[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





 
                      THE ANNUAL TESTIMONY OF THE


                       SECRETARY OF THE TREASURY


                          ON THE STATE OF THE


                     INTERNATIONAL FINANCIAL SYSTEM

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 22, 2016

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 114-80
                           
                           
                           
                           
                           
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
BILL POSEY, Florida                  WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
    Pennsylvania                     DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
LUKE MESSER, Indiana                 JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
TOM EMMER, Minnesota

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
                    
                    
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 22, 2016...............................................     1
Appendix:
    March 22, 2016...............................................    71

                               WITNESSES
                        Tuesday, March 22, 2016

Lew, Hon. Jacob J., Secretary, U.S. Department of the Treasury...     5

                                APPENDIX

Prepared statements:
    Lew, Hon. Jacob J............................................    72

              Additional Material Submitted for the Record

Beatty, Hon. Joyce
    American Banker article entitled, ``You'll Never Get Real 
      Oversight of the CFPB This Way,'' dated March 18, 2016.....    80
Lew, Hon. Jacob J.
    Written responses to questions for the record submitted by 
      Representatives Barr, Ellison, Hinojosa, Luetkemeyer, 
      Messer, Ross, Rothfus, and Murphy..........................    84


                      THE ANNUAL TESTIMONY OF THE



                       SECRETARY OF THE TREASURY



                          ON THE STATE OF THE



                     INTERNATIONAL FINANCIAL SYSTEM

                              ----------                              


                        Tuesday, March 22, 2016

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:04 a.m., in 
room 2128, Rayburn House Office Building, Hon. Jeb Hensarling 
[chairman of the committee] presiding.
    Members present: Representatives Hensarling, Royce, Lucas, 
Garrett, Neugebauer, Pearce, Posey, Luetkemeyer, Huizenga, 
Duffy, Hurt, Stivers, Stutzman, Mulvaney, Hultgren, Ross, 
Pittenger, Wagner, Barr, Rothfus, Messer, Schweikert, Guinta, 
Tipton, Williams, Poliquin, Hill; Waters, Maloney, Sherman, 
Capuano, Hinojosa, Clay, Lynch, Scott, Cleaver, Moore, Ellison, 
Himes, Foster, Kildee, Murphy, Sinema, Beatty, Heck, and 
Vargas.
    Chairman Hensarling. The Financial Services Committee will 
come to order. Without objection, the Chair is authorized to 
declare a recess of the committee at any time.
    Today's hearing is entitled, ``The Annual Testimony of the 
Secretary of the Treasury on the State of the International 
Financial System.''
    Before we begin today's hearing, we need to keep in our 
thoughts and prayers the victims of this morning's attacks in 
Belgium, as well as their loved ones and the first responders 
who are working to care for the injured and bring justice to 
those responsible for this terror.
    I ask that we pause for a moment of silence.
    Thank you. I will now recognize myself for 3 minutes for an 
opening statement.
    This morning, we welcome Secretary Lew for his testimony on 
the IMF and the international financial system. It is a system 
that faces serious challenges brought on by spending-driven 
debt and reckless monetary policies around the globe.
    Fortunately for hardworking American taxpayers, needed IMF 
reforms were passed by Congress in December, even if they 
weren't the reforms the Administration wanted. Notwithstanding 
IMF quota reform, Congress reduced the U.S. contribution to the 
IMF for the first time in its history, sunsetting over $40 
billion in credit lines.
    Congress also restored, over the Administration's 
objections, a rule that limits large IMF loans to countries 
with unsustainable debt. This rule was first put into place in 
2002 but was, unfortunately, altered by Treasury in 2010, when 
the IMF improperly bailed out Greece, a bailout that has led to 
nothing but additional bailouts.
    What remains certain for the international finance system, 
though, is that the IMF will never be able to bail out the 
United States if we remain on the Administration's current 
spending trajectory.
    As our monitors show, our national debt is spinning out of 
control and is undeniably unsustainable. During his time in 
office, President Obama has presided over the five largest 
nominal deficits in history. He has piled up more debt than 
every President from George Washington to Bill Clinton 
combined--a debt that leaves every American family owing an 
average of $153,000.
    Although our witness, Secretary Lew, and other 
Administration officials constantly attempt to change the 
subject to declining deficits, three facts remain.
    Number one, the deficits have only declined relative to the 
historic highs set by this Administration. Two, every deficit, 
declining or not, actually increases the national debt. And 
three, under the President's policies, deficits will soon begin 
rising again despite a $3.4 trillion tax increase and will 
approach the $1 trillion threshold before the end of the 
decade.
    That means the President's legacy will be a debt so large 
that at the end of his budget, we will spend more on debt 
service annually than what we spend on national defense, 
Medicaid, education, and transportation infrastructure. Only 
spending on Medicare and Social Security will be larger than 
interest on the national debt.
    According to the Congressional Budget Office, the 
President's legacy of debt may very well compromise our 
national security and increase the likelihood of a fiscal 
crisis. As we all know, it is the poor who will suffer most 
when this occurs.
    That is why the national debt and debt ceiling remain 
deadly serious matters. Regrettably and inexcusably, the 
Treasury Department, for over 2 years, has stonewalled, 
obfuscated, and misled Congress as our committee has 
investigated Treasury's contingency planning for the debt 
ceiling.
    That is why we recently issued a staff report entitled, 
``The Obama Administration's Debt Ceiling Subterfuge.'' I 
believe the report clearly reveals that Treasury has sought to 
withhold from Congress and the American people information 
about their contingency plans for the purpose of pressuring 
Congress to acquiesce to the Administration's position that 
there only be a naked debt ceiling increase without any reforms 
or fiscal discipline--or in other words, to hasten our national 
bankruptcy.
    We know the President's legacy will be one of doubt, 
decline, and debt. And as documents continue to be withheld, 
let us hope that deception will not be added to the list.
    The Chair now recognizes the gentlelady from Wisconsin, Ms. 
Moore, ranking member of our Monetary Policy and Trade 
Subcommittee, for 2 minutes.
    Ms. Moore. Thank you so much, Mr. Chairman.
    And welcome back, Secretary Lew.
    I think I ought to begin my comments by bashing my 
Republican colleagues and defaming them in the worst way that 
they know, and that is to thank them for working with you and 
the Obama Administration to pass IMF quota reform.
    I give Chairman Hensarling and Chairman Huizenga a hard 
time, but I have enjoyed working with Chairman Huizenga on the 
Monetary Policy and Trade Subcommittee, and I recognize that he 
and other Republicans had a big part in making this quota 
reform happen.
    I know that you, too, have worked really hard in getting 
this over the line, and I really think it is going to benefit 
us in the long run.
    Congress has been behind in the curve, but it was the right 
thing to do for the world and certainly for this country. And I 
am pleased that Christine Lagarde is again going to be heading 
the IMF, and I think on balance she is doing a tremendous job.
    Ranking Member Waters and I join Ranking Member Levin and 
Representative Rangel in urging that capital controls policy in 
the TTP be harmonized with IMF guidelines, and I was very 
pleased that it was included in the final agreement.
    I am looking forward to our conversation today. I hope that 
you might talk to us a little bit about money laundering and 
your efforts to combat that. But at the same time, the other 
side of that is, of course, trying to make sure we figure out 
how to get remittances in the hands of those who are very 
needy.
    I look forward, again, to your testimony.
    And I yield back.
    Chairman Hensarling. The gentlelady yields back.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Huizenga, chairman of our Monetary Policy and Trade 
Subcommittee, for 2 minutes.
    Mr. Huizenga. Thank you, Mr. Chairman.
    Secretary Lew, I am going to move quickly, but I appreciate 
you appearing here with us today. And there are obviously a lot 
of very important international issues that need to be 
addressed.
    One of those that I am extremely concerned about is the 
problem of the role of the IMF in future lending to Greece. In 
2010, Greece received an IMF bailout under the exceptional 
access rule, in which the IMF provided a 3-year assistance 
package totaling 40 billion, or more than 3,200 percent of the 
country's quota--well beyond any limit that had been in place. 
In 2012, a new $37 billion program superseded that 2010 
bailout.
    Under normal access, IMF countries can borrow up to 200 
percent of their quota per a 12-month period, or up to 600 
percent total. With exceptional access, borrowers can exceed 
these limits provided that their debt is considered sustainable 
with a high probability of paying off that debt.
    It is important to note that Greece did not meet the 
criteria for exceptional access lending, and the IMF has, in 
fact, conceded that it made mistakes in bailing Greece out. As 
you know, the fund's own evaluation department has found that 
internal assessments which permitted Greece to take part in the 
exceptional access framework were inaccurate, resulting from 
overly optimistic forecasts of debt sustainability, renewed 
market access, and government commitment to reforms.
    Although I am pleased that the IMF's systemic exemption for 
exceptional access was finally repealed earlier this year, I am 
very concerned that earlier this year--just in January, 
actually--the IMF board replaced it with significant new 
loopholes that will allow that to continue. Backed by the U.S. 
executive director, they decided that countries like Greece can 
receive assistance even when their debt is not sustainable with 
high probability, providing that there is a ``reprofiling'' of 
that debt.
    This new reprofiling seems to violate the spirit of the 
reforms that were included in the 2015 omnibus, in which 
Congress eliminated a systemic exemption due to the 
exploitation by Greece. I have stated before that the Treasury 
Department should resist the urge to push the IMF towards any 
more bailouts of Greece, and I will be introducing legislation 
today that will prevent future bailouts of countries that fail 
to meet the IMF's traditional rules.
    I have let the IMF know about that. They are aware of my 
concerns and this legislative initiative, as well.
    So with that, Mr. Chairman, I appreciate the opportunity, 
and I yield back.
    Chairman Hensarling. The Chair now recognizes the ranking 
member for 3 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman.
    I would like to thank Secretary Lew for coming to testify 
before us today on the state of the international financial 
system. The IMF quota reform package that was adopted after a 
5-year delay as part of December's omnibus spending deal is an 
important achievement and a positive reflection on the 
perseverance of U.S. Treasury officials and Democratic 
Congressional leaders to get this deal done.
    Previously, the failure of the U.S. Congress to approve the 
IMF quota reform had put the world economy and financial system 
in serious jeopardy. With ratification now complete, what is 
essential to U.S. interests is to restore some impetus to 
ongoing IMF reform and to repair, in part, the damage that has 
been done to the U.S. reputation for leadership.
    The price the Administration paid for the quota reform 
included a commitment which it achieved to seek to eliminate 
the systemic exemption--the rule that says 2010 has allowed 
lending even when there was a risk that the debt was 
unsustainable and that was used to support loans for the 
periphery countries of Europe.
    Many believe that the fund should revert back to its 
original exceptional access rules. I am perfectly fine using 
such rules as one of many guides when thinking about policy, 
and I agree that policy should be transparent and systematic as 
possible.
    But I am also sure that in a complex, ever-changing global 
economy, policymaking cannot be trusted to a simple instrument 
rule. I believe that the fund should recognize that the problem 
with rigid, predetermined thresholds is that they will 
inevitably conflict with the unpredictable circumstances of 
reality and that exceptions are going to be inevitable in some 
cases.
    Finally, before closing I want to take a moment to 
acknowledge the senseless loss of life caused by brutal and 
tragic events unfolding in Brussels today. The attacks on the 
innocents serve as a painful reminder of how important our 
efforts are in countering the financing of terrorism.
    Secretary Lew, I know you are deeply committed to 
disrupting the networks that finance terror and I hope you will 
share more with us today about areas where increased resources 
or enhanced authorities may assist you in your work. I look 
forward to your testimony, Mr. Secretary.
    And I yield back the balance of my time.
    Chairman Hensarling. The gentlelady yields back the balance 
of her time.
    Today, we welcome the testimony of the Honorable Jacob J. 
Lew. Secretary Lew has previously testified before this 
committee so I believe he needs no further introduction.
    Without objection, Mr. Secretary, your written statement 
will be made a part of the record, and you are now recognized 
for 5 minutes to give an oral presentation of your testimony. 
Thank you.

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

    Secretary Lew. Thank you, Chairman Hensarling, Ranking 
Member Waters, and members of the committee, for the 
opportunity to testify here today. Before I begin I would like 
to just say a few words about this morning's events in Belgium.
    The United States condemns in the strongest possible terms 
today's act of terrorism in Brussels. Our thoughts and prayers 
go out to innocent civilians targeted in these horrific 
attacks.
    At Treasury, we work with foreign governments every day to 
identify terrorist financing networks, and in the wake of 
attacks we work with them even more so. We work especially 
closely with our counterparts around the world.
    Right now, Treasury analysts are reviewing information to 
try and uncover leads on the Brussels attacks and we have 
offered our assistance to Belgian authorities. Our hearts go 
out to victims of today's events and our commitment to stopping 
the flow of funds to perpetrators of these kinds of attacks 
remains steadfast.
    Since my testimony last year, our economy has continued its 
record-breaking streak of private sector job creation, which 
has reached 6 consecutive years and more than 14 million jobs. 
Over the last 2 years, we have experienced the strongest job 
creation since the late 1990s.
    At 4.9 percent, the unemployment rate is half of its 2009 
peak, and we continue on a sound fiscal path. From Fiscal Year 
2009 to Fiscal Year 2015, the deficit of the share of GDP fell 
by almost three-quarters to 2.5 percent.
    The passage of the omnibus spending bill in December has 
helped to build on this momentum, contributing to our economic 
growth and helping to strengthen our international leadership. 
The agreement included critical IMF quota and governance 
reforms that have helped to preserve the central role of the 
United States in the international economic system and advance 
our economic and national security objectives.
    That agreement demonstrated that we have the capacity to 
find common ground on difficult issues, and it lays the 
foundation for addressing some of our long-term challenges. But 
more work remains to strengthen critical investments in our 
domestic and national security priorities.
    The international financial institutions, the IMF, 
multilateral banks, and related multilateral trust funds are an 
important part of the President's approach to bolstering 
national security and driving long-term prosperity. Our 
investments in these institutions promote our strategic 
interests in international stability.
    They help unlock the next generation of export markets for 
America's businesses and workers while fostering private sector 
development and entrepreneurship. And they are some of the most 
cost- effective ways to reinforce economic growth at home and 
respond to critical challenges abroad.
    The IMF remains the foremost international institution for 
promoting global financial stability. Through its three main 
activities--surveillance, technical assistance, and lending--
the IMF promotes economic stability and helps prevent and 
resolve financial crises when they occur.
    This work promotes global growth, enhances U.S. national 
security, and alleviates poverty in member countries. At a time 
of increased economic uncertainty, the IMF is actively working 
with countries vulnerable to low oil prices, financial market 
volatility, and other external shocks to provide policy advice 
and financing when appropriate.
    The United States plays a key role in shaping IMF policy 
through its position as the IMF's largest shareholder. Over the 
past year we have supported the creation of an IMF debt relief 
facility for low-income countries hit by public health 
disasters like the Ebola virus, and we encourage the IMF to 
help developing countries mobilize domestic resources for 
development.
    At the direction of Congress, the United States championed 
reforms to the exceptional access lending framework to tighten 
requirements on debt sustainability. Our investments in 
multilateral development banks like the World Bank also 
supports national security objectives, increases economic 
growth, and reduces poverty.
    Over the years, MDB Assistance has nurtured the economic 
reforms, infrastructure, and social investments that have 
driven the growth of some of our most strategic trade partners. 
They play an important role in building sustainable and 
transparent economic growth in emerging and developing 
countries. And more and more, we have come to see the MDBs as 
vital partners in helping to address national security threats.
    In addition to meeting our current commitments to the MDBs, 
it is urgent that we work with Congress to address our prior 
unmet commitments, which now approach $1.6 billion. At the 
World Bank, this is particularly urgent, as failure to meet our 
commitments this year will result in a loss of U.S. 
shareholding that could impact our veto power, damage our 
credibility, and weaken our ability to shape policy priorities.
    Successful development also depends on good governance and 
a well-functioning state. For over 25 years, Treasury's Office 
of Technical Assistance (OTA) has provided advice and training 
to government officials in developing and transitional 
countries so they can build affective public financial 
institutions. OTA helps countries improve government operations 
across several areas, including planning and executing budgets, 
managing debt, collecting revenue, developing sound banking 
systems, and combating corruption.
    OTA is particularly helpful with our foreign policy, 
security, and economic priorities in Ukraine, Central America, 
Africa, Asia, and other regions. Treasury's international 
programs are some of the most cost-effective ways to reinforce 
economic growth at home and to respond to critical challenges 
abroad. Specifically, U.S. leadership in international 
financial institutions enables us to influence how and where 
resources are deployed, often on a scale that we cannot achieve 
through our bilateral programs alone.
    It is crucial that we continue to have bipartisan support 
for these institutions to ensure that our influence remains as 
strong today as it has been over the past several decades. 
Treasury looks forward to continuing the dialogue with Congress 
on the important role that the international financial 
institutions play in the global economy, especially as we 
implement the IMF reform legislation and negotiate 
replenishments of several of the MDB windows that serve the 
world's poorest countries.
    Thank you very much, and I look forward to your questions.
    [The prepared statement of Secretary Lew can be found on 
page 72 of the appendix.]
    Chairman Hensarling. Thank you, Mr. Secretary.
    I now recognize myself for 5 minutes for questioning.
    Mr. Secretary, one thing maybe we can agree on is that tens 
of millions of our fellow countrymen are unhappy. I think one 
of the reasons they are unhappy is too often, they see an 
Administration that either makes up law, ignores law, or lives 
above the law, and they see a Congress that they think is 
helpless or hapless in dealing with that.
    In that context, Mr. Secretary, I think you know that for 
almost 3 years this committee has been seeking documents 
regarding debt ceiling contingency planning and information 
shared with the Justice Department regarding what some call 
``too-big-to-jail.'' And as I think you are aware, almost 1 
year ago this committee subpoenaed documents from Treasury, and 
in that time we have yet to receive the documents.
    You were asked about this last week in your appearance 
before the Appropriations Committee and you said, ``Lawyers are 
working through the document request.'' Mr. Secretary, it has 
been almost 3 years for these requests.
    You also mentioned in your appearance before the 
Appropriations Committee that you will provide us with 
``appropriate material.'' But, Mr. Secretary, with all due 
respect, Article 1 of the Constitution states, and there is 
longstanding Supreme Court precedent, that this branch of 
government has the oversight rule. We get to deem what is 
appropriate for oversight and investigation.
    With all due respect sir, it is not you. It has everything 
to do with checks and balances, and separation of powers.
    Thus, my first question: As custodian of records, do you 
understand our subpoena of May 11, 2015, imposes a legal 
obligation on you personally to ensure that the requested 
records are produced?
    Secretary Lew. Mr. Chairman, we recognize the important 
oversight role that Congress plays and we take seriously the 
responsibility--
    Chairman Hensarling. Okay. But Mr. Secretary, the question 
is, do you understand a personal legal obligation? Is that your 
understanding?
    Secretary Lew. Mr. Chairman, Treasury has taken steps to 
respond to each and every one of your--
    Chairman Hensarling. I will ask you again, Mr. Secretary. 
Do you understand that you have a personal legal obligation? If 
you don't, then I would recommend that you study 2 U.S.C. 192 
through 194, and 18 U.S.C. 1505.
    So I will ask you for the last time, do you understand that 
you have a personal legal obligation to ensure these requested 
records are produced?
    Secretary Lew. Mr. Chairman, Treasury's approach to the 
committee's inquiries has followed the longstanding Executive 
Branch policy set forth by President Reagan in 1984--
    Chairman Hensarling. Mr. Secretary, you have had 3 chances 
to answer the question. I will move on.
    Has anyone directed you not to comply with this committee's 
subpoena of May 11, 2015?
    Secretary Lew. Mr. Chairman, just the other day we 
responded in detail to the inquiry from this committee laid 
out--
    Chairman Hensarling. My question, Mr. Secretary, is, has 
anyone directed you not to comply with this committee's 
subpoena of May 11, 2015? It is a simple yes-or-no answer.
    Secretary Lew. Mr. Chairman, as the letter that we sent to 
the committee indicates, we have been reaching out to the 
committee, responding, sending documents--
    Chairman Hensarling. A third time, Mr. Secretary: Has 
anyone directed you not to comply with this committee's 
subpoena of May 11, 2015?
    Secretary Lew. Mr. Chairman, we have been trying to work 
with the committee to provide appropriate information--
    Chairman Hensarling. I am trying to get you to answer a 
simple yes-or-no question. It is no wonder the American people 
get outraged.
    Mr. Secretary, it is a simple yes-or-no question: Have you 
been directed not to comply with the subpoena? Yes or no, 
please, sir.
    Secretary Lew. No, Mr. Chairman I am--we have been trying 
to respond to this subpoena. That is the point I am trying to 
make.
    Chairman Hensarling. Okay, well for the third time you 
didn't answer that question.
    Next question then: Have you directed anyone at the 
Treasury Department to withhold documents from this committee, 
pursuant to the committee's subpoena of May 11, 2015?
    Secretary Lew. Mr. Chairman, if you just give me a moment 
to answer your question, we have been--
    Chairman Hensarling. If you will answer the question, Mr. 
Secretary, I will give you a moment for context, but we need to 
start off with a yes or no.
    Secretary Lew. With all due respect, these are not yes-or- 
no questions. If you want an answer, I am happy to give that--
    Chairman Hensarling. I don't know how much more simple it 
could be. Have you directed anyone at the Treasury Department 
to withhold documents from this committee, pursuant to the 
committee's subpoena of May 11, 2015? If you will give me a yes 
or no, Mr. Secretary, I will give you a moment for context.
    Secretary Lew. Mr. Chairman, at my direction, the 
Department staff has been reaching out to the committee trying 
to seek an accommodation. The committee has not followed up 
with any meetings to try and work through that. We have 
provided thousands of pages of documents.
    Chairman Hensarling. It has been 3 years, Mr. Secretary--3 
years on some of these document requests.
    Secretary Lew. But in many cases, we don't know what the 
committee is even looking for.
    Chairman Hensarling. Well, Mr. Secretary, if I need to 
provide you with another copy of the subpoena, I would be glad 
to do it. Are you at least certifying, then--are you prepared 
to certify in writing that you are in compliance? Because so 
far, you have failed to do so. You can't tell me that you are 
trying to comply and then not certify that you are in 
compliance.
    Secretary Lew. Mr. Chairman, respectfully, what we 
suggested in letters going back many months was that the 
attorneys should sit down and talk with each other, go through 
the details. I was being diplomatic at the Appropriations 
Committee the other day. This committee has not responded to 
our offers to meet at the attorney level. So we have been 
trying to be responsive.
    Chairman Hensarling. Mr. Secretary, what do you think would 
happen to an ordinary citizen, a school teacher or a factory 
worker, if they refused to comply with a legal subpoena? What 
do you think would happen to them?
    Secretary Lew. Mr. Chairman, we have been working to comply 
with the committee's request.
    Chairman Hensarling. Mr. Secretary, with all due respect, 
that just doesn't have credibility. It just doesn't have 
credibility.
    The Ranking Member is recognized for 5 minutes.
    Ms. Waters. Thank you very much for being here, Mr. 
Secretary.
    The chairman just talked about the American citizens' 
distrust with government and how angered they are with 
government.
    Mr. Secretary, I believe that if there is anger and 
distrust it is because of the way we conduct ourselves here. 
And when the Secretary of the Treasury is battered and 
disrespected then I think the American people see that more as 
the Congress of the United States not being able to work with 
each other, more than some so-called demand for a response to 
pages that have been seen, or questions that have been sent, or 
depositions.
    As I understand it, we have received over 3,000 pages from 
the Treasury since May 11, 2015. And as I understand it, there 
were four more depositions that were issued yesterday.
    And I want you to know, Mr. Secretary, that we are not 
consulted at all by the opposite side of the aisle on these 
depositions. We don't have the kind of cooperation here in this 
committee that would lend itself to seeking information from 
you or any of the other Secretaries.
    This has become a game of ``gotcha.'' This has become a 
game of, ``We are going to overwhelm you with subpoenas and 
questions so that we will be able to say you have not 
responded.''
    I am hopeful that the important issues of the Treasury are 
being worked on every day. We are in a situation where, yes, 
our economy is performing, and since 2008 we certainly have 
made advances.
    But we are concerned about the volatility of the markets 
and we want you to concentrate on the real issues. And I would 
hope that your office would not be tied down trying to respond 
to unreasonable requests from this committee.
    I don't think and I don't believe they are legitimate. And 
I apologize for the way that you are being treated here this 
morning, not being able to answer a question, being 
interrupted, not accepting that you are willing to have an 
explanation. And so it should not work that way and I want to 
get on with dealing with the real issues that you are 
confronted with.
    Since initiating free market reforms in 1978, China has 
been one of the world's fastest-growing economies, averaging 
9.7 percent in real gross domestic product growth annually from 
1979 to 2015 and lifting 660 million people out of extreme 
poverty.
    Over the past few years however, China's economy has 
slowed. Its real GDP growth was 7.3 percent in 2014 and 6.9 
percent in 2015 and is projected by the IMF to fall to 6.0 
percent by 2017.
    What are the implications of a slowdown in China for the 
United States as well as the global economy more broadly?
    Secretary Lew. Thank you, Congresswoman Waters.
    China's economy is one of the two largest economies in the 
world, along with our own. And it is not as integrated with the 
global economy in the way ours is in terms of financial 
systems, in terms of the interlocking relationships of those 
financial institutions, but it is the purchaser of a vast 
amount of inputs from around the world.
    So there is understandably a lot of focus on China's 
economy because it has a lot to do with what global growth will 
look like in the future, particularly in emerging economies 
that provide so many inputs to China. China is in the middle of 
a reform process that is very important to China, and it is 
important to the global economy.
    As they move towards a more market-oriented system it is 
going to be bumpier. There will be more volatility. They are 
going to have to learn how to tolerate some of those 
disruptions the way those of us more experienced with market 
economies do.
    But they are going to have to stick to the reform path 
because if they don't, if they don't open their market, if they 
don't make the changes that will have market signals become the 
more powerful drivers of the economy, they will be left with an 
overhang of overcapacity that will weigh them down and make it 
so that some of the doomsday scenarios would then become much 
more meaningful risks.
    I think China has a lot of tools; it has a lot of capacity. 
The question to me is not the question many have asked, is 
China out of tools? They have $4 trillion of foreign reserves. 
They have enormous resources within their government to deal 
with policy. What they need to do is not back away from the 
reform program.
    Ms. Waters. Thank you, Mr. Secretary.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Huizenga, chairman of our Monetary Policy and Trade 
Subcommittee.
    Mr. Huizenga. Thank you, Mr. Chairman.
    I am going to take a slightly different direction on my 
questioning, but not because I don't believe that what the 
chairman has been saying is extremely important. I am 
concerned, as well, about responses just to simple letters. I 
have gotten two dated March 18th, one dating back as of last 
year, in May. So speed has not exactly been Treasury's M.O. 
here.
    But my question is on the IMF--and you address this a 
little bit on pages three and four of your written testimony, 
starting on page two--but the Greeks obviously have suffered 
the Eurozone's highest unemployment rates: 25 percent for the 
past 4 years, youth unemployment near 50 percent. Instead of 
helping reduce Greece's public debt-to-GDP ratio to 110 percent 
as planned, the fund has witnessed the debt-to-GDP ratio climb 
to over 175 percent despite major restructuring of debt in 
2012.
    Clearly, IMF involvement has done little to improve the 
lives of Greek citizens, in part because Greek leaders have 
been slow-walking reforms for years. Last December, Greek Prime 
Minister Alexis Tsipras was unapologetic, criticizing the 
fund's ``unconstructive attitude on fiscal and financial 
issues.'' He indicated that the IMF should stay out of any 
future bailout. He and I agree on that one.
    On page four, you actually mention that at the direction of 
Congress--this is a quote out of your written testimony--``At 
the direction of Congress, the United States championed reforms 
in the exceptional access lending framework to tighten 
requirements on debt sustainability.''
    But then the United States led the charge to go against 
these reforms by inserting new loopholes. And I am just curious 
and confused as to why you would take a bipartisan 
congressional directive and go against that with the IMF. If 
the Greeks don't want the IMF's medicine, and if the medicine 
has been so ineffective anyway, why should we insist on giving 
them more taxpayer dollars?
    Secretary Lew. Congressman, let me start with the reforms 
at the IMF and then move--
    Mr. Huizenga. Very quickly, yes, please.
    Secretary Lew. --to Greece very quickly.
    The reforms removed the provisions that allowed systemic 
risk to cause an exception that would allow lending that is of 
the nature you describe. The exceptional access program remains 
very important. It has been the way we have seen assistance 
provided to many important countries. The case of--
    Mr. Huizenga. But why would we introduce more loopholes 
on--I mean, IMF rules stipulate the country must possess ``the 
political and institutional capacity to ensure success of an 
exceptional access loan.'' In short, government must be 
competent and must be committed to the reforms.
    Earlier this year, the Greek defense and foreign 
ministers--I am sure you are aware of this--threatened to 
``flood Europe with migrants, including potential terrorists'' 
if the country didn't get what it wanted in bail-out 
negotiations.
    And Defense Minister Panos Kammenos said, ``If Europe 
leaves us in the crisis we will flood it with migrants and it 
will be even worse for Berlin if in that wave of millions of 
economic migrants there will be some jihadists of the Islamic 
State too. If they--European creditors--strike us, we will 
strike them.''
    We might have just seen that in Brussels today. Isn't that 
true, Mr. Secretary?
    Secretary Lew. No. Congressman, I think that is a 
conclusion that I have no basis to comment on and I think we 
shouldn't jump to a statement like--
    Mr. Huizenga. I hope not. But when you have the--
    Secretary Lew. If I could just comment on--
    Mr. Huizenga. --defense minister of Greece threatening 
Europe, our NATO allies--
    Secretary Lew. So, if I could--
    Mr. Huizenga. --how in the world can we allow them to even 
qualify for this?
    Secretary Lew. If I can respond to your questions--
    Mr. Huizenga. Please, quickly.
    Secretary Lew. --both on the financial and on the larger 
set of issues in Europe. On the financial side, there have been 
many important reforms enacted in Greece over the last year.
    I am not going to disagree that the process was very bumpy 
and messy and the whole world was watching it, but after an 
opening set of conversations that was not constructive the 
government of Greece settled down and enacted more reforms than 
anyone thought possible.
    Why is it important for the IMF to remain engaged? This is 
principally a European challenge. It has been all along. But it 
has been important to Europe to have IMF as a partner. I--
    Mr. Huizenga. They have settled down, but earlier this 
year--not last year; this year--we have the defense minister 
and others making outrageous comments that--
    Secretary Lew. So if I--
    Mr. Huizenga. --which I still don't understand why you 
would--
    Secretary Lew. Yes. If I could just try to keep separate 
that--
    Mr. Huizenga. --lead the parade to try to include 
additional loopholes--
    Secretary Lew. If I can keep--
    Mr. Huizenga. --and just let them qualify.
    Secretary Lew. If I can keep separate the financial and the 
kind of geopolitical for a moment, on the financial side, I 
think the IMF is only going to remain involved if there is an 
ability to do a debt sustainability review, which will be based 
on some debt forgiveness, debt restructuring that would be 
required, if it is sustainable and it is consistent with the 
IMF rules.
    If they do that, then that will keep a European commitment 
together. And why is that important to us? I think at a time of 
geopolitical instability it would not be a good thing for 
Europe or for the United States if we were to see real tensions 
of Europe breaking apart again. There--
    Mr. Huizenga. We see that already. And I think this is why 
I am going to be introducing and dropping the bill today trying 
to tighten those loopholes. I would suggest that Treasury not 
go against Congress again on a bipartisan manner and that you 
need to work with us on this oversight.
    So thank you, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from Wisconsin, Ms. 
Moore, ranking member of our Monetary Policy and Trade 
Subcommittee.
    Ms. Moore. Thank you so very, very much, Mr. Chairman.
    Mr. Secretary, you have indicated that our economy is 
growing very slowly at 2 percent. And, of course, our 
colleagues here are fond of reminding us that we are $919 
trillion in debt.
    Of course we, just in the last budget negotiations, did 
another $700 billion in unpaid-for tax cuts, some good and some 
tax extenders that were not so good. But anyway, they are all 
unpaid for, on top of the wars we didn't pay for.
    And so we are now, over the next couple of decades, $2 
trillion more in debt from this policy. I also sit on the 
Budget Committee, and the solution there to this is sort of 
more austerity. Let's block grant Medicaid, let's voucherize 
Medicare, let's cut the social services block grant, let's take 
the entitlement status away from Pell Grants and for food 
stamps.
    And I guess, as the Secretary of the Treasury, I am 
wondering if you think austerity is the solution to our deficit 
problem?
    Secretary Lew. Congresswoman, I think we have to make sure 
our economy is growing, and part of that means we have to 
maintain fiscal policy that keeps it growing. And we also have 
to take a long-term view and have a sustainable fiscal outlook.
    If you look at where we started in 2009, there was an 
economy that was crashing. There was a debt that was 
skyrocketing and a debt that was completely out of control, 
growing to over $1 trillion. We brought it under control. It is 
not down to zero. The deficit is not down to zero, but we have 
reduced it by three-quarters to 2.5 percent of GDP.
    I think if you look at this next 10-year period, we 
maintain stability and it is a foundation to then look at the 
challenges of how do you deal with the 20-, 30-, 40-year 
challenges. In these next 10 years, I think that the United 
States, like the rest of the world, has to focus on the reality 
that there is insufficient demand in the world.
    The United States is doing a little better than most of the 
rest of the world, but you can't grow the global economy by 
just cutting spending everywhere. We are seeing that hasn't 
worked in other places. In the United States right now, we have 
great needs.
    Infrastructure is an enormous need in this country. We need 
it to have a sound economy in the future; we need it because it 
puts people to work and good jobs. And this is the time to do 
it, when we have the ability to finance it at very low cost.
    So I think that the question of what we do in the medium- 
and the long-term, and what we do in the short-term, are not 
the same. And I was also OMB Director for 3 years in the 1990s 
and I produced surpluses in 3 years. So I, more than anyone 
else, understand the value of fiscal discipline.
    But I also understand that you can't do it without a 
growing economy. Last year, the actions you described in total 
helped grow the U.S. economy by roughly half a percent. And 
with the headwinds coming from internationally slow growth, I 
am glad we have that extra energy in the U.S. economy.
    Ms. Moore. Thank you so much. So, just to be clear, you 
think our long-term challenges with Social Security, Medicare, 
Medicaid--70 percent of our economy is spending. If you take 
money away from people, how is it possible to grow the economy 
without folk having money in their hands?
    Secretary Lew. The challenge in the long-term has always 
been to have the right balance of revenues and spending to deal 
with structural issues. I think that if you look at what we 
have done in the last 7 years, we have bent the cost curve on 
health care.
    Some people don't like the Affordable Care Act, but nobody 
can deny that it has kept costs from going up. That has an 
enormous impact on the Federal budget.
    We have taken tremendous strides to reduce spending, I 
think too much so on the discretionary side.
    Ms. Moore. I have 30 seconds, so, do people need to have 
money? Do you agree that our economy depends on people having 
money to spend, like raising the minimum wage, like not 
cutting--
    Secretary Lew. I think if you look at the power of the U.S. 
economy, it is driven by consumer demand, and that consumer 
demand is important at all levels of the income spectrum. And 
people who work full-time ought to be able to be above the 
poverty line, which is why I think we need to raise the minimum 
wage. And we know that money will be spent.
    Ms. Moore. All right. Thank you so much.
    And I yield back my 2 seconds.
    Chairman Hensarling. The gentlelady yields back.
    The Chair now recognizes the gentleman from New Jersey, Mr. 
Garrett.
    Mr. Garrett. Thank you, Mr. Chairman.
    After listening to the Secretary's responses to your 
questions--or non-responses--Mr. Chairman, I think anyone 
viewing today's hearing would say, Mr. Secretary, that you are 
the epitome of what is wrong with Washington today. The disdain 
that you have for the American people, your failure to answer 
the simplest of questions, is what is wrong with Washington and 
why the public has the view of the bureaucracy and the 
bureaucrats, such as yourself, here today.
    The questions that we put to you are basic ones and simple 
ones, asking sometimes for long answers and sometimes for 
simple, short answers.
    I got a new phone the other day, and I have this curious 
question. Do you have a--do you use a cell phone, iPhone, or 
anything like that? Do you carry that with you?
    Secretary Lew. I carry it, but I hardly use it.
    Mr. Garrett. Okay. So there is almost a simple answer.
    So in your communications with people, whether on your 
phone, iPhone, e-mails, letters, phone calls, or other things, 
the chairman asked you a simple question. Has anyone from the 
Administration ever directed you to not comply with the 
subpoenas?
    So it is a simple question of whether, through any of these 
communication devices that you may have, one way, or shape, or 
another, has anyone directed you to do that? That is a yes-or-
no question.
    Secretary Lew. Congressman Garrett, I answered the 
question--
    Mr. Garrett. No, you didn't.
    Secretary Lew. --by saying we have been working to comply. 
We are trying to comply.
    Mr. Garrett. Excuse me, excuse me. The question was not 
whether you are working to comply. That was your answer.
    The question was, has anyone communicated this to you? Has 
anyone communicated that to you, Mr. Secretary? Yes or no?
    Secretary Lew. Congressman, you can make this seem like a 
yes-or-no question. I am not aware of any communications 
telling me what to do on anything I am doing here today.
    Mr. Garrett. There you go.
    Secretary Lew. I am giving you an answer--
    Mr. Garrett. That is the--
    Secretary Lew. --of what we are doing. I would think--
    Mr. Garrett. Thank you, Mr. Secretary. The answer is--
    Secretary Lew. I would think you would want to know what we 
are doing.
    Mr. Garrett. The answer is no, then, is--you are saying no 
one has ever communicated that to you.
    Mr. Chairman, I think that was the answer you were trying 
to get.
    I have been trying to get answers from you as well for a 
long period of time--9 months ago, both in committee and 
through a letter, I asked you to respond to some of the 
concerns I have regarding the implications of something else: 
the ISDA protocols on bank insolvencies and what effect they 
would have on nonbank institutions. I have not yet heard from 
you in over 9 months. I don't see why you couldn't answer me.
    So my simple question now, since I haven't heard back is, 
will you assure us that if any proposals come up, you will 
oppose any plans that would require U.S. companies to basically 
give up, waive their protections to U.S. law and sovereignty?
    Secretary Lew. Congressman, I am going to need you to give 
me a little bit more detail of what you are asking me about if 
you want me to answer that question.
    Mr. Garrett. I guess since my time is limited, we sent 
that--there was a--
    Secretary Lew. I am happy to respond. I am just not sure 
what you are asking.
    Mr. Garrett. Okay. We directed that to you back in--last 
year, 9 months ago, and I guess if you are happy to respond, we 
would ask you to respond to that back then.
    As far as trying to get information from you, that is one 
thing; to you is another.
    Here is a $10 bill. And there is a whole discussion going 
on of who should be on the $10 bill. You are familiar with that 
whole issue?
    Secretary Lew. Yes, I am.
    Mr. Garrett. And I know you have done a good thing. You 
have solicited the American public's opinion quite a bit. You 
are nodding your head.
    Secretary Lew. Yes. We got a lot of comments.
    Mr. Garrett. That is great. How come, then, when you are 
dealing with international bodies such as the FSB, you do not 
solicit for public opinion and the stakeholders in the same 
manner when you get into negotiations regarding financial 
standards and international bodies?
    Secretary Lew. We do work with stakeholders.
    Mr. Garrett. Will you commit going forward to ask for 
input, just like you did on the change of the $10 bill, as you 
would on dealing with international bodies?
    Secretary Lew. You know, we do reach out to stakeholders as 
we do our work domestically and internationally, and we will 
continue to do so.
    Mr. Garrett. That is great. That is good to hear. So will 
you engage in a formal notice-and-comment period as well?
    Secretary Lew. I am not going to comment on notice and 
comment for international proceedings.
    Mr. Garrett. Why not?
    Secretary Lew. Because I am not aware of any appropriate 
notice-and-comment process for international proceedings. We do 
notice and comment for domestic rules.
    Mr. Garrett. Do you have the authority, the power to 
establish formal notice-and-comment periods?
    Secretary Lew. Look, I think we have a lot of mechanisms 
for consulting with both public and private sector 
stakeholders. We will continue to do that.
    Mr. Garrett. Would you commit to doing this one more? 
Because--
    Secretary Lew. I don't think notice and comment is the 
answer to everything. We are not doing notice and comment on 
the $10 bill either.
    Mr. Garrett. But this is a little bit more important than 
the $10 bill. This is--
    Secretary Lew. You asked me, would we do the same thing.
    Mr. Garrett. Would you commit to doing a formal notice-and-
comment period--
    Secretary Lew. I don't think notice and comment is the 
answer to everything. It is the right way to perceive formal 
rules.
    Mr. Garrett. I understand it may not be for everything. But 
on this area I am simply asking you, would you commit to doing 
so?
    Secretary Lew. Congressman, I think that work that is done 
in the FSB is critically important work--
    Mr. Garrett. So, the answer is no.
    Secretary Lew. --but it doesn't make U.S. policy. When we 
make U.S. policy and rules--
    Mr. Garrett. So when you do--
    Secretary Lew. --we go through notice and comments.
    Mr. Garrett. So when you solicit input, because you said 
you do solicit input, it is just your soliciting input from who 
you want to hear from, as opposed to all of the Americans who 
want a formal process.
    Secretary Lew. I dare say when we solicit input, we get 
input from many who do not share my view, not just those who 
share my view.
    Mr. Garrett. Thank you.
    I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from New York, Mrs. 
Maloney, ranking member of our Capital Markets Subcommittee.
    Mrs. Maloney. Welcome, Secretary Lew.
    I know that this hearing is about international finance, 
but I would first like to ask about Puerto Rico, as it has a 
very pressing economic issue facing the country, and it impacts 
on ours.
    It is in a severe financial crisis which could really 
explode into a humanitarian crisis. And we know that it now has 
roughly $72 billion in debt outstanding and an additional $43 
billion in unfunded pension obligations. And to make matters 
worse, Puerto Rico does not have access to Chapter 9 bankruptcy 
or to any restructuring process that would allow it to 
renegotiate its debt and creditors, its obligations.
    And now I have been told that Treasury is working with the 
Natural Resources Committee on crafting legislation to address 
this financial crisis, but as you know, there is a Supreme 
Court case taking place right now, literally they are hearing 
the arguments in court today. And that case addresses whether 
Puerto Rico is prohibited by Section 903 of the Bankruptcy Code 
from enacting its own state-level municipal process and regime.
    Other States are also prohibited from enacting their own 
municipal bankruptcy codes, but they have access to Chapter 9, 
they have access to bankruptcy. Puerto Rico does not have 
access to Chapter 9. So it is unclear to me as why we subject 
them to the same prohibition on enacting their own municipal 
bankruptcy code.
    So one idea that I feel is worth pursuing and considering 
is simply carving Puerto Rico out from the Section 903 ban on 
States enacting their own municipal bankruptcy codes. That way 
we could--Congress could authorize Puerto Rico to enact its own 
restructuring regime for all of its municipalities.
    And this has precedent in that the Supreme Court upheld New 
Jersey's State-level municipal bankruptcy in 1942. It was 
Congress that enacted legislation prohibiting States in the 
future from doing so, but we could likewise enact legislation 
allowing, or carving out, the ability of Puerto Rico to so 
ask--to act.
    But my question really concerns the impact that the economy 
and Puerto Rico and the restructuring would have on our very 
important municipal bond market that finances so much of the 
improvements in our urban areas. And a lot of critics are 
arguing that allowing Puerto Rico to restructure their debt 
would have a terrible, terrible consequence in the muni-bond 
market here in America, that it would drive up borrowing costs 
for other States as well even though they are not affected by 
Puerto Rico's restructuring.
    And I would like to know what your response is to these 
arguments, and also do you think that a territorial bankruptcy 
regime for Puerto Rico would harm the broader municipal bond 
market that is so successful in America?
    Secretary Lew. Congresswoman Maloney, there is an immediate 
crisis in Puerto Rico; it is not a future crisis. For all 
practical purposes they are in default because they are not 
paying some of their bond issues and they have big payments due 
in May and July, and we don't see a path for them to be able to 
make those payments. The need for action is immediate.
    I don't believe that it is going to solve the problem if 
there is restructuring of just a small piece of Puerto Rico's 
debt. A restructuring is going to have to be inclusive of all 
of Puerto Rico's debt in order to address the crisis that they 
have.
    I think that the work that is being done--I haven't seen 
the work product of the Natural Resources Committee, but the 
work that is being done is very important and it is very time-
sensitive. What we think needs to be in it is we think there 
needs to be an oversight authority that is the gatekeeper; we 
think that there needs to be the ability to restructure all of 
Puerto Rico's debt, because even some of their general 
obligation debt has to be at a minimum rescheduled in order for 
there to be a solution; and we don't think it is a one-size-
fits-all approach.
    In terms of the impact on other municipal bonds, three of 
the leading bond analysts have put out studies that contradict 
the notion that it is going to have spillover effects on other 
municipal bond markets. In fact, what we know about the 
municipal bond market is that each issue is looked upon 
independently based on the risk and the quality of the credit. 
And I believe that the worst thing for the municipal bond 
market would be a disorderly unwinding in Puerto Rico, which is 
what will happen if Congress doesn't act.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    Mrs. Maloney. Thank you.
    The Chair now recognizes the gentleman from Wisconsin, Mr. 
Duffy, chairman of our Oversight and Investigations 
Subcommittee.
    Mr. Duffy. Thank you, Mr. Chairman.
    Welcome, Mr. Lew. Right over here.
    Secretary Lew. I can't see you through--
    Mr. Duffy. I just want to revisit a few of the questions 
that were asked by the chairman.
    Again, you understand that you have a legal obligation to 
provide the documents requested and subpoenaed by this 
committee, to this committee. Is that correct?
    Secretary Lew. Congressman, I answered that question 
already. We are working to respond.
    And I will clarify one thing I said before. I said we did 
not get any response to our offer to meet. After we received 
subpoenas last week--
    Mr. Duffy. I am going to reclaim my time--
    Secretary Lew. --there was then a response that--
    Mr. Duffy. I don't mean to be offensive, but are you having 
any trouble hearing today? Is your hearing working?
    Secretary Lew. I am hearing you just fine.
    Mr. Duffy. Okay. So let's try this one more time: Do you 
understand that you have a legal obligation to provide 
documents as--
    Secretary Lew. As I said, we have been responsive and we 
continue to work to be responsive.
    Mr. Duffy. But you are not answering my question. And is it 
your--in regard to anyone directing you to not comply with our 
subpoena? Did that happen?
    Secretary Lew. Congressman, I responded to that question 
already.
    Mr. Duffy. What is the answer? Tell me one more time.
    Secretary Lew. I am not aware of any instructions on 
anything I am saying today. You are talking to the Secretary of 
the Treasury and I am giving you my--
    Mr. Duffy. And as the Secretary of the Treasury, have you 
directed anyone at Treasury not to comply with our document 
request?
    Secretary Lew. I'm sorry that I couldn't hear. I didn't 
hear you.
    Mr. Duffy. Okay. Have you directed anyone at Treasury to 
not comply with our document requests?
    Secretary Lew. No, quite to the contrary. At my direction 
our staff has reached out and written letters--
    Mr. Duffy. Have they been told to comply with us?
    Secretary Lew. --seeking to have the conversations that 
would enable us to reach accommodations.
    Mr. Duffy. You have told your staff to comply with our 
document requests?
    Secretary Lew. You know, the practice--
    Mr. Duffy. Yes?
    Secretary Lew. I have told them to reach an accommodation 
with the committee, which would--
    Mr. Duffy. Let me express my concern to you.
    Secretary Lew. --reach an accommodation with the committee, 
which requires--
    Mr. Duffy. So we have a subpoena that is almost a year old. 
The document request, when we try to do it nicely with you, 
goes back 2\1/2\ years, and you have failed to comply with 
those document requests.
    And I think anyone sitting in this room listening to the 
responses that you gave the chairman, that you gave Mr. 
Garrett, and that you are giving me, would say that you are not 
compliant. We ask very simple questions and you say, ``I am not 
going to answer a question.'' But you come in and say, 
``Listen, ladies and gentlemen--''
    Mrs. Maloney. Will the gentleman yield?
    Mr. Duffy. I will not.
    You come in and say, ``I am trying to work with you; I am 
trying to answer your questions; I am trying to be compliant,'' 
when you don't even answer simple questions that this committee 
poses to you.
    You indicated, I think, in your--
    Secretary Lew. Can I ask you a question, Congressman? 
Congressman, can I ask you a question? Did you read the letter 
that we sent you last week?
    Mr. Duffy. Yesterday? I want to talk about what you sent me 
yesterday. Are you aware that you sent me--
    Secretary Lew. On March 18th, we sent you a letter.
    Mr. Duffy. --a document dump last night, yesterday. Are you 
aware of that?
    Secretary Lew. We have been providing documents on a 
regular basis.
    Mr. Duffy. Okay, so you provided 1,035 pages. Correct?
    Secretary Lew. I didn't count the pages, Congressman.
    Mr. Duffy. Roughly, does that sound about right?
    Secretary Lew. We sent a lot of pages.
    Mr. Duffy. Okay. And you are trying to comply with our 
subpoena, is that right?
    Secretary Lew. We have sent thousands of pages, and--
    Mr. Duffy. Let's talk about the kinds of pages that you 
send. So in the thousand pages that were sent to our committee 
this week--you can look up at the board--664 of those pages 
were news clippings, letters to Members of Congress, CRS 
reports, hearing transcripts, and public information. Another 
223 pages were private sector research from Finch Barclays, 
Merrill Lynch. Another 109 pages were from the Bipartisan 
Policy Center. And then 39 pages was a memo on the 1985 debt 
limit impasse.
    This isn't the documents that we requested. This is public 
information you are just throwing our way to try to say, 
``Listen, we have sent you thousands of pages,'' though it is 
thousands of pages of noncompliant material.
    One of the e-mails that you sent us I think is consistent 
with all of your compliance and your testimony today. At the 
very top you will notice that it says ``spam.'' You are sending 
us spam e-mails from Treasury and trying to tell this committee 
that you are complying.
    And so, let me ask you this. We have asked you to provide 
employees of Treasury--Anne Wall, Randall DeValk, Priya Aiyar, 
Patrick Pinschmidt--and you have refused to allow them to come 
and be interviewed by this committee. Is that correct?
    Secretary Lew. Congressman, we have tried in repeated 
communications with this committee to arrange meetings to reach 
accommodations to be able to provide information. You know when 
we got a response? Last night. Last night, after the better 
part of a year.
    Mr. Duffy. Mr. Secretary, we asked for documents, and as 
those who oversee you, you should comply. Or you should assert 
a privilege.
    Secretary Lew. Congressman, the process of responding to 
these requests is well-established. It involves give and take--
    Mr. Duffy. It is well-established.
    Secretary Lew. It involves give and take.
    Mr. Duffy. Are you asserting a privilege?
    Secretary Lew. Excuse me?
    Mr. Duffy. Have you asserted a privilege as to why you 
haven't complied with our document requests?
    Secretary Lew. Congressman, we have not yet had the 
conversations we should have between counsel. Hopefully, that 
will begin immediately and we will be able to work our way 
through it.
    Mr. Duffy. If you look at the answers--Mr. Lew, look at the 
answers you gave us today. Does anyone here believe that you 
are going to actually comply with our requests that are 2\1/2\ 
years old, when you can't even acknowledge that you understand 
that you have the legal obligation to provide these documents?
    Ms. Waters. Mr. Chairman, I have a unanimous consent 
request. Mr. Chairman?
    Mr. Duffy. Mr. Lew, again, you are everything that is wrong 
with government--
    Ms. Waters. Mr. Chairman?
    Chairman Hensarling. The time of the gentleman has expired.
    Ms. Waters. I have a unanimous consent request.
    Chairman Hensarling. The gentlelady will state her request.
    Ms. Waters. I ask unanimous request for a recess.
    Chairman Hensarling. I object.
    The Chair now recognizes the gentleman from Texas, Mr. 
Hinojosa, for 5 minutes.
    Mr. Hinojosa. Thank you, Chairman Hensarling and Ranking 
Member Waters, for holding this hearing on the annual state of 
the international finance system.
    Welcome, Secretary Lew. I am pleased that you are 
testifying today because this hearing gives us and this 
committee the opportunity to discuss the North American 
Development Bank, better known as the NADBank, in San Antonio, 
Texas.
    As you know, the NADBank was created in 1994 as part of 
NAFTA to alleviate the environmental concerns and economic 
problems that would be created by the movement of commerce and 
people to the U.S.-Mexico border region.
    Since its creation over 20 years ago, the bank has made a 
tremendous improvement to some of the most impoverished 
communities in both nations, including towns and colonias in my 
congressional district and along the U.S.-Mexico border, from 
Brownsville, to El Paso, and all the way to the California-
Mexico border.
    The bank's investments have brought lifesaving potable 
drinking water to millions of people, many of whom faced 
health-threatening conditions due to unsafe sources of drinking 
waters.
    So that leads me to the first question. In January 2015, 
during the high-level economic dialogue, President Obama and 
Mexican President Pena Nieto agreed to double the bank's 
capital from its current $3 billion to $6 billion, split evenly 
between the two nations. Can you tell us why the bank is 
seeking to double its capital?
    Secretary Lew. Congressman, the Administration is looking 
for this capital increase because it will allow the United 
States to continue supporting these kinds of infrastructure 
projects on our border that are so important. It deepens our 
relationship with Mexico, it addresses environmental issues 
that are cross-border issues. And it is an important aspect of 
our economic life to have those issues addressed, and only we 
and Mexico are the parties of interest, which is why in the 
NADBand and the U.S.-Mexico relationship is so different.
    Mr. Hinojosa. In June of 2015, Moody's rated the NADBank as 
Aa1, reflecting the bank's strong capitalization and liquidity 
position as well as noting the support of the bank receives 
from both the United States and Mexico. Moody's rated the 
bank's outlook as stable.
    So do you expect the bank will maintain that strong 
financial position moving forward?
    Secretary Lew. Congressman, the rating agencies have 
changed their methodologies in a way that, for idiosyncratic 
reasons, could have an adverse impact on NADBank. They are 
looking at whether there is concentrated activity, and when you 
are talking about two countries--only two countries--being 
involved in all the activity on one border, it by its basic 
nature is concentrated activity. Most of the international 
financial institutions are diversified.
    I think that, importantly, there are no nonperforming 
loans. So if you look at the core quality of the credit, it is 
very strong. I don't know what the rating agencies will do.
    Mr. Hinojosa. I like that response on how strong it is.
    Since 2010, the bank's lending portfolio and debt issuances 
have grown significantly. Has the increased lending portfolio 
had a negative impact on the bank's financial position?
    Secretary Lew. As I say, there are no nonperforming loans, 
so I think the bank remains in a strong financial position.
    Mr. Hinojosa. What steps has the bank taken to ensure that 
its debt issuances do not become an oversized liability for the 
bank?
    Secretary Lew. I think that the key is for there to be 
careful review of projects to make sure that each project that 
is funded can sustain the debt that is going to it. And, given 
the amount of work that needs to be done on the U.S.-Mexico 
border, there are a lot of good projects before you get to 
anything that would be questionable.
    Mr. Hinojosa. I agree with you. There are a lot of good 
projects on both sides.
    In 2011, I introduced H.R. 2216, the North American 
Development Bank Enhancement Act, a bill to allow the bank to 
expand its mandate beyond the environmental infrastructure 
projects. Would Treasury support efforts to expand the bank's 
mandate this year, 2016?
    Secretary Lew. Congressman, I am not familiar with the 
expansion proposal. I am happy to look at it.
    I think that the definition, as it is, permits some 
expandability because transportation, for example, is part of 
it, reducing emissions. So things like transportation, water, 
sanitation, renewables are all part of it. But I would be happy 
to look at the proposal.
    Mr. Hinojosa. Thank you. I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Luetkemeyer, chairman of our Housing and Insurance 
Subcommittee.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Mr. Lew, I have a couple of questions on a different 
subject here with regard to SIFI designations. You testified 
last week in front of the Appropriations Committee with regard 
to arbitrary thresholds for SIFI designations, and I just 
wanted to get a little clarification here. Your response was 
that you oppose raising the bank threshold SIFI designation to 
$500 billion.
    Secretary Lew. I'm sorry, I couldn't hear the last thing 
you said.
    Mr. Luetkemeyer. Last week at the House Appropriations 
Committee, your response to asset thresholds was that you 
oppose raising the bank SIFI threshold to $500 billion, is that 
correct?
    Secretary Lew. I commented on that issue. Last year, there 
was a proposal to go to $500 billion--$500 billion is a very 
large financial institution.
    The number is now $50 billion. There has been a lot of 
debate, should it go from $50 billion to $100 billion. What I 
said is that there is a big difference between $100 billion and 
$500 billion.
    Mr. Luetkemeyer. Yes, but I guess the question then 
becomes--assets is only one thing. I think we need to be 
looking at this based on the risk and the asset makeup and 
liability makeup of each one of these institutions. Would you 
agree with something like that?
    Secretary Lew. Look, I think that there are a lot of 
different criteria aside from just size that raise questions of 
risk, but I think that size is an important criteria because 
the larger an institution is, the more likely it is to be--
    Mr. Luetkemeyer. With regards to nonbank SIFIs, we have had 
two companies that sold off major books of business in an 
effort to escape the designation. And yet they have not been 
de-designated. Don't you think it would be helpful to have an 
off-ramp of some sort to be able to do that so that these 
businesses know how and what they need to do to be able to get 
de-designated?
    Secretary Lew. First, Congressman, I don't think the reason 
that those decisions are made are to get de-designation. I have 
talked to the CEO of one of those firms who said expressly it 
was not; it was a business decision for reasons of sticking to 
the core business of a technology and manufacturing company.
    There is a process for de-designation. There is an annual 
review, and if a company sheds risk and comes in for review on 
an annual basis, that is the way to get de-designated. And we 
look forward to seeing applications that reflect that kind of 
change.
    Mr. Luetkemeyer. Okay. With regard to another issue, 
international insurance legislation, we are working, in my 
subcommittee, to put in some guardrails with regard to the 
conversations taking place at the IAIS. Those would require the 
United States to uphold and advocate for our system of 
regulation. Do you have any objections to that mission, to try 
and make sure we protect our insurance industry here in this 
country?
    Secretary Lew. Can you just clarify which provisions--which 
proposal you are talking about?
    Mr. Luetkemeyer. We haven't dropped the bill yet, but we 
are working on a bill to try and put some guardrails on the 
discussion so that those advocates--
    Secretary Lew. I am just not sure what discussions--which 
discussions--
    Mr. Luetkemeyer. With the IAIS.
    Secretary Lew. On what subject though?
    Mr. Luetkemeyer. Capital standards and all sort of--
    Secretary Lew. For insurance?
    Mr. Luetkemeyer. Yes. For all other insurance supervision.
    Secretary Lew. We have been working--I assume you are 
talking about insurance now?
    Mr. Luetkemeyer. Right, right.
    Secretary Lew. Yes, we have been working to negotiate a 
covered agreement to make sure that we don't end up in a place 
where other countries can set standards that would require our 
companies to take action.
    Mr. Luetkemeyer. So you would support what we are doing, I 
take it?
    Secretary Lew. I think the right thing to do is to complete 
the covered agreement, to have prudential issues addressed and 
not to get into a situation where there is conflicting capital 
kinds of standards, and any action in this area should be 
action we take in the United States.
    Mr. Luetkemeyer. I think we are putting the cart before the 
horse there. I think we need to make sure that we have the 
ability to protect our folks first before we engage in any sort 
of agreements, period. But I appreciate the comments.
    With regards to paying our Nation's bills, the New York Fed 
serves as the Treasury's fiscal agent, is that correct?
    Secretary Lew. Correct.
    Mr. Luetkemeyer. Did you know that since 2011, the New York 
Fed has conducted so-called tabletop debt ceiling exercises 
that contemplated prioritizing payments of principal and 
interest on debt?
    Secretary Lew. Yes.
    Mr. Luetkemeyer. When did you learn that?
    Secretary Lew. I don't recall.
    Mr. Luetkemeyer. Did the Treasury direct the New York Fed 
to conduct these tabletop exercises?
    Secretary Lew. Congressman, during the period when we were 
at risk of going into default, there was a lot of analysis 
being done of what mechanically would work. My understanding of 
these exercises is that they were checking to see if the pipes 
would work.
    Mr. Luetkemeyer. Okay. You are aware of that then.
    The problem, then, is on two separate occasions, October 
10, 2013, and May 7, 2014, you appeared before the Senate and 
you appeared before the House and indicated something contrary 
to that.
    Secretary Lew. No I didn't. What I said at the time and 
what I believe now is we have never gone into a world where 
Congress has failed to extend the debt. We have never been in a 
world where there has been a question on whether you could or 
couldn't--
    Mr. Luetkemeyer. Sir, you fail to acknowledge that these 
exercises were going on.
    Secretary Lew. I know what I said. What we have learned 
since then is that the technical capability is there. We don't 
know if it works. It has never been tried. I don't want to be 
the one who finds out, and I hope nobody here wants to find 
out.
    Mr. Luetkemeyer. I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Georgia, Mr. 
Scott.
    Mr. Scott. Thank you very much.
    It might be appropriate for us to examine the impact and 
what you are doing in terms of the financing of terrorists, 
particularly in view of what happened earlier this morning over 
in Brussels. And your Treasury Department has this 
authorization.
    But before I get to that, are you aware, Mr. Lew, that 
there have been documented 73--I think it is 73--individuals 
working at America's airports with ties to ISIS?
    Secretary Lew. Congressman, I know that there has been work 
done to identify risks in this area. I couldn't--
    Mr. Scott. Let me just suggest this. Cox Media--WSB, 
particularly--did a story. Cox Media has media outlets, and 
newspapers, and radio stations, television stations all across 
this country. I would like to ask if you might contact them and 
get the full report on that report.
    Just contact, it is Cox Media. WSB television is the local 
affiliate in Atlanta, Georgia, and we did an interview on that.
    My whole point is this: In this financing of terrorism, we 
have to start looking at the other end of it. In other words, 
there is the money laundering and there is that going, but 
there is also the demand for it. And such a thing as this--and 
this particular incident, too many of our airports have these 
private contractors that come in and help to sort of subsidize 
the workforce at the airports.
    This was the same incident that happened abroad not too 
long ago, where a baggage handler came and put the bomb right 
on the plane. And I am sure you are familiar with that. The 
reason I am saying that is that this evil, this terrorism, has 
no greater target in mind than our Nation's airports. Our 
greatest tragedies have been because of that.
    We have to do everything we can to let the American people 
know that our airports are safe. So on that end, if your staff 
would--and my staff could assist you as well, but I think it is 
important for you to have that report. Homeland Security, I 
think--
    Secretary Lew. Yes, I am happy to look at it, Congressman. 
The Department of Homeland Security works vigilantly--
    Mr. Scott. But my point is that it is not--you have the 
money end. I am not talking about that end.
    I am talking about how we are failing in our efforts. Now, 
we passed a bill that I sponsored called the International 
Financing Hezbollah Act. Are you familiar with that one?
    Secretary Lew. Yes.
    Mr. Scott. All right. Now, in that Act, we directed the 
President to direct and to identify, to investigate, to use 
Treasury, to use the FBI, to use all of our brilliant--the 
CIA--investigative powers to identify sources of funding, the 
dummy companies that trail on it.
    So with that in mind, let me just ask you, what is your 
application of the law, and what is your report on how ISIS and 
these other terrorist organizations are getting their funding?
    Secretary Lew. Congressman, I have less than a minute, so I 
am going to do my best.
    We have an extensive operation, the best in the world, to 
track terrorist financing. We support U.S. operations, we 
support friends around the world when they are trying to track 
down financial ties. We are drilling into every lead we get.
    We work extremely closely with the intelligence community 
and the Homeland Security Department on leads. We have the 
ability to track when they get identification of individuals 
who need to be tracked. So it all flows from the intelligence 
that we get.
    Mr. Scott. Let me--
    Secretary Lew. And we are working on Hezbollah to identify 
targets. On ISIL, it is a slightly different case on ISIL 
because it is a very internal financing system. In 14 seconds, 
I can't answer it, but if I could get another minute I would be 
delighted to.
    Mr. Scott. Okay. All right.
    Then I want to ask you this: The Iran agreement makes 
available to Iran a huge cash load of over $100 billion. They 
are the number one sponsor of terrorism, and particularly to 
Hezbollah.
    Secretary Lew. Mr. Chairman, these questions about ISIL 
financing in Iran are very important. If I could just--
    Chairman Hensarling. Please give a brief answer, Mr. 
Secretary. We will extend--
    Secretary Lew. So on ISIL financing, the structure of it 
has changed as ISIL has grown. It started out that they seized 
territory, they took the money out of vaults, and they had it.
    That is not going to sustain them. They have too much 
territory, too many needs, and we have been too effective at 
hitting some of those vaults.
    What they do now is they try and use local resources like 
oil and they extort money from the people who live there. We 
have worked with the government of Iraq to shut down banks and 
to limit money exchanges. We have worked with the government of 
Iraq to stop paying people in ISIL-controlled territory. We are 
using military operations to blow up every aspect of the oil 
industry we can.
    Has it been 100 percent successful? No. It is hard to get 
in there to be 100 percent. But it has been successful enough 
that in some areas they have had to cut in half what they pay 
their fighters, so we know it is working.
    We have more work to do. We work every day to find every 
lead we can.
    On Iran, if I could just take 30 seconds, I am happy to--
    Chairman Hensarling. Please, Mr. Secretary, go ahead.
    Secretary Lew. --the notion of the amount of money going to 
Iran has been greatly overstated in a lot of places. At some 
level, it looks like there is $100 billion that goes to Iran. 
We know that no more than $50 billion can actually go because 
of limitations and encumbrances on the money. The government of 
Iran itself says they think they may get access to $30 billion.
    What we know is they have hundreds of billions of dollars 
of domestic needs, and we will continue to take action against 
funding of terrorism, funding of regional destabilization, 
funding of human rights violations. So we are going to do our 
level best to make sure--
    Mr. Scott. But my point is, is there any mechanism in place 
to make sure that none of that money goes into the hands of 
groups like Hezbollah, the Houthis?
    Secretary Lew. We have ongoing sanctions in those areas and 
we are continuing to work on designating and enforcing those 
sanctions.
    Mr. Scott. Thank you, Secretary Lew.
    And thank you, Mr. Chairman, for the extra time.
    Secretary Lew. I apologize for going over, but those are 
important questions.
    Chairman Hensarling. No, those are topics of great interest 
to Members on both sides of the aisle.
    The Chair now recognizes the gentleman from Texas, Mr. 
Neugebauer, chairman of our Financial Institutions 
Subcommittee.
    Mr. Neugebauer. Thank you, Mr. Chairman.
    I am interested in the line of questioning that you 
initiated in your questioning, and so I would like to see if 
maybe you get more answers than you got the first time around, 
so I want to yield my time to you.
    Chairman Hensarling. If the gentleman would yield to the 
Chair, Mr. Secretary, let's go back to document production 
here. You have stated that you believe you have been reasonable 
in this process. I accept that. But I hope you understand there 
is a level of frustration for document requests that have been 
pending in some cases for 2 to 3 years, and a subpoena which is 
almost 1 year old.
    We have had over a dozen questions for the record that were 
produced from last June's hearing for which we have yet to 
receive any information from your Department. You saw the chart 
that was placed by Chairman Duffy on the monitors that showed 
that basically when we had requested documents, most of what we 
received were news clips and speeches.
    So yes, Mr. Secretary, there is a level of frustration 
here. A question that Chairman Duffy asked, which I do not 
believe you answered, and if you did then forgive me, I wish to 
know--I am unaware that Treasury has asserted any executive 
privilege with respect to any of the documents that have been 
subpoenaed. So I am unaware that Treasury has invoked any 
executive privilege.
    Are you aware if executive privilege has been asserted with 
respect to any of the documents subpoenaed? And if so, do you 
have a list of those documents?
    Secretary Lew. Congressman, we have tried to reach out, to 
have conversations to clarify what is requested, to seek 
accommodations, to work in the spirit of President Reagan's 
direction to executive agencies on how to deal with 
congressional oversight in a respectful and responsive way.
    We wrote in December. We wrote in January. We wrote again 
last week. It was only after four additional subpoenas were 
delivered that we got a call back to try to set up--
    Chairman Hensarling. Mr. Secretary, I will accept what you 
are saying, but you are not answering the question. Are you 
aware if executive privilege has been asserted? I am unaware.
    Secretary Lew. I am not aware of any assertions of 
privilege--
    Chairman Hensarling. Thank you. That was the only question 
I was asking, Mr. Secretary.
    Secretary Lew. But I think you know as well as I do that is 
the end of the process, not the beginning.
    Chairman Hensarling. I am simply asking--well, when you say 
the end of the process, it is a process that has been going on 
for almost 3 years.
    Secretary Lew. The process of accommodation requires 
conversations that haven't even begun. We have reached out, so 
we have initiated conversations but we have seen no response.
    Chairman Hensarling. Mr. Secretary, I assure you that a 
subpoena would not have been issued had we not had to wait 
years. This isn't a matter of dealing with--
    Secretary Lew. But in December, we offered--
    Chairman Hensarling. This isn't a matter of days to weeks, 
Mr. Secretary. This has been going on for months and years. Let 
me ask--
    Secretary Lew. Yes. Maybe we can get to a better place 
where these conversations take place and we can find a path to 
accommodation, which is always our goal.
    Chairman Hensarling. Mr. Secretary, you testified before 
our committee on May 7, 2014, that the Administration has never 
made any decision to prioritize debt payments. Do you agree--
    Secretary Lew. That is correct--
    Chairman Hensarling. --that you testified to that?
    Can you pull up chart number six, please?
    As I think you are well aware, we are in possession of a 
number of documents that have come from your fiscal agent, the 
New York Fed, of various e-mail communications amongst and by 
Federal Reserve officials. This one dated September 17th 
states, ``Treasury is adamant they will make P&I''--I assume 
principal and interest payments--``not considering possibility 
of missing debt payments.''
    Number seven, please?
    This one is dated Friday, September 20th: ``Treasury 
continues to be adamant they will make principal and interest 
payments on the debt. This is a slightly different position 
than prior exercises where prioritization of debt payments was 
not specified.''
    Chart eight?
    ``As you may have heard''--this one is dated Monday, 
September 23rd--``unlike the 2011 planning around prioritizing 
payments and rolling maturities, the Treasury has said they 
will make all principal and interest payments this time 
around.''
    So you were aware of these tabletop exercises, correct? You 
testified to that earlier today--
    Secretary Lew. Mr. Chairman, the tabletop exercises were 
not in pursuance of a decision that had been made. They were 
exploring how to answer the question that you have asked me, is 
it technically possible? Now, I can't speak--
    Chairman Hensarling. The documents that were just 
presented, have you seen these documents?
    Secretary Lew. Only in recent months. At the time, I was 
not in on that--
    Chairman Hensarling. Pull up chart number two, please.
    Secretary Lew. Mr. Chairman, if I could just respond to 
your question, because the real point here is we should never 
be in a position where we have to make decisions about what to 
do when you default. If you could default on Social Security or 
Medicare instead of principal and interest you are still in 
default.
    Only the President can make a decision what to pay and what 
not to pay. That decision was never made--
    Chairman Hensarling. Mr. Secretary, I agree with that 
assessment. But I think you know that roughly half of the times 
that Congress in the modern era has voted on a debt ceiling, it 
has included some type of spending restraint to take us off the 
path to bankruptcy as well.
    Last chart, chart number two, a memo dealing with Federal 
Reserve Governor Powell.
    Two interesting comments from Powell. He understands why 
Treasury wants to maximize pressure on Congress by limiting 
communications about contingency planning.
    Mr. Secretary, did you direct somebody to maximize pressure 
on Congress by limiting communications about contingency--
    Secretary Lew. No. What I have said to this committee and 
other committees of Congress is, yes, we look at what is 
technically possible. We don't know if it works. We believe 
that it would be a grave mistake and a disservice to this 
country to ever default.
    That is my view now, it was my view then, and it will be my 
view in the future. And it would be a mistake if Congress goes 
down this path again. It would hurt our country--
    Chairman Hensarling. Well, it is interesting evidence from 
the New York Fed about the motivations of Treasury.
    The time of the gentleman from Texas has expired.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Clay.
    Mr. Clay. Thank you. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for your appearance today. We 
must not forget that this Administration brought us back from 
the brink of an economic collapse in 2008 that was not brought 
on by this Administration. But this Administration helped 
prepare a budget in an economy that was on the brink of 
collapse.
    So I wish my colleagues on the other side of aisle wouldn't 
forget that and would recognize the good that has come out of 
it.
    Mr. Secretary, how would you assess the effectiveness of 
the Financial Action Task Force (FATF) in identifying key 
terrorism financing risk and issuing universal recommendations 
for addressing them?
    Secretary Lew. Congressman, I think FATF is a very 
important organization that establishes norms and practices 
that, if followed around the world, would create the ability to 
do what we do in the United States more broadly. Candidly, we 
are far ahead of many other countries in terms of having the 
capacity to take those authorities and implement them 
effectively.
    One of the things that I think we have to do--and the IMF 
has a big role to play in this and FATF itself has a big role 
to play in this--is to provide the kind of technical assistance 
to make sure that we built up the capability around the world 
so the countries that want to be cooperative have the tools 
that they need.
    We had a meeting at the U.N. in December where, for the 
first time in the history of the U.N. Security Council, finance 
ministers met. I chaired the meeting and we had a unanimous 
vote to designate ISIL in the same category as Al Qaeda, which 
exposed anyone having even an intermediary role to sanctions. 
It is all rooted in the ability to see it and act on it.
    FATF was at that meeting. FATF is following up with 
countries to help build the capability.
    But I don't want to exaggerate where other countries are. 
We are even ahead of our most sophisticated colleagues, and we 
offer a lot of assistance, for example in Western Europe, when 
they need leads to be followed up on.
    Mr. Clay. And in light of what happened today in Brussels, 
I am sure there is a need for expansion of FATF.
    Secretary Lew. Yes. And we have already reached out to 
offer assistance, as we did after the bombings in France and we 
do on an ongoing basis, sharing information in between when it 
is appropriate.
    Mr. Clay. Thank you so much.
    And at this time, I would like to yield the balance of my 
time to the ranking member, Ms. Waters.
    Ms. Waters. Thank you very much.
    I would just like to give you an opportunity to share with 
us your attempts to cooperate and your desire to work with us 
in a reasonable manner.
    Secretary Lew. Thank you, Congresswoman Waters.
    The range of requests from this committee has been many. We 
have provided thousands of pages of material and, as has been 
noted, we provided an additional thousand pages of material 
just this week.
    In December--on December 17th and January 21st, we invited 
committee staff to meet to discuss what other information the 
committee needs. On the debt limit alone, we provided the 
committee over 3,800 pages of documents on this topic.
    And over the last 3 months, we have tried to reach out to 
the committee to find out what further materials would be 
useful. In the interim we did identify some additional 
materials on our own.
    I have a great deal of respect for the oversight function 
that Congress plays and it is appropriate for Congress to play. 
We seek to find accommodations to provide information and would 
only ask for those kinds of conversations that are necessary to 
go through the accommodation process to proceed.
    Ms. Waters. Have you received a response from this 
committee when you have reached out to them to attempt to come 
together and have some discussion around these issues?
    Secretary Lew. Well, only yesterday evening, but that was 
after four people on the Treasury staff received subpoenas for 
interviews. So we didn't have conversations that would help us 
work it through before that.
    Ms. Waters. So I think what I heard today is that you are 
still offering.
    Secretary Lew. Yes. We remain available and anxious to have 
those kinds of conversations.
    Ms. Waters. You and your staff are available?
    Secretary Lew. Yes. The right level is for counsel to 
counsel. That is how these things have been worked out for 40 
years that I have been part of.
    Ms. Waters. Perhaps before you leave, you can speak 
directly to the chairman, and reinforce your desire to be 
responsive and to talk and to have these discussions. Perhaps 
that would be helpful. Perhaps there is some misunderstanding 
about what efforts you have made to try and accommodate the 
many, many, many requests and the subpoenas and all of that.
    I do appreciate your willingness to do this, and again, 
perhaps maybe a conversation directly with the chairman might 
help.
    Secretary Lew. Thank you, Congresswoman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from South Carolina, 
Mr. Mulvaney.
    Mr. Mulvaney. Secretary Lew, I want to continue the 
conversation about the debt ceiling, not because I want to beat 
a dead horse, but mostly because I continue to be amazed, in my 
view, at an Administration that I perceived as wanting to 
create the threat of a financial crisis.
    We have already established in your previous visits here 
that your comments to the contrary notwithstanding, the 
technical ability to prioritize did exist and does exist. That 
issue has been put to rest.
    Secretary Lew. I testified to that effect at this committee 
last year.
    Mr. Mulvaney. And I am giving you the benefit of the doubt, 
Mr. Lew. When we are going to agree, you might as well let me 
do it, because it is not going to happen that often.
    I want to talk about something else today, though, if we 
could bring up the first slide.
    You have said on several occasions that no decision had 
been made to prioritize. This is an e-mail on September 17th. 
We got these from internal e-mails at the New York Fed: 
``Treasury is adamant that they will make P&I payments.''
    Next slide.
    ``Treasury continues to be adamant that they will make 
payments--principal and interest payments on the debt.''
    Next slide, please.
    ``As you may have heard, unlike the 2011 planning around 
prioritization payments and rolling maturities, the Treasury 
has said they will make all P&I payments at the same time.'' 
That is September 23rd, September 27th.
    Next slide, please.
    ``Even though the Treasury has directed the Reserve Banks, 
they intend to make all P&I payments, et cetera.'' That is 
September of 2013; 2 weeks later you went to the Senate and 
said that no decisions had been made to prioritize.
    In May of 2014, several months later, you came to this 
committee and brought a letter from the previous day and you 
testified to the same thing. It says, ``We stress that no 
decision regarding what to do in a situation was made during 
the recent debt limit impasses.''
    I will leave it to others to speak to the truthfulness of 
that statement and the truthfulness of what you have said to 
this committee. It is not what I want to focus on today. I want 
to focus on the next piece of the puzzle.
    Secretary Lew. Congressman, if I might?
    Mr. Mulvaney. Sir, I will, but--and I will give other folks 
a chance. I am trying not to take the whole 5 minutes.
    Secretary Lew. When somebody questions the truthfulness of 
a statement, I think I am permitted the opportunity to respond.
    Mr. Mulvaney. No, but it is not what I want to talk about.
    Secretary Lew. Because you have mischaracterized what I 
have said and it is incorrect--
    Ms. Waters. Mr. Chairman, point of order.
    Mr. Mulvaney. In fairness to--
    Ms. Waters. Point of order, Mr. Chairman.
    Chairman Hensarling. The gentlelady will state her point of 
order.
    Ms. Waters. Mr. Chairman, I--
    Chairman Hensarling. The clerk will stop the clock.
    Mr. Mulvaney. Thank you.
    Ms. Waters. I have a point of order that the committee is 
not exercising proper decorum.
    Mr. Mulvaney. May I speak to the point of order, Mr. 
Chairman?
    Ms. Waters. Mr. Chairman, if I may, when it is implied that 
the Secretary of the Treasury is not being truthful, he should 
be given an opportunity to respond to that. It should not be 
left saying, ``I have accused you of not being truthful, but I 
want to move on.''
    And I would say that if we are to comply with proper 
decorum, you would allow the Secretary of the Treasury to 
respond to what has been said as to his being untruthful.
    Mr. Mulvaney. May I speak to the point?
    Chairman Hensarling. Does any other Member wish to be heard 
on the point of order?
    The gentleman from South Carolina?
    Mr. Mulvaney. I have already indicated to the witness that 
I intend to leave him time at the end of my 5 minutes to 
respond. I do intend to do that. I would like to get through my 
presentation first and then give him the opportunity to respond 
to all of my points.
    In addition, no one is stopping him from receiving time 
from the opposition, the other side, the other party, to speak 
to my points, which we regularly do in this committee.
    Chairman Hensarling. If no other Member wishes to be heard, 
I would like to ask unanimous consent that the Secretary be 
given 30 seconds in which to address the issue that he wanted 
to address, and then we will go back to the gentleman from 
South Carolina.
    If so, would the gentlelady withdraw her point of order?
    Ms. Waters. Mr. Chairman, I appreciate your offer, but I 
hardly think 30 seconds is sufficient.
    If the chairman would reconsider the amount of time to be 
in compliance with decorum, I certainly would agree to that. I 
hardly think 30 seconds is sufficient.
    Chairman Hensarling. Mr. Secretary, I will simply, by 
unanimous consent, yield you as much reasonable time as you may 
consume, and if the gentlelady cares to withdraw, we will give 
the Secretary a moment to address the issue that was raised by 
the gentleman from South Carolina.
    Ms. Waters. Thank you, Mr. Chairman. I withdraw.
    Secretary Lew. Thank you, Mr. Chairman. And I am from New 
York, so I talk fast.
    All I wanted to say is when I testified on a number of 
occasions, I stated what was correct then and is correct now. 
The decision has never been made by the only people who can 
make the decision--that is the President of the United States 
on the advice of the Treasury Secretary--what to do. That 
decision was not made.
    I can't tell you what different officials in different 
organizations said to each other. But I can tell you the 
decision wasn't made.
    And we should never have to make a decision about how the 
U.S. Government defaults, which is what happens if Congress 
fails to raise the debt limit. And I don't think defaulting on 
payments to veterans is any better than defaulting on payments 
to foreign bond holders.
    Chairman Hensarling. I think we are getting a little far 
afield of the question now, but thank you, Mr. Secretary.
    And now we will go back to the gentleman from South 
Carolina.
    Mr. Mulvaney. I thank the chairman, and I thank the ranking 
member.
    Let's get to the question that I wanted to ask, Mr. Lew, 
which goes to the next slide, which is why no one at Treasury 
wanted to tell us. The next slide is from September 24th, 
another internal New York Fed document, which says, ``Agree the 
close hold here is crazy, counterproductive, and adds risk to 
an already risky situation.'' This is an internal document in 
the New York Fed. ``I will bring this up at the meeting at 
11.''
    Next slide, please.
    The last sentence of this long selection says, ``It is also 
totally unclear when and whether TRSO intends to share this 
thing with the affected business areas, especially given their 
request that I refrain from sharing this document, a request 
that I am obviously ignoring because I think it is outrageous 
that they are keeping such a close hold on this type of such a 
late date.''
    TRSO, I understand, is one of your internal working groups.
    The next slide, please.
    Another internal New York Fed documents with two 
interesting comments from Powell. Number two, he understands 
why Treasury wants to maximize pressure on Congress by limiting 
communications about contingency planning.
    Mr. Lew, this speaks to the very heart of why we have been 
beating you up on this for the last 3 or 4 years. So this is 
the question I wanted to ask from the very beginning: Who at 
Treasury made the decision to try to maximize pressure on 
Congress by limiting communications about contingency planning?
    Secretary Lew. Congressman, the decision that we made was 
to make sure Congress and the American people understood the 
risk of what happens if the debt limit is breached.
    Mr. Mulvaney. That is not what the e-mail speaks to. The e-
mail speaks--
    Secretary Lew. That was our decision. We do not believe 
that there is a path towards prioritization that works.
    Mr. Mulvaney. I get that. Mr. Lew, you said that 100 times 
and that is why we keep cutting you off because it is becoming 
redundant.
    So my question is this--I am not asking you about informing 
us about the risks of a debt ceiling. I am asking you 
specifically about the comments within the New York Fed, which 
is your agent, and with--
    Secretary Lew. Congressman--
    Mr. Mulvaney. Let me finish--and it is clear from all the 
documents we received from them through you that they were 
integrally involved with this as far back as 2011. And clearly 
people within the New York Fed thought that you were 
withholding information from Congress about contingency 
planning. And I want to know who told them that and why.
    Secretary Lew. I can't speak to what other people thought. 
I can tell you that--
    Mr. Mulvaney. If I asked Mr. Powell that, what would he 
say?
    Secretary Lew. --In 2011 and 2013, there were serious 
questions about whether the pipes could even handle this kind 
of decision.
    Mr. Mulvaney. We have covered all that.
    Secretary Lew. What we know for sure is, we know you can't 
do that with all the payments of the Federal Government.
    Mr. Mulvaney. I am giving you the benefit of the doubt, Mr. 
Lew. All I am asking you--
    Secretary Lew. And we can talk about the substance and 
maybe make some progress here.
    Mr. Mulvaney. Who made the decision not to tell Congress 
and who made the decision not to tell the public?
    Secretary Lew. Congressman, I am telling you we decided to 
share with the Congress and the public what we knew, which was 
that if there were no debt limits--
    Mr. Mulvaney. But you never shared with us--
    Secretary Lew. --default would be a terrible thing--
    Mr. Mulvaney. --or the public the contingency planning and 
prioritization.
    Secretary Lew. And the contingency planning may or may not 
work. We don't know that.
    Chairman Hensarling. The time of the gentleman--
    Secretary Lew. I can't sit here today and tell you that 
there is a plan. There is no plan to manage through a default.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Cleaver, ranking member of our Housing and Insurance 
Subcommittee.
    Mr. Cleaver. Mr. Secretary, is there a plan?
    Secretary Lew. As I was just trying to say, Congressman, 
these are questions about, technically, could you choose to pay 
bond holders, including foreign bond holders, and not pay 
American citizens things that they are due? I acknowledged to 
this committee that there is a technical capability to pay 
principal and interest, including to all of the foreigners who 
own U.S. bonds.
    I think we have to pay our bond holders. I think we also 
have to pay our veterans; we also have to pay Medicare; we also 
have to pay for the lights to go on in this room and in 
veterans' hospitals around the country.
    And I think the notion that there is a workable plan for 
the Government of the United States to default is the highest 
form of irresponsibility. And that is what is really the issue 
here.
    Mr. Cleaver. Thank you.
    I came here interested in oil more than anything else. 
There was a time when we said we have to produce more oil to 
reduce our dependence on imported oil from the Middle East 
because of the chaos.
    I am wondering now, today, AAA does this daily, gasoline 
price dealing, and so today the average price around the 
country is $1.99. So I am wondering what is the impact on the 
world economy, and on us here at home, of the almost 
unprecedented drop in oil prices and also the gasoline at the 
pump?
    Secretary Lew. Congressman, there is no simple answer, 
because it is different in different countries. As somebody who 
came of age in the policy world in the 1970s and 1980s, the 
notion that low oil prices and low gasoline prices would be bad 
for the U.S. economy is something that I find hard to embrace.
    There is no question but that it is very hard right now 
with the United States as a producer in many parts of the 
country--in the pats of our economy that are focused on oil 
production, it is very hard.
    Overall, for the U.S. economy, lower oil prices actually 
are like a tax cut. It lowers the cost of individuals and 
businesses to do their business.
    Around the world there are variable conditions, depending 
on whether you are a producer or a consumer. Generally there 
are more consumers than producers, so I think low oil prices 
actually are something of a boost to global demand.
    At the same time, it has caused a lot of uncertainty, and 
in terms of the economies of countries that are oil producers 
it has created volatility in the markets. It is not without its 
costs. There will be firms that fail. That has consequences.
    I think that the challenge we have is to use this moment of 
low energy prices to redouble our commitment and develop 
alternatives so that we continue over time to see a sustained 
world of moderated energy costs even when things change and 
there are external factors that are driving prices up.
    I think that the reason for the price being down now has 
been viewed in different ways by different analysts. Some view 
it as being a shortage of demand, a weak global economy. Some 
view it as being an excess of supply; there are more producers 
in the world and there is more energy--more oil on the market.
    The reality is it is a little bit of both. And we need a 
stronger global economy. And when the global economy is 
stronger, we are going to need more energy.
    So I think we have to look beyond the moment to the future, 
which is why all of the energy work that we do with the all-of-
the-above strategy remains very important.
    Mr. Cleaver. I am not sure whether or not this Congress 
will do a major infrastructure program during my lifetime. 
Tragic, from my vantage point.
    But when the price of oil drops and then the drop in the 
price at the pump, it impacts the revenues that we have 
historically used for highway transportation bills. At a time 
when our infrastructures is hemorrhaging all over the country, 
the money that is being made available both on the State tax as 
well as the Federal tax on oil is so low. That is the one 
negative that I--
    Secretary Lew. Yes. No, obviously it has reduced the 
revenues into the Highway Trust Fund.
    I firmly believe we should find other ways of expanding the 
investment we make in infrastructure. We proposed using tax 
reform--business tax reform--as a way to bring one-time money 
in for the next several years to get the kind of increase and 
infrastructure investment that we need for our economy. I wish 
that was something we could make progress on even this year.
    Mr. Garrett [presiding]. The gentleman's time has expired.
    Mr. Messer is recognized for 5 minutes.
    Mr. Messer. Thank you, Mr. Chairman.
    And thank you, Secretary Lew. I want to start with 
something I think ought not be that controversial, and it is 
around the extraordinary measures that are taken to try to 
lengthen the amount of time before we breach the debt.
    As you know, there was $350 billion I believe you guys were 
able to shift around in your Department from varying accounts. 
That is incredible power, shifting billions from retirement 
accounts, government workers' pensions, and the like.
    But it is remarkable how little transparency is required in 
those extraordinary measures. And so we offered an amendment 
that passed unanimously actually on the Floor, but I just would 
like your opinion of it, that would just require the Department 
of the Treasury to articulate publicly what extraordinary 
measures you intend to use, what, if any, costs there would be 
to those measures, and how long to put an estimate out before 
it would extend our effort before we breached it--
    Secretary Lew. Congressman, I am not familiar with the 
amendment. I am happy to look at it.
    We do have, both in my time and previously, always 
communicated with Congress and informed Congress as we have 
used extraordinary measures. So there has been transparency. I 
don't think--
    Mr. Messer. After the fact, you have reported transparency, 
but no one in the public knows what accounts you are moving 
around.
    Secretary Lew. At the time. It is contemporaneous, 
actually.
    Mr. Messer. And you haven't given us a date certain of when 
that extension would be or some--
    Secretary Lew. You don't always know precisely because it 
depends on the day-to-day cash flow. That is why operating the 
government--something as large as the government--
    Mr. Messer. Okay, so at a minimum--again, not trying to be 
controversial here--it is not required by law that you do it?
    Secretary Lew. I would have to check. We do it. Whether it 
is required or not, I would have to check.
    Mr. Messer. Okay. We will pursue that with your staff--
    Secretary Lew. And I am not trying to be argumentative 
either. Obviously, it is not a good thing.
    I don't like having to deploy extraordinary measures. It 
creates anxiety in the U.S. and global economy for no good 
purpose. And we have so many risks out there that we don't 
control, not having anxiety about the Federal Government being 
able to pay its bills is something we do control.
    Mr. Messer. Sure. Of course, I don't think any of us like 
the extraordinary measures. It just seems to me if we are going 
to do them, the public ought to know what we are doing, when we 
are doing it, how much it is going to cost, and how long it is 
going to extend it.
    So we will work with your staff. Hopefully, we can reach 
agreement there. I think it is the sort of commonsense measure 
that we should put forward.
    I would like to return now, to this question of having the 
technical capacity to prioritize debt and how far your staff 
has pursued it. You, I think, have said before the committee--
and I'm not trying to put words in your mouth, but that you 
have articulated for at least a year that you have the 
technical capacity to--
    Secretary Lew. Yes. I don't remember the exact date. I 
remember that I testified to this committee last year and I 
said it. I don't remember the date.
    Mr. Messer. Okay, so you have said that for a while.
    Secretary Lew. Yes. But I have also said that the technical 
capacity doesn't actually give me the comfort that we know it 
works. It is a complicated process.
    Mr. Messer. --said here it is irresponsible to breach the 
debt, and so you don't think we ever should. I would just 
suggest that it is irresponsible to not explore a plan for what 
you can do under your technical capacity.
    So I guess I am just asking you this: Have you instructed 
your staff? Are you working through it?
    You said you don't know what it looks like in the real 
world. Has your team looked at what it might look like in the 
real world?
    Secretary Lew. Yes, they have looked at the work that has 
been done in these tabletop exercises, but you would have to go 
into a nonpayment regime to actually test it, and I don't think 
any of us want to do that. So there is kind of a tabletop sense 
that you could pay principal and interest through the system 
that pays principal and interest. But we have never tried to 
cut it off and do it that way, and--
    Mr. Messer. Are you suggesting--
    Secretary Lew. --what I have also said is we don't have 
that ability over the whole Federal payment system to do that.
    Mr. Messer. Yes, and just again, are you suggesting that 
the only way to really know is we would have to do it?
    Secretary Lew. Ultimately, you would end up only learning 
if you cross that threshold and if the President made the 
decision to pay those bills and not others.
    Mr. Messer. Have you put together reports of what this 
would look? Is there an analysis that could be shown to 
Congress of what your team--
    Secretary Lew. I don't recall what the nature of the--form 
of the analysis was. I have mostly had conversations.
    Mr. Messer. It seems to me that unless we agree that the 
debt limit should just go away, we are going to continue to 
have one. It is still a possibility that that debt limit be 
breached, and, as you said, if you have the technical capacity 
at Treasury to do something about it, we ought to do more than 
just have a tabletop discussion. We ought to have an analysis 
of what that would look like provided by you so both the 
President and Congress can see what that would look like.
    Secretary Lew. Right. But to be clear, the people who were 
corresponding on those e-mails that you showed don't have the 
ability to make the decision. Only the President can make that 
decision.
    Mr. Messer. No, of course. But it sounds like now we don't 
have the information to make a decision.
    Secretary Lew. We didn't in 2011, that is for sure. If you 
ask me now if there is the technical capacity, I would say yes, 
there is the technical capacity through a tabletop exercise. It 
might work; it might not work.
    Mr. Messer. Let me ask you a different way. Are you in the 
habit of making big decisions at Treasury on tabletop analysis?
    Secretary Lew. Most decisions we make are not the kinds of 
avoidable decisions to create a crisis that this one would be. 
This one would be a self-inflicted wound. There is no reason to 
ever test it.
    Mr. Messer. Thank you. I yield back Mr. Chairman.
    Mr. Huizenga [presiding]. The gentleman yields back.
    The Chair recognizes the gentleman from Massachusetts, Mr. 
Capuano, for 5 minutes.
    Mr. Capuano. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary. Mr. Secretary, I had no 
intention of coming over this morning. I know you are a big 
boy, and you can take care of yourself.
    Unfortunately, I made a huge mistake. I actually turned the 
TV on.
    I was watching the hearing. And honestly, I was a little 
bit embarrassed, and a little bit angry, and I thought I would 
come over here and just do two things.
    Number one is I know that one of the first things I heard 
was a big concern about the deficit and the debt, and it is a 
legitimate concern. But apparently you are personally 
responsible for all of it, and I just--first of all, I am 
pretty impressed by that power and that incredible presence.
    But nobody mentioned anything about the Bush tax cuts that 
were totally unnecessary; nobody mentioned two wars that were--
one of which was totally unnecessary, and all the money we 
spent in Iraq without paying for it. No one mentioned those 
items. No one mentioned the recession. No one mentioned the 
vote that this House--two votes this House took late last year 
that increased the deficit by almost $2 trillion, one of which 
votes on the tax extenders 100 percent of my colleagues on the 
other side of the aisle voted for that. One hundred percent of 
them. Sixty-four percent of them on the other side of the aisle 
voted for the omnibus.
    No people are saying, ``I share the blame of this terrible, 
terrible thing.''
    So that kind of--I don't mind--I don't like the deficit; I 
don't like debt like anybody else. At the same time, I think 
those of us who participated in that should stand up and own 
what we should own, as opposed to trying to put all of the 
blame on one individual. That is number one.
    Number two, to be perfectly honest, I have had differences 
with you and we have discussed them. I still have some 
differences and that is fine. But those are reasonable, 
thoughtful differences. I hope that you see them the same way. 
We can disagree and still be respectful. I still like and 
respect your professionalism.
    And honestly, my questions have been answered, and I just 
wanted to take the last 3 minutes of my time to offer you an 
opportunity to do one of two things. Either you can address any 
of the items that you were not given the opportunity to address 
by anybody on this board, or you can take 3 minutes and take a 
deep breath, put your feet up, take a relax, and--I am not 
trying to get you out of the zone, but at the same time no one 
else is giving you the opportunity to answer questions, and I 
thought if you want to take the opportunity, fine. If you 
don't, I am perfectly fine to sit here and read my Blackberry 
for the next 2\1/2\ minutes.
    Secretary Lew. Thank you, Congressman.
    Look, I think if you look at the fiscal path that we have 
been on as a country for the last 2 decades, I have spent as 
much of my time as anyone else trying to reach a responsible 
fiscal policy. In the 1990s, when I was Director of OMB, we had 
a surplus because we worked on a bipartisan basis to reach a 
balanced budget agreement and then save the surplus and not 
spend it.
    You have described what happened in the years after my 
tenure and it created a big, big problem. We spent that surplus 
and then we had a recession that put us into a deficit, and 
then we had to spend to get out of the recession.
    And we are now in a place where we are doing a lot better. 
The economy is growing.
    But we are not at a place where I would say kind of 
grinding the economy down by trying to reach a balance 
prematurely would be a good thing to do. I think that the 
conversation we have had about infrastructure in some of the 
back-and-forth this morning illustrates that there are pressing 
needs in this country to get our economy and the people of this 
country where they need to be.
    So I would hope that we could have the kind of bipartisan 
discussion about tax and spending policies that over the next 
20, 30 years gets us where we need to be. But over 10 years, we 
have gone from skyrocketing deficits and debt that was crossing 
through 100 percent of GDP to a stable situation where we have 
reduced the deficit from 10 to 2.5 percent of GDP and we have 
stabilized the debt.
    For somebody whose last testimony in the Clinton 
Administration was projecting paying off the national debt, I 
wish that a lot of the things that happened afterwards that 
squandered the deficit hadn't happened. But we don't get to go 
back and change that.
    And it would be a terrible thing for this country if we 
accepted the myth that somehow these last few years have been 
anything but an improvement--a dramatic improvement--in our 
fiscal position.
    Mr. Capuano. --the last 45 seconds--
    Secretary Lew. I could fill 40 seconds, but I think I will 
stop.
    Mr. Capuano. Mr. Chairman, I am not yielding back just yet. 
I am contemplating what I am going to do with my last 26 
seconds.
    And now we are done. Thank you--
    Chairman Hensarling. The time of the gentlemen has expired.
    The Chair now recognizes the gentlemen from Arizona, Mr. 
Schweikert.
    Mr. Schweikert. Thank you, Mr. Chairman.
    And to my friend from Massachusetts, I was waiting for the 
offer of manis and pedis, with the excess time, but you know, 
hey.
    Secretary Lew, I would like to actually go in a slightly 
different direction. I know rhetorically, our side focuses on 
what I believe is the crushing debt that is coming, and the 
other side on, ``Hey, look at how much better our world is.'' 
But could we spend a couple of minutes just sort of looking at 
the headwinds that come to the next Administration? Some of it 
is demographic.
    I am holding a report right now, ``The Coming Pension 
Crisis,'' talking about government pensions, both State and 
municipal here in the United States and around the world. It is 
saying municipal pensions, the unfunded liabilities is now over 
100 percent of GDP.
    I am looking at an environment right now where GDP now, 
from the Atlanta Fed a couple of days ago, we are back under 2 
percent GDP; 14 years left in the Social Security Trust Fund; 9 
years left in the Medicare Trust Fund; 56 months left in Social 
Security disability.
    There are some really ugly things happening. And you and I 
know much of that we desperately need economic growth to cover 
these sins.
    How much in your team do you actually focus on, here is the 
debt management, here is the reality of what is happening, both 
because of lack of economic growth, demographics, and other 
things? How much actuarial math is happening at the Treasury 
Department saying, ``This is our future?''
    Even our previous conversations about, should we be selling 
long-term bonds, truly long-term bonds to get beyond the 
demographic bubble. What are you modeling?
    Secretary Lew. What am I what?
    Mr. Schweikert. Modeling in your team. How much are you 
looking at this incredible wave of debt that is going to crush 
us?
    Secretary Lew. Congressman, we have known for the last 50 
years that the Baby Boomers would retire roughly now and--
    Mr. Schweikert. Well, Congress seemed to just discover it a 
couple of years ago.
    Secretary Lew. Congress actually dealt with it in 1983 in 
Social Security reforms that have been very effective because 
they reflected the way you work on a bipartisan basis to deal 
with what goes into the trust fund, and what comes out of the 
trust fund. So--
    Mr. Schweikert. But right now Social Security is at a 2.7 
percent GDP that we are not even hitting, and the Social 
Security Trust Fund is gone in 14 years.
    Secretary Lew. So, the thing that I think it is important 
to remember is that the ongoing revenues in Social Security 
still continue to fund the bulk of the benefits--over 65 
percent of the benefits.
    Mr. Schweikert. Nope. Actually, I think under the CBO study 
were 2018 Social Security goes negative, that the tax revenue 
and I think interest revenue will no longer--and we pay 
ourselves, what--
    Secretary Lew. The point I am making isn't that at some 
point the revenue goes negative, but that the revenue keeps 
coming in and will continue to pay for the bulk of Social 
Security's ongoing expenses. And the gap is what is the issue 
for the long-term financing.
    Mr. Schweikert. But that gap--think about that gap. Today, 
the trust fund has what, $2.8 trillion? And we have burned 
through that principal in 14 years.
    At the same time we are paying ourselves 3.1 percent 
interest and the tax revenue. And Social Security is actually 
the easy one to fix compared to Medicare.
    Secretary Lew. Yes.
    Mr. Schweikert. But also, when I look at the public and 
private pension issues out there, I am just wondering, the 
scale of these things, is it just pushed off to the next 
presidency?
    Secretary Lew. Having spent 1983 working to fix Social 
Security, I had hoped that 5, 6 years ago we would have been 
able to have the kind of conversation about that kind of a 
bipartisan approach. It didn't happen.
    I think that we are in better shape because our fiscal 
position is improved. There is still more work to do.
    Mr. Schweikert. No, I need to correct that. And I know that 
is our script here, but that is not true.
    Our modeling just a couple of years ago, we weren't 
expecting this level of anemic GDP growth. Remember the model 
just a couple of years ago? We were going to be at 4, 4.3 
percent. Now today I am being told that this quarter we are at 
1.9 percent.
    Let's collectively have an honest discussion here. This is 
really bad.
    Secretary Lew. There is no question stronger GDP growth, 
stronger economic growth will help us deal with an awful lot of 
challenges, including funding Social Security and private 
pensions. I think that if you look where we were 7 years ago, 
and where we are now, we are in a stronger position to ask that 
question.
    Mr. Schweikert. We may be stronger than 7 years ago, but 
this is still crashing down upon us--
    Secretary Lew. That is where I guess I disagree a little 
bit. I don't think it is crashing down upon us. I think we have 
time to deal it.
    Mr. Schweikert. Okay, so if I tell you 14 years on Social 
Security, 9 years on Medicare, 56 months on Social Security 
disability, and we should just pretend things are fine?
    Secretary Lew. No. I think that these issues need to be 
addressed. I am not disagreeing. But I don't think it is a 
crisis for today. What would have--
    Mr. Schweikert. I need to yield back. I will beg of you, 
send me the information from your team on what you are actually 
doing to deal with this.
    Thank you, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Massachusetts, 
Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    And thank you to the ranking member, as well.
    Welcome, Mr. Secretary. It's good to see you again.
    Mr. Secretary, the chairman and the ranking member some 
time ago created a Task Force on Terrorism Financing here in 
this committee, and together with myself and Mr. Fitzpatrick 
and Mr. Pittenger, we have been working basically in the Middle 
East, North Africa, and my colleagues are leaving for Central 
America in the not-too-distant future.
    And the examples where we have had the greatest success in 
North Africa and the Middle East have been the result of 
coordination with your office, with FinCEN, the Financial 
Crimes Enforcement Network, and then also in several countries 
we have worked with Treasury attaches who are part of the U.S. 
embassies in those countries.
    And it goes from Afghanistan, to Jordan, to Egypt, Tunisia, 
Morocco. All of those countries, the level of cooperation we 
have from them, which has been considerable, has been the 
result of your work and the work of people like Joe Parker. I 
think he may be retired now, but he was very, very instrumental 
in setting up some of these financial intelligence units within 
these countries to push back on money laundering and also 
terrorist financing.
    The problem that we see is that it is spotty. Even in Joe 
Parker's example, he handled--he had a big portfolio. He had a 
big region where he would hop from country to country to help 
us convince the host country to adopt anti-money laundering 
statutes, just basic stuff: know your customer, helping the 
local banks prevent terrorist groups from using the legitimate 
financial system to spread terror.
    And it is ironic today, we have ISIL taking credit for the 
attacks in Brussels, and obviously all our prayers and thoughts 
are with the people of Brussels this afternoon.
    But is there a way to amplify what Treasury is doing, and 
is there a way to--I am not saying you need to have 192 
Treasury attaches in every country around the globe, but 
certainly there are problem areas where we could use some more 
help. And Treasury's people, the Office of Foreign Asset 
Control (OFAC), your technical people, the Office of Technical 
Assistance (OTA), and FinCEN--they have been great on this 
stuff.
    And they can educate not only the foreign central banks but 
also they do a great job in informing our embassies at large, 
in terms of what role they could be playing to shut off the 
financial system to these terrorist groups.
    Secretary Lew. Congressman, I couldn't be more proud of the 
work that our offices, from OFAC to the Treasury attaches to 
our Office of Technical Assistance, do. They really are the 
leaders in the world on this, and what they need more than 
anything else is well-equipped partners around the world.
    Mr. Lynch. Yes.
    Secretary Lew. I think that the financial attaches are our 
eyes and ears around the world. And we could use more of them, 
but what we really need to do is get people in country to 
provide the technical assistance. And that is more of an OTA 
function than it is a Treasury attache function.
    The leading providers of technical assistance around the 
world for--to build these capabilities are ourselves, through 
OTA, the IMF, and FATF. We worked closely with all three--well, 
obviously, we are one of the three. We work closely with the 
other two.
    We met in December in the U.N. and had FATF at the meeting. 
I chaired a meeting at the Security Council, the first time 
finance ministers in the history of the U.N. met in the 
Security Council, and we had a unanimous resolution to 
designate ISIL for the same treatment that Al Qaeda is given, 
which means that even intermediaries are subject to sanction.
    And part of that message was for FATF standards to be put 
in place and for the world to come together to provide 
technical support to build in the kinds of capabilities that 
you describe.
    We have a lot of work to do. Even our most advanced 
partners are not where we are. Their intelligence apparatus is 
not as well-developed. Frankly, they don't have a comfort level 
with some of the surveillance that is making it impossible for 
them to see some of the things that are going on.
    We have information that we provide to countries like 
France and Belgium to help them monitor and track and, after a 
terrible, horrific accident like today, respond. Our people are 
already engaged in that and we will work around the world to 
build these capabilities.
    Mr. Lynch. If OTA would need more resources, we would 
expect to--
    Secretary Lew. We proposed a doubling of OTA over the 
next--
    Mr. Lynch. Okay.
    Secretary Lew. --several years. I think it is critically 
important.
    Mr. Lynch. Okay. Great. Thank--
    Secretary Lew. We get more bang for the buck out of OTA 
than anything else.
    Mr. Lynch. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from California, Mr. 
Royce, chairman of the House Foreign Affairs Committee.
    Mr. Royce. Thank you very much, Mr. Chairman.
    Secretary Lew, I just wanted to talk trade.
    When there is a level global playing field, American 
workers and the American economy win. On TPP, I know you share 
the concern, as you have said, that data localization 
provisions are a trade barrier, pure and simple, as you 
explained.
    And as you know, TPP allows companies to transfer data 
across borders and to be protected from server localization 
directives. However, electronic payments and the financial 
services sector are excluded from the data localization part of 
the agreement.
    And you have talked about the possibility of having some 
kind of side agreement to thread the needle, as you explained 
on this issue. Where are we in discussions now with our TPP 
partners? Do you think a side deal is possible this year on 
this?
    Secretary Lew. Congressman, what I have said is that data 
localization in general is a barrier of free trade and we have 
opposed it vigorously in things like electronic payment 
systems, where it is no more than an excuse to put a server 
farm in your country and create jobs or to make it more 
expensive for international competition.
    In the area of financial services, there are two competing 
important goods. One is to prevent the kind of nontariff 
barrier from being put in effect. The other is to make sure 
prudential regulators have access to what they need when they 
need it.
    And the reason this is so hard is that there are legitimate 
concerns prudential regulators have. What I have been doing is 
working with our prudential regulators to try and have them 
work through an understanding where--how going forward we might 
be able to address this.
    Mr. Royce. I appreciate the stated priority--
    Secretary Lew. But in terms of TPP, I have tried to be very 
careful that there is very limited room to change TPP. So I 
don't want to raise that--
    Mr. Royce. But in terms of a side agreement, which you did 
raise that issue--
    Secretary Lew. Yes.
    Mr. Royce. --we need to see demonstrable progress on this 
issue. I stand ready to help on this, and I know many of my 
colleagues do as well. So I think it is a prerequisite to get 
this issue solved in a creditable way.
    And let me go to my last question here.
    In July, you testified to the Senate that Iranian banks 
will not be able to clear U.S. dollars through New York, or 
hold correspondent account relationships with U.S. financial 
institutions, or enter into financing agreements with U.S. 
banks. Iran, in other words, will continue to be denied access 
to the world's largest financial and commercial market.
    And I have received reports from the Administration that it 
is now considering providing Iran with access to the U.S. 
financial systems. So are these reports which contradict your 
previous testimony correct, and is the Administration planning 
to ease restrictions on Iran's access to U.S. banks?
    Specifically, are you considering permitting Iranian banks 
to clear transactions in dollars with U.S. banks or foreign 
financial institutions, including offshore clearinghouses? The 
reason I raise it is because Iran remains the foremost state 
sponsor of terrorism in U.S. judgment, a country of particular 
concern for its abuses of religious freedom, of--as a primary 
money laundering concern, as we say about Iran.
    This is clearly an explicate recognition that any financial 
transaction with Iran in U.S. dollars risks supporting the 
regime's illicit activities. And the international community 
agrees. Iran remains on the black list of the Financial Action 
Task Force on money laundering. So that is why I raise this 
issue.
    Secretary Lew. Congressman, we have reached an agreement 
with Iran that has caused Iran to roll back its nuclear 
program, which has done an enormous amount to increase the 
security of the United States. Part of the agreement was for 
Iran to have nuclear sanctions lifted.
    We made clear that we would lift the nuclear sanctions but 
keep in place sanctions on terrorism, sanctions on human rights 
violations, sanctions on regional destabilization. We will 
continue to do that.
    Mr. Royce. Yes, because our argument was that they need to 
stop building ballistic missiles. But they just tested four of 
them.
    Secretary Lew. We have continued to make clear--
    Mr. Royce. Yes.
    Secretary Lew. --that we do not consider missiles testing 
permitted.
    Mr. Royce. So we are not going to give them access to--
    Secretary Lew. So the--
    Mr. Royce. --the U.S. dollar or U.S. financial systems?
    Secretary Lew. We are continuing to look at how we comply 
with the Joint Comprehensive Plan of Action to make sure that 
Iran gets relief under the nuclear portions while we keep 
pressure on Iran on these other issues.
    Mr. Royce. Yes, but remember the basic commitment that was 
given to us in Congress: The Iranian banks will not be able to 
clear U.S. dollars through New York.
    That is the commitment, and they are still in violation of 
ballistic missiles, on support for terrorism, and abusing its 
people. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlemen from California, Mr. 
Sherman.
    Mr. Sherman. Thank you, Mr. Secretary.
    Often when you come here, I ask about contentious issues, 
ask you to break up the big banks. And I have said something 
about TPP that wasn't entirely favorable.
    This hearing has been contentious and so I am going to 
devote my 5 minutes to things that--it won't be quite Mr. 
Capuano, where we just give you 30 seconds of silence to rest, 
but these will be the least contentious issues you deal with 
today because they basically involve working with me on a few 
issues that will never be on the front page of a newspaper.
    We have tax treaties with hundreds of countries around the 
world, or at least--hundreds is not the right--scores of 
countries around the world. We devote a substantial amount of 
money to trying to achieve our international development goals. 
And so we can always provide foreign aid to Armenia, and that 
costs us money. But we could also achieve those goals by having 
a tax treaty.
    Now, we are currently negotiating a treaty dealing with tax 
enforcement, but the gold standard of tax treaties is your 
basic tax treaty on double taxation. The Armenian embassy tells 
me that they are willing to start with our basic framework and 
negotiate a tax treaty. They have negotiated a tax treaty with 
Canada, so Ottawa was able to do it.
    Do you see your Department working toward a tax treaty with 
Armenia?
    Secretary Lew. Congressman, the primary purpose for a 
bilateral tax treaty is to avoid double taxation. We are not 
aware of a double taxation problem in Armenia.
    Mr. Sherman. I would retreat just to--we have a chicken and 
egg circumstance. You don't get the business investment because 
you don't have the tax treaty. Then you don't need the tax 
treaty because you don't have the business investment.
    Given that this Congress has provided well over a billion 
dollars of aid to Armenia, it would seem that having one member 
of your staff work on this for a while to achieve the same 
objectives--
    Secretary Lew. I appreciate that. And obviously, to 
negotiate a tax treaty is quite labor intensive; to look at the 
things is less so. We have been looking at comments that come 
in. I would be happy to follow up.
    Mr. Sherman. Okay.
    The next issue relates to the Porter Ranch gas leak, the 
biggest gas leak in history: 5,000 of my constituents have left 
their homes.
    And this is not something I told your staff I would be 
asking you about, but Section 139--what we have is people 
living in hotels at the expense of the gas company and now they 
are told, ``You may be taxed on the money being paid for that 
hotel. But you can't live in your home because of the gas 
leak.''
    Now, the good news is Congress passed Section 139(c)(3), 
which says that you can avoid this travesty because gross 
income doesn't include payments for living off-site if it 
results from any other event which is determined by the 
Secretary to be catastrophic in nature. And I wonder if you can 
work with me toward making a fair determination that the 
largest gas leak in history, which displaced 5,000 families for 
months, meets this standard.
    Secretary Lew. Congressman, thank you for bringing this to 
our attention. I wasn't aware of it until then.
    Our staff has been talking to your staff and has reached 
out to the relevant parties. They haven't completed the 
analysis yet, but we understand the timeliness of this given 
that it is tax season, so we will continue to work on it.
    Mr. Sherman. I look forward to working with you, but I 
would hope that you would direct your staff to lean in the 
direction of fairness. I am a former tax lawyer myself. I know 
that a very strong argument can be made on this.
    And we have a similar issue, and that--not one that is 
quite as pressing, but we have a drought in southern 
California. This is the most environmental Administration in 
history. And people are being told that if they accept a 
payment--not even a payment--if the local water utility pays 
for the cost or part of the cost of ripping out their lawn and 
replacing it with cactus or replacing it with rocks or 
something else that uses less water, that they could be having 
to pay an income tax on what they are doing to help the 
community.
    And I hope that you could direct your staff, again, not to 
change the law, but to lean in an environmental direction.
    Secretary Lew. That I was not aware of, but we will follow 
up on it.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from New Hampshire, 
Mr. Guinta.
    Mr. Guinta. Thank you, Mr. Chairman.
    And thank you, Secretary Lew, for being here.
    Very quickly, I want to follow up on what the gentleman 
from California was talking about relative to TPP. You said 
last week in a subcommittee--F.S. Appropriations Subcommittee--
quote--``Because we have a principal position that data 
localization in general is bad, we are working to see if there 
is a way to thread the needle.''
    I understand I can't necessarily reopen--
    Secretary Lew. The other half of that was there are real 
prudential concerns and we have to balance those.
    Mr. Guinta. So, can you very quickly tell me what a side 
agreement may look like and would this be--
    Secretary Lew. I can't tell you right now. If I knew where 
this was headed, I would be happy to say so.
    I think that the challenge we have is that the prudential 
regulators, our prudential regulators, feel that they need to 
be certain that they can get access to what they need when they 
need it. And unfortunately, during the financial crisis there 
was an incident where with a major institution they were denied 
access in a timely way and it interfered with both crisis 
management and resolution.
    So the question is, how to make sure they get what they 
need while--
    Mr. Guinta. I understand that. I appreciate that. Relative 
to TTIP, obviously, U.S. financial institutions as well as 
European allies have asked for this particular area. I 
understand you are including or are working on TTIP, is that 
correct?
    Secretary Lew. We continue to work on TTIP and we think it 
is important that financial markets be opened up in the course 
of the TTIP negotiation.
    Mr. Guinta. Okay. Moving on to a different subject, in your 
role as Chair of FSOC, I am sure that you know market 
participants spent a lot of significant time in proprietary 
investment strategies and that differences exist from the 2012 
report of the Council of Inspectors General on Financial 
Oversight.
    Can you tell me how FSOC is addressing the differences that 
exist on a FSOC-wide basis to ensure Federal agency members are 
properly safeguarding information?
    Secretary Lew. I think each of the regulators has an 
obligation to protect the information that is within their 
area. One of the challenges that we have is that to do the 
systemic review that FSOC is charged with requires sharing 
information in an appropriate way.
    What we do is we limit the--and anonymize data and we make 
it so that each of the parties can be certain that they are 
complying with the responsibility that they have to protect--
    Mr. Guinta. To that end, would you provide our committee 
with a brief policy and procedures, outline that, what FSOC 
regulators are doing?
    Secretary Lew. I am happy to follow up afterwards and find 
out exactly what you are looking for and see if we can be 
responsive.
    Mr. Guinta. But can you commit to something in writing to 
show us what the policies and procedures are for regulators?
    Secretary Lew. I am not sure that I am the right one to 
address each of the regulators. The FSOC--
    Mr. Guinta. As Chair of FSOC--
    Secretary Lew. Well, let me follow up with you.
    Mr. Guinta. Okay.
    Secretary Lew. And obviously, each regulator speaks to its 
own statutory requirement.
    Mr. Guinta. Sure. I appreciate your willingness to follow 
up.
    That brings up--if we could put up a slide--another concern 
that I want to echo that some of my colleagues have brought up 
already, and that is document production.
    I have a slide here that shows the Financial Services 
Committee requested information from Treasury on CFPB's plan to 
renovate their leased office building. Obviously, 4 different 
letters, 288 days have passed since we have heard from this 
matter, going back to June 9th of 2015.
    Second example, Thursday, September 17th, 2015, about 6 
months ago almost to the day, Under Secretary Nathan Sheets 
came to testify during the Monetary Policy and Trade 
Subcommittee hearing. I personally submitted questions for the 
record.
    That was 6 months ago. I still have not received a 
response.
    I have those items here. Can I ask when I can expect to get 
a response and why the delay?
    Secretary Lew. Congressman, I am happy to take that back. 
There was a June 9th letter, I understand, requesting 
information. An August 25th response where Treasury informed 
the committee that a report by the Inspector General for the 
Federal Reserve Board found the work authorization related to 
the renovation was finalized after a CFPB Director was 
appointed, at which point--
    Mr. Guinta. I'm not sure that they actually addressed the 
specific issues in the four letters. That being said, the 
September 17th request that I have issued 6 months ago still 
has not--can you follow up on that--
    Secretary Lew. I am happy to follow up on that.
    Mr. Guinta. And finally, in my last few seconds I want to 
move to economy. You are aware that the President's budget 
includes a deficit of almost $800 billion at the 10-year end of 
the budget window?
    Secretary Lew. I am familiar with the President's budget, 
yes.
    Mr. Guinta. Okay. And are you aware that the gross Federal 
debt under the President's budget increases almost $8 trillion, 
from $19.4 trillion to $27.4 trillion in 2026?
    Secretary Lew. Yes. But I am also aware that GDP grows, and 
as a percentage of GDP, we have stabilized the deficit and 
the--
    Mr. Guinta. All right. Well, let's get the GDP. My 
understanding is the President's budget projects annual real 
GDP growth never exceeds 2.6 percent. Is that correct?
    Secretary Lew. I don't remember the exact decimal number, 
but it is the right range.
    Mr. Guinta. Thank you.
    I have run out of time, so I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Illinois, Mr. 
Foster.
    Mr. Foster. Thank you, Mr. Chairman, and Mr. Secretary.
    I would like to return, if I may, to the actual subject of 
this hearing. The capital outflows in China are now in excess 
of a trillion dollars a year. The Institute of International 
Finance estimated outflows in January alone of about $113 
billion.
    Now, when you have a trillion dollars in capital flight in 
a $10 trillion economy, it seems to me that this effect alone 
is more than enough explanation for the slowdown in economic 
growth in China. Would you agree that it is a major 
contributor?
    Secretary Lew. I am not sure how much to attribute the 
capital flight to the slower growth or the slower growth to the 
capital flight. I think that there has been capital moving out 
of China.
    Some of it has been to repay foreign debt; some of it is 
money leaving the country. It is a little bit hard to know 
exactly where the line is and there are stronger views than 
there are data on the subject in a lot of the analysis that I 
have read.
    Look, I think China has a serious economic challenge ahead 
of it. It has to go through this enormous transition from an 
industrial economy, an export-driven economy, to a consumer-
driven, more market-oriented economy.
    The faster they establish confidence that that transition 
is underway and that they will stick to it, I think the faster 
they will see progress on stemming some of the capital flight.
    Mr. Foster. Okay. The other structural problem I think they 
have to have is that basically the pileup of wealth at the very 
top, which is a universal problem, actually, in developed 
economies. And in large part, I believe this $1 trillion of 
capital flight consists of wealthy Chinese pulling their money 
out of China, often to spend that money in economically 
unproductive assets like empty apartments in Manhattan or 
Vancouver or you name it.
    And so it seems like when the wealthy in China break their 
social compact to reinvest productively in their own country 
and instead invest in less productive assets offshore that it 
lowers not only Chinese economic growth but economic growth 
throughout the world when productive assets, making new 
factories, et cetera, are replaced by investments of the rich.
    And that is more--and actually, if we look in the mirror, 
this is sort of a universal behavior of the wealthy elites 
throughout the world, that they tend to invest conservatively 
and that means low return on investment. And I was wondering if 
you--don't you agree that this behavior--the universal behavior 
of wealthy people to: (A) move their money offshore; and (B) 
invest in less productive assets, is a major contributor to the 
economic slowdown in the world?
    Secretary Lew. Congressman, there is no question but that 
both wealthy individuals and firms have a lot of cash and there 
could be a lot more investment. And I think the question is why 
is there not more investment being done?
    I think a lot of it gets to a sense of concern that global 
growth is weak and demand is weak and that--
    Mr. Foster. But the demand is weak because of the--
    Secretary Lew. It is circular--
    Mr. Foster. --pileup of the wealth distribution.
    Secretary Lew. Yes. And we--
    Mr. Foster. There is no shortage of consumers who would buy 
stuff in China if they had the money to do so.
    Secretary Lew. Yes. Look, I think in China there is no 
question but that the right policy is to give the consumer in 
China more resources. One of the things the consumer in China 
is going to need is confidence that there is a safety net. They 
don't have the kind of social safety net we have.
    Savings in China are extraordinarily high because, through 
a combination of the one-child rule and no safety net, people 
feel the only way they can take care of their future is by 
savings. Now unfortunately, the people who do more risky 
investment are some of those small savers. So when China has a 
volatile stock market, oftentimes it is small investors who are 
highly leveraged, which is a very dangerous thing.
    They have a lot of things that they need to fix.
    I think that the question of the kind of course direction 
of the economy comes first. They have to make the transition to 
a more consumer-driven, more market-oriented economy.
    That means the consumer is going to be central. They need 
to build a better safety net so the consumer feels free to 
spend.
    And they do have wealth and income distribution issues and 
corruption issues that they need to attend to. I would say that 
we have some income distribution issues that we need to attend 
to as well.
    Mr. Foster. That is right. And when you say strengthen the 
safety net, you are talking about effectively taxing the 
wealthy elites in China to provide--
    Secretary Lew. Whether it is taxing the elites or it is--
    Mr. Foster. Effectively--
    Secretary Lew. --corporations, entities pay dividends to 
support them. There is a variety of ways. China's tax system is 
a complicated one. I am not as expert in the details--
    Mr. Foster. Not like ours.
    Secretary Lew. --of it as ours.
    Mr. Foster. Right. Okay. I guess that was the main thrust 
of my question. I think this is a major effect that is 
underappreciated is that the crosstalk between wealth 
distribution and offshore capital blows I think has become a 
major--a macroeconomic factor that has to be factored in.
    Thank you. My time is up.
    Secretary Lew. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from New Mexico, Mr. 
Pearce.
    Mr. Pearce. How you doing, Mr. Secretary? Hi. Good to see 
you--
    Secretary Lew. We are going all back and forth.
    Mr. Pearce. Yes, okay.
    So the President is in Cuba this week, the first President 
in 90 years to visit. Have you been involved in the discussions 
about normalizing relations and trade with Cuba?
    Secretary Lew. Yes.
    Mr. Pearce. So the President stated in December that he 
would like to go to Cuba when there is progress in the liberty 
and freedom and the possibility of ordinary Cubans. What 
progress did we make since December that now has changed the 
President so he should go?
    Secretary Lew. Congressman, the purpose of the 
President's--
    Mr. Pearce. No, I didn't ask the purpose. He made the 
comment, sir, and you are in the discussions, and I just would 
like to know what progress Cuba has made since December in 
freedom, liberty, and the possibilities for ordinary Cubans?
    Secretary Lew. The purpose of the changes that we have made 
is to open--
    Mr. Pearce. Okay. That is not my question. I apologize. I 
don't mean--
    Secretary Lew. Well, I do--
    Mr. Pearce. I have 5 minutes. I--
    Secretary Lew. I do have an answer to your question if I 
can get beyond the first few words. I am happy to answer at 
your pleasure.
    Mr. Pearce. I am waiting. I am like Mr. Capuano. I am 
waiting, breathlessly quiet.
    Secretary Lew. One of the things that we are going to be 
doing is opening communication lines--telecommunications, 
bringing computers in--people-to-people contact. That is going 
to contribute to an environment that is very different than 
what we have seen over the last 50 years that hasn't worked.
    I am not suggesting that Cuba is changing instantaneously. 
I don't think the President is suggesting--
    Mr. Pearce. The President suggested that they needed to 
change and they didn't change, sir. I don't think so.
    If we pursue this normalization, do you think that the 
treaty obligations between the two should take place, like the 
extradition of fugitives, 70 fugitives up and down there?
    One guy named Charlie Hill killed a New Mexico cop back in 
1971. He's been living a life of freedom down there. So would 
you hope that we get to see Mr. Hill back in New Mexico and 
just see if he is guilty or not?
    Secretary Lew. Congressman, I am going to have to defer to 
my colleagues who have expertise on things like extradition--
    Mr. Pearce. You don't have a personal opinion about complex 
things like extradition and--
    Secretary Lew. I just don't have enough facts. I--
    Mr. Pearce. --enforcement of rule of law? You don't have 
opinions about--
    Secretary Lew. No, I do have opinions on the rule of law on 
democracy, and that is one of the--we have been seeing that for 
the last 50 years the policy of embargo and cutting Cuba off 
has done nothing to improve it. And I am certainly hopeful that 
the policy change we have put in place will lead to the kinds 
of changes that I think we all want to see in Cuba.
    Mr. Pearce. Yes. Judging from President Castro's comments 
today, it doesn't look like it is moving that way very fast. He 
says, ``You can't ask me this many questions.'' It is kind of a 
laugh, really.
    So do you know Mr. David Cohen?
    Secretary Lew. Yes, I do.
    Mr. Pearce. He was here in November of 2014. We had a 
fairly energetic discussion about the funding of ISIS. And you 
alluded to that earlier in the conversation today.
    You said it is hard to get in there to blow up the--you 
were referring to blowing up the oil. What does that mean, it 
is hard to get in there?
    Secretary Lew. We have gotten pretty good at it, actually. 
We have targeted points of real vulnerability, particularly the 
tanker trucks that move oil in the country into the--
    Mr. Pearce. What I just read is that--so when he was here 
he said they are getting a million dollars a day.
    Secretary Lew. Yes. I think that--
    Mr. Pearce. And so now they--that is $365 million a year. 
Now then, in December of 2015 it is 500, and that report talks 
about trucks getting in the line to get oil filled up and they 
wait months. Months in the line to get one truck of oil, and 
our airplanes are flying overhead, meanwhile they are sitting 
down here in a line that is five kilometers long.
    And so what exactly does it mean that we are being 
successful at interrupting? Because it doesn't--if their 
revenue is going up--now, keep in mind the price of oil in 2014 
was at 70 at the time he testified. So 70 down to 30, and they 
are doubling their revenues. It doesn't sound like that we are 
being very effective, honestly, sir, with all due respect.
    Secretary Lew. Congressman, as I said earlier, it is very 
difficult work and we have to keep at it. They are going to 
keep changing with they do and we have to keep up with their 
changes. By blowing up--
    Mr. Pearce. I have 25 seconds, sir, and if I could 
comment--very difficult work. It is not difficult to wait. You 
have--
    Secretary Lew. This is an important issue. I would think 
you would want to know the answer--
    Mr. Pearce. You have UAVs sitting up there, they are 
watching every tank, and when a tanker truck gets full you 
simply pop it with some incendiary--
    Secretary Lew. No, that is not what we do, Congressman. We 
actually have been very successful identifying where they keep 
their tanker trucks, getting at them when they are not full of 
oil, when they are not with people--
    Mr. Pearce. If they are waiting in lines five kilometers 
long, it is not hard to know where they are keeping them--
    Secretary Lew. The reality is this is going to be an 
ongoing challenge. It is not something that will be solved once 
and for all. But the fact that they have had to cut salaries to 
fighters because they are starved of cash means that we are 
making progress. We have to keep at it.
    Mr. Pearce. They made $2 billion last year, sir. They are 
not starved for cash. According to the CNN--
    Chairman Hensarling. The time of the gentleman has expired.
    Secretary Lew. In a classified setting, I would be happy to 
go through some of--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from Ohio, Mrs. 
Beatty.
    Mrs. Beatty. Thank you, Mr. Chairman.
    Thank you, Ranking Member Waters.
    And thank you, Mr. Secretary.
    Let me go back to the subject of international monetary 
financial policies and start by thanking you and those in your 
OTA office for working with my staff and office on Somalian 
remittance. We have the second-largest Somalian population in 
the country and, as you know, with the weak central banking, 
they have had great difficulties.
    So you have been responsive; you have sent a team of folks 
over to work on something difficult.
    Let me spin off on this, because sitting here through this 
entire hearing has been disappointing to me. And I want to 
apologize just in part to you, but more to the people who are 
watching, because they lump us all together and talk about 
``The Congress'' and what we are doing.
    I read an article in the American Banker, and I was hoping 
that we would have learned from this, because last week we had 
another one of your colleagues here, Directory Cordray with the 
CFPB. And this article talks about how ineffective it is when 
you are rude and disrespectful and you don't allow people to 
answer the questions--people who are well-versed and seasoned.
    Mr. Chairman, I would like to enter this into the record, 
if possible.
    Chairman Hensarling. All such exhibits are allowed under 
general leave and without objection.
    Mrs. Beatty. Thank you.
    I also want to thank you for your answers to the questions 
about the subpoenas. Now, while I am not a lawyer, practical 
law talks about, in article after article, when an individual 
or people like your staff receives subpoenas that it is very 
customary for them to contact the parties who have subpoenaed 
them and try to respectfully and informally work out the 
differences. So I also applaud you for that.
    I think it is also important for the American audience who 
watch us to know who we are talking to beyond our titles. And 
so when I think about your rich history, I think about you not 
only being the 76th Secretary of the Treasury; a White House 
Chief of Staff; you mentioned in reference being an OMB 
Director and tons of other jobs; you have worked for a 
Congressperson; you have worked for a Speaker of the House, Tip 
O'Neill; and most impressive, you married your childhood 
sweetheart and you are still married, the all-American dream 
with two children.
    But let's talk about you in your role as Harvard graduate, 
and Georgetown Law School graduate. Your close friends say you 
are exceedingly meticulous. Some would say that you are a 
brilliant scholar.
    I think it is important when we hear the question after 
question, that clearly you understand the question, and from 
where I sit you have clearly not only answered the question but 
gone far beyond the call of duty, as one in your position who 
is responsive for the international monetary financial policies 
of the trillions and trillions of dollars. You have shared with 
us the great growth in the economy; you have shared with us how 
we have reduced unemployment.
    And so I say to you, as this Congresswoman, proud to sit 
here, that I say to you the two most important words that I was 
taught and the two most powerful words that one can say, and 
that is ``thank you.'' My mother taught me that a long time 
ago. Because she said sometimes it is better to listen than to 
talk louder than the person.
    Because you were asked the question, ``What would happen if 
a person in a regular job were sitting there and answered?''
    Let's change that around, Mr. Secretary, and ask, ``What if 
a regular person talked to us in that loud voice, pointing 
their finger and pencil and not letting you answer the 
question?''
    You don't have to answer that, Mr. Secretary. We know what 
that answer would be.
    And lastly, my father, who knew me best, said, ``Remember 
to always say I'm sorry.''
    I'm sorry for what you have had to go through.
    I yield back
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from North Carolina, 
Mr. Pittenger.
    Mr. Pittenger. Thank you, Mr. Chairman.
    Mr. Lew, good afternoon to you.
    Mr. Lew, on your last visit when you were here and I had 
occasion to talk with you we discussed at some length 
information-sharing between Homeland Security's Trade-based--
Trade Transparency Units, and also FinCEN's role and their 
sharing together and how important that was. And to the extent 
that they are sharing, in terms of related to trade-based money 
laundering, that we would be successful.
    When I asked this question to you about sharing between 
Homeland Security and FinCEN, your response to me at the time 
was, ``I started out with a strong bias that we ought to work 
as one government and that we need to cooperate and 
collaborate. I started out sympathetic to this initiative.''
    So that was your statement then, and then in response to my 
questions to you, we got a response back from your staff for 
the record that stated the following: ``Treasury and DHS are in 
regular contact regarding ways our two agencies can better 
inform our respective efforts to combat terrorist financing. We 
are confident that we can achieve this important goal through 
our ongoing strategic relationship while at the same time 
maintaining our respective database autonomy.''
    Mr. Lew, there seems to be a conflict in terms of 
perspective and philosophy of how they would work together in 
information-sharing that is really so vital. If Homeland 
Security has certain data that we are not accessing at FinCEN, 
that certainly restricts your ability to be able to intercept 
the information we need.
    Could you kindly respond to this different viewpoint 
between your staff and yourself?
    Secretary Lew. I am not sure it is a different viewpoint. 
Our activities in tracking down terrorist financing depend on 
the constant flow of information from intelligence agencies and 
other partner agencies like DHS. And likewise, we provide 
enormous amounts of information on an appropriate basis back to 
them. The question of whether or not--
    Mr. Pittenger. Let me ask you, are you willing to enter 
into an agreement with DHS in terms of information-sharing?
    Secretary Lew. I am not aware of a problem right now in 
terms of information-sharing. What I do know is that full 
access to all the database would put a lot of information that 
is not necessary into a place that it probably shouldn't be. 
And I think the question is, how do we make sure the right 
information is fully shared, and we each protect systems where 
personal privacy is at issue for the other information as well.
    I am happy to follow up. After you and I talked at the 
meeting, we talked in North Carolina, as well, about it. I have 
followed up with my staff and have urged them to keep working 
on this.
    It has not been brought to my attention that there is a 
problem in terms of the flow of information, but if there is 
something specific that you are concerned about, I agree--
    Mr. Pittenger. I think the word that stuck to me was that 
there should be a sense of autonomy coming from your staff. 
That is directly opposite, in terms of what I heard, and I just 
want to make sure that there is an ongoing effort to share this 
data.
    You have incredible access to data, and I am familiar with 
the work that you have and what you contribute. And, frankly, I 
think that we have a greater need for access with the private 
sector in their efforts to try to work along our side. But this 
access to data is a very critical component among agencies, 
among the private sector, and, frankly, with our allies around 
the world.
    Secretary Lew. Yes. I really do believe that the practices 
we have at Treasury lead the world in how to get the right 
information into the right hands, and we provide an enormous 
number of leads to the appropriate agencies.
    Mr. Pittenger. Yes, sir.
    Secretary Lew. You are asking about a querying of data 
basis on a kind of real-time basis. I--
    Mr. Pittenger. Exactly. I need some follow up on that, if 
you could.
    Two other questions, quickly. FATF has an important role in 
terms of bringing its members countries, 34 countries, into 
those four regulatory compliances, but they are not an 
enforcer. What is your response of what we do with countries 
like Turkey, Kuwait, and Qatar, who clearly have been complicit 
in terms of transferring, financing, and being accessible on 
that?
    Secretary Lew. Look, we raised these issues very strongly 
in bilateral--
    Mr. Pittenger. What tools do we really have? I have raised 
the issues too. I have been to those countries. They dodge 
every way they can. But what do we--
    Secretary Lew. I think we are making progress, though I 
think it is--
    Mr. Pittenger. It is a nice word. And I am not trying to 
really cut you off, but I don't have much time.
    The reality is they are very aggressive in their efforts, 
they have been, and we really haven't done much--seen much 
cooperation from them in terms of not being complicit with the 
financing component.
    And my last question deals with Iran and the banks that 
come under SWIFT authority. Do you believe that these banks are 
going to be able to access--I didn't get a clear answer from 
you--that they can have access and work with American financial 
institutions?
    Chairman Hensarling. Brief answer, please.
    Secretary Lew. I think that what I said in the earlier 
response is that we will comply with the Joint Comprehensive 
Plan of Action and lift the nuclear sanctions; we will keep 
other sanctions in place. Part of the agreement was to give 
Iran access to money that it has a right to. We will work on 
making that happen.
    It is not going to be our goal to block transactions that 
are legitimate under the Joint Comprehensive Plan of Action, 
but we will enforce on other areas like terrorism and the like.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Washington, Mr. 
Heck.
    Mr. Heck. Thank you, Mr. Chairman. I ask unanimous consent 
to enter into the record correspondence dated March 18th to the 
gentleman from Wisconsin from the Assistant Secretary for 
Legislative Affairs at the Department of the Treasury.
    Chairman Hensarling. Again, these are allowed under general 
leave, but without objection, it is so ordered.
    Mr. Heck. Thank you for being here, Mr. Secretary. Earlier 
you had indicated verbally, and I just want to confirm that, in 
fact, on the dates December 17th, January 21st, and March 18th, 
you had extended an offer to sit down and work through the 
issue of the supply of certain materials and response to 
request, that being in addition to, by my best count, more than 
5,000 pages of documents you had already submitted. Is that 
correct, sir?
    Secretary Lew. That is correct.
    Mr. Heck. I would like to associate myself with the remarks 
of the gentlelady from Ohio. I was first elected to the State 
House of Representatives 40 years ago this year, and my muscle 
memory as a fairly young man was formed by strict rules 
prohibiting the impugning of another person's motives. And I 
have been somewhat surprised in my now 39 months here that that 
is allowed on too often an occasion.
    But I took the time to actually look up the House rules. 
And the House rules do indicate that committee meetings shall 
be in strict conformity with an observance of the acceptable 
standards of dignity, propriety, courtesy, and decorum 
traditionally observed.
    So the specific words that I want to associate myself with, 
with respect to the gentlelady from Ohio are ``I'm sorry.'' You 
didn't deserve that, and I, frankly, found it to be an 
egregious breach of our own rules.
    Now on to the substance, last fall I think it was Under 
Secretary Sheets who was here, and I queried him as to whether 
or not we had actually reached out to the newly formed Asian 
Infrastructure Investment Bank to see about ways in which we 
might collaborate, cooperate with that new deep pool of funds 
available. He seemed to indicate that it was really important 
that they engage in best practices but response didn't go much 
farther than that.
    There have been a couple of intervening events that it 
seemed to me might affect the degree of which we are reaching 
out: President Xi's visit, the IMF quota reform. So my 
question, sir, is have we reached out to them? Is this an area 
where we might collaborate or cooperate more to invest in 
infrastructure?
    Secretary Lew. Congressman, I appreciate your comments.
    And with regards to the Asian Infrastructure Bank, we have 
made clear from the start that we think it is a good thing for 
there to be more investment in infrastructure. And we didn't 
have an objection in principle to a new institution but that it 
was critical that a new institution adhere to high standards.
    I am actually quite pleased that sitting here today I can 
say that our pressure for high standards has been heard by the 
other countries participating and by China itself. And as they 
approach making their first commitments, they are certainly 
saying all the right things about adhering to high standards.
    In terms of collaboration with them, the way that we have 
talked to them about collaborating is through the existing--the 
older international financial institutions, where if they can 
collaborate on projects, the new institution piggybacks on the 
safeguards and the standards of the older institutions. So 
there is work underway looking at co-financing, for example.
    We have also offered on a bilateral basis to provide any 
technical advice that we can. Because frankly, a lot has been 
learned in the last 70 years, and those lessons don't all need 
to be relearned. They say that it is going to be open for fair 
contracting practices, and I trust that American firms will 
want to participate in that. But we have not explored joining 
any more formally.
    Mr. Heck. Thank you.
    On the subject of infrastructure, it seems to me that what 
we consider to be infrastructure has evolved very considerably 
over the centuries, from the 18th Century--roads, bridges, 
aqueducts; the 19th Century--railroads and later sewers; the 
20th Century--phones, water treatment, water lines; and in the 
21st Century, broadband. All physical.
    But it occurs to me that when it comes to economic 
development we might want to consider ``soft'' infrastructure 
investments, namely standing up a financial regulatory 
framework, especially in underdeveloped nations, for whom not 
having a developed financial regulatory framework is a great 
impediment to economic development.
    Thank you, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from Missouri, Mrs. 
Wagner.
    Mrs. Wagner. Thank you. Thank you, Mr. Chairman.
    And thank you, Secretary Lew, for coming and for staying 
the duration here.
    Following up on my colleague Mr. Guinta's discussion with 
you, I want to bring up the ongoing TTIP negotiations that have 
been occurring with our counterparts in the E.U. Next month, I 
know the President will be traveling to Germany to discuss 
efforts to advance negotiations on this trade deal. However, as 
we all know, financial services continues to be an issue that 
is not on the table.
    As you said last year, sir, you support increasing market 
access but view talks on regulation with I believe the word was 
skepticism. Different regulatory regimes, especially when they 
aren't equivalent, would seem to affect market access 
significantly. Isn't it difficult to draw a line between market 
access and regulations, sir?
    Secretary Lew. No, Congresswoman. Actually it is standard 
practice for market access to be something that is negotiated 
in a trade agreement.
    It would be very unusual for prudential regulatory issues 
to be covered in a trade agreement. We don't think it is 
appropriate for prudential regulatory issues to be handled 
there.
    There are a lot of places where we collaborate around the 
world, including with our European friends, to try and reach 
agreement on goals that we all share in terms of high 
standards. We have the high standards we are trying to pull 
everyone up to.
    I don't think that a trade agreement that could end up 
chipping away at some of our protections would be the place for 
prudential regulation to be reopened.
    Mrs. Wagner. With all due respect, many participants have 
said that previous mechanisms, so to speak, to engage the 
regulatory coherence have fallen short, such as the Financial 
Markets Regulatory Dialogue, the FMRD. Doesn't this trade 
agreement represent a unique opportunity, sir, to get 
communications and coordination between the U.S. and the E.U. 
right?
    Secretary Lew. In my conversations with the European 
Commission, I have actually heard in the last few months a 
recognition that opening the prudential issues in TTIP would 
not be acceptable to us, and I have heard a renewed interest in 
using the Financial Markets Regulatory Dialogue as a place to 
try to drive those discussions, which we think is a right way 
to do it and we are happy to engage that way.
    Mrs. Wagner. I heard quite differently, that it is just 
feckless and, frankly, non-effective. And as a former United 
States Ambassador and Diplomat to one of the financial hubs in 
Luxemburg, I find your response concerning.
    On the subject, moving on, of comparing E.U. and U.S. in 
terms of financial service regulations, I would like to bring 
up the E.U.'s call for evidence that is currently ongoing 
looking at unnecessary regulatory burdens and other unintended 
consequences.
    In fact, just last week European Commissioner for Financial 
Stability Jonathan Hill said, ``You can't expect to get 
everything right or to predict exactly how rules are going to 
interact.''
    Secretary Lew, do you disagree with Lord Hill's statement?
    Secretary Lew. I think that Lord Hill's statement reflects 
the fact that we always need to keep asking is what we are 
doing right and appropriate, and we certainly take that view in 
terms of our analysis of everything that we do.
    Mrs. Wagner. It doesn't seem FSOC has ever taken up such a 
comprehensive review such as what the E.U. is currently doing. 
Do you support dialogue here in the United States.
    Secretary Lew. Well--
    Mrs. Wagner. Let me finish my question, sir, please--here 
in the United States, similar to what the E.U. is doing with 
the call for evidence to look at the impacts that all--all of 
our post-financial crisis regulations have had on economic 
growth and financial stability?
    Secretary Lew. Our prudential regulators are in the middle 
now of a regular process that is every 5 years of reviewing 
their regulations to look back and see which regulations 
require reconsideration. I think that is the right way for it 
to happen. They have been having hearings around the country.
    They each have the authority over their own organic 
statutes. It is not an FSOC responsibility.
    And I must say, when I was OMB Director and I did a 
lookback of the Federal agencies that report directly, I was 
struck that it was not in my purview to go into the independent 
agencies. This other process is the right way to do it.
    Mrs. Wagner. The E.U.'s call for evidence asks for real 
analysis regarding the cumulative impact of regulations, 
including regulations that have yet to be implemented. How have 
you all looked at future regulations, such as Basel 4.0 and the 
fundamental review of the trading book, and how these fit in 
with our current structure?
    Secretary Lew. Our view is that we always need to be 
looking at the risks of the future, not the past. We have to 
make sure that our financial regulatory system doesn't become 
out of date. And we do that domestically; we do that 
internationally as we participate in various multilateral 
bodies.
    Mrs. Wagner. I think I have run out of time.
    I yield back.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from Kentucky, Mr. 
Barr.
    Mr. Barr. Thank you, Mr. Chairman.
    And, Mr. Secretary, thanks for your testimony today. I 
wanted to follow up on the questions from my colleague, Mr. 
Pittenger, as a member of the Terrorism Financing Task Force. 
As you know, the work of Treasury is critically important, 
particularly the Office of Technical Assistance.
    We know from our hearings--our hearings have revealed 
significant gaps in the anti-money laundering and 
counterterrorist financing capacity in many developing 
countries. And my question to you is, given the role of the 
Office of Technical Assistance and the Agency for International 
Development at the State Department within the U.S. Government, 
which of these agencies takes the lead in providing that 
assistance to our allies in other countries?
    Secretary Lew. Obviously, the Office of Technical 
Assistance has the subject matter knowledge to be most capable 
in this area. USAID has resources in some places that we don't. 
We collaborate together to try and work in partnership.
    One of the reasons we have proposed over the next several 
years to double OTA is it is, I think, one of the most 
important ways that we can build the capacity in other 
countries, not just in terrorist financing.
    One of the things you need to do is have transparency and 
an openness in the business environment to get those countries 
where they need to be. That gives you the ability to deal with 
terrorist financing.
    So you get multiple improvements by building the kind of 
infrastructure in this area. I have seen tremendous progress 
made in places where our OTA advisers are in there.
    Mr. Barr. Obviously, given today's news, the tragedy in 
Brussels, we continue to be reminded that we must confront 
radical Islamic terrorism.
    Secretary Lew. Yes.
    Mr. Barr. We must be proactive. Disengagement is not an 
option.
    And so I would hope that we certainly coordinate within our 
own government, in terms of who takes the lead on providing 
that technical assistance. Because we know from our work and 
our oversight that these developing countries have significant 
gaps in terms of their financial systems, their law enforcement 
systems, judicial systems.
    Secretary Lew. I totally agree. I don't think the problem 
is coordination. The reason we ask for more resources is we 
just don't have enough people out there, and I think we could 
do a lot more good work with more people.
    Mr. Barr. Let's talk about the Financial Action Task Force. 
Obviously, that task force peer reviews countries, and makes 
recommendations. Should we work with the FATF to have 
recommendations on coordinating technical assistance to 
developing countries?
    Secretary Lew. We do work with the FATF on coordinating 
assistance. We work with the IMF on coordinating assistance. 
Between ourselves, FATF, and IMF, that is where most of the 
assistance is coming from, and we work very closely together 
constantly.
    Mr. Barr. I think we do have a good model there and we do 
need to have recommendations on better coordination. Under 
Secretary Kimmitt, in our hearing, indicated that while we have 
plenty of Commerce Department and USAID attaches over a number 
of our embassies, there are only a couple dozen Treasury 
attaches in our embassies deployed worldwide. That seems to me 
to be an insufficient number, given the threat environment.
    And it doesn't seem--it wouldn't seem to me that we can 
sufficiently project our economic or our counterterrorism 
financing objectives without more Treasury attaches deployed 
worldwide. Would you agree with that?
    Secretary Lew. I wouldn't say no to more Treasury attaches. 
I would not suggest any inadequacy in the Treasury attaches we 
have out there. They do a tremendous job.
    Mr. Barr. I am not suggesting that, but a couple of dozen--
wouldn't you agree that having Treasury attaches deployed in 
more places would be at least as important as agriculture 
attaches?
    Secretary Lew. I am not going to question the value of 
other attaches. I can tell you the value of Treasury attaches 
is very high.
    Mr. Barr. We need to continue to work on that.
    Quickly, in my remaining time, let me ask you about 
insurance capital standards and sequencing. I am concerned that 
the IAIS standard-setting process might front run and prejudice 
the Federal Reserve process for insurance capital standards 
rulemaking. Obviously Congress weighed in by requiring the Fed 
to implement nonbank-centric standards, more insurance-based 
capital standards.
    What we don't want is for the international community to 
make an end run on that. Do you share those concerns? And what 
is Treasury doing to ensure that the IAIS timeline accommodates 
the work of the Fed going first?
    Secretary Lew. We discussed earlier how important it is for 
us to make progress with a covered agreement. If we get a 
covered agreement that would make clear what the line between 
prudential and capital issues is, that would be the--be a lot 
of protection to our firms. We don't think that other countries 
should set capital requirements for our--
    Mr. Barr. That is good to hear because domestic regulators 
have adopted FSB rules for banking, so we would hope that 
Treasury would work with Fed to prevent--
    Secretary Lew. I'm not sure I agree with that 
characterization of the FSB rules for banking, but I am happy 
we agree on insurance.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Pennsylvania, 
Mr. Rothfus.
    Mr. Rothfus. Thank you, Mr. Chairman.
    And if we could stay on this international insurance issue 
for a minute, I am concerned that foreign negotiators will use 
this process as a vehicle to impose rules that put U.S. firms 
at a disadvantage by unfairly targeting products they offer.
    As you know, the IAIS has approved higher capital charges 
for some U.S. insurance products by labeling them as 
nontraditional. However, there are similar insurance products 
offered by foreign firms that have not been subjected to a 
higher capital charge.
    I see this as a clear example of foreign negotiators using 
international rules to hurt U.S.-based firms. Why does this 
imbalance exist, and what is Treasury doing to address it?
    Secretary Lew. I have tried to respond, Congressman, that 
the E.U. is implementing insurance regulatory reform that they 
call Solvency II, that will subject an issuer to 
disadvantageous treatment if the insurer's country of domicile 
is not recognized as equivalent by the E.U.
    One of the reasons to get this covered agreement is to have 
a frame preventing that from happening. So we are very much 
engaged and very much focused on this.
    Mr. Rothfus. Chair Yellen testified before this committee 
recently and lamented the headwinds that are facing the 
economy. I would argue that many of the headwinds that we face 
are manmade and self-imposed. I consider the Affordable Care 
Act, where we had the Congressional Budget Office say that is 
going to cost 2 million jobs--
    Secretary Lew. I was with you on the first half of the 
sentence.
    Mr. Rothfus. But then you look at EPA regulations that are 
throwing middle-class workers in my district out of work.
    And then you look at the Dodd-Frank Act, which was sold as 
a way to end too-big-to-fail and product consumers when it ends 
up enshrining is too-big-to-fail in law. And, of course, former 
Treasury Secretary Geithner acknowledged that it didn't end 
too-big-to-fail. And it was sold as protecting consumers, and I 
see consumers losing products like free checking.
    A 2015 report by the Office of Financial Research (OFR) 
pointed out that market liquidity had become more fragile, that 
broker-dealer inventories had shrunk, and that those 
inventories had concentrated in high-quality liquid assets. The 
Office of Financial Research highlights several factors 
contributing to fragility in fixed income markets, namely bank 
capital standards and the Volcker Rule. Do you agree with OFR 
that these regulations are a factor leading to reduced fixed-
income liquidity?
    Secretary Lew. Congressman, as I have testified to this 
committee before, we are open to looking at any of the 
contributing factors. Market liquidity is an important element 
in any well-functioning financial system. And by most measures 
of market liquidity, particularly in the Treasury markets, we 
are now within historical ranges.
    That said, there are things going on in the markets that 
require more attention. That is one of the reasons we have put 
out a request for information to try and understand how some of 
the transformation and the structure of our markets is 
affecting the way the markets perform and potentially 
liquidity.
    I think that we are in a world now of electronic trading, 
high-frequency trading, algorithmic trading, where many, many--
really most of the transactions taking place are not what 
people think of as traditional individuals making decisions. 
That is having, potentially, an effect as well.
    So we are doing a request for information to try and get to 
the bottom of it.
    Mr. Rothfus. I guess I am trying to--I think you would 
agree in part, then, with some of the conclusions--
    Secretary Lew. I don't attribute great weight to the notion 
that regulatory changes are a key driver. I think if you look 
at the stability of our financial system, the health of our 
economy, and the health of our markets--in the beginning of 
this year we had substantial market volatility--
    Mr. Rothfus. Regulatory--
    Secretary Lew. --and nobody questioned--
    Mr. Rothfus. I'm sorry. You said regulatory actions are not 
a key driver?
    Secretary Lew. I said I am not convinced that they are a 
key driver. Yes, that is what I said.
    Mr. Rothfus. Okay. I would like to touch on something that 
former Treasury Secretary Larry Summers recently mentioned. He 
penned an op-ed in the Washington Post saying it is time to 
kill the $100 bill. In that piece he discusses a recent paper 
by Harvard University's Kennedy School of Government and 
advocates for stopping the issuance of high-denomination notes 
like the 500 euro note and the $100 bill, or even withdrawing 
them from circulation.
    According to Mr. Summers, who has apparently supported this 
idea since the late 1990s, ``Removing such currency from 
circulation would reduce corruption and crime around the world 
while having little downside for legitimate business or 
savers.'' Summers goes on so far to call for a global agreement 
to stop issuing high-denomination notes.
    Steve Forbes recently wrote in The Wall Street Journal that 
he is concerned that this idea would actually harm average 
Americans. And I am wondering if you have an opinion on this?
    Secretary Lew. Look, I think there is a big difference 
between the $100 bill and the 500 euro note or the 1,000 Swiss 
franc note. I think very large bills like the 500 euro bill are 
problematic. I think the $100 bill is the most--
    Mr. Rothfus. They are problematic because?
    Secretary Lew. Because the ease with which you can move 
large amounts of money is five-fold from what a 100 euro bill 
would be.
    Mr. Rothfus. I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Colorado, Mr. 
Tipton.
    Mr. Tipton. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for taking the time to be 
here.
    I want to be able to visit with you. Actually, I will go 
off of my colleague's comment, where you just made the comment 
that you are not convinced that regulatory changes are a key 
driver in terms of some of the challenges that we are having.
    And I would like to go back to when we visited last year. 
We were talking about small banks and the impacts that they are 
feeling because of the regulatory burdens that are being placed 
on them. I am sure you are well-aware that we have had more 
consolidation of banks, fewer applications for new banks 
starting up into our communities, providing the access that you 
were talking about just a little earlier in regards to 
liquidity, to be able to grow the economy.
    Because we have, frankly, a tale of two economies in this 
country, given your opening statement that was rather glowing 
on the American economy. As you travel through the 3rd District 
of Colorado, we are continuing to see in many cases what the 
real unemployment level, double-digit unemployment, more 
businesses shutting down than new business startups.
    And many of those businesses have expressed to me that 
their challenge is being able to get capital from their local 
banks. The banks are telling us they are having an inability to 
be able to make those loans because of expanded regulations.
    And when you are making the comment that regulatory changes 
are not a key driver, we have had testimony come in from Fed 
Chair Yellen and FDIC Vice Chair Hoenig acknowledging that 
there is a problem with rules and regulations and the impact on 
our financial markets. Do you dispute their comments?
    Secretary Lew. I would like to see the specific comments to 
respond to rather than just--
    Mr. Tipton. They were talking about the trickle-down 
regulatory effect.
    Secretary Lew. I think we are talking about different 
things when we use the word ``liquidity.'' Typically, liquidity 
is used to talk about matching buyers and sellers in markets 
for stocks and bonds.
    I think what you are asking about is a slightly different 
question and it is not something we typically refer to as 
liquidity, but it is, what is the availability of lending to 
small businesses and maybe individuals.
    We believe that the credit box has gotten narrower in some 
ways than it needs to be. That is why, for example, the FHA 
last week moved to try and make clear that the credit box for 
mortgages should be eased some. I think on the small business 
side, a lot of small businesses before the financial crisis got 
access to capital by having individuals really tap into their 
home equity.
    So it is a different question than what happens--
    Mr. Tipton. I guess my point is in regards to the 
regulations that we are seeing on a lot of our community banks. 
Last year, when we sat down and visited you had expressed that 
you hadn't really talked about this in terms of the FSOC. In 
fact, when we reviewed the minutes from 2010 to 2014 it had not 
been raised once.
    What is the threshold that has to be passed? What metrics 
have to be in place for--to have those conversations take place 
at your level?
    Secretary Lew. Look, I have had conversations with all of 
the prudential regulators about the need to use the flexibility 
that they have to not have a one-size-fits-all approach. And I 
don't believe they have a one-size-fits-all approach. But they 
need to keep looking at what can they do to provide the kind of 
proper accommodation to small institutions that don't present 
the kinds of risk that some of the larger ones do.
    When we talk about small institutions, we are not always 
talking about the same thing. The real community banks are 
quite small. Even the $50 billion threshold that is now in 
place for a SIFI is way bigger than your typical community 
bank.
    When the people raise questions of institutions of hundreds 
of billions of dollars, we are not talking about community 
banks anymore.
    Mr. Tipton. But unfortunately, as Chair Yellen, and again, 
Mr. Hoenig pointed out as well, we are seeing that trickle-down 
effect of regulations that are impacting those. Is that an 
important thing for you to be able to address?
    Secretary Lew. I think we have to do two things at the same 
time. We have to make sure that our system is safe and sound 
and that we are not exposed to the kind of financial crisis 
that did so much damage to this country in 2007, 2008. And I 
think we have to constantly be asking ourselves, ``Are there 
things that we can do to make it easier for small financial 
institutions?'' We are doing both of those.
    Mr. Tipton. I guess the point, Mr. Secretary, that our 
banks are asking, the community banks, which did not cause the 
financial crisis is, ``When can we expect to be able to see 
some action, rather than talk?''
    Secretary Lew. The kinds of things that we have discussed 
in this hearing room and other hearing rooms, there are areas 
like the regularity of reviews for small banks, where we are 
open to having conversations. But when we see a piece of 
legislation that would really repeal major parts of financial 
reform, that is a place we are not going.
    So it is a question of can you have a conversation about 
the reasonable thing.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Arkansas, Mr. 
Hill.
    Mr. Hill. Thanks, Mr. Chairman.
    And thank you, Mr. Secretary, for being here.
    Let me add my comments on previous questions submitted. As 
a former Treasury employee, you are making me look bad. I 
submitted questions to you on June 17, 2015, like 
Representative Guinta, and I hope you will assure me that you 
will get prompt answers to my questions.
    Secretary Lew. I will certainly go back and--
    Mr. Hill. They are all softballs. They are easy. I promise.
    On the subject of TTIP, I know my colleague from Missouri 
touched on that, but I want to have a nuanced question on that 
with you. I know you have been involved, and certainly OASIA 
has been involved in the negotiating team on development of 
TTIP.
    And are you pleased with TTIP as it relates to financial 
services from your briefings and review of it?
    Secretary Lew. I think that we have had challenging 
discussions but we are making some progress now. I believe that 
financial market access should be part of the TTIP negotiation. 
I don't believe that prudential regulations should be.
    I think we have made some progress with the Europeans, and 
to shift the discussion of prudential regulation to the 
existing international bodies that are set up to appropriately 
deal with it.
    Mr. Hill. There is a really important derivative issue over 
in the subject of data management and data centers that was a 
big part of TTIP. Financial services are not included.
    Secretary Lew. I think you mean TPP.
    Mr. Hill. I'm sorry, TPP. And I have heard concerns that 
that data center issue is problematic. Our international 
services companies are not being treated like nonfinancial 
services--
    Secretary Lew. The data localization issue is a very 
difficult one. We generally oppose data localization 
requirements. I put a considerable amount of effort into making 
sure that data localization was not required in parts of the 
financial services industry like electronic payments, where it 
was really no more than a nontariff barrier.
    In the area of financial institutions, the issue is that 
our own prudential regulators feel that they need to be 
guaranteed access to timely and appropriate prudential 
information, and there has been experience during the financial 
crisis where that was cut off.
    So we are trying to reconcile legitimate interests of the 
financial institutions not to have nontariff barriers and costs 
imposed on them, but also the needs of our prudential 
regulators to be guaranteed access to information.
    We are trying to work our way through that, as I have said 
before, to see if we can thread the needle. TPP is closed, so 
we can't reopen TPP. Perhaps there could be some mention in 
some side piece that is helpful. But really the question is 
going forward, what are the--what will be the framework for a 
TTIP or for a future BIT negotiation?
    Mr. Hill. I think the financial services players can 
certainly provide regulators data that they need in order to do 
their job looking forward and meeting expectations. But it is 
concerning that financial services companies, some of the 
biggest and best in the world that are headquartered here, are 
not getting the same accordance on data localization that 
nonfinancial services are. So I respect your view on it, but I 
think it deserves more discussion.
    Secretary Lew. Yes. And the reality is that the problem did 
exist during the 2008 financial crisis, so it is not ancient 
history.
    Mr. Hill. No, I understand. But also people have changed a 
lot of things in their operating style since then.
    Secretary Lew. And that is why we are trying to work our 
way through it.
    Mr. Hill. Yes. TARP--it is hard to believe we are talking 
about TARP this many years later. Large banks have been 
facilitated through the Treasury to exit TARP with--on pretty 
favorable terms and close down that part of the program. But a 
lot of small banks have not had that favorable treatment from 
the Treasury, particularly those that are in the community 
development program.
    I am wondering if I could have your commitment that if 
people bring you a market-oriented offer to exit their TARP 
position that they could be done by the end of the Obama 
Administration?
    Secretary Lew. It would be my fondest hope for us to be 
able to say that TARP was completely done--
    Mr. Hill. I would think so. I would think it would be one 
of--
    Secretary Lew. We have made huge progress--
    Mr. Hill. --the feathers in your cap.
    Secretary Lew. Yes.
    Mr. Hill. But there are a lot of small institutions that 
are not getting, I think, the attention when they are bringing 
quality opportunities to exit TARP. I really urge you to look 
into it.
    Secretary Lew. We will continue to put every effort into 
it. It has been challenging to get proposals of the quality you 
are describing, and that is why it has been slow.
    Mr. Hill. The other thing that is on my mind is recently, I 
introduced a bill that was marked and moved forward on 
commercial mortgage-backed securities. And the Fed has a 
rulemaking that I think will put conduit loans and some other 
kinds of commercial mortgage-backed securities really in 
jeopardy from refinance risk over the next couple of years, and 
I think Treasury should be very interested in the bill we have 
put forward in this committee.
    Secretary Lew. I am happy to take a look at it.
    Mr. Hill. Thank you.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from Maine, Mr. 
Poliquin.
    Mr. Poliquin. Thank you, Mr. Lew, very much for being here. 
I appreciate it.
    I would like to follow up on a little bit of the discussion 
a short time ago with Mr. Guinta, from New Hampshire. One of 
the new regulators, as a result of the Administration's new 
financial regulations, is the CFPB. They have a new office 
building for their 1,500 employees downtown, Mr. Lew, and it 
cost the taxpayers about $200 million. And the CFPB doesn't own 
the building; they spent about that amount of money to rehab 
it, and I think that is a huge waste of taxpayer money, sir.
    Mr. Cordray was here, the Director of the CFPB, in March, 
and he testified in front of this committee when Mrs. Wagner 
questioned him, and I quote--``It was the Treasury who was in 
charge of all Bureau operations at the time the decision was 
made.''
    And so my question to you, sir, is there have been follow-
up letters that date back now 288 days asking you specifically 
in Treasury, the folks who work for you, who, in fact, at the 
CFPB or Treasury--they said it was you folks who were in 
charge--made the decision to waste that kind of money? Do you 
know who that was?
    Secretary Lew. Congressman, I responded earlier that we did 
follow up on this and provide the Inspector General findings. I 
am happy to go back and--
    Mr. Poliquin. With all due respect, sir, I have the letter 
right here that you responded to which was dated June 16th of 
2015. It says, ``The Treasury is working to respond to your 
requests.'' I repeat, ``The Treasury is working to respond to 
your requests.''
    That was 288 days ago. It was signed by Mr. Randall DeValk. 
So I am just asking you for a commitment now, Mr. Lew, if you 
don't mind, can you give me a specific day when you will get 
back to us as to who was responsible for wasting that kind of 
money?
    Secretary Lew. Congressman, without agreeing to your 
characterization, I am happy to follow up.
    Mr. Poliquin. Okay. And when will you follow up and 
specifically give us the date when you will get back to us who 
is responsible for making that decision?
    Secretary Lew. Congressman, after this meeting we will get 
back and work--
    Mr. Poliquin. Okay. It has been 288 days, Mr. Lew. I don't 
want to be rude, but that seems to be an awful lot of time. 
Here is what concerns me--
    Secretary Lew. On August 25th, we did--Treasury informed 
the committee that a report by the Inspector General of the 
Federal Reserve Board found that the work authorizations 
related to the renovation were finalized after the CFPB--
    Mr. Poliquin. Mr. Lew, here is what--
    Secretary Lew. We have responded, but I am happy to go back 
and see what additional responses--
    Mr. Poliquin. I appreciate that.
    Here is what I am concerned about, Mr. Lew. These are very 
simple questions I am asking you. They are not complicated at 
all. You are the Secretary of the Treasury of the United States 
of America, and if you are unwilling or unable to answer a 
simple question, I think it puts in doubt to the American 
taxpayers how you are going to be able to make the decisions 
that affect our capital markets, our economy, and our freedom.
    Secretary Lew. We have provided 200 pages of information to 
the committee on the condition of the building when it was 
transferred--
    Mr. Poliquin. Okay. I am looking for who was--
    Secretary Lew. So we have given a lot of material and I am 
happy to look and see what you are looking for--
    Mr. Poliquin. Great.
    Secretary Lew. --and see if we can be helpful.
    Mr. Poliquin. Thank you. And you won't give me a specific 
commitment when, so let's move on.
    Mr. Lew, you are familiar, I am sure, with the budget that 
was submitted by President Obama a short time ago that never 
balances ever. You are familiar with that budget?
    Secretary Lew. I am familiar with the budget, yes.
    Mr. Poliquin. Okay. And you are also familiar, I assume, 
Mr. Lew, with the fact that it increases spending by $2.5 
trillion, increases taxes by $3.4 trillion, with this budget?
    Secretary Lew. There are a variety of policies in the 
budget, but it would restore taxes to roughly where it was when 
we had a balanced budget the last time--
    Mr. Poliquin. Okay. And I am sure you also know that this 
budget that never balances increases the debt from the current 
$19 trillion to $27 trillion. It triples from when the time the 
President arrived. So you are familiar with this budget?
    Secretary Lew. I am also familiar with the percentage of 
GDP--
    Mr. Poliquin. Okay.
    Secretary Lew. --which stabilizes as a--
    Mr. Poliquin. Okay, so you are familiar with this budget.
    Secretary Lew. --percent of GDP and the debt as a percent 
of GDP.
    Mr. Poliquin. Thank you, sir. Do you think short-term 
interest rates will remain at zero forever?
    Secretary Lew. No, I don't, but neither does our budget. 
Our budget assumes interest rates that are far above what the 
current market--
    Mr. Poliquin. Okay. Then I also assume that you are 
familiar with the OMB projections that in 3 years, the annual 
interest payments on the debt at that time will be about $440 
billion in 1 year, which will equal what we spend on Medicaid.
    And I am sure you are also familiar with the fact that in 7 
years, the OMB projects that the interest on the debt will 
exceed what we spend on national defense.
    So my question to you, sir is, given the fact that this 
Administration continues to submit budgets to us that increase 
spending, increase taxes, increase the debt, never balance, at 
what point, Mr. Lew, do you think those interest payments--not 
the percent of the GDP represented by the deficit--but when do 
those interest payments become a concern of yours?
    Secretary Lew. Look, Congressman, as GDP grows, nominal 
dollars grow, and having cut the deficit by three-quarters from 
10 to 2.5 percent of GDP has put us on a stable path. We have 
more work to do but we are not in a moment of crisis like we 
were when the President took office. We are in a stable, 
sustainable place.
    Mr. Poliquin. Mr. Lew, I would debate you a little bit on 
that, with all due respect. I am a former State treasurer of 
Maine. There are 49 States that have to balance their budgets; 
the government here does not. They spend what they want, and 
borrow what they need.
    Do you think a balanced budget amendment to the 
Constitution is something that we need, Mr. Lew?
    Secretary Lew. No, I do not.
    Mr. Poliquin. Tell me why you don't.
    Secretary Lew. I think you are out of time, but I am happy 
to respond if the chairman would like me to.
    Mr. Poliquin. I would appreciate that, Mr. Chairman, if the 
Secretary could respond to that question.
    Chairman Hensarling. Quick response, please.
    Secretary Lew. I think that the responsibility for making 
policy rests with the Congress and the President, that a 
mechanical approach that would make it difficult if not 
impossible to respond to crises or economic turmoil--
    Mr. Poliquin. Those are not, with all--
    Secretary Lew. --would be very, very bad. I am happy at 
another time to--
    Mr. Poliquin. With all due respect, Mr. Lew, there are 
bills that have been submitted that I have co-sponsored, along 
with others, that give plenty of flexibility in that budgetary 
process. The American people have seen that the Congress and 
the Administration cannot live within its means. Don't you 
think it is time to help them with a--
    Chairman Hensarling. The time of the gentleman has expired.
    I would like to thank the witness for his testimony today.
    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 witnesses 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.
    I would remind the witness that we have over a dozen 
questions which are still pending by both Democrats and 
Republicans from the June hearing. So I would ask our witness 
to please take this seriously and have Treasury respond 
promptly.
    This hearing stands adjourned.
    [Whereupon, at 1:20 p.m., the hearing was adjourned.]

                            A P P E N D I X



                             March 22, 2016
                             
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