[Senate Hearing 107-343]
[From the U.S. Government Publishing Office]
S. Hrg. 107-343
NOMINATIONS OF:
JOHN E. ROBSON, PETER R. FISHER, JAMES
J. JOCHUM, ALPHONSO R. JACKSON, RICHARD
A. HAUSER, JOHN CHARLES WEICHER, AND
ROMOLO A. BERNARDI
=======================================================================
HEARINGS
before the
COMMITTEE ON
BANKING, HOUSING, AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
ON
NOMINATIONS OF:
JOHN E. ROBSON, OF CALIFORNIA, TO BE PRESIDENT OF THE
EXPORT-IMPORT BANK
__________
PETER R. FISHER, OF NEW JERSEY, TO BE UNDER SECRETARY FOR
DOMESTIC FINANCE, U.S. DEPARTMENT OF THE TREASURY
__________
JAMES J. JOCHUM, OF VIRGINIA, TO BE ASSISTANT SECRETARY OF
COMMERCE FOR EXPORT ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE
__________
ALPHONSO R. JACKSON, OF TEXAS, TO BE DEPUTY SECRETARY
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
__________
RICHARD A. HAUSER, OF MARYLAND, TO BE GENERAL COUNSEL
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
__________
JOHN CHARLES WEICHER, OF THE DISTRICT OF COLUMBIA, TO BE
ASSISTANT SECRETARY OF HOUSING AND FEDERAL HOUSING COMMISSIONER
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
__________
ROMOLO A. BERNARDI, OF NEW YORK, TO BE ASSISTANT SECRETARY FOR
COMMUNITY PLANNING AND DEVELOPMENT
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
__________
MAY 10 AND 15, 2001
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
U.S. GOVERNMENT PRINTING OFFICE
78-297 WASHINGTON : 2002
____________________________________________________________________________
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
PHIL GRAMM, Texas, Chairman
RICHARD C. SHELBY, Alabama PAUL S. SARBANES, Maryland
ROBERT F. BENNETT, Utah CHRISTOPHER J. DODD, Connecticut
WAYNE ALLARD, Colorado TIM JOHNSON, South Dakota
MICHAEL B. ENZI, Wyoming JACK REED, Rhode Island
CHUCK HAGEL, Nebraska CHARLES E. SCHUMER, New York
RICK SANTORUM, Pennsylvania EVAN BAYH, Indiana
JIM BUNNING, Kentucky ZELL MILLER, Georgia
MIKE CRAPO, Idaho THOMAS R. CARPER, Delaware
JOHN ENSIGN, Nevada DEBBIE STABENOW, Michigan
JON S. CORZINE, New Jersey
Wayne A. Abernathy, Staff Director
Steven B. Harris, Democratic Staff Director and Chief Counsel
Brian J. Gross, Deputy Staff Director and Counsel
Linda L. Lord, Chief Counsel
Martin J. Gruenberg, Democratic Senior Counsel
Jonathan Miller, Democratic Professional Staff Member
George E. Whittle, Editor
(ii)
C O N T E N T S
----------
THURSDAY, MAY 10, 2001
Page
Opening statement of Chairman Gramm.............................. 1
Opening statements, comments, or prepared statements of:
Senator Corzine.............................................. 4
Senator Sarbanes............................................. 12
Senator Bunning.............................................. 14
Prepared statement....................................... 22
Senator Dodd................................................. 16
Senator Hagel................................................ 18
Senator Allard............................................... 22
WITNESSES
Charles E. Grassley, a U.S. Senator from the State of Iowa....... 2
Dianne Feinstein, a U.S. Senator from the State of California.... 3
NOMINEES
John E. Robson, of California, to be President and Chairman of
the Export-Import Bank......................................... 6
Prepared statement........................................... 22
Biographical sketch of nominee............................... 24
Response to written questions of:
Senator Miller........................................... 46
Senator Santorum......................................... 46
Peter R. Fisher, of New Jersey, to be Under Secretary for
Domestic Finance, U.S. Department of the Treasury.............. 7
Prepared statement........................................... 26
Biographical sketch of nominee............................... 27
Response to written questions of:
Senator Gramm............................................ 47
Senator Miller........................................... 48
James J. Jochum, of Virginia, to be Assistant Secretary for
Export Administration, U.S. Department of Commerce............. 7
Prepared statement........................................... 37
Biographical sketch of nominee............................... 38
Response to written questions of:
Senator Gramm............................................ 50
----------
TUESDAY, MAY 15, 2001
Opening statement of Chairman Gramm.............................. 51
Opening statements, comments, or prepared statements of:
Senator Sarbanes............................................. 57
Senator Allard............................................... 58
Senator Reed................................................. 59
Senator Bunning.............................................. 59
Prepared statement....................................... 87
Senator Schumer.............................................. 69
Senator Miller............................................... 80
Senator Carper............................................... 82
WITNESSES
Christopher S. Bond, a U.S. Senator from the State of Missouri... 52
Kay Bailey Hutchison, a U.S. Senator from the State of Texas..... 53
Hillary Rodham Clinton, a U.S. Senator from the State of New York 53
James T. Walsh, a U.S. Representative from the State of New York. 54
NOMINEES
Alphonso R. Jackson, of Texas, to be Deputy Secretary, U.S.
Department of Housing and Urban Development.................... 61
Prepared statement........................................... 87
Biographical sketch of nominee............................... 89
Response to written questions of:
Senator Reed............................................. 152
Richard A. Hauser, of Maryland, to be General Counsel, U.S.
Department of Housing and Urban Development.................... 62
Prepared statement........................................... 99
Biographical sketch of nominee............................... 101
Response to written questions of:
Senator Reed............................................. 153
John Charles Weicher, of the District of Columbia, to be
Assistant Secretary for Housing and Federal Housing
Commissioner, U.S. Department of Housing and Urban Development. 64
Prepared statement........................................... 118
Biographical sketch of nominee............................... 121
Response to written questions of:
Senator Reed............................................. 154
Senator Miller........................................... 156
Senator Johnson.......................................... 156
Senator Schumer.......................................... 157
Romolo A. Bernardi, of New York, to be Assistant Secretary for
Community
Planning and Development, U.S. Department of Housing and Urban
Development.................................................... 65
Prepared statement........................................... 141
Biographical sketch of nominee............................... 143
Response to written questions of:
Senator Reed............................................. 160
Additional Material Supplied for the Record
Statement of Jack Kemp, Former Secretary of the U.S. Department
of Housing and Urban Development............................... 162
NOMINATIONS OF:
JOHN E. ROBSON, OF CALIFORNIA
TO BE PRESIDENT OF THE EXPORT-IMPORT BANK
----------
PETER R. FISHER, OF NEW JERSEY
TO BE UNDER SECRETARY FOR DOMESTIC FINANCE
U.S. DEPARTMENT OF THE TREASURY
----------
JAMES J. JOCHUM, OF VIRGINIA
TO BE ASSISTANT SECRETARY OF
COMMERCE FOR EXPORT ADMINISTRATION
U.S. DEPARTMENT OF COMMERCE
----------
THURSDAY, MAY 10, 2001
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10 a.m., in room SD-538 of the Dirksen
Senate Office Building, Senator Phil Gramm (Chairman of the
Committee) presiding.
OPENING STATEMENT OF CHAIRMAN PHIL GRAMM
Chairman Gramm. Let me call the Committee to order. I want
to thank our colleagues for coming.
Let me explain what we are going to do today.
We have a hearing today on three of the President's
nominees: John Robson, of California, to be President of the
Export-Import Bank; Peter Fisher, of New Jersey, to be Under
Secretary of the Treasury for Domestic Finance; and Jim Jochum,
of Virginia, to be Assistant Secretary of Commerce for Export
Administration.
My intention is to hear from our three nominees, have a
period of questions for them, and then we will vote on the four
nominees who appeared last week: Grant Aldonas, of Virginia, to
be Under Secretary of Commerce for International Trade; Ken
Juster, of the District of Columbia, to be Under Secretary of
Commerce for Export Administration; Maria Cino, of Virginia, to
be Assistant Secretary of Commerce and Director General of the
U.S. and Foreign Commercial Service; and Glenn Hubbard, of New
York, to be Chairman of the Council of Economic Advisers.
We will do a rolling vote today and give Members an
opportunity, until 3 p.m. to cast their vote. I hope that each
of our Members will be able to do so. My intention is that we
will follow this procedure now until we get all these
confirmations done.
Let me welcome our nominees today. We have two
distinguished Members of the Senate to introduce our nominees.
I would like to suggest to Members of the Committee that we
allow them to speak first. I am going to leave for a minute to
introduce a Texan who has been nominated to be Secretary for
the Army. I am going to ask Senator Dodd to Chair in my
absence.
But before I leave, let me recognize the distinguished
Chairman of the Finance Committee, Senator Grassley, to
introduce a person we all know because he worked for this
Committee after he worked for Senator Grassley, and that is Jim
Jochum.
Senator Grassley.
STATEMENT OF CHARLES E. GRASSLEY
A U.S. SENATOR FROM THE STATE OF IOWA
Senator Grassley. Even though Jim lives in Virginia now,
Mr. Chairman, we are still going to consider him an Iowan. And
obviously, I am pleased to introduce him, or I would not be
here. I am pleased to call him a friend and, most importantly,
he was a very loyal staff person. He is part of the Grassley
family, as far as I am concerned.
Jim Jochum is a distinguished Iowan. He has character,
educational background and management skills and professional
experience, both in the public, as well as the private sectors,
that make him a really ideal candidate for the position of
Assistant Secretary for Export Administration in the U.S.
Department of Commerce.
It was a short 7 years ago that I was able to have Jim come
and join my staff here in Washington, as a counsel in charge of
agriculture. And then later, he did all of our trade
legislation.
It is quite obvious for a legislator who represents a State
that is number one in hog and grain production, that the staff
person in charge of farm and trade policy in my office has big
shoes and high expectations to fill.
At the time, I may have raised a few eyebrows by hiring a
Jochum who hailed from Dubuque because, in that part of our
State, there is a couple of prominent State house Democrats
with the name of Jochum. But then, again, family partisan
squabbles would make him feel right at home here in the
Nation's Capitol. Since that time, Jim has proven his mettle in
the legislative, legal and lobbying briarpatch here in
Washington, DC.
Jim is also an Iowan through and through. He brought with
him grit, most importantly, a work ethic that is really going
to be challenged in this new job where international trade is
so important for our prosperity. But he also brought smarts and
he brought leadership skills.
These are necessary to build a consensus among commodity
and business groups inside the Beltway and at the grassroots,
and to forge critical alliances with Congressional staff and
Members from both sides of the aisle.
As an example, during his tenure on my staff, Jim played a
pivotal role in drafting the 1996 farm bill. He organized a
bipartisan farm policy caucus comprised of more than half of
the Members of the U.S. Senate.
Later on, he joined me in my first experience with
international trade endeavors on the worldwide scene by going
with me to the first ministerial WTO Singapore.
His expertise and sincere interest in international trade
serve my home State constituents well, where one out of five
jobs on the assembly line at the John Deere plant can be
attributed to international trade, not to mention the fact
that, fully, one-third of an Iowan farmer's income comes from
export sales.
Jim has an ability both to see the big picture and to break
down complex situations into smart legislative and political
strategies. After spending even a short time with Jim, I think
everybody who works with him and gets to know him will see why
people gravitate to him. With that, I will close my
introduction and express my best wishes to all, including Jim.
But I want to assure everybody that not only for myself, but
also people in Congress who consider themselves stewards of the
taxpayers' dollars, that I would say that I have a great deal
of confidence that Jim Jochum will be an asset to the
bureaucracy and a dogged advocate of U.S. interests.
Thank you, Mr. Chairman.
Chairman Gramm. Thank you, Senator Grassley. I know you
have to get on about your business and we are very honored that
you came here today. I am sure that Jim is very appreciative of
your support.
Let me recognize Senator Feinstein to introduce Mr. Robson.
Dianne, we are happy to have you here. Thank you for coming.
STATEMENT OF DIANNE FEINSTEIN
A U.S. SENATOR FROM THE STATE OF CALIFORNIA
Senator Feinstein. Thank you very much, Mr. Chairman. I am
here to indicate my strong support for John Robson, who has
been nominated by the President to serve as Chairman and
President of the Ex-Im Bank.
Frankly, Mr. Chairman, I did not know Mr. Robson. And I
began to get telephone calls, believe it or not, from
Democrats, including a former Secretary of Commerce in the
Clinton Administration. And the request was, would I sit down
and meet with him?
He comes from my home territory--San Francisco, CA. I am
actually surprised that I had not met him before. I did sit
down with him. I did have a chance to talk with him. He is
currently a Senior Advisor to the firm of Robertson Stephens.
He resides in my home city in San Francisco.
He has a very distinguished past governmental service. He
has been Chairman of the Civil Aeronautics Board and was
actually the one who initiated deregulation of airlines, Under
Secretary of Transportation, and Deputy Secretary of the
Treasury.
One of those was even in a Democratic Administration. He
has also served as Dean of the Goizueta School of Business
Administration at Emory University and he was an attorney at
the firm of Sidley and Austin.
He holds appointments as a Distinguished Fellow at Stanford
University's Hoover Institution and as a Visiting Fellow at The
Heritage Foundation.
What was interesting to me is that the prominent Democrats
that called said, meet him. He is really a good guy. He really
knows his stuff.
Well, Mr. Chairman, that is enough for me. I am very proud
to be here and very proud to support your nomination as
President of the Ex-Im Bank, John Robson. Thank you very much.
Senator Dodd [presiding]. Thank you very much, Senator. It
is an honor to have you here before this Committee.
Senator Feinstein. Thank you. I appreciate that.
Senator Dodd. And your remarks are very meaningful and
important. And I know Mr. Robson appreciates them immensely. So
we thank you for coming by. We know you are busy as well, so we
will excuse you.
Senator Feinstein. I appreciate it. Thank you.
Senator Dodd. I am going to ask our colleague from New
Jersey, Jon Corzine, to introduce his constituent, Mr. Fisher.
Senator Corzine.
STATEMENT OF SENATOR JON S. CORZINE
Senator Corzine. Thank you, Senator Dodd.
It is a real honor for me to introduce one of my
constituents. It is great to have a New Jerseyan come before
the Committee. I have been waiting for that for a long time.
It is with great pleasure that I do introduce Peter Fisher,
the nominee to become Under Secretary for Domestic Finance at
the Department of the Treasury, with his wife, Mary Sue, who I
believe is here, and his mother, Ms. Caroline Fisher, who we
are pleased to have joining us.
Peter comes before us as the Executive Vice President of
the New York Federal Reserve Bank. He serves as the head of the
bank's markets group.
At the New York Fed, Peter manages the open market account
for the FOMC and, as such, oversees domestic open market
foreign exchange trading operations and provisions of account
services to the foreign central banks.
He served the Federal Reserve Bank for 15 years, worked his
way up, beginning in the bank's legal department, and then to
the bank's foreign exchange function, where, in 1993, he was
promoted to Senior Vice President in charge of the Foreign
Exchange Department. It is clear from his biographical profile
that he is enormously qualified for the position for which he
has been nominated. But, frankly, the profile does not tell the
story.
Having had the experience of working with Peter in my
previous career, I can attest firsthand to his intellect, his
wit, and quality of character. He is a gentleman who I consider
to be one of the most intellectually honest people I have ever
worked with, gifted in the world of finance and gifted in his
relationships and ability to work with people.
I can say without hesitancy, Senator Dodd, that he will
make an outstanding Treasury Under Secretary. I am very, very
proud to introduce him to the Committee and look forward to his
speedy confirmation. Nice to have you here, Peter.
Senator Dodd. Thank you very much, Senator.
Let me ask, if I can, for all three of you to rise and
raise your right hands, if you will, for the purpose of taking
the oath.
Do you swear or affirm that the testimony that you are
about to give is the truth, the whole truth, and nothing but
the truth, so help you God?
Mr. Robson. I do.
Mr. Fisher. I do.
Mr. Jochum. I do.
Senator Dodd. And do you agree to appear and testify before
any duly-constituted committee of the U.S. Senate?
Mr. Robson. I do.
Mr. Fisher. I do.
Mr. Jochum. I do.
Senator Dodd. Thank you. Before we begin, as normal
proceedings here, I am going to congratulate all three of you,
and congratulate the President on choosing three very fine
individuals to serve in the capacities in which you have been
selected. And to thank you for agreeing to serve as well.
I had a chance to see Mr. Robson yesterday because I know
Mr. Jochum and have heard of Mr. Fisher. I am just very
impressed you are willing to do this.
In the case of John, I think this is your fourth time you
have been confirmed by the Senate for positions.
Mr. Robson. Five.
Senator Dodd. Five. Excuse me. We do not cherish enough and
celebrate enough public service, in my view. And people who
could easily choose a different path and I am sure would be
more financially attractive and less troublesome and time-
consuming for families and friends alike.
I am deeply appreciative as I know all Members of the
Committee are, for your willingness to serve your country. It
is deeply, deeply appreciated. So we thank you.
Why don't I begin just briefly with you, John, if you want
to introduce any family or people who are here, for the
purposes of the record. Do you have any family members present
at all?
Mr. Robson. I do not.
Senator Dodd. All right.
Mr. Robson. We are a long way from California.
Senator Dodd. I know.
Mr. Fisher.
Mr. Fisher. Thank you. Senator Corzine has already
introduced
my mother, Mary Sue Fisher--excuse me--my mother, Caroline
Fisher, and my wife, Mary Sue Fisher.
[Laughter.]
I got the sequence wrong, last name right.
Senator Dodd. Mr. Jochum.
Mr. Jochum. My wife Rita, who is behind me.
Senator Dodd. Nice to have you with us. Very good. The way
I am going to do this is we are going to start with you, Mr.
Robson, with your testimony, and then we will go down to each
of you. And any prepared remarks or information you would like
to share with the Committee, we are happy to receive it.
STATEMENT OF JOHN E. ROBSON, OF CALIFORNIA
TO BE PRESIDENT AND CHAIRMAN OF THE
EXPORT-IMPORT BANK OF THE UNITED STATES
Mr. Robson. Thank you, Mr. Chairman. I have a brief
statement.
Mr. Chairman, Members of the Committee, I am very pleased
to come before you as you consider my nomination to be
President and Chairman of the Export-Import Bank of the United
States.
With your indulgence, I shall omit reciting my biographical
background, which is submitted with this statement. If the
Senate acts favorably on my nomination, it will be, as Senator
Dodd just observed, my fifth confirmation.
Some might say, it is about time this old warrior hung 'em
up. But I relish this new challenge because I have never found
a canvas as big to paint on as public service offers, and I am
particularly excited about the prospect of leading the Export-
Import Bank.
The Export-Import Bank is a venerable independent agency
with a reputation for professionalism and objectivity. It has
enjoyed strong bipartisan Congressional support since its
establishment under President Roosevelt, and it performs
important roles in fostering American exports and thereby
stimulating economic activity and job creation here at home.
It accomplishes this by helping to level the playing field
for U.S. exporters in an increasingly challenging and complex
global marketplace, where they contend with foreign competitors
who may be very generously assisted by their sovereigns and by
assuming the financiers responsibility and risk where
commercial institutions fear to tread.
Over the years, Ex-Im has handled the taxpayers' money
quite responsibly. So Ex-Im has carried out its mission very
well.
But I would be disappointed if this Committee and, indeed,
the entire Senate, did not expect of me and every nominee it
approved, that the person would go to the job alert to
opportunities to do things better and maybe differently.
Without, at this point, having specific knowledge of what
those opportunities might be at the Export-Import Bank, I
welcome ideas from Congress, the exporting community, and
anyone else. A couple of concluding points.
First, in deference to the Senate confirmation process, I
have always maintained a respectful distance from agencies for
which I have been nominated until I am confirmed.
Thus, you may find me deficient in specific knowledge or
opinion on events and policies in which you are interested, a
deficiency I expect to remedy with sufficient time at the Bank.
And second, you have my commitment to deal openly and
straightforwardly with this Committee and Congress. I solicit
your interest, your questions, and your informed comments. And
I will try my best to ensure that, even where we disagree, we
maintain a civil and constructive relationship.
Mr. Chairman, Members of the Committee, I respectfully ask
for your favorable consideration of my nomination and will be
pleased to respond to your questions. Thank you.
Senator Dodd. Thank you. As Tip O'Neill said, it is always
good to ask for the votes. So we appreciate your doing that as
well.
Mr. Fisher, welcome.
STATEMENT OF PETER R. FISHER, OF NEW JERSEY
TO BE UNDER SECRETARY FOR DOMESTIC FINANCE
U.S. DEPARTMENT OF THE TREASURY
Mr. Fisher. Thank you, Mr. Chairman. Thank you, Members of
the Committee, for the opportunity to appear before you today.
I have submitted a brief written statement for the record. Let
me be even briefer.
I am honored that President Bush has nominated me to serve
as Under Secretary of the Treasury of Domestic Finance and, if
confirmed, to have the opportunity to work with Secretary
O'Neill, the Treasury staff, others in the Administration, and
with this Committee, to advance the President's economic
agenda.
The strength and resilience of our Nation's system of
financial intermediation is a precious asset. In addition to
serving as an adviser to Secretary O'Neill, I especially hope
to have the opportunity to work with this Committee to improve
upon the efficiency with which our financial system converts
the savings of the American people into productive investment.
My work at the Federal Reserve Bank of New York I think has
given me some understanding of the forces shaping our
increasingly global banking and capital markets and, with the
Senate's concurrence, I hope to bring that experience to
Secretary O'Neill's team at the Treasury.
Thank you again for the opportunity to appear before the
Committee today. I hope very much that this will be the
beginning of a strong working relationship. And I would be
pleased to answer any questions.
Senator Dodd. Thank you very much, Mr. Fisher.
Mr. Jochum, welcome home.
Mr. Jochum. Thank you.
Senator Dodd. Back to this Committee. You have been highly
regarded and well respected by Members of both political
parties here. We are deeply appreciative of your service to
this Committee over the years. And so it is exciting to have
you back sitting on that other side of the table, if you will,
and we are looking forward to working with you.
Mr. Jochum. I think it is more comfortable on the other
side of the table, actually.
[Laughter.]
Senator Dodd. Wait and see.
[Laughter.]
STATEMENT OF JAMES J. JOCHUM, OF VIRGINIA, TO BE
ASSISTANT SECRETARY FOR EXPORT ADMINISTRATION
U.S. DEPARTMENT OF COMMERCE
Mr. Jochum. Mr. Chairman, Senator Sarbanes, and Members of
the Committee, I am honored to appear before you today as the
nominee for Assistant Secretary of Commerce for Export Admin-
istration. I thank President Bush and Secretary Evans for plac-
ing their confidence in me with this nomination. I am humbled
when I reflect on the distance traveled between a modest
upbring-
ing in Iowa that Senator Grassley alluded to, and being asked
by
the President of the United States to serve the American people
in
this position.
I am especially proud to appear before the Committee for
which I served as a staff member. I have very fond memories and
good friendships as a result of my time spent here. And I
appreciate the support of my many friends on the Committee and
in the audience today. I thank Senator Chuck Grassley for his
very kind introduction and for supporting my nomination. I
would also note, I think he has better speech writers since I
left.
[Laughter.]
I know that the Finance Committee is busy working on a tax
bill and his willingness to take the time to introduce a former
staff member shows the kind of person he is. Senator Grassley
brought me to Washington in 1987 as an intern. And over the
years, I learned from him the value of hard work and
perseverance.
He often refers to this as a ``constancy of purpose.'' I
will take this constancy of purpose with me to the Commerce
Department if confirmed by the Senate.
I must also express my deep gratitude to the Chairman,
Senator Phil Gramm. When you work for Senator Gramm, you learn
something new every day, since he is still a college professor
at heart. But the most important lesson I learned is that as a
public servant, you have a responsibility to stand on your
principles, even if it makes people mad at you or your own
friends uncomfortable. I will continue to stand on my
principles as a public servant and trust that Senator Gramm
will gently remind me when I fail to do so.
On a final personal note, I want to thank my family in
Iowa, who could not be here today, and my wife Rita, who is
sitting behind me. Rita gives me more love and support than any
one person deserves. She is responsible for any success I
achieve in my career and I thank her for being my closest
adviser and best friend.
Mr. Chairman, as this Committee well knows, the Bureau of
Export Administration has a critical mission--protecting and,
indeed, enhancing, national security, while preserving the
right of American businesses to export their products.
I take this responsibility very seriously, as do the civil
servants I have met at BXA. They are very conscientious, hard-
working people, who place the interests of their country above
their own. It would be a privilege to work alongside them as we
carry out this important mission.
Finally, I commend the Committee on its efforts to
reauthorize the Export Administration Act. A sound legal basis
for controlling the export of dual-use items is critical to
protecting national security. A new Export Administration Act
will send a signal to the rest of the world that American
leadership to reinvigorate the multilateral export control
process is forthcoming.
I look forward to working closely with this Committee on
this important endeavor. Thank you again for holding this
hearing and considering my nomination.
Chairman Gramm. Thank you very much, Jim.
Since we have a good number of Members here, let me ask
unanimous consent that the four nominees I previously mentioned
be considered en bloc, and that we do a roll call vote, begin
that now, so that we can get the maximum number of people here
to save
everyone's time in coming back and forth. We will keep the vote
open until 3 p.m., to give people an opportunity to vote.
And so, I would like to ask unanimous consent that we
consider: Grant Aldonas, Ken Juster, Maria Cino, and Glenn
Hubbard, and their confirmation en bloc. Without objection, so
ordered.
I would like to ask the Clerk to call the roll.
The Clerk. Chairman Gramm.
Chairman Gramm. Aye.
The Clerk. Mr. Enzi.
Senator Enzi. Aye.
The Clerk. Mr. Hagel.
Senator Hagel. Aye.
The Clerk. Mr. Bunning.
Senator Bunning. Aye.
The Clerk. Mr. Sarbanes.
Senator Sarbanes. Aye.
The Clerk. Mr. Dodd.
Senator Dodd. Aye.
The Clerk. Mr. Bayh.
Senator Bayh. Aye.
The Clerk. Mr. Miller.
Senator Miller. Aye.
The Clerk. Mr. Corzine.
Senator Corzine. Aye.
The Clerk. Mr. Chairman, for the time being, the ayes are
nine.
Chairman Gramm. And we will leave the vote open until 3
p.m.
Let me first, Jim, congratulate you. I want to thank you
for your kind comments about me, I would like to simply say
that I think you are a perfect example of the excellent staff
that we have here in Congress and the remarkable work they do.
It is an amazing thing to me when I am walking out the door
to my building, and I am standing there waiting for my ride to
pick me up, I watch all these people walk out and notice how
young they are. Then I realize that the country is being run by
children.
[Laughter.]
But they do a remarkable job. I do not think people
understand the important role that our staffs play in making it
possible for us to do the job we do. It is people like you who
really make American Government work. We are very proud of you
in your new position.
I would like to ask you one question. You have taken a good
look at our bill that we reported, Reauthorizing the Export
Administration Act. Are you confident that you can use that law
to strengthen export administration and to protect national
security?
Mr. Jochum. Senator, I am very confident in that regard.
I think that the bill that you are debating in the Senate
currently actually provides additional safeguards from current
law. For instance, it involves the other agencies, to a larger
extent. It requires, the first time in statute, license
applications to be referred to DoD. It requires commodity
classifications for the first time to be referred to DoD.
It creates a statutory process by which, if agencies do not
agree on a licensing decision, it can be elevated all the way
up, even to the President, to make that determination. So there
are several things in the statute itself that provide
safeguards beyond what we have today.
And I think a critical point is also that national security
depends on having an underlying law in place. And inaction is
probably the worst-case scenario.
Again, I commend you on moving that along and look forward
to getting in place to help you do that.
Chairman Gramm. Thank you.
Mr. Robson, let me congratulate you on your appointment.
Some have complained that the President's budget actually
proposes a lower dollar expenditure for the Export-Import Bank.
Could you give us your reaction to that and your response
to the conclusion that that means a reduction in the amount of
export financing that Ex-Im can do?
Mr. Robson. Let me say first, I was not present at the
creation of the budget that was sent up. So I had no
participation in its manufacture.
As I said earlier in my opening statement, Senator, I have
kept my arm's length from the agency until the Senate has
decided to confirm me. But I do not know the answer to the
question of whether every percentage reduction in the amount of
funding proposed for the agency is equivalent to an equal
percentage reduction in the amount of business that can be
done. I simply have not had the opportunity or learned enough
to answer that.
One might presume that a 25 percent cut in the agency's
budget is going to have a burden on the amount of export
transactions it can finance. And at this point, I cannot tell
you how much that might be.
I can tell you, that by the time I have been at the agency
a while and appropriations are before the Congress, that I will
be educated on that subject and will give you my honest opinion
as to what I think the impact will be and what I think we ought
to do.
Chairman Gramm. Many people would view the Ex-Im Bank as an
export subsidy device. Would you give me your defense as to why
the American taxpayer should be subsidizing exports?
Mr. Robson. Well, let me start with an assumption with
which I hope the Members of this Committee and the Senate would
agree. And that is that exports are a good thing, that they
create economic activity and they create jobs here in the
United States.
If you look at the world today, where some 50 to 70
countries have export support mechanisms, you have three
alternatives.
First, you can unilaterally disarm and withdraw from any
kind of export support that is taxpayer-funded. Second, you can
get into an export subsidy arm's race, if you will, and match
yen for yen, franc for franc, pound for pound, Deutschemark for
Deutschemark, with American dollars every subsidy that is
offered by our foreign competitors. And the third is that you
can do something somewhere in between, which is, on the one
hand, to try to moderate the dimension of export subsidies that
are conferred by our industrial competitors, as is done under
the OECD rules of engagement. And, on the other hand, to
provide armament here at home to be able to enable our
businesses to compete.
So that is kind of where we are. Where it ought to be
level-wise, I think is a matter of legitimate debate. But I
think that, as long as the world is as it is, it strikes me as
a respectable place for taxpayer money to go.
Chairman Gramm. Let me ask just one question of Mr. Fisher.
One of the things that we debate, at least in the abstract,
is what we are going to do with the surplus--from Social
Security and Medicare--the degree that we do not use Medicare
money to pay for plus the potential of the on-budget surplus.
If the projections we are looking at continue, at some point in
6 or 7 years, we will have a situation where we literally will
be buying debt back quicker than it is maturing.
I understand that about a third of our debt is owned by
foreign central banks and foreign governments.
At that point, we obviously would face an important
decision, and that is, should we pay a premium to buy that debt
back, or should we try to deal with that problem, or that
blessing, depending on your perspective, in another way?
Have you given that any thought? What would be your initial
thinking be?
Mr. Fisher. Thank you, Senator.
I have given that topic some thought, but from the
perspective of the Federal Reserve. As I believe you have heard
from Chairman Greenspan, the Federal Reserve has begun
consideration of the challenge that the Federal Reserve will
face in the need to accumulate private assets if the stock of
Treasury securities is insufficient for managing the balance
sheet of the Federal Reserve.
I thought about that problem a great deal, but from the
relatively narrow perspective of managing the central bank's
balance sheet and its monetary operations. I have some thoughts
on that. It is a very broad topic and I want to be clear, I
have not thought about all the aspects of it.
Chairman Gramm. Well, now, your duty is to manage the
public debt, right?
Mr. Fisher. Absolutely, sir.
Chairman Gramm. You are not going to turn that over to the
Federal Reserve.
Mr. Fisher. No, we are not.
Chairman Gramm. All right.
Mr. Fisher. Not at all. The challenge will be to focus on
maintaining the cheapest cost of financing in the long run of
the Federal Government.
Clearly, there will come a point, in all likelihood, where
purchasing debt out of the market will be more expensive, maybe
more expensive than our financing costs--that is, of new
issues--there are various ways of measuring that, continued
purchases would not make economic sense. You would be paying a
premium over your cost of borrowing, however, the general fund
will be accumulating cash. And at present, there is no
mechanism other than the cash management vehicles that the
Treasury has in the TT&L system to invest that cash.
I have worked on the Federal Reserve's views on this and
have worked cooperatively with the Treasury in the last
Administration on the challenge of how and when the Government
might accumulate assets.
I share the perspective that Chairman Greenspan has
expressed here of a reluctance for the Government to be
involved directly in accumulation of assets.
I think that this issue over the next 5 years is going to
be looked at. I think it is the President's priority. I know
Secretary O'Neill has said it is his priority to look at the
Social Security system.
And I believe the principles that President Bush has
announced for the reform of the Social Security system that
will guide the commission that was just formed are exactly the
right ones.
That still leaves a lot of work to do, to figure out how to
fund politically and financially an acceptable way the Social
Security system and Medicare system, as well as manage the
Government's debt. I have not thought through all of the
attributes of that, but the objective will be the cheapest
financing for the Federal Government over the long run, while
trying to maintain liquid markets in the Government's debt as
long as those exist.
Chairman Gramm. Thank you.
Senator Sarbanes.
STATEMENT OF SENATOR PAUL S. SARBANES
Senator Sarbanes. Well, thank you very much, Mr. Chairman.
First of all, Mr. Chairman, I want to commend you for
expeditiously scheduling this confirmation hearing today, as
well as the mark-up that we are currently engaged in with
respect to the four nominees on whom we held a hearing last
week. And we have also scheduled now the four HUD nominees for
a hearing on Tuesday.
I understand, with the exception of Roger Ferguson, that,
in effect, takes care of everyone who is now appropriately
before the Committee in terms of the completion of their
papers.
As I indicated to you at the outset, and I think on behalf
of my colleagues as well, we want to be helpful and cooperative
in trying to help the new Administration get its people into
place.
Chairman Gramm. We appreciate that.
Senator Sarbanes. We are moving right along here. In fact,
I do not know when you hope to take the four we are reporting
out right now up on the floor, but, presumably, that could be
done in the very near future.
In any event, I would anticipate we get everybody in place
before we break for the Memorial Day recess, which I know would
be very helpful to the Secretaries. I also want to say that I
regard these three nominees as very highly qualified for their
positions and I look forward to voting to confirm them.
I want to say that I think both Secretary Evans, Secretary
Martinez--of course, Mr. Robson comes outside of a departmental
structure. But I am willing to give the Administration a nod on
the quality of the people they have sent up as far as they have
come before this Committee.
It is important to put good people in these positions.
These are important positions with extensive responsibilities.
I am sure if the Administration falls off that standard, we
will have something to say about it. But thus far, it has been
a good standard and I have been pleased to be supportive.
I am reminded of a story.
I went to an event once and received an award. My mother
was present. They asked my mother to make a few comments. And
in the course of it, she says--he has been a good boy--so far.
[Laughter.]
Chairman Gramm. Well, that is reserving judgment.
[Laughter.]
I was thinking the same thing as you were talking.
[Laughter.]
Senator Sarbanes. Let me just say a word or two about the
nominees.
Mr. Fisher is extraordinarily well qualified I think to
take on these debt management responsibilities. It is a very
complex and arcane area of responsibility. He has had this
extended experience at the Federal Reserve Bank of New York. We
are pleased to see him moving into the Government.
I actually had the privilege of knowing his father, who is
a very distinguished professor of law at Harvard Law School. We
are delighted to see the family tradition of public service
continue here.
You have already talked about Jim Jochum. But I want to
again express appreciation to him for the extraordinarily
skillful work
he did when he was here with the Committee on working on the
Export Administration Act. He really helped to put together
that
consensus which resulted in the Committee overwhelmingly mov-
ing the bill in the last Congress and, of course, in this
Congress,
we worked off of the product of the last Congress in order to
move
it forward.
We are now out there on the floor struggling with this
situation. It is somewhat frustrating because a careful
analysis of the bill, I think, would show not only that it does
not do some of the things its critics are saying it does, but,
in fact, it meets more successfully some of these objections
that are being made than the existing
regime does.
Hopefully, we will be able to somehow get that across and
be able to move it along. I know the Chairman is very
interested in doing that.
Mr. Robson, we welcome you back to Government service. I
think this is the third time, you have been before this Senate.
Mr. Robson. Fifth.
Senator Sarbanes. Fifth, for confirmation?
Mr. Robson. Unfortunately.
Chairman Gramm. The man has trouble holding a job.
[Laughter.]
Senator Sarbanes. I apologize. I did not realize. Yes, I
guess that is true we wish you well. This is an important
responsibility.
The Ex-Im Bank, as you know, has had bipartisan support in
the Congress. John McCumber, of course, who was the present
Chairman of the Ex-Im Bank under former President Bush, was an
extremely able and effective head of the Ex-Im Bank. I think as
long as other countries engage in these practices, we have to
have some counter to that.
In a perfect world, you can envision a situation in which
no one provided any support and it was all left completely to
the private marketplace.
But the real world does not operate that way. We have tried
hard to develop rules of the road through the OECD. But I think
even those limited rules that we have been able to develop came
about only as a consequence of the fact that the United States
was prepared if we did not get the limited rules to provide
strong backing to our exporters, which would put them in a
competitive position.
There are now all kinds of other ways that people are
trying to develop to get around those restrictions, and I think
we have to be very vigilant and supportive of our industry in
that regard. The Tied Aid War Chest is an important weapon in
that regard.
We hear disturbing reports of people in OMB who want to
curtail or limit this and, of course, we have this reduction in
funding for the Ex-Im which we will have to come to grips with
here in the Congress. You made a strong opening statement about
the Export-Import Bank in terms of its professionalism and its
objectivity and the responsible way in which it is carrying out
its charge.
I really have no questions.
Mr. Robson, I would just say to you, maybe I can draw you
out a bit. I think, given these pressures that I perceive from
other sources within the Administration, the Ex-Im Bank will
require an advocate and a leader within the Administration and
that is a role I think that is necessary for you to assume. How
do you warm up to that task?
Mr. Robson. Well, you were kind enough when we met
privately, Senator Sarbanes, to describe my situation as being
on the spot. This is kind of a continuation of that discussion.
Let me just say this. This will be the fifth agency or
department that I have had a leadership role in. I have gone to
each one pretty much the same way, which is to do the best job
I can in what I think to be in the interest of this country. I
will do so at the Ex-Im Bank. As I said in my opening
statement, I am very pleased to be there. It has a long and
honorable tradition. I expect to be a good leader and one who
is looking to do everything that is in the national interest
insofar as I can possibly perceive it. I expect, as I have been
I think at other places that I have been, to be a pretty
forceful leader as well.
Senator Sarbanes. Thank you, Mr. Chairman.
Chairman Gramm. Thank you, Senator Sarbanes.
Senator Bunning.
STATEMENT OF SENATOR JIM BUNNING
Senator Bunning. Mr. Chairman, I have an opening statement
that I would like to ask unanimous consent that it be entered
into the record.
Chairman Gramm. It will be entered into the record as if
read.
Senator Bunning. Thank you very much.
Mr. Jochum, I welcome you back to the Committee on the
other side of the table.
What can the Department of Commerce do to help ensure the
passage of the important legislation that we have before us,
Export Administration Act? In other words, how can you advocate
from your side to make sure that we get this bill that this
Committee almost unanimously passed out, done?
I know we have Foreign Relations. We have Armed Services.
We have others on the floor of the Senate who are objecting in
some way or another to the passage of this bill.
As Senator Sarbanes said, most of us here think that there
are adequate protections in the bill. I happen to think that
the fines should be increased, but swallowed hard when they
were reduced and not to add an amendment on the floor, hoping
that that would help ensure the passage. It has not.
What can Commerce do to help us?
Mr. Jochum. Thank you, Senator. That is a good question. I
would note that the President once again reiterated his strong
support for the bill.
I think maybe one factor is just having the people at my
level in place to carry out the President's agenda will be very
helpful. One thing that the Commerce Department can do is help
address some of the misperceptions about the current system.
We are the lead agency in processing the applications and
so we have all the information. We have a very good story to
tell that we have protected national security, that this bill
will give us additional tools to protect national security. And
I think we need to get that story out in a more forceful way,
at probably a higher level than we have done here today.
Senator Bunning. The present set of circumstances as far as
a slap on the wrist if you are found in violation of the
current law, looks like it is thrown in as the cost of doing
business rather than a real deterrent.
And I am sure that Commerce can do something to advance
that and say that there is actual penalties involved now. I
just want to make sure that we get this thing done and get it
done before we get out of here in September.
Mr. Jochum. As we discussed yesterday, Senator, I agree
that the current law, and especially if we have to default to
IEPA, the penalties are really the cost of doing business, as
people have testified here, as you considered the bill the last
2 years.
The heightened penalty provisions are something that we are
very supportive of. And actually, there is also some additional
enforcement activities that will give the Commerce Department
the ability to stop transshipments and other things that occur
that are contrary to the Act.
Senator Bunning. Mr. Fisher, I would like to ask you about
the economy and the stimulant that they are talking about as
far as fiscal policy. How would you propose to stimulate the
economy, not only in monetary policy, but also in fiscal
policy, since you are going to be in charge of reducing our
debts and making sure that we have a debt-free economy and
continue to have one?
Mr. Fisher. Senator, that is a very broad question which I
want to be clear, takes us well beyond----
Senator Bunning. I gave you a large target to shoot.
[Laughter.]
Mr. Fisher. It takes me well beyond my areas of competence.
Senator Sarbanes. Above your pay level, I think is the way
that it is put.
[Laughter.]
Senator Bunning. We would just like to hear your ideas. You
do not have to have them all, just a few.
Mr. Fisher. I am eager to support the President's economic
program and the tax provisions before the Congress now. I am
not aware of the current state of play on the considerations in
Congress in current year fiscal stimulus concepts.
I know, I have been working as a consultant to the
Treasury, giving the Secretary some advice. I am aware that the
Treasury staff has been working to find a way to make sure that
if Congress choose some immediate stimulus in the form of tax
rebates, that that can be effectively implemented.
The sphere of debt management I believe should be thought
of as the tail and not the dog. I think Congress and the
Administration should work on the appropriate mix of fiscal
policy, spending and tax cuts. And then it is the duty of the
debt manager to finance the Government as efficiently as
possible.
The current projections we are all working with is that the
debt will be paid down over the coming 10 years. After that,
longer-term forecasts would suggest a rising level of debt.
I think the challenge for debt management is to deal with
that volatility. I would see myself as trying to do that and
engineer the cheapest cost of financing for the Government over
time. And I wouldn't think it the role of the debt manager to
be dictating the course of fiscal policy.
Senator Bunning. Thank you, Mr. Chairman.
Chairman Gramm. Thank you, Senator Bunning.
Without objection, I would like to put Senator Allard's
statement in the record as if given. He had to go preside on
the floor.
Senator Dodd.
STATEMENT OF SENATOR CHRISTOPHER J. DODD
Senator Dodd. Mr. Chairman, why don't we just do that for
all Members. I presume they may have statements that they want
to put into the record.
Chairman Gramm. We will do that. Anyone who has a
statement, we will be happy to put it in the record.
Senator Dodd. Again, my congratulations to all three of you
here. Just a couple of things. Rather than questions, and I
think you all indicated pretty much getting into the details of
these things, we will be dealing with you once you assume these
responsibilities, as Senator Sarbanes has said, and Senator
Gramm, the Chairman, has said, and I think all of us feel here,
that you are all eminently qualified for the positions for
which you have been nominated. And as I mentioned at the outset
in my remarks, I am particularly grateful to all three of you
that you are willing to do it. We are in a day and age when it
is getting harder and harder to convince competent, good people
to subject themselves to the rigors of public life.
It is one thing when those of us get out and run for public
office who must accept that these things are going to come. We
ask people to serve in positions such as you have been chosen
to and it can be difficult.
I am grateful to all three of you. But I want to take
advantage of your presence here just to share some thoughts.
Again, I have had a chance to talk to Mr. Robson a little bit
about some of these.
In the case of you, Mr. Fisher, your immediate predecessor
did a very fine job. He was highly thought of, I think, by both
sides of the aisle here and played a very important role of
policymaking decisions regarding the portfolio which you are
about to assume.
And this Committee, actually, with his help and others, we
had a good Congress, with the repealing of Glass-Stegall, was a
major achievement. I was pleased to work very closely with
Senator Gramm on that and other Members of the Committee, and
the House. It took us years working at that, and we think we
passed a pretty good bill.
The Modernization of Commodities Markets, Bill Rayner did a
fabulous job. I know Members of the Committee--not one of the
best known people in Washington, but a highly competent
individual who just did a terrific job in taking a very
difficult set of constituencies and wove together a proposal
that many of us thought was never going to be possible to
achieve. Again, people out of your office were helpful.
Certainly, the reducing of paying down nearly $400 billion
in debt over the last few years has been, I think, by all
accounts, a significant, extremely positive achievement, to the
point where the Gross National Product now, debt comprises
about 34 percent, debt does, of the GDP, whereas it was about
50 percent.
And while I certainly appreciate your response to the
Chairman's question about the Federal Government accumulating
assets, we are not there yet. We are a long way from that.
We ought to stay on the track, in my view, of continuing to
pay down as much of this debt as we can without getting to the
situation of accumulating resources. My hope would be that our
budget considerations would have that as a major part of it.
I come from the most affluent State in the country and,
arguably, a State that on a per-capita basis would be a greater
beneficiary of the President's proposed tax cut, than any other
State in the country.
And I can tell you, I can count almost on one hand the
number of people who have advocated strongly for the size of
the tax cut. I can tell you I get voluminous mail and e-mails
from people who want to see us continue to pay down on the
debt, who would like a tax cut as well, but believe we ought to
have a balanced approach. So we look forward to working with
you on that.
In the case of Mr. Robson, I had a chance to chat with you
yesterday, and I appreciate your response to the budget
questions. But there are those of us up here who feel that the
25 percent reduction in the Ex-Im financing vehicle is large.
And I am not asking you to take a position on this. I am just
going to tell you were I stand on it. I may be alone, but I
suspect there may be others who want to revisit this.
I am very worried that at a time when we have the President
arguing for fast-track legislation, expanding export markets,
at a time when we are now encouraging more mid-size and smaller
businesses in America to become players in the international
marketplace, not just the large corporations, but expanding
those opportunities to smaller and mid-sized businesses, this
is an opportunity, as Senator Sarbanes has said--it is a highly
competitive world we are in. But I want to make sure that my
businesses in Connecticut and others around the country are
going to have a chance to compete out there.
This is an agency that has returned dollars to the Federal
Government. It has been a money-maker for the Federal
Government. So while there is obviously a budget outlay
associated with export financing to the Ex-Im Bank, it has been
a net gainer for the country. And in this 21st Century, to the
extent that we can expand America's presence in emerging
markets, it has in everyone's advantage, in my view.
Obviously, there can be, as you rightly pointed out to me
yesterday, what that number is that allows you to continue to
do that is subject to some significant debate. And I accept
that and look forward to that discussion and moving forward.
Finally, I just would raise with you, there has been some
suggestion about consolidation. And again, you and I talked
about this, about taking OPIC and Ex-Im Bank and others and
somehow, just taking all of these and wrapping it into one
nice, tidy agency.
Again, I have strong and serious reservations about that,
since there are distinct roles being played. I think there
ought to be better communication, in my view, between the
various agencies that have a portfolio charged with expanding
export opportunities.
And others may want to express themselves on this. But I
have some strong reservations about the idea of having some
sort of neat bureaucratic chart that disregards the distinct
and unique missions performed by these agencies, instead of
lumping them all together into one particular super-agency, as
some have suggested.
Again, I do not expect you here today to jump into this
debate, but I thought I would at least take advantage of your
presence here to express my concerns about that point and my
concerns about the budget. But, again, I welcome your
nomination and look forward to working with you.
Mr. Robson. Thank you, Senator Dodd.
Senator Dodd. Jim, we just welcome you and, again, as I
said earlier, we are very pleased with your nomination. We know
you will be in touch with us.
Mr. Jochum. I will.
[Laughter.]
Senator Dodd. You know the numbers up here. So we will look
forward to working with you.
Mr. Jochum. Thank you.
Mr. Robson. Mr. Chairman.
Senator Dodd. You can respond to that.
Mr. Robson. If Ex-Im Bank is indeed a profit center, it
will be a first for me in working in the Federal Government.
[Laughter.]
Senator Dodd. Well, it has been.
Mr. Robson. I am aware of that.
Chairman Gramm. Senator Dodd, we will certainly get an
opportunity to debate these issues because the Ex-Im Bank
authorization bill expires this year and we will be looking at
reauthorization.
I think it is a very timely thing that it does and I look
forward to working with you and Senator Sarbanes and everybody
on the Committee to reauthorize it.
Senator Hagel.
STATEMENT OF SENATOR CHUCK HAGEL
Senator Hagel. Mr. Chairman, thank you. I add my greetings
and congratulations to each of you. And as Senator Dodd has
said, we are grateful that you have each come forward to offer
yourselves for these positions that have some rather
significant responsibility, at a time when I believe the
competitiveness of the world is at a state never before seen in
the history of man. And that means that the decisions that are
made in the next 4 years, during your watch, will be very
critical as to where America is placed in this competitive
cycle.
We are so large and powerful today, that it is difficult
for any of us to understand what is going on out there. And the
rate of change in the world is so phenomenal in the areas that
you have responsibility for, that we cannot chart it. We cannot
calibrate it.
I think your charge, as well as ours, is to make certain
that we do not regulate and interfere with our market
competitiveness to the point where in fact we inhibit our
industries and businesses and services from competing in the
world. That will have devastating consequences for our future.
I believe you all know that, understand that. You have been
practitioners in this area. And for all those reasons, I
believe you are each eminently suited for your positions.
As Senator Dodd and my colleagues have said, we are not
here this morning to get into defined programming and thoughts
on the specifics of those. But I would be interested in getting
some general comments from each of you, starting with you, Mr.
Robson.
As you assume your responsibilities and prepare to launch,
you obviously have taken some measure of the agency that you
will head. You bring some practical experience to that, as you
were over at Treasury and worked very closely with Ex-Im.
In your view of the world today, without having the benefit
of all the specifics and the knowledge of not being on the job
yet, where are some of the more treacherous curves ahead for
you and your agency?
Mr. Robson. Well, I would like to reference again the
statement that I have kept my arm's length relationship with
the agency prior to, hopefully, the Senate acting on my
confirmation. So I am not as well schooled as I might be.
I think that, obviously, one issue is the question of
whether--and I raise this in response to the Chairman's
question--where do we sit in the global, competitive situation
in respect of what we do for our exporters vis-a-vis their
competitors?
And as I said, I think that is a legitimate area for
debate. You have choices to make there that are budgetary and
that are policy in respect of what the taxpayers ought to do in
that arena.
I think that is clearly an issue that is legitimately
subject to ongoing debate. And as almost everyone on the panel
has said, it will surface in connection with our budget for
2002. I hope to be able to look you in the eye and tell you
what I think and tell you what I think the facts are.
There is, as kind of a peripheral issue to that, the
question of whether there are other mechanisms that have sprung
up in other countries, the so-called market window agencies
that are performing some of the activities that were once
thought to be forbidden under the OECD strictures.
And that is a matter which I expect I will be looking into
and soon get some facts. It is a slippery path out there when
you are dealing with multiple, millions of transactions. To get
really good definition is hard to do. But I think it is worth
trying.
Senator Hagel. As you know, Mr. Robson, the Subcommittee
that I Chair will hold a hearing next week on some of these
issues and we intend to pursue market windows and tied
financing and untied financing and some of the areas that you
are going to have to jump right into that in fact are very much
entangled around the axle of our competitiveness and directly
relates to your mission over there. I appreciate your comments
and look forward to working with you.
Mr. Jochum, you have seen this close up. And I would be
very interested in your general comments and from the
perspective of what you will be assuming over at Commerce as to
how we can maximize your position in dealing with this larger
issue of competitiveness in the world.
Mr. Jochum. Well, your statement hit the nail right on the
head. The former Under Secretary used to call BXA the speedbump
on
the information superhighway. And it could turn into more than
a speedbump if we are not careful. As you said, the high-tech
in-
dustry is adapting to globalization. Indeed, they are leading
globalization.
We need authorities that meet the reality of today's
marketplace. And currently, we do not have that. Our underlying
statute, as you well know, is based on a cold war mentality,
when we could control things and we had ally support for not
exporting items to the former Soviet Union. And the world has
changed.
The other significant change, when you talk to people over
at the Pentagon, is they now purchase their items from the
commercial sector, where it used to flow from the defense
sector to the commercial sector. This area of the world has
changed dramatically and I think the most important thing that
we can do to work together is give us the tools so we can adapt
to that change.
Senator Hagel. I think that you will, certainly on this
Committee, find a willing audience and very receptive audience
to deal with you on these things, evidenced by the Chairman's
bill that we passed out of here that you helped construct, 19
to 1, here a couple of weeks ago, and with Senator Sarbanes and
others leading the effort on this. That is a good, very solid
beginning point here.
My time is up and I appreciate the three of you.
Thank you, Mr. Chairman.
Mr. Jochum. Thank you.
Mr. Robson. Thank you.
Mr. Fisher. Thank you.
Chairman Gramm. Thank you, Senator Hagel.
If there are no further questions, let me thank each of
you. I want to especially thank Mr. Fisher. He will be voted on
in the Finance Committee. But, actually, most of your
jurisdiction is under the jurisdiction of this Committee.
We look forward to working with you. We take what the
Treasury does and the whole area of domestic finance, bank
regulation, very seriously. And we will be reauthorizing in
some form the Ex-Im Bank this year. I am sure that we will
probably see you again, Mr. Robson, soon.
Jim, we look forward to working with you. We are going to
pass our bill. We would like to do it the easy way, but if we
have to do it the hard way, we can do that.
In any case, congratulations to each of you and thank you
for being willing to serve our great country.
Mr. Robson. May I just say one thing, Mr. Chairman, by way
of nostalgia? Looking at you and Senator Sarbanes, the first
time I came before the Banking Committee when I was Deputy
Secretary of the Treasury was in connection with the savings
and loan clean-up. This is a lot better.
[Laughter.]
Chairman Gramm. It certainly is a much happier time.
Now would the Clerk call the roll for those Members who
were not able to vote previously for our four nominees en bloc:
Grant Aldonas, Ken Juster, Maria Cino, and Glenn Hubbard?
The Clerk. Mr. Shelby.
Chairman Gramm. Aye, by proxy.
The Clerk. Mr. Bennett.
Senator Bennett. Aye.
The Clerk. Mr. Santorum.
Chairman Gramm. Aye, by proxy.
The Clerk. Mr. Crapo.
Senator Crapo. Aye.
The Clerk. Mr. Ensign.
Chairman Gramm. Aye, by proxy.
The Clerk. Mr. Johnson.
Senator Sarbanes. Aye, by proxy.
The Clerk. Mr. Reed.
Senator Reed. Aye.
The Clerk. Mr. Schumer.
Senator Sarbanes. Aye, by proxy.
The Clerk. Mr. Carper.
Senator Carper. Aye.
The Clerk. Ms. Stabenow.
Senator Stabenow. Aye.
The Clerk. The vote is 20 ayes, Mr. Chairman.
Chairman Gramm. Thank you all. We stand adjourned.
[Whereupon, the hearing was adjourned.]
[Prepared statements, biographical sketches of the
nominees, and response to written questions follow:]
PREPARED STATEMENT OF SENATOR JIM BUNNING
Mr. Chairman, I would like to thank all of our nominees for
testifying today and I would like to thank you for holding this hearing
and this markup in such an expeditious fashion. I think President Bush
has once again demonstrated that he will continue to ask outstanding
people to serve in his Administration. I hope that the Committee will
report the nominations we are going to vote on today and the
nominations we are going to vote on next Tuesday to the Senate floor.
I worked with Grant Aldonas when he was on the staff of the Senate
Finance Committee under former Chairman Bill Roth. We had a few sticky
tariff issues that Mr. Aldonas helped us navigate through. Grant was
very professional and helpful.
I also think Ken Juster will be an outstanding official at the
Department of Commerce. Secretary Evans will be greatly helped by Ken.
I have met with Ken, specifically about the Export Administration Act,
and let him know of my strong support for this legislation and to get
his and the Department of Commerce's commitment to passing Export
Administration Act legislation.
I feel Glenn Hubbard will be an outstanding addition to the
President's Council of Economic Advisers. I discussed at great length
with Glenn my concerns that we are slipping toward a recession. We
agreed that we must pass the President's tax plan, and have strong
monetary policy to get us out of this economic slump.
Finally, I would like to talk about Maria Cino. I have known Ms.
Cino for many years. I worked with her often when both of us worked in
the House. I have always found her to be extremely bright, and
extremely capable. I think she will make a fine addition to the
Department of Commerce.
We also will have hearings on Jim Jochum, Peter Fisher and John
Robson. As we all know, Jim Jochum served on this Committee as a
counsel. I think Jim is an outstanding candidate and he will be a real
asset to Secretary Evans.
I was unable to schedule a meeting with Peter Fisher, but I do
appreciate his making himself available to myself and the Committee. I
believe his experience at the Federal Reserve Bank of New York will be
invaluable to Mr. Fisher at Treasury.
I have not had the opportunity to meet with Mr. Robson. However, he
has a very impressive resume and has served his country with
distinction. We are fortunate to have someone of his caliber at the Ex-
Im Bank. Once again, I urge all of my colleagues to support these
worthy nominees.
Thank you, Mr. Chairman.
----------
PREPARED STATEMENT OF SENATOR WAYNE ALLARD
First, I would like to thank Chairman Gramm for holding this
hearing. He has made it very clear that he intends to move expediently
on the President's nominations, and I appreciate his effort.
Today's lineup of nominees gives a good picture of the breadth of
the Committee's jurisdiction, today we will hear from individuals
nominated to Commerce, Treasury, and the Export-Import Bank. They will
all play an integral role in the Banking Committee's work this
Congress, and I look forward to working with them.
I would like to offer a very special welcome to Jim, a former
Banking Committee staffer. I know that you put a lot of work in on the
Export Administration Act,
and I am pleased that you will have the opportunity to continue your
work over
at Commerce.
Again, I appreciate the opportunity to raise these issues. I am
looking forward to discussing these matters in more detail with the
nominees, and I look forward to hearing their testimony.
----------
PREPARED STATEMENT OF JOHN E. ROBSON
President and Chairman-Designate of the Export-Import Bank
May 10, 2001
Mr. Chairman, Members of the Committee, I am very pleased to come
before you as you consider my nomination to be President and Chairman
of the United States Export-Import Bank. With your indulgence, I shall
omit reciting my biographical background, which is submitted with this
statement.
If the Senate acts favorably on my nomination, it will be my fifth
confirmation. Some might say, it is about time this old warrior hung
'em up, but I relish this
new challenge because I have never found a canvas as big to paint on as
public
service offers and I am particularly excited about the prospect of
leading the Export-
Import Bank.
Export-Import Bank is a venerable independent agency with a
reputation for professionalism and objectivity. It has enjoyed strong
bipartisan Congressional support since its establishment under
President Franklin Roosevelt and it performs important roles in
fostering American exports and thereby stimulating economic activity
and job creation here at home. It accomplishes this by helping to level
the playing field for U.S. exporters in an increasingly challenging and
complex global marketplace where they contend with foreign competitors
who may be very generously assisted by their sovereigns, and by
assuming the financier' responsibility and risk where commercial
institutions fear to tread. Yet over the years, Ex-Im has handled the
taxpayers' money quite responsibly. So Ex-Im has carried out its
mission well.
But I would be disappointed if this Committee and indeed the entire
Senate did not expect of me and every nominee it approved that the
person would go to the job alert to opportunities to do things better
and maybe differently. Without at this point having specific knowledge
of what those opportunities might be at the Export-Import Bank, I
welcome ideas from Congress, the exporting community and anyone else. A
couple of concluding points.
First, in deference to the Senate confirmation process, I have
always maintained a respectful distance from agencies for which I have
been nominated until confirmed. Thus you may find me deficient in
specific knowledge or opinion on events and policies in which you are
interested, a deficiency I expect to remedy with sufficient time at the
Bank.
Second, you have my commitment to deal openly and straightforwardly
with this Committee and Congress. I solicit your interest, your
questions and your informed comment. And I will try my best to insure
that, even where we disagree, we maintain a civil and constructive
relationship.
Mr. Chairman, Members of the Committee, I respectfully ask for your
favorable consideration of my nomination and will be pleased to respond
to your questions.
PREPARED STATEMENT OF PETER R. FISHER
Under Secretary-Designate for Domestic Finance
U.S. Department of the Treasury
May 10, 2001
Chairman Gramm, Ranking Member Sarbanes, and Members of the
Committee on Banking, Housing and Urban Affairs, thank you for the
opportunity to appear before your Committee today. I am honored that
President Bush has nominated me to serve as Under Secretary of the
Treasury for Domestic Finance and, if confirmed, to have the
opportunity to work with Secretary O'Neill, the Treasury staff, and
others in the Administration to advance the President's economic
agenda.
If confirmed, I also look forward to working closely with this
Committee, the Senate, and with Members of the House of Representatives
on the broad range of issues addressed by the Office of Domestic
Finance.
The strength and resilience of our Nation's system of financial
intermediation is itself a precious asset. In addition to serving as an
adviser to Secretary O'Neill on debt management and fiscal policy
issues and on capital market and financial institution issues, I
especially hope to have the opportunity to work with this Committee to
improve upon the efficiency with which our financial system converts
the savings of the American people into productive investment.
My 15 years of experience with the Federal Reserve Bank of New York
has given me the opportunity to learn firsthand about the forces
shaping the increasingly global banking and capital markets. As manager
of the Federal Reserve's monetary operations since 1995, I have been
afforded the unique vantage point of active participation in financial
markets from a position of public responsibility. In this capacity I
have worked with members of the Board of Governors and the Reserve Bank
Presidents in the formulation and implementation of monetary policy. I
have worked with senior Treasury officials on debt management and
capital market issues and in the implementation of exchange rate
policy. In both of these capacities, I have had the opportunity to
learn from the experience of central bankers and finance ministry
officials from around the world.
Mr. Chairman, thank you again for the opportunity to appear before
the Committee. I hope this will be the beginning of a strong working
relationship. I would also like to thank Secretary O'Neill for the
confidence he has shown in me by supporting me for this job. I would be
pleased to answer any questions that you and other Members of the
Committee may have.
PREPARED STATEMENT OF JAMES J. JOCHUM
Assistant Secretary-Designate for Export Administration
U.S. Department of Commerce
May 10, 2001
Chairman Gramm, Senator Sarbanes, Members of the Committee: I am
honored to appear before you today as the nominee for Assistant
Secretary of Commerce for Export Administration. I thank President Bush
and Secretary Evans for placing their confidence in me with this
nomination. I am humbled when I reflect on the distance traveled
between a modest upbringing in Iowa and being asked by the President of
the United States to serve the American people in this position.
I am especially proud to appear before the Committee for which I
served as a staff member. I have very fond memories and good
friendships as a result of my time spent here. And I appreciate the
support of my many friends on the Committee and in the audience today.
I thank Senator Chuck Grassley for introducing me and supporting my
nomination. I am certain that the Chairman of the Finance Committee has
more important matters to attend to, and his willingness to take the
time to introduce a former staff member shows the kind of person he is.
Senator Grassley brought me to Washington, and from him I learned the
value of hard work and perseverance. He often refers to this as a
``constancy of purpose.'' I will take this constancy of purpose with me
to the Department of Commerce, if confirmed by the Senate.
I must also express my deep gratitude to the Chairman, Senator Phil
Gramm. When you work for Senator Gramm you learn something new every
day, since he is still a college professor at heart. But the most
important lesson I learned is that as a public servant you have a
responsibility to stand on your principles. Even if it makes people mad
at you, or your own friends uncomfortable. I will continue to stand on
my principles, as a public servant, and trust that Senator Gramm will
gently remind me when I fail to do so.
On a final personal note, I want to thank my family in Iowa who
could not be here today and my wife, Rita, who is in the audience. Rita
gives me more love and support than any one person deserves. She is
responsible for any success I achieve in my career and I thank her for
being my closest adviser and best friend.
Mr. Chairman, as this Committee well knows the Bureau of Export
Administration (BXA) has a critical mission: protecting, and indeed
enhancing, national security while preserving the right of American
businesses to export their products. I take this responsibility very
seriously, as do the civil servants I have met at BXA. They are
conscientious, hardworking people who place the interests of their
country above their own. It will be a privilege to work along side of
them as we carry out this important mission.
Finally, I commend the Committee on its efforts to reauthorize the
Export Administration Act (EAA). A sound, legal basis for controlling
the export of dual-use items is critical to protecting national
security. A new EAA will send a signal to the rest of the world that
American leadership to reinvigorate the multilateral export control
process is forthcoming. I look forward to working closely with the
Committee in this important endeavor. Thank you again for holding this
hearing and considering my nomination.
RESPONSE TO WRITTEN QUESTION OF SENATOR MILLER FROM JOHN E.
ROBSON
Q.1. How do you respond to your constituents who are concerned
about the 25 percent cut in Ex-Im Bank funding?
A.1. First, for one thing they should understand that the
fiscal year 2002 budget proposal for Ex-Im Bank was sent
forward before President Bush named his Ex-Im Bank Chairman, so
there was no participation by the Bush-appointed head of the
agency in the budget proposals.
Second, there have been many complaints from the exporting
community and Members of Congress regarding the
Administration's budget proposal. There is pressure to raise
the budget level.
Third, the new Ex-Im Chairman (who is not yet confirmed by
the Senate) has stated that he will examine the actual impact
of
the proposed budget cut on the level of exports and other
activity
it would allow Ex-Im Bank to support and will be in a position
to share that information and deliberate the matter with
Congress
as the appropriations process goes forward. It is here where
the
final decisions as to what Ex-Im Bank's budget for fiscal year
2002
will be.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SANTORUM FROM JOHN E.
ROBSON
In recent years, the U.S. steel industry has been
struggling to compete against dumped and subsidized foreign
steel. The industry has filed and won trade case after trade
case. Last July, the Department of Commerce issued a report to
the President, Global Steel Trade, Structural Problems and
Future Solutions, which confirmed that there is a global
overcapacity for steel production. The report noted that this
overcapacity is one of the root causes of the market distorting
conditions that gave rise to the steel crisis.
Despite these dismal conditions for the steel industry, on
December 14, the Ex-Im Board of Directors approved an $18
million loan guarantee for U.S. products that would be used to
modernize a Chinese steel mill. Specifically, Ex-Im voted to
support the export sales of U.S. software, control systems, and
main drive power supplies to the Benxi (Ben Chee) Iron and
Steel Co. hot strip steel mill in China. The items supported by
Ex-Im financing are manufactured by: General Electric in Salem,
VA; Carlen Controls in Roanoke, VA; and CIC Co. in Glenshaw,
PA.
Ex-Im has offered several justifications for its decision.
First, Ex-Im's mission is to promote U.S. exports. Second, if
the U.S. companies did not receive Ex-Im loan guarantees,
European companies were ready to supply the necessary equipment
to Benxi. Third,
Ex-Im's economic impact analysis determined it was unlikely
that
the increased production from the Benxi upgrade project would
displace U.S. production--primarily because projected increases
in
demand for hot rolled steel in China could absorb the
additional
production from the project. However, due to sharp criticism of
this
decision, Ex-Im agreed to review its economic impact policy and
to solicit views from interested parties as to how the policy
may
be changed.
Q.1. What changes, if any, do you feel should be made to Ex-
Im's economic impact analysis?
A.1. Of course I was not at Ex-Im Bank when this decision was
made and I have not examined the record of the decision. Thus I
cannot say whether the economic impact analysis in this
instance brought to bear the appropriate expert analytical
resources on the issues presented. So it is difficult for me to
say whether this case suggests that broad permanent changes in
the Bank's economic analysis methodology or process are
required or whether this was a single instance where the
economic analysis was legitimately amenable to differing
interpretations.
My goal will be to insure that, in carrying out the Ex-Im
Bank's statutory mandate to consider economic impact, the
proper expert resources are brought to bear on the case,
including consultation with experts outside the Bank. The
objective must be to do these analyses thoroughly and
objectively in all cases. Should I come to the conclusion that
changes in the Bank's economic impact analysis methodology or
process are required in order to meet that objective, I shall
undertake to see that they are made.
Q.2. Do you feel that Ex-Im's current economic impact analysis
adequately takes into account how struggling domestic
industries are affected by the loan guarantees?
A.2. It would seem to me that such considerations would and
should be part of an economic impact analysis made by the Bank
in connection with a loan or loan guarantee. I do not have
knowledge as to what weight this particular factor is given in
making an economic analysis or credit decision. I will,
however, look into that issue after taking office and would be
pleased to discuss it with you thereafter.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR GRAMM FROM PETER R.
FISHER
Q.1. What is your view of cost and benefit analyses in the
context of regulation? What are the sorts of items that you
would include for analysis under the cost and benefit headings?
A.1. Our overriding objective should be the efficiency with
which financial intermediaries convert savings into investment.
The regulation of financial activities should be seen in this
context. Specific regulations should be designed to achieve
identifiable outcomes against which their total costs can be
assessed. On the cost side, direct costs such as regulatory
burdens should be included as well as indirect costs such as
limits to competition. On the benefits side, one should strive
to identify specific, measurable outcomes associated with a
regulation's objective, such as the safety and soundness of
insured depositories, investor or consumer protection, and
improving the transparency and efficiency of the credit and
capital allocation process. The distributional consequences of
regulations should also be considered because of the risk that
costs and benefits might fall in different places.
Q.2. What is your view of the future of the banking system and
banking regulation, and Treasury's role?
A.2. The commercial banking system has been, and remains, under
competitive pressure from other financial service providers.
Overall, this is a positive development, and consistent with
the objectives of the Gramm-Leach-Bliley Act, which helped to
level the playing field among financial service providers. The
public policy goal should not be the preservation of any
particular form of financial intermediation but, rather,
improving the efficiency with which savings are converted into
investment. With respect to the future of bank regulation, I
remain concerned that regulatory approaches developed before
the enactment of Gramm-Leach-Bliley may impede the efficiency
we seek. I believe that we should strive to ensure that the
competitive landscape for financial services is shaped by
market forces, not legal and regulatory boundaries.
Treasury exercises a significant policy role in the
financial institutions arena, for example, as a member of the
President's Working Group on Financial Markets. In addition,
Treasury normally takes the lead in developing and drafting the
Administration's legislative proposals on financial regulation
[examples are FIRREA, FDICIA, and recently GLBA and the CFMA]
and frequently is designated by law to prepare reports and
recommendations on financial regulation. As a result of GLBA,
Treasury has responsibility--in conjunction with the Federal
Reserve Board--for approving new financial activities for
financial holding companies and financial subsidiaries of
national banks.
Treasury has only a marginal role in the direct regulation
and supervision of financial institutions. By statute, Treasury
has direct regulatory oversight responsibilities for Sallie
Mae's safety and soundness during the GSE's transition to full
privatization. The
Office of the Comptroller of the Currency and the Office of
Thrift
Supervision, two Treasury bureaus, have direct responsibility
for
regulating and supervising national banks and Federal savings
associations, respectively. However, by law Treasury may not
intervene in matters before either bureau that affect specific
institutions. Congress has given the Comptroller and the OTS
Director authority to develop independently and present to
Congress their own legislative proposals and testimony without
review by Main Treasury. Also, although Main Treasury generally
reviews OCC and OTS regulations, it may not prevent or delay
their issuance. These arrangements are awkward because they
give Main Treasury apparent responsibility but little actual
authority.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR MILLER FROM PETER R.
FISHER
Q.1. Please identify the issues surrounding paying down the
Federal debt from the Treasury's perspective.
A.1. The Treasury Department has three fundamental debt
management goals:
To provide sound cash management;
To achieve the lowest cost of funding over time; and
To promote efficient capital markets
Achieving all of these goals while paying down the debt
creates a number of challenges. As the Treasury has responded
to a period of budget surpluses and a corresponding reduction
in the Federal Government's financing needs, both the frequency
and amount of debt issued have been reduced, the issuance of
certain securities has been eliminated altogether, and a
program to buy back outstanding securities has been initiated.
As the debt pay down continues over the next several years,
achieving the multiple objectives of efficient cash management,
lowest cost financing, and efficient capital markets will
become more challenging, forcing the Treasury to adapt its debt
management strategy.
Q.2. Please discuss how much privately and publicly held debt
is outstanding and what the debt retirement schedule currently
is.
A.2. The table below shows the current profile of the Federal
debt:
Figures in Billions of Dollars as of April 30, 2001
------------------------------------------------------------------------
Dollars Dollars
------------------------------------------------------------------------
GROSS FEDERAL DEBT.................... 5,661 ...............
Of which,
Debt held by Government Accounts is... ............... 2,363
------------------------------------------------------------------------
the remaining total is
PUBLICLY HELD DEBT.................... 3,298 ...............
Of which,
Federal Reserve Holdings are.......... ............... 544
------------------------------------------------------------------------
the remaining total is
PRIVATELY HELD DEBT................... 2,753 ...............
Of which,
Marketable debt is.................... ............... 2,318
Nonmarketable debt is................. ............... 435
------------------------------------------------------------------------
Projections of debt levels going forward are based upon the
Office of Management and Budget's analysis. Currently, OMB
forecasts indicate that the publicly held debt will shrink to
less than $1.2 trillion by fiscal year 2011. Over the same
period, the holdings of nonmarketable securities in Government
accounts is expected to increase to roughly $6.0 trillion.
Currently, publicly held debt represents nearly 60 percent
of the outstanding Federal debt. Of the publicly held debt,
more than 85 percent is in the form of marketable securities
(including Federal Reserve holdings). Based upon the current
budget projections, by 2011 the debt held by the public will
amount to roughly 15 percent of the outstanding total, with
marketable securities representing an even smaller amount.
Q.3. At what point, if any, does the Treasury get concerned
about retiring too much debt?
A.3. The majority of debt that is paid down is in the form of
maturing securities that are not refinanced with new borrowing.
There is no cost to this method of retiring debt. A small
portion of the debt pay down is in the form of debt buy backs,
which are closely monitored to ensure that the Treasury is
purchasing securities in an efficient manner. To date the
results of the debt buy back program have been very positive,
and it is likely that it will remain a cost effective means of
reducing debt for some time. Nevertheless, if at some future
point the cost of purchasing securities were to outweigh the
benefits, then Treasury would then reevaluate the status of the
buy back program.
With respect to the broader impact of a declining supply of
Treasury securities, the markets are capable of adjusting. In
many areas, this adjustment has already begun to take place.
For instance, markets are increasingly using other instruments
such as swaps or agency debt as a pricing benchmark.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR GRAMM FROM JAMES J.
JOCHUM
Q.1. The President has been a staunch advocate of export
control reform. During the campaign, he called for ``a tough-
minded, common sense, export control policy.'' More
specifically, he noted that ``our national security and
commercial competitiveness have been compromised by a broken
export control system.'' In your view, would leaving in place
the current ``broken export control system'' promote our
national security?
A.1. As I stated at the May 10, 2001 confirmation hearing, I
believe S. 149 provides several new tools to protect national
security beyond those contained in current law. For example,
for the first time explicit statutory authority is granted to
control exports based on end-users, in order to prevent the
proliferation of weapons of mass destruction. Furthermore, the
bill provides an enhanced role for the Department of Defense
and the Department of State in all licensing and commodity
classification determinations. Finally, penalties for violating
the Act are increased significantly and additional enforcement
authorities are added.
Q.2. As Assistant Secretary, you will be working on the
regulations to implement the bill. Some seem to think that to
be effective, an export control system must impose burdensome
regulations on exporters. I tend to agree with Rep. Chris Cox,
who noted recently that ``Burdensomeness (sic) is not the same
as effectiveness. A system that is less burdensome and more
effective is our goal.'' Do you agree with that statement?
A.2. Yes. If confirmed by the Senate, I will work to ensure
that all regulations are issued in accordance with the
authorizing statute and intent of Congress and achieve their
stated purpose in the least obtrusive manner possible.
NOMINATIONS OF:
ALPHONSO R. JACKSON, OF TEXAS
TO BE DEPUTY SECRETARY
U.S. DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
----------
RICHARD A. HAUSER, OF MARYLAND
TO BE GENERAL COUNSEL
U.S. DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
----------
JOHN CHARLES WEICHER, OF THE
DISTRICT OF COLUMBIA
TO BE ASSISTANT SECRETARY FOR HOUSING
AND FEDERAL HOUSING COMMISSIONER
U.S. DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
----------
ROMOLO A. BERNARDI, OF NEW YORK
TO BE ASSISTANT SECRETARY FOR
COMMUNITY PLANNING AND DEVELOPMENT
U.S. DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
----------
TUESDAY, MAY 15, 2001
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10 a.m., in room SD-538 of the Dirksen
Senate Office Building, Senator Phil Gramm (Chairman of the
Committee) presiding.
OPENING STATEMENT OF CHAIRMAN PHIL GRAMM
Chairman Gramm. Let me call the Committee to order. I want
to welcome everyone to the hearing.
We have Senators, Congressman, and other dignitaries to
introduce some of our nominees, and what I would like to do is
to give them an opportunity to introduce the nominee that they
are supportive of. I know each of them is as busy as we are,
and that they will be getting up and leaving to go on about
their Senate chores.
Let me first call on Senator Bond.
STATEMENT OF CHRISTOPHER S. BOND
A U.S. SENATOR FROM THE STATE OF MISSOURI
Senator Bond. Thank you very much, Mr. Chairman.
As one responsible for the VA/HUD appropriations bill on
this side, it is a pleasure to welcome Congressman Walsh from
our sister committee on the other side because we both have a
great interest in these very important nominations.
We welcome all the nominees and we look forward to working
with them. We will have some suggestions and advice for them as
it goes along.
Today, I am here for a special privilege, to be able to
join with my colleagues from Texas in presenting Alphonso R.
Jackson to the Committee, as the nominee to be the Deputy
Secretary of the Department of Housing and Urban Development. I
have known and worked with Al for over 30 years, since I first
ran for Governor of the State of Missouri, when we both were a
lot younger.
Senator Hutchison may claim Al as a Texan----
Senator Hutchison. No doubt about that.
Senator Bond. But he certainly has good Missouri
credentials.
He holds a law degree from Washington University. He held
many of the toughest positions in the city of St. Louis,
including Director of Public Safety, Executive Director of the
St. Louis Housing Authority. He went on from there to less
privileged jurisdictions to help upgrade their activities. He
served the housing authorities in Washington, DC and Dallas, no
small tasks.
But the most important thing about Al Jackson is his
reputation for creativity, competence and dedication to the
people whose service is under his jurisdiction. He is eminently
qualified for the position of Deputy Secretary. I can assure
you he is a man of energy, commitment, and integrity, who will
bring all of these good qualities of character to the
Department.
My colleagues know that I share Al's passion for improving
public and assisted housing, and reviving troubled communities.
For 14 years, both as a former Member of this Committee and now
on the Appropriations Committee, I have been deeply troubled by
the lack of management protocols and leadership at this
troubled Agency.
This is a breath of fresh air with Secretary Martinez and
the
distinguished panel we have before us today. It is time we got
a
handle on this Agency.
As for Al Jackson, the Deputy Secretary has the
responsibility for the day-to-day financial operations of the
Agency. He must be smart, competent, financially responsible
and creative.
Given all the problems that HUD has experienced in recent
years, the new Deputy Secretary must also have leadership
skills to overcome some inertia and to get the Agency back on
the right track. Let me assure you, Mr. Chairman, that Al
Jackson is the right man for the job. It is with great
pleasure, excitement, and enthusiasm that I urge the
Committee's expedited confirmation of Mr. Jackson.
Thank you, Mr. Chairman.
Chairman Gramm. Well, Senator Bond, let me thank you. And
let me say that it has been a great pleasure for me and for the
Banking Committee to work with you as one of our Appropriations
Subcommittee's Chairman.
You have always been responsive to us, and we appreciate
it.
Senator Bond. We appreciate your guidance and intend to
continue to work very closely with you.
It has been one of the great areas of cooperation we have
seen and we are very grateful for all the help and guidance you
have
given us.
Chairman Gramm. Thank you.
Senator Hutchison.
STATEMENT OF KAY BAILEY HUTCHISON
A U.S. SENATOR FROM THE STATE OF TEXAS
Senator Hutchison. Thank you, Mr. Chairman.
It is my pleasure to recommend to you a Texan. He does have
a lot of Missouri roots, I must admit, but he is a Texan.
He has blazed trails at every stage of his life. He was the
first African-American to head the Dallas Housing Agency, when
he served as its President from 1989 to 1996.
During that tenure, I want to talk a little bit about what
he did because I think it shows his qualifications more than
any of his other attributes for the job in which he is going to
be confirmed.
He also had dreams, which he turned into a reality, both
for himself and the many who struggle daily to keep their heads
above water. One of those visions was of a public housing
community that consisted of a state-of-the-art recreation
facility surrounded by suburban-style houses that were true
homes.
As Mr. Jackson said at the time, I saw a community that was
desolate and people who had given up hope. I realized that part
of my responsibility was to give the community a reason for
being, not just existing.
My vision was creating a community that people would want
to live in and would not have the stigma of public housing.
Last year, 10 years after he looked at a lot of the people
who he was hired to serve, and he looked at the broken-down
apartment complexes throughout West Dallas, and when he had his
vision, he presided over the grand opening of the Lake West
Multi-Purpose Facility, a facility that was dedicated to him in
gratitude for his efforts to make it happen.
Of all the things that have been said about Alphonso
Jackson, that dream turned into a reality is what I think
qualifies him for this job. And I am proud to recommend him to
the Committee, and to call him my friend.
Thank you.
Chairman Gramm. Thank you, Senator Hutchison.
Senator Clinton.
STATEMENT OF HILLARY RODHAM CLINTON
A U.S. SENATOR FROM THE STATE OF NEW YORK
Senator Clinton. Thank you very much, Mr. Chairman.
I am delighted to be here to introduce and add my words of
support for Mayor Bernardi from Syracuse. Roy Bernardi is a
very talented and dedicated public servant who has been
nominated to serve as Assistant Secretary of HUD for Community
Planning and Development.
I am also delighted to support this nomination because of
his work as Mayor, as well as his work previous to that in city
government, has well qualified him to understand the
instrumental role that can be played in bringing people
together to work on behalf of community-based solutions for
residents who are seeking a better life for themselves and
their children. Roy's community-based housing programs gave
community residents just that kind of a voice, in planning
efforts to reinvigorate struggling neighborhoods. His Mayor's
``Flight Blight'' program built partnerships between community
organizations, law enforcement, and others, working together to
clean up targeted areas.
The Mayor also sought to draw families back into the city
of Syracuse through homeownership programs that have met with
great success. And he has forged alliances with landlords
through a slum landlord program that provides landlords of run-
down facilities with much-needed training and assistance, so
that they can contribute to a restored sense of pride in the
neighborhoods.
Mayor Bernardi's extensive efforts to make Syracuse a more
vibrant urban center go hand-in-hand with his commitment to
spurring economic growth and creating new jobs. New businesses,
encouraged by the neighborhood revitalization efforts, have
decided to call Syracuse home and, of course, Roy and I invite
many people, along with Congressman Walsh, to call Syracuse and
central New York home.
He has also invested in bringing high-speed Internet access
to Syracuse and in working to ensure that our businesses there
have the latest technology that they need to compete.
Many of these ideas that he has put into action on the
ground in Syracuse are ideas that I believe have great merit to
revitalize small- and medium-size cities throughout Upstate New
York and throughout our country.
Mayor Bernardi and his wife Alice, who has accompanied him
here today, have been recognized as well for their service to a
long list of community organizations.
And I am convinced that his record in Syracuse has well
prepared him to serve as Assistant Secretary of HUD for
Community Planning and Development, and I highly recommend him
to this Committee and ask you to act favorably on his
nomination.
Thank you, Senator Gramm.
Chairman Gramm. Thank you, Senator Clinton.
Congressman Walsh.
STATEMENT OF JAMES T. WALSH
A U.S. REPRESENTATIVE FROM THE STATE OF NEW YORK
Representative Walsh. Thank you, Mr. Chairman.
It gives me a great deal of pleasure to introduce to this
Committee today my good friend and colleague, and fellow
central New Yorker, Mayor Bernardi.
It is my belief that he would make an ideal candidate for
Assistant Secretary of HUD. As Chairman of the VA/HUD
Subcommittee on Appropriations in the House, I know that he has
a strong and keen interest in our cities and their needs.
Mayor Bernardi was born in Syracuse to immigrant parents, a
first-generation American Mayor. He has lived out the American
Dream. To cap his impressive career in public service here in
Washington would be the icing on the cake. I know his mom and
dad, Carmella and Harold, as well as his wife, Alice, who I
welcome here today, is as popular as the Mayor is back home.
All central New Yorkers join me in our pride at his
accomplishments.
While serving as mayor, he celebrated our city's diversity.
He brought people together. He worked hard to enhance
Syracuse's quality of life. Crime went down. Taxes stayed
level. People felt that he cared about them.
Like many other northeast cities, the challenges are great
in Syracuse. Population loss, disinvestment, poverty and
homelessness are issues that he dealt with every day. And he
always found a positive message, providing comfort and support
and encouragement to our citizens.
He always tried to take care of the little things that make
a city livable. He has served as President of the New York
State Conference of Mayors, as well as Vice Chair of the
Northeast Region for the U.S. Conference of Mayors. And I am
sure that if you confirm him, he will bring the same qualities
of leadership and compassion to his role at HUD.
I enthusiastically endorse his nomination and suggest that
Syracuse's loss will be the Nation's gain.
Mr. Chairman, just briefly, if I could also mention. I have
had a working relationship with Dick Hauser, who is the General
Counsel designee. Dick and I worked together when I Chaired the
District of Columbia Subcommittee on Appropriations in the
House.
He was the Chairman of the Board of the Pennsylvania Avenue
Development Corporation. And Dick, we did well. Unlike when we
were there, the city now is flourishing and I think we have a
lot to be thankful for. So good luck to all of you. So, Mayor,
all the best. Thank you, Mr. Chairman.
Chairman Gramm. Thank you, Congressman Walsh.
Let me thank all of our distinguished colleagues for
coming. We appreciate your interest and, obviously, your
support for our nominees is duly recognized.
We appreciate having the honor of you appearing here today.
Let me review for everybody on the Committee what we need to
do today.
We have four distinguished nominees before us, and we are
going to give them an opportunity to speak to us and then we
will have the opportunity to ask them questions.
As we did last week and as we will in the ensuing weeks, we
are going to vote today with a rolling vote that will last
through 3 p.m. on those who testified last week.
What I would like to do, if the Clerk is ready, is to go
ahead. I would like to ask unanimous consent that the
nominations of John Robson, to be President of the Export-
Import Bank, and Jim Jochum, to be Assistant Secretary of
Commerce for Export Administration, be considered en bloc.
Without objection, so ordered.
And we will do a roll call and then the roll call will be
left open until 3 p.m., so that any Member of the Committee who
wishes to vote can do so.
The Clerk will call the roll.
The Clerk. Chairman Gramm.
Chairman Gramm. Aye.
The Clerk. Mr. Allard.
Senator Allard. Aye.
The Clerk. Mr. Hagel.
Senator Hagel. Aye.
The Clerk. Mr. Sarbanes.
Senator Sarbanes. Aye.
The Clerk. Mr. Bunning.
Senator Bunning. What are we voting on?
The Clerk. Nominations of John Robson and Jim Jochum.
Senator Bunning. Aye.
The Clerk. Thank you, Senator.
Mr. Reed.
Chairman Gramm. Good question.
[Laughter.]
Senator Reed. Aye.
The Clerk. Mr. Miller.
Senator Miller. Aye.
The Clerk. Mr. Chairman, the ayes at the moment are seven.
There are no noes.
Chairman Gramm. Thank you.
We have before us today four distinguished nominees:
Alphonso Jackson, who has already been introduced by two of our
colleagues. I would just like to say that it has been a
pleasure to work with Mr. Jackson in the leadership capacity he
has had in public housing in Dallas. He has done an outstanding
job, and I strongly support his nomination to be Deputy
Secretary of Housing and Urban Development; Richard Hauser--is
that pronounced right? What a nice name for a person working at
HUD--Hauser.
[Laughter.]
Of Maryland, to be the General Counsel of the Department of
Housing and Urban Development.
John Weicher--is that right, of the District of Columbia,
to be Assistant Secretary of Housing and Urban Development, and
to serve as the Federal Housing Commissioner; and Mayor Roy
Bernardi of New York, to be an Assistant Secretary of Housing
and Urban Development for Community Planning and Development.
I need to give you an oath. So if you will each rise and
raise your right hand. Do you swear or affirm that the
testimony you are about to give is the truth, the whole truth,
and nothing but the truth, so help you God?
Mr. Weicher. I do.
Mr. Jackson. I do.
Mr. Hauser. I do.
Mr. Bernardi. I do.
Chairman Gramm. Do you agree to appear and testify before
any duly-constituted committee of the U.S. Senate?
Mr. Weicher. I do.
Mr. Jackson. I do.
Mr. Hauser. I do.
Mr. Bernardi. I do.
Chairman Gramm. Please be seated and congratulations.
Senator Sarbanes.
STATEMENT OF SENATOR PAUL S. SARBANES
Senator Sarbanes. Thank you very much, Mr. Chairman. I
would like to make just a short opening statement.
First, I want to welcome the nominees to the Committee this
morning. I am pleased that we are taking up these nominations.
The Chairman and I have talked and we agree that it is
important to try to put people into position in the new
Administration and we are trying to work with Secretary
Martinez. I have a lot of confidence in him, but he cannot run
the Department by himself. I think that is pretty clear. So we
would like to get these policy and operational people into
place.
There is a considerable breadth of experience among this
morning's nominees. Mr. Jackson has run three different public
housing authorities, in each instance with considerable
success, including the one here actually in the District of
Columbia at an earlier time. Mr. Bernardi is a Major and a user
of HUD programs, so he brings that perspective. Mr. Weicher
served as an Assistant Secretary for Policy Development and
Research at HUD. And Mr. Hauser has had extensive experience in
economic development for the Pennsylvania Avenue Development
Corporation.
I want to note that housing has traditionally been a
bipartisan endeavor. In fact, last year, we passed important
new legislation out of this Committee and through the Congress
dealing with manufactured housing and a host of other issues,
including elderly housing, in the last Congress.
In the previous Congress, we passed major legislation to
restructure both the Section 8 project-based portfolio and the
public housing program. That was all done on a bipartisan
consensus basis.
I just want to note that that has been the attitude that
the Committee has brought to some of these problems, we look
forward to working with all of you in that same spirit in the
coming months.
Mr. Weicher, I am going to focus on you just a little bit
here, and I want to lay out a few things. Hopefully, you will
respond to them either in your statement or subsequently in the
question session.
I do that because we have heard from quite a wide array of
industry, nonprofit, and low-income advocacy groups concerning
some of your writings. You have a paper trail and it always
comes back, on occasions, such as this.
You have expressed some varying degrees of opposition to
some of the very programs that you would be charged with
overseeing
if confirmed.
For example, and let me just mention a few, you have talked
about eliminating the multifamily FHA program. Of course, FHA
is an important partner in the construction of rental housing
that is affordable to middle-income American families and at a
low cost to the taxpayer. In fact, the administration of this
program has been improved over the past 8 years to the point
where its costs and default rates have dropped very
significantly.
You have talked about limiting the FHA single-family
program, although its success and fiscal well-being and mission
have been hailed by the GAO. Actually, previously, and I am
encouraged by this, in your service at HUD, you helped to put
the FHA back on the path toward solvency. There is, in a sense,
a contradiction there in the record.
You have also indicated support for vouchering out all
public and assisted housing. Actually, that approach has not
been accepted by the Congress. I strongly support adding
vouchers to the budget, but only as part of a balanced approach
to solving the affordable housing crisis.
And just last year, Senators Bond and Mikulski included a
provision in the HUD appropriations bill allowing housing
authorities to increase their use of project-based assistance.
I can appreciate that many of these statements were made in
a different context, and we would like to get from you this
morning the benefit of that context. I would like to be able to
give these, as I said, a wide array of various groups, both
industry, nonprofit, housing advocates, some reassurance that
these programs will
be strengthened and nurtured in the course of your tenure at
the
Department.
We have heard from so many different sources, that I
thought that I ought to lay it out here right at the opening of
the hearing. I look forward, Mr. Chairman, to the testimony of
all of these nominees as we try to move forward in putting a
team in place for Secretary Martinez.
Chairman Gramm. Thank you, Senator Sarbanes.
Senator Allard is Chairman of the Housing Subcommittee, and
I would call on him now.
STATEMENT OF SENATOR WAYNE ALLARD
Senator Allard. Thank you, Mr. Chairman. My remarks will be
very brief.
I would like to associate myself with the remarks of my
colleagues, including Congressman Walsh. I look forward to
hearing about the qualifications of this panel that we have
before us.
I think we have an outstanding line-up of nominees for top
positions at the Department of Housing and Urban Development.
I have met with all four nominees--Mr. Jackson, Mr. Hauser,
Mr. Weicher and Mr. Bernardi. And I must say that I am very
impressed.
As Chairman of the Housing Subcommittee, I have held many
HUD oversight hearings, and I know how important it is to have
top-level appointees at the department. It is my hope that we
can get these officials confirmed quickly.
I would like to raise several important issues, and we can
follow up on these in the question-and-answer process.
My concerns are, first, we need program consolidation. We
have 328 programs, which is too many, in my book. HUD should
focus on the core mission of affordable housing.
Second, we need results-based management and in particular,
I would ask all the nominees to study carefully the Government
Performance and Results Act and apply it to the HUD
decisionmaking process.
Finally, I would urge you to communicate regularly with the
Congress and keep us informed and work with us to implement the
laws in a timely manner. A good example is the recently passed
legislation to reform manufactured housing regulations and
provide additional incentives for homeownership and affordable
housing. I hope we can see this law implemented in a timely
manner.
Mr. Chairman, I look forward to working closely with each
of the nominees, and thank you.
Chairman Gramm. Thank you, Senator Allard.
Senator Reed, did you want to make an opening statement?
STATEMENT OF SENATOR JACK REED
Senator Reed. Yes, thank you, Mr. Chairman. I appreciate
you having this hearing today, and I look forward to the
testimony of all these very capable and dedicated nominees.
I would just briefly like to say that I had the chance to
meet all of these gentlemen and they are dedicated, principled
public servants who take their responsibilities very seriously,
and they have serious responsibilities.
Their Department has to help some of the most vulnerable
people in this country--the disabled, the elderly, those in the
margin of life because of income or disease or disability.
We are facing, in my view, a housing crisis in many parts
of this country. We have not been producing enough housing. We
have a challenge of affordability. We have a challenge of
accessibility to good, decent, safe housing. And our commitment
for generations has been that we would have a country where
everyone could live in a decent, safe and affordable home. We
have to do much more.
We have a homeless program in which we will review perhaps
this Congress in detail. Too often, that program has been used,
not to help the homeless, but to help those who are just on the
fringe because our other public programs are not able to keep
people in decent, adequate housing.
The task before you is great and I am convinced after
listening to these gentlemen that they bring goodwill and great
energy to the task. We will explore some policy differences
today, but we begin, I think, with some very dedicated
individuals.
Thank you, Mr. Chairman.
Chairman Gramm. Thank you. Would anyone else like to make
an opening statement?
Senator Bunning. Yes, Mr. Chairman.
Chairman Gramm. Senator Bunning.
Senator Bunning. It is short.
Chairman Gramm. Oh, please, take your time. Go ahead.
STATEMENT OF SENATOR JIM BUNNING
Senator Bunning. Mr. Chairman, I would like to thank you
and all our nominees for testifying today and I would like to
thank you for holding this hearing and this mark-up in such an
expeditious fashion. First of all, it is always nice to come in
in the middle of the vote and not know what you are voting on.
I think President Bush has once again demonstrated that he
will continue to ask outstanding people to serve in his
Administration. I hope that the Committee will report the
nominations that we reported on today--now we have seven ayes--
and are going to vote on in the future, who are testifying here
today to the Senate floor very quickly.
All four nominees have very impressive credentials.
Alphonso Jackson has been the head of three housing
authorities, as well as the President of a public utility and
served on two national commissions. Richard Hauser has been an
Associate White House Counsel and has worked at the Department
of Justice and was Chairman of the Pennsylvania Avenue
Development Corporation; John Weicher was an Assistant
Secretary at HUD and worked for OMB; Romolo Bernardi is the
Mayor of Syracuse, NY.
Why would you want to give up being the Mayor of Syracuse
to go to work at HUD?
[Laughter.]
And was the city auditor there, also.
We are very fortunate that these fine nominees have chosen
to serve the public at HUD. Their diverse backgrounds and
unique experience will help fulfill HUD's mission.
We are lucky to have them. Once again, I urge all my
colleagues to support these worthy nominees.
Thank you, Mr. Chairman.
Chairman Gramm. Thank you, Senator Bunning.
Anyone else want to make a statement?
[No response.]
If not, let me suggest that each of our nominees try to
speak for a maximum of 5 minutes. There is a clock here and on
each side of the room that you can see. I am not going to stop
you if you go over, unless you go over by too much. But start
collecting your thoughts when you hit the red light.
Let me also say, Mr. Weicher, if when you finish your
statement, if you had not in the statement responded to Senator
Sarbanes, let me suggest that you just take a minute or two and
do that.
Given that I am from an academic background and spent much
of my life trying to avoid perishing by publishing----
[Laughter.]
I understand what it is like to write things down on paper.
I once was writing an article about the theoretical
capacity of the market system to abate pollution and, in
essence, predicting that there would be green products that
would come on the market if people really cared about
pollution.
And even though people would be almost perfect competitors
in the environment based on what they bought, I just as an
afterthought stuck in the footnote that I had voted for Barry
Goldwater. I also noted that if I hadn't voted for him--and I
listed whatever the number of votes he had received--there
would have been one less vote.
Well, not knowing that some day, having grown up in the
south and in a Democrat family, where all of the Republicans
wore blue shirts and burned down my grandmother's barn--or my
grandmother's mother's barn. She claimed they burned down the
house, of course. That turned out not to be true when we looked
at it closely.
[Laughter.]
But in any case, it was war and people say whatever.
[Laughter.]
The point is, I was debating my opponent in the Democratic
primary, and my opponent pulled out that article and read that
I had voted for Barry Goldwater. So he would say, I would like
the name of all the Democratic Presidents you voted for,
Democratic candidates for President that you voted for. So I
swallowed hard and said, none.
I still won the Democratic primary, you understand. In any
case, I understand what it is to write things down. I want to
give you an opportunity to explain.
Al, you are first.
STATEMENT OF ALPHONSO R. JACKSON, OF TEXAS
TO BE DEPUTY SECRETARY
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Mr. Jackson. Thank you, Mr. Chairman, Senator Sarbanes,
distinguished Members of the Committee.
Chairman Gramm. Please introduce any family members you
have and let them stand up if they will.
Mr. Jackson. I will, Senator.
Thank you for the opportunity to appear before you today. I
would also like to thank Senators Hutchison and Bond for their
generous introductions.
Let me express my sincere thanks to President Bush and
Secretary Martinez for selecting me for this important job. I
am honored by the trust and confidence that they have placed in
me to be Deputy Secretary of the U.S. Department of Housing and
Urban Development. And I would like to introduce to the
Chairman and Senator Sarbanes and the Committee, my wife,
Marcia Jackson.
Mr. Chairman, I was born and raised in Texas, the youngest
of 12 kids. Although my father had only a 5th grade education
and my mother an 11th grade education, they made sure that all
of their children got a good education. I am here because of my
parents, because of the love that they showed and because of
the education that they stressed.
This is one of the reasons that I spent my early years, 6
years of that, as a Public School Administrator and as a
Professor at the University of Missouri.
My interest in, and expertise in, urban law and housing
issues has been a great challenge for me. I have been told that
I am the first Deputy Secretary of HUD to have experience in
both public housing and the community development field. I have
run, as you noted before, three major public housing
authorities and I have
had the experience of knowing how well HUD can work, if given
the opportunity.
I think that the oversight that has been given and talked
about by GAO, and the Inspector General, as it relates to HUD
has merit, and I think that this Secretary and myself will
address those issues. I also think that my private-sector
experience has taught me about the importance of management and
successful enterprise.
I have spent the last 5 years in the private sector as
President of American Electric Power of Texas, where I was
responsible for the management and operation of an $11 billion
corporation, 2,800 employees, and over 900,000 customers.
I think it is important to understand that my management
experience at the professional levels believes that the worst
thing that can occur is that you micromanage your staff.
I think at HUD we must again establish a relationship of
trust and belief in the core staff that carries out the
mission. In that process of establishing that belief in the
core staff, we must also believe in the mission of GAO and the
IG as not adversarial, but that of a partnership, to make sure
that HUD functions well.
We know that HUD has a long history of trouble. We know
that it was one of the high-risk agencies, and there are a
number of areas that are still high-risk within HUD.
I am aware, of the concern of GAO and the HUD Inspector
General and I have studied their reports.
If confirmed, I will insist that the agency work in tandem
with GAO and the IG's office to correct the Department's
problems. We will avoid the adversarial stand that has too
often marked HUD's relationship with these offices in the
Senate and the Congress, and I can assure you we will avoid
that.
In conclusion, I realize that we have much work ahead of
us. HUD has an important mission to accomplish. Many of
America's neediest families need our service. We owe it to them
to provide the best possible programs we can, in the most
effective and efficient manner that we can. And we owe it to
the American taxpayers to make sure that their tax dollars are
spent efficiently and wisely.
I am a man of optimism. When I see HUD, I see a Department
with a lot of opportunities to do great things. I see the
historical opportunities to improve HUD management.
The Deputy Secretary functions as the Chief Operating
Officer. I see one of the top duties of the Deputy Secretary as
helping to solve the management problems that have plagued HUD
for so long.
If confirmed, I look forward to working with Secretary
Martinez and the rest of the HUD team as we implement the
Administration's mission. I also look forward to working in a
bipartisan manner with Congress on all issues that challenge
HUD.
As Secretary Martinez said at his confirmation hearing,
``our mission at HUD is not a Republican or Democratic mission,
but rather an American mission.''
My task is to carry forward and make sure that HUD
functions in the best and most proper manner that it can in
relationship with the Congress.
And I can assure you that any recommendation that is made
by the Congress will be adhered to by this HUD. Thank you.
Chairman Gramm. Thank you, Mr. Jackson.
Mr. Hauser.
STATEMENT OF RICHARD A. HAUSER, OF MARYLAND
TO BE GENERAL COUNSEL
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Mr. Hauser. Thank you, Mr. Chairman, Senator Sarbanes,
Members of the Committee.
I too want to thank you for the opportunity to appear
before you today. And with your indulgence, I would like to
introduce my family--my wife Karen and three of my five
daughters who are with me today. My daughters Kristin, Erica
and Alissa.
Chairman Gramm. It must be a very lonely house, being the
only man.
[Laughter.]
Mr. Hauser. I tell people my retirement is spelled tuition.
[Laughter.]
Anyway, I would like to submit my statement for the record,
if I may, but I also, with your indulgence, have a few points
that I would like to highlight.
First, I want to express my sincere appreciation to
President Bush for his confidence in me. I am honored to be
nominated for this very important position.
I also want to thank Secretary Martinez for asking me to
join his team. Secretary Martinez's life story is a compelling
one and it is truly the embodiment of the American Dream. I
will be proud to be at his side as he develops and implements
his vision for the agency.
I am committed to assist Secretary Martinez in his efforts
to make the Department of Housing and Urban Development a more
efficient, effective, and responsive institution, one that will
operate with the highest ethical and professional standards,
both for its employees and its program participants. And like
my colleague, Alphonso Jackson, I too am very respectful of the
independence of the GAO and the Inspector General. I appreciate
the valuable oversight functions that they perform. And if
confirmed, I will work hard to develop a constructive working
relationship with both the IG and the GAO in furtherance of
HUD's goals.
With the confidence and support of Secretary Martinez, I
expect to be involved in all aspects of HUD and its program
responsibilities. And indeed, as General Counsel, I will be
expected to provide guidance on the statutes and regulations
that govern the operations of the Department to assure that the
programs are administered as Congress intended and in the
interest of those to whom the Department was established.
Nothing, however, will be more important than to assure
that the standards of conduct are clearly articulated and
observed by HUD employees and HUD program participants. As
President Bush stated on January 20, ``everyone who enters
public service for the United States has a duty to the American
people to maintain the highest standards of integrity in
Government.''
Secretary Martinez embraces that view, and so do I. But we
want to do more. We want to create a culture that will attract
and retain good employees. We want to create that which would
allow employees to perform their duties without fear that the
ethics laws and regulations will be used as sport to curb their
initiative.
We want to create a culture that will restore confidence in
the integrity of HUD's programs on Capitol Hill, and throughout
the HUD community. And finally, if confirmed, I look forward to
working with the Committee and the Congress in fulfilling the
duties and responsibilities of the Office of General Counsel of
Housing and Urban Development. Thank you, Mr. Chairman.
Chairman Gramm. Thank you, Mr. Hauser.
Mr. Weicher.
STATEMENT OF JOHN CHARLES WEICHER
OF THE DISTRICT OF COLUMBIA
TO BE ASSISTANT SECRETARY FOR HOUSING
AND FEDERAL HOUSING COMMISSIONER
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Mr. Weicher. Thank you, Mr. Chairman.
It is a great honor to appear before this distinguished
Committee today as the nominee for Assistant Secretary for
Housing and FHA Commissioner. I am extremely grateful to
President Bush and to Secretary Martinez for offering me the
opportunity to serve in this important position.
Mr. Chairman, like you, I am an economist married to an
economist. My wife Alice is with me this morning, along with
our daughter Jean, who has just finished her sophomore year at
Washington University in St. Louis, Mr. Jackson's alma mater.
Our son John graduated from college last year. He is now
working in Louisville and could not be with us here today.
FHA has been central to the American Dream of homeownership
since the 1930's. It is widely and rightfully regarded as a
social policy experiment that worked.
FHA revolutionized the housing finance system and the
mortgage instrument. Working with Ginnie Mae, it pioneered the
Mortgage-Backed Security. FHA has a proud legacy and FHA has
more work to do.
As Secretary Martinez has pointed out, the homeownership
rates among Hispanic Americans and African-Americans remains
below 50 percent. That is a challenge for HUD and for FHA in
particular.
President Bush has proposed the ``New Prosperity
Initiative,'' to expand homeownership opportunities for low-
income families. FHA will be part of the President's
Initiative, helping more Americans realize the dream of owning
their own home.
In addition to promoting homeownership, FHA provides
mortgage insurance for multifamily housing. FHA multifamily
insurance serves important public services. Most of the
projects provide housing that is affordable to families in the
lower half of the income distribution. Almost half are located
in underserved areas. These families and these communities need
FHA.
In my prepared statement, I address some of the questions
which Senator Sarbanes has made in the statement that I have
submitted for the record. I would be happy to explain in
further detail when I made those statements and who I was
making them to, and what other people were saying at the same
time.
Let me say with respect to what I hope to do at HUD, Secre-
tary Martinez has said that his first priority will be for HUD
to
continue putting its own house in order, building on the work
of
Secretaries Kemp, Cisneros, and Cuomo, and addressing the
institutional weaknesses identified by GAO and by the HUD
Inspector General. I am looking forward to working with him to
make all of FHA's programs work as well as possible, serving
the public purposes for which they were created.
Mr. Chairman, I know the issues and problems of HUD from
experience. I have served at HUD three times before. As Senator
Sarbanes mentioned, I was Assistant Secretary for Policy
Development and Research with Secretary Jack Kemp in the
Administration of President George Bush. I was Chief Economist
for Secretary Carla Hills under President Ford. As Assistant
Secretary for PD&R, I worked several major policy issues that
concerned FHA, including the reform of home mortgage insurance,
the regulation of real estate settlement practices, and
environmental issues in housing.
In addition, I directed the Secretary's Advisory Commission
on Regulatory Barriers to Affordable Housing.
Mr. Chairman, you and your colleagues honored me by
appointing me to the Millennial Housing Commission last
September, for which I am very grateful. I have also served on
the Committee on Urban Policy of the National Academy of
Sciences, in the Census Bureau's Advisory Committee on
Population Statistics, and I have worked on three other
national housing commissions. All of this experience will be
helpful at FHA.
Mr. Chairman, I have devoted my entire professional life to
housing and urban issues since my graduate school days. Most of
my classmates chose to specialize in public finance or money
and banking or labor economics. Quite a few decided to be
agricultural economists.
I felt that the cities presented the most urgent economic
problems in America. Starting with my doctoral dissertation, I
have spent my career on those problems and I have never
regretted it.
The Federal Government has two major housing policy
objectives--helping families become homeowners and making sure
that everyone lives in decent housing. Those are very important
public purposes. They are FHA's basic missions, and I support
them wholeheartedly as I have throughout my career.
Mr. Chairman, Members of the Committee, the office of
Assistant Secretary for Housing is a high honor, a great
responsibility and a tremendous challenge.
If I am confirmed, I pledge to work with Congress, with
both Houses and with both parties. Working together, we can
achieve the goals of housing policy and I will certainly do my
part.
Thank you very much for the opportunity to appear before
you this morning.
Chairman Gramm. Thank you.
Mayor Bernardi.
STATEMENT OF ROMOLO A. BERNARDI, OF NEW YORK
TO BE ASSISTANT SECRETARY FOR
COMMUNITY PLANNING AND DEVELOPMENT
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Mr. Bernardi. Good morning, Mr. Chairman, Senator Sarbanes,
Members of the Committee.
I thank you for the opportunity to be here. I want to thank
President Bush for his confidence in me, and Secretary
Martinez.
In the last few weeks, I have had the opportunity to spend
some time with the other three designees that are here and I
believe, under the guidance of President Bush, that Secretary
Martinez is putting together a good team that can help the
American people and the Department of Housing and Urban
Development. I also want to thank Senator Clinton and
Congressman Walsh for their kind introduction. The Congressman
and I go back a long way.
The Congressman talked about my immigrant parents. I grew
up on the north side of the city of Syracuse in an Italian
neighborhood. When my parents came to this country, they looked
for their opportunity in the cities.
My wife Alice and I, who I would like to introduce right
now--Alice. Our young children, Dante and Bianca, could not be
with us. But we want the American Dream for our children as it
was for my parents and it was for myself and my siblings.
I love cities. When I think of cities, I think of people
that are disadvantaged. I think of the immigrant. I think of
the young families struggling to make ends meet. I think of the
renter who is saving for her first home. And I think of the
businessman and the entrepreneur who sees the city as his best
chance. But also, the homeless person that perhaps sees the
city as his last chance.
My background in the last 35 years, I have been in public
service, 7 years in education as a public school teacher and a
guidance counselor, 20 years as the elected City Auditor in the
city of Syracuse, and I am in my eighth year as Mayor of that
wonderful city.
Senator Bunning, I am term-limited. That is not the only
reason that I am here. But the fact of the matter is that I
have had the opportunity firsthand with that practical
experience to see what a Government agency, a Federal
Government agency, can do for people, what it can do for
cities.
The Community Development Block Grant program, which would
be under my responsibility, how we have utilized that money in
Syracuse for housing and how we have helped groups in that city
provide services to the most needy.
I look at the brownfield redevelopment monies that we used.
Many of our cities, especially in New York State, Upstate New
York, and in the northeast, just reclaiming those industrial
wastelands, turning them around, providing an economic
opportunity and jobs for people.
I am very proud of the HOME program that HUD has and what
we have done in Syracuse. As you know, the proposal is to take
12 percent of that HOME budget and use that so that people can
buy their first home--low-income people, people that need some
downpayment assistance. And we do that in Syracuse in a program
we call Home Headquarters.
Of our $2 million allocation, we spend approximately
$300,000 for homeownership, and that is the American Dream.
Another part of the American Dream is the economic advantages
that you want for your children and your family.
The Department of Community Planning and Development are
varied. I also know that we have to have keen oversight. As
auditor, I made sure that there was accountability, made sure
that the monies were spent properly, and that they went to the
people that were entitled to them. And I would do the same
thing at HUD, working with Mr. Jackson and my partners to make
sure that we cooperate with the GAO and the ID.
As an auditor, I know full well that you do not look at
them as the enemy. You do not look at them as the opposition.
You look at them as people who provide opportunities,
recommendations and how you can have a better work force, a
better product, and how you can have a better delivery system.
If I have the opportunity to be confirmed by this body, I
pledge to you that I will give all of my energy and resources,
my entire commitment and my experience to being the Assistant
Secretary for Planning and Development and will work in
conjunction with my colleagues here to provide the necessities
for the people of our wonderful country. Thank you.
Chairman Gramm. Thank you.
Well, let me first thank each of you for being willing to
serve.
It is a very high calling to be called to serve the greatest
country
in the history of the world, and we appreciate your willingness
to serve.
What I would like to do is pose just one question--make a
statement and then ask that each of you respond to it.
Much of our public housing is focused on the elderly. I
find that those public housing units or subsidies are uniformly
popular
everywhere. Other parts of our public housing have to do with
younger families.
I have always shared Mayor Bernardi's view that owning your
own home is part of the American Dream.
It seems to me that while we cannot always be successful
and maybe in many cases, we would not be successful, that one
of the goals we should have is to make HUD's subsidized housing
a way station toward homeownership. Not something that somebody
goes into permanently, but something that someone is in as a
way station toward ultimately owning their own home. I would
like to ask each of you to respond to that, give me some of
your initial thoughts as to what HUD could do to help promote
that.
Mr. Jackson.
Mr. Jackson. Mr. Chairman, I agree with you.
Initially, if you go back to the Alley Drilling Act that
was established when HUD was first established, that was the
purpose of it. It was a way station. In the late 1970's, it
became basically a place where people felt that they had a
lifetime tenure.
It is my belief that the first act that we must do to make
sure that people understand that public housing is not forever,
is to give them incentives to get them out.
I believe that there are a number of ways that we can do
that, Congress has answered that question in the sense that we
have a number of programs, self-sufficiency is one, helping
public housing residents leave public housing, giving them
incentives to leave.
We have the Section 8 program which will serve as a down
payment for a home if they will find employment to subsidize
that.
I have a philosophical belief that my parents taught me was
simple--if you expect performance from people, you get
performance from people. I think for too long, we have not
expected performance from public housing residents.
While I was in Dallas, one of the things that I asked for
and was given by HUD is that every resident in public housing
pay rent.
Some of my colleagues in the business at the time did not
believe that it could be done. Well, people in Dallas pay rent.
Every resident pays rent. And in the final analysis, what we
have seen is no less, but better abilities to take care of the
properties.
We also, if you notice, Mr. Chairman, started the process
of building 300 homes which will eventually be 900. The first
300 are coming online now--for homeownership programs. And I
think that we will be pretty innovative and believe that public
housing residents can get out of public housing. We can help
them get out of public housing.
If we do not perceive them as human beings with the same
sense of worth that we have, then it is not going to happen. I
just believe that expectation is the key in order to make sure
that we do have a way station and not a place of permanent
housing.
Chairman Gramm. Thank you.
Mr. Hauser.
Mr. Hauser. Mr. Chairman, I support your view on this and
it is a view that is shared by the President and the Secretary.
As General Counsel, I will have less to say programmatically
about those issues than my colleagues here. But I can pledge to
you that I will see that the Office of General Counsel gives
the very best advice to see that these programs are carried out
in an efficient way.
And also, as President Bush said yesterday in his efforts
to bring about, as he called it, domestic tranquility, to our
streets and to our neighborhoods, that the Office of General
Counsel can play a role there, too, as people move from what
should be in a short period of time, into homeownership, which
is the ultimate goal here.
Thank you.
Chairman Gramm. Mr. Weicher.
Mr. Weicher. Mr. Chairman, as I said in my statement, I
certainly agree with you that owning your own home is the key
to the American Dream in our society. In fact, in published
research which I did as a Visiting Economist at the Federal
Reserve Bank of St. Louis, I documented the importance of home
equity as a force for economic inequality in our society.
And indeed, until very recently, the equity that we as
Americans have had in our own homes was larger than the equity
that all of us had in financial assets--stocks and bonds and
mutual funds.
It is a great force for stability in our society and we
should be promoting it.
Senator Sarbanes will certainly remember that in 1992,
Secretary Kemp and President George Bush proposed to use the
housing voucher as a homeownership support for low-income
families. And Congress, a Democratic Congress, passed that
proposal and it became law.
Various reforms of that were proposed by Secretary Cuomo
and enacted by the Republican Congress in 1998. President Bush,
in the campaign, proposed making the voucher available for a
down payment toward the house and Congress enacted that in the
year 2000. And we at HUD are now in the process of writing
regulations to implement that, trying to use housing assistance
for lower income families to help them become homeowners.
Chairman Gramm. Thank you.
Well, I know, Mr. Bernardi, you agree with me because of
what you said.
Mr. Bernardi. Just very quickly, Senator, the Section 8
voucher program that Mr. Jackson spoke of, Syracuse is one of
the pilot communities, or the Syracuse Housing Authority.
We are always going to have public housing. I think we need
to do everything that we possibly can with our resources to try
to provide people the opportunity to utilize those vouchers
along with employment, so that, eventually, they could purchase
their own home. The HOME program runs hand-in-hand with the
Section 8 voucher. It provides the necessary dollars, but also
the educational aspect that goes with it.
In our HOME headquarters program in Syracuse for first-time
homebuyers, we not only provide down payment assistance
dollars. We also obviously pay for some points. But we also at
the same time have training programs, so that people that end
up in their first home can stay there so that defaults do not
take place.
I support, obviously, your concept.
Chairman Gramm. Thank you very much.
Senator Schumer, you were not here before when we were
doing introductions and I knew you wanted to do one.
Let me just recognize you briefly for that purpose, and
then I will turn to Senator Sarbanes.
STATEMENT OF SENATOR CHARLES E. SCHUMER
Senator Schumer. Thank you, Mr. Chairman. I appreciate that
and I thank my colleagues.
I apologize to Mayor Bernardi and the others that I could
not be here. When they changed the date of the hearing, I had a
previous commitment that I could not get out of.
I want to thank you, Mr. Chairman. I want to give a welcome
to our nominees. But particularly to give a New York welcome to
Mayor Bernardi from Syracuse.
Mr. Chairman, it is an indication, whenever you come to a
hearing, even if you think it is going to be a little bit pro
forma, you learn something.
What I just learned is that Mayor Bernardi's first name is
not Roy, which we have always referred to him as, but Romolo.
Mr. Bernardi. Romolo.
[Laughter.]
Senator Schumer. Romolo. I say to you, bello. Beautiful.
Mr. Bernardi. Grasi.
Senator Schumer. That is my foray into the Italian romance
language.
Anyway, Mayor Bernardi is not transplanted from New York
like so many others who have come before us this year. The
Mayor is an organic New Yorker, so to speak--homegrown,
homeraised. I have a deep and abiding respect for him. We share
a common, pragmatic approach to governing.
Mayor Bernardi is the first Republican Mayor of Syracuse in
20 years and in his two terms, he has consistently reached
across party lines to get things done for the people of
Syracuse.
We spend a lot of time together, from walking in the St.
Patrick's Day parade each year, where we make a strange pair,
to, more importantly, working on a number of projects for
Syracuse.
The most important was bringing Jet Blue, a start-up, low-
cost air service to Syracuse. Now people from Syracuse are
saving over $250 on trips to New York City and this has helped
stimulate the Syracuse economy. Mayor Bernardi and Mr. Everett,
his airport director, were instrumental in helping bring Jet
Blue there.
Because of the Mayor's work, the city of Syracuse is
starting to turn the corner toward strong, economic growth.
But, like so many other talented politicians, the Mayor is
being term-limited.
In his two short terms, the mayor has accomplished a great
deal. On behalf of all New Yorkers, I want to thank you, Mr.
Mayor, for the great work you have done for the people of
Syracuse.
But now, Syracuse's loss is Washington's gain. I want to
thank Congressman Walsh for championing your nomination. He did
another good deed for both Syracuse and for the country when he
did that. And the Mayor's experience and accomplishments as
City Auditor and Mayor, my colleagues, make him ideally suited
to become Assistant Secretary for Community Planning and
Development.
I welcome the Mayor to Washington, wish him good luck, and
fully support his nomination.
Chairman Gramm. Thank you, Senator Schumer.
Senator Sarbanes.
Senator Sarbanes. Thank you very much, Mr. Chairman.
First, let me make this observation. A theme, I think, that
has characterized all four of the nominees is the need to
improve the administration within HUD.
Mr. Jackson, you said, put the house in order, or some
phrase of that sort. But I am encouraged to see that that is
coupled with the recognition that that is, as it were, a base
or a foundation upon which then to move forward and to carry
out the substantive programs which will actually provide
housing, help people obtain housing all across the country.
Mr. Hauser, you have a couple of paragraphs in your
statement which you did not read, but which exactly address
that. It is where you talk about the Secretary making the
appropriate administration of HUD programs a major priority.
And then you go on later to note that the Secretary has made it
his priority to focus the agency on the core mission, and then
you list the various programs that we are trying to encourage.
So I think that is a very important coupling of objectives
there.
We very much want the improved administration. In fact, the
Cuomo people did get HUD--the Department--off of the high-risk
list, although some of its programs are still in that category.
But it is a step leading on, then, to carrying through these
programs.
Mr. Weicher, you did not read the part of your statement
that I was looking forward to you reading. I know we have now
included it in the record. Let me develop a few sort of
specific questions.
Working with Senator Mack a few years ago, and the Members
of this Committee, we addressed the situation of making
assisted housing, ensuring that it remained affordable to low-
income people.
That was the Mark-to-Market program.
We saw that as preventing the loss of scarce, affordable
housing. And in fact, I note that in this morning's Wall Street
Journal, there is an article that says: Looming Need For
Housing A Big Surprise. And then it goes on to say ``housing
advocates have been complaining about the lack of affordable
housing for low-income Americans for years. But now the problem
appears to be spreading to the middle class.'' And further on
in the article, one observer says ``a decade ago, there were
discussions of a looming lack of demand and now there are
discussions of a looming lack of supply.'' And they go on to
talk about the demographics reflected in the 2000 census.
Now in your 1997 book, you said the Mark-to-Market program
should be rejected, although you allowed, of course, that it
could cost the Government money where there was FHA insurance.
Now, we reached the conclusion that we just could not allow, or
we should try to retain these units in the affordable housing
inventory.
Over the next 4 years, approximately 1.2 million units will
expire. In buildings where owners have opted out, rents have
increased on average 44 percent. And in buildings where owners
have prepaid their Federal mortgages, and in both instances,
thereby getting out of the program, the increase in rents
averages an
astounding 57 percent. Almost three-quarters--72 percent of the
residents of these buildings--are elderly or disabled, making
it
even more difficult for them to move or to find adequate
housing.
I really want to draw you out on what your attitude is with
respect to these Section 8 contracts for property that are
decent and safe with respect to their renewal over the next 4
years.
Mr. Weicher. Certainly, Senator. First, I wrote that paper
for a conference in 1996, although with publication lags, with
which Chairman Gramm is certainly familiar, it did not come out
for a year after the conference at which I gave the paper. It
has a publication date of 1997, but it was written in 1996. And
it was written in the context of President Clinton's
Reinvention Blueprint for HUD which introduced the concept of
Mark-to-Market, but which, as I remember the discussions in
both Houses and both parties, there was a great sentiment that
Mark-to-Market, as formulated at that time, was not likely to
work very well.
There were many problems with it. And indeed, Congress
wrestled with it through 1995 and 1996, without enacting it,
and then revisited it and enacted a version of Mark-to-Market
in 1998, if I remember correctly, as part of the housing bill
that finally emerged that year.
Since then you established the Office of Multifamily
Housing Assistance Restructuring and Mark-to-Market has been
going forward at HUD ever since then, and is going to continue
to go forward as long as the need is there and the program is
there. As I understand it, it is expiring later this year.
I think the problems of the multifamily assisted inventory
have been the most complicated problems, program problems, that
HUD has experienced. Congress has wrestled with solutions for
those projects since at least 1986. The Mark-to-Market
approach, as finally enacted by Congress in 1998, is a serious
attempt to address the problems. And I think when we complete
that process, we will see what remains.
I also think that Congress effectively indicated how the
problem of rising rents should be addressed for the tenants
with the enhanced voucher, which provides protection for the
tenants who are in danger of being evicted because they cannot
afford the rents when people opt out.
I think serious efforts have been made in recent years to
address that problem. I hope to work with you all to continue
addressing the problems in that inventory as we move forward.
Senator Sarbanes. Do you contemplate that we could lose 1.2
million units over the next 4 years?
Mr. Weicher. I do not see that we will lose 1.2 million
over the next 4 years with the programs that you all have put
in place.
Senator Sarbanes. We will have to move that program through
to continue to work it through the 4 year period. Is that
correct?
Mr. Weicher. I know that we will need to either reauthorize
that program or we will all need to agree on an alternative for
that program to address the problems of the remaining units
that are going to be in a position to prepay over the next few
years.
Senator Sarbanes. Well, I do agree with you that I think
Congress did come to grips with the problem in a constructive
way in 1998, and that that is working pretty well. I do not
think we ought to simply depart from that or jettison it.
Mr. Jackson, you are going to be the Deputy. Do you have
any views on this?
Mr. Jackson. I agree with that. And I think that Mr.
Weicher has answered it very well.
I think that with the support and help from Congress, we
can address the need and avoid the crisis that you spoke about
just a few minutes ago.
Senator Sarbanes. Now, Mr. Weicher, you criticized the
multifamily insurance programs at one point. You said those
problems can be solved by reforming the programs of FHA most
directly by eliminating multifamily insurance.
It is a little bit like getting rid of the headache by
cutting off your head. We have tried to do something there. Let
me just mention a couple of facts.
The credit subsidy necessary to operate the 221(d)(4)
program has dropped from 12.74 percent in 1993 to 3.35 in 2001.
The credit subsidy for the 221(d)(3)program has dropped from
29.89 in 1995 to 17.22 in 2001, and it is projected to drop
even further in 2002 to 10 percent.
The Apt report in 1999 shows that claim rates in each of
the major multifamily programs have dropped significantly in
recent years and found that, taken together, the five
multifamily programs earned more in fees and premiums than they
paid out in claims. As FHA Commissioner, you will be
responsible for overseeing the multifamily insurance programs.
What is your current view of those programs?
Mr. Weicher. Well, as I said in my statement, I think
multifamily insurance serves important public purposes for
lower income families in underserved areas. The statement that
you quoted is a statement I made in 1995, in a very different
political context than we have now.
In 1995, nearly every Republican who was interested in
housing had a proposal to abolish HUD. There was a substantial
group of freshman Republican Congressmen with a proposal to
abolish the Department.
Senator Faircloth, who was a Member of this Committee and
Chair of the HUD Oversight Subcommittee at that time, had a
proposal to abolish HUD.
Senator Dole had a proposal to abolish HUD. The Republican
platform of 1996 proposed to abolish HUD.
In the House, Congressman Lazio was Chair of the Housing
Subcommittee and he had a proposal to repeal the National Hous-
ing Act of 1935, which he carried through the House and into
conference with this Committee. And it was my understanding
afterwards that you, Senator Sarbanes, were responsible for the
conference not agreeing to repeal the National Housing Act of
1935, as the leader of the Democrats in the conference.
And at the same time, President Clinton had his Reinvention
Blueprint, which had very dramatic proposals for changing the
way FHA worked for drastically revamping the single-family
mortgage program, but leaving the multifamily mortgage program
alone.
I was saying to my colleagues in the Republican Party, in a
number of venues and hearings before this Committee and the
House Committee and other Committees, and also in various
speeches and publications, I was saying we should not abolish
HUD. HUD serves important public purposes, purposes that we as
Republicans recognize as important, as well as purposes that
Democrats recognize as important. And it serves those purposes
reasonably well.
There are programs in areas, in HUD, that do not work very
well. You should fix those. You should make them run better.
Or, if you like, you should abolish them. But you should not
abolish HUD. And I was a lonely voice.
At a hearing in this room, in front of two Subcommittees of
this Committee, Senator Faircloth asked me directly, should we
abolish HUD? And I said to him, point blank, no. And that was
not the answer he wanted to hear.
Senator Bond was about the only Republican who was speaking
about the value of preserving HUD. And Senator Bond was saying,
we should have a top-to-bottom review of FHA and we should
sharply consolidate the number of programs.
I thought that the problems in HUD, the management problems
at HUD, had been concentrated in multifamily insurance and I
think that that is something that there is also bipartisan
agreement about among people who have worked at HUD in
administrations back 30 years. That was 1995 and 1996.
Now, 5 years later, no one in either party is talking about
abolishing HUD or terminating HUD or terminating any of its
major programs. Certainly, President Bush did not during the
campaign, and I was one of his advisers as Chairman of his
Housing Policy Task Force. Certainly, Secretary Martinez has
not said that.
The Republican Party position now is reasonably close to
the position I was taking in 1995. Of course, what I wrote in
1995 and 1996 remains in print. It is accessible on the
Internet. But what is not there is the context, who I was
speaking to and what other people were saying at the same time.
Senator Sarbanes. Well, thank you. I see my time is up. I
would just make the observation that Secretary Martinez has
actually asked Congress to raise the FHA multifamily loan
limits.
Mr. Weicher. Yes, he has.
Senator Sarbanes. By 25 percent, to ensure that multifamily
housing can be built in high-cost areas. So he and the
President have an initiative, actually, in that arena.
Mr. Chairman, could I just very quickly----
Chairman Gramm. Oh, sure.
Senator Sarbanes. What is your view of the Low-Income
Housing Tax Credit program?
Mr. Weicher. I think the Low-Income Housing Tax Credit is
one of the programs we have which is actually producing housing
for lower income people. It was enacted, of course, in 1987,
and when I was at PD&R, we were doing the first studies of the
low-income tax credit. And we were also implementing the
regulations for the qualified census tracks in difficult-to-
develop areas that you enacted, I believe, in 1990. It may have
been 1989.
And that is the important part of the housing finance
system, the system of providing affordable housing, for making
sure that every American lives in the most decent affordable
housing that we have.
Senator Sarbanes. Now what is your view of using HOME and
CDBG funds for affordable housing production?
The HOME program, of course, is being used by the State and
localities in a matching way and they have drawn in the private
sector for, I think, important housing production. And the CDBG
funds as well in certain instances. What is your view about
that?
Mr. Weicher. I think those programs are available to cities
to do what the cities think needs to be done in housing and
community development. And that is a local option.
My recollection is, and I haven't looked at CDBG in this
light in some years, that it cannot be used for new housing
construction.
I believe that was certainly true when we were here in the
Administration of the first President Bush. I do not really
know if you all have changed that in recent years. But those
programs are there to address the housing and community
development needs of the cities as the cities see them.
Senator Sarbanes. All right.
Thank you, Mr. Chairman.
Chairman Gramm. Thank you.
Senator Allard.
Senator Allard. Thank you, Mr. Chairman. I just think it
should be pointed out that, in the late 1980's and early
1990's, FHA was in very serious financial trouble. In fact, it
was essentially broke. And Mr. Weicher, you played a major role
in designing the proposals that rescued FHA.
Mr. Weicher. Yes.
Senator Allard. And FHA is today in great financial shape.
In fact, some Members are wanting to take some of these extra
dollars and divert them to other programs. Would you please
share with this Committee your work in that area?
Senator Sarbanes. Mr. Chairman, let me just say, I
acknowledged that contribution in my opening statement about
Mr. Weicher. Mr. Weicher has many skills and a lot of
expertise. And if he would just assure us that they are going
to be working in the right direction, we would be very
comforted by that.
Senator Allard. I just felt like they ought to be writing
these things down.
[Laughter.]
Mr. Weicher.
Mr. Weicher. Mr. Chairman, I promise not to write a single
article as long as I am Assistant Secretary and FHA
Commissioner.
[Laughter.]
For one thing, I won't have time. But I do promise to
testify.
Thank you, Senator Allard. I did work with Secretary Kemp
and with my colleagues in the 1990 reform of the FHA single-
family program, as Senator Sarbanes mentioned. And the
proposals that we made were passed by Congress on a bipartisan
basis with the support of Senator Cranston and Senator D'Amato
and the support of Congressman Gonzalez and Congressman Wylie
in particular.
I think that was an example of bipartisan cooperation to
address an important problem in a major program and to address
it in a hurry. I think the experience of the last 10 years
indicates that we certainly were doing something appropriate in
that situation.
I think that the FHA insurance funds, according to the
evidence we have now, is solvent. The MMI Fund, we have seen
the new Deloitte & Touche actuarial study indicating that the
Fund is not quite in as good shape as they thought it was a
year ago.
We have the GAO testimony before you, I believe, indicating
that there are circumstances under which the Fund's reserves
may be drawn down rather sharply. And I understand that there
is a paper about to be published by a CBO analyst suggesting
that both GAO and Deloitte & Touche may be optimistic.
And of course, the last Administration lowered the up-front
premium by 75 basis points. And I think we need to look closely
at the effect of that on the MMI Fund.
I certainly intend to monitor the status of the Fund
carefully. I went through the process of restructuring it once
and I really would not like to revisit that issue if I possibly
can.
Senator Allard. Mr. Jackson, as Chairman of the Authorizing
Committee, I am greatly concerned about the vast number of
programs at HUD that have never been authorized, as well as the
current number of major programs with expired authorizations.
Does this concern you, and do you plan to submit language
for authorization or reauthorization?
Mr. Jackson. The Secretary and I at this point in my
consultant status has been reviewing that. I cannot give you a
specific answer today, Senator. But after much evaluation, I
can assure you that we will get back to you.
Does the Secretary perceive that there are too many
programs? Yes. How we will approach that at this point, I think
it is important that we do it in a very systematic way and we
will get back to you at that point in time.
Senator Allard. You are looking at some language you might
get to us for authorization or reauthorization. Is that
correct?
Mr. Jackson. Yes.
Senator Allard. Thank you.
Mr. Hauser, last December, Congress passed and the
President signed a housing bill that modernized manufactured
housing. And that legislation included an implementation
timetable. Will you work with the Congress to see that this
important law is implemented in a timely and an efficient
manner?
Mr. Hauser. Senator Allard, we will do that. And I know it
is a concern in terms of time limits that Congress has placed
in legislation. And my understanding is that we are on track to
make these time limits. I think there are some appropriations
or funding issues, but the answer is yes.
Senator Allard. Are you willing to work with this Committee
to ensure that housing laws are implemented and administered
according to Congressional intent?
Mr. Hauser. Yes, sir.
Senator Allard. Mr. Bernardi, currently, HUD has a number
of different homeless programs. Are you willing to work with me
and this Committee to find ways to consolidate and improve
these
programs?
Mr. Bernardi. Yes, I am, Senator. The billion dollars that
is available for homeless programs, we use the emergency
shelter grants back in Syracuse and they are very, very helpful
for the various organizations that provide housing for people
that are in desperate need.
But we would be more than happy to work with you and with
this Committee in any way in which we could consolidate it. As
I understand it, they are looking at the formula-based program
as opposed to the competitive grants.
Senator Allard. Thank you.
Mr. Chairman, I see that my time is expired.
Chairman Gramm. Thank you.
Senator Reed.
Senator Reed. Thank you very much, Mr. Chairman.
Mr. Weicher, we continually refer back to your writings and
that is a compliment because these are not the extemporaneous
musings of someone with a casual interest in housing. You are a
serious scholar. You have thought about these issues.
Just as recently as 1997, I believe, in your book,
``Privatizing Subsidized Housing,'' you stated: ``Despite the
concern about a shortage of available housing for the poor, in
reality, the supply of available decent housing that families
could afford if they were given tenant-based assistance at
current subsidy levels, is large enough to accommodate them
all.''
Yet, the evidence, particularly in my part of the country,
New England, is that 30 percent of families given vouchers are
unable to use them because the rents are too high. And there is
also anecdotal evidence from around the country that this is
not a regional phenomenon.
First, do you believe that there is sufficient housing out
there by giving everyone a voucher which you wrote about 2 or 3
years ago--4 years ago. I am sorry.
Mr. Weicher. Senator, as I said before, I wrote that in
1996, and I wrote that in the context of proposals by both
parties in President Clinton's Reinvention Blueprint and by
Senator Dole and the Republican platform to voucher-out public
housing. The Reinvention Blueprint, as I think Senator Sarbanes
mentioned, had a dramatic proposal to give everyone in public
housing a voucher.
I was invited to give a paper at a conference at the
American Enterprise Institute. The subject of the conference
was Getting Serious About Privatization. The conference was in
July 1996. They first asked me to write a paper about getting
rid of HUD, privatizing HUD, and I said, no. Then they said,
well, how about privatizing public housing?
And I thought that with leaders in both parties talking
about vouchering out public housing, it would be interesting to
look at what would happen, if we did that, if we took that
seriously, how would it work, what would the benefits be, what
would the problems be, and how would the problems be addressed.
The quotation that you mentioned comes from a discussion, a
very specific discussion of suppose you give everyone now
living in public housing a voucher. How many of them would want
to move? And for those who want to move, would there be enough
housing for them?
And working with census data, I calculated that about
500,000 families living in public housing would want to move.
That was based on those who said that they were very
dissatisfied with either their housing or their neighborhood.
At the same time, other census data indicated that there
were about 1\1/2\ million available vacant rental units renting
for less than the national average fair market rent. And so,
with that data, I concluded that there was enough housing
available if everyone who wanted to move was given a voucher.
I then went on to say that those were national figures and
that I did not have data for individual markets and there could
well be local markets in which that situation would not apply.
Senator Reed. So based on current data, would you still
share that conclusion?
Mr. Weicher. I haven't looked at current data on either of
those questions. I do not know what the latest data shows about
the attitude of public housing residents toward their housing.
But that would be the key in determining how many might want to
use vouchers to move. And I haven't really looked at the
vacancy rates.
First of all, that is not germane to anything I am likely
to be doing as FHA Commissioner. But beyond that, I do not
think, as Senator Sarbanes said earlier, Congress is likely to
pass a proposal like that any time in the next few years.
Senator Reed. My concern is that you are likely to
recommend such a proposal to the Secretary and the President.
Would you recommend such a proposal?
Mr. Weicher. I do not have any expectation of recommending
such a proposal to them.
Senator Reed. I want to understand this because, again, you
are a serious student and an accomplished academic.
I seem to be hearing you say that this dynamic is based
upon those who voluntarily want to leave public housing
matching up with those who are in available housing. And that
conditions your conclusion. Is that fair?
Mr. Weicher. That is right. That is exactly right, Senator.
There is about a three-page discussion in that monograph of
that particular issue and the quotation is in that context.
Senator Reed. Is it fair to conclude that for those who
want to remain in public housing, we have to continue with
public housing?
Mr. Weicher. Yes, Senator. Senator Gramm said earlier that
our experience is that public housing for the elderly generally
works very well and most elderly residents seem to be very
satisfied with their housing.
We all know that there are public housing projects in this
country which do not provide decent housing. And we know that
there are troubled public housing authorities and that is a
problem that Congress and Administrations have wrestled with
for years.
Senator Reed. My time is expired, so--is there a second
round, Mr. Chairman?
Chairman Gramm. Yes, go ahead.
Senator Reed. Thank you.
Chairman Gramm. I don't know that we will have a second
round. Why don't you just take a couple more minutes?
Senator Reed. Thank you, Mr. Chairman. Thank you very much.
Just to note that Senator Sarbanes has raised the issue of
the Mark-to-Market program. And one of the phenomenon that
seems to happen, the data that is collected, is that when the
owners opt out, rents have increased an average of 44 percent.
And in buildings where owners have prepaid their Federal
mortgages, got out early, the increase in average is an
astounding 57 percent.
Seventy-two percent of all the residents in these buildings
are elderly or disabled, making it difficult just on a
practical basis to go elsewhere besides the psychological
attachment to a home, particularly for a senior.
That seems to me to require two things. Either continuing
the Mark-to-Market to keep these units in a subsidized form, or
tremendous increases in vouchers, forgetting of course the
psychological and physical dislocation. And again, I think
those are the alternatives. What is your view?
Mr. Weicher. Well, I think it does require continuation of
the Mark-to-Market program until we have completed the process.
And it requires the enhanced vouchers which Congress has
enacted so that people who do not want to move are not required
to move.
Senator Reed, my mother lived in the HUD-insured project
for a number of years in her later years, and she would not
have moved out for anything. And she did not require financial
assistance as an issue. That issue did not arise. But she was
very comfortable where she was and that is where she intended
to live out her days, and that is where she did live out her
days.
Senator Reed. I am glad that is your sense. That is my
experience with my tenants in my building units. One final
question.
You will have a significant influence on the GSE's, Fannie
Mae and Freddie Mac. Last year, HUD established significantly
higher affordable housing goals for Freddie Mac and Fannie Mae.
It did so in part because it found that the share of the
affordable housing market, their share, was substantially
smaller than their share of the total conventional conforming
market. My question would be what are you going to do to
continue this effort to increase the participation of these
GSE's in the affordable housing market?
Mr. Weicher. HUD will continue to monitor how the GSE's are
performing in the housing goals and will continue to monitor
the housing market. I have not participated in any discussions
about specific changes in the goals and I have no plans to
address that issue in the near future. I do not know what the
timetable is on which HUD acts on that issue. I have not really
followed it very closely since the legislation in 1992.
Senator Reed. Thank you.
Thank you, Mr. Chairman.
Senator Allard. Mr. Chairman.
Chairman Gramm. Thank you.
Senator Allard. I would just make the observation, I think
it was 3 years ago, I was the only Republican that voted with
the Democrats in support of vouchers. And we see a lot of
concern about vouchers here. What a difference 3 years makes.
Senator Sarbanes. We support the vouchers as part of a
balanced program that also maintains this project-based
assisted housing. We think we need all of that in the inventory
as weapons to address the housing issue.
Senator Reed. Right.
Senator Sarbanes. So I do not want the issue drawn as
though we are rejecting the vouchers because we have supported
the vouchers. But not totally in lieu of the other assisted
housing that we are provided, which often deals with a
different target population and a different set of housing
circumstances.
Senator Reed. Thank you.
Chairman Gramm. Thank you.
Senator Bunning.
Senator Bunning. Thank you, Mr. Chairman.
This is a toss-up question. Anyone who would like to can
answer it. What priorities do you feel should be emphasized and
how can we allocate resources better at the agency?
I know that you have been a consultant only, Mr. Jackson,
but I obviously think that all of you have been thinking how
you are going to make HUD a much better place.
Mr. Jackson. Senator, I think the Secretary has spoken very
well to this. And I believe the same as he does, that we must
go back to the core mission of HUD.
I think we have extensive programs that have been at HUD
and until we can, in essence, and I don't like necessarily
using the term, consolidate, but facilitate those programs and
bring them down to a manageable number, I think we will still
have some problems. Our first objective and goal is to bring
those down to a manageable number.
Second of all is to make sure that we allocate the
resources in the places they are needed the most within HUD.
Third, if we do that, we think that the morale of the
agency will be boosted, not necessarily in headquarters, but
also in the field, and that is where we need it most. So I
would say, in that order, that is the way that we should
approach it.
Senator Bunning. Does anyone else have any different ideas
or comments?
Mr. Bernardi. No different ideas, Senator, but to provide
the technical assistance and the training to our field offices
around the country. I think that that is very important so that
we can monitor and assist localities in whatever program they
are dealing with.
Senator Bunning. Mayor, I would like to ask you
specifically, this is not a special question, but I would like
to put something on HUD's radar screen, so to speak.
In Kentucky, we have a large number of tobacco warehouses
that have been closed. Many of these buildings are brownfields.
They have lead-based paint on the walls and asbestos in the
roof.
Unfortunately, these buildings also usually sit in
downtown. In fact, in Lexington, in Maysville, and many of the
towns in Kentucky have these right in the middle of the town.
Because of the liability, they are not being torn down or
resold. They just sit there vacant. A number of towns in
Kentucky and other tobacco States need help finding funds to
tear down these buildings and bring in new tenants to create
jobs.
I just wanted to make you aware of the problem and if HUD
had some kind of interest in seeing to it. Once the area is
cleaned up, we could build some really nice housing projects
and/or supplement those buildings with buildings that are
usable buildings. So when you are thinking of new ideas and
places to spend money for either housing or whatever, I want
you to keep that in mind.
Mr. Bernardi. Senator, in Syracuse, we used the Clean Air/
Clean Water Bond Act. In the State of New York, we spent I
think, $4 million to take down the old Smith-Corona plant that
was just filled with violations and had an awful lot of
asbestos and PCB's. That was 3\1/2\ acres. And that was a
State-city combination effort. We have also had the good
fortunate to use some HUD assistance on some of our brownfield
remediation.
But the budget, I believe, is $25 million, which is not a
significant--it is a significant amount of money, but not
enough money to do what you would like to do around the
country. But to reclaim those properties, business people, for
the most part, will not go in unless the property is ready. If
the property is not ready, the cost is too prohibitive.
So I agree with you, Senator. Any way we can find in which
we can leverage our resources and work with our States and our
communities to remediate those sites and put them back into use
and create jobs.
Senator Bunning. Thank you, Mr. Chairman.
Chairman Gramm. Thank you.
Senator Miller.
COMMENTS OF SENATOR ZELL MILLER
Senator Miller. Thank you, Mr. Chairman, and thank you,
gentlemen, for being willing to serve in this arena. I have
maybe two or three questions for Mr. Weicher.
One is philosophical, a couple, more specific. And I
realize you probably want to get on to the job before you
answer these specific ones, but let me ask you anyway.
In December 2000, Congress made an additional $40 million
appropriation in the credit subsidy. And as you know, that
money has not been released. There are 2,331 units in Georgia
that will not be funded if that money is not released. What do
you think about the release of those funds?
Mr. Weicher. Senator Miller, the Administration's position
has been that the program should be operated within the $101
million that was authorized and appropriated within the regular
procedure in the last fiscal year.
This problem of excessive demand for credit subsidy has
arisen three times in the last 8 years. And part of the problem
this year is the fact that there was $12 million left over in
demand last year which took up the first $12 million for this
year. So the last Administration basically took the first $12
million of this year's credit subsidy and then, of course, went
on allocating subsidy through the end of the Administration.
We also have an unusual problem this year in that we have a
much higher proportion of D-3's in the program than we do D-
4's. D-3's, as Senator Sarbanes was mentioning, have a much
higher credit rate. It is about 5 times the credit rate as D-
4's.
We now have 25 percent of the portfolio this year being D-
3's instead of 10 percent. If we would have had the usual
proportions, we would have $27 million more in credit subsidy
than we now have and we would not be having the problem.
The Administration's proposal, of course, is to raise the
premium by 30 basis points, which will turn this into a demand
program like FHA single-family and will resolve that problem.
I also know, and I believe it was Senator Sarbanes who
referred to the Apt study, I also know that there is some
evidence that the mortgage bankers have argued that, in fact,
the credit subsidy requirements are much too high and there may
even be no need for credit subsidy because the losses in the
program have been so low.
One of the things that I would intend to do if I am
confirmed is to do a systematic review of exactly how the
credit subsidy is calculated. As far as I can tell, that issue
has not been revisited in a number of years, and I would intend
to see what the appropriate credit subsidy rate would be, what
the appropriate premium would be, and make that recommendation
to the Secretary and to the present OMB and, hopefully, to the
Congress.
Senator Miller. Thank you. Let me ask you this also.
As you know, the HUD Secretary serves as a member of the
Federal Housing Finance Board, which regulates the Federal Home
Loan Bank system. And usually, he names the FHA director as his
designee. What do you think in general about what is the
appropriate role of the Federal Home Loan Banks?
Mr. Weicher. I think they are an important part of the
housing finance system. I think they provide a stable source of
funds for community banks and other housing lenders. And I
think they proved their worth in the 1980's and early 1990's,
in particular, before and after FOREA, when much of the housing
finance system was disintegrating around them. I think that I
had the pleasure of assisting Secretary Kemp in his role as a
member of the Federal Housing Finance Board.
Indeed, when it was first created, he was the only member
of the Federal Housing Finance Board because he was the only ex
officio member and there was a question about whether Congress
had intended to have a full-time board or a part-time board.
And until that got resolved, it had a one-man board, one-person
board, and I worked with him on that. So I am somewhat familiar
with the issues that the Federal Housing Finance Board deals
with on a day-to-day basis.
Senator Miller. Thank you. One quick question, and this
will be my last one.
Have you had time to get an opinion on what you think about
the streamlined down payment program that they put into effect
in 1998 for 2 years and then renewed it for another 2 years?
Mr. Weicher. No, I have not, Senator. I have not taken a
look at that yet. I have been here as a consultant for about 4
weeks and I know that that is important, I have not gotten to
it. But I will.
Senator Miller. Thank you.
Chairman Gramm. Thank you.
Senator Carper.
COMMENTS OF SENATOR THOMAS R. CARPER
Senator Carper. Thanks, Mr. Chairman. To our witnesses,
welcome. I apologize for being late. We have another hearing at
this time on the Postal Service rate hikes that you have been
hearing about. So I apologize for missing your statements.
Senator Sarbanes may have touched on this one issue, but I
want to come back to it again just for clarification. And the
issue is whether or not we ought to increase the multifamily
loan limits by 25 percent.
I think when Secretary Martinez was before us, maybe even
before he was the Secretary, we talked about this. I think he
said it is what I would like to do. And I would just like to
ask you, Mr. Weicher, first, your thoughts more generally on
multifamily housing and what we ought to be doing. But more
specifically, your views with respect to that 25 percent
increase.
Mr. Weicher. Well, I certainly think that that increase is
desirable. We have not had one, I believe, since 1992. And
while we have not had a lot of inflation in the economy, we
have had some inflation in this economy and those limits are
now out of date.
I believe the Secretary announced that in March, if I
remember correctly. It may have been in February, that that was
his intention to do that.
As I said in my statement, and I know that, with all the
hearings around here, I am surprised that there are very many
Senators here at all. As I said in my statement, I think
multifamily insurance serves important public purposes. Most of
the projects provide housing for people who are in the lower
half of the income distribution. About half of them are located
in underserved areas. That is where the housing is needed and
that is the people for whom the housing is needed. I think the
program is very important.
Senator Carper. How do you feel about maybe indexing the
loan, some CPI, something like that in the future?
Mr. Weicher. I haven't thought about that issue, whether
you would want to index it. If you wanted to index it, there
would be a question of whether you wanted to index it to
something on the demand side of the market or something on the
supply side of the market. There are some indexes of cost of
construction which might be useful. But I think that, I know
that the Administration would want to look at that issue before
making any recommendation.
Senator Carper. Thank you.
If I could go to Mr. Jackson, I understand that you have
run a number of housing authorities.
Mr. Jackson. Yes.
Senator Carper. Where?
Mr. Jackson. St. Louis, Washington, DC, and Dallas.
Senator Carper. Just those little ones, huh?
[Laughter.]
Mr. Jackson. Just those little ones.
[Laughter.]
And I had the opportunity of meeting with you when I was on
the National Commission on Severely Distressed Public Housing
and we came to Delaware.
Senator Carper. To see how a place that doesn't have
nationally distressed housing is run.
Mr. Jackson. You did not have it.
[Laughter.]
Senator Carper. Thank you. I have just a couple of
questions. One, when you look at the budget proposed by the
Administration, with respect to operating support, operating
subsidies, I think what they have done is they have collapsed
one of the programs that we used to fight crime and that sort
of thing in our public housing.
And they sort of collapsed that money into providing a
little increase in the operating subsidy money and said, I
think it was a $300 million appropriation for the public
housing, drug enforcement, or whatever it was called.
We end up with zero in that program in the proposed budget.
We end up with another $150 million a year I believe in the
operating subsidy. And we are just basically saying to the
housing authorities, you figure out how you want to do it. You
want to use that $150 for drug elimination, for public safety,
you can do that.
Put on your old housing authority director hat for one of
those places, DC or St. Louis or some other place. And you are
asking in an environment with energy costs going up as they are
to choose between meeting energy needs and trying to provide a
safer place for people to live. How do you make that decision?
Mr. Jackson. Senator, having run three housing authorities,
I believe that the drug elimination money, had it been used for
what it was set out to be, would have been a very good thing
initially.
What occurred is that many of the housing authorities in
this country were using it for the operational expenses. Now
you will get some to say, no. But having run housing
authorities, I know, traveling around this country.
I do believe that the monies that are allocated, the $150
million, can be used as they so choose. If they so choose to
use it for drug elimination purposes, it can be used for that.
And I think that that gives them the flexibility to decide,
rather than having a program that says, there is no
flexibility. And yet, housing authorities are using it for
purposes that it is not designed for. And that has gone on for
some period of time.
I do believe also that when we look at the budget that we
have today, at almost $31 billion, I can tell you that back in
the 1990's, when I visited your city, we had a budget of about
$23 billion. So that is a tremendous increase today compared to
what it was in the early 1990's and mid-1990's.
I think that the program, as set up, with me reviewing the
budgets in the consultant status, I think it is well organized
and well established. The operating subsidies can literally be
met.
The other thing that I think is important is that the
Congress allocated a specific allocation to address the energy
needs of the housing authorities in this country because of the
energy crisis.
I think we will have to review it to see how much of that
money has been used. I asked the other day--and clearly, I
think it was about $101, $105 million that you allocated--as of
today, through energy costs, I think only about $30 million of
it has been used. And I can get the specific number for you for
sure. But, still, we have a major portion of it that has not
been used to date.
So I think that if we see that it is necessary to allocate
it for energy costs, yes, we will come back and speak to you.
But as of today, my initial information is it has not all been
utilized.
Senator Carper. The Administration is going to roll out
their other proposals with respect to energy policy in the
weeks ahead.
The President has had some comments. He is going to have
more to say very soon. And I think the Vice President's
commission is going to report to us next month.
What role do you see on the energy conservation side? Do
you see us pursuing through HUD--how does it relate, energy
efficiency and public housing--what is the relationship here?
And how does that relate to our funding for capital investment?
Mr. Jackson. I don't think I am in a position to address
the energy policy at this point of the Administration. I can
tell you that I do believe in energy conservation, being the
President of a major utility company.
Senator Sarbanes. Careful. We may send you to California.
[Laughter.]
Chairman Gramm. That would be the end of your career.
[Laughter.]
Mr. Jackson. But I will say this to you, Senator. The most
difficult thing that I have found out in running a utility
company is to get people to conserve energy.
I remember when I was in Corpus Christi and I was talking
to a group of nuns. They were at the monastery. And I will
never forget talking to the principal nun. And she says, well,
if the people across the street save energy, then we will, too.
[Laughter.]
Well, it is very difficult to get people conditioned to
conserve.
I think that we will have to look at the President's policy.
And
we as HUD will work with them to make sure that the residents
within our public housing complexes address those needs.
I have always been a conservationist and even when in
Dallas, we tried to conserve energy. In fact, we had a policy
that, other than for senior citizens, if you expended so much
energy, we expected you to pay the differences.
Senator Carper. Let me just say, in closing, my time has
expired, let me say in closing, we all need to be
conservationists with respect to energy. Even the nuns.
[Laughter.]
Mr. Jackson. Yes.
[Laughter.]
But I was not going to tell the sister that.
[Laughter.]
Senator Carper. Probably would not. There are probably some
opportunities here for us to conserve energy in our public
housing.
And I hope that we will be mindful of that as we consider
the amount of money that we allocate to or take away from
capital investments in the public housing. Thank you very much.
Chairman Gramm. Senator Sarbanes, did you want to make some
closing----
Senator Sarbanes. I did. Mr. Weicher, Senator Mikulski
yesterday held a hearing in Baltimore on the problem of
property flipping and predatory lending.
This is something we have met more than once with Secretary
Martinez on. He has been very supportive of efforts there. And
he has appointed Laurie Magiano, who is the Director of the
Single-Family Asset Management Disposition Division at FHA, to
be the point person. Are you familiar with this ongoing effort?
Mr. Weicher. I am somewhat familiar with it, Senator.
I do know that Secretary Martinez is very concerned about
this and prepared to work with the Federal Reserve Board, with
the industry, with consumer groups, and certainly with the
Congress.
Senator Sarbanes. Ms. Magiano has moved in. We are
impressed by her efforts now just over a few weeks. So,
presumably, we can count on your cooperation and support for
this effort of the Secretary's and her activities.
Mr. Weicher. Yes, that is right. I had heard that the
people that went up from HUD thought that that was a useful
town meeting. But I am very glad to hear it also from you.
We know that this is a particular problem in Baltimore.
But, of course, FHA had identified five cities where there were
hot zones.
Besides Baltimore, it is Atlanta, Chicago, New York and Los
Angeles. In those cities, we are looking at the loans which
counselors identified to us as predatory loans where people are
in danger of losing their houses. We are working to prevent
foreclosure, to write down the mortgages in some cases where it
has been overvalued and where we have lenders who are engaging
in predatory lending, to either bring them before the mortgagee
review board or to have post-endorsement technical reviews to
see what they are doing, in some cases, to bar them from the
program.
FHA, for about a year now, has been doing the heavy grunt
work of fighting predatory lending. And I am sure that that is
going to continue under Secretary Martinez and, if I am
confirmed, it will continue with me.
Mr. Jackson. I can tell you, Senator, that I have had that
conversation and that is a priority. He believes that that is
very important and he has stated that.
That is why Laurie is taking the lead.
Senator Sarbanes. Right. Well, thank you all very much.
Mr. Chairman, I want to thank all of the witnesses. I want
to say to the other three, other than Mr. Weicher, we are very
interested in what you are doing as well. But, as it turned
out, I think in this hearing you were sort of sailing in the
wake of Mr. Weicher's ship.
[Laughter.]
So it was relatively easy duty for you. You owe a few to
Mr. Weicher because of it. And I want to wish all of the
nominees well.
Mr. Jackson. We just did not write anything down. That was
it.
[Laughter.]
Senator Sarbanes. All right.
Chairman Gramm. Thank you all very much. We will finish our
vote on the nominations of: John E. Robson, to be President of
the Export-Import Bank; and James J. Jochum, to be Assistant
Secretary of Commerce for Export Administration.
The Clerk will call the roll of those Senators who have not
previously had the opportunity to vote.
The Clerk. Mr. Shelby.
Chairman Gramm. Aye, by proxy.
The Clerk. Mr. Bennett.
Chairman Gramm. Aye, by proxy.
The Clerk. Mr. Enzi.
Senator Enzi. Aye.
The Clerk. Mr. Santorum.
Chairman Gramm. Aye, by proxy.
The Clerk. Mr. Crapo.
Chairman Gramm. Aye, by proxy.
The Clerk. Mr. Ensign.
Chairman Gramm. Aye, by proxy.
The Clerk. Mr. Dodd.
Senator Sarbanes. Aye, by proxy.
The Clerk. Mr. Johnson.
Senator Sarbanes. Aye, by proxy.
The Clerk. Mr. Schumer.
Senator Schumer. Aye.
The Clerk. Mr. Bayh.
Senator Sarbanes. Aye, by proxy.
The Clerk. Mr. Carper.
Senator Carper. Aye.
The Clerk. Ms. Stabenow.
Senator Stabenow. Aye.
The Clerk. Mr. Corzine.
Senator Corzine. Aye.
The Clerk. The vote is 20 ayes, Mr. Chairman.
Chairman Gramm. Thank you. And thank you all very much. The
Committee stands adjourned.
[Whereupon, at 11:50 a.m., the hearing was adjourned.]
[Prepared statements, biographical sketches of the
nominees, response to written questions, and additional
material supplied for the record follow:]
PREPARED STATEMENT OF SENATOR JIM BUNNING
Mr. Chairman, I would like to thank all of our nominees for
testifying today and I would like to thank you for holding this hearing
and this markup in such an expeditious fashion.
I think President Bush has once again demonstrated that he will
continue to ask outstanding people to serve in his Administration. I
hope that the Committee will report the nominations we are going to
vote on today and the nominees who are testifying today to the Senate
floor quickly.
All four nominees have very impressive credentials. Alphonso
Jackson has been the head of three housing authorities, as well as the
President of a public utility and served on two national commissions.
Richard Hauser has been a Deputy White House Counsel, has worked at the
Department of Justice and was Chairman of the Pennsylvania Avenue
Development Corporation. John Wiecher was an Assistant Secretary at HUD
and worked for OMB. Romolo Bernardi is the Mayor of Syracuse, NY and
was the City Auditor.
We are very fortunate that these fine nominees have chosen to serve
the public at HUD. Their diverse backgrounds and unique experiences
will help fulfill HUD's mission. We are lucky to have them.
Once again, I urge all of my colleagues to support these worthy
nominees. Thank you, Mr. Chairman.
----------
PREPARED STATEMENT OF ALPHONSO R. JACKSON
Deputy Secretary-Designate
U.S. Department of Housing and Urban Development
Tuesday, May 15, 2001
Mr. Chairman, Senator Sarbanes, and distinguished Members of the
Committee, thank you for the opportunity to appear before you today. I
would also like to thank Senators Hutchison and Bond for their generous
introductions.
Let me express my thanks to President Bush and Secretary Martinez
for selecting me for this important job. I am deeply honored by the
trust and confidence they have placed in me by nominating me as Deputy
Secretary for the Department of Housing and Urban Development.
Mr. Chairman, I was born and raised in Texas, the youngest of 12
children. Although my father had only a 5th grade education and my
mother an 11th grade education, they made sure that all of their
children received a good education. I am here because of my parents'
love and devotion and the lessons that they taught my siblings and me.
They stressed to us that with a good education and a strong work ethic,
there was nothing that we could not accomplish in this world. No
mountain would be too steep and no road too long. That is one reason
why I spent 6 years of my early career as a Public School Administrator
and a University Professor, helping to educate others.
My interest and expertise in urban law and housing issues led me to
a career in public service. I have been told that I am the first
candidate for Deputy Secretary of HUD who has experience both in the
field of public housing and in the field of community development.
I have run three major urban public housing authorities: St. Louis,
Washington, and most recently, Dallas. This experience has given me
insight into the needs of public housing authorities and how HUD
relates to them. It has also given me ideas about how to improve HUD's
oversight of these authorities so that they can provide better services
to those families living in public housing.
Having chaired two community development block grant agencies--one
in St. Louis and the other here in Washington, DC--I have also had
extensive experience with that side of HUD's mission. I have been able
to see HUD grants go to these urban areas. HUD has played an important
role in the recent rejuvenation of American cities and I look forward
to seeing HUD continue working in partnership with local governments to
improve the quality of life for American families.
My private sector experience has taught me about the importance of
management to a successful enterprise. I have spent the last 5 years
working in the private sector in Texas, most recently as the President
of American Electric Power-TEXAS, where I was responsible for the
management and operations of a nearly $11 billion company with 2,800
employees and over 900,000 customers.
My management style emphasized professionalism at all levels of the
company. I believe in setting high expectations and holding managers
and workers accountable. This is the kind of environment that I have
sought to create in the private sector and I see no reason why we
should not expect the same high standards from the employees at HUD.
The taxpayers deserve such standards from their public servants, as do
those who rely upon HUD's services.
HUD has a long history as a troubled agency. Although the
Department has been taken off the General Accounting Office's ``high-
risk'' list, many of its individual programs are still designated as
``high-risk.'' My top priority as Deputy Secretary will be to assist
Secretary Martinez in restoring complete credibility and accountability
to HUD. Congress has repeatedly told HUD that it must get its house in
order. This Administration is listening.
I am aware of the concerns of the GAO and HUD's Inspector General
and have studied their reports. If confirmed, I will insist that this
agency work in tandem with the GAO and the IG's office to correct the
Department's problems. We will avoid the adversarial stance that has
too often marked HUD's relationship with these offices in the past.
In conclusion, I realize that we have much work ahead of us. HUD
has an important mission to accomplish. Many of America's neediest
families rely on our services. We owe it to them to provide the best
possible programs we can in the most effective manner. And we owe it to
the American taxpayers to make sure that their tax dollars are being
spent efficiently and wisely.
I am a man of optimism. When I see HUD, I see a Department with
lots of opportunities to do great things. I see this as a historic
opportunity to improve the way HUD manages its programs. The Deputy
Secretary functions as the Chief Operating Officer. I see one of the
top duties of the Deputy Secretary as helping solve the management
problems that have plagued HUD for too long.
If confirmed, I look forward to working with Secretary Martinez and
the rest of his team at HUD as we implement this Administration's
mission. I also look forward to working in a bipartisan manner with
Members of Congress as we meet the challenges before us. As Secretary
Martinez said at his confirmation hearing, ``our mission at HUD is not
a Republican or Democrat mission, but rather an American mission.''
Thank you.
PREPARED STATEMENT OF RICHARD A. HAUSER
General Counsel-Designate
U.S. Department of Housing and Urban Development
Tuesday, May 15, 2001
Mr. Chairman and distinguished Members of the Committee, thank you
for the opportunity to appear before you today.
Let me begin by expressing my sincere appreciation to President
George W. Bush for his confidence in asking me to be part of his
Administration as General Counsel of the U.S. Department of Housing and
Urban Development. I am honored to be nominated. I also want to thank
Secretary Mel Martinez for asking me to join his team. Secretary
Martinez's life story is compelling and is the embodiment of the
American Dream. I will be proud to be at his side, as he develops and
implements his vision for making HUD an agency that will truly serve
America consistent with its core basic mission.
Mr. Chairman, I come before this Committee as an individual with
previous public and private sector experiences which hopefully have
prepared me for the challenges that lie ahead at HUD. From my early
days as a Federal prosecutor with the U.S. Attorney's office in Miami,
FL, at the Department of Justice in Washington in the Office of Policy
and Planning, and two terms in the White House Counsel's Office, as
Associate Counsel in the Nixon White House and Deputy Counsel to
President Ronald Reagan, I have well understood the value of Government
service and the need to approach that service with integrity and a
sense of commitment. My experience in the private practice of law
representing clients before departments and agencies has underscored
the importance of integrity and responsiveness in the administration of
our laws and programs. With that in mind, and with the Senate's
approval I am committed to assist Secretary Mel Martinez in his efforts
to make the Department of Housing and Urban Development a more
efficient, effective and responsive institution--one that will operate
with the highest ethical and professional standards--both for its
employees and its program participants.
It is my understanding that HUD has been an organization designated
as high risk by GAO and often criticized by its own Inspector General.
These areas of concern include--but are not limited to--FHA, the
integration of financial management systems, consistent application of
HUD program requirements and staffing capability. In this regard, let
me state clearly that I respect the independence of GAO and the Office
of Inspector General and appreciate the valuable, oversight functions
that they perform, and if confirmed, I will work to forge a
constructive working relationship with both entities.
During his first months in office, Secretary Martinez has already
begun the task of assuring that the appropriate use of HUD funds and
the appropriate adminis-
tration of HUD programs is his top priority. He has delivered that
message to the
Congress in his confirmation hearing, and at subsequent budget
hearings. He has
delivered that message to HUD staff and perhaps most important he has
delivered that message to the recipients of HUD programs. As General
Counsel, it would be my intent to help the Secretary put the HUD house
in order, and address the priorities of President Bush and Secretary
Martinez, so that HUD will become a truly effective agency, which is
capable of providing the housing and community renewal opportunities
needed by so many American families and neighborhoods.
Mr. Chairman, the Department of Housing and Urban Development has a
wide range of responsibilities. To his credit, the Secretary has made
it his priority to focus the agency on the core mission to: expand
homeownership opportunities for low- and moderate-income families;
renew distressed areas with decent and safe neighborhoods; enhance
affordable housing opportunities for all residents particularly members
of disadvantaged minorities; recognize the needs of the growing elderly
population and provide incentives to address those concerns and
encourage economic vitality while at the same time address the
challenges of growth and its impact on the quality of everyday life.
The Office of General Counsel cuts across all of those lines and
helps the Department achieve its goals consistent with the laws passed
by the Congress and signed by the President. The General Counsel is the
chief legal officer for the agency providing advice on all aspects of
Federal housing and urban development laws, regu-
lations and policies. These duties include: drafting legislation, and
regulations;
representing the Department in affirmative and defensive litigation and
serving
program clients as program counsel by providing guidance about the
statutes and
regulations that govern the operations of the Department to assure that
the programs are administered as Congress intended and in the best
interest of those whom the Department was established to serve.
I would also like to mention one other prior experience that I
believe is relevant to my prospective position at HUD. From 1987-1996,
I had the privilege of serving as Chairman of the Pennsylvania Avenue
Development Corporation (``PADC''), the Federally chartered and funded
entity that was charged with the revitalization of Pennsylvania Avenue
from the Treasury Department to the Capitol. In that capacity, I had
occasion to work with executive branch agencies, the Congress, the DC
Government, and the development community in a cooperative effort that
resulted in new commercial, retail, and residential development along
``America's Main Street.'' My work with the PADC gave me an
appreciation of the complexities of development in the inner city and
the benefits that can be achieved when working cooperatively with the
Congress, Federal and local officials, and the private sector.
With the confidence and support of Secretary Martinez, I expect
that as General Counsel, I will be involved in all aspects of HUD and
its many program responsi-
bilities. As I have already mentioned in this brief statement, a major
focus will be
ethics. One of President Bush's first acts was to meet with his White
House staff and clearly articulate his expectations that all who work
in his Administration will comply with the highest ethical standards.
Secretary Martinez has embraced this mandate for administering HUD
programs. It will be my intent, if confirmed as General Counsel, to
assure that the standards of conduct are clearly articulated, clearly
understood and fairly but firmly enforced by HUD, as they relate to
both HUD employees and HUD program participants. That is the only way
HUD can administer its programs and assure that the programs are
delivered consistent with the responsibility entrusted by the public
for the benefit of the people who need them most.
It is an important time for our country and a critical time for
HUD. It is time for HUD to address its mission with a sense of urgency,
integrity, efficiency, and high ethical standards. If reported
favorably by this Committee and confirmed by the Senate, I look forward
to fulfilling the duties and responsibilities of the position for which
I have been nominated. Thank you for your consideration.
PREPARED STATEMENT OF JOHN CHARLES WEICHER
Assistant Secretary for Housing and
Federal Housing Commissioner-Designate
U.S. Department of Housing and Urban Development
Tuesday, May 15, 2001
Thank you, Mr. Chairman. It is a great honor to appear before this
distinguished Committee today as the nominee for Assistant Secretary
for Housing/FHA Commissioner. I am very grateful to President Bush and
to Secretary Martinez for offering me the opportunity to be part of
this Administration, in this important position.
FHA has been central to the American Dream of homeownership since
the 1930's. It is widely and rightfully regarded as a social policy
experiment that worked. FHA revolutionized the housing finance system
and the mortgage instrument. Working with GNMA, it pioneered the
Mortgage-Backed Security. It has helped to establish the viability of
new mortgage instruments such as Graduated Payment Mortgages and Home
Equity Conversion Mortgages. It has provided mortgage insurance for
purchasers of manufactured homes. FHA has a proud legacy.
Promoting homeownership remains important today. As Secretary
Martinez has pointed out, the homeownership rates among African-
Americans and Hispanic Americans remain below 50 percent, even though
the overall homeownership rate is at a record high. That is a challenge
to HUD and FHA in particular. During his campaign, President Bush
proposed the ``New Prosperity Initiative,'' to expand homeownership
opportunities to lower-income families. The New Prosperity Initiative
includes $1.7 billion for an investor-based tax credit to encourage the
construction and rehabilitation of single-family homes in distressed
communities, parallel to the Low Income Housing Tax Credit. It also
includes the ``American Dream Down Payment Fund,'' to provide $1
billion in matching grants to lenders to help low-income families
become homeowners; and the down payment voucher, enacted by Congress in
December, allowing low-income families and individuals with
disabilities to use Section 8 rental vouchers toward the down payment
on a home. The primary responsibility for developing and implementing
these important initiatives will lie with other program offices in HUD,
and with other agencies in the Administration, but FHA will be working
with them, drawing on its long experience, to help more Americans
realize the American Dream of owning their own home.
In addition to promoting homeownership, FHA provides mortgage
insurance for multifamily housing, supporting the construction of new
apartment projects and the refinancing of older ones. FHA multifamily
insurance serves an important public purpose--most of the projects that
FHA insures are affordable to families in the lower half of the income
distribution, and almost half are in underserved areas. These families,
and these communities, need FHA. FHA also insures a large portfolio of
assisted rental housing projects for lower-income families. It insures
hospitals and nursing homes. It insures home improvement loans. These
are important programs also.
During his confirmation hearing, Secretary Martinez stated that his
first priority will be for HUD to continue to put its own house in
order, building on the work of Secretaries Kemp, Cisneros, and Cuomo,
and addressing the institutional weaknesses identified by GAO and the
HUD Inspector General. He mentioned specifically some of FHA's
programs. If confirmed, I plan to work with these experts and with the
senior management at HUD to remedy these problems. It is my intention
to make all of FHA's programs work as well as possible, serving the
public purposes for which they were created.
Mr. Chairman, I know the issues and the problems of HUD from
experience. I have served at HUD in three previous Administrations.
From 1989 to 1993 I was Assistant Secretary for Policy Development and
Research for Secretary Jack Kemp in the Administration of President
George Bush. I was Deputy Assistant Secretary for Economic Affairs
(Chief Economist) from 1975 to 1977 with Secretary Carla Hills in the
Administration of President Gerald Ford. Before that, I spent 1 year
(1973-1974) as a Division Director. I have also served as Associate
Director for Economic Policy (Chief Economist) at the U.S. Office of
Management and Budget, from 1987 to 1989.
As Assistant Secretary for Policy Development and Research, I was
active in addressing several major policy issues that concerned FHA.
These included reform of FHA home mortgage insurance, regulation of
real estate settlement practices, and environmental issues in housing.
In addition, I directed the Secretary's Advisory Commission on
Regulatory Barriers to Affordable Housing. I also worked on some of
HUD's major management challenges of that time.
Since 1993, I have been Director of Urban Policy Studies at the
Hudson Institute. I was the Project Director for Hudson's Michigan
Urban Policy Initiative, designing a State urban homeownership strategy
and developing a reform of the State's property tax reversion process.
After 2 years of work, all our proposals were passed with overwhelming
bipartisan support in the State legislature and signed into law by the
Governor in July 1999. I have also held the F.K. Weyerhaeuser Chair at
the American Enterprise Institute, and I was Director of the Housing
Markets Program at the Urban Institute. Before coming to Washington, I
was a Professor of Economics at Ohio State University for 10 years.
Last September I was very pleased to be appointed by Congress to
the Millennial Housing Commission. I have also served on the Committee
on Urban Policy of the National Academy of Sciences, and the Advisory
Committee on Population Statistics of the U.S. Census Bureau, and I
have worked on three other national housing commissions. All of this
experience will be helpful at FHA.
Mr. Chairman, as I have talked with Members of this Committee in
the last few days, several have asked me about my views on FHA
programs. They have referred to testimony that I have given and some of
my publications during 1995 and 1996. I would like to take this
opportunity to make my views clear, and place my testimony in the
context of the policy discussions of the time.
In 1995, the Clinton Administration published a ``Reinvention
Blueprint'' calling for drastic change in nearly all of HUD's programs.
(For example, it proposed to voucher out public housing.) At the same
time, there were numerous proposals from Republican Members of Congress
to abolish HUD, among them: a group of freshmen Congressmen; Senator
Faircloth, who was Chairman of the HUD Oversight Subcommittee of this
Committee; and Senator Dole, the Majority Leader and leading
Presidential candidate. Representative Lazio, Chairman of the Housing
Subcommittee in the House of Representatives, developed legislation to
repeal the National Housing Act and he carried it through the House and
into conference. In 1996, the Republican platform included a plank to
abolish HUD.
I was asked to testify and speak on these proposals, and I kept
telling my fellow Republicans that they should not abolish HUD. HUD
served--and serves--important public purposes, public purposes that are
supported by both Republicans and Democrats, and it serves those
purposes reasonably well. Rather than abolish HUD, I pointed out the
parts of HUD that did not work very well, and suggested that Congress
should fix them, or make sure they were better managed, or abolish them
if they chose. But they should not abolish HUD.
At a hearing before two Subcommittees of this Committee in March
1995, Senator Faircloth asked me, ``Do you think we should abolish
HUD?'' and I responded, ``No, Senator, I don't.'' I said further, ``I
would leave the things that HUD does now with HUD doing them.'' I was
almost the only Republican interested in housing policy who did not
want to abolish HUD.
At the same time, President Clinton's Reinvention Blueprint
proposed drastic changes in FHA's Single-Family Mortgage Insurance
Program, while leaving multifamily insurance unchanged. I thought that
was the wrong approach. Home mortgage insurance worked well; it served
a market that was not being served in the private sector; and it did so
while covering its cost and building reserves. The multifamily programs
presented the most serious management challenges in HUD. Both
Commissioner Retsinas and the IG were talking about the problems in
strong terms, and HUD was estimating that FHA would lose about 20 cents
on the dollar for its entire multifamily portfolio. The Reinvention
Blueprint had things backward.
Now, 5 or 6 years later, nobody in either party is proposing to
abolish HUD or terminate any of its major programs. Certainly neither
President Bush or Secretary Martinez has offered such proposals. The
Republican Party is much closer to the position I took in 1995 than it
was back then. But of course what I wrote at that time is still in
print, or available through the internet, without the policy context in
which I was writing.
Mr. Chairman, I have been concerned with housing and urban policy
all my professional life, since my years as a graduate student in
economics at the University of Chicago. Most of my fellow students
chose to specialize in public finance, or money and banking, or labor
economics; quite a few became agricultural economists. I thought about
some of those fields. But I felt that the cities presented the most
urgent economic policy problems in America, and indeed the University
and the city threatened to be overwhelmed by them. Starting with my
doctoral dissertation, I have devoted my career to housing and urban
issues, and I have never regretted it. The Federal Government has had
two major housing policy objectives for many years: helping families
become homeowners, and making sure that everyone lives in decent
housing. Those are very important public purposes; they are FHA's basic
missions; and I support them wholeheartedly, as I have throughout my
career.
Mr. Chairman and Members of this Committee, the office of Assistant
Secretary for Housing is a high honor, a great responsibility, and a
tremendous challenge. Both President Bush and Secretary Martinez have
stated a strong commitment to working on a bipartisan basis to address
our urban problems. If I am confirmed, I pledge to work with Congress,
with both Houses and both parties. Working together, we can achieve the
goals of housing policy, and I will certainly do my part. Thank you for
the opportunity to appear before you this morning.
PREPARED STATEMENT OF ROMOLO A. BERNARDI
Assistant Secretary for
Community Planning and Development-Designate
U.S. Department of Housing and Urban Development
Tuesday, May 15, 2001
Good morning, Mr. Chairman, and distinguished Members of the
Committee, my name is Roy Bernardi, Mayor of the City of Syracuse and
President Bush's nominee for the position of Assistant Secretary for
Community Planning and Development.
I wish to thank the Committee for inviting me and for expediting
the confirmation process for myself and the other nominees present
today. With President Bush's guidance, Secretary Martinez has assembled
a supremely qualified team with the experience and vision to act on his
and your concerns for urban America. If confirmed, it will be a great
honor to serve with these individuals.
Before proceeding further Mr. Chairman, please allow me to
introduce my wife Alice. Without her support and love I would not be
here today. Unfortunately, our two young children Dante and Bianca
could not be here, but it is because of them that I understand the true
importance and seriousness of the task before me, before this
Administration, and before this Committee.
To paraphrase Senator Gramm's famous saying, ``A parent's dream
dies hard in America.'' Alice and I dream that Dante and Bianca can
grow up, work, and find happiness in the city where we were raised--
where neighbors were family, where jobs were plentiful, and where you
always felt secure.
Unfortunately, for many decades the tides of history seemed to flow
the other way. In Syracuse, typical of many cities across the Northeast
and the Nation, we have seen our population decrease while the needs of
our citizens increase.
For 20 years as City Auditor and now nearly 8 years as Mayor I have
fought to reverse those tides and ensure that the mothers and fathers
of Syracuse can still dream. And as the past-President of the New York
Conference of Mayors and the past-Vice Chairman of the northeastern
division of the U.S. Conference of Mayors' I have worked with other
local leaders to make sure that the public trust is kept with all
families.
Throughout my 3 decades of public service the issue of housing and
community development has remained at the forefront of my agenda. With
the knowledge that can only come from hands-on experience, I understand
the role of the Department of Housing and Urban Development in the
lives of Americans. Because I have seen inefficient initiatives waste
valuable resources I approach this new challenge with a sense of
realism. I also approach it with a sense of hope. Hope, because I have
seen how good programs, ones that are well-conceived and well-managed,
can change lives and change communities.
As an administrator, I will also draw on my firsthand knowledge of
the CDBG process, the HOME program, and brownfield remediation efforts.
I know the importance of CDBG dollars, and I also know the importance
of keen oversight. These block grants fund valuable programs, but too
often foster dependence, rather than development. My office will focus
on using these resources for civic improvement, not civic welfare.
Vital to civic improvement is greater homeownership. Owner occupied
housing makes for cleaner, safer, and more livable neighborhoods. The
Homeownership Downpayment Program authorizing legislation will be
proposed that would require each participating jurisdiction to use, on
a cumulative basis, 12 percent of each annual allotment for down
payment assistance toward the purchase of single family housing by low
income families that are first time homebuyers. I spoke earlier of a
parent's dream, well homeownership has been a uniquely American Dream
for hundreds of years. It is a dream that the HOME program has made
real for hundreds of people in Syracuse. And the efforts of the Bush
Administration will make it real for thousands of other families across
the Nation.
As the Mayor of a city with a long industrial history I also know
that housing is an issue linked with economic development and
redevelopment. Over the years I have addressed many audiences on the
subject of suburban sprawl and the importance of brownfield
remediation. I am proud to say that today in Syracuse our most sought
after downtown residential addresses are in remodeled factories and
several parcels of land--victims of decades of environmental abuse--are
now prized pieces of commercial real estate. Similar scenarios across
the country show the flexibility of our urban centers to respond to the
changing needs of industry and individuals.
This faith in cities as centers of commerce, and culture, and
community, fuels my interest in aggressively reclaiming our industrial
wastelands. It also fuels a desire to reclaiming our neighborhoods. In
Syracuse we did that by literally attacking problems block by block.
From my office to the dog control office we enter troubled
neighborhoods as a team to tow abandoned cars, mow lawns, cite code
violators, haul debris, and talk with residents. We have also attacked
neighborhood issues by publicly identifying absentee landlords that
take advantage of low-income renters. Meanwhile, to help responsible
property owners we have set up classes to teach them how to be better
landlords.
That is the practical experience I bring before you today. With it
I bring a commitment to urban America that transcends that facts and
figures of public record. As a child of immigrants--raised in an
Italian enclave on Syracuse's Northside--I know that when my parents
sought opportunity in America they found it in the city. I want my
children to find it there too. So that is where my heart has remained--
with the immigrant, and with the young family struggling to make ends
meet, with the renter saving for her first home, with the man who sees
the city as his best chance, and with the man who sees it as his last
chance. For all of these reasons I am deeply thankful for the
confidence President Bush and Secretary Martinez have placed in me and
for the chance to address this distinguished body.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED
FROM ALPHONSO R. JACKSON
Q.1. Secretary Martinez has talked about the need to increase
the number of personnel at HUD. Have you made any initial
assessments in this regard? Please describe.
A.1. The Department has just completed the first phase of a
three phase series of work measurement and work force
requirement studies. These studies cover all major programs and
occupational categories of the Department. In addition, the
studies provide the Department with a system for calculating
and validating work-
force needs based on workload, allocating resources, creating a
workforce plan tied to the Department's Strategic and Annual
Performance Plans, and legitimizing the resource needs included
in the Department's budget request.
Phase I covered:
40 studies and four organizations; PIH, CPD,
Administration, and Housing;
5,600 employees or approximately 60 percent of HUD's
work-
force.
According to the Phase I ``raw data'' results, the
Department may need 140 additional employees for the four
``studied'' organizations. Assuming that the Phase I results
hold true for the remainder of the Department. HUD may need
approximately 200 additional staff. However, these preliminary
results are being refined, and assume that all employees are at
the full performance level and are geographically located with
their work. Refinements of Phase I, as well as the final
results of Phases II and III, may further enhance the staffing
requirements of the Department.
Over the next 90 days the Department will:
Refine Phase I results, complete Phase II, and begin
Phase III of the work measurement studies. Phase II covers
six HUD organizations (FHEO, FPM, PD&R, CIO, OMHAR, Healthy
Homes), involving approximately 25 percent of HUD's
employees. With the completion of Phase I and II, the
Department will have assessed approximately 85 percent of
its workforce. Phase III will cover the remaining 15
percent of HUD's staff and occupational categories.
Begin implementation of the Phase I work measurement
validation process which will collect workforce data at set
intervals.
Complete a preliminary analysis of employee skill
levels and training needs.
Develop a workforce plan, to provide a more accurate
accounting of the Department's personnel needs, considering
employee skill levels and projected attrition, and
balancing employee skills and geographic locations with
workload.
At that time, Secretary Martinez and I will have a better
assessment of the staffing requirements of the Department.
Q.2. In your written statement you say that you have ``ideas
about how to improve HUD's oversight of public housing
authorities so that they can better provide services to those
families living in public housing.'' Please describe these
improvements.
A.2. From my experience I know that HUD's oversight can
contribute substantially to, or detract from, PHA's efforts to
deliver better services. HUD's oversight can provide a valuable
boost to good management practices, but only if it is properly
prioritized to emphasize the most important management
functions, clear and easily understood, and broadly accepted as
fair.
Substantial improvements in HUD's oversight system need to
be made. Reforms were promised in the long legislative debates,
which led to the 1998 overhaul of the public housing law, and
Congress and HUD rightly put new emphasis on the conditions in
which public housing residents are living, but for various
reasons HUD has not implemented some key reforms.
I strongly support the addition of an independent physical
inspection as part of the evaluation system, and the inclusion
of financial and other evaluation components. These measures
must be implemented, but we also have much more work to do
before the evaluation system will satisfactorily meet the
description I have put forward. The oversight system also
includes not just the report card such as the Public Housing
Assessment System (PHAS) or a successor, but also audits, field
office reviews and other monitoring HUD (including the
Inspector General) initiates, planning and application
documents, and the actions HUD takes when the system indicates
local success or failure. If HUD reexamines these actions and
listens carefully to those who must live with our decisions,
but always with our role as steward of tax dollars in mind, we
can make the entire system better prioritized toward what is
most important in terms of both risk and delivery of services,
clearer, and more generally accepted as a fair basis an which
HUD may take regulatory actions. If we can accomplish this and
then implement the system consistently, PHA's will respond with
better performance and the families they serve will benefit.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED
FROM RICHARD A. HAUSER
Q.1. Do you believe that HUD should be involved in law
enforcement through the IG's Operation Safe Home Program?
A.1. I understand Operation Safe Home to consist of two parts:
curbing equity skimming in insured multifamily housing, and
combating violent crime in public housing.
Audits and investigations of FHA's multifamily programs for
equity skimming would seem to be an appropriate HUD function
and specifically authorized by the IG Act, 5 U.S.C. app. sec
2(1). There is also a HUD specific statute relating to equity
skimming that provides for a civil penalty and double damages,
12 U.S.C. 1715z-4a. Although HUD program offices do not enforce
the criminal equity skimming statute, the IG can and does
involve itself in enforcing the civil statute against equity
skimming,
On the other hand, I do not believe that Operation Safe
Home, as it relates to combating violent crime, is the type of
program contemplated by HUD's basic enabling legislation or the
statutes authorizing HUD's core programs. If confirmed, I
intend to examine whether these activities are consistent with
the IG Act, for the HUD IG to audit and investigate HUD
programs and operations. In my view, the policing of public
housing can be most effectively carried out by the appropriate
law enforcement agencies.
Pennsylvania Avenue Development Corporation
Q.1. Please describe how your experiences with the PADC have
informed your views about the mission of HUD and the
Government's role in the community.
A.1. The Pennsylvania Avenue Development Corporation was a
successful and perhaps unique experiment in urban
revitalization. The PADC was able to leverage $150 million in
taxpayer funds into a $1.5 billion investment by the private
sector into new commercial, retail, and residential
development. The result has been an en-
livened downtown with new residents, restaurants, art
galleries,
and retail stores. The PADC was the recipient of the
prestigious
Urban Land Institute Award for Excellence for having ``revamped
a downtrodden and unsightly segment of the Nation's capital . .
.
and building the kind of Main Street that taxpayers can be
proud
of.'' The PADC's success was also attributable to the
cooperative
interaction among all interested parties--the Congress, the
Federal
and District of Columbia Governments, local groups, and private
entrepreneurs--working out difficult urban problems with a com-
mon goal.
I believe my experiences as PADC Chairman will be helpful
at HUD; particularly, with respect to the Department's lodestar
program for urban development--the Community Development Block
Grant (CDBG) program. The CDBG is a formula grant program
for large cities, very large counties, and States to assist
smaller
cities and counties. This program includes among its eligible
activ-
ities public facilities, social services, and private
development and
redevelopment. I understand that much of its emphasis reflects
communities' own local decisions about economic development and
job-creating incentives.
My PADC experience also aligns with the CDBG statute's
objectives such as--
eliminating blight and preventing blighting
influences;
expanding and improving the quantity and quality of
community services;
better rationalizing utilization of land and other
resources; and
stimulating private investment and community
revitalization to alleviate physical and economic distress.
The PADC demonstrated that Government can play an impor-
tant role in community development by ensuring community
involvement in development planning; establishing standards and
guidelines for development to achieve good design and historic
preservation; providing infrastructure that encourages
development, especially in areas developers are not pursuing on
their own; and providing incentives so that goals and policies
(such as housing where none exists) are achieved.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED
FROM JOHN CHARLES WEICHER
Q.1. The authority for mortgage restructuring under the Mark-
to-Market program expires at the end of this fiscal year, as
does the authorization for the Office of Housing Multifamily
Assistance Restructuring (OHMAR). What will your
recommendations be about either the continuation of Mark-to-
Market and OHMAR, or alternatives to ensure the preservation of
affordable housing? (A). Do you believe that the Mark-to-Market
program should be continued? (B). Do you believe that the
existing Office of Housing can take over the functions of OHMAR
without interruption?
A.1. It is my understanding that OMHAR expects to complete
about two-thirds of its workload, by the end of the current
fiscal year, when its authority will expire. In order to deal
with the remaining workload in the most cost-effective manner
and maximize the continued availability of safe, decent,
affordable housing, the Administration is proposing an
extension of the restructuring authority, and is submitting
legislation to the Congress. There is as yet no final decision
on whether to support the extension of OMHAR itself, but any
institutional framework will be designed to continue the work
that OMHAR has been doing and bring it to a timely and
successful conclusion.
Q.2. Would you support pooling the various General Insurance/
Special Risk Insurance (GI/SRI) programs together, so that no
appropriation for these programs is necessary?
A.2. The Administration certainly recognizes that different
multifamily programs have different default patterns and claim
losses. Cross-subsidization would be a significant change in
the Credit
Reform Act, and would reduce FHA's ability to control its indi-
vidual programs on an annual basis. The Administration prefers
to
reduce the cost of the individual GI Fund programs, and to
estab-
lish an insurance premium that eliminates the need for credit
sub-
sidy appropriations, as a means of serving all eligible loans
in
these programs.
Q.3. Mr. Weicher, you have written that the FHA single-family
mortgage insurance program should be targeted to low-income and
first-time homebuyers. In its 67 year history, FHA insurance
has been available to anyone with qualified credit. Do you
still believe that these programs should be scaled back?
A.3. FHA home mortgage insurance is a demand program; FHA
insures the loans that are brought to it, as long as they meet
the mortgage limits and other underwriting guidelines. That
includes first-time buyers and repeat buyers. FHA has
traditionally served first-time homebuyers, and middle-income
families, and I expect that to continue. In the Clinton
Administration, Commissioner Apgar boasted about the rising
percentage of FHA homebuyers who were first-time buyers,
approaching 80 percent. The latest analysis shows that 70
percent of FHA homebuyers have incomes below the area median
(half have incomes below 80 percent of the area median), and
one-third are members of minority groups. The President and the
Secretary want to increase homeownership, especially among
minority groups, and families who are on the edge of the middle
class and striving to improve their lives. At the same time,
these priorities do not rule out anybody else who is now
eligible for FHA home mortgage insurance.
I made the targeting suggestion in 1995, when the Clinton
Administration's Reinvention Blueprint was proposing to weaken
the FHA home mortgage insurance program, in my opinion. My
point was to stress that FHA home mortgage insurance worked
reasonably well; it was, and is, a sound program. If Congress
wanted to change the home mortgage insurance program, targeting
made more sense than the Reinvention Blueprint proposals.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR MILLER FROM JOHN
CHARLES WEICHER
Q.1. Mr. Weicher, do you have any reorganization ideas for FHA?
Would you shift resources within FHA to favor one program over
another?
A.1. I do not have any particular plans or ideas for
reorganizing FHA. The Secretary has said that he doesn't plan
to reorganize the Department. I know that the Secretary is now
reviewing the REAP study, and putting a team in place to
implement the study. The team would be headed by Mr. Jackson
after confirmation as Deputy Secretary.
Q.2. The FHA Streamlined Downpayment Program started as a
2 year pilot program in 1998. The program, which decreases down
payment costs for borrowers and simplifies the down payment
calculation, expired at the end of the year 2000, but was given
an extension until 2002 by Congress. Would you support making
this program permanent?
A.2. I have not reviewed the effect of the FHA Streamlined
Downpayment Program. The Department will review this and make
the
appropriate recommendations for the fiscal year 2003 budget
submission.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR JOHNSON FROM JOHN
CHARLES WEICHER
Q.1. Mr. Weicher, last December, Congress appropriated $40
million in an emergency supplemental appropriation to fund the
FHA multifamily new construction and significant rehabilitation
programs. Would you comment on whether this money, which has
already been appropriated, should be released? Would you also
provide your definition of what constitutes a ``budget
emergency''
in the context of releasing appropriated funds? Is the shutdown
of these programs an emergency?
A.1. The Administration believes that HUD should operate the
multifamily insurance programs within the credit subsidy
amounts that have been appropriated through normal budget
process. Certainly there are negative consequences if the FHA
multifamily insurance is forced to suspend activity for a
period of time, but this does not constitute an emergency along
the lines of an earthquake or flood.
This is not a new problem. FHA has run out of credit
subsidy
3 times in the last 8 years, including fiscal year 2000 as well
as fiscal year 2001. There are a number of special
circumstances this year. Because there was excess demand for
credit subsidy at the end of fiscal year 2000, the current
fiscal year began with $12 million in subsidy being absorbed by
projects that were shut out of the programs last year. In
addition, an unusually large share of projects this year are
Section 221(d)(3) projects, with nonprofit sponsors; these
projects, require five times as much credit subsidy per dollar
as Section 221(d)(4) projects. In recent years, Section
221(d)(3) projects have been less than 10 percent of the
portfolio; so far this year they constitute 25 percent. They
were an especially large share in the first few months of the
fiscal year. If they had constituted the same share as in
recent years, FHA would now have $27 million left from the
fiscal year 2001 appropriation, and would not have this
problem. The Administration's proposal to raise the premium by
30 basis points turns FHA multifamily insurance into a demand
program, like FHA single-family insurance, and the credit
subsidy problem won't occur again.
I know that the Mortgage Bankers Association is concerned
that the current subsidies are set too high, and MBA believes
that the programs do not in fact lose money, so they should not
be subject to a credit subsidy appropriation. If confirmed, I
intend to look at the subsidy calculation process and see
exactly how it works. I
believe the process has not been studied systematically in sev-
eral years. Based on that study, I would expect to make
appropri-
ate policy recommendations to the Secretary, depending on what
we learn.
Q.2. It is my understanding that in order for all of the
projects that are in the pipeline for fiscal year 2001 in the
FHA multifamily new construction and significant rehabilitation
programs to be completed, an additional $115 million will have
to be appropriated.
Mr. Weicher, do you support additional appropriations? If not,
what would you recommend to encourage the private sector to
con-
tinue to lend for purposes of creating affordable multifamily
housing projects?
A.2. The appropriated subsidy of $101 million is large enough
to support all projects that are currently in the FHA pipeline,
but not projects in earlier stages of development. The estimate
of $115 million in credit subsidy for additional projects in
fiscal year 2001 seems high. That would involve a much larger
volume of multifamily insurance than in any year of the last
10.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SCHUMER FROM JOHN
CHARLES WEICHER
Predatory Lending
Q.1. Given the interest by policymakers, regulators, and the
general public in understanding how the subprime market
functions (and the lack of data), will you support the Federal
Reserve's proposal to collect data on the pricing of subprime
home loans, which was recommended in last year's HUD/Treasury
report on predatory lending?
A.1. The Department has stated that it supports the Federal
Reserve Board's proposal. The information will significantly
enhance HUD's ability to perform research functions that
support the Department's housing and fair landing mission. It
will help in developing appropriate responses by HUD to
addressing credit needs, particularly the availability and
affordability of credit options for homeownership.
Q.2. On March 18, Secretary Martinez spoke at the National
Housing Summit put on by the Mortgage Bankers Association and
discussed the issue of predatory lending. He said, ``There are
some lenders who choose to prey on those at the lowest end of
economic scale--the elderly, the disabled, the minorities, and
the men and women in our military. For those who participate in
such schemes, you should know that such practices will not be
tolerated by this Administration.'' What concrete steps will
the Administration take to reduce the incidence of predatory
lending?
A.2. Secretary Martinez and the Administration are very
concerned about predatory lending. As he stated in the
Congressional hearings 3 weeks ago, the Secretary is expecting
to work with the Federal Reserve Board, with the industry, and
with consumer groups. The Administration is already taking
concrete steps to address the problem of predatory lending. On
May 14, the Secretary sent a
representative to the Baltimore town meeting on predatory lend-
ing, Laurie Maggiano, Director of FHA's Asset Management and
Disposition Division in the Office of Single-Family Housing.
Ms. Maggiano's presentation of the Department's activities was
warmly received. The Department has expanded the ``Hot Zone''
in Baltimore to embrace the entire city, not just selected Zip
Codes. A year ago the Department identified ``Hot Zones'' in
five cities (Baltimore, Chicago, Atlanta, New York, and Los
Angeles) where there was reason to suspect predatory lending.
HUD identified Zip Codes with concentrations of possibly
predatory loans; gave grants to counseling agencies; suspended
foreclosure on loans suspected of being predatory, as
identified by counselors; and cut the mortgage amount on
overvalued properties. These efforts continue.
In addition, the Department is reviewing the behavior of
individual lenders where there is reason to be concerned about
predatory lending: bringing them before the Mortgagee Review
Board, withdrawing FHA approval, or requiring technical reviews
of their underwriting. This is the hard work of fighting
predatory lending.
FHA
Q.1. Last December, Congress appropriated an additional $40
million in an emergency supplemental appropriation to fund the
FHA multifamily new construction and significant rehabilitation
programs. In spite of the fact that these programs ran out of
credit subsidy last month and as a consequence many projects
across
the country have been shut down, Congress and the Administra-
tion have not released this money. Could you please comment on
whether you think this money, which has already been
appropriated, should be released? Could you also give us your
definition of what constitutes a ``budget emergency'' in the
context of releasing appropriated funds? In other words, do you
think that the shut down of these programs is an emergency?
A.1. The Administration believes that HUD should operate the
multifamily insurance programs within the credit subsidy
amounts that have been appropriated through normal budget
process. Certainly there are negative consequences if the FHA
multifamily insurance is forced to suspend activity for a
period of time, but this does not constitute an emergency along
the lines of an earthquake or flood.
This is not a new problem. FHA has run out of credit
subsidy
3 times in the last 8 years, including fiscal year 2000 as well
as fiscal year 2001. There are a number of special
circumstances this year. Because there was excess demand for
credit subsidy at the end of fiscal year 2000, the current
fiscal year began with $12 million in subsidy being absorbed by
projects that were shut out of the programs last year. In
addition, an unusually large share of projects this year are
Section 221(d)(3) projects, with nonprofit sponsors; these
projects require 5 times as much credit subsidy per dollar as
Section 221(d)(4) projects. In recent years, Section 221(d)(3)
projects have been less than 10 percent of the portfolio; so
far this year they constitute 25 percent. They were an
especially large share in the first few months of the fiscal
year. If they had constituted the same share as in recent
years, FHA would now have $27 million left from the fiscal year
2001 appropriation, and would not have this problem. The
Administration's proposal to raise the premium by 30 basis
points turns FHA multifamily insurance into a demand program,
like FHA single-family insurance, and the credit subsidy
problem won't occur again.
I know that the Mortgage Bankers Association is concerned
that the current subsidies are set too high, and MBA believes
that the programs do not in fact lose money, so they should not
be subject to a credit subsidy appropriation. If confirmed, I
intend to look at the subsidy calculation process and see
exactly how it works. I
believe the process has not been studied systematically in sev-
eral years. Based on that study, I would expect to make
appropri-
ate policy recommendations to the Secretary, depending on what
we learn.
Q.2. In order for all of the projects that are in the pipeline
for fiscal year 2001 in the FHA multifamily new construction
and signifi-
cant rehabilitation programs to be completed an additional $115
million will have to be appropriated. Do you support this addi-
tional appropriation?
A.2. The appropriated subsidy of $101 million is large enough
to support all projects that are currently in the FHA pipeline,
but not projects in earlier stages of development. The estimate
of $115 million in credit subsidy for additional projects in
fiscal year 2001 seems high. That would involve a much larger
volume of multifamily insurance than in any year of the last
10.
Q.3. There has been debate in the past about whether the FHA
single-family home mortgage program should be targeted to just
first-time buyers or low- and moderate-income families. The
reasons given by advocates for targeting is that FHA encroaches
on the private sector's ability to make mortgage loans. Do you
agree that FHA single-family programs should be targeted or
restricted
in any way?
A.3. FHA home mortgage insurance is a demand program; FHA
insures the loans that are brought to it, as long as they meet
the mortgage limits and other underwriting guidelines. That
includes first-time buyers and repeat buyers, FHA has
traditionally served first-time homebuyers, and middle-income
families, and I expect that to continue. In the Clinton
Administration, Commissioner Apgar boasted about the rising
percentage of FHA homebuyers who were first-time buyers,
approaching 80 percent. The latest analysis shows that 70
percent of FHA homebuyers have incomes below the area median
(half have incomes below 80 percent of area median), and one-
third are members of minority groups. The President and the
Secretary want to increase homeownership, especially among
minority groups, and families who are on the edge of the middle
class and striving to improve their lives. At the same time,
these priorities do not rule out anybody else who is now
eligible for FHA home mortgage insurance.
Q.4. Several years ago Congress passed legislation to
streamline and reduce the down payment requirements for FHA
home mortgage loans. FHA borrowers can obtain loans with a
minimum of
3 percent down payment. The legislation that authorized this
streamlined down payment program will expire on December 31,
2002. All indications are that the legislation has simplified
the process and made FHA loans more affordable. If this program
is not made permanent or extended, the amount needed for a down
payment will significantly increase, particularly for those
borrowers purchasing homes in high-cost areas. Do you support
making the simplified down payment calculation program
permanent?
A.4. I have not reviewed the effect of the FHA Streamlined
Downpayment Program. The Department will review this and make
appropriate recommendations for the fiscal year 2003 budget
sub-
mission.
Cooperatives
Q.1. Housing cooperatives are a different structure of
homeownership. To make sure their sometimes unique
characteristics are
accommodated when existing laws are being executed, the law
mandates the appointment of a Special Assistant for Cooperative
Housing to serve under the direction of the FHA Commissioner.
The position is now vacant. I would like your assurance that
you will take the steps necessary to see to it that the
Secretary fills this important position.
A.1. I certainly promise to work with the Secretary and make
sure that this important position is filled as quickly as
possible.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED
FROM ROMOLO A. BERNARDI
Q.1. The Appropriations Committee has required that 30 percent
of homeless funds be used for permanent housing. How do you
intend to improve HUD's performance so that it achieves
Congressional intent in this area?
A.1. The annual homeless assistance competition is largely
based upon local decisionmaking and local priority setting.
Mindful of this policy, the Department included language in the
2001 NOFA that strongly encouraged Continuum of Care to begin
planning for new permanent housing projects, if they haven't
already, to be included as part of the 2001 and future
competitions. In addition, as a powerful incentive in the 2001
funding round, the ``permanent housing bonus'' for eligible,
new permanent housing projects placed in the number one
priority slot, was doubled to up to $500,000. Almost $40
million in bonus funds were awarded to new permanent housing
projects in the 2000 competition and this total is expected to
more than double this year. Finally, by establishing a funding
selection process that resulted in the replacement of over 300
nonpermanent housing projects (valued at approximately $100
million) with lower scoring permanent housing projects in the
2000 funding round, the Department sent the strongest possible
message, and inducement, for applicants to submit permanent
housing projects instead of nonpermanent housing projects going
forward. By having taken such dramatic action in 2000, HUD has
made clear its seriousness in emphasizing permanent housing. By
the nature of the competition, applicants can be expected to
submit many more new permanent housing projects than would
otherwise have been the case due to HUD's forceful stand in
implementing the 30 percent requirement in the 2000 funding
round.
Q.2. Congress has required that HUD obtain unduplicated counts
of homeless people at a jurisdictional level, so that HUD can
focus on who is homeless and what can be done to prevent and
end homelessness? How is HUD implementing this request and what
will you do to help us get this important data?
A.2. The Conference Report (H.R. Report 106-988) on the fiscal
year 2001 HUD Appropriations Act cited the importance of local
jurisdictions collecting client-level data. Furthermore, the
report
stipulated that ``HUD is directed to take the lead in working
with
communities toward this end, and to analyze jurisdictional data
within 3 years.'' The conferees directed HUD to report to the
Committees on its strategy for achieving this ``goal,''
including details on financing, implementing, and maintaining
the effort. This required report is currently in Departmental
clearance and is anticipated to be submitted to Congress in the
near future. Let me summarize the key elements of our strategy:
New Eligible Activity. HUD has implemented the new Homeless
Management Information System (HMIS) eligible activity under
the Supportive Housing Program (SHP) in the 2001 McKinney-Vento
competition. This activity was created by the 2001
Appropriations Act. HUD has implemented this new activity in
such a way as to allow all applying communities to request SHP
fund-
ing to implement and operate HMIS's. HUD highlighted the new
activity in the grant application packet and in two live
satellite
broadcasts.
Technical Assistance. HUD has two technical assistance
products for use by all communities to help them establish and
operate HMIS's. The first is the ``Homeless Service Tracking
System Implementation Guide.'' This document assists
communities in developing homeless service tracking systems.
The second product is ``Homeless Management Information
Systems: An In-Depth Look.'' This publication includes a review
of several leading software products; an analysis of the costs
involved in operating these systems; and a review of the data
elements collected by available software products. HUD will be
updating these guides as well as providing comprehensive
technical assistance to communities from now through 2004 to
help achieve the goal established by Congress.
STATEMENT OF JACK KEMP
Former Secretary of the U.S. Department of
Housing and Urban Development
May 15, 2001
President Bush's choice for FHA Commissioner at HUD, Mr. John C.
Weicher, is exceptionally well qualified for the position.
Mr. Weicher has a breadth of knowledge and experience about HUD
that is unparalleled among housing policy experts. He has served at HUD
with distinction under three previous Secretaries, including 4 years
when I was Secretary under President George Bush. He has participated
in several housing policy commissions, including the Advisory
Commission on Regulatory Barriers to Affordable Housing in 1990-1991,
which resulted in the first Federal legislation to reduce the cost of
housing regulation.
Mr. Weicher has been a strong defender of HUD's role in American
housing and urban policy. He has frequently written and testified that
HUD serves important public purposes and serves them effectively. In
1995 and 1996 he opposed the numerous Congressional proposals to
abolish HUD, testifying before several Committees in both the House and
the Senate. Mr. Weicher was one of the few Republicans concerned with
housing policy who argued for fixing the programs at HUD that do not
work well, instead of abolishing the Agency. Mr. Weicher also opposed
the last Administration's HUD Reinvention Blueprint for FHA, because it
would damage FHA's successful home mortgage insurance program without
doing anything to address long-standing management problems in FHA
multifamily insurance.
As Director of Urban Policy Studies at the Hudson Institute, Mr.
Weicher headed a 2 year project in Michigan to create a framework for
promoting urban homeownership and solving the problem of abandoned
housing that plagued most of Michigan's cities. Hudson's proposals were
passed with overwhelming bipartisan support in the State legislature
and signed by Governor Engler in 1999.
Mr. Weicher has been concerned about housing and urban issues since
he earned a Ph.D. in economics at the University of Chicago with a
dissertation about urban renewal. In his academic publications, he has
strongly defended the mortgage interest deduction. His research on the
distribution of wealth in America shows that homeownership is the most
important force for a more equal distribution; he also has demonstrated
the importance of small business, including rental housing, in creating
wealth.
Mr. Weicher is recognized as one of the leading experts on housing
and urban problems. He has been President of the leading academic
organization of housing economists, the American Real Estate and Urban
Economics Association, and received the Association's award for career
achievement in 1993. He is a member of the Millennial Housing
Commission, created by Congress to advise it on housing policy; a
member of the Editorial Advisory Boards of Housing Policy Debate and
Housing and Development Reporter; and a member of the Advisory Board of
the Center for Housing Policy, which is part of the National Housing
Conference. He has been a Member of the Committee on Urban Policy of
the National Academy of Sciences and the Census Bureau's Advisory
Committee on Population Statistics.