[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                   THE ANNUAL REPORT OF THE FINANCIAL

                      STABILITY OVERSIGHT COUNCIL
=======================================================================


                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 22, 2013

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 113-24



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

GARY G. MILLER, California, Vice     MAXINE WATERS, California, Ranking 
    Chairman                             Member
SPENCER BACHUS, Alabama, Chairman    CAROLYN B. MALONEY, New York
    Emeritus                         NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York              MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California          BRAD SHERMAN, California
FRANK D. LUCAS, Oklahoma             GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
JOHN CAMPBELL, California            STEPHEN F. LYNCH, Massachusetts
MICHELE BACHMANN, Minnesota          DAVID SCOTT, Georgia
KEVIN McCARTHY, California           AL GREEN, Texas
STEVAN PEARCE, New Mexico            EMANUEL CLEAVER, Missouri
BILL POSEY, Florida                  GWEN MOORE, Wisconsin
MICHAEL G. FITZPATRICK,              KEITH ELLISON, Minnesota
    Pennsylvania                     ED PERLMUTTER, Colorado
LYNN A. WESTMORELAND, Georgia        JAMES A. HIMES, Connecticut
BLAINE LUETKEMEYER, Missouri         GARY C. PETERS, Michigan
BILL HUIZENGA, Michigan              JOHN C. CARNEY, Jr., Delaware
SEAN P. DUFFY, Wisconsin             TERRI A. SEWELL, Alabama
ROBERT HURT, Virginia                BILL FOSTER, Illinois
MICHAEL G. GRIMM, New York           DANIEL T. KILDEE, Michigan
STEVE STIVERS, Ohio                  PATRICK MURPHY, Florida
STEPHEN LEE FINCHER, Tennessee       JOHN K. DELANEY, Maryland
MARLIN A. STUTZMAN, Indiana          KYRSTEN SINEMA, Arizona
MICK MULVANEY, South Carolina        JOYCE BEATTY, Ohio
RANDY HULTGREN, Illinois             DENNY HECK, Washington
DENNIS A. ROSS, Florida
ROBERT PITTENGER, North Carolina
ANN WAGNER, Missouri
ANDY BARR, Kentucky
TOM COTTON, Arkansas
KEITH J. ROTHFUS, Pennsylvania

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    May 22, 2013.................................................     1
Appendix:
    May 22, 2013.................................................    59

                               WITNESSES
                        Wednesday, May 22, 2013

Lew, Hon. Jacob J., Secretary, U.S. Department of the Treasury...     8

                                APPENDIX

Prepared statements:
    Lew, Hon. Jacob J............................................    60

              Additional Material Submitted for the Record

Ellison, Hon. Keith:
    Financial Crimes Enforcement Network FY 2013 President's 
      Budget Submission..........................................    68
    Financial Crimes Enforcement Network FY 2014 President's 
      Budget Submission..........................................    71
Lew, Hon. Jacob J.:
    Written responses to questions submitted by Representative 
      Ellison....................................................    74
    Written responses to questions submitted by Representative 
      King.......................................................    76
    Written responses to questions submitted by Representative 
      Stivers....................................................    78


                   THE ANNUAL REPORT OF THE FINANCIAL


                      STABILITY OVERSIGHT COUNCIL

                              ----------                              


                        Wednesday, May 22, 2013

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:05 a.m., in 
room 2128, Rayburn House Office Building, Hon. Jeb Hensarling 
[chairman of the committee] presiding.
    Members present: Representatives Hensarling, Bachus, Royce, 
Lucas, Capito, Garrett, Neugebauer, McHenry, Campbell, 
Bachmann, Pearce, Posey, Fitzpatrick, Luetkemeyer, Huizenga, 
Duffy, Hurt, Grimm, Stivers, Fincher, Stutzman, Mulvaney, 
Hultgren, Ross, Pittenger, Wagner, Barr, Rothfus; Waters, 
Maloney, Velazquez, Watt, Sherman, Meeks, Capuano, McCarthy of 
New York, Lynch, Scott, Green, Cleaver, Ellison, Perlmutter, 
Himes, Peters, Carney, Sewell, Foster, Kildee, Murphy, Delaney, 
Sinema, Beatty, and Heck.
    Chairman Hensarling. The committee will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    The Chair now recognizes himself for 5 minutes for an 
opening statement.
    This morning, we welcome Treasury Secretary Jacob Lew for 
his first appearance before the Financial Services Committee. 
Today, the Secretary is here to present, according to statute, 
the third annual report of the Financial Stability Oversight 
Council, or FSOC.
    The FSOC is an amalgamation of regulators heading agencies 
that either helped cause the financial crisis or were largely 
negligent in preventing it in the first place, notwithstanding 
they had the regulatory power to do so.
    Yet, we know the root cause of the crisis was not 
deregulation; it was dumb regulation. Federal policy strong-
armed, incented institutions to loan money to people to buy 
homes that ultimately they could not afford. This dramatically 
eroded historically prudent underwriting standards of the 
subprime and alt-A mortgages that led to the financial crisis.
    More than 70 percent were incented and backed by the 
Federal Government through Fannie Mae, Freddie Mac, the FHA, 
and other programs. This speaks for itself.
    So in many respects, as we examine FSOC, the regulators 
that helped precipitate the last crisis are now put in charge 
of preventing the next. And, according to the U.S. Government 
Accountability Office (GAO), after 3 years they don't have much 
to show for it. Just last month, we received testimony from the 
GAO that FSOC ``has still not developed a structure that 
supports having a systematic or comprehensive process for 
identifying potential emerging threats.''
    Yet, FSOC has been granted sweeping new powers within our 
economy. And this is disconcerting to me. Because as we know, 
on occasion, regulators may not just be dumb, they may not just 
be negligent; they may actually be criminal.
    Just down the hall, as we speak, the House Oversight and 
Government Reform Committee is holding a hearing where, 
according to her attorney of record, top IRS official Lois 
Lerner is ``pleading the Fifth'' Amendment for having led an 
IRS division which trampled upon the First Amendment.
    The American people are appalled that the most feared 
government agency has been permitted to attack their most 
sacred rights. The American people are appalled at the 
arrogance of the agency. They are appalled by this abuse of 
power. And for the last 2\1/2\ months, and for the foreseeable 
future, this agency, the IRS, just like FSOC, reports to you, 
Mr. Secretary.
    And although the IRS is clearly accountable to you, the 
Consumer Financial Protection Bureau (CFPB), and the Office of 
Financial Research (OFR), two agencies which are part of FSOC, 
are not. Neither the Bureau nor the Financial Research Office 
answers to anyone. A single director who cannot be removed by 
the President at will heads both.
    Spending by both agencies is unaccountable to Congress or 
the Administration. Neither is bound by the constraints of the 
government pay scale. And both agencies have subpoena power.
    Something else both of these FSOC agencies have in common 
is that they are engaged in gathering massive, massive amounts 
of information about private American citizens.
    At the same time, the IRS, thanks to its enforcement powers 
that it gained with Obamacare, is building the largest personal 
information database the government has ever seen. The CFPB is 
monitoring how millions of Americans interact with their 
lenders. And the OFR is working to gather enough information in 
its computers that would equal all the data held in all the 
U.S. academic research libraries combined. This is big data for 
``Big Brother.''
    As the IRS scandal reminds us, the freedom of every 
American is endangered when a government agency abuses its 
power and misuses sensitive information entrusted to it. In 
light of the recent scandals, this is an appropriate time to 
remind everyone that our committee maintains on its Web site a 
confidential way for Americans to report evidence of abuse of 
power by the Federal agencies under our jurisdiction. We 
encourage all concerned and informed citizens to use it.
    Secretary Lew, we look forward to discussing these issues 
and many others with you in detail in today's hearing.
    At this time, I will now recognize the ranking member for 2 
minutes for an opening statement.
    The gentlelady is recognized.
    Ms. Waters. Thank you very much, Mr. Chairman.
    I am very pleased to welcome Secretary Lew to his first 
appearance before the Financial Services Committee to deliver 
the annual report of the Financial Stability Oversight Council, 
as required by the Dodd-Frank Act.
    We are aware of your tremendous responsibilities. We are 
very pleased that you were confirmed. And many of us look 
forward to working with you to ensure that you are able to do 
the best job possible.
    As the Council notes in its report, despite some positive 
developments in 2012, the housing market remains anemic and the 
foreclosure crisis continues to weigh heavily on our fragile 
economy.
    However, mortgage lenders' poor servicing standards have 
yielded ongoing court challenges, slowing the process and 
leaving millions of homeowners in limbo as they contend with 
the inadequate government programs and mass settlements.
    RealtyTrac reported that from January of 2007 to December 
of 2011, there were more than 4 million completed foreclosures 
and more than 8.2 million foreclosure starts. And while 
estimates of future foreclosures range widely, Moody's 
Analytics recently estimated that foreclosures will strike 
another 3 million homes in the next 3 or 4 years.
    Accordingly, I do hope, Mr. Secretary, that you can discuss 
with the committee how housing, both legacy issues and 
perspective reform, factors into this agenda.
    Lastly, I am concerned that our financial system remains at 
risk from delays in implementation of Dodd-Frank and continued 
industry challenges, both here in Congress and in the courts, 
to weaken the rules before they have been implemented. While 
Title VII of Dodd-Frank was designed to increase the 
transparency of the over-the-counter derivatives market, many 
of the most critical components remain stalled in rulemaking, 
challenged in the courts, or obstructed in the Congress.
    This slow pace of Title VII rulemakings, combined with 
delays in implementation of the Volcker Rule, finalization of 
the living wills, and designation of Systemically Important 
Financial Institutions (SIFIs) is only made more troubling when 
considered in the context of the myriad financial scandals, 
from LIBOR and the money-laundering cases to illegal 
foreclosures that have occurred since the passage of the Wall 
Street Reform Act.
    For these reasons, I am concerned that our financial system 
remains fragile, despite substantial improvements since 2008.
    I, therefore, look forward to your testimony and insights 
that you may be able to provide on all of the above matters and 
what FSOC is currently doing to monitor systemic risk and 
preserve financial stability.
    I yield back the balance of my time.
    Chairman Hensarling. The Chair now recognizes the 
gentlelady from West Virginia, Mrs. Capito, for 2 minutes.
    Mrs. Capito. Thank you. I would like to thank the chairman 
for yielding me time.
    And I would like to welcome our witness today.
    Like most Americans, I was shocked and dismayed to learn of 
the IRS' admission on May 10th that they had specifically 
targeted conservative groups for political reasons.
    This witch hunt is an insult to the American people and to 
the very freedoms that are at the heart of our Nation's 
democracy. No group, regardless of their political affiliation, 
should ever be discriminated against because of their political 
beliefs.
    The First Amendment protects the rights of individual 
Americans and groups to express their views without fear or 
concern of intimidation.
    Not only is Mr. Lew serving as the Secretary of the 
Treasury, as the IRS' transgressions unfold, he was also the 
White House Chief of Staff from January 2012 until his 
confirmation in January 2013.
    We need to know more from the Secretary about what steps 
are being taken to ensure that this breach of trust never 
happens again. We need to know if further examination is 
necessary to ensure that this behavior is not occurring in 
other divisions of the IRS.
    And we need to know why and how, as Chief of Staff and 
Secretary of the Treasury, Mr. Lew did not take immediate steps 
to bring this un-American action to light?
    After all, reports indicate that senior IRS officials have 
known about these abuses for 2 years, and senior White House 
officials admitted to learning about them 1 month ago.
    Americans deserve the truth. As public servants, we all 
take an oath to uphold the Constitution. The American people 
entrust us to be honest stewards of the freedoms and liberties 
that are at the core of our Nation's democracy.
    It is clear that actions taken by the IRS employees and 
senior officials violated that trust and are counter to this 
duty.
    This is a sad chapter for our Nation's democracy, and it is 
incumbent upon this Administration to take all appropriate 
measures to ensure that this type of intimidation and 
discrimination does not happen again.
    I yield back. Thank you.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from New York, Mr. Meeks, for 2\1/2\ minutes.
    Mr. Meeks. Mr. Secretary, I would like to welcome you to 
your first appearance before this committee. I know that in 
your testimony before the Senate Banking Committee yesterday, 
you emphasized making sure that Dodd-Frank implementation is 
done quickly to provide new protections for consumers, while 
ensuring we take a well-rounded approach in looking at the 
system as a whole.
    I look forward to your testimony and commend you on the 
Council's findings regarding Basel III implementation, 
international coordination, and protecting the Nation's 
financial system from frequent and varied cyber attacks.
    As to community banks and Basel III, I am encouraged by 
your position on the application of Basel III capital rules to 
community banks. Often the sole source of mortgage financing, 
community banks, which were not responsible for bringing the 
Nation's economy to the brink during the financial crisis, 
should not be held to the same standards as larger banks and 
other systemically risky institutions.
    I was also pleased to hear during your testimony yesterday 
that Basel III would be a floor and not a ceiling for the 
international community.
    In my view, the United States should remain a competitive 
financial market with the necessary safeguards enacted in Dodd-
Frank.
    And I am interested to hear how the Council will strenthen 
the core of the nation of financial regulation, both 
domestically and internationally, not only by pulling up global 
standards and reducing importing systemic risk into the United 
States through the effective implementation of Basel III, but 
also in the cross-border cooperation that is key to 
implementing the FDIC's Orderly Liquidation Authority (OLA) 
under Title II of Dodd-Frank.
    Now, I want to just briefly talk about the revelations last 
week in the Treasury's Inspector General's report. The 
excessive scrutinizing of particular groups by the IRS is 
certainly wrong. And the IG report findings showing that some 
employees at the IRS exercised poor judgment in using 
inappropriate methods to determine if groups qualify for tax-
exempt status are troubling.
    While these methods are unacceptable and troubling because 
all individuals and organizations should be treated fairly by 
the IRS, the report stated that the conduct was not politically 
motivated.
    I commend President Obama and you, Secretary Lew, for 
taking swift action to restore public confidence in the IRS. 
And I hope that while the IRS is taking these corrective 
measures, it does not shy away from curtailing organizations 
attempting to abuse their tax-exempt status.
    I have a specific example in mind when I raise this issue. 
The IRS 501(c)(3) exemption requires that in order to be tax 
exempt under Section 501(c)(3) of the Internal Revenue Code, an 
organization ``may not attempt to influence legislation as a 
substantial part of its activities, and it may not participate 
in any campaign activity or against any political candidates.''
    Here, I have a fund-raising letter from a 501(c)(3) 
organization.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Alabama, the 
chairman emeritus, Mr. Bachus, for 1 minute.
    Mr. Bachus. Thank you.
    Congratulations on your appointment, Secretary Lew. And 
thank you for appearing before the committee today.
    Secretary Lew, you are obviously familiar with Dodd-Frank, 
due to your position as the Director of OMB. Now, you are about 
to confront all of it--the good, the bad and the ugly--as I 
have said.
    One of the common elements in the Democratic and Republican 
reform proposals that preceded Dodd-Frank was the formation of 
some type of systemic risk council to help regulators share 
information and coordinate their actions. These councils 
differed in their details. And of course, the end result was 
the Financial Services Oversight Council.
    Our expectation throughout the rulemaking and under the 
statute was that it would be transparent and have 
accountability, especially considering the high-level nature of 
the regulators involved.
    So it is particularly disturbing to me, especially 
considering the events in the news over the past few weeks, 
that the GAO has found that there is a serious lack of 
transparency at the FSOC. Very little is put down in writing or 
made available to the public.
    And as I noted to Attorney General Holder, when you don't 
have a record, you don't know the details, and there is no 
accountability.
    So my hope is as Chairman of FSOC, you will work with us to 
assure more accountability and more transparency.
    Thank you.
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the gentlelady from Alabama, Ms. 
Sewell, for 1 minute.
    Ms. Sewell. I want to thank Ranking Member Waters and 
Chairman Hensarling for scheduling this critically important 
hearing today.
    I also would like to welcome Secretary Lew and thank him 
for his testimony today.
    I am very encouraged to find out that since the Council's 
last annual report, the U.S. financial system has continued to 
strengthen and make incremental progress.
    I am also encouraged to see that many of the stop-gap 
measures and regulations put into place by Dodd-Frank have 
succeeded in providing oversight, transparency, and continued 
liquidity in the marketplace.
    However, this report is also very sobering, in that it 
identifies significant and unresolved risks in the financial 
marketplace.
    This report points to lingering structural vulnerabilities 
in the wholesale funding markets, continued overdependency on 
government and agency guarantees in the housing market, and the 
emerging operational risks to our financial systems posed by 
increasing cyber attacks, just to name a few.
    Our work as Members of Congress is obviously far from done. 
And we must continue to remain vigilant in providing the 
necessary guidance and oversight to fully realize the overall 
objective of Dodd-Frank.
    At this time, there may even be commonsense reforms that we 
must consider, to make technical corrections in order for its 
purpose to be felt.
    I want to applaud the Secretary, as well as administrators 
at FSOC, for their efforts in providing that transparency.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Kildee, for 1 minute.
    Mr. Kildee. Thank you, Chairman Hensarling and Ranking 
Member Waters.
    And welcome, Secretary Lew.
    Five years after the greatest economic crisis since the 
Great Depression, home values continue to recover. One way we 
can improve financial stability, increase property values, and 
rebuild neighborhoods is by eliminating blight and abandonment 
in our communities.
    Yesterday, I hosted a meeting for Members--including from 
this committee, Mr. Huizenga and Mr. Peters--with Assistant 
Secretary Tim Massad to discuss the ongoing importance of 
demolition in certain housing markets, including places like 
Flint and Saginaw, Michigan, which I represent.
    This issue is not just important to my district, though, 
but to cities and towns across the country.
    Targeted demolition strengthens municipalities and affects 
their long-term sustainability. Leaving blight and abandonment 
in buildings and neighborhoods not only hurts homeowners 
nationwide, but also makes our communities less safe, as 
vacant, run-down properties often are the sites of crime.
    I look forward to your testimony today, and to working with 
Treasury to continue to identify ways to eliminate blight and 
abandonment in our communities.
    Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from Ohio, Mrs. 
Beatty, for what he hopes will be 1 minute.
    Mrs. Beatty. Thank you, Mr. Chairman, and Ranking Member 
Waters.
    And thank you, Secretary Lew, for your testimony today and, 
more importantly, for your service to this country.
    This year's annual FSOC report discusses several different 
areas of concern that continue to pose ongoing threats to the 
systemic financial market stability.
    And though some are uncontrollable, there are some that I 
believe can be resolved through the actions of this Congress.
    Specifically, the report mentions the U.S. fiscal policy in 
the absence of bipartisan consensus as an ongoing risk. And 
since over the last 2 years, unfortunately most of what has 
been showcased has been our bickering and disregarding the 
deficit, government spending and raising the debt ceiling--so 
today, hopefully with your guidance and testimony, we can look 
at this report seriously and work together to find a common 
cause.
    And thank you very much for being here to help us do that.
    Chairman Hensarling. And thank you very much for coming in 
under time.
    Today, we welcome the Secretary of the Department of the 
Treasury, the Honorable Jacob J. Lew, who was confirmed by the 
Senate on February 27th of this year to serve as our Nation's 
76th Secretary of the Treasury.
    His prior Government service includes tenures at heading up 
OMB for both the Obama and Clinton Administrations, as well as 
serving as a Deputy Secretary at the State Department.
    In addition to Secretary Lew's public service, he served as 
the managing director and chief operating officer for two 
different Citigroup business units, and as an executive vice 
president and COO of New York University.
    No stranger to the halls of Congress, our Secretary has 
served for 8 years as an adviser to former Speaker Tip O'Neil. 
Secretary Lew holds degrees from Harvard College, and the 
Georgetown University Law Center.
    Secretary Lew, you will be recognized to give an oral 
presentation of your testimony. And without objection, your 
written statement will be made a part of the record.
    I wish to inform all Members that we have agreed to release 
the Secretary at 12:45 p.m. today.
    Mr. Secretary, welcome. Please proceed.

   STATEMENT OF THE HONORABLE JACOB J. LEW, SECRETARY, U.S. 
                   DEPARTMENT OF THE TREASURY

    Secretary Lew. Thank you, Mr. Chairman.
    I would like to, just at the outset, say that I think all 
of us are in the same place, that our thoughts and prayers are 
with those affected by the devastating tornadoes in the 
Oklahoma City area. It is just a reminder of the terrible 
ravages that natural disasters can cause. And our hearts and 
prayers are with the families who are suffering there.
    Chairman Hensarling, Ranking Member Waters, members of the 
committee, thank you for the opportunity to testify today 
regarding the Financial Stability Oversight Council's 2013 
annual report.
    Before I address the report, I want to say just a few words 
about the Treasury Inspector General for Tax Administration's 
report last week, which showed that some employees at the IRS 
used outrageous methods to determine if certain groups 
qualified for tax-exempt status.
    As the Inspector General's report indicates, while this 
conduct was not politically motivated, it was unacceptable and 
it was inexcusable. Administering the Tax Code without any hint 
of bias is a solemn obligation that must be carried out with 
the highest of standards. That is why I moved quickly to take 
steps to restore confidence in the IRS.
    Within 24 hours of the report coming out, I asked for and 
received the resignation of the acting Commissioner. And within 
24 hours, the President appointed a new acting Commissioner, 
Daniel Werfel. He is a person of high integrity and he has 
earned the confidence of Democrats and Republicans for his 
professionalism.
    I have directed incoming Acting Commissioner Daniel Werfel, 
who just starts today, to carry out a thorough review of this 
conduct, and to take action on three specific things: first, 
making sure that those who acted inappropriately are held 
accountable for their actions; second, examining and correcting 
any failures in the system that allowed this behavior to 
happen; and third, taking a forward-looking view in determining 
whether the IRS has systemic problems that need to be 
addressed.
    The acting Commissioner will hit the ground running. He 
will take actions as needed. And he will report to me on his 
progress within 30 days. We are going to make sure that nothing 
like this ever happens again.
    I would like to turn now to the Council's annual report. 
This report represents extensive collaboration among Council 
members, agencies, and staff. It gives us a chance to provide 
Congress and the public with the Council's assessment of 
significant financial, market, and regulatory developments, 
potential emerging threats to financial stability, and 
recommendations to strengthen the financial system.
    I want to point out that the strength of our financial 
system depends greatly on the strength of our economy. Now, 
there is no doubt that we have made significant progress 
recovering from the worst economic crisis since the Great 
Depression.
    The economy has grown for 15 consecutive quarters. The 
private sector has been creating jobs for 38 straight months. 
The housing market is healing. Our deficits are falling at the 
fastest rate in decades. But there is more to be done. We need 
to keep our foot on the accelerator. Economic growth and job 
creation need to be more rapid.
    The President has put forward a comprehensive jobs and 
growth plan. His path forward strengthens the recovery by 
making needed investments in manufacturing, innovation, 
infrastructure, and worker training, while taking a balanced 
approach to restoring our long-term fiscal health. This 
strategy will not only help grow our economy now and well into 
the future, it will replace the sequester with sensible deficit 
reduction measures.
    Since the Council's last annual report, our financial 
system has grown stronger in a number of ways. Capital and 
liquidity levels for the largest financial institutions have 
increased. Regulators have taken additional steps towards 
improving transparency and risk mitigation in derivatives and 
other markets.
    And the implementation of the Dodd-Frank and internal 
coordination on G20 reform priorities have brought significant 
progress towards establishing a more resilient and stable 
financial system, both domestically and globally.
    On the topic of Dodd-Frank implementation, the Council and 
its member agencies continue to put reforms in place. It is 
important to note that while additional work remains, we are 
much closer to the end of the process than we are to the 
beginning.
    We have seen a good deal accomplished recently, including: 
progress on the Council's evaluation of an initial set of 
nonbank financial companies for potential designation; progress 
on a new framework for the consolidated supervision of large 
financial institutions; progress on a new framework for the 
Orderly Liquidation Authority; progress on implementing 
provisions related to living wills; progress on reducing risk 
and increasing transparency in the derivatives markets; and 
progress on enhancing protections for borrowers and other 
participants in the mortgage markets.
    Despite these positive developments, there are still risks 
to U.S. financial stability. The Council's report identifies 
those risks and makes specific recommendations to mitigate 
them.
    For instance, it is our judgment that market participants 
and regulators need to take steps to reduce vulnerabilities in 
wholesale funding markets; that government agencies, 
regulators, and business need to address operational risks 
posed by technology failures, natural disasters, and cyber 
attacks; and that reforms are needed to address the reliance on 
self-reported reference interest rates like LIBOR.
    Mr. Chairman, I want to thank the other members of the 
Financial Stability Oversight Council and all the staff 
involved with the 2013 annual report for their hard work and 
dedication. This is an ongoing effort, and we look forward to 
continuing to work with you, this committee, and Congress to 
make sure we have a more resilient and stable financial system.
    With that, I conclude my opening remarks, and I look 
forward to answering your questions.
    Thank you.
    [The prepared statement of Secretary Lew can be found on 
page 60 of the appendix.]
    Chairman Hensarling. Thank you, Mr. Secretary.
    And I would remind all Members, at the direction of the 
Speaker, that later today during our vote series, there will be 
a moment of silence for all the victims of the Oklahoma 
tornadoes, and an opportunity to reflect upon that great 
tragedy.
    The Chair will now recognize himself for 5 minutes for 
questions.
    Mr. Secretary, I am personally not going to spend a whole 
lot of time with you on discussing who knew what, when, with 
respect to the IRS scandal, but I would like to say this: I 
don't know the level of responsibility that you and the 
President bear for this scandal, but I know it is not zero. And 
I think the American people would like to hear a little bit 
more from you and the President that the buck stops here, as 
opposed to hear no evil, see no evil, and I know nothing, 
nothing, nothing.
    And that may just be a little bit of unsolicited advice. So 
I am not going to look retrospectively. I am going to look 
prospectively. I know you have seen the forms that the IRS has 
sent to American citizens. The IRS now reports to you, Mr. 
Secretary, and has for the last 2\1/2\ months.
    So I look through these forms and I find out where the IRS 
is asking American citizens for all of their activity on 
Facebook and Twitter, including hard copies of all advertising 
on social media.
    Under your watch, will it be appropriate for IRS agents to 
ask for this information?
    Secretary Lew. Mr. Chairman, I take responsibility for the 
management of the Treasury Department and for the management 
oversight of the IRS. There is a difference between general 
management oversight and the very important line that exists 
between policy roles and the Administration of the tax system.
    For decades, we have had an appropriate line--
    Chairman Hensarling. But Mr. Secretary, the Administration 
just fired someone. That would seem to indicate there is some 
control over the policies of the IRS.
    So to the extent that you have the ability, and the 
Administration has the ability to hire and fire the head of the 
IRS, will it be appropriate for the IRS, going forward, to ask 
for this information from American citizens?
    Secretary Lew. Mr. Chairman, if I could just finish the 
thought that I was on?
    There is a very important distinction between hiring a 
Commissioner of the IRS and there is one other political 
appointee at the IRS, the General Counsel. The rest of the 
IRS--
    Chairman Hensarling. Are you positing an inability--
    Secretary Lew. --for appropriate reasons, it is a career 
agency. And there is involvement on policy matters, but on 
administration of the tax--
    Chairman Hensarling. So, are you unable to impact the 
policy?
    Secretary Lew. On policy, I will continue, as Secretaries 
of Treasury have and should, to express views on tax policy--
    Chairman Hensarling. Okay, Mr. Secretary, I get to control 
the time here. But in your opinion, is it appropriate to ask 
American citizens about their prayer life, how often they 
attend prayer meetings and what percentage of time of 
organizations are spent in prayer groups?
    Secretary Lew. Mr. Chairman, I am not familiar with the 
specific document that you are looking at.
    As a general matter, there is the highest regard for the--
    Chairman Hensarling. --release by the IRS--
    Secretary Lew. --personal privacy of individuals is very 
high priority. Protecting of individuals from the kinds of 
questions that invade their privacy is a very high priority.
    Chairman Hensarling. You have some ability to impact who 
heads the IRS.
    So, in your personal opinion, is it appropriate for the IRS 
to be asking about the prayer lives of American citizens?
    Secretary Lew. Mr. Chairman, it is a hypothetical question, 
since I am not familiar--
    Chairman Hensarling. It is not hypothetical, Mr. Secretary, 
to the people who received this application, on penalty of 
perjury, if they didn't disclose their prayer lives to the IRS.
    Secretary Lew. Mr. Chairman, I cannot respond to a form 
that I haven't had the chance to see. I am happy to get back to 
you on a specific--
    Chairman Hensarling. Okay, if you would, Mr. Secretary. And 
after being on the job for 2\1/2\ months, and it is one of the 
biggest scandals that has rocked Washington in years, I would 
hope in the matter of priorities of the Secretary of Treasury, 
you would undertake to review this material going forward.
    Secretary Lew. Mr. Chairman, I have made clear that it is 
an extraordinarily high priority, my highest priority to 
restore confidence in the IRS. That is why we have a new acting 
Commissioner who is taking over today.
    His first job is to find out who is accountable and make 
sure people are held accountable for any actions that were 
wrongful. Secondly, he is--
    Chairman Hensarling. Mr. Secretary, regrettably, my time is 
running out. I assume you will have ample opportunity to speak 
more about the IRS.
    I am actually going to change subjects, which may be 
pleasant for you. In the FSOC report, on page 13, it states, 
``The Council recommends that the Treasury, HUD, and FHFA 
continue to work with Congress and other stakeholders to 
develop housing reform system.''
    Mr. Secretary, I have been either the chairman or the vice 
chairman of this committee for the last 2\1/2\ years. And I am 
unaware of any activities of either HUD or Treasury to work 
with Congress. I am aware of the White Paper that was released, 
that has now gathered dust for over 2 years.
    So I am not sure who Treasury and HUD has been working 
with, but it hasn't been this committee. And I see my time has 
expired.
    I would like to have the opportunity to speak to you about 
this later, to find out if the Administration intends on doing 
anything with their White Paper besides allowing it to gather 
dust on housing reform.
    The Chair now recognizes the ranking member for 5 minutes.
    Ms. Waters. Thank you very much.
    Mr. Secretary, I wanted to talk with you about living 
wills, but I think it is important, before I deal with public 
policy that we are all concerned about, that we make some 
things clear on the record.
    As I understand it, the knowledge about the IRS problem was 
only learned recently by you. Is that correct?
    Secretary Lew. That is correct.
    Ms. Waters. And, as I understand it, the President was not 
told about the problem by his Chief of Staff or anyone else. Is 
that correct?
    Secretary Lew. That is correct. Until it was a public--
    Ms. Waters. I beg your pardon?
    Secretary Lew. Until the report was completed, yes.
    Ms. Waters. Okay. And I understand that there is an 
investigation going on.
    Secretary Lew. There are multiple reviews here on the Hill 
and by the Department of Justice and within the IRS.
    Ms. Waters. And so, the Administration has not in any way 
said they were not willing to try and find out what was 
happening in the correct way. Is that correct?
    Secretary Lew. Yes. Quite the contrary, we are determined 
to make sure. The activities that were disclosed by the 
Inspector General are unacceptable. We have said so in the 
strongest terms.
    We have appointed an acting Commissioner who is going to 
make sure people are held accountable, who is going to make 
sure we find out how there was a breakdown in communication and 
management to permit it, and to look more broadly at the IRS to 
make sure that nothing like this could ever happen again.
    So we are very determined to restore confidence that the 
IRS is operating without any bias, which is our obligation. And 
we are committed to doing that.
    Ms. Waters. Again, and my colleague, the chairman of this 
committee, said that he knows that you and the President must 
have known something. He said basically that you must have had 
some information. Would you please take as much time as you 
want that I have left, because you were interrupted and you did 
not have time to respond to that.
    And if you feel the need to say something else about it, 
please use my time to do that.
    Secretary Lew. Congresswoman, I was informed of the fact 
that there was an audit under way on March 15th, when I had an 
initial meeting with the Inspector General.
    It was brought to my attention at a very high level, that 
it was an investigation regarding 501(c)(4) approvals. And I 
was told that there could be some troubling findings. Then, I 
did what is an appropriate thing; I did not do anything to get 
in the way of an independent IG review. That is what agency 
heads should do. They should give the IG the opportunity to 
complete their work, and make sure they have access to people 
and records that they need.
    As has been discussed over the last few days, there was 
some discussion, as is appropriate, between attorneys and other 
staff at agencies and the White House, for situational 
awareness.
    Now, I want to make clear, the reason that it was not 
brought to my attention before the report came public, what the 
facts were--and the reason it was not brought to the 
President's attention before the Inspector General completed 
his report is that there was nothing that we should have done 
to interfere with an Inspector General report.
    Just like the IRS should not impose any political influence 
on the administration of the tax system, agency heads and 
senior political officials should not exercise any action to 
interfere with an Inspector General review.
    So the first we knew of the facts was when they become 
public on the Friday before last, in a general way, and then, 
just last Tuesday, when the actual IG report was delivered.
    Within 24 hours of getting the IG report, we took action. 
We asked for and we got the resignation of the acting 
Commissioner. And 24 hours after that, the President appointed 
a new acting Commissioner who starts today, who is going to 
undertake the task that I described with the three very 
important parts: accountability; finding out what happened; and 
making sure it never happens again.
    Ms. Waters. Thank you so very much, Mr. Secretary.
    And now, for some public policy.
    Secretary Lew. Yes.
    Ms. Waters. What can we do to help get these living wills 
in, so that we can make sure that we have a process that works 
in the orderly wind-down that--
    Secretary Lew. Congresswoman, we have made great progress 
in the area of living wills with the largest financial 
institutions. We now have living wills on file for the very 
largest institutions.
    I think the challenge is now to make sure that we know that 
those can work. And I think the operational issues are not 
insignificant.
    We are not, hopefully, going to have a test of these any 
time soon. We are going to need to do the kinds of exercises 
that make sure that you have confidence in the capital that is 
available and the structures that are available, so that if 
there is a crisis, they work.
    We are committed to doing that, and the regulatory agencies 
responsible for the living wills are as well.
    Ms. Waters. I thank you very much, Mr. Secretary. And I 
look forward to working with you.
    I yield back the balance of my time.
    Chairman Hensarling. The Chair now recognizes the 
gentlelady from West Virginia, Mrs. Capito, for 5 minutes.
    Mrs. Capito. Thank you.
    Thank you, Mr. Secretary,
    And you heard my opening statement, so I am going to ask a 
question regarding the IRS scandal. I think what would be in 
the best interests of the taxpaying citizens of this country is 
to know, as you said, that this could never happen again.
    How are we going to be able, or the Administration going to 
be able to convince the American public that being targeted for 
political beliefs or religious beliefs or lifestyles or 
whatever--in order for this to put the American mind at ease, 
which I think is going to be very difficult, you have to come 
forth with everything.
    And so, how do you plan--are you going to issue a report, 
fire more people? What kind of end-game is there going to be to 
lay this to rest?
    Secretary Lew. Congresswoman, there is nothing more 
important than restoring the confidence of the American people 
in the IRS. It is central to the capacity of the IRS to 
function effectively, which is central to the capacity of our 
system of government to function effectively.
    Mrs. Capito. Right.
    Secretary Lew. I think that by taking the action that we 
took last week and bringing in new leadership immediately, we 
now have a person in place who will very quickly get on with, 
first, making sure we hold people accountable. That is very 
important. We have to get the facts and we have to make sure 
any actions that are taken are based on fact.
    Second, the kind of scrutiny that we need to do now has to 
get at, how did this happen?
    Mrs. Capito. Right.
    Secretary Lew. How could the communications be so bad? How 
could the management be so loose?
    And I can't sit here today and tell you we have completed 
that. Somebody began today, in whom I have the utmost 
confidence to get that under way very quickly.
    But I think the third piece is really ultimately the 
answer. We have to look beyond the facts here and ask more 
broadly, is there something systemic about the management 
structure of the Internal Revenue Service that needs to be 
fixed to be able to say with confidence that not just with 
regard to this area, but more broadly, we have taken the kind 
of look to be able to say that we can be confident that this 
won't happen again?
    Now, there is all kinds of information people have to 
provide on a confidential basis to the IRS. We have to protect 
people's confidentiality.
    Mrs. Capito. Right.
    Secretary Lew. And I think that while most of us would 
rather not have to file a lot of forms, when you want to get 
approved as a not-for-profit--
    Mrs. Capito. But how do people who provide that 
information, no matter what it is, know it is going to be held 
in the strictest confidence?
    I think the erosion of trust here is tremendous. And I 
think the best advice I would give to you is that bad news 
doesn't get better with time. You have to get it out there. And 
you have to get it out in the strongest, in the most honest 
way, with the American people.
    And so I am going to move to the substance of your 
appearance here today. I have two questions.
    One is, Secretary Geithner, your predecessor, in talking 
about implementation of Dodd-Frank, he and I had several 
conversations. And he talked about how we have all this new 
regulation and we are going to scrape out the old regulation, 
outdated regulation, outmoded.
    And then, when questioned, he really couldn't come up with 
any outdated or outmoded regulation that he actually was 
draining from the overpiling of regulation in the financial 
sector.
    Is this an area in which you are interested? Is the FSOC 
dealing with this?
    Because we hear daily, it is not one regulation, it is not 
two, it is the continuous weight of regulation that is dragging 
down particularly our community banks and regional banks.
    Secretary Lew. Congresswoman, I will tell you that, in 
general, that is an area of great concern to me. I have not had 
the time yet, in 2\1/2\ months, to go backwards. I am very much 
committed to making the full implementation of Dodd-Frank 
happen in as quick a timeframe as possible.
    But I will say that when I was OMB Director, we did, for 
the very first time, take a look back in the overall regulatory 
system, to ask agencies what do you have on the books that is 
out of date and that can be eliminated? And we eliminated a 
whole bunch of regulations across the government. I think it is 
an exercise that we should not just move forward, we have to 
look backwards and forwards, both.
    Mrs. Capito. Right.
    Secretary Lew. And I hope we can get Dodd-Frank in place 
and have the ability to do that.
    Getting Dodd-Frank implemented is still a fair amount of 
work. And getting it done quickly, I think, is a very, very 
important priority.
    Mrs. Capito. I hope the next time you come before the 
committee, you can give me some specifics--
    Secretary Lew. Sure.
    Mrs. Capito. Because I am going to ask you--
    Secretary Lew. And I look forward to--
    Mrs. Capito. --other regulations that you have been able 
to--
    Secretary Lew. It is something I am personally committed to 
as a general principle.
    Mrs. Capito. That is good news to me. Thank you.
    Lastly, I only have 25 seconds. Basel III is a great--I 
chair the Financial Institutions Subcommittee. We have, with 
the ranking member, talked about this quite a bit, the 
inability of community and small banks to deal with the risk-
weighted aspects of Basel III.
    Have you considered pushing that back for those 
institutions? And why are they involved anyway?
    And I just ran out of time, so--
    Secretary Lew. Mr. Chairman, if I could just take a half a 
minute to answer the question?
    Chairman Hensarling. A brief moment.
    Secretary Lew. I think that it is very important that all 
of the regulatory agencies take into consideration whether or 
not there are special issues regarding small and medium-sized 
institutions. The law, in many regards, has reflected that. And 
in the review of regulations, the agencies are looking at that 
as well.
    I think that the discussion I have heard in the last few 
weeks suggesting that maybe Basel III should be repealed or not 
be used, I worry about that as a principle. Because Basel III 
is a floor for the world, and we want the world to kind of have 
a race to the top.
    And if we don't keep Basel III as that driver for a race to 
the top, we face financial--
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentlelady from New York, Ms. 
Velazquez, for 5 minutes.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary. I would like to discuss with you 
another issue that is on the minds of Americans, and that is 
the state of the economy.
    We continue to see improvement in the housing sector, with 
increased construction activity, more sales and higher prices. 
As you know, the economic recovery relies heavily on a healthy 
housing market. In your opinion, could complete privatization 
of the secondary mortgage market, as some policymakers have 
proposed, create procyclical conditions where too much credit 
is available in good times, and too little when there are 
problems, thus exacerbating downturns?
    Secretary Lew. Congresswoman, I think that our challenge as 
we go through winding down Fannie Mae and Freddie Mac is really 
in multiple parts. First, we have to make sure taxpayers 
recover the big investment they made during the financial 
crisis in those institutions. We are working very hard to do 
that. They have long-lived assets and it is going to take a 
while to wind down those institutions.
    We also have to be thinking ahead to how do we have a 
housing market that strikes the right balance, that provides 
opportunity for homeownership and the economic activity that 
goes with that, since so much of the construction employment 
and other employment in our country is related to housing 
construction, with the prudential considerations that 
institutions and individuals not be overextended, creating the 
seeds of some future crisis.
    We are working on that. I think it is very important that 
we have a reduction in the presence of Federal direct and 
guaranteed loans; that we have an active private capital market 
for mortgages. And that is our goal as we move forward.
    Ms. Velazquez. Thank you.
    Mr. Secretary, some stakeholders have alleged that last 
year's LIBOR manipulation enriched the largest banks, to the 
detriment of community and regional banks. As you know, 
community banks are a significant source of small business 
lending. And we continue to hear the obstacles that small 
businesses are facing in accessing capital.
    What have Federal regulators done since the LIBOR scandal 
broke to prevent manipulation of key interest rates that impact 
the cost of credit for small businesses?
    Secretary Lew. Congressman, I think they are kind of 
separate issues. The manipulation of LIBOR was a terrible abuse 
of trust, in addition to--the world financial community and 
participants in it had accepted LIBOR as something that was a 
market-determined reference rate. And then the manipulation of 
it was very, very unsettling, in addition to being just very 
wrong and bad behavior.
    Going forward, one of the things the FSOC report makes 
clear is that we need to work on an international basis with 
other financial regulators and with market participants to 
develop an alternative to LIBOR, because there needs to be a 
broadly accepted market reference rate to take the place of 
LIBOR, if there is a need to replace it. So that is one area 
where there is substantial progress being made.
    I think in terms of the kind of transmission mechanisms for 
capital to be made available to small business, that is a very 
complicated practice. And I think that the tradeoff that I was 
describing in the area of housing lending, that same tradeoff 
exists in commercial lending.
    There is a need for small and medium-sized enterprises to 
have access to credit. That means taking some level of risk. 
Banking does involve some level of risk. We need to make sure 
that institutions don't take risks that become taxpayer burdens 
afterwards. Striking that balance correctly so that we can open 
up the channels of lending to small- and medium-sized 
enterprises is very important.
    Ms. Velazquez. But we have to also provide a level playing 
field for those regional and community banks that are really 
the ones that are lending to small businesses and not put them 
at a disadvantage.
    Secretary Lew. Yes, and as I was indicating before, I have 
met with small and medium-sized bank representatives. I have 
shared the concerns they have raised with me with the 
regulators. I have the very clear understanding that the 
regulators are sensitive to those concerns. And as they work 
through the implementation of these rules, things like the 
Basel III rules, they are working to try and address the 
legitimate issues that have been raised.
    Ms. Velazquez. Thank you, Mr. Chairman. I yield back.
    Chairman Hensarling. The gentlelady yields back the balance 
of her time.
    The Chair now recognizes the gentleman from New Jersey, Mr. 
Garrett, for 5 minutes.
    Mr. Garrett. I thank the chairman.
    And I too want to get to the seminal issues on financial 
services, but let me just touch initially on the issue with 
regard to the IRS.
    I must say, first of all, that I found your opening comment 
on this disingenuous at best, because your initial statement 
was that as soon as you found about the situation, you were 
outraged. You found it outrageous conduct. You took immediate 
action. You made this the top priority. This was going to be 
your first focus.
    And the very first question from the chairman, asking you 
about documents from your own agency, that are from your 
agency, that are in the public domain, that have been in the 
press for literally weeks now--and again, from your agency--
your response was that you know nothing about them; you do not 
know the details; and you would have to get back to us.
    If this was really your first priority, if you were going 
forward trying to solve the situation, not retrospectively but 
in the future, I would think, sir, that you would know about 
the basic documents that everyone else in this room knows 
about.
    But that is a rhetorical question. We can judge for 
ourselves whether you are really trying to fix this for the 
future, and make it a priority.
    Secretary Lew. If I could respond--
    Mr. Garrett. My time is limited. In another hearing room, 
there is another woman, who is a woman from the IRS, Lois 
Lerner, formerly from the IRS, who has stated that--I think she 
has taken the Fifth Amendment. But she has stated that she has 
done nothing wrong; she had done nothing criminally wrong or 
did not violate any IRS rules or regulations.
    Would you agree with her assessment that she did absolutely 
nothing wrong, did not violate any rules, regulations, or 
criminal conduct in any way, shape or form?
    Secretary Lew. Congressman, I think it is important that we 
get to the bottom of the facts--
    Mr. Garrett. Yes or no, do you think she did anything--
    Secretary Lew. Congressman, it is not a yes or no, and if I 
could be permitted to answer your question, I would like to do 
so.
    Mr. Garrett. Sure.
    Secretary Lew. You have asked me a question which--we have 
a new acting Commissioner who has taken office today--
    Mr. Garrett. Right.
    Secretary Lew. --who is beginning today to get to the very 
bottom of who should be held accountable. I am committed to--I 
am meeting with him this afternoon. I am not waiting for 30 
days to meet with him.
    Mr. Garrett. Good.
    Secretary Lew. I didn't wait for 5 minutes after I read the 
IG report to get on top of it. I got on top of it right away.
    Mr. Garrett. What did you do?
    Secretary Lew. What did I do? I got the wheels in motion to 
get a new IRS Commissioner in there as soon as possible.
    Mr. Garrett. You fired someone immediately here in the 
case, before you knew whether he did anything criminally wrong, 
violated any regulation whatsoever. So you are able to make 
that decision--
    Secretary Lew. Congressman, I think that if you are talking 
about an agency where an IG report makes clear that there was 
behavior that was totally unacceptable, in order to restore 
confidence, you begin at the top. We needed a new head of the 
IRS, which we have as of today. We are going to get to the 
bottom of it. Anyone who is accountable will be held 
accountable.
    Mr. Garrett. Okay. So you don't know whether she did 
anything wrong or--
    Secretary Lew. Congressman, I am going to wait to have all 
the facts. I don't have all the facts. We have to make 
decisions.
    Mr. Garrett. But you were able to make a decision to fire 
someone without knowing whether he did anything--
    Secretary Lew. I knew the fact that he was the acting 
Commissioner of an agency that had lost the public trust.
    Mr. Garrett. What position did she have?
    Secretary Lew. I think that as the head of an agency, there 
was a standard that is unique. Frankly, even--
    Mr. Garrett. But do you know what position she has?
    Secretary Lew. --even if--
    Mr. Garrett. Do you know what position she has?
    Secretary Lew. --even if there is no wrongdoing at the head 
of the agency, I think it is the right action.
    Mr. Garrett. Do you know what position she held?
    Secretary Lew. Yes, I do.
    Mr. Garrett. And it is or was?
    Secretary Lew. She is the Deputy Commissioner in this area.
    Mr. Garrett. In this area. So wouldn't she be responsible 
for this area if she was the head of that area?
    Secretary Lew. Congressman, I am not going to go through 
person by person asking questions that I can't answer right 
now, and none of us can answer right now. But I am committed, 
as we have made very clear publicly, that everyone who is 
accountable will be held accountable.
    Mr. Garrett. Okay. So let us take a look at some of the 
people that maybe you are responsible for. According to the 
IG's testimony last week, the IG alerted the IRS and Treasury 
officials to the investigation in May or June. Have you 
confirmed that the General Counsel and Deputy Secretary were, 
in fact, briefed by the Inspector General back in 2012?
    Secretary Lew. Congressman, I think that we have made clear 
that the Deputy Secretary was aware of the fact that an audit 
was under way. He did not become familiar with the details of 
it until I did last Tuesday.
    Mr. Garrett. Okay. Do you know whether or not he--this 
would be Deputy Secretary Wolin, correct?
    Secretary Lew. Correct.
    Mr. Garrett. Right. Do you know who, if anyone, he advised 
about the investigation back at that time?
    Secretary Lew. We have over the last few days made clear 
that there were, as appropriate, conversations among staff 
where the fact of an investigation was clear. And subsequently 
in the last few weeks, as draft reports were being either--the 
facts in them or the reports themselves were available, that 
there were conversations. But there was no action taken by 
anyone in the Treasury Department in any way to interfere with 
the Inspector General's report. And that was the number one 
goal and responsibility.
    Mr. Garrett. I understand. I understand why you don't want 
to get involved there. Did he contact the IRS Commissioner and 
advise him to correct the false testimony that the Commissioner 
had given to Congress just the month before?
    Secretary Lew. Congressman, I told you that there were 
conversations as appropriate for people who needed to 
understand that there was an investigation.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from North Carolina, 
Mr. Watt, for 5 minutes.
    Mr. Watt. Thank you, Mr. Chairman.
    And I thank Mr. Lew for being here.
    Let me turn our attention to FSOC, since I thought that is 
what this hearing was about, rather than the Internal Revenue 
Service. I assume the Internal Revenue Service is not on the 
FSOC. Is that correct?
    Secretary Lew. No, it is not.
    Mr. Watt. Okay. One of the things that you all have been 
doing, according to your testimony, is designating some 
financial institutions as particularly significant to the 
economy, which results in them being given enhanced scrutiny 
and some higher standards.
    So you have designated some financial institutions. And at 
the bottom of page 6 of your prepared testimony, you say you 
have designated 8 financial market utilities. What kinds of 
utilities are those?
    Secretary Lew. It would be utilities like clearinghouses.
    Mr. Watt. Okay. And then you also say that you are looking 
at a number of nonbank financial companies that will be 
designated. What kinds of institutions are those?
    Secretary Lew. Congressman, the identity of the companies 
has not been publicly noted because in order to go through this 
process, it requires getting very confidential information from 
the companies. And it would be inappropriate for me to list the 
specific entities.
    The test that is used, the standard is whether the failure 
of those companies--the material distress of those companies 
will be a threat to U.S. financial stability. So the question 
is, if something were to happen in a nonbank entity that could 
become a kind of systemic problem. And that is the way the 
review is structured. It is really the interconnection between 
the company and the broader state of financial stability.
    Mr. Watt. Which actually gets me to the point that I was 
trying to get to circuitously. A number of people have raised 
concerns that by designating these entities, we somehow give 
the impression that they are so important that the government 
won't allow them to fail. Walk us through, if you would, how we 
make sure that doesn't end up happening, both statutorily under 
Dodd-Frank and through the process that the Council is 
following.
    Secretary Lew. The determination is not at all to create 
the impression that a firm might be too-big-to-fail. It is 
quite the opposite. It is to ask the question, does a firm need 
to be regulated in a way so that it won't fail and won't cause 
that kind of distress to the broader financial stability. The 
more likely consequence of being designated would not be to get 
bigger.
    I don't think that any designated firm gets any protection 
by being designated. What they get is a higher level of 
scrutiny and regulatory oversight by the appropriate regulatory 
body.
    FSOC does not actually take on the regulatory function. If 
the vote of FSOC is to designate a nonbank, there will be 
regulatory oversight by the appropriate regulatory body. So in 
many cases, it will be the Federal Reserve Board, with its 
regulatory authority over bank and bank-like institutions.
    Mr. Watt. And would each one of those significant 
institutions end up having to do one of those living will 
scenarios if FSOC designated them as--
    Secretary Lew. I think if they are at a size level that 
would require it. I believe it will be a case-by-case 
determination, but I would have to get back to you on that.
    Mr. Watt. All right.
    On page 2 of your testimony, you indicate that reforms are 
needed in the LIBOR system to address the reliance on voluntary 
self-regulated and self-reported reference interest rates. Can 
you tell us what kinds of reforms might be in the contemplation 
on that front?
    Chairman Hensarling. Briefly if you could, Mr. Secretary?
    Secretary Lew. Thank you, Mr. Chairman.
    These reference rates are interwoven into millions of 
financial transactions on a contractual basis. We need to have 
reference rates that are reliable and not subject to 
manipulation. And we need, if LIBOR is not in that status at 
some point, to have an alternative to go to.
    And I think that working with the international financial 
regulatory agencies and working with market participants 
developing an alternative is critical, because even if you 
don't ultimately need to move to a different reference rate, 
there needs to be another reference rate available.
    We--
    Chairman Hensarling. The time of the gentleman has expired.
    Secretary Lew. Thank you, Mr. Chairman.
    Chairman Hensarling. At this time, without objection, our 
chairman emeritus is recognized for 1 minute to speak out of 
order.
    Mr. Bachus. Thank you.
    Today, the staff of the House of Representatives loses one 
of its most valuable staff members. I think we all know and 
love Warren Tryon, who served as the Deputy Staff Director, a 
very intelligent, diligent, informed individual.
    And in tribute to him and really all the valuable work of 
our staff, both on committees and our personal staff, I would 
like Warren to stand up and take a bow.
    [applause]
    And I appreciate that, Mr. Chairman.
    Chairman Hensarling. And now, the Chair recognizes the 
chairman emeritus for his 5 minutes.
    Mr. Bachus. Thank you.
    Secretary Lew, the GAO and really many press reports and 
articles have criticized the secrecy of the FSOC. Last week, 
there was an article in a Washington paper where one gentleman 
heading up a nonprofit organization with liberal leanings 
actually said that the FSOC's proceedings make the Politburo 
look open by comparison. They treat their information as if it 
were state secrets.
    The Council doesn't transcribe its meetings. Is that 
correct?
    Secretary Lew. Minutes are kept.
    Mr. Bachus. Minutes.
    Would you commit to transcribing the meetings as the GAO 
has recommended, and releasing those transcripts, with 
appropriate redactions, after a certain period of time, as the 
Fed does?
    Secretary Lew. Mr. Chairman, I think that FSOC deals with 
matters that range from very company-specific, proprietary 
information to broad--
    Mr. Bachus. And I understand appropriate redactions. The 
Fed redacts confidential--
    Secretary Lew. And I think that for where the FSOC has 
moved in policy areas, it has tried to be very open in terms of 
public notice and taking comments. So for example, in the area 
of the money market rule recommendations to the SEC, they have 
been open for comment. And many, many--
    Mr. Bachus. I understand comment. But would you commit, at 
least, to following the same thing that the Fed does about 
releasing those transcripts?
    Secretary Lew. Congressman, I would have to go back and 
look at that.
    Mr. Bachus. Okay, thank you. Take a look at that. That is 
all I ask.
    The FSOC doesn't keep transcripts and I don't even think 
they keep minutes of their staff meetings or subcommittee 
meetings or the committee meetings. That is where most of the 
work is done. Would you commit to transcribing those 
proceedings and keeping minutes of those meetings?
    Secretary Lew. Congressman, I am not aware of practices 
where meetings like that are normally transcribed. The 
challenge of working in these complicated areas involves many, 
many meetings.
    And I am happy to follow up with you on--
    Mr. Bachus. Sure.
    Secretary Lew. --the concerns you have about transparency--
    Mr. Bachus. I think most minutes--yes. But as you know, you 
are chairman. This is one of the most important committees or 
councils in response to the financial crisis. I think it is 
important from a historic basis.
    Secretary Lew. Congressman, when congressional staff meet 
to draft important legislation, there aren't minutes of those 
conversations either.
    Mr. Bachus. Right.
    Secretary Lew. So, I think these are complicated questions.
    Mr. Bachus. Sure.
    Secretary Lew. I am happy to pursue it with you.
    Mr. Bachus. Take a look at what the GAO recommended--
    Secretary Lew. I will take a look--
    Mr. Bachus. --and the statutory language which encourages 
transparency and see if you can't give us some assurances. 
Thank you.
    Let me ask you this, you have been questioned about this 
IRS thing. You now know that there was a ``Be on the Lookout'' 
list that included Tea Parties, patriot groups, and Project 9/
12, which is Glenn Beck's group, and that it was maintained 
since early 2010.
    Now, in 2012, there were quite a number of press reports 
about this. And it is my understanding that in May, several 
people at Treasury were briefed. But then, as Chief of Staff of 
the White House, you were briefed in June and alerted by, I 
think, Mr. George.
    Secretary Lew. My first conversation on this with Russell 
George was March 15, 2013, after I became Treasury Secretary.
    Mr. Bachus. All right, now are you aware that last Friday, 
he testified that he briefed you?
    Secretary Lew. I think he testified that he briefed me in 
March 2013.
    Mr. Bachus. Actually, he says--he is talking about May and 
June 2012: ``I alerted Commissioner Shulman on May 30th. I 
subsequently alerted the General Counsel on June 4th, and 
subsequently alerted Deputy Secretary Neal Wolin about this 
matter. And then upon assumption into the division, I mentioned 
it to Secretary Lew--''
    Secretary Lew. But that was just March 2013. I was 
confirmed--
    Mr. Bachus. All right.
    Secretary Lew. --on February 27th.
    I think it is important to note that the fact of the 
ongoing audit was not a secret. It was publicly posted--
    Mr. Bachus. Sure.
    Secretary Lew. --on the Inspector General's Web site in 
October 2012.
    Mr. Bachus. And it was the subject of numerous newspaper 
articles back in March--
    Secretary Lew. But it was just the fact of the audit being 
undertaken.
    Mr. Bachus. Specific information that even Democratic 
legislators had leaned on the Administration to conduct 
investigations.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from New York, Mr. 
Meeks.
    Mr. Meeks. Thank you, Mr. Chairman.
    First, I just want to finish off where I ended in my 
opening statement. Because we have to make sure that we tighten 
up, but I just want to make sure that we don't lose the fact 
that some people abuse their tax-exempt status. And I stated, I 
had a specific example in mind.
    I talked about not only that a 501(c)(3) exemption requires 
that to be tax exempt under 501(c)(3) of the Internal Revenue 
Code, an organization may not attempt to influence legislation 
as a substantial part of its activities and may not participate 
in any campaign activity or against any political candidate.
    Now, 501(c)(3) is supposed to be more confined than 
501(c)(4). And I have a fund-raising letter from a 501(c)(3) 
organization. I will read a few lines:
    ``I am writing to ask for your help. We want to finish him 
off. Let me explain why this is so important. Barack Obama is 
President. The Democrats control Congress. Your gift would 
allow us to show that the Empress Pelosi has no clothes. And 
soon Barack Obama will have to take a stand. Your gift will 
help us expose the hypocrisy of Obama and his allies in 
Congress.''
    Is this letter okay from a 501(c)(3) organization, to send 
a fund-raising letter like this?
    But my point is I hope that in the face of the very real 
need to prevent any future overreach and targeting by the IRS, 
we don't lose sight of the important role of the IRS in 
answering questions like these that are also at the heart of 
the public trust.
    With that, Mr. Secretary, I am going to go to the issue at 
hand. I just wanted to make sure that--to let people know that 
the IRS has oversight over this, and it is important for all of 
the people to make sure that once you get the 501(c)(3) or 
(c)(4) designation, that they still should oversee those 
organizations and make sure they don't overstep their bounds.
    So, going to FSOC and the issue at hand, as I also stated 
in my opening, I am encouraged to hear that, while you have 
stated that there is need to implement Dodd-Frank quickly, you 
also mention the need to look at the system as a whole by 
crafting rules that are more tailored to institutions, rather 
than a one-size-fits-all regime.
    So, I am asking, what are your views on and what are your 
thoughts on bifurcating Basel III in order to make community 
banks more secure by establishing a simple cap ratio applicable 
to community banks in order to allow them to operate more 
effectively for our economy?
    Secretary Lew. Congressman, I think that the Basel III 
rules, which are now being worked on by the Federal Reserve 
Board, will, in all likelihood, based on public statements made 
by members of the Fed, reflect the differences in risk in some 
ways.
    So, there are capital surcharges for very large 
institutions already. I don't know where they are going to set 
the rates, how they are going to address it, but I think that 
there are important differences between small and large 
institutions.
    The thing that I think we have to keep in mind is that 
small and medium-sized banks are not without some element of 
systemic risk. And we were all focused on the financial crisis 
of 2008. But in the 1980s, the financial crisis was a savings 
and loans financial crisis. So, I think we have to look at risk 
not just as a question of size, but at the characteristics, the 
activities, and the exposure.
    We are very much aware of the fact that community banks 
play an important role in all of our States and in all of our 
communities. And I think the law has reflected that. And I 
think the regulators are attentive to it as they are writing 
their rules.
    Since they haven't completed their rules, it is difficult 
for me to address exactly how they will be taken into 
consideration. But I know that there is an effort very much to 
take it into consideration.
    Mr. Meeks. And also, in yesterday's testimony before the 
Senate Banking Committee, you mentioned that Basel III would be 
a floor as opposed to a ceiling. So, how will the 
implementation of Basel III pull up global standards 
everywhere, thereby reducing the risk that the United States 
faces by undercapitalized institutions from around the world?
    Secretary Lew. We have made a lot more progress than a lot 
of other countries since the financial crisis in terms of 
recapitalizing our financial institutions, in terms of putting 
liquidation authority and resolution authority in place. There 
is a lot of work to be done, and our financial stability is 
connected to the financial well-being of institutions that are 
regulated in other parts of the world.
    It has a lot to do with our ability to address some of 
these cross-border issues, also. We are not going to lower our 
standards to some other standard. We are going to have the 
world's standards at a higher level. And we are working in the 
G20 and in other bodies to try and bring world standards up. 
Basel III is a piece of that.
    Mr. Meeks. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Neugebauer.
    Mr. Neugebauer. I thank you, Mr. Chairman.
    Secretary Lew, welcome.
    In your previous life as the Chief of Staff for the 
President, I am sure you are aware that the President was not 
really fond of the Citizens United case. In fact, he is quoted 
as saying, ``The Supreme Court reversed a century of law that I 
believe will open the floodgates for special interests.''
    You may also be aware that some of the Senate Democratic 
leaders wrote in 2010, including Financial Services Committee 
Chairman Baucus and Senator Schumer, a call for the IRS to 
investigate conservative 501(4) organizations.
    At that time, did you or the President think that was a 
good idea, what the Senator suggested, that the IRS look into 
those organizations?
    Secretary Lew. Congressman, I am not familiar with the 
Senator's statement at the time, so I can't comment on that.
    Mr. Neugebauer. It was a letter that they sent to the IRS. 
You are not aware of that letter?
    Secretary Lew. I couldn't hear you.
    Mr. Neugebauer. Excuse me?
    Secretary Lew. I couldn't hear you, I'm sorry.
    Mr. Neugebauer. It was a letter to the IRS. You are not 
aware of the letter?
    Secretary Lew. As Chief of Staff, I would not get an IRS 
letter. You know--
    Mr. Neugebauer. I think it was fairly well-publicized. I 
don't think it was a big secret that they had written that 
letter.
    But let me ask you a question. Had you known about the 
letter, do you think that you and the President would have 
thought it was a good idea for Members of the Senate or the 
House to be asking the IRS to investigate or to audit 
organizations?
    Secretary Lew. My position has been, and always will be, 
that the IRS has to be beyond political reproach. There can be 
no question of political bias. There can be no question of 
political motivation. I think organizationally, it has to be 
set up that way, and in terms of how it is operated, it has to 
be that way.
    That is why we said it is so unacceptable that these 
practices happen. And there is no disagreement on criticizing 
the practices that are the subject of these questions.
    The question is, how do we fix it? We are committed to 
fixing it. And there are legitimate questions as to who 
qualifies for 501(c)(3) and 501(c)(4) status, but it has to be 
in a politically neutral way. There should be no element of 
bias in it. I have said that to Democrats. I have said that to 
Republicans. I said it before this set of facts became open.
    Mr. Neugebauer. Thank you, Mr. Secretary. You have said 
that before, and I agree. And I just would say that I think 
that America is going to be watching how you handle this, 
because I think people will define a lot of your service in 
that capacity.
    I want to move on to another question.
    As the Secretary of the Treasury, you are obviously 
governed by our laws, including the SIFI provision as set forth 
in Dodd-Frank.
    You are also one of the three representatives on the 
Financial Stability Board, which, I understand is about to 
finalize their designation of what we call GSIs. And given the 
policy that will be determined by this Board, versus what we 
are going to do with the SIFIs in this country, many of us are 
very concerned, particularly that some of our U.S.--or 
insurance companies could be disadvantaged by this designation, 
because this is a lot less transparent process than what is 
going on in the United States.
    Can you comment on--what you can assure us that we are not 
going to disadvantage domestic companies with a process that is 
going on that is not as transparent?
    Secretary Lew. Congressman, as we go through the review of 
whether or not to make these determinations, we are working 
with all the firms and understand they will have every 
opportunity to comment. It will be a process where they have 
full visibility into what we are doing.
    We have worked at the international level to try and have 
as much, as we can, common approaches. Obviously, it is more 
complicated in the international setting. It is very important 
to us in this and in all areas that we strike the right balance 
of protecting the U.S. economy. And sometimes, that means 
taking actions that may be higher levels of prudential concern 
than other countries are taking.
    What we are trying to do is convince them to raise their 
standards. We are trying to level the playing field, because it 
is in their interest and in our interest for us all to be 
comparably taking steps to make sure we don't have financial 
crises.
    The questions we are asking for these nonbank institutions 
really get at their interconnectedness to the broader question 
of financial stability. So, we are not stepping into the role 
of being a State insurance Commissioner. We are looking at 
whether or not there are levels of risk that warrant the 
designation.
    Mr. Neugebauer. I would just say that having different 
capital requirements for the people who are inside the box 
versus the people outside the box will cause some competitive 
disadvantage. Would you agree with that?
    Secretary Lew. I think that we need to make sure that we 
are addressing the statute's requirement that we do the review 
based on whether or not there is a material risk to financial 
stability.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Massachusetts, 
Mr. Capuano.
    Mr. Capuano. Thank you, Mr. Secretary, for being here.
    And thank you, Mr. Chairman, for having this hearing.
    Mr. Secretary, I want to associate myself with the remarks 
of Mr. Meeks and Mr. Neugebauer. I do agree with them. And I 
think the only difference overall between our side and their 
side is that we are willing to give you the benefit of the 
doubt that you are going to do the right thing, but you know 
the country is watching. All of us are watching, and you know 
that. And I have faith that you will do the right thing as we 
move forward.
    It also strikes me as not surprising that, had you not 
fired someone, today you would be criticized for not having 
fired someone. It is an interesting little box of cute little 
tricks to play, but I think it is worth pointing out.
    So either way, you were going to lose that argument, or at 
least be beat up a little bit. And I am not going to 
participate in that particular one. I will try something else.
    Mr. Secretary, I want to talk about what FSOC does, some of 
the things. Right now, as of today, almost all the money that 
was given out during the bailout and during the difficult times 
has been paid back. Almost all the money. The most glaring 
example of who has not is Fannie and Freddie. My numbers show 
approximately $187 billion of taxpayer money went to Fannie and 
Freddie, and none of it has been technically paid back, 
although $65 billion has been paid. And another $66 billion is 
about to be paid, which would represent about 70 percent of the 
overall.
    But that money is not allowed to go towards payment of the 
principal. It is my understanding that Treasury or FSOC could 
simply change the way that is accounted and allow them to pay 
off their debt, like everyone else was allowed. Every bank, 
every private company was allowed to pay off their debt with 
interest, by the way, and dividends. And I would like to note 
that every penny that has been paid back, the government has 
made a very good profit.
    I am not suggesting we shouldn't make one on Fannie and 
Freddie, but I am simply asking that as you move forward, you 
take a look within your own shop, your shop now, to make sure 
that we allow Fannie and Freddie, as they pay back, to be 
credited for that payment.
    If that happens it: number one, is the right thing to do; 
and number two, accepts reality. The reality is, they have paid 
back almost $130 billion of the money--or are about to do it--
that we have loaned them. And I think they should get credit 
for at least some of that. It is my understanding that that 
could be done internally in Treasury.
    I would like you to take a look at that and get back to us 
when you can, as to if you can, please do it. If you won't, 
tell me why. And if you can't, tell me what action we need to 
take.
    Similarly, to the FHA: The FHA right now, as you know, is 
probably, in this fall, about to have to take what is called a 
draw on Treasury, even though they have $30-some-odd billion 
sitting in the bank. And no thoughtful person thinks they are 
actually going to have to access taxpayer money. The law 
requires them to do it because they are below a certain 
percentage of their outstanding numbers.
    I think that is ridiculous. I think FHA should be allowed 
to draw when they need the money, but should not be required to 
draw when they do not. And I would like you to take--we are 
filing a bill on that. And at some point, I would like your 
response and your comments on whether that is a good move or a 
move that you would like to see amended.
    Would you like to go right ahead? I have one more after 
this. Go ahead, though.
    Secretary Lew. I am happy to get back to you, Congressman, 
on both issues.
    I would just say, very briefly, that the treatment of 
Fannie and Freddie was set up so that all of the profits go to 
the taxpayers--
    Mr. Capuano. Yes.
    Secretary Lew. --until they are out of conservatorship, 
until they have discharged all their obligations.
    I think that is a very high priority. And I am happy to 
follow up with you on the other question.
    Mr. Capuano. But, as it is currently done, they will not be 
able to get out of conservatorship because they will still owe 
us $187 billion at any given time. So, that is--
    Secretary Lew. On the FHA drawdown, I am also happy to 
follow up with you. But the economic significance of the 
difference is probably not as great as the description sounds, 
if they don't need to draw on it--
    And we are following prudent practices in the rules to make 
sure that FHA is able to continue functioning--
    Mr. Capuano. I totally agree. I just think that it 
distracts us from the real discussion of FHA.
    The last thing I want to talk about is derivatives. I know 
you had a discussion on the LIBOR issue. My understanding is 
the LIBOR issue might involve upwards--it has been reported of 
a $500 trillion market.
    I know that there is an international review going on. I 
have also read recently about another potential scandal. That 
is interest rates, but also in the interest rates swaps 
category, another $400 trillion of a market that may be the 
exact same thing by the exact same players.
    We are talking close to $1 quadrillion worth of a market, 
which is obscenely ridiculous. I had to look it up; it has 15 
zeros. I have never used the term ``quadrillion'' in public 
before. I hope to never do it again.
    I am not a scientist, so I don't get to count molecules.
    That being the case--and I apologize, my time is about up, 
but I would like to know at some point what FSOC is going to do 
about these scandals that are brewing.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from California, Mr. 
Campbell.
    Mr. Campbell. Thank you, Mr. Chairman.
    I will say ``quadrillion,'' just so that it is a bipartisan 
term.
    Okay. Secretary Lew, getting back to the IRS issue. The 
IG's audit determined there was targeting. Do you believe it is 
important to know why that targeting occurred?
    Secretary Lew. Congressman, I think it is important to hold 
accountable everyone who is accountable. That process is under 
way. We have a new acting Commissioner who is taking over 
today. That will be his first order of business, to make sure 
we know who made what decisions, whose behavior warrants--
    Mr. Campbell. But shouldn't they know why this occurred? 
Isn't that a logical question?
    Secretary Lew. It is very important, I think, that the IG's 
report noted there was no evidence of political pressure being 
brought to bear.
    I can tell you I think that there is no--
    Mr. Campbell. Okay. Okay. But, Mr. Secretary, the IG, their 
purpose was to determine whether it existed, not why.
    Now, because they didn't present any evidence in that 
report, does that lead you to conclude that there was no 
political involvement in this at all?
    Secretary Lew. I think, appropriately, we did nothing to 
interfere with an IG's report. The IG's report came out just 1 
week ago. There are ongoing efforts, with a new Commissioner 
coming in, to take a review of the personnel involved and to 
take any necessary--
    Mr. Campbell. So we should determine--
    Secretary Lew. I think--if I could just finish?
    Mr. Campbell. Okay.
    Secretary Lew. We have multiple hearings under way. We have 
the Department of Justice undertaking a review.
    So I think that there is an awful lot going on.
    Mr. Campbell. Including to determine why?
    Secretary Lew. Their review is whether or not there was any 
criminal activity.
    Mr. Campbell. Have you asked them to determine why? Because 
intent is involved in criminal activity and other things. 
Correct?
    Secretary Lew. I think we have said that it is unacceptable 
behavior. And those who participated in it will be held 
accountable.
    I think the fact that there is no evidence of any political 
involvement is very important. But it doesn't make the actions 
any less--
    Mr. Campbell. Just because there is no evidence now doesn't 
mean there isn't evidence out there we haven't found. Isn't 
that correct?
    Secretary Lew. I think the IG--
    Mr. Campbell. Are you trying to find that evidence, if it 
is out there?
    Mr. Secretary, if somebody robs a bank, it is reasonable to 
conclude that they did it for the money.
    Now, you can't assume they did it for the money, but it is 
reasonable to conclude they did it for the money.
    When someone targets organizations entirely of one 
political bent, it is reasonable to conclude that was the 
reason for doing it.
    Now, not--
    Secretary Lew. But--
    Mr. Campbell. --you can't assume that--
    Secretary Lew. When concerns like this arise--
    Mr. Campbell. --finding that out. Shouldn't you, as 
Treasury Secretary, overseeing the IRS, be trying to find that 
out?
    Secretary Lew. When concerns like this come up, the place 
you go is to the Inspector General to do an investigation. That 
is what has happened. That is what is ongoing.
    Mr. Campbell. Okay, but now it is out there. It is the IRS, 
it is within the Department of the Treasury. You are the 
Secretary of the Treasury. Don't you want to know why these 
people did this?
    Secretary Lew. Congressman, I have said many times and I 
will repeat: I am committed, and the President is committed to 
making sure we figure out what happened here, and holding 
people accountable for wrong behavior, and making sure it never 
happens again.
    So, of course, I care.
    But I also believe that it would be inappropriate to stand 
between an IG and an investigation or, for that matter, to 
interfere with other investigations, like criminal 
investigations.
    Mr. Campbell. Have you spoken to anybody in the Treasury or 
IRS about this, since you found out about it, in terms of, why 
were these people doing this? What were they trying to 
accomplish here?
    Secretary Lew. Congressman, I think that the facts will 
all--
    Mr. Campbell. Have you had any conversations like that?
    Simple question.
    Secretary Lew. Since this IG report came out, I have had 
many conversations about what steps we need to take. Step 
number one was getting the resignation of the Commissioner.
    Step number two was getting a new Commissioner. I am going 
to meet after this hearing with the new Commissioner. I haven't 
had a chance this morning to do so. But I will meet with him on 
his first day.
    Mr. Campbell. Have you learned anything you can share with 
us perhaps about the motivations for this?
    Secretary Lew. Congressman, I think we all have the same 
facts in front of us at this point. And we will cooperate with 
investigations, because we want to know the facts.
    What I won't do is I won't put any kind of political 
intervention in the review of an IG, and I won't put political 
intervention in the administration of the tax system, because 
the cure would be worse than the disease there.
    Mr. Campbell. That is good. We don't want political 
intervention now. But we need to find out whether there was 
political intervention then, because that is significant to--
    Secretary Lew. It is also significant that the IG found no 
evidence of any political pressure. So, we have no evidence. If 
there becomes evidence, that would be significant. But I can't 
respond to evidence that has not yet been uncovered. And there 
will be much time put into figuring out what happened here.
    Mr. Campbell. Then, let us uncover it.
    Thank you, Mr. Secretary.
    I yield back.
    Chairman Hensarling. The Chair now recognizes the 
gentlelady from New York, Mrs. Maloney, for 5 minutes.
    Mrs. Maloney. I would like to thank the chairman and the 
ranking member.
    And welcome, Secretary Lew, from the great State of New 
York. And the residents of that great State are very proud of 
your public service.
    Secretary Lew. Thank you.
    Mrs. Maloney. We are very proud of you. Congratulations on 
your appointment.
    In Dodd-Frank, there were a number of regulations that we 
called upon the agencies to come forward with. Could you bring 
us up to date on how quickly we are going to get these 
regulations into effect?
    Specifically, I am interested in three areas: the nonbank 
designation; the Volcker Rule; and the capital rule 
requirements.
    I, for one, do not favor legislating capital rule 
requirements. I think it is dependent on many changing factors.
    But could you comment on the Basel-required capital 
requirement of roughly 3.5 percent, which fluctuates, but also 
the new bill that has been put in the Senate, with Mr. Vitter 
and others that would require a 15 percent capital requirement?
    And, again, congratulations on your service.
    Secretary Lew. Thank you very much, Congresswoman.
    From literally my first day as Treasury Secretary, I have 
been putting an enormous amount of my time into stepping on the 
accelerator in the implementation of Dodd-Frank.
    I went from my swearing-in to the meeting of the Financial 
Stability Oversight Council, and chaired my first meeting 
within an hour of being sworn in.
    I have met with--we have had three FSOC meetings. I have 
met in between that with many of the regulators independently.
    I believe that the role of the Treasury Secretary as 
Chairman of FSOC is to continually keep the pressure on for 
action. And I have made the case to them, and I have made the 
case publicly, that we have to measure our progress in weeks 
and months, not years. We have to get to the end of 
implementing the regulations.
    I think it is important to take that a step back and to 
remember that one of the reasons for delay was that there was a 
political fight over repealing Dodd-Frank. We had an industry 
that was fighting with everything it had to slow down the 
implementation.
    And I think we are beyond that. I think there is now a 
consensus in the industry and, certainly, from the view of 
myself and other regulators, that getting Dodd-Frank 
implemented is a top priority.
    I think that will give stability, in terms of knowing what 
the rules of the road are, and then, like everything else that 
we do, it will require fine-tuning as we go along.
    One of the problems we got into between the Great 
Depression and 2008 is we went more than half a century without 
taking a hard look at what we had done. This is going to 
require constant attention. The financial industry evolves too 
rapidly to take 50 or 70 years off between taking a hard look 
at whether the tools we have are effective.
    On the nonbank rules, we are hoping to make determinations 
soon at the FSOC level. On the Volcker Rule, we have five 
agencies that are working together, I think trying very hard to 
come out with a common approach, which would be the best way to 
have clarity in the marketplace, and on capital requirements, 
the Fed is moving ahead and working toward finalizing 
regulations.
    From statements that have been made by Fed Members in the 
last few weeks, I think that they are working toward trying to 
create a system that gets as close as possible to meeting the 
concerns of small financial institutions, while being able to 
say that we have ended too-big-to-fail, and we are encouraging 
them to get to a conclusion as quickly as possible.
    Mrs. Maloney. Specifically on Volcker, I know that the 
institutions that I have the privilege of representing have 
already implemented the proprietary rule. They have moved out 
of their major headquarters, any proprietary trading into a 
different organization or stopped it completely.
    But could you speak a little more on the market-making rule 
that they are working on, on how do we maintain liquidity in 
the markets but at the same time have financial stability and 
safety and soundness?
    Secretary Lew. Yes.
    Mrs. Maloney. Many people are very concerned about getting 
that rule right, in order to keep our competitive edge as a--
    Secretary Lew. It is very important to get the rule right, 
because what looks like the same activity may be a very 
different activity. If you are a market maker and you need to 
have an inventory in order to play the role as a market maker, 
that is very different from taking a bet and buying with 
proprietor capital, a stake for yourself.
    So the rules are going to have to distinguish between the 
different reasons that financial institutions hold assets. They 
are working very hard on this. The definitions matter, the 
coordination amongst the agencies matter, and I will be 
reconvening those groups to make sure that all five agencies 
are talking to each other.
    Mrs. Maloney. Thank you. And GSC reform: where do you stand 
on that? No answer? Okay. My time has expired. Congratulations.
    Secretary Lew. Thank you.
    Chairman Hensarling. The Chair would like to yield the 
witness 10 minutes to speak on the matter--
    [laughter]
    But he won't. The Chair now recognizes the gentleman from 
New Mexico, Mr. Pearce, for 5 minutes.
    Mr. Pearce. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for being here.
    When I was in college, I had a professor of statistics who 
was making the point that I am sure everyone has heard, that if 
you put an infinite number of chimpanzees in a room with an 
infinite number of typewriters, they would eventually write the 
works of Shakespeare.
    And you are asking us to believe that you have an infinite 
number of IRS agents, conducting an infinite number of audits, 
and they all just happen to be conservatives. That is more 
preposterous, sir, than my statistics professor.
    The fact that I got an email before the story broke from a 
gentleman in Socorro, New Mexico, who had been singled out and 
he didn't know why he was singled out for an audit and there 
was nothing in the audit that said what it was about.
    But he noticed a handwritten name on the outside of the 
folder, and at the end of the interview, after no significant 
questions on his practices in his business, was asked if he 
knew that name. He didn't know the name.
    On the way home, he said, ``By golly, I think that is the 
guy who went to that meeting 3 years ago.'' He went to one 
meeting and he didn't much care for it--the Tea Party hadn't 
gotten organized, but it was the same guy who eventually who 
organized the Albuquerque Tea Party--went to one meeting, wrote 
a small check, maybe $25, and for that, 3 years later, he is 
picked out, and you want us to believe there are no political 
overtones. You don't find any political nuances to the 
situation, sir, and I find that to be an incredible situation.
    We are also told, as we have been told in many other 
scandals of this scandal-ridden Administration that the 
Administration had no knowledge. Just to run a few fast and 
furious, the Administration had no knowledge. We had an 
American border agent killed with rifles that were sent 
illegally into Mexico, a crime was committed. No one yet has 
been held accountable.
    Jon Corzine took $1.5 billion from segregated accounts in 
2011. And I hear you saying things like, ``I don't want to get 
in the way of the investigation.'' The facts have come out. At 
what point, sir, are you going to be suspicious that the facts 
won't come out?
    It was 2011, and Mr. Corzine has yet to be charged. And it 
is a crime to take out money from segregated accounts. We could 
take a look at the GSA conference, the DOJ tapping of AP 
phones. Maybe you are willing to talk about the DOJ tapping of 
Mr. John Rosen's phone and his parents. It was said he is a co-
conspirator. A co-conspirator says, ``guilty.'' And I wonder 
what his parents were accused of.
    So we are sitting here, today, understanding that this 
Administration had no knowledge of any of these circumstances. 
Not even of Benghazi. And we are to sit here, and take the--I 
think one of my colleagues said ``artful'' answers that you 
give--myself, I don't know.
    What I am going to ask about is the war on the poor in 
which this Administration engaged. In driving interest rates to 
zero, you are decimating the people who have no political--no 
financial sophistication. These are people who are 8 times more 
likely to have money in just bank accounts--the aging, the 
elderly. They are the people who come out to my town halls and 
say, ``I have lived my life correctly. I bought my home. I have 
a savings account. I was expecting that I could live on my 
savings, and now I am having to dip into it, because I get no 
interest every month.''
    This Administration continues to have its war on the poor, 
and the elderly, to the benefit of Wall Street, while you tout 
you are doing so much for the 99 percent when the case is 
exactly opposite.
    So I don't really have any great impression that you are 
going to answer any of the questions that come up today. I 
don't have any great impression that you will stop your war on 
the poor. Just know that we realize it is going on.
    New Mexico's $31,000 with our per capita income. We 
recognize a war on the poor when we see it.
    And I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Georgia, Mr. 
Scott.
    Mr. Scott. Thank you very much, Mr. Chairman.
    Welcome, Secretary Lew. It is good to have you here. I 
think that you have expressed your concern over this issue. The 
Administration is concerned over it. And we certainly look 
forward to you helping to move to a speedy conclusion of this 
IRS situation, for there is no more penetrating agency, that 
penetrates into the personal lives of the American people, as 
the IRS.
    And let me say that concern over this investigation goes 
for Democrats and Republicans as well. This is not a Democratic 
or Republican issue; this is an American issue. And the 
American people are expecting us to get to the bottom of it, 
and not politicize it, not score these political points.
    One of the things I do want to mention to you is that 
yesterday, in the Senate Finance Committee, former Commissioner 
Shulman mentioned that he knew about this investigation, that 
there were facts shown to him, but he did not take that 
information to higher-ups.
    The reason I mentioned this is because Mr. Shulman was a 
Bush Administration appointee, and Mr. Shulman served as the 
Commissioner of the IRS from May of 2008, I believe, until 
October of 2012, just 6 months ago.
    So my question is that in getting to the facts of this who 
knew what, when, wouldn't you think since the IRS is a agency 
of the Treasury Department, that the agency should have brought 
this to the Treasury Department when he knew of it? Shouldn't 
he have done so?
    Secretary Lew. Congressman, I think that the first line of 
responsibility here is the IRS Commissioner. The IRS 
Commissioner is in day-to-day contact with all of the different 
departments of the IRS, and fixing anything that is wrong in 
the IRS is a fundamental part of the IRS Commissioner's job. 
Making sure the system runs well is part of the IRS 
Commissioner's job.
    We are bringing in a new acting Commissioner today, and we 
are charging him with: first, making sure we find out who is 
accountable; second, finding out what went wrong; and third, 
being sure that anything that needs to be fixed is fixed, going 
forward.
    Mr. Scott. Right. The point I wanted to make is that--
because everybody is looking at where this goes. Does it go all 
the way up to the President? But it is very important for the 
record to show that his Commissioner, who was the Commissioner 
during much of the investigation, knew what was going on, and 
testified before the Senate Finance Committee yesterday that he 
did not take it to the higher-ups. That is important.
    Let me ask about Basel III, if I may--
    Secretary Lew. If I could just say one additional word on 
that, Congressman.
    I think it is important that--I didn't know there was even 
an audit until March 15th. I didn't know the results until it 
was final. The President found out about it when the report 
became public. If there was any sense of political involvement 
in any way, interfering with this investigation, that would be 
a real problem.
    And it didn't happen. So I think it is a good thing that we 
didn't know about the investigation that was going on.
    Mr. Scott. Right. Very good. Let me ask you about Basel 
III, if I may. What would you say are the likely effects that 
differences of implementation between the United States and 
other foreign jurisdictions of the derivative's credit 
valuation adjustment or the CVA capital requirement might have 
on American financial institutions and end-users of these 
derivative products? Do you share the concern of implementing 
Basel III requirements, and is this an issue that the FCO--OOC 
is already reviewing?
    Secretary Lew. Congressman, we are concerned with Basel III 
and with other areas of implementation of Dodd-Frank and other 
financial rules that we both do what we need to do to protect 
the U.S. economy from the kind of risks that we never want to 
see again, but also to work with our international partners to 
where we can harmonize standards and reach a level so there is 
a competitive level playing field.
    We have made good progress in the G20. We are working with 
our G8 partners. I have already been in many meetings with my 
counterparts at the finance ministry level and with central 
bankers. It is going to be a complicated undertaking. We have 
different legal systems. We have different standards.
    The thing that we have to be clear about is that our first 
obligation is to make sure that we make the U.S. financial 
system sound. And then, we work with others to bring their 
standards up.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from Florida, Mr. Posey.
    Mr. Posey. Thank you, Mr. Chairman.
    Mr. Secretary, how long was left on the term of the 
Commissioner whose resignation you sought?
    Secretary Lew. He was an acting Commissioner. His term is 
until he actually departs; he is a career employee. So there is 
not a term limit on his time as a career employee.
    Mr. Posey. So had it not been for this event, you expect he 
would have been Commissioner forever? Is that correct?
    Secretary Lew. Under the Vacancy Act, there was a limit in 
terms of how long you could have the title of acting--
    Mr. Posey. Yes, yes, and how long is remaining on that 
timetable?
    Secretary Lew. Because of the length of time, it was coming 
up sometime, I think, in June--
    Mr. Posey. Yes--
    Secretary Lew. --but the important fact--
    Mr. Posey. I only have 5 minutes--
    Secretary Lew. No, I need to answer your question, 
Congressman--
    Mr. Posey. I have some questions I want to ask you.
    Secretary Lew. He would have remained in the position that 
he had, with all the authority afterwards unless he resigned, 
which he did.
    Mr. Posey. I read your written testimony, and it says, 
``The strength of our financial system ultimately depends on 
the strength of our economy.'' You talk about the sequester 
having hurt confidence, which is a key driver of economy.
    And I just think everyone knows that spending more money 
than you make doesn't do anything to inspire confidence either, 
and proposing budgets that never balance doesn't do anything to 
inspire confidence either, and in plain English, I think that 
you might have recommended we try and do the budget process and 
not level it by C.R.s, and maybe send that message over to the 
Senate if you ever get to talk to them.
    You mentioned that job creation and economic growth have to 
be a top priority, and next to Obamacare, the biggest 
impediment to job growth in this country right now seems to be 
the overuse and overstepping of administrative rules that are 
killing more jobs than this Administration could ever begin to 
put in place.
    Last year, the Treasury wrote a rule that would require all 
banking institutions to submit to them the names of all 
nonresident alien depositors. The Mercatus Center said that 
could have an impact of over $88 billion, yet the Department of 
the Treasury never did a cost/benefit analysis, which is 
required of every agency who writes a rule with an impact of 
shafting the public for more than $100 million.
    Can we count on you to at least do a cost/benefit analysis 
before that rule takes effect and we have further financial 
harm to our country?
    Secretary Lew. Congressman, I am going to have to get back 
to you on that specific rule, and I am happy to do so.
    Mr. Posey. How long do you think it will be before you can 
get back to us, because we would really, really like to stop 
this thing in its tracks as soon as possible?
    Secretary Lew. In 2\1/2\ months, I have been involved in a 
lot of different matters. I haven't worked on that specific 
matter. So I will take a look at it and get back to you.
    Mr. Posey. Any idea how long it will take you to look at 
it?
    Secretary Lew. I am going to take a look at it, and get 
back to you, Congressman.
    Mr. Posey. I think in regard to Mr. Pearce's question, and 
before that Mr. Campbell's from California, you said there is 
an awful lot you would have to look into to answer Mr. 
Campbell's questions, but when the gentleman from Georgia, Mr. 
Scott, asked you, you didn't have any hesitation at all saying 
that there was no knowledge at the top about what was taking 
place. How do you make the distinction between the two answers?
    Secretary Lew. I know what I know. I know when I heard 
about this for the first time. I can answer with great 
confidence on that.
    Mr. Posey. Okay. In answer to Mr. Pearce's question, there 
is a pattern called: ``Admit nothing, deny everything, and 
blame everybody until it blows over.'' I think that would be 
the proper answer to your question, Mr. Pearce.
    Mr. Chairman, my time is about up. I yield back.
    Chairman Hensarling. Time has been yielded back.
    The Chair now recognizes the gentleman from Texas, Mr. 
Green.
    Mr. Green. Thank you, Mr. Chairman. I thank you and the 
ranking member for the hearing.
    I thank the witness for appearing today. And I also thank 
the witness for making note of those who are victims in 
Oklahoma. It is important that we not forget. Notwithstanding 
all of the other things that are on agendas, we should remember 
what has happened. And I assure you that at the appropriate 
time, I will cast my vote for aid to the victims in Oklahoma.
    I would also like to remind everyone that Dr. King called 
to our attention that on some questions we have to do that 
which is neither safe nor politic nor popular. Your not 
interceding in the audit may not have been safe, may not have 
been politic, and may not be popular, but it was the right 
thing to do. And you don't need validation when you are doing 
the right thing, Mr. Secretary. It was the right thing to do.
    Let us move on to page 5 of your testimony or your 
statement that you have provided. On page 5, you indicate under 
impacts of fiscal policy that, ``To guard against future 
threats to our economy and financial stability policy makers 
should avoid using last minute resolutions to fiscal policy 
matters such as debt ceiling and deficit reduction as a 
negotiating tactic.''
    I would like for you to elaborate on this, because as you 
know, we will again confront debt ceiling and deficit reduction 
questions. Would you elaborate on how this adversely impacts 
the economy, given that you have indicated that the economy 
needs confidence, the consumers need confidence, businesses 
need confidence? And would you elaborate on how this impacts 
the confidence factor?
    Secretary Lew. I would be happy to, Congressman.
    In 2011, we had a series of crisis-driven, deadline-driven 
negotiations that created a broad sense that there was 
dysfunction in our government, which undermined confidence in 
the business community in the United States. It undermined 
confidence amongst rating agencies. We saw, for the first time, 
a downgrade of the United States' credit rating, not because of 
our economic condition, but because of our political condition.
    I talk to people around the world in positions of 
authority, and it makes them very uneasy whether they are in 
businesses or making financial economic policy decisions, when 
the United States looks like it is in constant crisis.
    I think that if you look at 2012, there was some progress 
made. We saw less of the brinksmanship in 2012 than we did in 
2011. We saw issues getting addressed, and an attempt was being 
made to avoid having that kind of anxiety, which makes it 
harder for businesses to invest and harder to get the economy 
moving.
    We have to stay on a path where we do our business or 
Congress does its business. And on the debt limit, the 
President has made clear that Congress has the responsibility 
to raise the debt limit. Every bill that we owe, whether it is 
interest on a Treasury bill or whether it is a payment for the 
rent in a building that we lease, it is an obligation of the 
Federal Government, and for our entire history, the U.S. 
Government has paid its obligations.
    The way to control spending in the future and the way to 
reduce the deficits in the future, is to make sensible tax and 
spending policies. It is not to say, we won't pay the bills 
that we have already obligated. And that is why I think 
Congress just needs to pass the extension of the debt limit.
    Mr. Green. Thank you.
    Let us move quickly to one additional topic. You talked 
about how we have to concern ourselves with stability in terms 
of the Oversight Council. And I would like for you, if you 
would, to just explain very briefly how important it is to 
maintain FSOC, given that you have made a comment about too-
big-to-fail and how you see too-big-to-fail.
    So would you comment please on FSOC and how it will help us 
to maybe not eliminate but help us to keep taxpayers off the 
hook on too-big-to-fail issues?
    Secretary Lew. Congressman, FSOC is a kind of unique agency 
or council. It has some areas of direct responsibility, but 
mostly it is a coordinating role and as Chair it is to pull 
together the different actors in our quite complicated 
financial regulatory system to act in a decisive way and a 
coordinated way.
    I think that is very important. These are areas where if 
you have five regulators going off in five different 
directions, it could cause massive confusion and a large 
burden. I think that there is analytic work being done and 
shared that is very helpful, and I hope that, as Chair, I will 
play the role to help drive the process towards sensible 
decision-making in a timely manner.
    Mr. Green. Thank you, Mr. Chairman.
    I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Luetkemeyer.
    Mr. Luetkemeyer. Thank you.
    Thank you, Mr. Chairman.
    Thank you, Mr. Lew.
    One of the problems with being on the lower part of the 
totem pole here is that you wind up with a lot of questions 
which have already been asked, so let me just go through some 
things to just kind of clean up a couple of the questions that 
were brought up in my mind.
    One of the things is with regard to the investigation going 
on with--
    Secretary Lew. I apologize, I can't hear you because of 
the--
    Mr. Luetkemeyer. Okay. There we go.
    Okay, one of the questions that I hope that this afternoon 
when you talk to your new Commissioner and discuss with him 
this investigation, it is not only to have him investigate what 
Ms. Lerner and her group were doing with regards to the 
conservative folks in her tax exempt department, but also the 
request that was made by lots of folks with regards to the 
liberal groups and not investigating those.
    I have sent you personally about 3,000 documents and a 
request to investigate one. I sent you a letter last week to 
also, again, ask for this investigation to take place. That was 
3 years ago, and was never given any sort of anything but a 
stone wall over the last 3 years.
    So, I think that this investigation should be broader than 
just looking at conservative groups. It should be looked at on 
the lack of action with regards to investigating the liberal 
groups, and, as the gentlemen from New York said, the oversight 
that was supposed to be provided with regards to those 
activities.
    One of the questions that came up also with regards to SIFI 
designation, I know that in discussing a lot of the banking 
circles the definition is very concerning to them, from the 
standpoint that a while ago, you made the comment--I think it 
is in your testimony yesterday also--with regards to size. You 
also made the comment that perhaps the risk and the activities 
that they take should also be taken into consideration.
    So, do you have a preference in that, if, whenever you 
start looking at a designation for banks with regards to 
Systemically Important Financial Institutions whether it should 
be based on size or whether it should be based on risk of the 
activities they are engaged in?
    Secretary Lew. I think that size is one of the 
characteristics that suggests risk, but it is certainly not the 
only one. You can have a large institution that is very well-
capitalized and entirely safe. You can have a medium-sized 
institution that plays a role in the financial marketplace that 
is far in excess of its size--
    Mr. Luetkemeyer. Right.
    Secretary Lew. --and creates more risk. So I think it has 
to be a balanced approach.
    Mr. Luetkemeyer. I appreciate that, because I think that is 
the direction that we need to go.
    Following up on Chairman Hensarling's question a while ago, 
with regards to the kinds of questions that the IRS should be 
able to ask its citizens with regards to compiling their tax 
returns and investigating their activities, are you intending 
to go through the types of questions that are on some of these 
forms to try and winnow out some of these unnecessary and 
actually very intrusive questions with regards to getting into 
the private lives of individuals?
    Secretary Lew. I think that in terms of the facts that we 
have seen with regard to this set of determinations on 
501(c)(4)s, they clearly went to an unacceptable place, and we 
have made clear--I have made clear that we need to fix that.
    So it is going to be the job of the IRS Commissioner to 
take the lead on that, but it is something that I will continue 
to pay attention to, being respectful of the line between 
Treasury and IRS, not reaching into the administration of the 
tax system. Because frankly, I do think that would run the risk 
of politicizing things in a way that it shouldn't.
    So there is not--
    Mr. Luetkemeyer. Will you take him this message this 
afternoon, then, when you talk to him and say this was brought 
up in our committee today? That the kinds of questions you ask 
are more than intrusive, that there needs to be a streamlining 
of this process to get back to your finding out the facts of 
things--
    Secretary Lew. I will share the message, and my own view is 
we should only ask for the information that is necessary and no 
more.
    Mr. Luetkemeyer. Okay. Thank you very much on that.
    Following up on one other thing that is of concern to me 
with regards to FSOC, your organization has the responsibility, 
according to one of its purposes, to respond to emerging 
threats to the stability of the United States financial system. 
I fail to see in the report recommendations on things that 
happened to actually minimize those threats or find a way to 
keep them from happening in the future.
    For instance, regarding the London Whale situation, I fail 
to see where FSOC promulgated any new rules. With regards to 
the FED's Q.E. program, I see nothing in there that ever even 
mentions that. At what point are you going to support winding 
it down? Are you going to continue to support the quantitative 
easing program?
    My concern is that, and in response to some of your 
questions on these things, you kept saying, ``Well, it needs 
time to do this and do that.'' Mr. Secretary, it is kind of 
like a doctor waiting for the cancer to take over the patient. 
If we don't start doing something pretty soon on some of these 
things, it is not going to happen at all.
    Secretary Lew. If I could just respond very briefly.
    Chairman Hensarling. Briefly, Mr. Secretary.
    Secretary Lew. I think if you look at the report and the 
recommendations, it identifies the areas that FSOC believes are 
the areas of greatest risk. It does lay out for the next year 
the things that we should be looking at. And this will be an 
evolving list as we go forward.
    But take wholesale funding, for example. That is a big 
risk. There is a lot of activity to be had there. So I think we 
do go through and identify the big systemic risks and I would 
be happy to follow up.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from Minnesota, Mr. 
Ellison.
    Mr. Ellison. Thank you, Mr. Secretary.
    And I also thank the chairman and the ranking member.
    Mr. Secretary, I just want to make a comment. First of all, 
whenever you are dealing with institutions that involve human 
beings, things go wrong. Something went wrong with this 
situation. As a person who is probably on the liberal end of 
the political spectrum, I don't like the idea that somebody--
tea party people--got more scrutiny. I just want it even.
    But I will say this. The President denounced this. You have 
publicly disapproved of it. There has been an apology issued, 
which is shocking to me because you never see that. And I think 
that somebody ought to at least say there has been an apology 
and the President has promised to make sure that steps will be 
put in place to not have it happen again.
    I just want to say that because I think the truth is that 
you can't take the politics out of politics. No doubt somebody 
is going to try to turn this into some election gold. But I 
think it should be our interest in this body to make sure that 
if you are a 501(c)(4) organization, you in fact are a social 
welfare organization. And if you are not, then you cannot get 
that exemption.
    And there was more scrutiny on some of the tea party 
groups, but as I read the record in the press, they all got it. 
Now, that doesn't excuse anything, but it does mean to me that 
there are groups of various persuasions that are applying for 
this kind of exemption that shouldn't be getting it because 
they are not actually social welfare groups and actually are 
political in nature.
    I hope you will make sure that there are no political 
tests, but in fact that anybody who is actually trying to 
electioneer shouldn't get get this designation. I just want to 
say that.
    Secretary Lew. Congressman, I totally agree. There should 
be no bias. There should be an even standard. I am not aware of 
any bias in favor of groups on the other side. If that were the 
case, it would be wrong, and there has to be an evenhanded, 
unbiased system of administering our Tax Code.
    Mr. Ellison. That is right. And I just want to say that you 
all have said you are going to do something and I trust that 
you will. Please keep it up.
    I have a question of kind of a particular nature. In 
President Obama's last three budget submissions, the Treasury 
Department requested Congress to enact legislation to provide 
permission for State and Federal regulators of money services 
businesses to share information. Are you aware that has 
happened?
    Secretary Lew. I am generally familiar with it, yes.
    Mr. Ellison. Okay. I ask unanimous concent to enter into 
the record a Financial Crimes Enforcement Network budget 
request for Fiscal Years 2013 and 2014, with no objection.
    And so last month, Mr. Duffy from Wisconsin, Mr. Paulsen, 
my good friend from Minnesota who is no longer on the 
committee, but is on Ways and Means, and I introduced the Money 
Remittances Improvement Act.
    This bill incorporates the request for the President's 
FinCEN budget. I am eager to see the bill pass. And my hope is 
that it increases availability of affordable remittances to 
people in Somalia, because I have a large community from that 
region. In Minnesota, we have about 33,000 Somali-Americans and 
they need to send money home to sustain their families.
    Of course, we want you to protect the public from people 
who inappropriately use the money wiring system, but I really 
do believe that there is no better foreign aid than 
remittances? And I just hope that Treasury recommendation can 
recommend the bill and can help streamline the regulatory 
system.
    I just want to add this: Some bankers in my district have 
told me that the accumulation of regulations makes it expensive 
for them to facilitate these transactions that they do want to 
facilitate. U.S. Bank has agreed to try to make a way to do it. 
But at the end of the day, streamlining and consolidating some 
auditing would be helpful.
    If you could respond?
    Chairman Hensarling. Without objection, the gentleman's 
materials will be entered into the record.
    Mr. Ellison. Thank you, Mr. Chairman.
    Secretary Lew. Congressman, we would very much hope that 
some form of the provisions we have proposed that are similar 
to the proposals that you have made are included in 
legislation. Getting that balance right is very important; 
making sure that we screen out payments that are for bad 
purposes, for terrorist finance purposes is critical.
    But having a system in place that permits legitimate 
remittances and an either State or Federal law that ensures 
that would be very important.
    Chairman Hensarling. The gentleman's time has expired.
    The Chair recognizes the gentleman from Wisconsin, Mr. 
Duffy.
    Mr. Duffy. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here today.
    I have a quick question for you. When did you become aware 
of the allegations that the IRS is targeting conservative 
groups? When did you become aware that targeting was going on?
    Secretary Lew. Congressman, I have testified several times 
today on this. I am happy to do it again. I learned the fact of 
an investigation was under way on March 15th, but I did not 
know any of the details at that time.
    Mr. Duffy. Mr. Lew--
    Secretary Lew. I became familiar with specific details when 
it became public--
    Mr. Duffy. I want you to answer my question, okay? You are 
aware that there is a scandal going on right now in Washington 
about the IRS targeting Americans. You are aware of that 
scandal?
    Secretary Lew. Congressman, I have been testifying on it 
for 2 days.
    Mr. Duffy. That is right. So in regard to that scandal, 
when did you become aware that targeting of groups was going 
on?
    Secretary Lew. Congressman, I just answered your question.
    Mr. Duffy. No, you didn't.
    Secretary Lew. I am happy--I first saw the report a week 
ago--
    Mr. Duffy. Hold on a second, Mr. Lew. I am not talking 
about a report.
    When did you become aware in your capacity as a chief or 
any other capacity, that there was targeting going on of 
Americans? I am not asking about a report. I am not asking 
about the IG. When did you become aware that there was 
targeting of Americans from the IRS?
    Secretary Lew. Congressman, I had no fact that I was in 
possession of until the date--
    Mr. Duffy. I didn't ask you that. When did you become aware 
that the IRS was targeting Americans? No specific--
    Secretary Lew. I was notified on--
    Mr. Duffy. No IG report, when did you become aware--
    Secretary Lew. --March 15th that there was an investigation 
under way. I learned on the Friday before last--
    Mr. Duffy. Mr. Lew, I am not asking you about an 
investigation.
    Secretary Lew. --I learned last Tuesday the IG report 
recommendation.
    Mr. Duffy. Mr. Lew, I am not asking you about an 
investigation. I don't care--I know that you found out about 
the IG investigation on March 15th. Everyone here knows that. 
That is not my question to you.
    My question is: when did you learn that the IRS was 
targeting different Americans because of political views?
    Secretary Lew. Congressman, I had no knowledge until the 
date that I am describing. People can make all kinds of 
allegations, but I had knowledge as of the dates that I 
described.
    Mr. Duffy. So the first time that you heard about any 
targeting of Americans by the IRS was when you read the IG 
report? Is that your testimony?
    Secretary Lew. Congressman, you asked me--
    Mr. Duffy. Is that your testimony?
    Secretary Lew. --you are asking me when I knew. I answered 
when I knew.
    Mr. Duffy. No, you didn't answer. You did not answer my 
question. And you know what?
    Secretary Lew. I am not sure what you are looking for, 
Congressman.
    Mr. Duffy. I am asking a very specific question that you 
dodged, and our President has dodged. If you want to look back 
at the President's testimony, he received the same question 
that I just asked you, and what he said was, ``Let me answer it 
specifically. I learned about the IG report on this date.''
    I am not asking you or the President when you heard about 
an IG report. I want to know when you learned that the IRS was 
targeting Americans. When?
    Secretary Lew. And I am telling you when the facts were 
available to me.
    Mr. Duffy. Outside of the IG report? The first time you 
heard about it was the IG report?
    Secretary Lew. I had no facts until--
    Mr. Duffy. I am not asking about facts.
    Secretary Lew. What are you asking me?
    Mr. Duffy. I am asking you--
    Secretary Lew. I only testify on facts.
    Mr. Duffy. When did you learn that there the IRS was 
targeting Americans? When did you learn it? I am not asking you 
about specific facts.
    Secretary Lew. I will answer--
    Mr. Duffy. I am not asking about the IG. When did you know 
that this targeting was going on?
    Secretary Lew. You are not going to like my answer, because 
I learned about it when I learned about it.
    Mr. Duffy. When was that?
    Secretary Lew. I did not know there was an investigation--
    Mr. Duffy. I didn't ask you about an investigation.
    Secretary Lew. Well, I--what are--I didn't know--
    Mr. Duffy. I am not asking about an investigation.
    Ms. Waters. Mr. Chairman? Mr. Chairman?
    Secretary Lew. Congressman, you can ask me a question--
    Chairman Hensarling. The time belongs to the gentleman from 
Wisconsin.
    Ms. Waters. Mr. Chairman, I would ask that the witness not 
be badgered.
    Mr. Duffy. I would ask that the witness answer the 
question.
    Secretary Lew. Congressman, I am answering your question.
    Mr. Duffy. No, you are not. You keep saying--you are 
dodging me, because the bottom line is you knew before the IG 
report came out that the IRS was targeting Americans--
    Secretary Lew. Congressman, I am answering your question.
    Mr. Duffy. --and that is why you are answering the question 
the way you are--
    Secretary Lew. I did not know--
    Mr. Duffy. That is why the President--
    Ms. Waters. Regular order, Mr. Chairman, regular order.
    Secretary Lew. I did not know the facts until the dates 
that I--
    Chairman Hensarling. The time belongs to the gentleman from 
Wisconsin.
    Mr. Duffy. Let us try it again. When did you learn that the 
IRS was targeting Americans? When did you learn about--
    Secretary Lew. Congressman, I have said so many times that 
it is unacceptable behavior. That I learned on March 15th that 
there was an investigation, with no facts. I learned the facts 
a week ago Friday and then I saw the report last Tuesday.
    Mr. Duffy. America now knows. I reclaim my time.
    Secretary Lew. --saw the report on Tuesday.
    Mr. Duffy. I reclaim my time.
    It is evident that you knew before March 15th because you 
keep answering my question, because you don't want to lie to 
Congress that you knew about an investigation--
    Secretary Lew. I did not have any facts until the dates I 
am telling you of. I don't understand what--
    Mr. Duffy. Answer my question.
    Secretary Lew. --I had no facts until--
    Mr. Duffy. I am not asking about facts.
    Secretary Lew. What are you asking me about?
    Mr. Duffy. When did you learn--that is my question--when 
did you learn--give me the date--when did you learn, Mr. Lew, 
that the IRS was targeting Americans? Give me a date. When did 
you learn it?
    Secretary Lew. Congressman, I learned about this in the 
dates that I have told you about.
    Mr. Duffy. That Americans were being targeted or an IG 
report?
    Secretary Lew. Congressman, I was not aware of any of these 
facts until the dates I have told you about.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from California, Mr. 
Sherman.
    Mr. Sherman. Mr. Secretary, take a deep breath. You have 
earned it.
    Secretary Lew. I am fine.
    Mr. Sherman. I want to focus on a different tax scandal, 
since that seems to be what we are talking about, and that is 
our failure to collect taxes from multinational corporations. 
Apple computer is just an apple on top of the iceberg. It 
appears as if they have less than 4 percent of their assets, 
less than 4 percent of their sales, and less than 4 percent of 
their payroll in the Republic of Ireland but somehow have 65 
percent of their profits attributed to the Emerald Island. That 
is damn effective tax accounting.
    One view put forward by the Chamber of Commerce is, hey, we 
are just never going to be able to tax multinational 
corporations, U.S. corporations that earn money abroad are just 
never going to be paying taxes in United States, and we 
shouldn't even try and just let 'em repatriate their profits, 
because we do want the profits repatriated.
    The other approach--and I don't know if you are familiar 
with it--is the approach California took for many decades, and 
that is the worldwide unitary approach. And I wonder if I can 
count on you and your staff to take a look at that.
    You can be hated by the Chamber of Commerce--but you may 
achieve that on your own--and others, but it is actually a 
system that they cannot evade and would allow us to collect 
taxes on the appropriate percentage of worldwide income of all 
the multinational corporations that do business in the United 
States. I don't know if you have a comment on that--
    Secretary Lew. Congressman, if I could comment just 
briefly, when we laid out principles of tax reform last year, 
we tried to address this issue in terms of a conceptual 
approach. And we see business tax reform as being very 
important to lower statutory rates and make the United States a 
more competitive place to have businesses call home.
    But it also is a way of addressing this issue, because what 
we would do is we would put a minimum tax in place so that 
there is something of a hybrid system that you pay a minimum 
tax and then you could repatriate with no tax above that if you 
have paid the minimum tax on your foreign earnings in the first 
instance.
    And we would like to work--there are some other ideas that 
have been developed. I think, in fact, we have something of a 
hybrid system now. This would make it a little bit more closer 
to what you are describing, somewhere in the middle.
    Mr. Sherman. The worldwide unitary system is completely 
different, I think, than what you are describing. I hope that 
you will take a look at it--
    Secretary Lew. I am happy to look at the California--
    Mr. Sherman. And it is a system that California ultimately 
made optional because we faced such incredible pressure from 
the worldwide business community. But the Federal Government is 
a little more influential in world business decisions and this 
would be a system that would eliminate the 482 audits, would 
eliminate all the shenanigans, substantially increase--I think 
the best estimate is $1.2 trillion over the next 10 years. I 
know you spent a lot of last year focusing on trying to produce 
$1.2 trillion from many sources over a 10-year period. As to 
the tax issue--
    Secretary Lew. --it is still under way, I might add.
    [laughter]
    Mr. Sherman. I understand.
    As to the other tax issue that is being discussed here, I 
always wanted to be on the Ways and Means Committee and be at a 
hearing devoted to tax issues, 501(c)(4) secret super PACs can 
spend unlimited amounts of secret money influencing Federal 
elections, but they are subject to certain limitations. And I 
hope that we will enforce those limitations as the law 
requires, no matter how politically difficult. At the same 
time, we have to do it, obviously, impartially.
    Now, when a ship sinks out of negligence, you might be 
inclined to fire the admiral of the fleet, but the captain of 
the ship and even the officer of the deck ought to have some 
effect on their careers. Do you need additional narrowly 
crafted legislative tools so that those who are not 
Presidential appointees at the IRS--which is everybody but 
two--can face appropriate personnel action for the mistakes 
made in this case?
    Secretary Lew. Congressman, obviously, the rules that 
govern the treatment of Federal employees are the same for most 
agencies of government, so it is a broader question than just--
    Mr. Sherman. Let me just change--only in the IRS do you 
have a circumstance where many very top managers are civil 
service, and the question is--
    Secretary Lew. I am happy to--
    Mr. Sherman. --do we need take a look at that?
    Secretary Lew. --yes, one of the things that I have asked 
the new acting Commissioner to do is to look at--question 
structural organizational issues to see if there are changes we 
need. I don't want to jump to a conclusion, not having had that 
review, but I am happy to look at that.
    Mr. Sherman. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from North Carolina, Mr. 
McHenry.
    Mr. McHenry. Thank you, Secretary Lew, for your service to 
our government.
    Now, back to the IRS question--we have a few more 
questions. When you were White House Chief of Staff, I assume 
you were just as concerned about this then as you are today. Is 
that fair?
    Secretary Lew. What is the ``this?''
    Mr. McHenry. I am returning to the scandal within the IRS 
of the IRS targeting conservative groups. I assume--
    Secretary Lew. I wasn't aware of the issue of this 
investigation or to the facts that we have come to know. So it 
was not on my radar at the time.
    Mr. McHenry. So you were not aware of the IG audit at that 
time?
    Secretary Lew. No, I learned about the IG audit on March 
15, 2013, when I met with--
    Mr. McHenry. Okay. Were you aware of the internal 
investigation within the IRS prior to that?
    Secretary Lew. No, I was not.
    Mr. McHenry. Okay. So as Chief of Staff, did you hear news 
reports about the IRS targeting conservative groups?
    Secretary Lew. I was not aware of any facts at the time--
    Mr. McHenry. No, no, I am asking a separate question than 
what you are answering, and I have heard the answers you have 
given prior to that.
    So I don't want to talk over you, but I do want to restate 
the question. At the time you were Chief of Staff, did you read 
or hear of the allegation that the IRS was targeting 
conservative groups?
    Secretary Lew. I do not recall paying attention to this 
issue when I was--
    Mr. McHenry. No, no, I understand. Paying attention is one 
thing--
    Secretary Lew. I do not recall any articles that I read on 
the subject.
    Mr. McHenry. You don't recall--
    Secretary Lew. I have no recollection.
    Mr. McHenry. Okay. Okay. So did you--you don't recall 
anything. So therefore, you couldn't have pursued any 
allegations?
    Secretary Lew. If I don't recall having done it--obviously, 
one has to have the--
    Mr. McHenry. I am asking this question--
    Secretary Lew. If I take your--if I were aware of there 
being something that was being investigated in this way at the 
agency, I would have stayed out of it as Chief of Staff.
    Mr. McHenry. Okay, you would have stayed out of it.
    Just to be clear, you wouldn't have picked up the phone and 
called Chicago to say, ``By the way, just to put it out there, 
we are in a Presidential election year. We have a scandal at 
the IRS, an agency--
    Secretary Lew. No, that is not--
    Mr. McHenry. No, no, no, hold on. Let me finish. But you 
wouldn't have picked up the phone and said, ``Hey, guys, you 
know, this might be a political issue that the President might 
have to answer in, I don't know, a Presidential campaign 
debate.'' This is something which is fairly common, where the 
Chief of Staff communicates with the campaign, I assume.
    So to ask this question is not absurd, sir.
    Secretary Lew. But Congressman, if I wasn't aware of it, 
and I had no conversations at the time, you are creating a 
narrative that doesn't exist.
    Mr. McHenry. Okay.
    Secretary Lew. I just want you to know.
    Mr. McHenry. Okay, but you did that on other issues, as a 
good Chief of Staff? This is not new. I am not trying to catch 
you on something.
    Secretary Lew. Congressman, obviously, as Chief of Staff, 
you deal with many, many topics with many, many people. But you 
are asking me about a specific subject--
    Mr. McHenry. Okay, then, let me just move on--
    Secretary Lew. --answer. But if I can just say, though--
    Mr. McHenry. --and let me ask you this question, okay.
    Secretary Lew. --you created a narrative that--
    Mr. McHenry. My time is limited, sir, okay.
    Secretary Lew. Well--
    Mr. McHenry. Just to get this on the record.
    Secretary Lew. In fairness, you should give me at least 30 
seconds to respond.
    Mr. McHenry. Sir, you haven't actually responded to any of 
these questions in a meaningful way, so 30 seconds won't 
actually apparently mean anything because you are reciting the 
same line over and over again.
    So while you were Chief of Staff, did anyone at the White 
House or in the Executive Office of the President ever suggest 
the IRS or Treasury--that the IRS should focus additional 
scrutiny on the application of conservative groups?
    Secretary Lew. I am--not that I am aware of.
    Mr. McHenry. Okay. We are just asking these things to 
certainly understand where things stand.
    So while you were Chief of Staff, did anyone in the White 
House or in the Executive Office of the President meet with or 
in any way communicate with Members of Congress regarding these 
letters that Members of Congress sent on the left to say target 
conservative groups on the right, raising concerns about the 
targeting of conservative groups?
    Secretary Lew. Not that I am aware of.
    Mr. McHenry. Not that you are aware of.
    Okay, so to remind you sir, in March of 2012, the 
Associated Press and the New York Times ran stories about this 
allegation. You were then Chief of Staff. And is it your 
testimony here today that you were never aware of those 
allegations raised in those two news organizations?
    Secretary Lew. I have already testified that I have no 
recollection of it.
    Mr. McHenry. No recollection.
    Okay, so when Commissioner Shulman of the IRS testified 
before Congress in March of 2012, and these questions were 
posed to him, he said, ``There has been a lot of press about 
that.'' And your testimony today is that as White House Chief 
of Staff, you didn't know about it.
    So the final question I have for you is that--
    Secretary Lew. Congressman? Congressman, if you would give 
me the 30 seconds that I think I deserve to respond. It would 
be inappropriate--
    Mr. McHenry. Hold on. I ask unanimous consent that the 
gentleman have 30 seconds. So understand that Democrats are 
objecting to their witness.
    Chairman Hensarling. The time of the gentleman has expired, 
and the Chair will take the liberty of, without objection, 
offering our witness 30 seconds to comment.
    Secretary Lew. Thank you, Mr. Chairman.
    Chairman Hensarling. The gentleman has objected.
    The Chair recognizes the gentleman from Massachusetts, Mr. 
Lynch.
    Mr. Lynch. Mr. Secretary, first of all, thank you for your 
willingness to come before this committee and help us with our 
work.
    Why don't I yield you 30 seconds and you can finish your 
answer?
    Secretary Lew. Thank you, Congressman.
    I think the fundamental issue here is there is separation 
in the enforcement administration of our tax system so that it 
is supposed to be insulated from political involvement. It 
would be inappropriate as White House Chief of Staff, or as 
Secretary of the Treasury, to try to put any political pressure 
on our tax system.
    I never did, and I never would. And that is why I didn't 
pay an awful lot of attention to questions of the 
administration of our tax system, because it wasn't something 
that I would have intervened in. There is intentionally a 
separation so that the tax system will not be biased. And I 
think that what the President has made clear, what I have made 
clear is that this behavior is unacceptable. We have to find 
out the facts. We have to take action where people need to be 
held accountable, and we have to make sure it never happens 
again.
    But, please, let us not get into a world where we start 
having the White House jump in for the administration of our 
tax system, because that will be a cure well worse than the 
disease.
    Mr. Lynch. I thank you.
    And in fairness--you know what? I just think that the 
circumstances here are sort of politicized, anyway, when the 
IRS has conceded the fact that they did use political terms, 
such as ``tea party'' and ``patriot.'' And any group critical 
of how the government is being run, those were the standards 
that they were using.
    So, I guess the circumstances sort of invites this type of 
accusation, but I accept and I agree with your answer, Mr. 
Secretary, again.
    I would like to ask you more about what we have been doing 
in this committee; 2 weeks ago, this committee passed a set of 
bills amending Title VII of Dodd-Frank. And I believe those 
provisions significantly undermine the high port reforms to the 
over-the-counter derivatives market we achieved in Dodd-Frank.
    A GOA report earlier this year estimated that the cost of 
the financial crisis was about $22 trillion, and that the 
opaque and largely unregulated derivatives market was at the 
heart of the crisis. And now, not even 5 years after those dark 
days, we are, in this committee, I believe, planting the seeds 
for the next crisis.
    And before any of the regulations mandated under Dodd-Frank 
to reform the derivatives markets have been finalized, this 
committee has passed what are being called ``technical fix'' 
bills to prevent those reforms from ever happening.
    I read last week that former Chairman Sheila Bair talked 
about the original push-out provision of Section 7-16. And, Mr. 
Secretary, I know that you sent a letter prior to this 
committee's markup of those bills urging us not to advance that 
legislation, calling it premature, disruptive, and harmful to 
the implementation of key derivatives reform.
    Could you explain to this committee why these bills, in 
your opinion, are destructive to our economy and to meaningful 
Wall Street reform?
    Secretary Lew. Congressman, I think it is very important 
for the regulators who have been given authority to implement 
these revisions and for that process to be completed.
    Many of the concerns--some of the concerns that are raised 
in the legislation actually are going to be addressed, as I 
understand it, as these rules are forthcoming. Not necessarily 
all, but the legislation is premature because we haven't yet 
had the opportunity to complete the process.
    In the first 2 years of Dodd-Frank's history, the fight 
was, should it be repealed, or should it be implemented? It 
slowed down the implementation process. And then, at the end of 
2 years, there were concerns that there was uncertainty because 
the rules were not yet in place.
    Our first responsibility now is to make sure we get all the 
rules in place, we get that certainty, and I think we are now 
at a point where the financial industry actually would like us 
to complete the regulations. They are not in the place they 
were in fighting for repeal. And we just need to finish the 
work.
    And I am committed with regard to the entire implementation 
of Dodd-Frank to really keeping the pressure on all of the 
different parties, as Chairman of FSOC, to keep making 
progress. And I can't say exactly when the process will be 
completed, but we are moving, and we are well on our way, and 
we are going to make a lot more progress this year.
    Mr. Lynch. I seem my time is just about expired. I yield 
back.
    Chairman Hensarling. The time of the gentleman was about to 
expire.
    The Chair now yields to the gentleman from Michigan, Mr. 
Huizenga.
    Mr. Huizenga. I appreciate that, Mr. Chairman.
    Chairman Lew, I appreciate you being here. And maybe we can 
use a slightly different section of your briefing book, or 
maybe not use the briefing book at all, and discuss a few other 
issues.
    But I do--I was hearing your answer to my colleague about 
implementation and the uncertainty being out there. And I just 
have to tell you, I don't buy it.
    It is pretty clear that this Administration would veto any 
attempt that--as much as I might desire eliminating Dodd-Frank 
and starting over and fixing it a different way, it seems to me 
that this Administration would be pretty clear on a veto 
message on that.
    And how in the world that would stop you all from 
implementing the rules--now, I would say that it is probably 
because this monster is so massive and has so many problems 
with it that you have realized that you can't go in and 
implement it the way that it is currently written.
    And frankly, 2 weeks ago, we had 9 bills that moved through 
here. All but one of those were in a bipartisan fashion--fixing 
derivatives.
    Last year, I had a bill signed into law by the President. 
That was fixing an issue with the CFPB in privacy. We have a 
myriad of other bills that are going to go in. We had a hearing 
yesterday on conflict minerals and some of the issues and 
problems that are there.
    These are bipartisan fixes, trying to address this problem. 
And I will note that you sent a letter opposing all nine of 
those bills that were passed, and eight of those nine were 
passed in a bipartisan fashion.
    So, how you can blame Congress, or one side of the aisle or 
the other for a lack of progress seems to be a stretch to me. 
And you had mentioned on LIBOR--you were asked earlier about 
LIBOR. And your quote was: ``It was a tremendous violation of 
trust.'' I think you are sensing a lot of the frustration, not 
just up here, but in the general public.
    There is a feeling and a frustration that there is not 
trust, and that things have been politicized in the budget 
process, in the regulatory system. And I have a specific one 
that just came to light to me, which I thought was interesting.
    OMB--and I know you are former--it is not maybe under your 
current bailiwick, so please give me some insight, if you 
could, OMB has decided that FASB, GASB, PCAOB, SIPC--all these 
other regulatory advisors and those kinds of things--they are 
subject to sequester. Under Section 109 of Sarbanes Oxley, it 
distinctly says that these are not Federal dollars. These are 
user fees that are coming in and fees that are paid into these 
organizations.
    And the frustration is that it seems like every time this 
Administration has come to a fork in the road, and one 
direction is making some very tough, difficult decisions--I 
understand it. We are having to do that in our own personal 
offices.
    We are having to do that in our own personal lives. Every 
business in America that I am aware of is having to make those 
tough, difficult decisions. But making it work, or politicizing 
it and trying to make it painful, it seems that this 
Administration has gone with the painful route.
    Shutting down the White House for spring break, FAA--
whatever it might be. And just to give you a little sense, that 
is a sense of frustration. And I know this is sort of an 
archaic element, and you might not be specifically aware of it, 
but why the OMB would come in and tell these organizations that 
they are somehow subject to the sequester just is baffling to 
me.
    Secretary Lew. Congressman, I can't address the specific 
facts around those decisions, but I do know that OMB has just 
been calling these issues on a straight basis. But they are--
you either do or don't get covered--
    Mr. Huizenga. I think the real problem is that the--
    Secretary Lew. Sequestration was designed to be a bad 
policy to force Congress to act, so no one should be surprised 
when it--
    Mr. Huizenga. Put out by the Obama White House, I might 
add.
    Secretary Lew. It has--it was designed to get Congress to 
act.
    Mr. Huizenga. Okay. So, please point out to some of your 
colleagues Section 109 of Sarbanes Oxley. That would be 
helpful.
    Page 13 of your report, the chairman had talked a little 
bit about this with the Housing--my background is real estate, 
construction. I, too, am baffled as to what HUD and FHA--
continue to work with Congress and other stakeholders.
    There has been radio silence. Other than the White Paper 
that was talked about, it is been radio silence from this 
Administration on what we are going to do and what direction we 
are going to go with our GSEs. And that, in my mind, needs to 
change. Take 15 seconds if you want to address that and what we 
are going to do.
    Secretary Lew. I don't know that I can do it in 9 seconds, 
but it is an important subject. We look forward to making 
progress on it in a bipartisan way.
    Mr. Huizenga. But how can you claim that you have been 
working with us when you haven't been?
    Saved by the bell. Okay.
    Chairman Hensarling. While the Chair is also curious, the 
time of the gentleman has expired.
    I wish to alert all Members that, in agreement with the 
Secretary's schedule, I believe we will be able to clear four 
more Members, and then we will excuse the Secretary.
    The gentleman from Colorado, Mr. Perlmutter, is recognized.
    Mr. Perlmutter. Thank you, Mr. Chairman.
    I thank you, Mr. Lew, for being here. You have stayed a lot 
cooler under fire than I was just a moment ago.
    And I want to thank my friend Mr. Lynch for granting you 
those 30 seconds to explain your position, because I would have 
given you the 30 seconds. But I think this committee is better 
than the badgering that I have seen you undertake or you have 
had to face today.
    So, let us just talk--since we have talked so much about 
501(c)(4), I think we ought to read what 501(c)(4) says. It 
says, ``An exempt--an organization described in Section C or D 
of Subsection 401 shall be exempt from taxation under this 
subtitle''--this is 501--``lest such exemption is denied under 
Section 502 or 503.''
    You come down to 4--is says, ``Civic leagues or 
organizations not organized for profit, but operated 
exclusively for the promotion of social welfare or local 
associations or employees, a member of membership of which is 
limited to the employees of a designated person or persons in a 
particular municipality, and the net earnings of which are 
devoted exclusively to charitable, educational, or recreational 
purposes.''
    So, the IRS has an obligation to look at exemptions that 
people request. Most people are paying their taxes. Most 
Americans are out there paying their taxes, but there are 
certain people who seek exemptions under 501(c)(4). But those 
have to be scrutinized. They have to be scrutinized 
impartially, but they have to be scrutinized.
    There was an article this week in The Denver Post. It says, 
``A Colorado conservative group believed to be targeted by the 
Internal Revenue Service is operating without any tax exempt 
status and spent more than $1 million last year against 
Democrats, public records show.'' I was one of those Democrats 
who was the recipient of some of the ads, apparently, of this 
organization.
    In an editorial in the Post this weekend by Curtis Hubbard, 
I want to read one section, ``So-called 501(c)(4) social 
welfare groups have increasingly been putting money into 
political campaigns. Their spending increased from about $40 
million in 2004 to upwards of $150 million in 2008, according 
to the Center for Responsive Politics. But the real boom came 
after the Supreme Court's Citizens United ruling in 2010, as 
the groups' campaign spending soared beyond $300 million in 
2012. Much more is believed to have been spent, but the groups 
are only required to report on spending in the 60 days leading 
up to the general election and 30 days prior to a primary.''
    Many 501(c)(4) nonprofit ``social welfare'' organizations 
are simply fronts for political operations that provide 
anonymity to donors, and with anonymity comes a lack of 
accountability.
    So the IRS, in my opinion, whether it is an exemption for 
this or some other kind of an exemption, has a responsibility 
on behalf of the taxpayers to look at these things. Do it 
impartially, obviously, that has been much of what the 
conversation has been about. But specifically here, when it 
talks about civic leagues or organizations operated exclusively 
for the promotion of social welfare, not for political 
purposes.
    So despite all of this tempest that we are in right now, 
sir, I would ask that the IRS continue in an impartial way to 
look at these particular exemptions. So, that is just my point 
on that. I think one of the reasons we are so off on this 
subject is because since Barack Obama took office, the stock 
market has doubled, unemployment has dropped, inflation is low, 
real estate is selling. So let us not talk about those things, 
let us talk about this--potentially two people in Cincinnati. 
Let us devote all the time to that.
    One of the things that came up last week that particularly 
disturbs me is a bill the Republicans are pushing which 
prioritizes the country's debts. The country has, since its 
inception, paid everything pari passu equally. And now they 
want to start prioritizing it, which means we are not going to 
pay somebody.
    I hope, Mr. Secretary, that under your watch, we pay 
everybody pari passu, and I would like you to comment on that 
bill.
    Secretary Lew. I couldn't agree more that there is no 
distinction between defaulting on one or another obligation. If 
you are in default, you are in default. And prioritization 
doesn't solve that problem. You need to extend the debt limit.
    Mr. Perlmutter. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from New York, Mr. 
Grimm.
    Mr. Grimm. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for being here today.
    It is been a bit contentious and I know it is not an easy 
day for you. But I am going to start with going back to an 
unpleasant area, and then I will move on to other substantive 
issues.
    When was the last time you spoke with the four individuals 
who were testifying in the other committee today--Lois Lerner, 
Russell George, Neal Wolin, and Doug Shulman?
    Secretary Lew. I have never spoken with Lois Lerner. I met 
with Russell George several weeks ago. And I haven't--Neal 
Wolin is my Deputy, so I see him every day. And I haven't seen 
Doug Shulman since sometime before he left the IRS.
    Mr. Grimm. The few conversations that you did have, was any 
of that about testimony or about the situation--the scandal?
    Secretary Lew. I have testified already that Russell George 
on March 15th informed me that there was an audit under way, so 
I spoke with him about it then as he reviewed a number of 
pending matters. He didn't give me the details. He did give me 
a heads up that it could be troubling, but I didn't know in 
what way.
    I haven't spoken with him. He may have been at a staff 
meeting after that, but I haven't spoken with him since.
    Mr. Grimm. Thank you. You have clearly testified that you 
didn't want to get involved in an investigation, and I think 
that is the proper and prudent policy to have. Stating that, 
there were people in the White House who knew there was an 
investigation, there was a problem. There were people in 
Treasury who knew prior to you and the President finding out.
    In retrospect, again not saying that you had to take 
action, but do you think you should have been notified that 
there was a problem?
    Secretary Lew. Congressman, I really believe that on a 
matter like this, the general practice that is followed at 
Treasury is the right one, which is that the Secretary is not 
brought into the conversation on an IG report until there is a 
final report. Reports go through changes in degree and 
direction--
    Mr. Grimm. But even before--if I may, Mr. Secretary--
though, but prior to the IG report, wasn't there an internal 
investigation at the IRS?
    Secretary Lew. I am, obviously, while I have been at 
Treasury, there has not been anything that--
    Mr. Grimm. But I am asking you in general, now that you are 
the Secretary, what is your policy going to be? In other words, 
you have a new Commissioner that you spoke about--
    Secretary Lew. Yes, we have a new Commissioner, and I will 
be meeting with the new Commissioner this afternoon.
    Mr. Grimm. Right. So will you be telling your new 
Commissioner that if something like this arises, you want to be 
notified?
    Secretary Lew. Just to be clear, I think that as a general 
matter, the Treasury Secretary needs to have visibility into 
the general management of the IRS. But the Treasury Secretary, 
for all kinds of appropriate reasons, does not intervene in the 
administration of the tax system. So there is a fine line 
there, and I think it is very important to honor that line.
    Mr. Grimm. But I am specifically asking you if there is a 
problem such as something that arises to this level--this is 
probably one of the biggest scandals in the history of the 
IRS--are you going to advise your Commissioner--is it going to 
be your policy that if there is a major problem going on, you 
want to be advised of it or not? That doesn't mean you will 
take action, because maybe for political reasons you would say, 
just as the attorney general did with Mr. Corzine, he recused 
himself, but he knew what was going on.
    Secretary Lew. Congressman, if in fact either I or the 
President had known some of these facts earlier, you would be 
asking me, ``What did we do?'' It is a very fine line to 
preserve information and the ability to make sure that there 
is--
    Mr. Grimm. I agree. But I am asking--because it is such--
    Secretary Lew. I think we are going to have to work our way 
through, in an agency like the IRS that has a delicate balance 
between being part of Treasury, but an independent, having the 
right line.
    Mr. Grimm. But with all due respect, you have to still have 
a policy--
    Secretary Lew. And I am going to meet this afternoon with 
the new acting Commissioner--
    Mr. Grimm. I am just asking you--I am not saying whether it 
is good or bad, I am just asking you what your policy is going 
to be now that you have a new Commissioner. In light of what 
has happened, what will your policy be?
    Secretary Lew. My policy will be to hold the IRS 
accountable and make sure the IRS holds people accountable for 
their behavior, to make sure that we find out what happened 
here in terms of the breakdown of the management, of the 
communication of the IRS to permit it, and we look to see 
whether there are systemic problems.
    On an ongoing basis, I will work with the new Commissioner 
to make sure that I have visibility into that which is 
appropriate, but I will stop short of intervening in the 
Administration of the tax system.
    Mr. Grimm. Again--
    Secretary Lew. And that is going to take some--
    Mr. Grimm. --okay, I want to move on, but again, 
intervention is different than knowledge. I have asked that 3 
or 4 times. You just won't answer the question. That is fine. 
Let is just move on.
    Mr. Secretary, I am hearing that the Treasury is thinking 
about floating variable rate notes. I have a big problem with 
that. Is that true, first of all, that the Treasury is 
considering floating variable rate notes?
    Secretary Lew. I just wanted to double-check. There is a 
proposal that is out from I think several weeks ago.
    Mr. Grimm. My time has expired.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from Delaware, Mr. 
Carney.
    Mr. Carney. Thank you, Mr. Chairman. Thank you for having 
this hearing today.
    And thank you, Mr. Secretary, for coming in, and for your 
answers to the questions.
    I am going to try to focus--first, a comment about what you 
have said. As a former Secretary of Finance at the State level, 
whose responsibilities or whose jurisdiction included tax 
administration, I certainly appreciate your kind of hands-off 
approach to that administration of taxes, and understand why it 
is necessary for the political appointee at a place like 
Treasury or where I served.
    I would like to ask you a few questions about your role as 
Chair of the FSOC. And the first one is, we hear a lot, we hear 
it in this committee, we hear it from folks on the other side 
of the aisle, and we hear it from people who come in that too-
big-to-fail still exists. What would you tell folks who say 
that?
    Secretary Lew. Congressman, I think the challenge we have 
is to be able to get to the end of the implementation of Dodd-
Frank and then answer that question by saying, ``too-big-to-
fail is over.'' That is what the policy of Dodd-Frank is. That 
is our policy in terms of implementing Dodd-Frank.
    We are not yet at the finish line. So, I think that there 
is a challenge if you take a snapshot today and you look ahead. 
I think if you look at the debate that has taken place over the 
last number of months, there are different approaches to what 
additional actions are needed. There is authority in Dodd-Frank 
to turn a number of dials to different levels in terms of 
capital requirements, in terms of leverage requirements.
    And until that process is complete, it is going to be a 
little challenging to answer it in the present tense. But I 
certainly hope the answer, and I intend for the answer to be 
that too-big-to-fail is over.
    Mr. Carney. Our former chairman and ranking member, Mr. 
Frank, would argue that the Orderly Liquidation Authority 
effectively ends too-big-to-fail.
    Secretary Lew. Yes, but it makes it so we don't have the 
authority to do it.
    Mr. Carney. Right, right. The second question I would like 
to ask you, and you have been asked about it a little bit, is 
about housing finance reform. Your report talks about allowing 
the GSEs to wind down and to try to encourage and get more 
private capital into the mortgage market.
    A few weeks ago, we had a presentation here in committee by 
a guy by the name of Jim Millstein, who has worked kind of on 
the details of that. Treasury has a paper that was presented 
here in committee about a year or 2 years ago that described at 
a very high level three options.
    Mr. Millstein has put the meat on the bones of what was 
option number three, kind of a hybrid where there would be a 
more limited Federal role, a specific guarantee, reinsurance, 
actually, like the FDIC. Have you seen that proposal? And if 
you have, what do you think about it?
    Secretary Lew. I have seen it, and I have actually asked my 
staff to do an analysis of it. We are in an ongoing process 
working through what the next steps should be, and we welcome 
the contribution to the debate.
    Mr. Carney. Yes, I would love to see your staff's analysis 
of that and any concerns and issues that are raised by it. It 
is very intriguing to me. I have met with Mr. Millstein and his 
staff. He was here in front of the committee. And it seems to 
work out, basically that option three that is included in the 
Treasury White Paper of a couple of years ago.
    Secretary Lew. Obviously, the challenge as we go forward is 
going to be to strike that balance so that we maintain access 
to mortgages, 30-year mortgages, and we avoid having 
institutions get back into the place where they fell back on an 
implied guarantee that created the financial crisis.
    Mr. Carney. And that was exactly his advice and to be 
careful, frankly, about the transition from where we are today, 
where more than 90 percent of mortgages are being federally-
insured, which is a really bad situation.
    Secretary Lew. Either directly or federally.
    Mr. Carney. Right, right, right.
    Lastly, my first term in the last Congress, I sent a letter 
that was signed by other Members encouraging Treasury to be a 
little bit more aggressive with foreclosure prevention programs 
that you have. In particular, the one that is most effective in 
our State, the State of Delaware, is HAMP, and our local 
officials at the State housing authority have used it, and it 
has been very effective in helping keep people in their homes.
    And I would just encourage you do that. I would be happy to 
resend the letter or talk to your staff about it for a minute, 
if you would, on your approach to foreclosure prevention.
    Secretary Lew. Congressman, I think we have made progress, 
but we still have a lot more to do. I think that both HAMP and 
HARP have done a lot of good directly, but they have also 
indirectly created a set of practices that the private sector 
has stepped into.
    So we have seen six-plus million homeowners be able to 
refinance or restructure. We have more work to do, and we have 
to take advantage of this time when interest rates are low to 
make as much progress as we can for middle-class homeowners.
    Mr. Carney. Thanks very much. I look forward to hearing 
more about it.
    Chairman Hensarling. The last Member to be recognized will 
be the gentleman from Indiana, Mr. Stutzman, who is recognized 
for 5 minutes.
    Mr. Stutzman. Thank you, Mr. Chairman.
    And thank you, Mr. Lew, for being here today. I do want to 
just make a statement, then I have another question.
    This audit of the IRS started roughly over a year ago. You 
were the Chief of Staff at the time. I hope that you will give 
us confidence as we moved through this and as more details come 
out that, as the leadership of the White House, that if this is 
one of the biggest scandals that this Administration or the IRS 
is dealing with, that you should have known about it.
    Leadership expects to know about these things, and if you 
say that you only knew of the facts on March 15th, I hope that 
you are asking the people below you, ``Why didn't I know about 
this?''
    Because I read in a report that you said that you were 
outraged when you heard of the facts. And if this is the 
biggest scandal that this Administration is facing, you should 
be outraged. And I hope that somebody below you is going to 
face the consequences, because leadership really should step up 
and find out why you didn't know.
    Now, I would like to talk a little bit about what we see on 
the wall here on the debt clock. Mr. Secretary, on March 13th, 
the President said, ``We don't have an immediate crisis in 
terms of debt. In fact, for the next 10 years it is going to be 
in a sustainable place.''
    Under President Obama's budget proposal, can you tell me 
how long it will be until the budget balances?
    Secretary Lew. Congressman, I think, as you know, the 
budget does not balance in a 10-year window. And that is not 
what he meant when he said a ``sustainable place.'' His budget 
would bring the deficit as a percentage of GDP and the debt as 
a percentage of GDP back into a sustainable range.
    If anything, we are overachieving on deficit reduction 
right now, given where we are in terms of the current year and 
immediate economic needs.
    So the goal should not be to balance the budget right now. 
The goal should be to be on a path where we have a 
sustainable--
    Mr. Stutzman. What year should be our goal?
    Secretary Lew. I don't think that the year is what is most 
significant. I think the path we are on is what is most 
significant.
    Mr. Stutzman. But for my 11- and 7-year old, when can they 
expect the Federal Government to balance the budget?
    Secretary Lew. I think that the test is, are we building an 
economy for the future? Are we running our fiscal policy so 
that we have a deficit and a debt that are sustainable? And are 
we addressing it in a fair and balanced way?
    The President has put together a budget proposal that would 
do that, and we are looking forward to a bitpartisan--
    Mr. Stutzman. --are you suggesting we should raise--raise 
taxes, then, to balance the budget?
    Secretary Lew. I think that we should have a fair mix of 
spending reductions and loophole closing that would give us the 
ability to, in a fair and balanced way, be on a long-term path 
to fiscal sustainability.
    Mr. Stutzman. We have already raised taxes. I want to talk 
about what, really, I think is holding up the economy, and that 
is the health care law.
    As I talk to folks around northeast Indiana, they 
consistently say, ``I don't have any certainty. I don't know 
what is going on.'' And this plays right back into the IRS 
issue, because the IRS is going to be one of the main agencies 
of administering the health care law. Is that correct?
    Secretary Lew. It is one of many agencies, but HHS is the 
main agency.
    Mr. Stutzman. But the IRS is going to be involved.
    Do you think that the confidence level of the American 
people in the IRS, as they administer, as they start to roll 
out the health care law is going to be increased at all? Is 
there going to be more skepticism?
    Secretary Lew. I have said over and over again that it is a 
top priority to restore confidence in the IRS. We are committed 
to doing that. After this hearing today--
    Mr. Stutzman. Do you know Sarah Hall Ingram?
    Secretary Lew. I do not know her, no.
    Mr. Stutzman. Okay. She was the head of the tax-exempt 
office during what we understand to be--during the targeting of 
Americans. And now she is--and I don't know how you don't know 
her--the head of the health care law--rolling out the health 
care law.
    Should you know her?
    Secretary Lew. Typically, I deal with Treasury staff, who 
deal with others in the IRS on policy matters.
    If I can just correct the facts that you just described, my 
understanding--and we--facts matter, we have to make sure the 
facts are correct, that her responsibilities at the time when 
awareness of this investigation, these problems, became known, 
was working on the Affordable Care Act. And--
    Mr. Stutzman. So you know of her, then?
    Secretary Lew. I know of her, of course. Yes.
    Mr. Stutzman. Okay. All right. So do you think it would be 
inappropriate for her to continue or to remain in the position 
she is as now the head of the health care--as the rollout--
    Secretary Lew. I just said that facts matter. If the facts 
are that she was not in the position--taking day-to-day 
responsibility for this at the time in question, then the 
question is, is she doing her job on the Affordable Care Act 
effectively? And I am sure the new acting Commissioner who will 
take over today will look at that.
    Mr. Stutzman. I can tell you, the American people are not 
trusting of this Administration right now.
    Chairman Hensarling. The time of the gentleman has expired.
    I would like to thank the Secretary for appearing today, 
and thank him for his testimony.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    Before adjourning, pursuant to the committee's organizing 
resolution, Mr. Ross is hereby transferred from the 
Subcommittee on Oversight and Investigations to the 
Subcommittee on Housing and Insurance.
    And pursuant to the committee's organizing resolution, Mr. 
Rothfus is hereby appointed to serve on the Subcommittee on 
Oversight and Investigations and the Subcommittee on Financial 
Institutions and Consumer Credit.
    This hearing stands adjourned.
    [Whereupon, at 12:55 p.m., the hearing was adjourned.]



                            A P P E N D I X


                              May 22, 2013


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