Transcripts For CSPAN3 Treasury Secretary Housing Finance Re

This hearing will come to order. Today well receive testimony from the secretary of the United States department of treasury on domestic and International Policy issues. Thank you mr. Secretary for attending today. This is secretary mnuchins first hearing since being sworn in as treasury secretary in february and we look forward to our discussion. Many of this committees priorities fall within the jurisdiction of the Treasury Department, including Housing Finance reform and development of policies to encourage a healthier economy. We look forward to working with you and your staff on these priorities and improving the lives of americans. Hou housing reform means the most significant piece of business following the crisis. Its important to build bipartisan support for a path forward. Last week we received testimony from the federal Housing Finance director mel watt. He emphasized its congress that needs to act to determine the future of housing reform. The hearing reinforced why its unsustainable. Namely gses have zero capital, taxpayers on the hook for loss and the government taking all risks. A number of groups have released proposals for reform in recent months, including the mba, several coauthors writing jointly for the urban institute and many others. Three years ago, seven republicans and six democrats on this committee voted in support of a comprehensive finance reform bill. A key priority this congress is to build on that bipartisan legacy, and these new ideas and pass legislation that will create a sustainable Housing Finance system for future generations. I look forward to working with you, secretary mnuchin, and your staff at the Treasury Department as this committee develops this Bipartisan Legislation that will fix the broken Housing Finance system. Regarding Economic Growth im encouraged by President Trump tfs executis order for regulating the Financial System. I understand the Treasury Department will be issuing a report identifying law and regulation that inhibit federal regulation of the United States Financial System in manner consistent with the Core Principles soon. I will review this report and work with you regulators and members of the committee to enact measures to improve our Financial System. Financial regulation should help insure a safe and sound Financial System but in a tailored manner to help grow and maintain a healthy economy. We want our nations banks to be wellcapitalized and wellregulated without being drowned by unnecessary compliance costs. Undo regulation imposes cost and burdens on Financial Institutions and companies, often disproportionately on smaller ones. For example, Community Banks and Credit Unions lack the personnel and infrastructure to handle the overwhelming Regulatory Burden of the past few years. Yet in many ways, are treated the same as the worlds biggest institutions. Our Regulatory Regime should be properly tailored and avoid a one size fits all approach. One area i would like this committee to address is the 50 billion threshold for regional banks. Weve discussed whether 50 billion is the appropriate threshold. I hope we can Work Together to craft a more appropriate standard. My goal is to work with you, secretary mnuchin, senators of this committee, and financial regulators to look for ways to foster Economic Growth while maintaining resiliency in the economy. Senator brown. Thank you, mr. Chairman. Welcome, mr. Secretary, nice to see you two days in a row. Thank you so much. I thank the chairman for calling the hearing. Treasury played a key role in our government since its creation more than two centuries goal. That role expanded in the wake of the Great Recession when it became clear at great cost that the rules in place for Financial Services were inadequate. Given the greater role the treasury secretary plays in oversight of wall street, it makes sense that he devote some of his time to conveying his views and those of the administration on issues within this committees jurisdiction. To us and to the public. So far that communication has been insufficient. Questions posed today the secretary by me, questions posed to the secretary by other senators have gone either unanswered or were answered by non sequiturs. I hope today will give an opportunity for all of us for more forth right conversations. Tuesday we held an ordinary hearing that in my mind, turned out to be quite extraordinary. Three of the four nominees work in National Security positions in treasury, if confirmed. The fourth will work in a National Security position at commerce. One senator after another felt compelled to ask the nominees to ask each of them if they would put the law and the constitution and their country ahead of loyalty to the president. Amazing and unprecedented that we thought we had to ask that question. Given all the troubling revelations from the white house and about the white house, such a question is vital for every nominee in a sensitive position. This was hours before we learned that President Trump very likely asked fbi director comey to shut down an investigation. Honesty is critical, our National Interests are undermined whether National Security or domestic Economic Security when our leaders traffic in falsehoods. You cant lead if we dont believe you. And when i say we, i mean the American Public. China was a champion of currency manipulation. And then it wasnt. Wealthy taxpayers would not get a tax cut and then they would. The deficit would be eliminated in eight years and then it wouldnt. Wall street was getting away with murder but now hit has a compliance burden. The loop hole would be closed but now maybe not. We must invest a trillion dollars in our third world infrastructure but now there seems to be no rush. No cuts to medicaid it was promised now a 900 billion cut to medicaid is fine. The president launched examination of dodd frank with the claim that creditworthy borrowers cant get loans but the spigot isnt dry and we dont need to, in the president s original words, prime the pump. Bank loans and profits are at record levels, these are facts that bear repeating. Bank loans and profits are at record levels. The president was elected saying wall street has caused tremendous problems for us, were going to tax wall street. His words. Now that hes in office, he seems to have forgotten the tremendous problems that wall street created for middle class families across america. That same amnessia seems to have infected my colleagues which seems to forget what wall street did ten years ago to our economy, our families and neighborhoods. The president sacked one of the only champions that consumers have in the executive branch. Can we improve on how we regulate the banks . Of course we can. I believe we can do so for smaller institutions. But lets do so based on facts. The fact is that one in five homeowners in the city of cleveland, one in five, holds a mortgage that is more than 120 of the value of their home. Back lending has grown 6 annually over the past three years, loan growth at Community Banks was 8 this past year. Lending stalled in the First Quarter of this year, why . Because demand wasnt there. U. S. Households have more debt than they did at the peak in 2008 driven by increased auto and student debt. The fact is that wealthiest americans may have recovered from the Great Recession but many families like this cleveland homeowners have not. If we want to improve our economy wed be better off debating how to create jobs through an effective means rather than the thoroughly discredited trickle down approach whether achieved through the tax code or by raising the speed limit for wall street. Secretary mnuchin, well turn to you. You have the time you may need to make a statement. If you would like to introduce anyone as you choose, you may do so. And the time is yours. Thank you, i would like to introduce my fiance louise linten who is with me this morning as well as my team at treasury. Chairman crapo, Ranking Member are brown and members of the committee. It is an honor to appear before you today for the first time as treasury secretary. During my confirmation hearing, i promised to work with congress to create and maintain prosperity for all americans. I want to reaffirm that commitment to you today. Let me begin by discussing the treasurys recent report on Foreign Exchange policies of our Major Trading partners. Insuring that American Business, consumers and workers face a level Playing Field is one of the essential components of this administrations agenda. When foreign governments engage in currency manipulation, it makes the Playing Field uneven, which is why we regularly monitor these practices. After a careful study the Treasury Department has found that no Major Trading partner met the criteria for currency manipulation during the current reporting period. We will continue to follow this important issue and have established a monitoring list of economies that warrant close attention, this list comprised china, germany, japan, korea, switzerland, and taiwan. Additionally, we are committed to rethinking our foreign agreements and trading practices to insure they are both free and fair to American Business and workers. In my discussions with the imf and finance ministers of the g20 i have emphasized this goal and ill continue to do so. Turning to our domestic agenda, it has been more than 30 years since we have had comprehensive tax reform in this country. Combined with often imprudent regulations crafted in the midst of a crisis the entire american prosperity has slowed. I believe a goal of 3 gdp or higher Economic Growth is achievable if we make historic reforms to both taxes and regulation. There are about 100 people working at the treasury on the issue of tax reform. It is our goal to bring relief to middle income americans and make American Business competitive again. We will do this all while simplifying the tax system. On Regulatory Reform treasury is preparing its response to the president s executive order on Core Principles for regulating the United States Financial System. These principles provide a road map for the administrations approach to Financial Services regulation. We have taken a systemic approach by meeting with a variety of stakeholder groups to hear what works, what does nat work and what can be approved. Our initial report contains recommendations to provide relief for Community Banks and make regulations more efficient, effective and appropriately tailored. Housing financial reform is another priority of mine. Its been an unresolved issue for far too long and once were committed to fixing. We will insure that there is both ample credit for housing and that we do not put taxpayers at risk. This committee has done extensive work, along with your work on Community Financial regulatory relief. My hope is that we can partner on both of these issues, i look forward to working with the congress to develop a solution. Finally, another area that is crucially important to treasury is our commitment to combatting terrorist activities. We announced a number of sanctions against individuals and entities associated with destabilizing regimes like syria, iran, and north korea. This work is essential to the efforts to keep americans safe. The first few months of this administration have been significant. We have been working hard at treasury to develop and implement policy that will allow the economy to grow. This will make the dream of prosperity once again a reality for all americans. Thank you. Thank you very much, secretary mnuchin. I want to thank you personally for your responsiveness to this committee. We appreciate your willingness to work with us on these issues. And certainly your expertise and assistance can help us get to the right results. I want to take my first question, ask my first question about Housing Finance reform and the status quo. As i indicated in my opening remarks, director watt indicated this was critical for congress to deal with. My question to you is, do you agree the status quo was unsustainable and Congress Must move on this issue . Thank you, chairman crapo. I do agree completely with that. We are committed to working with you on a solution on housing reform. I think we need to fix fanny and fr freddie. Were committed to make sure theres liquidity in the housing markets. Its an important part of the American Economy. We need to make sure theres ample credit for the middle class to buy homes, at the same time making sure taxpayers are not at risk. The treasury has a very big line outstanding to those two entities. Thank you. And as you know, during the 113th congress this committee developed a comprehensive housing reform bill. We had to make a lot of compromises to achieve that Bipartisan Legislation. As the committee again focuses on Housing Finance reform, what do you think the key compromised that need to be achieved . Well, i think were open to working with you. As i suggested. We need to find a solution that creates necessary liquidity while making sure we dont put taxpayers at risk. And while weve been busy working on tax reform and focusing on regulatory issues, during the second half of this year ill focus on housing reform and look forward to speaking to you for ideas. One of the big issues that faces us on Housing Finance reform is whether there should be an explicit government guarantee provided through the housing system. Do you believe that such a guarantee is necessary . And if so, do you think how do we deal with implementing adequate taxpayer protections in exchange for any government guarantee . Well, i think its a bit early for me to make a conclusion on whether a guarantee is necessary. That is something that we would like to study very carefully. And if there is a guarantee, we would want to make sure that there is ample credit and real risk in front of that guarantee so that taxpayers are not at risk. All right, thank you. I want to move quickly to the executive order that the president has issued. I notice i only have a couple minutes left. I did not at the beginning of this remind our colleagues we need to pay close attention to the five minutes for questioning. Because im confident that every senator on this committee wants to have his or her opportunity to speak with you. So ill just in my last two minutes, quickly bring up the order that President Trump signed in february outlining the administrations Core Principles for regulating the u. S. Financial system. Now, the executive order requires you to report within 120 days on the extent of which existing laws and regulations promote those principles and to identify laws and regulations that inhibit the system in a manner consistent with them. I agree with those Core Principles and im looking forward to working with you. Can you tell the committees some of the specific issues youve looked at and some of the findings we may expect to see in your report . Yes, thank you. Weve had a very large group at treasury working on this. One of the things that i emphasized to the team ahead of time was that we wanted to make sure that we reached out to many different groups and got feedback this was not just something treasury was designing on its own. Some people refer to it as a review of dodd frank, but its broader than that in looking at the Core Principles. Weve met with 16 different groups, many of them having 50100 people. Weve had Community Banks, weve had small and medium sized bankbanks weve reached out to the regulators and had working groups with the independent regulators to make sure we have input from them. And we will be issuing a series of reports, the first one coming out shortly, which will be on banking. And i will say, one of the big focuses will make sure that as we have different regulators, we have proper coordination between them. And this is something that ive been working on at fsoc where i take my position seriously. Thank you, mr. Cha