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Annual Report Highlights
00:15:03
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| Treasury Secretary Scott Besant talked about the state of the U.S. economy and inflation during testimony before the House Financial Services Committee. | ||
| During the nearly three and a half hour testimony, Secretary Besson also talks about housing affordability and potential effects of the Trump administration's immigration policies on the U.S. economy. | ||
| The Committee on Financial Services will come to order without objection. | ||
| The chair is recognized to declare a recess of the committee at any time. | ||
| Today's hearing is titled the Annual Report of the Financial Stability Oversight Council. | ||
| Without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. | ||
| I now recognize myself for a four-minute opening statement. | ||
| Good morning, Treasury Secretary Bessant. | ||
| Welcome. | ||
| It's an honor to have you with us today to provide testimony as the chair of the Financial Stability Oversight Council. | ||
| Today, we'll examine recent actions taken by the FSOC and provide members the opportunity to address any questions or concerns regarding FSOC's 2025 annual report. | ||
| As the 2025 annual report makes clear, economic growth is essential for financial stability. | ||
| In a growing economy with rising incomes, debt burdens fall, American standards of living rise, and the financial system remains stable. | ||
| It's encouraging to have financial regulators and policymakers who understand this fundamental reality and aim to foster a regulatory environment that considers how both new and existing regulations alter and impact economic growth. | ||
| Committee Republicans share the commitment to promoting economic growth through the elimination of unnecessary regulatory burdens, a hallmark of the Trump administration. | ||
| Since assuming the presidency just over a year ago, President Trump has built on this critical work that he achieved in his first administration to make further progress in rolling back overly burdensome regulations that stifle innovation in our economic growth. | ||
| These efforts go beyond reducing just regulatory red tape. | ||
| They're about fostering an environment where financial institutions can thrive and contribute to the stability and growth of our economy. | ||
| I'd be remiss if I didn't remind everyone in the room today of the doom and gloom economic predictions that we heard across the aisle as the Trump administration was sworn in. | ||
| In late 2024, Moody's analytics anticipated that a Republican-controlled government would bring 3.5 percent inflation, 5 percent unemployment, a recession, and a budget deficit of 6 percent of GDP. | ||
| Since then, Democrats have repeatedly and wrongfully accused Republicans of, quote, tanking the economy, close quote. | ||
| With most of the official data in the books, these warnings missed the mark by a mile. | ||
| Inflation came in at nearly one percentage point lower than that forecast. | ||
| The unemployment rate never increased beyond 4.5 percent. | ||
| No recession materialized, and GDP is on track to have three consecutive quarters above 3 percent growth. | ||
| Meanwhile, the budget deficit is on track to fall to some 5.4 percent of the GDP. | ||
| These numbers speak for themselves. | ||
| Under President Trump's leadership and Treasury Secretary Besant's steady hand, the economy is back on track, reversing the damage of the previous administration. | ||
| Throughout the 119th Congress, Congress and Committee Republicans remain steadfast in our goal of reinvigorating the commercial banking system and make life more affordable for our American families. | ||
| That commitment is why I introduced the Main Street Capital Access Act with Subcommittee of Financial Institutions Chair Andy Barr last month. | ||
| Our community banking package is designed to revitalize local bank formation, write-size regulations that are intended for far larger and more complex institutions, ensure that community lenders can focus on serving our families, small businesses, and our local economies. | ||
| This bill also aligns with the administration's efforts to right-size regulation and reflects the committee Republicans' dedication to ensuring that financial operations focus on safety and soundness with a tailored approach to supervisory complexity. | ||
| Similarly, our Bauer-Potterson Housing for the 21st Century Act addresses housing affordability head-on by reducing the burdens that have made homes and apartment construction untenable. | ||
| Improving affordability requires directly expanding the housing supply. | ||
| Paired with Main Street capital access, Americans will benefit from more homes and more affordable ways to finance them. | ||
| We're grateful for your time today, Mr. Secretary. | ||
| We look forward to the discussion, and I yield back the balance of my time. | ||
| I now recognize the ranking member of the committee, Mrs. Waters of California, for a four-minute opening statement. | ||
| Thank you very much, Mr. Chairman. | ||
| Last week, Donald Trump marked his first year in office with consumer confidence plummeting to a 12-year low. | ||
| That is not a coincidence. | ||
| Trump promised a so-called golden age, but apparently he only meant one for his family and billionaire friends. | ||
| Instead of helping families, Trump's trade wars are driving up the price of goods like groceries, clothing, and furniture. | ||
| Small businesses and farmers feel it too. | ||
| And we all know exactly who is to blame. | ||
| Instead of lowering costs, Donald Trump has doubled down on chaos and cruelty while handing more power and more freedom to Wall Street. | ||
| For example, instead of directing the Financial Stability Oversight Council to address threats to our economy, Mr. Secretary, it appears they're using it to do the exact opposite and deregulate Wall Street. | ||
| While Trump claims he wants to cap credit card interest rates, his administration has repealed rules that curbed excessive credit card late fees and shuttered the Consumer Financial Protection Bureau, the very agency that returned $21 billion to Americans after they were ripped off. | ||
| In fact, Trump's team has dismissed enforcement actions against predatory firms, even after they admitted to defrauding consumers. | ||
| Why? | ||
| Could it be because they gave to Trump's campaign or brought his crypto coins, or could it be this president is not on the side of the American consumer and never has been. | ||
| It does not stop there. | ||
| Right now, Trump's Justice Department is conducting a baseless criminal investigation into Jerome Powell to bully the Federal Reserve so they serve Trump's agenda instead of the American people. | ||
| Since Trump returned to office, Republicans have looked the other way. | ||
| While consumer protections were gutted, instead of offering solutions to help families, they have protected corporate profits. | ||
| Under this administration, billionaires are winning and hardworking Americans are losing. | ||
| We've seen this movie before. | ||
| The same blind loyalty and deregulation led directly to the 2008 financial crisis when millions of Americans lost their jobs, their homes, and their savings, all while Wall Street walked away with bonuses. | ||
| Despite repeated demands from Democrats for accountability, Republicans have refused to bring other key administration officials before Congress. | ||
| That includes CFPB acting director Russia Vaught, who must be held accountable for dismantling the CFPB. | ||
| This includes FHA Director Anbio Pulte, who has unlawfully installed himself and his staff on the board of Fannie and Freddie, weaponized mortgage data to try to attack Trump's political enemies, and who is incompetently pushing just plain, dumb housing policies, like a 50-year mortgage. | ||
| Every turn, committee, Democrats, and I are standing up for America's consumers, defending strong safeguards, fighting corporate abuse, and the corruption of the Trump family. | ||
| It's just common sense. | ||
| Our economy should work for everyone, not just for Trump, that billionaire circles that he's involved with. | ||
| Republicans need to stand up to Trump, defend our regulators, protect consumers, and put families ahead of Wall Street. | ||
| Anything less is complicity. | ||
| The gentlewoman's time has expired. | ||
| I yield back. | ||
| I recognize the chair of our Subcommittee on Financial Institutions, Mr. Barr of Kentucky, for a one-minute opening statement. | ||
| Thank you, Mr. Chairman. | ||
| Secretary Besant, welcome back to the committee. | ||
| Under your leadership, FSOC has done a terrific job eliminating unnecessary regulatory burdens and promote economic growth. | ||
| Common sense legislation like the Main Street Capital Access Act is exactly the type of pro-growth proposal to promote financial stability that FSOC highlighted in its annual report. | ||
| I'm proud to sponsor the TIRE Act and the Community Bank Regulatory Tailoring Act that will modernize outdated statutory thresholds that impose disproportionate regulatory burdens on our financial system. | ||
| This committee, along with FSOC, can successfully support our community lenders and allow them to thrive under right-size regulation with this legislation in place. | ||
| Regulatory tailoring helps to protect the diversity of our financial system, which is itself key to promoting financial stability. | ||
| I look forward to working with the Treasury Department as you implement my outbound investment legislation that the President signed into law in December. | ||
| With you at the reins, FSOC has returned to its core values and away from the weaponization and disarray we experienced under the Biden administration. | ||
| I yield back. | ||
| The gentleman yields back to recognize the ranking member of our Subcommittee of Financial Institutions, Dr. Bill Foster of Illinois, for a one-minute opening statement. | ||
| Thank you, Chair Hill. | ||
| Mark Twain is credited with observing that history does not repeat but often rhymes. | ||
| And those of us who served on this committee during the financial crisis recognize this poem and its tragic ending. | ||
| We have once again a historically unpopular President, fixated on the glory of his overseas misadventures and foreign bailouts. | ||
| We have once again a multi-trillion dollar asset bubble underpinned by opaque and conflicted financial mechanisms that nobody understands by design, being willfully ignored by partisan financial deregulators. | ||
| And we have families all over America who, despite all the happy talk from the President, are having a hard time paying their mortgages and their monthly bills. | ||
| You can hardly open any financial news source without seeing a discussion of the pending collapse of the AI circular investment bubble. | ||
| And that is why we created the EFSOC. | ||
| And that is why last November, Democrats on this committee sent you a letter as chair of FSOC to figure out what we will have to do when the music stops. | ||
| Your response was insufficient, dismissive, and dangerous to our economy. | ||
| I look forward to hearing more from our questions and yield back. | ||
| The gentleman yields back. | ||
| Today, we welcome the testimony of the Honorable Scott Besant, Secretary of the Department of Treasury and Chair of the Financial Stability Oversight Council. | ||
| Secretary Besant, we thank you for taking time to join us today. | ||
| We'll be recognized for five minutes to give an oral presentation of your written testimony. | ||
| And without objection, your written statement will be made part of the record. | ||
| Mr. Secretary, you are recognized for five minutes. | ||
| Chairman Hill, Ranking Member Waters, and members of the committee, thank you for inviting me to discuss the Financial Stability Oversight Council's 2025 annual report. | ||
| This report is a culmination of extensive collaboration amongst FSOC members. | ||
| I'd like to thank them for their hard work and dedication in advancing the President's old vision for a better America. | ||
| Since day one, President Trump has focused on building parallel prosperity, an era of economic expansion where Wall Street and Main Street can grow together. | ||
| To that end, Treasury has tirelessly pursued pro-growth policies to unlock the potential available to all Americans when they are free to save, invest, build businesses, and drive their own economic destinies. | ||
| The Financial Stability Oversight Council plays an important role in delivering on this agenda. | ||
| Too often in the past, we have seen regulation by reflex. | ||
| Rather than preempting crises, regulators have frequently reacted to them after the fact. | ||
| They have played the role of a hazmat cleanup team instead of preventing dangerous spillovers in the first place. | ||
| Regulation by reflex has led to a regulatory myopia that has undermined safety and soundness. | ||
| Under President Biden, the bank regulators preoccupied themselves with reputation risk, climate-related financial risk, and other risks with no clear nexus to safety and soundness. | ||
| At the same time, they centered supervision on management and other governance matters that distracted examiners and banks' risk managers from the real risk to safety and soundness. | ||
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Fourth Pillar: AI & Financial Stability
00:03:47
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| The result, predictably, was the second, third, and fourth largest bank failures in U.S. history in 2023. | ||
| Besides undermining safety and soundness, regulation by reflex has driven excessive regulation that can lead to economic stagnation. | ||
| And economic stagnation is itself a grave threat to financial stability. | ||
| In calibrating regulations, Federal agencies must avoid the temptation to create a zero-risk financial system, which would result in what others have called the stability of the graveyard. | ||
| FSOC should aim to identify vulnerabilities that could lead to systemic crises and encourage the private sector to mitigate those risks before recommending additional regulation. | ||
| FSOC should also work with its members to support efforts to avoid or pair back existing regulation that stifles pro-growth lending, capital formation, and innovation. | ||
| And the best way to achieve these goals is by centering economic growth and economic security at the heart of FSOC's agenda. | ||
| Promoting economic growth and economic security is essential to ensuring financial stability. | ||
| Economic growth strengthens household, business, and financial institution balance sheets, creating capital buffers that reduce the risk of defaults and financial stress. | ||
| And economic security reinforces domestic production capacity, raising living standards while reducing vulnerability to external shocks and supply chain disruptions. | ||
| FSOC's annual report prioritizes economic growth and economic security accordingly, with a specific focus on four policy areas: Treasury markets, cybersecurity, regulatory modernization, and AI. | ||
| First, the Council is ensuring that the U.S. Treasury market remains the deepest and most liquid in the world. | ||
| The Council is supporting efforts by member agencies to strengthen this market against future shocks, including through the Interagency Working Group on Treasury Market Surveillance and the Market Resilience Working Group. | ||
| Ongoing monitoring and targeted reforms by individual agencies remain essential to financial stability. | ||
| Second, the Council is taking action to protect our financial system from increasingly sophisticated cyber attacks. | ||
| Nation-state actors and criminal groups continue to target our financial institutions and infrastructure. | ||
| To address this risk, the Council is supporting expanded information sharing, joint monitoring, and scenario-based exercises, and it is emphasizing the need for regulated firms to manage cyber risk tied to third-party service providers. | ||
| Third, the Council is committed to supporting efforts to modernize supervisory and regulatory frameworks for banks and credit unions. | ||
| Going forward, regulation and supervision should address material risk, enhance transparency, and reduce unnecessary burdens, particularly for small and community banks. | ||
| Fourth, the Council is prioritizing the responsible use of artificial intelligence to strengthen financial stability. | ||
| The Council is working with public and private partners, including international counterparts, to enhance system resilience while closely monitoring emerging risk. | ||
| I will close by highlighting our progress and enhancing the utility of our annual report. | ||
| In this year's report, FSOC shifted away from its past approach, where nearly every major market and financial sector was described as a financial stability Vulnerability. | ||
| By introducing a new structure centered on fostering economic growth and security, we are tuning out the noise to concentrate on the issues that matter most for U.S. financial stability. | ||
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Questions About Tailoring Regulation
00:05:25
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| With this overview, I look forward to taking your questions. | ||
| Well, now thank the Secretary, and we will turn to member questions. | ||
| I recognize myself for five minutes for questions. | ||
| You made a persuasive case that since President Trump was sworn in, that economic growth is a cornerstone of his presidency, and you highlighted today, as you have in speeches over the year, the importance of that Wall Street is doing well, but it is Main Street's turn, and you would like to see economic growth expanded into what I always quote from Steve Case, the rise of the rest, where we see that economic performance expand across the country. | ||
| We share that commitment here on this committee about reversing elements of the regulatory framework that have sought, possibly certainly well-intentioned, the concept of too big to fail, but ended up in creating an environment over the past 15 years where community banks are too small to succeed, or maybe avoiding your term today, you chose to use the stability of the graveyard. | ||
| The committee has worked together on a bipartisan basis to highlight some of the principal actions that we have considered over the past year, our Main Street Capital Access Act, which we intend to bring to the House floor. | ||
| We are grateful for your Undersecretary, Mr. McKernan, who last month joined us as we rolled out that package to talk about how we can collaborate. | ||
| Would you take a minute, and from your perspective, how do strong, well-capitalized community banks and the benefits of tailoring that are in this legislative proposal help accomplish faster economic growth and the rise of the rest? | ||
| Chairman Hill, as I have said, it is Main Street's turn and essential for Main Street's having its turn are the small and community banks. | ||
| And I would note that thanks to onerous regulation, and as you and I both say, community and small banks became too small to succeed. | ||
| Tragically, more than 550 percent are community banks have disappeared since the great financial crisis, not during since. | ||
| There have been virtually no de novo banks created, whereas before the GFC, there were more than 50 per year. | ||
| And small and community banks not only are the anchor for community-based lending, but they provide the bulk of the lending for agriculture, for small real estate loans, and for small business loans. | ||
| So a thriving community bank infrastructure and ecosystem is essential. | ||
| I have met with more individually and in roundtables with more than 200 community bankers. | ||
| I have spoken at conferences with more than 1,000, and tailoring is essential. | ||
| I had one banker From my home state in South Carolina with assets of about $200 million, tell me that under the previous regulatory regime, she was told that she should be more like Bank America, the second largest bank in the country. | ||
| And so it is essential that we have the right tailoring, right risk levels, and right monitoring of these important institutions. | ||
| We thank you for your perspective. | ||
| On that, and to illustrate it in our work we have done on housing in the committee, also on a bipartisan basis, it was noted that banks under $10 billion in size, really the heart of our community banking system, several thousand banks across the country, they make 60 percent of our one to four family construction loans. | ||
| And while banks of all sizes deliver amazing capital access in our economy, at a heart of our main streets, if we want more housing supply, we find that it's really that local grassroots public or privately held community bank that helps lead that. | ||
| You mentioned de novos and under Chairman Barr's leadership in our subcommittee and again with bipartisan support, we've enhanced in the Main Street Capital Access Act ways we think that will speed up and make easier to get both deposit insurance, raise capital, and tell the story about having more dynamic de novo bank formations that, as you say, have been so slowed by the last 15 years. | ||
| Turning to digital assets, something that we've talked about quite a bit in the time remaining, can you tell me your assessment of how the regulatory process is coming for the implementation of the Genius Act? | ||
| The Genius Act was an important act, an important piece of legislation for bringing back into the U.S. the regulation, creation of digital assets, and making the United States a national champion. | ||
| The Genius Act and the stable coins that will be created with that could, in fact, be an important feature of financing the U.S. government. | ||
| And we are moving with deliberate speed to round out the House and the Senate's intention on that important. | ||
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Tariffs and Housing Affordability
00:06:52
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| Thank you very much, Mr. Secretary. | ||
| Appreciate your work and leadership there. | ||
| I now recognize the ranking member of our committee, Mrs. Waters of California, for five minutes for questions. | ||
| Thank you very much, Secretary Besson. | ||
| In the FSOC annual report, you stressed the importance of economic growth to promote financial stability. | ||
| While you noted many ways you plan to deregulate Wall Street and plant the seeds for another crisis, you said little about the harms of inflation. | ||
| I find this odd as the President and you have finally began discussing in the media how the price of goods are way too high. | ||
| Notably, you mentioned that tariffs may need to come down to lower costs for Americans. | ||
| So I have a few questions about this. | ||
| As a former hedge fund manager in 2004, and I don't want you to go into any long details about this, but did you write a letter to investors raising concerns about the impact of tariffs, writing that, quote, tariffs are inflationary? | ||
| Did you say that at that time, yes or no? | ||
| No. | ||
| Okay, thank you. | ||
| Okay. | ||
| We have a New York Times article that agrees. | ||
| Then last summer, when you testified before a Senate committee, you said, and I quote, there is no inflation. | ||
| Tariffs are not being passed on to consumers. | ||
| You were quite definitive and even claimed that critics had, quote, tariff derangement syndrome. | ||
| Well, those comments are at odds with the statement you made to investors that tariffs are inflationary. | ||
| Again, I want to be clear, so just let me ask you, are tariffs inflationary? | ||
| Yes or no? | ||
| According to the San Francisco Federal Reserve, with 150 years of data, tariffs do not cause inflation. | ||
| San Francisco Federal Reserve. | ||
| Well, last November, as the Trump administration finally began to realize that affordability issues in America are not a hoax, you told Fox News that the government was going to reduce tariffs on goods like coffee and bananas, and that doing so would, quote, bring the prices down very quickly. | ||
| Mr. Secretary, why was that announcement even necessary? | ||
| If tariffs aren't inflationary, and as you and the president like to say, are paid for by foreign countries, by the foreign country, a tariff on coffee or bananas shouldn't raise the price of either for American consumers. | ||
| Well, that's the Trump logic, but that isn't reality. | ||
| It did raise prices across the board. | ||
| And you know it. | ||
| I think you knew back in July also. | ||
| The real question is, why would you even impose a tariff on a good that a country doesn't grow or make, as that would only serve to punish the American consumer. | ||
| Now, as you know, this committee has taken a bipartisan approach to addressing another real affordability crisis. | ||
| Housing. | ||
| Rents are too high. | ||
| There aren't enough houses. | ||
| However, one clear reason that the housing crisis has grown worse is that you and the rest of the Trump administration levied tariffs on housing production goods like lumber and steel, as well as appliances. | ||
| These tariffs are reclaiming my time. | ||
| We don't get to talk about five-year low Congress. | ||
| Reclaiming my time. | ||
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unidentified
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Let's just have the facts. | |
| Reclaiming my time. | ||
| Thank you. | ||
| However, one clear reason that the housing crisis has gone worse is that you and the rest of the Trump administration levied tariffs on housing production goods like lumber and steel, as I said, as well as appliances. | ||
| These tariffs will result in half a million fewer homes built at a time when we need more homes built, not less. | ||
| Trump single-handedly made housing more expensive. | ||
| And once again, you know it, as Exhios has reported that you were planning to lift tariffs on housing production goods. | ||
| In addition, the unlawful campaign the Trump administration has waged with ICE and Border Patrol, terrorizing American communities, has also harmed home construction across America. | ||
| So I ask you, Secretary Benson, will you be the voice of reason in the administration and urge Trump to stop waging a war on American consumers and on housing affordability and putting the economy at risk? | ||
| Yes or no? | ||
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unidentified
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You don't have to explain. | |
| Representative Watson. | ||
| Will you be the voice? | ||
|
unidentified
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Will you be the voice? | |
| Will you be the voice of inflation? | ||
|
unidentified
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Will you be the voice of reason? | |
| Will you be the voice of refuge? | ||
| Reclaiming my time. | ||
| It was a massive immigration. | ||
| Mr. Chair, will you let him know when I asked you to do that? | ||
| Tom does not california. | ||
| 10 and 20 million immigrants shut the housing stock of working Americans, and can you maintain some level of data? | ||
| The gentleman's time has expired. | ||
| No, my time has not expired. | ||
| Your time has expired. | ||
| The gentleman took up my time. | ||
| I think you should recognize that, Mr. Chair. | ||
| The gentlewoman's time has expired. | ||
| The gentlewoman's time has expired. | ||
| Well, if you want to The chair recognizes the vice chairman of the United States. | ||
| Mr. Chair, parliamentary inquiry. | ||
| Go right ahead, but I would not expect you to do that. | ||
| Thank you, Mr. Chairman. | ||
| And I will grant very briefly any time that you feel like you need to address anything. | ||
| Again, I think the ranking member does not understand. | ||
| Mr. Secretary, I'm sorry. | ||
| The gentleman will suspend. | ||
| There's a parliamentary inquiry. | ||
| Mr. Chairman. | ||
| Mr. Chair, will you enforce the rules of this committee so that the time belongs to the questioner and prevent filibusters from taking time away? | ||
| And if those filibusters by the witness do take time away, will you allocate additional time? | ||
| I will enforce the five-minute rule. | ||
| I want my time back. | ||
| The gentleman from Michigan is recognized. | ||
| I grant briefly anything that you need to feel you need to address. | ||
| I believe the ranking member does not understand the definition of generalized inflation versus one-time price increases. | ||
| I would also note that housing, especially for working Americans, a Wharton study has shown that the mass unfettered immigration, adding 10 to 20 million new people demanding housing, Congresswoman, is what caused a great deal of housing inflation for working Americans. | ||
| So you and the Biden administration should be ashamed. | ||
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Protecting Rohingya, Sanctioning Myanmar
00:04:10
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| Which is also why we are seeing rents. | ||
| There was just a recent media story on this. | ||
| Rents are going down, partially because of that enforcement. | ||
| So, Mr. Secretary. | ||
| Supply and demand continues to work. | ||
| I've got a number of issues I've got to hit very briefly here on FSOC. | ||
| I need to talk then Burma and 3 percent. | ||
| You talked about with the chairman about regulators using tailored market approach tools. | ||
| How are you ensuring that FSOC's current work continues to prioritize activity-based, transparent, analytically rigorous approach grounded in cost-benefit analysis and coordination with functional regulators when evaluating potential risks in non-bank financial markets? | ||
| That is done primarily for small banks through the Office of the Control of the Currency and the FDIC. | ||
| And those chairs are intent on tailoring the rules for small banks so that we do not have another 50 percent decrease in mainstream lending. | ||
|
unidentified
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All right. | |
| Thank you. | ||
| You outlined as part of the four goals protecting, number two was protecting from cyber attacks. | ||
| We have seen a rise in those cyber attacks and scam centers in Burma. | ||
| And I applaud you and Treasury for some of your work in that, including sanctioning North Korean individuals selling weapons to the Burmese military regime, as well as the Democratic Korean Benevolent Army, a Burmese Army group that has organized these scam centers. | ||
| However, last week it was reported that Iran was secretly shipping vast amounts of jet fuel in Burma. | ||
| And I need to move through this quickly here, but that's why last year I introduced a bipartisan legislation that would specifically require the President to determine whether to impose stronger blocking sanctions on Myanmar Oil and Gas, Myanmar Economic Bank, and foreign persons operating in the jet fuel sector of the Burmese economy. | ||
| I read recently that Treasury responded to Reuters' report by noting that Orion's quest for, quote, new markets is a sign that President Trump's policies are working, which I would agree. | ||
| I'm also aware that Burma's military leaders have attempted to gain favor with the President, especially when it comes to lowering tariffs levied on his country. | ||
| This is something that simply cannot happen. | ||
| I represent a significant Rohingya population and know that the active bombing that is going on is unacceptable. | ||
| And I believe we must continue to impose strict sanctions on the Burmese military rulers. | ||
| What tools can Treasury use to punish both Iran and Burma for violating both U.S. and other Western country sanctions? | ||
| Well, with respect to Iran, President Trump, upon entering office, instructed U.S. Treasury to implement a maximum pressure campaign, and we saw the fruits of that campaign in December as the Iranian economy has collapsed. | ||
| We had a large bank collapse there. | ||
| The central bank was forced to bail it out, created inflation, and the Iranian, the brave Iranian people have taken to the streets. | ||
| We continuously monitor trade between two countries like that. | ||
| The good news would be Iran has a significant shortage of dollars to buy, whether it is weapons or goods for the people or to pad the Swiss bank accounts of the Iranian regime. | ||
| Well, we've got to keep the pressure up on Iran, but also that pressure on the Burmese junta, please. | ||
| Lastly, I'd be remiss if I did not thank you in public for your discussion of a desire to lower the deficits to 3 percent of the GDP. | ||
| I've introduced, along with 14 of my colleagues from the bipartisan fiscal forum that I chair with Congressman Scott Peters out of California, that urges the House to achieve this 3 percent goal by 2030, a tangible, achievable goal that is desperately needed, and we're building consensus here in the House. | ||
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Retaining Seized Bitcoin
00:09:15
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| I know you and the administration take the ticking debt bomb seriously, and I hope that to continue this conversation with you. | ||
| I don't know if you can in 10 seconds address. | ||
| I look forward to working with you on that. | ||
| And I would note that the deficit to GDP calendar year 2024, 7 percent highest, not at war, not in recession, calendar 2025, down to 5.4 percent. | ||
| I yield back. | ||
| Thank you. | ||
| Chair recognizes the gentleman from California, our ranking member of our capital markets subcommittee. | ||
| Mr. Sherman, you're recognized for five minutes. | ||
| I want to agree with the gentleman from Michigan that we need to impose those sanctions on the Myanmar regime and protect, of course, the Rohingya minority to the extent we can. | ||
| The FSOC has to define what is systemic. | ||
| I, for one, think that we shouldn't be focusing on the assets, but rather the liabilities. | ||
| We didn't have a problem in 2008 because the banks had too many assets. | ||
| We had a problem because they had too many liabilities. | ||
| So I don't see how. | ||
| Congressman, that's incorrect. | ||
| Ben Bernanke, then Fed chair, said, could you please tell me what these assets are? | ||
| I'm going to reclaim my time. | ||
| Regardless of that, I'm going to ask you whether you're not going to ask you to agree with me. | ||
| I'm going to ask you to agree with your predecessor, Secretary Mnuchin. | ||
| During the first Trump administration, Secretary Mnuchin promulgated interpretive guidance that prioritized an activities-based approach to systemic risk regulation over an entity approach. | ||
| Secretary Benson, you have indicated that you want to kick off a review of FSOC's activities and processes. | ||
| The FSOC Improvement Act, led by my colleague Dr. Foster, which I've co-sponsored, as you know, would codify an activities-based approach to systemic risk regulation. | ||
| Does the FSOC plan to revert to the 2019 guidance of the first Trump administration regarding a definition of a CIFI? | ||
| Yes, we prefer an activities-based approach rather than an institutional-based approach. | ||
| Thank you. | ||
| I want to pick up on the ranking members' comments about whether tariffs cause inflation. | ||
| You know, economists can say when the price of something goes up by 20 percent, that isn't inflation. | ||
| It's a one-time price increase. | ||
| But out in my district, when the price of something goes up by 20 percent, we call that unaffordability. | ||
| And to say it is not inflation is a sophistry. | ||
| I will point out that every time Democrats had regulations that increased a company's cost, people in this room said that is going to cause inflation. | ||
| Well, tariffs clearly have to be paid by companies, and if environmental costs are passed through, you can be sure tariffs are passed through. | ||
| The ranking member asked the question, why a tariff on coffee and bananas? | ||
| I think the answer is obvious, to make our tax system more regressive, to pay for the big, bad, beautiful bills cuts in taxes for billionaires, and to fund ICE. | ||
| I used to head the largest sales tax agency in this country, and we knew the sales tax was regressive, but we knew it would be even more regressive if we imposed sales taxes on food. | ||
| And that is what you do with a tariff on bananas and coffee. | ||
| Mr. Secretary, we lived through the bailouts of 2008 when powerful men lose money. | ||
| They now want a government bailout. | ||
| Does the Treasury Department or the various components of the FMOC have the authority to bail out Bitcoin? | ||
| Could you please elaborate? | ||
| What exactly does bail out Bitcoin? | ||
| Okay, could you instruct the banks of this country to buy Bitcoin or change banking regulations so that they are encouraged to do so in terms of the reserves that they are otherwise required to have? | ||
| Again, within the context of asset diversification within banks, they could hold many assets. | ||
| They can, and there are different. | ||
| But do you have the authority to order banks to buy Bitcoin or to invest U.S. tax dollars in Bitcoin or Trump coin? | ||
| I am Secretary of the Treasury. | ||
| I do not have the authority to do that. | ||
| And as Chair of FSOC, I do not have that authority. | ||
| So we are not going to see our tax dollars invested in crypto assets. | ||
| Why would a private bank be your tax dollars, Congressman? | ||
| Excuse me. | ||
| I am now asking about the money of our taxpayers, which you manage as Secretary of the Treasury. | ||
| Is it going to be deployed into crypto assets? | ||
| We are retaining seized Bitcoin. | ||
| That is not exactly taxpayer money. | ||
| You collect a lot of taxes this money. | ||
| No, that is an asset of the U.S. | ||
| It is an asset of the U.S. | ||
| And I will point out that. | ||
| Mr. Secretary, reclaiming my time, are you going to invest in $1 billion of Bitcoin was seized, $500 million was retained, and that $500 million has become over $15 billion. | ||
| The gentleman's time has expired. | ||
| The gentleman from Oklahoma, the chair of our monetary policy task force, Mr. Lucas, you are recognized for five minutes. | ||
|
unidentified
|
Thank you, Mr. Chairman, and thank you, Secretary, for being here today. | |
| You have said that the current deposit insurance framework is a vulnerability for the banking system, that there is a competitive imbalance that favors large banks, and that this increases the risk of bank runs and erodes depositor confidence. | ||
| Can you talk more about a targeted expansion of deposit insurance for non-interest-bearing transaction accounts, and would that strengthen financial stability within the system? | ||
| Congressman Williams, thank you for that very important question, because it is my belief that because there is the belief that big banks, the depositors, will not lose money during a financial crisis, as we saw in 2023, assets leave small banks. | ||
| And much of that is what is known as the payroll account. | ||
| So I think it is very important for small banks to have one non-interest-bearing account that can have a much higher level of insurance so that they are able to retain deposits during a stress period. | ||
| This is one of the reasons that we have seen assets leave small banks. | ||
| It is one of the reasons that we have seen 50 percent of small banks disappear. | ||
|
unidentified
|
Continuing along this line of inquiry, Mr. Secretary, a robust banking system with healthy banks of all sizes reduces systematic risk across the entire system. | |
| Why is it important that Congress act now on targeted deposit insurance reform, not only for Main Street, but also our financial stability? | ||
| Again, deposit volatility, which is what you are referring to, is deposits moving during a stress time, does not benefit anyone in the long run. | ||
|
unidentified
|
And one more question on this perspective. | |
| Congress should look at giving FDIC authority to raise the coverage level for non-interestbearing transaction accounts to an appropriate amount that is data-driven and put smaller institutions on a level playing field with larger banks. | ||
| How would our banking system be safer with a narrow, targeted expansion, such as the one I have suggested? | ||
| Again, it would permit the small and community banks to continue competing. | ||
| It would get credit to our Main Street and it would stem deposit flight during a period of stress, which is one of the most or one of the biggest threats to financial stability. | ||
|
unidentified
|
Focusing on a slightly different subject. | |
| Sometimes something I have focused on as chairman of the task force on treasury monet resilience has been strengthening market stability and liquidity. | ||
| We saw occasional bouts of Treasury market volatility last year. | ||
| How would reforms to banking regulations like the liquidity coverage ratio and stress tests incentivize market intermediation for banks and improve market stability? | ||
| Again, Congressman, wonderful question, that it brings more of our Treasury market onshore. | ||
| And as you said, there were periods of stress last year. | ||
| The market successfully navigated those. | ||
| At the end of January, we had the third highest volume in the Treasury market, and the bid ask spreads, very important for the financial well-being of the American people who are invested in money market funds, in bond funds, in their retirement funds. | ||
| They have stayed right in the center line, and we are at a five-year low in bond market volatility. | ||
|
Trump Fans' Crypto Scandal
00:03:58
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|
unidentified
|
Thank you, Mr. Secretary. | |
| I yield back, Mr. Chairman. | ||
| Thank you. | ||
| Gentleman yields back. | ||
| The chair recognizes the gentleman from New York, the ranking member of our Foreign Affairs Committee. | ||
| Mr. Meeks, you are recognized for five minutes. | ||
| Thank you, Mr. Chairman. | ||
| Secretary Bassett, if I am not mistaken, you were working in the financial service industry during the late 1980s, correct? | ||
| I was. | ||
| Thank you. | ||
| And I am wondering, do you recall or are you knowledgeable of the Keating 5 scandal back then? | ||
| Yes, sir. | ||
| And I will point out that I was afraid of the pressure. | ||
| Mr. Secretary is the gentleman from New York State. | ||
| So I just want to make sure everyone knows who doesn't know that the Keating 5 scandal involved five U.S. senators accused of pressuring the Federal Home Loan Bank Board to expedite and give more consideration to the case of Charles Keating Jr., who ran the California-based Lincoln Savings and Loans. | ||
| It led to a 14-month investigation unveiling how five U.S. senators and staff ended up with more than $1 million in contributions, four trips to the Bahamas, and all expenses paid stays at resort hotels. | ||
| Following the scandal, the industry saw sweeping regulatory changes that was launched by then President George H.W. Bush. | ||
| Now, Mr. Secretary, I'm sure you can agree conflicts of interest and improper influence by U.S. elected officials over bank regulators' weakened supervisory independence and ultimately impose, they ultimately impose massive losses on consumers and taxpayers. | ||
| I think that we can all agree upon that. | ||
| And as we know, the basic lessons from the post-Keating reforms still apply today when the Office of the Comptroller of Currency, the OCC, is deciding to get a bank charter. | ||
| I think we can stimulate that. | ||
| Now, Mr. Besson, as our nation's treasurer, I'm sure you also know that a foreign-linked investment firm tied to the United Arab Emirates government quietly bought about half of the Trump family's crypto company, World Liberty Financial. | ||
| And at the very same time, the President of the United States was dealing with that country on foreign policy. | ||
| Now, Eric Trump, the President's son and co-founder of World Liberty Financial, said, and I quote, I'm not going to get into who the investors are, but I've got some pretty meaningful investors, end of quote. | ||
| Lack of transparency. | ||
| And it didn't end there. | ||
| When Trump fans brought the tokens, they thought they were getting the deal of a century. | ||
| But what they didn't know was that only Trump and his sons had the sole power to decide who can sell the token and when. | ||
| Today, the price of the token has fallen over 50%, and the Trump fans who bought the token are now begging to get out. | ||
| Now, I'm not making this up. | ||
| I'm not making this up. | ||
| You can see it for yourself on the World Liberty Financial Discussion Forum yourself, Mr. Secretary. | ||
| So there's no longer, this is no longer just about a shady crypto deal or a possible gift when a foreign-linked investor is putting hundreds of millions of dollars into a company controlled by the president's family. | ||
|
Pause Bank Scrutiny
00:05:28
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| And at the same time, this president is conducting foreign policy with that country. | ||
| You know what that cause creates? | ||
| It creates a national security concern. | ||
| So, I'm not going to ask much of you, Mr. Secretary. | ||
| I just want to know whether you will commit today to pause and heighten the scrutiny of any bank charter or licensing application at the OCC connected to the World Liberty Financial until all of these conflicts of interest and foreign influence reviews are completed and shared with the United States Congress. | ||
| All I need to know is: will you halt it and do a complete investigation and scrutiny of this licensing application? | ||
| All you have to ask is yes or no. | ||
| No, Congressman, all you have to ask is. | ||
| The OCC is an independent entity, and I would know, Congressman. | ||
| I take that as a note. | ||
| You traveled to Venezuela. | ||
| I take that as a note. | ||
|
unidentified
|
On behalf of the presentation, I do not want to answer that question. | |
| I take that as a note. | ||
| For a $7 billion. | ||
|
unidentified
|
I'm asking you to do your responsibility as Secretary of the Treasury. | |
| You do not. | ||
| You cannot arrange the witness. | ||
| He's the one that went past your time, Mr. Chairman. | ||
| He did not answer my question. | ||
|
unidentified
|
And he wouldn't constitute it. | |
| He had six seconds left to try to answer your question. | ||
| It was a yes or no answer. | ||
| I asked him, Will he? | ||
|
unidentified
|
No, yes or no. | |
| Gentlemen, stop covering for the president. | ||
| Stop being his flunky. | ||
| Gentlemen, gentlemen, he's talking to me. | ||
| I'm responding to 2006 trip to Venezuela. | ||
|
unidentified
|
Stop covering for the president. | |
| Don't be a fucking work for the American people. | ||
| Mr. Makes. | ||
| Trip to Venezuela. | ||
| Work for the American people. | ||
| Don't be a cover-up for a mob. | ||
| Maybe you're going to be afraid of the people who are going to be able to do it. | ||
|
unidentified
|
As long as he talks to somebody. | |
| Please. | ||
| I recognize the gentleman from Texas, Mr. Sessions. | ||
| You're recognized for five minutes. | ||
| Mr. Chairman, thank you very much, Secretary. | ||
| Welcome to the Financial Services Committee. | ||
| I'm delighted that you're here. | ||
| Mr. Secretary, we've talked with you about a broad range of things, not necessarily related to FSOC and your chairmanship there. | ||
| But I would like to, if I can, talk with you something about the word public confidence. | ||
| And the word public confidence does have a lot to do with the financial stability of the country. | ||
| There are reports in social media that have shown, and I don't want to put you in a position where you cannot answer this because of anything that you've learned in Minnesota with the $9 billion worth of fraud. | ||
| But there are social media accounts that show people who are at a Minneapolis airport with baggage full of up to a million dollars cash attempting to exit the country. | ||
| And I have engaged several people who have worked at Treasury to ask their opinion about that. | ||
| Not the relationship between how they got the money, but just that it's going out of the country and following the law. | ||
| Can you tell us or give this committee your viewpoints about people not using some other system but taking cash up to a million dollars through our airports to leave the country? | ||
| Yes. | ||
| So that is a DHS TSA function. | ||
| Having learned of this, we are attempting to integrate our fence-in better with those forms. | ||
| What we are trying to do at Treasury via fence-in is to keep money from being wired out of the country through what are called money service businesses. | ||
| So we have issued a geographic targeting order bringing down the amount of reporting to $300 and also asking on the form, if someone is wiring money out of the country, are you receiving public benefits? | ||
| These are all very important issues. | ||
| And as you did talk about, Department of Homeland Security does have a role in this. | ||
| I would suggest to you that Treasury probably has a philosophy about the role of the American dollar in the world economy, the stability that we have, the use of wanting to make sure that the dollar remains that dominant use. | ||
| But I would tell you that I will be very interested if you have a working group on this of us making ourselves aware because it is an issue to people who simply see social media. | ||
|
Role Of Homeownership In Politics
00:02:20
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| We look forward to working with you on that, Congressman. | ||
| Thank you, Secretary. | ||
| Mr. Secretary, as you have alluded to and as the discussion here has been about banks, community banks, the ability that they have, you recognize because you spoke directly to it about the stress that they are placed under as opposed to bigger banks. | ||
| Could you please talk to us about what you believe the role is of home ownership, which is increasingly a part of the political discussion and debate and discussions for members of Congress back home of solving our home ownership problem. | ||
| And you've got almost a minute, boy, I'm giving you a lot of time. | ||
| And interest rates as they correspond to people being able to buy their own homes. | ||
| Good. | ||
| Well, thank you. | ||
| And I would note that I was also a banks and financial institutions analyst for 35 years and was instrumental in working with the government to bring down American Continental and Sun State savings and loans, which were the direct beneficiaries of the Keating 5. | ||
| That getting small banks lending again, we need to get them back into the mortgage market. | ||
| No one knows their communities like small banks. | ||
| And that having moved into the larger system, the strength and breadth of the U.S. mortgage market is choice. | ||
| And we have lost the choice in the small banks. | ||
| And I think we need to get them back into the housing lending business. | ||
| And we are seeing, it's a tragedy, that the average first-time homebuyer is now 40 years old, 40 years old. | ||
| Well, I had a discussion last night with the realtors about their importance in this process, too. | ||
| So I'd like to once again make sure we see community banks and realtors and homebuilders all have an interest in this. | ||
| I want to thank the gentleman. | ||
| I thank the gentleman from Texas. | ||
| Before we move on, I want to remind everyone participating today to uphold the House's rule of decorum. | ||
| And I'd like to remind everybody to respect the five-minute rule. | ||
|
Five Minutes, Many Questions
00:10:09
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| And having been a witness before Congress before in my executive branch days, it is important to note that our members can spend their five minutes and never ask a question or not. | ||
| It's their five minutes. | ||
| So let's try to be mutually respectful of each other. | ||
| And I now recognize the gentleman from Massachusetts, the ranking member of our Digital Assets, Financial Technology and Artificial Intelligence Subcommittee, Mr. Lynch, Massachusetts, five minutes. | ||
| Thank you, Mr. Chairman. | ||
| Mr. Secretary, based on our early reports, and this is an analysis done by Public Citizen and subsequent news reports, when the Trump administration came into office, | ||
| they immediately took steps to either halt, dismiss, or roll back over 100 enforcement actions and investigations against corporations in its first two months in office with a very heavy concentration on financial services, consumer protection and cryptocurrency, totaling over $3.1 billion in potential penalties avoided. | ||
| Now, as a member of the Financial Services Oversight Council, is that a concern that you have raised within the Council all these immediate dismissals of cases against financial services firms? | ||
| Well, I think the Biden administration had an extinction. | ||
| Please be responsive to my question. | ||
| I am trying, sir, and this back and forth is just eating your time, that the Biden administration had an extinction policy for crypto. | ||
| This is when Trump came into office. | ||
| I am going to go to the next question because you are not, you know, your answers aren't. | ||
| Mr. Chairman, the answers have to be responsive if we are going to have a serious hearing here. | ||
| Well, the questions have to be serious. | ||
| Well, those are 100 dismissals of cases that the Trump administration came in and executed in their first weeks in office like that. | ||
| All of a sudden, all these crypto cases went away. | ||
| The SEC was dropping cases. | ||
| The Consumer Financial Protection Bureau dropping cases. | ||
| And look, you are on FSOC with all the heads of these agencies. | ||
| This should be a serious question to you. | ||
| Trust should be a serious question and a serious issue for the financial services industry, especially as the Secretary of the Treasury. | ||
| That's an important view. | ||
| I haven't asked any more questions. | ||
| I haven't asked you any more questions. | ||
| I'm trying to get to my next question. | ||
| Could you speak a little louder? | ||
| I can't hear you. | ||
|
unidentified
|
Yeah, okay. | |
| I might. | ||
| I might. | ||
| Mr. Secretary, let Mr. Lynch proceed with his time. | ||
| Put four seconds back on the clock, please. | ||
| Thank you, Mr. Chairman. | ||
| Yes, Mr. Lynch. | ||
| I just want to do a comparison of the FSOC reports. | ||
| Let's go back to 2024, and then we will talk about the current report. | ||
| In the previous report, the members of FSOC expressed serious concerns related to potential risk to financial stability regarding the lack of explainability and high complexity of AI and the approaches that have a potential to heighten financial instability, especially in the areas of bias and discrimination in credit decisions. | ||
| That was in 2024. | ||
| Your report in 2025 focuses on removing regulatory impediments. | ||
| So in 2024, we were concerned about consumer protections, and now, under your leadership, we are concerned with eliminating regulatory impediments. | ||
| The dangers, and that was a report during a time where the chairman and I were co-chairs of an AI task force. | ||
| Those dangers haven't gone away in reality. | ||
| Those dangers are still as severe for the American consumer, but they are absent from FSOC's report. | ||
| So it's obviously you've eliminated or dropped that priority as an issue for FSOC. | ||
| So can you explain the change from protectiveness to consumer and now eliminating regulations? | ||
| We are charged with financial stability, and we are focused on leveraging AI strength and the financial system resilience, but with economic growth in a security lens. | ||
| On the issue of explainability, any concern about that in the use of AI in the financial services industry? | ||
| I'm sorry, what was the question? | ||
| The issue of explainability, how when people apply for credit and are denied, we don't have the ability for AI to explain why they were denied. | ||
| Is that a concern? | ||
| I mean, we are talking about the trust within the financial services industry. | ||
| It could be a concern, but we don't view it as a priority for financial stability. | ||
| That's the truth. | ||
| That's the truth. | ||
| Okay, Mr. Chairman, I yield back. | ||
| Thank you. | ||
| The gentleman from Massachusetts yields back. | ||
| I recognize the gentlewoman from Missouri, Ms. Wagner, who chairs our Capital Markets Subcommittee. | ||
| You recognize for five minutes. | ||
| I thank you, Mr. Chairman and Secretary Besant. | ||
| I find your answers to be quite clear, substantive, and as always, well-informed. | ||
| Thank you for being here. | ||
| Early, sir, in your tenure as Treasury Secretary, you said, and you touched on it here today, and I quote, for the last four decades, Wall Street has grown wealthier than ever before, and it can continue to grow and do well. | ||
| But for the next four years, it's Main Street's turn. | ||
| It's Main Street's turn to hire workers. | ||
| It's Main Street's turn to drive investment. | ||
| And it's Main Street's turn to restore the American dream. | ||
| And as chair of the Capital Markets Committee, I could not agree more, sir. | ||
| For too long, outdated securities laws have limited everyday Americans' ability to invest in innovative startups. | ||
| At the same time, the number of companies listed on public markets continues to shrink. | ||
| And as a result, everyday Americans in Missouri's second congressional district that I have the honor to represent have fewer opportunities to invest toward major life goals, including owning a home, paying for their children's education, or securing a dignified retirement. | ||
| Main Street businesses across the Midwest and other regions of our country are overlooked as venture funding and capital raising opportunities remain largely concentrated on the coast. | ||
| That is why I have made it a priority to facilitate capital formation and empower entrepreneurs and small businesses across America. | ||
| Just weeks ago, Mr. Secretary, December 11th, to be exact, the House passed my Invest Act, a bipartisan package of 22 bills focused on three goals, expanding access to capital for small businesses, increasing opportunities for everyday investors, and strengthening our public markets. | ||
| Capital formation is the lifeblood of American economic growth and prosperity. | ||
| Our capital markets are indeed the deepest and most liquid in the world, and the Invest Act will ensure that they remain among the greatest strengths for decades to come. | ||
| I look forward to continuing to work with you and the administration to advance these priorities and unleash the power of our capital markets. | ||
| Secretary Besant, in your view, what are the largest barriers to capital formation for small business? | ||
| Congressman, Congresswoman, I look forward to working with you. | ||
| And I think I would bifurcate that most small businesses are individuals. | ||
| And for many individuals, we have learned that most of them, 38 percent of Americans, do not own equities. | ||
| So with the Trump accounts, which will give every child $1,000 seed finance, every American will be invested in a low-cost index fund. | ||
| Every American will have a share of our great innovative economy. | ||
| For small businesses, it is often, I would say, it is a duality of regulatory and access to finance. | ||
| Americans are entrepreneurial. | ||
| We want to get out and form businesses. | ||
| And I believe that with the confidence of being able to do that and what President Trump's agenda has done, businesses now have tax certainty with the one big beautiful bill, that 100 percent deductibility of equipment, of factories, and of ag structures. | ||
| We have energy certainty with our energy dominance, and we have regulatory certainty as we are pulling back the regulatory morass that was highly, highly harmful to both small and large business. | ||
| Absolutely. | ||
| And as global competition for capital intensifies, the United States risks falling behind if our public markets also, I must say, remain costly or inaccessible for growing companies. | ||
| How important is capital formation reform, like the reforms included in the Invest Act? | ||
|
Why DJT's Announcement Matters
00:15:30
|
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| Again, 22 bipartisan bills that we brought to the floor with the support of 87 Democrats. | ||
| How important are these reforms to maintaining U.S. economic leadership and long-term growth quickly, sir? | ||
| Congresswoman, they are vital. | ||
| And what we have seen, as you correctly outline, is since the early 2000s, the number of public companies available for Americans and indeed international investors to invest in has greatly diminished and it has developed into a network of private assets. | ||
| Thank you. | ||
| My time has expired. | ||
| I have others that I will put forward for the record, and I yield back. | ||
| The gentlewoman yields back. | ||
| Chair recognizes the gentleman from Texas, Mr. Green, who is the ranking member of our Oversight and Investigation Subcommittee. | ||
| Mr. Green, you're recognized for five minutes. | ||
| Thank you, Mr. Chairman. | ||
| Mr. Secretary, I ask that you recall Liberation Day, the day that President Trump announced tariffs. | ||
| I ask that you recall that when he made this announcement, there was a sharp decline in the stock market. | ||
| In fact, when he made the announcement, the NASDAQ experienced a 6 percent decline, the SP 500 a decline of 11 percent. | ||
| I ask that you also remember that some days later, the President announced that he was going to pause those tariffs. | ||
| And when he indicated that he would pause the tariffs, the market then moved up. | ||
| Do you recall these things, Mr. Secretary? | ||
| I recall them very well, Congressman. | ||
| Thank you. | ||
| And I ask that you also recall, please, Mr. Secretary, that hours before the President announced the pause, he indicated by way of Truth Social, he has more than 50 percent ownership in Truth Social, it's a great time to buy DJT. | ||
| That was his announcement on Truth Social. | ||
| And in so doing, Truth Social had a value that moved up. | ||
| In fact, Truth Social, which the President has a majority ownership, went up by $415 million. | ||
| Now, here's what's interesting in this scenario. | ||
| When he made that announcement and said it's a great time to buy DJT, that happens to be the symbol for his stock, DJT. | ||
| I ask you kindly, and as one professional to another, Mr. Treasury, Secretary, do you think that this should be investigated, the President's stock being linked to his Truth Social message, | ||
| and that stock having gone up by some $415 million in a single day, in a single day, and this is a stock that was doing very poorly prior to that, hadn't had a lot of success. | ||
| Do you think that this should be investigated? | ||
| No, sir. | ||
| Kindly explain to me why we would not investigate the President making such an announcement as it relates to his stock and then reaping some $415 million as a potential capital. | ||
| Well, all Americans benefited from the rebound in the markets that day, and in fact, the rebound in the market after that was the fastest in market history. | ||
| Yes, it was. | ||
| But here's what's interesting about your statement. | ||
| You did not note, Mr. Secretary, that DJT had probably the sharpest increase on that day, $415 million, and that the President said by DJT, and that's what happened. | ||
| I'm unfamiliar with the exact text. | ||
| Did he say buy DJT? | ||
|
unidentified
|
Yes. | |
| He said now is a good time to buy and have a salutation, DJT. | ||
| Yes, sir. | ||
| DJT immediately following, now is a good time to buy. | ||
| Well, those are his initials, as you've said. | ||
| They are his initials. | ||
| But it's also, do you agree that those are the symbol, that's the symbol for his stock? | ||
| I believe it is. | ||
| Okay. | ||
| And do you believe that such a thing done openly and notoriously should not be investigated? | ||
| Is that what you are telling the American people? | ||
| Sir, I believe that anything that is widely disseminated is widely disseminated and available to everyone. | ||
| Well, it was available to everyone, but what he said related to his stock could relate to something else, but to his stock. | ||
| And here's the point, Mr. Excuse me. | ||
| Secretary, here's the point. | ||
| I believe that any other President making this kind of move is almost a hustle. | ||
| I don't want to say that about the President, but making this kind of move would at least be investigated. | ||
| If you're going to allow the President to do this openly and notoriously, $415 million, what you're doing is giving him a license to move markets at will, make announcements, and reap benefits. | ||
| He is literally hustling the United States stock market. | ||
| I yield back. | ||
| Gentlemen's Tom's yield back. | ||
| Gentleman from Kentucky, Mr. Barr, Chairman of our Financial Institutions Subcommittee, you're recognized for five minutes. | ||
| Thank you, Mr. Chairman. | ||
| Mr. Secretary, you came here to testify about financial stability and threats to financial stability. | ||
| I think what we're learning from this hearing, Mr. Secretary, is how much Trump derangement syndrome is a threat to emotional stability. | ||
| There's been a lot of lectures directed at you today. | ||
| Would you like to clarify anything or respond in any way to any of these lectures? | ||
| I would just like to say that A financial stability analysis centered on identifying vulnerabilities in financial institutions or markets that might disrupt the provision of credit or liquidity, disrupt other sectors, and lead to significant losses across the financial stability. | ||
| This is what FSOC is chartered to do. | ||
| Thank you. | ||
| Secretary Besant, I'd like to applaud President Trump and the Treasury Department for announcing Trump accounts. | ||
| I do believe this will kickstart the American dream for children born between 2025 and 2028 with a $1,000 investment from the U.S. Treasury. | ||
| And I'm personally grateful because my daughter, Virginia, was born in October and will be a beneficiary of these Trump accounts. | ||
| Not only will this ensure that American children born in this timeframe will participate in the deepest, most liquid capital markets in the world, but it importantly will also teach this new generation about the power of compound interest and will help them develop financial literacy skills, which will make them owners and investors and will improve their financial outcomes throughout their lives. | ||
| Can you touch on the impact of these Trump accounts and how it will help this new generation achieve financial independence? | ||
| And as you talk about that, you know, we have a mayor of New York that espouses socialism, members of Congress who espouse socialism. | ||
| How will these Trump accounts impact this new generation of Americans' view of financial independence versus socialism? | ||
| Again, history would show that people who own a piece of the action do not want to bring down the system when you are part of the system. | ||
| As I said, 38 percent of Americans, American households, do not participate in the equity market. | ||
| Many do, many directly, many through 401ks. | ||
| But over time, the goal here should be to have everyone own a piece of the American economic engine. | ||
| We have Treasury working with many people, are going to work on financial literacy. | ||
| This will be one of the greatest real-time experiments in history. | ||
| You are bringing Wall Street to Main Street, and Wall Street will work for Main Street instead of the other way around. | ||
| Well, on behalf of my three-month-old daughter, Virginia, and millions of American children, thank you to you and President Trump for bringing financial independence to the American people. | ||
| I agree with you that economic stagnation is itself a threat to financial stability. | ||
| That's why we're pushing this Main Street access to capital bill, which will provide for more de novo charters of community banks, the TIR Act, the Community Bank Regulatory Tailoring Act, which would modernize these statutory thresholds to remove the static nature of the thresholds and allow for more diversity and growth in financial institutions. | ||
| Can you discuss how indexing these static regulatory thresholds will allow banks of all sizes to grow and how that will in turn help financial stability? | ||
|
unidentified
|
Yep. | |
| So, Congressman, I've said very often that under the regulatory straitjacket that emerged that pushed lending outside the traditional banking system, small banks became too small to succeed. | ||
| And I think we have to fix that and tailor it to the risk for people who know their communities, who are concentrated geographically. | ||
| And if you were in Iowa, you were concentrated in farming. | ||
| If you were in Florida, you were likely concentrated in real estate and tourism, and we need to make adjustments. | ||
| And that will promote diversity in the financial system, which in turn will help with financial stability. | ||
| Final question, Secretary Besson. | ||
| At the end of last year, President Trump signed into law the NDAA, which included my legislation, which will be overseen by the Treasury Department, the Comprehensive Outbound Investment National Security Act, also known as the Fight China Act. | ||
| The COINS Act will ensure that Americans are not unknowingly funding the military-industrial complex of our adversaries by codifying and enhancing the Trump administration's existing outbound investment security program. | ||
| Can you discuss the Treasury Department's new obligations under this bill and how do you intend to implement it to prevent capital flows into Chinese military-industrial complex companies? | ||
| Well, I want to thank you for this important piece of legislation. | ||
| It is another arrow in our quiver. | ||
| And I can tell you, as I am the lead negotiator with China on the economic front, it is very useful for me to be able to say, well, I am happy to refer things to the Hillary. | ||
| The gentleman's time has expired. | ||
| Great to work with you on that. | ||
| I yield back. | ||
| Gentlemen's time has expired. | ||
| I recognize the ranking member of our Housing and Insurance Subcommittee, Mr. Cleaver of Missouri. | ||
| You're recognized for five minutes. | ||
|
unidentified
|
Thank you, Mr. Chairman. | |
| Unfortunately, this is an embarrassing kind of a hearing. | ||
| I've been on this committee 21 years. | ||
| We've had all kinds of conflict. | ||
| In fact, I was in here when the Federal Reserve Chair, along with the Treasury Secretary and many others, came in to tell us what was going to happen if Asian markets, when the Asian markets opened after the collapse of the economics of our nation. | ||
| And I've learned that you can't make honey and sting at the same time. | ||
| The question is whether we came here today to sting or whether we came here to talk about issues that are of importance to the nation. | ||
| I got a little grandson, I hope. | ||
| Well, he was in school today, hey friend, to have seen this so far. | ||
| What I would like to talk about is your opinion of the dual mandate, stable prices, maximum employment. | ||
| I would like to get your philosophy on that issue. | ||
| Is that the creators of the Federal Reserve and then the mandate? | ||
| Was that a mistake? | ||
| The Federal Reserve Act of 1913, which created the Fed, and then we have morphed into the dual mandate, and the dual mandate is a very delicate balance between maximizing economic growth while maintaining the low levels of inflation. | ||
|
unidentified
|
Well, so then you believe in, I'm assuming, the independence of the Federal Reserve. | |
| I believe in the independence of the Federal Reserve, but I also believe in accountability. | ||
|
unidentified
|
I mean, can you explain how you put those two together? | |
| Sure. | ||
| I would welcome. | ||
| We have seen these cost overruns. | ||
| The Fed has a the independence of the Fed is based on its trust with the American people. | ||
| And the Federal Reserve lost the trust of American people when it allowed the greatest inflation of 49 years to ravage working people in this country. | ||
|
unidentified
|
Mr. Secretary, so the people in the country, there was a poll or something. | |
| I mean, you are speaking of the American people as if there is some human being that had an opinion. | ||
| I mean, either the Federal Reserve is independent or it's not. | ||
| Isn't that right? | ||
| Isn't the logic right? | ||
| That the Federal Reserve should be independent for monetary policy and every other program that it undertakes impinges on the monetary policy independence, whether it is cost overruns on a building, whether it is intruding in climate, whether it is offering political opinions. | ||
|
unidentified
|
Mr. Secretary, so being a member of the cabinet, you would advise the President of the United States to verbally and politically interfere with the decision-making of the Federal Reserve. | |
| Well, it's his right, just as it's Senator Warren's right in September of 24 to say that they shouldn't cut 50 basis points. | ||
| They should cut 75 basis points. | ||
| It's the right of everyone in here because, again, there is no appropriation for the Fed. | ||
| The Fed has magic money and prints all its own money. | ||
|
Strong Dollar And Manufacturing Employment
00:11:22
|
||
|
unidentified
|
Yeah, I understand how the system is financed, the Federal Reserve, but Elizabeth Warren is not the President of the United States. | |
| And I'm sure, I mean, her comment was in newspapers on the news. | ||
| I'm asking about arguably the most influential human being on planet Earth. | ||
| Well, I will refer you to President Biden's last State of the Union, where he said, I believe the Fed is going to be cutting interest rates. | ||
|
unidentified
|
Mr. Secretary, can you tell me, please, would you advise the President to force the independent Federal Reserve to cut interest rates? | |
| And I invite the Secretary to respond to the gentleman's question in writing. | ||
| Gentleman from Texas, Mr. Williams, you are recognized. | ||
| Mr. Williams is chair of the House Small Business Committee. | ||
| You are recognized for five minutes. | ||
| Thank you, Mr. Chairman. | ||
| Mr. Secretary, thank you for being here. | ||
| I want to discuss the Main Street Capital Access Act, which strengthens local bank formation, allows community financial institutions to refocus on serving their customers, supporting small businesses, and improving affordability for Americans. | ||
| The one-size-fits-all regulatory requirements are particularly harmful to community banks, which often lack the large compliance staffs and resources needed to absorb broad mandates. | ||
| So to preserve competition and avoid consolidation of the banking sector, regulatory requirements must be tailored to the size and risk profile of each institution. | ||
| You touched a little bit of that today. | ||
| So a question would be, can you speak to the importance of tailoring and right-sizing regulations for community banks and the communities they serve? | ||
| And how does a one-size-fits-all regulatory approach undermine the community-based lending model? | ||
| Again, Congressman, as I said, a banker from my home state of South Carolina with about $200 million in assets, so it would be a very small bank, was told by a regulator, she should run her business like Bank America. | ||
| She has three compliance officers out of 17 employees. | ||
| She knows everyone in her small community in South Carolina. | ||
| So it is very important that we set the correct standards for the lending risk and for the business success, because our main streets will only succeed when these banks succeed. | ||
| Well, 99 percent of the businesses are small. | ||
| They need these banks. | ||
| Yes. | ||
| And just to be clear, I have come under fire from the Wall Street Journal for they called me a populist because I said that it is Main Street's turn. | ||
| And I will note that it is called the Wall Street Journal, not the Main Street Journal. | ||
|
unidentified
|
Thank you. | |
| Two of my bills are included in our committee's Main Street Act. | ||
| The first, the Merger Process Review Act, directs the Inspector General of the NCUA and Federal banking agencies to examine the agencies, merger review process to evaluate delay reduction, efficiency, and transparency. | ||
| The second, the Merchant Banking Modernization Act, would permit banks to hold merchant banking investments for up to 15 years, providing regulatory certainty and aligning Federal investment rules with real-world timelines of small and medium-sized business projects that often take more than a decade to plan. | ||
| So a question would be, Mr. Secretary, can you tell us what the benefits would be brought by greater clarity in merger review process? | ||
| And next, how would allowing banks to hold merchant banking investments for longer periods contribute to growth for small and medium end businesses in the wider economy? | ||
| Again, regulatory certainty for any business, as you know, an advocate for small business is important. | ||
| And for small businesses who don't have legions of consultants, legions of lawyers, the regulatory certainty is important and the ability to grow through acquisition is also important. | ||
| And we just want the regulators to put down the framework and stick to the framework, not to regulate through supervision. | ||
| Thank you for that answer. | ||
| And finally, in the 2025 SSOC annual report, you noted that financial stability and economic growth are closely linked. | ||
| You also observed that many financial and regulatory supervisory policies fail to consider their cumulative impact on economic growth with new regulatory costs often evaluated in isolation. | ||
| I hear this concern frequently from small businesses and financial institutions in my district in Texas, where layer after layer of regulatory burden from prior administrations led to millions of dollars and countless hours spent on compliance instead of serving customers and supporting their local communities and they are hiring compliance officers before they hire loan officers. | ||
| Again, it affects Main Street. | ||
| So how do layers of regulations after small business growth ultimately affect economic growth? | ||
| Again, it is a great retardant for economic growth. | ||
| And I believe that if we were to go back and look at what has happened, Karen Petteru, a progressive, believes that this regulation of small banks has been a real problem. | ||
| And she calls the Fed the engine of inequality. | ||
| And a lot of the regulation, the burdens and regulation, has come out of the Federal Reserve, but also the FDIC and the OCC. | ||
| And I think removing that can, again, get Main Street lending going again. | ||
| Thank you. | ||
| I have got 34 seconds left. | ||
| Would you like to have any of that? | ||
| I would like to add that under this administration, we are pushing for the financial system, the regulated financial system, to get back on an even, safe, sound, and smart level through deregulation, but not deregulation at any cost, but deregulation that will help the American small business, the American consumer, and those who would like to become homeowners. | ||
| Thank you for watching Main Street. | ||
| I yield my time back. | ||
| The gentleman yields back. | ||
| The chair recognizes the ranking member of our financial institutions subcommittee, Dr. Foster from Chicago. | ||
| You recognize four or five minutes. | ||
| Thank you, Mr. Chair, and to our witness. | ||
| I mentioned in my opening remarks our recent letter to FSOC asking them to look seriously at the risks of the deflation of the AI circular investment bubble, which is something you obviously read about every time you open up any financial journal anywhere these days. | ||
| I understand there was a letter sent, a similar letter sent recently by the Senate Democrats that received a similarly dismissive response, basically recognizing that, yeah, this is part of what we are supposed to be doing, but provided zero specifics on what you are actually doing. | ||
| So how many people do you have that are actually assigned to looking at the risk of this circular financing, these off-balance sheet entities, the securitization, all of the parade of terribles that wrecked our economy last time and are looking to threaten again? | ||
| So how many people are actually working on this, and when can we expect to hear from what they have concluded? | ||
| Again, we are constantly evaluating. | ||
| How many people are actually working on that problem? | ||
| Congressman, it is an all-agencies act. | ||
|
unidentified
|
No answer. | |
| Okay. | ||
| I understand. | ||
| They're not willing to give me a number on who is actually working on it. | ||
| I could say 2,000, but that wouldn't be correct. | ||
| Because some people may devote an hour a day, some people may devote 80 hours a week. | ||
| When can we hear something specific? | ||
| When can we expect to hear something specific? | ||
| In the interest of giving back to you and a change in tone, I am happy to send you a reply. | ||
| Okay. | ||
| I would appreciate something with a lot more detail than something we got from the under-assisted acting, whatever it was. | ||
| All right. | ||
| Also, last time we spoke, I asked you a simple question that I didn't get an answer to, which is, does this administration support a strong dollar policy or a weak dollar policy? | ||
| And frankly, as far as I've been able to tell, you're just all over the map on this. | ||
| So could you answer the question just simply, do you support a strong dollar policy or a weak dollar policy? | ||
| And how would you score your, whichever way you are trying to go? | ||
| How are you doing? | ||
| We always support a strong dollar policy. | ||
| Okay. | ||
| That's interesting because as last time we spoke, I presented a couple of graphs which presented the historic fact, interesting fact, that every time you put a Republican in charge of the presidency, that two things have happened, that the dollar has gotten weaker and that manufacturing employment has dropped. | ||
| And this has happened just during every Republican president in our lifetime, and the reverse has happened. | ||
| Every Democratic president, the dollar has strengthened, actually achieved your objective instead of just talking about it. | ||
| And since the time of that, actually, I think this plot here was the one we had then when the dollar was only 8 percent. | ||
| I think it is down about 10.5 percent now, so you are continuing down the traditional. | ||
| I am sorry, which index are you using? | ||
| DX dollar. | ||
| I think it is DXY year on year. | ||
| And I think it is the last time I looked at it, it was roughly down 10.5 percent. | ||
| And you have the president on there, but under President Clinton, it would be my belief that it was Speaker Gingrich and what he did. | ||
| I was just talking about the president who has been working with the Clinton administration. | ||
| I understand is Dr. Foster's time. | ||
| Yeah. | ||
| But you agree it is a historic fact that during those presidencies, manufacturing employment dropped and the dollar got weaker during Republicans, without exception. | ||
| I haven't seen the data, so I can't ask you. | ||
| I presented it to you on a graph. | ||
| It's my understanding, actually, that later on in that hearing, after I had left to attend a different hearing, that you said some rather negative things about the data and that as a finance professor that you would have, I think, given it an F, which I believe, your word. | ||
| And so that, all right. | ||
| I'm not a finance professor. | ||
| I'm a manufacturer, okay? | ||
| But I understand that the first thing, the first rule of a manufacturer is you don't piss off your customers, which seems to be something that your administration just revels in doing, internationally especially. | ||
| And so I think that this is, it's easy for me to understand why manufacturing employment has continued to drop. | ||
| That ever since Liberation Day, we have seen a continuous decline in manufacturing employment, which was one of your number one promises. | ||
| Congressman, as a manufacturer, you would know that I can't snap my fingers and create factories. | ||
| So there is a building process that is well underway. | ||
| I could send you the chart on factory ground brand. | ||
| I understand and the fact that we have been historically a low tariff nation is, I believe, responsible for the really extraordinary economic growth over the last decade of the United States compared to, say, the EU, which was a high tariff regime. | ||
|
unidentified
|
And now we are joining the jobs to China. | |
| You were touching on a lot of CCP talking points. | ||
| I think I, as a manufacturer who has kept jobs in the Midwest, I think I have a little more credibility. | ||
| Gentlemen, the gentleman's time has expired. | ||
| Does the gentleman want something inserted in the record? | ||
| Would you like that document inserted in the record? | ||
|
BSA Reporting Focus
00:15:37
|
||
| Without objection, we include the record. | ||
| The gentleman is from Georgia, Mr. Lautermelk. | ||
| You're recognized for five minutes. | ||
| Vice Chairman of our Financial Institutions Subcommittee. | ||
|
unidentified
|
Thank you, Mr. Chairman. | |
| Good to see you again, Mr. Sancretary. | ||
| Thank you for being here. | ||
| But before I get to my questions, I want to build on something that Mr. Lucas had talked about. | ||
| This committee held a hearing in November about deposit insurance, and we had an honest conversation about the need to maintain depositor confidence, the potential costs, and unintended consequences, and how we need more data before making reforms. | ||
| This issue is just too important to mess up, and I hope we can continue to talk about it in a thoughtful and data-driven way. | ||
| And now, on to my own questions here. | ||
| Secretary Besson, the Bank Secrecy Act or BSA reporting modernization is very long overdue and is required by the Anti-Mon Money Laundering Act of 2020, otherwise known as AMLA. | ||
| Increasing these outdated BSA reporting thresholds is, in my opinion, a critical component of this modernization effort. | ||
| The currency transaction report requires banks to report cash transactions that exceed $10,000. | ||
| That threshold has remained the same since 1972. | ||
| This low-value threshold has, in recent years, led financial institutions to file over 20 million reports on their customers annually. | ||
| And as I brought up during our recent hearing, $10,000 in 1972 was enough to buy two brand new Corvettes. | ||
| Just to give an illustration of how inflation has affected these CTR filings. | ||
| The vast majority of these reports are filed on law-abiding citizens conducting innocent transactions. | ||
| And I agree with something that you have stated: that banks need to be focused on their BSA reporting, or they need to focus their BSA programs on real illicit finance risk, and that focus on higher value activities would also better serve our law enforcement and national security objectives. | ||
| A few weeks ago, we had a markup in this committee and passed my bill, the Financial Reporting Threshold Modernization Act, that would responsibly raise the CTR and SAR thresholds while ensuring these reports are still useful for law enforcement. | ||
| As part of your community, your commitment to implement AMLA, will you use your authority to modernize and streamline the outdated reporting rules and increase the thresholds? | ||
| Yes, Congressman, we are studying this carefully. | ||
| We look forward to working with you on it. | ||
| The other thing that we are trying to do is to use common sense for geographical targeting, that we can lower thresholds with what's called a geographical targeting order for areas where we see disturbing trends like the southern border or in Hennepin and Farley counties, St. Paul, Minneapolis. | ||
|
unidentified
|
Right. | |
| And I believe under the program, those exceptions exist to give flexibility. | ||
| You've talked about the importance of creating an effective BSA program that will allow financial institutions to focus on high-risk activities other than just focus examinations on paperwork. | ||
| How can you ensure that our financial institutions can focus on real illicit finance risks, and do you plan to consult them in law enforcement throughout your process? | ||
| Yes, we have done a very iterative process, especially with the small banks. | ||
| And we have had numerous visits at Treasury. | ||
| Our fence-in group has been out on the road regionally asking for best practices, and we are working to incorporate to get the right mix of enforcement and common sense. | ||
|
unidentified
|
Well, that's good to hear because after spending almost 30 years in the IT sector, especially with data security, I've equated to the way the system is right now is looking for a needle in the haystack, where the government's default is always, well, let's just make the haystack bigger when I believe we should make the haystack smaller so it's easier to detect the fraudulent players. | |
| Do you believe that a modernized, effective BSA regime would hinder or undermine law enforcement if we were to modernize it? | ||
| Again, if it were done in a very smart way that optimizes looking for criminal activity not at all. | ||
|
unidentified
|
And that's really the direction I think we should be going. | |
| Eliminate the noise so we can focus on where the bad players actually are. | ||
| Mr. Secretary, when can Congress expect to see the Treasury's proposed changes to the BSA program? | ||
| Congressman, I will get back to you on that. | ||
| But we are working on it with all deliberate speed. | ||
|
unidentified
|
Okay. | |
| And stand ready to help in any way that we can. | ||
| And we appreciate your efforts and your service. | ||
| And Mr. Chairman, I yield back. | ||
| Gentleman from Georgia yields back. | ||
| The chair recognizes the ranking member of the House Permanent Select Committee on Intelligence. | ||
| Mr. Himes of Connecticut, you're recognized for five minutes. | ||
| Thank you, Mr. Chairman, and welcome, Mr. Secretary, over here. | ||
| Good to have you with us today. | ||
| Secretary, in February of last year, during your tenure as acting director of the CFPB, you instructed the staff to suspend all rulemaking litigation, communications and enforcement actions. | ||
| One of the rules that was in process at CFPB was a rule that would have capped credit card late fees at $8 for large issuers. | ||
| I understand there's an agency process. | ||
| Do you have a personal view as to the wisdom of an $8 cap on late fees? | ||
| I do not. | ||
| You have no view. | ||
| Okay. | ||
| The President recently proposed a 10 percent cap on credit card interest rates. | ||
| That's caused a certain amount of interest in this institution because presumably it would require legal action. | ||
| So as Treasury Secretary, what are the plus and minuses of that proposal? | ||
| Do you have a personal view on the wisdom of that proposal? | ||
| that the President is interested in affordability for the American people, and I think his view is that banks have done very well and that by capping the rate for one year, it would give the American people the chance to recover from the horrible Biden inflation of 22 percent. | ||
| We were both in the finance business for a long time. | ||
| Is there any possibility, any risk that such a cap would actually have a pretty constrictive effect on the availability of credit, especially to subprime borrowers? | ||
| Again, I think that would be very important to examine as it is being put in. | ||
| But, Congressman, what we've seen over time is credit cards used to compete on what was known as APR, the financing rate, and now they compete on rewards. | ||
| And what we have seen is that the APR, as you said, the subprime borrowers are paying higher APR and the upper-end borrowers are getting more rewards. | ||
| So maybe there is a calculus here on how to diminish the rewards and cut the APR. | ||
| When you were asked a similar series of questions, you gave a similarly careful answer, but you said that there were bad actors in the, I think you said you were referring to credit card companies. | ||
| Who are those bad actors? | ||
| I am not going to name them. | ||
| So you will tell us that they exist, but you won't tell the Congress who they are so that we might undertake some oversight. | ||
| I think you have very large investigative committees. | ||
| Okay. | ||
| Let me shift gears here. | ||
| So many, many years ago, working with then colleagues John Carney and John Delaney, we put together a proposal for the removal from conservatorship of the GSEs. | ||
| Last fall, as you'll undoubtedly recall, there was a roundtable held at Treasury around an issue that is really critical, which is housing and its affordability and the fact that we need to build a whole lot more housing. | ||
| The conclusion from that roundtable, as I understood it, was really one theme, which is do no harm. | ||
| Over the past year, the President and Director Pultey, however, have tweeted a host of utterly chaotic proposals for the GSEs, including an immediate IPO, 50-year mortgages, ending special purpose credit programs, rapidly exiting the conservatorship, stripping away the GSEs housing goals. | ||
| I could go on and on and on. | ||
| Mr. Pultey seems to have appointed himself the indictor, inquisitor of people like Letitia James and Adam Schiff. | ||
| And apart from making a political point here, I'm trying to point out that we have a crisis in this country around housing affordability. | ||
| The HUD Secretary was in here the other day using terms like, I'm going to encourage the building of additional housing. | ||
| So my question for you in my final minute, what should we be doing right now with respect to the GSEs so that the GSEs can create a lot less risk for the American people than they represent in the conservatorship, but so that they are a vibrant part of an expanding housing growth sector? | ||
| Good. | ||
| So, Congressman, I would point out that the market is the ultimate arbiter, and the spread between mortgages and Treasuries, despite your statement, is the lowest that it has been in many, many years. | ||
| That is because the mortgages are effectively guaranteed by the Federal Government. | ||
| That's not surprising. | ||
| That's trivial. | ||
| But my question is, what should we be doing right now? | ||
| But the spread is lower than it was this time last year, and it was guaranteed last year. | ||
| Let me repeat my question, Mr. Secretary. | ||
| You are an expert in the field. | ||
| What should we be doing right now to assist in the production of additional housing? | ||
| It is a very complicated question, but the most important thing that has happened is we now see mortgages touched a three-year low in January. | ||
| So I think getting down the payments and again moving toward Fannie and Freddie eventually leaving conservatorship and our North Star that the spreads cannot widen in any future. | ||
| The gentleman's time has expired. | ||
| It's okay. | ||
| Thank you. | ||
|
unidentified
|
I yield back. | |
| Thank the gentleman from Connecticut. | ||
| Gentleman from Ohio, Mr. Davidson, who chairs our National Security Subcommittee, you're recognized for five minutes. | ||
| Thank you, Mr. Chairman. | ||
| Mr. Secretary, thank you so much for your leadership at Treasury. | ||
| Like the markets, I'm comforted and reassured by your leadership there. | ||
| So thank you, and I hope you keep continuing the excellence that you've delivered for this first year in the job. | ||
| You know, the Export-Import Bank has played an increasingly important role in strengthening U.S. supply chains, and certainly doing that has been a big focus of this administration with a whole host of policies. | ||
| Given China's dominant position in many critical mineral supply chains and the bank's expanding use of financing tools to address these vulnerabilities, does the export-import bank need additional capital or authorities to scale its support for supply chain resilience? | ||
| I believe that John Yakonovich would come to you. | ||
| He's doing a fantastic job as the Exem Bank is overall, and it is the linchpin toward our move toward regaining our sovereignty with not only critical minerals, but will be semiconductors, medicines, steel. | ||
| So anytime Exim Bank comes forward and asks for more money for national security, I cannot stress that enough. | ||
| At FSOC, we are talking about economic security and national security are the same. | ||
| Yeah, thank you for that. | ||
| And we'll be meeting this week, frankly, to talk about just that. | ||
| So we need to reauthorize it, and I think that's things that we want to take into consideration. | ||
| What additional capital, what additional authorities do they need? | ||
| And that leads into the Defense Production Act. | ||
| In the most recent NDAA, certain Defense Production Act authorities were shifted to the Department of Defense. | ||
| So given that DPA authorities have historically been housed at Treasury to address supply chain vulnerabilities across the entire economy and not just defense needs, should the primary DPA authorities remain within Treasury to make sure we get a whole of economy approach? | ||
| Well, we are working well with DOW, and I can tell you that the defense priorities are the same across the economy, and it's really with it starts with critical minerals. | ||
| And I believe DOW is leading that along with Exim Bank. | ||
| Thank you so much. | ||
| And as we work to reauthorize that and modernize it, this will be the first modernization since COVID. | ||
| And we've seen the expanding use and how the administration has made such a focus on our trade policy and reshoring. | ||
| So I think the debate and reauthorization, modernization of Defense Production Act, I think, brings coherence to what has been a major focal point for the administration. | ||
| So thanks for your leadership there. | ||
| Lastly, as Mr. Foster was trying to tout the benefits of communist money, I appreciate you calling him out on that and rejecting it. | ||
| And frankly, during the Biden administration, the Federal Reserve posted positions. | ||
| They were literally recruiting developers to develop a central bank digital currency, including a, quote, senior crypto architect role dedicated to CBDC development. | ||
| Are you aware of any ongoing government or Federal Reserve efforts to develop a U.S. central bank digital currency? | ||
| Within the administration, absolutely not. | ||
| President Trump has made it clear that a central bank digital currency is athema to the creation of the U.S. as a digital powerhouse. | ||
| I can't speak for what goes on at the Fed, but I would assume that they would not be part of that either. | ||
| Yeah, I hope so because not only has the President been clear on that, he issued an executive order on it and said that we will not develop a central bank digital currency. | ||
| And of course, that applies to the whole executive branch. | ||
| Does that mean it applies to the Federal Reserve? | ||
| Again, I would say that the Federal Reserve has been very cooperative in terms of the regulation and they're a bit of forward thinking with the Genius Act of what's happening with stable coins, how that fits within the financial and the payment system. | ||
| Yeah, I think that approach clearly contrasts with what really China has been working on is essentially managed basically programmable money by the federal government. | ||
| And frankly, they're working on it with the Bank of International Settlement, with the European Central Bank, the Bank of England. | ||
| Mark Carney seems to be a fan of it, and they're all collaborating to basically develop communist money and impose it on their populations. | ||
| And it seems like you have a different hope for the future. | ||
| So as you lay that out, I would love to work with you on the future of money. | ||
| I really think it's going to shape the future of Western civilization. | ||
| I couldn't agree more with you, Congressman, and it's moving fast, and the U.S. has to keep the lead. | ||
|
Concerns About U.S. Direction
00:15:41
|
||
|
unidentified
|
All right. | |
| Thank you, and I yield back. | ||
| Gentleman yields back. | ||
| Chair recognizes the gentlewoman from Ohio, Ms. Beatty, who is the ranking member of our National Security Subcommittee. | ||
| Thank you. | ||
| Thank you, Mr. Chairman, Ranking Member, and to the witness. | ||
| First, let me start by saying that I am certainly concerned about the direction of this country, this Treasury, this administration, and this president. | ||
| I believe that our democracy is under attack, as well as CFPB, the Federal Reserve, CDFIs, HUD, and the list goes on and on. | ||
| So I'd like to start with a question on community development financial institutions or CDFIs as we refer to them, which you've played a key role in economic development. | ||
| As a matter of fact, in your one-page testimony, you mentioned economic development or growth or security almost a dozen times. | ||
| You also have stated promoting economic growth and economic security is essential to ensuring financial stability. | ||
| Economic growth strengthens housing, business, financial institutions, so forth and so forth. | ||
| Nationwide, CDFIs finance more than 45,000 affordable homes. | ||
| However, applications for CDFI's fund programs have been pending for almost 12 months or more, and except for some CDFI funds for administrative costs, none of the FY25 program funds have been allocated. | ||
| Last fall, CDF funds issued a supplemental application to CDFIs to ensure that they were in compliance with the executive orders issued by the administration, but funds still have not been dispersed. | ||
| Now, my question to you: are there plans to place in place to release monies to CDFIs so they can continue to finance affordable housing projects? | ||
| That's a yes or no. | ||
| If yes, when? | ||
| If no, why not? | ||
| Treasury has been working to implement the CDFI funds programs as required by law. | ||
| Upon apportionment of appropriated funds, Treasury will be a yes program awarded. | ||
| Mr. Secretary. | ||
| No, no, no. | ||
| I'm going to abide by the chairman's rules, but I have some rules. | ||
| You can say yes or no. | ||
| And then if you say yes, you may continue to give that support. | ||
| If it's a no, then you tell me why not. | ||
| And then we need to be clear. | ||
| Yes, let's start with the yes or no. | ||
| I'm trying to be respectful, but you're not going to do what you want to do on my time. | ||
| Yes or no? | ||
| Or you can say I'm not going to answer it. | ||
| Now move on. | ||
| Number three. | ||
| Okay, so let the record show that he refuses to answer a question. | ||
| No, we're not going to do that with me. | ||
| We are not going to do that with me. | ||
| Asking's time from Ohio. | ||
| Now, you opted for number three, so you get to hear my wrath that you refuse to answer a question under your authority and what this administration, and yet you've talked about the value of housing, and you're not releasing the funds. | ||
| And I want the record to be clear on that. | ||
| So let me move on. | ||
| Mr. Secretary, I've asked you, as your predecessors, Democrats or Republican, Jack Liu, Mnuchin, Janet Yellen, and you a year ago about putting Harriet Tuffman on the $20 bill. | ||
| We started this process in 2020. | ||
| At that time, Jack Liu said it would take four years. | ||
| I sent you a letter. | ||
| Do you know what your response was to me? | ||
| I haven't seen the letter, ma'am. | ||
| Well, you answered the letter. | ||
| So now I was given a chance to help you. | ||
| You responded to my letter just recently because you know I drilled you on this. | ||
| But now you responded to tell me in a few words, it's a complex process. | ||
| So that's not really an answer. | ||
| We know it's a complex process. | ||
| Your Republican predecessor said the same thing, but he went on to support it. | ||
| So it was supported by three people before you. | ||
| It was scheduled for 2020. | ||
| Then it got backlogged because it's a complex process to 2028. | ||
| The last Republican said we would be on target to do this. | ||
| So now my question to you is, why is it not on target? | ||
| And why are you not engaged in this process? | ||
| Part one. | ||
| Part two, do you know who is over the Department or the Bureau of Engraving and Printing? | ||
| Do you know who that person is? | ||
| Sorry. | ||
| Do you know who is over the Bureau of Engraving and Printing? | ||
| I am. | ||
| You run it? | ||
| The Treasury Secretary. | ||
| You run it? | ||
| The Treasury Secretary. | ||
| Be careful now. | ||
|
unidentified
|
Do you run? | |
| Gentleladies, time is expired. | ||
| And let me ask him to put it in writing because he doesn't run. | ||
|
unidentified
|
Mr. Trevor. | |
| It's appointed by him and it's Patricia Collins. | ||
| So let the record show that he was incompetent and answered. | ||
| Gentleladies, time is expired. | ||
| And I invite the Secretary to respond to your detailed question about that you proposed on the bill in writing. | ||
| And I now call on the gentleman from Tennessee, Mr. Rose, you're recognized for five minutes. | ||
| Thank you, Chairman Hill, and thank you, Ranking Member Waters, for holding this important hearing. | ||
| And thank you, Secretary Bassett, for taking time from your schedule to be with us here today. | ||
| If you would like, if you'd like to take a moment to address any of the issues that were just on the table. | ||
| There are numerous incidents with counterfeited bills, and we are revamping the 50, which is the most counterfeited bill first. | ||
| The Congresswoman does not seem to have an interest in safety and security of American money. | ||
| Thank you, Mr. Secretary. | ||
| Secretary Besson, I really enjoyed reading your recent Wall Street Journal op-ed with my friend Senator Bill Haggerty about strengthening Main Street banks. | ||
| You make a compelling case that the current FDIC insurance limits contribute to an uneven playing field where deposits flow toward the largest institutions in times of stress. | ||
| Could you elaborate on how raising deposit insurance coverage would help restore confidence in community and midsized banks, particularly in places like my home state of Tennessee, and ensure small businesses can keep their payroll and operations anchored in their local banks? | ||
| Again, Congressman, what happens during a stress period, the owners of the capital rightly move it to where they believe their deposits are insured. | ||
| There is the belief that large institutions have a special exemption called moral hazard. | ||
| And I think by increasing the deposit accounts, especially for payroll accounts, that those deposits will not be forced to flee. | ||
| When a local businessman calls up and says, I have $2, $5, $7 million in your bank, I have known you, we have banked here for 50 or 100 years, but we are going to have to move, many times they don't come back. | ||
| Thank you. | ||
| I share that view. | ||
| Secretary Besson, do you believe that raising deposit insurance limits would directly translate into more lending capacity for small businesses and farms that rely on community banks, particularly in rural communities like those that I represent across Middle and East Tennessee? | ||
| Congressman Rose, in a frank general banking system, deposits finance lending. | ||
| When deposits flow out, the ability to have capital to lend is greatly diminished. | ||
| Thank you. | ||
| Again, chair that view. | ||
| Mr. Secretary, the FSOC annual report highlights the terrorism risk insurance program and underscores that small insurers are significant participants in the terrorism risk market with their market share stable since 2017. | ||
| In light of that, and given that the Terrorism Risk Insurance Act backstop has never been triggered in more than 20 years, do you see any clear evidence today of market failure or a pressing need for Federal intervention that would justify continuing a permanent Federal backstop at current levels in this market rather than beginning a responsible transition to a more private terrorism risk insurance system? | ||
| Congressman, I have no data, so I have no opinion, but I will get back to you on that. | ||
| Thank you. | ||
| I would appreciate it. | ||
| And how does Treasury assess, if you could add to this or you can address it now, taxpayer risk under TRIA today, and do you believe that risk, that that risk profile is consistent with what Congress originally envisioned as a temporary Federal program? | ||
| I used to be an insurance analyst, but I haven't seen the actual aerial table, so I'm not going to comment. | ||
| Thank you. | ||
| I was proud to vote for President Trump's One Big Beautiful Bill and help create Trump accounts, which give kids a real foundation to build savings and wealth from day one. | ||
| These accounts are a great way to help families in Tennessee and across the country start planning for their children's futures. | ||
| Can you update us on how implementation of the Trump accounts is going so far, whether Treasury has the resources it needs to stand this program up effectively, and whether credit unions and small community financial institutions will be allowed to participate in offering these accounts? | ||
| So I will work backwards. | ||
| Initially, there will be one master custodian for the accounts. | ||
| So initially, these small banks will not be able to participate. | ||
| Eventually, the holders of the accounts will be able to migrate out to designated institutions. | ||
| The uptake is going quite well. | ||
| We had a big event this week to roll out the accounts. | ||
| More than a million households representing more than a million children have signed up. | ||
| I would tell everyone to look for the commercial right after the national anthem at the Super Bowl this weekend. | ||
| I think we are prepared for a flood of signups, and then they will go live on July 5th, and the goal is the lowest possible fees on these index funds. | ||
| Thank you. | ||
| Thank you, Treasury Secretary. | ||
| Hopefully, no spinging is a part of the. | ||
| Gentleman from California, Mr. Vargas, who is the ranking member of our monetary policy task force, you'll recognize for five minutes. | ||
|
unidentified
|
Thank you very much, Mr. Chairman, Ranking Member, and to the witness. | |
| I have to confess that I'm very disappointed in today. | ||
| I think a lot of our allies are losing faith in us. | ||
| We hear it in our European allies, certainly. | ||
| We see it in the diminishment of our dollar. | ||
| But we always seem to have faith in sort of the Fed chairman and also the Treasury Secretary. | ||
| They're always very serious people. | ||
| They're always seen around the world as very serious people. | ||
| I've been here for a long time now. | ||
| I used to watch when a friend of mine, Sean Duffy, used to sit over there and scream at the top of his lungs at Jack Lew when he was Treasury Secretary. | ||
| And the Treasury always answered in the most logical way, never flippant, never libelous. | ||
| Would never say something like, sure, my colleague here wants to see Harriet Tubman on the $20 bill. | ||
| She didn't say anything about not wanting confidence and not wanting to have secure money. | ||
| That was a very libelous comment that you made, a very flippant comment. | ||
| It was very disappointing to hear. | ||
| And then to hear the libelous comment that you made about the Fed. | ||
| We lost faith in the Fed, you said, in your testimony here today, because of inflation and the cost overrunning the buildings. | ||
| You know, mimicking basically the same thing that the President said is about the Chairman. | ||
| You didn't say it in the same words you said it in a way that's a little more elegant, but means the same thing. | ||
| Today, you've been very performative in everything that you've done. | ||
| That's very disappointing. | ||
| I wanted to ask you about the independence of the Fed. | ||
| I think it is important. | ||
| You did comment about that a little bit. | ||
| But today, I think, has been pretty much a waste of time. | ||
| But sadly, I think it really does erode the faith in our country when a person as important as you give the answers that you gave today. | ||
| So I'm not going to ask you any questions because I think it would be useless. | ||
| But I'm just going to say, Mr. Chairman, we've had some very good hearings recently. | ||
| This was not one of them. | ||
| This is not your finest day, and it's too bad, because I think you're a very competent person. | ||
| I disagree with some of your policies, but you're a very competent person. | ||
| The President has put in some people in very important places that are sort of caricatures of incompetence. | ||
| That's not you. | ||
| Today was not your finest day. | ||
| And with that, I yield back. | ||
| Gentleman from California yields back. | ||
| Chair recognizes the gentleman from Wisconsin, Mr. Stile, who chairs our House Administration Committee and also chairs the subcommittee here on digital assets, financial technology, and artificial intelligence. | ||
| Thank you very much, Mr. Chairman. | ||
| Mr. Secretary, thank you for being here. | ||
| Thank you for your service and your leadership at Treasury. | ||
| There's been a lot of energy in the room today. | ||
| A handful of times you've made some great points. | ||
| You've been cut off. | ||
| So I'm going to go back and give you an opportunity to elaborate on a couple of these points. | ||
| The beginning of the hearing today, Ranking Member Waters, you were in the process of mentioning the 10 to 20 million illegal immigrants came into the United States during the Biden administration, functionally with the blessing of Democrats in Congress. | ||
| As you mentioned that and you were building into a comment about the impact that that would have on the price of housing in the United States, the ranking member said, Can you shut up? | ||
| End quote. | ||
| I think you're about to make actually a really good point about the impact that Biden's and the Democrats' open border policies had on the cost of housing. | ||
| The time is now mine, and I'd actually love you to provide a little additional detail as to where you're headed there. | ||
|
unidentified
|
Good. | |
| Well, Congressman, thank you. | ||
| And to answer Congressman Vargas, who isn't able to stay for the whole or to hear my reply, that as you would have seen, that when approached, I am happy to have a conversation. | ||
| Representative Green, who is known for some fiery moments, and I had a very respectful back and forth, and I enjoyed my conversation with him. | ||
| And it is a shame that all conversations cannot be like that. | ||
| Yes or no answers to me mean that the representative has talking points from his or her staff and is unable to discuss things in a logical and in-depth manner. | ||
|
Brought Back From the Edge
00:02:29
|
||
| In terms of your question, look, we have had 4.1 percent economic growth for the past three quarters. | ||
| We are on track for 3 percent growth, and the economy is doing very well. | ||
| The financial stability that we are seeing, whether it is through growth or through economic security, we've been brought back from the edge. | ||
| President Trump, your leadership at Treasury, we have absolutely been brought back from the edge. | ||
| In particular, as we think about the impact of housing, was Biden's open border policies directly related to some of the inflation that we've seen in housing? | ||
| That's where you're previously cut off. | ||
| Yes, to come back to that, I would point to a study from the Wharton School that said that supply and demand works, especially in low-end housing. | ||
| That letting in 10, 20, we don't know how many illegal aliens that flooded into the housing market, they all need some place to live. | ||
| So, what we have seen is that the Wharton study says that for every 1% increase due to the illegal immigration, rents went up 1%. | ||
| So, if you got a 20% increase in population, then rents went up 20%. | ||
| And Economics 101, supply and demand, and Democrats drove up demand by having a massive number of illegal immigrants coming into the United States. | ||
| The Democrats didn't care what they did to working Americans. | ||
| We're seeing a substantial, substantial drop in rents. | ||
| Let me build another point you were making when you were cut off. | ||
| You said that lumber is at a five-year low. | ||
| Ranking Member Waters then said, quote, you don't get to talk, end quote. | ||
| Again, the time is mine, you get to talk. | ||
| Lumber's at a five-year low, supply and demand is in effect. | ||
| What's the impact of that on the cost of housing? | ||
| Again, that facts can be annoying for people who just want to make talking points. | ||
| And the fact is, we have not seen an increase in housing costs. | ||
| The increase in housing costs came during the Great Inflation, up 21.5 percent for consumer prices for the CPI, up much more up in the 30s for working Americans. | ||
| So, that's the cost to housing and regulation. | ||
| We're still recovering from the Democrats' terrible policies. | ||
|
Congressional Concerns Over Regulation
00:14:48
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||
| Let me get one final point in. | ||
| I chair the Digital Assets Subcommittee. | ||
| We passed and was signed into law the Stable Act setting forward legislation as it relates to stablecoin. | ||
| Treasury is required to complete implementing regulations by July 18 of this year. | ||
| Are you going to hit the deadline, and are there any impediments preventing you from hitting that July 18 deadline? | ||
| I don't see any impediments at present, and if we are going to hit them, we will notify you and the committee. | ||
| I appreciate that. | ||
| Appreciate your service at Treasury, Mr. Chairman. | ||
| I yield back. | ||
| I thank the gentleman. | ||
| The gentleman yields back. | ||
| I recognize the gentleman from Illinois, Mr. Caston. | ||
| You are now recognized for five minutes. | ||
| Thank you for being here today, Mr. Besant. | ||
| Appreciate your patience with us. | ||
| Since the U.S. captured President Maduro, the Trump administration has been selling Venezuelan oil. | ||
| Secretary Wright has said that is going to continue indefinitely. | ||
| The President's January 9th executive order said that those funds are the sovereign property of Venezuela, but has directed you, the Treasury Secretary, to hold those assets in custody to facilitate disbursements, transfers as directed by the Secretary of State. | ||
| As I have gone through the 91 specific trusts that you have the statutory authority to oversee, none of those have any relationship to Venezuelan oil. | ||
| So can you help us understand under what statutory authority or what statutory authority is Treasury relying on to exercise the discretionary control over natural resources and sovereign assets of another country? | ||
| Treasury has no control over the I am just asking about what statutory authority you rely on. | ||
| Again, we are operating under an agreement between State and energy that we are not involved in. | ||
| The executive order said that the Treasury Secretary is holding those assets in custody. | ||
| That is a specific language there and is facilitating disbursements. | ||
| Under what authority are you acting? | ||
| I will get back to you with the exact authority, but it is under an agreement with State. | ||
| Let me just clarify, because my concern is that the executive order cites IEPA. | ||
| IEPA specifically says that you have to be engaged in hostilities with a country for IEPA to trigger that claim. | ||
| Secretary Rubio said that we are not at war with Venezuela. | ||
| I would agree. | ||
| I am glad we are not at war. | ||
| So unless you disagree with Secretary Rubio, I am unclear under what legal authority the United States has to control or disperse those assets. | ||
| Well, I would believe that the IEPA authority would act for a period of time before a transition. | ||
| Not unless we are not, that is not true, but please provide in writing what you are doing there. | ||
| And I want to get to why I think that's material. | ||
| Last week, Secretary Rubio also said that the $200 million in proceeds was sitting in a Qatari bank that was owned by Venezuela. | ||
| He went on to say the Treasury has a written agreement with Venezuela's interim government to review the monthly budget request for payments from that account. | ||
| I come back to where the authority comes. | ||
| What statutory authority are you using to exercise custody indirectly through a third country and direct the release of funds from those offshore accounts? | ||
| The IEPA. | ||
| That's not in IEPA. | ||
| Okay, so if you are managing a third country, not in IEPA, and please do provide us with the legal guidance because this matters. | ||
| What controls are you putting to audit those flows? | ||
| Because as you know, the Venezuelan government still has a lot of shady people. | ||
| How are you controlling the dispersion of those flows so that they don't go back to some of the shady characters that the President is concerned about in Venezuela? | ||
| What is the audit process? | ||
| Again, we will be bringing in outside auditors for this, and the Venezuelan government will be doing it. | ||
| Do you have an agreement in place right now for those auditors? | ||
|
unidentified
|
Sorry? | |
| Do you have an agreement for that audit in place right now? | ||
| Not at present. | ||
| Okay, because Secretary Rubio, when he was asked that question before the Senate, he said that the Treasury had handled the agreement that he would be providing to the Senate Committee. | ||
| Are you saying that Secretary Rubier was incorrect or that you are not aware of the agreement the Treasury directed according to the I am saying I am not aware of the agreement? | ||
| Okay, so Secretary Rubio said he would provide that to the Senate committee. | ||
| Can you please coordinate with Secretary Rubio and give us your word to provide us with what Secretary Rubio was providing? | ||
| Because he is alleging that that was done under your pleasure, Congressman. | ||
| Just so you know, the goal here, it's been 30 days. | ||
| I want to just move, claiming my time, just reclaiming my time, because the concern I have is that this would be considered a fraudulent conveyance. | ||
| I have a specific concern that we've entered into contracts with companies like VTOL, who have pled guilty to bribery and all sorts of nefarious actors. | ||
| If I was a company buying stolen goods and we didn't have statutory authority, I'm going to have a lot of creditors coming after me. | ||
| One last thing, sir. | ||
| I want to read you a quote. | ||
| Trump will pursue a weak dollar policy rather than implementing tariffs. | ||
| Tariffs are inflationary and would strengthen the dollar. | ||
| Do you recognize that quote? | ||
| I believe you are referring to a letter that I wrote, and tariffs could be inflationary. | ||
| No, no, it says tariffs are inflationary. | ||
| Yep. | ||
| You had said to the chairwoman, I would like to introduce into the record a January 31, 2024 letter from quote Scott Besent and the Key Square team to your partners where that quote comes from. | ||
| Without objection. | ||
| Do you want to correct what you said to the ranking member when you specifically said that you did not say tariffs are inflationary? | ||
| Well, I think she referenced a letter in the summer of something not. | ||
| No, no, I think you disparaged the New York Times. | ||
| Sorry. | ||
| You said tariffs are inflationary. | ||
| Sorry. | ||
| You said tariffs are inflationary. | ||
| Do you want to correct what you said to the ranking member or did you lie? | ||
| If I was mistaken, I want to correct it. | ||
| And I was also mistaken when I said the tariffs could be inflationary because I've seen inflation drop to 2.1%. | ||
| The gentleman's time has expired. | ||
| The chair now recognizes the gentleman from South Carolina, Mr. Timmons. | ||
| You're recognized for five minutes. | ||
|
unidentified
|
Thank you, Mr. Chairman. | |
| Ms. Secretary, it is great to see you again, and thank you for being here. | ||
| Your experience and leadership at Treasury are widely respected and appreciated as we work to make the U.S. economy more competitive in the global economy. | ||
| And I know you were hearing some questions about tariffs. | ||
| Is that the purpose of the last year to renegotiate our trade agreements to make the U.S. economy more competitive in the global economy? | ||
| 100%. | ||
| There are numerous goals, but it is to make the U.S. economy more resilient. | ||
| We are now seeing 4.1 percent growth for the past three quarters. | ||
| So we are seeing inflation drop. | ||
| So tariff inflation was the dog that didn't bark. | ||
|
unidentified
|
Well, I appreciate it. | |
| I think that the businesses that are trying to compete in the global economy are far better off because of the last year. | ||
| There was some strain through the uncertainty, but most of that is behind us, and I just really appreciate your hard work. | ||
| Additionally, after several years of regulatory uncertainty and pervasive government overreach, it is encouraging to see serious leadership at Treasury focused on restoring balance to our financial system. | ||
| That work matters not only to markets, but to families, small businesses, and communities across the country. | ||
| You have called for a fundamental reset of financial regulation and emphasized Treasury's role in promoting appropriately tailored regulation to support economic growth. | ||
| I agree with that approach. | ||
| While there has been progress on tailoring supervision, far less has been done to modernize regulatory tailoring itself, particularly the interagency thresholds that trigger enhanced prudential standards for Category 2 through 4 banks. | ||
| Those thresholds were set years ago and have not been updated to reflect inflation, economic growth, or changes in the financial system. | ||
| As a result, banks that were never intended to be treated like GSIBs are increasingly subject to requirements that do not match their risk profiles. | ||
| Republicans on this committee raised this concern in a letter to the federal banking agencies last November. | ||
| Mr. Secretary, my question is this. | ||
| How are Treasury and the Financial Stability Oversight Council working to coordinate across the agencies to modernize and update these thresholds and to ensure that regulatory tailoring keeps pace with economic reality rather than falling further behind it? | ||
| Congressman, I believe there's a chance that the community banker who I referenced with 200 million assets may have actually been from your district. | ||
| So we are all hands on deck, and we've seen 50 percent of these institutions disappear, and we are working as quickly as we can. | ||
| Again, one size fits all for regulation is a disaster. | ||
| And as potentially the woman, the bank president and owner from your district said, Bank America's regulatory regime is not good for something in the Piedmont and upcountry in South Carolina for a bank with 200 million assets. | ||
|
unidentified
|
I couldn't agree more. | |
| Tailoring should apply not only to prudential standards, but also to supervision itself. | ||
| For example, my bipartisan legislation, the SMART Act, would allow smaller, well-managed and well-capitalized institutions to combine certain consumer compliance and IT exams, reducing unnecessary burden while preserving strong oversight. | ||
| Ms. Secretary, how can legislation like the SMART Act and other bipartisan efforts this committee has advanced help build on the principle of tailoring and restore a regulatory framework that truly works for Main Street without compromising safety and soundness? | ||
| Congressman, I think it may be very important to get this into a regulatory framework because what we've seen for too long, just as the bank examiner said to the $200 million banker, you should be more like Bank America. | ||
| We cannot have supervision or we cannot have regulation done through supervision. | ||
| We need to have clear guidelines for tailoring for many banks, as I said earlier, are industry concentrated, geographic concentrated, and we have got to push this through or we are going to they will be too small to succeed. | ||
|
unidentified
|
I couldn't agree with you more. | |
| Thank you for that. | ||
| I want to close by discussing the trillions of dollars in foreign direct investment that you and President Trump have shepherded into the United States over the past year. | ||
| In our home state of South Carolina alone, hundreds of billions of dollars in new investment have been announced that will create high-paying, highly skilled jobs for our communities. | ||
| Nearly every week I'm in Washington, I meet with a foreign manufacturer that is expanding its footprint in the upstate. | ||
| And I also want to thank you for your work to remove tariffs from coffee, which has been directly welcomed by manufacturers like Keurag in South Carolina that have benefited from this administration's commitment to fair and sensible trade policy. | ||
| It's hard to believe that the largest coffee manufacturer in the world is in Spartanburg, South Carolina, but it is, and we greatly appreciate your work to help make sure that they're competitive in the U.S. economy and the global economy. | ||
| And with that, Mr. Chairman, I yield back. | ||
| Thank you. | ||
| And Congressman, just point out, there's been a lot of discussion on coffee prices. | ||
| The gentleman's time has expired. | ||
| Experienced a global pressure. | ||
|
unidentified
|
Thank you. | |
| Please, Mr. Sector, if you'd respond in writing if you have more on that topic. | ||
| Now, the Chair recognizes the gentlewoman from Massachusetts. | ||
| Ms. Presley, you recognize for five minutes. | ||
| Mr. Secretary, it took a year to get Secretary Turner before this committee, so I'm grateful for your return. | ||
| And I want to pick up where we left off nine months ago. | ||
| The average American spends over $20,000 on baby costs in the first year of having a baby. | ||
| Essential products like car seats are more expensive because of Trump tariffs. | ||
| You told me last time that they were under consideration, but nothing has changed since May of last year, much to the distress of families. | ||
| There is still no exemption for tariffs on baby products. | ||
| For the record, Mr. Secretary, how many tariff exemptions are there? | ||
| There are actually very few now. | ||
| You're right. | ||
| Actually, I think there's some 30 pages of exemptions totaling over 1,000, including for asbestos. | ||
| Can you explain to families across America, working families struggling to make ends meet, why baby products that are required by law are not exempt from Trump's tariffs? | ||
| Again, Congressman, Congresswoman, it is a matrix, and many of these products, unfortunately, are made in China. | ||
| Mr. Secretary, we're claiming my time. | ||
| It's just an unacceptable answer. | ||
| You've had nine months you told me was under consideration. | ||
| You've had nine months to think about it. | ||
| And while you've been thinking about it, working families have been struggling when it is required by law that they have many of these essential baby costs. | ||
| Your report from the Department of Treasury refers to them, car seats, as essential safety tools. | ||
| So if you can acknowledge that, this is. | ||
| I will acknowledge the gas to run the car. | ||
|
unidentified
|
Well, listen. | |
| Is that a five-year-old? | ||
| You've included asbestos in your exemptions. | ||
| So you're telling me you can do asbestos and not baby products. | ||
| Excuse me, it's my time. | ||
| I think you would want to get away from that. | ||
| Mr. Secretary, parents with newborns don't want to hear your excuses. | ||
| They need to keep their babies safe. | ||
| They want to comply with the law and they need action to lower costs, period. | ||
| So will you exempt baby products from tariffs, yes or no? | ||
| Again, we will. | ||
| Yes or no? | ||
|
unidentified
|
Mr. Secretary, respectfully. | |
| Mr. Secretary, respectfully. | ||
| Congresswoman, yes. | ||
| I am the Treasury Secretary. | ||
| I am not the USTR. | ||
| I'm not the President of the United States. | ||
| We're claiming my time. | ||
| You're asking the wrong question. | ||
| Well, I'll take it. | ||
| Mr. Secretary, you are taking my time as a result of the city. | ||
| This is Financial Stability Oversight Council. | ||
| Mr. Secretary, then I ask for your advocacy then because a no or a non-answer is unacceptable to the working families you claim to care so much about. | ||
| Moving on, moving on, moving on, moving on. | ||
| You will have my advocacy. | ||
| Okay, thank you. | ||
| Can you say that again for the record? | ||
| Sorry. | ||
| Can you say that again for the record? | ||
| I will have your advocacy. | ||
| I am one voice. | ||
| For an exemption? | ||
| I am one voice. | ||
| Okay. | ||
| Have you been paying attention to the high rate of unemployment for black workers? | ||
| Are you aware of that? | ||
| The high unemployment rate for black workers? | ||
| It is traditionally higher than for all workers. | ||
| Well, listen, no, it's through the roof right now. | ||
| There's hundreds of thousands of black workers that have been pushed out of the workforce, and the unemployment rates for black workers and all workers are among the highest they've been since the COVID-19 pandemic. | ||
|
High Unemployment Rates
00:11:18
|
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| Black workers contribute over a trillion dollars to the U.S. economy, but the pushout of these workers from the workforce has led to a loss of $37 billion in the GDP, with black women being among, just so you all know, the most educated and most active in seeking work. | ||
| Their pushout is a glaring warning sign for where our economy is headed because black workers, black women in particular, have always been the canaries in the coal mine. | ||
| So this is a problem for everyone. | ||
| Black women are bearing the brunt, but everyone will feel this hurt. | ||
| I have led letters to Fed Chair Powell calling for action to be taken. | ||
| He is also a member of FSOC. | ||
| So I want to ask you, Mr. Secretary, will you commit to analyzing black unemployment rates specifically and its impacts on financial stability? | ||
| Yes or no? | ||
| I will analyze black unemployment rates. | ||
| Wonderful. | ||
| And when will you get us a report and a plan of action? | ||
| I was thinking March 6th. | ||
| I can't commit to a date. | ||
|
unidentified
|
Okay. | |
| All right. | ||
| Well, I think March 6th makes sense. | ||
| I'd give you over a month, which is more than enough time, to convene that working group and to report out your findings. | ||
| I know you already have the infrastructure to do that. | ||
| So at the end of the day, black families, black futures, and the lives and livelihoods of all who call this country home are depending on you to act. | ||
| And with that, happy Black History Month. | ||
| I yield back. | ||
| Thank you. | ||
| And I'm sorry to see you not run for Senate. | ||
| Gentlewoman yields back. | ||
| Chair recognizes the chair of the Subcommittee on Oversight and Investigations, Mr. Muser from Pennsylvania. | ||
|
unidentified
|
Secretary Besant, thank you very much for being with us. | |
| And thank you when you state that it's now Main Street's turn. | ||
| I can assure you the people of Pennsylvania's 9th Congressional District greatly appreciate that. | ||
| And your remarks are quite refreshing. | ||
| The previous Treasury Secretary, once when I asked what their growth, economic growth initiatives were, they implied that spending, Federal spending, was their primary, if not only, growth initiative. | ||
| So clearly, under your leadership and President Trump's and the Republicans in Congress, passing the Families Tax Cut delivered meaningful tax relief, billions to workers and small business owners, no tax on tips, regulatory reform, no tax on overtime, 100 percent depreciation. | ||
| All this is driving our savings. | ||
| All this is driving our economy for a booming GDP, Q3 and Q4 in the over 4 percent range. | ||
| So things are going very well. | ||
| We expect 2026 to be pretty exciting as well. | ||
| Secretary, if there is anything that was asked that is still on your mind that you would like to respond to, why don't you go ahead and do so? | ||
| Again, this is supposed to be a financial stability oversight mission and that we have taken this very seriously. | ||
| And we believe that a lack of growth, one of the reasons I am sitting here and came out from behind my very quiet and nice private life is because I was worried that the U.S. was going to become like a European-style social democracy. | ||
| And indeed, what we are seeing in Europe, in many countries, is the death spiral of higher debt, raised taxes, lower growth. | ||
| The U.S. will have reported likely despite the government shutdown, despite the longest government shutdown in history, 4.1 percent growth for the past three quarters. | ||
| And so we have been successful at that. | ||
| Europe last week celebrated 0.3 percent growth. | ||
| So it's no comparison. | ||
| And I think we are beginning to accelerate. | ||
| And importantly, everything we are doing is to fix this terrible Biden inflation from the past four years, 21.5 percent, much more for working families, and we are bringing that down. | ||
|
unidentified
|
Your remarks and the President's remarks in Davos suggested that how you spiraled down in your economy, which Europe has been doing, a not having closed borders or secure borders anyway, over-reliance upon imports, and driving the public sector rather than the private sector is a recipe for disaster. | |
| And so we appreciate you correcting the ship and moving Pennsylvania or Pennsylvania and the United States in the right direction. | ||
| Just to get to some questions, Secretary, you've emphasized putting Main Street ahead of Wall Street when evaluating bank capital standards. | ||
| How will modernizing the capital framework improve credit access and affordability for small businesses, homeowners, farmers, who ultimately, in the end, bear the costs for such excessive capital requirements? | ||
| Again, Congressman, the groups you just listed are the three most dependent on community and small banks. | ||
| And we are determined to increase their lending capacity, to increase their proclivity to lend. | ||
| And we want to do it on a safe, sound, and smart basis. | ||
|
unidentified
|
In the previous administration, we had regulators that imposed capital requirements well beyond the international peers, including the GSIP surcharge, the CCAR, Tier 1 leverage ratios. | |
| Are these frameworks being reviewed holistically to better support lending and economic growth? | ||
| Again, we are not going to let outside regulators determine what is best for the U.S. financial system. | ||
|
unidentified
|
Thank you. | |
| The strength of the U.S. financial system is the depth and breadth, and we do not want to end up like Canada with five banks, Switzerland with one, France with three. | ||
|
unidentified
|
Absolutely. | |
| Great. | ||
| Your decisive action to confront what should concern all of us, certainly concerns us, is the rampant government benefits fraud uncovered in Minnesota. | ||
| Can you walk us through how Treasury is using your authorities to identify, disrupt, and recover fraud proceeds and how Minnesota is serving as a start for a broader national enforcement model? | ||
| Indeed, there is a substantial amount of waste, fraud, and abuse, and Americans and legislators on both sides of the aisle should be outraged when you are there and you see empty daycare centers, senior centers. | ||
| And I personally met with two centers for autistic children, and they are not getting their benefits. | ||
| So we are using our regulations under FinCEN to follow the money, which is what we've done, whether it's Mexican drug cartels, whether it's the mafia, or whether it is. | ||
|
unidentified
|
Thank you, Mr. Chairman. | |
| I yield back. | ||
| Thank you. | ||
| Someone yield very, very much for your great work. | ||
| The chair recognizes the gentleman from New Jersey. | ||
| Scott Harmer, you're recognized for five minutes. | ||
|
unidentified
|
Thank you, Mr. Chairman. | |
| Mr. Secretary, welcome. | ||
| The 10-year Treasury is running around mid-4 percent range. | ||
| Mortgage rates are still above 6 percent. | ||
| That's keeping monthly payments high and pricing would-be buyers out of the market. | ||
| The affordability crisis is increasing the homeownership gap in North Jersey, which I represent and across the country. | ||
| How can we get the 10-year down and help make homeownership more affordable? | ||
| And that's what I'm really focused on. | ||
| Well, the 10-year bond had its best year since 2020 last year, and we actually had a fiscal contraction in the budget. | ||
| The rest of the G7 bond market went up in yield. | ||
|
unidentified
|
So if we continue to So you see a pathway with this, you hope you think we'll continue to see it tick down, especially the long term? | |
| Well, I think we can do that, and that I believe that we have Oliver Wyman's numbers, not Treasury's, they say that what has been done with financial deregulation unleashes $2.5 trillion of lending capacity into the U.S. economy. | ||
| So by creating more capacity, there is less of a competition for scarce funds. | ||
| So we are decreasing scarcity. | ||
|
unidentified
|
Thank you. | |
| I have a strong belief that AI will revolutionize financial services and delivering meaningful gains for customers and regulators and institutions if we do it right. | ||
| FSOC's report strikes an encouraging balance, highlighting AI's potential to improve resilience and efficiency in financial markets while also noting that vendor concentration can create challenges. | ||
| How is FSOC threading the needle to enable broad AI adoption while encouraging competition? | ||
| And where can Congress help get this right so AI can flourish as a helpful tool for Americans in the financial markets? | ||
| I think it's important to work together because what we see many times in these very quick technology cycles is the technology gets ahead of the regulation. | ||
| So working together to keep the regulation in sync with the technology, whether it is for the financial system or for anywhere else. | ||
| There is good news, as you said, it will change the interaction. | ||
| The bad news is that it gives, whether it is state actors or independent actors, more tools. | ||
|
unidentified
|
What are you doing internally at Treasury? | |
| Obviously, you spent a lot of time on the security side of the Treasury piece of it. | ||
| What are we doing about that? | ||
| Yes. | ||
| So we have both at Treasury and then bringing in our private sector partners regularly. | ||
| We do tabletop exercises in terms of what would happen if a malign actor got into the system. | ||
| How can we reinforce that? | ||
| As you may have read before I arrived, Treasury itself was hacked by, we believe, a state actor. | ||
| So again, increasing resilience, being aware, and working with our private sector partners for best practices. | ||
|
unidentified
|
Thank you. | |
| We are obviously seeing a combination of factors that historically make markets nervous, softer dollar with higher gold prices. | ||
| Even if there are multiple drivers, those moves are often interpreted as investors seeking protection against policy uncertainty or concerns about U.S. fiscal and monetary credibility. | ||
| They can also be early signals that global capital is demanding a higher confidence premium to hold U.S. assets. | ||
| Are markets starting to price in a sustained shift away from U.S. assets, you believe? | ||
| And what are the specific indicators you watch to see if we are seeing that pullback from foreign investors? | ||
| Yep. | ||
| So what we see at Treasury is we saw a record amount of foreign inflows. | ||
| Despite the popular narrative, we saw a record amount of foreign inflows into Treasury auctions last year. | ||
| This year, many of the auctions have traded through the prevailing price before the auction. | ||
| So we are still seeing very good flow, and we are still seeing massive flows into U.S. equities. | ||
| And as several of the congressmen said, we are seeing very substantial foreign direct investment. | ||
|
unidentified
|
You know, one of the things I am concerned about, this week, writers reported Disney saw fewer international visitors at its U.S. parks. | |
| U.S. overall saw 6 percent fewer visitors despite global tourism revenue rising 6.5 percent. | ||
| Canadian trips are down significantly 22 percent year over year. | ||
| Even at the Great Jersey Shore, 2025 beach tag revenue is down. | ||
| What is the administration's plan to calm volatility? | ||
|
Alerting Everyone to Risks
00:02:41
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|
unidentified
|
And obviously, tariff policy has been part of this so tourists can continue to choose the U.S. Look, on some things there is nothing we can do. | |
| If the Premier of British Columbia or Ontario wants to be especially hostile and tell people not to come to the U.S., that is a decision. | ||
| I would say it is their loss. | ||
|
unidentified
|
And as you said, do you think we will see less volatility with the tariff policy kind of firming up? | |
| Well, less volatility in tourism? | ||
|
unidentified
|
Well, yeah, because it affects everything. | |
| Thank you, sir. | ||
| Thank you. | ||
| Chair recognizes the gentleman from Indiana, Mr. Stutzmann. | ||
| You are recognized for five minutes. | ||
|
unidentified
|
Thank you, Mr. Chairman. | |
| And thank you, Mr. Secretary, For being here today. | ||
| I'm going to yield to the chairman just briefly for a couple of questions he has. | ||
| Mr. Secretary, I appreciate members on the Republican side allowing you to clarify points on some key discussions back and forth, and we have had some good ones today. | ||
| There was an exchange you had with my friend from Massachusetts, Mr. Lynch, about artificial intelligence. | ||
| And in your capacity as chair of FSOC, our view here is that artificial intelligence offers great promise for better consumer service, fighting fraud, more accuracy in providing customer service, but also in providing a more robust compliance process with the rules in banking and the brokerage and securities industry. | ||
| I wonder if you could talk from an FSOC point of view about a philosophy of overseeing artificial intelligence, both in the financial services industry and among the supervisors of the financial services industry. | ||
| Yes. | ||
| So again, we are working with our private sector partners to best practices. | ||
| And, Chairman, as you said, there are two pieces to this. | ||
| There is service improvement, which we are, for instance, working on at the IRS. | ||
| We hope to be able to use artificial intelligence there to get customer wait downs and service down. | ||
| On the other side, both financial security, alerting everyone to the risk of what is going on. | ||
| But this is a transformative change. | ||
| And as I mentioned to the Congressman, we look forward to working with you on legislation to make sure that the technology does not move too far ahead of the legislation. | ||
| Very helpful. | ||
| And I yield back to my friend from Indiana. | ||
|
unidentified
|
All right. | |
| Thank you. | ||
| And first of all, I just want to say thank you for being just a steady voice. | ||
|
Grocery Prices Spike
00:02:50
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|
unidentified
|
Our economy is seeing tremendous growth. | |
| Is there volatility in places? | ||
| Absolutely. | ||
| We are still recovering. | ||
| You know, we have heard a lot today from my colleagues across the aisle about tariffs and the effect on inflation in the U.S. economy. | ||
| I just want to remind everybody: during the Biden administration, grocery prices increased by over 23 percent. | ||
| I'm in the food industry. | ||
| We've seen it. | ||
| That growth has accounted for nearly 91 percent of grocery price increases since January of 2021. | ||
| In Biden's first year alone, grocery prices increased by 6.5 percent as compared to 1.9 percent during President Trump's first year in office. | ||
| And that's nearly 3.5 times faster, but yet my colleagues want to blame Trump's tariffs for the prior administration's uncontrolled and excessive spending. | ||
| And I know that what the administration, what the Trump administration and you are doing is really, I mean, the America First policies are spot on. | ||
| We've needed somebody in the White House to be fighting for America First. | ||
| And so I just want to say thank you from folks in Northeast Indiana for your hard work to reset the table globally. | ||
| And, you know, we're a manufacturing agricultural sector. | ||
| We grow the food for the country. | ||
| We manufacture medical devices and all these other things. | ||
| And so I just want to say thanks for that. | ||
| And, Congressman, just to tell you, I was with the President out in Iowa, and to combine two of your themes, manufacturing and the farm economy, we were with the CEO of John Deere, and he is building a new factory in Indiana. | ||
| And he is building one in Indiana, one in North Carolina. | ||
| And the President said, what made you do that? | ||
| And he said, the tariffs. | ||
| The tariffs. | ||
|
unidentified
|
Yeah. | |
| No, it's, I mean, this really is putting manufacturing in a position to compete with China, whether it's a CNC shop, whether it's the medical device industry. | ||
| There's obviously some pieces there with the regulatory environment, things like that, but it's really giving manufacturing a spot. | ||
| One thing I would ask, and if I could maybe share with your office, I had a foundry owner in the office yesterday, and there are some definitions around foundries. | ||
| And so I'd be happy to send that information over to your office to take a look at. | ||
| It's an industry that's, of course, very important for America. | ||
| And I know you all care very much about manufacturing and the steel industry. | ||
| So I'll send that over with pleasure. | ||
| Yeah. | ||
| But anyway, my time is about to expire, but I do want to just say thanks because it's you know, what people back home are really dealing with is this cost over the last five years. | ||
| And for you to really reset the table, they're believing and they believe in America. | ||
| We just need to show them that we believe in America as well and that America can be great. | ||
| Good. | ||
| Well, Congressman, there's a level and there's a rate of change. | ||
|
Supplementary Leverage and Main Street
00:10:34
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| The level is very difficult to get down. | ||
| We're trying as hard as we can, but we've slowed the rate of change greatly. | ||
|
unidentified
|
Yeah. | |
| Thank you. | ||
| I'll yield back. | ||
| Thank you. | ||
| The gentleman from Michigan, Mr. Lieb, is now recognized for five minutes. | ||
| Thank you. | ||
| Mr. Secretary, a bank's leverage ratio is important, right? | ||
| Well, there are numerous leverage ratios. | ||
| Congressman, which one are you referring to? | ||
| So for the record, if I may, Mr. Chair, I'm going to submit the bank capital's analysis semi-annual update for the record. | ||
| May I? | ||
|
unidentified
|
Without objections, ordered. | |
| I want to talk about the way that we look at global systematic important banks, what they call, what do you guys call it, G-SIBS, is that right? | ||
| That's correct. | ||
| That's what I'm talking about. | ||
| They're banking organizations that could trigger a financial crisis if they failed, correct? | ||
| And they could trigger a financial crisis by not lending. | ||
|
unidentified
|
Yeah. | |
| So the leverage ratio is important when we look at it, right? | ||
| Again, I'm not sure which leverage. | ||
| Okay, so I'm looking at here this chart, okay? | ||
| It says tier one capital. | ||
| Does that help? | ||
| Tier one, that's helpful. | ||
| Okay, so I know it's kind of hard to see, but the green line is the community banks. | ||
| You see how high that cushion is? | ||
| It's about what, almost 11%? | ||
| I know you can't see it. | ||
| It's fine. | ||
| I was going to enlarge that. | ||
| I'm going to take good faith. | ||
| I'll take your word. | ||
|
unidentified
|
Yeah. | |
| So the largest bank capital analysis for the Federal Reserve Bank of Kansas City shows that last June the tier one leverage ratio of community banks was at 10.83 percent for the banks that pose the largest threat to global system what they call G SIBS. | ||
| This is the big banks, the ones who take all the risks. | ||
| You know this, right? | ||
| Their supplementary leverage ratio was about 5.8%. | ||
| That's a huge difference, right? | ||
| Correct. | ||
| Okay, I'm getting there, I promise. | ||
| Do you think the largest, most complex banks are roughly roughly half as risky in the threat that they pose to the financial system as a community bank in my district? | ||
| Well, I think, Congresswoman, what you're neglecting to think about is the composition of the assets and the capital. | ||
| So the capital at the G-SIBs can be much more liquid, where the banks in your community are much more, as we're used to seeing in the movies. | ||
| Well, let me explain to the public why community. | ||
| Yeah, I understand. | ||
| Community banks, though, lend out equivalent about 75% of their deposits to the real economy. | ||
| Some people refer to as Main Street, but we call it the real economy. | ||
| People, families, communities. | ||
| The largest banks only lend about 40% of their deposits into our real economy. | ||
| Instead, they rapidly expand their loans to hedge funds and private equity that you're calling liquidity. | ||
| They can liquidate, right? | ||
| Is that what you're saying? | ||
| Is that what you're saying? | ||
| No, I'm also saying that. | ||
| I'm just saying they hold a much higher. | ||
| Yeah, but the big banks are the ones who keep failing, right? | ||
| What's that? | ||
| The big banks are the ones who keep failing. | ||
| No, many small banks will be able to. | ||
| Well, that's because they're getting pushed out. | ||
| We're not actually supporting community banks. | ||
| Well, as I've said, I think more than 100 times today, I support community banks. | ||
| And I don't want to see. | ||
| You could say it, but you've got to do something about it. | ||
|
unidentified
|
But listen, Trump's not. | |
| I've met with more than 200 people. | ||
| I know, Mr. Secretary, but this is pretty bad. | ||
| Because the fact that community banks in my business have almost twice as much capital percentage-wise compared to banks that pose the largest threat to our financial system, you know, that shows that just how much Playingfield's titled tilted towards Wall Street. | ||
| You understand that, right? | ||
| That's where the risk is. | ||
| The big banks do far less for our real economy, for everyday people. | ||
| And that's what I'm trying to say, because Trump's regulators recently, you know, finalized a rule to modify the supplementary leverage ratio that applied to the largest banks. | ||
| Many former regulators and experts have warned that such a step will actually undermine the safety and soundness of our largest banks. | ||
| The final rule results in a reduction of about $219 billion, about 28%, in capital at the bank subsidiaries of global systematic important banks, GSIPs. | ||
| Alyn, my residents don't know this. | ||
| But the thing is, they end up with having to pay the cost when they fail. | ||
| And so I'm just trying to stress to my colleagues how important it is because, Secretary, last November, didn't regulators reduce it again, the capital requirement? | ||
|
unidentified
|
Right? | |
| Yes or no? | ||
| Again, Congresswoman, I want to be polite, not say it's naive what the road you're going down, but much of the excess capital has been invested in the U.S. Treasury market, and keeping those yields low helps the borrowers who want a mortgage or a small business or an ag loan. | ||
| But are you paying attention how much they are lending versus community banks? | ||
| Yes, we pay very closely. | ||
| It's really low. | ||
| I've been a financial over 40,000. | ||
| Do you agree it's low? | ||
| Sorry. | ||
| It's still very low. | ||
| It's not relative to the historical level. | ||
| Mr. Secretary, if you came to my district, you can go to Detroit or the suburbs. | ||
| They will tell you the big banks do not loan to them. | ||
| And if they do, it's predatory. | ||
| It's not supportive. | ||
| It's the local community banks that support them in owning home ownership and small businesses. | ||
| Congresswoman, you and I are in complete agreement. | ||
|
unidentified
|
The general aid's time's expired. | |
| Except on the capital ratio. | ||
|
unidentified
|
The journey is now recognized for five minutes. | |
| Thank you very much. | ||
| Secretary Besson, it's really great to see you before our committee again. | ||
| I want to thank you so much for working very closely with me on delivering the historic SALT relief to the tune of $40,000 because with that, my constituents in Orange, Riverside, and San Bernardino counties will finally be able to see the relief as they file their tax returns. | ||
| The four times increase in the SALT deduction, coupled with other provisions of the Working Families Tax Cuts Act, will result in supercharged tax returns, helping more American families get back on their feet after the years of failed by dynamics. | ||
| Last year, you noted that Treasury would revisit the 2023 guidance and analytic framework. | ||
| And you also highlighted that FSOC has other tools, such as issuing recommendations to member agencies that are more tailored and precise than designation power. | ||
| So, Secretary Besson, can we expect a new proposal for non-bank guidance that will be released sometime in 2026? | ||
| We should expect that. | ||
| Thank you. | ||
| And I look forward to seeing that proposal when it's finally released and hope there will be a public comment period to ensure stakeholders can weigh in and help shape that guidance. | ||
| Good. | ||
| And the Congresswoman, the other thing that I would point out is we had a lot of talk about affordability today, and you were a great advocate for the One Big Beautiful Bill. | ||
| And what we're seeing, unfortunately, in states like yours, that the stake revenue authorities are not going to mirror the no tax on tips, no tax on overtime, no tax on Social Security, deductibility of auto loans, which is very unfortunate. | ||
| So, to the extent that anyone in the California delegation, whether Democrat, Republican, the New York delegation, should push their states to follow through for working Americans. | ||
| You can count on me on that. | ||
| You know, let me shift gears now. | ||
| I want to focus on the Community Development Financial Institution Fund. | ||
| I was really happy and relieved to see that staff at the fund were restored after the conclusion of the Schumer shutdown late last year. | ||
| I know that you share my view that the fund's work is critical to serving communities that typically do not receive the traditional banking services. | ||
| So, can I ask you how you are planning to make the fund more effective and efficient as we move forward? | ||
| Well, what we want to do is focus on community revitalization, not unrelated and ill-advised social policies. | ||
| And we want to drive reforms, new restrictions on the use of funds, and we want to focus on the program's statutory intent. | ||
| I know making the lives better for people in their communities. | ||
|
unidentified
|
Sure. | |
| You know, CDFI fund, as you know, has bipartisan support, and I think it would also have a bicameral support. | ||
| So I look forward to continuing to work with you on the future of this critical, critical program. | ||
| But I also want to talk to you and thank you for being willing to come to California and investigate all the fraud, waste, and abuse. | ||
| Unfortunately, Gavin Newsom has tied, you know, he tried to hide all those fraud and waste under the carpet, allowing more than $32 million of unemployment fraud that went unchecked. | ||
| The state has also watched $13 million stolen from California students because of the AI-generated ghost students enrolled in community colleges. | ||
| So, you know, I suspect this is just the tip of the iceberg in California's fraud, waste, and abuse. | ||
| And I've been talking a lot about this. | ||
| Unfortunately, sadly, the state that I love and I live in, I represent a district from California, has become a fraud capital of the world. | ||
| So sad. | ||
| But that's why we need your team in California. | ||
| And is there anything that you can share to that end? | ||
| How your investigation into California fraud is proceeding? | ||
| There's nothing I can share right now, but I have spoken to Dr. Mehmet Oz at HHS, and he is laser-focused on the health care fraud that's going on in California, which seems to be substantial. | ||
| Yes, I also sent a letter to Gavin Newsom to that end, and I was glad to see Dr. Oz sending a letter demanding. | ||
| So now the State of California is now in the process of returning $1.6 billion to the federal government. | ||
| So thank you for that, and I look forward to continuing to work with you. | ||
| Thank you for joining us. | ||
| Thank you. | ||
|
unidentified
|
The gentleman from New York, Mr. Torres, is now recognized for five minutes. | |
| Thank you, Mr. Chair. | ||
|
April 2025 Tariffs Debate
00:04:02
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||
| Mr. Secretary, does the President have the constitutional authority to remove the Chair of the Federal Reserve or a member of the Board of Governors solely because of a policy disagreement? | ||
| I am not a lawyer, and I don't have an opinion. | ||
| You have no opinion on whether the President can remove a board member at will? | ||
|
unidentified
|
Well, I believe that the board member has committed to a particular case. | |
| I am asking about the President's general authority. | ||
| Let me ask it differently. | ||
| Do you believe that the unitary executive theory applies to the Federal Reserve? | ||
| Again, I think we will have to wait and see what the Supreme Court says. | ||
| What is your opinion? | ||
| I am not a lawyer. | ||
| What is the administration's opinion? | ||
| There are varying opinions in the administration. | ||
| What is the prevailing opinion? | ||
|
unidentified
|
The official opinion. | |
| Again, we will have to see. | ||
| Do you consider the Federal Reserve an executive agency or a legislative agency? | ||
| I consider it an independent agency. | ||
| So neither executive nor legislative? | ||
| So we will see. | ||
| Therefore, independent of presidential control. | ||
| It sounds like you do have a question. | ||
| Again, we will see, Congressman. | ||
| Okay, thank you for establishing the independence of the Federal Reserve. | ||
| I do believe that the Federal Reserve has to maintain credibility and be like Caesar's wife beyond reproach. | ||
| And undermining the independence of the Federal Reserve is a threat to that credibility. | ||
| So I know you are no fan of the New York Times, but let me cover a billionaire. | ||
| Let me reclaim my time. | ||
| The Wall Street Journal, which is hardly a leftist publication, published an article with the following headline, quote, Trump claims factory construction is up, contradicting U.S. data. | ||
| The article then goes on to note, quote, President Trump claimed that the U.S. factory construction is up by 41 percent, a number that doesn't appear to be supported by the government's own data. | ||
| One of the stated policy objectives of the Trump tariffs is to bring back manufacturing jobs. | ||
| Yet, since the so-called Liberation Day tariffs of April 2025, we have seen the net loss of manufacturing jobs. | ||
| Do you know how many net manufacturing jobs have been lost since April 2025 under your watch? | ||
| Well, a couple of things. | ||
| Manufacturing operates with very long leads. | ||
| What's the number? | ||
| Is there a number? | ||
| I believe it's about 67,000. | ||
| 70,000. | ||
| Yes. | ||
| 70,000 jobs lost. | ||
| Despite the stated objective, let me proceed. | ||
| I'm going to reclaim my time. | ||
| I'm going to reclaim my time. | ||
| Let me reclaim my time. | ||
| The Purchasing Managers Index measures whether manufacturing is expanding or contracting. | ||
| A PMI above 50 means expansion. | ||
| Below 50 means contraction. | ||
| Since the so-called Liberation Day tariffs of April 2025, has the PMI been mostly above 50 or below 50? | ||
| We just had the biggest increase in over a decade, and we are well above 50 now. | ||
| Has it been mostly above 50 since April 2025? | ||
| Again, long and variable lead times in manufacturing that you may represent. | ||
| Let me ask it differently. | ||
| Since April 2025, for how many months has the PMI been below 50? | ||
| Where are we now? | ||
| Where are we now? | ||
| January went up. | ||
| What about April to December? | ||
| It was below 50 for nine consecutive months. | ||
| Where are we now? | ||
| So the score is nine to one. | ||
| Nine months of manufacturing contraction versus one month of expanding. | ||
| I look forward to seeing you next year. | ||
| So one of the stated policy objectives. | ||
| And we'll keep score. | ||
| One of the stated policy objectives of the Trump tariffs is to bring back domestic production. | ||
| Does the Trump administration regret imposing tariffs on goods that cannot be produced domestically at scale in the United States? | ||
| Do you realize in hindsight that that was foolish? | ||
| Do you realize that we use the leverage to bring down tariffs from other countries to take down non-terrorists? | ||
| Tariffs on bananas give you leverage? | ||
| Yes, with Colombia, with Brazil. | ||
| I think, Congressman, you are being very naive with negotiating. | ||
|
Trump Tariffs Impact
00:06:29
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| I mean, we were promised reindustrialization. | ||
| A tariff on bananas did not lead to domestic banana production. | ||
| It simply made bananas more expensive for American businesses and consumers. | ||
| This has led to countries negotiating in a more fulsome manner. | ||
| Are you willing to commit to no longer imposing tariffs on any product that has neither a domestic substitute nor a national security rationale? | ||
| That would be the definition of foolish in a negotiation. | ||
| So you are not willing. | ||
| You are willing to impose tariffs that make more expensive goods that we cannot domestically produce here in the United States and that have no national security. | ||
| What is the national security nexus of bananas and coffee? | ||
| Again, why would you do that? | ||
| There are numerous things when you negotiate with Indonesia. | ||
| There are things that are only made in Indonesia, but the Indonesians brought down their tariff barriers or non-tariff barriers. | ||
|
unidentified
|
I get it. | |
| We have to make bananas great again. | ||
| I get it. | ||
| Thank you, Mr. Secretary. | ||
|
unidentified
|
The gentleman from New York, Mr. Garberino, is now recognized for five minutes. | |
| Thank you, Mr. Chairman. | ||
| Thank you, Secretary, for being here today. | ||
| First off, let me lead off. | ||
| I was one of the people you were in negotiations with over SALT last year, and I really appreciate the hard work and the commitment and helping us get it across the finish line. | ||
| And a lot of my constituents are going to see that. | ||
| And this is better. | ||
| I can tell you, as also the IRS Chairman, that the second largest refunds are going to come from your constituents or go to your constituents because of the SALT deduction. | ||
| It's going to be great. | ||
| And like myself, the rest of my constituents, I think, are going to plow that money back into the economy with some purchases when they get their refund this year. | ||
| So thank you for all the hard work you did there with us. | ||
| Last year, you oversaw Treasury's efforts to implement President Trump's executive order to phase out paper checks, eliminating a costly, inefficient, and more fraud-prone process. | ||
| Part of the EO directed the Treasury Department to work with financial institutions, consumer groups, and other stakeholders to address financial access for unbanked and underbanked populations. | ||
| Secretary, can you share more on what on the work stream and particularly how Treasury plans to incorporate digital technologies or payment solutions to increase financial access for unbanked Americans? | ||
| Again, we are trying to bring them into the financial system, and we are trying to, one of the ways is over these individuals' phones. | ||
| And what we see, especially for the cohort you described, is they are especially susceptible to theft of the paper checks. | ||
| They may not have fixed addresses. | ||
| The fixed addresses or the mailboxes may not be secure. | ||
| Someone from the New York delegation in Staten Island brought this to my attention for her district. | ||
| And I appreciate that. | ||
| I really do think the administration has made serious strides to modernize our financial system through these initiatives. | ||
| Are there other ways Treasury is looking to safeguard against fraud and improper transactions that you are working on? | ||
| Well, again, as we have done in Minnesota, we have found a substantial amount of waste, fraud, and abuse. | ||
| And we want to know, with our geographic targeting order, we have pushed down the threshold for reporting for money service businesses, which these are non-banks, to $300. | ||
| And we want to know if you are wiring money out of the country, that are you on public benefits? | ||
| Because one of two things must be true. | ||
| You are receiving more public benefits than you need, so you can wire it back home, or you have stolen the money. | ||
| Is there anything that Treasury is working on to any other payment modernizations that you are all working on right now? | ||
| We are constantly working on payment modernizations. | ||
| We are working with the Fed to modernize their Fed now. | ||
| We are looking at ways on digital assets also. | ||
| Great. | ||
| I am going to switch gears a little bit here. | ||
| Myself, just as any other member, has constituents that will face emergencies. | ||
| You can't plan for those, whether it is a natural disaster, medical emergency, unexpected refrigerator stops working at home. | ||
| So they have to, and a lot of people don't have savings accounts, so they often have to rely on short-term credit to cover basic expenses that arise from these emergencies. | ||
| Would you agree, Secretary, that access to credit can be a critical lifeline for millions of Americans, particularly middle and lower-income households? | ||
| Yes. | ||
| What actions is the Administration taking to promote affordable and responsible access to credit for American households? | ||
| Again, we believe by some of the financial deregulation that we have done, especially for community banks, this will lead to more credit for communities rather than the money coming from a distant credit card agency. | ||
| I appreciate that answer, Mr. Secretary. | ||
| And last, as Chairman of the Homeland Security Committee, cybersecurity is one of my top priorities. | ||
| Secretary, can you describe what the Administration is doing to strengthen cybersecurity across the federal financial regulatory agencies, particularly in light of last year's breaches at OCC and CFPB that had information leak? | ||
| So the Treasury, we are committed to making risk-informed resources. | ||
| We constantly work on emerging threats, and we are in close collaboration with our financial sector partners, both as a push and a pull. | ||
| We recently had a group of them into Treasury for a very large conference on best practices, sharing with each other, sharing with us. | ||
| And we've used that as a convener and then our convening ability. | ||
| And then also the gentleman's time has expired. | ||
| We've identified it as a financial stability concern. | ||
| I appreciate your time has expired. | ||
|
unidentified
|
Thank you. | |
| The chair recognizes the gentlewoman from Texas, Ms. Garcia. | ||
| You're recognized for five minutes. | ||
| Thank you, Mr. Chairman. | ||
| And Mr. Secretary, earlier in response to someone else's question, you talked a little bit there toward the end, but I'm not sure that there was time for follow-up. | ||
|
Chairman's Expired Time
00:07:51
|
||
| About, I think you said 10 to 20 million immigrants that are responsible for the driving up the housing costs. | ||
| Is that what you said? | ||
| I'm referring to a Wharton report, yes. | ||
| Do you know what they based it on? | ||
| What data, what information they looked at? | ||
| Yes, the survey by survey, community by community. | ||
| You could go, if you'd like, I will have my people posted on the Treasury X account as we speak. | ||
| Well, thanks for the cooperation because I'm just completely baffled. | ||
| The average new home sale is about $500,000, and you're saying that it's driving up the housing crisis when DHS is over there trying to pick up and deport people because, quote unquote, they're a drain on society. | ||
| They're dependent on public benefits. | ||
| So if you're on public benefits, how do you afford a $500,000 house? | ||
| Well, let me clarify your confusion. | ||
| I'm not confused, sir. | ||
| Don't be demeaning to me, all right? | ||
| I'm going to object and ask the chairman to make you answer questions. | ||
| Anyway, I'm trying to explain to you that it is rental income and rental properties that balance. | ||
| Do you really think that people value the value of the public? | ||
| Have you been to the rental income rental places of immigrants? | ||
| I have people in my district that are in rental houses that I wouldn't rent to anybody. | ||
| They're not expensive. | ||
| They're probably $500 or $600 a month. | ||
| You think people that can barely afford housing like that, that's the housing that we're talking about when we talk about the housing crisis? | ||
| D properties push up the price of C properties. | ||
| Inflation in C properties pushes up the price of A properties. | ||
| Inflation in price of A property, B properties pushes up A properties. | ||
| So it moves up the stack. | ||
| And if you think that somehow the laws of supply and demand do not apply to housing, I would say you're incorrect. | ||
| No, well, I'm not incorrect. | ||
| You know, the only thing that we might say about immigrants is that we don't have new housing because there's a shortage of labor supply because they build the houses, and you all are more focused on deporting them than having them stay here and build. | ||
| Mr. Chairman, I'd like to introduce three items to the record. | ||
| Construction workforce shortages are leading costs. | ||
| Project delays as immigrant enforcement affects nearly one-third of firms. | ||
| Second, how the ICE crackdown has impacted Minnesota's economy. | ||
| And third, the price of cruelty, how Trump's mass deportation agenda endangers all. | ||
| Without any idea how much of that is. | ||
| Thank you. | ||
| Do you have any idea how much we're spending on ICE every single day? | ||
| Dear Representative, this is the Financial Stability Oversight Commission. | ||
| But you're the treasurer. | ||
| You're the treasurer. | ||
| You're supposed to follow the money. | ||
| In response to questions on this side, you're always talking about, well, we follow the money. | ||
| Have you followed the money? | ||
| How much are they spending every single day in Minnesota and other states where they occupy cities, terrorize communities, and try to break up our country? | ||
| Again, President Trump has secured the border. | ||
| He was elected on a mandate. | ||
| Well, I disagree with you. | ||
| And I think you're confused. | ||
| You disagree that he was elected? | ||
| I think you're confused, but let me ask you about something else. | ||
| Maybe you'll answer this one. | ||
| You also recently announced the formation of new FSOC Household Resilience Working Group that will focus on American households' financial condition. | ||
| American households across the country, especially in my district, which is a working-class district, Texas 29, have experienced firsthand the destabilizing effects of climate disasters. | ||
| Property insurance companies are leaving Texas, California, Florida, and many other states because of growing climate risks. | ||
| I myself have felt the impact. | ||
| My constituents feel, Mr. Secretary, what, if anything, are you all doing to address the risk to households of mortgages and other forms of credit becoming unavailable in certain regions of the country due to climate change? | ||
| Again, Congresswoman, are you familiar with KLW 24? | ||
| No. | ||
| It was the base for everything that was done with climate and with all the proposed climate legislation, and it has been discredited. | ||
| So everything that FSOC previously did based on climate has been discredited. | ||
|
unidentified
|
Who discredited it? | |
| Nature Magazine, Nature Magazine, has retracted the economic commitment of climate change more than 18 months after first learning that the paper was fatally flawed with authors acknowledging that its errors are too substantial for correction. | ||
| I'm sorry, I'm not familiar with Nature Magazine. | ||
| We're relying on the Nature Magazine to determine public policy. | ||
| Unfortunately, that's what we're going to invite the Secretary to respond more. | ||
| Mr. Chairman, I'd like a response in writing. | ||
|
unidentified
|
Thank you. | |
| Yes, gentlewoman, we'll have those answers to you in writing. | ||
| The gentleman from Wisconsin, Mr. Fitzgerald, you're recognized for five minutes. | ||
| Mr. Secretary, thanks for being here today. | ||
| I appreciate all the work that you've done and certainly look forward to working with you in the future. | ||
| I did have just a couple questions. | ||
| In many ways, the CSEs are far less risky than they were before the financial crisis. | ||
| And one of the reasons has been that the CSEs, that credit risk transfer, the CRT piece, those programs. | ||
| However, some industry experts are concerned that the CRT program has been significantly diminished and focused on capital arbitrage instead of the real risk reduction. | ||
| Can you just kind of in general discuss the importance of the CRT with regard to the CSE in ensuring that they're transferring a significant amount of credit risk to the private market and really are then avoiding the risk that the taxpayers take on? | ||
| Good. | ||
| So the CRT or the credit risk transfer is very important at FSOC and the attendant agencies, the members, we closely monitor to make sure that there is no daisy chain effect, that the quality of the risk transfer is at least as high as the entity from which it was bought. | ||
| What we saw in the GFC was a complexity can create a daisy chain. | ||
| So what we want is transparency. | ||
| But I think CRTs are very important, but they cannot be opaque. | ||
| Very good. | ||
| You called for, you originally called for kind of a fundamental reset of financial regulation, and then you emphasized kind of Treasury's active role in promoting just more efficient, effective, and appropriately tailored regulation. | ||
| While we've seen progress in tailoring the supervision, can you just tell us kind of overall how you've tried to move the entire department kind of in that direction? | ||
| Again, as FSOC, I have convening power. | ||
| And so that would be what you were describing would be done by the Federal Reserve Regulation, the regulatory body. | ||
| Vice Chair Mickey Bowman has done an excellent job, the controller of the currency and the FDIC. | ||
| We have tried to get them aligned in what they are doing and for tailoring and to understand that the reason 50% of small and community banks have disappeared over the past 15 years has been because of a one-size-fits-all regulatory strategy, which clearly it does not. | ||
|
Keep Up the Good Work
00:02:00
|
||
| Very good. | ||
| Keep up the good work and thank you for being here today. | ||
| And I yield back, Chairman. | ||
| Thank you. | ||
| The gentleman from Wisconsin yields back. | ||
|
unidentified
|
C-SPAN's Washington Journal, our live forum inviting you to discuss the latest issues in government, politics, and public policy from Washington and across the country. | |
| Coming up this morning, author and law professor Jonathan Turley talks about his book on the American Revolution: how our democracy differs from other countries, and if it can survive into the future. | ||
| Then Reverend Paul Brandeis Rochenbush of Interfaith Alliance on his organization and the faith community's response to recent Trump administration actions. | ||
| C-SPAN's Washington Journal. | ||
| Join in the conversation live at 7 Eastern this morning on C-SPAN, C-SPAN Now, our free mobile app, or online at c-SPAN.org. | ||
| Here's a look at our live coverage coming up today on the C-SPAN networks. | ||
| At 10 a.m. on C-SPAN, Treasury Secretary Scott Bessett testifies on the state of the U.S. financial system and Trump administration economic policy before the Senate Banking Committee. | ||
| At 1 o'clock, a conversation at the Hudson Institute with a U.S. Special Envoy to Monitor Anti-Semitism. | ||
| He'll give an update on the Trump administration's policies. | ||
| And at 4.30, the Ronald Reagan Presidential Foundation hosts former Polish President and Nobel Peace Prize winner Lek Valencia, who will discuss U.S. foreign policy and how it can support freedom and democracy around the world. | ||
| At 8.30 a.m. on C-SPAN 2, President Trump will attend the 74th annual national prayer breakfast in the nation's capital. | ||
| He'll be joined by members of Congress. | ||
| And at 10 a.m., the Senate will continue their work on President Trump's district court nominations. | ||
| Over on C-SPAN 3, at 10 a.m., conservatives, members of Congress, and faith leaders will gather for a summit looking at the impact of drug trafficking organizations on U.S. national security. | ||