[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE ANNUAL TESTIMONY OF THE SECRETARY
OF THE TREASURY ON THE STATE OF THE
INTERNATIONAL FINANCE SYSTEM
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
DECEMBER 12, 2013
__________
Printed for the use of the Committee on Financial Services
Serial No. 113-55
______
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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:
December 12, 2013............................................ 1
Appendix:
December 12, 2013............................................ 63
WITNESSES
Thursday, December 12, 2013
Lew, Hon. Jacob J., Secretary, U.S. Department of the Treasury... 7
APPENDIX
Prepared statements:
Green, Hon. Al............................................... 64
Lew, Hon. Jacob J............................................ 65
Additional Material Submitted for the Record
Bachus, Hon. Spencer:
Insert from the Dodd-Frank Act Conference Committee.......... 70
McHenry, Hon. Patrick:
Letter to Treasury Secretary Lew from Representative Garrett,
dated June 7, 2013......................................... 78
Response letter to Representative Garrett from Treasury
Assistant Secretary for Legislative Affairs Alastair M.
Fitzpayne, dated July 12, 2013............................. 79
Letter to Treasury Secretary Lew from Representative McHenry,
dated June 7, 2013......................................... 81
Response letter to Representative McHenry from Treasury
Assistant Secretary for Legislative Affairs Alastair M.
Fitzpayne, dated July 26, 2013............................. 83
Response letter from Representative McHenry to Treasury's
July 26, 2013, letter, dated August 22, 2013............... 85
Letter to Federal Reserve Bank of New York President William
C. Dudley from Chairman Hensarling, dated November 6, 2013. 86
Letter to Treasury Secretary Lew from Chairman Hensarling and
Representative McHenry, dated December 6, 2013............. 89
Peters, Hon. Gary:
Written statement of the American Automotive Policy Council
(AAPC), the Mexican Automobile Industry Association (AMIA),
and the Canadian Vehicle Manufacturers' Association (CVMA). 92
Proposed Language to Address Currency Manipulation in the TPP 96
Lew, Hon. Jacob J.:
Written responses to questions for the record submitted by
Representative Duffy....................................... 97
Written responses to questions for the record submitted by
Representative Fincher..................................... 101
Written responses to questions for the record submitted by
Representative Himes....................................... 105
Written responses to questions for the record submitted by
Representative Hultgren.................................... 106
Written responses to questions for the record submitted by
Representative Luetkemeyer................................. 107
Written responses to questions for the record submitted by
Representative Moore....................................... 109
Written responses to questions for the record submitted by
Representative Ross........................................ 111
Written responses to questions for the record submitted by
Representative Rothfus..................................... 113
Written responses to questions for the record submitted by
Representative Sinema...................................... 115
Written responses to questions for the record submitted by
Representative Wagner...................................... 117
THE ANNUAL TESTIMONY OF THE
SECRETARY OF THE TREASURY ON THE
STATE OF THE INTERNATIONAL
FINANCE SYSTEM
----------
Thursday, December 12, 2013
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 9:35 a.m., in
room 2128, Rayburn House Office Building, Hon. Jeb Hensarling
[chairman of the committee] presiding.
Members present: Representatives Hensarling, Bachus, Royce,
Miller, Capito, Garrett, Neugebauer, McHenry, Campbell,
Bachmann, Pearce, Posey, Fitzpatrick, Westmoreland,
Luetkemeyer, Huizenga, Duffy, Hurt, Grimm, Stivers, Fincher,
Stutzman, Mulvaney, Hultgren, Ross, Pittenger, Wagner, Barr,
Cotton, Rothfus; Waters, Maloney, Sherman, Meeks, Capuano,
Hinojosa, Clay, Lynch, Green, Cleaver, Perlmutter, Himes,
Peters, Carney, Sewell, Foster, Kildee, Murphy, Delaney,
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.
Today's statutorily required hearing is for the purpose of
receiving the testimony of the Secretary of the Treasury on the
state of the international finance system.
Before we begin, I would like to make a few preliminary
comments. I want to thank the Members and staff for their
flexibility in scheduling. Due to the passing of the late
Nelson Mandela, in order to accommodate a number of Members and
the Secretary for both Mr. Mandela's funeral and memorial
services, we moved this hearing to this morning.
So, as many Members know, today the committee will have a
double feature. We will see the rest of you at 2:00, as well,
for our monetary policy hearing, so Members will have an
opportunity for lots of quality bonding time today. I wish to
also announce ahead of time that at 11 a.m., I will declare a
short recess of the committee.
I now recognize myself for 5 minutes to give an opening
statement.
The committee meets today, again, to receive the annual
testimony of the Secretary of the Treasury on reforming both
the International Monetary Fund and the broader international
financial system.
There are important questions that must be raised.
Undoubtedly, hardworking American taxpayers suffer from bailout
fatigue, having been forced now to pay for the bailouts of AIG,
Fannie Mae, Freddie Mac, Chrysler, G.M., banks big and banks
small, and most recently, the Federal Housing Administration.
Many Americans question the wisdom of supporting the IMF
and other multilateral financial institutions that take their
hard-earned dollars and use them to bail out other countries.
Americans do not want to be part of a bailout nation any more
than they wish to be part of a bailout planet.
An important question at the outset is whether the
Administration's credibility has been compromised and thus
compromised our ability to reform multilateral financial
institutions. An American President's most awe-inspiring power
may not be the ability to launch a drone strike, but that when
he speaks, the world listens, and the world listens because the
President's words are backed by the moral authority of the
United States of America.
Lately, that moral authority of our Nation has been under
question by the words of our President. Whether it is an erased
red line in Syria, a deal with Iran that dismantles numerous
sanctions but does not end the terrorist regime's march towards
a nuclear bomb, or revelations about spying on our allies, we
now live in a world where too many of our friends no longer
trust us and too many of our adversaries no longer fear us.
The collapse in confidence and credibility is not confined
to foreign lands. Here at home, millions of Americans took
President Obama at his word when he promised no fewer than 36
times that they could keep their health insurance if they liked
it. They now know better.
Next, although the last couple of months have brought some
welcome news on the jobs front, Americans continue to suffer
through the slowest, weakest recovery in generations. Thus,
regardless of the wisdom, many Americans now rightfully
question our ability to continue supporting multilateral
financial institutions like the IMF.
When President Obama took office nearly 5 years ago, he was
able to pass every major piece of legislation he wanted--the
stimulus, Obamacare, the Dodd-Frank Act, the largest tax
increase in our Nation's history--and the results speak for
themselves.
Poverty is up. Income inequality is up. The debt has never
been higher. Small businesses are drowning in the greatest sea
of red tape in our Nation's history. And the number of
Americans in the labor force is at its lowest level in 30
years.
Five years into these policies, hardship and anxiety
abound. Just listen to what I hear from my constituents in the
Fifth Congressional District of Texas, people like Nancy from
Dallas, who wrote to tell me, ``I have been looking for a job
for close to 2 years. God has blessed me with many jobs on and
off, but that does not pay the bills.''
From Marsha in Reklaw, Texas, who said, ``I have spent more
time unemployed in the last 4 years than I have employed.''
John from Alba, in my district, writes that he has had to
close his business and says, ``I am 70 years old, and I have
tried to find a job, but no one wants to hire a 70-year-old
when so many younger people are out of work.''
These people deserve better than the results of this
Administration's economic policies. Which brings us back to the
central truth that you cannot strengthen and reform the global
economy without first strengthening and reforming the American
economy. That means respect for the rule of law, both
fundamental tax reform and tax relief, freezing Federal red
tape that is hindering job creation, and giving one-sixth of
the economy, that is health care, back to the American people.
And it also means ceasing to spend money we do not have.
The single greatest threat to a stronger economy is our growing
national debt. Witness the national debt clock to my left and
right. This is a debt that has mushroomed under this President.
Never in our history have so few indebted so many so quickly
with such dangerous implications.
We know our debt is unconscionable. It is unsustainable.
And frankly, I believe it to be immoral. Yet, this President
dismisses the threat at every opportunity and, I fear, leads a
parade of Washington debt-deniers.
Under the current policies we have, it is not a question of
whether a debt crisis will come, it is a matter of when. For
the sake of our economy, for the sake of our children, for the
sake of our freedom, I would call upon the President to work
with Congress now to avoid this catastrophe. Our Nation
deserves better.
At this time, I yield 6 minutes to the ranking member for
her opening statement.
Ms. Waters. I want to thank Chairman Hensarling for holding
this hearing. And I am delighted to welcome you, Secretary Lew,
before our committee today to testify on the state of the
international financial system.
I would like to discuss what I believe to be one of the
biggest social, economic, and political challenges we face
today, both domestically and internationally. And that is the
problem of growing inequality. Over the past 30 years, income
inequality in the United States has been steadily increasing.
This was the case even during periods of growth. Before the
financial crisis, levels of inequality in the United States
reached peaks not seen since the late 1920s.
While other advanced and emerging market economies have
also experienced rising income inequality, the most shocking
shortcomings are right here in the United States, which has the
highest level of inequality of any advanced industrial nation.
In fact, today 20 percent of the income in our country goes to
the top 1 percent of Americans.
If you look at inequality of wealth, it is even worse. The
top 1 percent holds about 40 percent of the country's wealth.
The gap between the rich and the poor in America has become a
chasm. Moreover, the gains from growth during the recent
recovery have accrued overwhelmingly to the wealthiest people
in society. Almost 95 percent of the income gains since the
recovery began have been captured by the top 1 percent. This
means that the most unequal advanced industrial economy in the
world is becoming even more so.
I recognize that in a capitalist system, some degree of
inequality is necessary for the function of a market economy
since it creates incentives to work hard and take risk. But
left entirely on its own, the market system will produce more
inequality than is economically necessary. And here in our
country, we have much more inequality than is necessary for
efficiency. I believe this is a moral problem from the
standpoint of social equity.
But excessive inequality not only undermines social and
political cohesion, it has also recently been shown to have
negative effects on growth and stability as well. Recent
research at the IMF has shown that excessive inequality slows
growth because depressed earnings lead to weaker demand and
lower consumption. Reducing inequality is increasingly
understood to contribute to economic growth.
Inequality is also a political problem. We now have an
increasing degree of resistance on the part of many Americans
to new trade agreements because they see themselves as victims
of globalization, rather than as participants in its benefits.
I believe our international economic policy has in fact been
too one-sided, too focused on elevating the interests and
mobility of capital over all other considerations.
This was based on the misguided belief that unfettered
markets would not only create wealth and stability, but would
also trickle benefits down to others in society. But this isn't
what has happened. In fact, one of the most important lessons
we have learned from the recent financial crisis is that
markets must be deeply embedded in systems of governance. The
idea that markets are efficient and self-correcting has
received a mortal blow.
I believe in capitalism, and I believe that the markets are
the main engines of wealth creation in our country and
elsewhere, but in order to be truly supportive of the free
market, I believe you must also be supportive of government.
This is because we need to have an appropriate set of public
policies in place to reign in the excesses of the market, to
help maintain stability, and to ensure that the benefits of
capitalism and growth are broadly shared.
We need to do a better job of dealing with equity.
Questions at home, for example. We should be increasing the
minimum wage, extending unemployment insurance, and providing
trade adjustment and other assistance for those in the United
States clustered in the low-skilled end, who are disadvantaged
by globalization. Until we do that, and people begin to feel
secure at home, we will not have the political support we need
for more active engagement by the United States with the
international economy.
Mr. Chairman, I thank you for holding this hearing today.
Some of what I have alluded to in my statement are issues that
are being dealt with as we consider the budget today. And these
issues that I have alluded to include, of course, the
unemployment benefits that I understand may not be in the
budget agreement.
Also, I believe that providing trade adjustment and other
assistance for those that I have pointed to, who end up
clustered in the low-skilled end, are issues that we have not
sufficiently dealt with. And I am looking forward to engaging
you and others on these issues so that we can get at how we
will deal with this income inequality that is a central theme
of my testimony today.
I yield back the balance of my time.
Chairman Hensarling. The gentlelady yields back.
The Chair now recognizes the gentleman from California, Mr.
Campbell, the chairman of our Monetary Policy and Trade
Subcommittee, for 3 minutes.
Mr. Campbell. Thank you, Mr. Chairman.
And welcome, Secretary Lew.
Your testimony today is required annually by the
International Financial Institutions Act. And there is no
shortage of international financial issues that we can discuss.
I will let my opening statement stand for itself. But one of
the things that you, I believe, will be discussing in your
statement that we need to talk about is the IMF. And as a
reminder, in 2009 Congress authorized a $100 billion commitment
to the IMF in an account called, ``New Arrangements to
Borrow.''
Now, there is discussion of transferring $63 billion of
that into a permanent paid-in-capital. And there is a lot of
concern about this, Secretary Lew.
The first thing is, we don't believe this is just a
bookkeeping entry. This puts the $63 billion significantly at
risk, whereas currently, it is not.
Second, in this era of budget cuts, there is a lot of
concern up here of whether, when we are cutting a lot of
domestic issues, as the ranking member just mentioned, is this
the time when we should be increasing funding to first world
countries around the world? And there is some concern of
whether a lot of this money could go to European countries.
And, yes, they have some crises and some problems, but can't
they deal with those within Europe without the U.S. taxpayer
being involved?
There is concern about moral hazard. Would the IMF, by
making more loans to countries that are deeply in debt, be
encouraging that kind of indebtedness, rather than trying to
encourage these countries to get out of their debt, and not to
spend so much and borrow so much?
And then, finally, there are reforms, we understand,
involved with the IMF in this additional contribution, but a
lot of concern about whether those reforms are really enough,
whether they go far enough to change the governance of the IMF
as it should be.
Mr. Secretary, if the Administration, if you and the
President are committed to and want this $63 billion transfer,
we need a couple of things. We need three things, actually. We
need, first of all, you to make a formal request, which has not
yet been received by this committee, for this money, for this
transfer. Second, we need you to address these issues.
And, third, we need you, and we need the President, if this
is a priority, for $63 billion of U.S. taxpayer money, we need
you, Mr. Secretary, and we need the President to vocally
articulate why this is a priority in this era of limited
budgets. And why these concerns that people on this committee
have are not well-founded.
Thank you. I look forward to your testimony.
I yield back, Mr. Chairman.
Chairman Hensarling. The gentleman yields back.
The Chair now recognizes the gentleman from Illinois, Mr.
Foster, for 1 minute, as well.
Mr. Foster. Thank you, Mr. Chairman.
Thank you, Secretary Lew, for joining us today.
Mr. Secretary when you left your first tour of duty in the
White House in 2001, we were paying down our debt to the tune
of a couple hundred billion dollars a year, and were on track
to pay our debt down to zero by roughly 2008.
In the next 8 years, we saw the surplus we were running
reversed and the structural deficit exceeding $1 trillion a
year in the next 8 years.
We are also sitting on 8 straight years of uninterrupted
job growth, roughly 22 million jobs in 8 years. And we saw in
the 8 years following your first departure, zero net job
growth, 20 million people entered the job market with zero jobs
produced for them. And we have made significant progress since
entering the worst recession since the Great Depression.
We have seen 45 straight months of consecutive private
sector job growth, and there is much work left to be done. And
I thank you for appearing today.
Chairman Hensarling. The gentleman yields back.
The Chair now recognizes the gentleman from Washington, Mr.
Heck, for 1 minute.
Mr. Heck. Thank you, Mr. Chairman. Secretary Lew, thank you
for your service to the country, and for appearing at this
hearing today.
But the hearing I am most interested in is actually taking
place at your Treasury Department as we speak. The Bank Secrecy
Act Advisory Group is meeting right now and it is confronting
the question of how to allow legal marijuana businesses to
access the banking system.
As you know, the voters in my State of Washington, and in
Colorado, last year, approved initiatives to make marijuana
legal for adults. These policies go into effect in the new year
but we need cooperation from the Federal Government to make it
work.
If Federal banking regulations continue to prohibit
marijuana businesses from using the banking system, these all-
cash businesses will be a magnet for robberies and organized
crime.
You have the power to prevent that, Secretary Lew. I hope
the advisory group agrees on a new workable guidance today, and
I hope you swiftly approve it.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentlelady from New York, Mrs.
Maloney, for 30 seconds.
Mrs. Maloney. It is my pleasure to welcome Secretary Lew,
who is from the great State of New York, and New Yorkers are
very proud of your public service.
My question concerns GSE reform. You mentioned in your
testimony our growing economy and that your main job is to
create jobs. Many economists have testified that one of the
most important things we could do is bring certainty to housing
finance. I hope you meant your comment on the efforts of the
Administration to support housing finance reform and certainty
in that area.
Welcome, and I look forward to your testimony.
Chairman Hensarling. The time of the gentlelady has
expired.
Today, we welcome the testimony of the Honorable, Jacob J.
Lew, the Secretary of the Treasury of the United States.
Secretary Lew appeared before our committee earlier this year,
so I believe he needs no further introduction.
Without objection, Secretary Lew's written statement will
be made a part of the record.
Again, Mr. Secretary, welcome to the committee. You are now
recognized for your oral testimony.
STATEMENT OF THE HONORABLE JACOB J. LEW, SECRETARY, U.S.
DEPARTMENT OF THE TREASURY
Secretary Lew. Thank you, Mr. Chairman, Ranking Member
Waters, and members of the committee. I appreciate the
opportunity to testify today. And thank you for the flexibility
and courtesy in rescheduling so that a number of us could
attend the memorial services for Nelson Mandela.
There are signs that the economic conditions are improving
in advanced countries, led by the United States. Despite
political headwinds, our economy has been steadily growing.
Over the past 45 months, our businesses have created more
than 8 million jobs. While we are moving in the right
direction, we have more to do to create jobs, accelerate
growth, and put our economy on a firmer foundation.
As we know, economic progress at home depends, in part, on
the global economy. And the global economy continues to face
many challenges. A long recession in the euro area seems to be
ending, while significant progress has been made in achieving
financial stability. Europe is now in a position to place
greater priority on boosting demand and reducing unemployment
which remains very high in many countries.
In Japan, the authorities have taken forceful action to
begin ending deflation. But to achieve sustained success, Japan
needs to undertake structural reforms to strengthen domestic
demand growth.
Recently, some emerging markets have slowed as post-crisis
stimulus wanes. Emerging markets need to make reforms that
increase their resilience and address structural constraints to
growth. China's new leadership recently announced bold
commitments to reform. The pace and character of these reforms
will shape China's economic transition toward domestic
consumption-led growth and away from resource-intensive export
growth.
An important part of my job is to work to create the most
favorable external environment for U.S. jobs and businesses.
The international financial institutions, the International
Monetary Fund and multilateral development banks, are
indispensable in this effort and we must preserve our
leadership in these institutions.
That is why it is so important that Congress act to approve
IMF quota and governance reform. At the G-20 Seoul summit in
2010, we secured reforms that preserved the U.S. board seat and
veto without increasing the U.S. financial commitment to the
IMF. Right now, U.S. approval is the only remaining step needed
for these important reforms to go into effect. If we fail to
act, we risk a loss of U.S. influence at the IMF.
To implement the IMF quota reforms, the Administration has
provided draft legislation to reduce U.S. participation in the
new arrangements to borrow and simultaneously increased the
size of the U.S. quota in the IMF by an equal amount. Our
investment in the IMF is safe and sound. When the IMF lends, it
does so subject to appropriate conditions and with safeguards
to assure it is repaid. And its repayment record is
outstanding.
Investments in the multilateral development banks also
provide substantial returns. These institutions leverage our
limited contributions and multiply our impact by attracting
contributions from other nations. They also effectively promote
our national security and economic priorities, including
opening up markets and lowering barriers for U.S. businesses
abroad.
It is important to note that the United States will be
making new commitments to the International Development
Association of the World Bank and the African Development Fund
this year. These are the two largest sources of finance for the
world's poorest countries and their impact is enormous. As we
maintain our commitments to the international financial
institutions, it is crucial that we continue to strengthen the
world's financial system.
The United States has led the global effort on
international regulatory reform with many of the core reforms
of Dodd-Frank largely completed at home. In fact, on Tuesday,
the Volcker Rule, a centerpiece of these reforms, was
finalized. This rule is both strong and comprehensive. It will
change behavior and practice across our financial system to
safeguard taxpayers from risks created by banks' proprietary
trading and investments in hedge funds and private equity
funds.
It also fulfills the President's vision and the statute's
intent by setting tough, but workable restrictions, while
continuing to allow banks to perform essential market
functions.
As we move forward with our international agenda in 2014,
we will work with the G-20 and through the Financial Stability
Board to promote consistent implementation of high-quality
regulations. We will focus on advancing vigorous implementation
of Basel III, ensuring risk-weighted assets are assessed
consistently across borders, and that Basel III's high-quality
capital standard is met.
We will also focus on strengthening arrangements for cross-
border resolution of large complex financial institutions,
promote swift implementation of convergent requirements for the
over-the-counter derivatives markets, and develop a road map to
address risks posed by shadow banking.
We also have been at the forefront of efforts to use
financial measures to advance key national security and foreign
policy goals. Nowhere have our efforts been more concentrated
than in using sanctions to advance our policy and prevent Iran
from obtaining a nuclear weapon.
Together with our international partners, and in close
coordination with Congress, we have built the most effective
sanctions regime in history. And even as we explore the
possibility of a long-term agreement with Iran that would
provide verifiable assurance that Iran cannot obtain a nuclear
weapon, we will continue to enforce our sanctions vigorously,
as our action this morning imposing sanctions on more than a
dozen entities demonstrates.
Chairman Hensarling, Ranking Member Waters, and members of
the committee, across the global landscape, there is much work
ahead. And with your ongoing support, I am confident we will
continue to protect America's vital interests abroad and at
home.
Thank you, and I look forward to your questions.
[The prepared statement of Secretary Lew can be found on
page 65 of the appendix.]
Chairman Hensarling. Thank you, Mr. Secretary.
The Chair now yields himself 5 minutes for the purpose of
questioning.
Mr. Secretary, as OMB Director in February of 2011 you were
quoted as saying, ``It is an accurate statement that our
current spending will not be increasing the debt. We have
stopped spending money we don't have.''
You said that while you were introducing the President's
Fiscal Year 2012 budget, which according to CBO added $12.5
trillion to the gross national debt over a 10-year budget
window.
And under your watch as OMB Director, $1.4 trillion was
added to the gross national debt.
So I am trying to get some insight into the
Administration's view of our national debt. Do you still stand
by those comments? Is there some context here for those
comments?
Secretary Lew. Mr. Chairman, at the time I was trying to
explain the difference between a primary balance, a primary
surplus, and spending, new spending, new commitments that are
being made.
The definition of primary balance is when the only deficits
are related to paying interest on the national debt. And other
than that, we are covering all of our expenses--
Chairman Hensarling. Let me move on--
Secretary Lew. --the primary balance in I believe 2 years
in our budget.
Chairman Hensarling. Let me then move on to a statement the
President made fairly recently, about 6 weeks ago: ``Don't
pretend as if America is going bankrupt at a time when deficits
have been cut in half.''
Isn't it true, Mr. Secretary, that these deficits have only
been cut relative to the largest deficits in our Nation's
history, save World War II?
Secretary Lew. Mr. Chairman, I think if you look at the
reduction in the deficit since 2009, we have seen the most
rapid reduction in the deficit as a percentage of GDP--
Chairman Hensarling. But, again, Mr. Secretary, weren't
these the largest deficits in our Nation's history save World
War II?
Secretary Lew. We did come in at a time when we inherited a
very large deficit. We were in a financial crisis and an
economic crisis spiraling out of control.
Chairman Hensarling. Mr. Secretary, if you are unaware, I
would have your aides look into it. I think you will find that
probably is true.
Also, CBO recently released their latest long-term outlook.
Have you had a chance to look at it? It came out about 6 weeks
ago.
Secretary Lew. I have--I am aware of it, yes.
Chairman Hensarling. Under that outlook, under either
current law or current policy baselines, deficits come down
temporarily until 2015 and then rise thereafter with no end in
sight.
Isn't that true, Mr. Secretary?
Secretary Lew. Mr. Chairman, I came here prepared to
discuss a wide range of issues. I have not reviewed the CBO
report in detail. I can speak generally about this issue, and I
would be happy to.
Chairman Hensarling. Isn't it true, then, that the
Administration has never submitted a budget that balances in 5
years, 10 years, 50 years, or at any time?
Secretary Lew. Mr. Chairman, the Administration has
submitted budgets that took a fiscal situation that was out of
control and brought it under control. We have achieved more
progress reducing the deficit--
Chairman Hensarling. But, Mr. Secretary, has the
Administration ever submitted a budget that balances over any
time span?
Secretary Lew. I don't believe that the measure of an
effective budget right now is whether--
Chairman Hensarling. That is fine, Mr. Secretary. But I get
to ask the questions here. So if you don't know or you--
Secretary Lew. No, no, I do know. There is a point when it
balances in the far distant future, but it is not in the 10-
year window.
Chairman Hensarling. Not according to the Congressional
Budget Office.
Secretary Lew. Well--
Chairman Hensarling. So, according to whose analysis? Is
this Treasury's analysis? OMB's analysis? Whose analysis?
Secretary Lew. Mr. Chairman, I am happy to look at the
projections of the budget. I did come to testify on a wide
range--
Chairman Hensarling. Okay, let me, if I could, in the time
I have remaining, move on to the debt ceiling.
I think, as you know, just about every major deficit
reduction package of the generation has been attached to a debt
ceiling, Gramm-Rudman, PAYGO, OBRA, a Budget Enforcement Act,
even today's Budget Control Act.
Every President in your lifetime and my lifetime has
negotiated on a debt ceiling. I have had our capable staff
research the issue. The debt ceiling tends to be the early
warning system that spending is out of control.
Yet on September 15th of this year, the President took the
unprecedented and radical action of stating, ``I will not
negotiate on the debt ceiling.''
So is it the position of this Administration that if
Congress does not functionally repeal the debt ceiling and
allow the President to spend what he wishes, that he is
threatening default on our sovereign debt?
Secretary Lew. Mr. Chairman, I would disagree with the
characterizations of the debt ceiling as an early warning. The
debt ceiling is at the very end. All the decisions that
Congress makes in the budget, as it is making today, all the
decisions Congress makes on entitlement programs and tax
policies. That determines the spending--
Chairman Hensarling. My time is almost up.
Secretary Lew. The debt ceiling is the very end--
Chairman Hensarling. Are you aware of any other President
in our lifetime who has taken the radical position of stating
that he will not negotiate deficit reduction on the debt
ceiling?
Secretary Lew. Mr. Chairman, I think we learned in 2011,
and we learned again just this past October, that treating the
debt limit the way Congress did put our economy in grave
danger.
Every President in my lifetime has said the same thing. It
is imperative to raise the debt ceiling and it is Congress'
unique and exclusive responsibility.
Chairman Hensarling. The time of the chairman has expired.
And I would also say that every President in your lifetime
has also negotiated on the debt ceiling.
The Chair recognizes the ranking member for 5 minutes.
Ms. Waters. Thank you very much, Mr. Chairman.
I would like to see if I can get a clearer understanding
about where we are in relationship to finance discussions and
trade talks with Europe.
I sent a letter to, I think you and the President,
basically stating my position on whether or not we would be
including financial services provisions in a trade agreement,
and I indicated that I think it may undermine broader efforts
by regulators in the United States and elsewhere in the world
to address cross-border oversight.
And I noticed that in a Wall Street Journal report it
indicated that U.S. Treasury Secretary Jacob Lew poured cold
water on a push by the European Union's top financial markets
regulator to include negotiations of a financial services
regulation in E.U.-U.S. trade talks.
But then I also note that there is another article that
talks about the possibility that we are softening our position.
So I would like some clarification from you today about where
we are in those discussions.
Secretary Lew. Congresswoman Waters, I think the issues of
working on an international basis to make sure that we have a
race to the top, to the highest standards possible in terms of
financial stability is very important.
We work actively through the G-20 and the Financial
Stability Board, the FSB, to try and drive that process.
I am actually of the belief and am proud that the United
States is a leader, that we have taken decisive action, the
most decisive action of any country in the world after the deep
recession and economic crisis of 2008 and 2009.
I have said on many occasions that I do not believe that
trade agreements are an appropriate place for us to dilute the
impact of the steps that we have taken to safeguard the U.S.
economy, and I think that we should make a call to the world
community in the appropriate fora, like the G-20 and the FSB to
try and drive that race to the top.
I have said that in public. I have said it in private
conversations with the Europeans.
Obviously, a trade agreement is very important. I think it
would open up opportunities for U.S. economic growth and for
European economic growth.
I would point out that Europe is 20 percent of the U.S.
export market, so Europe's core economy is important to us, and
keeping that line of trade open is important to us.
I look forward to making progress in the trade
negotiations, and I look forward to making progress in terms of
opening up access to financial markets for even more U.S.
competition and more U.S. investment.
Ms. Waters. I would like to try and understand how much
pressure you are receiving to introduce financial regulatory
issues into these negotiations.
Secretary Lew. The issue has come up, really, for the
entire time that I have been Secretary, since February, March.
It has been an issue that Europeans have raised. I have
responded, as I just did in response to your question.
And I made some pretty public remarks last week where I
called on our international partners to work through the G-20
and the FSB to tighten standards. So I have tried to be very
clear on our policy.
Ms. Waters. Are you--of course you are aware, you
understand that efforts are already under way to deal with
cross-border financial regulations including the G-20 and the
Financial Stability Board.
So our concerns, and some of the criticisms from other
lawmakers, are that other Administration trade initiatives
would effectively sidetrack domestic regulation in favor of
international laws.
And some of our Members are saying they fear that the
ambitious Trans-Pacific Partnership could create rules
affecting technology development that would supplant U.S.
domestic regulation.
Secretary Lew. Congresswoman, on the financial issues, I am
quite familiar with it. On the technology issues, that is
really an issue that the U.S. Trade Representative would be
more appropriate to address.
On the financial issues, I have been clear in every
conversation that I have had that we are going to, in the text
of agreements, promote opening markets for U.S. access, having
standards consistent with our own. I have been very clear that
watering down, in any way, U.S. regulatory standards is not
appropriate in trade agreements in terms of protecting our
financial markets, our financial system, and our economy.
I do think, separately, we have to discuss what it means to
harmonize across international boundaries. And I think we have
seen very constructive developments, say in the derivatives
area, where we took an initial action. The international
community responded, and there is now a reconciliation so that
we can have the world community reach the U.S. high standard.
And we may sometimes have to go back and make some
conforming changes for that to work. But if it is in our high
standard, that is a real--
Chairman Hensarling. The time of the gentlelady has
expired.
The Chair now recognizes the gentleman from California, Mr.
Campbell, the chairman of our Monetary Policy and Trade
Subcommittee, for 5 minutes.
Mr. Campbell. Thank you Mr. Chairman.
Let me jog back to the IMF for a minute. One thing I know,
an e-mail from a staff member with language does not constitute
a formal request. If Congress is to consider the IMF money, we
need a formal request from you, according to the law on that.
But I don't want to get into too much minutia on that.
But one thing is, what this thing costs. Would you agree
that if you move the $63 billion into paying capital, that it
is not without risk?
Secretary Lew. Congressman, I think if you look at the
history of the IMF, it supports the statement I made that there
is very little risk.
Mr. Campbell. Okay. But it is not zero. So--
Secretary Lew. I believe it is awfully close to zero.
Mr. Campbell. But shouldn't we have CBO tell us what they
think?
Secretary Lew. CBO has looked at this in the context of
appropriations.
If I could go back, Congressman, because I think the
question of request is tied to the fact that we have been
trying to be flexible in responding to what we have heard from
Congress.
In our budget last year, we proposed this as something that
will be done as an authorization, as a mandatory provision. We
heard back from Congress that there was a preference to deal
with it as an appropriations matter. We responded and provided
language that would do it as an appropriations matter.
At the time, CBO looked at it--
Mr. Campbell. Okay.
Secretary Lew. --and it did have a modest score.
Mr. Campbell. If I might say that authorizing committees
like this don't like things that go directly through
appropriations without the people who are actually--
Secretary Lew. We would be happy to do it either way.
Mr. Campbell. --involved in the issue--looking at the
issue. So we would certainly, I think, on a bipartisan basis
here, prefer it be done that way.
But we think CBO should score this at risk.
Is the President personally supportive of this transfer?
Secretary Lew. Oh yes, the President is very much
supportive of it. He has told me it is a very high priority in
terms of our place in the world staying at the very strong
point that we are at.
I think on the cost side, CBO has scored it, but it is not
a enormous score. CBO's score was in the neighborhood of $300
million; it was not in the $63 billion range.
Mr. Campbell. There are different ways CBO scores things,
and if they score it on a risk basis--
Secretary Lew. Yes.
Mr. Campbell. We have to look at that.
Let me get into the issue of trade and so forth that we
talked about with Europe. Okay, I hear you that you say that
you think the G-20 is a better venue for negotiating financial
services, let's say, harmonization than with the European trade
agreement that is being worked on.
Won't the Europeans make the same arguments at the G-20
that they will here? Why is that any better or any different
than trying to harmonize these financial regulations as best we
can through a trade agreement, particularly given how the
borders in financial matters have dropped so much?
Secretary Lew. I think if you look at the progress we have
made internationally, since 2009, the G-20 and the FSB have
been quite effective places to work through very complex,
technical financial regulatory matters.
I don't think the trade context is the ideal place for that
to be done. The people at the table there are not necessarily
the right people, and the mechanisms already exist in the G-20.
And the real point I was making, regardless of where we do
it, is the core issue. When we enter into a trade agreement--
Mr. Campbell. Okay, let me just--you had a meeting in
Brussels, I think on November 27th--
Secretary Lew. I don't remember the date, but yes, it was
in Brussels.
Mr. Campbell. Okay. What was the outcome of that meeting?
This was with the Europeans?
Secretary Lew. I think, as I acknowledged in my response to
Congresswoman Waters, that I have discussed this a number of
times with the Europeans. They do make the argument that it
should be in the trade agreement.
We make the argument that it should be in the G-20 and the
FSB. But the core issue, and I think, wherever we do it is we
can't dilute our protection of the U.S. financial system, the
U.S. economy.
That is the core principle that applies wherever we are
doing business.
Mr. Campbell. Is it our position that we have the perfect
financial regulation, worldwide, and everybody else in the
world should copy us? I fail to--
Secretary Lew. No.
Mr. Campbell. --understand why talking with the Europeans
about this, understanding better what they want to do, why that
is a problem? What is the risk to the U.S. financial system to
do that?
Secretary Lew. To be clear, Congressman, not at all. We
talk to the Europeans and to our Asian partners in the G-20 and
the FSB, we learn from each other, we take best practices from
each other. We are very open.
The question is whether it is a question of financial
regulation or environmental regulation or labor rules, is a
trade agreement the appropriate place to do it?
Normally, in a trade agreement, the pressure is to lower
standards on things like that and that is something that we
just think is not acceptable.
Mr. Campbell. If I can stop you, because I only have a few
seconds left. The chairman and I have written letters--several
letters to you about this. We think and urge you to try at the
European level, because the purpose of a trade agreement is to
facilitate trade that benefits both economies. We can do that
in the financial services area, and we should do it.
Secretary Lew. Well--
Mr. Campbell. I yield back.
Secretary Lew. Our core goal is very consistent, we think
we can achieve a trade agreement that opens up financial
markets for much--even more robust cross-border trade and
relations. And that is our goal.
And our issue is not that we don't want to coordinate on
financial regulation, we very much do. It is critically
important, and I think it is one of the biggest priorities we
have.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Missouri, Mr. Clay,
the ranking member of our Monetary Policy and Trade
Subcommittee, for 5 minutes.
Mr. Clay. Thank you, Mr. Chairman. Secretary Lew, as you
know, an earthquake devastated Haiti on January 12, 2010,
leaving millions homeless.
In the wake of the disaster, the American people and the
global community rallied to provide relief to the Haitian
people. As the Center for Economic and Policy Research points
out in a recent report, despite billions of dollars pledged to
build back Haiti, more than 350,000 Haitians remain internally
displaced, and it is unclear what sustainable impact our funds
have had.
Secretary, can you give members of this committee a
progress report on post-earthquake humanitarian reconstruction
and development efforts in Haiti?
Secretary Lew. Congressman, I would have to get back to you
on a update. I was deeply involved in putting together the
Haitian relief package when I was Deputy Secretary of State. I
have not had the opportunity in the last few months to become
familiar with the detailed, up-to-date assessment, but I am
happy to do so and get back to you.
Mr. Clay. This is the second time I have inquired about
this. One of your Deputy Secretaries was supposed to get back
to me a couple of months ago, and I haven't heard anything.
Secretary Lew. I am happy to get--we will get back to you.
I was not aware of that.
I think if you look at the relief response in Haiti, we
responded quickly with the emergency assistance. We responded
generously with economic assistance. I know the question you
are asking is on the efficacy of that effort. I share the
concern that when we go in, we have to be successful.
And I am happy to go back and look into it and get back to
you.
Mr. Clay. Thank you.
Secretary Lew. I personally was very committed to putting
that package together and I would actually very much like to be
able to get back to you on that.
Mr. Clay. I look forward to your response.
And on the euro zone, economic growth is still a continued
challenge with the annual GDP growth now forecast at zero--at
minus 0.1 percent in the E.U. and minus 0.4 percent in the euro
area for 2014.
European Commission President Jose Manuel Barroso, stated
that the economic austerity policies in Europe have reached
their limits and they should receive minimum political and
social support.
He also pointed out that E.U. should focus on growth
measures in the shorter term as reforms in the public finances
sector should take time to have any effect.
Additionally, a recent report by the IMF states that too
much austerity is self-defeating, which means that the
continuous fiscal austerity for some countries in the euro
zone, especially in the south, leads to an even deeper
recession, in most cases deeper than projected.
In this vein, how do you think the United States and, more
particularly through its participation in the IMF, could
channel its efforts in alleviating the harsh consequences of
this continuous crisis that has brought severe economic and
social traumas to these countries?
Secretary Lew. Congressman, we have been deeply involved in
multilateral and bilateral discussions on the response to
Europe's economic challenges. I know in my own conversations
with finance ministers around Europe, I have made the case very
strongly that Europe needs to worry about growth; that, as it
looks at the weakest economies in Europe, it needs to stay
focused on the reforms and structural changes.
But as they look at the pace of fiscal consolidation, they
also have to look at the enormous unemployment and the economic
effect and the social effect that has.
I think we have actually made some progress in these
conversations and I don't want to exaggerate at the same time
how much progress we have made.
I think you are seeing more flexibility in terms of the
timetables for fiscal consolidation. You are seeing recognition
that the structural changes are very hard and that, as
countries make them, they need to have some breathing room.
But you have also seen sustained pressure to stay on the
path. I don't disagree with that general direction because it
is not sustainable for Europe's economies or their national
finances to be in a place that is unsustainable.
But I think when you are looking at 20 percent or 30-plus
percent unemployment rates, that has a very, very serious
impact on domestic demand, the potential for economic growth,
and ultimately political stability.
So I have had these conversations. I do believe we are
making progress. I think that the IMF is sensitive to the
trade-off. I think if you look at the G-20 communiques over the
last year, they have increasingly moved towards a position that
reflects the view I am expressing.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentlelady from West Virginia,
Mrs. Capito, chairman of our Financial Institutions and
Consumer Credit Subcommittee, for 5 minutes.
Mrs. Capito. Thank you, Mr. Chairman.
Thank you, Mr. Secretary, for joining us today. The
Treasury Department recently announced revised guidelines on
how the MLBs will be financing coal-fired power plants in
emerging markets.
As you can imagine, I represent a State that exports 30
percent of the total coal exports because we can't burn them at
home, and we are having difficulty with the President's war on
coal. And now, it seems like it is an international war on
coal.
Explain this policy to me.
And are you really in the--as part of your stated goals,
fast-growing African countries were supposed to present new
opportunities for U.S. businesses.
What kind of energy development is going on if we can't
help them with the cheapest, most affordable, and reliable base
load energy production that we have around the world?
Secretary Lew. Congresswoman, our policy on coal and on the
climate impact is one that I know we have some differences on.
But we believe very strongly domestically and internationally
that we need to drive towards developing technologies that have
a less adverse impact on the climate situation.
So we have taken the view that at home, we need to use fuel
more efficiently. We need to develop renewable energy
technologies. We very much believe that we have a lot of
potential to export technology overseas.
You look at most of the developing countries, in some cases
hydroelectric power is an abundant source of power. In many
cases, highly distributed renewable energy is a very efficient
form of technology.
Mrs. Capito. Are you talking about wind and solar?
Secretary Lew. Wind and solar and--
Mrs. Capito. And you are aware how much we have to
subsidize that here to make it any kind of cost-benefit?
Secretary Lew. The challenge to develop cost-competitive
renewable technology is something to which we have dedicated a
lot of energy. We believe that we are getting there. And we
believe in order to meet our international objectives on
climate, it is important that we have a consistent approach
domestically and internationally.
Mrs. Capito. My concern on the innovation--and I don't
disagree on the innovation and the goal, the ultimate goal, to
make it cleaner, more efficient and less emissions. I am all
for that.
But I feel like, if you are cutting off the emerging
markets, which are the fastest growing markets, from
development--from being able to finance these kinds of
facilities, you are going to stifle innovation in this country,
because universities and such aren't going to devote the
resources to it when they think they are looking at a dead end
here.
And so, not only from the human element of these folks in
Africa who can't even access just baseline power generation, I
am very concerned.
And another thing I would like to say is I also represent a
lot of natural gas interests. We have a glut of natural gas in
this country; it is wonderful. It creates jobs, all down the
spectrum, and you know this, I am certain, in your position.
But we are now embarking on whether we should be exporting
our natural gas. And my question to you would be, is part of
this global initiative--natural gas is a carbon fuel. Is that
next? Is that the next thing that is not going to have any kind
of financing opportunities for the MLBs?
Secretary Lew. We have obviously been very aggressively
developing natural gas resources in this country and other less
emitting fossil fuel. So we have been encouraging the
development.
I think the export question is a different one. The
Department of Energy has responsibility for reviewing natural
gas export license proposals.
Obviously, it has been a source of enormous strength to our
economy, that we have had an energy revolution, where the cost
of energy as an input into production has made the United
States a much more attractive place to invest. And that is
something we are very anxious to continue.
I would defer to the Department of Energy to review these
export licenses, and I would be happy to follow up with you on
that.
On the question of kind of the need for power in the third
world, we totally agree. One of the President's major
initiatives is what he calls Power Africa, which is that we
need to make sure that the African continent has access to
electricity to fuel economic growth.
And we are working side by side in the international
community to be very strong partners in that because--
Mrs. Capito. And many of these countries that you are
working with, Germany, for instance, are building themselves
more coal-fired power plants in their own country because they
have had to shut down their nuclears because of the potential
negatives there.
And so I am just very concerned about this because I think
it hurts the American innovator; I think it hurts American jobs
and it certainly picks winners and losers in this country.
And unfortunately--I love living in West Virginia, but this
Administration has picked us as one of the ones to lose. And I
deeply resent that.
Thank you.
Chairman Hensarling. The time of the gentlelady has
expired.
The Chair now recognizes the gentleman from Texas, Mr.
Hinojosa, for 5 minutes.
Mr. Hinojosa. Thank you, Mr. Chairman.
And Secretary Lew, thank you for your testimony. Thank you
for being here with us today.
I am going to ask a question outside the realm of
international finance. I would like to first ask you about an
issue in which I have great interest.
As co-chair of the Financial and Economic Literacy Caucus
with Mr. Stivers, I am interested in the progress of the
Financial Literacy and Education Commission known as FLEC, of
which you are Chair, and also the upcoming President's Advisory
Council on the Financial Capability for Youth, which the
Treasury will coordinate.
As you know, FLEC was created by Congress to coordinate
Federal financial literacy strategy.
What is your personal philosophy on financial literacy?
And what do you hope to achieve in 2014?
Secretary Lew. Congressman, I am a strong believer in
financial literacy and have been for a long time. I think that
people have to make informed decisions when they make financial
decisions in their life.
For all too many Americans, it is a mystery when they make
those decisions. I have taken FLEC very seriously. I have gone
to several meetings. I have worked with CFPB Director Cordray
on these issues.
We have made it clear that it is a matter of importance to
us personally that we continue to make progress in this area.
I actually think, if you look at the work that the CFPB has
done, they have actually made a lot of progress creating the
tools for financial literacy.
Part of the challenge is that people have to understand the
documents that they end up looking at when they enter into
transactions. Part of the challenge is to make sure that the
documents are understandable.
And I think if you look at the simplified mortgage
disclosure forms that the CFPB has recently issued, it is
approaching a level where people who are not financial
professionals actually can understand the documents they are
about to sign.
So I think we have to remember that you have to work in
both directions. You have to increase the awareness and the
education of people in the economy, but you also have to make
sure that the transactions are not so masked in language that
is not comprehensible and in pages and pages of detail that
hide the key points.
And I think they have made significant progress in that
area.
Mr. Hinojosa. I look forward to working with you over the
next 2 years in trying to take it to a much higher level.
And I am going to move to an international situation that
we are discussing.
In your testimony that I read, you state that Europe has
made great gains towards financial stability. Like you, I am
cautiously optimistic about the improving economies of the
United States and Europe.
Secretary, how confident are you in the health of the
economies of the eurozone, and what are the indicators that you
are watching the closest?
Secretary Lew. Congressman, I look at the progress of the
eurozone and think about watching on a daily basis in the
spring and summer of 2012 when there was the real fear that any
day could bring a crisis. And we have made a lot of progress
from there.
There are still a lot of knotty problems, difficult
situations that need to be worked through, tough structural
decisions that have to be implemented, and risks that are still
there. But it is not in the same place of fear that there is
going to be an immediate crisis that it was just a year, 18
months ago.
I think they have made a lot of progress. They have a lot
more progress to make. I think that the GDP measures are
significant. They were negative broadly and now they are
positive broadly. It is not equally distributed. Some of the
economies, particularly in northern Europe, are doing much
better.
I think if you look at the economies of Europe, there is a
correlation between how well they are recovering and how much
they have embraced the need to make tough structural changes.
And I think that one of the things we continue to do is try to
be very understanding of how hard that is and the impact it has
in the short term. But to keep the pressure on, because that is
the path they need to follow.
Mr. Hinojosa. I have read that some of the countries like
Greece, Italy, Spain, Portugal, and others have very high
unemployment rates in the group from 18 to 25 years of age,
very similar to the problems we have in the United States. How
are they addressing that?
Secretary Lew. They do have very high unemployment rates in
Europe and the youth unemployment rate is very high. I think
that one of the reasons I mentioned earlier that we are seeing
some additional flexibility on timetables is recognition of
that.
Excuse me, Congressman, I am getting over a cold.
I think that if you look at--excuse me--this has been a
challenging week.
[laughter]
Chairman Hensarling. Take your time, Mr. Secretary. But you
can give a short answer, since the time of the gentleman has
expired.
[laughter]
Secretary Lew. My problem is that my voice is not coming
back.
Mr. Hinojosa. Mr. Chairman, being a Texan, give me 1 more
minute, won't you?
Secretary Lew. Sorry, Congressman, but I have been losing
my voice all week, and this was a longer stretch than I have
had for much of the week. So, if you will just bear with me.
I think the economy in Europe is moving in the right
direction. Some of the structural changes are significant in
terms of opening opportunities to young workers. One of the
keys is opening up the channels of credit so that small and
medium-sized enterprises have access to capital, because that
is where the opportunities for young workers will come from.
Mr. Hinojosa. Thank you.
Chairman Hensarling. The time of the gentleman has long-
since expired.
Secretary Lew. I apologize for coughing through part of it.
Chairman Hensarling. The Chair now recognizes the gentleman
from New Jersey, Mr. Garrett, chairman of our Capital Markets
and Government Sponsored Enterprises Subcommittee, for 5
minutes.
Mr. Garrett. Thank you, Mr. Chairman.
Mr. Clay's question sort of precedes mine. Today, I wanted
to focus my time on two important issues, accountability and
transparency to the American people.
I have been quite disturbed at this Administration's clear
pattern of stonewalling anyone who dares shine the light of day
into the inner workings of this Administration, from a
terrorist attack on a U.S. embassy in Benghazi and Attorney
General Eric Holder's refusal to turn over key documents, to a
lack of this Administration's cooperation with Congress in
providing details regarding Obamacare's failed implementation.
Requests for simple information have either been met with
silence or outright refusal by this Administration. This
pattern has continued at the Department of the Treasury under
your leadership.
Mr. Clay had a very simple question and your answer to him
was, ``Don't blame me; I didn't know; it was my staff.'' In my
case, it was back on June 7th, 6 months ago, I sent a letter to
you asking for details on 3 simple and straightforward
questions regarding the IRS scandal. First, I asked when was
the first time that you became aware of the IRS targeting
taxpayer groups, including targeting independent of knowledge
on the I.G.'s investigation. Curiously, the answer came not
from you, but from an Assistant Secretary a month-and-a-half
later, basically refusing to answer the questions.
The second question I asked was whether you attended any
meetings with then-Commissioner Shulman, and whether there were
any discussions at that time regarding the IRS conservative-
leaning organizations or their tax-exempt status, and a couple
of other simple yes-or-no questions. Again, a refusal from you
to answer yes-or-no questions.
So then, after several months more passed, I simply called
your office and said, ``Would you, Mr. Secretary, just give me
5 minutes on the phone so we could talk?'' And your answer was,
``No, I cannot talk to you, I am too busy.'' So then, I offered
to actually have a meeting with you, not in my office. I agreed
to go down to your office at your convenience at any time just
for 5 minutes to discuss this. And your answer was, no, you
were too busy for the last 6 months to meet with a Member of
Congress.
So my first question is: Is it appropriate for you and your
staff to deny even a 5-minute phone call or a 5-minute
discussion with a Member of Congress on important issues
relevant to them?
Secretary Lew. Congressman, first of all--
Mr. Garrett. That is a yes-or-no question, too.
Secretary Lew. --I answered Congressman Clay's question
quite directly. I demonstrated my knowledge--
Mr. Garrett. To my question--could you answer mine now?
Secretary Lew. --and I will follow up on it and get back to
him.
You and I went back and forth at the hearing I appeared at
this committee before. And I gave you all the information I had
and that remains the case now.
Mr. Garrett. You never answered the three questions in the
letter, and to this day, you have not. Do you think it is
appropriate that you would not pick up the phone and talk to a
Member of Congress?
Secretary Lew. Congressman, I have responded to your
question on multiple occasions.
Mr. Garrett. You did not. This letter is not from you. This
is from some Assistant Secretary. In 6 months, I have not
gotten an answer from you. And Mr. Secretary, I am still not
getting an answer from you right now, and I think it is
deplorable that you would not answer a Member of Congress and
it makes--we have to raise these issues over and over again.
But let me get on to other issues--
Secretary Lew. Congressman, on the question of the letter,
it has been for generations traditional for the Assistant
Secretary for Legislative Affairs to respond. When I was OMB
Director, I responded to the President's letters--
Mr. Garrett. Mr. Secretary, your assistant did not answer
the question. When I followed up and I simply asked to speak to
you to get a clarification, you would not answer it. So let's
move on because obviously you are continuing in the pattern of
this Administration of not answering simple yes-or-no
questions, and you are doing it here.
Let's go on--I know I am wasting my time because you are
wasting the American public's time when you will not simply
answer, ``Did you meet with someone?'' That is a simple yes-or-
no question.
In the time that we have left, let's look at the Volcker
situation and the rules that have just come out on this. Do you
believe that there is any negative impact on the corporate bond
market by the new rules that have come out?
Secretary Lew. I think that the rule as it has come out of
the five agencies reflects an important balance between
maintaining the markets and protecting the economy from the
risks--
Mr. Garrett. Right. So will there be any negative impact on
the corporate bond market and liquidity?
Secretary Lew. I think that the financial sector will be
able to manage implementing--
Mr. Garrett. Will there be any negative impact upon the
corporate bond market?
Secretary Lew. Look, I think--
Mr. Garrett. That is a yes-or-no question. Will there be a
negative impact on liquidity?
Secretary Lew. Congressman, it is not a yes-or-no
questions. It is a very complicated issue and I am happy to
respond to you, but it is not a yes-or-no question. It is an
important balance that we make sure that firms do not take on
risks that put taxpayers in their place, taking on risk if they
fail.
Mr. Garrett. So, let's stop there then. Let's stop there,
Mr. Secretary. You are saying that it is okay for them to take
on risks such as in the muni market and on sovereign debt, but
not corporate debt? You created exemptions in it, did you not,
so they could invest in Detroit, for example, which is a failed
bankrupt city. They could invest in foreign Spanish banks,
which are exceptions as well. So, they can take on and gamble
in those markets?
Secretary Lew. I think if you look at the--
Mr. Garrett. That is a yes-or-no question, Mr. Secretary.
Secretary Lew. --rule, we have struck a balance to protect
our markets--their depth, their liquidity, and also to protect
taxpayers from being exposed to inappropriate risk. I think the
agencies did an excellent job striking that balance to keep
economic growth going and to protect the economy and the
taxpayer.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Missouri, Mr.
Cleaver, for 5 minutes.
Mr. Cleaver. Thank you, Mr. Chairman.
Thank you, Mr. Secretary, for being here today.
I just have a couple of questions. We learned early on that
there is something in every space; nature abhors a vacuum. And
so, this is a question asking just for your opinion. What do
you think would happen if there is a void left as a result of
the United States' nonleadership in the IMF?
Secretary Lew. Congressman, I think that U.S. leadership in
the world is important to the United States and it is important
for the world. As I talk with my counterparts in Asia and
Europe, I hear over and over again, ``We need the United States
to be the strong leader that you are.''
In the IMF, what we see is with our contribution, which is
less than 20 percent of the entirety of the IMF, we have
enormous influence. We have veto over some important decisions,
and we have the influence that goes with that to help drive
decision-making in a way that serves U.S. interests and a
sounder global economy.
I think that is important for the United States. I also
think it is important for the world. We are already seeing that
when--if the United States in any way steps back, there is a
rush to come in and it kind of starts to fraction, break apart
some of that influence. I don't think we should let that
happen. It is just too important.
Mr. Cleaver. I think in some ways we are wanting to become
isolates, I think, in the world, and I have some problems with
a lot of expansionist things we do. But I am concerned about
the IMF and our leadership and economic financial
participation.
My other question, though. I represent Kansas City,
Missouri. Missouri, not Kansas. And that is important.
That's right. I am just getting an ``amen'' from my
colleagues.
Secretary Lew. I started out here working for somebody who
said all politics is local. I get it.
[laughter]
Mr. Cleaver. Yes.
Kansas City used to be the second largest manufacturer of
automobiles in the world behind Detroit. And Detroit has
fallen, Kansas City has fallen. I think we are fifth now. But
in recent times, we have been building up again. And when I
speak with the automobile manufacturers and the workers, the
unions, their biggest concern is currency manipulation. I was
part of a group that sent a letter to the President asking for
currency manipulation discipline in the TPP. Is that possible?
What is your position on that, or what is the Administration's
position on that?
Secretary Lew. Congressman, we have worked hard and focused
hard on currency issues for a long time. From the moment I
stepped in at Treasury, it has been an issue that has been very
much on my agenda. And if you look at the progress we have made
working in the G-20 and the G-7, we have gotten the leading
economies of the world to agree to principles that reflect our
own, which is that currencies should be market-determined,
exchange rates should be market-determined, and that the tools
that governments use should be domestic tools for domestic
purposes.
We have maintained our focus on that in our bilateral
conversations. We have seen progress in the conversations.
Any trade agreement that we reach has to be built on the
principles that we have worked to reach in places like the G-
20. And those are principles that undergird everything that we
do.
So without addressing the specifics of any of the
negotiations, it is a core underlying bedrock principle that we
are going to be deriving from market-determined exchange rates.
We believe the G-20 is an appropriate place to do that, and we
have made great progress there.
Mr. Cleaver. Thank you for that, because it will be
difficult for a lot of people to support it in light of the
currency manipulation that is going on, particularly with
China. And as you know, that creates an imbalance in the sale
of automobiles and that is--
Secretary Lew. I have engaged directly with the Chinese on
a regular basis on this, and we have seen real progress in
terms of the exchange rate approaching--not reaching, but
approaching--the point that we are pressing them to get to. I
think that they understand they have to get to a market-
determined exchange rate.
In our exchange report, we try and focus in great detail on
the progress made and where there are still concerns, where
interventions are troubling. We have to keep pressing on it,
and that is what we are doing.
Mr. Cleaver. Thank you, Mr. Chairman.
Chairman Hensarling. The time of the gentleman has expired.
The Chair recognizes the gentleman from Texas, Mr.
Neugebauer, chairman of our Housing and Insurance Subcommittee,
for 5 minutes.
Mr. Neugebauer. Thank you, Mr. Chairman.
Thank you, Mr. Secretary, for being here this morning.
Mr. Secretary, on October the 7th, I wrote a letter to the
Director of the Federal Insurance Office (FOI), Mr. McRaith,
inquiring about three reports that are required by law to be
submitted to this committee. One of those reports, a report on
insurance modernization, is nearly 3 years overdue. Not
surprisingly, I have not received any response to my letter.
Do you find it acceptable that these reports have not been
submitted to this committee and in some cases are over 3 years
past due?
Secretary Lew. Congressman, I know there is a report that
is virtually complete and will be here very shortly--I hope
even before you leave for your break.
Mr. Neugebauer. Mr. Secretary, I appreciate that, but on a
number of occasions that is the same story that I have gotten
from Mr. McRaith, is that, ``We are going to have that shortly.
We are going to have that shortly.'' And actually, that
dialogue began last year.
It is not like these are a little bit late. Some of these
reports are 3 years late. And it is--this Administration talks
a lot about transparency. But, as I think you have heard some
of my colleagues say, we are a little concerned--it is hard to
have transparency when you are not hearing from the
Administration.
Secretary Lew. Congressman, the modernization report is a
very important piece of work. They have virtually completed it.
It is in the stages of kind of final production, which is why I
can say with some confidence that it will be here very shortly.
Mr. Neugebauer. So when you say shortly, is that shortly
next year or the year after?
Secretary Lew. No, no, I am hoping, as I say, before you
leave. So, I am hoping it is days, not weeks.
The work that the FIO has done is very important. They have
brought a knowledge of insurance into Treasury at a time when
we know that the insurance industry is highly interconnected
with other aspects of the financial system. It is a complicated
system where we have a lot of respect for State regulation, but
there are issues of national importance as well. And I think
this report, when it is issued--it won't resolve these issues,
but it will cue up for a serious discussion some very important
policy questions. And I look forward to engaging with you on
those.
Because, frankly, the report will not be the final word. It
is going to be opening the conversation so that we can work
together on this.
Mr. Neugebauer. Actually, Mr. Secretary, that segues into
my next question. The G-20 leaders declaration coming out of
the St. Petersburg meeting in September stated that the G-20
leaders ``look forward to the International Association of
Insurance Supervisors' further work to develop a comprehensive
groupwide, supervisory and regulatory framework for
internationally active insurance groups, including quantitative
capital standards.''
Were you personally consulted about that statement? Did you
have input into that statement?
Secretary Lew. I am aware of it. It is something that was
part of the discussions--
Mr. Neugebauer. Did you support the inclusion of that
language in the report?
Secretary Lew. I very much support the FIO being part of
the international conversation and asking these questions so
that as we inquire domestically as to what are the right steps
to take, we do it in concert with our international partners.
And the statement doesn't prescribe the end result. It is a
process that I think we should be engaged in, yes.
Mr. Neugebauer. So, as you know, the European model is more
bank-like in the way that they regulate their insurance
industry over there. Do you support that same kind of
regulatory framework for U.S. domestic companies that have a
much different regulatory structure?
Secretary Lew. I think that raises some very important and
some pretty complicated issues. I think that where there is an
appropriate need for regulation, we ought to be sensitive to
the differences between insurance companies and other financial
institutions.
I know the regulators have looked at this and they are
looking at being flexible as they use the tools they have. And
if they don't have all the tools they need, it is something we
should talk about. Because to the extent that there is a need
for regulation of insurance companies, it ought to reflect the
characteristics of insurance companies.
Mr. Neugebauer. I think one of the things that we hear from
the industry, though, as this dialogue is going on, is that
there is not a lot of transparency, again, in this process and
that the industry, particularly the U.S. domestic insurance
industry, feels like that they are being kind of left out of
this debate and discussion. And I think they may be concerned
that there is some movement within Treasury and others to move
to a European model for regulating U.S. insurance companies
that many people feel like--when you go back and look at the
crisis, the insurance industry fared extremely favorably.
Secretary Lew. The inquiries that have taken place with
regard to the Financial Stability Oversight Council (FSOC) have
really been questions of determining whether there is systemic
risk that is presented by any individual insurance companies.
The question of how to regulate them is a totally different
question. The FSOC standard is to make the determination on
risk.
And I think that we are very much interested, as regulators
follow through, that they think this through carefully and that
we not jump to a conclusion which says the banks and insurance
companies are exactly the same. So--
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Illinois, Mr.
Foster, for 5 minutes.
Mr. Foster. Thank you, Mr. Chairman.
I would like to switch a moment to the question of the Iran
sanctions. And then, first of all, congratulate you on the
recent--this morning's designation of an additional batch of
these.
However, it seems to me that the rate at which these have
been coming out is sort of erratic. In the 6 weeks prior to the
Iranian elections in June, the Treasury Department issued 7
notices of designations of sanctions violators that included
more than 100 new people, companies, aircraft, and sea vessels.
Since June 14th, when Hassan Rouhani was elected, the
Treasury Department issued only 2 designation notices that
identified only 6 people and 4 companies as violating the
sanctions.
And now we have a new batch, for which I commend you.
And so, my question is, to what do you attribute this sort
of erratic, batch-by-batch nature of the designations? Just
start with that.
Secretary Lew. Congressman, the work of enforcing sanctions
is painstaking work that we have an extraordinarily talented
team at Treasury working on. They are dedicated to it, they are
committed to it. And they make progress at the pace that they
make progress. I think the designations today reflect the fine
work that they have done and the determination that we have to
be true to what I said in my opening remarks and what I have
said over and over again, that we will continue to investigate
for violations of sanctions and take action where we find them.
That is important to the sanctions being effective, that
they be implemented.
Mr. Foster. Now, in light of this 6-month freeze and
negotiating window, many people, including myself, have the
concern that companies will say, oh, boy, the sanctions are
going to go away in 6 months, and that you will see massive
cheating on the sanctions for companies that are trying to gain
a commercial advantage with anticipating the easing of the
sanctions.
And I was wondering, do you feel like you have all of the
authority you need to make sure that any company that is caught
cheating on the sanctions gains no commercial advantage from
that?
Secretary Lew. Congressman, enforcement is the answer. And
I have said in every meeting I have had with CEOs since the
interim agreement that there should be no uncertainty, we are
continuing to enforce sanctions, no one should think that
having Iran on a bill of lading or on a financial record is
going to go unnoticed, that we are going to stay on this and
that this is not an opening up of any door to relaxing our core
financial, banking, and oil sanctions.
I said it in a public speech again last night. I have
probably talked to several hundred CEOs in one group or
another, and delivered the message personally.
So I don't know how to be more clear than that. It is not
like we have some other mechanism, other than enforcement. But
we are very clear that any CEO, any business that steps into a
space that violates sanctions is doing it at the risk of having
an enforcement action.
Mr. Foster. Yes. But do you anticipate, for example, that a
company that is caught cheating on this will have sanctions
that extend past the time that normal sanctions would be
released?
Secretary Lew. Congressman, the duration of sanctions is
something that is a technical matter depending on the violation
and the provision, so rather than give you an off-the-cuff
answer, I would rather follow up and do it on a more detailed
basis, based on which provision you are referring to.
Mr. Foster. Okay. So I would like to change for a moment to
a couple of things that relate to your position on FSOC and
some important issues there.
One is the application of, basically, banking capital
standards to insurance companies. And I wonder if you have any
reaction to the appropriateness of that?
Secretary Lew. To be clear, the only actions taken at FSOC
regarding insurance companies were to designate the
institutions that met the standard of financial--presenting
that degree of financial risk.
The question of how they are regulated is something that
each of the regulators will now be dealing with. They have made
it clear that they are looking at how to do this in a way that
works.
The charge under FSOC is not to implement; it is to make
the determination as to whether or not there is that kind of
systemic risk. And then, the tools of each of the regulators
will be used as appropriate.
But, as I tried to indicate in my response to Congressman
Neugebauer, we understand that banks and insurance companies
are not identical.
Mr. Foster. And another issue related to this in the few
seconds left is the issue of collateralized loan obligations
and risk retention which is--obviously, C.L.s were not involved
in our financial collapse, and the specter of risk retention is
something that makes a lot of people uncomfortable.
And I was wondering if you have a reaction to that?
Secretary Lew. I think, in general, the idea that firms
should internalize their risks is a very important principle.
There are many ways to achieve that. And we have tried, as we
have laid out our actions in response to financial reform, to
make that clear.
The test is are firms putting themselves at risk rather
than tax payers at risk for the business decisions that they
are making? And it is--capital is part of it and restrictions,
like some of the things, the Volcker Rule, are part of it, and
leverage as well.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from North Carolina,
Mr. McHenry, chairman of our Oversight and Investigations
Subcommittee, for 5 minutes.
Mr. McHenry. Mr. Chairman, I request unanimous consent to
submit for the record five letters from the leadership of this
committee to the Treasury Secretary, and two responses from
Treasury to those letters.
Chairman Hensarling. Without objection, it is so ordered.
Mr. McHenry. Secretary Lew, thank you for being here.
I want to state this for the record. Article I of the U.S.
Constitution establishes and makes vital the oversight
authority of the Congress vis-a-vis the Executive Branch. And I
am sure you agree with that notion.
But your Treasury Department has stiff-armed this committee
in its oversight capacity by your unsupported refusal to
provide complete responses to this committee. That is
unacceptable.
Chairman Garrett already covered his concern. I also sent
you a letter on August 22, 2013, requesting documents that were
the subject of a FOIA request made by a public interest group.
The Treasury's position is that the Department would
provide this committee with only redacted documents that group
already received. This implies that FOIA is applicable to
Congress.
Mr. Secretary, I would hope you understand that FOIA does
not apply to Congress, and that you will direct your
Legislative Affairs staff that they will provide those
documents promptly.
Furthermore, in addition, on November 6, 2013, Chairman
Hensarling sent a letter to the New York Fed requesting
information regarding contingency planning related to U.S. debt
limit.
The New York Fed pointed the finger at the Treasury
Department, claiming they needed the Treasury's permission to
produce the requested information.
Although we have rejected the Fed's claim that it needs
Treasury permission, I ask that you commit to resolving this
issue and ensuring that the committee receives the requested
documents by the requested production date of December 18th.
You can respond in writing. We will move forward.
Additionally, this question of prioritization of debt, Mr.
Secretary, you have mentioned in the past that you are unsure
whether your Department has the legal authority to prioritize
debt payments in the event of a failure to raise the debt
ceiling.
I voted to raise the debt ceiling. I think we have to--we
have an obligation to pay our obligations.
But have you requested from the--or has your Department
requested from the Office of Legal Counsel, the Department of
Justice, an answer to this question?
Secretary Lew. Congressman, on the question of
responsiveness to oversight, I very much accept--
Mr. McHenry. I just asked for you to respond in writing to
that.
If you would address this prioritization question: Have you
asked or your Department asked whether or not you can
prioritize debt from the Office of Legal Counsel--
Secretary Lew. Congressman, the question--
Mr. McHenry. --of the Department of Justice.
Secretary Lew. The question of prioritization is
fundamentally a policy question. And I think, as your comments
reflected, I do not believe nor has any President nor any
Treasury Secretary--
Mr. McHenry. I understand that. You have established that.
Let me ask you to answer my question.
Secretary Lew. And I have also said publicly that
ultimately--
Mr. McHenry. I appreciate that, but I have 1:54 left. Have
you asked the Department of Justice's Office of Legal Counsel
whether or not you have the authority, in the event of not
raising the debt ceiling, to prioritize debt payments?
Secretary Lew. The issue of whether or not that decision
can be made is fundamentally a Presidential decision. It would
be a communication--
Mr. McHenry. I know, but have you--
Secretary Lew. It would be--
Mr. McHenry. --as Treasury Secretary, your Department,
requested from the Office of Legal Counsel whether or not you
can prioritize?
Secretary Lew. Let me answer your question, Congressman.
It would fundamentally be a question between the White
House counsel and the Justice Department, because the
President--
Mr. McHenry. Okay. Let me point you to the fact that a
Huffington Post article from last week says the Obama
Administration took the platinum coin option more seriously
than it let on.
This idea that you have a $1 trillion coin minted and
deposited at the Fed, and then draw upon that, it is, according
to the Huffington Post, the Administration did ask the Office
of Legal Counsel for this absurd idea to actually be judged
whether or not it is legal.
Yet at the same time, you will not say that you have asked
whether or not you can prioritize payments? That is deeply
concerning--
Secretary Lew. I am prepared to discuss the policy on both
of those issues. I don't disagree with you that the platinum
coin is not a serious option.
Mr. McHenry. Good. I am glad we agree on that.
Let me ask one final question on Volcker.
Who is the primary enforcer of the Volcker Rule?
Secretary Lew. So if I could just go back, Congressman, on
the question of the debt limit, the real issue is we must keep
all of our obligations.
Mr. McHenry. I agree. Let me ask you--
Secretary Lew. That is the--
Mr. McHenry. Who is the primary enforcer of the Volcker
Rule?
Secretary Lew. The Volcker Rule is a rule that came out of
five different agencies. As you know--
Mr. McHenry. So there are five different primary enforcers
or is there one--
Secretary Lew. There are different aspects of the Volcker
Rule, depending on what kind of a financial institution you
are. You are regulated by--
Mr. McHenry. Will you submit in writing sort of your view
of this as Chairman of FSOC?
Secretary Lew. I am happy to respond to your question in
writing.
Chairman Hensarling. The time of the gentleman has expired.
As previously announced, the Chair now adjourns the committee
for a brief recess. ``Brief'' is going to be defined as
approximately less than 5 minutes. The committee stands in
recess.
[recess]
Chairman Hensarling. The committee will come to order.
The Chair now recognizes the gentleman from Connecticut,
Mr. Himes, for 5 minutes.
Mr. Himes. Thank you, Mr. Chairman.
And thank you, Mr. Secretary, for being with us today.
I have a few question, but I just want to take a minute,
maybe, to restore a little bit of order to this--or balance to
this discussion that has emerged on our debt.
Mr. Secretary, like you, I believe that a concern with our
debt is prudent. And I think I say that with some credibility,
having supported measures that balance our long-term debt
scenario, some of which were unpopular.
However, when that concern becomes ideology blind to all
facts and economic advice and reality, it is something
different than prudence. In the 5 years I have been here, I
have heard over and over and over again that the question is
not if we will have a disaster associated with our debt, but
when, that just around the corner is a debt-induced disaster
that the Federal Reserve's expansionary monetary policy,
inflation is just around the corner.
And of course, the hallmark of every single one of those
multiple predictions in the last 5 years is that they have been
absolutely wrong.
Of course, in those 5 years, a consensus has developed in
the economic community broadly shared that in fact the fiscal,
the contractionary fiscal policies of this Congress, the
austerity, have meaningfully contributed to a reduction in
growth and to the loss of otherwise creatable jobs in this
economy.
Mr. Secretary, you might be interested to know that when
Chairman Bernanke was sitting just where you are sitting, I
asked him, conscious as I am of the importance of long-term
stability in our debt, whether he could point to any
industrialized country which had better managed the tensions in
the last 5 years between the need to reduce long-term debt and
the need to assist in economic recovery. Sometimes, there are
significant tension in those two needs.
The Chairman of the Federal Reserve, Ben Bernanke, could
not name a country which had better managed those tensions. And
I know you have been a part of that effort and I thank you for
your work in that regard.
Mr. Secretary, my question is about the Volcker Rule. Like
you, I was pleased to see that the regulators finally came out
with a rule. I agree with you; I think that it is strong and
comprehensive.
I am, however, concerned by the explicit exemption for
proprietary trading with respect to sovereign bonds, and
frankly, also the exemption for muni bonds. The headline,
``Bank Brought Low by Investments in Greek Debt,'' I think, is
probably not just an idea, and certainly it is a possibility in
the future.
So I wonder if you could address the ability under the
Volcker Rule of the banks to invest in securities which could
be very, very risky and quite volatile over time.
Secretary Lew. Congressman, obviously our initial core
concern was the treatment of U.S. Treasurys. And issues arose,
particularly with regard to the impact that the rule would have
on banks with relationships with other foreign nationals and
their sovereign debt.
I believe that the way the provisions were worked out
provides guidelines, a path for sovereign debt bonds to be
treated appropriately. I think if you look at the structure of
the rule, it is clear that there is accountability at the level
of the CEO to come up with a plan for implementing these rules
in a way that is consistent with the statute and the risks that
are being undertaken.
So I don't think all of the detail is necessarily reflected
in the black-letter law of the rule. There are going to be
questions of interpretation. It was deliberately left to be
worked out by the regulators and the firms to reach a balance
so that we don't shut down a very important sovereign market,
including the market for U.S. Treasurys.
So it is something we will continue to work on with this
committee and with the regulators.
If I could just say a word on--
Mr. Himes. I have one other question. I appreciate that
answer. I just, having worked in that industry for a long
period of time, know they will gravitate towards exemptions.
And both munis and sovereign bonds present the possibility of
very real risk. So I hope that you and the regulators will
continue to watch that closely.
One other question before I run out of time, Mr. Secretary,
pertains to a statement in your written testimony--Dodd-Frank,
many of the regulatory changes being largely completed now. I
wonder if--I am heartened to hear that, but I wonder if in my
30 or so seconds remaining you could talk a little bit about
how you are feeling about systemic risk, and in particular the
problem of too-big-to-fail.
To make the question very simple, has Title II succeeded in
fact in reducing the likelihood that we will see a major
dislocation or problem in one of our major banks?
Secretary Lew. I am not sure I can do that in 5 seconds.
Mr. Chairman, do I have--
Chairman Hensarling. You have 3 seconds.
[laughter]
We will give you about 20 or 30 seconds.
Secretary Lew. Yes, we have made enormous progress since
2009. We are much safer and sounder. And I made some very
detailed remarks on this last week. I would be happy to give a
more detailed response when I have the time.
Mr. Himes. Thank you.
Thank you, Mr. Chairman.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Alabama, Mr.
Bachus, our chairman emeritus, for 5 minutes.
Mr. Bachus. Thank you.
Mr. Secretary, I am going to introduce for the record some
dialogue from the conference committee that we had just 2 weeks
before we passed Dodd-Frank. And it is what we are still
dealing with now that we have the Volcker Rule.
Chairman Hensarling. Without objection, it is so ordered.
Mr. Bachus. What I asked, and this was on June 23rd, I
asked Mr. Frank if he was aware of any other country that had
committed to adopting the Volcker Rule that would be imposed on
U.S. firms if this bill went into effect. And I actually said
that the European financial ministers have indicated that the
Volcker Rule restrictions would actually violate E.U. universal
banking laws.
I reminded him that, and Chris Dodd, Chairman Dodd also, he
had said just 3 months before, ``For us to adopt this rule
without the rest of the international community, that makes it
unworkable.''
And I then said that I felt like universal, unilateral
adoption of the Volcker Rule by the United States will only
undermine our competitive advantage, and therefore is going to
undermine the profitability of financial institutions. If it
does that, it raises the cost of capital to American business,
consumers, and home buyers, and it will slow economic activity
and job creation. And we all agree on the need for more jobs in
our country.
Mr. Frank responded to me, and the first thing he said is
just sort of a diatribe on Republicans. But after four pages of
that, he said, ``As for the rest of the world, we are going to
get this bill done and then we are going to take it to the G-20
and there will be serious conversations going on with the rest
of the world.'' He talked about Davos, where people were coming
together to talk about banning proprietary trading. And he
assured me that the world was moving in that direction. And Mr.
Kanjorski joined that. So, he goes on for several pages, and
basically assures me that the world is going to go along with
it.
We know now that they haven't. And just this week, in
talking about the Volcker Rule, the Federal Reserve noted,
``This rule may create a competitive disadvantage for U.S.
financial institutions because their foreign peers are still
able to trade proprietarily. There does not seem to be any
traction right now for other countries to follow suit with
similar rules.''
In my opinion, what I said then will happen now, absent
restrictions in other countries. Under the Volcker Rule,
prohibited transactions will likely be offshored to foreign
banks, shifting the risky behaviors to another venue, but not
eliminating it from the global financial system as a whole.
I also quoted Mr. Geithner, just as when we talked about
the rule. Mr. Geithner was quoted as saying, when I asked him
in a hearing a year before, and I repeated that, about
proprietary trading and banning it. He said, ``Most of the
losses that were material for the weak institutions and the
strong relative to capital did not come from proprietary
trading activity. They came overwhelmingly from what I think
can fairly be described as classic extensions of credit.''
So what I am saying is that Secretary Geithner said that
proprietary trading--and others have also said this--was not a
significant cause of the financial meltdown. We have adopted
the rule prohibiting proprietary trading. The rest of the world
has not. Does that concern you?
Secretary Lew. Congressman, I think fundamentally our
objective has to be to meet the challenge of making sure that
we are taking the steps we need to to safeguard the U.S.
financial system, the U.S. economy, and then to try to bring
the world to that high standard.
Mr. Bachus. But after 3\1/2\ years, have we brought the
world--
Secretary Lew. I think we have in many areas. I think you
are seeing a lot of progress in capital, in leverage, in--
Mr. Bachus. Have any other countries adopted--
Secretary Lew. I think that now we have just completed--our
agency has just completed the Volcker Rule--
Mr. Bachus. Let me just--
Secretary Lew. I would just point to the comments made by
the European commissioner who is responsible for financial
regulation, just yesterday, which were quite favorable towards
the Volcker Rule and the policy--
Mr. Bachus. All right. They are quite favorable, but has
any country adopted it?
Secretary Lew. I think that other countries will have to
make their own judgments. We will continue to make the case. If
you look at the response in the United States--
Mr. Bachus. Have any of them adopted it?
Secretary Lew. I think the question to me is: What is the
strength of the U.S. financial services industry? Are we
leaving the U.S. financial services industry--
Mr. Bachus. I understand that. Have any other countries
adopted a Volcker Rule?
Chairman Hensarling. The time of the gentleman has expired,
but if the Secretary would like to give a yes-or-no answer to
the question?
Secretary Lew. I think that the Volcker Rule in the form it
is in is unique, but other countries are looking at--
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Michigan, Mr.
Peters, for 5 minutes.
Mr. Peters. Thank you, Mr. Chairman.
Secretary Lew, thank you so much for your testimony and for
appearing here today before our committee.
As you know, the United States is in the process of
negotiating the Trans-Pacific Partnership, which is a
multilateral free trade agreement that now includes Japan, a
country with a history of both currency manipulation and
closing off their auto markets for imports.
I sent a letter to the Administration in December of 2011
which argued that Japan should not be included in the TPP
negotiations until they open up their market to U.S.
automobiles. And I, to this day, remain very deeply concerned
about the impact of Japan's inclusion in those negotiations.
This hearing, of course, is focused on international
finance. And so, I would like to focus on the currency
manipulation issue. I know Mr. Cleaver asked you some questions
about that earlier. But currency manipulation has cost millions
of jobs in the United States and many of those jobs were in my
home State of Michigan.
There have been various proposals ranging from my
colleague, Congressman Sander Levin, to The Peterson Institutes
to the auto industry, to address currency manipulation in the
TPP without tying a country's hands to its own monetary policy.
Today, I have with me language from the Automotive Policy
Council that I would like to enter into the hearing record, Mr.
Chairman.
Chairman Hensarling. Without objection, it is so ordered.
Mr. Peters. And as I mentioned, this proposal would direct
currency manipulation--or would target, rather, direct currency
manipulation without stopping necessary quantitative easing by
evaluating first the protracted large-scale intervention in one
direction in the exchange market; excessive and prolonged
accumulation of foreign assets and, three, prolonged current
account deficits or surpluses.
So my question is, just generally speaking, do you support
strong and enforceable currency manipulation provisions in a
free trade agreement to address trade-distorting practice,
generally speaking?
Secretary Lew. Congressman, I tried in my response to
Congressman Clay to explain my view. And I am happy to do it
again.
I believe that it is very important that we continue to
insist on having market determined exchange rates, that we do
that through the proper mechanisms.
We have done it, I think, quite effectively through the G-
20. We are doing it quite effectively in bilateral relations.
I think if you look at the policies country by country in
our currency report, try to analyze in some detail what we see
as problematic and what we see as movement in the right
direction.
With regard to some countries, in Japan, we, for a decade,
were saying Japan needed to do something to get its economy
moving. The deflation in Japan was hurting the world economy
and it was hurting the U.S. economy as well.
Whether or not their monetary policies are manipulation or
not depends whether or not they abide by the standard of market
determined exchange rates and domestic tools for domestic
purposes.
Obviously, it is a fine line. We are going to keep our eye
on that line to make sure that countries don't cross it. And
when they cross it, we are going to press very hard. We have
done it time and again.
I have met with my counterparts from Japan on many
occasions. I met with my counterparts from China on many
occasions. And we have made it exceedingly clear that this is a
matter of necessity in order for us to have our bilateral
relations continue to improve.
And I think we are making a lot of progress. A trade
agreement has to be built on that firm commitment for us to
continue making progress on these matters.
Mr. Peters. In response, in the negotiations that have gone
on that you talked about, the problem still is about
enforcement and whether or not we have the ability to step up
and enforce those kinds of actions on currency manipulation and
hopefully bring it to an end.
And that is why I think it is important to actually have it
in the agreement, in the TPP agreement. And I just want to say
that in June of this year, 230 House Members, including 30
Members who are on this committee, including myself, sent a
letter to the President calling for currency manipulation
disciplines to actually be written into the TPP.
And in September, we had 60 Senators who sent you and
Ambassador Froman a letter calling for strong and enforceable
currency manipulation disciplines in the TPP. Now to my
knowledge, none of us has received even a letter in response--
and this is a letter from 230 House Members and 60 Senators.
Does the Administration plan to send a letter and respond
directly as to what will be in this TPP to us?
Secretary Lew. Congressman, I realize this is different
than the letter, but I have spent a fair amount of time with
Members of Congress on this. I spent several hours with the
Ways and Means Committee on both sides discussing it. I have
talked to many Members about it. I look forward to remaining in
close conversation.
Mr. Peters. Good. I appreciate that. And hopefully, we can
get that in the agreement.
I yield back.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Georgia, Mr.
Westmoreland, for 5 minutes.
Mr. Westmoreland. Thank you, Mr. Chairman.
And thank you, Mr. Secretary, for being here. This is kind
of off the subject, but I would like to ask this of all of our
witnesses, are you taking part in the Affordable Care Act
change?
Secretary Lew. Congressman, like most of the employees at
the Treasury, I participate in the Federal employee health
benefit plan.
Mr. Westmoreland. Okay. So you haven't voluntarily gone on
the exchange? Because all the staff in here and the Members
here are required to be on the exchange. And if it is such a
good deal--
Secretary Lew. The goal of the Affordable Care Act
obviously is for employers to provide coverage. Federal
employees have access to coverage with cost sharing between the
Federal Government and the employee. And I participate in the
Federal employee health benefit plan, as do most employees.
Mr. Westmoreland. We are all envious. We wish we could have
stayed there, too.
I want to follow up a little bit on the Volcker Rule.
From 2006 to 2009, you were the lead at Citigroup's
alternative investment unit, correct?
Secretary Lew. I was in the--I ran operations, not the
business practices.
Mr. Westmoreland. But you ran that group's proprietary
trading, right?
Secretary Lew. Just to be clear, I was chief operating
officer. So I was responsible for kind of the internal
mechanics in the business. I was not making investment
decisions.
Mr. Westmoreland. Okay. But you were doing proprietary
trading.
Secretary Lew. The firm did, yes.
Mr. Westmoreland. Yes.
Would those people still have a job today?
Secretary Lew. I think I have spoken to my views in my
response to questions on the Volcker Rule. I think coming out
of the financial crisis, it is incumbent on all of us to ask
what was happening before 2008 that should be done differently.
I believe that this--
Mr. Westmoreland. But you never thought you or Citigroup or
anybody else was doing anything wrong? Did you feel like you
all were doing something that was sleazy or--
Secretary Lew. I think, going forward, the challenge we
have is to ask the questions: how do we take risk out of the
financial system; how do we maintain strong, healthy financial
institutions; how do we protect taxpayers from being exposed--
Mr. Westmoreland. While Citigroup was doing the proprietary
trading, do you think they were weakening the company or taking
a big risk?
Secretary Lew. I think that the challenge going forward is
to look at what practices can we put in place to make sure we
have visibility into financial institutions and make sure that
they are not taking on risks which they can't internally absorb
themselves.
And I think the Volcker--
Mr. Westmoreland. Did you ever take any of the--did your
group or Citigroup ever take on any of these things that they
didn't feel they can manage?
Secretary Lew. I am not testifying today on behalf of one
firm or another.
Mr. Westmoreland. Oh, I know.
Secretary Lew. I think I have made it clear that the
positions I have taken reflect my view and the view of the
Administration. And it may not be consistent with views that
are shared by people I may have worked with in the past.
Mr. Westmoreland. Sure.
On November 26th, the Treasury and the IRS published in the
Federal Register proposed guidance for clarifying the range of
acceptable political activities for tax-exempt social welfare
organizations under Section 501(c)(4) of the Internal Revenue
Code.
Were the same IRS personnel who targeted the nonprofit
conservative organizations responsible for making the decision
as to what is political and what is not political under the
law?
Secretary Lew. To be clear, Congressman, in the aftermath
of what we all discovered was going on in that program, all of
the senior leadership in that area has been replaced. We have
had significant new leadership, a set of leadership changes put
in.
So in general, it is--
Mr. Westmoreland. Who is going to be making the decision as
to what--
Secretary Lew. There is a policy in there, to be clear,
there was an I.G. report. The I.G. report called on us to take
a number of actions. And one of the actions was to provide
greater clarity here.
The notice that you are describing was not a final act. It
was asking for comment to--
Mr. Westmoreland. All right--
Secretary Lew. --conversation. I think we have some policy
that we have to make. And that policy is policy that is going
to be made by policy officials and we should do it in
conversation--
Mr. Westmoreland. Do you think it is good to be putting new
rules in while we are in the process of trying to investigate?
Secretary Lew. I think it is important that we took all of
the I.G. recommendations seriously. We have acted on each of
them. This was one. And while it is not final, it is a step in
the direction of working through what the right--
Mr. Westmoreland. When do you think it will be finalized?
Secretary Lew. I actually would have to get back to you on
the schedule. I don't know the exact schedule. This was the
first step. So, it is some space away from being final.
I think this is an important subject and there is a need
for comment and for us to hear the different views.
Mr. Westmoreland. Thank you, sir.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Michigan, Mr.
Kildee, for 5 minutes.
Mr. Kildee. Thank you, Mr. Chairman.
I have a couple of questions, but I just wanted to say, Mr.
Secretary, that today, as I think we are all aware, the
Treasury Department designated a number of entities that have
been providing support for Iran in violation of international
sanctions.
And I just want to thank you for your continued diligence
on that point. It is obviously important to the Congress. There
is discussion and a lot of debate occurring even as we speak on
this particular question. And it is a pretty dynamic condition
that we are in.
For me, it is particularly important. I have a constituent,
Amir Hekmati, a former U.S. Marine who was held prisoner and
has been for nearly 2\1/2\ years in Iran. So I want to thank
you for your continued diligence on this subject. And if there
is time, I would invite any comment that you might have on that
particular question.
I just want to return to the question of the Trans-Pacific
Partnership. I represent Flint, Michigan, and Saginaw,
Michigan--communities that--in the case of my own hometown,
once had 79,000 auto workers, people working for the auto
industry directly, and now that number is roughly one-tenth
that number. So we have seen the effect of some trade
agreements that are sold on the notion of economic growth but
don't necessarily deliver, and in particular communities
actually have exacerbated an already difficult problem.
And for a year now, under the direction of Prime Minister
Abe, Japan has taken a number of drastic macroeconomic
measures, including setting negative yen interest rates,
engaging in major quantitative easing measures, including
setting negative interest rates. That has caused the yen to
drop roughly 20 percent to the dollar over the past year,
severely undermining our competitiveness.
And I guess I would like to ask, without going into much
further detail, what will Treasury do to ensure that U.S.
exports remain affordable and domestic manufacturing jobs are
protected as we move forward and potentially see TPP enacted,
and particularly with Japan's involvement?
Secretary Lew. Congressman, I think our commitment to
making sure we have a healthy U.S. auto industry is reflected
in many actions that we have taken. And I was very pleased this
week that we were able to sell the final shares of GM stock
that the government owns, and leave GM and Chrysler stronger
than anyone thought they would be. And it is our goal to have a
competitive domestic auto industry. It is so important to our
economy and to our country.
I think that the challenge of--in taking the policy
agreements that we have reached on exchange rates, which I
described earlier, and making sure each country lives up to
them is something that we have to do constantly. We have to do
it in our bilateral conversations. We have to do it in our
multilateral conversations.
I think that we have taken it very seriously. We continue
to take it very seriously. And we are making progress.
I think that the fact that we got an agreement in the G-20
in February to the principles that I described is very
significant. Living up to that commitment is something I remind
my counterparts on a constant basis is as important as the
agreement itself.
I think if you look at Japan's economy, they were in a
long-term period of deflation and negative economic growth.
There was a need for them to take action with their combination
of policies. And the question of whether they ultimately
crossed the line is one that we are very alert to, and as we
said in our currency report, we will keep an eye on.
But it is a good thing for the U.S. economy for Japan to be
out of deflation and growing; is one of our biggest trading
partners. And in our relations with countries, we don't shy
away from being very direct on making sure that they live up to
their obligations which they have agreed to, in the case of
Japan as a member of the G-20.
Mr. Kildee. I thank you for that. I just want to make sure
that there is continued diligence on this. The auto community
has really suffered. Many communities don't consider themselves
auto communities, but I would suspect that every Member of
Congress, on this committee in particular, would say the fact
that we have such a trade deficit, and particularly in the auto
sector, impacts the local economy and it really affects our
ability to put people back to work.
Secretary Lew. If I could just respond on the issue you
started with. We are very sensitive to the suffering of people
who are held in--Mr. Hekmati is very much on our minds. I would
refer you to the State Department. They have kept a very close
eye on this.
Mr. Kildee. Thank you very much.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Florida, Mr.
Ross, for 5 minutes.
Mr. Ross. Thank you, Mr. Chairman.
Mr. Secretary, thank you very much for being here.
In my home State of Florida, insurance plays a significant
role in our economy and our markets. We have natural disasters
there probably more frequently than other States.
In fact, Kevin McCarty, our insurance commissioner, has
testified on the importance of insurance companies to
appropriately match their assets with liabilities. And I am
encouraged with the Federal Reserve Board's recent announcement
that more insurance experts are necessary as we look into
continuing in the regulatory scheme, especially with capital
requirements under Basel III.
My concern, and you have addressed this a little bit, you
have acknowledged that there is a difference between capital
requirements, I think, for insurance companies and for banks.
You stated in your initial testimony--your written testimony
today that, ``We will focus on promoting vigorous
implementation of Basel III, ensuring that risk weighted assets
are assessed consistently across borders, and that Basel III's
high-quality capital standard is met.''
My concern has to do with what assurances can the Treasury
give to make sure that certain insurance companies are not
subject to bank-centric capital requirements which do not fit
their business models?
Secretary Lew. Congressman, I know that as the regulators
look at implementing supervision, they are looking very hard at
the question of how to treat insurance companies. Obviously,
they don't have infinite flexibility. They--
Mr. Ross. But you acknowledge that there is a difference
between the two.
Secretary Lew. I have acknowledged there is a difference,
and I have acknowledged that they are looking to define
flexibility in their tools. I can't speak for them in terms of
how they will exercise that.
Mr. Ross. Would you give them any--would you give these
insurance companies any advice as to how to prepare for what
may be coming down the pike as far as capital requirements?
Secretary Lew. My advice would be for them to work closely
with the regulators that supervise them, and to have this
conversation that we are having right now.
Mr. Ross. Again, looking back at my State of Florida, I
think we have a very good framework. And we have a very good
regulatory scheme. The Financial Stability Oversight Board, of
which the Department of the Treasury is a member, released a
report in August recommending that the United States consider
federalizing insurance supervision. Is this something with
which you agree?
Secretary Lew. I think that we need to keep taking a look
at how we are working at the State level, and at the Federal
level.
Mr. Ross. Because there is a pre-emption there that we have
to be concerned with. And I think in Dodd-Frank, we have
reaffirmed McCarran-Ferguson and that State-based regulatory
schemes work for consumers. But there must be something here
that allows for some assurance that consumers can be guaranteed
that the Federal Government is not going to impose new
requirements that raise premiums.
Secretary Lew. The question that Congressman Neugebauer was
asking earlier about studies, the reports that--
Mr. Ross. Right.
Secretary Lew. --the Federal Insurance Office is issuing,
when they issue the report on the future of the insurance
industry, it will raise some of these questions so that we can
have a discussion of what, if any, is an appropriate Federal
role.
And we have been very respectful of the States' role in
this area. We are also very aware that there is an
interconnectedness which raises national issues. And we have to
have the conversation--
Mr. Ross. Good. Because I want to give you an example. Most
insurance companies use statutory accounting principles. They
required by--in fact, the National Association of Insurance
Commissioners recommends that. However, the Generally Accepted
Accounting Principles (GAAP), are used more for bank-centric
entities.
If FSOC deems certain non-bank entities to be Systemically
Important Financial Institutions (SIFIs), would they not then
require them to change their accounting procedures from the way
they report to the State to change to the way they report to
the Federal Government? That is an issue I see that could
realistically happen.
Secretary Lew. I know from the conversations that I have
had with regulators that they are very sensitive to the fact
that there is an ongoing regulatory structure. And these are
issues they are working their way through.
Remember, we are just beginning this practice.
Mr. Ross. Oh, I agree.
Secretary Lew. --we have to work our way through to make
sure we--at a Federal level we do the job appropriately, and we
do it in a way that doesn't unduly disrupt--
Mr. Ross. And, again, just some assurance for--because
ultimately it is the consumer who is going to have to pay for
this. Because the cost of compliance is one of the largest--in
fact compliance officers are one of the fastest growing
occupations in this country, thanks in large part to the
regulatory environment that we have here.
But I guess my concern is that we know what is coming. We
know that there is going to be a time when an insurance company
may have to make a decision as whether they can accommodate the
regulatory scheme of accounting principles, and in order to do
so, their cost is going to have to be passed on to somebody.
And I guess I am just looking for some assurance that may
not have to happen.
Secretary Lew. Congressman, I can assure you that the
regulators are looking carefully at how to do this in a way
that works for the economy and for the industry.
Mr. Ross. I am very hopeful about that.
Thank you. I yield back.
Chairman Hensarling. The time of the gentleman has expired.
The Chair recognizes the gentleman from Florida, Mr.
Murphy, for 5 minutes.
Mr. Murphy. Thank you, Mr. Chairman.
Thank you, Mr. Secretary, for being here.
Back to the Volcker Rule, there has obviously been a lot of
discussion about that today. We started to hear a few
questions--Mr. McHenry brought this up, and didn't really give
you a chance to answer. Would you mind taking a minute to talk
about how the regulators are going to split up their
responsibilities in regulating Volcker?
Secretary Lew. The regulators regulate different entities
based on their characteristics. So depending on where
institutions are currently supervised, that will flow through
into the Volcker Rule, depending on who their primary regulator
is, and what products they are engaged in.
So I don't think the Volcker Rule actually creates new
lines. The reason there are five agencies is we have a
regulatory structure that divides up responsibilities for
different institutions and different products. The Volcker Rule
is just an extension of that.
Mr. Murphy. Will there be a clear head of those functions?
Secretary Lew. I think the clarity that each of the
agencies issued the same rule, they went through a process
where they worked hard to simplify it.
It is not a long rule. It is about 70 pages long. It leaves
some space for supervisors to engage with the entities that
they supervise to work through some detail.
And I know that the intent is to have clarity that there is
one set of rules. And now, it will be implemented through a
regulatory structure that sometimes does create some shades of
difference between entities based on what regulator has
jurisdiction over them and what the characteristics of the
entity are.
So, I think there is an underlying issue in our regulatory
system, that it is a complicated system which divides up
responsibility amongst many different regulatory authorities.
I think actually, in the case of the Volcker Rule, the fact
that they were able to agree on common rule text is a step
forward. It is, I think, unprecedented to have had five
agencies act on the same day, on the same rule text.
And that should give some encouragement that there is
really a goal here of doing it in a sensible way.
If I could just take one moment, earlier I was asked about
whether other countries have a form of the Volcker Rule. And,
while I said the Volcker Rule is unique, it is, in fact, the
case that France and Germany have their own form of rules here.
So we are not the only country to be dealing with this issue of
proprietary trading.
Mr. Murphy. So you are not worried that this will, in fact,
set American companies back, put us at a disadvantage?
Secretary Lew. I'm sorry? Could you--
Mr. Murphy. You are not worried that this will, in fact,
set American companies back?
Secretary Lew. I believe that the American financial system
is sounder and America's financial services companies are
sounder because of all the steps we have taken since 2009.
I don't think that it served our industry or our economy
well to go through the financial crisis that we did in 2008 and
2009.
So, if one balances kind of short-term and long-term
issues, I think we are leaving the industry safer and sounder
than it was, and that is a good thing.
Mr. Murphy. Another question, shifting gears a little bit:
I wonder if you can put a number on what the dysfunction in
this institution has cost the American taxpayer? Whether it is
the shutdown, the sequester instead of the smart spending cuts,
continuing resolutions, if you can put a number on that?
Secretary Lew. It is hard to put one number. I believe
deeply that the uncertainty and anxiety caused by the repeated
financial crises, fiscal crises that were manufactured because
of this process have hurt the economy. I think we see
businesses holding back because they are uncertain about what
the next 6 months will bring.
I think today is actually a step in the right direction.
Small as the budget agreement is compared to the grand bargain
people talked about, it backs out some short-term discretionary
cuts that were hurting the economy, replaces them with longer-
term structural savings, and it provides clarity, so that for
the next couple of years, Congress can hopefully avoid the kind
of dysfunction you described.
Mr. Murphy. Let's hope so. I have 1 minute--
Secretary Lew. But I would just underscore that it is
important to extend the debt limit in the same way.
Mr. Murphy. Thank you.
I want to ask about FSOC and their process of designating
institutions as systematically important.
Recently, there have been some reports saying that large
asset managers will be designated as SIFIs. I wonder if you can
talk briefly about that decision and if you are going to be
relying on the Office of Financial Research's (OFRs) recent
report on asset managers to make that determination.
Secretary Lew. Congressman, first of all, the Office of
Financial Research study is a piece of research. It is not a
decision by FSOC. It is just one of the pieces of analysis that
will be considered. And it will be part of it. OFR was created
in order to provide FSOC with that kind of research.
I think the important thing is we can't be afraid to ask
questions. And it doesn't mean you know the answer when you ask
the questions. We have to follow the data and the analysis
where it takes us. And we have to do it in an open-minded way.
Mr. Murphy. Thank you.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Kentucky, Mr.
Barr, for 5 minutes.
Mr. Barr. Mr. Secretary, welcome to the committee.
Is the mission of the Export-Import Bank to support U.S.
exports and jobs for U.S. workers?
Secretary Lew. It is to promote opportunities for U.S.
export, which is good for the U.S. economy and for creating
U.S. jobs.
Mr. Barr. And is the mission of the Export-Import Bank to
pick winners and losers among U.S. industries?
Secretary Lew. It is to level the playing field in the
world so U.S. industry has the ability to compete in a fair
way.
Mr. Barr. The reason why I ask those questions is because I
am from Kentucky, and like Chairwoman Capito, from a coal-
producing State, and so I share her concern about Treasury
directives and policies with respect to the coal industry.
We want to see a future for the coal industry and the
vitality of the American coal industry.
Kentucky is the third largest coal-producing State in the
country. And so, my questions really are directed on behalf of
the 6,200 coal miners in my State who have lost their jobs,
with all respect, because of the anti-coal policies of this
Administration over the last couple of years.
And so, with respect to the policies directed to the
multilateral development banks, most notably the World Bank,
opposing funding for new coal plants and also the Export-Import
Bank has adopted at the Administration's direction stringent
carbon standards that essentially prohibit funding for coal-
fired power plants abroad.
I noted with optimism the written testimony that you
presented here today, where you indicated that Treasury has
worked successfully to secure support from the World Bank and
the African Development Bank for President Obama's Power Africa
Initiative, which, as you say, aims to bring energy to half-a-
billion people in sub-Saharan Africa.
I share your interest in that, because for many parts of
the world coal-generated electricity is vital, because it
remains one of the only means to lift people out of darkness,
literal darkness, into energy diversity and energy prosperity.
And, in fact, the International Energy Agency estimates
that over 1.3 billion people on this planet, nearly 20 percent
of the world's population, live with no access to electricity,
to say nothing of the 1.7 billion who have very limited access.
So my question is, the rhetoric in your written testimony
that we want to deliver energy, diversity, and opportunity to
people living in poverty in Africa, and the reality of the
policy which is depriving these impoverished people of access
to affordable, reliable coal-fired power, how do you reconcile
the policy, the reality of the policy, and this rhetoric and
this desire, the rhetorical desire to deliver energy
opportunities to people in poverty?
Secretary Lew. Congressman, we believe very much in being
good partners in helping developing countries gain access to
electricity. It is key to their economic growth and their
further development.
There are a lot of ways to develop electricity for a lot of
these countries. Renewables and hydro and natural gas are--
Mr. Barr. But the reason why these countries are in poverty
and the reason why these people are in poverty is because they
don't have access to affordable, reliable, baseload power. Coal
is a proven technology. Why would we discriminate against this
particular reliable source of energy?
Secretary Lew. As I tried to explain in my response to
Congresswoman Capito, we have very strong concerns about
climate change domestically and internationally. And we are
trying to balance our concerns while promoting access to energy
around the world.
Mr. Barr. I understand. I heard your testimony before.
Secretary Lew. Our policy is--regards our vote in
international bodies.
Mr. Barr. Right.
Secretary Lew. It does not regard private financing. Nor
does it in every case--
Mr. Barr. With respect, to reclaim my time, I would
encourage Treasury to reconsider. If the goal truly is to
deliver energy diversity and opportunities to impoverished
nations, we ought to consider true energy diversity, which
would include a portfolio of coal-fired power.
Quickly shifting to the Volcker Rule, I do want to focus on
the ambiguity and complexity of the Volcker Rule and whether or
not the rule is capable of consistent enforcement.
You have heard in recent days after the final issuance of
the rule, Fed Governor Sarah Bloom Raskin at the Federal
Reserve talking about how Section 619 of Dodd-Frank certainly
doesn't specify enforcement standards.
She indicates that the SEC may bring one perspective in its
supervision of broker-dealers, and the OCC may bring a
different perspective.
Commissioner Gallagher of the SEC says that banking
agencies can employ discretion, whereas at the SEC, a rule is a
rule, and they have a different approach.
So with a 71-page textual rule, no guidance really in the
statutory language of Section 619, and 882 pages of
explanation, how are banking and market regulators under your
purview supposed to enforce this rule? How are the five
separate regulators supposed to enforce the rule consistently
when they have such divergent philosophies?
Secretary Lew. Mr. Chairman, may I take just 30 seconds to
respond?
Chairman Hensarling. Brief response, please.
Secretary Lew. Congressman, I think that we have for 100
years seen the evolution of our financial regulatory system
that has worked to create the five bodies. I think that the
fact that the five agencies agreed to an identical rule text
and are embarking on supervision and enforcement from a common
starting point is enormous progress. So, I think we are going
into this stronger than anyone might have expected.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Maryland, Mr.
Delaney, for 5 minutes.
Mr. Delaney. Thank you, Mr. Chairman.
And thank you, Mr. Secretary, for joining us here today.
I was going to frame my question around the issue of asset
managers being systemically important, which I don't think they
should be deemed systemically important. But my good friend and
colleague from Kentucky made me think about another question
that I want to ask you, kind of a follow up to what you were
talking about.
And I would just be interested in your opinion on this
topic. If you were confronted with the following kind of policy
question that was being posed to the President, which is that
we would implement some form of market-driven and market-based
carbon tax. And if the revenues produced from that form of a
carbon tax were used entirely to provide a variety of tax
breaks to individuals and businesses, so that it was a revenue-
neutral proposal. But we actually had a true market-based
carbon tax, which is something I am in favor of, but that the
revenues generated from something like that were entirely given
back to the American population either through individual tax
breaks or through corporate tax breaks.
How would you advise the President to think about something
like that? What would be your directional view on a step like
that?
Secretary Lew. Congressman, this has obviously been debated
over many decades. I was part of an Administration that
proposed a BTU tax and was unsuccessful because it had such
resistance in the 1990s. I think these are questions we have to
look at. But the right context is in terms of comprehensive tax
reform where you are looking overall at our tax system and how
to make it more conducive to a growing, efficient economy.
And the Administration has not made any proposals--
Mr. Delaney. Right. I agree with you. Obviously, the best
way to do tax reform is in a comprehensive manner, both for
individual and corporate. And I say this respectfully, I am not
trying to pin you down, but if you were just presented with the
option that I have described, which--so I am not going to allow
you to defer to comprehensive reform because I agree with
comprehensive reform. But just directionally, I am trying to
get a sense as to how you weigh these things.
Because politically, when we think about a carbon tax,
again a market-based carbon tax which allows the private
markets to do what I think we oftentimes try to have regulators
do too much of. I would much rather see the private market
adjust behavior in a way that I think is in the best interests
of us across the long term, as opposed to trying to regulate
that behavior.
But if we were to have a real market-driven carbon tax, and
the only way that could be done politically was by taking those
tax revenues and giving them back to individuals and
corporations through a variety of tax reductions, do you think
directionally, that is something you would be supportive of? Or
are you not at a point where you could comment on that?
Secretary Lew. Congressman, I am really not at a point
where I could comment on it. I haven't looked closely at this
matter in recent years. I think that it would be a good thing
if we got deeply into the debate over broad tax reform in a
context that helps deal with our long-term fiscal challenges.
It is not enough to be revenue-neutral. It has to help solve
the fiscal challenges we face. And we haven't gotten deeply
into that discussion--
Mr. Delaney. But if it were just revenue-neutral, do you
think it is compelling enough to take this step towards
behavior that, in my opinion, would change climate change?
Secretary Lew. I appreciate that you are asking the
question for a third time, but I am just going to have to say I
would have to look at it and get back to you.
Mr. Delaney. Do you think climate change is a big economic
risk to the United States?
Secretary Lew. I do.
Mr. Delaney. Do you think corporate tax rates are too high?
Secretary Lew. I think that, as we have made clear, we
think that it is important that we do business tax reform so we
lower the statutory rate, being more competitive, and flatten
out some of the system so that it doesn't distort economic
decision-making.
Mr. Delaney. Okay. Thank you, sir.
I yield back.
Chairman Hensarling. The gentleman yields back.
The Chair now recognizes the gentleman from Pennsylvania,
Mr. Rothfus, for 5 minutes.
Mr. Rothfus. Thank you, Mr. Chairman.
Thank you, Mr. Secretary, for being here today.
I would like to touch a little bit on the coal-fired power
generation guidelines that have recently come out, following up
on Congressman Barr and Congresswoman Capito.
Did the Administration consult with other countries and
develop these new policies as a result of multilateral
negotiations at the boards of these institutions?
Secretary Lew. We have had discussions. I would have to
check whether they were discussions that would rise to a level
of negotiations.
Mr. Rothfus. I would be interested in hearing if they were,
so if you could please follow up with us in writing to see who
was involved with those.
My concern is that this is essentially a unilateral
political decision that was made at the White House without
consulting our friends and allies.
Secretary Lew. We have had conversations with our friends
and allies about it. So it is obviously our view, but it is not
something that we have just done without talking to our friends
and allies.
Mr. Rothfus. Can you tell us whether the countries that
will be made ineligible for development bank funding for coal-
fired power plants agree with this new U.S. policy?
Secretary Lew. I think you can see from the facilities
proposals that are moving through that there are plans that
continue to be presented for funding.
Mr. Rothfus. Yes, we hear a lot about China doing a lot of
investing in Africa. Won't countries just start buying Chinese
coal-fired power plants that are less durable and that do not
have the same rigorous standards that we have in the United
States?
Secretary Lew. I think that relates to a separate question,
which is that China is increasingly looking for ways to
increase its participation in multilateral--in international--
Mr. Rothfus. Is China adopting the same regulations or the
same guidelines that you--
Secretary Lew. I don't believe so.
Mr. Rothfus. Is it fair--
Secretary Lew. I will say this, that China--
Mr. Rothfus. Is it fair, Mr. Secretary, to deny
underdeveloped countries the opportunity to grow their economy
with low-cost energy the way the United States has?
Secretary Lew. Congressman, we are trying to help
underdeveloped countries gain access to bountiful and, in many
cases, renewable energy sources.
Mr. Rothfus. How many people have been lifted out of
poverty because of solar power?
Secretary Lew. Hydro is a big factor in many underdeveloped
countries. And I think solar and renewable have potential. I
would say this about China, China is confronting climate change
in a very real way because they are dealing with a public
health problem in their own country which they--
Mr. Rothfus. Has China suspended the construction of coal-
fired power plants?
Secretary Lew. They haven't suspended, but they are very
much focused on how they can reduce carbon emissions.
Mr. Rothfus. I would like to switch gears a little bit. In
a recent article that appeared in the pages of The Wall Street
Journal, it was reported that the number of banking
institutions in the United States has fallen to its lowest
level since the Great Depression, down from a peak of more than
18,000 institutions to below 7,000.
This significant decline has come almost entirely in the
form of exits by banks with less than $100 million in assets,
in other words, our community banks. Rising regulatory cost is
cited as a major reason why these numbers are declining. Over
the past year, this committee has heard from a number of
witnesses about these rising regulatory costs and how they
acutely burden small financial institutions, both community
banks and credit unions.
Mr. Secretary, are you concerned about these bank closures
and consolidation within the financial services industry?
Secretary Lew. Congressman, I think community banks play a
very important role in our economy. I have met with community
bank representatives on quite a number of occasions. I have met
with regulators and I have shared my concerns with them.
I think that if you look at the actions taken by
regulators, it shows a great deal of attention to trying to
carve out rules that treat community banks appropriately, even
the Volcker Rule that was finalized this week. So I think we
are concerned with the health of community banks and are trying
to balance the responsibilities we have to ensure safety and
soundness in the financial system with a good opportunity for
community banks to be healthy.
Mr. Rothfus. In a recent speech that you delivered at the
Pew Charitable Trusts, you heralded the work of the Consumer
Financial Protection Bureau, particularly its implementation of
the new qualified mortgage standards which will go into effect
in a couple of weeks. You also criticized the work of this
committee to institute much-needed reforms at the CFPB to make
the Bureau more transparent and accountable to the American
people.
Just a few weeks ago, before you delivered that speech,
Chairwoman Capito and I held a roundtable back in Pittsburgh
where we heard firsthand from banks, credit unions, housing
advocates, and community development organizations about how
the Q.M. rule as currently written will cause significant harm
to the economy and housing market and will make it more
difficult for working families in western Pennsylvania and
around the Nation to buy homes.
As the Chairman of FSOC, you have some oversight authority
over CFPB rulemaking, including QM. So I would like to hear
your response to these concerns.
Secretary Lew. Congressman, I think that as Director
Cordray has indicated, they are working through the final
details, and I believe that many of those concerns can be
addressed. And when the institutions understand better--
Mr. Rothfus. Those concerns--I would encourage you to
listen to the advocates for the low- to moderate-income
borrowers.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentlelady from Ohio, Mrs.
Beatty, for 5 minutes.
Mrs. Beatty. Thank you, Mr. Chairman, and Ranking Member
Waters.
And thank you, Mr. Secretary, for being here.
First, let me start by saying thank you to all of the
Assistant Secretaries, Assistant Chiefs of staff or Assistant
Legislative Directors for their scholarship and their hard work
because I am sure much of what you are getting today has been
scribed, signed, and sent from some assistant.
So I guess my question to you would be, in your selection
of assistant secretaries, would you say, yes or no, that some
of them in their complex specialty areas are as talented or
even more talented than you?
Secretary Lew. I am thankful every day that I work with
people who know much more about many of the things that I work
on than I do. I think that is a requirement in any of these
positions that we have. We make the Federal service attractive
to people who come with technical knowledge and the ability to
help support decision-making by policymakers like myself.
Mrs. Beatty. Thank you.
We have heard the word ``radical'' used to describe
President Obama's response to our financial crises. So hearing
it used with so much disdain, I decided that I would do some
research on radical responses and plans from Presidents.
And President Bush came up repeatedly. Let me just share
with you: President Bush outlines radical plan to part-
nationalize banks. And he said this in a press conference from
the White House as he authorized hundreds and hundreds of
billions of dollars with banks to shore up the financial crises
in 2008.
And in his televised statement, he said, it was essential,
although it was unprecedented, it was necessary to be
aggressive to address the financial crises.
So would you say sometimes, when you are a real leader, it
takes radical actions--and that is not said with disdain--
whether it is climate preparedness, whether it is health care,
whether it is the debt ceiling, that real leaders sometimes
must take aggressive, radical actions?
Secretary Lew. I will leave to others whether the word
``radical'' is the right word to describe it. But taking
decisive and effective action is a mark of leadership. And it
is one that I am proud that we have tried to follow in the work
I have been describing today.
Mrs. Beatty. Thank you.
Now to something a little more related to financial
services.
For almost 11 months, I have served on the Financial
Services Committee. And certainly, we have heard, as you have
heard, a lot about oversight and regulation. Is it too hot, is
it too warm, where should we be in between with it?
So my first question to you is, is there a broadly
comparable market segment of what we call small or mid-sized
banks in places like Europe or China?
Secretary Lew. The banking systems overseas tend to be very
concentrated. And they have a real challenge in many countries
opening up lines of capital that get into small and medium-
sized enterprises.
So I think the variety, the diversity of the U.S. system
serves us well. And I think we have the deepest and most liquid
financial markets in the world. Part of that is due to the fact
that we have a variety of different kinds of institutions
serving different needs.
Mrs. Beatty. Okay. Would applying the same banking
regulations, let's say covering a $2 trillion bank, be
appropriate for, let's say, a $40 billion bank?
Secretary Lew. We have tried, as I noted a few moments ago,
at every level to be sensitive to the fact that our rules have
to treat differently firms that present different
characteristics and that they have to be designed to meet the
needs of ensuring financial stability.
And that is why there are special provisions that provide a
different kind of treatment for smaller banks than larger
banks. It is why we have supplemental requirements on the very
largest banks, ranging from the living wills to supplementary
capital requirements. So we can't have a one-size-fits-all
system, and we don't.
Mrs. Beatty. Then lastly, generally speaking, is there any
reason, based on that answer, to believe that the average,
small or mid-sized bank is actively participating in global
financial activities?
Secretary Lew. I think every bank has its own unique book
of business, but I think most of your smaller banks are dealing
with pretty much local business.
Mrs. Beatty. Okay.
Thank you very much. I yield back.
Chairman Hensarling. The time of the gentlelady has
expired.
The Chair now recognizes the gentleman from California, Mr.
Royce, the chairman of the House Foreign Affairs Committee, for
5 minutes.
Mr. Royce. Thank you, Mr. Chairman.
Mr. Secretary, I want to thank you for your comments to Mr.
Neugebauer earlier today regarding the Federal Insurance Office
Modernization Report. And that report was originally introduced
to Dodd-Frank through an amendment that I co-sponsored with
another Member here on this committee.
One of the goals for a long time on insurance modernization
has been this concept of trying to create more uniformity,
first of all, hopefully less government price and product
control, but instead more competition infused into the system.
We have sort of moved in the other direction in some ways
in recent years because now we have layered regulation at the
Federal Reserve on top of a tangled web of State bureaucracy
and a lot of duplicative regulations.
So I think it is more important than ever that we restart
this conversation on how to best serve the insurance consumer
in this country. And it appears the report apparently is off
the printer, and it is on to the binder.
And so my hope was that you could shed some more light on
what we should expect, and will that report include specific
language on recommendations to improve the uniformity of
insurance regulation in the country, or even our ability to
deal with international regulatory issues where we are out of
compliance and so forth?
Secretary Lew. Congressman, I don't want to jump too far
ahead of the report being released so that you can read it and
make an evaluation of it on your own in its entirety.
But I would say this, that in the work that has been done
in preparing it, there has been a lot of focus on the fact that
we have a history of State regulation of insurance in this
country. We have cross-cutting national concerns; finding a way
to balance that even better than we have in the past is
important. And that means cueing up important questions for
further scrutiny.
I think that is what the report really tries to do, to
focus on the issues that we need to deal with together, to
answer the questions that you are posing. I don't think you
will find that the report is conclusory in all of these areas.
Mr. Royce. We did have that previous Treasury blueprint,
which did lay out recommendations for legislative action. My
hope was that it would be decisive enough to at least
delineate.
Secretary Lew. I think that you will find ample food for
thought in the report when it comes out. And I would look
forward to following up, once we can talk through the details.
Mr. Royce. I will look forward, Mr. Secretary, to meeting
with you on that.
I wanted to jump over to Iran sanctions and a specific
question I had on the $4.2 billion in oil sales over the next 6
months that the interim agreement stated that we are going to
allow Iran to access.
And the other aspect of that is there is also language in
the agreement where it sort of puts a pause on this concept of
nations having to significantly reduce their purchases.
But going to that first point, nowhere in the law does it
explicitly allow for a limited release of these funds. And so
if they are going to access this $4.2 billion in currency,
under what specific authority will you allow that repatriation?
How would that work in terms of the hard currency coming
into the Iranian regime? Are you going to invoke a waiver to do
that or--
Secretary Lew. Congressman, if I can get back to you on the
specific legal authority, I would be happy to do that. Let me
just address the economic issue and try to put it in a bit of
perspective.
We have immobilized roughly $100 billion of Iranian assets.
So, the relief of $4.2 billion is a small fraction of the
assets that we have immobilized.
Mr. Royce. I understand that.
Secretary Lew. And even during the 6-month period of the
interim agreement, there will be an additional $30 billion of
foregone oil sales because of the sanctions.
Mr. Royce. Because of the existing sanctions.
Secretary Lew. Yes. So we are continuing to keep the
pressure on Iran in a very serious way.
Mr. Royce. But I would--we are a little off-topic here in
terms of the authority. I would like to get an answer on that.
But I will say this, sanctions are largely psychological, not
just legal. So when you pick up The Wall Street Journal and a
headline says, ``Businesses Rushing To Iran To Do Business.''
And you have read the articles about oil and gas queuing up
because of the anticipation, of course is that once you start
down this road, sanctions start to unravel.
So I am not sure that the impact is going to be as slight
as you think it is. Already you see their currency rebounding,
going up 30 percent. It is partly the result of reversing
course.
Secretary Lew. Mr. Chairman, if I could just respond
briefly.
Chairman Hensarling. Briefly, Mr. Secretary.
Secretary Lew. Iran's economy has shrunk by 5 percent over
the last year because of sanctions. The relief that we are
talking about is roughly 1 percent of their economy. There is
still going to be more pain put on their economy. Whatever is
driving Iran to change its views and negotiate in an interim
context will continue to force them to continue to make
concessions to get real relief, which is the only way they will
get real relief is if they forego their nuclear program.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Washington, Mr.
Heck, for 5 minutes.
Mr. Heck. Thank you, Mr. Chairman.
I am grateful to my colleague from Kentucky for having
asked about the Export-Import Bank because it reminded me of a
question I have been wanting to ask for some time.
As you know, Mr. Secretary, the Export-Import Bank is
scheduled to expire next October 1st. As you also well know,
the Export-Import Bank transferred to you $1.057 billion about
6 weeks ago in what otherwise would be called profits. And as
you know, the Export-Import Bank has been independently
assessed to have created by virtue of its activity
approximately a quarter of a million jobs.
But my question to you, sir, is if we were to allow the
Export-Import Bank to expire, the Bank which has never used one
red cent of Federal Treasury or tax dollars, would that render
the United States of America the only developed nation on the
face of the globe without an entity something like the Export-
Import Bank?
Secretary Lew. Congressman, I have to do a little research
to answer whether it would be the only one. But we certainly
would find ourselves facing an unlevel playing field because so
many countries have programs like this.
Mr. Heck. Thank you. Now, I want to return to the subject
of my opening statement.
I noted that it prompted a chuckle or two when I asked you
about the role of the Department of the Treasury in providing
access to banking services to otherwise legally constituted
marijuana businesses in well-regulated States. In Washington
State and Colorado last year, the voters approved adult use of
marijuana. The Department of Justice said if the State is well-
regulated, they will stand down on enforcement of criminal
activity and prosecution. But these businesses still do not
have access to banking services. And in Washington State, it
has been forecast by fairly reputable work that it will be
about a $1 billion a year sector of the economy.
This is a serious question. A billion dollars in cash
floating around an economy where the businesses which otherwise
legally operate cannot access depository services, can't issue
checks, can't receive credit card payments. In fact, all cash.
It is, in fact, sir, an open invitation--it is setting out the
welcome mat to organized crime and disorganized crime.
It is setting out the welcome mat for tax avoidance. It is
an open invitation to all sorts of activities which will render
us and our communities and our neighborhoods less safe.
Now, the context is today, right now as we speak, the Bank
Secrecy Act Advisory Group is meeting. The Financial Crimes
Enforcement Network (FinCEN), a division of the Treasury, is
with them. I suspect they are talking about some guidelines to
parallel the Department of Justice's efforts to allow access to
bank services. My question to you, sir, is: Given all of this,
do you recognize, do you understand, and will you acknowledge
the threats to public safety if these businesses, otherwise
legally constituted, do not have access to bank services?
Secretary Lew. Congressman, I recognize the serious
challenges that are attendant to this, and obviously when there
are State laws and Federal laws that are not consistent, it
creates complicated decisions that have to be made. I look
forward to seeing the work that comes out of these meetings
that you are describing and will evaluate them when they are
presented to me.
Mr. Heck. Would you commit, even in a general sense, to a
timeline of action, keeping in mind that in both Colorado and
Washington State, these businesses go live in a matter of a few
weeks from now?
Secretary Lew. Congressman, I can't commit to a timeline
until I see the results of the work that is done here, but I am
happy to follow up on the matter with you.
Mr. Heck. You understand the urgency?
Secretary Lew. I understand the external timeline quite
well. And when informed of the recommendations, I would be
happy to follow up.
Mr. Heck. Finally, in the very brief amount of time
remaining, I want to commend you for the work that your agency
and you yourself personally undertook to lead the adoption of
the Volcker Rule. We are all aware that there are lawsuits
pending and that, according to news reports, several more are
possible.
My question to you, and again a brief answer: What would be
your general statement about the risk associated to the
progress that you have deemed earlier here and a speech last
week that the combination of this rulemaking has provided
toward the objective of safety and soundness of our financial
institutions and our economy if those suits, some or all of
them, are successful?
Secretary Lew. Obviously, I have spoken to how important I
think the rule is. I know that the foundation for it is strong.
And I would think that it would be a much better thing if it
just goes forward as is.
Mr. Heck. Thank you.
Chairman Hensarling. The time of the gentleman has expired.
The Chair recognizes the gentleman from California, Mr.
Miller, our vice chairman, for 5 minutes.
Mr. Miller. Thank you, Mr. Chairman.
Welcome. It is good to have you here this afternoon. I know
it was this morning a few minutes ago, but there has been a
great deal of discussion.
Secretary Lew. It seems to happen.
[laughter]
Mr. Miller. Pardon me?
Secretary Lew. It seems to happen--
Mr. Miller. I know. It goes quickly.
There has been discussion regarding what would result if
bank asset standards were applied to insurance companies. I
know that has been touched on a little bit during the hearing
today.
But during your confirmation hearing, Sarah Bloom Raskin
said, ``A one-size-fits-all approach is not going to work here.
Insurance companies have a very different set of asset and
liability structure than do banks, and to regulate them in
terms of a one-size-fits-all approach is not going to be an
effective form of supervision or regulation.''
Do you concur and agree with this?
Secretary Lew. I tried to indicate in response to several
other members of the committee that I think it is important
that the regulators look at what it requires to regulate
insurance companies appropriately, to look at the discretion
they have within their authorities to make distinctions. And
that we are going to work together on this going forward to
make sure we do it right.
But the objective of the review that the Financial
Stability Oversight Council made was to determine whether or
not there was systemic risk. The job of tailoring the
regulatory approaches is really in the hands of each of the
respective supervisory regulatory agencies. And I know they are
all focused on trying to do this effectively.
Mr. Miller. Yes, but my concern is the timing. Treasury's
position has been that no statutory change should be made to
Dodd-Frank until implementation is complete, which is late, as
far as I am concerned, yet the Federal Reserve has previously
expressed a few that Section 171 of Dodd-Frank, the Collins
amendment provision, constrains their ability to tailor
standards to non-bank business models such as insurance. And
Chairman Bernanke confirmed that when he was here--several
times.
So my concern is that even though it is acknowledged that
there is a problem and it won't work, the Treasury position is
that we are not going to do anything until after the
implementation is complete, and my position is that it is too
late at that point in time. And I think it is a matter of
timing. But are you willing to work to help solve this problem
in your roles at Treasury and FSOC?
Secretary Lew. Congressman, I believe that each of the
regulatory agencies is looking at what discretion they have
within their current statutes. I don't know that they have
reached final judgments in every case. I don't believe they
have. I think there are some differences of view as to how much
flexibility they have. And I think we will need to continue
looking at this and working together if there is an issue.
Mr. Miller. But if there is an acknowledgment--and I am not
arguing with you. We have a tough job ahead. But if there is an
acknowledgement that there is a problem, and yet the agency
that is going to move forward with the implementation
acknowledging that there is a problem, and allow that
implementation to occur, saying that we will somewhat fix it
later like the Feds say, it seems like we should step back and
say, ``We know there is a problem here, we know this is not
going to work, so why don't we take care of it in a normal
process instead of after the fact?''
Secretary Lew. Obviously, each of the issues that comes up
under Dodd-Frank has somewhat different character. Many of the
issues where we have taken the view that it is premature were
issues where agencies were still in the process of making
judgments and the legislation was jumping ahead of it.
Mr. Miller. I understand that, but--
Secretary Lew. And this is one that I believe is more
complicated. I think that--
Mr. Miller. Especially for insurance companies.
Secretary Lew. I think that it is a mistake to conclude
that the agencies don't have any flexibility here, because I
know that there is some flexibility that they do have. And
whether it is enough is the question.
I think we have to wait and see if it is enough. And I
would look forward to continuing the conversation, if it turns
out not to be.
Mr. Miller. Okay. That is fair.
On September 30th, Treasury's Office of Financial Research
(OFR), published a report entitled, ``Asset Management and the
Financial Stability,'' at the direction of FSOC.
In the introduction, the report states that, ``the asset
managers' activities differ in important ways from commercial
banking and that asset managers act primarily as agents,
managing assets on behalf of clients as opposed to investing on
the manager's behalf. Losses are borne by and, again, accrue to
clients rather than asset management firms.''
Do you agree with the study that the asset management
banking firms are different?
Secretary Lew. I think there is no doubt that they are
different. And the question is whether or not there are
systemic risks that rise to the level of designation.
I would just point out that OFR's study was not a
regulatory undertaking. It was an analytic study. It is a
totally separate matter to reach a determination--
Mr. Miller. But do you see a clear line between the
functions?
Secretary Lew. I think that we deal with a complex
financial system where we have many different players that have
different functions. They sometimes look more similar in some
cases than others.
But to acknowledge that they are different seems to me to
be necessary to understand each of them.
And the question as to whether or not there are issues of
systemic risk has to flow from the character of what each
organization is, and we can't be afraid to ask the questions.
Mr. Miller. Thank you. I appreciate it.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Texas, Mr.
Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman.
I thank the ranking member. I would like to associate
myself with the opening comments of the ranking member, and I
would like to pursue some of what she discussed.
By the way, I welcome you to the committee, Mr. Secretary.
I have before me, Mr. Secretary, an article entitled, ``The
top 25 hedge fund managers earn more than all the 500 top CEOs
together.''
The first paragraph reads, ``The best chance of becoming
super rich is to be one of the highest paid hedge fund managers
or masters of the universe,'' as it said here.
``In 2010, the top 25 hedge fund managers combined earned
roughly four times,'' some things bear repeating, ``roughly
four times as much as all of the 500 CEOs at the top of the 500
giant corporations that make up the S&P 500 Index.''
And then it indicates that the average pay of these 25
hedge fund managers was $134 million in 2002, and peaked at
over $1 billion in 2007.
Now, we go down to paragraph number seven, quickly. Okay.
This one I find quite interesting. It talks about the poverty
among managers of law firms. It reads, ``The poverty in the
higher ranks of law firm partners is striking. The average
profit per partner was just $1.6 million in 2010.''
I would call to your attention 2007, when a hedge fund
manager made over $3 billion--by the way, I don't begrudge any
of these people for making the money that they make--and that
is a lot of money, and it is difficult to get your mind around
it. That is about $400 per second. It would take a minimum-wage
worker 198,000 years to make that $3 billion.
Which brings me to my question: Speculative income is taxed
at a lower rate than ordinary income. Are there policies that
we should review such that this type of inequality does not
continue to expand, because the chasm between the poor partners
at law firms who are only making $1.6 million and the super
rich hedge fund managers has to be dealt with.
What policies could we implement, if you can tell me
quickly, to deal with this?
Secretary Lew. Congressman, I think the President spoke at
great length to this question of inequality just the other day.
It is a deep, deep problem.
I don't think, frankly, the poverty of the attorneys you
are talking about is what he was focusing on, but it was the
challenges of minimum-wage workers who work full-time but don't
break through the poverty line and can't support their
families.
So I think we have to ask different questions of what can
we do to provide opportunity for people to rise to the middle-
class, how do we make sure people who work full-time have a
middle-class income? And things like raising the minimum wage
are part of that. Things like the action taken at the beginning
of this year when the top tax rate went back to where it was
before the tax cuts of 2001, 2003 is part of it.
But we have a lot more work to do. And we fundamentally
have to focus on building a growing economy that is creating
jobs that have good salaries and good middle-class
opportunities.
That is where the growth in our country is going to--
Mr. Green. Let me just quickly intercede. And I appreciate
your answer. Would you agree that ordinary income is taxed at a
higher rate than speculative income?
Secretary Lew. Earned and unearned income are taxed
differently. And I have over the years thought that we have to
look at that as a question of whether we have it in the right
place.
Raising the top rate was part of it. And, as we go through
individual tax reform, we ought to be asking these kinds of
questions.
Mr. Green. Generally speaking, and this is in a very
general sense, speculative income is taxed at roughly around 15
percent. Is that a fair statement?
Secretary Lew. Correct.
Mr. Green. And ordinary income, which secretaries make,
probably you, your ordinary income is at around 35 percent. Is
that correct?
Secretary Lew. Correct.
Mr. Green. So these minimum-wage workers who work full time
and live below the poverty line, something has to be done, Mr.
Lew. And I appreciate your--
Secretary Lew. I think we have to have a tax system that
encourages investment. We have to have a tax system that
encourages people to work. And I think we have a lot more work
to do.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from North Carolina,
Mr. Pittenger, for 5 minutes.
Mr. Pittenger. Thank you, Mr. Chairman.
Mr. Secretary, thank you for your service, and for being
here today.
Mr. Secretary, during the October Government shutdown, the
Treasury Department and the Administration declared that there
were about 90 percent of the Treasury's 15,009 IRS employees
deemed to be nonessential, including nearly every staffer of
the Financial Crimes Enforcement Network (FinCEN) and the
Office of Foreign Asset Control (OFAC).
The Treasury put out a statement bemoaning the state of
affairs. It said, ``This massively reduced staffing impairs
OFAC's ability to execute terrorism, financial intelligence,
broader efforts to combat money laundering and illicit finance,
protect the integrity of the U.S. financial system, and disrupt
the financial underpinnings of our adversaries.''
Let me read some statements put out by the Treasury, one on
September 27th. It says that the Treasury ``assures the public
that in the unfortunate case of the lapse in appropriations, it
will continue to provide certain critical functions, among them
terrorism and financial offices will continue collection,
analysis, and reporting of intelligence as well as the
administration of the specially designated nationals.''
A little bit later, you put out another statement that
said, ``The Office of Foreign Asset Control, which implements
the U.S. Government's financial sanctions, has had to furlough
nearly all of its staff due to the lapse in congressional
funding, and it is unable to sustain its core functions.''
According to this press guidance, this massively reduced
staffing for TFI offices ``undermines the efforts to combat
money laundering and illicit finance, protect the integrity of
the U.S. financial system, and disrupt the financial
underpinnings of our adversaries.''
Mr. Secretary, the Treasury kept top political appointees
on the job during this time and declared them to be essential.
At the same time, they furloughed almost every professional who
is tasked with stopping the funding of terror and stopping
people doing business with Iran's rogue regime.
By that decision, those jobs were deemed nonessential. That
troubles me deeply and leads to a few questions.
First, how is preventing a terror attack on the United
States and preventing Iran from developing a nuclear weapon
nonessential?
And what sort of jobs were more important than that?
Secretary Lew. Congressman, going back to October, I
believed deeply then, and I believe deeply now, that there were
many bad consequences that came from the fact that there was
that kind of brinksmanship, and important things weren't
happening because the Government shut down.
So, that is just a consequence of shutting down the
government.
There were guidelines put out by the Office of Management
and Budget that we adhered to in making the judgments. There
are categories of employees, who, because of their status, fall
on one side of the line or the other.
I can tell you that we brought back the staff who were
needed to support the negotiations that were going on with
regard to Iran. We had the capacity to do that.
But there are consequences to shutting down the government.
And you can't keep the whole government open when the
government shuts down.
So--
Mr. Pittenger. Mr. Secretary, let me ask you this, though.
You made the statement on September the 27th in the lapse of
appropriations that these important functions related to the
Department regarding collecting analysis and reporting
intelligence would continue in the midst of the shutdown.
What happened between the time of that statement and the
subsequent statement that says that you would have massively
reduced staffing?
Secretary Lew. Congressman, during the days of the
shutdown, at the beginning of the shutdown, there was not even
a flow of intelligence information coming in because our
intelligence operation was in the same position that our
threat-financing--
Mr. Pittenger. Mr. Secretary, with all due respect, it is
clear that you kept political appointees intact. It is clear
that you eliminated jobs of professionals whose assignment it
is to protect this country. And I think it is not clear to the
American people why you would make that type of decision.
Secretary Lew. Congressman, we followed the guidelines of
the Office of Management and Budget. We followed the rules and
the law regarding these determinations. And the problem, when
you have the kind of confrontation that shuts down the
government--
Mr. Pittenger. Mr. Secretary, my time is up. But what I
will say is you have two different statements here, one, that
you would continue to fund it and and that later you did not.
Chairman Hensarling. The time of the gentleman has expired.
The Chair announces to all Members that under the agreed-upon
schedule with the Secretary, we have an opportunity for 2 more
Members to question him.
The Chair now recognizes the gentleman from California, Mr.
Sherman, for 5 minutes.
Mr. Sherman. Thank you.
Secretary Lew, I want to commend you and Secretary Cohen
for the effective and hard work to enforce existing sanctions,
laws, particularly your new announcement today.
Secretary Kerry testified before the Foreign Affairs
Committee yesterday that we were going to move forward in
force, and you have proved him right.
The Chair made an opening statement focusing on bailouts.
We have worked hard together, the Chair and I and many others,
to prevent statutes from providing pre-existing bailout
authority.
But I would point out that we didn't have pre-existing
bailout authority in 2008. That is why we changed the statute.
We adopted TARP. He and I opposed that at the time. But I hope
he will join me in co-sponsoring the bill to say that too-big-
to-fail is too-big-to-exist.
Because I will tell you now, if Goldman Sachs is going
under, you and I may be working against a bailout. Who knows?
Maybe we won't be. But in any case, I don't think we are going
to have a different result.
Too-big-to-fail is too-big-to-exist. And I know the
Secretary, along with the other regulators, has the authority
under Dodd-Frank to break up the too-big-to-fail, but I am not
sure he is going to do it until you and I pass a law requiring
it.
Mrs. Maloney made an excellent opening statement focusing
on the need for a stable housing finance system. I would add
that the higher conforming loan limit that we have in her city
and mine and 10 other high-cost areas actually makes money for
Fannie Mae and Freddie Mac and thus for the Federal Government.
And we would increase the national debt if we cut that
back.
Mr. Campbell focused on the $63 billion change of status at
the IMF. He pointed out a number of things Congress would want
to see on any bill authorizing that.
I will add one more, speaking only for myself, and that is
there should be a requirement that the IMF, prior to us dealing
with that $63 billion, suspend Iran and that Iran be ineligible
for any transactions with the IMF until such time as by an 80
percent majority the IMF board determined that they had,
indeed, abandoned their nuclear weapons program.
Mr. Green pointed out the focus on the unfairness in tax
rates. Even if you believe--and I will point out the capital
gains rate is, in effect, 23.8 percent, not quite as bad as 15
percent, but still, less than ordinary working people are
paying.
And even if you believe that we should have a lower rate
for money--profits earned on capital risk, the hedge fund
managers are able to take their earned income and treat it as
capital gain unless they make it based in the Cayman Islands,
et cetera, and it is a 0 percent rate.
Speaking of international taxation, Mr. Secretary, the last
time you were here, in May, in my questions I focused on the
California system of apportionment for international taxation,
known as the California System. And you promised that you would
look at it. I won't put you on the spot here and ask for a full
discussion.
But I wonder if you could commit that we will talk about
that, to cut the Gordian knot and eliminate the transaction-by-
transaction approach and instead say that if a company is 50
percent-based in the United States, we ought to tax 50 percent
of its worldwide income.
So, can I count on you for further discussions on that?
Secretary Lew. I am happy to continue the conversation.
Mr. Sherman. And then I would also add--and this is a
smaller fix--that we ought to disallow any deduction for
payment for the use of intellectual property if that
intellectual property was developed in a high-cost--in a high-
tax country like the United States but has now been transferred
to a low-cost country, such as the Cayman Islands.
Your Department and you personally issue a report on
currency manipulation. The National Association of
Manufacturers says the renminbi is undervalued by almost 40
percent. And frankly, if we were able to prevent that
undervaluation, you would be here testifying about the labor
shortage in the United States.
Why have you not reported to us that China is indeed
manipulating its currency?
Secretary Lew. Congressman, I have addressed the issue of
exchange rates a number of times. I believe we have pushed very
hard on China to move towards a market exchange rate. They have
appreciated substantially.
Mr. Sherman. Tariffs would push them a lot harder.
Secretary Lew. We are going to continue to push them.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentlelady from Minnesota,
Mrs. Bachmann, for 5 minutes.
Mrs. Bachmann. Thank you, Mr. Chairman.
And thank you, Mr. Secretary, for being here.
I understand that today the Treasury Department made
additional designations regarding sanctions of companies, rogue
companies, front organizations that were dealing with Iran.
That was a good move. I think that is a positive move that the
Treasury Department made.
But it seems that additional sanctions against Iran would
be exactly what is needed now to let Iran know that the United
States would do whatever it takes, including a military option,
to stop Iran from reaching its stated goal of ultimately having
a nuclear program.
And what I am wondering--Congress was not aware that the
Administration was undertaking secret negotiations with Iran
regarding sanctions relief with its nuclear program for that
period of time. Were you aware of these secret negotiations
with Iran?
Secretary Lew. Congresswoman, I have been aware of many
things going on with regard to Iran, but I don't think this is
an appropriate place to discuss that topic.
Mrs. Bachmann. The reason why I ask that is because a
report came out on November 8th that, in June, when Mr. Rouhani
was elected president of Iran, that at that time it appeared,
from a review of Treasury notices, that there was a distinct
cutting back on the number of designations that were being made
against companies.
That designation, again, was done today. And I--one report
said that in the 6 weeks prior to the Iranian elections in
June, Treasury issued 7 notices of designations of sanctions
violators that included more than 100 new people, companies,
aircraft, and sea vessels.
Since June 14th when Hassan Rouhani was elected, the
Treasury Department only issued 2 designation notices that
identified 6 people and 4 companies as violating the Iran
sanctions.
So it seems like two things have gone on. While the secret
negotiations were going on between the United States and Iran,
it seems to me that at the worst possible time in the
negotiations, beginning last June, the United States
intentionally chose to weaken our hand and our negotiating
position with Iran at a crucial time--sending a signal of
weakness, sending a signal of sanctions reductions, and at the
same time, it appears that the Obama Administration was
strengthening Iran's hand in those negotiations.
It also appears that two things were happening with the
Obama Administration: cutting back on the number of
designations; and making it very clear that they were adamantly
opposed to new sanctions. Both of those would send the signal
to Iran that we mean business that they will never have a
nuclear weapon. And it seems that the exact wrong tack was
taken from the Treasury Department. And it seems that it is
Treasury more than any other agency that sent the signal to
Iran that they are going to prevail--
Secretary Lew. Congresswoman--
Mrs. Bachmann. --in the negotiations rather than the United
States.
Secretary Lew. --I disagree with that characterization
almost completely. I think that this Administration has pushed
on an international basis for the toughest sanctions in
history, which is the only reason that Iran is looking to make
concessions and the only reason there is any chance that there
will be a peaceful resolution of this.
I think Treasury's enforcement of sanctions has been
consistent. The action taken today, the action taken
yesterday--a negotiated settlement with the Royal Bank of
Scotland, these are matters that take months to develop. And we
are working every day. And I have said to hundreds of CEOs:
Make no mistake about it, enforcement will continue. We are not
taking our eye off of the ball at all, and we will not.
Mrs. Bachmann. There are a number of companies that are
essentially front organizations for Iran to have--front
organizations to help the regime to be able to continue to
proliferate and do the work that they are doing. It seems to me
that the bottom line with Iran is, will they have the right to
enrich uranium? It doesn't seem to me that when we are pulling
back on the number of designations from June, essentially to
this week, that we have sent a signal of strength. It appears
that we have sent a signal that America is weak, America is in
decline. America is pulling back militarily, and we are
weakening ourselves economically.
Secretary Lew. I think if you look at Iran's economy, they
are feeling the pain of these sanctions every day. They are
feeling the 5 percent decline in GDP, the 40 percent inflation,
the devaluation of the rial. They are seeing all kinds of pain.
And that is the only reason--
Mrs. Bachmann. Which was exactly why we got them to the
negotiating table. So at the time when we finally have them
talking, the Obama Administration decided to strengthen their
hand and weaken our own.
I yield back. Thank you, Mr. Chairman.
Chairman Hensarling. The time of the gentlelady has
expired.
We will end questioning at this time.
Secretary Lew, we appreciate your testimony today. However,
a number of questions do remain unanswered, as do a number of
written inquiries from Members on both sides of the aisle. So
thus, early in the new year, we will take the liberty of
inviting you back in hopes that these questions can be
addressed. We trust you will accept our invitation.
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.
This hearing stands adjourned.
[Whereupon, at 12:44 p.m., the hearing was adjourned.]
A P P E N D I X
December 12, 2013
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