Transcripts For CSPAN3 Treasury Secretary Housing Finance Reform A Priority For Administration 20170518

This hearing will come to order. Today well receive testimony from the secretary of the United States department of treasury on domestic and International Policy issues. Thank you mr. Secretary for attending today. This is secretary mnuchins first hearing since being sworn in as treasury secretary in february and we look forward to our discussion. Many of this committees priorities fall within the jurisdiction of the Treasury Department, including Housing Finance reform and development of policies to encourage a healthier economy. We look forward to working with you and your staff on these priorities and improving the lives of americans. Hou housing reform means the most significant piece of business following the crisis. Its important to build bipartisan support for a path forward. Last week we received testimony from the federal Housing Finance director mel watt. He emphasized its congress that needs to act to determine the future of housing reform. The hearing reinforced why its unsustainable. Namely gses have zero capital, taxpayers on the hook for loss and the government taking all risks. A number of groups have released proposals for reform in recent months, including the mba, several coauthors writing jointly for the urban institute and many others. Three years ago, seven republicans and six democrats on this committee voted in support of a comprehensive finance reform bill. A key priority this congress is to build on that bipartisan legacy, and these new ideas and pass legislation that will create a sustainable Housing Finance system for future generations. I look forward to working with you, secretary mnuchin, and your staff at the Treasury Department as this committee develops this Bipartisan Legislation that will fix the broken Housing Finance system. Regarding Economic Growth im encouraged by President Trump tfs executis order for regulating the Financial System. I understand the Treasury Department will be issuing a report identifying law and regulation that inhibit federal regulation of the United States Financial System in manner consistent with the Core Principles soon. I will review this report and work with you regulators and members of the committee to enact measures to improve our Financial System. Financial regulation should help insure a safe and sound Financial System but in a tailored manner to help grow and maintain a healthy economy. We want our nations banks to be wellcapitalized and wellregulated without being drowned by unnecessary compliance costs. Undo regulation imposes cost and burdens on Financial Institutions and companies, often disproportionately on smaller ones. For example, Community Banks and Credit Unions lack the personnel and infrastructure to handle the overwhelming Regulatory Burden of the past few years. Yet in many ways, are treated the same as the worlds biggest institutions. Our Regulatory Regime should be properly tailored and avoid a one size fits all approach. One area i would like this committee to address is the 50 billion threshold for regional banks. Weve discussed whether 50 billion is the appropriate threshold. I hope we can Work Together to craft a more appropriate standard. My goal is to work with you, secretary mnuchin, senators of this committee, and financial regulators to look for ways to foster Economic Growth while maintaining resiliency in the economy. Senator brown. Thank you, mr. Chairman. Welcome, mr. Secretary, nice to see you two days in a row. Thank you so much. I thank the chairman for calling the hearing. Treasury played a key role in our government since its creation more than two centuries goal. That role expanded in the wake of the Great Recession when it became clear at great cost that the rules in place for Financial Services were inadequate. Given the greater role the treasury secretary plays in oversight of wall street, it makes sense that he devote some of his time to conveying his views and those of the administration on issues within this committees jurisdiction. To us and to the public. So far that communication has been insufficient. Questions posed today the secretary by me, questions posed to the secretary by other senators have gone either unanswered or were answered by non sequiturs. I hope today will give an opportunity for all of us for more forth right conversations. Tuesday we held an ordinary hearing that in my mind, turned out to be quite extraordinary. Three of the four nominees work in National Security positions in treasury, if confirmed. The fourth will work in a National Security position at commerce. One senator after another felt compelled to ask the nominees to ask each of them if they would put the law and the constitution and their country ahead of loyalty to the president. Amazing and unprecedented that we thought we had to ask that question. Given all the troubling revelations from the white house and about the white house, such a question is vital for every nominee in a sensitive position. This was hours before we learned that President Trump very likely asked fbi director comey to shut down an investigation. Honesty is critical, our National Interests are undermined whether National Security or domestic Economic Security when our leaders traffic in falsehoods. You cant lead if we dont believe you. And when i say we, i mean the American Public. China was a champion of currency manipulation. And then it wasnt. Wealthy taxpayers would not get a tax cut and then they would. The deficit would be eliminated in eight years and then it wouldnt. Wall street was getting away with murder but now hit has a compliance burden. The loop hole would be closed but now maybe not. We must invest a trillion dollars in our third world infrastructure but now there seems to be no rush. No cuts to medicaid it was promised now a 900 billion cut to medicaid is fine. The president launched examination of dodd frank with the claim that creditworthy borrowers cant get loans but the spigot isnt dry and we dont need to, in the president s original words, prime the pump. Bank loans and profits are at record levels, these are facts that bear repeating. Bank loans and profits are at record levels. The president was elected saying wall street has caused tremendous problems for us, were going to tax wall street. His words. Now that hes in office, he seems to have forgotten the tremendous problems that wall street created for middle class families across america. That same amnessia seems to have infected my colleagues which seems to forget what wall street did ten years ago to our economy, our families and neighborhoods. The president sacked one of the only champions that consumers have in the executive branch. Can we improve on how we regulate the banks . Of course we can. I believe we can do so for smaller institutions. But lets do so based on facts. The fact is that one in five homeowners in the city of cleveland, one in five, holds a mortgage that is more than 120 of the value of their home. Back lending has grown 6 annually over the past three years, loan growth at Community Banks was 8 this past year. Lending stalled in the First Quarter of this year, why . Because demand wasnt there. U. S. Households have more debt than they did at the peak in 2008 driven by increased auto and student debt. The fact is that wealthiest americans may have recovered from the Great Recession but many families like this cleveland homeowners have not. If we want to improve our economy wed be better off debating how to create jobs through an effective means rather than the thoroughly discredited trickle down approach whether achieved through the tax code or by raising the speed limit for wall street. Secretary mnuchin, well turn to you. You have the time you may need to make a statement. If you would like to introduce anyone as you choose, you may do so. And the time is yours. Thank you, i would like to introduce my fiance louise linten who is with me this morning as well as my team at treasury. Chairman crapo, Ranking Member are brown and members of the committee. It is an honor to appear before you today for the first time as treasury secretary. During my confirmation hearing, i promised to work with congress to create and maintain prosperity for all americans. I want to reaffirm that commitment to you today. Let me begin by discussing the treasurys recent report on Foreign Exchange policies of our Major Trading partners. Insuring that American Business, consumers and workers face a level Playing Field is one of the essential components of this administrations agenda. When foreign governments engage in currency manipulation, it makes the Playing Field uneven, which is why we regularly monitor these practices. After a careful study the Treasury Department has found that no Major Trading partner met the criteria for currency manipulation during the current reporting period. We will continue to follow this important issue and have established a monitoring list of economies that warrant close attention, this list comprised china, germany, japan, korea, switzerland, and taiwan. Additionally, we are committed to rethinking our foreign agreements and trading practices to insure they are both free and fair to American Business and workers. In my discussions with the imf and finance ministers of the g20 i have emphasized this goal and ill continue to do so. Turning to our domestic agenda, it has been more than 30 years since we have had comprehensive tax reform in this country. Combined with often imprudent regulations crafted in the midst of a crisis the entire american prosperity has slowed. I believe a goal of 3 gdp or higher Economic Growth is achievable if we make historic reforms to both taxes and regulation. There are about 100 people working at the treasury on the issue of tax reform. It is our goal to bring relief to middle income americans and make American Business competitive again. We will do this all while simplifying the tax system. On Regulatory Reform treasury is preparing its response to the president s executive order on Core Principles for regulating the United States Financial System. These principles provide a road map for the administrations approach to Financial Services regulation. We have taken a systemic approach by meeting with a variety of stakeholder groups to hear what works, what does nat work and what can be approved. Our initial report contains recommendations to provide relief for Community Banks and make regulations more efficient, effective and appropriately tailored. Housing financial reform is another priority of mine. Its been an unresolved issue for far too long and once were committed to fixing. We will insure that there is both ample credit for housing and that we do not put taxpayers at risk. This committee has done extensive work, along with your work on Community Financial regulatory relief. My hope is that we can partner on both of these issues, i look forward to working with the congress to develop a solution. Finally, another area that is crucially important to treasury is our commitment to combatting terrorist activities. We announced a number of sanctions against individuals and entities associated with destabilizing regimes like syria, iran, and north korea. This work is essential to the efforts to keep americans safe. The first few months of this administration have been significant. We have been working hard at treasury to develop and implement policy that will allow the economy to grow. This will make the dream of prosperity once again a reality for all americans. Thank you. Thank you very much, secretary mnuchin. I want to thank you personally for your responsiveness to this committee. We appreciate your willingness to work with us on these issues. And certainly your expertise and assistance can help us get to the right results. I want to take my first question, ask my first question about Housing Finance reform and the status quo. As i indicated in my opening remarks, director watt indicated this was critical for congress to deal with. My question to you is, do you agree the status quo was unsustainable and Congress Must move on this issue . Thank you, chairman crapo. I do agree completely with that. We are committed to working with you on a solution on housing reform. I think we need to fix fanny and fr freddie. Were committed to make sure theres liquidity in the housing markets. Its an important part of the American Economy. We need to make sure theres ample credit for the middle class to buy homes, at the same time making sure taxpayers are not at risk. The treasury has a very big line outstanding to those two entities. Thank you. And as you know, during the 113th congress this committee developed a comprehensive housing reform bill. We had to make a lot of compromises to achieve that Bipartisan Legislation. As the committee again focuses on Housing Finance reform, what do you think the key compromised that need to be achieved . Well, i think were open to working with you. As i suggested. We need to find a solution that creates necessary liquidity while making sure we dont put taxpayers at risk. And while weve been busy working on tax reform and focusing on regulatory issues, during the second half of this year ill focus on housing reform and look forward to speaking to you for ideas. One of the big issues that faces us on Housing Finance reform is whether there should be an explicit government guarantee provided through the housing system. Do you believe that such a guarantee is necessary . And if so, do you think how do we deal with implementing adequate taxpayer protections in exchange for any government guarantee . Well, i think its a bit early for me to make a conclusion on whether a guarantee is necessary. That is something that we would like to study very carefully. And if there is a guarantee, we would want to make sure that there is ample credit and real risk in front of that guarantee so that taxpayers are not at risk. All right, thank you. I want to move quickly to the executive order that the president has issued. I notice i only have a couple minutes left. I did not at the beginning of this remind our colleagues we need to pay close attention to the five minutes for questioning. Because im confident that every senator on this committee wants to have his or her opportunity to speak with you. So ill just in my last two minutes, quickly bring up the order that President Trump signed in february outlining the administrations Core Principles for regulating the u. S. Financial system. Now, the executive order requires you to report within 120 days on the extent of which existing laws and regulations promote those principles and to identify laws and regulations that inhibit the system in a manner consistent with them. I agree with those Core Principles and im looking forward to working with you. Can you tell the committees some of the specific issues youve looked at and some of the findings we may expect to see in your report . Yes, thank you. Weve had a very large group at treasury working on this. One of the things that i emphasized to the team ahead of time was that we wanted to make sure that we reached out to many different groups and got feedback this was not just something treasury was designing on its own. Some people refer to it as a review of dodd frank, but its broader than that in looking at the Core Principles. Weve met with 16 different groups, many of them having 50100 people. Weve had Community Banks, weve had small and medium sized bankbanks weve reached out to the regulators and had working groups with the independent regulators to make sure we have input from them. And we will be issuing a series of reports, the first one coming out shortly, which will be on banking. And i will say, one of the big focuses will make sure that as we have different regulators, we have proper coordination between them. And this is something that ive been working on at fsoc where i take my position seriously. Thank you, mr. Chairman. Welcome, mr. Secretary. At your nomination hearing on january 19th and as a member of the committee i was there. You stated that one west, the bank you were affiliated with did not engage in robo signing and other types of misconduct related to mortgage practices. Since there has been a lot of news, including reports in ohio from perhaps our states most conservative newspaper, some 1,900 signings in ohio, just in the six largest counties, reports that one west did in fact engage in robo signing earlier this week your former Company Financial freedom settled with the department of justice for 89 million. 89 million. Related to violations of federal law. Do you stand by that january 19 january 19th testimony . Let me first comment and let me first say that as you know im no longer on the board of cit. So i only have access to Public Information and what ive read. I would like to comment on the Financial Freedom settlement, which was in the recent press. Let me first make it as short as possible. These issues were identified by my Management Team and selfreported to hud and fha when we became aware of them. These were issues that existed prior to us taking over the bank. We were concerned. We sent a team to go see the fha kmig commissioner and dealt with that. We also took reserves and as soon as we learned there were issues, with we put in policies to correct those issues immediately. Im sorry to interrupt, but my question, mr. Secretary, was did you you said that one west did not forgetting the settlement. You said one west did not engage in robo signings, do you stand by that statement from january 19th you said under oath to the finance committee . I do and i would also just comment i believe in a series of questions that were issued to me after that hearing, we responded on the definition of what we expected robo signing. And again, i am no longer at the bank. I know that. All right thank you. Chairman crapo mentioned the executive order and then you gave us some detail about it. Im appreciative of that. As you and your team at treasury work through this, are you reviewing the reforms made to the Mortgage Market that would address practices that took place at one west, including protecting you mentioned the banks you brought in the room. But there are customers, there are Community People that you didnt mention. But the practices that took place at one west, protecting home buyers from predatory mortgages. Banning robo signings, other harmful practices, evaluating borrowers for their ability to repay a loan. Are you reviewing those reforms . There will be a series of reports, and we will be making recommendations on things that impact home mortgages. Im just concerned, as i sit through this, these hearings, year after year after year, so many of my colleagues have suffered this collective amnessia about what happened ten years ago. I dont want you to suffer from the same affliction. Meeting with stakeholders and wall street reform and Housing Finance reform, how many Industry Groups have you not your staff, but how many Industry Groups have you met with versus how many consumer groups . First of all, let me just comment on your other thing. I wont forget those issues. I lived with those issues very seriously from the problems at indy mac and i worked on home Loan Modifications. In regard to Industry Groups, i met with several groups of Industry Leaders in community areas. We have worked with them and have had several meetings of large groups that have come in. Can you spell out for this committee, i assume you cant recite numbers now. But would you get back to this committee within the week that the chairman usually calls on to delineate which whom you have met with, which banks . You have given us a litany of diversity of meetings is not small banks, medium banks, large banks, there are customers, there are community groups, there are all that. If you would spell out specifically whom youve met with and give that to this committee, whom youve met with, about the executive order, if you would be willing to do that. We would be happy to do that on a confidential basis. Of course. I accept that and honor that. Last question, mr. Secretary, you committed to senator hatch in the finance committee you would respond to all the finance Committee Members questions i wrote to you on march second i havent received an answer i asked for about potential conflicts of interest. Today theres a front page story in the mainstream media, its the wall street. About the president s Business Partners and his financial entanglements with a russian bank. I would like to pose the question again i asked in finance in follow up that i wrote to you on march second. Will you get a complete list of trump financial ties to insure any foreign entangleabilitiment benign. Would you commit to us to get a complete list of trump Business Associates and financial ties, because of the threat they could have to insure that they are, in fact, benign . Well, let me first say, i did review before i came today to make sure that my staff had fully responded to all the inquiries from you and the committee. And i believe we have. And if there is if there are outstanding questions that youve had from letters youve sent us, please make sure you follow up with me after this and we will make sure that we are responsive. In regards to your specific question, again, if youd just send me a note on what youre looking for well review internally whether its appropriate to come from us or somewhere else and were happy to be responsive to you. I appreciate that. Thank you for your cooperation. But the letter was march 2nd. It was not answered. Im asking it again. Ill follow up with a letter again. We want a complete list people in this country are troubled by the president s business connections. Theyre troubled when the president s family goes to another country to do business and american taxpayers provide security for their families and that money goes to the trump business empire, including the president. People want to know about those financial entanglements. Thats not an academic or a Political Science exercise. Its not even a political exercise. Its about the National Security of this country. And its about people wanting needing to know that information. So i reiterate how important it is. We just last week listened to the nominee for terrorism and financial crimes, all those very important issues, or those positions, and we want to make sure his ties dont affect their ability, the secretary for terrorism and financial crimes, the ability of siffious nominee to do their jobs. I take the siffious responsibility very seriously. I review the cases weekly. My teams rereporports to me on. I can assure you if there were any cases that involved the president or any members of his family that they would be treated very seriously and we would review them, like anything else. But the public needs to know that as you review them. Thank you, mr. Chairman. Senator corker. Thank you, mr. Chairman. Mr. Secretary, thank you for being here. I appreciated our conversation yesterday evening. And i know that you heard secretary chairman crapos commitment to housing reform in his opening comments. I know youve got tax reform issues and others to deal with. But its my sense that youre strongly committed to finally dealing with Housing Finance reform in an appropriate way, is that correct . That is correct and i hope its something we can do on bipartisan basis. I think the only way to do it appropriately where you deal with some of the charter issues that are necessary to really go beyond the model that we had back in 2008, the only real way to do that is through congressional action, is that correct . Nimy strong preservance is t do it through congressional action working with you and your colleagues. The treasury has a lot of exposure and taxpayers are at risk. My strong preference is to do it exactly as youve described. I talked to you a little bit about the a couple nights ago, mr. Watt called me to talk a little bit about a conversation we had had here publicly about the capital condition and some other issues. I sincerely believe he feels strongly about the position he has laid out. I dussed that with you a little bit last night. And i know your position there. It seems like weve got another 75 days or so to figure out the appropriate resolve to that, is that correct . That is. I appreciated you calling me and talking about that issue. Ive had the opportunity to meet with mel watt several times. Last time we talked about the dividend extensively and i did tell him that it was our expectation at treasury that they would pay us the dividend. And we hope they continue to do so per the agreement. We i think most of the models that have been put forth to try to resolve the issues that have continued to exist with fanny and freddie, most of them call for an explicit guarantee because of the fact that there was an implied guarantee, which, really, calls the situation where there were private gains and public losses. Certainly, if there is any guarantee thats put in place after, hopefully, large amount of capital being put up in front, thats something that should be priced, should it not . Absolutely. If we end up with a situation where the government is issuing a guarantee, no different than fdic insurance or fha insurance the government and taxpayers should be compensated for that risk. Id like to say, again, its been a lot of work, senator western werner and myself have spent a lot of time on this issue. I doubt well have a secretary of treasury like you, that knows as much about this topic as you. I look at this as a tremendous opportunity, really, to resolve this issue. Because of your knowledge and the strong interest on our committee. I think when we attempted this back in 2013, we did so in a fashion that was so complicated. Very difficult, even though we passed something out of the committee. To bring that into the main stream on the floor and certainly in front of the american people. My sense is theres been a lot of work to stream hospitline se. I will say i feel for the first time a real opportunity to align, not just the interest of u. S. Taxpayers and the fact that we want to have a Housing Finance system that is robust, but also in fairness, one that more fully aligns the Public Sector interest and the private sector interest. I know i talked to you a little bit about some potential proposals last night on the phone, but i just want to thank you for your interest in this and look forward to hopefully completing the work that is the last piece of work, the one piece of work that really should have been front and center on financial reform when we did it in 2010. And i want to thank you for your concern, your interest, and hopefully involvement in bringing this to a close. Thank you, im committed to working with you on it. Thank you, senator reed. Thank you mr. Chairman and thank you mr. Secretary. You noted in your statement to identify terrorist activities by targeting the financial networks. This depends a great deal of cooperation from our allies around the world, particularly with intelligence sharing is concerned. After the recent revelation that President Trump shared classified information with the russian ambassador, do you have concerns about the affect this is likely to have with our critical intelligence sharing partners . I cant comment on what information was shared or not since the only thing i know is what i read in the press. Im probably spending 50 of my time on tfi issues. It is, i think, perhaps the most important issue right now as part of my job. I assure you that i take it very seriously. I have had two foreign trips, meeting with both the g 7 and g 20 and in each one of those meetings with my counterparts,ious have discussed this. Im happy to report we have a very close working relationship with our partners and our allies on this issue. And something i think can be incredibly effective in stopping terrorism throughout the world. Thank you. The white house is also asked you to review the order Liquidation Authority established by the dodd frank act. As you know the purpose of the ola is to provide the Necessary Authority to liquidate failing Financial Companies that posed significant risk to the Financial Stability of the United States and mitigates such risk and minimized hazard. And id like to highlight some of the ola provisions and ask whether you support them. In the case of the failure of a mega bank, do you support the mandatory removal of the executives and Board Members responsible for the failure . Again, we are going through an extensive review of ola as instructed by the president. We are just starting that process. I have had discussions with many finance ministers and governors throughout europe. This is something thats obviously very important to them as well. It would be premature for me to make any specific comments on any aspects of it. Were doing a review, im open minded to looking at all these, and i look forward to issuing a report and we would be more than happy to come back and update you once weve done more work on it. Let me recognizing your answer put on the record two other issues which i would like you to pay particular attention. And i will put it in the form of a question, understanding your response would probably be similar to your initial response. Do you support the fdics authority to call back compensation from executives or directors substantially responsible for the failure . As a general matter, i think thats a good policy that has been instituted. So, again, its something we will review, but, yes, i generally support that. Would you support the statutory mandate that taxpayers shall bear no losses under the exercise of authority under ola. Thats an objective. I would reserve comments, specific comments until we complete the review. Obviously we do not want to put taxpayers at risk in any way. And thats one of the reasons were looking at all the Core Principles. Mr. Secretary, the tax plan is rather tourious in details. But it suggests some of the highest income americans would receive significant tax cuts and the majority of tax relief to the remaining americans would be rather minuscule or certainly small. And theres a possibility that in the proposal there could be, indeed, increases on individual families or taxpayers. Are you committed to insuring there will be no increase on individuals or taxpayers less than 250,000 a year. Im picking that as a reference point. Let me say that obviously tax reform is something were working on with the house and the senate. I can assure you that the president s objective and my objective is that we create a middle income tax cut. And that we do not raise taxes on the middle income, if anything, the opposite. We are trying to create a middle income tax cut. Would that tax cut be equivalent to the tax cut enjoyed by the richest americans . People who make about 1 the highest 1 . Again, obviously, were working on the details. One of the things weve done is we have proposed getting rid of almost every single deduction which is something that is used by the rich in return for a slight reduction in taxes. And our objective is that 95 of americans wont need to use itemized deductions and will be able to fill out simplified tax returns. We look forward to working with you as we progress on the details. Thank you, mr. Secretary. Senator toomey. Thank you, mr. Secretary, thanks for joining us. Right over here. Good to see you again. I want to take a moment to compliment you on the extraordinary accessibility. You have been before groups of us, members of the finance committee i have lost track of the number of the times youve been on the hill to get input on the various issues. Youve been available by phone, hosted meetings at the white house. And that is a very Welcome Change from the previous regime. And i am grateful for your accessibility and responsiveness. I want to commend you for reiterating the goal that we should be striving to create an environment in which we can sustain growth above 3 . I think thats entirely achievable and its a very important goal. Thanks for mentioning that. As a quick follow up to the comments from the senator from rhode island, i would like to underscore as you do this review of the ola and olf, i hope well keep in mind that this very convoluted construct which at the end of the day contem plates a taxpayer funded bailout of a failed bank, its a creature of the fact that we dont have an adequate resolution mechanism in bankruptcy. And some of us have been working for some time on legislation that would give us the confidence that we could resolve, even a very large complex firm in bankruptcy so we wouldnt need to put taxpayer funds at risk, indirectly, through the olf, nor all of these very priescriptive punishment mechanisms, of which the senator from rhode island mentioned a few. In this general topic, i wanted to address one of the egregious problems with the fsoc which you chair now. It has to do with the designation of these too big to fail firms. It strikes me there are obvious problems with the way it had been run. Im hoping to get your reassurance its going to be run differently. Some of the things ive objected to is a completely opaque process, where a protective designee would have no idea the criteria by which their designated. Second a the lack of a stringent regulation, which is the dodd frank punishment for being designated. No off ramp, no mechanism by which you could change your Business Practices so you could be relieved of the designation. And even firms like Asset Managers had to worry about being designated and Asset Managers, do not intermediate credit risk and fund themselves with deposits. They do not have the kind of risk profile that banks have. My question for you is can you assure us that the fsoc is not going to launch a wave of designations and is not going to be run in this very opaque fashion and could you share with us how you do intend to lead the fsoc since it does exist in statute. I take my responsibility very seriously, not only on the designation issue but its an Important Forum where we can talk about. Cybersecurity is something were focused on and were working with fsoc and the regulators. Specifically on your question the president signed an executive order where were reviewing the fsoc designation process. Its early in that work, but i will tell you i do support the concept of transparency. And i do believe thereat if a company is being designated that they should understand what would be required to be designated if they wanted to derisk their business. Yes, generally and regulation i believe that there should be transparency. Thanks. And then just quickly on the cfpb, i remain deeply concerned that the way this entity was structured has left it completely unaccountable and behaves as an unaccountable regulator in many ways. Despite the fact that the statute forbids them to regulate auto lending, they continue to fail to produce a timeline that weve requested to explain their involvement in the discovery of the wells fargo abuses where it appears that the cfpb jumped in to take credit for what others have done. And director cordray has failed to respond. I think the lack of responsiveness and accountability is the logical consequence of an entity that even a court has determined is unconstitutional in its construct. I hope you agree to work with us to change the guarantovernance, make it subject to appropriate congressional oversight. Yes, we would work with you on that. Thank you. Thank you mr. Chairman. Senator menendez. Welcome. The president spent a great deal of time on the Campaign Trial highlighting those neighborhoods and communities throughout the country that seldom reap the benefits of economic expansion but are burdened by economic downturns. And in responses to my questions for the record after your confirmation hearing. You said, quote, i share your commitment to bring back jobs to these communities that have been gravely affected for Economic Conditions in which theyve had no part in creating. I will make sure the poorest and rural americans will be no longer left behind. Which was heartening to hear. Let me ask you about Community Development Financial Institutions. The private Community Partners that have stepped up for the better part of a century to inject capital, provide banking ser services in those forgotpen communities. In 2016. Cdfi made excuse me 39,000 loans and investments totalling more than 3. 6 billion financed over 11,000 Small Businesses and over 33,000 Affordable Housing units. So explain to me, how is it possible to reconcile the president s promises and your commitments with the administrations plan to eliminate the Community Development Financial Institution from the very foundation on which these investments are made possible . Sure let me first again say, i am committed to working with you on helping these communities. And traveling with the president during the campaign, i had the opportunity to see a lot of this and i also had the opportunity at one west to see this where previous loans had been made improperly by indy mac. In regards to your question on cdfis, as you know, the president s budget has a priority to make sure that we reinstitute proper spending for the military. The president is very concerned that we have not made those proper investments over the last number of years. And that that required a Huge Investment on part of the government. So we had to make difficult decisions in where we would try to save money on other areas. While i share some of your concerns with the cdfis we had to look at this across a lot of different priorities. It is an area where this market is mature and there is private capital that will come in let me but i do share your concerns on this. Let me respond to that. Because i believe in a strong defense. We spend more than the next seven countries combined. We can do better. But now at the cost of everything that makes america worthy of fighting and dying for. Not at the cost of millions of americans who languish in an Economic Situation for which none of us generally would want to live in. And when i look at the budget justification that was put out by the administration, the justification proposed and the budget outline as to why it should be zeroed out is not even an accurate description of the programs statutory purpose. It said this was to jump start an industry. That wasnt the case. It was create todd to promote gh in economically distressed area. We disagree on the value of the program. Because in my mind, when there are more than 50 million americansi living in communitie with high percentages of americans who are not working, every block has a few vacant homes and incomes are stagnant. These communities desperately need investments that will allow them to start Small Businesses, create jobs, purchase homes. This is why i thought i was going to find Common Ground with the administration. But zeroing out, for example, cdfis, even in your desire to do national defense, doesnt make any sense on behalf of the very people who supposed you want to defend. We want to create economic opportunity. Even the Banking Industry said it best in their letter to congress requesting full funding they said cdfi in the exact communities that were the focus of this conversation a. As we go into the 2018 fiscal cycle. I hope you can be an advocate within the administration for something that would meet the president s goal, and your own stated goal, and, you know, i hope to be able to work with you to make that happen. Lastly, i wrote a letter in march to you concerning about the real possibility that the administration would be forced to deal with an offer from russias state owned oil company to acquire critical ener energyfurcate in the United States. Last year, venezuelas large state owned oil company pledged 50 of shares as a collateral for its loan. I received your response on friday evening and frankly it doesnt say anything. T it recites procedures. Would it concern you, mr. Secretary, if venezuela state owned oil Company Defaults on the debt and as a result russias state own oil company exercises a near majority ownership stake if they havent purchased additional shares. They may have. With 48 u. S. Petroleum products, nine pipe lines throughout the country, wouldnt that be something that would concern you . Well, let me just be clear in stating this is an issue that i am aware of, not just from your letter, but for other people who have raised the concern. I can assure you this, like any other National Security issue, will be reviewed and in appropriate where National Security issues also discussed in other confidential settings. And at the appropriate time, id be more than happy as issued progress on a classified basis would be more than happy to have a confidential discussion. I look forward to that. Thank you, mr. Chairman. Senator scott . Thank you, mr. Chairman. I think its good to see mr. Ti tillis here with us today. Everyone s giving him thumbs up, its good to see you healthy here. Not at 8 00 a. M. In the morning, however. Excuse me. Well talk to you later. Mr. Secretary, its good to see you here as well. Like you, i had a past professional life, spent 20 years in the insurance industry. That may not be as cool as making the lego batman movie, but it is germane to my question. President called you to review the authority. I think examining the transparency and stress associated with these is good public policy. At the end of the day Insurance Companies are not banks. And they should not be treating as such. Under existing law fsoc includes an independent member with insurance expertise. Most members can have their vacancies on the council filled by whoever takes their place. The law specifically allows that. Unfortunately such a provision does not exist for the independent member with insurance expertise. When the current Insurance Experts sixyear term ends, there will be no one there to take his place, and no Voting Member with any insurance expertise. Do you believe that congress should address this discrepancy between the vacancies of the fsoc members . And if so, how would you suggest that we do so . I would first of all let me say ive had the opportunity to meet with him several times. I do think its very important that we have someone on fsoc that represents and has experience in the industry, knowledge. I would be happy to work with you on that issue. Were aware of his term is coming up and if you or anybody else have suggestions for us for someone to replace him, wed be happy to listen to that. But i share your concern and we want to make sure that we keep that spot on fsoc. I assume that when you make your presentation to the president on your review that you would perhaps bring that issue up to the president as well . Yes. I want to thank chairman and Ranking Member brown whove both committed to solving this issue as well. So i think if we work as a committee, we can solve this, i think, discrepancy that is unusual and certainly not practical. Thank you. Thank you. Senator tester. Thank you, mr. Chairman and Ranking Member brown. And thank you for being here, secretary mnuchin. Appreciate your presence at this hearing. Senator moran and i have a Community Bank reg relief bill called the clear act. Have you had a chance to take a look at that at all . I have the reason i bring it up there are a number of democrats willing to work with you, and republicans, willing to work with you to try to get some common sense reg relief for Community Banks. If you could take a peek at that and get back to us, i would like that a lot. I would be more than happy to do that. I can assure you one of the things that will be in the report to the president is relief for Community Banks. Thank you. Theres a bill out there called the marketplace fairness act. It deals with requiring Small Businesses to collect sales tax on behalf of other states and local governments when selling goods over the internet. Are you familiar with that bill . I am familiar with the bill. Do you or the president have a position on that bill . I havent discussed it with the president , so i dont know his view. I think this is something that we seriously need to look at and i share certain concerns of yours on it. How about a National Sales tax in general . Is that something that the administration supports . Weve had no discussions on a National Sales tax. Its not something that we are inclined to do. Okay. Recently you along with nec director cohn announced a onepage tax plan. In a briefing thet 1200 that and do you support a 30year fixed rate . No. You talked about i think thats solid. Would your support for that go away if in fact there were some taxpayer risk with the gse rebuild . Well, again, i think the 30year mortgage has been a fundamental part of Mortgage Finance for as long as most people can possibly remember. Its a big deal. Again, if we end up with a scenario where we need some type of explicit guarantee, i would expect that it would be paid for. And i would expect thattkai no different than okay. Okay. The fsoc, number of changes really to transparency and designation process, weve talked about some notifying companies when they move between stages, making calculation for stage one evolution, providing more information to companies as they go through annual review, would you support codifying those changes into law . Again, we are looking at recommendations, but i think thats one of the things we will look at and potentially recommend. Okay. Thank you very much. Thank you, mr. Chairman. Thank you. Senator shelby. Secretary, thank you for your willingness to serve. You bring unique experience from the private sector to the office of treasury. You know bank reform. Youve been in the banking business. A lot of us have pushed for overall comprehensive bank reform, but it seems to me a lot of the Smaller Banks and regional banks to my knowledge been here 31 years on this km d committee and chairman three times that they dont pose a Systemic Risk to this country, you know, the small banks and regional banks. So do you support in concept and would you work with us to try to bring some meaningful[ln fundamental bank reform to our system . Absolutely. And i think that regional banks and Community Banks are critically important to lending. These are the banks that know the communities, know whats needed and they know how to make loans. And we should make sure that they can do it without undue Regulatory Burden without putting taxpayers at risk. And, sir, arent they mainly the banker for the small and medium size business in this country, which are the job creation machines . They are indeed. On the tax reform, which we were all interested in and weve talked about, we talked about the corporate rate 35 is too high. Of course nobody pays 35 as we know. But i have brought this up with the administration several times, a lot of us have. Most of the small and medium size businesses that we were just talking about in this country are taxed under the subchapter s of our s code. Correct . That is. So if were talking about tax relief or the biggest of the biggest, what are some of your proposals and what are you working on . Youve got a lot of smart people working on this. For the Small Businesses and so forth. Because i for one would not want to support a big reduction just for the biggest of the biggest and do nothing for our basic base and job creation, small, medium size businesses, are you working in that area . Yes. Thank you, senator. We share your concerns. And ive referred to this in the plan as a business rate as opposed to a corporate rate. We need to figure out and we have a large team working on how we would deal with passthroughs. But i also just want to emphasize that we are committed to make sure that rich people do not use passthroughs as a loophole to pay lower rates. So we do want small and medium size businesses to have the benefit of lower rates. But we will make sure that, you know, not every single accountant, lawyer and doctor who should be paying higher personal rates sets up an llc or a passthrough to get around the system. Again, this is the backbone of our economy, is it not . It is. And were working hard on how we create growth in that part of the economy. I dont want to put you on the calendar right now, but as you flesh this out and get into the weeds on this, i hope you will be briefing us. I know the finance committee has jurisdiction of this, but we have more than a passing interest in all of it. Absolutely. Be more than happy to come back and brief you and your staff on this. Thank you very much. Thank you, senator shelby. Senator heitkamp. Thank you, senator. And thank you, mr. Chairman. And i couldnt agree with you more. One of the demands of the American Public and the responsibility of washington, d. C. Is to encourage Economic Growth. That can solve a lot of our problems as we go forward. So i want to talk a little bit about the xm bank. Not a big surprise to a lot of people on this committee that ill be raising it. In 2014 xms last fully functioning year the bank supported 164,000 jobs across the country. Thats compared to about 52,000 jobs in 2016. Thats because we didnt have a in 2015 alone chinese credit act gencies financed a tl of 500 billion. The potential there is that both could have been markets that were accessing but were not getting access to today. Do you believe that the xm bank is a critical tool for enabling American Manufacturing competitiveness . I do. Ive actually spent a lot of time looking at this. And i am concerned that without more members on it they can only make loans up to 10 million. I think the board should look at credit risk and everything else, but the exim bank is great one of the suggestions weve had is suggestion of the leadership of the exim bank going to former representative Scott Garrett who really is not just a critic of the bank and a reformer, i think he is someone that we are very concerned would not advance the interest of the bank and does not believe in the mission of the bank. Not just reforming the bank. Do i have your commitment to work on a bipartisan basis to forward leadership in the bank that would in fact make sure that the bank is fully functioning and that these credits are actually come before the board before up or down approval. Im sorry, i want to make sure i understand your question. Is it on my question is, if in fact Scott Garretts name is advanced to lead the bank as chairman, we are deeply concerned that many of these credits that are, you know, 30 billion worth of manufacturing today will not even see the light of day because the head of the bank has the ability to set the agenda for the board. And so its very important that, you know, i dont i quite honestly dont care if mr. Garrett is on the board, but i do care if hes setting the agenda for the exim bank. My question to you are you willing to work on a bipartisan basis so we can move these nominees as expeditiously as possible without getting into the weeds that someone might be a saboteur of the bank. I cant comment on his specific situation. He was proposed by the president. I would say i can assure you the president is interested in making sure that the exim bank can lend. Weve had lots of Business People come in and talk about this. And it is something that director cohn and i are deeply involved in. Okay. I would tell you that i raise this issue as early as december with the president. And was grateful to hear that he was supporting the bank. But as we move forward were already in may looking to june. We dont have nominees yet. And the nominees that have been proposed i think cause great hesitation on our part. And so well leave it there. I wrote you a letter may 11th, should have received it by now about the Central States pension system. These are good americans, kind of americans that the president talks about every day who work very hard negotiating and bargaining for pension and health care and yet theyre being told in many cases in my state that their pensions will be reduced 70 . Now, we were able to, i think, reject as treasury rejects a plan that was submitted, where are you at with reviewing Central States and how do you see this moving forward . So, again, let me just comment on i do recall this is something that you mentioned at my meeting and confirmation. Im a lot more familiar today on this issue than i was beforehand. At treasury we perform an important function when people make applications on these. But its not a subjective function. Its a function of we go through and run tests. I share your concerns. And we look forward to working with you and others. Its a complicated issue. It certainly is. I look forward to your response to the march 11th letter. Thank you, mr. Secretary. Thank you, mr. Chairman. Mr. Secretary, we appreciate the opportunity to visit with you today. Id like to talk about just a couple of items. I would like to go back to an insurance related issue if i could. And that has to do with the u. S. Eu covered agreement. We may be getting into the weeds a little bit on it, and if youd like to take it for the record that would be fine. Im curious there are different types of insurance carriers that do business in the United States. Some do business in europe as well. They all want to be able to or at least a number of them want to be able to do business both within the European Market but also within the United States market. Some only do business here, a lot of our Property Casualty carriers do, but they have reinsurance connections with the European Market. The concern in many cases theres a little bit of a discrepancy between some of the reinsurers who want to basically have full access and capability to do business in all of the eu markets. And because of that there was a covered agreement that was created, one in which we have a temporary seat basically in this Decision Making body. But Property Casualty carriers on our side of the ocean have real concerns about what the impacts are of being included in this covered agreement which leaves a number of different areas unanswered with regard to it. Some of my friends on the other side of the aisle suggested in our last meeting with treasury officials that when i indicated it was kind of like passing a lot of whats in it going back to obamacare and i didnt need to do that at this time. But this covered agreement, which is there leaves some real Unanswered Questions for a number of our Property Casualty carriers that are doing business within the United States but may be subject to requirements found under the covered agreement in the future. Would you just simply number one i will submit a question specifically for you for the record, but would you commit to this and work with us and get back to us on taking a look at the covered agreement whether or not it really is in the best interest of most of the carriers that do business within the United States market today . I will. And i would just comment this is another area that im actually a lot more familiar with than when i first came during my hearings. Weve had several internal meetings where ive been briefed on this. Weve actually heard, weve reached out to industry and we are aware there are people who support it and people who dont support it. The agreement specifically this is something we do in conjunction with the u. S. Trade representative. And now that the trade representative has been confirmed, well be close to making a decision. But we would be more than happy to reach out to you and hear your views before we make that final decision. Thank you. I just think some of the questions which theyve asked really do deserve to be able we should be able to get an answer to them one way or another. I can assure you we will and this is something i am familiar with. All right. Thank you, mr. Secretary. Also in following up a little bit on senator shelbys discussion in terms of the tax rates and so forth and the fact a lot of our job creators are not c corp. S, they are s corps and so forth. We have a lot of discussion here about tax reform. Within a 74,000page tax bill some of those pages giveth and some taketh away. We can have people get hurt and people that have an advantage or that receive an advantage. When we Start Talking about doing that and particularly if were doing this there are going to be individuals who will lobby hard about not allowing reductions to be removed even if theres a lower tax rate once theyve done the calculation in their own situation. While we want to see a simplification, and i think a lot of people out there would love to see that happen, theres also a concern that as the president would suggest that it is truly time to prime the pump similar to the way that it occurred during the Kennedy Administration and during what was a very successful Reagan Administration where we refueled the economy. Part of thats got to be Regulatory Reform. Second part is actually allowing a few more dollars to remain with individuals so they can reinvest back into businesses as well. When we get right down to it, are we stuck with only a program which is revenue neutral . Meaning that we basically are going to take away as much as we give back, or could we actually consider some sort of a down payment perhaps on a tax plan in which we allow for a reduction in actual taxes collected so that can be reinvested back in the economy. In a very small nature. Perhaps in a bill im suggesting and one ill be introducing in which we take our basic tax rate for those individuals at 10 down to 8, from 15 to 13, from 25 to 23, from 30 to 28, from 35 to 33, from 39 to 37, its not a huge expense and yet it may very well impact those at the very bottom a little bit more than those at the top. And it would be a down payment to the American Public clearly indicating there is Additional Resources that they can invest back into business and into basically back into the economy. Well, the president and i fundamentally believe that tax reform is critical to growing the economy and getting back to sustained Economic Growth. We look forward to working with you. I think different people will have different views as to under what scenarios that should be revenue neutral. As we heard today some people believe in dynamic, some people believe in static, the president does believe that we need to create Economic Growth and that we are willing to have lower tax revenues in the shortterm if that will create Economic Growth. I think as ive said the difference between 2 and 3 gdp is roughly 2 trillion over a tenyear period of time. Thats a lot of money. And Economic Growth will help us deal with a lot of other complicated Economic Issues we have. Thank you, mr. Secretary. Thank you, mr. Chairman. Thank you, senator. Senator van hollen. Thank you, mr. Chairman. Thank you, mr. Secretary, for your service. Recently i sent you a letter together with many of my colleagues on this committee objecting to your decision to put keith in charge at the occ by using a maneuver that evaded Senate Confirmation. As you well know the occ serves as the chief banking regulator overseeing over 2,000 banks. And he has spent most of his career working very closely to protect the interests of those banks. I appreciate the letter. I got back yesterday. It raised some additional questions. And im going to be sending you another letter to ask you to respond to the following question. Why were you willing to install him as head of the occ before his ethics prevetting has actually been certified . So the American Public can know whether or not conflicts exist now that hes in charge at least for now of regulating 2,000 banks. And second, your letter indicated that his special temporary 130day status allows him to avoid President Trumps ethics pledge. And im going to want to know whether that would allow him to immediately go leave the occ and lobby or work on behalf of big banks. And im also interested in whether all this means that youll be presenting a nominee in the next 130 days. So im going to send you a letter to ask for your followup on that. I want to ask you a question about tax policy. And i agree with my colleagues who have said that if were going to do tax reform, and i think tax reform can work, can be an important step, that we should focus on middle income tax relief and not another round of tax breaks for the very wealthy and special interest. In fact, mr. Secretary, last november you agreed with that statement. And i quote what you said in november, any reduction we have in upper income taxes will be offset by less deductions so there will be no absolute tax cut for the upper class. Thats what you said. Now senators reed and tester have asked you questions about the tax reform plan that youre thinking of submitting or will be submitting. I have a question related to a tax cut plan thats already in progress that you and President Trump have strongly endorsed. And thats the House Health Care plan, which according to Congressional Budget Office has 900 billion in tax cuts including 270 billion in tax cuts that go to higher income families and the analysis of that tax cut is that millionaires will get on average 50,000 a year in tax cut. And thats because what we did in the Affordable Care act was we applied Capital Gains and net income taxes, medicare taxes on very high income individuals on their Investment Income. So they could help shoulder their share of the Medicare Trust fund. That totally violates, totally violates the standard you set forward in november, doesnt it . Let me just its a really yes or no question. Well, the first question you asked i wanted to respond to, which was on the controller of the currency. The occ. Yes. It is our intention. We actually have someone who the president has approved thats going through the fbi vetting process. I think as you know unfortunately with all the candidates this is a time consuming process. But we do hope that there will be somebody who is cleared and somebody who will go through a Senate Confirmation process. So this was in no way an attempt to put someone in who wouldnt be going through. This is someone whos in on an acting basis. On your second comment, i have only been partially involved in the health care. Thats not really in my prior area of responsibility. My comments are really more focused on tax reform. And, yes, the president s intent is that there is a middle income tax cut mr. Secretary, my question was, it is a fact that the Health Care Bill socalled Health Care Bill that passed the house has 900 billion in tax cuts. Combined with almost 900 billion in cuts to medicaid and some to medicare. So a huge pillar of this is tax cuts. And isnt it the case that the provision that gets rid of the medicare tax on Investment Income flatly, flatly contradicts your test that any reduction we have in upper income taxes will be offset by less deductions . So there will be no absolute tax cut for the upper class. Isnt it an absolute tax cut for millionaires . Yes or no . Again, my comments were focused on tax reform. Mr. Secretary, this is tax policy. It is a tax mr. Chairman, i think whats been interesting about this health care today is youve got this major tax change masquerading under the cover of health care. Why is there a big tax cut in a Health Care Bill . Youre the secretary of the treasury. You deal with tax policy. Again, i think the idea was that that tax was hurting investment and jobs in this country and that, again, that was part of the health care repeal. So, yes, factually the tax will help people who are investing money back into the economy and will create jobs. All right. Mr. Chairman, it flatly contradicts your statement of no absolute tax cuts for the upper class. Its a flat contradiction. Thank you, senator. Thank you, chair. Mr. Secretary, thank you for being here. Thank you. Appreciate you being willing to step up and do this. Nice to have a private sector guy in here trying to figure this out. I want to go to the debt in the portfolio. Weve got about 23 trillion all in, thats about a third of all sovereign debt in the world, theres about 200 total debt 200 trillion total debt in the world, but one out of every three Government Debt dollars that are out there are ours. Weve also got the largest fed Balance Sheet in history. The question is during this period of low Interest Rates about a little over 50 i think are three years or less in maturity while the uk has about 48 of their bond portfolio is 20 years or longer. So my question is, is this something that you guys are taking a look at . And do you plan to go a little longer while Interest Rates are still in somewhat of a low environment . It is. Its something ive talked about, we are studying ultralong bonds, which would be 50year bonds or even longer. Weve been working with the treasury borrowing committee, which is outsiders to advise us on what the market for that is. And its something that well consider as we look at debt management. No decision has been made. And were seeking guidance as to the demand. Great. Thank you. Lets move to basel iii. I can. It looks to me we are unilaterally ahead of our other cig toir partners, looks to me like as a business guy for small banks and Community Banks, regional banks that theyre hampered by this requirement. Is there any attempt in your future priorities to look at what were doing regarding our future commitments to basel iii and what we can do to get the other partners in basel iii to line up. There is. Ive had conversations most recently when i was at the g7 with other governors and other finance ministers about basel 3. And its something well be looking at as part of the president s executive order. But no decision is taken yet . No decisions have been taken. And i think as you know chairman yellen is the fed is the one who technically participates in basel, but it is something were looking at. Thank you. I met with her this week and talked about that. We talked about the fact that we got somewhere around 6 trillion of liquidity, u. S. Liquidity thats really not at work in the Economy Today between the russell 1000 Balance Sheets strong liquidity position, probably strongest ever, a few trillion dollars in the bank Balance Sheets because of this capital reserve requirement. Also this unrepatriated u. S. Profits. Let me move to growth for a second because the Capital Investment is one that i think is a part of our future in terms of getting the economy moving again. It looks to me like the cbo has said that 1 of gdp growth about 3 trillion over a decade in terms of federal impact on the federal budget. But yet we tend to talk in this in the senate about spending cuts or tax increases as a bilateral conversation. And yet growth really is very rarely talked about because its an term here in the senate. Can you talk about balance in relative to the 800pound gorilla in the room relative to deficit spending and that is mandatory expenses and how the president and the administration sees fiscal policy now marrying up with the Monetary Policy of our future . Well, let me just comment. You did talk about repatriation and that is something that we are looking at as part of tax reform because there are literally trillions of dollars sitting offshore. Its not a surprise with the highest Corporate Tax rate worldwide taxation and this concept to deferral, why would u. S. Companies bring money back . So as part of tax reform we do hope that there are literally trillions of dollars that come back. And as it relates to the other Economic Issues, we look forward to continuing to talk to you about them. But the Corporate Tax rate also puts u. S. Companies at risk for Foreign Companies who have a lot of liquidity who can come in and make an acquisition of a u. S. Company and basically use the tax arbitrage to basically pay for that acquisition, is that not correct . They can indeed and i hear that almost every day as i meet with Business Leaders. Reminding me of that, particularly u. S. Companies who feel like theyre at risk of getting taken over and at risk of having the jobs moved outside of the United States. We have an uncompetitive system that we need to fix. And i would also just comment, there are several economic reports that over 70 of the Corporate Tax burden actually bourn by the workers for far too long workers in this country have not had wage increases. Thats something that we clearly saw when we met with hundreds of Business Leaders across the country and something were focused on. Thank you. Thank you, mr. Chairman. Thank you, senator warner. Thank you, mr. Chairman. Secretary mnuchin, good to see you again. Nice to see you. I dont want to belabor the point that senator van hollen was making, but i would just add beyond the fact that the Health Care Legislation which i strongly oppose offered a massive tax cut for folks like you and me. It also, i say this as a former governor, is really just a transfer of obligation from the federal government which used to share in the medicaid responsibility to the states. Its an 830 billion transfer of responsibility back to the states. Now, the states can cut their medicaid, or they can end up resulting in dramatic tax increases to continue to pay for that medicaid which will slow the kind of growth that senator perdue and i would like to see. The Health Care Debate is going to influence how many of us approach the tax reform debate because whether its repatriation, other issues, im going to work with you. But weve got to do it in a way that is at least deficit neutral and doesnt follow upon something that frankly doesnt do the best for health care, doesnt disproportionately aqeq. Gq, epaaapapau 9] uuu,uuuuuuuuuuuua in order to have an orderly failure and wind down, would you agree that shareholders need to be wiped out in that sifi institution . Again, its hard to respond to a hypothetical situation. The normal course would be institution got into trouble and we dont want to have taxpayer bailout, youd want to have first of all shareholders wiped out, right . Again, let me just comment on that its hard to comment on a hypothetical. A Large Institution but failing i would think you would want based upon earlier comments and everybody else you would want the shareholders wiped out, the creditors to take some losses, youd want the management fired. I would expect that shareholders would be wiped out before the government was risked. Im only saying that its a hypothetical situation. There could be situations, okay, where for various regulatory reasons that title 1 and title 2 may not be appropriate. I guess what i believe is that if you wipe out the shareholders, wipe out the management, end up having creditors take the loss and still have liquidity issue, you need some backstop there. And i believe that while im not perfect by any means, the order liquidation process we set up in title 2 makes the most sense. And i just find i know my time is running out here, but back when we had your confirmation we talked about this referenced the fact that the National Bankruptcy conference which is composed of bankruptcy judges and lawyers believes, quote, orderly Liquidation Authority under title 2 should continue to be available even if the Bankruptcy Code is amended. I just hope that as you go through this process, i know youre reviewing title 2 if there are ways to improve. Some folks who are characterizing title 2 as a bailout frankly its not accurate and there is a recoupment clause as you know for any of that liquidity that may be needed in the short term. Thank you. I know well have more conversation on this but i wanted to at least put this out. And thank you. Let me just assure you we have not reached any conclusions on this. So this is something we are looking at. We havent reached a conclusion. And i do share your concern and concern of other senators that have expressed the currency bankruptcy si code does not work for Financial Institutions. And liquidity is a serious concern as to even if we went through a bank process. I look forward to continuing to work with you on this. Senator kennedy. Thank you, mr. Chairman. Good morning, mr. Secretary. For your benefit and mine im going to ask you to encapsulate your answers within 30 seconds if you could. We could cover more ground. A few months ago the chairwoman of the Federal Reserve was with us and she was asked what if anything the Community Banks and Credit Unions defined as less than 10 billion in assets did wrong in 2008. And she said nothing. Do you agree with that . I do. Would you support a bill that would eliminate Community Banks and Credit Unions defined as less than 10 billion of assets under supervision under dodd frank . That is likely going to be one of the recommendations we make when we come out with the report. Because if you do that, its not as if the Community Institutions arent going to still be regulated. Is that not accurate . That is correct. That would be regulated by their primary regulator which would make sense. Okay. Do we still have Financial Institutions of america that are too big to fail . I do not believe that anything is too big to fail. Some of them may be too big to succeed. Do we still have Financial Institutions in america that are so big that if they did fail it would have a substantial reprehensible, if you will, impact on the American Economy . It could. Do you think dodd frank has eliminated that risk . Again, i would just make the comment that its very fact specific as opposed to being hypothetical. Okay. If those Financial Institutions that i just referenced had more capital, would that help them . I believe right now that the large Financial Institutions actually have plenty of capital. But if they had more, it would make them safer, wouldnt it . More is obviously always better than less, but the question is if more is stopping them from lending, thats concerning. Uhhuh. Okay. My question is not meant to suggest my thinking about this. I honestly want your opinion. What do you think about glass steagall . Glass steagall we do not support a separation of banks from investment banks. We think that that would have a very significant problem on the financial markets, on the economy, on liquidity. And we think that there is proper things that potentially we could look at around regulation, but we do not support a separation of banks and investment banks. Okay. Why is productivity growth so low in your opinion, in our economy . I think thats a complicated question that was going to take more than 30 seconds. You got a full 30 seconds. Ill be happy to come back and talk to you about it. Just give me the cliff notes version. I think its a multifactor issue. Its a combination of regulatory issues. Its a combination of job training issues. Its a combination of tax issues. I think its a lot of issues thats leading to lower productivity. If we could increase productivity growth from 1 to what i think is normal 2 , wages ought to go up, right . Thats true. And we would create huge growth in gdp. Okay. Once again this is a question, not a suggestion. Do you think its possible to do legislation to incent businesses to do more Profit Sharing so that its a winwin . The idea being that it would increase profits for the entity as well as incent workers to work harder and therefore make more productive and make their wages go up . I think theres been very successful scenarios of companies with Profit Sharing. But i support leaving that to private industry to decide whats best. I dont support legislation for that. Okay. Ive got 30 seconds, could you tell me why gdp growth is so anemic . You know, i listened to a lot of economists tell me why were in a secular situation and give me all the reasons. Ive repeatedly said that may be the case, but were going to do everything i think fundamentally we need to grow gdp and our focus is a combination of tax reform, regulatory relief and renegotiating trade agreements that will create economic sustained Economic Growth. Thank you, mr. Chairman. Thank you, mr. Secretary. Thank you. Senator warren. Thank you. I want to go back to your remarks about glass steagall. As you know the original glass steagall was put in place to divide commercial banks and investment banks, the law was repealed in 1999 which created the too big to fail bank like citi group and Jp Morgan Chase got too large and since then there have been many proposals including my own bill with senators cantwell and mccain for a 20th Century Glass steagall that would break up the banks and modernize the wall between commercial banking and Investment Banking. Now, i look at the history of this, the president and this administration have said repeatedly that they support a 21st Century Glass steagall. It was in Republican Party platform. Donald trump said it specifically a few weeks before the election. You said, quote, we need a 21st Century Glass steagall at your confirmation hearing. And now youve just said exactly the opposite. In the past few months you and president have had a number of meetings with big banks, ceos and lobbyists. Is that the reason for the reversal on glass steagall . No, not at all. There actually wasnt a reversal. That wasnt a reversal . No. Let me just explain. Im ready. Republican platform did have glass steagall. We during the campaign and i had the opportunity to work with the president on this specifically came out and said we do support a 21st Century Glass steagall. Yes. Which is that means there are aspects of it, okay, that we think may make sense. But we never said before that we supported a full separation of banks im sorry, let me just stop you right there, secretary. Youre not letting me finish. Yeah, im not, because i really have to understand what youve just said. There are aspects of glass steagall that you support but not breaking up the banks and separating commercial banking from Investment Banking . What do you think glass steagall was if thats not right at the heart of it . Again, im well aware of what glass steagall was. And as you may know the original concern about glass steagall was actually about conflicts, not about credit risk. And if we had supported a full glass steagall, we would have said at the time that we believed in glass steagall, not a 21st Century Glass steagall. We were very clear in differentiating it. Now, i now realize that i had not realized that your bill was named the 21st Century Glass steagall. Yeah, and has been for three years now. I apologize. I was not aware of that. But i still havent heard the answer to my question. What do you think glass steagall was if it wasnt separating commercial banking from Investment Banking from ordinary banking . Again, the fundamental part of glass steagall was as youve just outlined in the separation of Investment Banking from commercial banking because people were concerned about conflicts between how do you break up the big banks that have integrated these two things . Again, the integration of commercial banking and investment banks has gone on for a long period of time. That is not what caused the problems during the financial crisis. And if we did go back to a full separation, you would have an enormous impact on liquidity and lending so in favor of glass steagall which breaks apart the two arms of banking. Regular banking and commercial banking, except you dont want to break apart the two parts of banking. This is like something straight out of george orwell. Youre saying simultaneously youre in favor of breaking up the banks. Thats what glass steagall is. Ive never said were in favor of breaking up the banks and separating. If we had, it would have been very simple. Let me try one more time. Were going to run out of time here, but i have to try this one more time. What does it mean to be in favor of 21st Century Glass steagall if it does not mean breaking apart these two functions in banking . You know what, id be more than happy to come see you and follow up and talk about this. Just tell me what it means. We never came out and said tell me what 21st Century Glass steagall means if it doesnt mean breaking apart those two things. Its an easy question or an impossible question. Its a complicated question. Ill bet. Theres many aspects of it. Okay, the simple answer which we dont support is breaking up banks from investment banks. We think that would be a huge mistake. But again, im more than happy to listen to your ideas on it. You obviously have strong views. And id be happy to followup and listen to you. This is just bizarre. The idea that you can say we are in favor of glass steagall but not breaking up the banks. We never said we were in favor of glass steagall. We said we were in favor of a 21st Century Glass steagall. It couldnt be clearer. We are in favor of a bill that is called breaking up the banks only dont break up the banks. Thank you, mr. Chairman. This is crazy. Senator tillis. Well, the good news is youre going to be able to finish your answers because im going to drill down on this. I have some other questions if time allows ill get to. Isnt it kind of fair to say that the 2008 financial crisis demonstrates that a nondiversified Companies Like leman, aig, Washington Mutual had the most significant economic failings . Im sorry, what was your question . In other words, the nondiversified institutions seem to be most susceptible in the 2008 crisis. Yeah. Well, i mean, in the case of aig they were diversified, they just took a massive amount of risk that they never should have taken. Same with lehman and others. I think i agree with you. Would you just go back and you were saying that breaking up of the banks would have an enormous impact. Can you give me an idea of what that would look like . Again, when were talking about breaking up the banks, i think theres, one, there are people who just think banks are too big and that they should be broken up into Smaller Banks. I would say our view is that what we should be doing is supporting and making sure that Community Banks and regional banks can grow so we dont just end up with big banks. I think if youre talking about separating Investment Banking from commercial banking thats completely different than the concept of breaking up big banks. I agree. And that is what im referring to. You test on Community Banks. And i know in your Opening Statement that you referred to Community Banks. I did hear you refer to regional banks earlier. And i know in the clear act that i believe is cosponsored by senators tester and moran that a concern that i have there is whether or not were hitting the right target for where were talking about regulatory relief based on institution size. Do you have any thoughts on when youre providing regulatory relief what that looks what that would look like, how you would actually structure it so you could provide that targeted relief to i think banks that are Financial Institutions that may be a little bit larger than targeted in the clear act . I agree with that completely. And when we come out with the report, we will that will be one of the recommendations. Do you have any sense in rough or magnitude would look like . I think generally there are people who believe that we should raise the 50 billion limit considerably. And theres as youve said theres people who believe we should raise the 10 billion limit. So were looking at both of those. But we believe that there should be a greater differentiation. Banks that have 50 billion dont play the same risk as a bank that has 750 billion or 2 trillion. What other regulations or provisions of dodd frank do you feel should be revisited for beyond what weve just talked about for mid size and regional banks . And specifically i think it was senator menendez that was talking about trying to get to the folks that need access to loans to be able to invest, the mid size and smaller businesses, i guess primarily, but what other areas should we be looking at or what other areas are you going to give us as feedback for where we should be prioritizing any other provisions of dodd frank . Excuse me. Well, i look forward in the next couple of weeks we will be delivering the extensive report and we will be more than happy to come and sit down with the committee and go through the recommendations. It will be quite detailed. Good. Were looking for that. Because i think we need leadership from the administration to focus our efforts so we can get to bipartisan reforms. There are a lot of singles and doubles that we can hit if we get a very clear indication from the administration what will be well received and what we can get bipartisan support for regulatory relief. But i think that we have to have explicit recommendations. Im looking forward to getting those detailed recommendations as quickly as possible so that the chair can continue his good work trying to get bipartisan support. I only have about 35 seconds remaining. In 35 seconds or i guess you can go over a little bit, can you tell me what direction we should take or what the administration thinks we should take on gse reform . Yeah. Not waiting for us to come up with something but giving us an outline. Yeah. So this is something that, you know, we will come back in the second half of the year and make recommendations to you. Will it be as extensive as the report were expecting on the i think wed like to kind of give a clear outline as to what our recommendation would be. And obviously we need to work with congress. And i do view this as something that needs to be done on a bipartisan basis. But, yes, just like were doing on the Core Principles we will be reaching out to many different groups, specifically consumers, specifically realtors, people who need their access to capital, mortgage bankers, and will come back with a specific suggestion. Thank you, mr. Secretary. Thank you. Senator cortezmasso. Thank you, mr. Chair. Secretary mnuchin, i represent nevada. And for eight years there was the attorney general. And i have to say ive been sitting here listening to your comments and have some concerns. And let me just start off by saying i give everybody benefit of the doubt. Even as attorney general it was about working for the betterment of people in our community, making sure everybody was coming together to Work Together. And im concerned about what ive seen, some of the responses and the dancing around that youve done here to some of the questions. And the only other time i had that opportunity to hear that was from some bankers and wall street executives who are in my Conference Room as attorney general during the worst foreclosure crisis weve ever seen. They said were all doing it and if you come after me youre going to have to come after all of us. You know what i did . I went after them. This is my concern, im still hearing the same kind of dance looking for the betterment of people instead of businesses and big corporations instead of looking out for homeowners and consumers and seniors and service members. So let me start off with this question because this is why i am concerned. You recently spoke at a conference of executives where the cheapest ticket to attend cost 12,000. And you joked, and i quote, you said you should all thank me for your bank stocks doing better. Im sure you dont feel that way today. But this remark came during a discussion of your efforts to roll back wall street reform including under an executive order signed by President Trump before a room full of powerful wall street executives. Well, let me just tell you this. While youre working to undo those financial protections, i am still hearing from constituents in my state who are suffering. And let me just quote you some of what im hearing from them based on your actions and what were seeing from this administration. Ruby from reno said, this bill needs to stay in effect. The regulations are needed now more than ever as you cannot depend on the big banks to just be honest. We have susan, please dont weaken the financial regulations that were meant to prevent a repeat of the financial collapse that led to the Great Recession. It will only hurt the middle class. Kathrine from spark said appalling that the regulations monitoring banks would be lowered. Stand against the executive order in rolling back wall street reform. Why doesnt President Trumps executive order that rolls back the wall street reform mention consumer or Investor Protection even once . Why doesnt it direct you to consider the financial needs of borrowers, students, service members, seniors, homeowners . What are you doing to ensure that youre looking out for those best interests . And who are you surrounding yourself with so that you just dont hear from executives but you also get the perspective of homeowners and victims of that 2008 collapse . This isnt about regulation for big banks. This is about making sure that small, medium small, mediumsized businesses, homeowners have access to prope homeowners have access to grow. Well, let me tell you my concerns. First of all, i am troubled by the people you are bringing into the treasury. Press reports suggest that youre advocating for the appointment of another one west executive to head the office of the comptroller of the currency or regulator entrusted with overseeing more than 2,000 National Banks and your senior counsel whom you hired to run Housing Finance policy was instrumental in managing the line of credit for Morgan Stanley to new century, a toxic subprime lender that went bankrupt in 2007. As attorney general, i sued for this very conduct. This was the subject of a 2. 6 billion Justice Department settlement in 2016. Do you have anyone on your Leadership Team that has advocated for borrowers or worked on behalf of homeowners . Absolutely. First of all, we absolutely are very interested in protecting borrowers and homeowners. It is it is very critical to everything that were doing. And this is something that is going to be a big focus of the treasurer when she starts who has lots of experience having worked at the Small Business administration and also having come up the ranks through ups and managed a big part of their business. And a big part of her focus will be on community outreach. And making sure and im sorry you feel that way about our appointments at the treasury. I think we have an enormously incredible staff. We have an incredible career staff. We have lots of people inside the treasury who have been with us that have tremendous experience. And i think as you may know, i started Loan Modifications at indy mac. Thats something we were very proud of. Yeah, i dont have enough time and i dont want to go through that because i think were going to disagree what you did to help homeowners in nevada with one west. I hope im wrong. I hope that you prove me wrong and youre out there advocating and the people around you will be advocating for the very constituency that i just talked about because i will tell you what. Right now i have not heard net specifics with middle class tax breaks, nos specifics how youll address the very people i talked about talking in absolutes and without bringing specifics into the conversation concerns me. So im looking for very specific information. I hope that you have that. And will the ability to Work Together. I will contact your office and i look forward to getting together with you and your staff. Well come over and talk about, we appreciate the issues in nevada in the housing issues. And i will follow up in the next couple of weeks to come and see you. Thank you. Senator shots. Thank you, mr. Chairman. Mr. Secretary, thank you for being here. I have some questions about your tax proposals. And the first is a process question. There are basically two paths for the administration and for the congress in terms of tax policy whether or not youre going to move through reconciliation which requires 51 votes for move through the regular order for legislation which would require 60 votes and, of course, would results in a bipartisan product. So the first question is, do you intend to work through reconciliation or through the regular order . Well, i mean, thats a decision for the senate. What i would saycy hope that we can get bipartisan support for tax reform as weve outlined, middle income tax cuts, making businesses competitive, creating jobs democrats support that. I have a lot of questions. And theyre mostly about process. So yes or no or a quick sentence would be great. Do you have any more details since this piece of paper was released on april 26th . We have a large team of people that there is working. Yesterday, i met with the finance committee. We are having outreach to lots of different people and we expect in the near term to have something with a lot more details into so is it fair to say, im looking at your proposal and media reporting around it. Yes or no, is it accurate to say that the plan cuts the Corporate Tax rate, cuts the pass through rate, reduces the top marginal tax rate for individuals, eliminates amt and eliminates the estate tax . That is correct. So i think it was two days ago, or maybe three leader mcconnell made a statement that tax reform must be paid for. Is that the view of the administration. It will be paid for through growth. So yes. Soapy just sorry, my colleague got a chuckle out of that. Im trying not to. I guess the question i have, and lets be really blunt here. I understand your position which is essentially tax cuts pay for themselves, but i think what im hearing is that youre not concerned with the sort of formal processes that determine whether or not at least in the context 6789 legislative Branch Something is paid for. Youre asserting not just through dynamic scoring which is a new technique of measuring the impact of legislation that the congress adopted over the last four or five years, but youre saying you know what, were going to ignore cbo and just hope, allege, assert that tax cuts always generate more revenue and pay for themselves. But thats a change in the way the tax policy is being made. Again, let me just comment that this is math. So you know, you can create models as weve seen, turn the financial crisis sometimes models work and sometimes models dont work. Are you going to rely on the math of cbo or generate your own arithmetic. What ive said, okay, and let me be clear. Tax reform is something obviously the administration is driving forward but needs the support of the house and senate. I believe we will have typically scores. A static score, a dynamic score per the process which joint tax. And your score . We will likely have developed out of treasury, we have over 100 people a different view of growth and show those numbers. And when its voted on youre going to have a static score, a dynamic score, and then a treasury score. Again, what id say is there will be a joint tax score and there will be a score that shows what we believe the impact is. Thats correct. So senator mcconnell also said that a border adjustment tax would not pass the senate, my view is that the same is true for a value added tax. I guess as im looking at the socalled loopholes youre looking at closing, without a v. A. T. Or a b. A. T. , youre not going to be able to generate the revenue to do tax reform. So my concern is either youre going to try to jam a vat or bat through, or basically not doing tax reform. Youre doing tax cuts unpaid for with a little bit of spin on the ball. Could you just allay my concerns that you actually i understand we may have a different view of the revenue impacts of tax cuts. Thats an interesting and legitimate conversation to have. But you cant possibly believe that we dont need to generate some revenue to make up for the holes that were creating in the tax code. First of all, we absolutely believe that we have to generate revenue, and thats why again, were trying to if not a v. A. T. And b. A. T. , then where. We need we believe to generate revenue. We are very concerned about the debt and we will go through the math and show you. This is clearly in the case of business taxes, there are many, Many Companies that pay much less than the 35 rate. And theres Many Companies that leave foreign profits offshore. This is all about broading the base. And in regards to the b. A. T. , we have said to chairman brady in its current format it doesnt work although well look at Something Else if they want to present it. Id like to make one final comment with the permission of the chairman. Briefly. I apologize. What concerns me is that it seems to me that youre very sure about where you want to cut taxes and youre very vague how you want to generate the revenue to make up for the tax cuts. That is a dangerous position to be in because all the things that youre sure you want to do mostly benefit the wealthiest among us and all the things very vague and may be done in secret and in private are the things that may be harming most of our constituents. Thats my deep and abiding concern about this process. Thank you. Theres nothing that will be done in deep and secret when the tax bill is generated. It will have all the specifics and it will have the distribution and there will be complete transparency in the process. Senator donnelly. Thank you, mr. Chairman. I want to follow up and support the comments of my colleague mr. Shots that whats actually happening is the appearances that will be making those working class families ones struggling the most will be the ones whose funds go away to help the richest among us. And we find ourselves with 20 trillion now, 20 trillion in debt. And we were going to dynamically score out way out of 20 trillion for the last 30 years and find that the pile gets bigger and bigger and bigger. And i laughed one time when somebody said to me about the dynamic scoring, i said well then, theoretically if we go to zero, we should have more money than we dreamed of in history because as the tax rates go lower and lower and lower we theoretically have more income coming in. One of my greatest fears as i look at the tax reform as i look where were going, as i look at the budget that goes forward, we have budgets that dramatically increase spending in areas. And tax reform that has huge cuts. And i think all youre doing is just adding to the deficit which is incredibly irresponsible to the children of this country. Well, i can assure you we have no interest doing that. The fact that the deficits and the National Debt went from 20 trillion to 20 trillion is something were very concerned about. Again, as ive said before, if we make cuts, this is going to be about broadening the base and paying for it. But weve heard that before. And you have seen in various times where the deficit just increased when we actually, the time we had a surplus under clinton and secretary ruben was where the economy grew incredibly which nobody expected. They never thought we were they couldnt have predicted that type of revenue. This is all about we need to create Economic Growth. I hope thats something everybody. We had follow on tax cuts after that that blew up the deficit, as well. So you know, there were specific tax cuts that occurred after that that increased the deficit. I also want to talk about outsourcing. And the president has talked about how this is one of his biggest priorities is stopping outsourcing. My state indiana is where carrier is is where rex forward is, where these worker whos did an amazing job creating the best products in the world were summarily fired for no reason other than 3 an hour wages in mexico. I was disappointed to see that the recent tax proposal did not have any provisions that addressed outsourcing in regards to things such as clawing back tax breaks for companies that move jobs overseas or Incentivizing Companies to invest in our communities. When i met with President Trump, i met with him at the white house and told him about an outsourcing billy have, he was very, very supportive of this. And so what i would like to get is any specific policies that youre working on now on a tax reform package to address this outsourcing. To incentivize that keeping jobs here to claw back any tax breaks that go to companies that are moving jobs overseas. Id love the details of that. Okay. First of all, let me say id be happy to get together with you and go over your ideas for your outsourcing. I can assure you that the president. The good part is i laid them out to the president and ed told me he was 100 behind them. Il get together with you and we will go through them. The president is very concerned about jobs leaving this country. I think you know one of the main reasons why he wants to renegotiate nafta in the case of carrier and others, he personally picked up the phone and made calls. And we are very concerned about that. We have supported all of those efforts. And all of my trips overseas, i have told my counterparts we expect free and fair trade and better trade deals. And that for too long, American Workers have been hurt by jobs leaving this country whether its because we have an uncompetitive tax system or whether we have bad trade deals and the president has talked about the concept of reciprocal deals and reciprocal taxes. Im about out of time. I want to ask you about one more subject. Currency manipulation. For a long time, weve suffered in indiana. Weve seen products dumped on our shores. Weve seen steel dumped in our state and around our country. And currency manipulation has been a big part of that. The president proposed to label china a currency manipulator. China has been able to rack up a huge trade surplus because of artificially keeping their currency low over the years at the expense of our companies. And in your testimony, you states that the Treasury Department found no Major Trading partner currently meets the criteria to be considered a currency manipulator including china. I guess the question is what happened. Again, first of all, thank you because we did a lot of the work. I brought the report with me. Im very impressed and its very attractive graphics but the president told us he said china was a currency manipulator. What happened. Page 13 we specifically reference, okay, chinas intervention for roughly a decade. Okay . And there is no question that they did. This is for a very specific period of time. We went through a very specific test. If anything, during this period of time, china has used their currency reserves to go the other direction which is actually good for American Workers and ive had very specific conversations with my counterparts that we will continue top monitor this behavior very carefully. Im glad you like the graphs. Very attractive. Im a lot more concerned about the currency manipulation though. So are we, i can assure you. Thank you, senator. Secretary nushen, a vote has been called. The questioning is concluded. Senator shelby wants to make a brief statement and then senator brown wants to make i guess a tamt and a couple of real quick questions. Theyll be wrapped up. We appreciate your appearance and your candor here today. Youre a breath of fresh air. We want you to stay that way. I want to pick up on the Export Import Bank. And the question by the senator. I believe that the two nominees by the president former congressman garrett and bachus, are good appointments. I do have some fundamental differences of the role of the bank, a lot of us do. We believe that had i two days of hearings when i was chairman of the committee of trying to reform the bank because if my numbers are about right what ive been told, you would know offhand, that about 2 trillion of our exports each year, a little more than that, and only about 1 or 1. 5 of something use the Export Import Bank and that we all know that the bank is used primarily by as far as the numbers by one or two big companies. A lot of us believe thats corporate welfare. You know, that bothers us. I would hope that the administration and the president talked about this at one time would look at ways to reform the bank. I know thats separate legislation than just the nominees themselves. I hope you would not close your eyes to that because you know a lot about the private market. Not only would i not close my eyes i would welcome working with you and the committee. We do support reopening the bank for more than 10 million in loans. We have a team that will work with you on making sure its not just for two large companies. But the majority of the republicans in the senate a year or so ago voted against reauthorizing the bank because we could not get real meaningful reform. So that would be a priority i think for a lot of us. Maybe not all of us. Well work with you on that. Senator brown. Thank you. I want 30 seconds to address what senator shelby just said. The blemish on this committee and this committees stonewalling last year affected Economic Growth because we didnt have an export impart bank as you just said for over 10 maryland. A couple of real quick questions. Theres a vote called on the floor. Are you aware, mr. Secretary, of any white house these are housekeeping measures we sometimes do. Are you aware of any white house guidance formal or informal urging Administration Officials not to respond to or to delay in responding to Democratic Senators . I am not. Thank you for that. Are you committed to chairman hatch you would respond to finance Committee Members questions. Will you commit to responding to members in both parties of this committee in a timely mandatory all requests for information. Yes, i will. Thank you. The last question is longer. I hope you can do it quick. Are you treasury and fha working together to prevent another draw on treasury by the gses . If so, how are you doing that. What was the question. Are treasury and mell watt and you working together to prevent another draw on the treasury by the gses and if so, how are you going to do that. No, my conversations with mel watt have been specifically one around the dividend and that we believe the Dividend Payment should be paid and two, that we are willing to work with him and with congress on housing reform. Those are the conversations weve had. Okay. Thank you for that. Thank you. Senator warren has come back and she wants to briefly ask a few questions. We do that and then we will be done. I will not ask about glass steagall. I want to ask about the tax proposal that the administration released a few weeks ago. It proposed slashing the rate on all passthrough entities, partnerships, ll cz, s corps to 15 . I just want to take a look for a minute who that benefits. 70 of all income from passthrough entities goes to the top 1 of taxpayers. Thats households making more than 450,000 a year. And according to an analysis, this week from the nonpartisan tax policy center, this passthrough change would put over 1 trillion in the pockets of the top 1 of households. While 95 of middle income households would receive zero in tax benefits from it. So other than creating new Tax Deduction for yachts, its hard to come up with a more targeted tax cut that goes to the rich other than this cut on the rate on passthroughs. So secretary mnuchin, with working families struggling 0 make ends meet, why is this administration giving the ultrawealthy this massive tax cut . So i can assure you, and ive said this repeatedly, we are not going to allow all passthroughs to get that rate. We are going to make sure that small and medium sized businesses have the benefit but we will put procedures in place, and i specifically said this, to make sure that people who should be paying higher taxes do not use passthroughs to arbitrage the system. If i can just understand, there are two parts to your answer i want to make sure im understanding what youre saying. Are you saying people who currently receive passthrough under your proposals may not receive pass through in the future . Again, the concept is that there will be a box box that you have to check that says im eligible for the business tax. Okay and are you. And there will be qualifications around that. So no, it is not will that shrink up the number of people who receive it now . Im not talking about new people coming in. Its a trillion dollars in tax breaks to the top 1 . Trust me, weve run the numbers and despite the fact that lots of people have asked me these questions, we are sensitive to the deficit and everything else. And youre correct. If we let every single passthrough holder, that would be purely arbitraging. Its clearly a pass through. Im not changing it. You are not going to do that. We are not going to allow every single pass through. Specifically people who are making lots of money will not be able to use passthroughs there there will be criteria whether youre eligible for the business tax if youre a pass through. It will not be available for everyone. Youre going to limit this to Small Businesses. Small and medium sized businesses. Limited to them. Thats what i wanted to understand. Thank you very much for the indulgen indulgence, mr. Chairman. Thank you. Thank you very much. Now the questioning has concluded. And secretary mnuchin, the hearing is concluded. Before i hit the gavel, thank you for your openness and your work with the committee. I mirror what senator toomey said. Youve been very willing to give us your time both in formal hearings as well as in private meetings with the senators of this committee and of other committees. I appreciate your outreach to us. Thank you very much for being here. A pleasure