extent of my and my spouse’s and our 

firm’s legal practices to be certain that there were no conflicts that 

could be problematic or limit my ability to function effectively as 

SEC Chair, if I were to be nominated and confirmed. I went 

through a very rigorous process of my own and with these parties 

to ensure that I am in compliance with all ethics regulations and 

laws. And I am very scrupulous about these issues and place a very 

high bar on them, and I was also focused in that process very much 

on making certain I could effectively function as the Chair. 

I know the Senate has received a letter from the Office of Government Ethics concluding that I am in full compliance with all applicable laws governing ethics and conflicts of interest. 

I was also advised in this process that while I have recusals, as 

do many nominees, mine were not out of the ordinary in scope, nor 

12 

out of the ordinary for past Chairmen or other Commissioners of 

the SEC. 

The career ethics officials at the SEC are quite experienced in 

managing these conflicts, should they arise. I will also be very vigilant in managing them myself and making sure that we are scrupulously attending to any that might arise. But I do not believe, 

Mr. Chairman, that the recusals, the extent of them, will prevent 

me from fully performing my duties. In general, I am not recused 

from any SEC rulemaking matters or policy matters, and as to 

party matters, as they are known, which primarily affects the enforcement function of the SEC, the scope of those recusals is also 

quite narrow. 

Chairman JOHNSON. Ms. White, what approach will you take 

with enforcement? How will the SEC under your leadership signal 

that wrongdoing will not be tolerated and restore confidence in the 

integrity of the U.S. capital markets? 

Ms. WHITE. First, I do not think there is anything more important than vigorous and credible enforcement of the securities laws. 

I think it must be done. To some extent, I think you convey that 

confidence to the public by the deeds, by the cases that you make, 

by the deterrence that you effect by your cases. And so I will be 

very focused on that throughout my tenure, and if confirmed, I will 

meet with the Enforcement Division to review various of its structures, practices, and cases to make certain that that happens. 

Chairman JOHNSON. Mr. Cordray, what is your vision for the 

Consumer Financial Protection Bureau? 

Mr. CORDRAY. Mr. Chairman, my vision of the Consumer Financial Protection Bureau really arises out of our work and it arises 

out of the legislation that Congress passed. I think any agency 

needs to hew closely to its governing statute. 

Congress created us to protect consumers in the financial marketplace and to help make those financial markets work more effectively for the consumer public and for the honest and responsible 

businesses that, for the most part, dominate the marketplace and 

deserve protection against unscrupulous competitors. 

As I have said before, I see our vision in light of the people we 

serve. They are—to be most direct about it—they are our mothers 

and fathers, our sisters and brothers, our sons and daughters. Everybody in this room and everybody paying attention knows of people in their extended family, friends, who struggle with consumer 

financial issues, and who need some help and support in navigating 

complex financial markets. To the extent we can deliver value for 

those people who, again, are your constituents and the people we 

serve, that is what we aim to do. 

Chairman JOHNSON. Senator Crapo. 

Senator CRAPO. Thank you, Mr. Chairman. 

Ms. White, recently the SEC has been commended by the GAO 

for raising the bar, frankly, when it comes to conducting economic 

analysis, and you actually already answered my first question. I 

am basically making a statement to you right now. But the SEC 

really has made major strides in this area, and I appreciate what 

I took in your opening statement to be your commitment to continue this and to even advance the agency’s focus on economic analysis. Is that correct? 

13 

Ms. WHITE. Yes, that is correct, Senator, and if confirmed, I will 

also—there is SEC guidance which I think has brought about that 

enhancement that you mentioned, and I will be very focused on 

seeing that as it operates in practice. 

Senator CRAPO. Well, thank you. And this question is also directed to you. Last year, the Financial Stability Oversight Council 

released a set of proposals regarding money market mutual funds, 

and many of us believe that that is a responsibility that much better lies with the SEC. Would you agree with that? 

Ms. WHITE. Money market mutual funds, which are very important investment products, I think are in the heartland of the SEC’s 

expertise, and I think it is the SEC’s responsibility, as it is focused 

on now and has been before, in determining what additional reforms there should be to that investment product. 

Senator CRAPO. And if confirmed, would you intend to see that 

the SEC takes prompt action in that area so that it takes the responsibility as it should? 

Ms. WHITE. Yes, Senator, I would. And my understanding is that 

those discussions are going on currently. 

Senator CRAPO. Thank you. And again, you have spent many 

years in the securities industry, in addition to your husband, as a 

prosecutor. Your husband is a highly experienced securities attorney. I appreciate your answer to the Chairman’s question, which 

was one of my questions as well. 

Mr. Cordray, as you know, the Senate Republicans want to see 

key structural changes such as a board versus a single Director, 

funding through the appropriations process rather than direct access to the Federal Reserve Board, and establishing a safety and 

soundness check for the prudential regulators. Are you open to 

working with the Senate on these reforms to increase the transparency and accountability at the agency? 

Mr. CORDRAY. We continue to be, and I personally continue to be, 

interested in working with the Senate to further develop transparency and accountability of the agency. There are numerous provisions in place now that we follow. For example, we are subject 

to a specific GAO audit of our finances, which is unusual for agencies. We are also subject to an outside independent audit, we do a 

semiannual report to Congress, and I am required to testify in 

front of both this chamber and the House on each of those reports. 

That is at least a minimum of four testimonies per year. We have 

the Federal Reserve’s Inspector General who oversees us as well. 

We also have been working toward further building out. You will 

recall that 2 years ago we had zero personnel, zero structure, and 

zero process. We have recently added the GPRA statutory performance review provisions into our budgetary process. I think we could 

make more commitments to you today than we could have a year 

or two ago, and would be willing to do so in order to improve transparency further and make sure that the Congress has all the information it needs and wants about our expenditures. 

As to our accountability to Congress, I always am accountable to 

you. I have found congressional oversight to be both vigorous and 

meaningful, and it keeps us in shape, and it keeps us on our toes. 

It is something we are very responsive to and I personally have 

been responsive to, and appreciate the value of that. 

14 

Senator CRAPO. Well, thank you, and I appreciate our private 

conversations about the importance of accountability and oversight 

and your commitment to help improve that. 

Mr. CORDRAY. Yes. 

Senator CRAPO. I also recognize that you cannot say what the 

White House and the Congress will ultimately decide with regard 

to the issues with regard to changing the structure of the agency. 

But I look forward to trying to work with you to resolve those 

issues and seek your support in helping us resolve those issues. 

Mr. CORDRAY. Thank you. 

Senator CRAPO. Finally, Ms. White, again, in your statement I 

appreciate the fact that you mentioned the JOBS Act and place 

those regulations as a top priority. What timelines do you think 

you could set for getting those regulations done? All of us up here 

I think are very anxious to see these regulations put into place as 

quickly as possible. 

Ms. WHITE. I appreciate the question. There is no higher priority 

that I have than moving the SEC along, frankly under both the 

Dodd-Frank Act and the JOBS Act, to get those regulations out as 

quickly as possible. And I think you can do them well and smartly 

and still get them out quickly. I cannot give you an exact date, but 

I guarantee you that I am going to be focused on that, if confirmed, 

from day one. 

Senator CRAPO. Well, thank you, and I appreciate your willingness to make that a high priority. 

The last question, again to you, Ms. White. With regard to the 

Dodd-Frank Act, the SEC made a public request for data and statistics, particularly on the potential regulatory costs to implement 

any potential changes to fiduciary standards for broker-dealers and 

investment advisers. Will you commit to reviewing the findings of 

this request prior to engaging in any rulemaking? 

Ms. WHITE. Absolutely. I think it is a very important area, and 

I do commit to doing that. 

Senator CRAPO. Thank you. 

Chairman JOHNSON. Senator Reed. 

Senator REED. Thank you very much, Mr. Chairman, and, Mr. 

Cordray and Ms. White, thank you very much. 

Mr. Cordray, one of the responsibilities that you have is not just 

to protect consumers but to ensure there is a compliance regulation 

of what used to be known as ‘‘the shadow banking system.’’ In fact, 

one of the major defects that we discovered to our chagrin in doing 

Dodd-Frank and with the financial crisis is that many of these 

shadow banking institutions were unregulated or regulated by 

States, et cetera, and they tend, in retrospect, to sort of lead the 

standards down, to lower the bar, lower the bar, putting pressure 

on regulating agencies. 

And now for the first time, your agency is able to regulate these 

entities. In fact, they have done a remarkable job. You have recovered significant amounts of money for consumers, but you are also 

setting an even standard between the regulated industries that 

have Federal deposit insurance and other Federal protections and 

the unregulated. Can you comment upon that role of the Financial 

Bureau? 

15 

Mr. CORDRAY. Thank you, Senator. That is one of the things that 

we have been working hard to be doing. It is one of the very positive advances made in the Dodd-Frank law, which is, you cannot 

regulate a market effectively if you are regulating part of the market and the rest of the market is going unsupervised and not subject to any standards or accountability. That is very much what we 

saw in the mortgage market leading up to the financial crisis. As 

you say, that not only opens the market to considerable exploitation of consumers without any oversight. It also hurts the responsible, honest businesses that are trying to do things right, but that 

do, as you say, feel pressure from unscrupulous competitors who 

are not subject to the same standards, not subject to the same requirements, and that is just a model that cannot work. 

The Consumer Financial Protection Bureau was given the authority in consumer finance markets to oversee not only banking 

institutions that are chartered, but also unchartered institutions. 

This has been a very important part of our work, and, frankly, 

since the day I was appointed, which is when we gained authority 

to do that work, it has been a very high priority for us. 

Senator REED. I noticed in this context that the QM rule, the 

qualified mortgage rule, is something you have worked on with 

banking regulators, et cetera, and, frankly, to the praise of many 

in the banking industry. Jamie Dimon indicated they have done a 

great job, quoting him, and others have said that, too. But it sort 

of reinforces the notion, which I think is not appreciated enough, 

that you function really in a way to make sure that there is a level 

playing field, so that traditional banking institutions, regulated institutions, are not under the competitive pressure of unregulated 

entities. That is an important role. 

Mr. CORDRAY. It is an important role. It is one that we are very 

mindful of and I think is important to the markets being able to 

function effectively. 

Senator REED. Let me also commend you for your work with 

military personnel. The Office of Military Services, headed by Holly 

Petraeus, has done a remarkable job, and that is another, I think, 

commendable aspect of what you have done with your leadership 

in protecting service men and women from foreclosure when they 

are on active duty, enforcing all of the different regulations. So I 

commend you for that and thank you. 

Let me just turn in my remaining time to Ms. White. First, you 

can assure us that in the rulemaking process your prior employment would in no way impinge upon your ability to participate in 

rulemaking because of the general nature of rules. Is that accurate? 

Ms. WHITE. I can certainly assure you of that, Senator. 

Senator REED. Thank you. 

Ms. WHITE. And have been so advised by the Office of Government Ethics as well. 

Senator REED. The next issue—and it sort of touches on what 

Senator Crapo suggested—can you give us your top three priorities 

of rules? You have a long, long list of actions pending, and it would 

be helpful to me to see, you know, what are your priorities going 

in. I understand when you get there and you get into the details 

those priority could change, but initially what are your priorities? 

16 

Ms. WHITE. Well, I have to say to that, Senator, that—and I realize—I am not a naive person in terms of can you get everything 

done at once. 

Senator REED. I do not think anyone accused you of being naive 

at all. 

[Laughter.] 

Ms. WHITE. Well, I have been accused of that, too, I think. 

Senator REED. Trust me. Trust me. 

Ms. WHITE. But, seriously, Senator, I think it is—and until I get 

into the SEC, if confirmed, you know, I do not have as much detail 

on the work streams that are proceeding, but it is my intention 

when I get there to personally take charge of assessing that and 

then truly trying to drive all of the rulemaking as quickly and as 

smartly as possible. So I do not have a rank order list yet. I just 

want to get in there, get it done, get it done smartly. 

Senator REED. Let me also just add sort of a footnote to your previous comments, which is if there is an issue where there is a potential appearance of a conflict, what is the mechanism outside 

your own individual judgment that you will avail yourself to get 

guidance or to get clarification? 

Ms. WHITE. Essentially, I will be frequently consulting—first, I 

will be very vigilant myself, as I think I have been throughout my 

career. The SEC ethics official and I have already had discussions, 

assuming that I would be confirmed, about a very vigilant screening agreement as well as mechanisms to identify any possible appearance issues as well. 

Senator REED. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Corker. 

Senator CORKER. Thank you, Mr. Chairman. And, Mr. Cordray, 

once again your family has been a great asset to you today. Your 

son and daughter are acting perfectly in the back, and even sometimes act like the questioners are asking intelligent questions. 

[Laughter.] 

Senator CORKER. So I do want to say that if you can get people 

dealing with consumers and the financial world to act like they are, 

you will do a very good thing for our country. 

And, Ms. White, during your introduction I thought at first you 

had to be a leading citizen from Tennessee, but thank you for being 

here. 

I have already talked to Mr. Cordray on many, many occasions. 

You are going to be dealing with the Volcker Rule, and we all know 

that prop trading is out, but hedging and market making is still 

something that is permitted. And I would just ask if you are committed to making sure that we have really bright lines there so 

that people—that the institutions that are affected by Volcker 

know the difference between prop trading, hedging, and market 

making. 

Ms. WHITE. I am totally committed to that and recognize the importance of both the mandate to bar proprietary trading, but also 

the permitted activities of market making as well as the hedging 

activities. And, again, I guess I am listing everything I am going 

to do the first day, but if confirmed, that is one thing that I am 

going to turn my personal attention to. 

17 

Senator CORKER. OK. In the area of money market funds, I know 

we have had difficulties getting to a place. I know you and I talked 

a little bit about that in the office. But have you thought any about 

the floating proposition? Have you given thought to how you might 

want to resolve the money market issue? 

Ms. WHITE. I have studied this issue. I am not, as I think I mentioned earlier, privy to the ongoing discussions in the Commission 

about it, and clearly I understand the risk that is trying to be— 

the systemic risk, possible run on the funds, that is trying to be 

addressed by the discussions that are ongoing. But I am also acutely aware of the value of the money market fund product, and so 

whatever is done, we want to take care that that is not harmed by 

this. 

I do not have a view on specific reforms until I get in there to 

meet with the staff and talk to my fellow Commissioners. You 

know, I do not have a conclusion on that. 

Senator CORKER. And the process has been a pretty long process 

there, and I know there have been some differing opinions. Do you 

view having Commissioners like this that represent different viewpoints, hashing out a rule, do you view that as being a positive or 

a negative? 

Ms. WHITE. That is a tough question. 

Senator CORKER. It is a good question. 

Ms. WHITE. It is a very good question. 

[Laughter.] 

Ms. WHITE. It is a very good question. I mean, clearly, the structure, the Commission structure, which is designed to be bipartisan 

and to bring in as many different perspectives as possible I think 

is a wise structure. The structure I operated under before as U.S. 

Attorney, I was more autonomous, and I did not mind having that 

autonomy as well. But I understand the strengths of that structure. 

Obviously, that requires you in the Commission structure to do 

a lot of talking with each other, which I think is quite healthy as 

well, and to, you know, bring people together as much as possible. 

Senator CORKER. Thank you. 

Mr. Cordray, I would not ask Mary Jo this because she is just 

starting, but the FSOC has the ability under, I think, Title II to 

wind down a large institution that poses a threat to our country, 

and I have a letter that is going out today to everybody that is part 

of the FSOC. But since you have been serving on it, is it your understanding that the FSOC has the ability to wind down an institution even if it is healthy because it poses a threat to our country 

if it were to have problems? Or is it your belief that that institution 

has to have financial issues before you can look at winding it down 

or doing away with various lines of business? 

Mr. CORDRAY. I do not think that that issue has been presented 

in the meetings that I have attended over the past year—that we 

would take a healthy institution and somehow seek to wind it 

down. It has been an assumption that the failure of an institution 

or the impending failure of an institution and, therefore, the imminent weakness of the institution would itself pose a potentially systematic threat to the financial system. That has been the basis on 

18 

which discussions have proceeded, and I think that that is appropriate. 

Senator CORKER. So at present, it has really been focused only 

if an institution gets in trouble. I would like some clarification 

there, and the letter will come to you, along with everyone else who 

is on the board, and if you could just look at it, Mary Jo, at the 

right time, if you could do that, that would be great. 

And on the equity markets, there have been a lot of discussions 

recently, and I do not think any of us have fully digested this yet. 

But there is a lot of high-frequency trading, dark pools, all kinds 

of things that are taking place, and there have been some concerns 

about that taking place to the harm, if you will, of just your everyday investors. I know you are committed to dealing with that, but 

do you have any initial thoughts in that regard? 

Ms. WHITE. This is one of the priority areas that I did note in 

my oral remarks, and it is one that I take away from my briefings 

at the agency as a very high priority to figure it out so that appropriate responses can be made. I mean, certainly there are concerns 

and questions that arise from the high-frequency traders and our 

electronic market in general, the dispersed market in general. But 

I think in the first instance, we need to know what is happening 

and what the impacts are, and that, again, is one thing that I— 

I am getting a longer list of what I am personally driving, I guess, 

but I am very interested in focusing on that. 

Senator CORKER. Well, thank you both for your testimony, and, 

Mr. Cordray, I do hope—I do appreciate the way that you have 

dealt with our office, and I would say most people here. And I do 

hope that over the course of the next short period of time we are 

able to figure out a way for the entity to function in a manner that 

makes everyone on both sides of the aisle feel comfortable. But I 

thank you both for your public service. I thank the families for 

being here, and I look forward to seeing you again. 

Mr. CORDRAY. Thank you, Senator. 

Chairman JOHNSON. Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

Let me start off by saying these are two exceptional candidates 

for these positions, and they have tremendous background. And in 

the case of Mr. Cordray, I certainly hope that the ideological opposition to the entity which received a majority vote in its creation 

by the Congress of the United States does not continue to be the 

opposition to someone who is eminently qualified, who has been 

fair, who has been balanced, who has been transparent—all the 

qualities that you would want in a director of an office. And so if 

that is a new standard that a majority will can now be subverted 

by stopping a nominee in order to subvert the agency, then that is 

a dangerous slope. And so I hope that Mr. Cordray’s nomination 

moves forward based on his abilities and what he has exhibited to 

us so far. 

And in the case of Ms. White, I know there are some who are 

concerned about her private sector experience. I remember her as 

a very tough prosecutor. I used a different word when we met, but 

I will not do that here. 

Ms. WHITE. I said you could. 

[Laughter.] 

19 

Senator MENENDEZ. Yes, but, you know. So these are two exceptional witnesses. Having said that, I do have some questions. 

Ms. White, I get numerous constituent letters concerning the 

lack of prosecution of wrongdoers, and basically when I see the testimony of the Attorney General before the Judiciary Committee, 

when he was asked in this field, that the size of some of these institutions are so large that it does—this is quoting from his testimony—‘‘it does become difficult for us to prosecute them when we 

are hit with indications that if you do prosecute, if you do bring a 

criminal charge, it will have a negative impact on the national 

economy, perhaps the world economy.’’ 

So the question then is: Are these institutions in essence protected against prosecution merely by their size, and understand 

that when, in fact, they do violate the law, that they will have an 

extensive fine and that will be the cost of doing business? Because 

if that is the case, then I think it subverts the very nature of the 

honesty and transparency that we want to see in the marketplace. 

If the American people and investors believe that entities can do 

this largely with impunity because they are so big that they cannot, you know, be prosecuted, at the end of the day then how do 

I know that the system is not being rigged at a time in which I 

am making my investments? 

So as the potential Chair of the SEC, give me your thoughts on 

what you would do in that regard in terms of when you found 

wrongdoing, assuming you found wrongdoing, what would you do? 

Ms. WHITE. Assuming you found wrongdoing, I think you proceed 

quite vigorously against, frankly, anyone that you find evidence of 

wrongdoing on, but certainly financial institutions. 

At the SEC, which, of course, does not have the criminal powers, 

those collateral consequences are not taken into account before 

charging decisions are made. So at the SEC there is no institution 

too big to charge. On the criminal side, there are also—in my view 

from my former life, institutions are not too big to charge either, 

but Federal prosecutors are instructed by Department of Justice 

policy. They have a long line of factors to consider, and one of them 

is the collateral consequences of a criminal indictment to innocent 

shareholders, employees, or the public. And certainly prosecutors 

should consider that before proceeding, but that does not necessarily dictate a no decision. 

Senator MENENDEZ. So if you were to confirmed as the Chair, at 

least to the extent that the SEC has powers of charging and proceeding, you would vigorously do that when you found the causes 

to be appropriate? 

Ms. WHITE. Absolutely, Senator. 

Senator MENENDEZ. Second, in Dodd-Frank, it has been reported 

that excessive compensation schemes provided part of the fuel for 

the financial crash. In response, I worked to include a provision in 

Dodd-Frank that would require publicly listed companies to disclose in their annual SEC filing the amount of CEO pay, the 

amount of the medium company worker pay, and the ratio of the 

two. 

Now, it seems to me while the agency has struggled with immensely more complicated rules, the SEC has yet to take action on 

20 

this. Will you work to follow through on this, if confirmed, and 

make sure that we get to the rule that is called for under the law? 

Ms. WHITE. I will, Senator. 

Senator MENENDEZ. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Johanns. 

Senator JOHANNS. Thank you, Mr. Chairman. 

Let me just say to both of you thank you for being here. I appreciate it. 

Mr. Cordray, if I could start with you, first, thanks for stopping 

by my office the other day. I enjoyed the opportunity to visit with 

you. 

When you took the oath that the Chair administered, as you 

know, a piece of that was that you would agree to appear before 

any duly constituted committee of the U.S. Senate, so let me probe 

that a little bit. 

Would you be willing, if asked, to appear before the Appropriations Subcommittee, a duly constituted, of course, committee of the 

U.S. Senate, on financial services in general Government to walk 

through your budget document and just answer questions about 

that document, the spending habits of your agency? Would you be 

willing to do that? 

Mr. CORDRAY. Senator, Bureau officials, including myself, testify 

regularly. In fact, more than 30 times in the last 2 years. Under 

the laws that exist, what has been contemplated, and what we 

have done, is that I appear before this Committee and before the 

House Financial Services Committee each time we issue a semiannual report. That is twice a year in front of each chamber, each 

committee, so that is four to begin with. We have also—— 

Senator JOHANNS. Let me just focus on your budget, though, because to some of us that is important. And as a former Cabinet official, I did not think that was a bad deal that I would be called to 

account before the Senate and go through my budget and justify it 

and ask for permission to do transfers. I thought that was actually 

a good thing. And I think the Senate appreciated it, the House appreciated it. 

Would you do that? Would you be willing to do that? 

Mr. CORDRAY. I have been willing to appear in front of the committees of Congress and have done so. If I understand correctly, 

under the current law, this Committee has the opportunity to do 

that with me. If the desire were to have me do that in front of a 

different committee, we could consider that. That has not been the 

structure that we have had. 

I think it is difficult among the banking agencies to suggest that 

this should be the only banking agency that would be appropriated. 

If there are measures that, as you suggest, included walking 

through and being subject to more transparency and accountability 

that would be satisfactory to you and your colleagues, we could certainly consider those things. 

Senator JOHANNS. Let me give you a specific example why we are 

concerned. 

Mr. CORDRAY. OK. 

Senator JOHANNS. And I think it is very, very legitimate. I think 

we are elected to provide oversight. 

21 

In fiscal year 2012, the CFPB spent about $150 million on contracts and support services, which is more than what was spent on 

employees. That is nearly half of the money you received from the 

Federal Reserve that year. There is no public accounting on how 

those monies were used for contract services and support services. 

Would you be willing to appear before that Subcommittee and answer all questions about that, let the Subcommittee members inquire about what that is about, where that money went, and who 

got that money, and follow up with additional written questions? 

We do that with every Federal department, really. Would you be 

willing to do that? 

Mr. CORDRAY. Senator, thank you for raising that issue again. 

The Ranking Member had mentioned it in his opening, and I did 

not get a chance to respond. 

The reason why we had so much money in contracts rather than 

personnel in our first year was that we did not exist as an agency 

before that. Much of the money was paid to the Treasury, which 

we were part of for the first year, and that we contracted with 

them for services. We continue to contract with them to piggyback 

on their IT service and other things as we are building an agency. 

Over time, that is diminishing and will continue to diminish. 

We also have published detail about our specific contracts—what 

they are, amounts—and I have been happy to provide that to this 

Committee. If the notion were that we provide it to a different 

Committee, we could consider that. 

Senator JOHANNS. Yes. I am running out of time here, but this 

is only part of the essence of our concern, and I think it is legitimate. I think we have a right as United States Senators to probe 

into this kind of information because it is important that we be 

able to tell our taxpayers, our constituents, ‘‘Do not worry. This 

money is being spent wisely and thoughtfully and carefully. And 

we have dug into it, and we can say that.’’ That is what we are 

thinking about. 

Mr. CORDRAY. It is this Committee that has had the opportunity 

to do that, and we are quite welcoming of that, and we understand. 

As I said at the beginning, I served in the legislature in Ohio. I 

appreciate and understand the importance of congressional oversight. I think it is a meaningful check on our agency. I do not take 

it lightly when I sit in this chair and answer your questions, when 

deal with questions for the record, or when we brief your staff. We 

try to be as transparent as we can, and as we have grown as an 

agency, we are able to do that more. We are completely committed 

to doing that. 

Senator JOHANNS. Thank you, Mr. Cordray. 

Chairman JOHNSON. Senator Brown. 

Senator BROWN. Thanks, Mr. Chairman. 

Ms. White, I have a number of questions, if you would try to do 

yes or no on the first two or three, because they are pretty simple 

questions. 

When you were U.S. Attorney, my understanding is you consulted Bob Rubin and Larry Summers when considering whether 

to bring charges against financial firms. Is that correct? 

22 

Ms. WHITE. I actually consulted the Deputy Attorney General, 

who had Mr. Summers call me back. I was asking a factual question. 

Senator BROWN. Did they reject the argument that institutions 

could not be prosecuted to the fullest extent of the law? 

Ms. WHITE. I would like to answer that yes or no, but I cannot. 

Essentially, I was seeking information based on an argument that 

had been made by the lawyers for the institution that I ultimately 

indicted as to whether an indictment of that institution would result in great damage to either the Japanese economy or the world 

economy, and the answer that I got back is I should proceed to 

make my own decision, which I took to mean that it would likely 

not have that impact. 

Senator BROWN. OK. I mean, policy seems to have changed. You 

had a moment ago said that—you talked about the SEC does not 

consider, you used the term ‘‘collateral consequences’’ to Senator 

Menendez’s question. And then in 2008, the Fed’s general counsel 

called the SEC to urge the Commission not to pursue full penalties 

against bailed out firm that had committed fraud. As a result, institutional investors, pension funds that provide retirement security for working Americans, for example, ended up with less compensation in the settlement. The New York Times affirmed that 

costs were shifted from Wall Street banks to working Americans. 

Was the SEC right to lower these penalties back in 2008? 

Ms. WHITE. I think what the SEC does do—they do not take collateral—as I understand it, they do not take collateral consequences into their charging decisions. But they do consider consequences in their remedies. So that, for example, a corporate fine 

that, in effect, would have a grievous impact on innocent shareholders is taken into account in terms of remedies that they seek. 

I do not know all the particulars of the example you are giving 

me, so I cannot respond any further than that. 

Senator BROWN. OK. We know today the banks are considerably—the largest institutions are considerably larger than they 

were only 5 years ago. The largest six banks in this country now 

control—and Senator Vitter and I are working on this and some responses to the too-big-to-fail issue, how they control some 65 percent of GDP when only 20 years ago it was less than a third of 

that. Senator Menendez mentioned Attorney General Holder’s comments about concerned about the size of the institution and what 

prosecutorial action might do. 

Yesterday, Arthur Levitt, one of your predecessors, currently a 

policy adviser to Goldman Sachs, when asked about Attorney General’s comments, said, ‘‘I think he is right. There is no question 

these institutions are very unlikely to be the object of prosecutions.’’ 

You have said that bringing criminal charges against corporations could harm employees. By that logic—and I have a couple of 

questions. First, do you agree with Attorney General Holder and 

Mr. Levitt? And if so, are we not creating by the logic of what you 

have said about bringing criminal charges on corporations harming 

employees, are we not creating a two-tiered system where we exempt the biggest banks because they have the most employees and 

shareholders who could be affected from criminal prosecution? How 

23 

do you sort of reconcile that belief with your position that no firm 

is, as we say, ‘‘too big to jail’’? I understand that you do not have 

criminal authority, but where do you go with that. 

Ms. WHITE. I think, again, it is a factor that prosecutors are directed to consider, and not just the impact on employees and shareholders, innocent employees and shareholders, but the public interest as well. And so, you know, I think we want our prosecutors 

making decisions in the public interest. Obviously, you do not want 

to have a two-tier standard for some institutions and not others. 

But I do think the deferred prosecution instrument, which has been 

used a great deal on a number of companies, was designed to be 

tough in terms of monetary sanctions, monitors, basically everything but the charge itself that might cause what the prosecutor 

may consider to be negative and very undesirable collateral consequences to the public interest. 

So, you know, I do not think you should—and I do not consider 

it to be a rule or even under the DOJ policy that, therefore, you 

cannot indict anyone. It is part of your consideration, and it should 

be part of the consideration, I think. 

Senator BROWN. Let me ask one other question. There was concern, at least on this side of the Committee, I assume on both 

sides, of what people in this town call your ‘‘revolving door’’ from 

the firm to U.S. Attorney, back to the firm, back to U.S. Attorney, 

the firm, U.S. Attorney, and back to the firm, and now this. And 

nobody questions your integrity or your aggressiveness or your 

toughness. But could you just—we need some reassurance that 

when you have this job, that the culture you have come out of the 

last 10 years, I assume both socially and professionally, will allow 

you or perhaps make you better at—make that case. Answer this 

specific, if you can. What have you done over the last decade that 

ordinary investors—when you see the wealthiest in this country 

have done better and better and better, and most of America has 

not gotten a raise in the last 10 years, what have you done the last 

decade that ordinary investors can look and be assured that you 

will advocate for them? 

Ms. WHITE. I think to some extent they—and it is true of anyone—they have to see what you do in the job, and in my case, I 

think they have a track record of when I was a prosecutor—— 

Senator BROWN. Well, over the last 10 years. 

Ms. WHITE. Well, I have been a lawyer over the last 10 years, 

and when you are a lawyer, you represent different kinds of clients, 

and you are ethically bound to represent them to the best of your 

ability, and I have done that. That does not change me as a person. 

It does not mean I embrace the policy thoughts of any of my clients 

in particular. And so I think the public investor should know that 

I am their advocate, that I have a very—and I say the track record 

because it is good to give them something concrete to look at. I 

think I was extremely, exceptionally aggressive against large institutions, against CEOs, senior executive types. And before I was 

that, I was in the private sector where I actually started. I actually 

started in the private sector. 

So after about the same amount of time in the private sector, I 

became U.S. Attorney and had that track record. I am the same 

person who—in this instance, if I am confirmed, the American pubVerDate Nov 24 2008 14:29 May 23, 2013 Jkt 048080 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 L:\HEARINGS 2013\03-12 NOMINATIONS OF CORDRAY AND WHITE\HEARING\31213.TX
24 

lic will be my client, and I will work as zealously as is possible on 

behalf of them. 

Senator BROWN. All right. Thank you, Ms. White. 

Chairman JOHNSON. Senator Coburn. 

Senator COBURN. Thank you. 

Mr. Cordray, I appreciated your visit in my office, and as I told 

you then, I think in your capacity you have done a great job. One 

question for you. Do you presently submit your data to 

USASpending.gov on how you spend your money? 

Mr. CORDRAY. I do not actually know the answer to that question, Senator, but it is something I would be happy to explore with 

you or have my staff explore with your staff. 

I will say again that we started 2 years ago with just the beginnings of an agency—— 

Senator COBURN. Well, I am not critical. 

Mr. CORDRAY. I understand. 

Senator COBURN. I am just asking a simple question. Everybody 

in the Federal Government—everybody—is supposed to submit 

data so that the American people can see where the money is 

spent. And so one way of answering Senator Johanns’ question is, 

well, sure we will come discuss it because it has already been made 

public because the American people have a right to know where 

you are spending the money. And by Federal statute, as authored 

by President Obama and I, it is required of every agency to put 

their information and their spending on that site. 

So I would love to have an answer to that, and you do not have 

to answer it now. 

Mr. CORDRAY. I will get you an answer. 

Senator COBURN. And I have explained to you—and my positions 

are very similar to Senator Crapo’s in terms of the requirements 

on this position. I know we are divided as a Committee on that, 

and I will not spend any more time on it, but I will compliment 

you. I think you have done a wonderful job so far in carrying out 

your duties. 

Ms. White, I will announce today at this hearing that I am going 

to aggressively support your nomination. I enjoyed our visit. The 

more I find out about you, the more I like you, and the more I am 

proud that you have agreed to accept to fulfill this critical responsibility. Thank you for doing that. 

Ms. WHITE. Thank you, Senator, very much. 

Senator COBURN. Thank you. 

Chairman JOHNSON. Senator Tester. 

Senator TESTER. Well, thank you, Mr. Chairman. And I just want 

to start with you, Ms. White, if I might. You have had a very interesting and distinguished career. As Senator Schumer has pointed 

out, both as a prosecutor in the Eastern and Southern Districts of 

New York, you developed a reputation for dedication and tenacity, 

and I think these qualities have contributed mightily to your success in taking down some pretty big dogs. 

You sent one of the most reputed mob bosses, John Gotti to jail 

for murder and racketeering. You led the charge, as Senator Schumer said, against the Blind Sheik, the mastermind behind the 1993 

World Trade Center bombings. You not only put him behind bars, 

25 

but you connected the pieces to reveal that this was not a single 

event but, rather, an emerging trend, one that you saw firsthand. 

Your office also indicted Osama bin Laden for his role in bombing American embassies in East Africa at a time before most Americans had a clue who he even was. 

A major part of your success in the Southern District of New 

York in prosecuting these criminals was your ability to dig deep to 

understand how they operated, the dynamics of their networks, 

their organizations, and what their motives were. These were some 

of the most dangerous criminals that you put away. 

So first I want to thank you for what you have done protecting 

this Nation. Some have questioned your toughness as a regulator, 

whether you would be able to hold accountable those sorts of folks 

that you might have defended in the past. And I would actually 

view your experience and expertise as an asset. Why? Because if 

someone was going to commit a crime, my gut tells me that you 

might have a pretty good idea where the body was buried. It also 

tells me that, given the list of enemies you already have, you would 

not be too concerned about Wall Street. 

So could you tell me, Ms. White, how your expertise as a prosecutor—because this question has been asked in many different 

ways this morning—how your expertise as a prosecutor will help 

you at the SEC, particularly as it relates to enforcement? 

Ms. WHITE. Thank you very much, Senator. I think it helps—I 

mean, I have extensive experience frankly from the public sector as 

a prosecutor and the private sector in investigating various things 

and trying to connect dots, trying to go up the chain to see whether 

there is evidence at high levels, and I really look forward to reviewing the entire enforcement function and hopefully adding value 

there from my experience in both the private and public sector. 

Senator TESTER. If you saw wrongdoing with the folks that you 

regulate, would you have any hesitancy whatsoever going after 

them? Now, let me tell you where I am going with this. Senator 

Brown talked about the comments were made of too big to jail. 

Others talked about—I think it was you that talked about DOJ 

that has to consider collateral consequences. 

If I was a bad guy and wanted to take the consumers for a ride, 

I would design my bank, my financial institution, so that you could 

not prosecute them. 

Do you see any reason out there why you would not prosecute 

regardless of how big they are? 

Ms. WHITE. Again, from the SEC perspective, I do not. 

Senator TESTER. OK. You talked about in your opening remarks 

your goals, Dodd-Frank, JOBS Act as far as the rulemaking goes, 

specifically Regulation A plus, which does not have any statutory 

deadlines. Could you just talk to me about—and we all talked 

about the first day you are in, you have got all this stuff to do. 

Could you just tell me how you are going to move that to the top 

of the list? 

Ms. WHITE. I think that it is, again, something that—whether a 

deadline or not—— 

Senator TESTER. Yes. 

Ms. WHITE. And, again, the SEC has obviously been given a 

daunting list of rulemaking to do. I recognize that. But I think all 

26 

of them have to proceed—the work streams have to be such that 

they all get done. 

You know, again, I come back to maybe I am not a naive person, 

but, you know, I think it has to be done. Some are easier to do than 

others as well, and there is no reason to hold them up. 

Senator TESTER. Good. Well, I think that if there is some attention paid to them, which I have the clear indication that you are 

going to pay some attention to them, that those rules will be forthcoming in much better order than they have in the past. 

Rich Cordray, first of all, I want to thank you for what you have 

done. I think you have done some good work. I want to talk about 

something that has been pointed out to me from Indian country in 

tribal communities. And I believe there is a Memorandum of Understanding with the Navajo Nation at this point in time with you. 

These tribes have a unique relationship, and I should have asked 

Senator Brown when he was here whether there are any Indian 

reservations in Ohio or not, but there are many in Montana. And 

President Obama issued an Executive order mandating that agencies create and maintain a formal consultation policy with Native 

American tribes. I think it is very important from my perspective. 

This consultation is critically important as we deal with Government-to-Government relationships. And I appreciate the outreach 

CFPB has done. 

I just wondered: Have you initiated a formal consultation policy 

for Native American governments? 

Mr. CORDRAY. We are doing that, Senator. In fact, we have been 

doing a lot of outreach to the tribal communities and understand 

that they have particular needs as consumers and deserve protection. As you say, we recently entered into a Memorandum of Understanding with the Department of Justice and the Navajo Nation. We have done a lot of consultation with them over the particulars of the Cobell settlement, making sure that everyone is vigilant about potential scams and frauds around that money coming 

to the tribal community. We treat the tribes as sovereign entities, 

and we are working with them through our Office of Intergovernmental Affairs. 

If I could, Mr. Chairman, my staff, who always know more in the 

aggregate than I do as an individual, does inform me that the answer to Senator Coburn’s question is yes, we do submit information 

to USASpending.gov. We will tell him that, but if you would pass 

that along, I would appreciate it. 

Senator TESTER. That is good. I want to follow up on the consultation. 

Mr. CORDRAY. Yes. 

Senator TESTER. You said you were in the process of developing 

a formal consultation policy or you have developed a formal consultation policy? 

Mr. CORDRAY. We have been in the process of having informal 

consultation and are working toward a formal consultation policy. 

We would be happy to follow up further with you, Senator, about 

what you would like to see in place. 

Senator TESTER. I would love that. When do you anticipate—or 

can you tell me when you will have a formal consultation policy for 

Indian country? 

27 

Mr. CORDRAY. Based on your interest in it, I would say shortly. 

Senator TESTER. OK. Thank you. 

[Laughter.] 

Senator TESTER. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Toomey. 

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

I would like to direct my questions to Ms. White. Thank you very 

much for being here. Thanks for taking the time to meet last week 

in my office. I enjoyed our discussion, and I appreciated that. 

First, just a quick follow-up on the rulemaking regarding Reg A 

in particular of the JOBS Act. I know from both your testimony 

today and our discussion last week that you have made it clear 

that that is going to be a priority to get that done. I would just 

want to underscore how important that is now that we are almost 

a full year past the adoption of the JOBS Act. And unlike some of 

the regulations, rulemaking, such as some that come from DoddFrank, the Volcker Rule being a case in point, that are incredible 

difficult, perhaps in my view impossible, Reg A is not like that. It 

is really straightforward and simple. 

So I hope you will use the very simplicity as a criteria for moving 

it up the list of priorities so that we could get that done soon. Do 

you expect that to be something that we could expect to see movement on in the very near future? 

Ms. WHITE. I appreciate your comment on that and our discussion, and I will not predict a time, but I will say that it strikes me 

as one that can be moved, and I am committed to moving everything as quickly as possible. But, again, as I said, some are easier 

to move and faster to move than others. 

Senator TOOMEY. And that would be one of them. 

Ms. WHITE. Yes, at least from the outside looking in, without 

question. 

Senator TOOMEY. Great. Thank you. 

I would like to follow up a little bit also on the discussions about 

money market funds, and you mentioned earlier that you recognize 

the importance of the product. I wonder if you could just underscore the importance, especially to the commercial paper market, 

the marketplace that provides so much liquidity and funding that 

is such an important source for investors, and the fact that there 

is no obvious alternative, certainly not in the short run, to the 

money market funds as the vehicle through which this occurred. Do 

you agree with that summary? 

Ms. WHITE. I do, Senator. Again, as I said, I have not had the 

opportunity to discuss, the internal discussions with the SEC, with 

my fellow Commissioners or the staff, but I have studied this issue, 

and I agree with your comments. 

Senator TOOMEY. And, again, you alluded earlier to the notion 

that since this is the area of jurisdiction and expertise of the SEC, 

it makes sense that the SEC would be responsible for the rulemaking. I make no secret about my view that the FSOC has put 

a lot of pressure, external pressure on the SEC, and I worry that 

the Commission might consider doing something in response to 

that pressure more than response to the needs of the industry. And 

I am just wondering if you could assure us, since you will have a 

28 

seat on the FSOC as well as being the head of the SEC, your views 

on the importance of the SEC handling this. 

Ms. WHITE. Yes. It is an investment product. It is where the SEC 

has expertise, and I think they should take the lead. I think FSOC 

has been, from what I have been briefed on, a very useful forum 

for bringing the different regulators together on different issues. 

But with respect to the rulemaking here, I would certainly like and 

expect to see it come from the SEC. 

Senator TOOMEY. Thanks. Furthermore, with respect to money 

market funds, I think you and I share the view that taxpayers 

should not be at risk of bailing out a money market fund. And if 

a money market fund were to fail, it should fail. The investors 

should bear that risk, but taxpayers should not. Do you agree with 

that general principle? 

Ms. WHITE. Well, I guess I go back to the history in 2008 where 

you had the breaking of the buck of the Reserve Primary Fund, 

and Treasury did step in to really guarantee the share price, which 

was to stop a run on the funds. You do not want to get to a run 

on the funds, I think. But I guess, you know, the reason that this 

is such a significant issue is to try to ensure, while preserving the 

product, that you do not run that risk going forward. 

Senator TOOMEY. Well, right, and I know you are very well 

aware that that incident happened in the context of a global financial meltdown. It was not caused by, it was not particularly concentrated in the money market funds. There were more serious and 

acute problems in other sectors as well. I think that is important. 

I also think it is important to note that throughout 40 years this 

has been an extraordinarily safe and sound product. 

But here is the question I have for your specifically. Is it your 

view that the role of the SEC is to make it impossible for a money 

market fund to break the buck? 

Ms. WHITE. I think it is the role of the rulemaking to guard 

against—while preserving the product, you know, to guard against 

the systemic risk. I am not trying to be not responsive to the question, but I think that is—— 

Senator TOOMEY. But that is different than making it impossible 

for an individual fund to break the buck. 

Ms. WHITE. It is probably hard to make anything impossible. 

Senator TOOMEY. But that should not be the goal of the—see, my 

point is that the goal is to make sure investors are aware of risks 

that they are taking, but that this is an investment that does carry 

some level of risk and that that is OK. 

Ms. WHITE. I mean, there certainly is—you know, there are risks 

with a lot of products, investment products, risk is inherent in that. 

Again, I think the focus is on preserving that, but also dealing with 

the possibility of the systemic risk and run on the funds. 

Senator TOOMEY. OK. Well, I see I am out of time, but I do have 

some follow-up questions I will probably send to you. Thank you. 

Chairman JOHNSON. Senator Hagan. 

Senator HAGAN. Thank you, Mr. Chairman. To both of our witnesses, thank you for being here today. 

Mr. Cordray, I think you are doing a very good job. I look forward to supporting your confirmation. I also want to say thank you 

29 

to your family—your wife and your two children—who are here 

today. 

Ms. White, I appreciate you coming by my office to meet me. I 

am extremely impressed by your record as a prosecutor, and I look 

forward to you returning to public service. In your testimony, you 

mention investing in technology to keep pace with the markets. 

Can you discuss how a robust budget for the SEC would help 

achieve that goal? 

Ms. WHITE. I think it is critical. I mean, today’s technology is not 

tomorrow’s, first of all, so it is very important for the SEC to be 

well funded for technology and some of—we are under a continuing 

resolution, as I think folks know, and, you know, a lot of those dollars that we do not have would have gone into technology. So that 

worries me. 

I also think it is a great investment of monies to hire more experts, market experts into this space so we really stay on top of 

what is the present-day market, the complexity of it, the speed of 

it. And so, you know, those funds are needed. 

Senator HAGAN. Thank you. The FSOC has tasked the Office of 

Financial Research (OFR) with analyzing the potential risks to financial stability, if any, that may be posed by the asset management industry. Given that the SEC is the expert and primary regulator in overseeing the asset management industry, would you 

share with me your initial thoughts on how to ensure that the SEC 

plays a central role in this effort? 

Ms. WHITE. Thank you, Senator. My understanding is that the 

SEC is in active discussions with the Office of Financial Research 

on precisely that subject so that the SEC’s expertise in that industry is brought to bear. That is something that, if confirmed, you 

know, I also want to learn more about. 

Senator HAGAN. OK. On February 1st of this year, the SEC’s Advisory Committee on Small and Emerging Companies unanimously 

approved a recommendation to the SEC to initiate a pilot program 

to increase the tick sizes for securities of smaller companies. The 

SEC also hosted a February 5th Roundtable on the topic. 

What are your views on a pilot program that would increase this 

tick size for small and mid-cap companies, or stocks? What are the 

pros and cons of a pilot program? 

Ms. WHITE. Again, this is something that, as I understand it, is 

under active consideration by the staff following that roundtable. 

I think, again, I have to be read into that before I reach a final 

conclusion, but clearly it is a priority to focus on that issue as well 

as just the small and mid-sized companies in general and to at 

least approach the issues with one size does not necessarily fit all, 

and we want obviously more liquidity for these smaller and midsized companies, and decimalization is a part of that, the size of 

the spread is part of that. 

Senator HAGAN. The pilot program is going to be considered. Is 

that correct? 

Ms. WHITE. My understanding is that the SEC is considering 

doing that based on the recommendation and the decimalization 

roundtable. 

Senator HAGAN. OK. And do you know how big that would be? 

Ms. WHITE. I do not. I would be happy to follow up. 

30 

Senator HAGAN. OK. That would be good. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Moran. 

Senator MORAN. Mr. Chairman, thank you very much. Mr. 

Cordray, Ms. White, thank you for joining us today. 

I think in listening to Senator Toomey and my colleague from 

North Carolina, the topics that I wanted to address with you, Ms. 

White, have at least been addressed. But I want to add my emphasis. 

One of the issues that Senator Warner and I have tried to champion is startup companies, trying to make certain that we create 

an entrepreneurial environment in the United States that advances 

the opportunities for folks with an idea to pursue those ideas and 

perhaps have a greater potential for success, and in the process of 

pursuing their success, create job opportunities for Americans. And 

both the topics that seem important to me is this tick size issue 

that you just were addressing, as well as the crowdsource funding 

that Senator Toomey pursued with you. And, again, you indicated 

in your testimony that you were going to pursue rulemaking, you 

would do it as quickly as possible. I want to indicate how important 

that is. I wanted to know if you have any serious reservations 

about crowdsource funding that would suggest that you would find 

fault with the process that Congress has instructed you to pursue. 

In other words, is there a philosophical or an economic reason that 

crowdsource funding, a consumer protection issue, that it bothers 

you that would delay? If you are confirmed and you are making 

these rules, would you be opposed to this outcome? 

Ms. WHITE. Senator, thank you for the question. I know that a 

lot of people are very excited about this happening, crowdfunding. 

The SEC is always concerned about investor protection, and should 

be and is, and I would be throughout my tenure, if confirmed. 

There are some protections built into the crowdfunding mandates, 

and so, you know, I think that we would want to maximize those. 

I also think we want to be sure that, following these rules that 

may come out on crowdfunding as well as some of the others, we 

are monitoring what is happening in the marketplace so that if 

there is—were there to be fraud or some other events that are occurring that needed to be addressed, that we are on top of it after 

it is out the door. And I know the staff of the SEC is focused on 

that, the Enforcement folks are, should that happen so that those 

investor protections can be taken care of, you know, after the rulemaking is completed. 

But, again, I understand the priority that you put on it, and we 

will turn to that as well. 

Senator MORAN. Do you know of any specifics at the SEC of concerns and why this is taking so long, any specifics about that? 

Ms. WHITE. I do not, Senator. I do not. 

Senator MORAN. And let me ask you—I think it is a similar question to what I have already asked but in a different way—if you 

were a Member of Congress and this issue was before you, would 

you have been supportive or opposed to this concept of 

crowdfunding? 

Ms. WHITE. I mean, that is a much harder question for me to answer. I think with respect to, frankly, you know, a number—whethVerDate Nov 24 2008 14:29 May 23, 2013 Jkt 048080 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 L:\HEARINGS 2013\03-12 NOMINATIONS OF CORDRAY AND WHITE\HEARING\31213.TX
31 

er it is Dodd-Frank or the JOBS Act, you know, what I might have 

done as a legislator had I been fully read into it, I cannot really 

answer. But as a regulator, it is my mandate to carry out that rulemaking. Congress has made a policy judgment to do it expeditiously, and obviously as well and as smartly as possible. 

Senator MORAN. While I would have been happy for an answer 

to the question about what you would have done, you did answer 

the question in the way that I was hoping that you would answer 

it, which is, ‘‘It is my responsibility to implement the laws as Congress has determined.’’ And I am not putting words in your mouth. 

Is that true? 

Ms. WHITE. You are not putting words in my mouth. You said 

it better than I did. 

Senator MORAN. And then on tick size, there are lots of IPOs, access to capital that see this as an opportunity for an improvement 

in that access to capital, and any reservations you have, I think 

you have pretty well described your thoughts about this with Senator Hagan. 

Ms. WHITE. I think the thought of the pilot program would be to 

sort of see how it works with, you know, various spreads in various 

stocks so that you get more information before finally deciding, you 

know, what is optimal. This is one that, again, I need to be read 

into further, but at this point I do not have a reservation. 

Senator MORAN. Would you confirm that my understanding is 

correct, which is the SEC conducted a roundtable. It is now at the 

staff level. Following that roundtable, they indicated—this is, I 

guess, the question: Did they indicate that there is going to be a 

pilot program or that has not yet been determined? 

Ms. WHITE. I do not know whether they have indicated it publicly, but clearly that was the discussion at the roundtable. It is 

under consideration by the staff, but I do not know that they have 

said anything publicly about a next step. They may have. I just 

may not know it. 

Senator MORAN. Well, I really do believe that we can unlock lots 

of opportunities for Americans in job creation, and your job is an 

important one, and the regulatory environment, finding the right 

balance matters. And consumer protection obviously is important, 

but also the opportunity to create jobs for Americans is exceedingly 

important. And I would encourage you in both of these instances 

to act prudently, but to act prudently quickly. 

Ms. WHITE. Understood, Senator. 

Senator MORAN. Thank you. 

Ms. WHITE. Thank you. 

Senator MORAN. Mr. Chairman, thank you. 

Chairman JOHNSON. Senator Warren. 

Senator WARREN. Thank you, Mr. Chairman. 

Thank you both for being here. I am not going to have any questions for Director Cordray since you have already testified 12 

times. CFPB officials have testified more than 30 times. You have 

been an open book. I think there has been a lot of transparency, 

and you have won widespread praise for both your balance and 

your judgment. 

But I do have questions. What I want to know is why since the 

1800s have there been agencies all over Washington with a single 

32 

Director, including the OCC; but unlike the consumer agency, no 

one in the U.S. Senate has held up confirmation of their directors, 

demanding that the agency be redesigned. 

What I want to do know is why every banking regulator since 

the Civil War has been funded outside the appropriations process, 

but unlike the consumer agency, no one in the U.S. Senate has 

held up confirmation of their directors, demanding that that agency 

or those agencies be redesigned. 

And what I want to know is why there are agencies all over 

Washington whose rules are final, subject to the ordinary reviews 

and oversight, while the CFPB is the only agency in Government 

subject to a veto by other agencies, but unlike the CFPB, no one 

in the U.S. Senate holds up confirmation of their directors, demanding that those agencies be redesigned. 

From the way I see how other agencies are treated, I see nothing 

here but a filibuster threat against Director Cordray as an attempt 

to weaken the consumer agency. I think the delay in getting him 

confirmed is bad for consumers, it is bad for small banks, it is bad 

for credit unions. It is bad for anyone trying to offer an honest 

product in an honest market. 

The American people deserve a Congress that worries less about 

helping big banks and more about helping regular people who have 

been cheated on mortgages, on credit cards, on student loans, on 

credit reports. I hope you get confirmed. You have earned it, Director Cordray. 

So my questions are for Ms. White. Thank you very much. We 

have gotten a sense of you as a rule writer, and I am glad that is— 

I mean as a prosecutor, but I want to ask a couple of questions 

around rule writing, and actually I am going to start in the same 

place many of my colleagues have, and that is to talk about the 

things that have not yet been done. In fact, I will just make a little 

note here. The consumer agency has met virtually all of its rulewriting deadlines. The SEC has missed about half of them so far. 

But everyone has been highlighting the rules that they want to 

make sure that you focus on. I just want to draw a line under four 

of them that the SEC has not yet written any rules for. 

There are still no rules for credit rating agencies that took money 

to sign off on risky deals that crashed the economy and still operate with big conflicts of interest. 

There are still no rules from the SEC to deal with the derivatives 

that were right at the heart of the financial crisis. 

There are still no rules from the SEC to protect the counties and 

towns that were cheated. 

There are still no rules from the SEC to require disclosure of 

CEO pay relative to regular employees’ pay. 

So if people are going to talk about priorities, I certainly hope 

that those are all near the top of your list. 

But one other thing I want to ask you about rule writing, because it came up earlier in the discussion, is the economic analysis 

or the cost/benefit analysis. You know, it is fairly easy to measure 

the costs of implementing a regulation. But what about the costs 

of underenforcing the rules? So what are the costs of people being 

cheated on mortgages and credit cards? What are the costs when 

33 

money launderers are not prosecuted? What are the costs when big 

financial institutions crash our economy? 

So my question is: How do you make sure that when we are talking about cost/benefit that the costs not just of enforcing regulations but the costs of underenforcing those regulations is also accounted for, Ms. White? 

Ms. WHITE. I appreciate the question. I think it also relates to 

measuring the benefits. I think it is kind of at least a similar issue, 

if not the same. Again, one of the things, if confirmed, I want to 

do first also when I get to the SEC is to really bore into exactly 

how this is being done. I also have the concern, as we all do, even 

though in terms of having our rules upheld by the courts, that 

needs to happen as well. But I think we have to recognize that 

there are some benefits, the cost of underenforcement, that have to 

be analyzed on their terms; in other words, that, you know, you 

have to say if you cannot quantify, you say why you cannot quantify. Or perhaps you do quantify, but you use a different parameter 

to do it. So I fully take your point. 

Senator WARREN. OK. Thank you very much. I see my time is 

up. 

Thank you very much, Mr. Chairman. 

Chairman JOHNSON. Senator Merkley. 

Senator MERKLEY. Thank you very much, Mr. Chair, and thank 

you to both of you for coming to testify. 

First I wanted to accentuate the comments that Senator Moran 

made over crowdfunding. That legislation here in the Senate was 

my legislation. It was focused on the fact that I go to town meetings, I have been to over 160 of them in Oregon, and people really 

are looking for sources of capital to drive small business. So here 

is an incredible need for small business capital and a new, innovative strategy for helping provide that source of funds, and the rules 

were supposed to be done in January, and we do not even have a 

draft yet. So how can something so important to the economy, so 

important to the success of small business, with folks on both sides 

of the aisle saying that small businesses really create jobs in America, how is it possible the SEC does not even have a draft completed at this point? 

Ms. WHITE. Well, I would go back to—and this is not offered by 

way of excuse, but the rulemaking that the SEC is undertaking as 

a result of Dodd-Frank and the JOBS Act truly is daunting. I 

mean, it truly is. 

On the other hand, I think, as I said in my oral remarks and my 

written testimony as well, these rules need to get out, and I need 

to figure out what work streams, additional work streams need to 

be put in place to do that. 

Senator MERKLEY. Thank you. Just take my remarks as an encouragement that something so important to the economy deserves 

to be near the top of the list. 

I want to turn to Director Cordray. Director, the CFPB is the 

only banking agency with decisions that are subject to the veto of 

its rulemaking powers by another agency. Is that correct? The 

FDIC does not have such a veto. The OCC does not have such a 

veto. The Fed does not have such a veto. 

Mr. CORDRAY. That is my understanding, Senator, yes. 

34 

Senator MERKLEY. Thank you. And the CFPB is the only banking 

agency with a capped budget? 

Mr. CORDRAY. That is correct. 

Senator MERKLEY. OK. These are extraordinary, then, measures 

related to the CFPB, and yet all we kind of hear about is the CFPB 

actually has fewer restrictions than other banking agencies. Why 

is there so much confusion among some of my colleagues on this 

point? 

Mr. CORDRAY. I do not know, Senator. 

Senator MERKLEY. Thank you. 

Something that you have been working very hard on with your 

agency is assisting veterans and seniors and home buyers with relevant financial information. Have the veterans, seniors, and home 

buyers found that financial information to be of some use? 

Mr. CORDRAY. It has been a two-way street. I know that they 

have. There are changes that Assistant Director Petraeus has been 

able to achieve, such as taking account of Permanent Change of 

Station Orders and the kind of disruption that creates in the lives 

of servicemembers and their families, and making sure that they 

have additional protections for those. 

It is also the case that all of those discussions have brought back 

ideas and thoughts to us about how we can better deliver more effective protections for the unique circumstances of active-duty 

servicemembers, the strains it puts on their family, and as they become veterans and graduate out of the service, peculiar needs that 

they have as consumers. That has been a high priority for us. I 

want to thank the Congress for the work they did on the Military 

Lending Act at the end of last year. We are working with the Defense Department and the other agencies to implement that appropriately and effectively, and we will continue to do that work. It is 

an important focus for the agency. 

Senator MERKLEY. Well, thank you. I can tell you I am hearing 

nothing but praise back home from veterans’ groups and senior 

groups for the type of work that you are doing. 

Another thing that CFPB is doing is a research-driven approach 

on financial literacy. For example, there is a whole host of financial 

literacy programs. Which ones actually work? I understand you are 

researching that. Consumer disclosures, what the format for consumer disclosures is actually of use to consumers? This is ongoing 

research. I do not know that you have published findings yet. But 

I think it is a great idea. Do you think it is going to have considerable promise in helping us understand better how to provide financial literacy or provide consumer protections that are at the right 

place at the right moment? 

Mr. CORDRAY. We are convinced that it will. It has been part of 

the leadership of the Consumer Financial Protection Bureau since 

we first were created that Know Before You Owe is an important 

principle, and that we need to rethink some of the assumptions in 

this field from the past, such as extensive, long, protracted disclosures were somehow good for consumers when, in fact, they often 

defeated consumers’ abilities to understand or their willingness to 

wade through. 

We have published a proposal, and we will be finalizing Know 

Before You Owe provisions for mortgages later this year. We have 

35 

voluntary efforts underway with industry at the moment on credit 

cards that we are pursuing. And we have Know Before You Owe 

efforts on student loans, which are very important and are part of 

our Paying for College Module, which is now up on our Web site 

and we are going to be promoting heavily over the next month as 

people come to making decisions about higher education. They and 

their families find those difficult and confusing at times. 

Senator MERKLEY. Thank you. My time is up, so I just want to 

note that all of these things are making families stronger, more 

successful. That is incredibly important. We should not be measuring the success of the American economy, if you will, simply by 

GDP but by how many families have living-wage jobs and how 

many families have the financial foundations to have a quality life. 

And I think your agency is playing an incredibly important role 

under your leadership in making that happen. 

Thank you. 

Mr. CORDRAY. I appreciate that, Senator. 

Chairman JOHNSON. Senator Schumer. 

Senator SCHUMER. Thank you, Mr. Chairman. I want to thank 

both witnesses. I have no questions for Mr. Cordray. I just fully 

support your nomination, and I do find it anomalous. You are in 

the same boat as some of our people on the D.C. Circuit. People are 

opposing you not because of you but because they do not want the 

body to which you are nominated to function properly. And it is 

something brand new, and I hope it is something people will reconsider. 

I have two quick questions for Mary Jo White. First, on credit 

rating agencies, as part of Dodd-Frank there was a bipartisan 

amendment led by Senators Franken, Wicker, and myself, and it 

gave the SEC authority to issue regulations rooting out conflicts of 

interest in credit ratings for structured products. The amendment 

passed on the Senate floor with 64 votes. It was bipartisan. Ranking Member Crapo voted for it. So did 10 other Republicans. 

So it is now 21⁄2 years later, and the Commission has not used 

the authority. I understand the Commission is going to be hosting 

a roundtable on the topic in May. It is my hope that the Commission will then quickly proceed to a rulemaking as Dodd-Frank authorizes you to do. 

Will you make it a priority to exercise the Commission’s authority under Dodd-Frank to address the conflicts of interest in rating 

of structured products? 

Ms. WHITE. I will, and I think it is an extremely important issue. 

Senator SCHUMER. Good. That is all I can ask. 

Second question: As you know, because you and I have discussed 

this previously, I am very interested in a rule proposal before the 

Commission enhancing the ability of retail investors to access 

proxy materials and actually vote their shares. We all know that 

that does not happen enough. It is called the ‘‘investor mailbox proposal’’ or the ‘‘enhanced brokers’ Internet platform.’’ 

Can you state for the record whether you support this proposal? 

Ms. WHITE. There is a tremendous amount of support for it, and 

as we discussed privately, it is a very, very good idea. I think the 

rule, the proposed rule, is still pending, but it is an excellent idea. 

Senator SCHUMER. You would make that a priority? 

36 

Ms. WHITE. I would. I would. 

Senator SCHUMER. Thank you. 

Mr. Chairman, the old maxim is, ‘‘Quit while you are ahead.’’ 

[Laughter.] 

Chairman JOHNSON. Thank you, Ms. White and Mr. Cordray, for 

your testimony and for your willingness to serve our Nation. Please 

submit your answers to the written QFRs as soon as possible so 

that we can move your nomination in a timely manner. 

This hearing is adjourned. 

[Whereupon, at 11:56 a.m., the hearing was adjourned.] 

[Prepared statements, biographical sketches of nominees, responses to written questions, and additional material supplied for 

the record follow:] 

37 

PREPARED STATEMENT OF RICHARD CORDRAY 

NOMINEE FOR DIRECTOR OF THE CONSUMER FINANCIAL PROTECTION BUREAU

MARCH 12, 2013 

Chairman Johnson, Ranking Member Crapo, and Members of the Committee, I 

am honored to be here once again as the nominee to serve as the Director of the 

Consumer Financial Protection Bureau. I am grateful to the President for the confidence he has shown in me and for giving me the opportunity to continue serving 

our country in this role. If confirmed, I pledge that I will do all I can to carry out 

and enforce the law that Congress passed to protect consumers and help consumer 

financial markets emerge from the devastating financial collapse of 2007–2008. 

Over the past 2 years, I have come to understand how your Committee exercises 

great responsibility for managing legislation that affects the lives of all Americans. 

I am in earnest in saying that it is a pleasure to appear before you frequently in 

my current role, and we have seen that our relationship can be cooperative and 

fruitful. If confirmed, I look forward to working closely with each of you to pursue 

the common goal that we share: to see that the people and families whom we serve 

are treated fairly in the essential marketplace for consumer finance. 

I am also glad once again to have my wife Peggy and my twins Danny and Holly 

here with me today. Like many of you, I commute back and forth from a long distance to do this work. My family has been willing to make real sacrifices, without 

complaint, because they believe in what I am doing to serve our country. They know 

how deeply I care for them and depend on their steadfast support. 

From childhood, my parents taught me the value of work that seeks to improve 

the lives of others. My Dad, Frank, who just turned 95 last month, spent his entire 

career in programs that served children and adults with developmental disabilities. 

My Mom, Ruth, who died of cancer when I was in college, founded the first foster 

grandparent program for the developmentally disabled in Ohio, in addition to doing 

all the many and various things that a mother does to raise three rambunctious 

boys. 

My approach to the role of Director is deeply informed by their influence. It is 

also deeply informed by more than two decades in public service. After completing 

degrees in political theory, economics, and law, I worked as an attorney in the private sector with individual and business clients. During that time, I was in and out 

of public service, including a brief stint in the Ohio legislature where I first became 

involved in consumer protection law. In 2002, however, my life took a different direction when I became the Franklin County Treasurer. 

The job required me to develop managerial skills and knowledge needed to run 

a financial office and safeguard public funds. But there was also another, very significant dimension of this work. From the beginning, I set out to collect millions of 

dollars from those who were evading paying their property taxes, and in doing so 

to protect all the law-abiding taxpayers and businesses who faithfully find a way 

to meet their obligations. 

As I went about that task, I was deeply impressed by the importance of consumer 

finance issues and the growing difficulties they posed for families and households. 

Although I found that many delinquent taxpayers were not willing to pay their 

share until we moved aggressively to enforce the law against them, I also found 

something different and noteworthy: Many others did not want to be in trouble, and 

wanted to pay their share, but were in tough circumstances through no fault of their 

own. Sometimes it was because of the loss of a job. Other times it was because of 

a death or serious illness in their family or because of a divorce that heaped on the 

added expense of running two households instead of just one. 

Out of these experiences, I developed a resolve to address these kinds of financial 

difficulties that confront our communities. I quickly learned that there is no such 

thing as a one-size-fits-all solution as we seek to aid those who want to do the right 

thing and, when necessary, to thwart those who seek to take advantage of others. 

On a variety of issues, we experimented with new approaches, and sought partnerships with a wide array of stakeholders. We were successful in pushing for a new 

law requiring high school students to receive personal finance education before they 

could graduate. As we saw the foreclosure crisis wreaking havoc in many neighborhoods, we created a ‘‘Save Our Homes’’ task force to bring together businesses and 

banks, nonprofits, and Government, to work together in assisting people who were 

just frantic not to lose their homes. 

Later I became the State Treasurer. In that position, it was my primary duty to 

protect the public’s money during the financial crisis, a job I fulfilled by steering 

clear of risky investments. In addition, I continued to work on consumer issues. We 

expanded the ‘‘Save Our Homes’’ program into a statewide effort, and I cochaired 

38 

a task force to work with mortgage servicers on a voluntary basis to seek fair treatment of their customers. The Chief Justice of the Ohio Supreme Court and I teamed 

up to start a foreclosure mediation program in the courts. And we implemented the 

new personal finance education law by developing a curriculum and training hundreds of teachers. 

Another major initiative during my time as Treasurer was the dramatic expansion 

of a low-interest loan program designed to help small businesses create jobs and to 

help farmers obtain needed funds on an affordable basis. We went out of our way 

to make this initiative available to the community banks that make credit available 

to borrowers and form the backbone of our smaller and medium-sized towns. All of 

this work reinforced for me how creative strategies can be beneficial to both consumers and honest businesses. 

Before coming to the Bureau as the chief of Enforcement, I also served as the 

Ohio Attorney General. There, we took on sweepstakes scams and other frauds targeting the elderly. We pursued many actions against foreclosure rescue scammers 

who were reaching into the pockets of desperate people in an effort to steal what 

little remained as they sought to keep their homes. And where necessary, we pursued those mortgage servicers who, despite strong warnings, repeatedly violated 

consumer protection laws. 

As Ohio’s Attorney General, I instituted an early warning policy of notifying parties and giving them a chance to tell us their side of the story before we filed a lawsuit. On a number of occasions, this policy allowed us to resolve issues without 

going to court. 

At every stage of our work, I believed—and I believe today—that law enforcement 

which is evenhanded, fair, and reasonable not only protects consumers, but also supports what I call the honest businesses in two key ways. First, the businesses that 

cheat can gain a significant and unfair advantage, and law enforcement protects 

honest businesses against the cheaters. Second, keeping the marketplace clean ensures consumers are treated fairly and gives them confidence they need to participate in that market. 

These are the experiences that brought me in January 2011 to the Consumer Financial Protection Bureau. When I became director 1 year later, I resolved to do 

everything in my power to make the Bureau accountable to American consumers, 

to American businesses, and to the Congress. 

As the economy recovers, we want people to know they now have a new agency 

standing on their side, looking out for their interests, to help restore their confidence in the consumer financial marketplace. So far, even though our work is still 

in its early stages, we have been busy addressing some of the most critical problems. 

For the largest single consumer financial market—the mortgage market, worth 

trillions of dollars—we have adopted new rules to ensure that the excessive and irresponsible practices that helped precipitate our Nation’s financial calamity cannot 

be repeated. These rules protect people shopping for a loan from being saddled with 

something they cannot afford. They protect existing homeowners from getting the 

runaround and being hit with surprises by their mortgage servicers. And, critically, 

they help struggling homeowners fighting to be responsible borrowers, pay back 

their mortgages, and avoid foreclosure. 

In the credit card market, we are implementing and overseeing the extensive positive changes that Congress made in the CARD Act. For consumers who have been 

deceived by credit card companies, we have worked closely with our fellow regulators to put $425 million back in consumer’s pockets, with more to come. 

In the student loan market, we have teamed up with the Department of Education to create products like the Financial Aid Shopping Sheet, which helps students understand how best to manage increasing levels of student loan debt. 

We also are developing and delivering powerful new tools for all consumers. For 

consumers who have felt disempowered by the convoluted rhetoric around many financial products, we have harnessed the power of technology to deliver clear information through our ‘‘Ask CFPB’’ tool, which is an interactive database of nearly 

1,000 answers to common consumer questions. 

Perhaps the most direct example of addressing problems in the consumer finance 

markets is our consumer response function. To date, we have already handled more 

than 130,000 complaints from people in every State around the country. Consumers 

have contacted us for help resolving specific problems they have experienced with 

consumer financial products and services, ranging from improper charges on credit 

cards to mortgage payments that were wrongly applied. Many of these complaints 

have been referred to us by you and your colleagues, and we thank you for that. 

Through our consumer response operation, we have helped return millions of dollars 

to consumers and have addressed many problems that had been frustrating your 

constituents for months or even years. 

39 

We have begun to fulfill our pledge of transparency around the work we are engaged in. We are presenting information to the public about our Consumer Complaint Database, which sheds new light on where customer service is falling short 

and how it can be improved. And we are building a National Mortgage Database 

that will allow researchers to track the long-term performance of this critical marketplace for consumer credit in ways not possible before. 

We are also experimenting with new methods of broadening public participation 

and heightening our accessibility in our rulemaking process. We have embarked on 

unprecedented efforts to assist industry in implementing our new rules. Our goal 

is to reduce the compliance burdens of implementation and help us better understand how to write practical rules that deliver value for consumers. 

Along with these initiatives, we are responding to an explicit challenge that Congress laid down for us by attacking the unique problems that confront special populations of consumers. In addition to our work with students, Assistant Director Skip 

Humphrey and his team are working to help older Americans get sound information 

and advice about their retirement finances. 

We have also become fierce advocates for servicemembers, veterans, and their 

families. Assistant Director Holly Petraeus and her dedicated team have helped secure changes in mortgage programs to take account of permanent-change-of-station 

orders. They have also empowered servicemembers and veterans to make more informed decisions about how to use their benefits under the GI Bill for the 21st Century. And they have highlighted how consumer debt can adversely affect security 

clearances. 

So these are the kinds of issues that the Consumer Bureau is already addressing 

on behalf of the millions of American consumers from coast to coast, reflecting the 

full diversity of this great country. Of course, there is much more to be done in each 

of these areas, and we are determined to make more progress. Our essential work 

is to serve and protect consumers—our mothers and fathers, sisters and brothers, 

sons and daughters—all the people of this country who rely every day on the markets for consumer finance. They deserve a fair shake, and they deserve to have this 

agency standing on their side to make sure they are treated fairly. 

Mr. Chairman and Members of the Committee, thank you for your time and your 

consideration today. I will be glad to answer your questions. 

40 

41 

42 

43 

44 

45 

46 

47 

48 

49 

50 

PREPARED STATEMENT OF MARY JO WHITE 

NOMINEE FOR CHAIR OF THE SECURITIES AND EXCHANGE COMMISSION

MARCH 12, 2013 

Chairman Johnson, Ranking Member Crapo, and Members of the Committee, it 

is my privilege to appear before you today as President Obama’s nominee to be the 

31st Chair of the Securities and Exchange Commission. 

There is no higher calling than public service. As the United States Attorney for 

the Southern District of New York for almost 9 years, I worked very hard on behalf 

of the American people investigating, prosecuting, and punishing those who committed crimes. From white collar criminals to terrorists—regardless of the complexity of the case or the identity of the defendant—we always strove to do the right 

thing and to vigorously enforce the law. Today, I am honored by the prospect of potentially returning to public service as the Chair of the SEC to help carry out its 

essential mission. 

While I served as United States Attorney, our office worked closely with the SEC 

investigating and prosecuting violations of the Federal securities laws by both companies and individuals. Through that experience, I became a strong admirer of the 

expertise, independence, and commitment of the Commission and its staff. I fully 

appreciate the critical role the SEC plays as the primary regulator of our capital 

markets and as a strong advocate on behalf of investors. Today, in the wake of the 

financial crisis and in the midst of implementing the substantial legislative mandates of the Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank Act) and the Jumpstart Our Business Startups Act (JOBS Act), the SEC’s 

importance and scope of responsibilities are greater than ever. 

If confirmed, I will vigorously embrace and carry out the SEC’s mission to protect 

investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. The SEC’s mission has a tri-partite mandate, but the component parts should 

not be viewed as in conflict with each other. It is the responsibility of the Chair and 

the Commission to take the long-term view, balance the objectives when necessary, 

and seek to fulfill all parts of its critical mission. Then, our markets can thrive and 

investors will be protected and benefit. 

As was true when Chairman Schapiro was first before this Committee in 2009, 

this too is a crucial time for the SEC. Although the worst of the recent financial 

crisis may be behind us, none of us can be complacent—least of all the SEC, which 

has faced a number of its own challenges. Under the leadership of Chairman 

Schapiro and Chairman Walter, the SEC has made significant strides to strengthen 

its examination and enforcement functions, improve its capacity to assess risks, and 

enhance its technology. Our markets, however, are continuously evolving, and the 

technology of today is most certainly not the technology of tomorrow. Fast-paced and 

constantly changing markets require constant monitoring and analysis, and when 

issues are identified, the investing public deserves appropriate and timely regulatory and enforcement responses. 

I am acutely aware that the position of Chair of the SEC carries with it heavy 

responsibilities and many challenges. But I commit to this Committee and the 

American public that, if confirmed, I will work tirelessly and do everything in my 

power to effectively lead the SEC in fulfilling its mission. Let me very briefly highlight a few early priorities were I to be confirmed. 

First, I would work with the staff and my fellow Commissioners to finish, in as 

timely and smart a way as possible, the rulemaking mandates contained in the 

Dodd-Frank Act and JOBS Act. The SEC needs to get the rules right, but it also 

needs to get them done. To complete these legislative mandates expeditiously must 

be an immediate imperative for the SEC. 

With respect to rulemaking, rigorous economic analysis is important and should 

inform and guide the decisions that are made. Although challenging—particularly 

in the quantification of benefits—in my view, the SEC should seek to assess, from 

the outset, the economic impacts of its contemplated rulemaking. Such transparent 

and robust analysis, including consideration of the costs and benefits, will help ensure that effective and optimal solutions are achieved without unnecessary burdens 

or competitive harm. If confirmed, I would continue the efforts of the Commission 

to ensure that the SEC performs robust analysis in connection with its rules and 

in a manner that does not undermine the SEC’s ability to carry out its mandate 

to protect investors and our capital markets. 

Second, if confirmed, it will be a high priority throughout my tenure to further 

strengthen the enforcement function of the SEC—it must be fair, but it also must 

be bold and unrelenting. Investors and all market participants need to know that 

the playing field of our markets is level and that all wrongdoers—individual and 

51 

institutional, of whatever position or size—will be aggressively and successfully pursued by the SEC. Strong enforcement is necessary for investor confidence and is essential to the integrity of our financial markets. Proceeding aggressively against 

wrongdoers is not only the right thing to do, but it also will serve to deter the sharp 

and unlawful practices of others who must be made to think twice—and stop in 

their tracks—rather than risk discovery, pursuit, and punishment by the SEC. 

Third, the SEC needs to be in a position to fully understand all aspects of today’s 

high-speed, high-tech, and dispersed marketplace so that it can be wisely and optimally regulated, which means without undue cost and without undermining its vitality. High frequency trading, complex trading algorithms, dark pools, and intricate 

new order types raise many questions and concerns. Are they problematic for retail 

and noninstitutional investors? Do they result in unnecessary volatility, or create 

an uneven playing field? Or do these modern-day features bring benefits such as efficiency, price reduction, and healthy competition to our markets? Do they do all of 

these things? The experts and studies to date have not been consistent or definitive 

in their observations and findings about whether and to what extent harm is caused 

by the current market structure and practices. There must be a sense of urgency 

brought to addressing these issues to understand their impact on investors and the 

quality of our markets so that the appropriate regulatory responses can be made. 

If confirmed, I will work not only to ensure that the SEC has the cutting-edge technology and expertise necessary to enable it to keep pace with the markets and its 

responsibilities to monitor, regulate, and enforce the securities laws, but also to see 

around the corner and anticipate issues. 

There are, of course, many other important areas within the jurisdiction of the 

Commission: from money market funds to private fund advisers, from credit rating 

agencies to clearing agencies, from the appropriate standards and regulations governing the conduct of broker-dealers and investment advisers when providing investment advice to retail customers to how to make public issuer disclosures more 

meaningful and understandable to investors, to name just a few. If confirmed, I 

would focus on these and the many other challenges facing the SEC. 

In conclusion, it would be my privilege and honor to work with the men and 

women of the Commission and this Committee to help carry out the SEC’s mission. 

Thank you for considering me to serve in this capacity and for the opportunity to 

appear before you today. I would be happy to answer your questions. 

52 

53 

54 

55 

56 

57 

58 

59 

60 

61 

62 

63 

64 

65 

66 

67 

68 

69 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO 

FROM RICHARD CORDRAY 

Q.1. For most of the rulemakings that the CFPB proposed since its 

inception, it claimed not to have sufficient data to conduct a thorough cost-benefit analysis. Is the CFPB spending enough money on 

its research and market analysis? If so, what else can the CFPB 

do to ensure that it has sufficient information to conduct a thorough cost-benefit analysis, as required by law? 

A.1. As specifically required by the Dodd-Frank Wall Street Reform 

and Consumer Protection Act (Dodd-Frank Act), the CFPB has conducted analyses of the benefits, costs, and particular impacts of its 

rulemakings with the information that has been reasonably available to the CFPB. These analyses have been thorough and generally have been published for public comment before being finalized so that interested parties could submit additional information 

to the CFPB to enhance the analyses. When members of the public 

have submitted additional information, the Bureau has considered 

that information on the record in finalizing its analysis. 

The CFPB would prefer to have more data as opposed to less 

when analyzing regulatory impacts, but there are significant constraints on data availability. Where feasible and appropriate the 

CFPB has acquired data from third parties that have already collected and compiled the data. But often data are not available for 

acquisition, and undertaking a new data collection could impose 

costs on private parties. The CFPB determines on a case-by-case 

basis whether the potential costs of a collection are likely to be justified by the potential benefits. The CFPB also has to consider 

whether the data can be acquired or collected in time to meet statutory deadlines, which is an important constraint. Certain collections cannot even be commenced (let alone completed) until after 

a months-long process to obtain approval for the collection under 

the Paperwork Reduction Act. Nevertheless, the Bureau will continue to work to ensure that it has sufficient information to conduct 

the analyses required by law. 

Q.2. CFPB’s mortgage servicing rule amended RESPA to expanded 

mortgage servicers’ obligations. Since RESPA has a private right of 

action, consumers will now have a Federal private right of action 

against a servicer for any alleged failure to engage in proper loss 

mitigation. Did the CFPB conduct an economic analysis regarding 

whether and if so, how much, this rule will increase the cost of 

mortgages by exposing banks to more lawsuits? 

A.2. The Bureau considered the advantages and disadvantages of 

the private right of action associated with the loss mitigation procedures and with certain other amendments to Regulation X in preparing the final rule. In that regard, the Bureau has multiple authorities under RESPA, some of which are subject to private causes 

of action and some of which are not, and the Bureau carefully calibrated the RESPA servicing rule with this in mind. Accordingly, 

with respect to loss mitigation, private causes of action exist only 

for specified provisions of the final rule, generally involving violations of specified procedural requirements and timelines relating to 

loss mitigation. Broader requirements for servicers to maintain certain policies and procedures relating to loss mitigation are not priVerDate Nov 24 2008 14:29 May 23, 2013 Jkt 048080 PO 00000 Frm 00073 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-12 NOMINATIONS OF CORDRAY AND WHITE\HEARING\31213.TX
70 

vately enforceable. Thus, once the final rule is effective, servicers 

will be subject to a private right of action under RESPA for failure 

to comply with certain procedural requirements with respect to 

evaluations for loss mitigation options—for instance, failing to 

evaluate a complete loss mitigation application within the timelines 

specified by the rule. However, servicers will not be subject to a 

private right of action under RESPA for failure to comply with investor guidelines to achieve loss mitigation results. The Bureau 

was concerned that such an approach might cause investors to stop 

offering loss mitigation options altogether for fear of litigation and 

delays in foreclosure timelines. Requirements that servicers maintain reasonable policies and procedures to evaluate loss mitigation 

options pursuant to investor guidelines are subject to enforcement 

by the appropriate regulator. 

Regulatory analyses generally assume that firms comply fully 

with a proposed rule and therefore incur costs associated with such 

compliance. Any other approach would require the Bureau to reduce the costs of compliance by a specified factor. In addition, assessing the potential costs of civil liability would require the Bureau to determine the probability that firms would under-comply 

with the loss mitigation provisions in questions and face resulting 

lawsuits, as well as the probability that firms would fully comply 

but nevertheless face nonmeritorious litigation. The analysis would 

involve further complexity given that compliance with the provisions of the final rule could also benefit firms by reducing other 

types of lawsuits asserting violations of existing legal requirements. For example, compliance with the general servicing policies, 

procedures, and requirements may reduce lawsuits asserting that 

servicers have failed to comply with applicable law with respect to 

sworn affidavits and notarized documents in connection with foreclosure proceedings. Similarly, compliance with the loss mitigation 

procedures may reduce lawsuits asserting claims based on a 

servicer conducting a foreclosure sale when a borrower has accepted an offer of a loss mitigation option and is performing pursuant 

to such option. Data that would permit the estimation of these various probabilities was not reasonably available to the Bureau. The 

Bureau intends to monitor the implementation of the servicing 

rules and to ensure that the rules achieve the intended consequences of guaranteeing borrowers an evaluation for a loss mitigation option where appropriate. 

Q.3. Currently, the CFPB is collecting account-level data from payment card issuers. It is my understanding that the request covers 

millions of individuals’ credit card accounts and that the information must be supplied to the CFPB on a monthly basis. The CFPB 

is requesting that the information be sent to the agency with personally identifying information about consumers. Please answer the 

following questions with regard to this collection of individual consumer transactions: 

What is the purpose of this data collection? 

A.3. The CFPB is not collecting any personally identifiable information about any consumers as part of its credit card data collection effort. The data we are collecting as part of our ongoing supervisory activities will help the CFPB to assess and examine compliVerDate Nov 24 2008 14:29 May 23, 2013 Jkt 048080 PO 00000 Frm 00074 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-12 NOMINATIONS OF CORDRAY AND WHITE\HEARING\31213.TX
71 

ance with Federal consumer financial protection laws and risk to 

consumers in the credit card marketplace. 

Q.4. How many accounts has the CFPB followed and how many is 

it currently following? Does it change the consumer accounts it 

maintains records for after a certain period of time or track certain 

account records continuously? 

A.4. The CFPB is obtaining information from a number of credit 

card issuers on a monthly basis on those issuers’ accounts. Information about the number of accounts on which the CFPB receives 

data is confidential supervisory information. 

Q.5. Why is it necessary to demand all consumer account data instead of an anonymous representative sample? 

A.5. The data are anonymous and cannot be used to identify any 

individual consumer. Identifying a sample that would be representative of an issuer’s portfolio would be burdensome for the issuer, 

which would need to pull that sample each month and then go 

through further procedures and analyses to compare those accounts 

to its overall portfolio to assure that the sample was representative. 

Q.6. What does the CFPB intend to do with it? 

A.6. The CFPB uses the data to inform its supervisory processes 

and to monitor risks to consumers. These data help the CFPB to 

analyze and benchmark credit card issuers across our supervision 

work. The CFPB also uses the data to assess and examine compliance with Federal consumer financial protection laws. 

Q.7. Has the agency set a time period for retaining this data, and 

will the individual consumer transaction information be purged 

from all Federal records after this retention period? 

A.7. The data exclude personally identifiable information about individual consumers. There is no set time period for retention of the 

data. 

Q.8. Does the CFPB share this information with any outside third 

parties? Are these outside third parties under contract with the 

CFPB? With whom does the CFPB intend to share it in the future? 

A.8. The CFPB has retained a data services vendor that manages 

the data on the CFPB’s behalf, and that vendor is under contract 

with the CFPB and is subject to all Federal data protection rules 

and requirements. The CFPB does not otherwise share this information with any nongovernmental outside third parties. 

Q.9. Does the CFPB provide this data—in whole, part, or summary—to any other Federal agency or entity? If so, please describe 

how this data is requested and how it is shared. 

A.9. The Bureau generally shares data with prudential regulators 

in accordance with the Supervisory Data Sharing Memorandum of 

Understanding between the CFPB and the prudential regulators. 

Any sharing of these loan-level data would comply with those 

agreements. 

Q.10. How much does the agency spend annually on this data collection? 

72 

1These include protections set forth in the Act; the Bureau’s confidentiality regulations at 12 

CFR §1070.40 et seq.; Exemption 8 of the Freedom of Information Act, 5 U.S.C. §552(b)(8); and 

CFPB Bulletin 12-01, which is viewable online at http://www.consumerfinance.gov/wp-content/ 

uploads/2012/01/GClbulletinl12-01.pdf. 

A.10. The Bureau spends approximately $3 million per year on this 

data collection. 

Q.11. With respect to the Paperwork Reduction Act and other laws, 

OMB has set forth certain parameters for surveys and data collection. Please submit the OMB approval document for this data collection effort. 

A.11. This data collection is not subject to PRA requirements. 

Q.12. Do individuals and their families have the opportunity to opt 

out of this Federal agency data collection? 

A.12. Individuals and families are not identified in this data collection, and individual consumers and their families are not participants in this data collection. Title X of the Dodd-Frank Act authorizes the Bureau to supervise certain consumer financial services 

companies to protect consumers. Some of the consumer financial 

services companies under CFPB supervision are the participants in 

this data collection, and they may not opt out of supervision activities. 

Q.13. Do you anticipate that the CFPB will engage in rulemaking 

as a result of the data collection? 

A.13. The CFPB uses the data to inform CFPB analysis of risks to 

consumers in the credit card marketplace and risks to the market. 

Analysis of the data may lead the CFPB to identify areas where 

appropriate regulations could improve the functioning of the market, and may support the CFPB’s efforts to reduce outdated, unnecessary, or unduly burdensome regulations. Thus, this information 

may be used to inform future rulemaking activities as appropriate. 

Q.14. I understand that this account-level data is comprehensive of 

each payment card issuer that furnishes data. How is the CFPB 

ensuring that the consumer information it collects is kept secure; 

to date, has the CFPB suffered any breaches of data, and has any 

data breach reached consumer information? 

A.14. The data that the Bureau solicits and collects from issuers 

exclude personally identifiable information about the individual 

consumers to whom the data pertains. Accordingly, no breach of 

personally identifiable information by the CFPB is possible. For example, the names of individual consumers or their contact information, Social Security numbers, and credit card account numbers are 

not included in the data. Because the data is not personally identifiable, it also does not constitute a system of records that is subject 

to the requirements of the Privacy Act of 1974, 5 U.S.C. §552a. 

Nevertheless, all such data are subject to the protections given to 

information that the CFPB obtains through its supervisory authorities. 1 The data are managed according to IT security requirements 

that comply with Federal laws, policies, and procedures. 

73 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR MENENDEZ FROM RICHARD CORDRAY 

Q.1. I have long been focusing my attention on the inability of New 

Jerseyans and tens of millions of Americans to gain access to capital and begin to build their credit worthiness. At last month’s Consumer Advisory Board meeting, you spent a good portion of your 

time discussing this challenge. In fact, you said, ‘‘There is an obvious demand for short-term credit products, which can be helpful for 

consumers who use them responsibly and which are structured to 

facilitate repayment. We want to make sure that consumers can 

get the credit they need without jeopardizing or undermining their 

finances. Debt traps should not be part of their financial futures.’’ 

Based on your comments, and due to the fact that under Title 12 

of the Dodd-Frank Wall Street Reform and Consumer Protection 

Act, the CFPB is mandated to consider resources and foster financial innovation, what initiatives do you think your agency should 

pursue to increase access to credit for the millions of Americans 

who are currently unable to receive emergency loans? I think it is 

important to strike a balance between extending credit to consumers, while also implementing important consumer protections. 

There is certainly a demand for these products, but the American 

people need better options and protections. Are there ways the 

CFPB could regulate this industry while still keeping a product 

that’s ‘‘helpful for consumers who use them responsibly?’’ 

A.1. While the CFPB is committed to understanding what, if any, 

risks of consumer harms are present in the small-dollar credit market and using available tools to mitigate those harms, we agree 

that it is important to balance the sometimes competing considerations of access and consumer protections in the provision of small 

dollar credit. In fact, the Dodd-Frank Act requires that when the 

CFPB considers rulemaking that we ‘‘consider the potential benefits and costs to consumers and covered persons, including the potential reduction of access by consumers to consumer financial 

products or services’’ that may result. 

The CFPB also recognizes the need to learn about the potential 

for innovation in financial products and services. We have formalized our efforts with an initiative called Project Catalyst, which 

was launched at an event in Silicon Valley last November. This 

event included a roundtable that specifically focused on innovations 

in small dollar lending. Following that launch, we have established 

ongoing outreach and formal structures in which we will both learn 

from innovators and facilitate testing of certain innovations in the 

marketplace. The findings from these activities may help further 

inform any future policymaking on small-dollar lending. 

Q.2. The lack of access to capital largely affects minorities and 

chronically underserved communities. There is a study on this 

issue by the CFPB that I am waiting to be completed, and I look 

forward to reading once it is completed. As I have worked on payday lending legislation over the years, one question continuously 

comes up but is never answered is: if payday lending is further curtailed, what products will take their place in communities where 

people have not built strong credit backgrounds, but need shortVerDate Nov 24 2008 14:29 May 23, 2013 Jkt 048080 PO 00000 Frm 00077 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-12 NOMINATIONS OF CORDRAY AND WHITE\HEARING\31213.TX
74 

term credit? Is this something the CFPB is reviewing in its study? 

What are the Bureau’s recommendations on this issue? 

A.2. The CFPB recognizes that there is demand by consumers for 

credit that is available in small increments, including those consumers who may not qualify for products such as credit cards or 

signature loans. The CFPB is currently undertaking data-driven 

analysis to determine the patterns of use undertaken by consumers 

using payday loans offered by nonbanks and deposit advances offered by certain depository institutions, and the outcomes of differing patterns of use. We are particularly concerned with loans intended for short-term, occasional use being used in a sustained, 

long-term way, particularly by households that are not using these 

products to deal with a specific financial emergency, but are instead turning to payday loans because their expenses regularly outstrip their income. 

As part of this analysis we are looking at a variety of models by 

which small-dollar credit is currently offered to otherwise creditconstrained households. This includes determining which product 

structures and features may curtail sustained use and negative 

outcomes, as well as the feasibility of implementation. Part of this 

analysis can include looking at the different methods States have 

employed to curtail sustained use of payday loan products, as well 

as the variety of safety features that depository institutions currently impose on deposit advances. 

Q.3. The CFPB adopted new rules related to mortgage servicing 

standards in January 2013. I have long advocated for increasing 

consumer protections on borrowers before foreclosures, encouraging 

loan modifications, eliminating dual tracking, placing limits on 

foreclosure fees, and creating an appeals process for those denied 

loan modifications as well as a mediation program. Can you give 

an update on these rules and when we expect them to go into effect? Are lenders currently working to implement these standards 

now? What actions have mortgage servicers taken since the rules 

were issued in January 2013? 

A.3. The Bureau’s January 2013 servicing rules take effect on January 10, 2014. The rules address a number of the issues that you 

reference. For instance, they generally require servicers to make 

good-faith efforts to contact borrowers who are experiencing serious 

trouble with their loans and to provide information regarding foreclosure alternatives. Servicers generally are required to review applications for loan modifications or other loss mitigation options received by specified deadlines promptly for completeness, and to 

work with borrowers to obtain any missing information. For applications received by specified deadlines, the rules set certain deadlines for servicers to respond, require notification to borrowers of 

the results, and provide an opportunity to appeal denials. The final 

rule also prohibits a servicer from making the first notice or filing 

required for a foreclosure process until a mortgage loan account is 

more than 120 days delinquent, and if a borrower submits a complete application for a loss mitigation option before a servicer has 

made the first filing required for a foreclosure process, a servicer 

may not start the foreclosure process unless certain requirements 

are met. Finally, servicers are required to maintain policies and 

75 

procedures concerning various loss mitigation processes, including 

communications with both consumers and loan owners/investors of 

the loans and proper evaluation of applications according to the criteria established by owners/investors. We believe that the combined 

rules will help to reduce avoidable foreclosures and help to address 

concerns about ‘‘dual tracking.’’ 

Based on requests for guidance received from servicers, the Bureau is aware that servicers are already working on plans to implement the new requirements. The Bureau has a multifaceted regulatory implementation initiative underway to assist industry in implementing these and the other new mortgage rules that the Bureau issued to implement title XIV of the Dodd-Frank Act. The Bureau’s initiative includes plans for several updates to the regulatory text and official interpretations over the coming year, the 

first of which will be issued this spring. It also includes publication 

of small business compliance guides (with companion video 

versions) for the new rules, updated examination procedures, and 

compliance ‘‘readiness’’ guides for the new rules. In addition, the 

Bureau will be working with other regulatory agencies, trade associations, industry service providers, and some individual lending 

and servicing organizations to track industry implementation efforts. Through this engagement, the Bureau expects to learn more 

about implementation challenges and provide support to help companies implement the new requirements more efficiently. Further, 

the Bureau issued a supervisory bulletin regarding mortgage servicing transfers on February 11, 2013 (CFPB Bulletin 2013-01). 

Among other things, that bulletin advises servicers about existing 

consumer protection requirements and provisions in the mortgage 

servicing rules that specifically relate to mortgage servicing transfers. Notably, the Bureau’s new mortgage servicing rules are 

backed by supervision and enforcement authority that encompass 

both large banks and nonbanks that service mortgage loans. 

Q.4. Consumers’ use of prepaid cards has exploded in the past few 

years, especially among underbanked consumers. Since credit 

cards, debit cards, and gift cards have all been regulated to some 

degree, prepaid cards remain one of the few largely unregulated 

products out there. Some fees on these cards are undisclosed and 

others are unreasonable, and they don’t always come with FDIC insurance or protection against theft or loss for the consumer. What 

progress has the CFPB made in analyzing this issue, and when do 

you anticipate moving forward on it? 

A.4. The CFPB issued an Advance Notice of Proposed Rulemaking 

(ANPR) on General Purpose Reloadable (GPR) prepaid cards in 

May 2012. The ANPR reflects the Bureau’s interest in learning 

more about this product, including its costs, benefits, and risks to 

consumers, and expressed the Bureau’s intention to take regulatory 

action to extend the Regulation E protections to GPR cards. Our 

focus is on safety and transparency. Our ANPR generated approximately 250 comments, and we have combed through that feedback. 

We are currently in the process of using all the information we received to determine the scope of our rulemaking in this market. We 

do not yet have firm time frames for rulemaking in the GPR market, though activity will be under way later this year. 

76 

Q.5. The CFPB’s Office of Minority and Women Inclusion (OMWI) 

is now up and running. The reason for creating these offices was 

that there just is not enough minority representation within our financial regulators. What will you do to increase the number of minorities and women, especially in management positions and as 

contractors, at the CFPB? 

A.5. I agree that one of the primary roles of OMWI is to enhance 

diversity at the Bureau. As a newly formed agency, we’ve been able 

to build diversity into our work early on. While our employment of 

minorities and women at the Bureau exceeds the average for other 

FIRREA agencies, we believe we can further enhance diversity at 

the Bureau at all levels of the organization, including senior leadership positions. We have and will continue to do this by doing the 

following: 

• Collaborating with the Office of Human Capital on building 

and continually enhancing a comprehensive workforce planning and development strategy that includes training and developmental opportunities, mentorship programs, rotations, 

lateral moves, and detail opportunities that enhance the skills 

and key competencies necessary for advancement and success 

at the CFPB. 

• Conducting training for employees and supervisors in an effort 

to expand awareness, knowledge, and cultural competencies 

that aid in the understanding and management of a diverse 

workforce and its value to the CFPB mission. 

• Collaborating with division heads to promote policies, practices 

and procedures to ensure that all employees, including women 

and minorities, are being developed to attain their maximum 

potential. 

• Supporting the development of and facilitating a framework for 

a diversity council to report to management and discuss issues 

and concerns regarding diversity and inclusion. 

• Increasing outreach to and recruitment/hiring of minority and 

women candidates by recruiting at minority-serving institutions and women’s colleges and universities (e.g., Historically 

Black Colleges and Universities and Hispanic-Serving Institutions). 

• Utilizing the networks of current employees to promote the 

mission of the Bureau and advertise upcoming positions. 

• Participating in targeted internship programs, including the 

one operated by the Hispanic Association of Colleges and Universities. 

• Conducting specific diversity and inclusion training for all personnel engaging in the hiring process. 

• Evaluating and assessing the diversity of the candidate pool at 

various decision points and providing feedback to hiring authorities. 

• Partnering with divisions to develop diversity initiatives associated with the work of the CFPB. 

Q.6. What role does your OMWI play at the CFPB? Is it a part of 

the decision-making process when hiring employees and contracVerDate Nov 24 2008 14:29 May 23, 2013 Jkt 048080 PO 00000 Frm 00080 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-12 NOMINATIONS OF CORDRAY AND WHITE\HEARING\31213.TX
77 

tors? How often do you meet with Stuart Ishimaru (head of CFPB 

OMWI)? Does the CFPB’s procurement office meet with the CFPB’s 

OMWI? 

A.6. The OMWI plays a central role in the operations of the Bureau. The Director of the OMWI participates in meetings of the Operations Advisory Committee and the Policy Committee, two of the 

primary governance mechanisms for the Bureau, addressing the 

full breadth of the Bureau’s activities. The OMWI plays a consultative role in the hiring process, providing advice and counsel to hiring managers and the Office of Human Capital. 

I meet regularly with Stuart Ishimaru and he has direct access 

to me whenever he needs to speak with me. In addition, Stuart 

meets weekly with the Chief Operations Officer of the Bureau. The 

OMWI is housed in the Operations Division, which also houses the 

Office of Human Capital and the Procurement Office, both key 

partners of the OMWI under Section 342 of the Dodd-Frank Act. 

This placement facilitates cooperation and collaboration between 

these offices. The Procurement Office and the OMWI meet regularly, and are currently planning a number of joint activities to 

support our work with minority and women-owned small businesses. 

Q.7. Your OMWI has had a director for almost a year now, so can 

you provide a progress report? How many Hispanics, African Americans, women, and/or minorities are working at the CFPB? How 

about in mid-level to senior-level management positions? 

A.7. Attached is a chart providing responses to the questions and 

data on employees at the higher pay bands at the Bureau as of 

February 23, 2013. 

Of the nine most senior positions (Director, Deputy Director, 

Chief of Staff, and six Associate Directors) at the Bureau in 2012, 

78 

three minorities served in three positions and three women served 

in four positions (the General Counsel was previously Chief of 

Staff). At the next highest level, roughly half of the Assistant Directors are minorities and/or women. Minorities and women are 

represented in all six Divisions of the Bureau, and together lead 

roughly half of the offices in the Divisions. 

Q.8. You’ve said your OMWI will develop standards for equal employment opportunity and standards for the racial, ethnic, and gender diversity of the workforce and senior management of the agency. Can you provide an update on the creation of those standards? 

What are the standards and how were they formulated? 

A.8. The OMWI is required under Section 342 of the Dodd-Frank 

Act to create these standards, and is in the process of doing so. Recently, the Bureau created a separate Office of Equal Employment 

Opportunity to carry out the counseling, investigative, and enforcement functions required by various civil rights laws. The OMWI is 

working with the EEO Office and with the Office of Human Capital 

to develop standards for equal employment opportunity and for racial, ethnic, and gender diversity. 

The Bureau has established workforce planning processes and organizational structures allowing for more precise identification of 

position needs and successful performance attributes. We have 

identified and intend to utilize a variety of broad recruiting methods to capture a diverse pool of qualified candidates to be considered for employment at the Bureau. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR VITTER 

FROM RICHARD CORDRAY 

Q.1. The CFPB can write rules and enforce against unfair, deceptive, and abusive acts or practices. The Federal Trade Commission 

(FTC) has spent decades documenting and defining ‘‘unfair’’ and 

‘‘deceptive’’ through policy statements and guidance, so companies 

have an idea of what the standards mean. This is important because honest businesses want to treat their customers fairly and 

they build compliance programs based with these standards in 

mind to ensure they understand and abide by the rules of the road. 

‘‘Abusive’’ is defined only in a cursory way by the Dodd-Frank Act, 

and the CFPB has not taken any steps to help companies understand what the standard means, and in particular, how it relates 

to unfairness and deception. In fact, the Bureau has said that abusive will be defined through enforcement action rather through regulation, guidance, or some other transparent means. Fifty-one 

State Attorneys General can also enforce against ‘‘abusive’’ making 

it all the more important the CFPB take steps to ensure the standard is consistently applied. For these reasons, Dodd-Frank contemplated the Bureau would need to undertake a rulemaking to establish a definition for abusive—and perhaps even for unfair and 

deceptive. Given the uncertainty created by this new term for the 

business community, and the likelihood that multiple interpretations will develop among the States, will you commit to initiating 

a transparent process to take public input and define ‘‘abusive’’ before the Bureau brings any kind or enforcement action using this 

authority? 

79 

2 According to FTC’s Complaint Assistant, www.ftccomplaintassistant.gov, ‘‘The FTC enters all 

complaints it receives into Consumer Sentinel, a secure online database that is used by thousands of civil and criminal law enforcement authorities worldwide. The FTC does not resolve 

individual consumer complaints.’’ 

A.1. In Section 1031(d) of the Dodd-Frank Act, Congress clearly 

and expressly limited the meaning of ‘‘abusive’’ acts or practices to 

those that: 

1. materially interfere with the ability of a consumer to understand a term or condition of a consumer financial product or 

service; or 

2. take unreasonable advantage of a consumer’s: 

a. lack of understanding of the material risks, costs, or conditions of the product or service; 

b. inability to protect his or her interests in selecting or using 

a consumer financial product or service; or 

c. reasonable reliance on a covered person to act in the consumer’s interests. 

The Bureau will be vigilant in obeying the law enacted by Congress and in observing and adhering to the limits of its authority 

under this provision. Its application will depend on specific facts 

and circumstances. Note also that if the Bureau were to undertake 

a rulemaking to implement the abusive standard that would allow 

51 State Attorneys General to enforce that rule against federally 

chartered depository institutions, which cannot be done under the 

statute itself. 

Q.2. The Federal Trade Commission has a widely admired automated complaint database, but you decided to expend funds to create your own database rather than using the FTC’s database architecture. Why did you make that decision and how much has it cost 

to create your own database? 

A.2. The Dodd-Frank Act instructed the CFPB to ‘‘establish a unit 

whose functions shall include establishing a single, toll-free telephone number, a Web site, and a database or utilizing an existing 

database to facilitate the centralized collection of, monitoring of, 

and response to consumer complaints regarding consumer financial 

products or services.’’ In preparing to launch its Office of Consumer 

Response to serve these and other related functions, the CFPB researched and considered the complaint handling models, case management systems, and related databases of the prudential Federal 

regulators and the Federal Trade Commission. 

Given the specific complaint-handling requirements laid out in 

the Dodd-Frank Act, the Bureau was required to adopt an individual-level complaint operating model that required a case management system that is not congruent with the FTC’s ‘‘complaint 

database.’’ 2 The Bureau’s complaint-handling operational model 

and case management system allow it to collect, monitor, and respond to complaints for a wide range of consumer financial products and services, to ‘‘coordinate with the Federal Trade Commission or other Federal agencies to route complaints to such agencies,’’ to collect responses from companies to complaints, to allow 

for consumer review of those responses through a secure Web portal, to conduct individual investigations of consumer complaints, 

80 

and to facilitate necessary record keeping in order to meet its Congressional reporting requirements. Nonetheless, for greater efficiency and sharing of information, the CFPB’s case management 

system uses an application programming interface to feed consumer complaints directly into the FTC’s complaint database 

(known as ‘‘Consumer Sentinel’’) also, which makes those complaints available to civil and criminal law enforcement authorities. 

Creating a case management system that integrates the aforementioned functionality to support the Bureau’s complaint-handling model consistent with the requirements of Dodd-Frank has 

cost approximately $8 million to date, including the database. 

Q.3. The CFPB established a legal safe harbor for certain Qualified 

Mortgages that creates a strong economic incentive for lenders to 

write very conservative mortgages. At the same time, however, the 

CFPB has said it will use disparate impact analysis for Equal 

Credit Opportunity Act (ECOA) enforcement. I’m concerned that 

these two policies are inherently in conflict. If a lender follows your 

ability to repay rule by making a business decision only to make 

QMs could that lender be found to be in violation of ECOA? 

A.3. The Dodd-Frank Act provides a presumption of compliance 

with its new ability-to-repay requirements for certain ‘‘qualified 

mortgages.’’ In its recent rules to implement those provisions, the 

Bureau accorded safe harbor status to certain qualified mortgages 

and a rebuttable presumption of compliance for others, depending 

on the annual percentage rate of the loans at issue. In defining the 

boundaries of qualified mortgages and of the safe harbor, the Bureau recognized that conditions are fragile and investors remain 

concerned about managing risks in the wake of the financial crisis. 

At the same time, we did not intend to stigmatize loans that fall 

outside those boundaries or to signal that responsible lending can 

or should take place only within the safe harbor space. Quite the 

contrary, the preamble to the final rule makes clear that the Bureau expects over time to see a robust market develop outside the 

QM safe harbor and, indeed, outside of QM altogether. 

We have received questions from a number of market participants about how decisions about what types of mortgages to offer 

under the ability to repay rule would be evaluated under ECOA 

and Regulation B. The Bureau recognizes that, depending on their 

business model, some creditors may primarily offer loans that are 

QMs, or non-QMs. The Bureau recognizes that business model decisions are affected by many legitimate considerations, including the 

ability to sell loans on the secondary market and appetite for repayment risk. We expect that business models will evolve over the 

next several years as creditors explore different options and as the 

mortgage markets shift in response to economic conditions and 

other regulatory initiatives. We are committed to engaging with 

stakeholders as they implement the new rules. We know creditors 

are working to make thoughtful decisions about their business 

models as the market environment evolves, and we are working as 

expeditiously as possible to develop and provide industry with consistent guidance on how we will approach supervision and enforcement under the QM rule and ECOA. 

81 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR JOHANNS 

FROM RICHARD CORDRAY 

Q.1. To follow up on a question I asked in our hearing, you have 

often taken the position that the budget of the CFPB is exceptionally transparent, and that transparency extends to your budget 

simply because you post it online. While I disagree with your refusal to allow Congressional oversight of your budget through the 

appropriations process, I know that this refusal is absolute. In the 

name of transparency, however, I need a more clear answer as to 

whether you are willing to appear before the Appropriations Subcommittee on Financial Services and General Government to walk 

through your budget documents and answer questions about the 

spending habits of the Bureau? Although you appear before the 

House and Senate Financial Services and Banking Committees, respectively, the Financial Services and General Government Subcommittee has the specialization and expertise in these areas and 

your commitment to working with the subcommittee is vital. 

A.1. Section 1017(a)(2)(C) of the Dodd-Frank Act provides that the 

Bureau’s funds derived from the Federal Reserve System shall not 

be subject to review by the Committees on Appropriations, and Section 1017(c)(2) provides that funds obtained by or transferred to the 

Bureau Fund shall not be construed to be Government funds or appropriated monies. Unlike agencies over which the Appropriations 

Committee has jurisdiction, the Bureau is an independent bureau 

within the Federal Reserve System. Nevertheless, the Bureau was 

pleased to provide over 100 pages of budget information in our annual report to the Appropriations Committees in July of 2012, including copies of fund transfer correspondence with the Federal Reserve Board, information on major expenditures, spending by division/program area, contractual obligations, a description of our 

budget process, our budget justification, information on our civil 

penalty fund, and numerous other materials. We also released a 

draft Strategic Plan for public comment in 2012, which includes 

goals, outcomes, strategies, and performance measures that inform 

our performance-based budget process. We anticipate releasing the 

final Strategic Plan in the Spring, along with updated budget and 

performance documents. The Bureau’s annual financial reports, 

quarterly spending updates, and budget justifications are also 

available on our Web site at www.consumerfinance.gov/budget. Director Cordray has met with members of the Appropriations Committees on numerous occasions and has discussed various aspects 

of the Bureau’s budget and operations with them. In addition, the 

Director has welcomed opportunities to testify before committees 

and subcommittees of both the House and Senate on the Bureau’s 

budget. In fact, the Bureau has now testified 31 times before Congress. The Bureau will be happy to meet with any Member of Congress to walk through its budget documents and answer questions. 

Q.2. H.R. 4367, a bill on which I worked very hard here in the Senate, removed the Federal requirement for ‘‘on the machine’’ disclosures on ATM machines. This bill was signed into law nearly 3 

months ago, yet a look at Regulation E (CFR 1005.16) still lists the 

‘‘on the machine’’ requirement as something with which our community banks must comply. Why is it that the CFPB has not found 

82 

the time to update the regulation and remove a requirement that 

the Congress unanimously agreed was unnecessary and costly? 

A.2. The Bureau agrees that changes in the law to eliminate unnecessary and costly requirements are a high priority and has been 

working hard on a rule to implement this statutory revision. In 

fact, we expect to issue the rule this month. Because the rule provides compliance burden relief, and because it merely implements 

the specific statutory revision, it is structured as a final rule that 

takes effect immediately on publication. 

Q.3. Lenders and service providers in the mortgage lending arena 

have stressed to the bureau that they will need a significant 

amount of time to implement new combined RESPA and TILA 

mortgage disclosures. Does the bureau have an implementation 

time frame in mind? Do you think 18 months is reasonable to ensure the greatest possible success with implementation? 

A.3. The Bureau has heard and appreciates concerns expressed by 

the mortgage and real estate settlement industries about the time 

needed to implement changes under the Bureau’s proposal to integrate TILA and RESPA disclosures. While the Bureau understands 

this concern and intends to remain engaged with affected persons 

in continuing to develop a final rule, that final rule has not yet 

been completed for two reasons. First, the Bureau is working carefully to ensure that such a significant undertaking as the integration of TILA and RESPA disclosures is done right, including 

through additional qualitative and quantitative consumer testing, 

which takes time. Second, the Bureau also has heard industry’s request that the integrated disclosures not be implemented too quickly, as creditors, mortgage servicers, and other affected persons 

work to comply with the many other regulatory changes under the 

Bureau’s January 2013 final rules implementing numerous new 

statutory requirements established by title XIV of the Dodd-Frank 

Act. As a general matter, the Bureau intends to make an informed 

determination as to the amount of time industry needs to comply 

with the integrated disclosure requirements and to afford industry 

adequate time, but the Bureau thus far has refrained from prejudging the question of exactly how much time that means and for 

now, at least, considers it inappropriate to comment on whether 18 

months is too short or too long. When the integrated disclosure 

rules are being finalized, and the Bureau knows exactly what they 

require and where the affected industries stand with respect to 

their implementation of the title XIV rules, the Bureau is confident 

that it will determine an appropriate implementation period in an 

informed manner. 

Q.4. The Small Business Review panel process informed the bureau about how it can reduce or eliminate added costs to implement new combined RESPA and TILA mortgage disclosures. One 

Small Business Review panel recommendation was to maintain the 

current line numbering to reduce software programming costs and 

industry confusion. Why did the bureau ignore this recommendation in its proposed rule to combine RESPA and TILA mortgage 

disclosures? 

A.4. One of the difficulties with the current HUD–1 that consumers 

receive at closing is that the line numbers for charges do not match 

83 

the Good Faith Estimate that consumers receive 3 days after application. In addition, the three- and four-digit line numbering system 

has proved difficult for consumers to understand. The Bureau is 

particularly mindful of the potential risk of information overload 

for consumers, given the amount of numbers and complexity involved in the credit transaction and the underlying real estate 

transaction. Consumer participants at the Bureau’s testing appeared overwhelmed by the three- and four-digit line numbers on 

the prototypes that were designed similarly to the current RESPA 

settlement statement. They performed worse in terms of understanding the pertinent information with prototypes containing that 

system. The Bureau also tested prototypes with a two-digit line 

numbering system, which performed better with both consumer 

and industry participants at the Bureau’s testing, with some industry participants at the Bureau’s testing preferring it over the system of the current RESPA settlement statement. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR KIRK 

FROM RICHARD CORDRAY 

Q.1. At Tuesday’s hearing, you stated that the CFPB is applying 

the Government Performance and Results Act (GPRA) to show how 

the agency is justifying its spending. Please provide the most recent GPRA report. If no current GPRA report is available, then 

please provide any interim GPRA report. 

A.1. The Bureau’s first draft of its strategic plan under GPRA is 

publicly available on its Web site at http:// 

www.consumerfinance.gov/strategic-plan/. We anticipate releasing 

a final version of the strategic plan this spring, along with updated 

budget and performance documents. 

Q.2. The CFPB is required by Dodd-Frank to convene a Small 

Business Review Panel when issuing a rule that will significantly 

impact a large number of small entities. In your August 1, 2012, 

testimony before the House Committee on Small Business, you 

stated that ‘‘[s]mall business review panels are a valuable component of our rulemaking process.’’ Yet, the Bureau did not convene 

a panel for the ability-to-pay rule because the rule was transferred 

to the Bureau from the Federal Reserve. Nonetheless, the Bureau 

did convene a small business review panel for the RESPA TILA 

mortgage disclosures, even though that rule was also transferred to 

the Bureau from the Federal Reserve. Can you provide clarity regarding the Bureau’s approach to convening small business review 

panels? Please explain why the CFPB chose to convene a panel for 

the RESPA TILA rulemaking but not for the ability-to-pay rulemaking. 

A.2. The CFPB conducts Small Business Review Panels in accordance with the requirements of the Regulatory Flexibility Act (RFA). 

The RFA, as amended, identifies the types of rules for which a 

Small Business Review Panel is required. Generally, the RFA applies only to rules for which a notice of proposed rulemaking is required by the Administrative Procedure Act, or ‘‘any other law.’’ 

When developing a proposed rule subject to the RFA, the CFPB is 

required to convene a Small Business Review Panel prior to issuing 

84 

the proposal unless the CFPB certifies that the rule will not, if promulgated, have a significant impact on a substantial number of 

small entities. Accordingly, the CFPB is not required to convene 

Small Business Review Panels for proposed rules that are not subject to the RFA or for proposed rules that are subject to the RFA 

but that the Director certifies will not have a significant economic 

impact on a substantial number of small entities. The CFPB also 

is not required to convene a Small Business Review Panel where 

another agency, such as the Federal Reserve Board, issued a rule 

proposal which was later inherited and finalized by the CFPB, 

since the statutory timing of the Small Business Review Panel is 

supposed to occur prior to issuance of the original proposal. This 

was the case with respect to the ability-to-repay rulemaking. 

The proposal to merge the TILA and RESPA mortgage disclosure 

requirements did not transfer to the CFPB from the Federal Reserve. The CFPB itself issued the proposal to merge the TILA and 

RESPA mortgage disclosure requirements pursuant to the requirements of the Dodd-Frank Act. The CFPB conducted a Small Business Review Panel before issuing this proposal. 

Q.3. Under the Small Business Regulatory Enforcement Fairness 

Act (SBREFA), the CFPB is required to give small businesses a 

preview of new proposals and receive extensive feedback from 

small businesses before proposing a new rule, including the potential impact of any new rules on the cost of credit for small businesses. Yet, the CFPB published all three of its Small Business Review Panel reports simultaneously with the proposed rules. By 

comparison, the Occupational Safety and Health Administration 

issues such reports when the panel is done. Why did the CFPB decide to publish the reports at the same time as the proposed rules 

and not after the panels were completed? Are there benefits to publishing the report after the panel has convened and before the proposal is issued? 

A.3. The statute requires that the Panel report be made public as 

part of the rulemaking record, but does not specify when the report 

should be released to the public. The CFPB released Panel reports 

with their corresponding proposed rules so that the public could 

consider them together. Publicly releasing the panel report with 

the Proposed Rule promotes transparency. As panel reports must 

be interpreted in the context of the corresponding proposed rule, releasing the Panel report before the proposed rule could cause unnecessary confusion. 

Q.4. In your statement, you mention that the CFPB is looking to 

help older Americans get sound information and advice about their 

retirement finances. In addition, you gave an interview to 

Bloomberg in January stating the CFPB is exploring initiatives in 

the ‘‘rollover moment.’’ What is the ‘‘rollover moment?’’ Is the CFPB 

relying solely on the statutory authority in Section 1013(g) of the 

Dodd-Frank Act establishing the Office of Financial Protection for 

Older Americans? Has the CFPB engaged any contractors and/or 

outside third parties to conduct research or analysis in the retirement savings area? Is the CFPB looking at retirement savings 

issues that target individuals other than seniors? 

85 

A.4. Some of the most important decisions that consumers make involve saving for retirement and making choices to improve their 

economic security later in life. Large numbers of Americans are expected to retire over the next decade, so some have referred to it 

as the ‘‘rollover moment.’’ Section 1013(g) of the Dodd-Frank Act directed the CFPB’s Office for Older Americans to undertake activities to enhance later-life economic security, including: 

• Providing goals for financial literacy programs for older Americans focusing on long-term savings and later-life economic security—and self-protection against unfair, deceptive, or abusive 

practices; 

• Researching best practices and effective strategies to educate 

older Americans on long-term savings as well as planning for 

retirement and long-term care; 

• Assessing and reporting on problems facing older Americans 

due to misuse of certifications and designations of financial advisors—and providing Congress and the SEC with policy recommendations; and 

• Coordinating consumer protection activities for older Americans with relevant Federal agencies and State regulators. 

The CFPB has a contract with Ideas42 d/b/a Behavioral Ideas 

Lab to help the Bureau examine consumers’ financial challenges in 

a range of financial decision-making areas, including the financial 

challenges that face older Americans. Saving for retirement before 

reaching retirement age and managing retirement savings accounts 

after retirement pose challenges to consumers and affect their 

later-life economic security. 

Q.5. Have you or any CFBP staff had conversations with officials 

and staff of the Departments of Treasury and Labor, the Internal 

Revenue Service, the Pension Benefit Guaranty Corporation, and 

the Securities and Exchange Commission regarding retirement savings issues? Has any agency request been made with respect to 

Section 1027 of the Dodd-Frank Act? 

A.5. The Bureau has had conversations with officials and staff of 

other departments and agencies about retirement savings issues. 

The Bureau is not aware of any formal request having been made 

pursuant to Section 1027 of the Dodd-Frank Act. 

Q.6. Has the CFPB entered into a contract with Ideas42 to look 

into the behavior science of auto enrollment and auto escalation 

features of 401(k) plans? Is this contract looking at seniors’ retirement savings decisions or other individuals’ retirement savings decisions? Was this contract put out for public bid? Please provide a 

copy of the contract and a copy of the justification if the contract 

was done as a sole source contract. 

A.6. The CFPB has a contract with Ideas42 d/b/a as Behavioral 

Ideas Lab to help the Bureau examine consumers’ financial challenges in a range of financial decision-making areas, including the 

financial challenges that face older Americans. The contract was 

properly competed for public bid and was not a sole source agreement. A copy of the contract is attached as Attachment A. 

86 

Attachment A 

87 

88 

89 

90 

91 

92 

93 

94 

95 

96 

97 

98 

99 

100 

101 

102 

103 

104 

105 

106 

107 

108 

109 

110 

111 

Q.7. Currently, the CFPB is collecting account-level data from payment card issuers. It is my understanding that the request covers 

millions of individuals’ credit card accounts and that the information must be supplied to the CFPB on a monthly basis. The CFPB 

is requesting that the information be sent to the agency with personally identifying information about consumers. Please answer the 

following questions with regard to this collection of individual consumer transactions: 

What is the purpose of this data collection? 

A.7. The CFPB is not collecting any personally identifiable information about any consumers as part of its credit card data collection effort. The data we are collecting as part of our ongoing supervisory activities will help the CFPB to assess and examine compliance with Federal consumer financial protection laws and risk to 

consumers in the credit card marketplace. 

Q.8. How many accounts has the CFPB followed and how many is 

it currently following? Does it change the consumer accounts it 

maintains records for after a certain period of time or track certain 

account records continuously? 

A.8. The CFPB is obtaining information from a number of credit 

card issuers on a monthly basis on those issuers’ accounts. Information about the number of accounts on which the CFPB receives 

data is confidential supervisory information. 

Q.9. Why is it necessary to demand all consumer account data instead of an anonymous representative sample? 

A.9. The data are anonymous and cannot be used to identify any 

individual consumer. Identifying a sample that would be representative of an issuer’s portfolio would be burdensome for the issuer, 

which would need to pull that sample each month and then go 

through further procedures and analyses to compare those accounts 

to its overall portfolio to assure that the sample was representative. 

Q.10. What does the CFPB intend to do with it? 

A.10. The CFPB uses the data to inform its supervisory processes 

and to monitor risks to consumers. These data help the CFPB to 

analyze and benchmark credit card issuers across our supervision 

work. The CFPB also uses the data to assess and examine compliance with Federal consumer financial protection laws. 

Q.11. Has the agency set a time period for retaining this data, and 

will the individual consumer transaction information be purged 

from all Federal records after this retention period? 

A.11. The data exclude personally identifiable information about 

individual consumers. There is no set time period for retention of 

the data. 

Q.12. Does the CFPB share this information with any outside third 

parties? Are these outside third parties under contract with the 

CFPB? With whom does the CFPB intend to share it in the future? 

A.12. The CFPB has retained a data services vendor that manages 

the data on the CFPB’s behalf, and that vendor is under contract 

with the CFPB and is subject to all Federal data protection rules 

112 

and requirements. The CFPB does not otherwise share this information with any nongovernmental outside third parties. 

Q.13. Does the CFPB provide this data—in whole, part, or summary—to any other Federal agency or entity? If so, please describe 

how this data is requested and how it is shared. 

A.13. The Bureau generally shares data with prudential regulators 

in accordance with the Supervisory Data Sharing Memorandum of 

Understanding between the CFPB and the prudential regulators. 

Any sharing of these loan-level data would comply with those 

agreements. 

Q.14. How much does the agency spend annually on this data collection? 

A.14. The Bureau spends approximately $3 million per year on this 

data collection. 

Q.15. With respect to the Paperwork Reduction Act and other laws, 

OMB has set forth certain parameters for surveys and data collection. Please submit the OMB approval document for this data collection effort. 

A.15. This data collection is not subject to PRA requirements. 

Q.16. Do individuals and their families have the opportunity to opt 

out of this Federal agency data collection? 

A.16. Individuals and families are not identified in this data collection, and individual consumers and their families are not participants in this data collection. Title X of the Dodd-Frank Act authorizes the Bureau to supervise certain consumer financial services 

companies to protect consumers. Some of the consumer financial 

services companies under CFPB supervision are the participants in 

this data collection, and they may not opt out of supervision activities. 

Q.17. Do you anticipate that the CFPB will engage in rulemaking 

as a result of the data collection? 

A.17. The CFPB uses the data to inform CFPB analysis of risks to 

consumers in the credit card marketplace and risks to the market. 

Analysis of the data may lead the CFPB to identify areas where 

appropriate regulations could improve the functioning of the market, and may support the CFPB’s efforts to reduce outdated, unnecessary, or unduly burdensome regulations. Thus, this information 

may be used to inform future rulemaking activities as appropriate. 

Q.18. I understand that this account-level data is comprehensive of 

each payment card issuer that furnishes data. How is the CFPB 

ensuring that the consumer information it collects is kept secure; 

to date, has the CFPB suffered any breaches of data, and has any 

data breach reached consumer information? 

A.18. The data that the Bureau solicits and collects from issuers 

exclude personally identifiable information about the individual 

consumers to whom the data pertains. Accordingly, no breach of 

personally identifiable information by the CFPB is possible. For example, the names of individual consumers or their contact information, Social Security numbers, and credit card account numbers are 

not included in the data. Because the data is not personally identiVerDate Nov 24 2008 14:29 May 23, 2013 Jkt 048080 PO 00000 Frm 00116 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-12 NOMINATIONS OF CORDRAY AND WHITE\HEARING\31213.TX
113 

3These include protections set forth in the Act; the Bureau’s confidentiality regulations at 12 

CFR §1070.40 et seq.; Exemption 8 of the Freedom of Information Act, 5 U.S.C. §552(b)(8); and 

CFPB Bulletin 12-01, which is viewable online at http://www.consumerfinance.gov/wp-content/ 

uploads/2012/01/GClbulletinl12-01.pdf. 

fiable, it also does not constitute a system of records that is subject 

to the requirements of the Privacy Act of 1974, 5 U.S.C. §552a. 

Nevertheless, all such data are subject to the protections given to 

information that the CFPB obtains through its supervisory authorities. 3 The data are managed according to IT security requirements 

that comply with Federal laws, policies, and procedures. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN 

FROM RICHARD CORDRAY 

Q.1. What combined effect do you expect the final rule on Qualified 

Mortgages and new servicing rules to have on the cost and availability of mortgage credit in the near future? 

A.1. In the Federal Register notices setting forth the final Abilityto-Repay/Qualified Mortgage (QM) rules and servicing rules, the 

CFPB shared its assessment of the potential effects of these rules 

on the cost and availability of mortgage credit. The CFPB stated 

its belief that the QM rule will not lead to a significant reduction 

in consumers’ access to mortgage credit or a material impact on 

cost. The CFPB also laid out in detail the basis for this belief. 

Among other reasons, the CFPB noted that underwriting practices 

and standards have tightened significantly since the financial crisis, so that implementation of the rule will not require a major 

change in current practices. The Bureau also noted that it had 

carefully structured the rules defining qualified mortgages to provide broad coverage for Qualified Mortgages, including a transition 

period, and through a variety of provisions to help encourage responsible loans to creditworthy borrowers as the market adjusts to 

the new regulatory regime, including further provisions that are 

currently under consideration in the concurrent proposal. 

As for the servicing rules, the CFPB stated that the cost of these 

rules is likely to be small. Regarding the amendments to Regulation Z, the Bureau exempted small servicers from the periodic 

statement requirement and found that the costs were extremely 

small for the variable-rate periodic adjustment notice, the new initial interest rate adjustment notice, the prompt crediting requirement, and the payoff statement requirement. Regarding the 

amendments to Regulation X, the CFPB explained that over 80 

percent of outstanding mortgages are guaranteed by Fannie Mae, 

Freddie Mac, FHA, or the VA and that many of the requirements 

of the final rule are similar or identical to requirements already 

imposed on servicers of such mortgages. Small servicers have been 

exempted from many of these requirements as well. 

Q.2. What kind of analysis and coordination is the CFPB undertaking to understand the aggregate impact of the Qualified Mortgages and Qualified Residential Mortgages (QRM) on the cost and 

availability of mortgage credit? Is the CFPB also taking into account how the proposed risk-weighting of mortgages and servicing 

rights in the Basel III proposals by the Federal Reserve, FDIC, and 

114 

OCC will affect the mortgage market before finalizing its QRM 

rulemaking? 

A.2. As stated above, the Bureau analyzed the potential impact of 

the QM rule on the cost and availability of mortgage credit. Under 

the statute, the Bureau is not an agency that will be finalizing or 

issuing either the QRM or the Basel III proposals. Therefore, conducting such analyses in the context of the QRM rulemaking and 

the risk-weighting of mortgages and servicing rights in the Basel 

III proposals by the Federal Reserve, the FDIC, and OCC are within the purviews of those other regulators rather than the CFPB. 

Q.3. In its first annual report, the CFPB Ombudsman recommended that the CFPB review and clarify what the enforcement 

attorney’s role during the supervisory examination is since it may 

be causing institutions to be less willing to share information. 

When do you expect the CFPB to act on this recommendation? 

A.3. The CFPB is currently reviewing its implementation of this 

policy, as recommended by the Ombudsman’s report. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR COBURN 

FROM RICHARD CORDRAY 

Q.1. Currently, Federal Reserve provides for CFPB’s operating 

costs from the ‘‘combined earnings’’ of the Federal Reserve System 

pursuant to Section 1017 of Dodd-Frank Wall Street Reform and 

Consumer Protection Act. In his February 14th testimony before 

the Senate Banking Committee, Chairman Bernanke stated that a 

recent Federal Reserve analysis estimated that the Federal Reserve might record losses of $40 billion and suspend contributions 

to the Treasury for 4 years beginning in 2017 if interest rates rise 

to 3.8 percent later this decade. If rates rise by another percentage 

point, the losses would triple, according to the study. As a result, 

the CFPB would have to seek funds from Congress at that time. 

If the CFPB does not intend to seek funds from Congress at that 

time, please explain how you plan to fund CFPB’s operations at 

that time? If the CFPB plans to seek funds from Congress at that 

time, why is it not appropriate to subject the CFPB to congressional appropriations process now? 

A.1. The Dodd-Frank Act authorizes the CFPB to receive funding 

from the Federal Reserve in amounts determined by the Director 

to be reasonably necessary to carry out the authorities of the Bureau, up to capped annual funding levels. The caps on the Bureau’s 

funding levels are expressed as a percentage of the total operating 

expenses of the Federal Reserve System as reported in its 2009 annual report and are thus fixed in amount at this time and going 

forward, without being affected by any ongoing fluctuations in 

earnings by the Federal Reserve. Estimates by the Congressional 

Budget Office show the CFPB as having spending authority derived 

from transfers from the Federal Reserve through the budget horizon. The Bureau is also authorized to seek up to $200 million annually in additional appropriated funds from Congress if deemed 

necessary, but the Bureau has no plans to seek any such appropriated funds at this time. However, the Bureau will continue to 

submit an annual report to the House and Senate Committees on 

115 

Appropriations, as it did in July of 2012, and is happy to meet with 

any Members of Congress to discuss the Bureau’s budget. 

Q.2. At the hearing, you stated that the CFPB is applying the Government Performance and Results Act (GPRA) to show how the 

agency is justifying its spending. Please provide the most recent 

GPRA report. If no current GPRA report is available, then please 

provide any interim GPRA report. 

A.2. The Bureau’s draft strategic plan under GPRA is publicly 

available on its Web site at http://www.consumerfinance.gov/strategic-plan/. We anticipate releasing a final version of the strategic 

plan this Spring, along with updated budget and performance documents. 

Q.3. A November 2012 audit of the CFPB by the Government Accountability Office (GAO) revealed that of CFPB’s approximately 

$300 million in obligations, $151 million was spent on Contracts & 

Support Services, $134.2 million on Salary & Benefits, and $14.6 

million on other obligations. Moreover, total CFPB net costs for 

FY2012 for its three strategic missions are as follows: $150.2 million for Supervision, Enforcement, Fair Lending and Equal Opportunity; $56.7 million for Consumer Education and Engagement; 

and $39.3 million for Research, Markets, and Regulations. Do you 

consider these breakdowns to be appropriate and adequate? How 

do you anticipate them changing over time? 

A.3. Yes, the display of Fiscal Year 2012 obligations in the Financial Report of the CFPB for Fiscal Year 2012 is a fair and accurate 

representation of spending by major program area. 

The CFPB also published quarterly updates on Fiscal Year 2012 

spending, which are available on the Bureau’s Web site (http:// 

www.consumerfinance.gov/budget/). The additional detail includes 

an accounting of spending by major budget category (object class) 

and division, as well as a listing of major investments for Fiscal 

Year 2012. In addition, as you inquired at the hearing, all CFPBawarded contractual obligations over the threshold of $3,000 are 

publicly available at www.usaspending.gov. 

The proportional breakdown of the Bureau’s spending is evolving 

over time. At the outset, most funds were expended on contractual 

services (including significant payments to the Treasury Department, which had initial statutory authority to stand up the new 

Bureau), as the Bureau began with small numbers of personnel 

and has gradually grown in staff and developed more fulsome 

structures. Accordingly, the amount of contract services will diminish over time. The proportion of funds expended on different functions of the Bureau will continue to evolve over time, though it is 

likely that Supervision, Enforcement, Fair Lending and Equal Opportunity will always require the largest share of resources to be 

devoted to their work. 

The CFPB received an unqualified ‘‘clean’’ opinion from the GAO 

on its Fiscal Year 2012 financial statements. GAO also provided an 

unqualified opinion on the Bureau’s Fiscal Year 2011 financial 

statements. These opinions confirm that the CFPB has implemented effective internal controls over the efficiency of operations, 

compliance with laws and regulation, and financial reporting. 

116 

Q.4. The GAO audit also revealed that in Fiscal Year 2012 the 

CFPB expended $39.3 million on ‘‘Research, Markets, & Regulation.’’ Yet, the audit did not provide a breakdown of spending in 

each of these categories. What portion of that budget was spent on 

research and what percentage on rule writing? Do you believe that 

the CFPB is spending adequate amounts on research and market 

analysis? 

A.4. Of the $39.3 million obligated to support Research, Markets, 

and Regulations, approximately 19 percent supported Research activities while about 33 percent covered Regulation activities. The 

Bureau is building its Office of Research and has and will continue 

to make investments in these core functions to achieve the statutory purposes that Congress established and assure that its policymaking is backed by rigorous, data-driven analysis. 

Q.5. Note 4 in the GAO audit states that ‘‘[a]mounts in the Civil 

Penalty Fund are immediately available to CFPB and under the 

control of the Director, and shall remain available until expended, 

for payments to victims of activities for which civil penalties have 

been imposed. To the extent that such victims cannot be located or 

such payments are otherwise not practicable, the Bureau may use 

such funds for the purposes of consumer education and financial 

literacy programs.’’ The audit report also notes that ‘‘[d]uring fiscal 

year 2012, the CFPB negotiated $340 million in redress payments 

made directly to harmed victims. Additionally, the CFPB received 

$32 million from civil penalty settlements.’’ Please provide detailed 

accounting for the amount contributed to and distributed from the 

Civil Penalty Fund since its inception, including a detailed breakdown of how much money was expended from the Fund to victims 

(as a lump sum) and how much money was distributed for purposes 

of consumer education and financial literacy programs, including a 

detailed list and amount for each such programs. Does the Bureau 

intend to use the funds from the Civil Penalty Fund to pay for existing consumer education and financial literacy programs or to 

create new programs? 

A.5. The CFPB received $32 million in civil penalties during Fiscal 

Year 2012. The CFPB received an additional $14.1 million in penalties shortly after fiscal year 2012 closed. These amounts were reported in the Financial Report of the Consumer Financial Protection Bureau, Fiscal Year 2012 (Notes 16 and 17), available at 

http://www.consumerfinance.gov/reports/financial-report-of-thecfpb-fiscal-year-2012/. Subsequent to the publication of the Financial Report, the CFPB collected an additional $5,001 in civil penalties in fiscal year 2013. No distributions have been made from 

the Civil Penalty Fund to date. The Bureau has been carefully proceeding to develop an initial rule governing the process of distributing funds from the Civil Penalty Fund. The Bureau will publish 

that rule soon and will also request public comment. 

Q.6. In this report, the CFPB highlights that it spent $151 million 

on contracts and support services for FY2012. At the hearing, you 

stated that most of this cost is due to start-up costs and most of 

the contracts were with Treasury and other Federal agencies. The 

report lists some but not all of the expenditures. In addition, 

USAspending.gov only lists $58 million in contracts by the CFPB. 

117 

Please provide a complete list of contracts the CFPB has entered 

into for FY2012 and FY2013, including the amount of the contract 

and whether the contract was a ‘‘sole source’’ contract or done 

through a public request for bid. For the contracts identified as sole 

source, please submit all justifications and contract amounts. 

A.6. Lists of the contracts that the CFPB has entered into for Fiscal Year 2012 and Fiscal Year 2013, including the amounts, are attached as Attachments B and C. Attachment D identifies the contracts listed in Attachments B and C that were sole source, and the 

justification for each. 

118 

Attachment B 

119 

120 

121 

122 

123 

124 

125 

126 

127 

Attachment C 

128 

129 

130 

Attachment D 

131 

Q.7. The report shows that the CFPB grew from 214 employees in 

the third quarter of FY2011 to nearly 1,000 employees by the end 

of the FY2012. There has been some criticism that the CFPB is 

paying some employees very high salaries. How many people are 

employed currently by the CFPB? Please provide the number of 

employees who earn more than $125,000, $150,000, and $200,000 

respectively. 

A.7. The Dodd-Frank Act requires the CFPB’s pay and benefit programs to be comparable to those of the Federal Reserve Board and 

other Federal financial regulators. In compliance with the law, and 

following accepted salary administration practices, pay for CFPB 

employees is based on the skills, experience, and qualifications of 

the individual being hired, the position for which they are being 

hired, and the relevant pay band. As of February 23, 2013, the 

CFPB had 1,131 employees on board. Of these, 484 (43 percent) 

earned more than $125,000; 300 (27 percent) earned more than 

$150,000; and 59 (5 percent) earned more than $200,000 per year. 

Q.8. How many economists does the CFPB hire? How many economists work on economic analyses pursuant to rulemakings undertaken by the agency? 

A.8. The CFPB has 20 PhD economists in its Office of Research at 

present. The number of economists working on analyses for 

rulemakings varies over time and depends on the number of 

rulemakings in process. 

Q.9. The report states that the CFPB has spent $150 million on 

Supervision, Enforcement, Fair Lending and Equal Opportunity. 

Please provide a detailed breakdown of how the monies are being 

allocated. Are any of these monies being used for data collection? 

Are any of these monies used to hire contractors, and if so, please 

list the contracts and amounts? 

A.9. The $150 million in costs allocated to Supervision, Enforcement, Fair Lending and Equal Opportunity represent both direct 

costs of that division as well as indirect costs. The indirect or centralized costs include certain administrative and operational services provided centrally to other Divisions (e.g., building space, utilities, and IT-related equipment and services). 

Direct costs for the Supervision, Enforcement, Fair Lending and 

Equal Opportunity division were approximately $77 million. Of this 

amount, approximately $60 million was spent on personnel and approximately $9 million on travel and transportation. The remaining 

$8 million was spent on other contractual services. In order to fulfill the CFPB’s statutory purposes and objectives, including its obligations to assess compliance with Federal consumer financial protection laws and to monitor consumer financial markets, it is necessary for the Bureau to acquire and analyze qualitative and quantitative information and data pertaining to consumer financial 

product and service markets and companies. For your information, 

we have attached as Attachment B a detailed listing of all contracts and interagency agreements that the CFPB entered into in 

Fiscal Year 2012, including for goods and services supporting the 

Supervision, Enforcement and Fair Lending and Equal Opportunity 

function. Detailed information about each contract, including the 

132 

vendor, description of service, and value of the contract, is also 

available at usaspending.gov. 

RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN 

JOHNSON AND SENATOR CRAPO FROM MARY JO WHITE 

Q.1. Your spouse, John White, sits on the advisory committees for 

the Public Company Accounting Oversight Board and the Financial 

Accounting Standards Board. Both of these entities received extensive comments from their respective advisory committees on auditing and accounting standards that are either approved or recognized by the SEC. How do you intend to handle any real or perceived conflict of interest on matters where the advisory committees make policy recommendations on these standards that may 

come before you as Chairman of the SEC? 

A.1. Pursuant to my Ethics Agreement, I will only be recused from 

particular party matters involving the PCAOB and/or the FASB. I 

will generally not be recused from broad policy recommendations 

that come from either entity. However, I am sensitive to the appearance concerns that could arise due to my spouse’s participation 

as an unpaid member of the advisory groups of the PCAOB and the 

FASB even in the context of broad policy discussions. In addition, 

although I understand that these advisory groups do not themselves make policy recommendations, I will be sensitive to situations, if any, in which my spouse makes a policy recommendation 

as a member of either group. Accordingly, I will consult with the 

SEC’s Ethics Counsel and the SEC’s Chief Accountant regularly to 

ensure that any appearance concerns are addressed. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO 

FROM MARY JO WHITE 

Q.1. SEC enforcement actions have often required respondents to 

undertake certain actions, such as correcting the violative conduct 

and strengthening internal policies and procedures to prevent or 

detect future violations. How will you ensure that SEC enforcement 

undertakings are not used as a way to inform regulated entities 

not directly involved in the enforcement action of new regulatory 

requirements, without the opportunity for those entities to provide 

comments? 

A.1. I understand that undertakings strengthening internal policies 

and procedures to prevent or detect future violations, among other 

things, can be an important aspect of certain SEC enforcement actions. However, as I understand it, such undertakings are tied to 

the unique facts and circumstances of particular enforcement actions, and the underlying facts involved in the particular misconduct at issue in each action. 

Q.2. Section 417 of Dodd-Frank requires the SEC to conduct two 

studies on short selling and submit reports on the results of those 

studies to Congress. The SEC has missed the statutory reporting 

deadlines for both studies. Will you commit to finishing the studies 

in a timely manner? 

133 

A.2. I have not yet had the opportunity to discuss the status of 

these two studies with the Commissioners and the staff, but as a 

general matter, I am committed to completing all Dodd-Frank Act 

mandates—both rulemakings and studies—both thoughtfully and 

expeditiously. 

Q.3. Section 619 of Dodd-Frank requires the SEC to work with the 

three banking regulators and the CFTC to adopt the so-called 

Volcker Rule. How will you ensure that a final Volcker Rule will 

not unnecessarily restrict permitted market-making activities? 

A.3. I understand the important role that market making plays in 

our financial markets. I look forward to working with the staff, my 

fellow Commissioners, and the other regulatory agencies to ensure 

that the final rules implementing Section 619, and the way that 

these rules are described in the adopting release, appropriately, 

and with clarity, account for this critical market function and ensure that the rules continue to allow market makers to provide 

needed liquidity to investors in a broad range of instruments, while 

at the same time ensuring that all of the statutory objectives are 

furthered. 

Q.4. Title VII of Dodd-Frank includes indemnification provisions 

that make it difficult, if not impossible, for foreign regulators to obtain information on swap transactions. All four of the current SEC 

Commissioners, as well as former SEC Chairman Mary Schapiro, 

support repealing the indemnification requirements. Do you agree 

with them? 

A.4. Yes, I agree with the other Commissioners and former Chairman Schapiro and support repealing the provision in the DoddFrank Act (Section 763(i)) that requires any U.S. or foreign authority, other than the Commission, seeking to obtain security-based 

swap data from a Commission-registered security-based swap data 

repository to agree to provide indemnification to the security-based 

swap data repository and the Commission ‘‘for any expenses arising 

from litigation relating to the information provided.’’ 

Q.5. Last year, the CFTC issued proposed interpretive guidance on 

cross-border application of the swaps provisions of Dodd-Frank, the 

so-called extraterritoriality guidance. The CFTC guidance received 

widespread criticism from foreign regulators across the globe for, 

among other things, not conforming to a G20 agreement, being too 

expansive in scope and confusing in application. Recently, the 

CFTC approved an exemptive order delaying the effective date for 

some of the provisions and issued further cross-border guidance in 

an attempt to clarify the scope and definition of ‘‘U.S. person.’’ 

However, at least one foreign regulator has stated that the further 

guidance made the definition even less clear. What steps will you 

take to ensure that the SEC will not face similar criticism? 

A.5. As Chairman Walter recently testified before this Committee, 

I understand that the Commission intends to address the international implications of the security-based swaps rules arising 

under Title VII of the Dodd-Frank Act holistically in a single proposing release. To my mind, that approach allows the Commission 

to cover a broader set of issues than the CFTC included in its proposed interpretive guidance. I think the Commission’s proposal 

134 

should address the application of Title VII in cross-border contexts 

with respect to each of the major registration categories covered by 

Title VII relating to market intermediaries and infrastructures for 

security-based swaps, and certain transaction-related requirements 

under Title VII in connection with reporting, clearing, and trade 

execution for security-based swaps. 

This needs to be done with a notice-and-comment rulemaking, so 

that it can consider investor protection and incorporate an economic analysis that considers the effects of the proposal on efficiency, competition, and capital formation. It is clear this approach 

takes more time than simply issuing interpretive guidance, but it 

has a number of advantages. These include, among others, a full 

articulation of the rationales for, and consideration of reasonable 

alternatives to, the proposals the Commission puts forth and ultimately adopts. I agree that the cross-border rules adopted by the 

Commission need to provide, among other things, a clear and workable definition of ‘‘U.S. person’’ so that international participants 

have clear guidance as to how trading activities will trigger regulatory U.S. regulatory requirements. 

Q.6. Section 975 of Dodd-Frank enhances the regulation of municipal advisors. The provision was intended to apply to previously unregulated financial advisors. However, the SEC’s proposed municipal advisor rule went much further and would capture some activities of regulated bond underwriters. If confirmed, how will you address the ‘‘underwriter exclusion’’ provision of the proposal when 

moving to a final rule? 

A.6. I have not yet had the opportunity to discuss this issue in detail with the staff or with my fellow Commissioners, but I understand that the Commission has received numerous comment letters 

that the 2010 proposed municipal advisor registration rules were 

too broad, including with respect to the scope of the underwriter 

exclusion. I understand that the staff is carefully weighing these 

comments as they develop recommendations for the Commission. I 

recognize the important role that bond underwriters play in assisting municipalities in the issuance and sale of municipal securities. 

If confirmed, I commit to reviewing the scope of the underwriter 

exclusion and I will work closely with staff and the Commissioners 

to finalize and adopt these rules in a balanced way, with careful 

consideration of public comments and concerns about undue 

breadth of the proposed rules. 

Q.7. A July 2012 SEC staff report evaluated the development of 

International Financial Reporting Standards (IFRS) by the International Accounting Standards Board (IASB). The report highlighted several significant concerns about moving to IFRS, including its uneven application around the world, the potential cost to 

U.S. companies and the surrender of U.S. standard-setting sovereignty. The report also cited concerns about the independence of 

the IASB. How will you address concerns that adopting IFRS 

would cede control over U.S. accounting standards to a foreign entity? 

A.7. I agree that the issues you have identified are concerns. I have 

not yet had the opportunity to discuss this issue in depth with the 

staff or with the Commissioners. As a general matter, I believe 

135 

that the pursuit of a single set of high-quality, globally accepted accounting standards is a worthy goal. I plan to work with the Commissioners and staff on the challenges raised in the final staff report. Ultimately, any decision to further incorporate IFRS within 

the U.S. should assure that such a change is in the best interest 

of U.S. investors and registrants. 

Q.8. Last year, the SEC and the Department of Justice (DOJ) 

issued joint guidance containing detailed information about the 

Foreign Corrupt Practices Act (FCPA), its provisions, and the agencies’ enforcement priorities. Since then, companies and individuals 

seeking to comply with the FCPA have asked for further clarification. If confirmed, will you commit to working with companies and 

individuals seeking to comply with the FCPA in order to improve 

the guidance? 

A.8. I understand that the SEC worked extensively with the Department of Justice to prepare the recently issued joint FCPA 

Guidance. The Guidance explains how the Government interprets 

the FCPA and seeks to educate companies about the limits of permissible conduct. I understand that as part of the process of developing the Guidance, the Director of the SEC’s Division of Enforcement and the Assistant Attorney General for the Criminal Division 

at the Department of Justice engaged in a series of roundtables 

with members of the business community, as well as others from 

the NGO and compliance community, to listen to their concerns 

about FCPA compliance. I understand that the Guidance addresses 

many of those concerns, and particularly seeks to clarify the type 

of conduct that gets prosecuted under the FCPA. I will need to review with the staff any requests for further clarification of the 

FCPA Guidance, but if confirmed as Chair, I certainly would remain open to listening to any additional concerns of those seeking 

to comply with the FCPA, along with the leadership of the Division 

of Enforcement and its specialized unit dedicated to FCPA Enforcement and our colleagues at the Department of Justice. 

Q.9. Recently, the National Association of Manufacturers has challenged the SEC’s conflict minerals rule in Federal court saying that 

‘‘The final conflict mineral rule imposes an unworkable, overly 

broad and burdensome system that will undermine jobs and growth 

and may not achieve Congress’s overall objectives.’’ In addition, 

there has been considerable concern that the conflicts mineral disclosures do not fit within the scope of the SEC’s mission to protect 

investors, maintain fair and efficient markets, and promote capital 

formation. Do you believe that conflict mineral disclosures should 

be considered material disclosures for investor protection purposes? 

A.9. As the Commission recognized in its release adopting the rule, 

several of the cosponsors of the conflict minerals statutory provision, as well as commentators during the rulemaking process, expressed the belief that conflict minerals disclosures are material to 

investors’ understanding of the risks in an issuer’s reputation and 

supply chain. The rule has been challenged in court and that issue 

has been raised, so I cannot appropriately comment further at this 

point. 

136 

Q.10. In July 2010, the SEC released an advance notice of proposed 

rulemaking with respect to the U.S. proxy system. The concept release addressed a number of important issues, including proxy mechanics and the growing influence of proxy advisory services. The 

concept release generated a large number of comments, as well as 

created substantial industry and investor interest in these issues. 

Since then, however, the SEC has not moved forward with any proposed rules or other action to address the issues in the concept release. If confirmed, what priority will you give to deciding whether, 

and if so how, to move on the SEC’s proxy system concept release? 

A.10. The Proxy Mechanics concept release addressed a number of 

significant issues related to the proxy system and a large number 

of commenters provided useful feedback to the Commission. I agree 

that addressing the issues discussed in the concept release is an 

important undertaking for the Commission. I have not yet had the 

opportunity to discuss the concept release with the Commission 

and the staff. If confirmed, I will work with the other Commissioners and the staff to outline the next steps to respond to the 

comments the Commission received on the concept release. 

Q.11. Treasury Secretary Jack Lew recently wrote ‘‘The Administration has consistently opposed a financial transaction tax on the 

grounds that it would be vulnerable to evasion, create incentives 

for financial reengineering and burden retail investors.’’ Do you 

agree with this assessment? 

A.11. While I understand there are arguments both for and against 

the imposition of financial transaction taxes, their imposition does 

raise many complex issues such as those mentioned by Secretary 

Lew. Before taking a position on this particular proposal, I would 

want to closely review the details and consider how it might affect 

incentives for particular types of capital markets activities or have 

other impacts, positive or negative. 

Q.12. SEC Commissioner Dan Gallagher has pointed out that the 

last time the SEC conducted a comprehensive review of market and 

regulatory structure was almost 20 years ago, when the SEC undertook the ‘‘Market 2000 Report’’ in 1994. Since then, new forms 

of competition, technology, global growth in trading, and broader 

investor participation have integrated and interconnected the 

world’s capital markets as never before. While many academic 

studies find that these trends have generally benefited retail investors in the form of lower trading costs, there have been a number 

of well-publicized technology failures in the past few years. Do you 

agree with Commissioner Gallagher that it is time to undertake a 

new comprehensive review of market and regulatory structure? 

A.12. I agree with Commissioner Gallagher that the SEC needs to 

be in a position to fully understand all aspects of today’s marketplace and, if confirmed, would take the steps necessary to achieve 

that objective. As I noted in my testimony, today’s high-speed, 

high-tech, and dispersed marketplace raises many questions and 

concerns that must be addressed with a sense of urgency. I have 

not yet had an opportunity to discuss these issues with the Commissioners and staff, but generally believe that the SEC should follow a path that will enable it to address market and regulatory 

structure issues as expeditiously as possible. 

137 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED 

FROM MARY JO WHITE 

Q.1. A recent New York Times editorial noted that, ‘‘to earn and 

retain the public trust, it is crucial that [Ms. White] avoid the appearance of conflict in all SEC matters.’’ To address the numerous 

conflict of interest concerns raised by many, you have indicated 

that in addition to direct conflicts involving your former law firm 

or clients, you will also consider the appearance of conflicts, including those that arise due to your husband’s relationship to Cravath, 

Swaine & Moore LLP (Cravath). Please explain how you will avoid 

the appearance of conflicts that stem from Mr. White’s participation on the advisory boards of the Public Company Accounting 

Oversight Board (PCAOB) and the Financial Accounting Standards 

Board (FASB), particularly given the SEC’s oversight of the 

PCAOB and the SEC’s reliance on the FASB in establishing accounting rules that apply to public companies? In addition, what 

further assurance can you provide regarding the consultative process you will use to decide when recusal is appropriate with respect 

to any matter in which Cravath appears before the Commission? 

A.1. As I emphasized in my testimony, I am sensitive to any potential conflicts issues that could arise as a result of my or my 

spouse’s (or our firms’) legal practices. These issues were fully discussed and vetted with the Office of Government Ethics (OGE) and 

the SEC Ethics Counsel. During this process, I was informed that 

the extent of my possible conflicts and recusals are not out of the 

ordinary for other nominees, including former Chairmen of the 

SEC and other Commissioners. The Committee has my written 

Ethics Agreement that I have entered into with the SEC’s Ethics 

Counsel and that agreement sets forth the manner in which these 

issues will be addressed. 

I am also sensitive to any appearance concerns that could arise 

due to my spouse’s participation as an unpaid member of the advisory groups of the PCAOB and the FASB. These issues were also 

fully discussed and vetted with OGE and the SEC Ethics Counsel. 

My Ethics Agreement sets forth the manner in which these issues 

will be addressed. I will also consult with the SEC’s Ethics Counsel 

and the SEC’s Chief Accountant regularly to insure that any appearance concerns are addressed. In addition, if confirmed I will 

work with the SEC’s Office of Ethics Counsel as well as my own 

counsel to vet all party matters that come before the Commission 

in which Cravath is a party or represents a party to determine 

whether any conflict or appearance concern exists. Any potential 

conflict of interest will be resolved in accordance with the terms of 

my Ethics Agreement. 

Q.2. In October 2011, the Securities & Exchange Commission 

issued guidance to public companies regarding the disclosure they 

should provide about cybersecurity risks and incidents. Since the 

guidance was issued, we have witnessed an increase in 

cybersecurity threats and breaches that threaten our companies, financial markets and our national security. In fact, on February 12, 

2013, the President signed the ‘‘Improving Critical Infrastructure 

and Cybersecurity’’ Executive Order to address this increasing 

threat. Given the risks posed by cybersecurity threats to public 

138 

companies and financial market participants and regulators that 

rely on computer systems, will you request the agency re-evaluate 

the efficacy of its October 2011 guidance and report to Congress on 

how such guidance in being implemented? Would you also consider 

evaluating whether updated guidance is needed in light of the Executive Order? 

A.2. One of the SEC’s most important roles is to oversee the disclosure provided by public companies. In this role, the SEC seeks to 

assure that investors have the information they need to make informed investment decisions. While I understand that there are not 

specific line item requirements for cybersecurity risk and breaches, 

a number of existing disclosure requirements may result in disclosure in this area. Companies provide disclosure on cybersecurity 

risk based on a general materiality analysis of what a reasonable 

investor would need to know. As I understand it, the goal of the 

guidance put out by the SEC staff was to assist companies in reviewing cybersecurity issues within the existing disclosure framework, which, I believe, is well suited to eliciting material information without overwhelming investors with other information that 

may not help them to make informed investment decisions. If confirmed, I will review these issues with the staff and my fellow Commissioners. 

I certainly understand and agree that cybersecurity is a key national security issue and one that will only grow in importance in 

the coming years. The frequency and severity of the attacks on 

companies and governmental institutions will inevitably increase, 

and the President’s and Congress’ focus on this issue is critical. 

The goal of the SEC staff’s guidance and the disclosure requirements of the Federal securities laws are directed at providing material information about risks facing a public company. I believe it 

is important for the Commission and the staff to remain focused on 

cybersecurity, as risks in this area can change rapidly. If confirmed, I look forward to the opportunity to work with Congress on 

this matter. 

Q.3. The FSOC is comprised of members representing the various 

financial services regulators. Diversity of views on the panel is important and there is no one-size-fits-all regulation when it comes 

to financial stability issues. How do you see the SEC’s role on the 

FSOC? How do you plan to ensure the SEC’s mission of investor 

protection is incorporated into the FSOC’s efforts? 

A.3. The FSOC serves a critical purpose by providing a cross-agency focus on financial stability issues. I also believe the FSOC is an 

important and useful forum for the sharing of information and collaboration among financial services regulators. 

If confirmed as Chair, I would expect to be an engaged and active 

participant in the FSOC. Further, I would encourage staff to constructively share information with the FSOC’s financial regulators 

and educate them on the role of the SEC as a capital markets regulator with a mission to protect investors, maintain fair, orderly, 

and efficient markets, and facilitate capital formation. As laid out 

in its 2011 and 2012 annual reports, the FSOC has described its 

purposes as identifying risks to financial stability, promoting market discipline by eliminating expectation of Government protection 

139 

from losses, and responding to emerging threats to the stability of 

the U.S. financial system. These purposes would seem to complement the SEC’s mission and investor protection focus, and if 

confirmed as Chair of the SEC, I would expect to work with my fellow FSOC members to foster that outcome. 

Q.4. The Dodd-Frank Act required the SEC to adopt rules mandating that municipal advisors register with the SEC. The SEC 

proposed rules in this area in 2010. Is it your intention, if you are 

confirmed as the SEC chair, to move to adopt final municipal financial advisor rules? 

A.4. If confirmed, I will work closely with staff and my fellow Commissioners to finalize and adopt these important rules promptly to 

protect municipal entities and investors without unnecessary regulation. 

Q.5. Have you had an opportunity to review the SEC’s report on 

the municipal securities market, which was issued last year? If so, 

what are your thoughts with respect to the report’s recommendations? 

A.5. I am familiar with the Commission’s Report on the Municipal 

Securities Market. Although I have not yet had the opportunity to 

review it in detail and discuss it with staff and my fellow Commissioners, I appreciate that this significant Report addresses two 

major areas that warrant careful consideration to ensure a stronger 

municipal securities market in the future. First, the Report made 

several important legislative and regulatory recommendations in 

the municipal disclosure area to improve the timeliness and uniformity of municipal disclosure and financial statements, including 

a recommendation to provide the SEC with direct authority to set 

baseline disclosure standards in this area. Second, the Report made 

a series of recommendations in the market structure area to improve price transparency in the municipal securities market. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR MENENDEZ FROM MARY JO WHITE 

Q.1. Dodd-Frank Wall Street Reform requires the SEC to issue a 

uniform fiduciary standard to require all financial professionals— 

including broker-dealers who are not currently covered—to act in 

the best interests of their investors when providing investment advice. Fiduciary standards should apply to all professionals who give 

people investment advice. Do you see any reason why we should 

not have a uniform standard that includes broker-dealers? Will you 

move this provision forward in a timely manner? 

A.1. Broker-dealers and investment advisers both provide investment advice, but are regulated differently when doing so. Whenever different standards apply to the same activity, I believe regulators should carefully consider whether such distinctions make 

sense from both the perspective of investors and industry. Section 

913(f) of the Dodd-Frank Act gives the SEC the authority to adopt 

rules requiring a uniform fiduciary standard for the provision of 

personalized investment advice about securities to retail customers. 

As you know, the Commission very recently published a release requesting input from the public on a uniform fiduciary standard of 

140 

conduct for broker-dealers and investment advisers. The release 

contained details about how a uniform fiduciary standard of conduct could operate. I am very much looking forward to reviewing 

with the Commissioners and the staff the information provided in 

response to that release. The goal in this effort should be to make 

sure that investors, particularly retail investors, are appropriately 

protected and have access to, and choices about, the type of investor-focused investment advice that they need. 

Q.2. Wall Street Reform required the SEC to issue a rule on corporate political spending. The SEC has received over 490,000 public comments asking for disclosure of political spending. The SEC’s 

important move to consider this rule and its statement that it will 

issue a NPRM shows that they are adapting to the new way corporate money is being used in the marketplace, and that they take 

their mandate to protect investors seriously. Investors are told this 

corporate spending is for their benefit, and so should have an SEC 

rule that will allow them to assess that claim. How will you move 

this important rule forward when you take office? 

A.2. Although the Commission is not required to issue a rule on 

corporate political spending, I understand that the Commission has 

received two rulemaking petitions asking the Commission to require the disclosure of political contributions made by public companies. These petitions have received considerable attention, both 

from those in favor and from those opposed. The staff is reviewing 

the petitions to determine whether or not to recommend any rulemaking in this area. It would be premature for me to make an assessment of the merits of the petitions, or to pre-judge the disclosure requirement generally, without the benefit of the staff’s review. 

Q.3. The SEC’s Office of Minority and Women Inclusion (OMWI) is 

now up and running. The reason for creating these offices was that 

there just is not enough minority representation within our financial regulators. What will you do to increase the number of minorities and women, especially in management positions and as contractors, at the SEC? 

A.3. I have met with the Director of the SEC’s OMWI to discuss 

how I can personally help in this critical effort. If confirmed, I intend to give my full support to OMWI to ensure that the SEC has 

staff, infrastructure, and strategies in place to make significant 

strides in these areas. I will take a close look at the agency’s management organization and training programs, and also will encourage the agency’s managers and senior staff to work with OMWI 

both to expand the breadth of contracting opportunities available 

to minority-owned and women-owned businesses and to advocate 

for their inclusion in the competitive contract award process. I plan 

to make visible my commitment to diversity to ensure that the 

SEC’s workforce and supplier base reflect the increasing diversity 

of our Nation and of the investing public the agency is charged 

with protecting. 

Q.4. A bipartisan amendment led by Senators Franken and Wicker, 

which I supported, was added to Dodd-Frank that gave the SEC 

the authority to do a rulemaking to reduce conflicts of interest in 

141 

the credit rating industry. Are you committed to aggressively using 

the Commission’s authority to make sure that conflicts of interest 

are rooted out? 

A.4. This is a very important issue. I am committed to ensuring 

that all violations of the Exchange Act and the rules thereunder regarding prohibiting or managing conflicts of interest are aggressively pursued. In the report to Congress pursuant to Section 939F 

of the Dodd-Frank Act issued in December 2012, the SEC staff recommended that the Commission, as a next step, convene a public 

roundtable to explore potential regulatory and statutory changes to 

further address any conflicts of interest. The roundtable will be 

held on May 14 and, if confirmed, I look forward to participating 

with the other Commissioners. 

Q.5. On the issue of money market mutual funds, there has been 

a great deal of discussion recently, from the role they play for consumers in the financial markets and whether or not new regulations are warranted in this space. I would appreciate your thoughts 

on whether you think money market funds played a role in the financial crisis and the current status of regulations of these products, as well as the process we might expect from the SEC moving 

forward as far as reviewing comment letters and hearing from affected parties in determining whether or not there’s a need for new 

regulations. 

A.5. As you know, late last year the SEC’s Division of Risk, Strategy and Financial Innovation issued a report analyzing the run on 

money market mutual funds during the financial crisis and its potential causes and consequences. I have reviewed that report and, 

if confirmed, I am committed to continuing my review of this important set of issues. If confirmed, I also look forward to discussing 

with the SEC Commissioners and staff the potential need for further regulatory reform of money market mutual funds and, if so, 

what reforms would be optimal. I would expect that SEC staff 

would review all relevant comment letters, and I would look forward to hearing from any interested parties regarding the potential 

need for further reform as well as any impact potential further reforms could have. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN 

FROM MARY JO WHITE 

Q.1. In response to a question from Senator Menendez, ‘‘consider 

consequences in their remedies so that, for example, a corporate 

fine that in effect would have a grievous impact on innocent shareholders is taken into account in terms of remedies that they seek.’’ 

You elaborated on this answer to me: ‘‘do consider consequences in 

their remedies so that, for example, a corporate fine that in effect 

would have a grievous impact on innocent shareholders is taken 

into account in terms of remedies that they seek’’ 

Is it the SEC’s policy that institutions with more shareholders 

should be subject to lower penalties? 

Under Dodd-Frank’s Title II Orderly Liquidation Authority, 

shareholders will be wiped out. The Nation’s second largest bank 

has nearly 3,700 institutional and mutual fund shareholders alone. 

142 

A.1. No, it is my understanding that while the Commission analyzes a number of factors when determining the appropriateness of 

particular penalties imposed or sought in its enforcement actions, 

it does not to my knowledge have a policy that would dictate that 

a public company should receive higher or lower penalties simply 

as a result of its market capitalization or number of shareholders. 

What I was referring to in my testimony was the SEC’s 2006 corporate penalty policy, which discusses the consideration of, among 

other things, whether current shareholders of the corporation were 

beneficiaries of the allegedly fraudulent conduct in determining the 

appropriate penalty level. 

Q.2. Would the SEC consider whether a particular penalty would 

send this institution into Orderly Liquidation, thus wiping out 

these 3,700 shareholders, when determining whether such penalty 

is appropriate? 

A.2. The Commission’s penalty authority is limited by statute to 

certain specified tiers tied to particular levels of misconduct, and 

the Commission does not currently have penalty authority that 

would allow it to impose significantly larger penalties—for example, penalties calculated based on investor loss. Based on my understanding of the Commission’s existing penalty authority, it is 

difficult to imagine a situation where an SEC enforcement action 

could result in a penalty of the nature envisioned by your question. 

Nonetheless, as indicated, I understand that the Commission considers a number of factors when determining the appropriateness 

of a particular penalty imposed or sought in one of its enforcement 

actions, but, to my knowledge, has no policy mandating that a particular penalty not be imposed because of anticipated collateral consequences. 

Q.3. The SEC’s so-called Guide 3 rules governing financial disclosures by Bank Holding Companies were written in the 1970s. The 

largest financial institutions have grown significantly since then— 

as I said at your hearing, 18 years ago, the six largest banks had 

assets equal to 18 percent of GDP, whereas today they equal 64 

percent of GDP. They are also much more complex—the six largest 

banks have around 14,420 subsidiaries. 

Do you believe that the Guide 3 rules should be updated to reflect the growth and complexity of financial institutions? 

A.3. I have not yet had the opportunity to discuss the disclosure 

rules for financial institutions with the Commissioners and the 

staff, but if confirmed, I will work with the Commissioners and the 

staff to review the effectiveness of the existing disclosure regime 

for these companies. As a general matter, I agree that consideration should be given to whether the staff should conduct an evaluation of the guidance set forth in Industry Guide 3 in light of the 

growth and complexity of financial institutions since it was issued. 

Q.4. Should these disclosures be simplified so that investors have 

access to a more accurate picture of a financial institution’s balance 

sheet? 

A.4. Investors should have as accurate a picture as possible of 

every company’s financial statements. I also believe that we should 

always strive for the most meaningful and understandable discloVerDate Nov 24 2008 14:29 May 23, 2013 Jkt 048080 PO 00000 Frm 00146 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-12 NOMINATIONS OF CORDRAY AND WHITE\HEARING\31213.TX
143 

sure. It is also important to recognize that the financial reporting 

of the Nation’s largest financial institutions is complex because the 

institutions themselves are complex, and, therefore, finding the 

right balance will continue to be a significant challenge. To address 

this, a review of the disclosure regime for these companies should 

also include an evaluation of how disclosures might be presented 

in a manner that is calibrated to the needs of different investors. 

Q.5. Would you support a requirement that institutions disclose, on 

a quarterly and annual basis, all settlements, judgments, enforcement actions, and penalties brought against such institution? 

A.5. I understand that disclosure of settlements, judgments, enforcement actions, and penalties brought against financial institutions is an important issue, and I would be interested in working 

with the staff to understand current practices and evaluating the 

adequacy of existing disclosure rules in this area. 

Q.6. Upon leaving, your law firm, Debevoise & Plimpton, will give 

you $42,500 a month in retirement pay for life, or $510,000 per 

year, through the firm’s partner-retirement plan. Debevoise would 

make a lump-sum payment to you in lieu of monthly retirement 

checks for the next 4 years, while you serve as SEC Chair. After 

that, your monthly payments would resume for life. Other Chairmen and Commissioners—Republicans Harvey Pitt and Daniel Gallagher, for example—severed all financial ties with their law firms 

when they went to work at the SEC. 

Doesn’t your compensation arrangement create the perception 

that your financial future is tied to the performance of your former 

firm? 

Why not cut all financial ties with Debevoise & Plimpton? 

A.6. If confirmed, I will retire from Debevoise & Plimpton LLP. I 

do not believe that the payment of retirement benefits to me should 

raise the perception you note. This retirement arrangement has 

been vetted by the U.S. Office of Government Ethics (OGE) and 

does not constitute a continued interest in the profitability or performance of the firm. I have earned this retirement benefit as a result of my years of work at the firm. (It is my understanding that 

neither former Chairman Pitt nor Commissioner Gallagher was eligible for retirement or retirement benefits at the time they left 

their firms to join the SEC.) The retirement benefit that I am entitled to receive is the same benefit available to any retiring partner 

at the firm. Like all retired partners, under the retirement plan, 

I am entitled only to the specified lifetime benefits, not to the cash 

value of such benefits in an up-front payment. And, although there 

is no realistic possibility that any matter at the SEC could impact 

Debevoise’s willingness or ability to make the required retirement 

payments to me, under the terms of my Ethics Agreement, I would 

be recused from participating in any such matter. 

Q.7. During the 2008 bailouts, many large financial firms made 

representations about their financial conditions and failed to disclose, or made vague disclosures, regarding assistance provided to 

them by the Federal Reserve, FDIC, or United States Treasury. 

Section 501.06c of the SEC’s Codification of Financial Reporting 

Policies requires that any financial assistance that has ‘‘materially 

144 

affected, or are reasonably likely to have a material future effect 

upon, financial condition or results of operations, the [Management 

Discussion & Analysis portion of a company’s 10-K] should provide 

disclosure of the nature, amounts, and effects of such assistance.’’ 

Do you agree that loans from the Federal Reserve, guarantees 

from the FDIC, or capital injections from the United States Treasury could materially affect the future financial conditions of financial large institutions? 

Do you believe that this support should be clearly disclosed to investors at the time that they occur? 

A.7. A loan or other financial assistance from the Federal Government could materially affect the future financial condition of a 

large financial institution if that institution is in need of additional 

liquidity—and thus would require disclosure. On the other hand, 

there could be circumstances where a loan or other financial assistance is provided to a financial institution where the amount of the 

loan or the nature of the financial assistance is not material— 

whether because the financial institution is not in need of the liquidity or the amount of the assistance is not material. Materiality 

is a very fact specific analysis that will differ from one financial institution to another. If a financial institution receives assistance in 

the form of a loan or similar obligation that is material to the financial institution, it would be required to provide disclosure in a 

Current Report on Form 8-K within four business days of receiving 

the assistance. I think it is important for financial institutions to 

carefully and broadly consider their materiality analyses as they 

relate to the receipt of financial assistance from the Federal Government. 

Q.8. You have been credited with creating the Deferred Prosecution 

Agreement when prosecuting Prudential Securities. Since 2009, the 

Justice Department has used DPAs on a number of financial institutions, however, it has recently adopted an approach that permits 

it to criminally charge smaller foreign subsidiaries of financial companies. 

It has been noted that the Securities and Exchange Commission 

began using DPAs in 2010, and that the SEC’s financial crisis 

cases—including a settlement with your former client JPMorgan 

Chase for selling faulty mortgage securities—have rarely named 

executives as defendants. 

Do you believe that the widespread use of DPAs is appropriate? 

Do you continue to believe that DPAs are an appropriate tool for 

the largest financial institutions? 

What will be your approach to using DPAs? Will you continue 

the SEC’s policy regarding the use of DPAs, or will you push for 

more companies and executives to admit guilt as part of settlements? 

A.8. In appropriate circumstances, I believe that DPAs can be an 

effective tool for addressing corporate misconduct, particularly by 

making sure that companies and other entities implement remedial 

measures and other reforms to ensure future compliance with the 

law. In addition, DPAs can be used to help secure an entity’s selfreporting of misconduct and extraordinary cooperation against the 

individuals responsible for the wrongdoing. I understand that in 

145 

2010, the SEC initiated a series of measures to strengthen its enforcement program by encouraging greater cooperation from individuals and companies in the agency’s investigations and related 

enforcement actions. These initiatives, which included the use of 

DPAs, were patterned after the cooperation tools that criminal authorities have regularly and successfully used for years. 

I understand that under the cooperation measures adopted in 

2010, the SEC issued a policy statement setting forth a framework 

for analyzing and evaluating cooperation in investigations and related enforcement actions in evaluating appropriate dispositions. 

Each situation is dependent on the facts and circumstances, but if 

confirmed as Chair, I will review with the staff the appropriate use 

of DPAs in resolving SEC enforcement matters. 

Q.9. Do you believe that requiring firms to admit to, or be charged 

with, criminal liability will cause the ‘‘loss of jobs, the loss of pensions and other significant negative consequences to innocent parties who played no role in the criminal conduct’’? 

A.9. The SEC does not have the authority to charge firms with 

criminal liability. The SEC’s mandate is to enforce the Federal securities laws, and I understand that the Commission seeks to hold 

wrongdoers accountable wherever it identifies evidence sufficient to 

establish a violation of those laws. As discussed in my testimony, 

the DOJ has a long-standing policy that Federal prosecutors should 

consider, among other factors, the collateral consequences of a corporate indictment in evaluating bringing charges against a business organization. The actual collateral consequences of a corporate 

criminal charge will vary case to case. 

Q.10. An important component of SEC settlements is the requirement that financial institutions agree not to breach antifraud laws 

in the future. According to the New York Times, during the last 15 

years, at least 51 enforcement actions were brought against at 

least 19 Wall Street firms for breaking antifraud laws they had 

agreed never to breach. These companies included: American International Group, Bank of America, Bear Stearns, Deutsche Asset 

Management, Credit Suisse, Goldman Sachs, JPMorgan Chase, 

Merrill Lynch, Morgan Stanley, RBC Dain Rauscher, UBS, and 

Wells Fargo/Wachovia. 

Should there be increased penalties for firms that violate their 

pledges not to break laws, in addition to the penalties for breaking 

those laws? 

A.10. It is my understanding that the staff will consider recidivism 

in evaluating appropriate penalties for a current enforcement action, but that the Commission’s existing statutory penalty authority does not authorize it to seek a specific penalty enhancement for 

a defendant that has previously been subject to a judgment or 

order in an SEC action. Nor does existing statutory authority authorize the SEC to seek a civil penalty if an individual or entity 

has violated an existing Federal court injunction or bar obtained or 

imposed by the SEC in an enforcement action. Former SEC Chairman Mary Schapiro requested that Congress provide the SEC with 

such enhanced statutory penalty authority, as well as additional 

enhanced statutory penalty authority. I support that request and 

I believe that this approach would be more efficient, effective, and 

146 

flexible than the limited and cumbersome civil contempt remedy. I 

understand that such authority also would be comparable to the 

Commission’s existing ability to obtain civil penalties for violations 

of its administrative Cease and Desist orders. A bipartisan bill has 

been introduced in the Senate to enhance the SEC’s penalty authority and, if confirmed as Chair, I look forward to working with 

Congress on that important legislation. 

Q.11. Should the Commission consider the fact that a firm has broken one of these pledges, and whether it has done so repeatedly? 

A.11. As indicated, I support Chairman Schapiro’s request to Congress for additional penalty authority to authorize the Commission 

to seek an enhanced penalty against a defendant that has been 

subject to a judgment or order in an SEC action within the previous 5 years and to seek a civil penalty against a defendant that 

has violated an existing Federal court injunction or bar obtained or 

imposed in an SEC action. If Congress authorizes such enhanced 

penalty authority, and if confirmed as Chair, I would work with my 

fellow Commissioners and the Division of Enforcement to exercise 

that authority where appropriate. As also indicated, I believe the 

Enforcement staff does consider recidivism in evaluating appropriate penalties for enforcement actions. 

Q.12. You previously represented JPMorgan Chase. According to 

the New York Times, ‘‘despite six securities fraud settlements in 13 

years, JPMorgan rarely if ever lost any special privileges. It has 

been awarded at least 22 waivers since 2003, with most of its SEC 

settlements generating two or more. In seeking the reprieves, lawyers for JPMorgan stated in letters to the SEC that it should grant 

a waiver because the company has ‘a strong record of compliance 

with the securities laws’. ’’ 

The Times continues: 

Bank of America and Merrill Lynch, which merged in 

2009, have settled 15 fraud cases and received at least 39 

waivers . . . Only about a dozen companies . . . have felt 

the full force of the law after issuing misleading information about their businesses. Citigroup was the only major 

Wall Street bank among them. In 11 years, it settled six 

fraud cases and received 25 waivers before it lost most of 

its privileges in 2010. By granting those waivers, the SEC 

allowed Wall Street firms to have powerful advantages, securities experts and former regulators say. The institutions 

remained protected under the Private Securities Litigation 

Reform Act of 1995, which makes it easier to avoid classaction shareholder lawsuits. 

Do these repeat offenders have strong records of compliance with 

securities laws, in spite of their frequent pattern of violations? 

The SEC’s head of Corporate Finance told the New York Times 

that the purpose of these rules is to protect investors. Do investors 

need to be protected from repeated legal violations by the largest 

broker dealers? 

As Chairman of the SEC, will you revisit this waiver policy in 

a manner that is less friendly to large broker-dealers? 

147 

A.12. I have not yet had the opportunity to discuss in detail the 

issue of waivers with the Commissioners and the staff, but will examine the issue if confirmed. I believe strong enforcement is necessary for investor confidence and is essential to the integrity of 

our financial markets. And, I certainly believe that wrongdoers 

must be held accountable for their misconduct, including large 

broker dealers. As a general matter, when considering whether a 

waiver would be appropriate, I believe consideration should be 

given to the purpose of the specific disqualification and whether a 

waiver would be consistent with the Commission’s goals of protecting investors, maintaining fair, orderly, and efficient markets, 

and facilitating capital formation. 

Q.13. The central premise of the JOBS Act, which I did not support, was that reducing long-standing investor protections would 

make it easier for companies to raise capital and therefore lead 

companies to create more jobs. Chairman Schapiro was very strong 

in voicing her opposition to that legislation, however, I am concerned that some, including members of the SEC’s Advisory Committee on Small and Emerging Companies, continue to press for 

further deregulation. 

Do you believe that the JOBS Act will achieve its stated purpose? 

Do you have any concerns with the JOBS Act, generally, or any 

of its specific provisions? 

Can you assure us that the SEC will not, absent a specific directive from Congress, move forward with any further deregulatory 

proposals? 

A.13. As I understand it, through the JOBS Act, Congress was 

seeking to address, at least in part, the decline in the number of 

initial public offerings in the United States and the challenge faced 

by small businesses to raise capital. Both of these objectives are 

seen as catalysts for supporting the growth and development of 

small businesses, which are drivers of job growth. It is too early to 

tell what impact the JOBS Act will have on strengthening small 

businesses and job growth. 

Investor protection is always a concern and priority for the SEC. 

A very important challenge for the Commission as it relates to the 

JOBS Act will be in its implementation. The success of the implementation and the ability for small businesses to have meaningful 

capital formation will depend on whether investors understand 

what they are investing in and feel secure in making such an investment. It will be critically important to consider this as the 

rules are implemented, but also after the rules are in place. If confirmed, I would work with the Commission and the staff to implement a robust program to review the capital raising practices that 

develop as a result of the JOBS Act and assess the impact these 

practices have on investors, capital formation and the markets generally. 

While I believe that the Commission should always consider 

whether its existing regulations should be further improved to encourage capital formation, if confirmed, I will be committed to ensuring that any such consideration would be coupled with a 

thoughtful, robust, and transparent review of the impact on investor protection. 

148 

Q.14. When Congress passed the JOBS Act, it included a number 

of measures to make it easier for companies to go public without 

having to immediately meet the full obligations of public companies 

(such as internal control audits, compliance with basic corporate 

governance rules related to executive compensation, and even adoption of new accounting and auditing standards). But, in our eagerness to promote IPOs, we have paid little attention to the need to 

reform the IPO process itself. Questions have surrounded some of 

the biggest recent IPOs—questions about the adequacy of 

Facebook’s disclosures regarding revenue trends around the time of 

its IPOs, for example, and about Groupon’s failure to disclose, prior 

to its IPO, a material weakness in its internal controls. There are 

even lingering questions about the fairness of investment bank IPO 

practices around the dot.com boom and bust, as described in a recent column by New York Times columnist Joe Nocera. I am not 

suggesting that these are examples of illegal actions (though some 

may be). 

What would you do, a chairman, to ensure that the IPO process 

operates in a way that is fair to all participants? 

A.14. The JOBS Act made significant changes to the Commission’s 

rules concerning the offering process, disclosure, and communications in connection with initial public offerings. I believe it is too 

early to tell what impact these changes have had, or will have, on 

the IPO market and the way that IPOs are conducted. If confirmed, 

I would work with the staff to better understand the impact of the 

JOBS Act on offering practices and where challenges may still 

exist. 

As I noted in my written testimony, I believe that investors and 

all market participants need to know that the playing field of our 

markets is level. Accordingly, when issues that frustrate the fundamental integrity of our markets are identified, I believe that the investing public and market participants deserve appropriate and 

timely regulatory and enforcement responses. If confirmed, I would 

look forward to working with the staff and the Commission on the 

important issue of ensuring the fairness of the IPO market. 

Q.15. Do you have a view on areas that may be most in need of 

reform? 

A.15. I have not yet had the opportunity to discuss the issue of reforms to the IPO process with the Commissioners and the staff, but 

if confirmed, I would work with the staff and my fellow Commissioners to better understand the range of current IPO practices and 

offering practices generally. I believe continued improvement and 

transparency is important and should be supported by all market 

participants. In general, I believe that the Commission’s offering 

rules must keep pace with innovations in technology and methods 

of communication in order to properly balance its mission to protect 

investors, facilitate capital formation, and maintain fair and orderly markets. If confirmed, I would seek to ensure that the Commission continues to assess the effectiveness of its rules in light of 

evolving communications technology, and, importantly, changes in 

the manner in which companies and investors communicate. The 

costs and benefits of the regulatory structure governing commuVerDate Nov 24 2008 14:29 May 23, 2013 Jkt 048080 PO 00000 Frm 00152 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-12 NOMINATIONS OF CORDRAY AND WHITE\HEARING\31213.TX
149 

nications during offerings should be considered as a part of that review. 

Q.16. Every year thousands of investors file complaints against 

their stockbrokers and investment advisers. Almost every brokerdealer and many investment advisers include in their customer 

agreements a mandatory pre-dispute arbitration provision, with 

some now also including class action waivers. Section 921 of the 

Dodd-Frank Act authorizes and delegates to the Commission the 

responsibility to reform or prohibit pre-dispute arbitration requirements if it finds that such changes are in the public interest and 

for the protection of investors. Congress has, in effect, given the 

SEC both the tools and a mandate to act in this area. 

Will the SEC take a serious look at the use of mandatory predispute arbitration agreements? 

A.16. I have not yet had the opportunity to discuss this issue with 

the Commissioners and staff, but, as you noted, Section 921 of the 

Dodd-Frank Act amended the Securities Exchange Act of 1934 and 

the Investment Advisers Act of 1940 to provide the Commission 

with authority to conduct rulemaking, under certain circumstances, 

relating to agreements that require customers or clients to arbitrate any future disputes arising under the Federal securities laws 

or related rules or regulations. If confirmed, I commit to exploring 

the use, reform, and possible prohibition of these mandatory predispute arbitration agreements. 

Q.17. If the SEC concludes that these agreements are, in fact, not 

in the best interest of investors (in other words, the threshold set 

forth in the statute has been met), will the SEC exercise its authority under Section 921 and will it take action to limit or prohibit the 

use of these contract clauses? 

A.17. If confirmed, I commit to exploring with the staff and my fellow Commissioners the use, reform, and possible prohibition of 

these mandatory pre-dispute arbitration agreements. At this point, 

I am not able to commit to any specific outcome or approach. 

Q.18. The Foreign Corrupt Practices Act (FCPA) forbids U.S. companies and their subsidiaries from paying foreign Government officials to obtain or retain business. The New York Times has reported that Walmart, one of the largest companies in the United 

States, bribed Mexican officials in exchange for permits to open 

new stores. According to that story, members of the highest levels 

of company’s management also quashed an internal investigation 

in 2005 into the alleged bribery, and failed to notify the SEC and 

shareholders of either the allegations or the investigation. Only 

now, with the SEC and Justice Department investigating Walmart, 

are shareholders learning that the company believes that it may 

have committed additional FCPA violations in China, India, and 

Brazil. Meanwhile, the U.S. Chamber of Commerce has argued that 

the FCPA hampers the ability of U.S. companies to compete overseas and is leading a movement to weaken the law. 

What steps will you take to ensure that the SEC sends a clear 

message about the importance of complying with the Foreign Corrupt Practices Act? 

150 

A.18. I believe that the SEC has a strong record of FCPA enforcement. I understand that the Commission has filed a number of significant FCPA actions in recent years that have imposed penalties 

and other sanctions against U.S. and non-U.S. companies that have 

engaged in bribery of foreign officials to obtain or retain business 

abroad and that have failed to implement strong policies and procedures to ensure FCPA compliance at their subsidiaries operating 

around the world. I believe that the SEC’s FCPA enforcement actions can have a powerful deterrent impact—typically, they are 

carefully studied by the private bar and by compliance professionals at U.S. companies with overseas operations. I also understand that the SEC’s Enforcement Division has a specialized FCPA 

unit with investigative attorneys and industry experts at SEC offices around the country dedicated to FCPA investigations. This 

FCPA Unit worked extensively with the Department of Justice to 

develop and issue the recent FCPA Guidance that explains how the 

Government interprets the FCPA and seeks to educate companies 

about the limits of permissible conduct. I believe that the deterrence obtained through the SEC’s FCPA enforcement actions, along 

with the prevention that the SEC believes can be obtained through 

the FCPA Guidance, sends a clear message about the importance 

of complying with the FCPA. 

Q.19. FCPA enforcement often involves only the corporation with 

no related individual prosecutions. Do you agree that a more effective deterrent of FCPA violations necessitates individual prosecutions? 

A.19. As indicated, I understand that the SEC has brought a number of significant FCPA enforcement actions in recent years. I assume that where there has been sufficient evidence to charge individual executives or employees in connection with the company’s 

FCPA violations, the Commission has not hesitated to do so. In 

fact, numerous recent FCPA enforcement actions have involved 

charges against individuals. I believe that full enforcement of the 

FCPA means investigating potential violations and pursuing the 

evidence wherever it leads, including appropriate actions against 

individual executives and employees. It is also my understanding 

that both the DOJ and SEC have in recent years emphasized the 

importance of prosecuting individuals (as well as companies) in appropriate cases. I agree with that emphasis. 

Q.20. What is your position on the U.S. Chamber of Commerce’s 

call to amend the FCPA? 

A.20. I believe that the FCPA sends a powerful message that bribery of foreign officials cannot be a way of doing business for U.S. 

companies operating abroad. If confirmed, as indicated, I would 

continue the SEC’s existing focus on strong FCPA enforcement. I 

also believe that the recently issued SEC–DOJ FCPA Guidance 

educates U.S. companies about the limits of permissible conduct 

and also makes clear how the SEC would reward companies that 

adopt compliance programs that are effective in preventing FCPA 

violations. With respect to proposed amendments to the FCPA, if 

confirmed, I would further study this issue. 

151 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER 

FROM MARY JO WHITE 

Q.1. Right now there are about 50 rules under the SEC’s jurisdiction that have missed their deadlines. In the case of the 

crowdfunding rules, the delay is legitimately holding up capital formation among startups. Can you respond to how you might confront the SEC’s challenging workload as Chairman, and what improvements can be made in order to expedite the regulatory process 

in a prudent manner? 

Specifically in the JOBS Act, how might the SEC move the Title 

III Crowdfunding regulations more expeditiously? I know you are 

working through concerns about private placements and the new 

definition of accredited investors. However, some level of predictability about what is expected from securities crowdfunding platforms would help this sector develop appropriately. 

A.1. Under the Dodd-Frank Act and the JOBS Act, the SEC was 

mandated to engage in extensive and complex rulemaking. A substantial number of rulemakings have been completed, but a substantial number have not, including the crowdfunding rules. The 

remaining rulemaking mandates contained in the Dodd-Frank Act 

and JOBS Act must be completed swiftly. Though voluminous, if 

confirmed, I will work with the staff and my fellow Commissioners 

to finish, in as timely and smart a way as possible, those mandates 

required by Congress. This will require, I believe, strong leadership 

of parallel workstreams and close consultation with each of my fellow Commissioners. In working through the remaining 

rulemakings under Dodd-Frank and the JOBS Act, I will be cognizant of potential improvements that could be made to make the 

regulatory process more efficient. 

As I indicated in my testimony, completing the rulemaking mandates that the Commission has received from Congress, including 

the crowdfunding rulemaking mandated under Title III of the 

JOBS Act, will be a high priority for me if confirmed. An important 

first step in this process will be for the Commission to issue a rule 

proposal on which issuers, investors, potential crowdfunding intermediaries, and other interested parties may comment. My understanding is that Commission staff has been actively working on a 

rule proposal for the Commission’s consideration. I also understand 

that Commissioners and staff have met with a number of interested groups, and the staff has engaged in collaborative discussions 

with FINRA, the relevant national securities association for 

crowdfunding intermediaries, about the most efficient and effective 

way to move forward with the rulemaking. If confirmed, I will consult with the Commission and staff to determine how best to move 

forward with rule proposals to implement the crowdfunding provision. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR HAGAN 

FROM MARY JO WHITE 

Q.1. In August 2012, the SEC adopted conflict minerals rules to 

implement Section 1502 of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act. These rules require public companies 

with conflict minerals that are necessary to the functionality or 

152 

production of their products to make annual disclosures in their 

SEC filings, obtain an independent audit and post information on 

their Web sites. Aside from the actual disclosure and independent 

private sector audit that is required (other than during a brief 

transition period), I understand than an extensive process is required for companies to determine if they are subject to the rules. 

When the SEC proposed these rules, it estimated that the addi- tional costs of the disclosure requirements would be less than $75 

million. Commentators responded that the SEC had vastly underestimated the costs of the rules. Professors from Tulane University 

estimated the costs to be $7.93 billion, and the National Association of Manufacturers estimated cost of $8–16 billion. After reviewing this input, the SEC concluded that the implementation costs of 

the revised rules would be $3–4 billion, and the ongoing compliance 

costs would be $207–609 million. It nevertheless proceeded to adopt 

final rules. 

Given the extraordinary cost of these rules, do you think the SEC 

should have adopted the final rules? 

A.1. The Dodd-Frank Act required the SEC to promulgate the final 

rule. In fulfilling this mandate, the Commission tried to reduce the 

burden of compliance in areas in which it had discretion while remaining faithful to the language and intent of the statutory provision Congress adopted. The rule has been challenged in court, and 

the extent of the Commission’s responsibilities in light of the cost 

is at issue, so it would be inappropriate for me to comment further 

at this point. 

Q.2. Given the pending legal challenge to the SEC’s conflict minerals rules what steps do you plan on taking if confirmed as Chairman to lessen the prospect of these legal challenges? 

A.2. A thoughtful and transparent rulemaking process—which includes a careful economic analysis—is an essential part of agency 

decision making and rulemaking. While it is impossible to predict 

or control the choices that potential litigants may make when contemplating a court challenge to an SEC rulemaking, I believe that 

such analyses to support SEC rules will lessen the strength of 

many arguments raised against our rules. 

Q.3. The issue of fiduciary duty is one that has received considerable attention. 

What are your thoughts on harmonizing the standard of care for 

investment advisers and brokers? 

Along these lines and agency harmonization, do you believe that 

the SEC should work with the Department of Labor to ensure that 

there is a consistent standard of care, or at least workable dual 

models, for those who provide investment advice for retail products 

and retirement plans? 

A.3. Broker-dealers and investment advisers both provide investment advice, but are regulated differently when doing so. Whenever different standards apply to the same activity, I believe regulators should carefully consider whether such distinctions make 

sense from both the perspective of investors and industry. As you 

know, the Commission very recently published a release requesting 

input from the public on a uniform fiduciary standard of conduct 

for broker-dealers and investment advisers. The release contained 

153 

details about how a uniform fiduciary standard of conduct could operate. I am very much looking forward to reviewing with the Commissioners and the staff the information provided in response to 

that release. I believe that the goal in this effort should be to make 

sure that investors, particularly retail investors, are appropriately 

protected and have access to, and choices about, the type of investor-focused investment advice that they need. 

With respect to the SEC’s coordination with the DOL, my understanding is that SEC staff has coordinated fairly extensively with 

DOL staff on the question of how to implement a workable fiduciary standard and the practical effect for financial services providers, particularly broker-dealers, of operating under a fiduciary 

duty. I think such coordination and discussion is important and, if 

confirmed, I would encourage the staff to pursue coordination with 

DOL and other regulators. I have every expectation that the SEC 

and the DOL will continue to collaborate on developments regarding the statutory standards each agency administers. 

Q.4. Final implementing rules for the Volcker Rule have been significantly delayed. Given that the agencies will most likely not publish final rules until summer and that the statute explicitly recognized a minimum 2-year conformance period, do you expect that 

guidance should be given to extend the current implementation 

date beyond July 2014? 

A.4. The Federal Reserve Board has sole authority under Section 

619 of the Dodd-Frank Act to determine whether the law’s conformance period should be extended. However, I understand that the 

Commission has been consulted on issues regarding the Volcker 

Rule’s conformance period in the past. If confirmed, I will review 

this issue and consult with the Federal Reserve Board to ensure 

that the requirements both implement the intent of Congress and 

provide adequate time for entities that the Commission supervises 

to make the changes necessary to fully comply. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN 

FROM MARY JO WHITE 

Q.1. I’m very concerned about the revolving door that exists between the SEC and the private sector. Last month, the Project on 

Government Oversight released a report showing that, between 

2001 and 2010, more than 400 former-SEC employees filed almost 

2,000 disclosures indicating that they were representing a client in 

front of the SEC. Those disclosures were required to be filed only 

by former employees who had left the SEC within the previous 2 

years—so the actual revolving door activity went beyond the reported 2,000 disclosures. I’m worried if someone works for the SEC 

and is already looking ahead to their next job, particularly their 

next very fancy, very high-paying job, that it might affect their 

judgment while they are still working at the SEC. 

Do you believe the revolving door is still a problem, and if so, can 

you talk about any plans you have to fix it? 

A.1. Every agency needs to be concerned about both the fact and 

appearance of the so-called revolving door and must have rules in 

place governing post-employment activity, as well as strong mechaVerDate Nov 24 2008 14:29 May 23, 2013 Jkt 048080 PO 00000 Frm 00157 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-12 NOMINATIONS OF CORDRAY AND WHITE\HEARING\31213.TX
154 

nisms for dealing with any potential conflicts resulting from prior 

employment activity. I understand that the GAO issued a report 

that noted the SEC’s post-employment procedures are similar to 

those of other regulatory agencies. In addition, the GAO only made 

one recommendation—that the agency has already adopted—related to documenting the advice that ethics officials provide to SEC 

employees before they depart. If confirmed, I would further review 

these issues. 

Q.2. According the same report, the SEC heavily redacts the socalled disclosures so that the public is often left in the dark about 

the real conflicts of interest. I think that’s a mistake and that 

transparency here should be a bigger priority for the SEC. Do you 

agree? 

A.2. As someone who previously served in Government, I too value 

transparency. But, without knowing what is being redacted, it is 

difficult for me to weigh the various factors that may be at play. 

I would, however, note that the reason these disclosures exist is because the SEC has a specific rule that requires former employees 

to notify the agency if they are going to appear before the Commission within 2 years of departure—something that goes beyond what 

is required by the Office of Government Ethics. If confirmed, I will 

look into the process regarding these disclosures. 

Q.3. The consumer agency has met virtually all of its Dodd-Frank 

rule-writing deadlines. The SEC has missed about half its deadlines. 

Can you outline your plans as SEC Chairman to make sure the 

SEC issues rules required by Dodd-Frank swiftly? 

A.3. The rulemaking mandates contained in the Dodd-Frank Act 

must be completed swiftly. Though voluminous, if confirmed, I will 

work with the staff and my fellow Commissioners to finish, in as 

timely and smart a way as possible, those and any other mandates 

required by Congress. As an initial matter, I believe strong leadership of parallel workstreams and close consultation with each of 

my fellow Commissioners is required to complete this rulemaking 

in a responsible and expedited manner. 

Q.4. To what extent do you think the SEC’s reliance on appropriations for funding has played a role in the agency’s failure to meet 

its rule-writing deadlines? 

A.4. As one not yet employed at the Commission, I cannot yet 

speak specifically as to how the appropriations process may have 

impacted the Commission’s ability to meet all of the rule-writing 

deadlines imposed by the Dodd-Frank Act. I do note, however, that 

under the Dodd-Frank Act the SEC was given over 90 complex 

rulemakings to complete without being given significant additional 

resources to do so. As a general matter, I also believe that the 

Commission has significant resource needs: to build out programs 

newly created under the Dodd-Frank and JOBS Acts; to strengthen 

other core agency functions like enforcement and examinations; 

and to continue critical investments in information technology. The 

fact that the Commission has been flat funded during FY13 in a 

Continuing Resolution—and frequently is funded under a Continuing Resolution—will make it difficult for the SEC to plan longVerDate Nov 24 2008 14:29 May 23, 2013 Jkt 048080 PO 00000 Frm 00158 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-12 NOMINATIONS OF CORDRAY AND WHITE\HEARING\31213.TX
155 

term in hiring the experts and investing in the information technology projects the SEC needs to keep pace with its dynamic markets. 

Q.5. To what extent do you think the dynamics around SEC’s governance structure—a five-person board—has played a role in the 

agency’s failure to meet its rule-writing deadline? 

A.5. As one not yet employed at the Commission, I cannot speak 

specifically to how the five-person board structure has played a role 

in the agency’s ability to meet all of the rule-writing deadlines imposed by the Dodd-Frank Act. As a general matter, while there are 

certainly benefits to a five-person Commission structure, it would 

also seem that the participation of multiple decision makers could 

impact the pace by which rules are promulgated. If confirmed, I 

look forward to working with my fellow Commissioners to finish, in 

as timely and smart a way as possible, all rulemaking mandates 

required by Congress. 

Q.6. As you know, all of the bank regulators—the Federal Reserve 

Bank, the OCC, and the consumer agency—are funded independently—outside the political process. Earlier this week, in an Op-ed 

in Politico, former CFTC Chairman Brooksley Born and former 

SEC Chairman William Donaldson called for the CFTC and SEC 

to be independently funded as well. Do you believe that independent funding would increase the ability of the SEC to live up 

to its mission of protecting investors, the public, and the capital 

markets? 

A.6. Yes. During the Dodd-Frank debate, I understand Congress 

considered making the SEC ‘‘self-funded’’ like the SEC’s bank regulator counterparts. I believe that such a change, had it been made, 

would have been a significant benefit to the SEC in many respects, 

including closing the resource gap between the SEC and its regulated entities and in fulfilling its mission. 

While self-funding did not come to pass, there were significant 

changes made to the SEC’s funding structure so that now it is 

charged with collecting transaction fees from the securities industry to match the SEC’s appropriation. With this so-called matchedfunding, a rise or fall in the SEC’s appropriation is matched by an 

increase or decrease in transaction fee collections. This is significant, as no matter what level Congress appropriates, the SEC’s 

budget is deficit-neutral. I would hope that this change would 

make it easier for the SEC to receive the resources it badly needs 

to carry out its wide-ranging responsibilities on behalf of investors 

and our capital markets. 

Q.7. Many Americans are concerned about the impact that wellfunded lobbying of large corporations—particularly Wall Street— 

has had on weakening and slowing down the SEC’s rule-writing 

process. 

Can you describe what you would do as SEC Chairman in general to stand up to lobbyists and help make sure the SEC lives up 

to its mission to protect investors, the public, and the capital markets? 

A.7. While I will always listen to differing viewpoints, and think 

it is important to do so, my focus will be on doing what is right 

156 

to protect investors and effectively overseeing our capital markets, 

focusing on aggressive enforcement of the securities laws and 

smart and timely regulation. At the end of the day, it is the responsibility of the Commission to do the right and best thing in every 

situation and to make every rulemaking decision to further the 

SEC’s mission to protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation. If confirmed, that is 

what I would always endeavor to do. 

Q.8. At the hearing, we discussed the importance of measuring not 

only the costs of regulation in any cost-benefit analysis but also the 

costs of under-regulation—such as the costs of when too-big-to-fail 

banks take the kinds of risks that lead to the crash of our economy. 

Can you describe in more detail what you will do to make sure 

that the analysis carried out at the Commission is a real cost-benefit analysis that incorporates both the costs of regulatory implementation and the costs of inaction? 

A.8. I agree that an important part of good economic analysis is determining the benefits of regulation as well as the costs. As you 

stated at the hearing, in some situations avoiding the harms that 

result from the absence of sound regulation can be a very significant benefit of a regulation. I am aware that it can be quite difficult to quantify the benefits of regulation; thus, while we must try 

to do so, if we cannot, we should explain why and still consider the 

qualitative benefits of regulation. 

Q.9. The SEC’s chief counsel has determined that the SEC should 

use cost-benefit analysis only in cases of discretionary action. Economic consultants to the Commission have called for performing a 

cost-benefit analysis on even core statutory directives. Which approach do you favor? 

A.9. I understand that the approach currently set forth in the SEC 

staff’s guidance for economic analysis is to consider the overall economic impacts of a rulemaking, including both those deriving from 

statutory mandates and those resulting from the Commission’s exercise of discretion. If confirmed, I look forward to having the opportunity to more carefully consider these issues in the context of 

specific Commission rulemakings. 

Q.10. Analysis after analysis has shown that the willingness of 

credit rating agencies to give AAA ratings to toxic mortgage-backed 

securities played a huge role in the crash of our economy. In 2011, 

the SEC proposed rules under its Dodd-Frank authority to implement a number of provisions to improve the integrity of the ratings 

system and limit future risk. It has now been 2 years since then, 

and we haven’t seen final adoption of the rules. I am concerned 

that the credit rating agencies continue to have clear conflicts of 

interest. I understand the SEC will be hosting a roundtable on this 

topic in May, and it is my hope that the Commission then immediately proceed to a rulemaking, as Dodd-Frank authorizes it to do. 

What will you do as Chairman to accelerate this process? 

A.10. In the report to Congress pursuant to Section 939F of the 

Dodd-Frank Act issued in December 2012, the SEC staff recommended that the Commission, as a next step, convene a public 

roundtable to explore potential regulatory and statutory changes to 

157 

further address any conflicts of interest. The roundtable will be 

held on May 14 and, if confirmed, I look forward to participating 

with the other Commissioners. I have not yet discussed with the 

Commissioners and staff the process to finalize the particular rules 

you identified. If confirmed, I am committed to reviewing the agenda and prioritizing the required rulemakings that remain outstanding. 

Q.11. Can you describe the substantive approach you believe the 

SEC should take to fix this problem and dial down the risk? 

A.11. If confirmed, I look forward to participating with the other 

Commissioners in the roundtable and exploring potential regulatory—and considering possible statutory—changes to further address any conflicts of interest. In the meantime, I understand that 

the SEC staff will continue to perform annual examinations of the 

NRSROs, which specifically includes reviewing the management of 

any conflicts of interest by the NRSROs. 

Q.12. What will you do to make sure that the conflicts of interest 

are reduced and that the agencies follow the law? I’ve heard a lot 

of concerns that the rule proposals were too weak in these areas. 

A.12. I understand that there currently are rules in place to prohibit or manage certain conflicts of interest and I am committed to 

aggressively pursuing any violations of those rules. That said, if 

confirmed, I will work with the SEC staff and the Commissioners 

to review the proposed rules and identify any provisions that may 

be further strengthened to address conflicts of interest. 

Q.13. As you know, derivatives markets are global in scope. How 

do you plan to make sure the SEC effectively oversees international derivatives transactions? 

A.13. For the security-based swaps that the Commission regulates, 

transactions that involve multiple jurisdictions are the norm, not 

the exception. It is therefore critical that the Commission consider 

how to apply the security-based swap rules in a cross-border context and in doing so, also consider how to create and apply a regulatory framework to an existing market that is already global in 

nature. 

As Chairman Walter recently testified before this Committee, the 

Commission plans to address holistically the international implications of the security-based swap rules arising under Title VII of the 

Dodd-Frank Act in a single proposal. I believe this will give interested parties, including investors, market participants, foreign regulators, and other interested parties, an opportunity to consider as 

an integrated whole the Commission’s approach to the application 

of Title VII’s requirements to cross-border security-based swap 

transactions and non-U.S. persons that act in capacities regulated 

under the Dodd-Frank Act. Through these proposed rules, I believe 

the Commission can develop a strong regulatory framework that 

addresses the risks that can be posed to the United States by crossborder security-based swap transactions. 

Q.14. The taxpayers of many cities and towns have suffered huge 

losses in recent years as a result of bad and self-serving financial 

advice provided by large financial institutions. The Dodd-Frank Act 

requires anyone who provides financial advice to public entities to 

158 

register as municipal financial advisors and follow a fiduciary 

standard of care. The SEC proposed rules on this issue more than 

2 years ago but has not yet issued final rules. 

Do you agree with the principle that anyone who provides financial advice to municipalities should be held to a fiduciary standard? 

A.14. The municipal advisor registration provision in the DoddFrank Act imposes a fiduciary duty on municipal advisors to act in 

the best interests of municipal entities that they advise. If confirmed, I will work with staff and my fellow Commissioners to implement this provision fully and adopt final municipal advisor registration rules promptly. Congress added the municipal advisor 

provisions for good reason—to protect municipalities, their taxpayers, and investors in municipal securities from conflicted advice 

and unregulated advisors. They deserve the benefit of effective municipal advisor regulation. 

Q.15. What will you do to prioritize the issuing of a strong final 

rule that defines municipal advisors so that the fiduciary standard 

can move forward? 

A.15. As I stated in my written testimony, if confirmed, one of my 

early priorities would be to finish the rulemaking mandates contained in the Dodd-Frank Act in as timely and smart a way as possible. I understand that SEC staff is moving as promptly as possible to finalize the municipal advisor registration rules and that 

this rulemaking is the highest immediate priority in the SEC’s 

newly established Office of Municipal Securities. The staff has indicated that it would like to present final rules for the Commission’s 

consideration in the first part of this year. If confirmed, I will work 

closely with staff and my fellow Commissioners to finalize and 

adopt these important rules promptly in a way that would carry 

out the intent of this Dodd-Frank Act provision to ensure the core 

protection of imposing a fiduciary duty on municipal advisors to 

municipal entities. 

Q.16. In Section 953(b) of the Dodd-Frank Act, Congress required 

the SEC to issue a regulation mandating that companies disclose 

the ratio of pay between the company’s CEO and the company’s 

median employee. This disclosure requirement is intended to help 

investors evaluate total levels of CEO pay relative to other company employees. Many investors want to know about these pay ratios because high pay disparities between the CEO and other employees—particularly in a time of economic belt tightening—can result in lower employee morale, reduced productivity, and higher 

turnover, thereby signaling economic trouble for the company. It 

has now been more than 2 years since the SEC issued its rule implementing the Dodd-Frank ‘‘say-on-pay’’ vote requirement, but the 

SEC has not yet issued a rule implementing Section 953(b). 

What will you do to finally get the rules implementing Section 

953(b) finally issued? 

A.16. Completing the rulemaking mandates that the Commission 

has received from Congress will be a priority for me if confirmed. 

This is the case both for those provisions with statutory deadlines, 

and those without, such as the Section 953(b) ‘‘pay ratio’’ rulemaking mandate. An important first step in this process for the 

Commission will be issuing a rule proposal through which the 

159 

Commission will be able to receive feedback from shareholders, 

companies, and other interested parties. I understand that there 

are differing views relating to the implementation of this mandate. 

Some believe that the disclosures required by Section 953(b) represent critically important disclosures to investors and have expressed concerns about any implementation approach that would 

narrow the provision’s scope. In contrast, others have questioned 

the usefulness to investors of the mandated disclosures, while at 

the same time questioning the ability of companies to collect the 

data necessary to make the disclosures required by the provision 

and asserting that the compliance costs will be quite high. If confirmed, I will consult with the Commission and the staff to determine the most effective and expeditious path forward for implementation of the pay ratio provision. 

Q.17. U.S. capital markets are uniquely diverse and provide consumers with a wide range of banking and investment products. 

There has been concern expressed that various new regulations 

may result in making our financial markets even more reliant on 

banks. 

Do you agree with concerns over the concentration of assets in 

a few of the largest institutions? 

A.17. The strength of our capital markets depends on the existence 

of vigorous competition but also on sound regulation that gives investors, depositors, and other participants confidence in the safety 

of their assets. Regulators, in considering the economic effects of 

new rules, must take into account their benefits and costs, which 

includes the impact on competition and the potential risk of concentrating market share among a few large financial institutions. 

Further, the financial regulators—as members of the Financial Stability Oversight Council (FSOC)—must be vigilant in seeking to 

identify and address concentrations that create systemic risk. I understand these responsibilities and, if confirmed, will make sure 

that SEC does its part to live up to them. 

Q.18. What would be the implications of that consolidation for retail investors? 

A.18. The SEC’s mission is to protect investors. If confirmed, I will 

seek to ensure that the SEC’s authority is used in a way that 

avoids risk to retail investors as a result of concentration and that 

preserves a broad array of choice among both providers and products. 

Q.19. Investors receive advice about securities under two standards 

of care. While investment advisors must follow a fiduciary standard 

of care when offering advice, broker-dealers must follow a different 

suitability standard. The result of having different rules for what 

is virtually the same service causes confusion and creates problems. Under the Dodd-Frank Act, the SEC is authorized to extend 

the fiduciary duty to broker-dealers. As you know, the SEC recently put out a request for additional cost-benefit data. 

What is your view about extending the fiduciary standard to 

broker dealers? 

Will this be a priority for you? 

160 

A.19. Whenever different standards apply to the same activity, I 

believe regulators should carefully consider whether such distinctions make sense from both the perspective of investors and industry. This is true of broker-dealers and investment advisers, which 

you point out both provide investment advice but are regulated differently when doing so. As you know, the Commission very recently 

published a release requesting input from the public on a uniform 

fiduciary standard of conduct for broker-dealers and investment advisers. The release contained details about how a uniform fiduciary 

standard of conduct could operate. I am very much looking forward 

to reviewing with the Commissioners and the staff the information 

provided in response to that release. I believe that the goal in this 

effort should be to make sure that investors, particularly retail investors, are appropriately protected and have access to, and choices 

about, the type of investor-focused investment advice that they 

need. 

Q.20. The SEC enforcement division plays a critical role in ensuring compliance with securities laws, but the private right of action 

is also a critical tool for making sure that corporations are accountable to their shareholders and that investors can recover losses 

they suffer as a result of violations of securities laws. 

In Morrison v. National Australia Bank, the Supreme Court limited the ability of U.S. shareholders, especially public pension 

funds, to recover losses from securities fraud. Can you describe 

what you think the response should be to this ruling, and also in 

what ways you think the SEC should play a role in that process? 

A.20. I understand that, pursuant to Section 929Y of the DoddFrank legislation, the Commission last year undertook a study of 

potential legislative proposals that would address the Supreme 

Court’s decision in Morrison with respect to private rights of action. 

If confirmed, I commit to reviewing the study’s proposals with the 

staff and determining what role the Commission can play in helping Congress determine what, if any, further legislative response to 

Morrison is necessary to ensure that investors have appropriate 

protections under U.S. securities laws. 

Q.21. Under the Dodd-Frank Act, the SEC has the authority to 

write rules on mandatory arbitration agreements. To date, the SEC 

has not done so. What is your stance on mandatory arbitration 

clauses that force investors to agree to arbitration instead of other 

measures during securities disputes, and what approach do you 

think the SEC should take on this issue? 

A.21. I have not yet had the opportunity to discuss this issue with 

the Commissioners and staff, but I am committed to having those 

discussions if confirmed. As you know, Section 921 of the DoddFrank Act amended the Securities Exchange Act of 1934 and the 

Investment Advisers Act of 1940 to provide the Commission with 

authority to conduct rulemaking, under certain circumstances, relating to agreements that require customers or clients to arbitrate 

any future disputes arising under the Federal securities laws or related rules or regulations. If confirmed, I commit to exploring the 

use of these mandatory pre-dispute arbitration agreements. At this 

point, I am not able to commit to any specific outcome or approach. 

161 

Q.22. Do you believe there are other steps the SEC should take to 

strengthen the rights of private action for shareholders? 

A.22. Private rights of action have long been recognized as an important element of the Federal securities laws, as meritorious private actions provide an essential supplement to the Commission’s 

own enforcement efforts. Historically, key issues surrounding the 

scope of private rights of action have been resolved by the courts 

in judicial decisions or addressed through legislation by Congress. 

If confirmed, I certainly will focus on whether there are ways the 

Commission could help to improve the current system of private securities litigation. 

Q.23. Through its Citizens United decision, the Supreme Court unleashed a powerful group of millionaires and billionaires who would 

spend hundreds of millions of dollars to influence election outcomes—all in secret. When there was a push in Congress to require 

disclosure of corporate spending on elections, armies of corporate 

lobbyists used their influence to kill it—and to keep the American 

people in the dark. The SEC is considering a proposed rule requiring public companies to disclose political spending, but I am very 

concerned that the rule is in the sights of many powerful interests. 

Can you describe what you will do as SEC Chairman to make 

sure that corporations have to disclose the use of corporate resources for political activities? 

To what extent will ensuring transparency over political spending by corporations be a priority for you? 

A.23. I understand that the Commission has received two rulemaking petitions asking the Commission to require the disclosure 

of political contributions made by public companies. These petitions 

have received considerable attention, both from those in favor and 

from those opposed. The staff is reviewing the petitions to determine whether or not to recommend any rulemaking in this area. 

It would be premature for me to make an assessment of the merits 

of the petitions, or to pre-judge the disclosure requirement generally, without the benefit of the staff’s review. 

Q.24. As you know, last year, Congress passed the JOB Act. 

What will you do to make sure that the SEC implements this 

legislation in a way that ensures investors will be protected? 

What will you do to make sure that the SEC implements this 

legislation in a way that ensures sufficient transparency in our 

capital markets? 

A.24. The rulemakings mandated by the JOBS Act represent new 

capital raising opportunities for companies of all sizes. I recognize, 

however, that the JOBS Act made significant changes to the securities laws. In connection with the implementation of the changes, it 

will be important to make sure that the Commission and its staff 

are focused on the agency’s critical mission of protecting investors. 

The success of the JOBS Act, and the ability of companies to raise 

capital, will depend on whether investors understand what they 

are investing in and feel secure in making such an investment. It 

will be critically important to consider this as the rules are implemented, but also after the rules are in place. If confirmed, I would 

work with the Commission and the staff to implement a robust program to review the capital raising practices that develop as a result 

162 

of the JOBS Act and assess the impact these practices have on investors, capital formation, and the markets generally. 

Q.25. Do you believe that the 1982 accredited investor standard 

continues to be appropriate in 2013, or do you think it makes sense 

to increase the threshold ($1 million in assets, $200,000 in income)? 

A.25. I think it is very important for the Commission to undertake 

a thorough study of the current definition of accredited investor, 

particularly as it relates to the net worth and income tests for natural persons. The Dodd-Frank Act instructs both the Government 

Accountability Office and the Commission to study the definition. 

I believe that the insight and recommendations that come from 

those studies will be important components of the Commission’s 

consideration of any possible rulemaking relating to changes to the 

accredited investor definition. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR VITTER 

FROM MARY JO WHITE 

Q.1. What will you do to ensure that coordination is taking place 

between the SEC’s uniform fiduciary standard of care for broker 

dealers and investment advisers and the DOL fiduciary rule that 

also seeks to regulate financial advice provided to investors planning for retirement? 

A.1. I think such coordination and discussion is important, and if 

confirmed, I would encourage the staff to pursue coordination with 

DOL and other regulators. 

Q.2. Do you know if anyone at the SEC has engaged in regular 

conversations with the DOL on this subject over the last year as 

Congress asked? 

A.2. My understanding is that SEC staff has coordinated fairly extensively with DOL staff—including over the last year—on the 

question of how to implement a fiduciary standard and the practical effect for financial services providers, particularly broker-dealers, of operating under a fiduciary duty. 

Q.3. The SEC’s mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. How 

would you balance these sometimes competing goals to insure that 

our capital markets remain the envy of the world? 

A.3. As I noted in my testimony before the Committee, I do not believe that the three components of the SEC’s mission should be 

viewed as in conflict with each other. While each is critical in its 

own right, they also are complementary. For example, a market 

with robust investor protections—protections that help to assure 

that investors will have the confidence to participate in the market—will create the environment for sustained and meaningful capital formation. Without these protections, and the investor confidence that comes with it, the markets will not attract the breadth 

and depth of capital that will enable our markets to flourish. 

It is the responsibility of the Chair and the Commission to take 

the long-term view, balance the objectives when necessary, and 

seek to fulfill all parts of its critical mission. Then, our markets can 

thrive and investors will be protected and benefit. 

163 

Q.4. How much importance do you place on the careful analysis of 

the costs and benefits of any proposed rulemaking? 

A.4. I believe that carefully analyzing the potential economic effects of a proposed rule is an essential part of sound rulemaking 

practice. Such careful analysis involves a qualitative and, where 

possible, a quantitative assessment of a rule’s potential costs and 

benefits. As I stated at the hearing, I understand that it can be difficult to quantify certain economic effects of financial regulation, 

and particularly the benefits of such rules. But I believe we must 

make reasonable efforts to quantify the likely costs and benefits of 

a proposed rule, and if we cannot we should explain why. 

Q.5. In a meeting with reporters you were adamant that Anthony 

Hargrove, a Saints defensive lineman, was shown saying, ‘‘Bobby, 

give me my money.’’ You also told Peter King that you were sure 

it was Hargrove ‘‘because you can see his lips moving.’’ You also 

said that as a prosecutor you had gotten convictions with less evidence. Roger Goodell said he now believes that Hargrove didn’t 

make these comments. In his letter to the accused players after 

their appeal put doubt to these claims Goodell stated, ‘‘I need not 

resolve the issue of who made the statement. Instead, I am prepared to assume—as he apparently stated publicly—that he did not 

make it.’’ Mr. Hargrove has been unable to find work in the NFL 

since your allegation. What does your insistence of Hargrove’s guilt 

say about your credibility as an independent evaluator? 

A.5. In meetings on June 18, 2012, in connection with disciplinary 

proceedings brought by the NFL, whom I represented, against Mr. 

Hargrove and other players, I presented a summary of the evidence 

obtained by investigators from NFL Security. On this point, I explained how the NFL investigators viewed the sideline footage that 

captured Mr. Hargrove and others. At the time, Mr. Hargrove had 

declined to be interviewed by NFL investigators or to otherwise 

provide evidence contradicting the NFL’s findings, which was noted 

during those proceedings. Subsequently, Mr. Hargrove denied to 

the media that he had made some or all of the quoted statement. 

In denying Mr. Hargrove’s appeal, Commissioner Roger Goodell 

noted, in his July 3, 2012, decision, that the NFL investigators 

‘‘reasonably concluded’’ that Mr. Hargrove was the speaker of the 

quoted language, but he would assume, as Mr. Hargrove asserted 

after the June 18 meetings, that he was not the speaker. As Commissioner Goodell also made clear, it was not necessary to resolve 

the issue to conclude that Mr. Hargrove had misled the NFL investigators as to the existence of a pay for performance/bounty program, which was the basis of the discipline imposed on Mr. Hargrove. In ruling on the players’ ultimate appeals, former NFL Commissioner Paul Tagliabue, while vacating the specific discipline, affirmed both Commissioner Goodell’s factual findings as to all players, including Mr. Hargrove, and his conclusion that Mr. Hargrove 

(and two of the other players) had engaged in ‘‘conduct detrimental 

to the integrity of, and public confidence in, the game of professional football.’’ As an independent evaluator of evidence, it is always important to be open-minded and to take into account all of 

the relevant facts available to you, which is what I did. 

164 

Q.6. Ms. White, you stated that the punishments the Saints received were based on ‘‘multiple, independent first-hand accounts.’’ 

How many of these accounts specifically mentioned a ‘‘pay for injury’’ program? And, did any of the witnesses have a vested interest in collaborating what the league was alleging? 

A.6. As the record of these proceedings reflects, a number of witnesses stated that the pay for performance/bounty program rewarded injury-producing plays. The credibility of witness testimony 

must always be carefully scrutinized before reaching any conclusions; part of that scrutiny involves a consideration of any bias or 

self-interest. Here, the accounts of witnesses were credited where 

they were consistent with and corroborated by the independent accounts of other witnesses and/or the documentary evidence. As 

noted in response to Question 5, the factual findings of Commissioner Goodell were affirmed on appeal. 

Q.7. What do you believe the FSOC’s proper role is in money market fund rulemaking? 

A.7. I believe that the next step on money market fund reform 

should occur at the SEC. If confirmed as Chair of the SEC, I would 

certainly be open to the views of FSOC members, as well as other 

interested parties, with respect to money market fund reform. 

However, the SEC is the primary regulator of money market funds 

and should take the lead in regulating the product. 

Q.8. If you choose to go with a floating NAV for some or all funds, 

will you commit to working on the accounting issues and working 

through the tax issues with the IRS? 

A.8. If confirmed, and the Commission were to propose requiring 

that some or all money market mutual funds transact with a floating NAV, I would seek to ensure that the SEC considered and 

worked to mitigate any potential accounting issues associated with 

such a reform. Further, I would seek to ensure that SEC staff 

worked with the appropriate tax regulators at the IRS and the 

Treasury Department to mitigate any potential tax issues associated with a floating NAV. 

Q.9. In a recent speech, FRBNY President Dudley suggested that 

money market funds might be a good candidate for a Fed backstop. 

Do you agree with Mr. Dudley? 

A.9. The fundamental nature of money market funds is that they 

are an investment product. Although I have not had the opportunity to study Mr. Dudley’s speech in detail, my initial reaction 

is that, as investment products, they presumably would not represent the type of vehicle that should carry a backstop of the Federal Reserve Board. However, if confirmed, I would expect to explore this issue further with the staff, Commissioners, and other 

Federal financial regulators. 

Q.10. Are you open to giving serious consideration to voluntary gating by fund boards as a potential reform? 

A.10. I am open to a variety of potential reforms of money market 

funds that address the concerns that remain since the adoption of 

the SEC’s important 2010 money market fund reforms. That would 

include giving consideration to voluntary gating by fund boards, as 

165 

well as other reform options. If confirmed as Chair, I would want 

to continue to study the issue—and the potential impacts of potential reform options—with the SEC staff and Commissioners. 

Q.11. Some have argued that having an inadequate capital buffer 

is worse than having no buffer at all. Do you agree with that argument? 

A.11. If confirmed as Chair, I would want to study the issue of capital buffers for money market mutual funds with the SEC staff and 

Commissioners and consider whether having a capital buffer of any 

size would be beneficial for money market funds and advance the 

Commission’s investor protection and capital formation goals. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR JOHANNS 

FROM MARY JO WHITE 

Q.1. You mentioned in your written statement as well as during 

the hearing that you intend to focus on equity market structure by 

first getting a better understanding of the market segments. As 

you know the SEC issued a Concept Release in 2010 about equity 

market structure, this Committee has held several hearings about 

equity market structure, the Financial Services Committee in the 

House of Representatives has held a hearing, the Joint CFTC–SEC 

Advisory Committee made recommendations about equity market 

structure and there has been several recent studies conducted by 

independent third parties such as Tabb Research and the CFA Institute about equity market structure. Given all of this work that 

has already been done, I believe the prudent step is to move forward rather than start over. Regardless as to what people believe 

should be done to address the cracks and lack of confidence in the 

U.S. equity market structure, it is clear that there is a problem and 

it should be addressed before all trading is done in the dark and 

investor confidence continues to decline. What substantive steps do 

you intend to take to address the increased level of trading in the 

dark and the lack of confidence in the public markets? 

A.1. I agree that the SEC should take all steps necessary to promote investor confidence in the fairness and integrity of the equity 

markets. Equity investing inherently involves risks and rewards. 

Our equity market structure should be perceived by investors as a 

strength and source of confidence, rather than perceived as a risk 

factor in and of itself. As I noted in my testimony, today’s highspeed, high-tech, and dispersed marketplace raises questions and 

concerns that must be addressed with a sense of urgency. While I 

agree that the Commission, other regulators, and Congress have 

done significant work on equity market structure, I have not yet 

had an opportunity to discuss these issues with the Commissioners 

and staff. I generally believe that the SEC should follow a path 

that will enable it to address market structure issues in a responsible manner as expeditiously as possible. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY 

FROM MARY JO WHITE 

Q.1. The conflict minerals rule seriously impacts publicly traded 

companies, many of whom are trying to be compliant but are unVerDate Nov 24 2008 14:29 May 23, 2013 Jkt 048080 PO 00000 Frm 00169 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-12 NOMINATIONS OF CORDRAY AND WHITE\HEARING\31213.TX
166 

1 The phrase ‘‘consistent with [the Fed’s] long-standing policy of national treatment and 

equality of competitive opportunity between the U.S. operations of foreign banking firms and 

U.S. banking firms’’ is taken from the Fed’s proposing release. See, Enhanced Prudential Standards and Early Remediation Requirements for Foreign Banking Organizations and Foreign 

Nonbank Financial Companies, Proposed Rule, 77 FR 76629 (Dec. 28, 2012). 

clear on the timing of the rule. There was a somewhat ambiguous 

final rule, and I have heard that the SEC intends to release guidance to clear up these ambiguities. Can you just let us know what 

the timing is for the release of the guidance and the scope of the 

guidance? 

A.1. The Commission adopted the Conflict Minerals rule in August 

2012, and the Commission established a compliance date that requires issuers subject to the rule to file the first reports by May 

31, 2014, for the reporting period covering January 1, 2013, to December 31, 2013. I understand that the staff has stated publicly 

that it has received inquiries from companies seeking interpretive 

guidance on the conflict minerals rule and that it is working to respond to the inquiries and hopes to provide guidance soon. I have 

not discussed the scope and specific timing of the guidance with 

Commission staff. 

Q.2. What are your views on the Fed’s proposed rules on foreign 

banks and specifically their impact on foreign owned broker-dealers? 

Are you concerned about the case where a foreign firm does not 

own a U.S. bank subsidiary but the Fed is still seeking to set U.S. 

bank capital standards for the foreign firm’s U.S. broker-dealer, via 

an intermediate holding company, on top of SEC standards? 

Won’t this have the effect of discriminating against foreignowned broker-dealers? 

As the new Chairman of the SEC, how would you address the 

Federal Reserves’ attempt to override the SEC broker-dealer capital requirements? 

A.2. The Federal Reserve Board has stated that its proposed rules 

regarding foreign banking organizations are consistent with its 

long-standing policy of national treatment and equality of competitive opportunity between the U.S. operations of foreign banking 

firms and U.S. banking firms. 1 Generally, I am informed that the 

proposal is meant to ensure foreign banking organizations maintain sufficient capital and liquidity within its U.S. subsidiaries on 

a consolidated basis, instead of relying on the strength of a foreign 

parent or guarantor. 

Large U.S. bank holding companies, including those with large 

broker-dealer subsidiaries, are already required to meet the Fed’s 

standards on a consolidated basis, while the broker-dealer is required to meet the SEC’s standards. The Fed is proposing that the 

U.S. operations of certain large foreign banking organizations meet 

the same prudential standards as domestic bank holding companies 

at the intermediate holding company level, which also may include 

large broker-dealers regulated by the SEC. 

I understand that certain foreign banking organizations have 

raised the issue of whether the Fed’s proposed rules will discriminate against foreign-owned broker-dealers. It would be expected 

that the Fed would address any such comments it may receive in 

the context of its final rulemaking in this area. 

167 

I have not yet had the opportunity to discuss this issue with the 

Commissioners and staff. But if confirmed, I will do so and work 

closely with the Fed to ensure that its prudential oversight of foreign banking organizations in the U.S. at the intermediate holding 

company level would be consistent with the Commission’s oversight 

objectives and with the safe operation of broker-dealer subsidiaries 

of foreign banking organizations in the U.S. securities markets. 

Q.3. Should the Federal Reserve Board, OCC, FDIC, SEC, and 

CFTC all work together to ensure consistency and uniformity, and 

issue one set of final Volcker Rule regulations? 

Should the SEC make finalizing the Volcker Rule regulation as 

a priority since the Federal banking agencies are further along in 

their process? 

A.3. I understand that the Federal Reserve Board, OCC, FDIC, 

SEC, and CFTC are, in fact, working together closely to develop 

rules to implement the requirements of Section 619 of the DoddFrank Act, commonly referred to as the ‘‘Volcker Rule.’’ I agree 

that, as recognized by Congress in the statute, inconsistent rules 

could provide advantages to, or impose disadvantages on, the different types of legal entities subject to the provisions of the Volcker 

Rule. In addition, commenters on the joint proposed rules have emphasized the importance of comparable regulations and have noted 

that diverging rules would increase regulatory burdens. I am committed to following the statutory mandate and will work closely 

with my fellow regulators to assure that our regulations are comparable and consistent. I understand that Commission staff and 

the staffs of the other regulatory agencies, along with Treasury 

staff in their role as coordinator, are involved in regular discussions on this rulemaking. Since the staffs of the various agencies 

are working together closely to refine the proposed rules in response to comments, I am informed that it is not the case that any 

of the agencies are further advanced than others in the process of 

adopting final rules. 

Q.4. Will the SEC conduct a comprehensive cost/benefit analysis 

before any money market mutual fund rule is either proposed or 

adopted? 

A.4. If confirmed, I will ensure that any SEC proposal for further 

money market mutual fund reform will contain a full proposed economic analysis (including a cost-benefit analysis) compliant with 

the staff’s ‘‘Current Guidance on Economic Analysis in SEC 

Rulemakings’’, and would request comment on that analysis. I 

similarly commit to ensure that any SEC adoption of such money 

market mutual fund reforms would contain a final economic analysis in accordance with that Guidance. This Guidance is available 

at such money market mutual fund reforms would contain a final 

economic analysis in accordance with that Guidance. This Guidance is available at such money market mutual fund reforms would 

contain a final economic analysis in accordance with that Guidance. 

This Guidance is available at http://www.sec.gov/divisions/ 

riskfin/rsfilguidanceleconlanalylsecrulemaking.pdf. 

Q.5. The IPO On-Ramp, Title 1 of the Jumpstart Our Business 

Startups Act, is being used by many emerging companies in purVerDate Nov 24 2008 14:29 May 23, 2013 Jkt 048080 PO 00000 Frm 00171 Fmt 6602 Sfmt 6602 L:\HEARINGS 2013\03-12 NOMINATIONS OF CORDRAY AND WHITE\HEARING\31213.TX
168 

suit of public financing. Without such easing of up-front and ongoing regulatory burdens to incentivize companies to enter the U.S. 

public equities market, such companies would remain on the sidelines, failing to grow their businesses, create new jobs, and speed 

U.S. innovation. I am very encouraged by use thus far of the IPO 

On-Ramp and expect interest in entering the public market as an 

Emerging Growth Company to grow, as more companies are familiarized with its advantages. 

However, I don’t believe we should stop there. Do you agree that 

there is more to be done to give smaller public companies the tools 

they need to be successful—not only at IPO, but throughout their 

future as a publicly listed and traded company? 

As Chairman, will you examine volume and liquidity issues of 

smaller public companies, acknowledging that a one-size-fits-all approach does not make sense, nor does it best serve our country and 

our economy? 

A.5. I recognize that small companies play a significant role in the 

economic growth and job creation in this country, and believe that 

a strong initial public offering market would serve to encourage increased investment in small companies. The JOBS Act made significant changes to the initial public offering process for smaller 

companies, but I believe it is too early to tell what impact these 

changes will have on the initial public offering market. If confirmed, I would ask the staff to closely monitor these developments. 

I do agree that consideration should also be given to address concerns raised by smaller public companies regarding the ongoing 

regulatory requirements facing these companies and the impact of 

market structure on the ability of these companies to grow and 

raise capital. I understand that a review of the public company disclosure requirements has been considered by Commission staff for 

a long time. If confirmed, I would seek to gather more information 

from Commission staff regarding this issue. Additionally, if confirmed, I would work with the staff to better understand the impact 

of the lack of post-initial public offering liquidity on small companies. I would like to learn from the staff’s work on the impact of 

decimalization to understand the role that tick size plays on liquidity for small companies. 

Q.6. We understand that the staff has been working on a final rule 

regarding municipal advisors. Can you tell us what stage the rulemaking is in and when the Commission may vote on it? 

A.6. I understand that SEC staff is moving as promptly as possible 

to finalize the municipal advisor registration rules and that this 

rulemaking is the highest immediate priority in the SEC’s newly 

established Office of Municipal Securities. The staff has indicated 

that it would like to present final rules for the Commission’s consideration in the first part of this year. If confirmed, I will work 

with staff and my fellow Commissioners to finalize and adopt these 

important rules promptly. 

Q.7. Many have criticized the municipal advisor rule as being potentially overbroad and covering industries that are already highly 

regulated. Are you aware of these concerns generally, and particularly those of the banking industry which provides such a broad 

range of services to municipalities? 

169 

A.7. I am aware of these concerns generally and understand that 

the Commission has received numerous comment letters that the 

2010 proposed municipal advisor registration rules were too broad. 

I further understand that one of the major themes of the public 

comments concerned the potential effects of the proposed rules on 

traditional banking activities and that the staff is carefully weighing these comments as they develop recommendations for the Commission. If confirmed, I will work closely with staff and the Commissioners to finalize these rules in a balanced way to ensure protection of municipal entities and investors without overregulation. 

Additionally, I will give careful consideration to addressing overbreadth concerns in general with more tailored rules, and also will 

give careful consideration to the concern you highlighted regarding 

the potential impact on the banking industry. 

Q.8. Are you concerned about the impact on municipalities if small 

banks decline to provide loans and other services to them because 

of the additional cost of complying with SEC regulation in addition 

to existing regulatory requirements? 

A.8. I have not yet had the opportunity to discuss this particular 

issue with staff and my fellow Commissioners, but as a general 

matter, I am concerned about the costs and consequences of all 

SEC rules. I understand that the staff is working closely with staff 

in the SEC’s Division of Risk, Strategy, and Financial Innovation 

to assess the economic impacts of the municipal advisor registration rulemaking as they develop recommendations for the Commission. If confirmed, I commit to reviewing this issue and I look forward to working with staff and the Commissioners to strike an appropriate balance to ensure protection of municipal entities and investors without unnecessarily imposing additional regulation, including careful consideration of the issue you raise regarding the 

potential impact on small banks and the services they provide to 

municipalities. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN 

FROM MARY JO WHITE 

Q.1. Economic impact of new SEC rules and regulations can only 

be properly assessed by a comprehensive cost-benefit analysis. How 

will such a cost-benefit analysis be applied to rules such as the developing Consolidated Audit Trail? What will be the frequency and 

depth of this cost-benefit analysis? 

A.1. I understand that the Consolidated Audit Trail will be implemented through a National Market System (NMS) plan that must 

be submitted to the Commission by the self-regulatory organizations (SROs) by December 6, 2013. The NMS plan must provide details regarding how the SROs plan to meet the requirements of the 

Consolidated Audit Trail rule adopted by the Commission. The 

NMS plan also must: (1) provide an estimate of the costs associated 

with creating, implementing, and maintaining the Consolidated 

Audit Trail; (2) discuss the costs, benefits, and rationale for the 

choices made by the SROs in developing the NMS plan; and (3) 

provide the SROs’ analysis of the NMS plan’s potential impact on 

competition, efficiency, and capital formation. 

170 

Once the NMS plan is submitted to the Commission, I understand the Commission would publish the plan for public comment. 

After considering any comments received, the Commission would 

need to determine whether or not to approve the plan. The cost estimates and analyses provided by the SROs in the NMS plan will 

help inform the Commission as it evaluates whether to approve the 

NMS plan and will help inform the Commission’s own economic 

analysis of the Consolidated Audit Trail. 

The Consolidated Audit Trail rule provides that, in determining 

whether to approve the NMS plan and whether the NMS plan is 

in the public interest, the Commission must consider the impact of 

the NMS plan on efficiency, competition, and capital formation of 

creating, implementing, and maintaining the national market system plan. I also understand that the Commission agreed to consider the costs and benefits of the creation, implementation, and 

maintenance of the consolidated audit trail pursuant to the details 

proposed in the NMS plan submitted to the Commission for its consideration. 

171 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD