S. HRG. 110–928 NOMINATIONS OF: RANDALL S. KROSZNER, ELIZABETH A. DUKE, AND LARRY A. KLANE HEARING BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE ONE HUNDRED TENTH CONGRESS FIRST SESSION ON NOMINATIONS OF: RANDALL S. KROSZNER, OF NEW JERSEY, TO BE A MEMBER OF THE BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM ELIZABETH A. DUKE, OF VIRGINIA, TO BE A MEMBER OF THE BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM LARRY A. KLANE, OF THE DISTRICT OF COLUMBIA, TO BE A MEMBER OF THE BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM THURSDAY, AUGUST 2, 2007 Printed for the use of the Committee on Banking, Housing, and Urban Affairs ( Available at: http://www.access.gpo.gov/congress/senate/senate05sh.html U.S. GOVERNMENT PRINTING OFFICE 50–354 WASHINGTON : 2009 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Nov 24 2008 08:23 Jan 12, 2010 Jkt 050354 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 E:\HR\OC\D354.XXX D354 WReier-Aviles on DSKGBLS3C1PROD with HEARING COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS CHRISTOPHER J. DODD, Connecticut, Chairman TIM JOHNSON, South Dakota RICHARD C. SHELBY, Alabama JACK REED, Rhode Island ROBERT F. BENNETT, Utah CHARLES E. SCHUMER, New York WAYNE ALLARD, Colorado EVAN BAYH, Indiana MICHAEL B. ENZI, Wyoming THOMAS R. CARPER, Delaware CHUCK HAGEL, Nebraska ROBERT MENENDEZ, New Jersey JIM BUNNING, Kentucky DANIEL K. AKAKA, Hawaii MIKE CRAPO, Idaho SHERROD BROWN, Ohio JOHN E. SUNUNU, New Hampshire ROBERT P. CASEY, Pennsylvania ELIZABETH DOLE, North Carolina JON TESTER, Montana MEL MARTINEZ, Florida SHAWN MAHER, Staff Director WILLIAM D. DUHNKE, Republican Staff Director and Counsel AARON D. KLEIN, Economist DEAN V. SHAHINIAN, Counsel LYNSEY GRAHAM REA, Counsel JOSEPH L. HEPP, Professional Staff Member PEGGY R. KUHN, Republican Senior Financial Economist ANDREW OLMEM, Republican Counsel JOSEPH R. KOLINSKI, Chief Clerk and Computer Systems Administrator JIM CROWELL, Editor (II) VerDate Nov 24 2008 08:23 Jan 12, 2010 Jkt 050354 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 E:\HR\OC\D354.XXX D354 WReier-Aviles on DSKGBLS3C1PROD with HEARING CONTENTS THURSDAY, AUGUST 2, 2007 Page Opening statement of Chairman Dodd .................................................................. 1 Opening statements, comments, or prepared statements of: Senator Shelby .................................................................................................. 3 Senator Bunning ............................................................................................... 5 Senator Allard ................................................................................................... 5 Senator Casey ................................................................................................... 25 WITNESSES Randall S. Kroszner, of New Jersey, to be a Member of the Board of Gov- ernors, Federal Reserve System ......................................................................... 7 Prepared statement .......................................................................................... 50 Biographical sketch of nominee ....................................................................... 53 Response to written questions of: Senator Dodd ............................................................................................. 88 Senator Casey ............................................................................................ 104 Senator Schumer ....................................................................................... 109 Senator Menendez ..................................................................................... 112 Senator Akaka ........................................................................................... 118 Elizabeth A. Duke, of Virginia, to be a Member of the Board of Governors, Federal Reserve System ...................................................................................... 8 Prepared statement .......................................................................................... 67 Biographical sketch of nominee ....................................................................... 69 Response to written questions of: Senator Dodd ............................................................................................. 121 Senator Casey ............................................................................................ 130 Senator Menendez ..................................................................................... 134 Senator Akaka ........................................................................................... 136 Larry A. Klane, of the District of Columbia, to be a Member of the Board of Governors, Federal Reserve System ............................................................... 9 Prepared statement .......................................................................................... 79 Biographical sketch of nominee ....................................................................... 81 Response to written questions of: Senator Dodd ............................................................................................. 137 Senator Casey ............................................................................................ 144 Senator Schumer ....................................................................................... 146 Senator Menendez ..................................................................................... 148 Senator Akaka ........................................................................................... 151 (III) VerDate Nov 24 2008 08:23 Jan 12, 2010 Jkt 050354 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 E:\HR\OC\D354.XXX D354 WReier-Aviles on DSKGBLS3C1PROD with HEARING VerDate Nov 24 2008 08:23 Jan 12, 2010 Jkt 050354 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 E:\HR\OC\D354.XXX D354 WReier-Aviles on DSKGBLS3C1PROD with HEARING NOMINATIONS OF: RANDALL S. KROSZNER, OF NEW JERSEY, TO BE A MEMBER OF THE BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM; ELIZABETH A. DUKE, OF VIRGINIA, TO BE A MEMBER OF THE BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM; LARRY A. KLANE, OF THE DISTRICT OF COLUMBIA, TO BE A MEMBER OF THE BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM THURSDAY, AUGUST 2, 2007 U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. The Committee met at 9:45 a.m., in room SD–538, Dirksen Sen- ate Office Building, Senator Christopher J. Dodd (Chairman of the Committee) presiding. OPENING STATEMENT OF CHAIRMAN CHRISTOPHER J. DODD Chairman DODD. The Committee will come to order. My apolo- gies to all of you this morning for—they are doing an experiment, I guess, or test on constitutionality this morning. Not a good excuse but, nonetheless, that is reason I am a few minutes late, and I apologize to my colleagues and to the witnesses and to your fami- lies. Let me make an opening statement, if I can, and then I will be turning to my colleague from Alabama, the Ranking Member, and any other Members who wish to make some opening statements here. We will then swear in the witnesses and hear your testimony, and then we will raise some questions with you. First of all, I am pleased to welcome all of you here this morning. Today the Committee will meet in open session to hear from Dr. Randall Kroszner, Ms. Elizabeth Duke, and Mr. Larry Klane, who have been nominated to the Federal Reserve Board of Governors. One of the most important and influential nominations that we consider in this Committee is that of a Governor of the Federal Re- serve Board. The seven Federal Governors are the only individuals appointed by the President of the United States and confirmed by the U.S. Senate who have a voice in our Nation’s monetary policy. The Governors are responsible for upholding the Fed’s dual man- (1) VerDate Nov 24 2008 08:23 Jan 12, 2010 Jkt 050354 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 E:\HR\OC\D354.XXX D354 WReier-Aviles on DSKGBLS3C1PROD with HEARING 2 date: to promote employment and achieve price stability. Fulfilling this mandate creates the conditions necessary for our economy to grow and for every American to have an opportunity to participate in the shared prosperity of our Nation. The role of the Fed is critical not just in setting monetary policy; it also serves as a regulator of the safety and soundness of our largest lending institutions and, very significantly, as a regulator and enforcer of the laws passed by the U.S. Congress and signed by the President to protect consumers and ensure that they have an opportunity to participate and succeed in the American econ- omy. The duties of the Fed are no less important than the Fed’s mone- tary policy responsibilities. In fact, given the depth of experience that the Fed’s current Governors have in monetary policy, issues of consumer protection and bank supervision are of particular im- portance with respect to the nominees that we have before us today. It is for all of these reasons that the Fed Governors should be of the highest caliber and quality to serve our Nation. The position of Governor also requires substantial political independence. In es- tablishing the Federal Reserve, the Congress created a system in which each Fed Governor’s seat has a fixed 14-year term. I know some of my colleagues wish that the Founders had thought of us in that way. Governors at the Fed enjoy the third longest