Transcripts For CSPAN2 Treasury Sec Mnuchin On Stability Report 20180201

Treasury collaboration with congress is vital to the admission and we are working to make it that way. I look forward to answering your questions. Thank you, appreciate your comments at the Regulatory Reform and protection act and appreciate your encouragement that would move quickly. I appreciate your comments on Housing Finance reform, my highest priority in many. In the annual report last year, one recommendation was the regulators and Market Participants continue to take steps to encourage private capital to play a larger role in the Housing Finance system. I agree with that goal. Can you elaborate why it is important to play a larger role in what steps you believe we can take to further encourage . I believe in the importance of the 30 year mortgage. It is important to the economy and as we look at housing reform we need to look at fannie mae and freddie mac and the risks. Im openminded to Many Solutions and had some very productive conversations with several members of the committee and look forward to working with you on them. In order to protect taxpayers we need to have substantial private capital and risk in front of any government guarantee or government support. In the context of protecting taxpayers against a government guarantee there have been a number of ideas how to accomplish that including the idea of guarantors absorbing losses in front of the government guarantee. If that were part of the model do you believe it is important such guarantors are subject to Capital Requirements to ensure taxpayers are protected . It is very important that there is substantial capital and taxpayers are protected and i look forward to working with you and your committee and if there is any guarantee that the taxpayers are paid for putting that up as opposed to explicit guarantees that were not compensated in the past. Moving to another topic in the treasury report on the designation process treasury recommended the after stock implement activities base or industrywide approach to evaluating Systemic Risk. The Supervisors Development activities based approach to assessing Systemic Risk in the insurance sector. Habit and activities based approach work and why is it more effective than the current entities based approach . It is more effective because to the extent we look at risky activities across an industry or within a sector we can look at proper regulation that deals with those issues and eliminate Systemic Risk. Moving to Cyber Security, cybersecurity is one of the most pressing issues that you mentioned in your testimony that faces companies, consumers and governments. The annual report identified cyberattacks on Financial Service companies as a potential vulnerability to us Financial Stability due to the increasing frequency and sophistication of such attacks is there are shortfalls in cybersecurity protection today and what steps can we take to address this . I dont see any specific gaps but i do think this is an area where we need to always be advancing issues whether it is recent issues or software situations, this is something we need to be very careful, we need to be working in Public Private partnerships, have ways of sharing intelligence, make sure whatever the cost the United States Financial System is protected from cyberattacks. Appreciate your attention to all these issues and the willingness you have to engage very aggressively with us on issues as they come forward. Im sure we will be dealing with you on each of these and many more. I appreciate your attendance here today. With that, senator brown. Based on the bank threshold and the wall street Reform Efforts a 50 billion threshold as an initial factor to determine if a shadow bank could cause Systemic Risk to treasurys november report suggesting raising that level. The deregulation bill enacted, is it safe to say fsocks could raise regulation and not put any resources into investigating shadow bank below 50 as your report said . That is correct and theres a general consensus in the Regulatory Community that the threshold should be raised and of course the committee could always make exceptions if there were significant i challenge that statement. Maybe regulators appointed by donald trump, and other regulators that have been in office, did not say should be 250 but more on that later. This bill has other consequences beyond Bank Deregulation. It would mean the f stock would be unlikely to designate a large leverage Hedge Fund Like longterm Capital Management which when it failed had just 129 billion in assets, leveraging 251 and more than 1 trillion derivatives exposure making the system less safe and sound with those ideas. Second question, the june treasury, if we raise 50 billion threshold for us banks we should do the same for foreign megabanks based on their domestic asset so if the chairmans Bank Deregulation bill is enacted foreign banks with 250 billion in us assets will be deregulated, can the us reach banks . Correct. The treasury report said if we move 50 billion threshold up we should move the threshold up for foreign banks. The report says 50 billion threshold, domestic and foreign banks to be raised too so to be clear the chairmans the bill with your acquiescence will deregulate banks like those that repeatedly failed the stress test in deutsche bank, the only bank that went, woodland donald trump after his repeated bankruptcies and botched deals. Third question, last night your staff sent the committee varies classified and unclassified reports do under the russia sanctions bill including an unclassified oligarchs report that looked a lot like the forbes list of rushs wealthiest men. I hope the classified portion is more detailed and compelling and the cia director did not see any reduction in west and subversion of western elections nor did he expect them to back off their efforts to interfere in our own upcoming elections, the president reportedly will talk about the need for bipartisanship tonight, cant get any more bipartisan than the work senator crapo and i bill did and it looked like the president didnt impose any sanctions under mandatory authorities we enacted, nothing to combat russias Cyber Security, no sanctions on those helping its intelligence and defense sectors, nothing in response to its corrupt privatization of stateowned assets. How can sanctions punish russian interference in ukraine and in american elections if these sanctions continue to sit on the shelf unused by the president . I want to commend the treasury and the Intelligence Community who did an enormous amount of work in preparation of the report we delivered last night. As we tried to outline in the unclassified version the list in the unclassified version is senior political people as well as oligarchs based on a threshold of 1 billion or more gone public, you are correct that the public version does look a lot like the public. When are you going to take those sanctions off the shelf and use them in terms of cybersecurity, in terms of intelligence, in terms of american elections . There is a substantial amount of work that was done. I look forward to you reviewing the classified report and we will be doing based upon that looking at 98numtwo in the senate, three no votes in the house, there is a lot of belief on both sides of the i like your senators talking about. This congress and the American People dont trust the president on russia, and all those things and your delay on this just enforces that, last question, persistent budget deficits a threat to Economic Growth in the annual report. A month later the president in a partisan majority in congress ignore their own warnings passing tax cuts for corporations and billionaires that will add 1 trillion to the deficit. Immediately after passing the budget busting textile some of my colleagues started to turn towards getting entitlements under the guise of fixing the deficit. I listen to candidate from come to ohio for rally after rally saying he would protect medicare, medicaid, said he would protect Social Security. The fair to add 1 trillion to the deficit for tax cuts and then have colleagues, republican colleagues with apparently the president s acquiescence Start Talking about cutting medicare and medicaid, Social Security. Let me comment on your previous comment. I dont we are slow walking the report, we look forward to discussing it with you in a classified setting. On the issue of taxes i think you know as i said before the president and i believe with a breakeven of 35 basis points the tax bill will create growth and enough revenue. Nobody has ever believe that in the past, why should we believe that now . I would be more than happy to meet with you and go through the numbers and their economic analysis. Why the acquiescence on the attacks on medicare, medicaid and Social Security calling them unsustainable when the president promised to protect them . I havent made those comments, senator. Senator shelby. Thank you for your service. I would be remiss if i didnt thank you for your leadership and steady hand in dealing with tax reform measures that a lot of us, maybe not all of us but a lot of us believe is going to really help our economy and we see signs already in the confidence that i see but congratulations on that. When you designate an entity that is deemed systemically risky, that is a very, very important designation. It shouldnt be done on a whim, should be done very carefully with a lot of data and cost. When we look at Insurance Companies as an entity and we look at banks as an entity, there might be some overlap between 2 different models i believe. Should they be viewed as such before you make a designation . Banks are very different from Insurance Companies. They have different liabilities, they should be reviewed carefully, something we have done over the last year. When you designate an entity systemically risky is a profound thing. Would you agree with that . I would. I want to shift to something i hope you will have interest in and that is infrastructure. We keep talking infrastructure. How are we going to a lot of democrats and republicans both know that we need an infrastructure bill, we need to do it and it takes money to put that together, we know that. How do we use an infrastructure bill to tap the private money in america which you are very familiar with, a lot of it out there that is looking for better return on their investment. How do we do that rather than just let the government deal with infrastructure. Have you thought about that . We have thought about that. The administration put a lot of work into this and the president looks forward to releasing his infrastructure plan shortly and working with congress and i agree with you that we should be looking at both federal money, state money and private money as we look at infrastructure investment. Shouldnt the infrastructure bill from the standpoint of future economy and infrastructure in this country so important to move goods, people, services and be one of our top prioritys and i think it might be . I believe so, yes. The chairman talked about cybersecurity. We know we are in the information age, so is everybody else in the world. We know we get benefits from modern Information Systems but they are subject to attack including our law enforcement, pentagon, treasury, Federal Reserve and so forth. This is an ongoing Risk Management and i dont know how we get to the bottom of it but that is a big challenge for all of us and that would be for the treasury. That is and that is why it is one of my top priorities, senator. What should we do first, should we worry about the Financial System . Should we worry about our electrical grid, we also have to worry about National Security and the implications of penetrating through cybersecurity. That is correct and that is why we have a process across all the different agencies we are focused on this, Homeland Security is responsible for the overall coordination. We are responsible for looking at the Financial Sector and dedicating a lot of resources to that. How do you think the economy will continue to grow . I like what i see out there. Do you feel like it is going to continue to move forward . I do. The president is determined we and act legislation that moves forward on a sustained Economic Growth of 3 or higher. We are not focused on any one quarter, we are focused on sustainability. Senator menon does. You talked up the economy and results of the trump tax plan but i dont think workers facing myopic carrier, toys r quote us, at t, kimberlyclark, walmart and ge would share your enthusiasm and i dont think we should be satisfied with the slowest year of job growth since 2011. I have a different view of what we need to do as relates to the economy. I want to get to a specific provision in the trump tax bill which gutted the state and local Tax Deduction and compelled thousands of new jerseyans to rush to prepay their 2018 property taxes before the start of the year in order to escape being taxed twice on the same dollar. As if it wasnt bad enough spending the holidays fretting over attacks like coming game the grinch played by the irs to tell they couldnt deduct their property taxes in 2017 despite paying them that year. This irs advisory was confusing, frustrating and plain wrong. The trump tax bill specifically prohibited the deduction of prepaid state income tax but made no similar prohibition against prepaid property taxes. My question is do you commit to fixing this fundamentally flawed irs advisory and stopping the irs from changing rules in the middle of the game for working families . I dont think it was confusing. The intention for the irs was to put something out the clarified. Do you suggest that advisory is right . Yes i do. How is it possible that it is right when those at legislative text is as clear as day, section 11, 11042 specifically prohibits 2018 state and local income taxes from being prepaid and deducted from federal income taxes in 2017. It is silent on the prepayment and deduction of property taxes. Whether that exclusion was included intentionally or because of the secretive and rushed process by which the bill became law the legislative text through its deafening silence is loud and clear on this topic and that means the irs advisory clearly contradicts the law and is nothing more than a backdoor attempt to get these people who should be able to deduct their property taxes when they paid it. With the irs advisory did is the third it to the legal position of the state and i would be happy to meet with you and go through that. The intent was it wouldnt allow taxpayers to abuse the system. It was intended for clarification. The system is abusing them. They paid it in 2017. They should be able to deduct it. I hope you can get to a point with us that you can help us on this because it will be bad enough that in the next year they wont have that deduction but they certainly should get the deduction for the year in which they paid it. Let me ask you this. The cia director unequivocally states he believes russia has every intention in meddling in the 2018 election, do you agree with his assessment . It for to the cia director. You dont disagree. Im not disagreeing. Do you agree with the assessment that russia used a hybrid of political intelligence and defense tools to metal in the 2016 election . Im not going to comment on things there has been plenty in the public sphere to have a judgment on this because your department actually has jurisdiction over the enforcement of sanctions so if you dont believe those things are true that goes maybe to your views on sanctions policy. I didnt say i didnt believe it is true. It is not classified. Yesterday the Treasury Department identified senior political oligarchs and political figures in russia as mandating encountering americas adversary through the sanctions act which i was one of the coauthors of which this body past 98numtwo. That law provided tools and a deadline of yesterday to go after entities who support the very same russian intelligence and defense agencies, however isnt it true yesterday the trumpet ministration failed to apply a single new sanction against anyone who might be supporting these russian efforts. We very much agree with the purpose of the report. There was an extraordinary amount of work. I assume you havent seen the classified version i look forward to. Yes or no. Have you, the administration imposed any new sanctions on any of these entities . The intent was not to have sanctions by the delivery report last night, it was to do an extremely thorough analysis, hundreds of pages and there will be sanctions that come out of this. The law was pretty clear and it seems not only did you have to describe the entities but you had to pursue sanctions and i look forward to continuing to press that question. Senator heller. Thank you. And thanks for taking time to be with us today. Im sure you recall last august when you came to las vegas with a roundtable with Business Leaders in my state, the promises and questions and concerns that were shared at that roundtable were delivered much later in december with a tax bill last week i had a town hall meeting out of my office with nfib, we called thousands of Small Businesses hundreds on the line and questions were asked specifically of what the new tax bill, what you anticipate your Business Practices will be for this year. 90 of Small Business in nevada said they were planning on expanding their business, going to hire more employees, provide bonuses, pipe pay raises and increase the minimum wage to their business, 90 said they would do parts or all or some of those Business Activities. A professional survey by any means, i was pleased to know the white house and what your department attempted to do in december i do believe are being delivered. What we are seeing in nevada. We have had self point casino doubling its 2300 fulltime workers bonuses, fountain blue. Developers. They are going to resume a stalled project and the effects creating approximately 10,000 jobs and we are seeing this across nevada and i want to thank you, the white house and all your efforts putting us where we are today and seeing this. What do you anticipate Economic Growth to be this year and from what you originally anticipated . Thank you for your comments. The tax rate on Small Businesses is the lowest it has been since the 1930s and we are seeing that. We would expect over the next several years sustained Economic Growth of 3 or higher. I was in your office and you showed me the comment, written note from the president saying he wants 5 growth, when are we going to get there . He has delivered high ambitions for is as you know. Do we expect to see nevada over the next couple years . Could you repeat that . Tell us what positive impacts we will see in the next couple years through growth and Business Activities in nevada . One of the most important things is we expect to see Wage Inflation for the average american worker, wages have really gone nowhere, has been a great time for financial people and one of the benefits we expect of the tax bill is wage growth. What do you anticipate with capital coming back into the country . Apple Just Announced a new Data Center Expansion in reno, 30 billion Capital Expenditure over the next 5 years which can we anticipate or what do you anticipate over the next 5 years of capital coming back to the United States due to this tax bill . We expect a lot. I had the pleasure of meeting with tim cook recently to talk about their investment. Obviously they are bringing back hundreds of billions of dollars, paying a very large tax to do that and they have made a major commitment to invest in the United States. I also had the opportunity to meet with many ceos of International Companies and as a result of the tax bill now committed to bring manufacturing into the us and we look forward to that. Mister secretary, i am pleased we are seeing huge expansions in nevada. Some of it is causing problems in northern nevada, Housing Starts are 20 behind. With the kind of expansion we are seeing that is come from this piece of legislation passed in december, the jobs act is doing exactly that, technology and Technical Companies coming to the state of nevada we can list them from amazon to tesla to apple, lists of organizations moving into the northern and southern part of the state has been pretty incredible and im pleased we have the treasury secretary in front of us to expound on some of these issues and thank you for the time, thank you, mister chairman. Senator tester. Are you familiar with the marketplace and affect . Yes i am. Change review and the president opposed to creating this . I think the president is fundamentally supports the idea of some type of sales tax across the board and we look forward to working with you and others on that. You are saying the president would support National Online sales tax . In my conversations with the present there are aspects of that that he likes a lot and looks forward to working with you and others on it. Will you direct the Treasury Department to conduct the study on what i believe would be burdensome cost on Small Businesses and nonsales tax states . More than happy to work with your office on that and there are ways of dealing with that. We would love to have that conversation to figure out how we can do that. In a previous question on entitlement reform, you had said that you had not made the commitment to protect Social Security, medicare that the president had. Does that mean you are looking to do reductions in Social Security and medicare . Not at all. What does it mean . Just was a comment, i was referring to at the time, the president made that commitment and and i have every reason to believe he will continue. Do you believe you will support him in that . Whatever the president wants to do i will support. Do you believe a 30 year fixed rate would exist without a government guarantee . I think a 30 year i think it is critical that we have a 30 year mortgage. I dont believe the private markets on their own could support it so i think one of the things we are looking at is Different Solutions around that. I dont disagree with any of your comments with potential reform putting private money ahead of taxpayer dollars. The question i have relates to a previous person sitting at the desk a few days ago that said he believed the 30 year fixedrate mortgage would occur without a governmentbacked guarantee. By your answer, i think you disagree with that. You believe a 30 year fixed rate even with public dollars up front you need the governmentbacked stock at some time. Im not trying to be cute. This is a complex thing. What i do believe is fannie and freddie would not be able to exist without either implicit or explicit government guarantee and if there is an implicit guarantee i would want to taxpayers to pay for it. This is something we are working with with people looking for solutions. It is very complicated but i agree with you we need a 30 year fixedrate mortgage in this country and as we talk about gse reform and there is plenty of options on the table we need to make sure we dont do something that puts that at risk because it would have incredible impact on the Housing Market and affordability. I agree with that. Lets start out of stock for a second. It was put in in doddfrank for nonbank financial companies, dont need to give you a lecture on this, you know that. The f sock has basically taken the companies that were designated and d designated them. I assume you did research on that and found out they were not systemic . Actually that is not the case. The only company we d designated as a result of them not being financially systemic was aig where they had to cut the risk significantly and that is why that happened. So the issue was more a legal issue. And prudential . Prudential again would follow the same issues. I guess the question is could you confirm that the council cs still functioning and still actively looking at Companies Financial products and assess the risks risk to the Financial System . Absolutely. Thank you, mr. Chairman. Senator cotton. Thank you, mr. Chairman. Thank you, mr. Secretary. Senator brown started his remark speaking of a swiss ski resort. I assume he was referring to day post where the president addressed the World Economic forum last week come to my knowledge and they boast all the dudes have the party once a a r but in other swiss ski resort, basel, the report to exercise Great Authority without accountability at the Financial Stability board. Lets address what happens in the swiss ski resort, mr. Secretary. We recently set the administration a letter which raise concerns about the operation of the Financial Stability board or what concern it is morphed into a global regulatory body using its peer review mechanism as a quasimathilde press u. S. Companies into adopting global standards. Im concerned about the current regulatory into u. S. Jurisdiction. For example, we have thousands of small lenders, independent Asset Managers and we have an Insurance Industry regulated by our states primarily. So simple question. Are fsb rules voluntary or binding . They are voluntary. Are they suitable to be used in u. S. Courts by regulatory agencies or in private litigation . Again im going to defer to the lawyers on that, but my view is not necessarily. In 2015, or chinese banks sought an executive from a fsb world will tell much capital they have to hold. Given i agree with you that these rules are voluntary, its strange they would have to seek an exemption from such a rule. Can you imagine a u. S. Bank or from would have to seek an exemption from fsb role . Again, the u. S. Banks are regulated by the u. S. Regulators. I think the purpose of the International Standards from our standpoint is to make sure that theres a level Playing Field for our banks, and that to the extent that foreign banks have a lot less capital that there are certain standards that they would adhere to, but that is not legally binding. Thank you. Lets talk about the fsoc process or identifying system Important Financial Institution institutions, special under the last administration as a relates to fsb. In july 2013 the fsb determine that three u. S. Insurers, aig come metlife and provigil, were globally systemic important insurers. But at the time of aig had been designated by the fsoc is a systemically Important Institution in the United States. Prudential wasnt designated as a sifi until september 2013. Metlife not to december of december 2014. Since the fsb operates by consensus this means that for months before the fsoc designated either prudential or metlife as sifi your predecessor at treasury and the chair of the fed two of the most important members at fsoc at a predetermined as members of the fsb to designate prudential and metlife as globally systemically important. I assume if he from a system important on a global scale it must be systemically important in its own home country. I i wanted and how the fsoc designation process in the last administration for potential and metlife could be considered fair and objective. The fed had determined as members of the fsb that they were globally systemic. Do you believe that this decision was simply a show trial by the fsoc in 2013 and 2014 . Senator, since i was a i cant comment specific although i understand your concerns. I was a fundamentally i do believe that there should be better transparency at fsoc to the extent that companies are designated. They should understand why their designated, and the basis of the risks. Can we be certain we will not see a repeat of such a scenario in which the fsb designates a u. S. Firm as globally systemically important before the fsoc designates that as systemic important in the United States . I would not expect that to be the case. Thank you. I think its an important issue. Financial experts around the world havent exactly covered themselves in glory for the last 25 years. Our nation is not just the United States but in europe have faced some turbulent political times with populist candidates and parties on both sides, right and left across our nations. Defeating more conventional politicians and parties because of the failure of our countrys leaders to deliver stable, prosperous conditions for our citizens. I think its important to remember we are countries that are governed by our citizens, not by our experts, so do not by unelected expert at swiss ski resorts. Senator schatz thank you, mr. Chairman. Mr. Secretary, thank you for being here. I want to try to get a three question. The first is about the debt sitting at that limit. I heard the Vice President was at least open to the notion of repealing the statute over all. That is very attractive to me. Having been here under democratic president now under a republican president and with the Democratic Senate and with the republican senate, i can say definitively that utilizing the debt ceiling statute as a sort of opportunity to take a policy ransom only harms our country. Im wondering whether he would be willing to work with us on a statutory fix to repeal this thing once and for all . I distend the political difficulty of doing it, because on the record you were you are g the amount of debt that the country is under. But the fact of the matter is there is no evidence that having a statutory requirement that we do this every six months or 12 months for 18 months reduces spending at all, reduce of the debt and deficits at all. Im wondering what you could work with us and we especially need a little Political Support on the republican side. I know they want to get rid of this as badly as we do but they need cover from the administration. We will need to work with you on this if youre open to it. I have spoken to both the president and Vice President , and and we are very open to Bipartisan Solutions to figure out something as an alternative to the Current System that a think many of us would agree doesnt work well. Thank you. Your comments on the dollar in davos i think surprised a lot of people, raised a lot of eyebrows. I want to give you an opportunity to expand on them or clarify them, if you wish. Sure. So thank you. Ive tried to clarify this now many times. This was clearly a situation where at a press gaggle i made a comment that at three parts to it, that was extremely valid and very specific. It was not anything new, and the press took one part out of this and kept on playing it over and over. So let me be very clear. I absolutely support a strong dollar as being in the longterm best interest of the country, and a strong support we have free currency market that we dont intervene in, and have relied upon the most liquid market in the world. So the short term is not a concern of us, and it was no intended no way intended to talk down the dollar whatsoever. Thank you. Yesterday the administration declined to impose sanctions required under the bipartisan russia sanctions law that passed with overwhelming majorities from the house and the senate. Its not clear which parts are waivable in which parts are not. Were still doing the analysis but what clear to the extent there is discussion to waive or delay, the administration has to a factual findings. Can you tell us what those findings are . Senator, i will repeat this again. I think thats a very unfair characterization of what weve done. As i said, there was an extraordinary amount of work that went into this. The classified report is hundreds of pages. I look forward to congress reviewing this. Our sanctions Going Forward will be based upon a lot of the work that the Intelligence Community did. It was our interpretation that we had to deliver the report to congress yesterday, which we did and we fulfilled. Again, i want to commend a lot of career professionals at treasury you are saying you didnt waver delete anything . We did not wait or delay. There will be as a result of this work damages that and committed just . Again that sounds like a delayed. That is not a delay. I think as you know our sanctions are based upon an enormous amount of intel work. There was an enormous amount of work that went into creating this report and thats what we did and that we will take the basis of that report and look at canadas we do in the normal course where its appropriate to put sanctions. This in no way should be interpreted as we are not putting sanctions on any of the people in that report. I got it. One final question. I will take it for the record. On sifi designations im trying to understand him him him the underlying statute is about Financial Stability of the system, and you seem to be introducing a new criteria for consideration which has to do with the burden on the institution that is designated systemically significant. Im trying to figure out why that would matter under the policy objectives of the law itself it were confident whether something is systemically significant, it actually shouldnt matter whether theres a burden on the institution designated. If we wanted to provide you with that discretion we wouldve written a lot accordingly. I will just take that for the record. Sorry for going over. Thank you. Senator corker. Thank you, mr. Secretary. Thank you for being here. I, national and we talked a lot about the tax reform a great deal in our office. All i have to say is i was surprise, i saw Christine Lagarde at the event last week, and i went there because my Foreign Policy activities. And i will say that she revised upwards world Economic Growth because what the United States have done, which was quite shocking to me actually, and to see what other countries are doing in response to what we did with tax reform is pretty amazing. Psyche what to say it seems to be having an impact far beyond what we thought it would have just on our own country. On the rush you russian issue, i actually think what theyre done is exactly the right thing. We gave a time to warn people about doing business with russia. That was a purpose of it. Our diplomats were involved in that. They did keep numbers of transactions from occurring. They put together this report, and now the process that they will begin cecchini, so just what its worth a someone as you know thats more than glad to offer criticism if i think it needs to be offered, in this particular case i do think they have handled it in a way that it was supposed be handled. I do look for the two sanctions being put in place for those violators. On the issue of Housing Finance reform which senator crapo brought up earlier, i noticed you been very involved in this in the past, understand it will. Let me go through a series of questions quickly. The conservatorship that we now have is unsustainable, is that correct . Yeah, i believe so. And if we have a new model of Housing Finance reform, there are people sides of the aisle working together and have worked together in the past, if we have a government guarantee in the future, would it not be your preference that that be at the actual security level and not at the entity level . That would be my preference. Something most of us understand where as last time taxpayer had to bail out with hundreds of billions of dollars the entities, what we really care about is the individual borrowers and that their security guaranteed come is that correct . Thats what would create a sustained liquid market. And i assume people are able to pass something here that you would want significant private capital in advance of an explicit guarantee, where if we are issuing guarantees, where as was not the case in the past, these whatever entities are actually paying for those so the government is getting something for the eagle stamp which is causing the 30 year mortgage to be guaranteed, is that correct . That is correct as a tax rates would become as if for any unlike the risk. I assume if you were to put in place a new machine we will want to do what we could to in the too big to fail situation that we have today, is that correct . I believe so. So let me just, in the event we dont act, as you know we passed something in his past called jumpstart which it we could only revise these entities through a process of us acting. That ended december 31 at midnight. So now the administration, if they so chose, and i think youre committed to the fact youre not going to leave things as they are, what would be your options if we dont act, and i hope that we will, i mean, what would be your options with these entities . There are certain administrative options that we have. These entities are very complicated. I would just say my strong preference would be to work with congress on a bipartisan basis to reach a longterm solution. But in the event of this great bipartisanship doesnt survive and we dont get this done, its very complicated topic, what are some of the steps that you might take . For instance, i know that in past administrations the notion of putting these entities into receivership and moving forward with a clean slate has been laid out. Is that something that you have thought about . Again, we have thought about and consider lots of things. I dont really want to go through in this format publicly all the different alternatives you and ive spoken. I would be more than happy to come see you. There are lots of alternatives. I just want to be careful given that they do have different market impacts. Well, i appreciate that and i do appreciate your leadership on this issue, and extreme knowledge. And i would just say to the chairman, i know this is one of your goals. I actually believe that we got an opportunity to do something. Its a very complex topic, that matters. We have an administration that is willing to work with us. And i think for the first time we have an opportunity because of just all the things that have occurred that we have a lot of interest out there. Lets face it. We have people we have shareholders in these entities today. And i understand some of the rob that have existed there. I think weve got an opportunity though to really deal with all of the interest in the manner that is fair but also move our nation had in the manner that we dont have these two but he missed that 100 right now back by the federal government behemoth i hope we will get there. Senator warren. Thank you, mr. Chairman so after the 2008 2008 financial , congress created the Financial Stability Oversight Council in order to monitor the risks in the Financial System, and one of fsocs main duties is to quote identified gaps in regulation that could pose risks to the Financial Stability of the United States. Now, mr. Secretary, you hit the head of fsoc. Despite the role you appear to support you are the head a bill that this committee has passed that would roll back the rules on banks between 50 billion 250 billion in assets. Thats about 30 of the 40 largest banks in this country. So what i want to understand today is why you are so confident that that would not pose a risk to the Financial Stability of the country . So, mr. Secretary, how much do these 30 banks hold collectively in assets, deposits, securitis and so one . Well, first of all, i think that we have very significant regulators that will continue to regulate but thats not my question. Excuse me, mr. Secretary, im just asking you a straightforward question were talking about changing the rules, the 30 of the 40 larget Financial Institutions would lose the designation automatic designation assistant of the significant Financial Institutions. And im just asking you, that 30, how much do they collectively hold in assets . Is a large number. A large number. I dont have in front of me. How about 4 trillion . That sounds of a creek. Thats what portion of the gdp . Again, thats thats about a quarter of the entire gdp. During the 2008 financial crisis do you know how much the taxpayers have to pay out in bailout money to those 30 of the 40 largest banks in the country in order to keep them up and floating . Again, i assume you have that number there, too, so i dont have it in front of me. Its 50 billion, nearly 50 billion. So im a little surprised that as the head of fsoc and the secretary of the treasury that you would support a bill without knowing how much you are actually reducing the regulation on it in these giant Financial Institutions. These banks hold a question of about a quarter of the entire economy. They got 50 billion in bailout money less than a decade ago, and yet you think we can rollback, reduce our oversight of them now. So let me ask, do you think that these 50 billion 250 billion banks can pose a risk to the Financial System . Again, there could be banks, okay, that do pose a risk and could be designated. The purpose of this is many of those banks are large community, Regional Banks that speed on some become our you think a bank of 200 billion is a commute commute to make. Was no. Im saying the original banks, okay. Under using Regional Banks cant pose a risk to the financial i didnt say that he requested was many of those banks dont, okay . This is something i believe there is bipartisan support for an my understanding, if they dont pose risk, you can always alter under the current rules how to regulate them. The question is the immediate designation so you keep them on the watchlist. You know, its clear to me that these banks do pose a risk to the economy and thats the reason that Congress Said they should be on a watchlist. But let me take a specific example. In the years leading up to the financial crisis, countrywide financial issued one out of every five mortgages in the country. It did more subprime and teaser rate mortgages than almost anyone, and it turned around and sold into wall street banks. It basically created all these grenades, pulled of the pins out, threw them into our economy and help blowup the American Economic system. At the height of its impact on the Financial System, about 18 months before the crash, countrywide was a 200 billion bank, which is actually smaller than some of the banks that would be deregulated by this bill. So my question is, mr. Secretary, why would you be so eager to take these banks off the watchlist to deregulate it and make it easier for them to follow whatever practices they want to follow . First of all, i share your concerns about countrywide. I think that was lots of mistakes that went on there, particularly with mortgages that the underwrote and lots of blame to go around. Again, we believe these entities below this size can be regulated by their primary regulators. But let me just say this is something that requires bipartisan support and its up for congress to decide whether they want to raise the limit. Thank you, mr. Secretary, t as i understand it you have been pushing on raising the level from 50 billion to 250 billion. 250 billion. If you think that means well be taking on more risk in the system, and i think thats what it means, i wish you would tell us so. The banks have record profits right now. They are rolling in money. They just got a giant tax giveaway. Theyve got even more money. They did not need another chance to blow up this economy. Thank you, mr. Chairman. Senator toomey. Thank you, mr. Chairman and mr. Secretary, thank you for joining us once again. Let me just stay on this topic since my colleague from massachusetts has brought it up. I think an important point that needs to be stressed here, and im curious to see if you agree, mr. Secretary, that these banks are 50 billion 250 billion and under this bipartisan regulatory relief may would no longer be automatically designated as sifis. They are extremely heavily regulated anyway, outside of a sifi designation absent a trend i designation is it not true that all of these banks are subject to a huge raft of regulations that has nothing to do with the sifi designation . That is true. In many cases they are probably regulate by his many as four different entities. Multiple regulators. Isnt it also true that these banks now have huge capital standards, the industry is generally extremely heavily capitalized . Isnt it also true that theyre very high liquidity requirements, new requirement that didnt exist prior to the crash, and isnt it also true that most of these entities engaged in pretty ordinary plainvanilla banking activities as opposed to the more exotic complex and interconnected International Business of the truly enormous banks . Are those all relevant statement. Those are the reasons why its perfectly reasonable to not automatically designate for yet another regulatory overnight those banks that dont create Systemic Risk. Let me briefly thank you and congratulate you for your work and that of your team on tax reform. You folks and your organization were terrific to work with, and the collaboration between the administration and Congress Allowed us to produce something that is enormously constructive. I think you mentioned in response to a question that is the view of treasury that were likely to have approximately 3 Economic Growth for some time, did i understand it correctly . That is true, and i just want you particularly thank you and senator scott and others who worked very closely with us on the tax bill. Thank you. I would point out the Congressional Budget Office forecasted prior to the tax reform that Economic Growth would average 1. 9 . Are now at approximately 3 before the tremendous benefits of this tax reform have fully kicked in and were already at 3 . If we sustain anything close to 3 , just for the record, the federal government will take in much more revenue as a result of a bigger economy than we were projected to take in with 1. 9 growth, is that true . That is very accurate. And i think its very important factor. I want to touch briefly on the discussion on mortgages. I am eager to see us make some progress on this. Im pleased that there seems to be a consensus that we should a private capital in front of taxpayer risk on guarantees i would disagree with your view, but is understandably a subjective matter, that a government guarantee is a necessary precondition to have a liquid thirtyyear mortgage. As you know very well the average life for the duration, however you choose to measure it, of a 30 year mortgage its a much less than that, typically depend on Interest Rates and a look at it anywhere seven to maybe 12 years is about right. We have other securities that play an Important Role in the Capital Market so i would urge us to consider what i think is a very likely probability that we could have a very robust thirtyyear Mortgage Market without requiring the taxpayers to be at risk. Very quickly, and im running out of time, mr. Chairman, mr. Secretary, north korea, we recently, we seeing stories now yesterday or todays wall street journal reports Behavioral Changes by the regime in north korea that might be linked to the sanctions that are making fuel, for instance, more difficult for them to obtain. I hope thats true. That strikes me as constructive but i and my colleagues on the committee from maryland, senator van hollen have legislation which i think you are aware of and which your staff has been very helpful. This would require additional round of sanctions against Financial Institutions that are facilitating business with north korea. I think this is very important, to help you support our effort to get that done. The work came out of the screen with unanimous support i believe. Thank you. Thank you. Senator heitkamp. Thank you, mr. Chairman, and thank you, secretary come for coming. A couple follow one points. Obviously, no one wants to put the Financial Institutions in jeopardy or in any way limit the ability of the economy to thrive. I think its critically important that we make the public understand that we simply went in the bill from designating automatically to basically allowing the regulators to designate some entity as a sifi. We havent abandoned that process and so i want to make that point. Also want to make another point. I think its fascinating when people hear sightsee the of statistics but the dont want to take all of cbo. Its called cherry picking. Cherry picked the statistic that most make sure argument whether its world liquid have 1. 9 projected growth when the growth has been over 2 for a prolonged period of time. So i want to talk a little bit about cbo projections. The lovefest that were having here needs to have little discussion about cbo forecasts on deficit, which as you know moodys has recently issued a report on what they think id be considerations and results of the tax bill. Its not exactly consistent with the store were hearing today. So cbo forecasts that the administration 1. 5 trillion tax bill was sent deficit to 4. 6 of Gross Domestic Product by 2020, versus 3. 6 under six under the forecast made last july. So talking about they were forecasting lack of growth are obviously the forecasted it is that were going the debt. The publicly held debt which doubled as a share of gdp during and after the recession was projected before the tax cut to rise from 78 to this year, the 91 over the coming decade. The cbo announced expected tax change to send this ratio to 97. 5. You know, if were going to use cbo statistics lets use cbos statistic. And this is, its like we handed a credit card and at the same time we handed a credit card with debt on it to the next generation. We are failing to fix over 50,000 bridges. Thats another way to hand debt and deficit on. I know the administration is looking at an infrastructure plan that could impact be adopted to pick its not going to be robust enough could, in fact, if you look at the corps of engineers, the corps of engineers has an iq of projects. If they dont get another time about what theyre doing, its going to take at least 17 years in current dollars to finish those projects. We have now made a choice. We made economic choice and we made an economic gamble. But lets not pretend that we have and take a risk that this is all rosy. If we inoperative whipping fiscal responsible entity that we are here. Do not pretend that im going to talk about some that his everyday and thats the insecurity in multi employer pensions. Weve got a plan in which the Ranking Member has ably presented, the butch lewis plan. Its incredibly important to thousands of north dakotans, thousands of people. The president promised to help exactly these people who now are being threatened with dramatic cuts in their pensions. Will this Administration Support the butch lewis bill and help us get it on the spending package . First of all, let me thank you for your comments on the regulatory issue because youre right, it doesnt preclude the regulators from designating people. That was an important point. On the multi employer pensions it is a very competent at issue. Ive had the opportunity to study this at the last year, and meet with actually workers on this issue and would look for to what would Different Solutions. Daish what is your plan . Is exactly the people the president promised that he would represent the forgotten people. We stand alone on this side tried to fix this. We havent gotten a lot of help from the other side of the aisle. We need you guys. We need the administration thats made a commitment to stand up for these workers who are threatened with, in my case, some 70 reduction in their pensions. That is unfathomable, unspeakable. And so can you help us . And watch idea question dont like butch blues, what is your idea, but lets get this done. We look forward to working with both thats not, you know, i hear that all the time, i look for to working with you. You know what . This probably has been hanging out there. We have a solution on the table. We need a a result discussed tt in a to have process. We need a result for these pensions that i want to thank the Ranking Member for the actual work that he and the staff have done on this. We are proud to stand with you, and if thats not the solution, tell you what is. But these folks need to be made whole. Senator scott. Thank you, mr. Chairman. Secretary, good to see again. Let me say at the beginning as senator toomey did as well, thank you for your hard work on the tax reform package. You help to come to something that hasnt been done in over 30 years. Specifically, thank you for helping the irs get the new withholdings done in time for hopefully the february 15 paychecks. My understanding is somewhat around eight out of ten employees will see more money in their takehome pay. That is significant progress for folks who are living paycheck to paycheck. They are going have a greater appreciation in a tangible way of the success of this administration and, frankly, of your leadership so thank you for that. I would also like to say thank you because between the president s executive order last spring and the treasurys report last november the administration has made solid progress on the issue of nonbank sifi designations. But imagine getting pulled over for speeding in the neighborhood without any speed limit sign. Its kind of how you get designated a sifi from a nonbanking perspective. Then imagine the ticket doesnt have any instruction on how to pay it. Thats how you find your way out of being a sifi. Id like to make sure folks back at home who are not involved in the financial industry at all understands and appreciates the complexity of something that is as profound as sifi designation but to do so in language that we all understand and appreciate, and that is just how dizzy this process is for the average person to understand and appreciate, but the impact on those folks because of designations is significantly higher costs in doing business. This should be clarity about what get you labeled as a sifi and what gets you off of being designated without a doubt fsoc should release public explanation for this designation. So my question for you, and i know you agree with much of this, is what specific steps are you and fsoc taking to bring about these needed reforms . Thank you syndicate. I thought that was a very good and interesting analogy, so i share your view on transparency. Doesnt mean people cant get tickets, but we have to post the speed limit. So were working with the committee on looking at guidelines and trying to get how we can have more transparency in the process. Thank you. Whats the level of involvement of other Council Members in recent fsoc decisions . Very active. Theres been some questions about that and if they could support for us to recognize fsoc is to meeting, so actively involved in process. Absolutely. We cut public and private meetings and has been robust discussion with the principles and the staff there a lot of work went into whats been done this year. Thank you. Next question. Not congress and not you, but the District Court now requires a costbenefit analysis which i support. My question is can you walk me through what and fsoc costbenefit analysis will look like, and whats taken into consideration . Him him we are working on that and we look forward to coming to your office and reasoning with them before theyre implemented. That would be an important part of the process to understand. Thank you the glass question. Actually just saving. Last may i ask you reevaluate the need to include property and Casualty Insurance premiums under reporting requirements. An october treasury issued a priority guidance plan that included doing just that. I appreciate your response to this and hope i can count on the same level of responsiveness as a work with you on inclusion in the ifc investor guidelines. Thank you. Senator cortez masto. Time to that perfectly. Thank you. Thank you for being here, secretary. Interesting morning. Let me start off just a comment. I heard some of the conversation back and forth and i think in response to one of my colleagues you made a comment that its been a great time for financial people. That concerns me. There are many people across this country are still struggling struggle and that is what we should be looking, working bellies together thing i want to point out, im from nevada get with the worst recession weve ever seen. We are still coming out of it and, in fact, there was a report that came out that shows that nevadas Economic Forecast is doing very well. Experts are bullish on the overall economy issue continue recovery from the recession and growth. They cite for key markers for the outlook, wages, because the average peak in october represent a 2. 2 year over year your construction activity, construction and the sober state is Fastest Growing sector. Discouraged workers, the number of disgorge workers who left the labor force because they couldnt find a job has dropped. And nevadas gdp has shown significant Continual Growth over the past five years. That is an incredible statistic considering we were the hardest hit in 2007 because of economy. What i just cited to you was report that came out in january 1, 2017. Before you are President Trump were even in office. The comments i can today that somehow this taxi from bill contributed to where we are today in nevada to me is a misnomer. And it doesnt give respect to the governor and everything legislator and every single leader both republican and democrat in the state who has worked hard for nevada to come out of recovery. With that said im hoping the action today continue to benefit what we do in the bad and i look forward to working there. But i think its questionable now what is going to be in the year to come. The other area that if a difficult for the state of nevada right now, weve been having this conversation, is Affordable Housing. One in four winters pays more than 30 of income for rent and utilities. Half of renters pay more than half the income from it took only about 5 million families live in Public Housing benefit from section eight of the usda assisted housing programs for ebola income family who get some Housing Assistance, for families receive no Housing Assistance at all. So while im early low Income Housing tax credit and private activity bonds remain, they support 90 90 of all a for te housing built in our nation, their value has gone down. Some say this could result in 200,000 fewer affordable units built in the next decade. Wages are stagnant or increasing modesty but the rent is going up. When will the treasury address affordable rental housing crisis . Its an important issue and would look forward to working with you on it. Okay. That seems to be the standard answer for everything. Let me ask you this but with the president s or post them for such a bill include funding to invest in our Affordable Housing infrastructure . I think that when the president releases it they would be the opportunities in Affordable Housing as in other things. Are you working with the president the president now to address that, those needs . Not specifically Affordable Housing but yes, the overall infrastructure, and that can be part of it. When will treasury and hud begin publishing a monthly housing scorecard against . I was not aware that but i will look into that and get back to your. Okay. And in my breaches and Treasury Department killed the mayor ray program. Half the workers dont to haves to a retirement account at work. The National Savings rate is going down. How does it take apart the plant more people save for retirement . Again this action something i looked at very carefully and it really, the desire was a reason to get rid of it had nothing to do with our view on savings and would you want to pick it was just the cost of maintaining it. There were very, very few people who are using it with a staggering costs and we rather reallocate that money to other ways we can help people in savings and retirement. Do you have a program youre looking at right now . We moved those people into the private sector and were looking at different programs to encourage private solutions, yes. I would like to know if you would in the future as you develop your programs and what youre looking at you make sure you are reaching out to my step and working with sso. I noticed my time is up. Basically up so i will submit the rest of my question for the record. Thank you. Senator tillis. Thank you, mr. Chairman. Secretary, thank you for being here. I want to go back there we are ten years past financial crisis. We now have a bipartisan bill that is intended to provide regulatory relief for Community Banks and Regional Banks. Can you tell me a little bit about why you think thats important and what benefits are ultimately accrued to businesses and customers to those banks . Sure. First of all i believe that to be at the banking assets are held in the large banks, and one of the waste to distribute risk is to allow the Smaller Banks to continue to grow effectively and not have the burden to buy unnecessary regulations. So i think this accomplishes more diversification in banking and i also think that lending is very important in terms to growing the economy. And in many cases a local bank, the Community Bank and Regional Bank as those relationships. They know how to land and want to encourage them. Do you think that people wanting to start up a bank, weve got a very unhealthy, i think, situation in the banking ecosystem today and thats the number of the noble banks have, pick at the very disturbing trend in North Carolina. We lost about half of ours. Since the financial crisis and a stiffen it a vibrant environment for North Carolina. Do you feel like a part of the reason why were just not seeing that turn on banks is at least partly to get to the fact that they have regulatory hurdles they would have to climb that make it difficult for them to make the Business Model work . I do. I want to ask also about, tax reform, if you were, lets say in december we failed to pass tax reform and so the current tax regimens going to the regiment for the next ten years. What you think will ultimately economically over a ten year period . I think we would be substantially lower than we are and probably in the low twos. One of the things we have seen, it is that the economy was turning, some states are doing better before the president took office. I think we saw significant increase last year largely attributed to a calming regulatory overreach. In this you think it will be a combination of continuing that precatory reform, rightsizing regulations and the benefits of tax form. As businesses start looking ahead and looking at how the tax cuts affected business, weve seen hundreds of businesses announced pay raises. Were seeing de facto minimum wage is being created in the Banking Industry in the recent industry as a result of announcements that were made by large organizations. We seem pay increases, bonuses, plans for capital deployment. I dont think theres any doubt that the Fast Passenger of thoe occurred as a result of the tax plan and would not have occurred if we did not pass it to the presence the present death. Do you agree with that . [inaudible] theres been one piece criticized like to talk about and that has to do with stock buybacks. Some people think that using some of the resources back into tax of up to do stock buybacks is a bad thing. I dont necessarily agree with that. In many cases. And you talk about what actually occurs when a company does a stock buyback, what theyre likely to do with the resources . Sure. Its really just a reallocation of capital. So please have decision. They can reinvest money in their business. They can pay dividends, or they can buy back stock. Thats capital that flows out to investors that can be recycled and put into other businesses pick so its a natural flow of funds from businesses that have access capital, businesses that need to raise capital. It boldly contributed increase in the gdp and economical . Yes, it does. The last question i have for you actually relates to what youre going to do as secretary for regulatory relief within your own rulemaking authorities. Can you give me some sense of what your priorities are over the next year or so in terms of areas that you think to the rulemaking process, not through congressional action, that we can see some of, i know you cant get specific to what you want to do but in the areas of regulations that you think i need to be looked at . What can we expect . Again, we will look across the board in the financial area. Secretary, i appreciate you being here. I actually appreciate you offering to work with us and partner with us, and do on a bipartisan basis come up with good outcomes that audit by person basis, like the banking rates arent relief bill, see one member who was you here who worked with us to get that out of the committee and to the senate and hopefully to the house that we look forward to working with you on a continual basis on a bipartisan basis to get regulation tried a gift economy moving even more quick than it is at this time. Thank you. Senator jones. Thank you, mr. Chairman. Thank you, mr. Secretary, for your appearance today. I want to go back. I want to defer a couple of my question at the top of my time to go back to Center Height camps questions concerning the pension bills that Ranking Members senator heitkamp pending wichita i was going to sign on. Thats an important bill for folks in my stead i think we can agree that there is an looming crisis in that. I appreciate your answer about looking for to working with him but id like to start that process now and if you could just give me your ideas, giving the thoughts about what come you look at the bill. What about the bill is okay . Anything . Are there other things we need to be looking at to try to solve that crisis . First of all thank you. I be more than happy to come meet with you. Again, this is a significant problem. I dont believe theres a simple solution. Its complicated. Id be happy to go through aspects but theres something other forward to working with senator brown and chairman crapo and figure out what are the various Different Solutions. We have a lot of resources at treasury. I think as you know one of the things we look at is restructuring. We are very prescribed form of what we can do and what we cant do. As i said im aware of the problem that exists. You would acknowledge its a significant problem for those that have those pensions . I would say it is a significant problem. I dont know, its not one with a clear simple solution but we look forward to working with the committee. Thank you, mr. Secretary. The Small Business jobs act of 2010 was created to support a lot of local Small Businesses to help accelerate growth. That was an Important Initiative for alabama it i think we created a number of jobs. We got 31 million, but that has now, round one has effectively run out. Would you support a reauthorization of the sbc i . Not necessarily but i would not rule it out. Again is something that i would work with congress and we need to look at more carefully. All right. I wasnt here when the tax bill was brought to the floor, and half. Im sure you may have talked about this ad nauseam, and i apologize. But you mentioned earlier that the tax bill would help create Wage Inflation and help wage growth. Thats a big problem again in my state, the Median Income is 47,000 a year which is below all but a handful of states. In some counties that meeting income is below 30,000 a year. Could you just explain how the tax bill as it exists right now is going to help in place like alabama, particularly those rural areas where the meeting income is 27, 28,000 a year . Sure. And that is a big concern of the president , as i commented, that workers have not had the type of raises that they should have. Id be happy to go through with you the council of economic advisers put out a piece that showed the average would be about 40,000. We believe we believe that there is significant more investment into business, that that will lead to wages going higher. The other thing thats coming up and were talking about, i know the president will be talking about tonight, is infrastructure. And huge infrastructure builder were also talking with immigration and Border Security. The administration is asking for 25 billion this year to be placed for Border Security, which generally Everyone Wants better Border Security. My concern though is the cbo reports that talk about the debt that is being created by the tax bill, 1 trillion over over ten years, and i know were going to try to tap into senator shelby sets of private investment but private investment in infrastructure is not going to help in my world area. There will not be a toll road in Dallas County over one bridge or certain roads there. How are you going to pay for all this . How are we going to pay for the 25 billion before having to wait to catch up and hopefully the tax that would do is exactly what you said and will grow the economy and will get more money coming in . How are we going to pay for the infrastructure now and the Border Security . I think as you know we dont agree with the cbo analysis as on the tax bill. We do think the revenues will go up significantly. On the infrastructure, its going to have to be a combination of as i said federal dollars, state dollars and private titles. I agree with you completely. Theres many, many Infrastructure Projects that are not going to be privately funded. All right. I see my time is up. Thank you, mr. Chairman. Senator rounds. Thank you, mr. Chairman. Good morning, sir. Im just curious. First of all, i appreciate the time you been in the church operates on going to try to be brief and not repeat a lot of the items that have been laid out today. As you know on january 18, fsoc metlife filed a joint motion to dismiss an earlier fsoc appeal which was an effort to designate metlife as a sifi. Additionally on september tonight fsoc voted to descendents designation of aig. Him and understand fsoc is given the ability to designate nonbank. Translator transit under sn 113 of the doddfrank. Given your comments on fsoc today, should the Banking Committee consider changes to section 113 . And to the structure of the fsoc more broadly, you mentioned Greater Transparency is necessary to fsoc. Would you recommend other changes as well specific with regard to this section . Again, i do have specific recommendation to that section because i think there are things we can do at the committee level. As you mentioned in the case of aig they were de designated because they significant reduce the risk and i was the decision the committee. In the case of metlife there was a legal view and a decision to drop the appeal, and so i dont think we need legislative changes at this point. I know senator scott had done a series with regard to the costbenefit analysis that were being used. Just curious, kind of like to follow a little bit with his questioning, do you intend to push for an interpretive guidance from fsoc to reflect that Agency Action is appropriate only if a costbenefit analysis can show that it does more good than harm . We are going to go through redoing those guidelines, and i want to be careful to make conclusions before ive had a chance to review that with the committee members. But we are in favor of more transparency in the analysis of costbenefit. So you would be interested in a further discussion with the members of when you say the committee . Excuse me, fsoc, not this committee. We would be happy to have that discussion with you as well. In the past also on another issue, in the past theres been a great deal of concern, the fsb and fsoc designation process. As you know the fsb is an International Body that makes recommendations about the global Financial System. While the United States is represented in fsb, the body has no authority over u. S. Financial regulation. However, past actions this is a designation of prudential and metlife raise questions over the influence of the fsb and fsocs sifi designations. Can you commit what would you discuss with us your philosophy with regard to the role that the fsb will play or perhaps no role in future fsoc designations . Whats your thoughts and what you see the Committee Going . I dont see fsb having any role in future designations and fsoc. With it be a change from previous activity or previous considerations, in your opinion . I cant comment on what the committee did before i was on it, although i share some of the concerns that have been raised. So more appropriate to perhaps take under advisement but certainly more independently from anything proposed buyout International Group . Absolutely. We fall recently watched the swings in bitcoin market value. Bitcoin along with other numerous crypto currency have seen the value jump substantially since the beginning of 2017. Do you see crypto currencies as a threat to Financial Stability . Im glad you brought up one of my favorite subjects. Weve got something you to talk about now. So i dont see it as a threat to Financial Stability but i see the mets are important issues. We up a subcommittee at fsoc to look at this. My primary concern about crypto currencies is twofold. One, i want to make sure that these are not used by bad guys, that they dont turn into old swiss numbered bank accounts. In the United States if youre dealing with these crypto currencies and your wallets wad other things, yet the same bsa, the same Money Laundering requirements as banks to want to make sure around the world that exists and i also want to make sure that consumers understand the issues around cryptocurrencies. Just one last, a very quick follow up on that particular issue. Do you think you have the tools available to you now both in terms of legislative authority and the manpower to actually follow through and enforce with regards to the concerns that you have expressed . I do think we have them now, but having said that, this is an evolving world and we will not be bashful and coming back and asking you for more resources. Thank you. Thank you, mr. Chairman. Senator donnelly. Thank you, mr. Chairman. Mr. Secretary, thanks for being here. Mr. Secretary, the recently enacted ndaa, the National Defense bill, clifford an amendment i offered to require a comprehensive strategy from all the agencies that includes treasury within 90 days of enactment to address the threat posed by north korea. That was enacted in late november. This is due by march 15. Have you had any discussions about treasurys reporting requirements in regards to this north korean strategy . I probably spend more time on north korea that almost any other subject, so the report will be part of this but we spend a lot of time at treasury discussing these issues. Participants in more than 140 multi employer pension fans plans and we must sure the system before it grows even worse. I know youve met some of these retirees in the past and we could really use your support to get the legislation across the finish line. Im also a sponsor of the butch lewis act. Are you willing to support the butch lewis legislation in order to ensure the safety of these men . Again, im not willing to specifically support that legislation but i am willing to sit down withyou and others on a bipartisan basis and figure out a solution. Do you have any specifics of legislation you will support at this time . Id rather not do it at this moment in time. Its a complicated issue. As one of the more complicated issuesive come across in the last year. When you meet with me will you bring specifics . Id be more than happy to do that. Let me tell you about a meeting i had inoakland to the indiana , and it was with 300 miners and their spouses, retired miners who had just gotten their Health Benefits and they said harry truman made this promise to us and to be able to get this, for one of the miners there, many could still get the medicine he needed but that his wife who was in a terminal medical condition could get that medicine and without her remaining days in peace and without pain get at how important that was and they said this pension piece is equally important to us, so we dont find ourselves living hand to mouth at the end of the day. And youve been kind enough to agree to meet with me andi know youve met with others, will you meet with our miners and Truck Drivers to go through this to answer their questions . They are our friends and neighbors, they are citizens of my state. They want to know what the future holds. We had a meeting last year and id be happy to conduct a meeting this year again with workers across Different Industries are affected by this class okay. Senator saxon and i leave the Banking Committee on International Trade and finance. We held a meeting last spring on north korea aformer Administration Officials how we can more effectively deploy sanctions. Unsurprisingly as im sure its unsurprising to you, the conversation focused largely on china and the possibility of secondary sanctions on chinese institutions. I know treasury has imposed sanctions on a number of chinese entities that have served as horses of trade revenue for north korea. Have you seen that those secondary sanctions have been effective as a deterrent in regards to north korea . Yes, very much so when you look at this, does china have a basic understanding of where and how north korea is using chinas bank and economy . I do. And does that activity occur at the largest chinese banks including date owned banks or does north korea intentionally funneled primarily to the smaller chinese banks that are less susceptible to us pressure . I dont want to go through the specifics but id be happy to talk to you about it but id say we are having very specific ongoing dialogue with the chinese banks. I sent my undersecretary over there. She met with a large group of people and regulators and we are having very good dialogue with the banks over there and we will continue to have sanctions where appropriate. I appreciate that and i would like that meeting to be sooner rather than later. It might be a significantly dangerous situation we find ourselves in with north korea. We will follow up with you. Thank you mister secretary and misterchairman, thank you. Thank you mister chairman for joining us here today and the 2017 f dot annual report, they called for underscoring the necessities of sustained seniorlevel attention on Cyber Security risk and a potential systemic implications. Could you elaborate and give us more on this, what you are doing as cyber seems to be in theheadline of every paper every day. Thank you, and its a very important subject. Im spending a lot of time on this. Im happy to report as i said earlier, i dont see anything at this moment that is a risk to the Financial Sector, but we need to continue to invest lots of money and this has to be a combination of our Intelligence Community, are experts at treasury, are experts in the regulators as well as private industry. We need to be working very closely together because this is something that evolving every day. I just apropos of every day, i saw this week the story about the atms that can be remotely controlled by bad people. Theres one that if you have the right magic word, you could go up and demand money and it just flows out. If thats not checked, that would be an upheaval in our banking system. Thats been going on for years. First people put skimmers on and now they are using little doctorthings. But the atms have been upgraded to where we are okay but there are other Cyber Attacks we need to stay ahead of. And related question is given the fact that its an onslaught bible organized statesponsored entities, criminal entities, individual actors that have talent, etc. , if you have adequate personnel and experts at the Treasury Department to carry on this expanding work . I would say right now we do but im not going to be bashful to come back and ask for more resources as this evolves if we needed. Weve talked about Digital Currencies, senator round raised the issue and he seems to enjoy things about Digital Currencies so ill give you another one. Fdot is involved now not just in terms of these Digital Currencies but also with nefarious activities by moneylaundering, avoiding sanctions. That faces the question of how closely are you aligned with our Intelligence Community in terms of the intelligence problems here, i. E. Circumventing sanctions . The criminals using it to support terrorist activities or you can go down a long laundry list, whats your relationship in this committee . Very closely, i meet with director pompeo and others and at all levels of the treasury have daily interaction and people going back and forth so its very good working relationships. Have you noticed a significant increase in these types of nefarious actors using crypto currencies or is it just as the department of state law or is it growing. I want to be a little bit careful of what i say in this format but what i would say is theres not something that is of significant concern to us today, but it is something we need to actively monitor and its a bigger concern of mine and other countries so that our big push whether it be the g7 orgy 20 to make sure that other countries are regulating these activities the way we are. Huddling back for a moment, as the chairperson, you have multiple agencies reporting to you, youve raised to multiple topics here today. Crypto currencies, Cyber Security particularly, do all your components agencies have the expertise, the relevant expertise and the personnel to only engage with you . You might be well intentioned but if you cant count on an agency that has every responsibility, your intentions wont be in the end of the day , up to the job. Again, id say right now i think we do but one of the things we want to make sure is we have proper coordination so that we have all these resources, we can use them appropriately together and as ive said i will be bashful at the agencies that they need to come back with more resources. Will you, are you intend on doing an assessment of the threats and resources and presenting it . I assume first to the administration but to us so that we have an idea because in the past , weve had agencies, and the direction said we dont need anything but in fact they were really in our readers in terms of personnel and resources. Thats something in the early stages we are working on and i think it makes tents. Thank you mister secretary. Thank you senator van hollen. Thank you mister chairman, welcome and its in another Committee Hearing and i want to start by thanking you and the department for your input on the legislation. I think senator toomey mentioned the chairmans been working hard to get a vote scheduled on that and i appreciate working with you and your team. On the issues related to north korea. A lot of the issues that i was going to cover have been addressed but this is the first time i believe even before the congress has had the passage of the tax bill, and by all accounts the president intends to talk about that this evening. You and i will find plenty to disagree with about the tax bill in general but in the interest of truth in advertising i think its worth pointing out a couple things that were said that the plan would do which it did not. And one of course is that it ended up providing big tax breaks to very wealthy americans and you were called because ive been faced with this question before in november 16 you said and i quote any reductions we have an upper income tax will be offset by less inductions though there will be no absolute tax cut for the upperclass asians. That is not true with respect to the final bill. There are net tax reductions. There are overall. There are people who kept them but there are overall. And i do think its worth pointing out the joint committee on taxation which of course is the official sort of scorekeeper on tax matters included that households that make more than 1 million per year will get an average tax cut of 64,000 in 2019 alone. Mister secretary, you have any reason to doubt that analysis . I dont have the numbers but i dont have any reason to doubt that. And let me go back to another statement made by canada trump in may 2016. You said with respect to his tax plan and i quote, everybody is getting a tax cut, especially the middleclass. And the speaker ryan and later republican leader mcconnell made statements about how every Single Person in the middle class was going to get a tax cut and that turned out not to be the case either. I think we work very hard that almost everybody got a tax break. But as you know, the tax system was very complicated and as we simplified it, certain people at different situations but it got over 90 percent of the people have gotten tax breaks. Mister secretary, with all respect we just had a analysis and this was a bipartisan result in the state of maryland and it was performed by the Maryland Bureau of revenue and you ask them and they concluded that 376,000 maryland families are going to get a tax increase as a result of the bill that passed the congress and that those tax increases will average 2080 for a family. I dont know what you mean by almost nobody but 376,000 marylanders, thats a lot of people just in the state of maryland. And if you look at the impact of those tax cuts, they concluded that 123,000 maryland families who make between 25,000 and 50,000 a year are going to get tax hikes and for them it will be an average tax height of 759. That is not a system with earlier claims that everybody was going to get a Tax Deduction, is it . Ill assume your numbers are correct. Thats a lot of people in maryland so maryland, like other legislators and others around the country are scrambling to try to protect the people in our state from tax increases that theyre going to face as a result of this tax bill. Im hoping the department of treasury will actually work with this, work with the states on this. If your intention was as the president indicated early on that nobody in the middleclass should see a tax increase, i hope you will work with us especially as it relates to issues of eliminating the deduction for state and local taxes, the total deduction which result in double taxation. I hope you will be working with us to accomplish what the president said he wanted to accomplish on the campaign trail and i look forward to that discussion. Thank you very much, senator van hollen and senator kennedy who had to go preside until noon which is about five minutes, is on his way back so i told him that i would keep the hearing open and while were waiting just a few minutes, senator kennedy to return, i thought i would take another opportunity to ask you a few questions. Mister secretary, i dont want to go into this tax question. Youve been asked a number of questions about taxes. I said sat on the finance committee and was a part of the team that help you write this tax bill. And senator van hollen, i do kind of wonder about the numbers you are getting from your state. Was, what was the one about 0 to 25,000 . That, no. 123,000 maryland families make between 25,000 and 50,000 a year will get tax height, average tax height 759. I dont know what that is but you tell you some of the stuff we ran into in terms of these kind of scores and we will have to check it out but when we , when we eliminated the individual mandate which was a tax on people who did not want to buy insurance but the law forced them to buy, that was scored by some of the tax scores including the joint Tax Committee as a tax increase. And how can you be telling people they can voluntarily avoid attacks, turn it into a tax increase . The way that happened was the joint tax said if they dont take advantage of the obamacare city of several thousand dollars to buy insurance, that they dont want to buy, then that value of that insurance is, that they are voluntarily choosing not to get the subsidy for, the value ofthat subsidy , is a tax increase. Some of us found that that was an outrageous assumption to be making in calculating these kind of things so we asked joint tax to run the numbers without calling it a tax increase when someone voluntarilychooses not to take a government subsidy. When they ran those numbers , it turns out that and id like you to verify this if you can mister secretary. The analysis of the tax code that we implemented show that every single income cohort in the tax code starting from 0 to 10 and going on up into the highest income categories, every single income tax cohort got a tax cut. Can you verify that . I can can you also verify that the largest percentages of tax cuts were in the lower and middle income categories . I believe that the case. Now, ill be the first to say that is the secretaries indicated you can go into each cohort and find individuals whose the cause of their particular tax circumstances might have seen their taxes go up, particularly if they live in a state with high state and local taxes. Thats something that happens. But that needs to be said. That every single solitary tax cohort got a tax cut and the highest percentages of tax cuts were in the lower and middle income categories. And i just, can you verify that again . Yes. I dont think those things are important. Ive seen a lot of analysis of this code and many other different tax codes and we have to be very careful when we look at the study that some group has done and be sure weunderstand what the assumptions that they are making are when they do their calculus. I want to shift quickly and i expect senator kennedy to come through the door at any moment but mister secretary, spoken a lot today about a wide range of issues. Are there any areas either in the report or the treasury reports that you think we need to continue monitoring or that we should pay greater attention to your . This is an open question to you. Tell us what youd like us to be focusing on. Weve had the opportunity to talk a lot of about a lot of interest across the board. Cyber we talked about a lot. Crypto currency which is something we are spending time lookingat. We talked about the designation process with regard to working with you and the committee to raise the threshold. That doesnt mean those entities wont be regulated. They will be regulated and as the senator pointed out, doesnt mean they cant be designated so we look forward to working with you on that and housing reform, im glad weve had a lot of conversations today on housing reform. I hope we do figure out a solution so we dont leave these entities around for another 10 years and as ive said, im openminded to working with you in the committee on lots of solutions with the understanding that we maintain a thirdyear mortgage and with the understanding if we put the government taxpayer at risk on a guarantee, which we dont have to do but we will look at different alternatives but if we do that, the taxpayer is compensated and that there wont be any explicit, implicit guarantees that they are not compensated. Thank you and i do before i turn it over im going to let senator and holland come back. Briefly, i would say on this date and that the analysis i gave you was based on our state revenue estimate and that there is no mention in there at all of the interaction component but i love to share information because i do think a lot more people are going to see tax increases and suggested. The last point i would make is that someone had a 200 Tax Liability and now its 100, thats a 50 percent cut. So yes, those folks who had in the lower brackets you got tax cuts were a higher percentage but that doesnt take away from the fact the average tax cut was 67,000 according to joint tax and we could have avoided that in this processs understood, its always going to be the case that when you have tax cuts across the board, those who pay more taxes will get larger tax cuts. Especially when you reduce the top rate which was not required to be done in order to close loopholes. But i wish we had another conversation, i appreciate the opportunity. Before i come back to you i want to ask one more question relating again to the basically the Economic Growth in the deficit. Just a couple quick things. The cbo score that was issued this year for budget purposes and also was used in discussion of the tax bill projected a 1. 9 percent rate of the economy . And i also correct that projected that the economy would grow only at 1. 9 percent for eight years . That is correct. In other words,zero growth in the rate of the economy. Under current law and thats what the cbo projected. Is that projection, that absolute flat line projection that we do nothing, we will see nothing in terms of growth. That has been used analyze and make the claims about this tax bill. The argument is that this is going to generate 1 trillion worth of jet deficit. How much with the economy need to grow to average over the next decade before there isnt before its revenue neutral. It exceeded 35. Which is about 2. 3 percent. Yes. So if the economy can averaged 2. 3 percent instead of 1. 9 percent over the next decade, there will be no deficit from this tax cut, correct . That is correct. And we are already at three and the projections that the council of economic advisers has put out is we will hope we will maintain that three for a decade. I understand those are projections and there are lots of arguments about those projections but at least this far in, we are exceeding what is needed to be achieved in order to avoid any deficit. That is correct mister chairman. Senator kennedy. Peggy mister german and thank you mister secretary. I want to start by associating myself with the remarks of senators who shall be and thank you for your hard work. Can we agree that the revenue generated the one time revenue generated by the repatriation of monies from overseas profits back to the United States is nonrecurring revenue . Yes. Then why dont we match that up with a nonrecurring expense infrastructure . Does that make sense in terms of budgeting . I would say at the end of the day, cash and revenues are fungible so from our standpoint we were looking at it from the tax standpoint and we leave it tocongress on the appropriation side. You wouldnt be opposed if we decided to dedicate all of the tax revenues, onetime tax revenues that are generated by money as repatriated one time to the United States from overseas profits and we match those up as any firstyear accounting student would recommend that you do with one time, nonrecurring expenses like infrastructure. You wouldnt have any objection. I would have no objection whatsoever. Can we agree that would be a swell idea . That sounds like aterrific idea. Going to ask us. I already have. I know youre not clairvoyant, over the next three years and perhaps eight , seven years, how many more times and you ask this . I assume a lot. Should we do something about that . Again, i think the president is very much concerned about the rate increase of the debt and particularly the rate that grew over the last eight years. His First Priority was to create Economic Growth. Thats the single most important thing that will create revenues and over time we need to figure out where we can have government savings to deal with the deficit. We are at 20 trillion and climbing. And at some point were going to have to change the name of the department of treasury to the department of the debt theres not going to be any treasury left. Now, in the past year weve added what, 536 billion to that . And it would seem to me that we need to have an adult discussion at some point about how were going to get control of that. I think the Long Term Debt and longterm budget deficits are something that Congress Needs to be conscious of. I want to talk about the sanction. Can we agree that at leastfor the past five years , that president putin has acted like a thug . Im not going to use that terminology, but there are clearly issues that we need to address and that we have done with sanctions and as ive said earlier, now that we delivered the report last night there will be additional sanctions Going Forward. Lets go through the list. Ukraine, crimea, syria, he metal in our elections. Hes helping north korea cheat. I mean, it seems to me that in terms of sanctions, we ought to hit him so hard is coughing up bones. I mean, hes not getting better. Hes getting worse. I dont understand why we are not, why the administration is not imposing the sanctions that the United States Congress Overwhelmingly supports. Again, i apologize because ive said this earlier and you werent here but we did an enormous amount of work in the Intel Community and treasury putting together this report. I encourage you to look at the classified version which is hundreds of pages. We delivered that last night and we intend to now use that report and that intelligence to go forward with additional sanctions. When . We are already working on it. Nowthat we finished the report that the next part. I dont mean to interrupt you, im sorry. And i really think were sending the wrong message at this critical juncture. His activities alone in helping north korea should require additional sanctions. I understand and we look forward to working with you on this and theres a lot of activity here. Thank you, mr. Chairman. And i have a couple of quick announcements, some senators may want to ask additional questions for the record and those will be due by february 16th, tuesday, and mr. Secretary, we ask that you respond to those questions as promptly as you can. And that concludes this hearing. Thank you for your testimony again. This hearing is adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] sunday night on after words, former speech writer for president george w. Bush and atlantic columnist david from with his book, trumpocracy. It comes as the same root democracy, autocracy, the book about the study of power. And thats what it means. This is a study of Donald Trumps power, how does he get it, get away with it and its the system of enabling. Its the system in the white house, the system between trump and congress. The system between trump and the media that enable him and create an audience. Its the system that involves his the republican donor leak, elements of the Republican Party coming to him and above all, between him and that core group of his voters within the Republican Party that enabled him to win the republican nomination and then go on to the presidency. Watch after words, sunday night at 9 p. M. Eastern on cspan2s book tv. This weekend on American History tv, on cspan 3. Saturday at 8 p. M. Eastern, on lectures in history. University of North Carolina at chapel hill professor Molly Worthen on 20th century fundamentalism and the origins and growth of pentecostalism. Fundamentalists are conservative protestants who militantly opposed, militantly opposed, that militance, the bible and society. And on real america, the 1989 documentary, island of hope, island of tears. Over 12 million, men women and children passed this way through rooms and corridors haunted with a special stillness which remains only in places once noisy with human life. Bought tickets for a thousand places in america. Here they traded their drachmas, rubles and lira for dollars. And song their first songs and christmas and hanukkah and waited to give permission to pass over to the new land. Sunday at 10 a. M. Eastern, an interview from the west point center for oral history, with katherine westmoreland, wife of u. S. Army general William Westmoreland who commanded u. S. Forces in vietnam. My main work was red cross and i did i really worked almost every day i worked in vietnamese hospital and the our hospital and then i went to natrong once a week to do red cross work. Watch American History tv every weekend on cspan 3. We are live this morning awaiting remarks from the foreign minister of qatar. Hes also the deputy Prime Minister and is expected to talk about middle east politics this morning. Qatar is currently the focus of a diplomatic and economic blockade led by saudi arabia and the united arab emirates. They expect to talk about this and the process to resolve the issue and also the role of iran, russian influences and u. S. Relations. The American Enterprise institute is hosting this discussion this morning. It should start in just a moment. Moment. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] were still a moment or two away from hearing from the foreign minister of qatar to talk about middle east politics this morning live at the American Enterprise institute. It should start in just a moment. A look at other programming we have coming up for you today here on cspan network. Admiral John Richardson chief of operations for the u. S. Navy will discuss the services, strategy and readiness. Live coverage of that starts at 11 a. M. Eastern on this network, cspan2. 1 remarks li and Ruth Bader Ginsburg talking about law, media and jewish life. Live coverage starts at 7 p. M. Eastern. Eastern. [inaudible conversations] good morning, everybody. Welcome to the American Enterprise institute. Sorry for the brief delay, but i think youll find that this is a conversation that youre going to find extraordinarily interesting. We are delighted to welcome today his excellency