- NOMINATIONS OF SARAH BLOOM RASKIN AND RHONDA SCHMIDTLEIN

[Senate Hearing 113-389]
[From the U.S. Government Publishing Office]

S. Hrg. 113-389

NOMINATIONS OF SARAH BLOOM RASKIN
AND RHONDA SCHMIDTLEIN

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

HEARING

before the

COMMITTEE ON FINANCE
UNITED STATES SENATE

ONE HUNDRED THIRTEENTH CONGRESS

FIRST SESSION

on the

NOMINATIONS OF

SARAH BLOOM RASKIN, TO BE DEPUTY SECRETARY, DEPARTMENT OF THE TREASURY;
AND RHONDA SCHMIDTLEIN, TO BE A MEMBER OF THE UNITED STATES
INTERNATIONAL TRADE COMMISSION

__________

NOVEMBER 20, 2013

__________

Printed for the use of the Committee on Finance

______

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COMMITTEE ON FINANCE

MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West ORRIN G. HATCH, Utah
Virginia CHUCK GRASSLEY, Iowa
RON WYDEN, Oregon MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York PAT ROBERTS, Kansas
DEBBIE STABENOW, Michigan MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington JOHN CORNYN, Texas
BILL NELSON, Florida JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware JOHNNY ISAKSON, Georgia
BENJAMIN L. CARDIN, Maryland ROB PORTMAN, Ohio
SHERROD BROWN, Ohio PATRICK J. TOOMEY, Pennsylvania
MICHAEL F. BENNET, Colorado
ROBERT P. CASEY, Jr., Pennsylvania

Amber Cottle, Staff Director

Chris Campbell, Republican Staff Director

(ii)
?

C O N T E N T S

__________

OPENING STATEMENTS

Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman,
Committee on Finance........................................... 1
Hatch, Hon. Orrin G., a U.S. Senator from Utah................... 3
Cardin, Hon. Benjamin L., a U.S. Senator from Maryland........... 7

WITNESS

Sarbanes, Hon. Paul, former U.S. Senator from Maryland........... 5

ADMINISTRATION NOMINEES

Raskin, Sarah Bloom, nominated to be Deputy Secretary, Department
of the Treasury, Washington, DC................................ 8
Schmidtlein, Rhonda, nominated to be a member of the United
States International Trade Commission, Washington, DC.......... 10

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:
Opening statement............................................ 1
Prepared statement........................................... 27
Cardin, Hon. Benjamin L.:
Opening statement............................................ 7
Hatch, Hon. Orrin G.:
Opening statement............................................ 3
Prepared statement........................................... 29
Raskin, Sarah Bloom:
Testimony.................................................... 8
Prepared statement........................................... 31
Biographical information..................................... 34
Responses to questions from committee members................ 46
Sarbanes, Hon. Paul:
Testimony.................................................... 5
Schmidtlein, Rhonda:
Testimony.................................................... 10
Prepared statement........................................... 80
Biographical information..................................... 82
Responses to questions from committee members................ 89

(iii)

NOMINATIONS OF SARAH BLOOM RASKIN, TO BE DEPUTY SECRETARY, DEPARTMENT
OF
THE TREASURY; AND RHONDA SCHMIDTLEIN, TO BE A MEMBER OF THE UNITED
STATES
INTERNATIONAL TRADE COMMISSION

----------

WEDNESDAY, NOVEMBER 20, 2013

U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10:18
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Max
Baucus (chairman of the committee) presiding.
Present: Senators Wyden, Menendez, Cardin, Brown, Hatch,
Grassley, Crapo, and Thune.
Also present: Democratic Staff: Mac Campbell, General
Counsel; Rory Murphy, International Trade Analyst; Lynn Becker,
Deputy Clerk; Carla Martin, Senior Advisor; and Tiffany Smith,
Tax Counsel. Republican Staff: Chris Campbell, Staff Director;
Nicholas Wyatt, Tax and Nominations Professional Staff Member;
Rebecca Eubank, Staff Assistant; and Jeff Wrase, Chief
Economist.

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM
MONTANA, CHAIRMAN, COMMITTEE ON FINANCE

The Chairman. The hearing will come to order.
Abigail Adams, the wife of President John Adams, once
asked, and I quote, ``If we do not lay out ourselves in the
service of mankind, whom should we serve?''
Joining us today are two people nominated to serve in
critical roles in the government: Sarah Bloom Raskin, the
President's nominee to be Deputy Secretary of the Treasury; and
Rhonda Schmidtlein, nominee to be a member of the International
Trade Commission.
I reviewed your backgrounds and your economic policy
experience. You are both well-qualified and have proven
yourselves to be extraordinary public servants.
Ms. Raskin, you served as Maryland's Commissioner of
Financial Regulation during the financial crisis, and, for many
years, you served as counsel on the Senate Banking Committee.
Your current role as Federal Reserve Governor gives you
valuable insight into our Nation's economy.
Your nomination also marks a milestone. If confirmed, you
would be the highest-ranking woman in the history of the
Treasury Department. [Applause.]
It is not often I get applause, especially in the middle of
an opening statement. [Laughter.]
Senator Hatch. It was not for you.
The Chairman. No.
If there is one thing to be sure of about being Deputy
Secretary of Treasury, it is that you will have to wear many
hats, and I am confident that you can. And you will need to,
because the Treasury faces a lot of challenges.
First and foremost, the Treasury must keep working to
strengthen our economy. The 7.3-percent unemployment rate is
far too high, and the tepid economic growth over the last few
years cannot continue. We must do better.
Treasury must also help foster and manage our relationships
with important trading partners around the world, including
China. We are at the pivotal stage with our trade agenda. There
are huge opportunities for us to boost exports and reinforce
trade ties, and Treasury must help seize them.
Your responsibilities at Treasury will also include helping
to rebuild the trust of the American people in the Internal
Revenue Service. At the confirmation hearing for your
predecessor, I stressed the importance of transparency at
Treasury and fairness at the IRS. Four years later, I stress
these same points to you, Ms. Raskin.
The revelations about IRS's inappropriate screenings of
501(c)(4)s shook the public's confidence. You will be part of
the team that works to regain it.
You will also be part of the team at Treasury responsible
for helping Congress create sound tax reform policy. That team
will need to be available and ready to act when the time comes.
Tax reform is an important endeavor, and we have to get it
right. And I, frankly, tell you I very much appreciated
Secretary Lew's comments yesterday in support of tax reform. We
need to work together to make our tax system more fair, more
simple for American businesses and families.
Ms. Schmidtlein, you have an extensive legal background in
trade. You have worked as a trade lawyer for the Department of
Justice, USTR, and in the private sector.
If confirmed, this committee will ask a lot of you. You
will need to fairly consider the cases before the ITC and
enforce our trade laws objectively. You will need to ensure
that the ITC continues to provide us with high quality, timely
advice to advance our trade agenda.
That agenda includes a singular opportunity to boost jobs
and growth in our country. Between ongoing talks with nations
across the Pacific and in Europe, we are negotiating trade
deals covering two-thirds of global GDP. The ITC plays a
critical role in providing Congress and our negotiators with
the facts they need to ensure that these trade deals work for
American families and for American workers and businesses.
As you take on this ambitious agenda, keep in mind the
story of former ITC Chairman Will Leonard. In 1975, the ITC
faced daunting hurdles. First, Congress had just expanded ITC's
role in the Trade Act of 1974. With a small number of
employees, the agency was being asked to do a whole lot more.
Second, his office building, a third of which was
condemned, was falling apart. In a cramped, unpainted meeting
room, Chairman Leonard met with the ITC staff, and here is what
he said, and I am quoting him: ``If we are excited and
interested in our work, our surroundings will take on a glow
that could never be transmitted by mere paint and plaster. It
is my pledge to you that we can make this place hum.''
If you apply Chairman Leonard's lesson, I have no doubt
that you will succeed. And do not worry, the offices are no
longer in disrepair.
Over the last 20 years, seven of eight nominees for Deputy
Secretary of the Treasury have been unanimously confirmed by
the Senate, as have all of the last 14 nominees for the ITC. I
hope we can carry on that tradition.
Thank you both for your service. You are top-notch
candidates. I strongly support your nominations, and I hope we
can work very quickly so that you can get to work, not only for
yourselves but, much more importantly, for the American people.
Thank you very much.
[The prepared statement of Chairman Baucus appears in the
appendix.]
The Chairman. Senator Hatch?

OPENING STATEMENT OF HON. ORRIN G. HATCH,
A U.S. SENATOR FROM UTAH

Senator Hatch. Well, thank you, Mr. Chairman, for holding
today's hearing. I also want to thank our two nominees for
joining us.
Governor Raskin, if confirmed as Deputy Secretary of the
Treasury, you will be making an interesting transition from the
monetary to the fiscal sphere, both of which, in my view, need
improvements when it comes to transparency. It is my hope that,
if you make this transition, you will work with us to improve
the lines of communication between the Treasury Department and
the Congress.
On the monetary side, the Federal Reserve has, in my
assessment, been treading perilously into the sphere of fiscal
policy. Treasury and the rest of the administration, not to
mention many in Congress, have been content to outsource
decisions, such as the maturity structure of our debt, to the
Fed and, in the process, have anointed the Fed with power over
what are essentially fiscal policy matters.
Relatedly, the Fed made a joint pledge with Treasury back
in March of 2009 that the Fed should not ``allocate credit to
narrowly defined sectors or classes of borrowers.'' The pledge
went on to proclaim that ``government decisions to influence
the allocation of credit are the province of the fiscal
authorities.'' Then, reneging on the pledge, the Fed decided in
September 2012 to buy $40 billion per month in agency mortgage-
backed securities and to allocate credit in order to ease
market conditions in the mortgage and housing sectors.
Remarkably, this came after the Treasury ended its foray
into mortgage-backed securities investments, citing improved
market conditions. It also came directly after a prominent
Democrat in Congress admonished Chairman Bernanke to, quote,
``Get to work, Mr. Chairman,'' on providing more stimulus.
Unfortunately, the joint Fed and Treasury pledge not to
channel credit to narrow sectors of the economy ranks right up
there on the credibility scale with the promise that, if you
like your health insurance policy, you can keep it.
When I ask the Fed and Treasury about the interplay between
monetary and fiscal policies and some dangerous overlaps, I
hear conflicting stories. On the one hand, officials assure me
that the Fed and Treasury are independent and doing their own
things. On the other hand, I see the Fed and Treasury acting
jointly, as when Fed officials publicly state that they are
helping the government lower its financing costs, which is
making debt-fueled government spending look artificially cheap.
So, Governor Raskin, my hope is that you would agree to
help make the Treasury more transparent and to work with
Congress when members ask for information about Treasury
policies or the country's debt or cash management decisions.
There is plenty available for you to do at the Treasury,
and I hope you will outline your objectives for us. I further
hope that these objectives include working to promote clarity
about the positions of the administration on issues that are
long overdue for action, including comprehensive tax reform,
entitlement reform, reforms of Fannie and Freddie, and plans to
drive down our Nation's unsustainably high and growing debt.
Now, turning to the trade side of today's hearing, Ms.
Rhonda Schmidtlein is nominated to be a member of the United
States International Trade Commission. If confirmed, you would
have a voice in shaping the ITC's future, including its section
337 process.
The ITC's section 337 process is a vital tool for U.S.
companies facing unfair competition from foreign imports that
infringe their intellectual property, and I have a longstanding
interest in making sure this process operates as effectively as
possible.
I am also very interested in ensuring that the ITC is able
to continue its role as a nonpartisan source of information
regarding U.S. trade policies and their effects on our economy.
Ms. Schmidtlein, I hope you share my belief in the
importance of an effective 337 process and the need for
Congress to be able to obtain the highest quality economic
analysis from the ITC.
Mr. Chairman, once again, thank you for holding today's
hearing and for your ongoing leadership of this committee. We
appreciate you.
[The prepared statement of Senator Hatch appears in the
appendix.]
The Chairman. Thank you, Senator.
Now, I would like to introduce our nominees.
First, Sarah Bloom Raskin is nominated to be Deputy
Secretary of Treasury.
Ms. Raskin, this is a good opportunity for you to introduce
your family, because you are going to be working really hard.
This is teamwork. We are all in this together. And I know you
are very happy to have your family accompany you.
Ms. Raskin. Well, thank you, Chairman Baucus. And I do have
quite a number of family members here with me today.
I have my husband here, Jamie, Jamie Raskin, and my three
children: Hannah Grace, Tommy, and Tabitha. My parents are
here, Herbert Bloom and Arlene Bloom. My brother, Kenneth
Bloom, is here. My niece, Maggie Littlewood, is here. And I
think there is also my father-in-law, Marcus Raskin, as well as
some cousins, Jed Bellman and Sarah Bergen.
The Chairman. I would like to have you all stand so we can
all applaud you, although there are not many left for applause.
All stand up. [Applause.]
Very nice. We will have other introductions in just a
moment.
Our second witness is Rhonda Schmidtlein. And we would love
to have you introduce your family too, Rhonda. It is a great
opportunity for you.
Ms. Schmidtlein. Thank you, Chairman Baucus.
I have with me today my husband, John Schmidtlein, and my
daughter Anna, who is taking a day off of kindergarten today to
be here. We have a 2\1/2\-year-old whom we did not bring, for
what should be obvious reasons.
My parents are here, Roger and Marilyn Schnare, who will
celebrate their 48th wedding anniversary next week.
The Chairman. Wonderful.
Ms. Schmidtlein [continuing]. And my father-in-law, John
Schmidtlein.
The Chairman. Why don't you all stand? We want to
congratulate you too. [Applause.]
We are very honored to have with us here Senator Sarbanes,
who I think would like to introduce one of our witnesses today.
We are very honored to see you again, Senator Sarbanes. You
have been a real credit to the Senate and the State of
Maryland, and we miss you sorely.
Senator Hatch. Yes. It is great to see you again. We are
really happy to have you here.
Senator Sarbanes. Well, thank you. Thank you very much, Mr.
Chairman and Senator.
Actually, Senator Hatch and I came to the Senate on the
same day. I took that advice about ``you have to know when to
hold them and know when to fold them.'' Senator Hatch is still
hanging in there. [Laughter.]
Senator Hatch. Yes. I think I should have followed your
advice sometimes, and I know a lot of others think I should
have followed your advice. [Laughter.]
The Chairman. There was a breakfast the Senator and I had,
when I was over in the House, thinking about coming over to the
Senate. You advised me, and you said, ``Max, I do not know if
you want to come over here. It is a lot different.''
[Laughter.]
Anyway, thank you very much.

STATEMENT OF HON. PAUL SARBANES,
FORMER U.S. SENATOR FROM MARYLAND

Senator Sarbanes. Senator Wyden, it is nice to see you, as
well as my colleagues Senator Cardin and Senator Brown.
I am pleased to be before the committee and to have this
opportunity to say just a few words about Sarah Bloom Raskin,
who is an old and dear friend and for whom I have a tremendous,
tremendous regard.
Sarah has now served on the Board of Governors of the
Federal Reserve for just over 3 years. I got to know her in a
work capacity, first, when she was a staff member to the Senate
Banking Committee.
I know Senator Crapo was here with us a few minutes ago.
But she did an outstanding job. She was with the committee not
quite 5 years and was really one of the--we had a very good
staff, if I do say so myself, on both sides of the aisle, and
she just did an outstanding job as a member of the staff of the
committee.
She showed measured judgment, was extremely hardworking,
very analytical, very smart, and had a tremendous ability to
work with people across the aisle, in the Congress, out of the
Congress, and she made a tremendous contribution.
Before she went on to the Federal Reserve Board, she was a
Commissioner of Financial Regulation for the State of Maryland.
She did an absolutely--and I am sure Senator Cardin will
comment about this--an absolutely outstanding job as our
Commissioner of Financial Regulation. And she rose very quickly
among the State bank supervisors.
She was on their executive committee. She headed up a
number of other committees and really became, to some extent, a
spokesman for the State banking regulators.
When she went to the Federal Reserve, they were very strong
in their support of her and her enthusiasm for that nomination.
The job to which she is going, hopefully, with the approval
of this committee, is a tremendously important job and very
broad in its responsibilities as Deputy Secretary of the
Treasury. She brings to it a tremendous amount of talent,
including--and I just want to touch on this--some clear
administrative abilities. She has been the Administrative
Governor at the Federal Reserve Board. So she has had some
responsibilities at the Fed for administering the workings of
the Federal Reserve Board.
As Commissioner of Financial Regulation in Maryland, she
was extremely good in handling that charge. And that will be
part of her job, as I understand it, as Deputy Secretary of the
Treasury, and I commend her very strongly in that area.
Mr. Chairman and members of the committee, I just want to
make a couple of points. When she was up to go on the Federal
Reserve Board, we had a number of the banking associations,
including the community bankers, who were in very strong
support of Sarah, and others who had worked with her when she
was Commissioner of Financial Regulation. At the same time, she
was very strongly supported by the Maryland Consumer Rights
Coalition, which had given her the Consumer Advocate of the
Year Award. So she has, obviously, shown an ability to bring
people together and solve difficult problems, have their
endorsement and have their support.
I happen to think that is a very valuable asset, and she
has manifested it in her previous work, and I am sure she will
continue to do so at the Treasury.
So, thank you very much for this opportunity this morning
to come and say a few words. I have known Sarah and her husband
for a long, long time, and I have the very highest regard for
her.
The Chairman. Thank you, Senator. It is a very strong
statement, and we deeply appreciate it.
Senator Cardin, I am sure you have a few words too that you
would like to add in support of the nominee.

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN,
A U.S. SENATOR FROM MARYLAND

Senator Cardin. Mr. Chairman, thank you for the courtesy to
allow me, also, to introduce to the committee Sarah Bloom
Raskin. We are very proud that she is a Marylander, lives in
our State, and is a person who has given so much in public
service.
Senator Sarbanes mentioned her husband Jamie. Jamie is a
member of our State Senate and an incredible person in his own
right. This is a family of public servants, and we very much
appreciate that.
Senator Sarbanes went over a great deal of the background
of Sarah Bloom Raskin. She worked in the private sector, very
successfully in the private sector, but then returned to the
public sector, because she is really dedicated to public
service. She is in public service for all the right reasons.
Her background, her education, her job training, all are
well-
suited for the position. As you pointed out, she will become
the
highest-ranking woman in the history of the Department of
Treasury. So this is really a moment where I think we all can
be very pleased that Sarah is coming forward to serve in this
extremely challenging position.
Senator Sarbanes mentioned the fact that she was our State
Regulator, and that is where I really got to know her. And I
remember, while she was our State Regulator, sort of
underscoring Senator Sarbanes's point--the Maryland bankers
come in every year to meet with us. I am sure the bankers from
your State also come in to meet with your delegations. And they
do not normally comment about our State Regulators, but they
did, and they were very complimentary of the manner in which
Sarah was conducting the regulatory atmosphere in our State.
In that same week, just by happenstance, we had consumer
groups that were in talking to us about some of the legislation
that was pending in Congress, and they said, ``You know, why
can't you get people like Sarah at the Federal level, because
they really are open to allowing us access to try to work out
issues?''
So I really want to underscore that point to the committee.
We need people in the administration who know how to bring
people together, and Sarah Bloom Raskin is that type of a
person. She really knows how to build effective coalitions to
get things done.
I had the honor of introducing her to the Banking Committee
during her confirmation hearings in 2010, and she was, of
course, confirmed to be on the Federal Reserve.
I thank her for her service. And on a personal note, it is
really--I am very proud of the reasons why you are in public
service and the differences that you have made.
Thanks to your family also.
The Chairman. Thank you, Senator, very, very much.
Thank you, Senator Sarbanes. It was good seeing you.
With that, Ms. Raskin?

STATEMENT OF SARAH BLOOM RASKIN, NOMINATED TO BE DEPUTY
SECRETARY, DEPARTMENT OF THE TREASURY, WASHINGTON, DC

Ms. Raskin. Chairman Baucus, Ranking Member Hatch, and
distinguished members of the committee, it is a great privilege
to appear before you today as the President's nominee to be
Deputy Secretary of the Treasury.
I do want to begin by thanking Senator Paul Sarbanes, who
has served as an exemplary role model and leader for Maryland,
the Senate, and our Nation throughout his lifetime of public
service.
Let me also thank your colleague and my Senator, Ben
Cardin, for his kind words and the excellence of his leadership
and passionate concern for the people of Maryland.
I also would like to thank all the members of my family,
especially my husband, Jamie, my parents, my brother, and my
three children for their support, understanding, and good
humor.
I want to mention that Jamie was with me at my confirmation
hearing when I was nominated for the Federal Reserve Board 3
years ago, even though he was going through radiation and
chemotherapy at the time. Jamie is a law professor and a
Senator--although not a real Senator, as my daughter, Tabitha,
said when she was a little girl--a State Senator, and I am
delighted that he is again behind me on this day, robustly
healthy and fit, 3 years after his final treatment.
I am grateful to President Obama and Secretary Lew for this
opportunity. The trust they have placed in me is a humbling
honor.
Finally, I want to thank you, Mr. Chairman, and Ranking
Member Hatch for the enormous courtesy you and the members of
your staff have shown me throughout this process. If confirmed,
I look forward to working closely with you as the Treasury
Department continues the essential work of promoting economic
growth and accelerating our recovery from the financial crisis
of 2008.
It is a special thrill to be back in the Senate. Although I
spent half of my career as a lawyer in the private sector, the
other half has been devoted to public service, and, for me,
this gratifying phase of my career began right here in this
chamber.
As a former counsel to the Senate Banking Committee under
three different chairmen, I cherish the time that I spent in
this remarkable body, where I learned that the character of our
leaders and the purposes they bring to public life are far more
important than their party labels. This is an institution with
a great history and a great future, and all of America is
deeply invested in its success.
I have worked extensively in the private sector. These
roles in business not only gave me invaluable management
experience, but they also taught me what those in the financial
marketplace seek most from government--stability,
predictability, fairness, a sense of proportion, attention to
the unintended consequences of regulation, pragmatism, and
bipartisan effort toward economic prosperity and public
efficiency.
From 2007 to 2010, I served as the Commissioner of
Financial Regulation for the State of Maryland. As
Commissioner, I worked hard every day to provide stability to
our financial sector and opportunity to our businesses and our
people through the darkest days of the Great Recession.
I mobilized a great deal of talent to address the
devastating effects of spikes in home foreclosures and
unemployment that shocked so many of our families and
communities, and I took action to revise and replace
ineffective and counterproductive State regulations in order to
enhance economic progress, regulatory effectiveness, and access
to affordable credit.
In 2010, I was nominated by the President and confirmed by
the Senate as a Governor of the Federal Reserve Board. In that
capacity, I have worked with my colleagues on the Board and on
the Federal Open Market Committee to maximize employment,
maintain price stability, and restore the underlying strength
and vibrancy of the American economy.
As the executive agency charged with promoting economic
prosperity and financial stability, the Department of the
Treasury has a sacred trust to advance the fortunes and
livelihood of our people, our businesses, our communities, and
our Nation. The government does not create wealth and
prosperity and innovation in our economy, but it does create
the conditions in which our people and businesses can, and,
therefore, its role is central and indispensible.
This is an exciting time to join the Treasury Department.
With the need for immediate stabilization from the financial
crisis behind us, Congress and the administration can
increasingly focus their attention on longer-term structural
reforms that will improve conditions for sustainable and
meaningful economic growth. From housing finance reform and
implementing financial regulatory reform to tailored sanction
design and implementation, new trade agreements, and tax and
entitlement reform, we have the chance to make important long-
term and durable progress for the country.
If confirmed, I look forward to working closely alongside
members of this committee to identify the best bipartisan
policy options to achieve such progress. I also look forward to
helping Secretary Lew continue the exemplary and efficient
management of the Department and its component bureaus and
offices.
At different points over the last decade, I have dealt with
the Treasury staff and have been greatly impressed by their
skill and commitment. If I am so honored to be confirmed, I
look forward to working every day to build effective policies
for a sustained economic recovery and growth that reaches every
corner of every State in our Nation.
Let me say, finally, that I have learned plenty from
intense study of econometric models and academic analyses in my
time as a Federal Reserve Governor, but I have learned more
than I ever imagined possible from the people I met when I made
impromptu visits to job fairs and unemployment centers. Talking
to people trying to avoid falling off the economic ledge
reminds us of the urgent public purposes that must infuse our
work here in Washington if we are to be authentically
successful. I make it a continuing commitment to throw
everything I have into seeking ways to broaden the
opportunities for prosperity for all Americans.
Thank you for allowing me to testify here today and for
receiving me in your offices. I would be happy to respond to
any and all questions you may have throughout this process and,
indeed, throughout my tenure at the Treasury Department, if I
am fortunate enough to be confirmed for that position.
Thank you.
[The prepared statement of Ms. Raskin appears in the
appendix.]
The Chairman. Thank you very much.
Ms. Schmidtlein, we are very honored to have you here and
would love to hear your statement.

STATEMENT OF RHONDA SCHMIDTLEIN, NOMINATED TO BE A MEMBER OF
THE UNITED STATES INTERNATIONAL TRADE COMMISSION, WASHINGTON,
DC

Ms. Schmidtlein. Chairman Baucus, Ranking Member Hatch, and
members of the committee, thank you for this opportunity to
appear before you today. I am deeply honored and grateful to
have been nominated by President Obama for the position of
Commissioner of the United States International Trade
Commission.
Before I go on, I would like to thank my family members as
well, who are here and who have been introduced. My husband and
my daughters, Julia and Anna. My parents, Roger and Marilyn,
and my father-in-law, John Schmidtlein. I am grateful to each
of you for your love and support and understanding over the
years. I also want to acknowledge my friends, many of whom are
here today, and others who are listening online, and thank them
for their steadfast support and encouragement.
I have been privileged to spend my career working in the
public interest. Starting at the U.S. Department of Justice and
then at the U.S. Office of the Trade Representative, and later
at the U.S. Public Company Accounting Oversight Board, I was
proud to represent the United States in negotiations and trade-
related disputes.
My work as a trade lawyer has given me a keen appreciation
for the important work of the ITC. While the ITC may be
relatively unknown to the general public, it plays an important
role in the U.S. economy through its administration of U.S.
trade remedy laws, including title VII and section 337. These
laws provide a vital tool for U.S. companies that are faced
with unfair trade practices, and the ITC's decisions impact the
livelihoods of workers, farmers, and businesses across America.
Another important, but perhaps less recognized aspect of
the ITC is the role it plays in maintaining the credibility of
U.S. trade remedy laws. As a lawyer who has represented the
United States in challenges to the application of U.S. trade
remedy laws, both in the U.S. courts and at the WTO, I
understand firsthand the importance of maintaining objectivity
in the administration of these laws.
If confirmed, I intend to apply the law, as written and in
accordance with the intent of Congress, in a fair and objective
manner.
The ITC also plays an essential role in supporting
policymakers by providing objective and high-quality economic
and industry analysis. Over the course of my career as an
advocate and a negotiator, I have depended from time to time
upon the work of economists. So I understand the importance of
policymakers having reliable and robust reports upon which to
base their decisions.
If confirmed, I would look forward to working with my
fellow commissioners and ITC staff to ensure that the ITC
continues to be responsive to Congress and other policymakers
and continues to provide objective and high-quality reports.
I believe in the power of a rules-based trading system to
expand trade, create jobs, and raise standards of living. But
simply having such a system is not enough. The rules must be
enforced, and the decision-maker must be independent and
objective. Congress has charged the ITC with playing this
critical role with regard to U.S. trade remedy laws.
If confirmed, I would be honored to participate in this
important process as a commissioner.
I thank you for your consideration, and I would be happy to
answer any questions.
[The prepared statement of Ms. Schmidtlein appears in the
appendix.]
The Chairman. Thank you both very much.
Ms. Raskin, what is the biggest lesson you learned as a
State Regulator, or add to that your role as a Fed Governor?
What is the biggest lesson learned?
Ms. Raskin. Well, Chairman Baucus, I have to say that the
lessons were many. I have served in both of those capacities
during the time of really great financial crisis in our
country, and the experience of working during the crisis and
seeing the effects of the crisis on our communities and on our
prospects for economic growth really has been a searing
experience, and one that I have wanted to commit myself to
never see this country have to go through again.
So the work that I see going forward is a combination of
both bringing about a strong recovery from that crisis, a set
of reforms that brings us to a place where we do not have to
repeat a crisis like that again, and putting our economy on a
long-term path for sustainability.
The Chairman. What can we do to tend to prevent that
reoccurrence of the financial crisis?
Ms. Raskin. Well, I think a lot of very good work is
underway, Chairman Baucus, and the work has involved a lot
regarding financial reform. And, as you know, Dodd-Frank is a
comprehensive statute with many provisions, and a lot of the
work that Congress envisioned in that statute is underway and I
think is moving towards bringing us to a place of greater
financial stability.
I think our economy is doing better than it was certainly
in the dark days of the crisis. We are seeing moderate growth,
and I would like to see that growth continue. And I think the
work of both the committee and Congress, as well as the
continued work of the Federal Reserve, are important for those
efforts.
The Chairman. But at Treasury, specifically at Treasury,
what tools do you have to help bring back the economy and,
also, prevent further collapse down the road, as opposed to the
Banking Committee?
Ms. Raskin. That is right. And Treasury, as you know, plays
a very important role in many facets of our recovery and in our
long-term growth prospects.
The projects currently facing Treasury involve important
work regarding tax reform, which I know this committee has
taken a very strong lead in; questions regarding housing
finance reform; financial regulatory reform; work moving
treaties ahead in an important way; and, at the same time,
doing all of this in a way that enhances transparency, happens
in an accountable way that people in the public can understand,
and puts our economy on a stronger footing.
The Chairman. I appreciate you mentioning tax reform,
because I personally believe that is going to help promote
economic growth. And I was very pleased, as I mentioned
earlier, at Secretary Lew's statement supporting tax reform.
I urge you, if confirmed, to keep that up, because we have
to keep our eye on that ball.
Ms. Schmidtlein, I am a little bit concerned that ITC
Chairman Irving Williamson reportedly informed the USTR last
week that it will take ITC at least 150 days from receiving the
full text of an agreement--that is, a trade agreement, whether
it is TTIP or whether it is the Trans-Pacific Partnership
agreement--and that is going to take a long time.
Just your thoughts on how ITC can speed up that process a
little bit more quickly.
Ms. Schmidtlein. Thank you.
The Chairman. Because in the past, we have required reports
to be provided to this committee in about 90 days.
Ms. Schmidtlein. And you are talking about the section 332
report that they would provide?
The Chairman. Yes. Right. Right.
Ms. Schmidtlein. Yes. I would look forward, if confirmed,
to working with my fellow commissioners to understand why this
is taking so long and to ensure that the appropriate resources
have been allocated to those offices so that they can provide
the reports in a more timely manner.
The Chairman. Because I think these trade agreements are
enormously important. They are going to dramatically boost
economic growth in this country.
Ms. Schmidtlein. Absolutely, and that is one of the
statutory responsibilities of the ITC, to support the
policymakers by providing these types of reports.
The Chairman. I appreciate that. I just encourage you to
double down a little bit and see what we can do. Thank you.
Senator Hatch?
Senator Hatch. Thank you.
Governor Raskin, when we approach the statutory debt limit,
it becomes important for Congress to know about the state of
the country's finances, including its cash, public debt
issuance, and how much time can be bought in terms of remaining
below the debt limit when Treasury uses its so-called
``extraordinary measures.'' Those measures, by the way, are
unfortunately becoming all too ordinary and probably need to be
reexamined.
While Congress needs information, it does not always get it
in a timely fashion. Will you commit to us here on this
committee to respond--and to me personally--to respond to my
requests for information about debt issuance, cash balances,
and how much room Treasury has under the debt limit through use
of extraordinary measures when we near a debt limit, and will
you commit to doing so on a weekly basis with me and the
Congressional Budget Office when we get close to the debt
limit?
Ms. Raskin. Well, Senator Hatch, as you know, a government
default resulting from the breach of a debt limit is an event
considered to be one of catastrophic consequences in terms of
financial stability, economic growth, and employment.
It has never occurred in the history of our country.
Congress has always found a way to pay its bills, fortunately.
And the work that leads up to a government default regarding
the balances that come in to Treasury or the information that
is received regarding the approaching of that limit, I think,
is critically important to understand, being a set of numbers,
of figures, that is important to have accurate.
Senator Hatch. Well, I appreciate that. The reason I ask
that question is because we have not gotten responses that we
have asked for, have not had responses to letters that we have
sent, and I am just hoping that you will correct that, because
we do have an obligation here to oversee this.
And I do not think either of us and most people on the
committee have any special axes to grind. We just want to make
sure we know what we are doing.
So I would appreciate if you will do that.
Ms. Schmidtlein, as you are no doubt aware, intellectual
property is an increasingly important part of the U.S. economy.
In my home State of Utah, for instance, IP is the lifeblood of
our industries, from information technology to life sciences.
And, as I mentioned in my opening, the ITC provides a vital
tool for U.S. companies that face unfair competition from
foreign imports that infringe their IP.
Can you share with us your thoughts on the section 337
process and what you would do to make it as effective as
possible?
Ms. Schmidtlein. Thank you, Senator Hatch.
Of course, the ITC has recently implemented a few changes
to the procedures for section 337, including discovery and
then, also, putting in place a pilot program so that
potentially dispositive issues might be ruled upon early.
So I would look forward to sitting down with my fellow
commissioners, if confirmed, to evaluate the results of those
efforts that have just been taking place over the last 6
months.
Senator Hatch. Governor Raskin, if confirmed as Deputy
Treasury Secretary, you are likely to be involved in
proceedings of the non-transparent Financial Stability
Oversight Council, or FSOC, especially given your background in
bank regulation.
Now, the FSOC is unlikely to be able to spot threats to
financial stability or guard the world against financial
instability, especially given that it cannot even define what
that means. With the Treasury Secretary at the helm and the Fed
at the table, it is highly unlikely ever to warn of any threats
to financial stability arising from monetary policy or from
exploding government debt. Indeed, as the debt limit was
approached recently and the Treasury Secretary warned of
calamity, the FSOC chair, who happens to be the Treasury
Secretary, remained silent.
So I think everyone should be clear about this relatively
new entity. It is not a stability guardian. Rather, it is a
roving regulator looking for pockets of the financial system
and the economy to ensnare into the regulatory webs of the Fed
and other regulators. It is a council consisting of an alphabet
soup of financial regulators, and it is capable of turning
pretty much any set of companies into regulated public
utilities.
Now, given your financial regulation experience and the
possibility that you will be working with the FSOC in the
future, I have just two questions.
First, if you are confirmed, will you work to improve the
transparency and responsiveness of the FSOC to congressional
inquiries; and, second, do any firms or sectors of the
financial system currently, in your view, meet the test of
being systemically important financial institutions in need of
being designated by the FSOC and subsequently regulated by the
Fed or others?
If you could answer those two questions, I would be
appreciative.
Ms. Raskin. Certainly, Senator Hatch. And let me commend
you for your articulation of the very important goal of
transparency. It is one that I share and one that I have been
committed to further and develop in the public sector positions
that I have held.
In terms of the transparency of the FSOC, yes, I certainly
can commit to you that I will work to improve its transparency.
The FSOC, as you described so well, is, in essence, a group--it
stands for the Financial Stability Oversight Council.
It is a group that comes together, consists of the leaders
of various financial regulatory agencies, and it has primarily
two purposes, as set forth in the statute. One is, it monitors
financial market developments, and, two, it looks primarily at
the risks to financial stability.
And the transparency mechanisms that it has used in doing
this, I think, are there. I hear you and share a concern that
they be brought forward in a more comprehensible way. But there
is, in essence, a statutory standard regarding designation of
an institution that presents a risk to financial stability. You
are absolutely correct that if, in fact, an institution is
designated by the FSOC, it becomes an entity that becomes
regulated and supervised by the Federal Reserve.
The FSOC, as I see it, has been issuing annual reports
since its creation. Those annual reports have taken a step
toward identifying risks to financial stability, risks that
need to be pursued by various regulators, as well as by the
FSOC as a whole.
So the work of the FSOC, I think, is quite significant, and
designations of institutions that are considered systemically
significant have occurred and have been referred to the Federal
Reserve for supervision. There have been three so far.
But, yes, I appreciate your comments. I certainly look
forward to working with you, if I am confirmed, to improve
transparency.
Senator Hatch. Thank you.
The Chairman. Thank you, Senator, very much.
Senator Grassley?
Senator Grassley. You were born in Washington, IA, it says
here.
Ms. Schmidtlein. I was.
Senator Grassley. When did you leave?
Ms. Schmidtlein. I think shortly thereafter. [Laughter.]
Senator Grassley. All right.
Ms. Schmidtlein. I was raised in Missouri.
Senator Grassley. I have just one question for you, and I
would like your comments and thoughts on currency manipulation
by foreign governments and how big of an issue you think it is
for global trade. And I do not know if it would ever reach your
commission or not, but, if it did, how would you handle it?
Ms. Schmidtlein. Well, I suppose if it were the subject
matter of a case that was brought before the ITC, then, of
course, I would apply the statutory requirements to the facts
of the case in a fair and objective manner.
Senator Grassley. Can you give me your views on what you
think about currency manipulation and its impact on global
trade, if you have a view?
Ms. Schmidtlein. Well, I have to say, in my role as an ITC
Commissioner, I am not sure whether I would be in a position to
offer a view on that, and I have not studied that myself.
So I would be happy to get back to you, but, sitting here,
I could not offer----
Senator Grassley. If you would give me your views in
writing, I would appreciate it.
Ms. Schmidtlein. All right.
Senator Grassley. And, Ms. Raskin, I am going to tell you
about a conversation I had with Attorney General Holder. I do
not want you to comment on his conversation. It is just the
background for a question I have.
He was before the Judiciary Committee, and we had been
hearing and maybe even reading that, before the government
might file certain criminal charges or some sort of charges
against financial institutions or people within the financial
institutions, there were certain so-called ``experts'' that
government would consult about what might be the impact of
those lawsuits upon the financial system.
That disturbed me. I asked him if that was true, and he
said, ``Yes, that is true. We do consult with certain
experts.''
I am not sure those experts were identified. I am not sure
I expected him to identify them. I do not know whether I
submitted a question in writing for him to tell us who those
so-called experts are.
But I am talking about this environment now. Do you share
the concern that charging large financial institutions or key
individuals within those large institutions would have some
broad ripple effect in the economy? And then, if those are
concerns of our government, does not a refusal to prosecute
create a lack of accountability for these institutions and the
people who run them, like, for instance, you can do something
wrong and maybe get away with it?
Ms. Raskin. Well, thank you, Senator Grassley. I certainly
appreciate your concerns about a focus on accountability. I am
not aware of the conversation with Mr. Holder, and I am not
aware of the details around it.
I can tell you that I have looked from the outside at some
of the contours of these settlements with large financial
institutions, and, from the perspective that I sit in,
certainly, at the Federal Reserve, we do look at consequences
regarding financial stability, regarding the safety and
soundness of the institution, as well as improvements towards
transparency and, of course, economic growth.
So I do look at it from those perspectives.
Senator Grassley. Well, let me give you my opinion, not
that you would necessarily follow it or that I would expect you
to, but I think that when we have an environment in which, if
somebody breaks a law or an institution does something wrong,
and somehow our government is afraid to charge them and
prosecute them or pursue whatever the law allows them to pursue
because it might have an impact on the financial institution,
that you are allowing people to have an environment where you
can get away with murder.
Not officially murder, but get away with bad things that
you should not be allowed to get away with, and it gives a
certain amount of freedom that brings about more risk. It is a
risk-
inducing thing if you tolerate that sort of thing.
I yield the floor.
Senator Hatch [presiding]. Senator Cardin?
Senator Cardin. Thank you, Mr. Chairman.
Let me thank both of our witnesses. Ms. Schmidtlein, thank
you, also, for your willingness to step forward, and we thank
your family as well.
I appreciate in your statement your reference to the remedy
laws and that the laws provide vital tools for U.S. companies
that are faced with unfair trade practices and that ITC
decisions can impact the livelihoods of workers, farmers, and
businesses across America. I could not agree with you more.
We are under attack on our remedy laws. There is unity
among our trading partners. They do not like them and do
everything they can to undermine them. Multinational companies
have invested a lot, also, to weaken enforcement of remedy
laws.
The ITC has been one of the strong institutions trying to
protect congressional intent on the enforcement of our remedy
laws. And I understand, when a specific case is before you, you
have to act on the facts and apply the law and do that in a
fair manner.
But my question to you is, are you prepared to work with
Congress to make sure that we have effective remedy laws, that
we look at--particularly when we are in trade negotiations--the
experiences that you would have on the Commission, if
confirmed, so that we can, in fact, protect against unfair
trading practices against America's businesses?
Ms. Schmidtlein. Yes, of course. I personally would be
willing to provide whatever insight I could to any members of
the committee or Congress when you are looking at how to make
the remedy laws more effective.
Senator Cardin. Thank you for that, because I have probably
testified before the ITC more than any other government
commission. There seem to be more problems involving industries
in our State.
What has always concerned me is, there are technical
defenses that are made through the applications of the remedy
laws that try to undermine the congressional intent. And, to
the extent that we need to strengthen our laws here, I think
the views coming from someone who has seen the application of
these laws in a contested setting could help us make sure that
Congress, which is responsible for the laws, passes laws that
can be enforced.
So I thank you for that.
Ms. Raskin, I want to talk about savings and retirement
savings. During the best of times in America, when our economy
was performing as strongly as any in the world, we were dead
last among the industrial nations on our savings ratios. At
that time, we were told we do not have to worry about it too
much because Americans are saving through the equities in their
homes. And we saw what happened with the equities in their
homes.
I would like to get your view about working with Congress
to provide effective tools so that Americans save more. This
Congress has passed many bills, including the Savers Credit, to
help lower-income families, but it seems to me that Treasury
should be playing an active role in looking at the fundamentals
of the American economy. And I hope that you would share with
me that Americans just do not save enough and we should be
looking at ways to increase savings, which not only helps our
economy from a macro sense, but also protects the security of
individuals and government programs that are stressed with
demographic changes.
Your views?
Ms. Raskin. Thank you, Senator Cardin. And I know you have
done a lot of work throughout your career on the issue of
savings and pension work, and I think you are correct.
My view is that this is an important component of our long-
term sustainability and long-term growth in our economy, both
in terms of moving through the recovery, as well as putting our
economy on a path towards greater growth and sustainability.
I think the proposals that you have mentioned are
important, and, yes, I do look forward to working with you on
them, if I am confirmed.
Senator Cardin. Thank you.
Following on Senator Grassley's point on currency
manipulation, I certainly support the thrust of his concern.
But I am going to ask Ms. Raskin that question, because
Treasury does have a direct role in dealing with currency
manipulation.
We have seen some progress from our trading partners, but
still any objective review would indicate that American
companies have been at a disadvantage because of currency
manipulation. What efforts can we expect, if you are confirmed,
to bring these matters to the attention of Congress and to the
attention of Treasury to get a more level playing field for
American companies?
Ms. Raskin. Well, thank you, Senator Cardin. And I think
both you and Senator Grassley have put your finger on a very
important issue that requires continued diligence and, from my
perspective, a lot of hard work, and that is the question of
really bringing other countries into a market-based exchange
rate regime.
And I think that some countries are doing it better than
others, but I think this is a problem and a set of issues that
we need to engage in, because these are very important trading
partners to us.
I will go out on a limb here and speak specifically of
China, which is the world's second-largest economy, and it is
incredibly important that we get the relationship with China
right.
My understanding is that there are a number of multilateral
and bilateral forums that Treasury has been working through in
order to bring about certain changes in those relationships,
one having to do with moving towards a more market-based set of
exchange rates; two, I would say, is leveling the playing
field, as you point out, so that our businesses and our workers
are not disadvantaged in that relationship; and the third I
would point out is seeing in these countries a movement away
from being primarily export-based countries to being ones more
where they are feeding and growing off of internal consumption
and demand.
Senator Cardin. I would just underscore, I agree with what
you said. We want market-based currencies, not manipulated
currencies.
I hope that you can, through the forums you mentioned, get
us to a level playing field. But do not be shy in asking
Congress for stronger tools in order to deal with this. We have
legislation pending here--and I am disappointed we have not
passed it, because I think we have the support for it--but, if
we can work with Treasury, I think it is vitally important that
we get to market-based currencies as quickly as possible.
Thank you, Mr. Chairman.
Senator Hatch. Thank you.
Senator Brown?
Senator Brown. Thank you, Senator Hatch.
Welcome to both of you, and thank you for your public
service, both of you.
Governor Raskin, I appreciate your comments about the local
job fair. Your behavior at the Fed is unusual, in a good way,
of course, in doing those kinds of things. Abraham Lincoln used
to talk about--when his staff said, stay in the White House,
win the war, free the slaves, preserve the Union, he would say,
``I need to go out and get my public opinion bath.'' And I
would encourage you to continue doing that. It is unusual
behavior at Treasury. It was unusual behavior at the Fed, and
something that we admire and appreciate.
Following up on Senator Cardin's and Senator Grassley's
question, you imply--maybe you imply, or maybe I have read
something you did not exactly say--that there are signs that it
is getting better.
I have, in recent reports, though, noted that the Japanese
government has undertaken a number of interventions in foreign
exchange markets. We have failed to identify Japan as a
currency manipulator.
This department you want to go to has a history of
resistance to news reports, analyses, and Senate and House
admonitions, if you will, on the whole issue of currency. The
administration--and whether it was Bush Sr. or whether it was
Clinton, whether it was Bush Jr., whether it is this
administration--talks a fairly good game on currency, but
always falls short in doing this.
Why is it going to be any better with you there advising
Secretary Lew, who seems never to want to use the strategic
economic dialogues or any other opportunities to move forward,
when we do know that there is a 20-percent or 25-percent tax
one way, a subsidy the other way, on currency?
Ms. Raskin. Well, Senator Brown, thank you, first of all,
for your very nice comments. And I will say that I certainly
hope that, if I am confirmed to go to Treasury, I do have the
opportunity to continue to go out into different neighborhoods
and communities and learn from what I see there. So thank you
for noting that.
In terms of this administration and other administrations,
as you say, showing a resistance towards listening, I hope I
will be different. I do want to listen. I do want to certainly
understand what the administration's efforts are currently
regarding putting pressure on countries that are not moving at
the pace that we would like to see.
So I would certainly want to understand what the efforts
are that are underway and, yes, I will listen. I will listen to
all of you regarding what you are seeing and why you might
sense that progress is not moving as quickly as we would like.
Senator Brown. Thank you.
Ms. Schmidtlein, there seems to be, in the last 30 years--
and I think the statistics bear this out--a bias in our
government, kind of maybe in our country, but it seems to be
coming out of our government, towards financial services at the
expense of manufacturing.
I know it is not quite that simple, but, if you look at
percentage of the GDP, manufacturing as a percentage of GDP,
financial services as a percentage of GDP, the percentage of
manufacturing has dropped precipitously. The percentage of
financial services has gone up in almost reverse proportions.
We saw, from 2000 to 2010, a loss of 5 million
manufacturing jobs in this country, and 60,000 plants closed.
In 2010, with the auto rescue, we saw, frankly, an
administration--and I say an administration, meaning ITC and
Commerce--that was significantly more aggressive in enforcing
trade rules, not quite aggressive enough, in my mind, but more
aggressive.
I think that is, in part, why we have seen growth beginning
in manufacturing, some half-million net job increase since the
middle of 2010--again, not good enough, but something that is
at least in the right direction. And I want to ask about the
ITC's role. We asked them to analyze the effect of a proposal--
of proposed or concluded trade agreements--and these analyses
tend to focus on the tariff reductions involved and estimated
exports that may increase as a result.
It seems they do not discuss the economic impact, though,
of what these trade agreements mean for a community and for a
region. Give us your thoughts on sort of expanding these
reports so they cover a broader set of economic metrics,
including the net effects on trade and employment.
I do not put at the feet of trade agreements all of the
lost manufacturing jobs, by a long shot, but I also do not
think that Washington--and whether that is ITC or USTR or
Commerce--really ever absorbs or discusses enough the impact on
communities of those lost manufacturing jobs and how the gains
are not spread so evenly to cover the losses of these trade
agreements.
If you would, talk to me about what your plans might be as
an ITC Commissioner in dealing with that.
Ms. Schmidtlein. Well, as you just talked about and as I
mentioned, this is one of the statutory responsibilities for
the ITC: to support policymakers by providing these kinds of
reports. And I have had the opportunity to work with economists
over the course of my career.
So, if I were confirmed, I would be committed to working
with the Office of Economics and Industry Analysis at the ITC
to ensure that the reports are looking at the full range of how
the trade issues under question are impacting people across the
country.
How specifically would that work? I would have to see what
exactly is being considered in those reports, but I would want
to make sure that the reports are transparent about what is
being evaluated, what is not being evaluated, what assumptions
are being made, and the conclusions that are being drawn.
Senator Brown. So would you commit, while the ITC's
behavior is not--its traditions are not normally that way--to
push your fellow commissioners to begin to broaden these
analyses?
Ms. Schmidtlein. I would certainly commit to reviewing this
whole area to ensure that the full range of impact is being
considered.
Senator Brown. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Brown.
Senator Menendez?
Senator Menendez. Thank you, Mr. Chairman.
Congratulations to both of you on your nominations.
Ms. Raskin, as you may know, the administration's
infrastructure investment plan calls for reform of FIRPTA* to
increase investment in the U.S. and create jobs. It is common
sense, in my mind, given the current economic circumstances,
that we should remove barriers to foreign investment in the
United States. It is a proposal that has gained broad
bipartisan support here in the Senate. I want to thank the
chairman for including FIRPTA reform as part of his discussion
draft release.
---------------------------------------------------------------------------
* The Foreign Investment in Real Property Tax Act of 1980.
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I raised this with Secretary Lew when he was here for his
nomination, and he was not quite apprised of it. But I know
that your predecessor, Mr. Wolin, has spent a fair amount of
time on this. So I am going to ask you what I asked both of
them, which is, if we all agree on the merits of reforming
FIRPTA--the President put it out there himself--which I believe
we do, why do we not administratively begin the action by
repealing the relevant parts of the 2007 IRS notice while
Congress works on the issue?
To use the President's words exactly, ``What are we waiting
for?''
Ms. Raskin. Well, Senator Menendez, I know you have
expressed strong interest in FIRPTA. I have to say that, in my
current role at the Federal Reserve Board, I have not had the
opportunity to become very skilled in the nuances of FIRPTA. I
certainly share the goals that you have articulated regarding
what its reform and amendment would do, and I look forward to
working with you to----
Senator Menendez. Well, can you commit to us to create some
focused attention within the Department? Because the Secretary
has a big portfolio, right? I mean, through my other role as
the chairman of the Foreign Relations Committee, I know that he
has a whole bunch of seats on international financial
institutions--I get it. He has macroeconomics in the country,
he has a whole host of issues.
But we need someone at the Department to follow through on
what the President himself has said, in his infrastructure
plan, is a critical element of trying to make sure that we get
investment in the United States. And there is an administrative
procedure, which I understand is revenue-neutral by invoking
the repeal of that section of the IRS.
So can I get from you at least a commitment that you will
create some focus in the Department? You are going to be the
number-two person.
Ms. Raskin. Absolutely. And again, if I am confirmed, I
look forward to working with you in assuring that there is a
focus on it, yes.
Senator Menendez. All right. Now, here is something that
you may have much more experience with in your role on the
Federal Reserve Board. The Fed has authority to set capital
requirements for insurance companies, for example, if they are
depository institution holding companies or non-banks,
systemically important financial institutions. And I support
strong capital requirements and believe they are an important
component of both safety and soundness and systemic risk
regulation.
But I have heard from a wide range of insurers about the
Fed applying bank-specific capital requirements to them,
despite the fact that many insurance companies have a very
different business model and, therefore, different balance
sheets and risk profiles from banks.
So a one-size-fits-all approach seems to me to be a
challenge, and, of course, the Financial Stability Oversight
Council, which is chaired by the Treasury Secretary, has an
important role to play in making sure that financial regulators
are utilizing the right tools to regulate industries that might
not be as familiar to them as institutions that have been
historically regulated.
So, as you move from the Fed to the Treasury, I would like
to get your commitment to work with this body to make sure that
capital standards applied to insurance companies are properly
tailored, that we understand the difference in the business
models, and that we do not apply a standard that would be
totally appropriate for banks, but in many insurance companies'
cases, would be totally inappropriate.
Ms. Raskin. And, Senator Menendez, that is exactly right. A
one-size-fits-all approach is not going to work here. You are
exactly dead-on correct that insurance companies have a very
different set of asset liability structures than do banks, and
to regulate them in terms of a one-size-fits-all approach is
not going to be an effective form of supervision or regulation,
in my experience.
So I think you are right about that. Fortunately, the
Federal Reserve has not gone ahead and pushed toward regulating
these designated insurance companies in such a way that they
are treated identically to banks, and I think that that is a
good thing.
And I would go, also, so far as to say that the FSOC--which
made the designations because particular insurance companies
were deemed to present a risk to financial stability--the FSOC
itself has insurance expertise on it. I think three members of
the FSOC can make good insights on questions of insurance
structure. And so I think that is a good thing, and I think
that that is going to work.
And when these institutions are designated and become
regulated and supervised by the Federal Reserve, the Federal
Reserve is going to have to look at them in a way that
obviously regulates them for their financial stability
concerns, but does not do it in a way that imposes a one-size-
fits-all approach.
Senator Menendez. Mr. Chairman, may I have one final, quick
question to Ms. Schmidtlein on intellectual property rights?
Ms. Schmidtlein. Yes?
Senator Menendez. New Jersey is the pharmaceutical capital
of the Nation and the world, medicine cabinet to the world, a
growing biotech sector, increasingly a high-tech sector, with
major trade publications by the Wiley Company, just to mention
a few.
So, in the context of a national agenda in which
intellectual property is, in essence, at the forefront of our
competitiveness globally, we increasingly face countries,
including countries that are, quote-unquote, ``allies,'' who,
with impunity, violate those intellectual property rights.
India is an example of it, and, of course, other countries,
China and whatnot.
I would like to hear your views, if confirmed, on how you
will pursue this, when there are cases of intellectual property
rights violations, at the Commission, what your position will
be in terms of responding to it.
Ms. Schmidtlein. Thank you, Senator Menendez. I agree this
is a very important area and one that I intend to pay close
attention to, if I am confirmed.
I would commit that I intend to strictly enforce the laws
when the evidence shows that one of our companies is facing
unfair trade practices in the form of infringement of their
intellectual property rights.
The Chairman. Thank you, Senator.
Senator Wyden?
Senator Wyden. Thank you, Mr. Chairman.
Both of you have given very thoughtful answers on a number
of issues.
Let me start with you, if I could, Ms. Raskin. And I was
not going to start with this, but you obviously have earned
great bouquets for your efforts to try to bring people
together, and that, obviously, is a skill in short supply here
in the Nation's capitol, if you look at the events of the last
couple of months.
So, for purposes of kind of starting in, do you have any
thoughts on how you might, in this position, help to bring
people together for pro-growth tax reform and, particularly,
pro-growth tax reform that would help encourage investment in
people? Because it is very clear to me that one of the premier
economic issues of our time is underemployment. We have
millions of workers who are underemployed. We are talking about
people who perhaps made $25 an hour a couple of years ago and
now are maybe making half of that, possibly even less.
So I have been very pleased that Senator Sarbanes and
Senator Cardin have been talking about how you have a
background of bringing people together, and that is surely
useful on these big issues like tax reform. Tell me a little
bit about how that bringing-people-together set of skills could
be used particularly on tax reform and especially how pro-
growth tax reform could encourage investments in people.
Ms. Raskin. Well, thank you, Senator Wyden. And I want to
start by saying I enjoyed our conversations earlier exactly on
these topics, and you gave me a lot to think about.
This is an incredibly important set of issues. I applaud
you for your focus on pro-growth tax reform. I think tax reform
does have the potential to be pro-growth. I have not had the
chance to delve into the details of tax reform in my role as a
Federal Reserve Governor or as Commissioner of Financial
Regulation, but my instincts are that a simpler tax code and a
tax code that essentially addresses issues regarding
competitiveness could do a lot towards increasing growth in
this country.
And, in particular, you note the problem of
underemployment, and you are exactly correct. I mean, the data
show, the anecdotes support that many of the jobs that have
been created are not jobs that people actually want to have.
They are not full-time jobs a lot of times. People are
sometimes cobbling together different part-time jobs. And the
data show this.
And the question, I think, for the long-term growth of our
economy is whether a pro-growth pattern can be sustained when
you have many people who are underemployed, and I think that
this is a particular cost and feature of our labor landscape
right now in the recovery.
And again, I look forward to working with you to figure out
ways in which we can----
Senator Wyden. I am especially interested in going back to
the skills at bringing people together and following up further
on your ideas for how that could be done. I mean, what happened
in 1986--and all of us here have been looking back at the
lessons of 1986, and this is a different time. There are
different challenges, but there are some lessons there.
For example, in 1986, Democrats were very interested,
rightfully so, in going after some of these ridiculous special
interest tax breaks. Republicans said, we are interested in
approaches that particularly promote economic efficiency in the
private sector.
So there are a variety of ways to bring people together.
You have skills in that particular space. They are much in
demand. I want to talk to you more about those kinds of
approaches.
Let me just turn to you with one quick question, Ms.
Schmidtlein. And, obviously, you have terrific credentials. My
colleagues were talking about the trade laws. You have
expertise particularly, as I understand it, in the antidumping/
countervailing duty statute space, and that is very important
for a whole host of issues we are concerned about as they
relate to renewable energy and a variety of different areas.
Tell us a little bit about what you see is the value of
those statutes and how you can use them, again, to help pry
open more opportunities for us to generate good-paying jobs in
the private sector.
Ms. Schmidtlein. Thank you, Senator Wyden.
As you said, I agree that these are incredibly important
statutes, and what they do is, they provide an opportunity for
U.S. businesses and workers to level the playing field if they
are facing unfair trade practices. And that is the purpose of
them.
So, if they are and they can get a remedy to level that
playing field, then companies can compete to the best of their
ability, which can, obviously, have the impact of creating jobs
and preserving jobs.
Senator Wyden. I intend to support both of your
nominations. I thank you today.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
I have four obligatory questions I have to ask each of you.
I will ask the questions, and I would like you to indicate
whether you agree or disagree.
Is there anything you are aware of in your background that
might present a conflict of interest with the duties of the
office to which you have been nominated?
Ms. Raskin. No.
Ms. Schmidtlein. No.
The Chairman. No. Thank you.
Do you know of any reason, personal or otherwise, that
would in any way prevent you from fully and honorably
discharging the responsibilities of the office to which you
have been nominated?
Ms. Raskin. No.
Ms. Schmidtlein. No.
The Chairman. Do you agree, without reservation, to respond
to any reasonable summons to appear and testify before any duly
constituted committee of the Congress, if you are confirmed?
Ms. Raskin. Yes.
Ms. Schmidtlein. Yes.
The Chairman. And this is a fourth that we have added. Do
you commit to provide a prompt response in writing to any
questions addressed to you by any Senator of this committee?
Ms. Raskin. Yes.
Ms. Schmidtlein. Yes.
The Chairman. Thank you. That last was--they are all,
obviously, very important, but we kind of pride ourselves in
this committee on working together. So, when a minority member
has a question to ask of Treasury or whatever the relevant
agency might be, we in the committee support it. So long as it
is a reasonable request, and they are generally reasonable, we
work together as a team, and I urge you to respond very quickly
to those questions.
Second, we developed a pattern, at least I have, over the
years, which I think has served us quite well; namely, keeping
in close contact with the relevant people in the administration
and not getting blind-sided.
For example, I speak weekly with Secretary Lew. We just
talk to each other about matters that affect the Treasury that
I am interested in, and it is very helpful. I just think that
getting the communication, getting to know people better, makes
a difference.
In addition, I speak frequently with acting Commissioner
Danny Werfel, as he is working to get the IRS back up to speed.
He is very good. He always calls me when there is about to be
some news. He calls me in advance, and it makes a big, big
difference.
So I urge you both, if something is coming up that is
relevant, let us know in advance, because we do not like
surprises, and you will find this committee very much wants to
work with you, with both the ITC and, also, with the Treasury.
We are a team. We may not always agree, but the more we can
talk things out, the more likely it is we are going to find a
constructive resolution, and, obviously, that helps serve the
American people. But it is something I find very helpful and I
think is very important.
Senator Hatch?
Senator Hatch. Well, thank you. I intend to support both of
you. I think you are excellent choices, and we will do
everything we can to speed this process up as much as we can.
With regard to the IRS, though, I have to say that we have
to continue the cooperation as we investigate these problems
that have arisen, showing preferences in the department, and I
think you have to be as interested in that as we are, because
you do not want that to happen either way.
If the IRS loses its reputation for decency and honor, it
hurts everybody. So we will count on you to help in that regard
and to make sure that the investigation that we are conducting
is completed, and completed properly.
I think we have handled it rather well. I want to
compliment the chairman. We have been working well together.
Our chairman has done a terrific job, but we are about halfway
through it, and we need to finish it up. So we are going to
need your help, Ms. Raskin, and I look forward to working with
you at the ITC as well.
Congratulations.
The Chairman. Thank you. Well, we wish you both all good
luck.
I know you will work hard. I know you are committed to
public service, and I wish you all the best.
The hearing is adjourned.
[Whereupon, at 11:33 a.m., the hearing was concluded.]

A P P E N D I X

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