Transcripts For CSPAN3 Treasury Sec Mnuchin On Stability Report 20180202

Year to raise the debt ceiling. We go to the Chairman Committee s senator mike crapo. The chair brings the meeting to order. Today, the secretary of pressure ri Steven Mnuchin is going to testify over the 2017 report. In december of last year, fsoc issued the and report in which it gave numerous re recommendations, and identified potential emerging threats to Financial Stability. One of the recommendations urged congress to reform the Housing Finance system and boost the role of private capital in mortgage finance. I have repeatedly stated that the status quo is not a viable option and reforming the Housing Finance system is one of my key priorities. Testifying before the Banking Committee secretary mnuchin reaffirmed the commitment to work with to us find a solution and stressed the importance of finding a balance of ensuring strong Taxpayer Protection and ample access to credit. Four years ago, a Bipartisan Group of senators passed a Housing Finance reform bill in this committee. We have an opportunity now to build on that effort and create a broader coalition of republicans and democrats to pass a bill into law. This remains one of my Top Priorities and i look forward to continuing to work with the other members of the committee and secretary mnuchin and other stakehold ers throughout the process. Another focus of this report was cybersecurity, particularly in the Financial Services space. Fsoc identified cybersecurity as an area requiring more attention due to the sophistication of the cyber criminals and the growing scope and scale of attacks including data breaches. The list of the significant s Cyber Attacks and cyber breeches in the public and the private sector continues to grow at an al larming rate, and seems to vim pacted the majority of all americans. The council made recommendations to specifically address cybersecurity risks including greater collaboration between the public and private sectors. It is critical that personal data is protected by both the government and industry, and that wen there is an attack or breach, the impact on the vi victims is minimized. The report also highlighted key actions taken by the council since the lasts report. This included fsoc rescinding the designation of two nonbank financial company, and many of us on the committee have long been critical of the lack of transparency and analytic rigor of fsocs process for designating nonbank entities. And treasure outlined a report with recommendations of enhancing the monbank and Financial Market yu tutility designation process which included tailoring regulations to minimize burdens and ensuring that the designation analyses are rigorous, clear, transpar t transparent. In the past, the nonbank process has lacked clarity an consistency with the threat of serious regulatory consequences for the the firms that received the designations. This is inevitably going to translate ip into higher costs for consume aers and the overall economy. When makeing the determinations the the fsoc process must be transparent, objective and measurable with clearly outlined criteria when such designations are appropriate. It must also discuss how companies can shed light on such designations. I thank the sek facretary in th areas and look forward to his comments and testimony. Mr. Brown. Thank you. Not all financial crisis. And we have had recovered some but not completely. Save sgs the 2. 4 which is the lowest since 2005. And Household Debt continues the climb, and job growth in 2017 was okay, and we will hear about that tonight. But below job growth in 2017 was below the levels of job growth in 2011, 2012, 2013, 2014, and 2015 and 2016. More americans have lost their jobs since gallop started tracking it a decade ago. And the Life Expectancy for americans fell driven by a large Opioid Epidemic ignored too long by those in washington. And stock markets around the world have been on a tear to help the top fifth of americans, and by most estimates this is controlled by 92 of those who own stocks. It is good for those who have a 401 k , but fewer workers have that security, and onethird of the workers are making contributions to the 401 k or a similar reretirement plan. While the president likes to take credit for what he liabled the ugly bubble, a little over a year ago, it is going to be interesting to see if he is eager to take credit for the down market. Most of the workers built wealth with a hard earned paycheck and not a statement from the broker. While the economy is the same as it averaged over the prior three years, the shares that goes the wages for these people is far too weak, and for a waitress in waverly or a machinist in mansfield, building a middleclass life is nearly impossible. And this administrations is making it worse. The tax care is going raise are premiums, and we know that, and gives a huge boost to the rich are e arest people in the country and we know that and it could encourage more outsourcing, and keep keeps the idiotic taxes in line and to keep plants from moving are from ohio to beijing, and in fact, the American Companies are going to be enticed to do that more when it comes to irs on overseas manufacturing operations brought to you by the most recent tax bill, and meanwhile, the kids are going to be left with the tab picking up 1 trillion in new deficit, and something that your party, and republicans in this town used to care about. I will be the first to acknowledge when a company does the right thing, and boosts wages. I was asking the bank ceos to increase the pay for the tellers averaging about 13 an hour, and custodians and contract workers long before the labor market was tight. I thanked them when they do that and i call them and compliment them, and i offed an amendment to the tax bill to reward the companies that did right by the workers of the Patriot Corporation act and happy that a combination of factors has caused the employers to work more, and take in account can wells fargo, a bank that you are familiar with. After the tax bill, wells fargo put out a press release talking about bragging to raise the pay to 15 an hour, and we welcome that and thank them for that, but them last week, the bank announced it is buying back more than 22 billion, and billion with the b of its own stock this year dwarfing what it will pass to the own workers and this is 288 more times of the stock than the cost of raising the workers pay, and that is 288 times. And the bank of america also gave a raise as they announced that they are going to start charging for checking accounts. And we know that we will pay the price if we roll back the rules of the financial industry, and to surprise, because this administration is a retreat for Goldman Sachs executives. This administration has ha had a steady drum beat of changes with hundreds of changes for the protection of the stability rules to make the risk and the severity of the crisis much b better, and so it is going to be as willingness to move them as past members of the fsoc were willing to do the hard work of keeping wall street honest, and this new team is going to join them for schnapps at a ski resort. Instead of renewing a wish list h, we should be finding a way to ensure our crumbling roads and bridge, and keep the pensions they have earned. I agree with the fsoc warn ings that it is going to be if in tough shape, and if they dont act soon, they will threatening the promises that we made for millions of retiree, and i look forward to todays hearings and the chairman and the testimony of the secretary. Mr. Secretary, there are still some disagreements of us on the panel, and i suspect that we will get into those on the panel, and i appreciate you coming here to be with you, and willing to report once again to us. And with that, we will return to the testimony, and begin your statement. Thank you. Chairman crapo, and Ranking Member brown and members of the committee. Thank you for inviting me today. One of my Top Priorities as treasury secretary is sustained Economic Growth for the American People. I am happy to report that the growth rate of the economy over the past year was higher than the average over the prior 20 year, and included two straight quarters of 3 or higher gdp growth. The president promised robust growth, and he is delivering on that promise. I am here to speak about the financial Oversight Councils annual report. It is a important vehicle to provide congress and the public with assessments and re recommendation and leading to regulatory developments and po identifying potential ris tox the system. This is going to emphasize Economic Growth and maintaining a resilient system. Since the financial crisis we have are had time to assess the Regulatory Reforms and consider their unintended consequences. The report recommends that the Council Amends and reduces duplication, and modernize outdated regulations and taylor the regulations based on the size and the complexity of the Financial Institutions. The report also are shows a number of risk thats the council is monitoring and one they would like to emphasize today in particular is cybersecurity. The system is heavy and reliant on ek technology, and increases the risk that cybersecurity incidents could disrupt the Financial Sector and potentially impact u. S. Financial stability. Substantial gains have been made, but i want to emphasize the sustained attention to these risks. The report makes a number of recommendation, including the creation of a Senior Council and including executives from the Financial Sector to collaborate with the are regulators to mitigate the cybersecurity threats. Turning to growth policies, the jobs cut and creation act for the tax code is having a positive reform. Because of the tax reform, over 300 million americans have received bonuses or other benefit, and other companies have announced investments in the workforces. Companies are workforces. Companies are announcing higher wages and increased benefits as well as greater spending on employee training and infrastructure and research and development. These investments will lead to longterm prosperity as Companies Continue to bring back cash from overseas, our economy will continue to grow. Let me now turn to specific priorities for this new year. I want to commend the houses of congress for their work on financial Regulatory Reform. The bipartisan Economic Growth regulatory relief and Consumer Protection act is a balanced and thoughtful approach that better aligns our Financial System to support Economic Growth in our communities. Further, the legislation reflects many of treasurys recommendations for the executive order reports released last year. I encourage the senate and house to Work Together to move legislation as quickly as possible. In december, i wrote to congress providing notification of my determination that a debt issuance suspension period would last until january 31st. Congress has not acted to suspend or increase the debt ceiling. I have determined that such the disk will be extended into february and well be notifying congress as such. I respectfully urge congress to act as soon as possible to protect the full, faith and credit of the United States by increasing the statutory debt limit. This house and senate have been working toward modernization of the committee on Foreign Investment in the United States cfius. I support the Foreign Investment review, risk review modernization act firma and applaud senators cornyn, finestein and burr and representatives pittinger and jack for their leadership on this issue. A modernized cfius will enable us to protect our National Security from current emerging and future threats while preserving our longstanding open investment policy that is key to fostering innovation and Economic Growth. I look forward to working with congress and the relevant committees to advance firma. One of treasurys Core Missions is to safeguard the nation by using powerful economic tools in our arsenal. We will continue to take frequent and ongoing actions to combat threats for malicious actors. These include terrorist groups and proliferators of weapons of mass destruction, human right abusers, cyber criminals and rogue regimes like north korea, iran and venezuela. We continue to review intelligence to identify targets with maximum impact and deny them access to the u. S. And international Financial Systems, disrupt the revenue regimes and ultimately pressure them to change their behavior. On Housing Finance, the Current Situation of indefinite conservatorship for fannie mae and freddie mac is neither a sustainable nor a lasting solution. The administration looks forward to working with congress to working with the finance system in a matter that helps consumers obtain the housing best suited to their own personal and financial situations while at the same time protecting taxpayers. I am proud of what we have accomplished so far and there is more to do. Our countrys potential is enormous which is why americans expect their governments to enact policies to allow them to succeed and prosper. Treasurys collaboration with congress is vital to that mission and we are working every day to make it a reality. Thank you very much, and i look forward to answering your questions. Thank you very much, secretary mnuchin. I appreciated your comments about the Economic Growth Regulatory Reform and Consumer Protection act and appreciate your encouragement that we move it quickly. I also appreciated your comments on the Housing Finance reform. As i indicated, its currently my highest priority in the committee. In the report last year, one recommendation made was that the regulators and Market Participants continue to take steps to encourage private capital to play a larger role in the Housing Finance system. I agree with that goal. Can you elaborate on why its important for private capital to play a larger role and what steps you believe we can take to further encourage that . Chairman crepo, thank you very much. I fundamentally believe in the importance of the 30year mortgage. I think its important to the economy and as we look at housing reform we need to look at fannie mae and freddie mac as far as the risks and fha and im open minded to Many Solutions and ive had productive conversations with several members of your committee on this and look forward to working with you on them. I do believe that in order to protect taxpayers, we do need to have substantial private capital and risk in front of any type of government guarantee or government support. Well, thank you very much. In the context of protecting taxpayers against a government guarantee there have been a number of different ideas about how to accomplish that as well including the idea of private guarantors absorbing losses in front of the government guarantee. If that were part of the model, do you believe it is important that such guarantors are subject to Capital Requirements to ensure that the taxpayers are protected . I think it is very important that there is substantial capital and that the taxpayers are protected, and i look forward to working with you and your committee and also feel if there is any guarantee that the taxpayers are paid for putting that up as opposed to explicit guarantees that werent compensated compensated in the past. Thank you. rs designation process, the fsok have an industrywide approach to evaluating Systemic Risk. Similarly in 2017 the International Association of insurance supervisor, announced the development of an activitiesbased approach to assessing Systemic Risk in the insurance sector. How would an activitiesbased approach to assessing Systemic Risk work and why is it different than the current entitiesbased approach . Think it is more effective because to the extent that we look at risky activities across an industry or within a sector, we can look at proper regulation that deals with those issues and eliminates Systemic Risk. Moving to cybersecurity. Cybersecurity is one of the most pressing issues and faces companies, consumers and governments. The fsoc annual report identifies Cyber Attacks on companies as a potential vulnerability to u. S. Financial stability due to the increasing frequency and sophistication at such a tax. Where does the fsoc see gaps or shortfalls in cybersecurity protection today and frankly, what steps can we take to address this . Well, im pleased to say that i dont see any specific gaps today, but i do think this is an area where we need to always be advancing issues. I think whether its recent issues weve seen in chips or recent software situation. This is something that we need to be very, very careful and we need to be working in Public Private partnerships and need to share intelligence when its appropriate and we need to make sure that whatever the cost the United States Financial System is protected from Cyber Attacks. Thank you. I appreciate your attention to all these issues and also the willingness you have to engage very aggressively with us on issues as they come forward and im sure well be dealing with you on each of these as well as many more and again, mr. Secretary, i appreciate your attendance here today. With that, senator brown . Thank you, mr. Chairman. Based on the banks threshold in the wall street reform act fsoc uses a 50 billion threshold that it could cause Systemic Risk they suggest raising that level and the chairmans Bank Deregulation bill is enacted and is it safe to say fsoc would raise its threshold fivefold and would not put any resources into investigating any shadow bank below 250 as your report said . I think that is correct, and i think there is a general consensus from the Regulatory Community that the threshold should be raised, and of course, the committee could always make certain exceptions if there were significant i challenge that statement, maybe the regulators appointed by President Trump, not the regulator leig regulators that have been in office say its 250 and this bill beyond consequences would mean that the fsoc would be very unlikely to designate a large leveraged Hedge Fund Like longterm Capital Management which when it fail head 129 billion in assets leverage of 25 to 1 and the derivative exposure, i think youre making the system less safe and sound with those ideas. Second question, the june treasury report on banking dreg said if we raised the 50 billion threshold for u. S. Banks we should do the same for foreign mega banks based on their domestic assets. So if the chairmans Bank Deregulation bill is enacted foreign banks with up to 250 billion in u. S. Assets will be deregulated to u. S. Regional banks, correct . That is correct. So the treasury report specifically said if we move the 50 billion threshold up, its the departments position we should also move the threshold up for foreign banks. The report says the 50 billion threshold for the stress test domestic and foreign tests should be raised, too. To be clear, the chairmans bill with your acquiescence will deregulate banks like santander that has repeatedly failed its stress test and deutsche bank, basically the only bank that would lend President Trump money after his repeated bankruptcies and botched deals. Last night your staff sent to the committee the reports due under the russia sanctions bill including an ole barks report that looked a lot like the forbes list of russias wealthiest men. I hope the classified portion is more detailed and compelling and pompeo said he didnt see sub version in western elections nor did he expect them to back off their efforts to interfere in our own upcoming elections. The president reportedly will talk about the need for bipartisanship tonight. He cant get any more bipartisan than the work that senator crepo and i did on the russia sanctions bill, 98two, it passed. The president didnt impose any sanctions under the mandatory enactions and we had the russia cyber activity and no sanctions on the intelligence and defense sectors and nothing in response to its corrupt privatization of stateowned assets. How can sanctions punish russian interference in ukraine and in american elections and deter future interference if these sanctions continue to sit on the shelf unused by the president . So, let me first say i want to commend the tfi group in treasury who did an enormous amount of work in preparation of the report that we delivered last night. As we tried to outline in the unclassified version, the list in the unclassified version is senior political people as well as oligarchs based upon a threshold of 1 billion or more based upon the public. So you are correct that the public version does look a lot like the public sorry to interrupt, but times limited. When are you going to take those sanctions off the shelf and use them in terms of Cyber Security and in terms of intelligence and in term of american elections . There was a substantial amount of work, and i look forward to you reviewing the classified report and what we will be doing based upon that, we will be looking at taking the time 982 in the senate and three no votes in the house. There is a lot of beliefs onneth bo sides of the aisle and i hear senators talking about this that this congress and the American People dont trust the president on russia, his closeness to putin and those things and your delay on this, and your slow walk to this enforces question and it cites a consistent budget deficit to the Economic Growth and the fsoc preliminary report and the president in the partisan majority ignored their own warnings passing tax cuts for corporations and millionaires that will add more than a trillion to the deficit. Immediately after passing the budgetbusting tax bill, some of my colleagues started to turn toward entitlements. I listened to candidate trump come to ohio for rally after rally after rally. He said hed protect medicare, medicaid and Social Security. So is it fair to add a trillion dollars to the deficit for tax cuts and have colleague, republican colleagues with apparently the president s now acquiescence to plan to start cutting medicare, medicaid and Social Security . Senator brown, first let me comment on your previous comment. I dont think were slow walking the report that we delivered last night and we look forward to discussing it with you in a classified setting. On the issue of the taxes, i think you know, as ive said before, the president , i believe, that with a break even of 35 basis points the tax bill will create growth that will create enough revenues. Nobodys ever believed that in the past, why should we believe that now . Again, i would be more than happy to meet with you and go through the numbers in the economic analysis. Why the acquiescence on the attacks on medicare, medicaid and Social Security calling them unsustainable when the president promised to protect them . Again, i havent made those comments, senator. Senator shelby . Mr. Senator, thank you for your service. Also, i would be remiss if i didnt thank you for your leadership and your steady hand in dealing with the tax reform measure that a lot of us, maybe not all of us will believe to help our economy and we see signs of it already in the confidence, at least, i see, but congratulations on that. Fsocs, when you designate an entity that is deemed systemically risky. Thats a very, very important designation. It shouldnt be done on a whim, should it not . It should be done very carefully with a lot of data and a lot of thought. When we look at Insurance Companies as an entity and we look at banks as an entity there might be some overlap, but two different model, at least, i believe. Should they be viewed as such before you make a designation . Whats your thought on that . I think as you pointed out, banks are very different from Insurance Companies. They have very different liabilities, and they should be reviewed carefully which is something, i believe, weve done at the committee over the last year. But when you designate an entity and systemically risky, thats a profound thing. Would you agree with that . I would. Okay. Now i want to shift to something that i hope you will have some play in and some interest in, and thats the infrastructure. We keep talking about infrastructure and how are we going to come up as the Trump Administration . I think a lot of democrats and republicans both know that we need an infrastructure bill. We need to do it, and of course, it takes money to put that together, we know that, but how do we use an infrastructure bill, if we come with one, and i hope we will to tap the private money in america which theres a lot of it out there thats looking for a better return on their investment. How do we do that rather than just let the government deal with infrastructure. Have you thought about that . We have thought about that. The administration has put a lot of work into this and the president looks forward to releasing his infrastructure plan shortly in working with congress and i agree with you that we should be looking at both federal money, state money and private money as we look at infrastructure investment. Shouldnt the infrastructure bill from the standpoint of our future economy and the infrastructure in this country is so important to move goods, people, services and be one of our Top Priorities . I think it might be. I believe so, yes. The chairman talked about cybersecurity. We know were in the Information Age and so is everybody else in the world. We know that we get benefits from this, big benefits from modern information system, but they are subject to attack including our law enforcement, pentagon, treasury, Federal Reserve and so forth. This is an ongoing Risk Management thing. I dont know how we can get to the bottom of it, but that is a big, big challenge for all of us, and it got to be for treasury, is it not . It is and its one of my Top Priorities, senator. What should we do first . Should we worry about the Financial System . Sure. Should we worry about our electrical grid . Sure. We also have to worry, first of all about National Security and the implications of penetrating through cybersecurity, do we not . That is correct, and thats why we have a process across all of the different agencies that were focused on this and homeland securitys responsible for the overall coordination. We are responsible for looking at the Financial Sector and dedicating a lot of resources to that. How do you think the economy will continue to grow. I like what i see out there. We feel it, people have confidence. Do you feel like its going to continue to move forward . I do and the president is determined to enact legislation that moves forward on a sustained Economic Growth, the 3 or higher. Were not focused on any one quarter. Were focused on sustained growth. Thank you. Thank you, mr. Chairman. Senator menendez . Thank you. Mr. Secretary, you talked up the economy and the results of the trump tax plan and at t, kimberlyclark, walmart and ge would share your enthusiasm and i dont think we should be satisfied with the slowest year of job growth since 2011, so i have a much different view about what we need to do as it relates to the economy, but i want to get to a specific provision in the trump tax bill which gutted the state and local Tax Deduction and compelled thousands of new jerseyians to rush to prepay their 2018 property taxes before the start of the year in order to escape being taxed twice on the same dollar and if it wasnt bad enough spending the holidays fretting over a tax hike, in came the grinch played by the irs to tell them they couldnt deduct their property taxes in 2017 despite paying them that year. Now this irs advisory was confusing, frustrating and most importantly, it was plain wrong. Plain wrong. The trump tax bill specifically prohibited the deduction of prepaid state income taxes, but it made no similar prohibition against prepaid property taxes. So my question, mr. Secretary is do you commit to fixing this fundamentally flawed irs advisory and stopping the irs from changing the rules in the middle of the game for working families . Senator, i dont think it was confusing. The intention for the irs was actually to put something out that clarified and do you suggest that that advisory is right . Yes, i do. How is that possible that it is right when the legislative text is as clear as day . Section 11042 specifically prohibits 2018 state and local income taxes from being prepaid and deducted from federal income taxes in 2017. It is silent. Silent on the prepayment on the deduction of property taxes. Now whether that exclusion was it included intentionally ore because of the secretive and rush process by through which the bill became law the legislative text through its deafening silence actually is loud and clear on this topic and that means the irs advisory clearly contradicts the law and is nothing more than a back door attempt to get these people who shouldnt should be able to deduct their property taxes when they paid it. Senator, what the irs advisory did is it deferred it to the legal position of the state, and i would be more than happy to meet with you and go through that. The intent was that it wouldnt allow taxpayers to abuse the system and again, it was intended for clarification. It never said. The system is abusing them. They paid it in 2017. They should be able to deduct it. I hope that you can get to a point with us that you can help us on this because it will be bad enough that in the next years they wont have that deduction, but they certainly should get the deduction for the year in which they paid and let me ask you this. The cia director pompeo uneshg givicly states that he believes that russia has every intention in meddling in the 2018 election. Do you agree with his assessment . I defer to the cia director on that . You dont disagree with his assessment . I do not disagree with him. Do you agree with our Intelligence Committee that russia used intelligence and defense tools to meddle in the 2016 u. S. Elections . Again, im not going to comment on things that i have classified information on. It is not a question theres been plenty in the public sphere to have a judgement on this because your department actually has jurisdiction over the enforcement of sanctions. So if you dont believe those things are true then maybe that goes to your views on sanctions policy. Senator, i didnt say i didnt believe it was true. I said its not classified. So yesterday the Treasury Department identified senior political oligarchs and political figures in russia as mandated in the countering americas adversaries which i was a coauth aor of which this committee passed 282 and they support the very same russian intelligence and defense agencies. However, isnt it true that yesterday the Trump Administration failed to apply a single new sanction against anyone who might be supporting these russian efforts . Senator, we very much agree with the purpose of the report. There was an extraordinary amount of work. I assume you havent yet reviewed the classified version. Just give me a simple yes or no. Have you, the administration imposed any new sanctions on any of these entities . Again, the intent was not to have sanctions. The intent was to do an extremely thorough analysis and its hundreds of pages and there will be sanction that come out of that. The law is pretty clear and it seems that not only do you have to describe the entities, but you also had to pursue sanctions and i look forward to continuing to press that question to the administration. Senator heller . Mr. Secretary, thanks for taking time being with us today. Im sure you recall last august when you came to las vegas and had a roundtable with prominent Business Leaders in my state and what i am pleased about is that the promises and the questions and concerns that were shared at that round table were delivered four months later in december with the tax bill that did file. Last week, i had a town hall meeting out in my office with nafib and we called thousands of businesses in the state of nevada and hundreds were on the line and questions were asked specifically of with this new tax bill out there. What do you anticipate your Business Practices will be for this year . 90 . 90 of the Small Businesses in nevada said they were planning on expanding their business, that theyre going to hire more employees, that theyre going to provide bonuses, pay raises and increase the minimum wage for their business. 90 said they would do part or all or some of those business activities. Now it wasnt a professional survey by any means and i was just pleased to know that what the white house and what your department attempted to do in december i do believe are being delivered on what were seeing in the state of nevada. Weve had southpoint casino that said it will double its 2300 fulltime workers bonuses. Weve seen fountain blue Developers Say that theyre going to resume a stalled project and that the effects of that will create 10,000 jobs and were seeing this across the state of nevada and i want to thank you, the white house and all of your efforts to putting us where we are today and seeing this kind of expansion. So what do you anticipate Economic Growth being this year . And from what you originally anticipated . Senators, as i said, thank you for your comments, the tax write on Small Businesses is the lowest its been since the 1930s and we are seeing that in terms of a pickup in growth. Wed expect again, over the next several years sustained Economic Growth of 3 or higher. I was in your office and you showed me that comment written note from the president saying he wants 5 growth. When are we going to get there . He has delivered high ambitions for us, as you know. Well pause f what positive effects can we expect to see . Im sorry, can you repeat that . Can you tell us what positive effects we can see in growth in nevada. We expect to see Wage Inflation for the average american worker. Their wages have really gone nowhere. Its been a great time for financial people and one of the benefits we expect to see of the tax bill is wage growth. What do you anticipate with capital coming back into the country . Apple Just Announced a new data center of expansion in reno and its a 30 billion Capital Expenditure over the next five years. Can we anticipatory what do you anticipate over the next five years with capital coming back into the United States to do to this tax bill . We expect a lot. I had the pleasure of meeting with tim cook recently to talk about their investment. Obviously, theyre bringing back hundreds of billions of dollars and theyre paying a very large tax to do that and theyve made a major commitment to invest in the United States. Ive had the opportunity to meet with many ceos of International Companies that is a result of the tax bill and theyre now committed to bring manufacturing into the u. S. And we look forward to that. Mr. Secretary, i am pleased that you are here and to the chairman, we are seeing some huge expansions in the state of nevada. Some of its actual he causing problems in northern nevada and Housing Starts are about 20 behind. So with the kind of expansion that were seeing that has come from this piece of legislation that was passed in december. The jobs act is doing exactly that and that technology and Technical Companies coming to the state of nevada we can list them from amazon to tesla to apple and the lists of organizations that are moving into both the northern and the southern part of the state has been pretty incredible and i am pleased that we have the treasury secretary to expound on these issues and i want to thank you for the time. Thank you, mr. Chairman. Thank you, senator hiller. Senator tester. Thank you, for being here secretary mnuchin . Are you familiar with the marketplace fairness act sales tax . Yes, i am. Will you and the president oppose creating this . I think the president is fundamentally support the idea of some type of sales tax across the board and we look forward to working with you and others on that. So what youre saying is the president would support a National Online sales tax . In my conversations with the president on that, he thinks that there are aspects of that that he likes a lot and he looks forward to working with you and others on it. Would you direct that the Treasury Department to conduct a study on what i believe will be burdensome costs on Small Businesses and nonsales tax states . I would be more than happy to work with your office on that, and we think theres ways of dealing with that. Wed love to have that conversation to figure out how to do that. In a previous question on entitlement reform, you had said that you had not made the commitment to protect Social Security and medicare that the president had. Does that mean that youre looking to do reductions in Social Security and medicare . Not at all. What does that mean then . It just meant, again, it was a comment i was referring to at the time and the president has made that commitment and i have every reason hell continue. Do you believe personally that you will support him in that commitment . Of course, whatever the president wants to do, i will support. Do you believe that a 30year fixed rate note would exist without a government guarantee . I think that a 30year again, i think its critical that we have a 30year mortgage. I dont believe that the private markets on their own could support it so one of the things were looking at is various Different Solutions about that. Ive got you and i dont disagree with any comments that you talked about with the gse potential reform putting private money ahead of taxpayer dollars. The question i have and it relates to a previous person who sat at that desk a few days ago who said that he believed that a 30year fixed Rate Mortgage would occur without a governmentbacked guarantee. By your answer, i think you disagree with that. You believe that a 30year fixed rate even with public dollars up front you need that government backstop at some point in time . Again, im not trying to be cute because i think this is a complex thing. What i do believe is that fannie and freddie would not be able to exist without either an implicit or explicit government guarantee, and if there is an implicit guarantee i would want taxpayers to be paid for it. So this is something that were working with people and working for solutions. It is complicated, but i agree with you, we need a 30year fixed Rate Mortgage in this country and as we talk about gse reform and there are plenty of options on the table that we need to make sure that we dont need to do something to put that at risk because it would have incredible impacts on Housing Market and affordability housings and all of the above. I agree with that. Thank you, senator. Lets talk about fsoc for a second. It was put in with dodd frank and i dont need to give you a lecture on this, you know that the fsoc has taken the companies that were designated and dedesignated them and i assume you did research on that and found out they were not systemically risky. Actually, thats not the case and the only companies that were designated as a result of them not being financially systemic were aig where they had delevered and cut their risk significantly and thats yet judgment was made. Thats yet only company we made was that judgment. So that decision for metlife didnt happen . Again, the decision on metlife had nothing to do with the risk of metlife. The decision was the recommendation as a result of the legal case that had nothing to do with the riskiness and metlife could, indeed, be subject to designate in the future. So the issue was more about a legal issue. And prudential . Prudential again would follow the same issues. So the question is, can you confirm that the council is still functioning and looking at companies that are Financial Products and assess their risk to the Financial System . Are they still working . Absolutely. Thank you, mr. Chairman. Thank you. Senator cotton. Thank you, mr. Secretary. Senator brown started his remarks speaking of a swiss ski resort. I presume he was addressing davos, to my knowledge, all they do is and they have Great Authority without accountability. Lets address what happens in that swiss ski resort, mr. Secretary. I and other members of the committees recently sent the administration a letter which raises concerns about the Financial Stability board and were concerned that its morphed into a global, regulatory body using its purity of mechanism as a quasi enforcement tool to Pressure Companies into adopting global standards. Im concerned about that kind of regulatory creep into u. S. Jurisdictions considering how dissimilar our Financial Markets are from many foreign markets. For example, we have thousands of small lenders and we have independent Asset Managers and we have an Insurance Industry regulated by our states primarily . A simple question. Are fsb rules voluntary or binding . Theyre voluntary. Are they suitable to be used by u. S. Courts by regulatory agencies or in private litigation . Again, im going to defer to the lawyers on that, but my view is not necessarily. Thank you. In 2015, four chinese banks sought an exemption from an fsb rule related to how much capital they have to hold. Given that i agree with you that these rules are voluntary, its strange that they would have to seek an exemption from such a rule. Can you imagine a scenario where a bank would have to seek an exemption from an fsb rule. Again, the u. S. Banks are regulated by the u. S. Regulators. I think the purpose of the International Standards from our standpoint is to make sure that there is a level Playing Field for our banks and that to the extent that foreign banks have a lot less capital that there are certain standards that they would adhere to, but that is not legally binding. Thank you. Lets talk now about the fsoc process for identifying systemically important Financial Institutions especially under the last administration as it relates to the fsb. In july 2013, the fsb determined that three u. S. Insurer, aig, metlife and prudential were globally systemic and important insurers, but at that time only aig had been designated by the fsoc as a systemically Important Institution in the United States. Prudential wasnt designated as a cify and metlife not until december 2014. Since the fsb operates by consensus, however, this means that for months before the fsoc designated prudential or metlife or a predecessor at treasury, and the chair of the fed, two of the most important members at fsoc had already determined as members of the fsb to designate prudential and metlife as globally systemically important and i would assume that on the global scale it must be systemically important in its own home country. I wonder how the fsoc designation process for prudential and metlife could be considered an objective. The treasury and the fed, after all, had already determined as members of the fsb that they were globally systemic. Do you believe that this was simply a show trial by the fsoc in 2013 and 2014 . Senator, since i wasnt there i cant comment on it specifically although i understand your concerns. Fundamentally, i do believe that there should be better transparency at fsoc to the extent that companies are designated and they should understand why theyre designated and the basis of the risks. Can we be certain that we will not see a repeat of such a scenario in which the fsb designates a u. S. Firm as globally systemically important before the fsoc designates it as systemically important in the United States . I would not expect that to be the case. Thank you. Thank you. I think this is a very important issue. Financial experts around the world havent covered themselves in glory for the last 25 years. Our nation is not just in the United States and in europe has faced turbulent political times with populist candidates and parties on both sides, right and left across our nations defeating more conventional politicians and parties because of the failure of our countrys leaders to deliver stable, prosperous conditions for our citizens. I think its important to remember that we are countries that are governed by our citizens and not by our expert, certainly not by unelected experts at swiss ski resorts. Senator shots . Thank you, mr. Chairman. Mr. Secretary, thank you for being here. I want to try to get in three questions. The first is about the debt ceiling and the debt limit. Ive heard that the Vice President was at least open to the notion of repealing the statute overall. That is very attractive to me. Having been here under a democratic president and now rnd a republican president and with the Democratic Senate and with the republican senate, i can say definitively that utilizing the debt s. E. A. L. Be statute as a sort of opportunity to take a policy ransom only harms our country and i wonder whether youd be willing to work with us on a statutory fix to just repeal this thing once and for all . Understand the political difficulty of doing it because on the record youre increasing the amount of debt that the country is under, but the fact of the matter is theres no evidence that having a statutory requirement that we do this every six months or 12 months or 18 months reduces spending at all. Reduces the deficits at all. So im wondering whether you can work with us and we especially frankly need Political Support on the republican side. I know they want to get rid of this as badly as we do, but they need cover from the administration and we need to work with you on this if youre open to it. I have spoken to both the president and the Vice President , and we are very open to Bipartisan Solutions to figure out something as an alternative to the Current System they think many of us would agree, doesnt work well. Thank you. Your comments on the dollar in davos surprised a lot of people and raised a lot of eyebrows. I just want to give you an opportunity to expand on them or clarify them, if you wish. Sure. Thank you. Ive tried to clarify this now many times. This was a clearly a situation where at a press gaggle i made a comment that had three parts to it that was extremely will bahhanced and very specific. It was not anything new and the press took one part out of this and kept on playing it over and over. So let me be very clear. I absolutely support a long dollar a strong dollar as being in the longterm best interest of the country, and i strongly support we have a free currency market that we dont intervene in and have relied upon the most liquid market in the world and the short term is not a concern of ours and it was in no way intended to talk down the dollar whatsoever. Thank you. Yesterday, the administration declined to impose sanctions required under the bipartisan russia sanctions law that passed with overwhelming majorities from the house and the senate. Its not clear which parts are waivable and which parts are not. We are still doing the analysis, but whats clear is to the extent that there is discretion to waive or delay the administration, has to have factual findings and so can you tell us what those findings are . Senator, and ill repeat this again. I think thats a very unfair characterization of what weve done. As ive said, was there an extraordinary amount of work that went into this. The classified report is helpeds of pages. I look forward to congress reviewing this, okay . Our sanctions Going Forward will be based upon the work that the Intelligence Community did. It was it was our enter prettiation that we had to deliver the report to congress yesterday which we did and we fulfilled. Again, i want to commend a lot of career professionals and treasury. You are saying you didnt waive or delay sanctions . There will be, as a result of this work. Theyre not implement the yet . That sounds like a delay. No, its not a delay. Our sanctions are based upon an enormous amount of intel work. There was an enormous amount of work that went into creating this report and thats what we did and now we will take the basis of that report and look at kind of as we do in the normal course where its appropriate to put sanctions, so it should no way be interpreted as we should not put sanctions on the people in that report. I got it. One final question, and ill take it for the record. On cfi designations im trying to understand the underlying statute is about the Financial Stability of the system and you seem to be introducing a new criteria for consideration which has to do with the burden on the institution that is designated systemically significant, and im trying to figure out why that would matter under the policy objectives of the law itself. If were trying to figure out if something is systemically significant, it shouldnt matter whether there is a burden on the institution designated. If we wanted to provide you with that discretion, we would have written the law accordingly, and ill just take that for the record. Sorry for going over. Thank you. Senator corker . Thank you, mr. Secretary. Thank you for being here. I, as you know, we talked a lot about the tax reform a great deal in our office. All i have to say is i was surprised i saw Christine Lagarde at the event last week and i went there because of my Foreign Policy activities and i will say she revised upward world Economic Growth because of what the United States has done which was quite shocking to me, actually, and to see what other countries are doing in response to what we did with tax reform is pretty amazing. So i do want to say it seems to be having an impact far beyond what we thought it would have just on our own country. On the russia issue, to my friend, i was invested in this and i was work very closely with crepo and brown. I actually think what theyve done is exactly the right thing. We gave a period of time to warn people about doing business with russia and that was the purpose. Our dip the mas were involved in that and they did keep numbers of transactions from occurring and they put together this report and now the process is that they will be in sanctioning. Someone, as you know is more than glad to offer criticism a think it needs to be offered in this particular case and i do think they handled it in the way it was supposed to be handled and i do think the sanctions are being put in place of those violators. On the issue of Housing Finance reform which senator crepo brought up earlier. I know that youve been very involved in this in the past. I understand it well, let me go through a series of questions quickly. The conservatorship we have is unsustainable. Is that correct . Yes, i believe so. And if we have a new model of Housing Finance reform and there are people on both sides of the aisle that are working together and have been working together in the past, if we have a government guarantee in the future, would it not be your preference that that be at the actual security level and not at the entity level . That would be my preference. So i think most of us understand whereas last time taxpayers had to bail out with hundreds of billions of dollars the entities. What we really care about is the individual borrowers and that their securities are guaranteed, is that correct . Thats what would create a sustained liquid market. I assume that if we were able to pass something here you would want significant private capital in advance of an explicit guarantees whereas was want the case in the past, these whatever entities are actually paying for those so the government is getting something for the eagle stamp which is causing that 30year mortgage to be guaranteed, is that correct . Thats correct. Taxpayers would be compensated for any unlikely risk. I assume if we were to put in place a new regime we would want to do what we could to end the too big to fail situation today, is that correct . I believe so. So let me just, in the event we dont act. As you know, we passed something in years past called jumpstart which said we could only revive these entities through a process of us acting and that ended december 31st at midnight and now the administration if they so chose and i think youve committed to the fact that youre not going to leave things as they are, what would be your options, if we dont act and i hope that we will, what would be your options with these entities . There are certain administrative options that we have. These entities are very complicated and i would just say my strong preference would be to work with congress on a bipartisan basis to reach a longterm solution. Yeah, but in the event of this great bipartisanship doesnt survive and we dont get this done its a complicated topic, what are some of the steps that you might take, for instance i know in the past administrations in putting this into receivership and moving forward with the clean slate has been out is that something thats been thought about . Weve thought about and considered lots of things. I dont really want to go through in this format publicly all of the different alternatives you and i have spoken. I would be more than happy to come see you, but there are lots of alternatives and i want to be careful given that they do have different market impacts. Well, i appreciate that and i do appreciate your leadership on this issue and extreme knowledge and i would just say the chairman and i know this is one of your goals, and i actually believe that weve got an opportunity to do something thats very complex topic that matters. We have an administration that is willing to work with us, and i think for the first time we have an opportunity because of just all of the things that have occurred that we have a lot of interest out there, lets face it. We have people, and we have shareholders and we have shareholders and these entities today and i understand some of the rubs that have existed there. I think we have an opportunity to deal with all of the interests in a manner that is fair, but also move our nation ahead in a manner that we dont have these two behemoths that basically are 100 right now backed by the federal government and i hope well get there. Thank you, senator. Senator warren . Thank you, mr. Chairman. So after the 2008 financial crisis, congress created the Financial Stability Oversight Council in order to monitor the risks in the Financial System and one of fsocs main duties is to, quote, identify gaps in regulation that could pose risks to the Financial Stability of the United States. Mr. Secretary, youre the head of fsoc, despite that role you appear to support a bill that this committee has passed that would roll back the rules on banks between 50 billion and 250 billion in assets. Thats about 30 of the 40 largest banks in this country. So what i want to understand today is why you are so confident that that wouldnt pose a risk to the Financial Stability of the country. So, mr. Secretary, how much do these 30 banks hold collectively in assets, deposit securities, and so on . Well, first of all, i think that we have very significant regulators that will continue to regulate but thats not my question. Excuse me, mr. Secretary, im just asking you a straightforward question. We are talking about changing the rules that 30 of the 40 large Financial Institutions would lose their automatic designation, significant Financial Institutions and im just asking you, that 30, how much do they collectively hold in assets . Its a large number. A large number. I dont have it in front of me. How about 4 trillion. It is a large number. How about 4 trillion . That is correct. And thats what portion of the gdp . Thats thats about a quarter of the entire gdp. During the 2008 financial crisis, do you know how much the taxpayers had to pay out in bailout money to those 30 of the 40 largest banks in the country in order to keep them up and floating . Again, i assume you have that number there, too. So i dont have it in front of me. Its 50 billion. Nearly 50 billion. So im a little surprised that as head of fsoc and the secretary of the treasury that you would support a bill without knowing how much youre actually reducing the regulation on in these giant Financial Institutions. These banks hold the equivalent about of about a quarter of the entire economy. They got 50 billion in bailout money, less than a decade ago and yet you think we can roll back and reduce our oversight of them now so let me ask, do you think that these 50 billion to 250 billion banks cant pose a risk to the Financial System . Again, there could be banks that could pose a risk and could be designated. The purpose of this is many of those banks are Community Large community, Regional Banks that dont are you saying that a bank of 300 billion is a Community Bank . Theyre Regional Banks. Are you saying they cant pose a risk to the Financial System . I didnt say that. What i said is many of those banks dont. This is something they believe there is bipartisan support for. And my understanding is again, my understanding is if they dont pose a risk you can always alter under the current rules how you regulate them. The question is the immediate designation so that you keep them on the watch list. You know, its clear to me that these banks do pose a risk to the economy and thats the reason that Congress Said they should be on a watch list, but let me take a specific example. In the years leading up to the financial crisis, countrywide financial issued one out of every five mortgages in the country it did more subprime and teaser Rate Mortgages than anyone and it turned around and sold them to wall street banks. It basically created the grenades and pulled the pins out and threw them into the economy and helped blow up the American Economic system. At the height of its impact on the Financial System about 18 months before the crash, country wide of a 200 billion bank which was actually smaller than some of the banks that would be deregulated by this bill. So my question is, mr. Secretary, why would you be so eager to take these banks off the watch list to deregulate it and make it easier for them to follow whatever practices they want to follow . First of all, senator, i share your concerns about country wide. I think there were lots of mistakes that went on there particularly with the mortgages that they underwrote and lots of blame to go around. Again, we believe that these entities below this side can be regulated by their primary regulator, but let me just say this is something that requires bipartisan support and its up for congress to decide whether they want to raise the limits. Well, thank you, mr. Secretary, but as i understand it you have been pushy on raising the rate raising the level from 50 billion to 250 billion. If you think that means well be taking on more risk in the system and i think thats what it means i wish you would tell us so. The banks have record profits right now. They are rolling in money and they do not need another chance to blow up this economy. Thank you, mr. Chairman. Thank you, mr. Secretary, and let me just stay on this topic sense my colleague from massachusetts has brought it up and i think an important point that needs to be stressed here and i i am curious to see if you agree, mr. Secretary, but these banks that are 50 billion to 250 billion and under this bipartisan regulatory relief measure would no longer be automatically designated as cfius. They are extremely regulated anyway, outside of a cfi designation. Is it not true that all of these banks are subject to a huge raft of regulations that has nothing to do with the cfi designation . That is true. In many cases they are probably regulated by as many as four different entities. Multiple regulators and isnt it also true that these banks now have huge capital standards. The industry is generally extremely heavily capitalized. Isnt it also true that they have very high liquid the requirements that didnt exist prior to the crash and isnt it also true that most of these entities engage in pretty ordinary banking activity as opposed to the more exotic complex and interconnected business of the truly, normo en banks. Theyre all true statements. Those are the reason yes it is perfectly reasonable to not automatically designate for yet another regulatory overlay those banks that dont create the Systemic Risk. Let me briefly thank you and con graj laity y congratulate you and you and your folks were terrific to work with and the collaboration between the administration and Congress Allowed us to produce something thats enormously constructive. I think you mentioned in response to a question that it is the view of treasury that we would have approximately 3 growth for some time. Did i understand that correctly . That is true, and i want to particularly thank you and senator scott and others who worked closely with us on the tax bill. Thank you. I would just point out that the could Congressional Budget Office averaged growth at 1. 9 . We are now at approximately 3 before the tremendous benefits of this tax reform have fully kicked in and were already at the 3 . If we sustain anything close to 3 just for the record the federal government will take in much more revenue as a result of a big are economy than we were projected to take in with 1. 9 dwroej. Is that true . That is very accurate. And i think is very important factor. I want to touch briefly on the discussion on mortgages. I am eager to see us make progress on this. Im pleased there seems to be a c consensus that we should have private capital on risk and guarantees. I would disagree with your view but understandably a subjective matter that a government guarantee is a necessary precondition to have a liquid 30year mortgage. As you know, the mortgage is much less than that. Depending on interest rates. And how you look at it, anywhere from 7 to 12 years is about right. And we have a number of other nonguaranteed 30year securities that are playing a very Important Role in the capital market. I would just surge us to consider that what i think is a very likely probability that we could have a very robust 30year Mortgage Market without requiring taxpayers to be at risk. Very quickly, mr. Secretary, north korea, we have recently, were seeing stories now and yesterday or todays wall street journal reports Behavioral Changes in the regime in north korea that might be linked to sanctions making fuel for instance more difficult for them to obtain. I and my colleague on the committee have legislation called the brink act which i think youre aware. And which your staff has been very helpful. This would acquire new additional round of sanctions against Financial Institutions that are facilitating sanctiones with north korea. I hope you will support our effort to get this done. It came out of committee with a unanimous vote, i believe. Thank you. Thank you. Thank you, mr. Chairman and thank you secretary for coming. Just a couple followon points. Obviously, no one wants to put Financial Institutions in jeopardy or in any way limit the ability of the economy to thrive. I think is critically important that we make, we went in the bill from designating automatically to basically allowing regulators to designate some entity as a sifi. We havent abandoned that process. I want it make that point. I also want it make another point. People say it is fascinating when they hear cbo statistics, but they dont want all of the points. It is called cherry picking. Take what most makes your argument. Whether it is 1. 9 projected growth when the growth is over 2 for a prolonged p period of time. I will talk about projections. The love fest we have here on deficits, moodys released a report on what they think is the considerations and results of the tax bill. Not exactly consistent with the story we are hearing today. Def cents will be sent to 4. 6 of Gross Domestic Product by 2020 versus 3. 6 under the forecast made last july. The cbo expects tax change to send this ratio to 97. 5. And this is its like we handed a credit card, and at the same time we handed a credit card with debt on it to the next generation, were failing at the same time fix 50,000 bridges. I know the administration is looking at an infrastructure plan that could in fact be adopted here. Its not going to be robust enough. Right now if you look at the corps of engineers, the corps of engineers has a queue of projects. If they dont get another dime about what theyre doing, its going to take at least 17 years in current dollars to finish those projects. So weve now made a choice. Weve made an economic choice and weve made an economic gamble. But lets not pretend that we havent taken a risk here, that this is all rosy. If do not pretend that we are being fiscally responsible every day that were here. And so im going to leave it at that. I want to talk about something that hits people every day. And thats the insecurity and multiemployer pensions. Weve got a plan which the Ranking Member has ably presented the butch lewis plan. Its incredibly important to thousands of north dakotans, thousands of people. The president promised to help exactly these people who now are being threatened with dramatic cuts in their pensions. Will this Administration Support the butch lewis bill and help us get it on the spending package . First of all, let me thank you for your comments on the regulatory issue because youre right. It doesnt preclude the regulators from designating people. I think that was an important point. On the multiemployer pensions, it is a very complicated issue. Ive had the opportunity to study this the last year and meet with actually workers on this issue. And we look forward the working with you on Different Solutions. But whats your plan . These are exactly the people the president promised that he would represent, the forgotten people. And we stand alone on this side trying to fix this. We havent gotten a lot of help from the other side of the aisle. We need you guys. We need the administration thats made a commitment to stand up for these workers who are threatened with, in my case, some 70 reduction in their pensions. That is unfathomable. Thats unspeakable. And so can you help us . And whats your idea . If you dont like butch lewis, whats your idea . But lets get this done. We look forward to working with both parties on this. Thats not i hear that all the time. I look forward to working with you. You know what . This problem has been hanging out there. We have a solution on the table. Well need a result. Its not enough to have a process. We need a result for these pensions. And i want to thank the Ranking Member for the excellent work that he and his staff have done on this. Were proud to stand with you. And if thats not the solution, tell me what is. But these folks need to be made whole. Senator scott . Thank you, mr. Chairman. Secretary, good to see you again. Let me say at the beginning as senator timmy did as well, thank you for your hard work on the tax reform package. You have helped to accomplish something that hasnt been done in over 30 years. And specifically, thank you for helping the irs get the new withholdings done in time for hopefully the february 15th paychecks. My understanding is that somewhere around 8 out of 10 employees will see more money in their takehome pay. That is significant progress for folks who are living paycheck to paycheck. Theyre going to have a greater appreciation and tangible way of the success of this administration, and frankly, of your leadership. So thank you for that. Id also like to say thank you because between the president s executive order last spring and the treasurys report last november, the administration has made solid progress on the issue of nonbank sifi designations. But imagine getting pulled over for speeding in a neighborhood without any speed limit sign. Its kind of how you get designated a sifi from a nonbanking perspective. Then imagine the ticket doesnt have any instructions on how to pay it. Thats how you find your way out of being a sifi. I like to make sure that folks back at home who are not involved in the financial industry at all understand and appreciates the complexity of something that as profound as sifi designation, but to do so in language that we all understand and appreciate. And that is just how dizzying this process is for the average person to understand and appreciate. But the impact on those folks because of designations is significantly higher costs in doing business. There should be clarity around what gets you labeled as a sifi and what gets you off of being designated. Without a doubt, fsoc should release public explanations for its designations. So my question for you, and i know you agree with much of this, is what specific steps are you and fsoc taking to bring about these needed reforms . Thank you, senator. I thought that was a very good and interesting analogy. So i share your view on transparency. It doesnt mean that people cant get tickets, but we got to post the speed limit. So we are working with the committee on looking at guidelines and trying to figure out how we can have more transparency in the process. Thank you. Whats the level of involvement of other councilmembers in recent fsoc decisions . Very active. Good. There has been some questions about that. And i think its important for us to recognize that fsoc is still meeting, still actively involved in the process. Absolutely. Weve had public and private meetings, and there has been robust discussion at the principles and the staff. A lot of work went into whats been done this year. Thank you. Next question. Not congress, not you, but the District Court now requires a cost benefit analysis which i support. My question is can you walk me through what an fsoc cost benefit analysis will look like . And whats taken into consideration . Were working on that. And as we develop those thoughts, we look forward to coming to your office and reviewing with them before theyre implemented. That will be an important part of the process to understand it before it happens. Thank you. Last question or just a statement. Last may i asked that you reevaluate the need to include property and Capital Insurance requirements. In october issued a guidance plan that included doing just that. I appreciate your responsiveness, a and i hope i can count on the same level of responsiveness as we work with you on krol bond rating agencies inclusion in the ifcs investor guidelines. Thank you. Senator cortez masto. Good timing. I did time that perfectly. Thank you. Thank you for being here, secretary. Interesting morning. So let me start off just a comment. Ive heard some of the conversation back and forth. And i think in response to one of my colleagues, you made the comment its been a great time for financial people. That concerns me there are many people across this country who are still struggling. And thats where we should be looking, those working families. The other thing i want to point out, im from nevada. We had the worst recession weve ever seen. We are still coming out of it. And in fact, there was a report that came out that shows that nevadas Economic Forecast is doing very well. Experts are bullish on nevadas overall economy this year, anticipating continued recovery from the recession and growth. They site four key markers for that outlook wages, because the average private weekly wage for nevada workers peaked in october, representing a 2. 3 yearoveryear. Construction activity. Construction now in the silver states fastest is the Fastest Growing sector. Discouraged workers. The number of discouraged worker, those who left the labor force because they couldnt find a job, has dropped. And nevadas gdp has shown significant Continual Growth over the past five years. Thats an incredible statistic considering we were the hardest hit in 2007 because of the economy. What i just cited to you was a report that came out in january 1st, 2017, before you or President Trump were even in office. So the comments that i am hearing today that somehow this tax reform bill contributed to where we are today in nevada to me is a misnomer. And it doesnt give respect to the governor and every single legislator and every single leader, both republican and democrat in the state who has worked hard for nevada to come out of recovery. With that said, im hoping the actions that you take continue to benefit what were doing in nevada. And i look forward to working there. But i think thats questionable now where thats going lead in the year to come. The other area that is very difficult in the state of nevada right now, and weve been having this conversation is Affordable Housing. One in four renters pays more than 30 of their income for rent and utilities. Half of renters pay more than half of their income for rent. Only about five million families live in Public Housing or benefit from section 8 or other hud or usda assisted housing programs. For every lowincome family who gets some Housing Assistance, four families receive no Housing Assistance at all. So while im relieved that the lowincome housing tax credit and private activity bonds remain, they support 90 of all Affordable Housing built in our nation, their value has gone down. Some say this could result in 200,000 fewer affordable units built in the next decade. Wages are stagnant or increasing modestly, but the rent is going up. When will the treasury address the affordable rental housing crisis . Its an important issue. And we look forward to working with you on it. Okay. That seems to be the standard answer for everything. Let me ask you this. Will the president s proposed infrastructure bill include funding to invest in our Affordable Housing infrastructure . I think that when the president releases it, there will be the opportunities in Affordable Housing, as in other things. Are you working with the president now to address that, those needs . Not specifically Affordable Housing, but yes, the overall infrastructure. And that can be part of it. When will treasury and hud begin publishing the monthly housing scorecard again . Apparently there hasnt been one issued in nearly two years . I was not aware of that, but i will look into that and get back to you. Okay. And then let me just say, im disappointed that the Treasury Department killed the my ira program. Half of workers do not have access to a Retirement Program at work. How does the Treasury Department plan to help more people save for retirement . Again, thats actually something i looked at very carefully. And it really it has the desire or the reason to get rid of it had nothing to do with our view on savings, and we do want to. It was just the cost of maintaining it. There were very, very few people who were using it with a staggering cost. And wed rather real locate that money to other ways that we can help people in saving and retirement. So do you have a program that youre looking at right now . We moved those people into the private sector, and were looking at different programs to encourage private solutions, yes. Okay. I would like to know if you would in the future, as you develop your programs and what youre looking at, to make sure youre reaching out the my staff and working with us as well. I notice my time is all up, basically up. So i submit the rest of my questions for the record. Thank you. Thank you. Senator tillis . Thank you, inner chairman. Secretary, thank you for being here. I want to go back in our ten years past the financial crisis, we now have a bipartisan bill that is intended to provide regulatory relief for Community Banks and Regional Banks. Can you tell me a little bit about why you think thats important and what benefits are ultimately accrued to businesses and customers of those banks . Sure. First of all, i believe that too many of the banking assets are held in the large banks. And one of the ways to distribute risk is to allow the Smaller Banks to continue to grow effectively and not have them burdened by unnecessary regulations. So i think that one, this accomplishes more diversification in the banking. And i also think that lending is very important in terms to growing the economy. And in many cases, the local bank, the Community Bank, the Regional Bank has those relationships. They know how to lend, and we want to encourage them to lend. Do you think that the people wanting to start up a bank weve got a very unhealthy, i think, situation in the banking ecosystem today, and thats the number of de novo banks that have come up. Its a very disturbing trend in north carolina. Oui lost about half of our sins the financial crisis in a state that had a vibrant environment before, north carolina. Do you feel like a part of the reason why were just not seeing that turn on banks is at least in part attributed to the fact that they have a regulatory hurdle that they would have to climb that make it difficult for them to make the Business Model work . I do. I want to ask also, with tax reform, if you were lets say in december we failed to pass tax reform. And so the current tax regiment was going to be the regiment for the next ten years. Where do you think we would ultimately be economically over a tenyear period . I think we would be substantially lower than we are and probably in the low 2s. One of the things that weve seen, it is true that the economy was turning. Some states were doing better before the president took office. I think we saw significant increase last year largely attributed to a calming regulatory overreach. And this year i think it will be a combination of continuing that Regulatory Reform, rightsizing regulations and the benefits of tax reform. Now as businesses start looking ahead and looking at how the tax cuts affect their business, weve seen hundreds of businesses announce pay raises. Were seeing de facto minimum wages being created in the Banking Industry and the Retail Industry as a result of announcements that have been made by large organizations. Weve seen pay increases. Weve seen bonuses. Weve seen plans for capital deployment. I dont think there is any doubt that the vast majority that has occurred was a result of the tax plan, and they would not have occurred if we had not passed that to the president s desk. Do you agree with that . I do. Now, there is one piece that i think has been criticized that i would like for you to talk a little bit about, and that has to do with stock buyback. Some people here think that using some of the resources that come through tax reform to do stock buybacks is a bad thing. I dont necessarily agree with that in many cases. You talk about what actually occurs when a company does a stock buyback, what theyre likely to do with the resources . Sure. Its really just a reallocation of capital. So companies have a decision. They can reinvest money in their business. They can pay dividends, or they can buy back stock. And to the extent they buy back stock or pay dividends, thats capital that flows out to investors that can be recycled and put into other businesses. So its a natural flow of funds from businesses that have excess capital and businesses that need to raise capital. So it also ultimately contributes to an increase in the gdp and Economic Growth . Yes, it does. The last question i have for you actually relates to what youre going to do as secretary for regulatory relief within your own rule making authorities. You give me some sense of what your priorities are over the next year or so in terms of areas that you think through the rule making process, not through congressional action, that we could see some of the i know you cant get to specifically what you want to do. But in the areas of regulations that you think that need to be looked at and maybe rightsides. What can we expect . Again, well look across the board in the financial area. Secretary, i appreciate you being here. I actually appreciate you offering to work with us and partner with us and do on a bipartisan basis come up with good outcomes that on a bipartisan basis like the banking regulatory relief bill. I see one member who was here who worked with us to get that out of the committee and to the senate and hopefully to the house. We look forward to working with you on a continuing basis on a bipartisan basis to get regulations right and get the economy moving even more quickly than it is at this time. Thank you. Senator jones . Thank you, mr. Chairman. And thank you, mr. Secretary for your appearance here today. I want to go back, though. I want to defer a couple of my questions at the top of my time here to go back to senator heitkamps questions concerning the pension bill that Ranking Members bill that is pending now which i told him i was going to sign on. Thats an important bill for folks in my state. I think we can agree that there is a looming crisis in that i appreciate your answer about looking forward to working with it. But id kind of like to start that process now. And if you can, just give me your ideas, give me your thoughts what youve looked at the bill. What about the bill is okay, anything. And are there other things that we need to be looking at to try to solve that crisis . First of all, thank you. And id be more than happy to come meet with you. Again, this is a significant problem. I dont believe there is a simple solution. Its complicated. Id be happy to go through in aspects. But there is something that i look forward to working with senator brown and chairman and figure out what are the various Different Solutions. So we have a lot of resources at treasury. I think as you know, one of the things we look at is restrictions. We have very prescribed formula of what we can do and what we cant do. But as i said, im aware of the problem that exists. And you would acknowledge that its a significant problem for those that have those pensions . I would say it is a significant problem. I dont know what its not one with a clear, simple solution. Yes. But we will look forward to working with the committee. All right, thank you, mr. Secretary. The Small Business jobs act of 2010 was created to support a lot of local Small Businesses and to help accelerate growth. That was an Important Initiative for alabama. I think we created a number of jobs. We got 31 million. But that has now that round one has effectively run out. Would you support a reauthorization of the sbci . Not necessarily, but i wouldnt rule it out. Again, its something that i would work with congress and we need to look at more carefully. All right. I wasnt here when the tax bill was brought to the floor and passed. And im sure you may have talked about this ad nauseam, and i apologize. But you mentioned earlier that the tax bill would help create Wage Inflation and help wage growth. Thats a big problem, again, in my state. The Median Income is 47,000 a year, which is below all but a handful of states. In some counties, that Median Income is below 30,000 a year. Could you just explain how the tax bill as it exists right now is going to help in places like alabama and particularly those rural areas where the Median Income is 27,000, 28,000 a year . Sure. And that is a big concern of the president , as i commented, that workers have not had the type of raises that they should have. Id be happy to go through with you. The council of economic advisers put out a piece that showed the average would be about 4,000. We believe that there is significant more investment into business that that will lead to wages going higher. All right. The other thing that is coming up, and were talking about and i know the president will be talking about tonight. Its been mentioned here, infrastructure. And a huge infrastructure bill. Were also talking about immigration and Border Security where the administration is asking for 25 billion and this year to be placed for Border Security, which generally Everyone Wants better Border Security. My concern, though, is the cbo reports that talk about the debt thats being created by that tax bill, a trillion dollars over ten years. And i know were going try to tap in as senator shelby said some private investment. But private investment in the infrastructure is not going help in my rural areas. Youre not going to have a toll road in Dallas County over one bridge or certain roads there. How are we going to pay for all of this . How are we going the pay for the 25 billion . How are we going to pay for the infrastructure if were having to wait to catch up . And hopefully the tax bill will do exactly what you said and well grow the economy and well get more money coming in. But how are we going pay for that infrastructure now and the Border Security . Well, i think as you know, we dont agree with the cbo analysis on the tax bill. We do think the revenues will go up significantly. On the infrastructure, its going to have to be a combination, as i said, federal dollars, state dollars, and private dollars. I agree with you completely there is many, many Infrastructure Projects that are not going to be privately funded. Right. I see my time is up. Thank you, mr. Chairman. Thank you. Senator rounds . Thank you, mr. Chairman. Good morning, sir. Im just curious. First of all, appreciate the time that youve been in the chair already, so im going to try to be brief and not repeat a lot of the items that have been laid out today. But as you know, on january 18th, the fsoc and metlife filed a joint motion to dismiss an earlier fsoc appeal which was an effort to designate metlife as a sifi. Additionally, on september 29th, 2017, fsoc voted to rescind aig. These moves leave prudential as the lone nonbank designated sifi. I understand that fsoc is given the ability to designate nonbank sifis under section 113 of dodd frank. Given your comments on fsoc today, should the Banking Committee consider changes to section 113 . And to the structure of the fsoc more broadly . You mentioned Greater Transparency is necessary to fsoc. Would you recommend other changes as well, specifically with regard to this section . Again, i dont have specific recommendation to that section because i think there are things that we can do at the committee level, as youve mentioned in the case of aig, they were dedesignated because they significantly reduced their risk. And that was the decision of the committee. In the case of metlife, there was a legal view and a decision to drop the appeal. And so i dont think we need legislative changes at this point. Okay. I know that senator scott had done a series with regard to the cost benefit analysis that were being used. Im just curious. I would just like to follow up a little bit with his questioning. Do you tend to push for an interpretive guidance from fsoc to reflect that Agency Action is appropriate only if a cost benefit analysis can show that it does more good than harm . Were going to go through reviewing those guidelines. And i want to be careful to make conclusions before ive had chance to review that with the committee members. But we are in favor of more transparency and the analysis of cost benefit. So you would be interested in a further discussion with the members of when you say the committee . Excuse me, of fsoc, not of this committee. I was going to say wed be happy to have that discussion with you as well. In the past also on another issue, in the past there has been a great deal of concern surrounding the role of the Financial Stability board the fsb and fsoc designation process. As i dont know, the fsb is an International Body that makes decisions about the global Financial System. The body has no authority over u. S. Financial regulation. However, past actions such as the designation of prudential and metlife raise questions over the influence of the fsb and fsocs sifi designations. Can you commit or would you discuss with us your philosophy with regard to the role that the fsb will play or perhaps no role in future fsoc designations . What is your thoughts and where do you see the Committee Going . I dont see fsb having any role in future designations in fsoc. Would that be a change from previous activity or previous considerations, in your opinion . I cant comment on what the committee did before i was on it, although i share some of the concerns that have been raised. So more appropriate to perhaps take under advisement, but most certainly independently from anything proposed by our International Group . Absolutely. Weve all recently watched the swings in bitcoins market value. Bitcoin along with numerous over cryptocurrencies have seen their value jump substantially since the beginning of 2017. Do you see cryptocurrencys as a threat to Financial Stability . Im glad you brought up one of my favorite subjects. Weve got something new to talk about now. I dont see it as a threat to Financial Stability, but i see them as very important issues. Weve set up a subcommittee of fsoc to look at this. My primary concern about cryptocurrencies is twofold. One, i want to make sure that these are not used by bad guys, that they dont turn into old swiss numbered bank accounts. In the United States, if youre dealing with these cryptocurrencies and your wallets and other things, you have the same bsa, you have the same Money Laundering requirements as banks. We want to make sure that around the world that exists. And i also want to make sure that consumers understand the issues around cryptocurrencies. Just one last just a very quick followup on that particular issue. Do you think you have the tools available to you now, both in terms of legislative authority and the manpower to actually follow through and enforce with regards to the concerns that you have expressed . I do think we have them now. But having said that, this is an evolving world, and we wont be bashful in coming back and asking for more resources. Thank you. Thank you, mr. Chairman. Senator donnelly . Thank you, mr. Chairman. Mr. Secretary, thanks for being here. Mr. Secretary, the recently enacted ndaa, the National Defense bill, included an amendment i authored to require a comprehensive strategy from all the agencies. That includes treasury, within 90 days of enactment to address the threat posed by north korea that was enacted in late november. This is due by march 15th. Have you had any discussions about treasurys reporting requirements in regards to this north korean strategy . I probably spend more time on north korea than almost any other subject. So the report will be part of this, but we spend a lot of time at treasury discussing these issues. I appreciate the fact that you discuss those issues. Will you be meeting the required reporting date of march 15th with treasury strategy regarding north korea . I have no reason to think that we wont meet that deadline. So i anticipate we will. Okay. Thank you. This has been mentioned before. Ill mention it again. Its absolutely critical to my state as well, and it is in regards to the pension situation we find ourselves in. We are working to protect the pensions of coal miners, teamsters, participants of more than 140 multiemployer pension plans. And we must shore up this system before it grows even worse. I know youve met some of these retirees in the past, and we could really use your support to help get the legislation across the finish line. Im also a sponsor of the butch lewis act. Are you willing to support the butch lewis legislation in order to ensure the solvency of these plans . Again, im not willing to specifically support that legislation, but i am willing to sit down with you and others on a bipartisan basis and figure out a solution. Okay. Do you have any specifics of legislation you will support at this time . Id rather not go through it at this moment in time. As i said, its a complicated issue. Its one of the more complicated issues ive come across in the last year. When you meet with me, will you bring specifics . Yes. At this time. Id be more than happy to do that. Let me tell you about a meeting i had in oakland city, indiana. And it was with about 300 miners and their spouses, the retired miners, and they had just gotten their health benefits. And they said harry truman made this promise to us. And to be able to get this for one of the miners there, it meant he could still get the medicine he needed so that his wife who was in a terminal medical condition could get that medicine and live out her remaining days in peace and without pain. Thats how important that was. And they said this pension piece is equally important to us. So we dont find ourselves living hand to mouth at the end of the day, and youve been kind enough to agree to meet with me, and i know youve met with others. Will you meet with our miners and our Truck Drivers to go through this to answer their questions . They are our friends and neighbors. They are citizens of my state. They want to know what the future holds. We had a meeting last year, and id be happy to conduct a meeting this year again with workers across Different Industries who are affected by this. Okay. Senator sass and i lead the banking subcommittee on National Security and International Trade and finance. We held a hearing last spring on north korea, and asked former Administration Officials how we can more effectively deploy sanctions. Unsurprisingly, as im sure its unsurprising to you, too, the conversation focused largely on china and the possible of secondary sanctions on chinese institutions. I know treasury has imposed sanctions on a number of chinese entities that have served as sources of trade and revenue for north korea. Have you seen that those secondary sanctions have been effective as a deterrent in regards to north korea . Yes, very much so. When you look at this, does china, do you think, have a basic understanding of where and how north korea is using chinas banks and economy . I do. And does that activity occur at the largest chinese banks including stateowned banks, or does north korea intentionally funnel primarily to the smaller chinese banks that are less susceptible to u. S. Pressure . I dont want to go through the specifics of this in this setting, but id be happy to come and talk to you about it but i will say were having very, very specific ongoing dialogue with the chinese banks. I just sent my undersecretary over there. She met with a large group of people and regulators, and were having very good dialogue with the banks over there, and we will continue to have sanctions where appropriate. I appreciate, that and i would like that meeting to be sooner rather than later in light of the significantly dangerous situation we find ourselves in with north korea. Well follow up with you to get that on the books. Thank you, mr. Secretary. Mr. Chairman, thank you very much. Thank you. Senator reid. Thank you, mr. Chairman. Thank you, mr. Secretary for joining us here today. In the annual report they called for sustained senior level Cyber Security risks and can you elaborate and give us more of what youre doing because cyber seems to be in the headline of every paper every day, please. Well, thank you. It is a very important subject. Im spending a lot of time on this. Im happy to report, as i said earlier. I dont see anything at this moment that is a risk to the Financial Sector, but we need to continue to invest lots of money, and this has to be a combination of our Intelligence Community, our experts at treasury, our experts in the regulators as well as private industry. We need to be working very, very closely together because this is something that is evolving every day. I just apropos of your comment evolving every day i saw the story this week the story about the atms that can be remotely controlled by bad people. In fact, theres one if you have the right sort of magic words you can go up and demand money and it just flows out. If thats not checked, that would you know, be an upheaval in our banking system. Thats actually been going on for years so at first people put skimmers on and now they are using little doctor things, but atms i think have been upgraded to where were okay but theres plenty other Cyber Attacks we need to stay ahead of. Let me ask you a related question is that given the fact that this is an onslaught by both organized statesponsored entities, criminal entities, individual hackers that have talents, et cetera, have you had adequate personnel and experts in the Treasury Department to carry on this expanding work . Again, i would say right now we do, but im not going to be bashful to come back and ask for more resources as this evolves if we need it. Weve talked about Digital Currencies, my colleague senator rounds raised the issue and i seemed to enjoy questions about Digital Currencies and ill give you another one and that is fsoc is, as you point out, not just involved with the Digital Currencies but also nefarious activities of Money Laundering, avoiding sanctions. That raises the question of how closely are you aligned with our Intelligence Community in terms of the intelligence problems here, ie, circumventing sanctions, criminals using it to support terrorist activities. You can go down a long laundry list. Whats your relationship with the intelligence communities . Very closely. I meet with director pompeo and others on a regular basis and at all levels of the treasury we have daily interaction and people going back and forth, so its very good working relationships. Have you noticed a significant increase in these types of nefarious actors using cryptocurrencies, or is it just a problem that has stabilized or is it going . Again, i want to be a little bit careful what i say in this format but what i would say is theres not something thats a craig concern to us today buscn but icraig concern to us today but fcraig concern to us today but icraig concern to us today but craig concern to us today but acraig concern to us today but ncraig concern to us today but tcraig concern to us today but raig concern to us today but aig concern to us today but ig concern to us today but g concern to us today but concern to us today but its something we need to actively monitor and its a bigger concern of mine in other countries so thats our big push whether at the g7 or g20 to make sure that other countries are regulating these activities the way we are. Stepping back for a moment, as a chairperson of the fsoc you have multiple agencies reporting to, weve raised multiple topics here today. Cryptocurrencies, cybersecurity in particular. Do all your agencies have the relevant expertise and the personnel to fully engage with you . I mean, you might be very well intentioned but, you know, if you cant count on an agency that has significant responsibility, your intentions wont be at the end of the day up to the job. Again, i would say right now i think we do, but one of the things we want to make sure is we have the proper coordination so when we have all the resources we can use them appropriately together and, again, as ive said, i wont be bashful if the agencies need to come back and more resources. Just a quick question. Will you are you contemplating doing an assessment of the threat and the resources and presenting it i assume first to the administration but to us so that we have an idea because in the past, you know, weve had agencies who have come up and at the direction particularly of omb said we dont need anything when in fact they were really in arrears in terms of person pell and resources. Can you make that commitment . Pe and resources. Can you make that commitment . El and resources. Can you make that commitment . And resources. Can you make that commitment . Thats something in the early stages that we are working on, and i think it makes sense. Thank you, mr. Secretary. Thank you. Senator van hollen. Thank you, mr. Chairman. Welcome, mr. Secretary. I was sitting in on another committee hearing, and i do want to start by thanking you and the department for your input on the legislation, the brink act. I think mr. Toomey mention the the chairman has been working very hard to get a vote scheduled on that and appreciate working with you and your team on the issues related to north korea. A lot of issues i was going to cover have been addressed, but this is the first time i believe youve been before the Congress Since the passage of the tax bill and by all accounts the president intends to talk a little bit about that this evening. You and i will find plenty to disagree with about the tax bill in general, but in the interest of truth in advertising i do think its worth pointing out that a couple of things that were said that the plan would do which it did not, and one, of course, is that it ended up providing big tax breaks to very wealthy americans, and you were called because youve been faced with this question before before. Back in november 16 and you said any reductions in upper income taxes will be offset by less deductions stow there will be no absolutely tax cut for the upper class, close quotation. Thats not true for the final bill. There are net tax reductions . There are overall, yes, thats the case. There are people that didnt get them. And i do think its worth pointing out, mr. Chairman, that the joint commit on taxation the sort of official score keeper on tax matters concluded households that make more than 1 is that make more than 1 million a year will get an average tax cut of 64,000 in 2019 alone, and mr. Secretary, do you have any reason to doubt that analysis . I dont have the numbers in front of me, but i think our numbers i dont have any reason to doubt that. Thank you. Let me go back to another statement. This was made by candidate trump in may 2016. He said with respect to his tax plan, and i quote. Everybody is getting a tax cut, especially the middle class, end quote, and speaker ryan and later republican leader mcconnell made statements about how everybody in the middle class, every Single Person was going to get a tax cut, and that turned out not to be the case either, right . I think we worked very hard that almost everybody got a tax break. As you know, the tax system was very complicated, and as we simplified it certain people have different situations, but, again, over 90 of the people have gotten tax breaks. Mr. Secretary, with all respect, we just had a statement analysis, and this is a bipartisan result in the state of maryland, and it was performed by the Maryland Bureau of revenue estimates, and they concluded that 376,000 maryland families are going to get a tax increase as a result of the bill that passed the congress and that those tax increases will average 2,080 per family. I dont know what you mean by almost nobody. But 376,000 marylanders, thats a lot of people just in the state of maryland, and if you look at the impact of those tax cuts, they also concluded that 123,000 maryland families who make between 25,000 and 50,000 a year are going to get tax hikes and for them will be an average tax hike of 759. That is not consistent with earlier claims that everybody was going to get a tax reduction, is it . Ill assume your numbers are correct. Well, thats a lot of people just in maryland so maryland like other legislators and others across the country are scrambling to try to protect the people in our states from tax increases that they are going to face as a result of this tax bill. Im hoping that the department of treasury will actually work with this work with the states on this. If your intension was as the president to indicated early on that nobody in the middle class should see a tax increase, i hope youll work with us especially as it relates to issues of eliminating the deduction for state and local taxes, the s. A. L. T. Deduction which results in double taxation, i hope youll be working with us to actually accomplish what the president said he wanted to accomplish on the campaign trail, and i look forward to that discussion. Thank you. Thank you very much, senator van hollen and senator kennedy who had to go preside until noon until about five minutes ago was on his way back so i told him i would keep the hearing open and while were waiting just a few minutes for senator kennedy to return i thought i would take another opportunity to ask you a few questions, mr. Secretary, and i want to go into this tax question. Youve been asked a number of questions today about taxes. I sit on the finance committee and was a part of the team that helped to write this tax bill, and senator van hollen i do kind of wonder about the numbers that you are getting from your state. What was the one about 0 to 25,000 . 123,000 maryland families who make between 25,000 and 50,000 a year. Right. Will get tax hikes, average tax hike for that group, 759. Well, i dont know exactly what that is but let me tell you some of the stuff we ran into in terms of these kind of scores and well have to check it out. When we eliminated the individual mandate, which was a tax on bill who did not want to buy insurance that the law forced them to buy, that was scored by some of the tax scorers, including the joint tax committee, as a tax increase. Now can telling people that they can voluntarily avoid a tax turn into a tax increase. The way that happened was joint tax said if they dont take advantage of the obamacare subsidy of several thousand dollars to buy insurance that they dont want to buy, that the value of that insurance that they are voluntarily choosing not to get the subsidy for and the value of the subsidy is a tax increase. Some of us found that that was an outrageous assumption to be making in calculating these kinds of things so we asked joint tax to run the numbers without calling it a tax increase when someone voluntarily chooses not to take a government subsidy. When they ran those numbers, it turns out that, and i would like you to verify this, if you can, mr. Secretary, the analysis of the tax code that we implemented showed that every single income cohort in the tax code starting from 0 to 10 and going on up into the highest income category, every single income tax cohort got a tax cut. Can you verify that, mr. Secretary . I can. And can you also verify that the largest percentages of tax cuts were in the lower and middle income categories . Yes, i believe thats the case. Now, ill be the first to say that as the secretary has indicated you can go into each cohort and find individuals who because of their particular tax circumstances might have seen their taxes go up, particularly if they live in a state with high state and local taxes. Thats something that happened, but i think it needs to be said that every single solitary tax cohort got a tax cut and the highest percentages of tax cuts were in the lower and middle income categories. And i just can you verify that again, mr. Secretary . Yes. I think those things are important. Ive seen a lot of analysis of this code and many other different tax provisions, and i just think that we have to be very careful when we look at the study that some group has done and be sure we understand what the assumptions that they are making are when they do their calculus. I want to shift real quickly and i expect senator kennedy to come through the door at any moment but, mr. Secretary, youve spoken a lot today about a wide range of issues. Are there any any areas in the fsoc reports or treasury reports that you think we should continue to monitor or pay greater attention to, just an open question to you to tell us what you would like us to focus on. I think weve had an opportunity to talk about a lot of interesting issues. Cyber weve talked about a lot we touched on cryptocurrencies which is something weve spent time looking at. Weve talked about the designation process and look forward to working with you in the committee to raise the threshold. That doesnt mean that those entities wont be regulated. They will be regulated, and as the senator pointed out, it doesnt moan that they cant be designated, so we look forward to working with you on that, and housing reform, im glad weve had a lot of conversations today on housing reform. I hope we do figure out a solution to this so that we dont leave these entities around for another ten years, and as ive said im openminded to working with you and the committee with lots of solutions with the understanding that we maintain a 30year mortgage and with the understanding that if we put the government taxpayer at risk on a guarantee, which we dont have to do but well look at different alternatives, but if we do do that that the taxpayer is compensated and that there wont be any explicit implicit guarantees that they are not compensated for. Thank you, and i do, before i im going to let senator van hollen have a comeback if he would like to. Very briefly. First of all i will say the analysis i gave you was based on our state board of revenue estimates and theres no mention in there at all of the Affordable Care act component but i would love to share information because i do think a lot more people are going see tax increases than suggested. The last point i would make, mr. Chairman, if someone had a 200, you know, Tax Liability and now its 100, thats a 50 cut, so, yes, those folks who were in the lower brackets who got tax cuts had a higher percentage but that doesnt take away the fact that the average tax cut for a millionaire was 67,000 according to joint tax and i think we could have avoid that in this process. Understood. Its always going to be the case that when you have tax cuts across the board those who pay more taxes will get larger tax cuts in dollars. Especially when you reduce the top rate which was not required to be done in order to close loopholes. Understood. Appreciate the opportunity. Senator kennedy, before i go back to you i want to ask one more question. This relates, again, to the basically the Economic Growth and the deficit issue. Just a couple of quick things. The cbo score that was issued this year for budget purposes and also was used in discussion of the tax bill projected a 1. 9 rate of the economy, correct . Correct. And am i also correct that it projected that the economy would grow only at 1. 9 for ten straight years . That is correct. In other words, zero growth in the rate of growth of the economy under current law, and thats what the cbo projected. It is that projection, that absolute flatline projection that if we do nothing we will see nothing in terms of growth that has been used to analyze and make the claims about this tax bill. The argument is that this is going to generate 1 trillion worth of deficit. How much would the economy need to grow to average over the next decade before there isnt before its revenue neutral, do you know that number . Its about 30 to 35 basis points. Which is about 2. 3 . Yes. So if the economy can average 2. 3 instead of 1. 9 over the next decade, there will be no deficit from this tax bill, correct . That is correct. And were already at 3 and the projections that the council of economic advisers has put out is that we hope to maintain that 3 for a decade. Thats correct. I understand those are projections and i understand those are lots of arguments about those projections, but at least this far in we are exceeding what is needed to be achieved in order to avoid any deficit. That is correct, mr. Chairman. Thank you. Senator kennedy. Thank you, mr. Chairman. Thank you, mr. Secretary. Nice to see you. I want to start by associating myself with the remarks of senator shelby and thank you for your hard work on our tax legislation. Thank you. Can we agree that the revenue generated the onetime revenue generated by the repatriation of monies from overseas profits back to the United States is nonrecurring revenue . Yes. Okay. Then why dont we match that up with a nonrecurring expense like infrastructure . Well, it doesnt that make sense in terms of budgeting 101 . I would just say at the end of the day cash and revenues are fungible so from our standpoint we were just looking at from th looking at from the tax standpoint and leave it to congress on the appropriations side. So you wouldnt be opposed if we decided to dedicate all of the tax revenues, one time tax revenues that are generated by moans repatriated, one time, to the United States overseas profits and we match those up as any first year accounting student would recommend that you do, with one time nonrecurring expenses like infrastructure, you wouldnt have any objection to that . I would have no objection with that whatsoever. Could we agree that would be a swell idea . That sounds like a terrific idea. Good. You are going to ask us to raise the debt limit. I already have. I know you are not clairvoyant, but over the next three years, and perhaps seven years, how many more times are you going to ask us to raise the debt limit . I assume a lot. Shouldnt we do something about that . Again, i think the president is very much concerned about the rate increase of the debt. And particularly the rate that it grew over the last eight years. His First Priority was to create Economic Growth, thats the single most important thing that will create revenues. And over time we need to figure out where we can have government savings to deal with the deficit. Well, we are at 20 trillion and climbing. And at some point we are going to have to change the name of the department of treasury to the department of the debt because there wants be any treasury left. Now, in the past year weve added, what, 536 billion to that . Thats about right. I mean, it would seem to me that we need to have pa adult discussion at some point how we are going to get control of that. I think the longterm debt and the longterm budget deficits are something that Congress Needs to be conscious of. I want to talk to you about the sanctions. Can we agree that at least for the past five years that president putin as acted like a thug . Im not going to use that terminology, but there are clearly issues that we need to address and that we have done with sanctions. And as ive said earlier, now that we delivered the report last night, there will be additional sanctions Going Forward. Lets go through the list. Ukraine, cromilia, syria, he meddled in our election, hes helping north korea cheat. I mean, it seems to me that in terms of sanctions, we ought to hit him so hard hes coughing up bones. I mean, hes not getting better. Hes getting worse. I dont understand why the administration is not imposing the sanctions that the United States Congress Overwhelmingly supported . Again, i apologize, because i said this earlier, and you werent here. But we did an enormous amount of work in the Intel Community and treasury, in putting this report together. I encourage you to look at the report, which is hundreds of pages, we delivered that tuesday. And we intend to use that report in the intelligence to go forward with additional sanctions. When . Well be working we are already working on that. Now that we finished the report, thats the next part. I dont mean to interrupt you, im sorry. Were you through . Yeah. Again, i want to be careful. But in the near future you will see additional sanctions. Is that near future within the next month . Again, i want to be careful, because the sanctions process, there is a process of decla declassifyings. I dont want to commit its within the next month but i want to assure you as quick as we can do this it will be. So the next several months you will see it. Maybe a month. I just want to be careful in making that process. Its a thorough process of the work that needs to be done. Hes not getting any better, mr. Sechblretary. Maybe you are seeing something and something in classified information that we are not seeing, and if there is id sure like to see it. Because what you allow is what will continue. I understand. Thank you. And i really think we are sending the wrong message at this critical juncture. I mean, his activities alone in helping north korea cheat ought to require additional sanctions. I understand. And we look forward to working with you on this. And there is a lot of activity here. Thank you, mr. Chairman. Thank you. And i have just a couple of quick announcements. Some senators may want to ask some additional questions for the record and those will be due by february 16th, tuesday. Mr. Secretary, we ask that you respond to those questions as promptly as you can. And that concludes this hearing. Thank you for your testimony again. This hearing is adjourned. By the labor of Bureau Statistics this morning. This weekend the cspan cities tour takes you to arkansas located in the ozark mountains home to the university of arkansas and Clinton House museum. First home of bill and hillary clinton. With cox partners well explore fayetteville history. Well visit the arkansas libraries where well hear about his career in the u. S. Senate. Full bright was remarkable in lots of ways, but he could talk to just about everybody, people across the aisle, people with different parts of the world. So this is democratic leader, of course, full bright here meeting with the president and the future republican president , george hw bush