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[Senate Hearing 112-326]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 112-326

 
NOMINATIONS OF: ALAN B. KRUEGER, DAVID A. MONTOYA, AND CYRUS AMIR-MOKRI

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                                   ON

                            NOMINATIONS OF:

   Alan B. Krueger, of New Jersey, to be a Member of the Council of 
                           Economic Advisers

                               __________

  David A. Montoya, of Texas, to be Inspector General, Department of 
                     Housing and Urban Development

                               __________

  Cyrus Amir-Mokri, of New York, to be an Assistant Secretary of the 
                  Treasury, Department of the Treasury

                               __________

                           SEPTEMBER 22, 2011

                               __________

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

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

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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  TIM JOHNSON, South Dakota, Chairman

JACK REED, Rhode Island              RICHARD C. SHELBY, Alabama
CHARLES E. SCHUMER, New York         MIKE CRAPO, Idaho
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
DANIEL K. AKAKA, Hawaii              JIM DeMINT, South Carolina
SHERROD BROWN, Ohio                  DAVID VITTER, Louisiana
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
HERB KOHL, Wisconsin                 PATRICK J. TOOMEY, Pennsylvania
MARK R. WARNER, Virginia             MARK KIRK, Illinois
JEFF MERKLEY, Oregon                 JERRY MORAN, Kansas
MICHAEL F. BENNET, Colorado          ROGER F. WICKER, Mississippi
KAY HAGAN, North Carolina

                     Dwight Fettig, Staff Director

              William D. Duhnke, Republican Staff Director

                       Charles Yi, Chief Counsel

                     Marc Jarsulic, Chief Economist

                     Laura Swanson, Policy Director

                   Glen Sears, Senior Policy Advisor

              Brian Filipowich, Professional Staff Member

                 Andrew Olmem, Republican Chief Counsel

                     Beth Zorc, Republican Counsel

               Mike Piwowar, Republican Senior Economist

                 Chad Davis, Professional Staff Member

                       Dawn Ratliff, Chief Clerk

                      Anu Kasarabada, Deputy Clerk

                     Riker Vermilye, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                  (ii)
                            C O N T E N T S

                              ----------                              

                      THURSDAY, SEPTEMBER 22, 2011

                                                                   Page

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

Opening statements, comments, or prepared statements of:
    Senator Shelby...............................................     2

                               WITNESSES

Alan B. Krueger, of New Jersey, to be a Member of the Council of 
  Economic Advisers..............................................     4
    Prepared statement...........................................    25
    Response to written questions of:
        Senator Shelby...........................................    29
        Senator Vitter...........................................    31
David A. Montoya, of Texas, to be Inspector General, Department 
  of Housing and Urban Development...............................     6
    Prepared statement...........................................    26
Cyrus Amir-Mokri, of New York, to be an Assistant Secretary of 
  the Treasury, Department of the Treasury.......................     7
    Prepared statement...........................................    27

                            NOMINATIONS OF:
                    ALAN B. KRUEGER, OF NEW JERSEY,
                            TO BE A MEMBER,
                     COUNCIL OF ECONOMIC ADVISERS;
                      DAVID A. MONTOYA, OF TEXAS,
                        TO BE INSPECTOR GENERAL,
              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT;
                     CYRUS AMIR-MOKRI, OF NEW YORK,
             TO BE AN ASSISTANT SECRETARY OF THE TREASURY,
                       DEPARTMENT OF THE TREASURY

                              ----------                              

                      THURSDAY, SEPTEMBER 22, 2011

                                       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. Good morning. I call this hearing to 
order. Thanks to all of our nominees for joining us here today. 
I also extend a warm welcome to our witnesses' families and 
friends who are here with us.
    Today we consider three nominees to fill important roles in 
the administration at the Council of Economic Advisers, the 
Department of Housing and Urban Development, and the Treasury 
Department.
    The Council of Economic Advisers is an agency within the 
executive branch charged with offering the President objective 
economic advice and the formulation of both domestic and 
international economic policy. At this point in the economic 
recovery, the Administration's economic team must have all 
hands on deck, so it is important that the Committee move in a 
timely manner on the consideration of Dr. Alan Krueger for this 
post.
    David Montoya was nominated to serve as HUD's Inspector 
General and fulfill the office's mission of providing 
independent and objective reporting to the Secretary and the 
Congress on HUD's operations. As with all executive agencies, a 
confirmed Inspector General is crucial for the integrity, 
efficiency, and effectiveness of HUD.
    The Office of Financial Institutions within the Treasury 
Department formulates policy on financial institutions, GSEs, 
and financial education. I hope that the Committee can proceed 
in the consideration of Mr. Cyrus Amir-Mokri as Assistant 
Secretary so that this office can function at full capacity.
    I now turn to Senator Shelby for any opening remarks he may 
have. Senator Shelby.

             STATEMENT OF SENATOR RICHARD C. SHELBY

    Senator Shelby. Thank you, Mr. Chairman. I think this is a 
very important hearing for these crucial nominees.
    Dr. Alan Krueger, as you mentioned, has been nominated to 
be the Chair of the Council of Economic Advisers. The CEA is an 
agency within the Executive Office of the President that is 
charged with providing the President economic advice, and there 
is no more crucial time, Dr. Krueger.
    Dr. Krueger is an accomplished labor economist. Given his 
expertise in labor market dynamics, I would be interested in 
hearing--we have met and talked--what policies he will advocate 
at the White House. After more than 2 years of failed Keynesian 
programs, I believe the President needs to be provided with 
better advice, Dr. Krueger, that will help grow our economy, 
not the size and scope of Government.
    The Committee will also be considering today the nomination 
of Mr. David Montoya to be the Inspector General of the U.S. 
Department of Housing and Urban Development. That is also a 
very important job. He has spent many years in law enforcement 
as well as other Government oversight and supervisory roles, 
and I would be interested here this morning in hearing how you 
would apply your skills and your background in the 
investigative, audit, and legal activities required of the 
office. Inspectors General are tasked, as you well know, with 
rooting out fraud and abuse as well as promoting transparency 
and protecting the taxpayers.
    For example, HUD's Office of Inspector General's most 
recent semiannual report highlighted 500 convictions and 767 
arrests related to fraud. That is a lot of stuff. In addition, 
the Office of Inspector General determined that $768 million, 
three-quarters of a billion dollars, of taxpayer funds should 
have been put to better use at HUD during the 6-month period. I 
believe you have your work cut out for you, but we want you to 
do a super, super job.
    Also here before us today--and I might struggle with the 
name--is Cyrus Amir-Mokri. Did I get it right?
    Mr. Amir-Mokri. Yes.
    Senator Shelby. Thank you. He has been nominated to serve 
as both the Assistant Secretary for Financial Institutions at 
the Treasury Department and as a member of the Board of 
Directors of the National Consumer Cooperative Bank. He has 
recently served as senior counsel to the Chairman of the 
Commodity Futures Trading Commission, where he also serves as 
the Commission's deputy representative to the Financial 
Stability Oversight Council. If confirmed, he will be 
responsible for coordinating Treasury's efforts regarding 
regulation and legislation affecting financial institutions. He 
will also be responsible for coordinating Treasury's efforts on 
financial education policy as well as overseeing the Terrorism 
Risk Insurance Program and the Community Development Financial 
Institutions Fund.
    I thank all of the nominees for their willingness to serve 
and to appear before the Committee, and I look forward to your 
testimony.
    Thank you, Mr. Chairman.
    Chairman Johnson. Would any other Senators like to make a 
statement?
    [No response.]
    Chairman Johnson. If not, I will now give brief 
introductions of our three nominees.
    The first nominee is the Honorable Alan Krueger, who has 
been nominated as the Chairman of the Council of Economic 
Advisers. Dr. Krueger is an eminent economist who is currently 
the Bendheim Professor of Economics and Public Policy at 
Princeton University and has published extensively. Dr. Krueger 
also has a great record of public service. He served as 
Assistant Secretary for Economic Policy in the Treasury 
Department from 2009 to 2010 and as the Chief Economist of the 
Department of Labor from 1994 to 1995.
    Mr. David A. Montoya has been nominated to serve as the 
Inspector General for the Department of Housing and Urban 
Development. For the past 6 years, Mr. Montoya has been serving 
as the executive special agent in charge of the U.S. Postal 
Service Inspector General's Western Area field office. He has 
over 24 years of great public service with the DEA, EPA, and 
the Department of Interior.
    Mr. Cyrus Amir-Mokri has been nominated to serve as 
Assistant Secretary for Financial Institutions in the Treasury 
Department. He most recently served as senior counsel to the 
Chairman of the CFTC. In this role he also served as the CFTC's 
deputy representative to the Financial Stability Oversight 
Council. Prior to joining the CFTC, Mr. Amir-Mokri was a 
partner at the law firm of Skadden Arps, where he focused on 
complex securities and antitrust litigation.
    I look forward to hearing the nominees' testimony.
    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. Krueger. I do.
    Mr. Montoya. I do.
    Mr. Amir-Mokri. I do.
    Chairman Johnson. Do you agree to appear and testify before 
any duly constituted Committee of the Senate?
    Mr. Krueger. I do.
    Mr. Montoya. I do.
    Mr. Amir-Mokri. I do.
    Chairman Johnson. Please be seated. Please be assured that 
your written statement will be part of the record. Please also 
note that Members of this Committee may submit written 
questions to you for the record and you should respond to these 
questions promptly in order for the Committee to proceed on 
your nominations.
    I invite all the witnesses to introduce your family and 
friends in attendance before beginning your statement. Dr. 
Krueger, please proceed.

STATEMENT OF ALAN B. KRUEGER, OF NEW JERSEY, TO BE A MEMBER OF 
                THE COUNCIL OF ECONOMIC ADVISERS

    Mr. Krueger. Thank you very much. I would like to introduce 
my wife, Lisa; my parents, Rhoda and Norman; and I see my 
sister-in-law, Karen, and my niece--I am a little bit confused 
on my niece because they are identical twins, but I see my 
niece, Amy, and I am delighted that they are here.
    Would you like me to proceed with my statement or----
    Chairman Johnson. Please proceed.
    Mr. Krueger. Chairman Johnson, Ranking Member Shelby, and 
other distinguished Members of the Committee, I am honored to 
have my nomination come before you today.
    I am grateful to President Obama for asking me to serve as 
a Member and Chairman of the Council of Economic Advisers at 
this critical time for our Nation's economy.
    I am also deeply grateful to my wife, Lisa, and to our 
children for their support and willingness to allow me to 
return to public service.
    And I am grateful that my parents and wife could attend 
this hearing today. Let me tell you a little bit more about 
them. My mother worked as an elementary school teacher in East 
Orange, New Jersey, and my father, an army veteran, had a long 
career as a certified public accountant and small businessman.
    From my father, I learned at an early age to respect the 
entrepreneurs and small business owners who were his clients. I 
have long appreciated that job growth is dependent on a vibrant 
private sector. Government can only set the conditions for 
private employers to prosper and grow. My father also 
encouraged me to work as soon as I was legally able to do so in 
order to save for my college education. My first job, when I 
was in middle school, was working in a medical laboratory. In 
high school, I worked at Baskin Robbins and later as an 
assistant electrician. These early work experiences taught me 
the importance of teamwork and that the actual labor market 
does not always function the way that economic theory says it 
should.
    My wife is a math teacher at our local public high school, 
which both of our children attended. I learned firsthand from 
my mother and wife's tireless efforts how a quality education 
can provide children with greater opportunities and a brighter 
future.
    I have been very fortunate in my own education. I graduated 
from my local public high school in Livingston, New Jersey, a 
year ahead of New Jersey Governor Chris Christie. I attended 
Cornell's School of Industrial & Labor Relations. I then earned 
a Ph.D. in economics from Harvard.
    I subsequently have had the privilege of working as a 
professor of economics and public policy at Princeton 
University for the last 24 years, teaching and conducting 
research.
    I have conducted research on a range of topics, from job 
growth and social insurance to terrorism and time use, from 
bond markets to labor markets, from the economics of education 
to the economics of Super Bowl tickets. I have tried not to be 
tied to a particular doctrine of economic thought in my work 
and instead have sought to develop the best evidence possible 
to test economic theories and estimate key parameters.
    This approach has often led me to collect original data and 
use econometric methods to study natural experiments and policy 
changes. Sometimes my findings have been contrary to what I 
expected and contrary to the conventional wisdom among 
economists. But, in every instance, I have tried to adhere to a 
standard of reporting my findings objectively, regardless of 
which school of thought they support.
    I also recognize that the data and evidence that economists 
and policymakers rely upon are not perfect. As a result, I have 
strived to improve our data and statistical infrastructure.
    Princeton briefly served as the capital of the United 
States, and the University is true to its motto, first coined 
by Woodrow Wilson, ``Princeton in the Nation's service.'' As 
part of this tradition, Princeton afforded me the opportunity 
to take a public service leave, as Chairman Johnson mentioned, 
to serve as Chief Economist of the U.S. Department of Labor and 
then as Assistant Secretary and Chief Economist of the Treasury 
Department.
    After returning to Princeton in November of last year, I 
taught a new course called ``The Great Recession: Causes, 
Consequences, and Remedies.'' I do not need to tell this 
Committee that that course is still a work in progress. The 
United States is still struggling to recover from the effects 
of the financial crisis that erupted in 2008. While time will 
heal many of the wounds in the economy, applying the proper 
medicine will help those wounds heal more quickly. I take 
solace in the fact that the United States is a resilient Nation 
with great resources, including our physical and human capital, 
our constitutional system of Government, our tradition of 
entrepreneurship, and our common-sense approach to solving 
problems. I am convinced that we can meet the serious 
challenges we face with the right mix of economic policies and 
faith in American workers and businesses to adapt to change and 
emerge a stronger country.
    The Council of Economic Advisers is a unique and important 
institution within the Government. The President relies on the 
Council to provide the best available objective analysis of the 
economy. I think an important role of the Chairman of the 
Council is to present to the President a range of views from 
leading schools of economic thought indicating the uncertainty 
surrounding an issue and highlighting where others hold 
different views from the Chairman. My background as a labor 
economist, teacher, and researcher helped to prepare me to take 
on these duties, if I am confirmed.
    I am humbled and honored to have the possibility of serving 
the Nation, should I be confirmed.
    Thank you again for the time and opportunity to appear 
before you today, and I look forward to answering your 
questions.
    Chairman Johnson. Thank you, Dr. Krueger.
    Mr. Montoya, please proceed.

   STATEMENT OF DAVID A. MONTOYA, OF TEXAS, TO BE INSPECTOR 
      GENERAL, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Mr. Montoya. Thank you. With me today, if I may, sir, is my 
brother, Daniel Montoya.
    Chairman Johnson, Senator Shelby, and Members of the 
Committee thank you for the privilege and the opportunity to 
discuss my nomination as Inspector General of the Department of 
Housing and Urban Development. It is an honor to appear before 
this distinguished Committee.
    If you will permit me, I would like to acknowledge my wife, 
Katherine, and children, Alyssa and Jonathan, both of whom are 
students at Colorado State University. While they were unable 
to attend with me today, I want to take a moment to publicly 
thank them for all of their support, thoughts, and prayers. I 
would also like to recognize my brother Daniel, who is here 
with me today, and my sister, Deborah, who unfortunately could 
not attend. I also want to acknowledge my parents who have 
truly been an inspiration to me. They raised me and my siblings 
with a strong work ethic, a dedication to public service, and 
leadership.
    Last but not least, I would like to also recognize and 
thank Mr. David Williams, the Inspector General for the U.S. 
Postal Service and the Council of Inspectors General for 
Integrity and Efficiency, for staying with me through this 
nomination process.
    I am honored that President Obama has nominated me to the 
position of Inspector General for the Department of Housing and 
Urban Development. The Department's mission, as you know, ``is 
to create strong, sustainable, inclusive communities and 
quality affordable homes for all,'' and I believe that owning 
your own home is truly a fundamental American dream. The 
Inspector General for the Department of Housing and Urban 
Development's mission promotes the integrity, efficiency, and 
effectiveness of HUD programs and operations to assist the 
Department in meeting its mission.
    My career has prepared me for the challenges of this 
position. I have spent the majority of my professional life 
dedicated to public service in Federal law enforcement. Sixteen 
of those years have been in oversight, supervisory, and 
leadership positions, including 10 years in the Federal Senior 
Executive Service and the Postal Career Executive Service.
    As an executive special agent in charge for the Office of 
Inspector General at the U.S. Postal Service, I direct the 
largest field office overseeing 60 percent of the United States 
and a Postal Area with just under $1 billion in contract 
obligations. As Assistant Inspector General for Investigations 
with the Office of Inspector General at the Department of the 
Interior, I reorganized and directed a national law enforcement 
program which helped to protect America's natural resources and 
heritage.
    As Deputy Director and Acting Director of the Environmental 
Protection Agency's Criminal Investigation Division, I provided 
leadership and direction to a national environmental crimes law 
enforcement program that investigated and helped to prosecute 
criminal conduct that threatened the health of our citizens and 
our environment.
    And, finally, as a special agent with the Drug Enforcement 
Administration, I conducted criminal investigations of 
individuals and organizations who threatened our country's 
security with the importation of illicit drugs and the violence 
that drug trafficking produces.
    My professional career has been characterized by increasing 
leadership roles and responsibilities with a commitment toward 
accountability and high ethical standards. While I have spent a 
career investigating violations of either criminal, civil, or 
administrative laws and regulations, it has always troubled me 
that these crimes and violations occur in the first place.
    If confirmed as the Inspector General for the Department of 
Housing and Urban Development, I will stress the need for 
collaboration with Secretary Donovan and HUD staff to ensure 
that HUD's resources are being effectively and efficiently 
implemented. In addition, I will work to ensure early detection 
of warning signs of fraud or abuse through the IG's audits, 
evaluations, reviews, and investigations. Every IG employee 
will focus on prevention, while ensuring that all funds lost 
through fraud, abuse, or mismanagement are fully recovered.
    A key priority, if I am confirmed, will be to maintain a 
strong partnership with this Committee and the Congress. The 
laws you write must be implemented in a manner that fulfills 
your intent and the very real needs of the people for whom they 
were written.
    With the state of our economy and the limited financial 
resources our Government faces, it has never been more 
important to ensure that every dollar spent is spent well.
    Given my background, I understand the responsibilities that 
the position of Inspector General will require. I believe that 
the knowledge and experience I have gained in nearly a quarter 
century of public service in investigative and oversight roles 
make me uniquely qualified and prepared for the new challenges 
I will face, should I be confirmed.
    If confirmed, I would look forward to the opportunity to 
work with this Committee and other Members of Congress, 
Secretary Donovan, and our State and local partners to be 
accountable and transparent with the work of the Office of 
Inspector General and the oversight of HUD's program 
responsibilities.
    Chairman Johnson, Senator Shelby, Members of the Committee 
thank you for allowing me the distinct privilege to testify 
here today. I would be pleased to answer any questions you may 
have.
    Thank you.
    Chairman Johnson. Thank you, Mr. Montoya.
    Mr. Amir-Mokri, please proceed.

STATEMENT OF CYRUS AMIR-MOKRI, OF NEW YORK, TO BE AN ASSISTANT 
     SECRETARY OF THE TREASURY, DEPARTMENT OF THE TREASURY

    Mr. Amir-Mokri. Thank you, Mr. Chairman. With me today are 
my parents, Mahvash and Ebrahim Amir-Mokri, sitting behind me, 
and my sister, Mina Amir-Mokri.
    Chairman Johnson, Ranking Member Shelby, and distinguished 
Members of the Committee, I am honored to appear before you 
today as the nominee for the position of Assistant Secretary of 
Treasury for Financial Institutions.
    I introduced my family. I just wanted to say that I would 
not be here today without their love, support, and sacrifice. I 
just want to take a moment right now to give special 
recognition to my parents' sacrifice. They were at or about my 
age today when, shortly after the Iranian revolution of 1979, 
they sent their two children, then aged 16 and 13, abroad. 
Physical separation between parents and children is difficult 
under any circumstance, but this difficulty was even more 
pronounced in those days because of the tensions that bedeviled 
relations between the United States and Iran, particularly 
during the hostage crisis and its aftermath. To give me and my 
sister the support we needed to go through school and young 
adulthood, my parents left behind everything that they had 
worked for in their careers, and more, and joined us in the 
United States to start a new life. And so we came to America in 
search of truths that the Declaration of Independence holds to 
be self-evident: that we are endowed by our Creator with the 
unalienable rights of life, liberty, and the pursuit of 
happiness. To our family, America has meant the realization of 
that promise.
    To all those around the world who wonder what America 
offers and what it represents, I ask that they consider my 
story. From the moment I arrived in 1981, I have known nothing 
but kindness, warmth, respect, and encouragement, whether it be 
in the idyllic town of Beaver Dam, Wisconsin, where I spent a 
year finishing high school, or in the cosmopolitan metropolis 
of New York City, which is now my permanent home. In America, I 
have not been judged by the place of my birth, but by my 
dedication, loyalty, and hard work. The fact that a first-
generation immigrant from Iran finds himself sitting before 
this distinguished Committee today proves that America, indeed, 
is a very special place.
    I am truly humbled that, in these extraordinary times, 
President Obama has nominated me to discharge the significant 
responsibilities of the Assistant Secretary of the Treasury for 
Financial Institutions and to serve as a Director of the 
National Consumer Cooperative Bank. And I am extremely grateful 
to Secretary Geithner for his confidence and support and for 
recommending me for the President's consideration.
    In these challenging times, it is my privilege to answer 
the call to public service. As a first-generation immigrant, I 
believe that I have a duty to give back to the country that has 
given so much to me. I also believe that we are all custodians 
of the idea of America, and we bear the solemn responsibility 
of safeguarding this idea of America so that it may continue to 
inspire people around the globe to seek a better life and to 
build a better world.
    Today we continue to recover from the most profound 
financial crisis since the Great Depression. Congress enacted 
landmark legislation to remedy flaws in our financial system. 
It is critically important that financial regulators continue 
carefully to implement the reform agenda embodied by that 
legislation in a coordinated and measured fashion, consistent 
with the intent of Congress. Our approach should strive to 
achieve appropriate balances so that we establish and maintain 
a healthy financial system while also continuing to encourage 
efficiency and innovation. We must continue to build the 
institutions designed for detecting and addressing systemic 
risk so that we do not experience a recurrence of the financial 
crisis of 2008. We must also work with regulators around the 
globe to ensure that financial regulatory regimes are 
consistent so that the playing field is not tilted to anyone's 
unfair advantage. Mindful that much of America is served by our 
community banks and that small businesses form a critical part 
of our job-creating engine, we must work to facilitate the 
means by which they can once again flourish. We must also work 
to ensure that Americans have access to housing, but that our 
financial system provides financing in a responsible manner. If 
confirmed, I will look forward to working with Congress toward 
these ends.
    I believe that my professional background has prepared me 
to accept this responsibility. Most recently, I was senior 
counsel to the Chairman of the Commodity Futures Trading 
Commission. I also served as the CFTC's deputy representative 
to the Financial Stability Oversight Council. After passage of 
the Dodd-Frank Act, I participated in the CFTC's implementation 
efforts and oversaw coordination of the CFTC's work with 
implementation by other financial regulatory agencies. And I 
supervised the CFTC's efforts to harmonize its regulations with 
the SEC.
    Before joining the CFTC, I was a general commercial 
litigation partner at Skadden Arps where, all told, I practiced 
law for more than a dozen years. My principal focus was in 
antitrust and securities litigation. I also served on the 
Practicing Law Institute's annual Consumer Financial Services 
Litigation program.
    If confirmed, I look forward to working closely with you to 
take the necessary steps to building and maintaining a 
financial system that can reliably sustain a growing, 
prosperous economy over the long term for all Americans.
    Thank you.
    Chairman Johnson. Thank you, Mr. Amir-Mokri.
    Dr. Krueger, I want to start by following up on something 
we talked about when we met last week. The unemployment rate is 
currently 9.1 percent. Do you think that most of the rise in 
unemployment has been structural or cyclical?
    Mr. Krueger. Thank you, Chairman Johnson. Since 2007, most 
of the rise in unemployment, in my view, has been cyclical. A 
concern I have, however, with the particularly sharp rise in 
long-term unemployment is that some of the cyclical 
unemployment may become structural. And I would also mention 
that even before the recession, the United States was having 
difficulty with job growth. The fraction of the population 
employed never recovered between 2000 and 2007 to its previous 
peak, so there are trends underlying the economy which are 
slowing down job growth, which may indeed be related to some 
structural forces.
    Chairman Johnson. Dr. Krueger, you supported a new job tax 
credit for employers when we had slow growth back in the early 
2000s, and now the President has proposed a measure along these 
lines. How do you think this policy will work now?
    Mr. Krueger. Well, I think the President's proposal in the 
American Jobs Act to eliminate the payroll tax on additional 
payroll that employers add is a measure which will have a lot 
of bang for the buck in terms of job creation. The CBO analyzed 
a variety of programs and found that a form of the new job tax 
credit, which the President's proposal is, has very high bang 
for the buck. I think it is focused on a dimension of the job 
market that is particularly weak, which is hiring. And I think 
it is also important to note that eliminating the 6.2 percent 
payroll tax for additions to payroll and cutting it in half for 
other employees in the President's proposal is focused on small 
employers because of the caps on the amount that employers can 
receive in this tax credit. And I think that is also 
particularly timely because small employers have been 
struggling in the recovery, and this will help their cash-flow, 
and small employers depend a lot on their cash-flow for their 
investment and hiring.
    Chairman Johnson. Dr. Krueger, the economic performance of 
the small business sector is a continuing concern. I think you 
had a hand in proving statistical data to track small business 
performance to help inform our policymaking. So what can you 
tell us about how small business is faring now?
    Mr. Krueger. Yes, that is right. One of the problems with 
tracking the performance of small businesses is that the data 
that we get are only available with a lag, and the Bureau of 
Labor Statistics had an ongoing survey called the Job Opening 
and Labor Turnover Survey, which began about 10 years ago, and 
this survey has information on establishment size, but they 
were not being produced on a regular basis. So I talked to the 
Bureau of Labor Statistics and asked if it might be possible to 
produce a new series, and indeed, what this data set shows, 
which is the most current, most authoritative current data that 
we have on small business job growth, is that small employers 
have been having much more difficulty than large employers.
    There are several research studies which find that that is 
not so unusual in the aftermath of a financial crisis. Small 
businesses are more dependent on bank financing than large 
companies that can go out and issue corporate debt. Given that 
the financial crisis led to an increase in credit tightening, 
that has been hurting small businesses, which is one of the 
reasons why I think helping their cash-flow can also help to 
support their additional hiring.
    Chairman Johnson. Mr. Montoya, as you know, this is a 
difficult time for too many Americans in need of affordable 
housing. What steps will you take to ensure that your office 
examines and works with HUD to improve the administration of 
their programs that millions of Americans count on?
    Mr. Montoya. Yes, sir, thank you. Well, clearly, I think 
through our audits, evaluations, and review process and working 
with the Department program managers, not only HUD's but 
obviously our State and local partners to figure out just 
exactly what is working well within these programs and what is 
not. Clearly, those have to take a priority. I think much like 
Senator Shelby mentioned, the arrests in the last couple of 
years have been very high. That tells me there is a problem. 
Something is obviously broken if that many arrests can happen 
with regards to fraud in these programs. So, clearly, an 
oversight role, making recommendations not only to HUD but to 
this Committee on concerns that we have and areas of weakness 
that we think could be tightened up to keep these monies going 
to those that need it the most, sir.
    Chairman Johnson. Mr. Amir-Mokri, if confirmed, what role 
do you think the Office of Financial Institutions can play to 
aid in our Nation's economic recovery? What would be your 
approach?
    Mr. Amir-Mokri. Thank you, Mr. Chairman. The portfolio of 
the position, Mr. Chairman, as Ranking Member Shelby was 
indicating, consists of financial institutions, other areas 
including housing and focus on small business issues. So it 
cuts across a number of very important and central matters that 
we are concerned with in the economy. And I certainly would 
feel that that office would play an integral role in supporting 
the efforts to better our economy.
    In terms of the approach that I would take, I would kind of 
go back to the experiences of my life and how I have served in 
my various professional capacities. I have been an adviser, 
whether in private practice of law or serving as an adviser to 
the Chairman of the Federal regulatory agency, what I would do 
is try to look at every side of an issue, be inclusive of all 
viewpoints. I am a firm believer in Justice Holmes' idea of a 
marketplace of ideas. You look for the best ideas. Extensive 
consultation working with the Members of Congress. I would 
also--in my approach I also believe in coordination of many 
different interests and interested stakeholders and agencies, 
whether it was in private litigation working on complex cases 
or in my role as--my coordinating role at the CFTC with other 
Federal regulatory agencies. I would certainly bring that 
approach.
    And, finally, I think what I would try to do is, given my 
private sector background, to be sensitive to issues that are 
of concern to the private sector. For years I advised companies 
on the impact of Government action and worked with them on 
their compliance with Government regulations. So I certainly 
would like to bring that sensitivity as well, but mindful of 
the deep financial crisis that we have been through and the 
important reforms that Congress has enacted.
    Chairman Johnson. Senator Shelby.
    Senator Shelby. Thank you, Mr. Chairman.
    I do not speak Farsi, so I probably will not pronounce your 
name right again. You have a beautiful education. You had a 
beautiful story of coming here, and your family. Amir-Mokri is 
that close or not?
    Mr. Amir-Mokri. That is very close, Senator. Mokri.
    Senator Shelby. Doctor. He is a doctor. He has a Ph.D. and 
a J.D., so we can call him that, although he does not purport 
to teach right now.
    According to a piece in today's Financial Times--you may 
have read it and you may not, but probably you have--Spain's 
economic problems are likely to spark, according to the 
article, a Spanish banking crisis, which nobody wants. It is 
very possible that a banking crisis in Spain could quickly 
spread to other European countries. We have been worried about 
Greece, and we still are. We have been worried about Portugal, 
and we still are. Ireland is not out of the woods yet. Italy 
has been in the news.
    What is your assessment of the impact that a European 
financial crisis--and its dark clouds hanging right now, as you 
know--would have on our banking system? Chairman Bernanke has 
already said and we know that there are some interrelated deals 
here. Candidly, for this Committee.
    Mr. Amir-Mokri. Right. Thank you, Senator Shelby. I think 
that is obviously a very, very important subject. I have not 
seen that particular Financial Times report, but----
    Senator Shelby. Would you pull your microphone up just a 
little bit?
    Mr. Amir-Mokri. Certainly. I have not seen that particular 
Financial Times story, but Europe----
    Senator Shelby. But you understand the problem.
    Mr. Amir-Mokri. Absolutely. Europe has been an issue that 
has been of concern for a long time.
    Senator Shelby. It is an issue not going away soon, it does 
not look like.
    Mr. Amir-Mokri. In response to your question, specifically 
what impact it is going to have, just to be clear, because I 
have been away from the Federal regulatory agencies since early 
March, so----
    Senator Shelby. But you bring a lot of experience and 
knowledge to this table.
    Mr. Amir-Mokri. Exactly. So here is how I would think about 
it. We have to make sure that we understand what our exposures 
are. We have to make sure that we are prepared in terms of--in 
light of what exposures we have.
    Senator Shelby. What do you mean by being prepared? What do 
you mean? Prepared for the inevitable? Prepared for some bad 
news, or what?
    Mr. Amir-Mokri. I think that--any circumstance that may 
come up. I think that it is, you know, sitting here today, it 
is--I do not want to prejudge anything. I do not want to 
suggest that anything is going to happen or not going to 
happen. So I just think that we should be prepared for any 
eventuality.
    And, finally, the one principle that I think should always 
drive how we think about this is protection of the U.S. 
taxpayers. So that is kind of how I would----
    Senator Shelby. Can we disengage ourselves from Europe, or 
are we so intertwined in the financial area that there is no 
way to do it short of a financial catastrophe?
    Mr. Amir-Mokri. That is one of the very important 
questions, Senator. Again, it is such a moment and fact and 
circumstance, and, you know, having all the information at your 
fingertips question that I--what I would do is I--I am very 
mindful of that question, and, you know, there is information 
gathering and consultation and all that that has to occur 
between agencies and, you know, foreign authorities.
    Senator Shelby. Would you agree that it is going to be hard 
to paper over, you know, just broad brush, the deep financial 
problems that Europe and European banks have today that we know 
about? It is not going to just go away like a Band-aid over it.
    Mr. Amir-Mokri. Well, Senator, again, I do not want to 
prejudge anything. I think the Europeans are--my understanding 
is that they are trying to deal with their issues. You know, we 
certainly have to give them a chance to resolve their own 
issues, and----
    Senator Shelby. Dr. Krueger, do you want to comment on 
this? What is your assessment of Europe right now as we talk? 
You are going to be at the White House, assuming you are 
confirmed--and I believe you will be--and you are going to be 
giving advice to the President. You will be interacting with 
Treasury and everything else. You will be interacting with this 
Committee and, of course, the House Committee on Financial 
Services. We have deep problems. Europe probably has got deeper 
problems. What is your observation there, candidly?
    Mr. Krueger. Thank you for the question. I would make a few 
observations.
    First of all, there is tremendous heterogeneity in Europe. 
Much of Europe is in strong fiscal health, and then there are 
some countries----
    Senator Shelby. Say that again, now.
    Mr. Krueger. Much of Europe--Germany, France are in strong 
fiscal health.
    Senator Shelby. You are saying France is in strong fiscal--
--
    Mr. Krueger. Fiscal health, government--the fiscal 
positions of their government.
    Senator Shelby. I know Germany is, or has been.
    Mr. Krueger. In Germany, for example. So I just want to 
highlight that there are differences across Europe, as you 
certainly understand. And when problems arise in Europe, as you 
mentioned, we are not insulated from them. The financial 
markets are integrated, and also our exports are affected. And 
one of the drags that has occurred in our recovery comes from 
both of those channels. Volatility in our financial markets is 
higher. Our exports are being held back because of weaknesses 
in Europe.
    One way of insulating against that is to try to increase 
demand for our products domestically. Components of the 
American Jobs Act would do that, for example, the payroll tax 
cut for employees.
    Senator Shelby. You are talking about the proposal the 
President has made lately?
    Mr. Krueger. The President's proposal would help insulate 
us if we see a drop in exports.
    Senator Shelby. Do you believe that is going to be passed 
in this Congress? Do you think that has got any life or legs to 
it?
    Mr. Krueger. You know, Senator, I try to analyze the 
economics of the proposals. I leave the politics to those who 
work on the politics.
    Senator Shelby. But isn't this proposal, as some people 
would say, a ``on of the stimulus bill,'' a smaller stimulus 
bill? You indicated that to me in our conversation. Maybe not 
in those words.
    Mr. Krueger. Well, I think it is focused on the problems 
and the weakness that we have in the economy, and I think it 
will strengthen aggregate demand, which is what we need to do. 
And I would also just add, as you alluded, our banking system 
is a lot stronger today than it was a few years ago. The 
increased capital that our banks have raised helped to provide 
a buffer against those shocks.
    Senator Shelby. Thank you, Mr. Chairman. Are we going to 
have another round?
    Chairman Johnson. Yes.
    Senator Shelby. OK.
    Chairman Johnson. Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Let me add my welcome to the witnesses who are here today 
and also your families who are here to support you and even 
friends.
    Dr. Krueger, we are in the middle of an unprecedented 
battle of our budget and deficits. It is as much a political 
debate as it is a policy and Government debate. As Council for 
Economic Advisers Chair, you will have a critical role in 
providing recommendations on economic policy based on objective 
economic research and data. How do you view your role in 
providing advice to the President, and hearing your economic 
background and the background you have had, it brings with you 
an interesting wealth of knowledge that you can apply.
    So my question is, is there an intersection between 
political considerations and factual data-based considerations 
that you would use?
    Mr. Krueger. Thank you very much for your question, 
Senator. The President said when he announced my nomination 
that he relies on the Council of Economic Advisers to provide 
him unvarnished objective economic analysis, and that is what I 
intend to do if I am confirmed for the position.
    How would I go about that? Well, the Council has an 
excellent staff. I saw at least one of the Members here 
earlier. I see both of the Members, who the Committee knows, 
Carl Shapiro and Katharine Abraham, both outstanding economists 
who I have worked with for over 20 years in my capacity as an 
academic. Together with our staff, we will gather evidence. We 
will look at the relevant theory. We search the literature. We 
talk to people involved in the policy, people in business, to 
learn more about what is going on on the ground. We monitor 
trends, monitor trends in Europe, for example. And then wading 
through this information present to the President the pros and 
cons of various options, the risks that we face, and, as I 
said, try to do this and let others make the political 
judgments. We provide the best economic input that we can.
    Senator Akaka. Thank you. We are in the middle of this 
crisis, but you were the Chief Economist at the National 
Council of Economic Education for several years and a senior 
official at Treasury. Based on these experiences, do you see a 
value to investing in financial literacy initiatives during 
these difficult economic times?
    Mr. Krueger. Well, thank you for asking about that and for 
noticing my work for the National Council on Economic 
Education, which subsequently changed its name to the Council 
for Economic Education. I believe that economic and financial 
literacy is critical. I think a better informed population 
makes better economic decisions and that strengthens our 
society, it strengthens our economy, and I have worked together 
with the NCEE. I have actually devoted several years to writing 
a high school economics textbook. Two million students take 
economics in high school, more than take it in college, and I 
think it is critical to reach people at an early age to teach 
them about making economic decisions and personal finance 
decisions.
    When I was at Treasury, I worked together with Michael 
Barr, who had financial literacy in his shop, the same position 
that Cyrus Amir-Mokri--I do not know if I pronounced it 
correctly, either--has been nominated for, and we worked very 
well together and I think there are many opportunities to try 
to further economic and financial literacy.
    Senator Akaka. Thank you.
    Dr. Krueger, the Census report that was released last week 
showed an increase of poverty in 2010. This includes an 
increase in children living in poverty. The report also showed 
that the level of hardship would have been much worse without 
unemployment insurance and the EITC, Food Stamps, and Medicaid. 
Some experts claim that we can reduce the deficit without 
sacrificing these low-income assistance and safety net 
programs. What do you think? What are the key programs to keep 
poverty levels from rising even higher? What data could you 
point to that could convince our colleagues to preserve these 
programs?
    Mr. Krueger. Thank you for the question. I think you 
highlighted the key programs in your question. All of those are 
key. I would mention, particularly with long-term unemployment, 
with over 40 percent of he unemployed spending 6 months or 
longer unemployed, unemployment insurance is now more of a 
bulwark against poverty. The programs you mentioned function as 
automatic stabilizers. They provide support for families to 
maintain their consumption, to pay for their mortgage, and so 
on, when the economy is weak. That helps the macro economy.
    And then the last thing I would mention, the best anti-
poverty program would be sustaining the recovery, strengthening 
job growth. I think ways that we have seen poverty decline in 
the past, in addition to the programs you cited, is a stronger 
economy and stronger job growth, so I would mention that, as 
well.
    Senator Akaka. Thank you very much for your comments.
    Chairman Johnson. Senator Reed.
    Senator Reed. Well, thank you very much, Mr. Chairman.
    Gentlemen, thank you for your willingness to serve and also 
the support your families will give you in that great service.
    Let me start with Professor Krueger. You are not only a 
noted economist, but you have also served previously in 
Government, so you bring many talents to bear. One program that 
we had a chance to speak about in my office is the Work Share 
Program, which is part of the President's proposal. It is 
working very well in Rhode Island, and for my colleagues' 
benefit, essentially, it allows the employer to basically 
furlough a worker for 2 days. They can collect unemployment, 
pro rate unemployment benefits. The employer maintains other 
benefits.
    But it has been extraordinarily successful in Rhode Island. 
I visited a machine tool company that has used it several times 
in the last year. Now, everyone is back at work. They are doing 
well. And instead of sort of casting people away and losing 
them forever, their talents, they have maintained the integrity 
of their operation.
    So I wonder if you might comment on that, Professor 
Krueger, how important it is, and it is something I hope we can 
get through.
    Mr. Krueger. Well, thanks very much for raising that issue. 
I think work sharing has been an important component in 
softening the effects of the recession in other countries and 
in speeding the recovery. Some States, as you mentioned, Rhode 
Island in particular, have had effective work sharing programs 
as part of their unemployment insurance program.
    In the President's proposals in the American Jobs Act, the 
President had several ways of reforming unemployment insurance, 
and I think we may be at a unique moment where we could take a 
75-year-old program and allow the States to do more 
experimentation with work sharing or wage loss insurance for 
older workers. I think we are in a situation where we might be 
able to learn from those--I hesitate to use the word 
``experiments,'' because it is not quite an experiment, but 
learn from those new programs and strengthen unemployment 
insurance going forward, and if I am confirmed, I would very 
much welcome an opportunity to work with you on those issues.
    Senator Reed. Thank you, Professor.
    I notice, and some of my colleagues might have noticed, 
there is an op-ed piece in the New York Times that referred to 
a new book by the head of the Gallup polling organization, and 
basically his conclusion looking at data worldwide is that the 
next 30 years is going to be dominated by trying to create jobs 
everywhere, and the suspicion, at least one comment was that 
there might be an at least temporary finite limit so that we 
are in a very rough race against tough competitors. But job 
creation, that seems to me should be central to all policies, 
because in your view, it looks like it is central to policies 
of our other economy at this time, and if we neglect it, then 
we will be poorer for it. Is that fair?
    Mr. Krueger. It is interesting that you raise that because 
I just received a copy of that book from Jim Clifton, the 
author. I should also acknowledge I have been a senior 
scientist for the Gallup Organization. I have worked on the 
world poll, which is the data set he analyzes for that book.
    One of the findings I found striking is the role of 
entrepreneurship and formal jobs. When we look across countries 
in the world, the countries which have the larger formal 
employment sector are the ones that have stronger GDP. And I 
think of this very much as how do we strengthen 
entrepreneurship. How do we maintain a formal employment 
sector. We do not want jobs under the table. I have not 
finished digesting the book, I have to say. I read chunks of it 
on the train on the way down here for this trip. But I think he 
raises a number of important issues in the book.
    Senator Reed. Thank you very much.
    Mr. Montoya, good luck with your important work, and just a 
quick question. The IGs usually come in after the explosion and 
try to sift through the rubble. Are you going to take, or try 
to take the view that you can also be helpful before these 
problems occur by looking sort of generally at the Department 
and offering advice and suggestions to the Secretary?
    Mr. Montoya. Thank you for the question, Senator Reed. 
Absolutely. I am coming in with the frame of mind that it is 
probably more important for me to look at preventative 
measures, measures that we are going to stress the economy, the 
efficiency and the effectiveness of these programs, well before 
we get into any investigative work. As I said earlier, once we 
get to that investigative stage, it is too late. We are chasing 
after people we do not know and looking for money we probably 
will never get back.
    So for me, critically important will be to work with the 
Department and our stakeholders, State and local stakeholders, 
to ensure that these programs are running the way they are 
supposed to so these monies get to the people who need it most, 
sir.
    Senator Reed. All right. Good luck with your efforts. My 
time has expired, but we had an opportunity, I think, to talk 
frankly and about important issues. I appreciate your 
commitment and I would look forward to supporting you as you go 
forward. Thank you, gentlemen.
    Mr. Krueger. Thank you, Senator.
    Chairman Johnson. Senator Menendez?
    Senator Menendez. Well, thank you, Mr. Chairman.
    Congratulations to all of you on your nominations and your 
families who are here, and I specifically want to recognize Dr. 
Krueger, who is a New Jersey native, grew up in Livingston, a 
professor at Princeton, has had an extraordinary career. In my 
view, by the President's nomination of you, it is a very strong 
statement, as one of the Nation's foremost job experts, that 
job creation is number one on his economic priority efforts, so 
I appreciate that and I appreciate your service.
    I want to start off by asking you, I know there is a chorus 
of voices who believe that maybe we should do nothing and that 
nothing will somehow create jobs in America. Can you give me a 
sense, if we do nothing from a governmental macro sense, what 
would we expect on the job market?
    Mr. Krueger. Thank you, Senator, and thanks for mentioning 
my past service. Let me just say that, having worked at the 
Treasury, having had the opportunity to go to some meetings 
together with the President, I do not think the President is 
satisfied with the pace of the recovery. I have seen him try to 
lead, every meeting I went to, looking for ideas for 
strengthening the economy. And the reason why, when he asked me 
to come back, I agreed, is because I think there are more 
things that we can do to strengthen the economy.
    The risks that we face of doing nothing are that the 
economy is facing several headwinds. One of those headwinds is 
the aftermath of the financial crisis. Families are 
deleveraging. They are reducing their debt. That is cutting 
back on their consumption. And also----
    Senator Menendez. The financial crisis that came to a peak 
in September of 2008.
    Mr. Krueger. That is correct.
    Senator Menendez. All right.
    Mr. Krueger. But the problems that caused the crisis took a 
long time to buildup, including excess debt, and families are 
working their way down through that debt. The financial crisis 
itself has a lingering effect because the appetite for risk has 
been reduced. Investors tend to swing after an event like we 
saw in 2008.
    On top of that, the support that has been provided for the 
economy is phasing down. The Recovery Act was, for the most 
part, temporary. Those programs are phasing out. That has been 
a drag on the economy, and I think you can see that effect, 
particularly in State and local governments which received 
support to retain teachers and first responders, and as that 
support has been cut back, we are seeing a lot more layoffs at 
the State and local level.
    And then, finally, as Senator Shelby mentioned, we have the 
volatility, uncertainty from what is going on in Europe.
    So I do not think this is a moment to say we do not want to 
try to do more to strengthen the economy, to try to speed the 
rate of job growth. For me, it is, if I am confirmed, a 
tremendous opportunity to go back with the people who I worked 
with, Secretary Geithner, who is the most dedicated, loyal 
public servant I have ever had the opportunity to work with, 
the rest of the economics team, and under the leadership of the 
President, who has encouraged me and the whole team to look for 
new solutions, solutions that have very high bang for the buck, 
and that not only strengthen the economy in the short run, but 
also put us in a better position in the long run by investing 
in the future, by trying to raise productivity in the future--
--
    Senator Menendez. Let me----
    Mr. Krueger.----and----
    Senator Menendez. Unfortunately, I do not have the same 
time that you have in your classroom at Princeton----
    [Laughter.]
    Senator Menendez.----so let me try to get you to be a 
little more succinct. I do appreciate your answer, but I want 
to get specifically what do you believe are--there are many 
elements into job creation, but what do you think are some of 
the most important ones, and as a corollary to that, I read the 
General Electric CEO is talking about the fundamentals of the 
economy are actually stronger than you would think compared to 
the negative outlooks that many people have. How do we change 
that dynamic?
    Mr. Krueger. Well, as I alluded in my opening statement, 
there are certainly strengths in our economy. The corporate 
sector is very strong. Corporate balance sheets are much 
stronger now than they have been in the past. So when they do 
see a pick-up in things, it is possible, and indeed, I would 
say likely, that we will see a more rapid turnaround.
    I think the fundamental problem that the U.S. economy is 
facing right now is weak aggregate demand. I think this is 
fundamentally a result of the excess borrowing that took place. 
The savings rate has been rising. So increasing aggregate 
demand, such as by cutting the payroll tax or supporting the 
unemployed, who have a very high marginal propensity to 
consume, I think have a lot of bang for the buck.
    And then I would just last add working on the hiring 
margin, making it less expensive for employers to hire through 
cutting the payroll tax for companies that expand their 
payroll.
    Senator Menendez. Mr. Montoya, you and I had a good 
discussion in my office. I do not have any questions for you. I 
appreciate your view about being proactive instead of just 
reactive as the Inspector General, and I look forward to, as 
the Subcommittee chair on housing, working with you in that 
regard. So I look forward to supporting your nomination.
    Finally, Mr. Amir-Mokri, your role is a very important one 
in Treasury and I would like to get a sense of--I read your 
statement, but I would like to get a sense of how you are going 
to approach the Treasury Department's interaction with the 
financial institutions that we dealt with in 2008 as a result 
of the crisis that Chairman Bernanke outlined would create 
systemic risk to the entire country's economy and the verge of 
a new depression. How are you going to view the implementation 
of Dodd-Frank in your role, but also how are you going to 
balance that implementation in a way that we get the right 
messages on responsible lending to take place, because we see 
this incredible freeze that has taken place in access to 
capital, which is part of growth at the end of the day. I would 
like to just get a sense from you of how you are going to 
approach that.
    Mr. Amir-Mokri. Absolutely, Senator. Thank you. Those are 
extremely, extremely important issues. Starting with the--I 
will probably take the first two together, the Dodd-Frank 
implementation and the large financial institutions. As you 
know, Treasury is part of the Financial Stability Oversight 
Council and it also--many of the regulations that were enacted 
in Dodd-Frank, the responsibility for actually drafting them is 
with independent regulatory agencies. Nevertheless, in some 
instances, the Treasury does play a coordinating role, and 
certainly as a member of the Financial Stability Oversight 
Council, the Treasury does have a role in the consultations and 
some of the decisions that are specific to the Financial 
Stability Oversight Council which relate to the large 
institutions that you were referring to. So taking the 
structure of the Dodd-Frank legislation into account, there is 
certainly going to be a role for my office in advising the--if 
confirmed, I would be advising the Secretary on these issues.
    And just to add a couple of points to that, I think the 
intent of the Dodd-Frank legislation was to make sure that the 
large institutions do not any longer pose the same risks or 
concentrate the same risks that they did that led to the 2008 
financial crisis, so we have to be very mindful of that and 
make sure that the prudential reforms and the heightened 
standards are implemented sensibly, but consistent with the 
intent of Congress.
    So, overall, with respect to your first two points, I think 
that I would just say implementing the Dodd-Frank legislation 
to make sure that we address the large financial institution 
issues that the legislation addresses and playing the role that 
has been outlined for Treasury in the legislation.
    The second--and more specifically on that, second, having 
had experience in coordinating activities between the CFTC and 
the SEC, I would hope personally to bring some of those skills 
to bear to make sure that regulations are consistent, that they 
are sensible as much as I can.
    With respect to the impact on jobs, I think the reason for 
the legislation was to build a financial system on which you 
can have job growth. When you have a stable financial system, 
when people are not worried about their sources of funding, 
then you can have more confidence with the banks to go ahead 
and lend and to get the economy going. So we have to work 
toward implementing the reforms to bring back the confidence to 
the financial system so that normal activity can resume.
    Senator Menendez. Well, CDFIs will be under your 
jurisdiction, as well, and we had a major initiative signed 
into law that is unfolding and we think that is a great 
economic driver, as well, and we look forward to working with 
you on that.
    Thank you, Mr. Chairman.
    Chairman Johnson. Senator Shelby.
    Senator Shelby. Thank you, Mr. Chairman.
    I would like to direct this to the Treasury nominee. For 
the past 2 years, you have worked with Chairman Gensler over at 
the Commodities Futures Trading Commission. During that time, 
Gensler has sought to impose a record number of new 
regulations, as we are all familiar with. There has been 
widespread criticism of a lot of those rules on grounds that 
they will undermine the competitiveness of the U.S. financial 
system without making it any safer.
    Do you disagree with this assessment, and if so, why? I 
would like to have your view.
    Mr. Amir-Mokri. Thank you, Senator. What I am aware of----
    Senator Shelby. Excuse me just a minute. I did not mean 
to--or do you disagree with any of Gensler's proposals? I know 
you worked with him and you have to do that. You are going to 
be a free man. You do not work there. I am sure you will be 
confirmed at Treasury. But there is widespread criticism there 
of a lot of those rules--not all, but a lot.
    Mr. Amir-Mokri. Senator, what I can say is I was there 
until about March 4 and that was at or about the time that we 
had gotten substantially all of the proposed rules out. You 
know, in any regulatory effort, there, as you well know, there 
are going to be folks who disagree with what you do and some 
folks who agree with what you do.
    More specifically with respect to how I saw it, and I am 
commenting on the proposed rules, what we tried to do was to--
you know, this is a very challenging area. The derivatives 
title poses a lot of complicated----
    Senator Shelby. Very complex, is it not?
    Mr. Amir-Mokri. Very complex. Very complex. And it is the 
first time that this area is, per the direction of Congress, 
being regulated. So what we tried to do when I was there, and 
this was, I believe, reflected in the proposed rules, was to 
make a proposal, which was subject to Commission review, and to 
ask robust questions in the proposals, to subject it to the 
administrative process, which depends on commentary from all 
interested stakeholders, and to hopefully get the best answer 
and to come up with the right result.
    And in that connection, I will just mention that I felt 
that we had a very robust outreach process with both all 
interested stakeholders and consultation with other regulatory 
agencies. As you know, Title VII has provisions on coordination 
and consultation with not only the Securities and Exchange 
Commission, but also the Federal Reserve. But we went above and 
beyond that to consult with many--any regulatory agency that 
had a stake in the rules that we were working on. So----
    Senator Shelby. But you are plowing new ground, are you 
not, in a sense, trying to regulate, or hopefully regulate, 
without taking risk out of the market, out of the derivatives? 
I think the derivatives, myself, play an important role in the 
international economy. Do you agree with that?
    Mr. Amir-Mokri. Senator, in terms of plowing new ground, 
the legislation, I feel for very right reasons--I mean, you 
remember the financial crisis. You were seeing it very up close 
and derivatives certainly played a role in that, so I think 
Congress was right to----
    Senator Shelby. Do you believe that derivatives, as we 
speak, play, overall, a positive role in the international 
economy?
    Mr. Amir-Mokri. Senator, risk management is critical. Risk 
management----
    Senator Shelby. Critical to a market economy, is it not?
    Mr. Amir-Mokri. Whether it is trading futures or entering 
into derivatives contracts, businesses run on risk management.
    Senator Shelby. Did it ever occur to you or Chairman 
Gensler I know he is not up here, but you will be up here from 
time to time--that you could possibly overregulate an economy 
or the derivatives market? I am not saying you have. I am 
saying a lot of people think you have. Do you consider that 
when you are making regulations----
    Mr. Amir-Mokri. Senator Shelby----
    Senator Shelby.----the possibility to overregulate the 
market?
    Mr. Amir-Mokri. Senator Shelby, that is absolutely always a 
concern. I think the issue with regulations, I alluded to 
before, I advised private clients on complying with 
regulations, so I fully understand what it means to--the impact 
of Government action on private business. So I would just make 
a couple of points.
    One is you always have to find the right balance, and as I 
was mentioning before, when we put those rules together, we 
were mindful of asking robust questions so that we would, in 
fact, at the end of the day find the right balance.
    But, second, we also have to remember that we are emerging 
from a significant financial crisis and Congress's reforms are 
very important. So you are absolutely right to be concerned 
with issues of overregulation. I think it is always a matter of 
finding the right calibration.
    Senator Shelby. Dr. Krueger, the stimulus programs. A 
recent academy paper by two economists at the University of 
Chicago and the University of California at Berkeley found that 
the so-called Cash for Clunkers stimulus program had no long-
run effect on auto purchases. They also found no evidence that 
it positively affected employment, house prices, or household 
default rates in the cities with high exposure to the program.
    Do you still believe that these stimulus programs work, and 
if you do, why?
    Mr. Krueger. Thank you for the question. Yes, I do believe 
that the Recovery Act did work, and I will explain why.
    Senator Shelby. You are talking about the big stimulus 
program?
    Mr. Krueger. I will talk about both. First----
    Senator Shelby. OK. You think they both worked?
    Mr. Krueger. Yes.
    Senator Shelby. You would be in the minority in this 
country.
    Mr. Krueger. Well, I think the way an economist views----
    Senator Shelby. OK.
    Mr. Krueger.----the question that you raised is to compare 
it to a counterfactual. What would the world have been like 
without the Recovery Act? And one of the things that we have 
learned recently is that the economy was contracting much more 
rapidly than anyone had appreciated back in the end of 2008. 
GDP fell by 8.9 percent at an annual rate in the last quarter 
of 2008. When the Recovery Act took effect, we seem to have 
broken the back of the recession. So I think the Recovery Act 
needs to be compared to what the world would have been like 
without it. Now, I do not question that there was a lot of 
damage inflicted by the recession and that we are still digging 
our way past that damage.
    If you would like, I can also respond to the Cash for 
Clunkers question.
    Senator Shelby. Go ahead.
    Mr. Krueger. So the study that you mentioned, which I think 
is a very nice attempt to address the question, divides areas 
up by looking at those where there were more clunkers, where 
more cars were eligible for the program. But I am not convinced 
that that is the best methodology in this particular instance 
because even in an area where there were relatively few 
Clunkers, the program was pretty well subscribed. This was a 
program--actually, I asked my father if he cashed in one of his 
cars--where it went so quickly that I do not think we were 
bumping up against the constraints that they were using in 
their analysis.
    And there is one other piece of evidence which I think is 
relevant. Of course, the goal of the Cash for Clunkers program 
was to move up consumption.
    Senator Shelby. Sure.
    Mr. Krueger. And a survey that the Department of 
Transportation has done found that the average person who 
traded in a car under the program said that they were not 
planning to buy another car for two-plus years. So it seems to 
have attracted a lot of people who were kind of frugal. They 
were not planning to buy a car right away.
    I think this is an area of active research----
    Senator Shelby. Did you factor in the cost of this program?
    Mr. Krueger. Oh, well, I think one has to look at the cost, 
no question. I think one also needs to look at the benefits 
fairly broadly. So, for example, when the program started, I 
think there was a boost in consumer confidence. There was a lot 
of advertising that took place. So I think there could have 
been some spillover more generally to consumption elsewhere.
    Senator Shelby. The Chairman has been generous with his 
time here with me. I would like to ask you one more question. 
You are going down to the White House. You are going to be 
advising the President on economics. We know the chances--there 
is conventional wisdom out there that the economy--the 
unemployment is probably going to tick up some. Some of the 
economists testified here that the real unemployment, that is 
people who have given up getting jobs and so forth, is around 
15 percent in this country, you know, if we look at it.
    Do you see, Dr. Krueger, a real turn-around in this economy 
without us, one, absorbing all the excess in housing, not just 
in California, Florida, Nevada, and others, but everywhere? How 
are we going to put people back to work? I do not mean 
marginally, but how is this economy going to really take off 
again until we absorb the excess out there? Do you have any--I 
do not think you can do it by stimulus programs, because if you 
could have, we spent nearly a trillion dollars. Of course, we 
could argue all day about that, but look at the economy today. 
Go ahead, sir. It is your forum.
    Mr. Krueger. Thank you very much, sir. As I said, the scale 
of the problem was much deeper than I think people had 
appreciated, and that shows up in the revisions to the GDP data 
back in 2008 and early 2009.
    The proposals that the President made in the American Jobs 
Act have high bang for the buck. Private forecasters, such as 
Mark Zandi, have forecast that the program would raise 
employment by roughly 1.9 million jobs. It could lower the 
unemployment rate by a percentage point. It could raise GDP 
growth by 2 percent.
    But I think what we need to do is to continue looking for 
these types of solutions. I think the proposal the President 
made selected the types of programs that independent analysts 
think have the biggest bang for the buck. But we need to do 
many things at once.
    I think we face three great economic challenges. The first 
is to sustain the recovery and strengthen job growth, as I 
mentioned.
    Second is to invest in the future, to continue educating 
and innovating and investing in infrastructure, which would 
also help right now in terms of putting people back to work.
    And then, third, as we discussed in your office, we need to 
get on a sustainable fiscal path. We need to do all of that----
    Senator Shelby. And that includes entitlements, does it 
not, whether we like to talk about it--none of us want to talk 
about it, but does it not include--a real, sustainable economic 
plan in any trajectory, we have got to deal with entitlements. 
I think the President has even alluded to it. I do not think he 
is on board, but he talks about it.
    Mr. Krueger. Well, I think what you said is exactly right. 
We need to look at the whole budget, including entitlements. 
The very fast growth is in Medicare and Medicaid costs.
    Senator Shelby. Mm-hmm.
    Mr. Krueger. The President put out a proposal which brings 
down the deficit relative to GDP, or debt relative to GDP over 
the next 10 years substantially, and if that were enacted, I 
think that would put us on much more solid footing in terms of 
sustainability over the next decade.
    Senator Shelby. Thank you. Thank you, Mr. Chairman.
    Chairman Johnson. Dr. Krueger, we have talked about a 
variety of important economic issues this morning. How would 
you summarize the economic policy challenges that we face?
    Mr. Krueger. Well, fundamentally, we face weak demand. 
Consumption has been growing at a modest pace. We have a lot 
more capacity to produce than people and businesses are willing 
to buy right now. That slack capacity shows up in the 
unemployment numbers that Senator Shelby mentioned. It shows up 
in the capacity utilization numbers.
    So, fundamentally, I think we need to strengthen demand. 
Some of that can come about by people becoming more confident 
that their jobs are secure, that they can go out and buy 
purchases that they put off. Some of it can come about by 
focusing our measures on raising job growth so people have more 
income. But the diagnosis that I have of the economy, the 
number one problem has been weak demand.
    Chairman Johnson. I thank the witnesses for your testimony 
and for your willingness to serve our Nation.
    I ask all Members of this Committee to submit questions for 
the record by close of business on Tuesday, September 27, and I 
request that the witnesses submit your answers to us in a 
timely manner so that we can move your nominations forward as 
quickly as possible.
    This hearing is adjourned.
    [Whereupon, at 11:23 a.m., the hearing was adjourned.]
    [Prepared statements and responses to written questions 
supplied for the record follow:]

                 PREPARED STATEMENT OF ALAN B. KRUEGER
         Nominee for Member of the Council of Economic Advisers
                           September 22, 2011

    Chairman Johnson, Ranking Member Shelby, and other distinguished 
Members of the Committee, I am honored to have my nomination come 
before you today.
    I am grateful to President Obama for asking me to serve as a Member 
and Chairman of the Council of Economic Advisers at this critical time 
for our Nation's economy.
    I am also deeply grateful to my wife, Lisa, and to our children, 
Ben and Sydney, for their support and willingness to allow me to return 
to public service.
    And I am grateful that my parents and wife could attend this 
hearing today. My mother worked as an elementary school teacher in East 
Orange, New Jersey, and my father, an army veteran, had a long career 
as a certified public accountant and small businessman.
    From my father, I learned at an early age to respect the 
entrepreneurs and small business owners who were his clients. I have 
long appreciated that job growth is dependent on a vibrant private 
sector and that Government can only set the conditions for private 
employers to prosper and grow. My father also encouraged me to work as 
soon as I was legally able to do so in order to save for my college 
education. My first job, when I was in middle school, was working in a 
medical laboratory, where I cleaned test tubes and retrieved lunch; I 
was promoted to a position where I stained slides that were screened 
for cancer. In high school, I worked at Baskin Robbins and later as an 
assistant electrician, laying cables and installing equipment. These 
early work experiences were important to me because they taught me the 
importance of teamwork and that the actual labor market does not always 
function the way that economic theory says it should.
    My wife is a math teacher at our local public high school, which 
both of our children attended. I learned firsthand from my mother and 
wife's tireless efforts how a quality education can provide children 
with greater opportunities and a brighter future.
    I have been very fortunate in my own education. I graduated from my 
local public high school in Livingston, New Jersey, a year ahead of New 
Jersey Governor Chris Christie. I attended Cornell's School of 
Industrial & Labor Relations with the idea of becoming a lawyer, but 
quickly became fascinated by the power of economics and statistics for 
improving people's lives. I then earned a Ph.D. in economics from 
Harvard University in 1987.
    I subsequently have had the great privilege of working as a 
professor of economics and public policy at Princeton University for 
the last 24 years, teaching undergraduate and graduate students and 
conducting research. My teaching has primarily been in the areas of 
labor economics, statistics, public finance and the economics of 
education.
    I have conducted research on a range of topics, from job growth and 
social insurance to terrorism and time use, from bond markets to labor 
markets, from the economics of education to the economics of Super Bowl 
and concert tickets. I have tried not to be tied to a particular 
doctrine of economic thought in my work, and instead have sought to 
develop the best evidence possible to test economic theories and 
estimate key economic parameters.
    This approach often has led me to collect original data and use 
econometric methods to study natural experiments and policy changes. 
Sometimes my findings have been contrary to what I expected and 
contrary to the conventional wisdom among economists. But, in every 
instance, I have tried to adhere to a standard of reporting my findings 
objectively, regardless of which school of thought they support.
    I also recognize that the data and evidence that economists and 
policymakers rely upon are not perfect. As a result, I have strived to 
improve our data and statistical infrastructure. In 1993, I started the 
Princeton Survey Research Center to facilitate innovative methods of 
data collection. More recently, I launched the Princeton Data 
Improvement Initiative. This effort enlisted business and academic 
economists and Government statisticians to try to evaluate existing 
economic indicators and to develop informative new measures.
    Princeton briefly served as the capital of the United States, and 
the University is true to its motto, first coined by Woodrow Wilson, 
``Princeton in the Nation's service.'' As part of this tradition, 
Princeton afforded me the opportunity to take a public service leave 
and serve first as Chief Economist of the U.S. Department of Labor in 
the mid-1990s and then as Assistant Secretary and Chief Economist of 
the Treasury Department in 2009-10.
    After returning to Princeton in November 2010, I taught a new 
course called, ``The Great Recession: Causes, Consequences and 
Remedies''. I do not need to tell this Committee that that course is 
still a work in progress. The United States is still struggling to 
recover from the effects of the financial crisis that erupted in 2008. 
While time will heal many of the wounds in the economy, applying the 
proper medicine will help those wounds heal more quickly. I take solace 
in the fact that the United States is a resilient Nation with great 
resources, including our physical and human capital, our Constitutional 
system of government, our tradition of entrepreneurship, and our common 
sense approach to solving problems. I am convinced we can meet the 
serious challenges we face with the right mix of economic policies and 
faith in American workers and businesses to adapt to change, and emerge 
a stronger country.
    The Council of Economic Advisers is a unique and important 
institution within the Government. The President relies on the Council 
to provide the best available objective economic analysis. The Council 
is responsible for preparing the Economic Report of the President, 
monitoring economic trends, and developing and recommending to the 
President economic policies to promote competitive enterprise and to 
avoid and diminish the effects of economic fluctuations.
    My background as a labor economist, teacher and researcher will 
help me take on these duties, if I am confirmed. My work on improving 
economic indicators would provide useful background in interpreting 
economic trends. My work as a researcher would help to appraise the 
success or failure of various programs. My experience as an editor of 
one of the American Economic Association's main journals will help me 
to present a wide variety of views and relevant evidence to the 
President, not just my own personal views but also those of the other 
Members and others in the economics profession. Indeed, I think an 
important role of the Chairman of the Council of Economic Advisers is 
to present the President with a range of views from leading schools of 
economic thought, indicating the uncertainty surrounding an issue, and 
highlighting where others hold different views of the merits and 
demerits of various policies than the Chairman.
    I am humbled and honored to have the possibility of serving the 
Nation, should I be confirmed. If you and your colleagues in the Senate 
give me the opportunity to serve as a Member and Chairman of the 
President's Council of Economic Advisers, I promise to apply my human 
capital to the best of my ability to justify your trust and confidence.
    Thank you again for the time and opportunity to appear before you 
today, and I look forward to answering your questions.
                                 ______
                                 
                 PREPARED STATEMENT OF DAVID A. MONTOYA
        Nominee for Inspector General, Department of Housing and
                           Urban Development
                           September 22, 2011

    Chairman Johnson, Senator Shelby, and Members of the Committee 
thank you for the privilege and opportunity to discuss my nomination as 
Inspector General of the Department of Housing and Urban Development. 
It is an honor to appear before this distinguished Committee.
    If you will permit me, I would like to acknowledge my wife, 
Katherine and children, Alyssa and Jonathan, both of whom are students 
at Colorado State University. While they were unable to be here with me 
today, I want to take a moment to publicly thank them for all of their 
support, thoughts and prayers. I would also like to recognize and thank 
my brother Daniel, who is here with me today and my sister Deborah who 
was unable to attend. Finally, I want to acknowledge and thank my 
parents who have truly been an inspiration to me. They raised me and my 
siblings with a strong work ethic, dedication to public service and 
leadership.
    I am honored that President Obama has nominated me to the position 
of Inspector General for the Department of Housing and Urban 
Development. The Department's mission ``is to create strong, 
sustainable, inclusive communities and quality affordable homes for 
all'' and I believe that owning your own home is truly a fundamental 
American dream. The Inspector General for the Department of Housing and 
Urban Development's mission promotes the integrity, efficiency, and 
effectiveness of HUD programs and operations to assist the Department 
in meeting its mission.
    My career has prepared me for the challenges of this position. I 
have spent the majority of my professional life dedicated to public 
service in Federal law enforcement. Sixteen of those years have been in 
oversight, supervisory and leadership positions, including 10 years in 
the Federal Senior Executive Service and the Postal Career Executive 
Service.
    As an Executive Special Agent in Charge, for the Office of 
Inspector General at the U.S. Postal Service, I direct the largest 
field office overseeing 60 percent of the United States and a Postal 
Area with just under one billion dollars in contract obligations.
    As Assistant Inspector General for Investigations with the Office 
of Inspector General, at the Department of the Interior, I reorganized 
and directed a national law enforcement program which helped to protect 
America's natural resources and heritage.
    As Deputy Director and Acting Director of the Environmental 
Protection Agency's Criminal Investigation Division, I provided 
leadership and direction to a national environmental crimes law 
enforcement program that investigated and helped to prosecute criminal 
conduct that threatened the health of our citizens and our environment.
    As a Special Agent with the Drug Enforcement Administration I 
conducted criminal investigations of individuals and organizations who 
threatened our country's security with the importation of illicit drugs 
and the violence that drug trafficking produces.
    My professional career has been characterized by increasing 
leadership roles and responsibilities with a commitment toward 
accountability and high ethical standards. While I have spent a career 
investigating violations of either criminal, civil or administrative 
laws and regulations, it has always troubled me that these crimes and 
violations occur in the first place.
    If confirmed as the Inspector General for the Department of Housing 
and Urban Development, I will stress the need for collaboration with 
Secretary Donovan and HUD staff to ensure that HUD's resources are 
being effectively and efficiently implemented. In addition, I will work 
to ensure early detection of warning signs of fraud or abuse through 
the IG's audits, evaluations, reviews and investigations. Every IG 
employee will focus on prevention, while ensuring that all funds lost 
through fraud, abuse or mismanagement is fully recovered.
    A key priority, if I am confirmed, will be to maintain a strong 
partnership with this Committee and the Congress. The laws you write 
must be implemented in a manner that fulfills your intent and the very 
real needs of the people for whom they were written.
    With the state of our economy and the limited financial resources 
our Government faces it has never been more important to ensure that 
every dollar spent is spent well.
    Given my background, I understand the responsibilities that the 
position of Inspector General will require. I believe that the 
knowledge and experience I have gained in nearly a quarter century of 
public service in investigative and oversight roles make me uniquely 
qualified and prepared for the new challenges I will face, should I be 
confirmed.
    If confirmed, I would look forward to the opportunity to work with 
this Committee and other Members of Congress, Secretary Donovan, and 
our State and local partners to be accountable and transparent with the 
work of the Office of Inspector General and the oversight of HUD's 
program responsibilities.
    Chairman Johnson, Senator Shelby, Members of the Committee thank 
you for allowing me the distinct privilege to testify here today. I 
would be pleased to answer any questions you may have.
                                 ______
                                 
                 PREPARED STATEMENT OF CYRUS AMIR-MOKRI
 Nominee for an Assistant Secretary of the Treasury, Department of the 
                                Treasury
                           September 22, 2011

    Chairman Johnson, Ranking Member Shelby, and distinguished Members 
of the Committee, I am honored to appear before you today as the 
nominee for the position of Assistant Secretary of the Treasury for 
Financial Institutions.
    With me today are my parents, Mahvash and Ebrahim Amir-Mokri, and 
my sister Mina Amir-Mokri. I would not be here before you today without 
their love, support, and sacrifice. I would like to take a moment to 
give special recognition to my parents' sacrifice. They were at or 
about my age today when, shortly after the Iranian revolution of 1979, 
they sent their two children, then aged 16 and 13, abroad. Physical 
separation between parents and children is difficult under any 
circumstance, but this difficulty was even more pronounced because of 
the tensions that bedeviled relations between the United States and 
Iran during the hostage crisis and its immediate aftermath. To give me 
and my sister the support we needed to go through school and young 
adulthood, my parents left behind everything that they had worked for 
in their careers, and more, and joined us in the United States to start 
a new life. And so we came to America in search of truths that the 
Declaration of Independence holds to be self-evident: that we are 
endowed by our Creator with the unalienable rights of life, liberty, 
and the pursuit of happiness. To our family, America has meant the 
realization of that promise.
    To all those around the world who wonder what America offers and 
what it represents, I ask that they consider my story. From the moment 
I arrived in 1981, I have known nothing but kindness, warmth, respect, 
and encouragement, whether it be in the idyllic town of Beaver Dam, 
Wisconsin, where I spent a year finishing high school or in the 
cosmopolitan metropolis of New York City, which is now my permanent 
home. In America, I have not been judged by the place of my birth, but 
by my dedication, loyalty, and hard work. The fact that a first 
generation immigrant from Iran finds himself sitting before this 
distinguished Committee today proves that America, indeed, is a very 
special place.
    I am truly humbled that, in these extraordinary times, President 
Obama has nominated me to discharge the significant responsibilities of 
the Assistant Secretary of the Treasury for Financial Institutions and 
to serve as a Director of the National Consumer Cooperative Bank. I am 
extremely grateful to Secretary Geithner for his confidence and 
support, and for recommending me for the President's consideration.
    In these challenging times, it is my privilege to answer the call 
to public service. As a first generation immigrant, I believe that I 
have a duty to give back to the country that has given so much to me. I 
also believe that we are all custodians of the idea of America, and we 
bear the solemn responsibility of safeguarding the idea of America so 
that it may continue to inspire people around the globe to seek a 
better life and to build a better world.
    Today, we continue to recover from the most profound financial 
crisis since the Great Depression. Congress enacted landmark 
legislation to remedy flaws in our financial system. It is critically 
important that financial regulators continue carefully to implement the 
reform agenda embodied by that legislation in a coordinated and 
measured fashion, consistent with the intent of Congress. Our approach 
should strive to achieve appropriate balances so that we establish and 
maintain a healthy financial system while also continuing to encourage 
efficiency and innovation. We must continue to build the institutions 
designed for detecting and addressing systemic risk so that we do not 
experience a recurrence of the financial crisis of 2008. We must also 
work with regulators around the globe to ensure that financial 
regulatory regimes are consistent so that the playing field is not 
tilted to anyone's unfair advantage. Mindful that much of America is 
served by our community banks and that small businesses form a critical 
part of our job-creating engine, we must work to facilitate the means 
by which they can once again flourish. We must also work to ensure that 
Americans have access to housing, but that our financial system 
provides financing in a responsible manner. If confirmed, I will look 
forward to working with Congress toward these ends.
    I believe that my professional background has prepared me to accept 
this responsibility. Most recently, I was Senior Counsel to the 
Chairman of the Commodity Futures Trading Commission. In my role as 
Senior Counsel, I advised the Chairman of the CFTC on legal and policy 
matters. I also served as the CFTC's deputy representative to the 
Financial Stability Oversight Council and was responsible for assisting 
the Chairman in matters regarding the President's Working Group on 
Financial Markets. After passage of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act, I participated in the CFTC's 
implementation efforts and oversaw coordination of the CFTC's work with 
implementation by other financial regulatory agencies. Additionally, I 
supervised the CFTC's efforts to harmonize its regulations with those 
of the Securities Exchange Commission and coordinated other joint CFTC-
SEC projects.
    Before joining the CFTC, I was a general commercial litigation 
partner at the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, 
where, all told, I practiced law for more than a dozen years. My 
principal focus was in antitrust and securities litigation. In addition 
to my law practice, I served as a faculty member for the Practicing Law 
Institute's annual Consumer Financial Services Litigation program.
    If confirmed, I look forward to working closely with you to take 
the necessary steps to building and maintaining a financial system that 
can reliably sustain a growing, prosperous economy over the long term 
for all Americans.
    Thank you.

 RESPONSE TO WRITTEN QUESTIONS OF SENATOR SHELBY FROM ALAN B. 
                            KRUEGER

Q.1. To build support for the Obama administration's stimulus 
bill, the CEA created an estimate of the number of ``jobs 
saved'' by the bill. A number of well-respected economists have 
criticized the ``jobs saved'' estimate as being non-measurable. 
For example, Dr. Allan Meltzer said ``The Council of Economic 
Advisers . . . shamefully invented a number called `jobs saved' 
that has never been seen before, has no agreed meaning, and no 
academic standing.'' What is your professional opinion about 
the accuracy and validity of the CEA's ``jobs saved'' estimate? 
Do you believe that it is appropriate for the CEA to create 
highly speculative statistics designed solely to support the 
Obama administration's political agenda?

A.1. In my view, the role of the CEA is to provide the best 
objective evidence available based on relevant economic theory 
and data, and to present the President with a range of views. 
The CEA should attempt to quantify only that which can be 
reasonably quantified, based on existing, commonly accepted 
methods and data. That said, there are a range of questions and 
issues that CEA addresses, and economists have more confidence 
in the precision of some estimates than others, by the nature 
of the issue addressed and underlying data and models.
    Measuring the impact of fiscal policies on growth and 
employment is inherently difficult because one typically cannot 
directly observe economic activity in the absence of the 
policy. It is my understanding that CEA's estimates of the 
employment effects of ARRA were similar to those of a range of 
other analysts, including the Congressional Budget Office (CBO) 
and Macroeconomic Advisers, who used similar forecasting 
methods. However, forecasts can be inaccurate because of the 
inaccuracy of the underlying data, as well as for other 
reasons. In the forecast to which the question referred, the 
revisions to the initial Bureau of Economic Analysis (BEA) GDP 
growth data showed that the economy was contracting at a much 
greater rate than had been appreciated at the end of 2008, 
which affected the accuracy of many analysts' estimates.
    If confirmed, I intend to hold to a standard of only 
releasing estimates that rely on mainstream economic methods 
and reliable data.

Q.2. Do you think that higher energy prices in the short term 
would be good for spurring the development of clean energy?

A.2. Mainstream economic principles would suggest that, all 
else being equal, if higher short-term energy prices are 
expected to last only for a short period of time, they would be 
expected to have relatively little impact on investments in all 
forms of energy production, including alternative energy 
development.

Q.3. In December 2009, you testified before the Finance 
Committee about the Obama administration's views on energy 
policy. In your testimony, you endorsed an excise tax on 
offshore oil and gas development, higher tax rates for the 
industry, and an economy-wide cap-and-trade regime. Is that 
still the energy policy that you think the United States should 
pursue?

A.3. The President's FY 2010 Budget stated that the 
Administration was developing a proposal to impose an excise 
tax on certain oil and gas produced offshore. That budget also 
proposed a cap-and-trade program that would provide incentives 
for firms to reduce greenhouse gas emissions. It is my 
understanding that these particular proposals have not been 
included in the Administration's FY 2012 Budget. From an 
economic perspective, sound energy policy is supported by a 
balancing of the benefits and costs of energy production and 
use, within the context of its broader macroeconomic, 
environmental, and international and security consequences. 
Affordable, secure and reliable energy supplies are critical 
for our economic performance, and I believe that policies that 
are consistent with these objectives should be pursued.

Q.4. In December 2009, you testified before the Finance 
Committee about the Obama administration's proposals for higher 
taxes on the oil and gas industry. You repeatedly justified 
higher tax rates by saying that:

        To the extent that current tax subsidies for the oil and gas 
        industry encourage the overproduction of oil and natural gas, 
        they divert resources from other, potentially more efficient 
        investments and they are inconsistent with the Obama 
        administration's goals to reduce GHG emissions and build a new, 
        clean energy economy.

You qualified that statement in a number of ways, but you 
clearly suggest that our current tax structure leads to at 
least some overproduction of those resources. On a net basis, 
however, our Nation imports about 9.2 million barrels of oil 
per day right now. Do you believe the United States 
overproduces oil and gas?

A.4. I testified in December 2009 as Assistant Secretary for 
Economic Policy and Chief Economist of the Treasury on certain 
provisions in the Administration's FY 2010 Budget relating to 
the oil and gas industry. This is not an area in which I have 
conducted original research as an academic economist. I tried 
to focus on economic aspects of the Administration's proposals 
in my testimony. As I noted in my testimony, my aim was to 
evaluate, from an economist's perspective, the Administration's 
budget proposals relating to oil and gas with regards to 
standard economic principles of tax policy.
    My testimony was intended to be in the narrow confines of 
tax policy, and, in particular, an economic evaluation of 
specific tax provisions. The question of determining the 
optimal amount of U.S. oil and gas production is a much broader 
and more complicated issue. On the one hand, in the absence of 
other factors, certain provisions of the tax code could lead to 
higher production than would otherwise be the case. On the 
other hand, many factors other than the tax code also influence 
domestic energy production, including policies governing 
development and production of State and Federal lands, energy 
infrastructure siting, and permitting. Because of the ambiguity 
inherent in these issues, I included many qualifications and 
caveats in my testimony, as the question noted.
                                ------                                

 RESPONSE TO WRITTEN QUESTIONS OF SENATOR VITTER FROM ALAN B. 
                            KRUEGER

Q.1. In the Treasury Department's Green Books (2010 and 2011), 
you make repeated references to oil and gas industry ``tax 
preferences'' and ``tax subsidies,'' yet the oil and gas sector 
pays a significantly higher effective tax rate than most other 
industries (41.1 percent vs. 26.5 percent for the rest of the 
S&P industrials). How can a sector that pays a higher effective 
tax rate be receiving ``preferences?''

A.1. In my role as Assistant Secretary for Economic Policy and 
Chief Economist at the Treasury Department, I did not 
participate in drafting the Greenbook. The Greenbook is 
produced by the Office of Tax Policy in the Treasury 
Department.
    However, my understanding is that tax preferences or 
subsidies are commonly defined as provisions of the tax laws 
that allow a special exclusion, exemption, or deduction from 
gross income, or that provide a special credit, a preferential 
rate of tax, or a deferral of liability. It is my further 
understanding that this is in keeping with the Administration's 
definition of tax expenditures.

Q.2. The President has called for all sectors of the economy to 
``pay their fair share.'' Do you believe it is ``fair'' to 
raise taxes on a sector that is already paying a significantly 
higher tax rate than others?

A.2. Given the budget situation, very difficult choices have to 
be made regarding spending and revenues. As an economist, I 
look at these questions through the lens of tax principles in 
the field of public finance, and, in particular, the concepts 
of vertical and horizontal equity. The President has emphasized 
the need for comprehensive reform of the tax code. The 
principles that he has proposed are reforms that: 1) lower tax 
rates; 2) cut wasteful loopholes and tax breaks; 3) reduce the 
deficit by $1.5 trillion; 4) boost job creation and growth; and 
5) comport with the ``Buffett Rule'' that people making more 
than $1 million a year should not pay a smaller share of their 
income in taxes than middle-class families pay. These 
principles strike me as consistent with principles of taxation 
that are standard in the economics field of public finance, 
and, in particular horizontal and vertical equity.

Q.3. How can you reconcile the Nation's energy security goals 
with your contention that the current tax code encourages 
``overproduction'' of domestic oil resources? With no 
alternatives readily apparent, how could your policy 
recommendations not result in greater reliance on foreign 
energy sources?

A.3. In December 2009 I testified, as Assistant Secretary for 
Economic Policy and Chief Economist of the Treasury, on certain 
provisions in the Administration's Budget relating to the oil 
and gas industry. This is not an area in which I have conducted 
original research as an academic economist. I tried to focus on 
economic aspects of the Administration's proposals in my 
testimony. As I noted in my testimony, my aim was to evaluate, 
from an economist's perspective, the Administration's budget 
proposals relating to oil and gas with regards to standard 
economic principles of tax policy.
    My testimony was intended to be in the narrow confines of 
tax policy, and, in particular, of specific tax provisions. The 
question of whether the United States overproduces oil and gas 
is a much broader and more complicated issue. On the one hand, 
in the absence of other factors, certain provisions of the tax 
code could lead to higher production than would otherwise be 
the case. On the other hand, many factors other than the tax 
code influence domestic energy production, including policies 
governing development and production of State and Federal 
lands, energy infrastructure siting, and permitting. Because of 
the ambiguity inherent in the issue, I included many 
qualifications and caveats in my testimony.
    As part of the Administration's plan for a secure energy 
future, President Obama has set a goal of reducing U.S. oil 
imports by one-third by 2025 relative to 2008. As part of its 
strategy to achieve this goal, the Administration is committed 
to increasing safe and responsible development of domestic oil 
and gas resources. I think about energy security in terms of 
both supply and demand. On the supply side, over the past 2 
years, domestic oil and gas production has increased, thanks in 
part to recent technological advances such as hydraulic 
fracturing to extract energy resources from shale formations. 
On the demand side, I agree with President Obama that we also 
need to enhance our energy efficiency to reduce our economy's 
reliance on imported oil, improve our energy security, and 
protect consumers and the economy from the adverse impacts of 
volatile oil prices.
    As an economist, I am convinced that having secure, 
reliable, and affordable energy supplies is critical for the 
economy. I also believe that the oil and gas industry, as well 
as other sectors of the energy industry, provide a great many 
American workers with well paying, high quality jobs.

Q.4. Most Americans would agree that we need to reduce our 
dependence on foreign oil. One of the easiest ways to do so 
would be to increase domestic production. The net effect would 
be increased jobs, increased production and supply, and 
accordingly a lower price for the cost of fuels as a result of 
increased supply. Please indicate if and why you disagree.

A.4. I agree we need to reduce our dependence on foreign oil. 
Among other things, reducing our dependence on foreign oil 
would improve our energy security and insulate our economy from 
fluctuations in the price and supply of oil. There are a 
variety of ways to accomplish these goals. As an economist, I 
think in terms of supply and demand. Increasing supply of 
domestic energy production and increasing energy efficiency 
will help achieve these goals.

Q.5. The 2010 Green Book opines that oil and gas industry tax 
credits divert funds from ``more efficient'' investments in the 
economy. As the Administration has demonstrated, through your 
time in Treasury and beyond, a steadfast preference for 
renewable energy Government investments, explain how these less 
cost-effective renewable investments are ``more efficient'' 
than oil and gas. Please also describe the success of each 
program over the last 3 years, both in tax revenue and job 
creation terms. Please also indicate the average amount of 
Federal taxpayer dollars that was required to create each full-
time renewable energy job now in existence as a result of 
programs under the Obama administration.

A.5. As the Assistant Secretary for Economic Policy and Chief 
Economist at the Department of the Treasury, I did not draft 
the Greenbook.
    As a general matter, however, economic theory implies that 
private market decisions can be inefficient when market prices 
do not reflect the full cost to society of market transactions. 
This would occur, for example, if the price of a good does not 
reflect the potential environmental effects associated with 
consumption of the good, or if it does not reflect potential 
security risks associated with the foreign supply of the good. 
Standard economic principles imply that policies that are 
designed to correct positive or negative externalities, such as 
these, can require subsidies or taxes as a way of increasing 
the efficiency of the economy.

Q.6. In 2009 you testified before Congress that the earth would 
heat by 7 degrees by the end of the century without action such 
as cap and trade. Now that cap and trade has failed, and given 
China and other growing economies increase in greenhouse gas 
emissions, what is your new estimate of global average 
temperature rise over the next 10, 20, 30, 50, and 100 years?

A.6. I should first note that I am not a climate scientist, and 
have neither the background nor the training to make my own 
climate predictions. When I testified as an economist on the 
Administration's Budget in 2009, I was not citing my own 
personal view, but rather referring to an estimate provided by 
the Intergovernmental Panel on Climate Change (IPCC), which at 
the time was their most current estimate available.

Q.7. Please discuss generally how Spain's renewable energy 
programs have both succeeded and failed.

A.7. As a CEA nominee, my expertise is mainly in the areas of 
unemployment and jobs, and general principles of 
microeconomics, macroeconomics, and econometrics. I am not 
familiar with Spain's renewable energy programs. However, I 
have been informed that this is an area of recent policy 
activity in Spain. I am not in a position to render judgment on 
the successes or failures of particular policies adopted by 
Spain, given the variety of economic, political, and other 
factors that are pertinent to evaluating whether a specific 
policy is successful or not, and given my lack of familiarity 
with relevant Spanish data and experiences.
    However, given the varied approaches to promoting renewable 
energy that have been adopted both within the United States and 
abroad, I am of the opinion that policymakers would want to 
examine these experiences to look for lessons that might be 
applicable to the development of any Federal policies, with 
consideration of any specific factors and circumstances present 
in Federal policy that may or may not be present in State or 
foreign policy.

Q.8. Please discuss generally how California's renewable energy 
programs have both succeeded and failed.

A.8. As mentioned in my response to the previous question, as a 
CEA nominee, my expertise is mainly in the areas of 
unemployment and jobs, and general principles of 
microeconomics, macroeconomics, and econometrics. I am not 
familiar with the details of California's renewable energy 
programs and I am not in a position to render judgment on the 
successes or failures of these programs.

Q.9. As you are aware, there exists no Federal programs for 
grants, loan guarantees or other financing for hydraulic 
fracturing similar to what we do for renewable energy. Please 
discuss the net economic effects on the U.S. economy as a 
result of hydraulic fracturing over the last 5 years. Please 
identify all known shale resources and generally the cumulative 
known shale resource base in the United States. As well, please 
discuss generally the jobs, salaries and revenue to local, 
State, and Federal treasuries that has been generated over the 
last 5 years as a result of hydraulic fracturing.

A.9. Consistent with the Administration's Blueprint for a 
Secure Energy Future, I believe that we need to deploy American 
assets, innovation, and technology so that we can safely and 
responsibly develop more energy here at home and be a leader in 
the global energy economy. Over the last 2 years, domestic oil 
and natural gas production has increased. In 2010, American oil 
production reached its highest level since 2003, and total U.S. 
natural gas production reached its highest level in more than 
30 years. Much of this increase has been the result of growing 
natural gas and oil production from shale formations as a 
result of recent technological advances utilizing hydraulic 
fracturing. Although I do not know where all U.S. shale 
resources are located, these resources, when combined with 
appropriate safeguards to protect public health and the 
environment, have played--and will continue to play--a critical 
role in enhancing domestic energy production in the coming 
decades.
    Hydraulic fracturing has led to particularly significant 
increases in domestic natural gas production. Production of 
natural gas from shale formations has gone from a negligible 
amount just a few years ago to being almost 30 percent of total 
U.S. natural gas production, and this share is expected to 
continue to rise in the coming decades. This increase in 
domestic production conveys significant economic benefits. 
First, increased domestic production has led to increased 
employment; the Secretary of Energy's Advisory Board recently 
concluded that ``well over 200,000 jobs (direct, indirect, and 
induced) have been created over the last several years by the 
development of domestic production of shale gas, and tens of 
thousands more will be created in the future.'' Second, the 
price of natural gas has dropped by roughly half since 2008, 
lowering electricity and heating costs for consumers and 
businesses, and supporting job growth and general economic 
activity. Third, the low price of natural gas in the United 
States has also benefited U.S. firms that use natural gas as an 
input in production, notably petrochemicals, which have 
recently increased investments in the United States 
significantly. Fourth, reducing our reliance on imported 
natural gas improves our net energy trade balance, and there 
may also be potential export opportunities for U.S. shale 
production technology and services.
    The development of hydraulic fracturing technology is an 
example of the type of technological innovation, combining 
private entrepreneurial ingenuity and risk taking and 
Government investment in basic research (e.g., Department of 
Energy investments), that will likely be required for the 
United States to have strong economic growth going forward.

Q.10. Do you believe the proposed new ozone standards, that 
were recently withdrawn by the President and EPA, would have 
created jobs and been a net positive for our economy? If so, 
please fully discuss the economic theories by which the new 
standards would have created jobs and been a net positive for 
the U.S. economy?

A.10. I was not part of the Administration at the time that the 
ozone standards were being considered, and have not studied 
this particular issue. Therefore, I am not in a position to 
render an opinion on this particular regulation.
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