S. HRG. 115–306 NOMINATIONS OF RICHARD CLARIDA AND MICHELLE W. BOWMAN HEARING BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE ONE HUNDRED FIFTEENTH CONGRESS SECOND SESSION ON THE NOMINATIONS OF: RICHARD CLARIDA, OF CONNECTICUT, TO BE A MEMBER AND VICE CHAIRMAN, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM MICHELLE W. BOWMAN, OF KANSAS, TO BE A MEMBER, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM MAY 15, 2018 Printed for the use of the Committee on Banking, Housing, and Urban Affairs ( Available at: http://www.govinfo.gov/ U.S. GOVERNMENT PUBLISHING OFFICE 31–196 PDF WASHINGTON : 2018 VerDate Nov 24 2008 17:41 Dec 14, 2018 Jkt 046629 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 L:\HEARINGS 2018\05-15 NOMINATIONS\HEARING\31196.TXT SHERYL COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS MIKE CRAPO, Idaho, Chairman RICHARD C. SHELBY, Alabama SHERROD BROWN, Ohio BOB CORKER, Tennessee JACK REED, Rhode Island PATRICK J. TOOMEY, Pennsylvania ROBERT MENENDEZ, New Jersey DEAN HELLER, Nevada JON TESTER, Montana TIM SCOTT, South Carolina MARK R. WARNER, Virginia BEN SASSE, Nebraska ELIZABETH WARREN, Massachusetts TOM COTTON, Arkansas HEIDI HEITKAMP, North Dakota MIKE ROUNDS, South Dakota JOE DONNELLY, Indiana DAVID PERDUE, Georgia BRIAN SCHATZ, Hawaii THOM TILLIS, North Carolina CHRIS VAN HOLLEN, Maryland JOHN KENNEDY, Louisiana CATHERINE CORTEZ MASTO, Nevada JERRY MORAN, Kansas DOUG JONES, Alabama GREGG RICHARD, Staff Director MARK POWDEN, Democratic Staff Director ELAD ROISMAN, Chief Counsel JOE CARAPIET, Senior Counsel TRAVIS HILL, Senior Counsel ELISHA TUKU, Democratic Chief Counsel LAURA SWANSON, Democratic Deputy Staff Director AMANDA FISCHER, Democratic Professional Staff Member DAWN RATLIFF, Chief Clerk CAMERON RICKER, Deputy Clerk JAMES GUILIANO, Hearing Clerk SHELVIN SIMMONS, IT Director JIM CROWELL, Editor (II) VerDate Nov 24 2008 17:41 Dec 14, 2018 Jkt 046629 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 L:\HEARINGS 2018\05-15 NOMINATIONS\HEARING\31196.TXT SHERYL CONTENTS TUESDAY, MAY 15, 2018 Page Opening statement of Chairman Crapo ................................................................. 1 Opening statements, comments, or prepared statements of: Senator Brown .................................................................................................. 2 NOMINEES Richard Clarida, of Connecticut, to be a Member and Vice Chairman, Board of Governors of the Federal Reserve System ..................................................... 4 Prepared statement .......................................................................................... 27 Biographical sketch of nominee ....................................................................... 28 Responses to written questions of: Senator Brown ........................................................................................... 57 Senator Reed .............................................................................................. 63 Senator Menendez ..................................................................................... 64 Senator Warner ......................................................................................... 67 Senator Warren ......................................................................................... 70 Senator Cortez Masto ................................................................................ 73 Michelle W. Bowman, of Kansas, to be a Member, Board of Governors of the Federal Reserve System ................................................................................ 5 Prepared statement .......................................................................................... 50 Biographical sketch of nominee ....................................................................... 51 Responses to written questions of: Senator Brown ........................................................................................... 83 Senator Reed .............................................................................................. 91 Senator Menendez ..................................................................................... 92 Senator Warner ......................................................................................... 95 Senator Warren ......................................................................................... 97 Senator Cortez Masto ................................................................................ 100 ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD List of Federal Reserve Enforcement Actions from January 2015–May 2018 submitted by Richard Clarida and Michelle W. Bowman ................................. 116 Joint letter submitted in support of the nomination of Richard Clarida ............ 122 ICBA letter submitted in support of the nomination of Michelle W. Bowman .. 124 Excerpt from the December 2012 FDIC Study submitted by Senator Brown .... 126 (III) VerDate Nov 24 2008 17:41 Dec 14, 2018 Jkt 046629 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 L:\HEARINGS 2018\05-15 NOMINATIONS\HEARING\31196.TXT SHERYL VerDate Nov 24 2008 17:41 Dec 14, 2018 Jkt 046629 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 L:\HEARINGS 2018\05-15 NOMINATIONS\HEARING\31196.TXT SHERYL NOMINATIONS OF RICHARD CLARIDA AND MICHELLE W. BOWMAN TUESDAY, MAY 15, 2018 U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. The Committee met at 10:17 a.m., in room SD–538, Dirksen Sen- ate Office Building, Hon. Mike Crapo, Chairman of the Committee, presiding. OPENING STATEMENT OF CHAIRMAN MIKE CRAPO Chairman CRAPO. The hearing will come to order. This morning we will consider the nominations of the Honorable Richard Clarida to be a Member and Vice Chairman of the Board of Governors of the Federal Reserve System, and Commissioner Michelle Bowman to be a Member of the Board of Governors of the Federal Reserve System. Welcome and congratulations to each of you for your nominations to these positions. I see friends and family sitting with you, and I welcome them here as well. You are certainly welcome to introduce them. We are fortunate to have two highly qualified nominees appear- ing today. These positions are critical to ensuring safe, sound, and vibrant financial systems and a healthy, growing economy. Dr. Clarida currently serves as managing director and global strategic advisor at PIMCO, a position he has held since 2006. Previously, he served as Assistant Secretary of the Treasury for Economic Policy from 2002 to 2003 and as a senior staff economist with the Council of Economic Advisers from 1986 to 1987. In his academic career, he was an assistant professor at Yale University from 1983 to 1988 and has served as a professor of eco- nomics at Columbia University in various capacities since 1988. If confirmed, Dr. Clarida will serve as the Federal Reserve’s Vice Chairman and will play an important role in monetary policy nor- malization. Dr. Clarida has written extensively about monetary policy, and I look forward to hearing more about his views. Such expertise will be especially important as the Fed continues to wind down its bal- ance sheet and raise interest rates after years at the zero lower bound. Commissioner Bowman is currently the State Bank Commis- sioner of Kansas, a position she has held since February 2017. Pre- viously, Commissioner Bowman worked as a Vice President at (1) VerDate Nov 24 2008 17:41 Dec 14, 2018 Jkt 046629 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 L:\HEARINGS 2018\05-15 NOMINATIONS\HEARING\31196.TXT SHERYL 2 Farmers & Drovers Bank, a community bank with $175 million in assets, from 2010 through 2017. She has also served in a number of Government roles, including as a staffer in both the Senate and House and in various roles at the Department of Homeland Security. With past experience as a community banker and as a bank reg- ulator, Commissioner Bowman is well equipped to fill the Federal Reserve Board role reserved for someone with community banking experience. Rightsizing our regulation for community banks has been a crit- ical goal of mine as Chairman. Earlier this year, the Senate passed Senate bill 2155, a bipartisan bill focused on providing regulatory relief for community banks. If confirmed, Commissioner Bowman will play a key role in im- plementing the bill, if it is signed into law. In addition, the Federal Reserve continues to review many of the rules put in place fol- lowing the crisis. If confirmed, I look forward to working with Dr. Clarida and Commissioner Bowman on further regulatory and monetary policy improvements. Congratulations again on your nominations and thank you and your families for your willingness to serve. Senator Brown. STATEMENT OF SENATOR SHERROD BROWN Senator BROWN. Thank you, Mr. Chairman. I want to congratu- late the two of you and welcome your families to the Committee. Thank you for your willingness to serve our country In the last Congress, two of President Obama’s nominees to serve as Members of the Federal Reserve Board of Governors were de- nied even consideration by this Committee. Mr. Allan Landon, a Republican, was nominated in January 2015. He waited for 2 years for a hearing—a hearing he never got. Ms. Kathryn Dominguez waited nearly as long—a year and half. Again, nothing. It sounds a lot like what the Republicans did on a Supreme Court nominee. As a result, President Trump will be able to nominate six of the seven members to the Board of Governors of the Federal Reserve. His first picks, Chair Powell and Vice Chair Quarles, have already been confirmed; Mr. Goodfriend