Transcripts For CSPAN3 Treasury Secretary Steve Mnuchin Testifies Before House Financial Services 20240713

This is nothing this is something we should work on, and the work on this predated me coming to treasury and this has been a long time, and as i mentioned earlier, we may come back to congress and suggest that you pass legislation. I would ask you, this is not on your 2021 calendar. This should be on your december calendar. I agree. I look forward to working with you. I need to know whether you need legislation. I need to know what you need and we need to make sure that are 2 billion of outstanding debt where people kbts determine what interest is supposed to be paid, and i want to move on because i do chair the asia subcommittee for another week, and we focused on china. China could end up with 1. 5 billion of world bank loans. This is under discussion now. Chinas income has exceeded the level where they should be eligible for these loans and the Chinese Government has enough money to put a million uighurs behind bars and to build a military complex that destabilizes the world so it seems like maybe china should be have the rates. I know the United States wont support world bank loans to china, but im asking, what are you doing to stop those loans . Are we simply making academic arguments or are we making it clear that our future involvement in certain world Bank Activities is dependent upon not giving concessionary loans to china. Again, thank you for raising this issue which i also think is a bipartisan consensus on. So David Malpass who is now the World Bank President , when he was working for me as undersecretary as part of our reforms package, we negotiated with the world bank, with the prior leadership there and we negotiated significant reductions in China Lending with the path below a billion last year. Yesterday, we submitted our objection to the current country plan and we look forward to following up with you. Thank you. The gentleman from florida, mr. Posey is recognized for five minutes. Thank you, madam chair and Ranking Member for holding this hearing on systemic stability. For many of us whoey g grow up r the Great Depression and it was the last financial crisis and at this time we often watched the classic movie its a wonderful life where we experienced the drama of the run on the banks with george bailey, the hero of the movie played by Jimmy Stewart who saves a small town savings and loan from the bank. The last crisis taught us that we no longer live in the world of Jimmy Stewart banks. It runs on other Financial System liabilities like money market funds may often threaten far greater consequences than bank runs. They may collapse in dramatic ways and destroy the ability of Financial Institutions to fund their Asset Holdings and meet the survival constraints imposed by liquidity and even solvency. We often hear the words you cant be too careful in regulating the Financial System we can be so careful that we stifle its invasion and restrict credit and finance and slow Economic Growth and inhibit jobs for people. We must strike a balance and we must look it those Balance Solutions to keep our economy on a path towards sustained growth. Mr. Secretary, please let me commend you with key regulators to final a reform with the proprietary trading with the volcker rule. Thank you. As you know, our banking history was different where banks focused on trade capital and played a limited role in longterm Capital Markets. In this country, banks always had a role in Capital Markets and the investments that made our economy a mighty engine of growth and the intercontinental railroad, shipping and a host of other industries. I believe banks have a key role to play in restricting the vital function. I recently sent a letter to you and other key stability regulators asking that you move quickly to amend the covered fund provision of the volcker rule. Specifically, we asked you to revise the overly broad definition of a, quote, covered fund, to exclude Venture Capital and other longterm funds. So my first question for you today, mr. Secretary is the statute makes you as chair of fsoc responsible for coordinating rule making. Are the financial regulators in the department of treasury working on changes to the covered funds provision and if so, could you please provide us with an insight on the timing for such a proposal . Thank you. First, let me acknowledge what you said that the healthy Banking System is critical to our economy and our banks have derisked and built up significant amounts of capital. So the regulators have already made some proposed changes to the volcker rule that wont create undue risk and will create more liquidity in certain markets and we are working with them as you suggested on the covered the covered fund issue, as well. Thank you. Any idea what the time line would be on that . I would hope its over the next 90 to 120 days, well get back to you. Do you expect criticism in that regard . Im not going to speculate, but it will be open to Public Comment and well take that into consideration. I wanted to talk about the Climate Change regulations and ive only got a minute left and i wonder if you give me your assessment on taking the shortterm stress testing discipline into much longer period realm of Climate Change. Does that make any sense to you . It does not. Im sorry. Can you repeat the question . I said it does not. Just wonder what your assessment is on the usefulness on taking the stress testing discipline into the longer term realm of the Climate Change requirements. Let me just say on my vast expeere expertise, climate is not one of it. The banks have a difficult enough time on modeling different risks. I think longterm climate risk is something thats subject to a lot of different views and as long as theres proper disclosure, i think thats adequate. Very good. I thank you, and my time has expired. Yield back. Thank you. The gentleman from new york, mr. Meeks who is also the chair for the subcommittee Consumer Protection and Financial Institutions is recognized for five minutes. Thank you, madam chair. Mr. Secretary, i think that we can agree, as i said in my opening statement, im really concerned. I mean, it was one of the most things that shocked me as a member of congress when saukt paulson came on the floor talking about our whole economy was going to drop, and so with fsoc which i look forward to try to figure out whats going on and what will happen in the future. I have some real concerns because as i look at the chinese growth, stalling, as i look at the european economies are slowing with some entering recession. I look at brexit looming and what affects that brexit may have and all of the turmoil going on in latin america, it gives me real concerns and the u. S. Economy is slowing also. History may not repeat itself, but sometimes it certainly rhyme, and i fore that over the next few years for the economy, it may rhyme too much for me with the past decade, and so im hoping that the administration is going to look well ahead of what takes place and have certain formulas in place in case there is a tremendous problem like when i look at the dead stock of corporations and even colleges and universities has ballooned and an important share is leveraged loans and coveted loans and there seems to be a real risk of a downgrade cliff and a growing share of this debt is just barely above junk. So im hoping and do you have some models to show what would happen to employment, home ownership, and the broader economy if these loans were downgraded in en masse and the downturn of the economy and how would it affect the retail sector, for instance . Any model that you have. Can you tell us . Im really concerned about the leveraged loans that are first let me say we share your concerns on Financial Stability. I worked for secretary paulson for a long time and speak to him regularly and i hope were never in that type of a time period again. Specifically as it relates to leverage lending and confident light. We do share your concerns. We are monitoring those risks. Weve studied it very carefully as it relates to the banks. And again were very comfortable that theres very limited exposure in the banks. As it relates to specifics of the impact on employment and retail sales and other areas. Well get back to you on our thoughts own that. But again my view that it is minimal because the exposure is outside of the Banking Industry and shouldnt have the type of contagion and risk that occurred during the financial crisis. Thank you for that. And do get concerned sometimes too because now that it is outside of the financial, the Banking System, we try to put certain things in place for the Banking System so that we can make sure we see the risk before and make sure we can downsize and do whats necessary. Outside i want to make sure were watching whats happening on the outside because i dont want that to catch us by surprise. I think thats tremendously important. I agree and i assure you we are. Also, you know, when i looked at what devastated me and in this financial crisis, its a reminder that recessions and crises dont hit all sectors of the and demographics of the economy equally. If you look at my district and black and minority communities, they overwhelmingly lost wealth, jobs, and were foreclosed upon at disproportionately high rates and many of them havent even recovered yet. In fact, Minority Banks failed at 2. 5 times the rates of nonMinority Banks, and they have also yet to recover. I was wondering if it considers the risks of financial disruptions, how much consideration is given to the manner in which the burden falls on low income and minority segments of the economy and how do you quantify this and what has it done to seek to address this . Anything to in 23 seconds to address this if you can do it . Two comments and were happy to follow up with you another time. One, housing reform is something were very focused on, particularly because of the disproportionate impact on certain communities. And also on minorityowned banks, we have a program, a treasury where we have a Mentorship Program that were working with those banks, but i look forward to following up with you. The gentleman from missouri, mr. Luca more, is recognized for five minutes. Thank you, madam chair. First of all id like to thank the secretary for responding to a letter that i and 20 of my colleagues sent to you recently regarding cecil. Fsocs meeting yesterday i can see you examined all research on the matter and report back. I think this will enable some light to be shed on the standard which i believe is detrimental to our industry as well as our consumers and economy. Looking forward to following up, make sure the process is connected correctly and look forward to working with you on issues that i think are going to be pointed out in this research. Thank you for doing that and responding to our request. First issue i want to talk about is with regards to the new Digital Currency libra thats being proposed by facebook. We had zuckerberg in here recently and he explained his intentions and how this was all going to take place. You know, since then, china has got made announcement with regards to their own Digital Currency and theres been some calls for the fed to issue its own currency. Id like for you to give us your position on it, where you see it going, what your thoughts are on it, because it does seem to have some legs. Sure. Let me just comment that when people talk about digital currencies, its a large vastly different area and different sectors have different things. Specifically as it relates to libra, weve had a dozen meetings with facebook. Weve shared our concerns. Its part of the reason why theyre slowing down their movement forward. Weve discussed this at the g7 and g20. I am fine if facebook wants to get into digital payments, thats fine and that may be good for their Customer Base and good for a lot of americans who dont have access to banks. We want to make sure if they do it theyre compliant with our bsaaml and no way can be used for terrorist financialing and illicit activities. The chinese have decided to get into this as well. The last half of my question was, theres been some thought process about the fed getting into it. Is this something you see necessary . Something you dont want to get into . Something that shouldnt be out there . Where do you see this going . Again, i would differentiate what china is doing from what a bitcoin or a facebook would do. What china is doing is issuing Digital Currency in lieu of physical cash. They can track all that. They will be able to track where that goes. Thats different from a bitcoin. Its no different in the u. S. If money is sent on the wire system, can be tracked. Money through swift has id fires. I would differentiate what Central Banks are doing from what a libra or bitcoin. As it relates to the fed, chair powell and i have discussed this, i think we both agree for the near future in the next five years we see no need to issue Digital Currency. Again, we have a very sophisticated system. The fed is working on electronic Payment System. We need to make sure theyre realtime electronic Payment System in the u. S. But thank you for your concerns. Okay. Appreciate the response. Yesterday we had a hearing in the committee and there were a number of questions with regards to Credit Unions buying out banks. It seems that this is a little bit of a trend here in the last 12 to 14 months. In fact the comment was made yesterday i think there was 28 that had already been purchased this year with another 14 more in the hopper, i understand. As i rest this in your purview, mr. Secretary, this means that those 28 banks plus perhaps these other 14 are going to come off the rolls as taxpayers. Its going to dent the treasury some. Not that much, but some. There doesnt seem to be any resistance from the fdic or credit regulators to not allow this to happen. So its continuing to be approved, continuing to happen. You know, in fact i was having a discussion last night with somebody and they said maybe the banks need to start Credit Unions, and avoid taxes. So i dont know if thats doable, but there are some people starting to think outside the box because theyre looking at this as a tax loophole. From your standpoint do you see concerns . From the standpoint of Credit Unions buying out banks . Is there just another part of the merger situation thats going on in this country . Or is this a trend . Is a tax evasion situation . How do you view this . Well, well follow up with the fdic on this issue and monitor it. Its not something thats caught my attention because fortunately its on still small scale. But i appreciate you raising the concern and well follow up. This past week theres announcement of a 700 million bank that was bought out by a 10 billion credit union. This is going to grow. Thank you for your response. The gentleman from georgia, mr. Scott, is recognized for five minutes. Secretary mnuchin, how are you . I want to make sure im clear on your level of concern about the continued volatility in the repo market and its impact on the calculation of sulfer. The secured overnight financing rate, which as you know is a designated replacement rate for lib bell. Now ive listened to your response to mr. Mchenry and also to the gentle lady from new york. And i want to be clear, because i read your report, the fsocs 2019 Financial Stability record. Heres what you said. You said that Market Participants with significant exposure to libber remain vernable. If they do not sufficiently prepare all the way to the end of 2021. What did you mean for that . And what did you mean about prepare . What are you doing to help the industry participators prepare . Well, again, let me just emphasize two different issues that are related in a way as you said. I am concerned what happened in the repo markets. Thats not just a concern for sofer. Thats a broader concern because we rely on these repo markets and it impacts many, many individuals and institutions. So weve had active discussions with the fed on that issue. That does impact the libor transition. But the libor transition is a much broader problem and i said as recent as yesterday we conviened a group of the banks and regulators on this. So what did you mean by, they will remain vernable . Well if banks and trusties and security holders dont prepare for the transition there are trillions of dollars that people could wake up in 2021 and by prepare, you mean to do what . Its a list of everything from prepare technology, so that they have the ability, prepare the legal analysis, prepare a transition. People literally have hundreds of thousands of transactions. Part of this may be kong back to congress and asking you to pass legislation. There may be serious legal issues that were still exexploring. Let me turn and lets go overseas for a moment. Im very concerned about brexit and the particular impact that brexit will have on our businesses, on our Financial Markets, particularly because of the uncertainty we are seeing around the whole deal of delays after delays and the failure of them to come up with a clean deal. So what i want to get from you as a treasure secretary, how concerned are you about this situation with brexit and its impact, this uncertainty is having, on our cross border transactions with our financial Market Participants . Well, i would describe im moderately concerned. Ive been discussing this issue for the past three years with my counterparts at the bank of england as well as the regulators and the finance minister whos the chancellor of the extracker. It is a significant risk to the uk. It is a dish it could have carryon risk to the u. S. Were working with the regulators on those risks. Weve managed through some of those. And some of those are still open. But as ive encouraged the uk, they need to resolve this one way or another. Now, also in your report concerning that, you said this. You said that and you highlight the potential for risk and that they will have significant spillover affects in the United States, should there be a nodeal brexit, particularly with regard to the crossborder translations. What did you mean by that . What would be the potential with no deal . What would be better for us or worse, no deal or deal in your mind . Let me say i respect the people of the uk. They can decide whether they want to be in brexit or dont want to be. The risk is making sure that whichever case, theres a coordinated transition. Thank you, mr. Secretary. The gentleman from oklahoma, mr. Lucas, is recognized for five minutes. Thank you, madam chair. And thank you, mr. Secretary, for appearing before this committee one last time before years end. Secretary mnuchin, in the councils annual report it recommend that government and private sector should have more effective information sharing practices. Could you expand on how agencies can best work with Financial Institutions to address cyber krurt concerns without inhishting the growth of emerging technologies . As i highlighted in my opening comments, cybersecurity is one of my most important priorities. While i think the industry is well prepared, we can never be prepared enough. The bad people continue to operate. We need to make sure that our Financial Markets are not only protected for today but are protected for the future and its a coordinated response between private companies, public companies, the intel community, as well as the treasury and the regulators. Secretary, in what ways is fsoc and its members educating the general public on cybersecurity risk particularly as you noted those coming from bad actors and bad actors abroad too . Our focus is less on educating the general public and more making sure that the banks are educated. They have the best practices. The general public will be protected as long as the banks and the Financial System is protected. Thats what we work on every single day. One last question. And im thinking of my colleague discussing brexit for a moment. Youre in a unique position with your finger on the national economy. A business person of much experience. Could you speak for a moment about the potentially how much better the usma deal is for American Workers and why its essential for the economy that we act swiftly on that in this body . I mean first of all let me say i hope that Congress Passes this between now and the end of the year. I know ambassador lighthizer the speaker and others are working closely on this. This will be a terrific win for American Workers, for the american economy. Our largest trading partners are mexico and canada. These economies are interlinked. This is a great step for growth. Thank you, mr. Secretary. And with that madam chair, i yield back. Thank you very much. The gentleman from colorado, mr. Pearl mudder is recognized for five minutes. Mr. Secretary, good to see you. Im over here. My questions are going to go back towards that repos and repurchases, because there are some flags here. And, you know, last year banks had the most profits theyve had in forever. In part because of the big tax cuts and stuff like that. But huge profits. And at the same time, we saw the excess reserves of the banks decline by 35 since 2017, and at the same time as the fed and treasury were sort of shrinking the Balance Sheet, all of a sudden over the last few months have had expanded again. I dont understand how those all come together. And if you could try explaining it again, id appreciate it. Because we got big profits, shrinking reserves, and now expansion of the Balance Sheet again. Thatthose are the kinds of things that i think we have fsoc in place to monitor. What is driving this on a bigger scale if you could tell us . Im happy to address it again because it is a very important issue. I dont want to minimize it. Again, as recently as yesterday at fsoc, we had a presentation from the Federal Reserve bank of new york. I think theres a lot of different issues that came together on those two days that caused the spike. It was not any one single issue but we are studying it carefully to make sure that this doesnt occur again and to make sure it doesnt occur on a prolonged basis. The banks are having very good profits mainly because of the u. S. Economy is performing very well. I dont think this has to do with an issue of bank profits. This has to do with an issue of bank liquidity. The banks had plenty of liquidity. Enough to go in and take up the repo, but they didnt want to do it. The reason they didnt want to do it had to do with different regulatory tests that fit together. So it wasnt the liquidity test was fine. It was different ratios that they were worried about hitting and tripping. So again, this was partially a treasury issue of tax day. It was partially a regulatory issue. It was partially a reserves issue. And then just to comment as you said, the fed has been shrinking the Balance Sheet, i with i think makes sense. Because as they went out of quantitative easing they didnt need a giant. That was for the financial crisis. And what theyre doing now doesnt impact the growth of the Balance Sheet by buying securities. Its really a Cash Management function around the repo markets. But these are all very complicated issues that were intertwined and we continue to work with them. Those were sort of the things that led up to the recession ten years ago. That all of a sudden there was this illiquid setting of our banks. And then everybody started getting nervous and the rate securities went to heck and Everything Else started closing in. And i guess it just doesnt add up for me. Were making money over here. But were shrinking. But all of a sudden the reserves are shrinking like crazy. We try to shrink the Balance Sheet. But now were expanding it again. It it isnt just two days. Its been happening for several months now. I can assure you the technical issues that happened around this have nothing to do with the financial crisis. It was driven primarily by real losses in real estate markets in highly leveraged securities. This issue, this is all about the government repo market. And again, when we talk about the reserves at the bank, the reserves, most of those are locked up with the fed because of regulations that require the banks to have so much excess liquidity. Let me slow you down for a second. I asked my staff to give me some numbers on Student Loans, auto loans and corporate debt. Were at 1. 6 trillion in Student Loans, 44 million americans have Student Loans, almost 30,000 the average debt. Auto loans at 2. 6 trillion. 7 million americans are more than three months behind. Corporate debt at 10 trillion, 1. 2 trillion in junk bonds. Theres a lot of lending going on. Are we getting overextended again . Thats what im worried about. The gentleman from colorado mr. Tipton is recognized for five minutes. Mr. Secretary, did you want to answer that . Thank you. I was just going to comment on is i think its a good thing that we have a lot of lending, a healthy economy, and again, i really do think that this bank issue is a highly technical issue, but it is something we are very focused on, and Student Loans, thats a longer subject that were studying carefully. We share certain concerns on the student loan market right now. Thank you, appreciate you taking the time to be able to be here and speaking to that specific point. The ability to be able to have access to capital, get this economy moving. I think its worthy of noting the first thousand days that youve been in office with President Trump, youve been able to implement historic tax reform, take extraordinary steps, to be able to safeguard National Security, making strides to be being a better steward of taxpayer dollars. Its important to note that our free market system with the help of tax reform and other policies have come out of congress and the Trump Administration have helped to be able to stimulate my states economy in colorado. In the past year alone, colorado employers have created 43800 jobs. Nearly 60,000 coloradans have found jobs. My state the Unemployment Rate is at 2. 6 . As you noted in your testimony, we are at a 50year low on unemployment in this economy right now. We have policies that are actually making this capitalistic system work. Main streets in Rural Americas a primary concern to me. That is my district. As you probably know, in many cases when were looking at economic recovery after down turns, its Rural America that is last to come out of that recovery. If another downturn comes theyre the first to be able to lead the way in to distressed economies. Im really pleased to be able to report to you in my district were starting to see property move in some of these areas, economy moves, jobs being created. I appreciate the efforts that you and the administration have made to be able to address that. Would you agree when we look at the overall economy, low unemployment, historic low unemployment in so many of the demographic groups that we have, the opportunity were seeing in this country, is this a good positive sign for my state of colorado and for america as a whole . It is indeed and its the bright spot of Global Growth. And i think thats something thats going to be important for us as a congress, as a nation. To be able to keep our eyes on. You know, despite some of this historic growth we have some of our colleagues across the capital, governors mansions across the country that are trying to upend our capitalistic system that has benefitted the majority of americans in this country. The economic engine in this country is to be celebrated. We should not be pursuing socialistic policies to be able to redistribute income and slow that down but rather policies to be making sure every american has that opportunity to be able to reach their highest and best potential as god has given them the ability to be able to do. Id like to be able to encourage you and the administration to be able to continue those policies that are creating opportunity for so many americans, to be able to reject those who are going to be seeking to redistribute income, outbid government to more programs, empowering people with their own resources, build for bigger, brighter future. Appreciate you taking the time to be here today and for your work on this economy. Want to wish you and your family the best for the holidays. Thank you. I yield back. Back. Gentleman from colorado yields back. The gentleman from conneticut mr hines from is recognized for five minutes. Thank you for being here. Id love to use my five minutes to have you reflect a little bit on shadow banking and in particular the intersection of shadow banking and the mortgage system. Im of a tenure, i was sworn in in january of09 when this committee wasnt sure that citi bank would remain solid until a couple of quarters had gone by. Of course so much of that was due to irresponsible underwriting in the Mortgage Market. In your report which i have not had a ton of time to absorb, you make specific mention and in fact box b, nonbank Mortgage Origination servicing here, the message is clear, nonbanks are now originating more or less than half of mortgages and those are disproportionally going into the gses. That makes me nervous because the gses are guaranteed by the United States, the american taxpayer. This feels to me like a little bit of a replay in which institutions that maybe dont have the underwriting discipline of banks are out there writing a lot of mortgages, sure that those mortages will be securitized. I have a general question and then specific. My general question is what sort of visibility do you think you and the other regulators have . And to the quality of the overall underwriting and specifically we spend a lot of time in this committee and trying to reflect in doddfrank the nation of retention, meaning you actually eat your own cooking with respect to the underwriting. I have a suspicion that a lot of these nonbanks are actually not retaining exposure but in fact transferring it to the gses. Generally what kind of visibility do you have . And more specifically, are these nonbanks underwriting competently . Let me say we do have concerns and thats why weve highlighted it. The good news is we do have visibility. And the main reason we have visibility as you pointed out, a lot of these loans are being sold to the gses. A lot of these are being guaranteed by fha. So one of the things we want to do as part of housing reform is we are concerned both at fha and at the gses that the underwriting criteria is deteriorating and the loan to values are increasing. We are working with the fhfa and hud on those issues. The other area of concern that we have is that the Mortgage Servicing business which used to be dominated by banks is now dominated by nonbanks. And one of the problems is the nonbanks dont have the liquidity to advance on mortgages that the banks had. So this is something that fsoc is very carefully studying. I can tell you my role as being on the fhsa board, were also studying this as well. I would say its not at the point where were nervous of the levels that it was ten years ago, but it is a significant concern and thats why were carefully following it. Well come back with additional recommendations. I think theres a lot hud can do and fhfa can do to cut down these risks. Youve got a sentence that says that loans originated by nonbank lenders have on average marginally threads and credit scores, so it fields to me i havent had a chance to study, but it feels to me like theres a little bit of an adverse selection going on here in as much as lower credit morb ganchz are being guaranteed by the gses but the hire quality mortgages are staying outside of the structure. Am i right in inferring that from the report . Not necessarily. But what is occurring, because a lot of the loans that the banks are originating are being sold to the gses. But if you look at the loans that the banks are originating, theyre better equaled. If you look at what the gess are buying, the higher level are from banks. The good news is the Bank Regulators made sure that banks werent originating bad loans and just selling them. That goes back to your original comments. By the way, these should be bipartisan concerns. These should concern all of us. I completely agree and im glad to see this focus. I would emphasize again just drawing on what it felt like. My own state of connecticut has only now recovered. I appreciate you highlighting this. I hope if you need us to help with either gse reform or whatever, we will be involved rather than surprised. We do need your help on gse reform. We look forward to working with you. Gentleman from connecticut yields back. Mr williams from texas is recognized. Thank you. Good to have you here, mr. Secretary. Full disclosure again, car dealer, retailer, main street and texas. And i want to thank you for taking time out of your busy schedule to come up here to answer these questions. By my count, this is the fourth time that you have appeared before this committee. And i know ive asked you this question before. But this is politics. And things up here in washington seem to change hour by hour, minute by minute. Before i continue my questions i must ask you, are you a capitalist or socialist . Im pleased to report im still a capitalist. Pleased to hear that. Im worried we are not paying enough attention to the National Debt which recently surpassed 23 trillion. The net interest is estimated to reach around 400 billion during this fiscal year and could account for over 10 of the gdp by 20. Jerome powell stated our debt is on an unsustainable path that will cripple our ability to respond to a recession. In addition to his comments ive heard from former military officers including some who served at ft. Hood that our debt is one of the National Security threats they say. The fact is we need to cut Government Spending and get serious operating within our means. Mr. Secretary, can you elaborate on the threat that our mounting National Debt has on Financial Stability . Well i would say that today, it doesnt have much of a threat because we are the reserve currency of the world. And i think relative to this side of the gdp its sustainable. I would say we need to grow our revenues faster than we grow our expenses. As you know when the president came in he presented a balanced budget. He wanted to increase military spending and decrease nonmilitary to pay for it. To get a bipartisan deal done we increased both. I was part of what praerk pelosi just noeshgating the recent deal. Over time we need to look at Government Spending. Its no secret Economic Growth has been slowing throughout the world. The International Monetary fund refused its Global Growth estimates down to 3 for 2019 when just two years ago it was growing at a rate of 3. 8 . Even as the Global Growth slows, the United States continues to outperform other developed economies as you talked about today. I can tell you again being in the retail business, on main street america, business is as good as ive ever seen. I appreciate it. What factors are contributing to our growth outpacing our european counterparts . Theres no question its the economic Trump Administration. Tax cuts, better trade deals, thats what were focused on. Unemployment is at 3. 6 . This number could call to as low as 3. 25 by the end of 2020. What concrete actions would you recommend we take to help make this prediction a reality . I would suggest you continue on bipartisan sport of usmca. Thats the most important thing on the economic side that congress can do between now and the end of the year. Totally agree with you. Data security is one of the greatest threats to our Financial System. Many states have adopted their own standards. For many businesses in my district they are going to be forced to comply with various standards in order to operate their businesses in all 50 states. I know youve addressed this before, but is it as important for the businesses in my district that we talk about this, what would be the value of having a single federal Data Security standard . I think its something we should very carefully look at. Just as there are National Banking standards, i think data is something thats very critical and also, by the way, this is an issue on a global basis. We want to make sure that localization doesnt stymie growth and transactions. Before i close, thanks for being here. I want to applaud the Treasury Departments work in standing up for european regulators over insurance capital standards. We cannot allow bureaucrats in brussels to write unworkable rules and regulations that would hurt Insurance Companies in our country. Keep up the good work. I yield back the balance of my time. Gentleman from texas yields back. The gentleman from illinois, mr. Foster, is recognized for five minutes. Thank you, mr. Chairman, and thank you, secretary mnuchin. There are so many new emerging threats from cryptocurrency projects such as libra to looming levels of corporate debt, leveraged lending, questions about accuracy of the ratings from bond rating agencies, in addition to climaterelated risks, the concentration Cloud Service providers, a very long list. Thats why im concerned that the budget and levels for fsoc and Financial Research have been greatly reduced under your watch. Compared to the, the fy 2020 budget would result in about half the staff for fsok and the ofr. Secretary mnuchin, do you really think that it was a wise idea to cut the fsoc and ofr staff levels in half . I do. And the reason for that is because one, youve been successfully increasing our treasury staff outside of fsoc as well as the other regulators. We rely uponone of the things that fsoc does, i think it can have a Smaller Group of core people. Most of the work is done on a coordinated basis through all of the agencies. Thats really why were comfortable doing that. Were trying to be prudent on expenses. It seems very shortsighted to me to cut the resources needed to make sure that we even reduce the risk of the sort of financial crisis that we lived through. Youre unwilling to commit to doing anything to restore those budgets . Id never say im unwilling to commit. Were happy to come up and explain our thinking. Were trying to save taxpayer dollars, not doing anything to create more financial instability. If we thought we needed those resources, wed keep them. I believe we need to give fsoc and the ofr funding to carry out their very important missions. Thats why ive im hoping were going to be marking up in committee. This is a common sense measure that tries to restore the minimum funding levels we had in 2017. Its Pretty Simple because we cannot foresee and prevent the next crisis if we do not have the personnel around to actually do the work, including the coordination of checking the data, analyzing the risks and performing the essential research. Anyway, so thats, i hope my colleagues will support me in this important effort. Think is i think sort short sighted to cut back those essential functions. Another point that i alluded to, increasingly big tech firms, amazon, google, others, are pushing into Financial Services including Cloud Computing for the largest banks. According to a recent readout of the meeting, Cloud Computing was a topic of discussion. My first question, in your view does fsoc have the authority to designate a cloud provider of being a systemically important financial utility . So at this point, and this is very fact specific situation, at this point the answer is no. But it is something weve discussed at the fsoc. Do you have the authority if youve come to the conclusion that theyif we came to the conclusion. Right. Okay. I have a real worry that the constration of cloud pro vooifrds, it would be an interesting thought experiment to say what happens if for example there was a not too long ago a story in bloomberg about the possibility that chinese had put little hardware bugs in very widely used equipment inside cloud utilities. And if that is discovered at a single cloud utility where they have to replace a big fraction of the hardware and have to be down for potentially months while that happens, this to actually think what that would do to our economy if aws went down for a month or two. As i highlighted cybersecurity is a big focus of ours. Part of the reason were focused on the cloud is we share your concerns. We want to make sure that no one Financial Institution is dependent and would be taken down by a cloud provider. And in my remaining time i want to thank you for your response to the letter that the congressman and i sent to you. I think theres an essential Government Role there to leverage as the administrations position to leverage the real i. D. Act to allow citizens who wish to have a way to authenticate themselves in a secure manner online. I think thats a fundamental necessity in a modern economy and theres an essential job for the government to provision that and many opportunities for the private sector to leverage addional features on top of that. I want to thank you for your response and encourage you to continue. Gentleman from illinois yields back. The gentleman from arkansas is recognized. Great to have you back. Appreciate all of your leadership. I just was so interested in listening today. Thanks for the regulators that we talked to yesterday for their swift implementation of s2155 on regulatory reform. We appreciate treasurys leadership on that. Your work on strict sanctions around the world, on venezuela, north korea, iran, russia, youve demonstrated a lot of leadership there. And of course tax reform thats been talked about extensively. Were grateful for your leadership as our treasury secretary. I want to turn and mention a couple of things that weve talked about today. On the repo market that mr. Pearl mudder talked about and the manking member, i think the concern is that the new york fed is not supporting the repo market. They are the repo market. I think thats the challenge. And we dont see the Bank Reserves that are more than adequate, billions more than needed, on jpmorgan, for example, 120 billion in daily cash held at the fed on a 60 billion cash requirement. And yet theyre not entering that repo market. Im pleased that yesterday at the fsoc meeting you talked about this. Because i do think supervision is an issue here and the stigma attached with something that was a regular part of our business lives which is running a daily inner day daylight over draft at the fed. On Mortgage Servicing i appreciated your comment there. Again that business shifted out of the bank sector to the nonbank sector because of dodd frank. And for five years that ive served ive tried to get the Obama Administration and now the Trump Administration to support the idea that Mortgage Servicing rights are not a derivative that should be treated in that manner. Its a natural as you know from your career in finance companion to the origination of mortgages. I hope fsoc will lend its weight to allowing them to not have the capital penalties they have in doddfrank. And were mr. Foster, he and i have had a lot of conversations about digital currencies. Jay powell just answered our letter on the idea of a digital token. I think the concepts a little misunderstood. If we warrant a Digital Future in finance and want to protect the preemnance of the american dollar as a reserve currency, this idea of a digital token is an important concept. Its not anything except allowing our government to facilitate a block chain transactiontion process legally in the future. We have visa debit, we have mastercard, we have swift, fed wire, the ach system, all true, all private sector participation in them and government participation. But this idea that theres a new rail, a block chain rail that both banks and nonbanks can participate in to settle transactiontions through a token, its coming our way faster than wed like, perhaps faster than the fiveyear timeframe you outlined. So i do think its important for the fsoc to consider and have treasurys view of what your agent think over at the reserve in article ones power on currency. Let me turn and ask you a question about World Bank Issues that we had a hearing a few weeks ago at the subcommittee on that topic, multilaterreal development. There was no treasury representative. We had an illness that day. I talked about the legislative man dats put on our managing director and out governor to direct votes at the fed. My question to you, mr. Secretary, are you concerned that that kind of governance to support or oppose a financing project ties the hands at the bank to being forced to abstain on voting . I am. And does treasury have an amount, a record of those extensions and that long binder i understand of rules that our governor has to follow . And is that something you can share with the committee . And help educate the committee . We can come back. Its a huge bureaucracy running all these tests. We keep the date awe. What i hear both from your former colleague and others, it reduces americas effectiveness to lead the bank. I think wed be interested in working with treasury to reduce those mandates, remove the ones that are redund dantd and have your leadership on that. Is that something youd be interested in working with us on . We look forward to working with you. I thank you and yield back. Gentleman from arkansas yields back. Before i recognize the gentle lady from ohio, i think we want to wish a happy 29th birthday. This is how i wanted to celebrate it. Id like to recognize now for five minutes the gentleman lady from ohio, miss beaty. Thank you, mr. Chairman, thank you Ranking Member, thank you to our witness, mr. Secretary. And let me start out by saying thank you for the information that i received from you on working with your director, looking at the diversity information. And that was very much appreciated. So thank you. Today mr. Secretary, i wanted to share with you in yesterdays hearing with pru deshl regulators, several of my colleagues including congressman cleaver, raised the issue of minority depository institutions, specifically with the rate that theyre disappearing. Since, as you know, the financial crisis of 2008, the number of mdis failed 31 . At the end of 2018, we only had 149 of these institutions left. Mdis are incredibly important to the minority communities that think operate in. Im introducing legislation today to codify the treasurys financial agent mentor program. Its known as the expanding opportunities for mdis act. And i also want to say that i was just it was just brought to my attention that your staff had sent my office some comments and Technical Assistance on the deal last night. I am very appreciative of that. So can you briefly describe what the treasurys financial agent mentoring program will seek to accomplish and how your department came up with it . Well, first of all, thank you very much. And were glad to assist on this. The Protege Program has worked very well. And the idea is to partner a Minority Bank with a large bank. And in that way the Minority Bank can get resources and training and help to run their business. And we share your concern. I think there should be an increase in opportunities for Minority Banks, not a decrease. So this is something im pleased. I personally wrote and asked many of the big ceos to help on this. We look forward i know we did work with you on some technical issues and we look forward to continuing helping you on this. I want to say thank you. Was there a specific need that you thought you had to send the letters to the big banks . Do you think it would help them to be more engaged to do it . Or because you felt they werent doing anything . No. They were pleased. So id say, you know, kind of when we asked people to go into this Protege Program, people had been very receptive. And its worked. And we look to scale this up. And we look to work with you on your potential legislation. Well, thank you, because we have noticed that some of the larger banks who i have been very critical of, their lack of working, increasing enough with their cras, participating on diversity and inclusion, so i would like to say, mr. Chairman, and Ranking Member, people ask us all the time why do you talk so much about inclusety and diversion, this is more than just hiring them. Its also about if you have someone in the room and youre mentoring and working with people, it helps with the economy, it helps with jobs, therefore it crosses over that people can pay for their housing, because we have a lack of Affordable Housing. It helps them with health care. It helps them with daycare and child care if they are in the room. So i again would like to say thank you and mr. Chairman i yield back the rest of my time. What gentlelady yields back. The gentleman from tennessee, mr. Kustoff, is recognized for five minutes. Thank you, mr. Chairman and mr. Secretary for appearing today. Weve had questions today about the u. S. Mexico Canada Agreement, and if i can ask you just in laymans terms, what is the effect to the he economy if in fact congress does pass the u. S. Mexico Canada Agreement and conversely, what is the effect of the economy if we fail to pass the u. S. Mexico Canada Agreement . If we pass it, we estimate its in excess of 50 basis points a year in gdp, which is very significant. This would create additional jobs, additional revenue for the government and consumer and businesses. And it modernizes trade with our two most important trading partners. Im not going to speculate on what would happen if you dont pass it because im highly encouraged you will. Id like to share your enthusiasm and i appreciate that. You received a question from mr. Williams of texas about the fate of localization and whether there should be a federal standard. If i can, id like to ask you about india. I know that you were recently in india and weve read the press accounts about how india is trying to raise the bars as relates to the data localization and frankly the restrictions on free trade as it relates to startups and other companies. Can you talk about what the barriers are for u. S. Companies operating now in india and what effect that could have . Well, again, in my recent trip, weve had very specific conversations. Weve been dealing with them over the last year own this issue. We want to make sure, one, that u. S. Companies are treated fairly and can compete. We have no issues with the countries want to have local data for regulatory purposes, they do that. Its the issue of eliminating data outside. I think as you know, were in a global economy. Were in a scenario where data transfers, that data is processed in different places. So this is a complicated issue that we continue to work on to make sure that our Financial Services companies are treated fairly. Not only Financial Services companies but also other companies that are operating in india as well . That is correct. And treasury continues to work with the officials in india on that . We do. And were also working very closely with ustr because its a trade issue. Thank you, mr. Secretary. Weve talked about the benefits of the tax cuts and jobs act, which no doubt has been a tremendous benefit to our economy and to our folks who live in the 8th Congressional District of tennessee and across the country. One thing that we may not have gotten right in the tax cuts and jobs act is the quip as it relates to depreciation. And i think thats a technical fix, trying to resolve that. Could you talk about the effect of trying to resolve that in terms of depreciation from 39 to 15 years . So let me just say this is something that i hope this committee and others will help us with on a bipartisan basis. This was clearly a technical mistake. And what happened for retailers was due to a literally a technical mistake in the drafting, the amortization became longer as opposed to shorter. I think everybody acknowledges on a bipartisan basis this was a technical mistake. And this impacts an area of the economy which is retailers. Its a big part of the economy. Weve been trying to get this fixed. I would hope its something that Congress Next year will reconsider helping us work on. It was a simple mistake. And nobody is debating that. From your standpoint in treasury, its something that should be resolved sooner rather than later or you would hope . Its our number one, two and three technical fix request. Thank you. I yield back the balance of my time. Gentleman from tennessee yields back. Mr. Heck from washington is recognized for five minutes. Thank you, mr. Chairman. First i want to join with my friend from texas, mr. Williams, in expressing my appreciation for the role that treesry played in the International Insurance negotiations. I happen to be one who believes we should keep faith with the mccairn ferguson act. This is the best way. I think its worked well. So thank you, sir. Im also grateful that my friend across the aisle raised the issue of a tax cut and jobs act. Id like to ask you about it. Obviously at the time small technical fixes necessarily notwithstanding, im a cosponsor, i hope we get to it that we were promied that it would be a game changer. Those were your words. A game changer for business. It was broadly held as something that would lead to increased Business Investment. It hasnt. Theres the chart. Thats the chart of the bureau of Economic Analysis revealing that weve basically had six quarters of a significantly downward trend of Business Investment in capital. And im going to ask you why you think that is and what it is you think we ought to do about it, especially given the promises that were made. But i want to say first of all about why i care about this. I think its pretty clearly established that theres a close relationship between increased productivity and increased wages. Lets face it, the data is in. Weve been fairly stuck on wage growth for the better part of 30 years in this country. While its beginning to inch up, its not really material in that increase. Every upward trend is appreciated. But we still do not have wage growth. And presumably we do not have wage growth because we do not have increased productivity, presumably because we do not have increased Business Investment, which we were promised. So mr. Secretary, why not . And what should we do about it . Well, first off i agree with you on the premise of wage growth. I kind of disagree with you. I think it actually has been significant. I think that for the first time in the last ten years weve seen wages growing and growing at a level that is meaningful to taxpayers. I think would you care to cite the data because it is not over consecutive quarters significantly outpaced Consumer Price index, and this is coming on the heels of basically 30 years with flat line. Were happy to give you the charts but theres no question that wage growth has been increasing and inflation has been very low. So happy to get back to you the data. The question is that downward arrow. We were promised an upward arrow. We havent gotten it. To be honest with you, i cant really read that chart, other than i can read the capital spending. Do you see the blue arrow . Thats not good sir. I got the blue arrow. Thats Business Investment. Again, i dont know how youre calculating that business assessment. Im not. The bureau of labor statistics is. Youve obviously pick a slide that demonstrates a dramatic decrease. One of my favorite adages is that some people use facts and figures the way i drunk used a lamp post, to lean on, not to illuminate. I assure you sir, i had not done that. This is the bureau of Economic Analysis data. It is six illuminate. Its six consecutive quarters. I havent in any way reshaped the graph or the line or the data in any way. Were on a downward trend in Business Capital and equipment even though we were promised as a promise that would it would flower. We have not gotten in real wage increases. Why havent we got it . First of all, mr. Heck, we are the only economy in the world that is showing continued growth. That is not coincidental. We are Economic Growth of 2 now . Thats what youre bragging about is a revised 10 forecast . Those numbers if youd let me respond please. As opposed to screaming at me. Oh no, sir, im screaming at you you will know. At this is not screaming. Gentlemen. Those numbers were impacted partially by the boeing impact. Those numbers were partially impacted by the strikes and i would say theyve also been impacted by a significant slowdown in Global Growth. I think youre going to see growth quite significant in the pickup at the rest of the year and next year. So theres no question american taxpayers are seeing the benefit of tax cuts. Thank you sir. The gentlemans time has expired. The gentleman from georgia mr. Loudermilk is recognized. Thank you. First, i want to thank you for directing treasury to put America First and standing strong for american interests during the recent International Insurance negotiations. I think you must be very cautious about imposing European Capital standards on u. S. Insurers. Im glad treasury has shown its official opposition. I want to talk to you about the national sewassociation of agents and brokers. A director of the board member nominated by the president and confirmed by the senate and this hasnt been done. Last time you were here we discussed that and you committed you would speak to the president about how important it was to get these nominations done. I just wanted to follow up and find out where are we on that process . Weve put in recommendations and its going through the process and well follow up with you again as we suggested. I appreciate that if you could stay on top of it. Its very timely and im concerned with timeliness right now of the senate because if we proceed with impeachment as it appears were doing, were about to shut down the senate for maybe two months or longer and not being able to get anything else done. So i appreciate that. Im also Ranking Member of the committees Intelligence Task force. Earlier this year we had a hearing regarding customersDigital Identity. The Task Force Chairman and i recently sent a letter to you asking to move forward with some of the recommendations of the 2018 fin tech report and just wanted to find out what action treasury has taken to work with the private sector on solutions to Digital Identity issues. I think as you pointed out, this is something that we identified early on. It is something we continue to work with the private sector. Its also something im very interested in because of the irs and from the government standpoint as well. Its something we look forward to continuing to work with you on. Its an important issue. If you could keep us up to date on progress made, that would be very helpful to us as well. Fsoc formed the Digital Assets working group to explore issues surrounding blockchain technology. I applaud that by my concern is that state banking regulators have been excluded from the working group and doddfrank specifies that nonvoting members such as state banking regulators must not be excluded from fsoc activities, so i think its important that we have our stakeholders in the state involved, and do you know why the state regulators have been been excluded from the working group . I dont. Its not intentionally. If the state regulators want to be part of it well absolutely accommodate them. Id appreciate again it if you could keep us abreast of that. I also want to close out by thanking you for your part of this robust historic economy that we have. I see that we could even add another 68 billion into this robust economy if we could move forward with the usmca which i hope that very soon we can put the American People first and get forward with that. With that i yield back. The gentlewoman from michigan ms. Tlaib is recognized for five minutes. Thank you for coming before committee. Residents in my community we have the third poorest district in the country. Were still recovering not only in detroit but even the wayne county communities throughout my district. And one of the things we did through doddfrank is created the Financial Stability and oversight. That kind of oversight of shadow banks is going to be critical, too big to fail kind of banks and so forth. Under your tenure so far and again, i would love to hear your vision of what you think this council is supposed to do because so far under your tenure, secretary, you dropped the appeal of the District Courts decision and metlife lawsuit. I think there is not one single nonbanking institution that is designated as too big to fail or what we call i believe systemically important Financial Institutions. What is the direction were going in if were not doing any oversight . Doddfrank, the whole purpose was so we dont have another downturn economic recession that led to predatory practices by these big banks. First, let me say i share your concerns and your issues. We are doing a lot on oversight. But you dont have anybody to regulate. Again not one single institution, correct. Again, thats a good thing. Thats because the you think metlife, prudential, none of those are too big to fail. That is correct and by the way, g. E. Capital was dedesignated prior to us coming here. It encouraged all these companies to derisk so they wouldnt be designated and regulated by the fed. They have proper regulators. I want to be clear. The committees job is to bring all the regulators together to make sure the primary regulators are regulating these entities. But by dismissing the case in metlife, we dont have that much authority now that weve walked away by saying they would fall under certain guidelines for oversight. Actually thats not the case at all. We have the same authorities we always had. The only issue we talked about was including the cost benefit analysis which we think was required by law. I just want to be clear. Its good news to the economy that we dont have anything designated. If we were sitting here with lots of entities designated, that would be a major concern of ours. Chairman, i would like to submit for the record strengthening the regulation and oversight of shadow banks to the record. Without objection. Last question, and this might seem out of whack but its important for me. No do you believe in socialism for corporations . Do i believe in socialism for corporations . Socialism for corporations. I do not believe in socialism for corporations. Thank you very much. I yield the rest of my time. Gentlewoman yields back. The gentleman from ohio mr. Gonzalez is recognized for five minutes. Thank you mr. Chair and thank you secretary for being here. Ive been working with your staff on some World Bank Reform issues and just want to thank you for your collaboration on that. To me, i think when i look at the world bank, the number one issue is ensuring that china graduates from the loan program. Its unconscionable to me that my taxpayers, our taxpayers, should be in any way subsidizint the chinese growth model. My understanding is today at this very moment or maybe its already happened that chinas Country Partnership framework is going to get a vote at the bank. I couldnt access the document. Thats not your fault. It wasnt on the banks website. My understanding is it provides loans for 1 billion in perpetuity and assistance in advancing the chinese growth mod internationally, a model that social credit scores, interns its own people, and obviously whats going on in hong kong. Huge issue for me. Just at a basic level, do you agree with the graduation objective . You agree china should be made the graduate at the world bank . I do. Secondly, whats the best way to ensure that occurs . Right now it feels like we have our hands tied behind our back despite the fact were the largest shareholder and have veto authority. It still feels like we have no ability to affect this. So how can we do it . I dont think thats the case. This is something that david mall pass worked on with the world bank when he worked for me, this was his number one issue. Reforms now at the world bank and leading the world bank. Hes worked with china. China i actually understand is cash flow positive this year meaning theres more cash coming into the world bank than cash going out. I believe theyre going to be under a billion dollars this year and hes working towards them, and by the way, in the China Program our executive board member has objected to the program and i think that gets read in and ultimately will be on the world banks website. We do technically have veto power, right . Can you explain how that would work . Just to be clear, we dont have veto power over every single loan or veto power over a specific statement. We have veto power over capital allocations and other issues. But again, i have great confidence in David Malpass. We all share the same objectives. I appreciate the progress. But for me even a dollar is too much for our taxpayers to be contributing to china. As you may know, ive also recently introduced legislation to support the policy that you just articulated to transition china off bank lending. I appreciate your staffs feedback and look forward to further collaboration. Another section of my bill deals with debt transparency with respect to the belt and Road Initiative. I see providing Debt Management as a vital piece of our national strategy. Can you talk about the current strategy and efforts to provide Debt Management assistance at the world bank and the imf to borrowing countries of the belt and Road Initiative . And what are we doing to get other partners and allies fully on board . We have a lot of support support at this issue from teh world bank and imf. Everyone supports that transparency. Its very important that china play by these roles and direct discussions with them. Thank you. As conditions of certyain imf programes weve demanded transparency on exposure. Thank you. I look forward to continuing to work with you on these issues. Shifting a bit to the prudential regulators a little this week that promotes Investment Opportunities and startups of Small Businesses. I know the volker regulations are considering revisions to the covered funds portion of the rule. Prior ro this job i ran a Silicon Valley tech startup. Very easy to acquire capital in that industry. Less so where im from in northeast ohio and where i represent. Can you talk about your thoughts on this specific issue and how it would impact private capital flowing to communities outside of places like Silicon Valley . I commented on this earlier but we are working on the regulators and i hope over the next 36 months we can address this. It will help Small Businesses. In no way is it going to impact Systemic Risk. Thank you. I yield back. The gentleman from illinois mr. Casten is recognized for five minutes. Thank you. I introduced hr5191 the Climate Change financial risk act to create a Climate Change risk subcommittee within fsoc and report annually on Systemic Risks of Climate Change to the Financial System. The reasons for that and im sure you know this but just to reiterate, 20162018 average economic losses from natural disasters were 150 billion. The paris goal i just returned from madrid. The goal of the Paris Agreement is to stay under 1. 5 degrees of additional warming. We are not even at 2. 2 degrees of warming. At 8 degrees manhattan feels like qatar essentially. Its really unpleasant. At 4 degrees of warming, the global losses could hit 23 trillion per year. There are already predicted to be 311,000 homes that will be regularly inundated by 2045 and millions by the end of the century. This dwarfs the financial crisis. By any analysis that is systemically disastrous. Have you consulted with any climate scientists in coming to a conclusion abotu stress testing . So again, let me just preface. I have expertise on a lot of issues. Climate is not one of them. Thats why im asking who you consulted with. I think there is a place and a role to study the climate issues and the impact on the economy. I dont think fsoc is that place and i think theres plenty of other areas. Now i will just say if i could, does the office of Critical Infrastructure believe theres no Systemic Risk from the Climate Crisis . Youre not an expert in cyber terrorism either but presumably. Actually i have become an expert in cyber terrorism. I spent a lot of time on that because that is my primary responsibility. I dont mean to criticise your expertise, im saying there are Systemic Risks that the office of Critical Infrastructure has concluded. Have they concluded that Climate Change is not a Systemic Risk . I dont believe they have concluded that it is a Systemic Risk. I dont know in the negative if theyve concluded it the other way. But let me just comment. Outside of the United States there are some areas where climate issues are very, very, very significant. I think the u. S. Has made a lot of progress on this. No, we havent. We are not on a sustainable path. But let me throw some numbers. Likely sea level rise, we already know if we went to zero co2 tomorrow we still got another 2 feet baked in. Realistically we probably have meters measured in. Best analyses, there are 900 billion of u. S. Homes that are underwater by the end of the century. Has fsoc analyzed how that would impact the Financial System . Not to my understanding it hasnt. The projected private investor losses globally dependingon the scenario somewhere between 4. 2 and 13. 8 trillion, depending on the scenario. Has fsoc estimated the effect on systemic Financial Stability from those losses . Again, as i commented earlier, you arent obviously spent a long time on this and i appreciate that. There is a place and role to analyze these. I think that the issue for f sock is to make sure banks have proper disclosure. I dont believe this is a Systemic Risk that warrants fsoc review. But ill discuss it with the committee. Im happy to. The concern, and just as i think about these things, obviously none of us are rooting for this, but if i am an insurer and im looking at these risks out in the future at some point we start to get to the point where those policies are coming due im going to change my risk profiles. Im going to stop insuring certain sectors. Weve seen what the maps of the country and where you will not want to live and where were going to have crop failures. And it is impossible for me to see a scenario where that does not exist. Before i left for paris i watched plains, trains and automobiles with my daughters. Were going the wrong way. We know were in the wrong lane. We know theres a couple trucks coming down the highway at us. If you dont think that fsoc should do it, i guess i respectfully disagree and thats why we introduced the bill because i think we need to look into these risks while we can swerve while we still have time. Gentleman from tennessee mr. Rose is recognized for 5 minutes. Thank you. Welcome secretary mnuchin. One of the defining tenets of our Insurance Industry is that it is by and large state regulated. It is the strength of the country and it is something we need to defend. Secretary, like so many of my colleagues here today, i want to thank you for your efforts to defend our state based insurance regulatory regime, for your close and collaborative work with the state Insurance Commissioners and for registering treasurys official opposition to the ics or International Capital standard in abu dhabi. I know theres still work to do on behlaf of team usa to ensure foreign bureaucrats dont tick tatedictate the rules for u. S. Obligation. I hope you will continue to engage with members of congress and the state Insurance Commissioners as we move forward. Since the ics was adopted, what are some of your main concerns with the current framework . Well, let me say im pleased to hear that there is bipartisan support on this issue. We do very much support the state regulatory mechanism for insurers. Shur insurers. We are concerned and weve expressed these concerns that although they arent required to be adopted, that it could force the industry in a way that is detrimental to our leadership and our state based regulators. Vice chair quarles said in his january 2019 remarks at the american counsel of life insurers that the Federal Reserves Building Block approach or bba could strike a better balance between entity level and enterprisewide supervision of insurance firms, which would facilitate the continued robustness of Product Availability here in the United States. I believe part of the intent behind developing the bba was that it could be deemed comparable to the ics. Are you familiar with the bba . Im not completely but i will follow up with your office. We have a lot of people who have experts and have spent time on this focused on it for me. Okay. Thank you. Do you think that the bba based on what you know now the bba framework could eventually be recognized as an outcome equivalent approach to the ics and would it be preferable in your opinion . Again, i want to get back to you on that. I believe thats the case, but i want to get back to you on that issue. To reiterate, i believe its important that we as members of Congress Also continue to voice our bipartisan support for the state based insurance system. So along those lines i want to thank my colleagues mr. Heck and mr. Bud for introducing the International Insurance standards act. Is there anything else that youre aware of that we as members of congress should be doing to help the usas position on the ics . I think not at the moment. Youve been very supportive working with our office. We had a lot of bipartisan support as we went with team usa to represent these issues. Transitioning over to some other issues, i wanted to ask you about f socks work on the transition away from libor as a reference late. Libor is set to be phased out as a Bank Reference rate by 2021. From the fsoc september minutes i understand libor is the underlying rate for 200 trillion in contracts world wide. I know this will cause a bit of disruption in our market and the committees preferred alternative to libor is the securitied overnight financing right. What makes the sofr the best alternative . The most important issue is that we have a transition from all these loans and securities. The thing we like about sofr is that its a very liquid market, it cant be manipulated and its readily calculable. There may also be no different than libor loans and prime loans, there may be more of a credit oriented index that developed as well. Were very focused on the transition. As we transition from libor to sofr what sort of out reach is treasure doing to engage with stakeholders as attention to the libor transition increases . We have a huge group working on it as i mentioned yesterday myself, chairman powell and a bunch of the regulators met with ten of the ceos and we continue to have outreach working on this. Thank you. The gentlewoman from virginia ms. Wexton is recognized for five minutes. In september the house passed the uyghur human rights policy act which is Bipartisan Legislation that was authored by senator rubio and cosponsored by 44 senators and 130 u. S. Representatives including many on this committee. This week the house passed the uyghur intervention and global humanitarian unified response act or the uyghur act. Both these bills seek to hold officials in the Chinese Government responsible for the gross violations of human rights in chinas uyghur autonomous region including the mass internment of over 1 million uyghurs. The uyghur act passed 4071. Would you recommend to President Trump that he sign these bills when they come across his desk . Im not going to make any comments publicly about what my recommendation will be to the president one way or another, but that doesnt mean im not recommending it. Okay. Because were getting mixed signals from the white house officials and reporting is suggesting that Treasury Department and you in particular are responsible for blocking or slow walking efforts to hold chinese officials accountable. No, thats not accurate. Im going to read from an article october 8th, 2019, New York Times article, which id like to submit for the record. Without objection. Senior officials in the National Security council and in the state department have pushed for use of the entity list to target Chinese Companies supplying Surveillance Technology to the Security Forces in xinjiang. They have also urged mr. Trump to approve sanctions that would penalize chinese officials and Companies Involved in abuses. But top american trade negotiators including treasury secretary mnuchin have cautioned against policies that would upset trade talks. Are you saying that is inaccurate reporting . That is inaccurate reporting and i think you know how we feel about the New York Times. But are you willing to sacrifice human rights abuses for the sake of trade talks . Because it certainly appears that way. Im here to talk about Financial Stability but i will respond. I very much am concerned about human rights issues all over the world. We administer global magnitsky sanctions all over the world on sanctions. Weve administered things in china as in other places, but im not going to make any comments on confidential discussions i have with the president on these or other subjects. Related to that, back in april i joined a number of other members of congress and the senate. In a letter addressed to you, secretary pompeo and secretary ross urging the administration to impose global magnitsky sanctions on senior policy leaders who were complicit in these gross violations and human rights abuses including the socalled architect of the roundup of uyghurs. We never received a response from you. While i have you here what is the response on sanctions in china . I thought state had responded for that letter on behalf of all of us. Well get back to you. I thought state responded from all of us. We generally dont make comments on future sanctions at all. Although i will tell you wherever we get letters, we take these things seriously. That letter was sent in april so its more than 6 months ago. Weve gotten no response and theres been no action by treasury. Again, if the letter was written to all three of us, its common that one Agency Responds if its an interagency issue. Its not common that we all respond. Did the state department respond to you . Yes. But they did not respond on treasurys behalf. Again the way we work on interagency issues is the primary agency thats responsible for an issue responds. Again, i wont comment on future sanctions other than to say that article is inaccurate. While were discussing human rights violations, i want to follow up on a question i asked you last time you were here about 6 months ago. When is the administration going to hold Mohammed Bin Salman responsible for the murder of Jamal Kashoggi . Again, i dont see what that has to do with Financial Stability. I can tell you, because i was the official who went over after secretary pompeo and again, we had very direct discussions about our concerns on these issues. The gentleladys time has expired. The gentleman from indiana mr. Holingsworth is recognized. Good afternoon. I appreciate you being here and i appreciate your continued efforts at the Treasury Department to get both price and volume information after the fact which has led to increased competitiveness, increased liquidity. And i know treasury has been looking into that and said they were going to start disseminating volume data but werent going to put out pricing data or volume data that were very close to those trades. I was curious why that decision was made. Are there further steps that are going to be taken to release more data around transaction in the treasury market . Let me respond. This is a complicated issue. So first let me just say the u. S. Treasury market is one of the most liquid markets in the world. It has very small transaction costs. Weve studied this carefully and trying to balance the disclosure issues and whether that really is going or hurt or help the market. I will say, as you look at some of these other markets and you look at the data, there is less liquidity in a lot of these other markets. Now, part of the reason there is less liquidity ill acknowledge also has to do with the volker rule and proprietary trade. When you look at transaction costs, you have to look at transaction costs in the context of overall liquidity and were happy to come and talk to you about it but we want to make sure we get this right and if it were clearer to us that releasing all the data would create more liquidity and more transparency, wed be doing it. We certainly understand the do no harm philosophy and appreciate that. I stipulate to you that it seems to be a well functioning market. There have been some blips along the way, october 2014, notably. Its hard for me to imagine, and i hope you might expounf upon the potential harm from transparency in price and volume data. I understand that you want to do no harm but its also hard for me to understand what that harm might be. I think there are times when weve got back and looked at the data as it relates to other markets. There are times when releasing the data hurts liquidity. Id also say another interrelated issue is the advent of electronic trading and a larger and larger portion of the government market is from people who virtually invest no capital but take advantage of sophisticated algorithms. Again, i want to make sure that the release of data, again, actually is helping the market and not just creating arbitrage opportunities for people who want to do electronic day trading. Totally agree. I dont want to be pejorative to those that are taking advantage of those small arbitrage opportunities because they are helping to close the market in a real and meaningful way. I dont want us to make a decision because we want to prevent somebody from being able to take advantage of that and not providing the transparency the market may benefit from. I agree it is well functioning today and well funcitoning many days but i want to ensure that transparency is an important part of that market going forward, as do you. Its just sometimes hard for me to understand what harm might come on account of that. I understand you guys have looked at other markets and seen some adverse effects to liquidity, but as you well know, its hard to hold everything constant when you are looking at different asset classes. I republican respect the fact you have a lot smarter people than i over treasury to look at that. I wanted to transition and talk aboutthe Taxpayer First act. It included a provision that people receiving permission must obtain the the express permission of taxpayers. Theres been some guidance by the irs that is for all transcripts, for everything that is sold after december 28 by fannie and freddie. It is important to the functioning of the market. The gentlemans time has expired. I yield back. The gentlewoman from iowa is recognized for five minutes. Thank you, chairman and thank you secretary mnuchin for being here again today. I know that weve heard a lot of criticism about the 2017 tax cuts as primarily benefitting the richest americans. I absolutely think those are accurate but thats not what i want to focus on. What im interested in looking at is how the irs is treating the wealthy. The wall street journal reported that irs audit rates for people making more than 10 million a year have dropped more than 80 in just the last four years. Why are the top 1 s tax returns being looked at so much less frequently . Thats actually not the case. Im working with the irs to release the data, because one of the issues is the way the irs releases the data now is on closed cases, not open cases. But i can assure you when i saw that article i had the same concern. I called up the commissioner and i said we should be doing more of these audits, not less. We are going to release this data in a transparent way to assure you that the people who are making the most money are getting high audit rates. Thats fantastic to hear. By the way, if you want to give us more money for enforcement, im happy to take it. We will absolutely talk with you about that. I think thats a great idea. Are you telling me then the number is much lower that is being audited . No. Its higher as a matter of fact, thank you again, this is the problem in the data you guys just gave me. The way we report the data is on closed audits. These audits take obviously a long period of time. Im happy to come back and im going to get the irs to release publicly. The way i think we should be looking at the data is for each tax year, what percentage of an income group are we auditing, not what percentage has closed in that year. That would be great if you could get that over to this committee or to my office, as well as if you could make sure it tells us what percent is currently being audited. What people want to understand is not what percentage of the audits were closed in a year, but in a tax year what percentage of those people will be audited whether it was closed in 2018, 19, 20. Well get you the data. I can assure you i had the same view when i saw it. Im glad to hear that. My concern is that i just want to make sure that those who are the wealthiest among us in the country are being audited at the same rate other folks are. And from what we can see right now it shows that theyre being audited at a much lower rate. If you can provide us with information that differs from that, i would love to see that. The next thing i want to talk about is back to the 2017 tax law, included two provisions intended to limit the use of tax havens for multinational corporations. The irss own data shows that in 2016 u. S. Operations booked more than 33 billion of profits in bermuda bermuda despite having only 384 employees there. Thats more than 85 million per employee. My goodness i know that data is in 2016 before the tax cuts were passed. Im using it because thats the last information we have. Has there been a significant reduction in profits booked in bermuda in 2017 or 2018 data . I dont have that data. Were happy to look into it and get back to you. I will tell you, part of the reason we moved from the global tax system to a territorial system with the guilty tax was to basically prevent people from moving to tax havens and make sure that the u. S. Taxed companies fairly. Great. Im so glad to hear that because from what were seeing right now, thats not happening. Id love to see if were making some improvement on that. Obviously i want to limit corporationsuse of tax havens. We need all that money here in the United States to address things like infrastructure and things that people in this country need. What suggestions do you have for continuing to work on curbing the use of tax havens . Again, there were many regulations we put out through the last two years on the tax act that limit these types of things and again, were happy to follow up with you specifically on some of them. And lastly the European Union has actually had success in reducing tax havens simply by requiring Public Disclosure of country by country income. Is that something you think might help . Not necessarily although i will say, you know, a lot of the information exchanged with the europeans is helpful in looking at tax havens. Thank you. The gentlewoman from new york ms. Ocasiocortez is recognized for five minutes. Thank you. I looked through the minutes of the fsoc meetings this year and i didnt see any mention of Student Loans. The total outstanding Student Loan Debt burden is now at over 1. 5 trillion. Young people are waiting until their 30s and 40s to have children, buy a home, make other major purchases. Do you believe that Student Loan Debt currently poses a major risk to our Financial Stability . I share your concern on Student Loans, although i dont think it is a major risk to Financial Stability. I can assure you on an interagency basis we are working with the department of education and the nec because i think in many cases people have taken out Student Loans that have created certain issues for them. So Student Loans are a large part of the debt and thats something were carefully studying. So it is a problem but not a major risk to Financial Stability. I just wanted to run through a few different topics here. Turning back to the fsoc meeting minuts, i also didnt see nay mention of Climate Change. Do you believe Climate Change poses to our economy . You may have missed my comments before on this. Apologies. I acknowledged that Climate Change should be discussed in certain areas. Fsoc is not an area where i believe it should be discussed. Based on previous discussions, i said id raise that with the committee. Ok. Lets talk about leveraged lending. It is up 20 this year with a total Outstanding Balance of over 1 trillion for the first time. I heard earlier you dont think it poses a threat to our Financial System either, is that correct . Not at this time, and specifically it doesnt pose a threat to the Banking System or the insurance system. But this is an area that fsoc will continue to monitor on a quarterly basis because it is an area particularly if the economy slows down we want to carefully monitor. Do you see similarities between collateralized Loan Obligations and the financial crisis . Not at all. What about medical debt . We spent about 3. 3 trillion dollar on health care last yearyear. Thats up more than 20 over the last five years. Do you believe that medical debt poses a significant risk to our Financial System . I would say this is not an fsoc issue but putting on my treasury hat, we are concerned about the rate of growth of medical expenses and that is something were trying to look at many different things. Because that does pose Economic Issues although not Financial Stability issues. What about housing . I see some mention in recent fsoc minutes about Mortgage Origination from nonbank lenders. So im assuming you at least agree that there are some problems in the Housing Market that can pose threats to the stability of the Financial System in that respect . Yes, i commented on earlier we are monitoring the amount of the Mortgage Market thats moved out of the Banking System. Particularly were focused on nonbank servicers that dont have liquidity and we hope to work with this committee and others on housing reform. Its an important issue. What percentage of mortgages were originated by nonbanks this year . I think its roughly 50 . 50 , so half of mortgages in america are being originated by nonbanks. That puts them outside the usual scope of regulation, is that correct . No, not outside the usual scope of regulation at all. Its outside of the banks. So it is something that were looking at carefully. Again, a lot of those loans are sold to fannie and freddie and are insured through fha. So we are looking at it through those regulators. The shortage of housing, stock is down more than 15 in several large metropolitan areas. Does the fact that this market seems to be slowing down, does that pose risks to the Financial System . Again, not risk to the Financial System but Affordable Housing is something were concerned about and making sure that theres greater access to Affordable Housing. Not an fsoc issue but a treasury issue. Weve got here Student Loan Debt does not pose a risk to Financial Stability, Climate Change potentially, leveraged lending does not, medical debt does not, Mortgage Origination does not. What are some of the largest risks to our economy right now and the Financial System . I dont know if you had a chance to read the report, but if you just look at and we highlight cyber security, structural issues, alternative reference rates, risk to the credit expansion. We specifically talk about nonbank Mortgage Origination, financial innovation, housing, finance. Do you see theres kind of a decoupling here with the quality of life from what were seeing in terms of measurements of Financial Stability . Im not making that connection, but im happy to explore that. Okay. Thank you very much. The gentleman from kentucky mr. Barr is recognized. Thank you, madam chairwoman. Mr. Secretary, youre almost at the end of the line here. I was compelled to come back and take my five minutes. I wasnt originally but i had to ask you to elaborate a little bit more on your dialogue with my friend mr. Heck from washington on Capital Expenditures and tax cuts. My views on this, having spoken to many manufacturers and ag businesses in central and Eastern Kentucky is that theres no doubt that accelerated Business Investment, improved productivity. Most of the ceos and Small Business owners said that tax cuts were huge in terms of pulling Forward Investment that they needed to do to enhance the productivity of their businesses, large and Small Businesses told me that. And its made their employees more productive. And so my theory is when you look at mr. Hecks chart of declining cap ex, it certainly wasnt caused by tax cuts. Tax cuts may have pulled forward a lot of Capital Expenditures and Business Investment. But when most private sector people tell me is that the decline in Capital Expenditures is not attributable to anything other than trade uncertainty. Also they note, many of them, we would continue to invest in a capital and equipment purchases and other items that would make their businesses more efficient and more productive if the democrats would stop opposing making those provisions permanent in the tax code. The uncertainty of not having permanency with bonus depreciation and expenseing provisions is maybe an impediment for continued cap ex. I want your thoughts on that feedback that im getting from actors in the private sector on cap ex. I also want your opinion about how trade uncertainty is contributing to a pause in additional Business Investment. So first of all, thank you for coming back. Theres no question from the companies that we see visiting all over the country that there have been major Capital Expenditures as a result of the tax cut act. And as youve said, this incentivized companies because they get automatic expensing. When people ask about will the tax cuts pay for themselves, i remind them this has to be calculated over a tenyear period of time because this was designed to stimulate investment and lead to expensing in year one which will recoup later. In response to trade, i h say theres a lot of people waiting on the sidelines because of usmca. Im hopeful congress will pass it between now and the end of the year. Its the single most important economic trading relationship we have. Theres no question that passing it will add Something Like 50 basis points to gdp and will increase capital expenditure. Usmca is why we dont have that line continuing to grow up in terms of Capital Expenditures. So the best thing we can do in a bipartisan way in this congress is to pass the usmca. I would argue thats going to give you and ambassador lighthizer momentum with china and the eu. I encourage my colleagues on the other side of the aisle to join us in supporting this renegotiated north american trade deal for all these reasons. I want to talk to you about leveraged lending. Lots of hand bringingwringing on the other side. I wanted to ask you your views on clos in particular as nonbank investor vehicles taking some of this leverage out of banks, federally insured depository institutions into these clo vehicles and the extent to which clos as nonmarket longterm vehicles provide liquidity and could provide liquidity precisely in the time where we need it in an economic downturn and to that extent offer the Financial System a tool, a Financial Stability tool. And that if we overreacted to leverage lending particularly if we overreacted to clos that that could actually have a destabilizing effect and limit liquidity right when we need it. I would agree with you and i would even go one step further which is a significant problem of the financial crisis was there was too much high risk mortgages in the Banking System. So the good news is the higher risk leveraged lending has moved out of the Banking System into permanent capital vehicles. Thank you. I yield back. The gentleman from texas, mr. Green who is also the chair for the subcommittee on oversight and investigations is recognized for five minutes. Thank you, madam chair and thank you for your appearance, mr. Secretary. Mr. Secretary im on a mission of mercy. Heres why. In 2008 we had 215 Minority Banks. 2018, 149. Of the 149, 23 are said to be africanamerican banks, meaning 50 , more than 50 africanamerican ownership. And it seems according to the icba the independent Community Bankers of america, this is dated october 22nd, 2019, these 23 africanamerican owned banks have assets of 5 billion, total assets, 5 billion. Im on a mission of mercy because usually these banks are in neighborhoods wherein the people are not high income earners. They are underserved neighborhoods. Theyre economically distressed neighborhoods. And they are neighborhoods in need of banks, but these banks need additional capital. So when you mention your small bank Mentorship Program, it really made my heart warm. I really would like to know how this program will help me with my mission of mercy to help capitalize these small banks that i no longer Call Community banks. I call them neighborhood banks. Community banks 10 billion. These neighborhood banks, if they can get to a billion there would be a great celebration. Can you please share some intelligence on the topic . Well, i share your concern. I mean, its really terrible that these numbers have dropped as much as they have. These are, as you said, to some communities that really, really need these banks. The Protege Program is a step in the right direction of helping these banks. We need to work with the regulators. We need to work with private capital in making sure these banks have access to capital and can grow and we turn these numbers around the other direction. How far along are you with the program . My understanding is that you have a departure date that is certain in your mind. Im not sure its been published, but will this become viable before you leave . I wasnt planning ongoing anywhere any time quickly, so yes. I heard rumors, im sorry, that you might be leaving. Leaving when . I said id stay through the second term. Through the second term . My apologies. Youre talking to a guy who is proud to apologize. I apologize. Im glad to know youll be here. So the question becomes how can we collaborate and Work Together in a positive way to affect positively these africanamerican banks . And im saying africanamerican because theyre at the lower end of the totem pole. No other community, no other banks when you take the aggregate are in this kind of dire circumstance. So i really want to work to get some help. Im going to ask my staff to schedule a meeting to get together with you. Maybe we can try to do it in the beginning of january and figure out how we can Work Together. I absolutely assure you that i will look forward to this meeting. One additional thing about these banks. I have many of them in my district. And they take pride in what they do. They have good personnel. But they dont have all of the technology that other institutions are blessed to have and they dont have obviously the clientele, but theres a willingness to grow and to work with larger banks. This Protege Program pairing Smaller Banks with larger banks can reap some good benefits if its done appropriately and properly, so im eager to hear more about how we can do this pairing and to work with some of these banks, these small africanamerican banks. Thank you and i yield back. Thank you. The gentleman from missouri, mr. Cleaver is recognized for five minutes. Recognized thank you, madam chair. Mr. Secretary, thank you for being here. I appreciate the response, your response to my letter in which i discussed issues surrounding the rise of White Supremacy and the el paso attack and specifically i dont think theres much question that that attack was motivated by white nationalism. In my letter i talked about the Treasury Departments ability or the tools you had available to challenge and hopefully even curb the rise of these acts of White Nationalist terrorists. In your letter you talked about the fact that you shared my concern over the racially and ethnically motivated violent extremism and then said you would use all the tools available. But you also said that, you know, you did not want to comment on any investigation, which i understand and appreciate. What i would like to know, however, is well, based on what the fbi director which is, and i quote, he said a majority of the domestic terrorism cases investigated are motivated by some version of what you might call white supremist violence. And 40 of the 850 domestic attacks were racially and motivated and i was a victim myself as my Congressional Office was firebombed and the gentleman was caught, so i dont need help there, but i do know that, i mean, i wanted to see where you are in terms of curtailing the financing of the criminal networks, and im not asking you about what happened in el paso, but in general the criminal networks that i think that all of our, that our intelligence Counter Intelligence units are saying is out there and that is what is there something going on in treasury where the networks are being targeted . Let me just say that i didnt realize that our office had been attack attacked and that is a horrible situation. Let me just say that any of these attacks are despicable. As it relates to the treasury role, there is a significant role to work with all of Law Enforcement. When i was a banker and i used to send in all of these sars and i used to wonder if they went into the nowhere land. I can tell you that these activities and us being able to follow the money is very important in us being able to fight all of these different activities. But, so, is there a unit in treasury that is actually following the money . There is. So there is two units. There is both finsin, and they are the ones who take in all of the data and they have huge analytic programs that work with all of Law Enforcement, and the other areas is our tfi area which is less domestically and more internationally, but to the extent that there are domestic issues that we work with Law Enforcement as well. All right. Madam chair. Thank you. I yield back. Thank you very much. Id like to thank the secretary for his time today. Without objection all members will have five legislative days in which to submit additional written questions to the chair which will be forwarded to the secretary for his response. I ask the secretary to please respond as promptly as you are able. Okay. Im going to interrupt the closing. We have a hard stop at 1 00, and if you will take your seat, we think that we can get you in, in five minutes. Excuse me, mr. Secretary for the inconvenience. Not a problem, not at all. And we will try to get this done so we can honor your hard stop. The gentlelady from california, ms. Porter, is recognized for five minutes. Thank you, mr. Secretary, i really appreciate your willingness to stay and i will be done in 4 56. In june of 2017, the treasury issued a report on banking deregulation. It suggested if congress raised the 50 billion threshold of which the u. S. Banks are subject to strict oversight, the congress should do the same for foreign megabanks or foreign banks. Earlier, they followed that and massively deregulated foreign mega banks which is an item on a wish list published in 2014. And there is a lot that concerns me about this, but the most glaring is Deutsche Bank, and im sure you are familiar and the chairwoman is familiar with Deutsche Bank that they have to submit their living will once every six years, and this is the same Deutsche Bank within the last six years had a surprise 3 billion quarterly loss. I dont know how you lose 3 billion and not see that coming, has failed its stress test for three of the last four years and fined for a trading scandal for laundering money from russian oligarch, and admitted to participating in interest scandals, and violated the u. S. Sanction laws against iran, libya, syria and the sudan. Why are you advocating, why did you advocate to deregulate one of the worst corporate recidivists operating in the u. S. Banking system particularly when it is not even a u. S. Bank. Let me first say that i share many of your concerns about Deutsche Bank. I obviously cant comment on any of the specifics, because from a regulatory standpoint, it would be inappropriate for me to comment specifically on Deutsche Bank, but i share many of your concerns, and particularly the sanctions is invasion is something that we will not tolerate by anybody domestic or internationally. And i think that the issue, and i will add to this generically, and not as it relates to Deutsche Bank, and the question is that the banks will be regulated. And so the u. S. Subsidiaries, and the way that we have changed the structure, there is Intermediary Holding companies so that the foreign subs that are effectively u. S. Foreign institutions, and we can look at the risk at that level. I understand the subseries of foreign relationship, but i dont understand why we would do something that is deregulating one of the worst actors in the marketplace and in particularly when it is a foreign Bank Operating on our soil and threatening the stability of our markets. I understand that there is a balance of regulating the industry and stifling capitalism, but if you do share my concern about Deutsche Bank this gives us one less tool. I wanted to ask you about something else. How many people currently work at fsoc, the fiblt Stability Oversight Council . I answered this previously and the way this works is that there are people who work directly at fsoc i am asking about the direct number. There are hundreds of people if you add up the number of agencies no, i mean the sole number of whose sole job is to work at fsoc. There is a small group within treasury. How many . Then theres the office of his Financial Research which we have cut significantly because we felt those resources were not going to be used appropriately. Because Financial Research is not valuable . Again, we didnt think it is the best use of taxpayer money, and so it is a function that we felt that the resources within the different agencies, which are quite ample and quite significant that are dedicated to this. I wanted to be clear. How many people work at fsoc and only at fsoc . Well, it is is it a secret . Again, we probably have when you say at fsoc, and are you referring to within the treasury well, since you are the secretary of the treasury, we will start there. And again, we have about 10 people that are directly in the treasury work on that, but we have probably 50 people within treasury does anybody work just for fsoc . Yeah, there is a small number of people. How many, sir . Again, it is roughly, its slightly less than a dozen people. Less than a dozen. Yes. Do you know what the maximum number was at the height . Again, comparing it to the middle of t. A. R. P. , in the middle of the financial area, and by the way, there were not thank you very much. Let me start over again, and i would like to thank the secretary for his time today and without objection, all members will have five legislative days in which to submit additional written questions to the chair which will be forwarded to the secretary for his response. I ask the secretary to please respond as promptly as you are able. Without objection, all members have five legislative days in which to submit extraneous materials to the chair for inclusion in the record. Thank you very much. This hearing is adjourned. Thank you very much. Subcomm, this is an hour and a off. My colleague mr. Lamborn is tied up with voting in the Natural Resources committee, and he is going to be along