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Senate Banking Confirmations Hearing 10.19.23

Senate Committee on Banking, Housing, and Urban Affairs
Hearing to Consider Nominations
Thursday, October 19, 2023

Topline

  • Democrats asked about transparency, independence, and the protection of American investors from all agencies that nominees were being considered for.
  • Republicans expressed concerns regarding the impacts of politicization of climate-related policies on the agricultural community and the power of large asset managers.

 Witnesses

  • Ms. Tanya Otsuka, Member Designate, National Credit Union Administration
  • Hon. Mark Uyeda, Member Designate, Securities and Exchange Commission
  • Hon. Spencer Bachus, Member Designate, Board of Directors of the Export-Import Bank
  • Ms. Jennifer Fain, Inspector General Designate, Federal Deposit Insurance Corporation
  • Hon. Claudia Slacik, Director Designate, Securities Investor Protection Corporation
  • Hon. William Brodsky, Director Designate, Securities Investor Protection Corporation 

Opening Statements
Chairman Sherrod Brown (D-Ohio)
In his opening statement, Brown said that the nominees being considered will play an important role in the success of the US financial system if confirmed. He noted that if confirmed, Ms. Otsuka would be the first Asian-American to serve on the National Credit Union Administration Board. Brown also noted that Otsuka is exceptionally well-qualified and has served as a key member of his Banking and Housing Committee staff. He closed by recognizing all nominees as very qualified and experienced.

Congressman Mike Rounds (R-S.D.)
In his opening statement, Rounds commended all the nominees for their desire to serve the American people. He specifically recognized Commissioner Uyeda as an independent voice of reason pushing against harmful policies from the SEC that aim to overhaul US capital markets. Rounds said he is concerned that Ms. Otsuka will allocate capital away from carbon-emitting industries, including agriculture. He closed by asking Otsuka to work with the agricultural community to protect their capital.

Testimony
Ms. Tanya Otsuka, Member Designate, National Credit Union Administration
In her testimony, Otsuka said her and her family’s experience as Japanese Americans has exemplified the important role that credit unions play in communities and the economy. She noted her deep appreciation that the role that independent agencies play in maintaining stability and confidence in the financial system. Otsuka closed by saying that, if confirmed, she will remain committed to the millions of Americans who rely on the NCUA to safeguard their hard-earned money.

Hon. Mark Uyeda, Member Designate, Securities and Exchange Commission (SEC)
In his testimony, Uyeda said his upbringing as an Asian American Pacific Islander and son of immigrants taught him about how capital is not readily available for all small businesses. He noted that his past 16 months as a Commissioner of the SEC have been the most fulfilling and humbling time of his public service. Uyeda mentioned that he has voted on 40 SEC rulemakings that touch on nearly every aspect of US capital markets and its participants. He closed by saying he is prioritizing keeping the markets robust, liquid, and vibrant as well as protecting investors, and clarified that one cannot exist without the other.

Hon. Spencer Bachus, Member Designate, Board of Directors of the Export-Import Bank
In his testimony, Bachus said his past term on the Board was a pleasure, and that being confirmed to serve another term would be a privilege. He emphasized his enjoyment and focus on visiting small towns, businesses, and women and minority-owned businesses. He noted that for years the Export-Import Bank did not have a quorum and that many companies lost market share. Bachus closed by saying that they now have a quorum and are working well.

Ms. Jennifer Fain, Inspector General Designate, Federal Deposit Insurance Corporation (FDIC)
In her testimony, Fain expressed her deep appreciation for the FDIC’s long-standing role in maintaining stability and public confidence in the US financial system. She noted that she has valued her role for over 22 years and that her extensive oversight experience in consumer protection matters provided a deep foundation. Fain closed by recognizing her experience in leadership positions in OIG offices at the Federal Housing Finance Agency and the Housing and Urban Development, which broadened my expertise, particularly for consumer protection to further make her case for confirmation.

Hon. Claudia Slacik, Director Designate, Securities Investor Protection Corporation (SIPC)
In her testimony, Slacik said that, if confirmed, she will be honored to do all she can to protect investors and to promote the US securities markets. She noted that before this current position, she was the Chief Banking Officer of the Export-Import Bank where her staff and her analyzed billions of transactions for small, medium, and large companies that supported hundreds of thousands of jobs for Americans. She said she recognizes the importance to retail investors and the vital role they play in the country’s financial system. Slacik closed by pledging to act vigorously for robust investor protection and to work diligently with the members of the Committee to address their concerns.

Hon. William Brodsky, Director Designate, Securities Investor Protection Corporation (SIPC)
In his testimony, Brodsky said he is well-qualified to continue to serve on the board based on his lifetime career in the investment business, specifically based on his experience in the securities industry. He said that if confirmed, he looks forward to working with the Committee to make sure that investors do not lose hard-earned assets because of a brokerage firm failure. Brodsky noted that his goal is to make sure that the SIPC has reserves and liquidity if a crisis were to arise. He closed by affirming his deep commitment to investor education, customer protection, and to help maintain the credibility and importance that SIPC plays in the viability, integrity, and importance of securities markets to Americans.

Question & Answer
Climate Change & Agriculture
Senator Mike Rounds (R-S.D.) asked Otsuka if she believes agriculture is a climate issue. Otsuka noted that agriculture, like other industries, produces carbon emissions, but noted that agriculture is a critical part of the US economy. Rounds then asked Otsuka if she will work with members in the agriculture community to ensure their access to capital. Otsuka agreed.

Sen. Katie Britt (R-Ala.) asked Otsuka what her opinion is on the NCUA’s rule regarding climate-related economic risks. Otsuka said the rule is required for credit unions to effectively manage risks and that she believes ensuring firms are properly managing risks is the role of the regulators.

Sen. Chris Van Hollen (D-Md.) asked Bachus what role the Export-Import Bank can play in access to critical minerals. Bachus said that the US’s domestic supply of lithium specifically is inadequate and that they are trying to work with other companies by spreading their message on their website.

Transparency & Independence
Sen. Jon Tester (D-Mont.) asked Fain how she would protect her independence in this position and how she protects against interference in the offices that she runs. Fain said that independence is a critical requirement for the OIG Office, especially for the Inspector General position, and that she will follow the standards for the work that they conduct. She also noted that it is critical that the office maintain their independence and objectivity to ensure that the work that they conduct has not been interfered with.

Rounds asked Fain if she commits to being independent and vigorous with investigations of the FDIC. Fain said she would be independent and vigorous.

Senator Brown (D-Ohio) asked Otsuka why it’s important for financial regulators to be independent. Otsuka said that financial regulators must be independent to promote market stability and recommended that there be increased Congressional oversight to ensure that there is independence among financial regulators.

Brown asked Fain how an inspector general can strengthen transparency in the federal government. Fain said that transparency is critical for the role of Inspector General and that the reporting they provide is essential because they investigate parts of the government that are opaque to the American public.

Van Hollen asked Uyeda if there is anything else that should be done to protect American investors and ensure that foreign investors are playing by the rules and being transparent. Uyeda assured Van Hollen that the SEC requires all foreign individuals and firms to disclose investment information to ensure transparency.

Credit Unions
Sen. Bob Menendez (D-N.J.) asked Otsuka if there should be more oversight on credit unions that rely heavily on overdraft fees. Otsuka noted that consumer protection is important and that she’s committed to looking more into this specific issue.

Britt asked Otsuka what experiences she has had in her professional career that qualify her to work with credit unions. Otsuka said that while working for the Committee, her focus was on credit union policies and oversight. She also noted that she worked in a bipartisan manner to pass legislation on strengthening the credit union market.

SEC Rulemaking
Tester highlighted the importance of American capital markets and asked Uyeda how he would achieve the goal of protecting investors while facilitating capital formation and orderly and efficient markets. Uyeda responded saying that conducting robust economic analysis on proposals ensures that rules and regulations from the Commission are considering the actual and cumulative costs to market participants and is key to achieving those goals.

Rounds spoke to the rapid pace of SEC rule making and the cumulative effects of SEC rules on markets and asked Uyeda if he agreed that the Commission should consider economic impacts, including cumulative impacts when rule making. Uyeda agreed with Rounds point of view. Rounds followed up asking how the SEC weighs the benefits of a proposed rule against its costs, especially if a rule has adverse effects on smaller fund managers. Uyeda said that this is an issue he has pressed on in the past, and that he believes giving smaller firms more time to comply with rules is a good way to mitigate harm done to these fund managers.

Brown pressed Uyeda on why he voted against the SEC rules that enhanced disclosures of cyber-attacks and stock buy backs given the importance of disclosure in achieving transparency. Uyeda said that transparency is a key part of securities laws but said the two rules Brown referenced had a number of technical issues that he had concerns with. In the cyber-attack disclosure rule, Uyeda said that the SEC would’ve required forward looking statements which is unusual for this particular type of disclosure. He continued saying the share repurchase disclosures that Brown referenced were far more prescriptive than what is normal at the SEC.

Senator J.D. Vance (R-Ohio) began by saying that many Americans don’t realize that when they invest in index funds, they are handing their money to very large institutions that act as political participants. Vance then asked Uyeda to explain who the “big three” asset managers are and why they are considered the “big three.” Uyeda responded saying that Vanguard, Blackrock, and State Street are the largest asset managers but there are several other large asset managers. Vance said these managers market their index funds as passive funds that track the general trajectory of the market. He then asked Uyeda if that is accurate or if these asset managers affect the management of the firms, they invest in. Uyeda said the managers have voting power not only of the assets held in index funds, but any other assets that fund oversees. Vance then asked if these asset managers use their power to conduct stewardship activities. Uyeda replied saying they do and mentioned that many promote their stewardship policies.

Vance followed up saying that there are 13D and 13G disclosures and asked which one the index funds file. Uyeda said his understanding is that most of them file on Schedule 13G for passive investors. Vance asked if this filing allowed funds to avoid many of the disclosures associated with filing on Schedule 13D and Uyeda said that is correct.

Menendez said two years ago the SEC’s Asset Management Advisory Committee submitted four recommendations for actions the SEC could take to improve diversity in the asset management industry. Menendez continued, saying that the SEC has adopted two of the recommendations in the form of staff guidance, but has not acted on the other two and asked Uyeda if he can commit to advocating for a vote on the other two recommendations. Uyeda said he would advocate for a vote on those recommendations while acknowledging that Chair Gensler sets the agenda.

Senator John Fetterman (D-P.A.) opened by asking whether Uyeda thinks that crypto should exist and where its value is derived from. Uyeda said his perspective as a regulator is that securities laws are neutral on the merits of a particular investment, and that the question is whether all necessary disclosures are provided to investors. Uyeda then noted the risk involved with investing in crypto. Fetterman followed up asking what Uyeda thinks crypto is, a next step in the evolution of money or a market fad. Uyeda responded saying that the Commission allows technological innovation and that his key concern is fraud with such an investment.

 

For more information on this meeting, please click here.
For an archive of past SIFMA hearing coverage, please click here.