Full text of "Nominations of Ronald K. Noble, Frank N. Newman, Leslie B. Samuels, and Jack R. Devore, Jr. : hearing before the Committee on Finance, United States Senate, One Hundred Third Congress, first session, on the nominations of Ronald K. Noble, to be Assistant Secretary of the Treasury for Enforcement; Frank N. Newman, to be an Under Secretary of the treasury for finance; Leslie B. Samuels, to be Assistant Secretary of the treasury for tax policy; and Jack R. DeVore, Jr., to be Assistant Secretary of the Treasury for Public Affairs"

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S. HRG. 103-145

\V) ' NOMINATIONS OF RONALD K. NOBLE,

FRANK N. NEWMAN, LESLIE B. SAMUELS,

AND JACKR. DEVORE, JR.

Y 4. F 49: S. HRG. 103-145

koniaatioas of Rorulrf K. XoUe, Fra. ^XvINCt

.^ORE THE

COMMITTEE ON FINANCE
UNITED STATES SENATE

ONE HUNDRED THIRD CONGRESS

FIRST SESSION

ON THE

NOMINATIONS OF

RONALD K. NOBLE, TO BE ASSISTANT SECRETARY OF THE TREASURY
FOR ENFORCEMENT; FRANK N. NEWMAN, TO BE UNDER SECRETARY
OF THE TREASURY FOR FINANCE; LESLIE B. SAMUELS, TO BE AS-
SISTANT SECRETARY OF THE TREASURY FOR TAX POLICY; AND JACK
R. DEVORE, JR., TO BE ASSISTANT SECRETARY OF THE TREASURY
FOR PUBLIC AFFAIRS

APRIL 26, 1993

2 1

Printed for the use of the Committee on Finance

U.S. GOVERNMENT PRINTING OFFICE
69-707— CC WASHINGTON : 1993

-ale b) the U.S Government Printii
Superintendent of Document--. <

ISBN 0-16-041304-4

(V J S. HRG. 103-145

v\) ' NOMINATIONS OF RONALD K. NOBLE,

FRANK N. NEWMAN, LESLIE B. SAMUELS,
AND JACK R. DEVORE, JR.

/ 4.F 49: S. HRG. 103-145

lo/iioations of Ronald K. XoUe, Fra. . IXvlJNJljr

./ORE THE

COMMITTEE ON FINANCE
UNITED STATES SENATE

ONE HUNDRED THIRD CONGRESS

FIRST SESSION

ON THE

NOMINATIONS OF

APRIL 26, 1993

2 1

Printed for the use of the Committee on Finance

U.S. GOVERNMENT PRINTING OFFICE
69-707— CC WASHINGTON '. 1993

sale In the I .S. Government Printir. ■
Superinicn .uments.i

ISBN 0-16-041304-4

COMMITTEE ON FINANCE

DANIEL PATRICK
MAX BAUCUS, Montana
DAVID L. BOREN, Oklahoma
BILL BRADLEY, New Jersey
GEORGE J. MITCHELL, Maine
DAVID PRYOR, Arkansas
DONALD W. RIEGLE, Jr., Michigan
JOHN D. ROCKEFELLER IV, West Virginia
TOM DASCHLE, South Dakota
JOHN BREAUX, Louisiana
KENT CONRAD, North Dakota

MOYNIHAN, New York

BOB PACKWOOD, Oregon
BOB DOLE, Kansas
WILLIAM V ROTH, Jr., Delaware
JOHN C. DANFORTH, Missouri
JOHN H. CHAFEE, Rhode Island
DAVID DURENBERGER, Minnesota
CHARLES E. GRASSLEY, Iowa
ORRIN G. HATCH, Utah
MALCOLM WALLOP, Wyoming

Lawrence O'Donnell, Jr., Staff Director
Edmund J. Mihalski, Minority Chief of Staff

(ID

CONTENTS

OPENING STATEMENT

Page

Moynihan, Hon. Daniel Patrick, a U.S. Senator from New York, chairman,
Committee on Finance 1

COMMITTEE PRESS RELEASE
Finance Committee to Consider Four Treasury Department Nominations 1

ADMINISTRATION NOMINEES

Noble, Ronald K., to be Assistant Secretary of the Treasury for Enforcement .. 2
Newman, Frank N., to be Under Secretary of the Treasury for Domestic

Finance 13

Samuels, Leslie B., to be Assistant Secretary of the Treasury for Tax Policy ... 20
DeVore, Jack R., Jr., to be Assistant Secretary of the Treasury for Public

Affairs/Public Liaison 24

ALPHABETICAL LISTING AND APPENDLX MATERIAL SUBMITTED

DeVore, Jack R., Jr.:

Testimony 24

Prepared statement 27

Letter to Senator Moynihan from the U.S. Office of Government Ethics,
dated March 30, 1993 28

Feinstein, Hon. Dianne:

Prepared statement 29

Moynihan, Hon. Daniel Patrick:

Opening statement 1

Newman, Frank N.:

Testimony 13

Prepared statement 29

Biographical 32

Letter to Senator Moynihan from the U.S. Office of Government Ethics,
dated March 25, 1993 34

Noble, Ronald K.:

Testimony 2

Prepared statement 35

Letter to Senator Moynihan from the U.S. Office of Government Ethics,

dated April 2, 1993 37

Response to a question from Senator Conrad 38

Samuels, Leslie B.:

Testimony 20

Prepared statement 39

Biographical 40

Letter to Senator Moynihan from the U.S. Office of Government Ethics,
dated April 21, 1993 44

(III)

NOMINATIONS OF RONALD K. NOBLE, TO BE
ASSISTANT SECRETARY OF THE TREASURY
FOR ENFORCEMENT; FRANK N. NEWMAN,
TO BE UNDER SECRETARY OF THE TREAS-
URY FOR FINANCE; LESLIE B. SAMUELS, TO
BE ASSISTANT SECRETARY OF THE TREAS-
URY FOR TAX POLICY; AND JACK R.
DEVORE, JR., TO BE ASSISTANT SECRETARY
OF THE TREASURY FOR PUBLIC AFFAIRS

MONDAY, APRIL 26, 1993

U.S. Senate,
Committee on Finance,

Washington, DC.

The hearing was convened, pursuant to notice, at 10:00 a.m., in
room SD-215, Dirksen Senate Office Building, Hon. Daniel Patrick
Moynihan (chairman of the committee) presiding.

Also present: Senators Chafee and Grassley.

[The press release announcing the hearing follows:]

[PreBS Release No. H-15, April 23. 1993]

Finance Committee to Consider Four Treasury Department Nominations

Senator Daniel Patrick Moynihan (D.-N.Y.), Chairman of the Senate Committee
on Finance, announced today that the Committee will hear from nominees for four
top Treasury Department positions.

The hearing will begin at 11:00 a.m. on Monday, April 26 in room SD-215, Dirk-
sen Senate Office Building.

The Committee will first hear from Ronald K. Noble, the nominee to be Assistant
Secretary for Enforcement. If confirmed, Mr. Noble would oversee the Bureau of Al-
cohol, Tobacco and Firearms and would assume responsibility for Treasury's inves-
tigation of ATF's involvement in the events in Waco, TX.

The Committee will also hear from Frank N. Newman, the nominee for Under
Secretary for Finance, Leslie B. Samuels, the nominee to be Assistant Secretary for
Tax Policy, and Jack R. DeVore, Jr., the nominee to be Assistant Secretary of the
Treasury for Public Affairs

OPENING STATEMENT OF HON. DANIEL PATRICK MOYNIHAN,
A U.S. SENATOR FROM NEW YORK, CHAIRMAN, COMMITTEE
ON FINANCE

The CHAIRMAN. A very good morning to our nominees and their
families and our gue?'

The Committee on Finance is meeting this morning to hear
nominations sent tc the Senate by President Clinton for the posi-
tions of Assistant Secretary of the Treasury for Enforcement and

the Under Secretary of the Treasury for Domestic Finance, Assist-
ant Secretary of the Treasury for Tax Policy, and Assistant Sec-
retary of the Treasury for Public Affairs.

We will follow just in the order that the witness list indicates.
And our first witness will be Ronald Noble, I am happy to say, a
professor of law at this point at New York University Law School,
who is the nominee for Assistant Secretary of the Treasury for En-
forcement.

This is a complex and obviously more demanding position of pub-
lic trust than what was perhaps widely perceived before the recent
events at Waco, TX.

The Assistant Secretary is responsible for the Bureau of Alcohol,
Tobacco and Firearms, an organization that dates back to 1863, an
organization which came to great prominence in the 1920's with
the constitutional provisions for Prohibition.

And it was the task of the Treasury to enforce those measures,
a matter of confusion in the minds of a great many people in the
Nation, who have assumed that this was somehow a Justice De-
partment function and FBI function. In these recent events, we
learned that these are, indeed, two separate organizations.

And the viability of this arrangement has been legitimately — it
is a question to be addressed. And we know that Professor Noble
will want to do so.

You also have responsibility for the Secret Service, again, a Civil
War institution, very small until very recently. We want to hear
about that and other matters that are of concern to you, sir.

And to my colleague, Senator Grassley.

Senator Grassley, good morning, sir.

Senator Grassley. Good morning. I do not have an opening
statement.

The Chairman. Professor Noble, do you have any members of
your family here? I know you are a bachelor. I cannot ask you to
introduce your wife, but do you have any members of your family
here?

Professor Noble. Yes. I do. I have my mother and my father
here.

The Chairman. Mr. and Mrs. Noble, good morning. The commit-
tee welcomes you. I am sure you are very proud of this occasion,
as well you ought to be.

Sir.

Professor Noble. Thank you. I also have a brother and sister-in-
law and niece who are watching me in New Hampshire. So I ex-
tend them my warm welcome.

The Chairman. Be very careful when you mention New Hamp-
shire around the U.S. Senate. [Laughter.]

Senator Grassley. Or Iowa.

The Chairman. Or Iowa, as said Senator Grassley.

STATEMENT OF RONALD K. NOBLE, TO BE ASSISTANT
SECRETARY OF THE TREASURY FOR ENFORCEMENT

Professor NOBLE. Mr. Chairman and members of the Senate Fi-
nance Committee, I am honored and privileged to appear before
you this morning as you consider my nomination as the Assistant
Secretary of the Treasury for Enforcement.

I sincerely thank Secretary Lloyd Bentsen and Deputy Secretary
Roger Altman for recommending me to the President. And I thank
President Clinton for nominating me to the U.S. Senate.

Finally, I thank you and the members of this committee for the
expeditious scheduling of this hearing.

On a more personal note, I would like to recognize my parents.
They are my source of inspiration and strength.

While I was growing up, the race relationships in our country
prevented my parents from traveling, as they did today.

Then, we traveled under cover of darkness to minimize the risk
of confrontation which our interracial family frequently faced.

When rest was required, my mother was often forced to stay in
motels reserved for whites while my father, brother, and I stayed
in motels for blacks.

I still recall occasions when my mother would be dropped off
alone by my father, brother, and me. On those occasions, I never
can recall my father sleeping. It seemed each time that I awak-
ened, I saw the same watchful parent seated near a window watch-
ing both his children and the window.

They wanted us to remember the harm one causes another by
prejudging him or her because of his or her group affiliation.

Finally, they wanted us educated so we would have a better life
than they had. My father had a vision. Although he served for 22
years in the U.S. Army, he could only find work as a janitor and
would take his sons with him to work.

In that way, we would learn the lessons of hard work while see-
ing what limitless opportunities there would be if we obtained a
formal education.

So we cleaned doctors' offices, law offices, bars, grocery stores,
professional offices. Anything that got dirty, we would clean. He
would proudly tell his clients that his children were going to col-
lege.

In closing the subject of my family, I hope you can see that be-
cause my parents sacrificed and lived for their children, I sit before
you today, not proud of myself or my accomplishments, but proud
of my parents and family.

The influence people had on my life continued throughout my
academic years and carried over into my professional life.

My first full-time professional job was as the senior law clerk for
Hon. A. Leon Higginbotham, Jr. For me, he always will be one of
America's greatest jurists and the greatest influence on my profes-
sional development.

His commitment to excellence and his compassion for the weak,
the impoverished, and the dispossessed are unparalleled. He
taught me first what I have now come to understand: there is no
greater calling than the call to public service.

At a number of positions at the U.S. Department of Justice, I
gained the experience of working with a wide range of law enforce-
ment bureaus.

I was exposed to the next greatest influence on my life, Hon. Ed-
ward S.G. Dennis, Jr., the former U.S. Attorney for the Eastern
District of Pennsylvania and the Assistant Attorney General for the
Criminal Division of the Department of Justice.

He assigned me to important prosecutions and projects. He
taught me the importance of letting the evidence, not the political
influence, drive one's decisionmaking in the area of law enforce-
ment and criminal prosecution.

Most recently, as an Associate Professor of Law at the New York
University School of Law, I have learned from my colleagues and
students the importance of securing the best future for the next
generation.

From enforcing tariff regulations and anti-money laundering pro-
grams to protecting the life of the President, interdicting drug
smuggling or enforcing the firearms laws, the oversight responsibil-
ities of the Assistant Secretary for Enforcement are awesome.

Naturally, there are significant issues to be considered in each
of my bureaus. We must look to the growing complexity of how
criminal enterprises are laundering their illegal proceeds.

We must ensure that the Federal work place is free of sexual
harassment and that our personnel polices are fair and our pro-
grams for the recruitment, retention, and promotion of women and
people of color ensure diversity.

Most importantly, we must ensure that the American taxpayer
is paying for programs that work efficiently and cooperative.

Finally, now that the standoff in Waco has ended, the Secretary
of the Treasury has directed that, if confirmed, I would oversee the
investigation of the ATF's role in the Waco incident.

Treasury and the American public need to know why what hap-
pened on February 28, 1993 near Waco, TX happened.

To that end, the Secretary has directed me to enlist individuals
of unchallenged integrity and ability to assist in Treasury's inves-
tigation.

I will not pre-judge what the investigation will reveal, but I
promise that I will follow the evidence wherever it leads.

There will be no relevant stone left unturned. I will work dili-
gently and methodically to ensure that a complete investigation
and full accounting is provided to the Secretary of the Treasury,
the President, and the American people.

With all of the recent attention directed at the Bureau of Alcohol,
Tobacco and Firearms, I must comment on the public impression
of ATF created by the incomplete record with which the American
public has been presented.

Because of an ongoing criminal investigation and because of the
delicate negotiations that were ongoing near Waco, TX until April
19, 1993, the Department of the Treasury could not comment in
full publicly.

But I will say to you today that the men and women of ATF are
a courageous and proficient lot of law enforcement professionals.

Putting aside for a moment why the tragedy occurred, we cannot
overlook that during almost 45 minutes of uninterrupted gunfire,
the men and women of ATF on site acted heroically and bravely in
protecting and tending to their wounded.

The American people have been well served by these dedicated
civil servants who carry out duties in every State in the Na-

tion.

In closing, although I am keenly aware of the breadth of respon-
sibilities of this office, I believe, with the Secretary and Deputy
Secretary's support and the guidance of this committee, I can meet
the challenge.

I look forward to the opportunity to lead the Treasury Depart-
ment's enforcement efforts during this period of urgency.

Thank you.

The Chairman. Thank you, Professor Noble.

So the committee learns that Secretary Bentsen has asked you
to oversee the investigation of the ATF's role in the Waco incident
and that you propose to enlist individuals of unchallenged integrity
and ability.

And with that commitment, on my part, I would say to you that
the Secretary has acted properly. And I know that you will do well.

But there are two levels of inquiry here. And I hope we could
learn whether you intend to address the second which is that of the
specific events of Waco, some of which you described in your pre-
pared testimony which will be placed in the record in full.

[The prepared statement of Professor Noble appears in the ap-
pendix.]

Professor Noble. I appreciate that.

The Chairman. And then there is this general question of wheth-
er we aren't dealing here with some arrangements that go far back
into the last century.

The Bureau was established in 1863, if I recall, with three em-
ployees. And it has developed through different phases. What to-
bacco has to do with firearms is not immediately clear to me.

The problem of firearms is voluminously pressing in our Nation.
You say we enforce the Federal firearms iaws. I am one who is
scarcely aware that there are any.

I notice you also are responsible for ammunition. Am I correct
that it takes a Federal license to manufacture ammunitions in our
country?

Professor Noble. Yes.

The Chairman. It does. And I believe the license is $30?

Professor Noble. We believe it is highly underpriced.

The Chairman. But $30 will get you a license — I am just talking
from memory here — for 3 years. Is that right?

Professor Noble. I am not certain of the precise figure or length
of time.

The Chairman. I think it is for a license. $30 gets you a license
to manufacture ammunition.

You don't have any reports about the amount of ammunition a
manufacturer gives back to you, do you?

Professor Noble. Not that I am aware of.

The Chairman. I mean, you have no recop

Professor Noble. Not that I am aware of.

The Chairman. Yes. We have introduced legislation. We did
about 6 years ago. We got one bill passed in the Congress, which
banned the manufacture, importation, and sale of a particular
round of ammunition, the so-called cop killer bullets, the teflon
coated rounds that would pierce body armor, which was the first
time we ever have outlawed a particular round.

And the question arises.

We are beginning to try to develop something of an epidemiology
of the slaughter that goes on in our streets and homes. And the
bullet is the pathogen.

And we have a great deal of attention paid, or so it seems to this
Senator, to the question of firearms. We have about, what, 70 mil-
lion handguns in our country?

Professor Noble. I believe we have perhaps as many as 100 mil-
lion handguns.

The Chairman. One hundred million. Well, I can remember — not
to get into sea stories, but I was in the Navy half a century ago.

And one night, we were watching Port-o-Spain down in Trinidad.
We had a gunner's mate there. And I remember, just for the lack
of anything better to do, we just unshipped, as we say in the Navy,
a 45 caliber sidearm which the officer of the deck has. And it had
been manufactured at the Worcester armory in Massachusetts in
1911.

And somewhere today, there is some ensign who is carrying that
revolver. I think we had better move over to a 38 Beretta or some-
thing. But if you keep a sidearm in fair condition, it will last, what,
a century?

We have a century's supply of handguns. I think we have only
about a 4 years' supply of ammunition.

I would just like to suggest that we might pay a little attention
to who makes the ammunition, how it is distributed, and how it is
sold.

That is the choke point. If you ban the manufacture or sale of
any handgun from now on out, you would have 100 million out
there, which is a three generation supply.

Does that evoke any response from you? You are a professor of
law. You will be the first professor of law to have this post, won't
you? I shouldn't be surprised.

Professor Noble. I am not certain, but I would not be surprised.

Senator, when we met privately, you mentioned something to me
that has stuck with me since then, and that is, using an analogy
of automobile accidents. You said they are not accidents. They are
collisions.

The Chairman. Yes.

Professor Noble. Collisions are a certainty.

The Chairman. A predictable event in a complex system. Yes.

Professor Noble. Right. And the

The Chairman. A predictable incidence. You cannot tell this one
or that one. But over in large numbers, you can predict how many.
Yes.

Professor Noble. Right. And that it was advisable to begin the
Work of seeing how we could reduce the likelihood of harm to any-
one involved in such a collision.

I, too, am very interested in thinking of new ways and innovative
ways of addressing the problem we have with the unlawful use of
firearms.

And your point about the ammunition being an area which has
not been focused on that ought to be looked into, I think that is
a fair point worth pursuing, worth analyzing, and worth investigat-
ing.

And I assure you that I will do that.

The Chairman. Good. Good. I could ask no more. In 15 years
pressing this, you are the first Federal official or official-to-be who
has indicated any interest, much less comprehension of which I am
very grateful.

Could I just make another point to you?

Professor Noble. Yes, sir.

The Chairman. And you have mentioned that you will have a
$2.5 billion budget. This is a sensitive subject. And I do not ask you
to respond until you have had an occasion to talk within the gov-
ernment about it.

The history of the Secret Service, begins with the Pinkerton men
who were assigned to Lincoln. Isn't that right? You must know. I
vaguely know that.

Professor Noble. It is an extraordinary history.

The Chairman. Thirty years ago, the budget of the Secret Serv-
ice was $5.8 million. And the present current budget is $468 mil-
lion. The job is to protect the President and the Vice President.

We had one of each in 1963. And I think we have one of each
now. Has a 1,000 percent increase in that budget been reviewed?

Professor Noble. Well, I was presented with a comparison for
the first time about 5 minutes before we began.

I have not thought about it, but I can tell you, in addition to pro-
tecting the President, the Vice President, and other heads of state,
the Secret Service performs a very important investigative function
in terms of ensuring that our currency remains intact and secure,
ensuring that financial institutions are investigated, counterfeiting
is explored, so forth and so on.

The point is well taken. The budget is much larger. The respon-
sibilities are much larger. But I cannot at this moment comment
on the explanation for a difference from $5.8 million to the figure
you just cited.

The Chairman. $468 million.

No, sir. You quite properly say to let yourself get into the job be-
fore you want to comment on it. Could I hope that you will think
about this?

Again, there is this sort of haphazard assortment of assignments.
They say that we do counterfeiting and we do protection of heads
of state.

It is like what does tobacco got to do with firearms? What does
counterfeiting have to do with protecting the persons of the Chief
Executive, the Vice President, and so forth?

And then, maybe the question could arise of when is enough?
When do people start stepping all over one another? Or maybe that
is wrong, but it is a legitimate question. And you so regard it?

Professor Noble. I do, Senator. I would just like to make one
point. I want you to know what I am like and what I think about

certain topics. I think it is your right. And I do not want to shirk
my responsibility.

I take very seriously the obligations of the U.S. Secret Service.
I take very seriously the obligations of all of Treasury's enforce-
ment bureaus.

Treasury is about collecting revenue, ensuring that the laws
which require people to report revenue-generated items, in fact, are
fairly enforced. And then, there are other items tied into that.

I do not take lightly the responsibility that we have as the Exec-
utive Branch to ensure that the taxpayers are getting their dollar's
worth, where the budget deficit does not have to be mentioned or
cited or referred to.

But I will look at these things very closely and very seriously,
but not without remembering the very, very important protective
functions, for example, that the Secret Service performs.

And it is important to the Treasury Department that our laws
relating to the currency, relating to the Bank Secrecy Act, and
other items are vigorously enforced.

The Chairman. Good. Good. More this Senator certainly could
not ask.

Senator Grassiey.

Senator Grassley. Thank you, Mr. Chairman.

And congratulations, Professor Noble. The first question I have
is from Senator Packwood who cannot be here today.

And I will read it just the way that he wrote it. "As Assistant
Secretary for Enforcement, you will be responsible for overseeing
enforcement matters at the U.S. Customs Service. One Customs
enforcement matter that I am very concerned about is the plan to
revisit the tariff reclassification of imported sports utility vehicles
and mini vans, increasing the tariff 1,000 percent from 2.5 percent
to 25 percent. Will you please inform the committee of your per-
sonal views on the reclassification issue? I am not seeking the
views of the President or the Treasury Department, but your per-
sonal views." End of question.

The Chairman. Senator Grassley, in the collegial spirit which
you and I have always worked and will continue to do, and with
our esteemed friend, Senator Packwood, do you think it quite fair
to ask the Secretary-designate's personal views? His personal views
probably are not very

Senator Grassley. I read the question as Senator Packwood
asked me to.

The Chairman. Yes, sir. Well, I could ask then just in that man-
ner, Professor Noble, proceed.

Professor Noble. I have no personal opinion on that matter.

Since becoming an Associate Professor of Law at New York Uni-
versity School of Law, I sold my car. [Laughter.]

I have no interest.

The Chairman. Now, just stop right there. If you have sold your
car, you are in the market for another one perhaps. [Laughter.]

Professor Noble. I was going to get to that point, Senator. I was
going to get to the point.

I have, however, had the fortune of meeting with all of the inter-
ested automobile manufacturers and dealers on this subject, each

of whom responded to me that they would be willing to sell me
their version of this particular automobile.

I can only tell you, it is being seriously reviewed. We have had
a number of meetings with all interested groups. And it is under
consideration.

The Chairman. Now, sir, if I could just say, this will not be a
decision that — where will this decision be made? Will it be made
by the Secretary?

Professor NOBLE. I am not certain exactly where the decision will
be made. I know

The Chairman. I know where it will be made. Wherever it is
made, we will not know. [Laughter.]

I am sorry, Senator Grassley.

Professor Noble. Senator Moynihan, thank you for the second
assist. [Laughter.]

Senator Grassley. My next question deals with something that
carries over from the previous administration and something the
previous administration did not do that the Congress told them to
do. And I am coming to you to ask if you will do what Congress
said that it should do.

It was about a year and a half ago, the Congress adopted an
amendment of mine that requires that the Treasury Department
compile an annual report of assets held by terrorist organizations
and countries in the United States.

The first report was due in March of 1992. It never came. I
brought this matter up with Secretary Bentsen and with Under
Secretary Summers during their confirmation hearings, hoping
that this year's March deadline would be met because it could be
upgraded in 1993, which would be a second installment.

Unfortunately, the March 1993 deadline last month came and
went without a report. Now, of course, the report has finally been
released today. At least phone calls over the weekend lead me to
believe that it will be released. And I do have a summary of it.

And I am very encouraged by that. Unfortunately, the Depart-
ment has chosen to deal mostly with the terrorist country question
and has mostly ignored the question of assets held by terrorist or-
ganizations.

Mr. Noble, as head of the Enforcement, you will bear some re-
sponsibility in ensuring that the law is complied with and the re-
port is issued in full and on time.

One of the major purposes of the report is to assist in carrying
out another measure that I sponsored, the Anti-Terrorism Act of
1992. This law allows victims of terrorism to sue the terrorists for
civil damages.

Of course, we want to do more than just embarrass them with
a court judgment. We want to go after their money and property
that funds their activities, hoping to put a halt to their activities.

Now, to do that, the Congress has mandated a report on what
these assets are.

I have heard the argument that law enforcement intelligence in-
formation cannot be compromised. Well, we are not asking for that.

As a maiter of fact, last week, during a terrorism hearing in the
Judiciary Committee that I sit on, I asked the FBI Director about
this. He said that to his knowledge, Treasury had not even con-

tacted the FBI on the matter. And I find that matter — that fact
rather incredible.

Treasury's Office of Asset Control has a primary responsibility of
putting together this report.

The bureaucrats over there have done more than their share of
stonewalling on this issue, as I believe you can see from not getting
anything until just lately.

The Chairman. That is interesting.

Senator Grassley. Yes. Thank you, Mr. Chairman.

So, Mr. Noble, I am looking for your cooperation in fulfilling this
mandate so that our overall anti- terrorism strategy can work.

One only has to look at the recent bombing in New York to ap-
preciate the need for this information on terrorist organizations.

So quite simply, I hope that I can get your help and cooperation
on this matter. Can I?

Professor Noble. Yes. You will get my cooperation and support.

When I was at the Justice Department and was a Deputy Assist-
ant Attorney General for the Criminal Division, one of the sections
I supervised was the General Litigation Section which had respon-
sibility for anti-terrorism related matters.

I can assure you that we will comply with the law. I will promise
to try to make every deadline I am required to make.

And if I do not, I will be adult enough to contact you and/or
members of your staff to advise you about any delay or difficulty
and to give you an opportunity to hear matters privately that
would be perhaps inappropriate for me to discuss publicly.

Senator Grassley. Remember that this includes organization as
well as country.

Now, according to the report that we got over the weekend, and
I quote, Treasury does not compile information on the holdings of
private individuals or organizations in the United States unless
those assets are subject to sanctions. End of quote.

Now, my point would be that Congress not only gave Treasury
the authority to report on these assets regardless of sanction, but
we also mandated that Treasury report on them as well.

So as far as I am concerned, you do not need to find new author-
ity to further pursue this action. You already have it. And I guess
I need to know whether or not you agree with that.

Professor Noble. I cannot comment on the substance of what you
say about the interpretation of the law, Senator Grassley.

However, what I will assure you of is that I will look into it. And
I will get back to you and let you know what my view is candidly
and accept whatever response you have in light of that.

Senator Grassley. All right. Let me give you some help as you
consider that because you probably know that the State Depart-
ment can now list terrorist organizations in an annual report.

And it seems to me that if there is no question as to the constitu-
tionality of that, then, we can surely list their assets for accom-
plishing their goals.

And also, if an organization is a terrorist one, then, I would pre-
sume that they are doing a number of things that are not protected
by the Constitution anyway.

So I thank you very much for your willingness to look at that.
I hope that you will see that the assets are very important informa-
tion, as well as for organizations, as well as for countries.

I hope you see the legislative authority to do this. I believe that
we gave it to you.

Maybe I could ask you generally if you would seek and then con-
sequently agree with the Congress that this report will be helpful
in combating terrorism?

Professor Noble. Generally speaking, abstractly speaking, theo-
retically speaking, I think that it is important for Congress to be
advised of any information relating to the activities of terrorist or-
ganizations so long as such disclosure does not compromise any on-
going criminal investigation or compromise any intelligence gather-
ing capabilities of the United States.

I know, Senator Grassley, from my relationships with you when
I was with the Justice Department that you are very sensitive to
these issues.

So I fully expect that I will be able to be responsive to you now
that I am with the Treasury Department, assuming I am con-
firmed.

Senator Grassley. I am sure you will be confirmed. I think we
should want it.

The Chairman. I think you may have just took a long step in
that direction, if I may say. [Laughter.]

Senator Grassley.

Senator Grassley. Thank you.

Putting that aside now and on a point that Senator Moynihan
brought up, I am also, as you will remember, a member of the Ju-
diciary Committee.

And right now, in regard to the question that the chairman
brought up about the Alcohol, Tobacco and Firearms Division,
there is some question about whether or not it should be moved
over to the Justice Department. Do you have any views on that?

Professor Noble. I understand that the Judiciary Committee,
certain members of the committee made public comments to that
end. I do not have any view on that subject right now.

I have only been working as an intermittent consultant. I have
not had an opportunity to closely examine the Bureau.

I have been tasked with the responsibility of investigating why
what occurred in Waco, TX on February 28, 1993 occurred.

But I will tell you what concerns me, Senator. I would be con-
cerned if one event, a tragic event though that it might be, drove
the decision to consolidate a bureau, whether it is the FBI into the
ATF or the ATF into the FBI.

What I will do is I will look at the organization, its operational
procedures, whether they are adequate, whether they were fol-
lowed, all of the logical, rational questions that one would ask.

But for me to sit here today and tell you that x ought to occur
or y ought to occur, I think, would be inappropriate. And I would
prefer not to do so.

Senator GRASSLEY. All right. And I would not push that point,
but congratulate you on being willing to look into it and looking
into it.

My last question deals with a point that I asked Secretary Bent-
sen about during confirmation. And his confirmation hearing came
within a day or two after some disclosure on a television program
which I know is not necessarily the basis for fact all the time.

The Chairman. What did you say, Senator?

Senator Grassley. Oh, I did not mean to say that. [Laughter.]

This was a report about sexual and racial harassment allegations
that had been made about the Bureau of Alcohol, Tobacco and Fire-
arms. And I asked him about that. And he said — I asked him about
pursuing them if they were true.

And he said that he would pursue those if there was any basis
for them. Do you have any updates that you can give me on the
investigation of those charges?

Professor Noble. Senator, I know that they are being inves-
tigated now, even as we sit here. I am can tell you that personally,
and I have made this clear to anyone who has cared to listen, I will
not tolerate it. I know the Secretary of Treasury will not tolerate
it.

In my opening remarks, I referred to it, whether it is sexual har-
assment or whether it is harassment of any kind with regard to
one's race, ethnicity, or origin.

It is something that I find offensive, repulsive, and unacceptable.
And under my watch, if it occurs, it will be swiftly dealt with.

Having said that, I do not have any specifics, sir, to give you
with regard to the ongoing investigations.

I will tell you that the Treasury Department is engaged in a De-
partment-wide review of our policies with regard to work environ-
ment for women in the Treasury Department generally and in the
Enforcement Bureaus more specifically.

Senator Grassley. Thank you, Mr. Noble and Mr. Chairman.

The Chairman. Thank you, sir.

And I think we are completed. Just in wishing you well, Profes-
sor Noble, could I also wish, and I am sure that Senator Grassley
would join me, that you do not forget that we are here?

We have raised a number of questions that we would like your
judgment on.

I think we would hope that the inquiry into the events at Waco
will rise to the level that Senator Grassley discussed, which is that
of the organization question generally: where do we want which
functions to be handled within the government without our having
any great disposition one way or the other?

We want to know what you think and what the Secretary thinks
and what the President thinks.

I would hope that you will address this question of ammunition.
It is bizarre that we should be as preoccupied as necessarily we are
with firearms and not with ammunition. And I am sure you will
address this issue.

It has been a great pleasure to get to know you now. And as I
say, if we can have the understanding that you will not forget we
are here when you go off to be preoccupied elsewhere because we
-would like to help you and the men and women you represent.

We are not for one moment unaware of the fact that American
men and women, Federal employees died in the pursuit of their du-

ties in Waco. And let us at least hope that we will learn something
from that experience.

If there are no further questions, I will make it the rule that for
Professor Noble and the others that any Senator who wishes to
present a question by the end of the day will be free to do so.

And we would hope to address the question of the nomination at
a full committee meeting which will take place tomorrow.

And with that, we thank you, sir. We wish you well. And you will
need all the good wishes you can get.

Professor Noble. Thank you, Mr. Chairman. Thank you, Sen-
ator.

The Chairman. And Mr. and Mrs. Noble, we are very honored to
have you in the hearing room. You are up there on our platform
taking photographs. That is absolutely forbidden to professionals,
but I gather that you are simply a talented amateur. [Laughter.]

Professor Noble. Thank you.

The Chairman. Send us a copy of it.

Now, our next distinguished nominee is Frank Newman who is
nominated to be the Under Secretary. There is a new term, Domes-
tic Finance, and obviously a very important position.

You, sir, have been out there at the Bank of America for a num-
ber of years of now. And you were previously with Wells Fargo.

Mr. Newman. That is correct.

The Chairman. So you are a San Franciscan. And Senator Fein-
stein has submitted a statement introducing you.

[The prepared statement of Senator Feinstein appears in the ap-
pendix.]

The Chairman. She cannot be here today. She is necessarily ab-
sent, but she wants you to know that you are welcome and that
you have her very strong endorsement.

Mr. Newman. Thank you.

The Chairman. Senator Grassley.

Senator Grassley. I have no opening statement.

The Chairman. Mr. Newman.

Mr. Newman. Thank you, Mr. Chairman.

The Chairman. Forgive me, sir. Do have you any family that you
would like to introduce at this point?

Mr. Newman. No. Thank you, Mr. Chairman. I do not. I believe
I have some newly-found friends with me today, but not family.
Thank you.

And I appreciate also — I would like to mention the appreciation
for Senator Feinstein's recommendation which she was kind
enough to submit.

STATEMENT OF FRANK N. NEWMAN, TO BE UNDER
SECRETARY OF THE TREASURY FOR DOMESTIC FINANCE

Mr. Newman. Mr. Chairman, Senator Grassley, and other distin-
guished members of the committee, it is genuinely an honor and
a pleasure to appear before you today.

Both of you and some of your colleagues were able to fit times
into your schedules to meet with me prior to the hearing. And I ap-
preciated the opportunity to talk with you.

69-707 0-93-2

I look forward to future opportunities to talk further with you
and to have discussions with members I have not yet had the
chance to meet personally.

It is a privilege to be considered for service in President Clinton's
administration and in the Department of the Treasury under the
leadership of Secretary Bentsen.

In addition, if confirmed, I hope to work closely and diligently
with this committee on issues of mutual concern and opportunity.

I realize that there are sometimes a number of different perspec-
tives represented in the committee. I believe that is one of the
strengths of our system of democracy.

And I have come to Washington determined to listen carefully
and to try to understand and appreciate key different views on is-
sues as I develop my own thoughts on the balance of alternatives.

The primary responsibilities of the Under Secretary for Domestic
Finance in this administration will include policy matters regard-
ing financial institutions, Federal debt finance, financial regula-
tion, and capital markets, as well as responsibility for fiscal man-
agement operations supporting Treasury auctions and other forms
of debt issuance.

In addition, I hope to have some constructive role in the formula-
tion of economic policy. I am concerned, for example, by the risk
that many public financial management programs at Federal,
State, and local levels may compound economic downturns.

And I would like to explore means through which government
could be more stabilizing at times when the private sector economy
is faltering.

The Chairman. Now, you mean something by that. And perhaps
you would elaborate on it when you are finished.

Mr. Newman. Fine, Mr. Chairman. I would be happy to.

I also hope to improve our understanding of the implications of
the flows of funds through the financial system as a result of gov-
ernment debt and deficit financing during periods of both weak and
strong economies.

I look forward to working closely with the Federal Reserve and
the FDIC, in addition to the Congress, on programs to assure that
the Nation has a strong, safe, and resilient system of financial in-
stitutions that can and will constructively and fairly serve the eco-
nomic and community needs of the Nation.

If confirmed, I will undertake the very challenging responsibil-
ities of the Office of the Under Secretary to the best of my abilities.

Thank you, Mr. Chairman and Senator Grassley. I would be
pleased to respond to any questions from the committee.

[The prepared statement of Mr. Newman appears in the appen-
dix.]

The Chairman. Fine. Would you mind then, sir, telling us just
what you have in mind by the risk that many public financial man-
agement programs, at Federal, State, and local levels, may
compound economic downturns?

Mr. Newman. Well, obviously, I have yet to take the time in of-
fice to really carefully study it, but the underlying

The Chairman. What are you thinking about? You have some-
thing in mind there.

Mr. Newman. The underlying concept is that during periods of
economic downturn, many of our institutions, such as State govern-
ments, find themselves in situations where their finances are dete-
riorating because their revenues are down.

The Chairman. Yes.

Mr. Newman. Unemployment has risen and the revenue sources
have declined.

Often the way that our systems function in response to that is
to reduce government spending. That very reduction of government
spending then tends to create even more unemployment and fur-
ther reduction in revenues, which just makes the cycle worse.

The Chairman. Good God man, are you a Keynesian and from
San Francisco? [Laughter.]

I thought they did not have them in San Francisco.

Mr. Newman. As I mentioned, Mr. Chairman, I am trying to be
open to a wide diversity of views that may be applicable in dif-
ferent circumstances.

I am not sure by any means what the appropriate response is in
those circumstances, but I see what appears to be that kind of ac-
tivity going on. I see it in our banking systems.

I see a situation where as the economy weakens, the banking
system gets tighter and tighter and credit is less and less available
just at a time when, in fact, we need the opportunity for businesses
to expand.

And obviously, that has to be handled very carefully and pru-
dently. Nonetheless, we should not have a system where needlessly
the behavior of the government exacerbates an economic downturn
rather than stabilizes it.

The Chairman. Right. Well, you are going to get your hands on
the records. You will have the data available to you, historically.
So you can see what is to be learned from the hypothesis that you
bring to this subject.

Mr. Newman. Fine.

The Chairman. And a very good one indeed.

Senator Chafee has joined us.

Let me just make one query to you.

Senator Chafee. Mr. Chairman, can I interrupt one minute?

The Chairman. Sure.

Senator Chafee. Unfortunately, I have a conflict, but I just
wanted to come down.

The Chairman. What don't you

Senator Chafee. I'm for all four nominees. What about that? Is
that all right? [Laughter.]

And furthermore, I will even give you my proxy to vote for all
four of them, if you would like it.

Mr. Newman. Thank you, Senator Chafee.

The Chairman. In fact, wouldn't you like to say something?

Senator CHAFEE. Well, I have had a chance to meet with each
of the individual gentlemen. And Mr. Newman and I had a little
chance to visit together. And I appreciate that. I think that the ad-
ministration did a good job.

The Chairman. So far so good.

Thank you, Senator Chafee.

Senator Chafee. I am sorry. I cannot stay.

The Chairman. I have one question. And then, Senator Grassley
will have some questions. And it is a large question which has not
been addressed, at least in my view, and that is, the manner in
which the Federal Government is managing and disposing of the
Social Security Trust Fund surplus.

In 1977, we moved, in effect to a partially funded retirement sys-
tem. It began in the 1930's as a pay-as-you-go system.

The notion that we just took more money out of the economy in
the middle of the Depression than we put back would seem vague,
although where money goes is an elusive subject.

I make the remark that anyone who pierces the veil of money
rarely returns with their faculties altogether intact.

But in 1977 and again in 1983, we raised Social Security taxes
to shore up the ailing system. And we in essence over did it. The
Social Security system will run large surpluses for the next 25
years.

The amount has not been widely understood. The amount would
buy the stock exchange, $4 trillion.

But the curious fact of this sort of large event in our financial
history is that it went unnoticed.

I can speak with some authority to that. I was a member of the
Committee of Conference with the House on the matter. I signed
the Conference Committee Report.

I did not have the vaguest idea of what the consequences would
be. I thought we were just raising rates because we would need the
money for the normal outlays.

By the mid-1980's, Robert Meyers, who had been Chief Actuary,
had gotten me to the point where I could understand this.

But there was never any evidence that the Treasury understood
it or thought much about it. We did, in fact, get to the point where,
as you know, the Treasury found itself twice — or you may not
know.

Twice in the 1980's, the Treasury found itself in a situation
owing to the debt ceiling. It had to disinvest trust funds that took
in the money and did not turn them into bonds.

In any event, we now are in a situation where routinely we bring
in $50 or $60 billion a year more than is needed into what is called
a trust fund, but which revenues are just used as if they were gen-
eral revenues with no intention to do otherwise for anything like
the foreseeable future.

Don't you think that presents a problem? Mind you, there was
never any declared public policy about what we would do with this
surplus.

And then, of course, we had a Director of the Office of Manage-
ment and Budget who said that not only was there no surplus, but
we were about to have the world's largest bankruptcy.

And you have a situation where the majority of non-retired
adults do not think they are going to get their Social Security.

There has been no reason for you to know this, Mr. Newman, but
there has been no Commissioner of Social Security since — the posi-
tion has been vacant since last September.

The efforts to get a decent Social Security card, to get an annual
statement are unavailing. The subject has sort of dropped off our
screen.

Two of the last three Social Security Commissioners now head up
mass mailing organizations saying that Treasury is dissipating the
trust funds. "They won't be there when you get there."

Two of the last three, these are presidential appointees. It used
to be a position of high honor.

And there is no Treasury position on this matter of the Social Se-
curity surpluses. We have never heard what the Treasury thinks.

And I wonder if this isn't an area of public policy which requires
attention. If a majority of non-retired adults think that government
is lying to them or cheating them in this, what else do they think?

What would warrant any belief that we are going to provide you
with health insurance if you already know that we are never going
to give you that retirement benefit, that contributory insurance
paid-for benefit?

I have spoken longer than I meant to, but do you take my point?

Mr. Newman. I believe so, Mr. Chairman. And I understand that
the subject of Social Security and its financing is extraordinarily
complex, but as

The Chairman. Could I ask, sir, what is complex about it?

Mr. Newman. Well, as you have noted yourself, the flow of funds
and the understanding of how money works is sometimes very
challenging to understand through the system in any given point
in time, let alone through future generations.

I do agree, however, that it warrants careful attention. And I will
pursue it actively and hope to be able to respond intelligently with-
out loss of our faculties as we follow to the sources and uses of the
funds over time because clearly, if one does want to understand the
implications of the flow of funds through the economic system and
the use of Treasury funds, the Social Security system is a very sig-
nificant piece.

And the flow of funds of the Social Security system is a very im-
portant piece. And, Mr. Chairman, we will endeavor to understand
it better than we do today.

The Chairman. Thank you.

I would simply make the point that we are entitled to learn from
our government.

Is the Treasury intent on using the Social Security payroll tax
as a source of general revenue for the next 25 years as if it were
a general purpose tax as against a contribution to an insurance
system generally?

Because that is what is now the policy in place that is not ac-
knowledged. And it needs to be raised to the level of public pro-
nouncement.

Mr. Newman. Fine. Mr. Chairman, we would be happy to look
into it. And if you would be kind enough to spare a little of your
own time to discuss it, I look forward to that opportunity.

The Chairman. Very much and very willing to do.

Senator Grassley.

Senator Grassley. Thank you, Mr. Chairman.

And congratulations, Mr. Newman. Thank you for coming to my
office to have a visit with me.

And I guess I would just for the public record exchange a view
with you that I had in my office, nothing new, but it directly re-
lates to a statement that you made in the second to the last para-

graph where you said that you want a "nation that has a strong,
safe, resilient system of financial institutions that can and will con-
structively and fairly serve the economic and community needs of
the nation."

The President has made a step in that direction by changing
some regulations to make it a little easier for banks to lend to any-
body, particularly based upon character determination of lending,
as well as some other things that are going to make it easier to
lend.

As I pointed out to you in my office, I think that this is some-
thing that President Bush thought he was doing in December of
1991 when he had all the big wigs of FDIC and the Federal Re-
serve and everybody, the Controller of the Currency and all the
other people together to try to shake loose burdens of regulation.

And then, I imparted to you how I had a discussion 2 months
from that point with then Secretary of Treasury Brady of how they
thought everything along that line was moving very smoothly.

So obviously, it did not move very smoothly. And in a sense, I
don't think anything really happened. And I think the President is
moving in the right direction to do what he is doing.

But as I indicated to you, if it does not get through right down
to the examiner that walks into the local independent banker in
the smallest communities of America and that does not affect the
behavior of that examiner who is examining, then, the policy made
at the White House is not going to make much difference.

And so I think it is very necessary in your position that you fol-
low through to make sure that those policy decisions that are made
at the White House level that are well intended and, I think, will
do a great deal of good come out the other end so that actually, the
local bankers feel more free to lend on character as opposed to just
having inches thick files on various customers just to satisfy exam-
iners.

I think another way to say it is, it is probably more simpler than
having a big meeting at the White House. It is probably letting ex-
aminers render some judgments at the bank.

And I do not think we have done that over the last 3 or 4 years.
I do not know how long it has been going on, but a long period of
time.

And I think it has had quite a bit to do with stifling capital for
particularly small entrepreneurs.

And I think that is where the President's direction is with the
small entrepreneur, particularly those who may have had to put a
home up for collateral against a small corporation. It really has
kept down job creation that these people can do very well from
happening.

So if that is what the President is up to, and maybe you want
to comment if that is what he is up to.

If I misinterpreted, please tell me, and whether or not you will
agree with my admonition about the thing that comes out at the
end of the pipeline at the examiner level is the policy that the
President indicated because obviously, President Bush's Secretary
Brady did not follow it through to the end. And it never came out
the other end.

Mr. NEWMAN. Well, Senator, yes, I do agree with your fundamen-
tal observation. And thank you for your support of the program.

Let me comment a little bit about what we are trying to do to
make it work effectively because I share your concern that simply
making pronouncements and having big meetings is not sufficient
to get the job done.

We are trying to follow up in a concerted manner with the Office
of the Controller of the Currency, the Federal Reserve, the FDIC,
and the Office of Thrift Supervision, a series of written regulations
that codify these policies so that the examiners will not only have
general statements made out of Washington, but will actually have
in hand — and the bankers will have in hand for discussion with
their examiners — new written regulations that define how these
new policies are supposed to be implemented.

In addition, we are arranging for senior people from Washington
to visit each of the district offices of these major — of the regulatory
organizations to sit down with the local examiners, explain to them
the underlying philosophy, hear their questions, understand what
their concerns are, what issues they may have on their minds in
terms of how to make this work, what the impediments might be,
and to follow through at a more close level to get across the mes-
sage that these new regulations have a specific intent.

They are expected to be enforced, that clearly there is no intent
whatsoever to impair the safety and soundness judgments of exam-
iners.

However, there is an intent to have a broader, more balanced
perspective on the part of the examiners that should be reflected
in these new regulations.

Senator Grassley. Thank you, Mr. Newman.

The Chairman. Thank you, Senator Grassley.

Well, sir, it remains only to congratulate you for your nomination
of a position of great trust and consequence. We look forward con-
fidently to your confirmation and wish you the greatest success and
good fortune in the years ahead.

Mr. Newman. Thank you.

The Chairman. Thank you, sir.

Will Leslie Samuels come forward? You should know that you
have the approbation and approval of Senator Grassley in advance.
He has no further questions after having the pleasure of meeting
with you.

Senator Grassley. I am not singling you out by taking off. I just
have another meeting.

Mr. Samuels. Thank you.

The Chairman. Thank you, Senator Grassley, very much for
being here.

Mr. Samuels, we welcome you. And have you, by chance, any
family or associates in the room?

Mr. Samuels. Yes, I do. I would like to introduce my wife, Au-
gusta Gross, and my daughter, Polly Samuels.

The Chairman. Dr. Gross and Ms. Samuels, we welcome you to
this hearing room, as you prepare to see your husband go through
a grueling experience. [Laughter.]

Sir, you are well and favorably known to this committee. You
have been careful enough to call and see each of us.

You are the person we get to know best in this committee of the
members of the Treasury Department. As the Assistant Secretary
for Tax Policy, you are with us at all times as we seem to be end-
lessly amending and gaming the tax code.

Would you proceed? Do you have a statement, sir? I don't know
that I have it.

Mr. Samuels. Mr. Chairman, I have a brief opening statement.

The Chairman. Would you please?

STATEMENT OF LESLIE B. SAMUELS, TO BE ASSISTANT
SECRETARY OF THE TREASURY FOR TAX POLICY

Mr. Samuels. It is a great honor to appear before you as Presi-
dent Clinton's nominee to be Assistant Secretary of the Treasury
for Tax Policy.

The President's economic plan includes important revenue pro-
posals. If confirmed, I pledge to work closely with this committee
and with your counterparts at the House Ways and Means Com-
mittee on these proposals and other revenue issues that arise.

I am looking forward to the challenge that has been offered to
me. I must tell you, Mr. Chairman, that this position to which I
have been nominated is the professional opportunity of a lifetime.

The Chairman. It is. It is exactly that.

Mr. Samuels. It is an honor to be able to be so directly involved
in one of the most crucial aspects of economic policy.

Every individual taxpayer and every business is concerned about
the taxes they pay. Everyone is entitled to a tax system that is not
only fair and equitable, but also is as simple as possible. I want
to work with you to accomplish these objectives.

I wish to thank President Clinton for nominating me to this im-
portant position. I especially want to thank Secretary Bentsen for
his trust and confidence in recommending my nomination to the
President.

It is a great privilege to have this opportunity for public service.

On a personal note, I would like to thank my wife, Augusta, and
my children, Colin and Polly, for their understanding and support.

This concludes my prepared remarks. I will be happy to answer
any questions you have.

[The prepared statement of Mr. Samuels appears in the appen-
dix.]

The Chairman. We have no questions at this point, Mr. Samuels.
We are simply filled with apprehension. [Laughter.]

The Chairman. As you know, we proceed

Mr. Samuels. So am I.

The Chairman. Well, then, that means you are qualified. If you
approached this job with anything but save fear and trembling, you
would obviously not understand what is involved with it.

Now, in the space of 8 weeks, we will be required to enact the
largest tax increase in history. There are some historical argu-
ments that there may have been a larger one earlier on. If larger,
then, insufficient unto this season.

We have spending reductions and movements that are also in
order. I think we have a $272 billion directive with respect to reve-
nues. And then, it balances off to about another $30 — about $35
billion in spending for about $307 billion is the formidable sum.

There has been very little discussion. We have the rudiments of
proposals from the administration. You do know that we do not
have proposals for almost half of the dollar amounts we are to
raise. That is right? Am I right?

Mr. Samuels. [Nods affirmatively.] [Laughter.]

Speak.

We do not have the bills, not the statutory language, but the spe-
cifics. And the time, the clock runs down.

The House will be moving toward legislation very promptly. We
will follow, but we do not want to follow at too great a distance.
We have until June 18.

Is there something that you would like to tell us at this point?
Obviously, you know that we will be very concerned that we are
not going to start moving the tax code back in the direction we try
to change. Let's see. That is a completely confused metaphor.

In 1986, we tried to clear up the code to make it as neutral as
can be with respect to economic decisions. And we would like to
keep it that way.

We have broadened the base and lowered the rates. Now, we are
going to be raising the rates. But if we start narrowing the base
again, we shall be back in that sort of almost hydraulic process
that you get into.

Do you have any words of counsel for us?

Mr. Samuels. Yes. I think when you look back at the 1986 act,
you can conclude that adding some progressivity to the tax rates
is appropriate at this time.

I would agree that the objectives of the 1986 act should continue,
that is, for the system to be

The Chairman. The principles.

Mr. Samuels. The principles, that the system should be as neu-
tral as possible.

On the other hand, there are proposals to encourage investment.
And I believe that those proposals, if properly crafted, can be useful
and should not bring us back to the pre- 1986 status that we had.

The Chairman. Yes. That is a nice term "properly crafted." That
is very crafty and agreed.

You do know that we have been told. This committee has been
told by Jay Levy of the Levy Institute that the amount of revenue
that we are asked to raise by way of new taxes would produce a
60-percent possibility of triggering a recession.

I am not asking you to comment, but I mean, we have heard
such testimony.

I know that Senator Packwood will be particularly concerned to
see that the principals of 1986, when he was chairman of this com-
mittee and put that legislation through and I was one of his core
group, will be preserved.

Can you ask Secretary Bentsen if we could have from you a table
showing the distribution of the taxes that have been proposed in
terms of the adjusted gross income?

You have given us this family income measure which imputes
value there of rent from owned residences. I think it accounts for
a certain amount of cheating and things like that.

It is a good economist's measure of what actual resource income
is. But from the point of the Finance Committee, it does not help

us too much to say, well, everybody cheats 10 percent or whatever.
We do not like that kind of language.

And the simple fact is we hope we will get — we suspect, sir, that
we will get an AGI, adjusted gross income, distribution of these
various tax proposals.

Can we expect that from you?

Mr. Samuels. If I can answer that question in the following way.
The family economic income standard has been the income classi-
fier for determining the distribution of tax changes for quite some-
time.

It goes back to the Ford administration and has had bipartisan
support. It is particularly helpful when you have tax changes that
are not purely income tax rate changes, for example, where you
have changes of excise taxes.

The Chairman. Yes.

Mr. Samuels. We have payroll tax changes that are in the ad-
ministration's proposal and corporate tax changes.

The Chairman. Yes.

Mr. Samuels. The family economic income concept has enjoyed,
as I say, bipartisan support. A broad-based income classifier, simi-
lar to family economic income, is used by both Congress' Joint
Committee on Taxation and the Congressional Budget Office. So it
has wide support.

The Chairman. Right. Can I just be simple about this? We need
both. It is very clear, as Mr. Gale just pointed out to me, that the
AGI is not in any sense an ideal measure of well being.

I mean, persons with vast amounts of tax exempt income have
no income on the AGI scale. And we r

Mr. Samuels. That is correct.

The Chairman. Yes.

Mr. Samuels. And it is not only tax exempt income. It is transfer
payments. The non-tax portion of Social Security payments would
not show up in adjusted gross income. In addition, the adjusted
gross income is done by taxpayer, not families. And I think that the
concern the people have had over the years and the reason that the
family economic income approach was developed and I think it goes
back to Professor Musgrave. Joe Pechman had done a lot of work
on it.

The Chairman. Yes.

Mr. Samuels. The reason they did that was because they wanted
to look at the impact of tax proposals on the well being of a family
unit. And when you look at it just on the basis of adjusted gross
income, it is just by way of taxpayer.

Having said that, we recognize that there is this interest in this.
And we are trying to — we are looking at it. It was raised at Sec-
retary Bentsen's hearing last week. And we are trying to develop
a response that we hope

The Chairman. Come on. Or you will find yourself in that situa-
tion that has developed since we had the misfortune to establish
the Congressional Budget Office. You have two conflicting views.

And you are not old enough to remember those 1930 movies
when you are flying in the Indies in the fog. And the compass goes
out. You do not know which way you are.

And you learn that having two compasses does not help you be-
cause you do not know which one is right. So you have to have
three. So you assume the probability that two are accurate as
against the third if one goes off, which may or may not be the case,
etcetera.

I see Mr. Newman has been generous enough to stay here. And
we are going to be out of here in just a few seconds.

Quite seriously, this is a point that I found myself thinking
awhile ago that since Charles Dawes became Director of the Bu-
reau of the Budget under President Harding first, there have been
30 directors of the OMB. And it happens that I have known 18 of
them.

And in the period when there was only one source of information
in the capital in our government about revenues and outlays expec-
tations, that was a most honorable position of trust. And no Presi-
dent would dream of expecting a director of the OMB to change a
number, make it seem more jolly.

But once you got a second source of opinion down here, that re-
straint was lifted and with which Miss Rosy Scenario arrived in
town. And it does not matter what they say down there.

I mean, I can even say without being partisan that when Presi-
dent Clinton discovered that the revenue estimates that he had
been relying on when he made certain proposals about what his
budget would do to the deficit and so forth were too optimistic, and
he could not quite keep specifically the commitment he made, there
was an under tone of comment on the other side of the aisle that,
didn't everybody know that they were lying, which is not really
what you want.

And I think it would help us very much if we got from you, first
of all, a very clear statement of why the family economic income
is your metric of choice.

I can say that anything that Musgrave and Pechman worked on
would find a welcome response from this member of the committee.

I mean, I perfectly understand why it is used, but there is this
other fable also. So if we got both from you, then, we will have your
judgment on the matter which we will not dispute.

Do you prefer to have the Cato Institute do it for us? Then, we
will get the Public Policy Institute to do a third. And then, we will
have a fourth. And the next thing you know, we will not be work-
ing from the same presumptions at all.

Do you take that as well meant advice?

Mr. Samuels. Yes. I do.

The Chairman. All right. And you will get together with the
Under Secretary. And you will talk with him about this question
of the transformation of the Social Security system from a pay-as-
you-go to a partially-funded system.

Have we let that go unrecorded so that the excess revenues have
simply become tax revenues as against pension contributions?

You do see that?

Mr. Samuels. Yes. Absolutely.

The Chairman. That is a subject that we have to

Mr. Samuels. Especially, as one who looks forward to my Social
Security.

The Chairman. Now, there you are. You are the rare working
person in his late 1940's who thinks it will be there.

Mr. Samuels. I am an optimist.

The Chairman. You are an optimist. I hope you would have said
you are a realist.

I mean, the statistics, after 53 years, show that they have never
been a day late or a dollar short. You would think some measure
of confidence would have emerged, but so far it has not.

I do not want to seem to be any more than supportive. We are
delighted with your appointment. We wish you every success. And
you may want to take your wife to lunch because you do not know
when you — you might take him to lunch, Dr. Gross, because you do
not know when you will see him again.

Thank you very much.

Mr. Samuels. Thank you, Mr. Chairman.

The Chairman. And now for a very brief hearing on the question
of the nomination of Jack DeVore, Jr. to be the Assistant Secretary
of the Treasury for Public Affairs/Public Liaison.

Jack, they haven't changed it. They haven't made it Public Af-
fairs-Public Liaison? Have they?

Mr. DeVore. No, sir. We didn't change it. It's been called that
for some time.

The Chairman. If you have to have a name, why can't it just be
Public Affairs?

Mr. DeVore. We may go for that, Mr. Chairman.

The Chairman. I mean, why have Public Liaison, which you can
figure out how much extra money will be spent in the next 5 years
printing Public Liaison.

Why not good English words like Public Affairs? Why do they
have this French word? [Laughter.]

Mr. DeVore. We will study dropping it forthwith.

The Chairman. Will you think about that? [Laughter.]

You have a statement, sir. Would you proceed?

Mr. DeVore. Chairman Moynihan, before my statement, if I
might, I would like to recognize my family.

The Chairman. Oh, I am sorry, sir. Forgive me. Would you
please do?

Mr. DeVore. They have patiently put up with a lot of things not
of their making, when I was here on the Hill and during the time
I have spent at Treasury. I hope 1 day to repay the support and
encouragement that they have given me over the years.

With me today are my wife, Aida, and two of my sons, Arthur
and Christopher Michael.

The Chairman. Mrs. DeVore, we welcome you to the committee
room. You have probably been here before.

And Christopher Michael and Arthur, gentlemen, we welcome
you.

STATEMENT OF JACK R. DEVORE, JR., TO BE ASSISTANT SEC-
RETARY OF THE TREASURY FOR PUBLIC AFFAIRS/PUBLIC
LIAISON

Mr. DeVore. I am a bit awed and somewhat confused to find my-
self sitting on this side of the witness table. I am also very honored
to be here.

I had the privilege of working for Senator Lloyd Bentsen for over
20 years. I now have the privilege of serving Secretary Lloyd Bent-
sen.

I want to thank Secretary Bentsen for the confidence he has ex-
pressed in me by recommending me for appointment by the Presi-
dent to this position.

These past 3 months, working in Public Affairs and Public Liai-
son at the Treasury Department, have given me a new perspective
on the executive branch.

My heart still belongs to Congress. But with each passing day,
I gain a greater appreciation for the challenges confronting that
branch of government which is situated at the foot of Capital Hill.

The Treasury Department is at the center of this administra-
tion's cooperative effort with Congress to rebuild our economy, cre-
ate growth and jobs, restore our standard of living, and reassert
our place of leadership in global economic matters.

These are not easy tasks. Their importance cannot be overstated.
I am convinced that our future prosperity, indeed the world's, de-
pends to a significant extent on whether we succeed or fail.

I believe that the most important thing we can do in public af-
fairs at Treasury, to help tip the balance toward success, is to be
responsive and honest in our dealings with the press.

It is also important to me, Mr. Chairman, that we do the best
job possible of informing and educating American business owners
and consumers about our policies and activities at the Department.

Again, I am honored to have been nominated for this position. I
can think of no more challenging an assignment in the field of pub-
lic affairs.

That completes my prepared remarks, Mr. Chairman. And I
would be happy to take any questions you might have.

[The prepared statement of Mr. DeVore appears in the appen-
dix.]

The Chairman. Yes. I have a question.

Mr. DeVore. All right, sir.

The Chairman. When Pierre L'Enfant laid out the design of the
City of Washington, he had in mind a sort of a diagram of the Con-
stitution. And Pennsylvania Avenue went directly from Congress'
house — this is depicted on the map — to the President's house.

And so you saw that connection, separation and connection. And
then, somebody came along and put the Treasury Department in
the way. Do you know who did that, sir, and why? [Laughter.]

Mr. DeVore. No, sir, but I assure you that it was not Secretary
Bentsen. [Laughter.]

The Chairman. That is the agility which has endeared you to
this committee for 20 full years.

We are absolutely delighted. We are just pleased for you, Jack.
I can call you Jack one last time.

Jack, get rid of Public Liaison, will you? [Laughter.]

And congratulations.

Mrs. DeVore, you know what this is like. You know the hours.
They will just be a little bit worse. That's all.

We just want to tell you how proud we are of the life of public
service which in your case has been exemplary and is now just be-
ginning a new phase in the Executive Branch.

Don't go head over heels with it. Remember you have friends
back here in any event.

Mr. DeVore. Thank you, Senator.

The CHAIRMAN. Thank you very much, sir.

Thank you all. We thank our staff.

I should indicate that we hope to have a quorum at our hearing
tomorrow, at which these nominations will be brought up, and I
have no doubt, reported out unanimously.

And with that, the hearing is concluded.

[Whereupon, at 12:25 p.m., the hearing was concluded.]

APPENDIX

Additional Material Submitted

Prepared Statement of Jack R. DeVore, Jr.

Chairman Moynihan, Senator Packwood, members of the
Committee:

Before my statement, if I might, I'd like to recognize my
family. They've patiently put up with a lot of things, not of
their making, when I waa here on the Hill and now that I am at
the Treasury Department. I hope one day to repay the support and
encouragement they have given me over the years. With me today
are my wife, Aida, and my sons, Arthur and Christopher Michael.

I'm a bit awed — and somewhat confused -- to find myself
sitting on this side of the witness table. I'm a'sr very honored
to be here. I had the privilege of working for S. i«. cor Lloyd
Bentsen for over 20 years. I now have the privilege of serving
Secretary Lloyd Bentsen. I want to thank Secretary Bentsen for
the confidence he's expressed in me by recommending me for
appointment by the President to this position.

These past three months, working in Public Affairs and
Public Liaison at the Treasury Department, have given me a new
perspective on the Executive Branch. My heart still belongs to
Congress. But with each passing day I gain a greater
appreciation for the challenges confronting that branch of
government which is situated at the foot of Capitol Hill.

The Treasury Department is at the center of tnis
administration's cooperative effort with Congress to rebuild our
economy, create growth and jobs, restore our standard of living,
and reassert our place of leadership in global economic matters.

These are not easy tasks. Their importance cannot be
overstated. I am convinced that our future prosperity — indeed
the world's --- depends to a significant extent on whether we
succeed or fail.

I believe the most important thing we can do in public
affairs at Treasury, to help tip the balance toward success, is
to be responsive and honest in our dealings with the press. It's
also important to me, Mr. Chairman, that we do the best job
possible of informing and educating American business owners and
consumers about our policies and activities at the Department.

Again, I'm honored to have been nominated fcr t' ;s position.
I can think of no more challenging an assignment in ' e public
affairs field.

That completes my prepared remarks, Mr. Chairman. Thank you
for the opportunity to appear before the committee, and I'd be
glad to answer any questions you have.

(27)

4^J^^^t, United States

F Si Office of Government Ethics

^ 1201 New York Avenue, NW., Suite 500
Washington, DC 20005-3917

March 30, 1993

AfENf

The Honorable Daniel P. Moynihan

Chairman

Committee on Finance

United States Senate

Washington, DC 20510

Dear Mr. Chairman:

In accordance with the Ethics in Government Act of 1978, I
enclose a copy of the financial disclosure report filed by
Jack R. DeVore, Jr., who has been nominated by President Clinton
for the position of Assistant Secretary of the Treasury for Public
Affairs and Public Liaison.

We have reviewed the report and have obtained advice from the
Department of Treasury concerning any possible conflict in light of
the Department's functions and the nominee's proposed duties.

Based thereon, we believe that Mr. DeVore is in compliance
with applicable laws and regulations governing conflicts of
interest.

Sincerely,

Stephen D. Potts
Director

Enclosure

Prepared Statement of Senator Dianne Feinstein

It gives me great pleasure to introduce a fellow California!!, Mr. Frank Newman,
who nas been nominated to become Undersecretary of Treasury for Domestic Fi-
nance.

His experience in California prepares him well for the challenges that face the
Treasury Department.

Mr. Newman most recently served as director and vice chairman of the board of
BankAmerica Corporation. Just prior to joining BankAmerica in 1986, Mr. Newman
served as executive vice president and chief financial officer of Wells Fargo & Com-
pany in San Francisco.

I have had an opportunity to work with Mr. Newman on a number of occasions
when I was Mayor of San Francisco. I found him to be a remarkable leader in the
financial community. I was impressed with his commitment to look for innovative
ways the private sector could join the public sector to improve the state's economy.

And with the lingering recession in California, where the statewide unemploy-
ment rate stands at 9.4 percent, it reassures me to know that Frank Newman will
bring his personal insight into the condition of our economy to the Treasury Depart-
ment.

In his position at BankAmerica, Mr. Newman manages the corporation's Financial
Accounting, Financial Analysis and Planning, Treasury, Corporate Development,
Tax, Investor Relations, Economics, and Government Relations functions.

Mr. Newman was appointed in 1980 to represent the American Bankers Associa-
tion on a special task force by the Federal Home Loan Mortgage Corporation to ad-
vise the agency on its capital structure, and has served as a director of the San
Francisco Municipal Railway Improvement Corporation.

Mr. Newman received his bachelor's degree in economics magna cum laude at
Harvard University in 1963.

Frank Newman will serve the Treasury Department well as we try to reduce the
deficit and improve our economy. I have seen Mr. Newman at work, and I know
we will all be impressed as he brings his private sector insight to Washington.

Thank you.

Prepared Statement of Frank N. Newman

Mr. Chairman, distinguished members of the committee, it is
genuinely an honor and a pleasure to appear before you today.
Some of you were able to fit time in your schedules to meet with
me prior to this hearing and I appreciated the opportunity to
talk with you. I look forward to future opportunities for
discussion with members I have not yet met personally.

It is a privilege to be considered for service in President
Clinton's Administration, and in the Department of the Treasury,
under the leadership of Secretary Bentsen. In addition, if
confirmed, I hope to work closely and diligently with this
committee on issues o~ • utual concern and opportunity. I realize
that there are someti e a number of different perspectives
represented in the committee; I believe that is one of the
strengths of our system of democracy, and I have come to
Washington determined to listen carefully, and to try to
understand and appreciate key different; views on iseues, as I
develop my own thoughts on the balance of alternatives.

The primary responsibilities of the Under Secretary for
Domestic Finance in this Administration will include policy
matters regarding Financial Institutions, Federal Debt Finance,
Financial Regulation, and Capital Markets, as well as
responsibility for fiscal Management operations supporting
Treasury auctions and other forms of debt issuance.

In addition, I hope to have some constructive role in the
formulation of economic policy. I am concerned, for example, by
the risk that many public financial management programs, at
foderal, state and local levels, may compound economic downturns,
and I would like to explore means through which government could
be more stabilizing at times when the private sector economy is
faltering. I also hope to improve our understanding of the
implications of the flows of funds through the financial system
as a result of government debt and deficit financing during
periods of both weak and strong economies.

I look forward to working closely with the Federal Reserve
and the PDIC, in addition to the Congress, on programs to assure
that the nation has a 6trong, safe, and resilient system of
financial institutions that can and will constructively and
fairly serve the economic and community needs of the nation.

If confirmed, I wilj undertake the very challenging
responsibilities of the o_fice of the Under Secretary to the best
of my abilities. Thank you, Mr. Chairman. I would be pleased to
respond to any questions of the committee.

4? MAR 2 2 1993

r/?/rA; ft

r/,M„/,„//f Frank N. Newnanf Qf Callforniaf

to be an Under Secretary of the Treasury, vice Jerome H.

Powell, resigned.

WILMS J. CM

Frank N. Newman was
named director and vice
chairman of the board in
February 1990. He joined
BankAmerica Corpora-
tion in October 1986 as
vice chairman and chief
financial officer.

Frank N. Ntwman

Vice Chairman of the Board
Chief Financial Officer

University In 1963. Prior
to joining Wrllj Fargo in
1973. he o <cd at C-E-
I-R, Inc. _nd Peat. Mir-
wick, Livingston A Co.
in Boston, and as viet
president st First Na-
tional City Corporation
(now Citicorp).

Newman, 48, previously

served as executive vice

president snd chief financial officer of

Wells Fsrgo 3l Company in San Francisco.

In his position at BankAmerica. Newman
manages the corporation's Financial Ac-
counting, Financial Analysis and Planning,
Treasury, Tax, Investor Relations, Econom-
ics, and Government Relations functions.
Reporting to Chairman Richard M. Rosen-
berg, he also serves on the Managing
Committee and the Senior Management
Council, and chairs the Asset and Liability
Policy Committee.

A native of Qulncy, Massachusetts. New-
man received his bachelor's degree In
economics magna cum laud* at Harvard

Newman was vice presi-
dent for special assignments at Wells Fargo,
became vice president and manager of
management sciences in 1975. snd was
named senior vice president In 1977 and
executive vice president in 1980.

He was appointed in 1980 to represent
the American Bankers Association on a
special task force formed by the Federal
Home Loan Mortgage Corporation to ad-
vise the agency on its capital structure,
and has served as a director of the San
Francisco Municipal Railway Improvement
Corporation. He is currently director of
the Harvard Club of San Francisco and
director of the Japan Society of Northern
California.

RESPONSE TO INFORMATION REQUESTED 07 NOMINEES

BY
UNITED STATES SENATE
COMMITTEE ON FINANCE

NOMINEE: FRANK NEIL NEWMAN

NOMINATED FOR: UNDER SECRETARY FOR DOMESTIC FINANCE
DEPARTMENT OF THE TREASURY

A. BIOGRAPHICAL:

1. Name: Frank Neil Newman

2. Address: 999 Green Street /2001 3030 K. St. NW /102

San Francisco, CA 94133 Washington, DC 20007

3. Date and place of birth: 4/20/42; Quincy, MA

4. Marital status: Married but living ip.rt

5. Names and ages of children: Dan, 23

6. Education:

Thayer Academy (HS) , Braintree, MA; 1959
Harvard College, Cambridge, MA; 1963

7. Employment record:

Wells Fargo and Company (1973-1986)

BankAmerica Corporation (1986-2/2/93 — I am currently
on leave of absence pending appointment upon which I
will resign from BanJcAmerica. As of 2/2/93, I have
resigned from my position as director and vice
chairman. )

8. Government experience: NA

9. Memberships:

Harvard Club of San Francisco

Japan Society of Northern California

10. Political affiliations and activities: None

11. Honors and Awards:

Magna Cum Laude, Economics, Harvard College
Alfred P. Sloan Scholarship, Harvard rollege

12. Published Writings: NA

13. Speeches: NA

14. Qualifications:

Chief Financial Officer and Vice Chairman of the Board,
Bank of America (10/86-2/93)

Executive Vice President and Chief Financial Officer,
Wells Fargo and Company (6/73-10/86)

received from Trpaenn. i Committee

teasury Department on April 16, 1993

Political con-
tributions:

Itemize all political contributions of §500 or mora to any
individual, campaign organization, political party,
political action committee or similar entity during the
last eight years and identify the specific amounts, dates,
and names of the recipients.

6-88 Friends of Diane Feinstein $1,000
4-89 Feinstein for Governor (primary) $1,000
10-89 Bradley for Senate $1,000

11-89 Feinstein for Governor

(general election) SI, 000

1989 Bank of America Federal $1/710

Election Fund
7-90 Feinstein for Governor $1,000

1990 Bank of America Federal $2,052

Election Fund
6-91 Feinstein for Senate $1,000

6-92 Hsieh for Supervisor $500

6-92 Kaufmann for Supervisor $500

6-92 Lazarus for Supervisor $500

6-92 Kennedy for Supervisor $500

1992 Bank of America Federal $2,000
Election Fund

■^^■kfc, United States

0 Office of Government Ethics

^Jffl ft^V 1201 New York Avenuc. NW., Suite 500
3^82^ Washington, DC 20005-3917

MAR 25 1993

The Honorable Daniel R. Moynihan

Chairman

Committee on Finance

United States Senate

Washington, DC 20510-6200

Dear Mr. Chairman:

In accordance with the Ethics in Government Act of 1978, I
enclose a copy of the financial disclosure report filed by Frank N.
Newman, who has been nominated by President Clinton for the
position of Under Secretary of the Treasury for Domestic Finance.

We have reviewed the report and have also obtained advice from
the Department of the Treasury concerning any possible conflict in
light of its functions and the nominee's proposed duties. Also
enclosed is a letter from the ethics official of the agency dated
March 23, 1993, which discusses Mr. Newman's ethics agreements with
respect to recusal, divestiture and certain other matters.

Based thereon, we believe that Mr. Newman is in compliance
with applicable laws and regulations governing conflicts of
interest.

Sincerely,

Stephen D. Potts
Director

Enclosures

Prepared Statement of Ronald K. Noble

Mr. Chairman and members of the Senate Finance Committee, I
am honored and privileged to appear before you this morning as you consider my
nomination as Assistant Secretary of the Treasury for Enforcement. I sincerely thank
Secretary Uoyd Bentsen and Deputy Secretary Roger Airman for recommending me to
the President and, I thank President Clinton for nominating me to the U.S. Senate.
Finally, I thank you and the members of this Committee for the expeditious scheduling
of this hearing.

On a more personal note, I would like to recognize my parents who are bere with
me today. They are my source of inspiration and strength. When I reflect on what our
family experienced in the late 50's and early 60's, travelling throughout the U.S. as an
interracial family, it gives me a valuable perspective on this position at this time.

While I was growing up, the race relations in our country prevented my parents
from travelling as they do today. Then, we travelled under cover of darkness to
minimize the risk of cor V itation which our interracial family frequently faced. When
rest was required, my l ol er often was forced to stay in motels reserved for whites,
while my father, brother and I stayed in motels for blacks. I still recall occasions wheu
my mother would be dropped off — alone — by my father, brother and me. On those
occasions, I never can recall my father sleeping, It seemed each time that I awakened, I
saw the same watchful parent seated near a window watching both his children and the
window.

Discussions of these experiences were regularly shared with my brother and me
by my parents while I was growing up. My parents wanted us to remember the
sacrifices each of us had to make in order Ui stay together as a family. They wanted us
to remember the harm one causes another by prejudging her because of her group
affiliation. Finally, they wanted us educated; so we would have a better Life than they.

In fact my father's 7th grade education and mother's lack of formal english
training proved to be little of a barrier to their children's education. My father became
a janitor and obtained the contract to dean a local catholic school so his kids would get
the best education. He was not ashamed that after 22 years of military service the only
work be could find was as a janitor.

He had a vision. He would take his sons with him to work. In that way we
would learn the lessons of hard work while seeing what limitless opportunities there
would be if we obtained a formal education. So, we cleaned doctor's offices, law
office, bars, grocery stores, professional offices — anything that got dirty we would
clean. He would proudly tell his clients that his children were going to college, and
since we cleaned with my father from the time we were 9 & 11, people would say Mr.
Noble don't you think your children should finish grammar school first. In dosing the
subject of my family, I hope you can see that because my parents sacrificed and lived
for their children, I sit before you today, not proud of myself or my accomplishments,
but proud of my parents and family.

The influence people had on my life continued throughout my academic years
and carried over into my professional life. My first full-time professional job was as the
senior law clerk for the Honorable A. Leon Higginbotham, Jr. For me be always will
be one of America's greatest jurists and the greatest influence on my professional
development. His commitment to excellence and his compassion for the weak, the
impoverished and the dispossessed are unparalleled. He taught me first what I have
now come to understand; there is no greater calling than the call to public service.

As an Assistant U.S. Attorney, Special Counsel to the Assistant Attorney General
and a Deputy Assistant Attorney General for the Criminal Division of the U.S.
Department of Justice, I gained the experience of working with a wide range of law
enforcement bureaus and was exposed to the next greatest influence on my life. The
Honorable Edward S.G. Dennis. Jr., the former U.S. Attorney for the Eastern District
of Pennsylvania and the Assistant Attorney General for the Cr' nJ d Division of the
Department of Justice. He assigned me to Important prosecuti as and assignments. He
taught me the importance of letting the evidence, not political influence drive one's
decision making in the area of law enforcement and criminal prosecution.

Most recently, as an Associate Professor of Law at the New York University of
Law, I have learned from my colleagues and students the importance of securing the
best future for the next generation. I also learned about sacrifices of a different sort.
My students in Evidence and Lawyering and my colleagues have sacrificed this semester
while I divided my time between Washington and New York. It was not uncommon for
Students to meet with me late in the evening or on the weekends and for my colleagues
to shoulder other responsibilities so I would be able to fulfill my commitment to them
and to the President. Dean John Sexton's approval of my collapsing four days of classes
into 2.5 allowed me to answer this call to public service by spending half the week in
New York and half the week In Washington.

In sum, my entire career has been devoted to public service. If confirmed, I will
be responsible for a broad range of programs and organizations both in the areas of
civil and criminal enforcement. I will be responsible for oversight the U.S. Secret
Service, U.S. Customs Service, the Bureau of Alcohol Tobacco and Firearms, the
Federal Law Enforcement Training Center, the Financial Crimes Enforcement Network,
the IRS-Criminal Investigative Division, the Office of Foreign Asset Control and the
Office of Financial Enforcement — a cpmbined 2.5 billion dollar budget and 30+
thousand employees. From enforcing tariff regulations and anti-mouey laundering
programs, to protecting the life of the President, keeping a watchful eye on drug
smuggling or enforcing the firearms laws, the oversight responsibilities of the Assistant
Secretary for Enforcement are awesome.

Naturally, there are significant issues to be considered In each of my bureaus.
We must look to the growing complexity of how criminal enterprises are laundering
their illegal proceeds. We must ensure that the federal work place is free of sexual
harassment and that our personnel policies are fair and our programs for the
recruitment, retention and promotion of women and people of color ensure diversity.
Most importantly we must ensure that the American taxpayer is paying for programs
that work efficiently and cooperatively.

Finally, now that the stand-off in Waco has ended, the Secretary of the Treasury
has directed that, if confirmed, I would oversee the Investigation of the ATFs role in
the Waco incident. Treasury and the American publk need to know why what
happened on February 28, 1993 near Waco, Texas happened. To that end, the
Secretary has directed me to enlist individuals of unchallenged integrity and ability to
assist in Treasury's investigation.

I will not pre-judge what the investigf tion will reveal, but I p mt se that I will
follow the evidence wherever it lead;. There will be no relevant ston Ittt unturned. I
will work diligently and methodically to ensure that a complete investigation and full
accounting is provided to the Secretary of the Treasury, the President and the American
people.

With, all of the recent attention directed at the Bureau of Alcohol Tobacco and
Firearms, I must comment on the public impression of ATF created by the incomplete
record with which the American public has been presented. Because of an ongoing
criminal investigation and because of the delicate negotiations that were ongoing near
Waco, Texas until April 19, 1993, the Department of the Treasury could not comment
in full publicly. But, I will say to you today that the men and women of ATF are a
courageous and proficient lot of law enforcement professionals. Putting aside for a
moment why the tragedy occurred, we cannot overlook that during almost 45 minutes of
uninterrupted gunfire, the men and women of ATF on site acted heroically and bravely
in protecting and tending to their wounded. Agents lied on top of fallen agents to
protect them from additional gunfire. Men and women, blacks and whites already in
positions of safety went back together to get their fallen colleagues. The American
people have been well served by these dedicated civil servants who carry out their duties
in every Slate in the nation.

In closing, although 1 am keenly aware of the breadth of responsibilities of this
office, I believe, with the Secretary and Deputy Secretary's support and the guidance of
this Committee, I can meet the challenge. I look forward to the opportunity to lead the
Treasury Department's enforcement efforts during this period of urgency.

Thank you.

°/58^K^ UnitcdSt"'
llr T£s Office of Government Ethics

_^ 1201 New York Avcmu
<^.T^^c^ Washington,

April 2, 1993

The Honorable Daniel P. Mo„

Chairman

Committee on Finance

United States Senate

Washington, DC 20510-6200

Dear Mr. Chairman:

In accordance with the Ethics in Government Act of 1978, I
enclose a copy of the financial disclosure report filed by
Mr. Ronald K. Noble, who has been nominated by President Clinton to
be the Assistant Secretary of the Treasury for Enforcement.

We have reviewed the report and have also obtained advice from
the Department of the Treasury concerning any possible conflict in
light of its functions and the nominee's proposed duties.

Based thereon, we believe that Mr. Noble is in compliance with
applicable laws and regulations governing conflicts of interest.

Sincerely,

Director
Enclosure

Response of Mr. Noble to a Question Submitted by Senator Conrad

Good morning, Mr. Noble. In your capacity as Assistant Secretary for Enforce-
ment, you will oversee the U.S. Customs Service in its enforcement of the collection
of revenues from tariffs and interdiction of contraband. As you probably know, I am
a strong proponent of tough enforcement of our customs and other laws. That is why
I am concerned about rumors that the Customs Enforcement office in Grand Forks,
North Dakota, might be closed as part of a reorganization of the Customs Service.
As you are probably aware, Grand Forks is the only Customs Enforcement office in
North Dakota. If it were closed, there would be no Customs Enforcement office be-
tween Minneapolis and Great Falls, Montana — a distance of over 750 miles. The
same rumors suggest that the Great Falls office is also being considered for closure,
which could expose a huge portion of our northern border and dozens of ports of
entry to inadequate enforcement. By contrast, the only two states that now have no
customs enforcement office are Idaho and New Hampshire, which between them
have only about sixty miles of border and a handful of ports of entry.

In my view, it would be a great mistake to leave such a long stretch of the border
with no Customs Enforcement office to act as back-up to border inspections. As you
probably know, the Grand Forks Customs Enforcement office has compiled an im-

f>ressive record, with cases ranging from child pornography to drug trafficking to il-
egal exports to Libya. In addition, coordination between the Customs Enforcement
office and other federal law enforcement agencies in North Dakota has been a vital

Eart of federal law enforcement in the state. If customs enforcement for North Da-
ota was based in Minneapolis, law enforcement in the state could suffer signifi-
cantly. Finally, I want to note that when North Dakota's Customs Enforcement of-
fice was moved from Pembina to Grand Forks a few years ago, we were given assur-
ances that that was not just a step on the way to closing the Customs Enforcement
office in our state.

As you review recommended closure options, I just want to urge you to consider
the impact on the effectiveness of customs enforcement of leaving long stretches of
the border without local Customs Enforcement offices and the effect on overall law
enforcement in those areas.

Question. When you make these decisions (on where Customs offices should be lo-
cated) what criteria are you looking at to ensure that these closures do not ad-
versely affect customs enforcement and law enforcement in general in the surround-
ing region?

Answer. We are very much in support of your point that Treasury enforcement
agencies must be prepared to respond to criminal violations of federal law in all
parts of the country. In the case of the Customs Service, we know that shipments
that violate the customs laws may pass through a point of entry destined for a party
at a location in the interior of the United States, at some distance from the port.
Specifically, truck shipments crossing from Canada into North Dakota may be des-
tined for any city in the Midwest.

In deciding were enforcement offices should be located the Customs Service looks
at several factors:

(1) Performance — The Customs Enforcement Performance System identifies both
current and past quantitative and qualitative measures to determine the most effec-
tive use of resources. Quantitative factors such as arrests, seizures, indictments, and
convictions are considered as well as an in-depth evaluation of Class 1 and other
significant cases.

(2) Cost — The cost of each office (or proposed office) is analyzed in comparison
with past performance and the performance of other offices.

(3) Threat — A thorough threat analysis is performed for each office (or proposed
office) to determine the current and potential level of unlawful activity in each of
Customs' priority areas.

(4) Expiring Leases — The cost of each lease, including operating costs such as util-
ities not included in the lease, is considered and compared with' costs of other sites;
consideration is also given to lease expiration dates.

(5) Consolidation of resources — A continuing management evaluation is performed
to determine whether offices can be consolidated to improve productivity in use of
resources.

Customs managers believe that the criteria enable them to allocate resources and
locate offices in an intelligent, informed manner.

Prepared Statement of Leslie B. Samuels

Mr. Chairman and members of the Committee, I have a brief
opening statement.

It is a great honor to appear before you as President
Clinton's nominee to be Assistant secretary of the Treasury for
Tax Policy.

The President's economic plan includes important revenue
proposal*. If confirmed, I pledge to work closely with this
committee, and with your counterparts at the House ways and Means
Committee, on these proposals and other revenue issues that
arise.

I am looking forward to the chal enge that has been offered
to me. I must tell you, Mr. Chairman, that the position to which
I have been nominated is the professional opportunity of a
lifetime. It is an honor to be able to be so directly involved
in one of the most crucial aspects of economic policy.

Every individual taxpayer, and every business, is concerned
about the taxes they pay. Everyone is entitled to a tax system
that is not only fair and eguitable, but also is as simple as
possible. I want to work with you to accomplish these
objectives.

I wish to thank President Clinton for nominating me to this
important position. I especially want to thank Secretary Bentsen
for his trust and confidence in recommending my nomination to the
President. It is a great privilege to have this opportunity for
public service.

On a personal note, I would like to thank my wife, Augusta,
and my children, Colin and Polly, for their understanding and
support .

This concludes my prepared remarks. I will be happy to
answer any guest ions you have.

MAR 2 2 993 ^

%//r

^/ewa/t yy//s v/s///rs/ .yjaJej.

rf'

'/ Leslie B. Samuels, of New York, to
be an Assistant Secretary of the Treasury, vice Fred T.
Goldberg, Jr., resigned.

Wlim ). CL!«IuN

40
Assistant secretary for Tax Policy

The Assistant Secretary for Tax Policy advises and assists the
Secretary in the formulation and execution of domestic and
international tax policies and programs. These functions include
analysis of proposed tax legislation and tax programs; projections
of economic trends affecting tax bases; studies of effects of
alternative tax measures; preparation of official estimates of
Government receipts for the President's annual budget messages;
advice and analysis on domestic, international and benefits tax
matters; assistance in the development and review of tax
legislation, and domestic, international and benefits tax
regulations and rulings; and participation in international tax
treaty negotiations and in maintenance of relations with
international organizations on tax matters.

*Provided by Treasury Department, April 23, 1993

RESPONSE TO INFORMATION REQUESTED OF NOMINEES

UNITED STATES SENATE
COMMITTEE ON FINANCE

NOMINEE: Leslie B. Samuels

NOMINATED FOR: ASSISTANT SECRETARY FOR TAX POLICY
DEPARTMENT OF THE TREASURY

BIOGRAPHICAL:

1. Name: Leslie B. S?mi>els

2. Address: 1165 Fifth Avenue, New York, NY 10029

3. Date and place of birth: November 10, 1942; St. Louis, MO

4. Marital status: Married; Dr. Augusta H. Gross

5. Names and ages of children:

Colin T. Samuels, 25
Polly B. Samuels, 24

6. Education:

University City Senior High School, University City, MO., 1957-1960; High

School Diploma

University of Pennsylvania, 1960-1963; B.S. in Economics

University of Denver, Summer 1961

University of Colorado, Summer 1962

Harvard Law School, 1963-1966; L.L.B.

London School of Economics and Political Science, 1966-1967

7. Employment record:

1968 - Present

1967 - 1968

Summer 1966

1965 - 1966

Summer 1965

Summer 1964

Geary, Gottlieb, Steen &. Hamilton
New York, New York 10006
Partner 1975 - Present

Associate 1968 - 1974

Gulf Oil Corporation
London, England
Tax Advisor

Pillsbury, Madison &. Sutro
San Francisco, CA
Law Clerk

Lybrand Ross Bros. &. Montgomery
Boston, MA
Pan-Time Tax Advisor

Davis Polk &. Wardwell
New York, NY
Law Clerk

Probate Court
Denver, CO
Summer Clerk

Summer 1963

Samsonite Corp.
Denver, CO
Summer Clerk

8. Government experience:

Member, Carter-Mondale Transition Planning Group (Treasury Department)
1976-1977

Member, Mayor-elect Koch Finance Task Force, 1977

9. Memberships:

For Profit Corporations (Director and/or officer)

Eastern Realty Investment Corporation and its subsidiaries listed below.
Eastern Realty Investment Management, Inc.
L'Enfant Plaza Properties, Inc.
L'Enfant Plaza Corporation
E.R.I.C. Trinity Place Corporation
E.R.I.C. Arlington Heights Corpoi ion
E.R.I.C. Santa Fe Square CorporaLjn
E.R.I.C. Chase Mill Corporation
E.R.I.C. Chase Gables Corporation
E.R.I.C. Chase Windsor Corporation
E.R.I.C. Holding Corporation
Eastern Acquisitions, Inc.

I.T.C. Properties Corporation and its subsidiaries listed below.
I.T.C. Eastridgc Corporaaon
I.T.C. Fashion Valley Corporation
I.T.C. Orchard Plaza

BOSTON PUBLIC LIBRARY

Technip.Inc. 3 gggg Q5982 331 8

Nflf-for-Profit Corporations

Member, Board of Directors, Lower Manhattan Cultural Council, Inc.

Member, Board of E re .ors, Robert J. Denison Foundation, Inc.

Cooperative Building Corporation (Director)

Member, Board of Directors, Two East Ninety-Eighth Street Co., Inc.

Profc^'""*1 Memberships

New York Bar

Bars of the Southern District of New York and Tax Court

Member, New York County Bar Association; Association of the Bar of the City
of New York; New York State Bar Association

Harvard Law School Association, Cambridge, MA

Tax Forum, New York, NY

Advisory Group, American Law Institute

Certified Public Accountant (Colorado)

9nHal Organizations

Harvard Club of New York City

10. Political affiliations and activities:

Registered Democrat

Member, Carter-Mondale Transition Planning Group (Treasury Department),

1976-1977

Member, Mayor-elect Koch Finance Task Force, 1977

Contributions

March 1990, Borges 1990 Contribution, $200
October 1990, Harvey Gantt for U.S. Senate, S750
January 1991, Liz Holtzman for Senate, S250
September 1991, Clinton Committee, $250

11. Honors and Awards:

Fulbright Fellowship, London School of Economics, 1966-1967

Educational Scholarships, Harvard Law School, 1964-1966

Board of Editors, Harvard Law Review

Magna Cum Laude, Harvard Law School

Member, Board of Directors, Community Action for Legal Services, Inc.

(CALS), 1977-1981

12. Published Writings:

Co-author, "Observations on the Taxation of Global Securities Trading",
45 Tax I-aw Review 527 (1990)

Contributor, "Tax Aspects of International Mergers and Acquisitions',
ATjA National Institute Review. 1990

Co-author, "Financing Taxable Acquisitions in the U.S.", IFL RCY. 1988

Co-author, "IRS Opens Door on Tax-Free M<LA*. IFL Rev. 1988

Contributor, "Report on the U.S. Treasury Department Discussion Draft on
Taxing Foreign Exchange Gains and Losses', Tax T^w Review. 1981

Author, "Federal Income Tax Consequences of Back-to- Back Loans and Currency
Exchanges', 33 Tax Lawyer 847 (1980)

Co-author, "Tax-Free International Corporate Combinations under New St .tions
367 and 1491", 30 Tax Lawyer 263 (1977)

Co-author, "U.S. Tax Aspects of Acquisitions of U.S. Corporations by Foreign
Corporations", 34 N.Y.U. Tax Tn<rimie 991 (1976)

Contributor, outlines on tax matters presented at Practicing Law Institute and
American Bar Association seminars which have been incorporated into outlines
published in connection with the seminars.

13. Speeches:

116th Annual Meeting of New York State Bar Association Tax Section, Marriott
Marquis, 1535 Broadway, New York NY, January 28, 1993, Panel Format - No
speech available.

Certain Tax Aspects of U.S. Mergers and Acquisitions Involving a Mexican
Corporation, Mexico, January 1992, Speech attached.

Certain Tax Aspects of U.S. Mergers and Acquisitions Involving a German
Corporation, Germany, October 1991, Speech attached.

14. Qualifications: see attachment, submitted April 23, ]993.

(Signature) (Date)

14. Qualifications

I have been in the active practice of tax law fox over twenty-five years. During this
period, I have advised on a broad range of tax issues, covering corporate matters, mergers and
acquisitions, partnerships, individual tax matters and international questions. As part of my
practice, I have participated in public debate on tax policy issues, through participation in
various committees of the New York Bar Association Tax Section and the Association of the Bar
of the City of New York and on the advisory committee of the American Law Institute. Also,
I have written numerous articles on complex international tax problems and spoken at
conferences and seminars on various topics. Finally, I have participated in public sector
activities, including serving on the Carter-Mondale Transition Planning Group for the Treasury,
as wel1 as serving on the board of Community Acuon for Legal Services Inc. and the Loucr
Manha ai. Cultural Council, Inc. Based on these experiences, I feel that I am qualified to can-
out the duties and responsibilities of the Assistant Secretary for Tax Policy.

s-yf8 |jfc United States

a Office of Government Ethics

^7 1201 Ne* York Avenue, NW., Suite 500
fi*^^ Washington, DC 20005-3917

April 21, 1993

The Honorable Daniel P. Moynihan

Chairman

Committee on Finance

United States Senate

Washington, DC 20510-6200

Dear Mr. Chairman:

In accordance with the Ethics in Government Act of 1978, I
enclose a copy of the financial disclosure report filed by
Leslie B. Samuels, who has been nominated by President Clinton for
the position of Assistant Secretary of the Treasury for Tax Policy.

We have reviewed the report and have also obtained advice from
the Department of the Treasury concerning any possible conflict in
light of its functions and the nominee's proposed duties. Also
enclosed are two letters from the ethics official of the agency
dated March 29, 1993 and April 15, 1993 which discuss Mr. Samuels'
ethics agreements with respect to waiver, recusal, divestiture and
certain other matters.

Additionally, we have been advised by the Department that Mr.
Samuels will continue to be a general partner in two investment
general partnerships, State Two Associates and Whitehall Ventures
Partners. The current total value of these interests is under
$10,000. The other general partners in these ventures are current
or former general partners of Cleary, Gottlieb, Steen & Hamilton.
By virtue of his continuing status as a general partner in the two
investment general partnerships, Mr. Samuels has agreed to recuse
himself from participating in any particular matter in which, to
his knowledge, a general partner in either of the ventures has a
financial interest, including any particular matter in which
Cleary, Gottlieb, Steen & Hamilton has a financial interest.

Based on the advice that we have received from the Department,
we believe that Mr. Samuels is in compliance with applicable laws
and regulations governing conflicts of interest.

Sincerely,

^e^e^^-

tephen D. Potts
Director

Enclosures

ISBN 0-16-041304-4

9 780160"413049

90000

69-707 .0 - 93 (48)

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