[House Hearing, 115 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 FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 27, 2017

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 115-36




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                     U.S. GOVERNMENT PUBLISHING OFFICE 
		 
29-455 PDF                WASHINGTON : 2018                 
















                 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
STEVAN PEARCE, New Mexico            GREGORY W. MEEKS, New York
BILL POSEY, Florida                  MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri         WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan              STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin             DAVID SCOTT, Georgia
STEVE STIVERS, Ohio                  AL GREEN, Texas
RANDY HULTGREN, Illinois             EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida              GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina     KEITH ELLISON, Minnesota
ANN WAGNER, Missouri                 ED PERLMUTTER, Colorado
ANDY BARR, Kentucky                  JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania       BILL FOSTER, Illinois
LUKE MESSER, Indiana                 DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado               JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas                KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine                JOYCE BEATTY, Ohio
MIA LOVE, Utah                       DENNY HECK, Washington
FRENCH HILL, Arkansas                JUAN VARGAS, California
TOM EMMER, Minnesota                 JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York              VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan             CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia            RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana

                  Kirsten Sutton Mork, Staff Director
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    July 27, 2017................................................     1
Appendix:
    July 27, 2017................................................    60

                               WITNESSES
                        Thursday, July 27, 2017

Mnuchin, Hon. Steven, Secretary, U.S. Department of the Treasury.     6

                                APPENDIX

Prepared statements:
    Mnuchin, Hon. Steven.........................................    60

              Additional Material Submitted for the Record

Beatty, Hon. Joyce:
    ``Trump Treasury pick Mnuchin misled Senate on foreclosures, 
      Ohio cases show,'' dated January 29, 2017, The Columbus 
      Dispatch...................................................    63
Ellison, Hon. Keith:
    ``Here's Why Treasury Nominee Steve Mnuchin Has Been Called 
      the `Foreclosure King','' dated January 19, 2017, TIME.....    68
    ``In its Rush to Foreclose on Homeowners, Steve Mnuchin's 
      Bank Allegedly Broke the Law,'' dated January 4, 2017, 
      Think Progress.............................................    70
    ``Treasury Nominee Steve Mnuchin's Bank Accused of 
      `Widespread Misconduct' in Leaked Memo,'' dated January 3, 
      2017, The Intercept........................................    73
    ``Treasury Secretary Steve Mnuchin Denies It, But Victims 
      Describe His Bank as a Foreclosure Machine,'' dated January 
      19, 2017, The Intercept....................................    81
    Consent Order from The Office of Thrift Supervision on the 
      matter of OneWest Bank, FSB................................    84
    Stipulation and Consent to Issuance of a Consent Order from 
      The Office of Thrift Supervision on the matter of OneWest 
      Bank, FSB..................................................   108
    ``Trump's Treasury Pick Has a $230 Million Blemish on His 
      Record,'' dated December 13, 2016, Bloomberg...............   113
    ``Steve Mnuchin's Old Company Just Settled for $89 Million 
      for Ripping Off the Government on Dodgy Loans,'' dated May 
      16, 2017, The Intercept....................................   117
    ``After 2-year foreclosure battle, she owns Minneapolis 
      home,'' dated August 23, 2011, Minneapolis Star Tribune....   120
    Statement by Colleen Ison-Hodroff............................   122
    Fact Sheet: CFPB Complaint Data Reveals OneWest's Track 
      Record Against Seniors.....................................   123
Heck, Hon. Denny:
    ``China's Technology Transfer Strategy: How Chinese 
      Investments in Emerging Technology Enable A Strategic 
      Competitor to Access the Crown Jewels of U.S. Innovation,'' 
      dated February 2017, Defense Innovation Unit Experimental..   130
Luetkemeyer, Hon. Blaine:
    Chart: Cyber Security........................................   178
Perlmutter, Hon. Ed:
    ``The Future of Banking,'' dated July 23, 2017, LinkedIn, 
      Pulse......................................................   179
Mnuchin, Hon. Steven:
    Written responses to questions for the record submitted by 
      Representatives Beatty, Ellison, Emmer, Hill, Hultgren, 
      Kustoff, Loudermilk, Ross, Sherman, and Waters.............   183

 
                      THE ANNUAL TESTIMONY OF THE
                       SECRETARY OF THE TREASURY
                          ON THE STATE OF THE
                     INTERNATIONAL FINANCIAL SYSTEM

                              ----------                              


                        Thursday, July 27, 2017

                     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, 
Pearce, Posey, Luetkemeyer, Huizenga, Duffy, Hultgren, Ross, 
Pittenger, Wagner, Barr, Rothfus, Tipton, Williams, Poliquin, 
Love, Hill, Emmer, Zeldin, Trott, Loudermilk, Mooney, 
MacArthur, Davidson, Budd, Kustoff, Tenney, Waters, Maloney, 
Velazquez, Sherman, Meeks, Capuano, Clay, Lynch, Scott, Green, 
Cleaver, Moore, Ellison, Perlmutter, Himes, Foster, Kildee, 
Delaney, Sinema, Beatty, Heck, Vargas, Gottheimer, Gonzalez, 
and Kihuen.
    Chairman Hensarling. The committee will come to order.
    Without objection, the chair is authorized to declare a 
recess of the committee at any time, and members will have 5 
legislative days within which to submit extraneous materials to 
the chair for inclusion in the record. The hearing is for the 
purpose of receiving the secretary of Treasury's annual report 
on the State of the international finance system.
    But before proceeding to that report, I will give you a 
report on the Hollingsworth family of Indiana. I would like to 
share with you some very good news that Joseph Albert 
Hollingsworth, IV arrived this morning at 1:38 a.m., weighing 
in at 7 pounds, 15 ounces. Mother and baby are doing well. 
Husband and father is a total wreck, but congratulations to our 
colleague, Trey Hollingsworth.
    We will give him an excused absence from this morning's 
hearing.
    The chair now recognizes himself for 3 minutes for an 
opening statement. Again, this morning, the committee welcomes 
Treasury Secretary Steven Mnuchin for his testimony on the 
state of the international financial system. As we all know, it 
is a system that rests heavily upon our U.S. financial system, 
and that system clearly needs improvement.
    Fortunately, President Trump has outlined a bold forward-
looking plan to tackle the serious problems facing hard-working 
American families who have seen their paychecks stagnate, their 
savings shrink and their dreams diminish over the last decade. 
The fact is, this economy isn't close to reaching its 
potential. Nearly 8 years after the last recession ended, 
Americans remain stuck in the slowest recovery in generations.
    Our economy grew at a measly 1.6 percent last year, when 
our historic norm is twice that. Over 300,000 manufacturing 
jobs have disappeared during the last 8 years. Clearly, 8 years 
of Obamanomics has clearly taken a toll.
    One place it has taken a toll is the competitiveness of our 
capital markets. We simply cannot afford to lose our status as 
the global leader for capital markets. Yet the United States 
has dropped to 17th in a recent world ranking of economic 
freedom, a historic low for our Nation. This is based upon 
levels of business freedom, investment freedom, and financial 
freedom.
    While U.S. economic freedom has declined, the economic 
freedom of a number of our international competitors has 
actually grown. I have faith in our U.S. capital markets and 
the spirit of American entrepreneurs and businesses to take 
necessary risk and grow.
    But to do so, the unaccountable Washington bureaucracy must 
finally be held accountable. We must address the regulatory 
cost of doing business in the U.S. under Dodd-Frank. We must 
work to level the playing field for American companies to 
prosper, and as a result, our economy will grow healthier for 
all. For these reasons, the President's executive order 
establishing the core principles for regulating the U.S. 
financial system is vitally important to us all.
    As the report notes, for too long, we have not empowered 
Americans to make independent financial decisions and informed 
choices in the marketplace, save for retirement, or build 
individual wealth. We have not enabled American companies to be 
competitive with foreign firms in domestic and foreign markets. 
I could not agree more.
    Mr. Secretary, as you know, your first report, issued last 
month, closely mirrors key foundational principles and policies 
that are contained within the House-passed Financial CHOICE 
Act. From helping end bank bailouts, to making the destructive 
CFPB accountable, to tailoring regulations for our community 
banks and credit unions, your recommendations will clearly help 
craft a more sensible, less burdensome, healthier regulatory 
system.
    Please know that the actions that you and this 
administration are taking to ensure the competitiveness of the 
U.S. financial system are a welcome change, and one that I 
fully support.
    Thank you for being here and the committee looks forward to 
working with you.
    I now yield 4 minutes to the ranking member for an opening 
statement.
    Ms. Waters. Thank you very much, Mr. Chairman, and welcome, 
Secretary Mnuchin.
    Mr. Mnuchin, as secretary of the Treasury, you have a wide 
range of responsibilities that are of great importance to our 
economy and the well-being of the American people. These range 
from safeguarding our financial system to advancing U.S. values 
internationally.
    One bureau within the Treasury responsible for safeguarding 
our financial system is the Financial Crimes Enforcement 
Network, or FinCEN, which as you know, collects, analyzes and 
disseminates financial intelligence, in addition to suspicious 
activity reports, foreign bank and financial account reports, 
and other reports. FinCEN has numerous information-sharing 
arrangements with foreign financial intelligence units, making 
the bureau well-positioned to identify and assist law 
enforcement in curtailing illicit activity.
    It is critical for the American public to learn the extent 
to which President Trump, his immediate family, and his 
associates colluded with Russia to influence the outcome of 
last year's election.
    Serious questions have been raised about their suspicious 
financial arrangements and involvement with Russian government 
officials, oligarchs, and organized crime leaders.
    As the committee of jurisdiction over Treasury and FinCEN, 
we, too, have our own share of questions. Fortunately, you, as 
secretary of the Treasury, are well-positioned to assist this 
committee in fulfilling its oversight responsibilities in 
assessing President Trump's financial entanglements with 
Russia.
    However, even though you have indicated, I think, on more 
than one occasion, that you do take requests from Members of 
Congress seriously, you did not respond to a May 23rd letter 
for me and my Democratic colleagues requesting copies of all 
pertinent financial records related to President Trump's 
financial transactions with and business ties to Russia, as 
well those of his family members and associates.
    Now, I understand your staff finally did call yesterday 
afternoon, while we were preparing for this hearing. But I am 
looking forward to hearing directly from you about this matter 
today.
    There are also other areas where I have serious concerns. 
Indeed, in June, the Treasury released a report with 
recommendations that largely mirrored Chairman Hensarling's 
``Wrong Choice'' act. You recommended gutting the Consumer 
Financial Protection Bureau and rolling back important Dodd-
Frank reforms, including rules in place to ensure the stability 
of our financial system, like stress tests and living wills.
    These recommendations are deeply harmful and shortsighted, 
given the progress we have made since the financial crisis.
    I also remain very concerned about the practices that took 
place at OneWest under your leadership. Even though OneWest 
foreclosed over 36,000 families in California and that--it has 
been the subject of numerous investigations, this President has 
selected numerous OneWest officials, including you, to fill 
government posts.
    For example, Joseph Otting, a former OneWest executive, has 
been nominated by Trump to lead the Office of the Comptroller 
of the Currency, which regulates the largest banks.
    Committee Democrats are very concerned about the potential 
for conflicts of interest with regard to a recent Department of 
Justice settlement with OneWest and any pending investigations 
into OneWest for wrongdoing that occurred during your tenure.
    So I look forward to hearing from you and what you have to 
share with us today. And, I yield back the balance of my time.
    Chairman Hensarling. Gentlelady yields back. The chair now 
recognizes the gentleman from Kentucky, Mr. Barr, chairman of 
our Monetary Policy and Trade Subcommittee, for 2 minutes.
    Mr. Barr. Secretary Mnuchin, thank you for your service and 
welcome to your first hearing on the state of the international 
financial system. As chairman of the Monetary Policy and Trade 
Subcommittee, which has jurisdiction over international 
financial institutions, sanctions and monetary policy, I think 
you are off to a great start.
    Two days ago, this committee unanimously passed a bill that 
would empower Treasury to encourage much-needed reforms to the 
World Bank's International Development Association, and reduced 
the IDA18 level by $580 million.
    I thank your staff for having worked with us so effectively 
on this legislation. We are also looking forward to the 
positive impact that you can have at the Financial Stability 
Oversight Council.
    I would urge you, in your capacity as lead member of FSOC, 
to assess the extent to which unconventional monetary policy 
and the Fed's $4.5 trillion balance sheet continue to distort 
economic decisions and constrain American households and 
businesses from enjoying a faster and more complete recovery. 
As Dallas Fed President Robert Kaplan recently wrote, ``There 
is a cost to excessive accommodation, in terms of limiting 
returns to savers, as well as creating distortions and 
imbalances in investing, hiring and other business decisions. 
Monetary policy accommodation is not costless.''
    Perhaps the greatest threat that we face are the threats 
from terrorism around the world, and I hope to continue to work 
with you on key proposals that would help thwart violent 
extremism and counteract rogue States like North Korea and 
Iran.
    Finally, I want to applaud your work in the June treasury 
report and its call for much needed regulatory relief for 
community financial institutions. According to a recent 
estimate, these reforms that you have proposed would allow 
firms to lend up to an additional $2 trillion into the real 
economy, which would create much-needed opportunities for 
Americans in all walks of life.
    Again, thank you, and I look forward to your testimony. I 
yield back.
    Chairman Hensarling. Gentleman yields back.
    The chair now recognizes the gentlelady from Wisconsin, Ms. 
Moore, ranking member of the Monetary Policy and Trade 
Subcommittee, for 1 minute.
    Ms. Moore. Thank you very much. I know I would feel a lot 
better, Mr. Secretary, if you support a strong, independent 
Consumer Financial Protection Bureau, especially given your 
reputation as a foreclosure king.
    I am so disappointed that you and the Trump Administration 
supported repeal of the extractive industry disclosures under 
Dodd-Frank, 1504, and ironically, Treasury has just fined the 
agency for a crooked deal it did with Russia while now-
Secretary of State Tillerson was its CEO.
    Finally, I have heard from State, USAID, and Treasury 
officials that section 1502 conflict minerals provisions are 
working just fine. So I am hoping that you will support 1502. I 
am a very nice, sweet person. I hope to get to know you. But 
trust me, I am going to fight you to the end to keep that in 
place.
    I look forward to your testimony.
    Chairman Hensarling. Gentlelady yields back.
    Today, we will welcome the testimony of the Honorable 
Steven Mnuchin. Since this is a new administration and the 
first time that we have had a cabinet-level official testify 
before our committee, I thought it would be prudent to review 
the committee and House rules on decorum.
    Members are required under the rules of the House to 
observe the principles of decorum and courtesy in debate set 
forth in Rule 17, and by related provisions in Jefferson's 
manual, including by speaking and acting respectfully and by 
refraining from the use of disorderly words or unparliamentary 
language, which includes impugning motives, charging falsehood, 
or implying a lack of intelligence.
    I would also add that, over the last 2 years, my colleagues 
on the other side of the aisle have expanded upon these 
principles on the record to say that no administration witness 
should be, quote ``badgered''. No administration witness should 
be subject to, quote ``I got you politics.'' The ranking member 
and other Democrats on the committee have also said that no 
administration witness should be, quote ``talked to badly.''
    No administration witness should be interrupted. Every 
administration witness should be, quote ``treated fairly.'' 
Every administration witness has, quote ``the right to be able 
to respond.'' And finally, my Democratic colleagues have opined 
that every administration witness should be treated with, quote 
``acceptable standards of dignity, propriety, courtesy. and 
decorum.''
    So, Steven Terner Mnuchin--
    Ms. Waters. Mr. Chairman?
    Chairman Hensarling. For what purpose--
    Ms. Waters. I have a parliamentary inquiry.
    Chairman Hensarling. State your inquiry.
    Ms. Waters. First, I would like to know if this witness 
will be sworn in.
    Chairman Hensarling. It is not our custom to swear in 
administration witnesses, and we did not do so with the Obama 
Administration. It is not the chair's intent.
    Ms. Waters. Well, Mr. Chairman, since you took time to talk 
about how we should conduct ourselves today, I would like to 
remind you and your colleagues how you treated Mr. Cordray. And 
I never heard you take time out to talk about how members 
should conduct themselves. So while we have not done some 
things in the past, and you are doing it now, I would like to 
make sure I understand that you do not wish to swear in this 
witness.
    Chairman Hensarling. I believe, in my tenure, we have sworn 
in exactly one witness, and we have never required Obama 
Administration officials to be sworn in. It is not my intention 
to swear in this witness. It is simply my intent to profit from 
the minority's advice and counsel on decorum.
    Ms. Waters. Thank you very much, Mr. Chairman.
    Chairman Hensarling. Today we welcome, again, the testimony 
of the Honorable Steven Mnuchin. Again, this is the first time 
that he has appeared before our committee. Steven Turner 
Mnuchin was sworn in as the 77th secretary of Treasury on 
February 13th, 2017. Secretary Mnuchin was born and raised in 
New York City and holds a bachelor's degree from Yale 
University. The secretary has several decades of both retail 
and investment banking experience, which he brings to the 
office and which he now holds. Without objection, the witness's 
written statement will be made part of the record.
    Secretary Mnuchin, welcome for your first appearance before 
our committee, and you are now recognized for 5 minutes to give 
an oral presentation of your testimony.

  STATEMENT OF HON. STEVEN MNUCHIN, SECRETARY, U.S. DEPARTMENT 
                        OF THE TREASURY

    Secretary Mnuchin. Thank you very much.
    Chairman Hensarling, Ranking Member Waters, and members of 
the committee, I am pleased to be here today and I look forward 
to discussing the important issues to the American people.
    I would like to begin by addressing Treasury's national 
advisory committee report. Treasury uses its leadership role in 
international financial institutions to help ensure that they 
are carrying out their core mandates effectively and 
efficiently.
    As the Federal Government is streamlining, Treasury is 
focused on keeping the international financial institutions as 
cost-effective as possible. We have pressed the IMF to increase 
its focus on the need to address global economic imbalances. 
This will help to improve prospects for U.S. jobs and exports, 
while holding the IMF's administrative budget largely flat in 
real terms.
    In addition, U.S.-supported reforms to how the multilateral 
development banks employ their balance sheets have made it 
possible for us to substantially increase the assistance that 
they can provide to the world's poorest countries, while 
reducing U.S. budgetary contributions.
    Where it makes sense, we will preserve these investments 
and remain a top donor and shareholder, while also balancing 
priorities across other parts of the government. In doing so, 
we will continue to promote access to economic opportunities, 
to eliminate poverty and to build shared prosperity. When the 
world is prosperous and stable, America reaps the benefits.
    I would like to now highlight our domestic reform agenda. 
Let me begin by congratulating the committee on its passage of 
the CHOICE act. The administration supported house passage of 
this legislation, and we will work with Congress to reform the 
financial regulatory system.
    Years have passed since the financial crisis, and this has 
given us time to see what has worked and what has not. The 
administration is committed to robust financial system with the 
free flow of credit that fuels the engine of American growth. 
This means allowing community financial institutions to lend, 
and small businesses access to borrowing. It means giving 
Americans the opportunity to make independent financial 
decisions, such as buying a home and saving for retirement. 
This also means preventing taxpayer bailouts. In February, the 
President issued an executive order that directed the 
Department of Treasury to report on whether financial 
regulations were in line with important core financial 
principles.
    In June, Treasury released the first in a series of reports 
in response to this executive order. Our first report dealt 
with banks and credit unions. The treasury report provides a 
road map to better align the financial system to serve 
consumers and businesses and to drive economic growth.
    While the report focused heavily on regulatory actions that 
can be taken by the executive branch, it also included a number 
of legislative recommendations to more appropriately align the 
laws governing depository institutions with the President's 
core financial principles.
    One of these is properly tailoring capital requirements for 
small, mid-size, and regional banks that pose little or no risk 
to the financial system. It included that is the endorsement of 
a regulatory off-ramp for highly capitalized institutions.
    Another recommendation is structural reform to provide a 
mechanism to identify a single lead regulator, to ensure that 
there is not unneeded regulatory overlap or duplicated efforts.
    A third is a legislative remedy to the overly complex 
Volcker rule.
    A fourth is statutory changes to make the Consumer 
Financial Protection Bureau more accountable. Working together, 
we can implement both regulatory reforms and legislative 
remedies, particularly for the benefit of community banks and 
mid-size institutions.
    Housing finance reform is also a priority of the Treasury 
and the administration. The current system, in which GSEs 
remain in perpetual Federal Housing Finance Agency 
conservatorship is not sustainable, and leaves taxpayers at 
risk.
    Our housing finance policy should be clear and should be 
designed to provide financing for homeowners and owners of 
multifamily units. Additionally, such policies should increase 
private-sector participation and protect taxpayers.
    The other critical component is comprehensive tax reform. 
We have gone too long without addressing our tax system. Our 
business rate is one of the highest and most complicated in the 
world. It makes our businesses less competitive, and we are 
committed to changing that. Lowering the rate and bringing back 
trillions of dollars that are sitting overseas will allow 
business to invest in this country, spurring economic growth.
    Another important component of strong and robust 
international financial system is stopping bad actors and those 
who finance them. I would like to acknowledge this committees 
effort to combat terrorism and illicit finance with the 
creation of its newest subcommittee. As our enemies change, so 
too must our weapons that combat them. Stopping the flow of 
funds is one more tool in our arsenal to disrupt their 
capabilities. Our Office of Terrorism and Financial 
Intelligence is ready to work with this committee, and I am 
personally looking forward to working with Chairman Pearce and 
Ranking Member Perlmutter on these critical issues.
    We have a chance to create historic opportunities for 
American people, and I look forward to working with you. Thank 
you.
    [The prepared statement of Secretary Mnuchin can be found 
on page 60 of the appendix]
    Chairman Hensarling. Chair now yields himself 5 minutes for 
questions.
    Mr. Secretary, you are probably familiar with the Federal 
Reserve report of December 2016, dealing with the Volcker rule, 
that concluded, quote ``The illiquidity of stress bonds has 
increased after the Volcker rule''.
    You may know that the director of the IMF's monetary and 
capital markets department provided another critique of the 
Volcker rule, saying that it can impact the ability of 
institutions to supply credit.
    We have a recent study, conducted by the Bank of England, 
saying, in their stress simulation, material increase in 
spreads and the corporate bond market, and in the extreme, 
corporate bond market dislocation can threaten the stability of 
financial markets.
    So, particularly as head of FSOC, what are your current 
concerns on the state of bond market liquidity in general? And 
what are your views on the Volcker rule in specific?
    Secretary Mnuchin. Chairman Hensarling, thank you very much 
for that question. And first, let me just acknowledge--I see 
you have the debt clock up here today. Hopefully, I will get 
out of here before it goes to $20 trillion.
    In any event, as it relates to your question about the 
Volcker rule, this is something that--I do share your concerns. 
I think the biggest problem with the Volcker rule is its 
complexity and regulatory overlap. And even if it is our intent 
not to have proprietary trading within banks, we need to make 
sure that banks understand how the regulation works.
    Recently, I was at a G20 meeting where we had some 
economists that came and talked to us, and they said that every 
trading desk needs a psychiatrist and a lawyer to determine how 
to apply the Volcker role.
    In any event, as my role of chair of FSOC, this is one of 
the issues that I am working on. I am pleased to report that we 
have already done preliminary work on it. The regulators also 
share these concerns, and we have it on our agenda tomorrow for 
the meeting and will be addressing how we can deal with the 
regulatory overlap.
    Also, Mr. Chairman, as you do know, in our report on the 
executive order to the President, we have also made certain 
suggestions for legislative changes to that. Thank you.
    Chairman Hensarling. Mr. Secretary, particularly those on 
this side of the aisle, we very much deplore what is happening 
to our community banks and credit unions. I know there are some 
on the other side of the aisle who have opined that there is no 
regulatory problem there. In your report and, frankly, in your 
testimony today, you mentioned the term ``tailoring.''
    Can you expound upon your views and what are you 
considering that one can--that you can do in the administration 
to better tailor rules to our community banks and credit 
unions?
    Secretary Mnuchin. Mr. Chairman, thank you for that 
question. And let me first say, we are very focused in making 
sure that community and regional banks can properly grow.
    Our financial system here, the top eight banks account for 
approximately 50 percent of the assets in the American 
financial markets. And that is quite problematic. What we want 
to do is make sure that there is robust lending, particularly 
in community banks.
    I have met with many, many people--these are not 
Republicans or Democrats. These are hard-working 
businesspeople, particularly in agricultural communities, 
particularly in small manufacturing communities, that 
constantly complain that the community banks are not able to 
lend because they are overburdened by regulatory issues. And I 
firmly believe that community banks know how to make loans.
    Let me just say they should be properly regulated, whether 
they are regulated by the State or the Federal Government. I do 
believe in proper regulation, but overly burdensome 
regulations, so that community banks cannot strive is not 
something that is good for any of us or the American economy.
    So we are very focused on raising the regulatory burden, 
and we look forward to working with this committee on it.
    Chairman Hensarling. Speaking of the regulatory burden on--
perhaps on our regional banks, the Treasury report recommended 
raising the asset threshold for the application of enhanced 
prudential standards to a bank holding company--raising it from 
its current $50 billion threshold to an unspecified amount.
    It appears that changes can be accomplished without 
legislation. So what do you believe the threshold should be 
increased to? And do we have your commitment that you can--that 
you will implement these changes administratively?
    Secretary Mnuchin. Sure. Mr. Chairman, let me first say, my 
understanding is that there had been bipartisan discussions on 
raising this limit in the previous administration. So I would 
hope that those conversations continue, and that this is 
something that we could accomplish quickly.
    I think that it should be raised substantially, at least to 
$250 billion or $300 billion. And I would go further, saying 
that simple, uncomplex banks, the regulators should be able to 
exempt above that.
    And again, that doesn't mean that those banks shouldn't be 
regulated. Those banks will be regulated. They will be 
regulated by the primary regulator. And they will be regulated 
properly.
    Chairman Hensarling. My time has expired.
    I now yield 5 minutes to the ranking member.
    Ms. Waters. Thank you very much, Mr. Chairman.
    Secretary Mnuchin, I want to make sure that we all are 
operating here with the same understanding. Even though you are 
not sworn in, do you realize you are under oath?
    Secretary Mnuchin. I do, thank you.
    Ms. Waters. Thank you very much. Are you familiar with the 
May 23rd letter I sent to you, along with several of my 
Democratic colleagues on this committee?
    Secretary Mnuchin. Yes, I am.
    Ms. Waters. Do you understand that this committee not only 
has jurisdiction, but a responsibility to oversee the 
activities of the Financial Crimes Enforcement Network?
    Secretary Mnuchin. Yes.
    Ms. Waters. Given that the Treasury maintains these types 
of records, and given your department's statements that the 
agency takes responsiveness to congressional requests very 
seriously and is committed to providing useful and appropriate 
responses to requests from congressional members, is there some 
reason why I did not get a response to the letter that I sent 
May 23rd?
    Secretary Mnuchin. So, Ranking Member Waters, first of all, 
let me thank you for your service to California. Being a 
resident of California, I appreciate everything that you have 
done--
    Ms. Waters. Thank you very much--
    Secretary Mnuchin --For the community there--
    Ms. Waters. I don't want to take my time up with how great 
I am.
    Secretary Mnuchin. I also have appreciated the 
opportunity--
    Ms. Waters. Reclaiming my time.
    Secretary Mnuchin --To meet with you several times--
    Ms. Waters. Reclaiming my time.
    Secretary Mnuchin --When we were doing our--
    Ms. Waters. Reclaiming my time.
    Chairman Hensarling. The time belongs to the gentlelady 
from California.
    Ms. Waters. Let me just say to you, thank you for your 
compliments about how great I am, but I don't want to waste my 
time on me.
    I want to know about the May 23rd letter. You know about 
it, why did you not respond to me and my colleagues?
    Secretary Mnuchin. I was going to answer that--
    Ms. Waters. Just, please, go straight to the answer.
    Secretary Mnuchin. Mr. Chairman, I thought, when you read 
the rules, you acknowledged that I shouldn't be interrupted, 
and that I would have--
    Ms. Waters. Reclaiming my time.
    Secretary Mnuchin --The opportunity--
    Ms. Waters. What he failed to tell you was, when you are on 
my time, I can reclaim it. He left that out. So I am reclaiming 
my time.
    Please, will you respond to the question of why I did not 
get a response--me and my colleagues--to the May 23rd letter?
    Secretary Mnuchin. Well, I was going to tell you my 
response.
    Ms. Waters. Just tell me.
    Secretary Mnuchin. So first of all--let me just say that 
the Department of Treasury has cooperated extensively with the 
Senate Intel Committee, with the House--
    Ms. Waters. Reclaiming my time.
    Secretary Mnuchin --Intel Committee--
    Ms. Waters. Reclaiming my time.
    Secretary Mnuchin --With the Senate Judiciary Committee--
    Ms. Waters. Reclaiming my time.
    Secretary Mnuchin. OMatter of fact--
    Ms. Waters. Reclaiming my time. Reclaiming my time.
    Chairman Hensarling. Mr. Secretary, the time belongs to the 
gentlelady from California.
    Secretary Mnuchin. Perhaps, Mr. Chairman, I don't 
understand the rules--
    Ms. Waters. Reclaiming my time.
    Secretary Mnuchin --Because I thought I was allowed to 
answer questions.
    Ms. Waters. Reclaiming my time. Would you please explain 
the rules, and do not take that away from my time.
    Chairman Hensarling. We will give the gentlelady adequate 
time.
    So what I read, Mr. Secretary, were statements of the 
ranking member and Democratic colleagues on how administration 
witnesses should be treated, not necessarily the way they will 
be treated.
    So the time belongs to the gentlelady from California, but, 
I assure you, majority members will allow you to answer the 
question when it is our time.
    Secretary Mnuchin. So what I was saying is that we have 
provided substantial information. We believe there is 
significant overlap, and, matter of fact, I would say that we 
spoke to your chief oversight counsel yesterday. We have been 
responsive, and we are trying to coordinate with you the 
response, and we have suggested that you get the information 
through the other committees.
    But I would like to emphasize we believe we have been very 
responsive--
    Ms. Waters. Reclaiming my time.
    Secretary Mnuchin --And will continue to do so.
    Ms. Waters. Thank you very much. You left a message 
yesterday--or someone on staff left a message.
    Secretary Mnuchin. No, we didn't leave a message.
    Ms. Waters. Reclaiming my time.
    Secretary Mnuchin. We spoke to the chief oversight counsel.
    Ms. Waters. Reclaiming my own time. Reclaiming my time.
    You did not respond. You left a message. Let us keep going.
    If a bank identifies suspicious activity related to 
potential money laundering or sanctions violations by The Trump 
Organization involving Russian persons, would such a bank have 
a legal obligation to report it to FinCEN?
    Secretary Mnuchin. Can you repeat your question, please?
    Ms. Waters. If a bank identifies suspicious activity 
related to potential money laundering or sanctions violations 
by the Trump organization involving Russian persons, would such 
a bank have a legal obligation to report it to FinCEN?
    Secretary Mnuchin. Yes. If a U.S. institution had any 
suspicious activity they would be required to file a SAR, which 
would go to FinCEN.
    Ms. Waters. Thank you. If FinCEN received reports of 
suspicious activity involving potential violations of money 
laundering or sanctions involving President Trump, his 
immediate family and associates, would FinCEN immediately share 
it with the Justice Department, Special Counsel Mueller, or 
other interested law enforcement officials? Or would you 
generally wait until you received a request from law 
enforcement for this type of information?
    Secretary Mnuchin. Let me just comment that I can't comment 
on any specific actions of FinCEN, because they are 
confidential, but I can assure you that FinCEN would respond to 
any issues revolving the Trumps no different than they would 
respond to anybody else.
    Ms. Waters. And so the question is whether or not you 
would--FinCEN would immediately share it with the Justice 
Department, Special Counsel Mueller, and other interested law 
enforcement officials, or, again, would you generally wait 
until you received a request from law enforcement for this type 
of information?
    Secretary Mnuchin. Again, what I would assure you is that 
FinCEN would respond to those situations no different than 
anybody else. And FinCEN and Treasury have cooperated 
extensively with, as I said before, the three other committees.
    Ms. Waters. If it was widely reported in the press that a 
close adviser of the President was being investigated for money 
laundering using anonymous shell companies and bank accounts 
located in Cyprus, would your department proactively seek to 
obtain relevant information from foreign financial intelligence 
units where such activity reportedly took place? Or would you 
wait until a specific law enforcement request came in?
    Secretary Mnuchin. Again, I am not going to comment on 
hypothetical situations. FinCEN would handle these situations 
no different than any other situation.
    Ms. Waters. Mr. Chairman, I respectfully request, pursuant 
to our memorandum, to ask for additional 5 minutes.
    Chairman Hensarling. Gentlelady is granted an additional 5 
minutes.
    Ms. Waters. Thank you. And I am not asking for specificity. 
I am asking for, generally, the way you would handle these 
questions that I have presented to you.
    Let me continue. Have any Treasury Department employees 
expressed concerns to you, or are you aware of concern among 
Treasury staff, about the relationship between President Trump 
and Russia?
    Secretary Mnuchin. No. Nobody has expressed those concerns 
to me.
    Ms. Waters. Given that you were finance chair of the Trump 
campaign, which is accused of soliciting illegal, in-kind 
contributions from a foreign country, have you recused yourself 
from any work related to Russia or other foreign countries?
    Secretary Mnuchin. I am not aware of those accusations that 
the campaign has taken those types of contributions, nor have I 
recused myself from anything at this moment, since I believe I 
have no conflicts.
    Ms. Waters. Thank you.
    Trump's ``red line'' on investigations of his personal 
finances--in a recent review, President Trump made it clear 
that he considered any investigation by Robert Mueller into the 
President's personal finances a red line that shouldn't be 
crossed.
    Secretary Mnuchin, have you had any conversations with the 
President or any official at the White House in which it was 
directly stated or implied that supporting any investigation 
into Trump's finances would in some way be crossing a line?
    Secretary Mnuchin. I am sorry, can you repeat the last 
part? I heard the first part. Just the last part of it.
    Ms. Waters. In a recent review, President Trump made it 
clear that he considered any investigation by Robert Mueller 
into the President's personal finances a red line that 
shouldn't be crossed.
    Secretary Mnuchin, have you had any conversations with the 
President or any official at the White House in which it was 
directly stated or implied that supporting any investigation 
into Trump's finances would in some way be crossing a line?
    Secretary Mnuchin. No. I have had no conversations along 
those lines. Quite the contrary.
    Ms. Waters. As secretary of the Treasury, you chair the 
interagency Committee on Foreign Investment in the United 
States, known as CFIUS--
    Secretary Mnuchin. Yes, I do.
    Ms. Waters --Which evaluates the sale of U.S. businesses to 
foreign entities to determine whether such sales undermine our 
national security.
    Given the significant pressure President Trump has exerted 
over government officials with key oversight responsibilities, 
from Sally Yates, to James Comey, to Robert Mueller, to Jeff 
Sessions, how can we be sure that you, in your own oversight 
role, will appropriately review the sale of assets or property 
to foreign entities by top administration officials?
    This includes, for example, reviews involving the sale of 
assets by the White House communications director, Anthony 
Scaramucci, and the President's son-in-law and adviser, Jared 
Kushner.
    Can you assure us that you would recommend blocking such a 
sale in the event it indicates the foreign entity may seek to 
unduly influence U.S. policy, even if doing so may jeopardize 
your position as secretary?
    Secretary Mnuchin. Well, let me assure you, I take my 
position at CFIUS very seriously. I have not had anybody in any 
way try to influence me in that position, nor would I let them. 
And I would use my judgment, as I have, to take the seriousness 
of the CFIUS responsibility.
    Ms. Waters. And, as I understand it, you have such a matter 
under consideration, relative to Mr. Scaramucci and the sale of 
a huge property to a Chinese interest. Is that correct?
    Secretary Mnuchin. Ranking Member Waters, I think, as you 
are aware, all actions at CFIUS are highly confidential, and it 
would be inappropriate for me to comment one way or another on 
any potential transaction and even acknowledge whether any 
transaction is being reviewed in this public format.
    Ms. Waters. Is it true that Mr. Scaramucci was considered 
for a position in the administration, but because of this 
questionable sale, that he could not go forward, for fear of 
not being confirmed, but yet he is now in the administration? 
And does this in any way influence your decision that you have 
to make about that sale?
    Secretary Mnuchin. Again, I want to acknowledge that I am 
not making any comment about any potential decision that I may 
make about a confidential item. But I will say I have not been 
aware that he was ever considered for a position that required 
confirmation within the administration.
    Ms. Waters. Thank you very much, and I yield back the 
balance of my time.
    Chairman Hensarling. Gentlelady yields back.
    The chair now recognizes the gentleman from Kentucky, Mr. 
Barr, chairman of the Monetary Policy and Trade Subcommittee, 
for 5 minutes.
    Mr. Barr. Thank you, Mr. Chairman.
    Again, Secretary Mnuchin, welcome to our committee.
    Over 20 of my colleagues and I sent you a letter last week, 
prior to the--with the ongoing Comprehensive Economic Dialogue 
with China, to ask you to address market access issues for U.S. 
financial firms, particularly, lifting the equity caps that are 
currently in place.
    And as you know, U.S. banks and insurance companies face 
significant barriers and restrictions in China, while Chinese 
banks and insurance companies have little, if any, barriers in 
the United States.
    I want to thank you for your response to this letter and 
your commitment to, quote ``continue to press for the removal 
of these and other restrictions that unfairly disadvantage 
American firms.''
    What are the next steps that you plan to take to help lift 
these foreign equity caps that harm American companies 
operating in China?
    Secretary Mnuchin. So, let me just first comment that I 
have had the opportunity to meet with President Trump and 
President Xi two times, once in Mar-a-Lago, and the other in 
Hamburg. I also had the opportunity--we just finished our 
Comprehensive Economic Dialogue.
    So, first, I think as you are aware, President Trump is 
very focused on having a more balanced economic relationship 
with China, and has made it very clear that the current trade 
balance is unacceptable. And I think you may have seen in our 
press release from the comprehensive economic dialog last week 
that China acknowledged that it is a shared goal to fix the 
trade deficit.
    I think, as you know, the United States has a significant 
competitive advantage in financial services, services in 
general. It is one of the areas where we actually have a trade 
surplus with China. And I assure you, I think it is extremely 
unfair that Chinese companies, subject to security reviews, can 
buy 100 percent of any company in the United States, yet, as 
you have said, our companies in China are limited to minority 
partners.
    We have seen, most recently, Apple has been forced to share 
their iCloud business, one of the key parts of their business, 
with a Chinese joint venture partner. That is not fair, it 
doesn't make sense, and this administration is fully committed 
to making sure that American companies and American workers are 
on a level playing field.
    Mr. Barr. Thank you, Mr. Secretary.
    And for the second time--I will move onto my second 
question, but I appreciate your commitment and the 
administration's commitment to working with Congress to address 
that inequity in our relations with China.
    With respect to Iran Air and the efforts that Treasury is 
engaged in in the implementation of the JCPOA, as you know, the 
Obama Treasury Department allowed U.S. banks to lend to Iran in 
order to finance aircraft sales, despite the fact that the 
associated services in the aircraft section of the JCPOA only 
spell out warranty, maintenance and repair services, and 
safety-related inspections.
    So the Treasury Department, as we understand it, currently 
authorizes U.S. banks to finance the sale of aircraft to Iran 
Air. Well, in a committee hearing in April, in this committee, 
we learned that this airline, Iran Air, flew 114 flights from 
Iran to Syria between the JCPOA's implementation day in January 
2016 and March 30, 2017, likely as an airlift in support of the 
Syrian regime's atrocities.
    Mr. Secretary, can you certify to us today that Iran Air 
has ceased all sanctionable activities? And if not, will the 
department re-designate this airline, an action that Treasury 
has admitted is allowed under the JCPOA?
    Secretary Mnuchin. So thank you very much for your question 
on that. First let me say, specifically on Iran Air, in this 
public format, I don't want to comment on them specifically. We 
do have intelligence information that I would be prepared to 
share with you in a private setting.
    But what I would say is that OFAC is responsible for 
granting licenses for aircrafts, as you have mentioned. Both 
the Boeing sale, as well as the Airbus sales will require 
additional OFAC licenses. And that is an issue that is under 
review and is part of the national security review of the 
JCPOA.
    Mr. Barr. Finally, Mr. Secretary, I asked your predecessor 
if he thought that regulations, particularly Volcker, risk 
retention, and the layers of capital liquidity requirements 
could contribute to illiquidity and actually undermine our 
financial system--destabilize our financial system. He always 
denied that. He said that it was a market structure issue.
    Do you agree or disagree with your predecessor?
    Secretary Mnuchin. Well, nothing against my predecessor, 
who I have a lot of respect for. But as you know, I do have 
firsthand experience in the trading and investment markets, and 
I absolutely agree with you that the Volcker rule, in 
particular, has eliminated liquidity that, in the times of 
crisis, we need market makers to provide liquidity--not 
proprietary trading, but liquidity for market making. And that 
is something we are very focused on fixing.
    Mr. Barr. Thank you, I yield back.
    Chairman Hensarling. Time of the gentleman has expired.
    According to the earlier-referenced memorandum of 
understanding, the chair will recognize two Republicans in a 
row.
    The chair now recognizes the gentleman from New Mexico, Mr. 
Pearce, chairman of our Terrorism and Illicit Finance 
Subcommittee.
    Mr. Pearce. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here today.
    Before getting into my observations from you, I would point 
out that my friend from California, and I do consider her to be 
a friend, her questions were edging toward things that would be 
a violation of the BSA.
    FinCEN works for national security. Everything that FinCEN 
has is available to any law enforcement agency, and to release 
that publicly not only reveals the process, which is 
extraordinarily sensitive, again, it looks to be very close to 
a violation of the actual law itself.
    So I appreciate your willingness to hold a position there, 
because it is a very delicate balance.
    Now, I--we all know that AML and CFT--those are real 
threats to the Nation. Mr. Secretary, what I really appreciate 
about your report is that you don't--even with these major 
threats coming into the Nation, you don't lose sight of the 
mission, and that is on page 2, where you talk about the robust 
financial system, free flow of credit, that fuels the engine of 
America--businesses--small businesses getting access to credit.
    At the end of the day, that is what you are here for and 
that is what we are here for. And so I appreciate the threats 
and that you are monitoring those, but you are not losing sight 
of what makes this country work. So thank you for that 
attention to detail as you approach your job.
    Mr. Pearce. Now, OFAC is--they work with Congress, the 
President. They work with the military to just see that the 
world's bad actors don't operate. Their major activity is 
shutting off funds to them, and we can see, in the estimates of 
North Korea and Iran, that we have very significantly affected 
that.
    But also the Financial Activities Task Force--they have 
evaluated that, as soon as you find a way to stop one action, 
then another action steps up. So my question is how do we 
modernize, how we update our AML, CFT standards?
    Myself, I see technology as having to be on a constant, 
robust movement. But tell me a little bit from your 
perspective, on that aspect of how we keep moving ahead of the 
threats.
    Secretary Mnuchin. So, first of all, I do acknowledge your 
concerns in this area. My number-one focus is on economic 
growth, and we are very focused on tax reform as part of that. 
But my number-two focus--probably spending 50 percent of my 
time on sanctions-related and terrorist-financing-related 
issues.
    And, as you have mentioned, using technology to stay ahead 
of these things is very important. We will continue to use all 
the tools in the toolbox and new tools. That is why we want to 
set up a terrorist financing unit with Saudi Arabia in the 
Gulf, where we have people there firsthand, working with them 
and working with our Arab partners.
    I firmly believe that cutting off the money works. It 
worked with Iran. It brought them to the table. It works in 
stopping terrorist activity. I constantly work with Secretary 
Tillerson, Secretary Mattis, Director Pompeo, General McMaster 
on a unified approach to stopping terrorism.
    Mr. Pearce. What can we do more here? In other words--be 
our subcommittee that contemplates your mission in that. Tell 
me what we need. If we need resources in a specific area, 
please share that with me, if you can.
    Secretary Mnuchin. Will do. We need more money for our 
Terrorist Financing Center in Saudi Arabia, but we will talk 
about that later.
    Mr. Pearce. The--Mr. Secretary, you had wanted to make 
responses earlier to some of the questions. I would yield the 
rest my time to you to make those answers right now, if you 
would like to go into depth where you weren't allowed to 
before.
    Secretary Mnuchin. Oh, I was really going to just thank the 
ranking member for her activity in support of regional banking 
in California, and that I had the opportunity to meet with her 
many times, and appreciated her work in California. That is 
really the extent of what I was saying in my opening remarks.
    Mr. Pearce. Well, again, I think, from my perspective, if 
you can get the tax reform that you have mentioned, if you can 
keep the focus on the small businesses, they are the engine of 
the economy of the U.S. Getting access to credit--those are the 
major things, and then we fight the--AML, fight the financing 
of terrorism.
    I think that we have got a big job, and I believe you are 
up to it. Thank you for being here today.
    Secretary Mnuchin. Thank you. I appreciate that. Thank you 
very much.
    Chairman Hensarling. 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. Thank you, Mr. Chairman.
    And welcome, Mr. Secretary.
    I am deeply concerned about terrorism financing, and during 
your confirmation hearing, you stated, and I quote ``I agree 
that law enforcement's anti-money-laundering efforts face 
serious challenges if they are unable to determine the 
beneficial ownership of the various companies and entities that 
utilize the U.S. financial system.
    ``It can be a real vulnerability that various bad actors, 
including terrorists and criminals, can exploit,'' end quote. 
And then you later stated that, if confirmed, you would, and I 
quote ``be willing to work with Congress and the various 
equities impacted by beneficial ownership due-diligence 
requirements to address this challenge.''
    We have, on this committee, introduced a bipartisan bill, 
called the Corporate Transparency Act, that would require 
companies to disclose their true beneficial owners at the time 
the company is formed. And this information would only be 
available to law enforcement and financial institutions that 
are required to know their customers, with those customers' 
consent.
    Our bill says that States can collect this information, but 
if they do not, then it would be Treasury's responsibility to 
collect it as a backup. So my question is, do you support 
requiring companies to disclose their true beneficial owners at 
the time the company is formed, and Treasury's role in our 
suggested legislation?
    Secretary Mnuchin. Let me just first say thank you very 
much for that. And I now understand this issue much better than 
I did, and when I have--my initial confirmation. And I spent a 
lot of time looking at this internally. It is also a concern at 
the G7. I can tell you, this is not only a--just a U.S. issue, 
but our European partners are concerned as they make progress 
in this area and we don't. So let me first say, I am very much 
looking forward to working with you and the committee on a 
solution to this. I hopefully think this can be a bipartisan 
solution.
    It is a complicated issue. We need not only the information 
when companies are set up, but we need to figure out a way of 
how that is maintained overall. Obviously, if we just capture 
the information on day 1 and it is literally the ownership is 
moved 1 hour later, then it is not very effective.
    And I am somewhat concerned about Treasury, perhaps, being 
the ultimate depository, because I think the States aren't 
going to want this responsibility. But we look forward to 
working with you on a solution.
    Mrs. Maloney. Well, I think it is critical. We have 
numerous LLCs that no one knows who owns them. This issue came 
to us from law enforcement, saying they keep hitting a wall in 
trying to know.
    And we certainly--if we know who owns things in our 
country, it is a tremendous step toward combating terrorism 
financing, which is a huge concern to the city of New York and 
our entire country.
    I would also like to ask about the debt ceiling, which will 
need to be raised soon, and I hope it can be done without the 
usual political drama. But the markets seem to be worried that 
the ceiling might not be raised in time, and it has already 
substantially raised the cost of short-term borrowing in 
Treasury.
    And Treasury is also expected to have to reduce its 
issuance of short-term treasuries this fall, in order to stay 
below the debt limit, and at a time when the supply of short-
term treasuries is already low because of the shifts toward 
government money market funds.
    So my question is, do you agree that the uncertainty over 
when and whether the debt limit will be raised is causing 
distortions in the market and is impacting Treasury's ability 
to borrow at the lowest possible rate?
    Secretary Mnuchin. Well, let me say that I assure you I am 
very focused on the debt limit. As I have said before, I urged 
Congress to work on this before anybody leaves. I said 
yesterday in my testimony, and I will be alerting Congress, 
that my previous letter on special powers will be extended 
through September--
    Mrs. Maloney. Mr. Secretary, my time is almost up, and I 
want to know, if Treasury were to breach the debt limit and 
start prioritizing interest payments on the debt over the 
government obligations, like Social Security, do you think the 
markets would view this as a default?
    Secretary Mnuchin. I have no intent on prioritizing. I 
think that doesn't make sense. The government should honor all 
of its obligations, and the debt limit should be raised.
    Chairman Hensarling. Time of the gentlelady has expired. 
The chair now recognizes the gentleman from Missouri, Mr. 
Luetkemeyer, chairman of our Financial Institutions 
Subcommittee.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary. I am over here. There we go.
    Thank you for being here, and appreciate your comments to 
date here. I will also thank you for the Treasury report that 
you have done. I know it was a tremendous effort, and I think 
it yielded great results.
    I want to followup on my initial question here on what the 
chairman started--or discussed a little bit with you, with 
regards to, basically, both banks and non-banks that are 
systemically important financial institutions.
    Your report discusses the problem with the arbitrary nature 
of the process. I am still perplexed, as to somebody who deals 
both with banks and non-banks--as to how one can indicate an 
insurance company as systemically important. But for now, all 
of my discussion will focus on the bank holding company side.
    I recently introduced H.R. 3122, my Systemic Risk 
Designation Improvement Act. And the bill removes the $50 
billion threshold, which the chairman discussed with you a 
moment ago, and goes to a well-established set of standards 
that more accurately reflects systemic importance--and goes to, 
basically, the Fed systemic risk indicator score, which--the 
Fed already does the analysis of this so that we can save time, 
money and effort on everybody's part and use that systemic 
score.
    So I guess my initial question is, you made the comment a 
minute ago that you want to focus on community and regional 
banks. Some of these regional banks are nothing but big 
community banks--just big. You better know this than anybody. 
So, again, does it make sense to put an arbitrary figure in 
there? Or do you think we need to go to more risk-based 
analysis?
    Secretary Mnuchin. My own preference would be to have the 
higher of both, so that we have a floor where we know it is not 
subjective, and then above that, as you have mentioned, the Fed 
would have the ability, based upon, as you have suggested, the 
risk analysis.
    Mr. Luetkemeyer. There is a--we are going to put a chart up 
here in a minute with regards to cyber security. And--
    Secretary Mnuchin. I love this chart, I saw it ahead of 
time.
    Mr. Luetkemeyer. Well, I am glad you could see it, because 
it reminds of an old Spirograph toy that I had when--it was a 
long, long time ago--as a kid. And it kind of gives you a 
headache to look at.
    But, Mr. Secretary, you addressed this subject, also, in 
your Treasury report, and there is a word that is used when 
discussing this with the different agencies and different 
banks, when they talk about this. It is ``harmonization.'' We 
need to harmonize, stop the duplicity and stop the overlap of 
the regulators with regards to all of the things that they are 
having to work with here.
    And so I would just like to give you--ask you to comment on 
whether, as chair of FSOC--that is a great position from which 
you can bring all of the different agencies together to stop 
some of this overlap and duplicity that is going on, and take 
some of the regulatory nonsense and provide relief for a lot of 
the banks.
    Would you like to comment on it?
    Secretary Mnuchin. Yes, well, thank you. It would look like 
modern art if I hadn't seen it in more detail. And I share your 
concerns in both my role of chair of FSOC and--as well as FDIC. 
Cybersecurity is a major concern of mine, and we are already 
working with the regulators on how to consolidate their 
resources.
    I am all for the different regulators making sure--but 
cyber security is one of our biggest, biggest risks, and we 
should make sure that they consolidate their resources, but 
they do it in a way that they don't have to do it four or five 
times, independently, with banks.
    Mr. Luetkemeyer. Well, I think, you know, some sort of 
standardization of guidelines and principles, I think, is a 
good place to start, and so when the regulators come in, they 
are not having one group say this, another group say that so 
the banks get a mixed message and they have to comply with 
different sets of rules and regulations.
    So I think your position as FSOC chair is key to getting 
that harmonization.
    Secretary Mnuchin. And I can assure you we are already 
working on it. Thank you.
    Mr. Luetkemeyer. Thank you very much.
    One last question, before my time runs out here, deals with 
Operation Choke Point. This is something we have been dealing 
with for a long, long time. I am sure you are familiar with it.
    Between the DOJ and the FDIC, they began to try and drive 
legally operating businesses out of the financial system 
because they, for political or own set of values that they 
believed didn't match up with their own.
    And I am quite concerned, quite frankly, I will be honest 
with you--the FDIC has sort of backed off on this problem for a 
while, but it has continued with the OCC.
    And we want--I would like your commitment to continue to 
work on something with us. And I realize that you are probably 
going to try and do your best to stop the nonsense, and that is 
great. But I am concerned that, should you leave, then there is 
another new administration down the road--4 years, 8 years, 10 
years, whatever it is--that we have a set of guidelines in 
place to prohibit this activity from ever being able to be done 
again.
    Would you help us along those lines, sir?
    Secretary Mnuchin. Absolutely. Look forward to working with 
you. Thank you.
    Mr. Luetkemeyer. I yield back the balance of my time.
    Chairman Hensarling. Time of the gentleman has expired. The 
chair now recognizes the gentlelady from New York, Ms. 
Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Secretary, former Secretary Lew was instrumental in 
passing legislation that provided Puerto Rico the necessary 
tools to comprehensively restructure its debt.
    Prior to his departure, he personally indicated to you that 
it was important to continue monitoring the situation to ensure 
Puerto Rico's successful recovery. He recognized that, even 
though the law was critical to providing the breathing room 
necessary for the local government, a missing piece of the 
equation were policy initiatives that will jumpstart the 
economy.
    In fact, in late May of this year, Senator Grassley 
restated that, and I quote ``Extending bankruptcy authority 
alone could not fix the problem.'' However, since the Trump 
Administration has taken command, there has been little to no 
conversation stemming from the Treasury Department on Puerto 
Rico.
    What policy tools are your staff considering to assess 
Puerto Rico?
    Secretary Mnuchin. So, thank you for the question. And 
first of all, I share your concern on the financial situation 
in Puerto Rico. I can assure you I personally spent a lot of 
time on it. Secretary Lew did give me his views on it, and his 
concerns, before he left. We do support the legislation.
    Ms. Velazquez. I know--
    Secretary Mnuchin. And we are using that. And I can assure 
you I have a team that is working on it actively. It is a very 
complicated issue. I wish there was a simple solution. There is 
not.
    Ms. Velazquez --I know--400,000 Puerto Ricans have left the 
island in the last 10 years. We have three doctors leaving the 
island every day. And so I am happy, in the sense that they are 
coming to Florida and Ohio.
    Believe me, politically speaking, it is going to be good 
for Democrats. But I want to give the option to the people of 
Puerto Rico for them to stay in Puerto Rico, if they choose to.
    So Puerto Rico is under the territorial clause. It means it 
is a colony. We, the U.S. Congress, have a responsibility. So I 
want for you to commit, yourself, that you will guide your 
staff to look at the viable options, including the use of the 
Exchange Stabilization Fund, to help reach Puerto Rico's 
immediate needs.
    Secretary Mnuchin. Well, I am not going to commit to use 
any specific tools, such as the exchange fund. But I can commit 
to you, easily, because I have already done this and will 
continue to do it--we are working very closely with lots of 
people on this. As I said, it is a very complicated issue. So 
we are trying to balance what a solution would be that is 
appropriate.
    Ms. Velazquez. So I was a member of the task force on 
Puerto Rico, to promote economic growth in Puerto Rico. So 
would you assign a--or do you have a staff that have been 
assigned to monitor the situation in Puerto Rico?
    Secretary Mnuchin. I do, and we are happy to followup with, 
and have them come meet with, you and your staff and get your 
thoughts.
    Ms. Velazquez. Wonderful, thank you.
    Mr. Secretary, in May, Senator Shaheen and I wrote you a 
letter expressing our concern regarding the administration's 
decision to eliminate all new program funding for the Treasury 
Department's CDFI programs for Fiscal Year 2018, and 
encouraging you and President Trump to reconsider this 
position.
    In June 2017, your own treasury report states that CDFIs 
are often the only source of credit and financial services in 
low-income urban and rural communities. So how do you reconcile 
the finding of your report and the shortsighted decision of 
eliminating funding for the program?
    Secretary Mnuchin. Well, thank you for asking that. And I 
had the opportunity to talk at the Senate yesterday about the 
same issue. So first let me say I do support the CDFI program. 
I think it has been effective.
    Having said that, we had to make difficult decisions in the 
context of the President's budget. The overall agenda was to, 
one, get to a balanced budget and, two, fund military 
expansion, which is much-needed. And this was just a difficult 
prioritization decision that we have made within the 
department.
    I would also comment that, as part of our financial report, 
we did specifically recommend a review of the Community 
Reinvestment Act and make sure that we meet with consumer 
advocates, community members, to make sure that that money is 
being used properly in communities, especially as we are forced 
to reduce other funding.
    Ms. Velazquez. I yield back my time.
    Chairman Hensarling. Time of the gentlelady has expired.
    The chair now recognizes the gentleman from Michigan, Mr. 
Huizenga, chairman of our Capital Markets Subcommittee.
    Mr. Huizenga. Secretary Mnuchin, I really appreciate you 
coming here and being in front of this committee.
    And, as tempting as it is--as you see some others on the 
other side of the aisle want to talk about anything other than 
the economy, our international standing--and it is tempting for 
me to talk about Samantha Power and Susan Rice illegally 
unmasking people, or Hillary Clinton's illegal use of her e-
mail as Secretary of State, or Director Comey illegally 
releasing classified documents, or Ukrainian meddling in our 
elections, I think it is a waste of time in this particular 
committee.
    So I would like to move on to a couple of other issues and 
try to divide those--that time equally. First and foremost, we 
just--celebrated would not be the right word in my mind--the 
seventh anniversary of Dodd-Frank. And we have seen this be a 
continual stumbling block to our recovery that we have been 
trying to get going here in the United States.
    And I am wondering, what do you view as the most urgent 
priorities needed to address and restore confidence and create 
more opportunities in our economy with our capital market 
system, being chairman of the capital markets committee, very 
interested in that and the effects of Dodd-Frank. And then I 
would like to move on quickly to Volcker.
    Secretary Mnuchin. Sure, so, I mean, I would just say, as 
part of Dodd-Frank, our focus is first, as I mentioned, 
community and regional banks. I think another big focus is 
around housing and housing reform and the qualified mortgage 
and making sure that banks that make good mortgages and they 
want to keep them on their balance sheet--they can.
    And I think you should mention the Volcker Rule as a big 
concern of ours in that--what it does to liquidity, and that we 
can have proper monitoring of eliminating proprietary trading 
with managing liquidity.
    Mr. Huizenga. And I know, in your report, you had laid out 
various items. And I am curious, is there anything specifically 
in Dodd-Frank that you think we, as a committee, need to 
address?
    Secretary Mnuchin. The long list is as we have outlined. 
But if I gave you the number-one thing, it is probably to raise 
the limit, as we have talked about.
    Mr. Huizenga. Great. That is helpful.
    As has been expressed by a few others, you know, I believe 
that the Volcker rule is at least partially to blame for the 
diminished liquidity in our markets. And, you know, this is 
something that is 900--I believe it is 932 pages, with 29--or 
just under 300,000 words.
    This is not an easily digestible, quote-unquote ``rule.'' 
That is War and Peace, frankly, into this whole thing. It is 
five separate Federal agencies in there. And I know, in your 
report, and I think it was page 132 and 133, you kind of have a 
chart laying out a number of things--19 different things, 
specifically, that could be used for improving the Volcker 
rule.
    And, as you had acknowledged earlier, our CHOICE act--we 
actually repeal Volcker in that. That is certainly my 
preference. You do lay out eight suggestions for Congress.
    But there are 11 regulatory suggestions for providing 
immediate relief. And that is from the Federal Reserve, the 
FDIC, the OCC, the SEC, CFTC--the alphabet soup of all these 
regulators.
    How quickly can we expect to see some relief coming, 
without the legislation, necessarily, maybe backing that up, 
but from the regulators themselves?
    Secretary Mnuchin. Well, I mean, I think, as you have 
mentioned in your legislation--you have repealing it, and we 
don't object to that, if that is what Congress wants to do. I 
don't think the Volcker rule is what created--or the lack of 
it--is what created the financial crisis.
    We are very focused on how to fix it. And as I said, 
these--there are active discussions at FSOC and with the 
financial regulators about what we can get a consensus to fix.
    Mr. Huizenga. Well, we would like to work with you on that 
and encourage you, because, again, as we know, legislative 
fixes are challenging to get to, but these are regulatory 
agencies that have the immediate and sometimes immediate 
ability to flip a switch. So we are hoping to do that.
    I guess, in the last few moments, here, I do want to touch 
on one other thing that Chairman Barr had talked a little bit 
about: the Iranian situation with aircraft exports.
    And I--the former chair of that committee in the last term, 
am curious, have there been any other financial institutions, 
be it U.S. or foreign institutions, that have been in contact 
with Treasury with respect to aircraft exports to Iran?
    Secretary Mnuchin. Again, I can't comment on the specifics 
that are confidential, but I can assure you we are on top of 
this.
    Mr. Huizenga. Well my time has expired, but I look forward 
to continuing the conversation.
    Secretary Mnuchin. Thank you.
    Mr. Huizenga. Thank you.
    Chairman Hensarling. Time of the gentleman has expired.
    The chair now recognizes the gentleman from California, Mr. 
Sherman, for 5 minutes.
    Mr. Sherman. Mr. Chairman, I want to get one thing clear 
for the record. Mr. Chairman, you began by quoting people 
saying that we should be nice to witnesses, and I think that it 
is important that the record reflect that no comment about 
being nice to either Democratic or Republican witnesses ever 
came from me.
    Now, I want to go through a number of things for the 
witness to respond to for the record.
    You talked about the importance of small banks and credit 
unions being able to make business loans to companies in our 
districts. That is not a reason for us to take the giant banks 
off the hook for prudential regulation. It is their near-
collapse that nearly collapsed the economy.
    It is the reason for you to deal with the OCC, which is 
under your jurisdiction, and have them, when they audit banks 
and those banks have a prime-plus-four or prime-plus-five loan 
to a company that is just a little shaky, that they have a 
reserve of just an extra 1 or 2 percent, rather than 30 to 50 
percent. You, Mr. Secretary, could do more than any of us to 
get small business loans made by local banks.
    The debt clock has been behind you. You commented on that. 
I would hope that any tax reform that came out of your 
department or that was supported by your department would not 
increase that debt according to the CBO.
    And we just voted in the House yesterday not to cut the 
CBO, because they are the umpire here in Washington to 
determine what increases and decreases the deficit.
    I would hope you would use your power on FSOC to break up 
the ``too big to fail'' banks. The debt limit is just over the 
horizon, and I hope that you would use your voice to remind us 
that it is not enough to deal with the debt limit in overtime, 
after you have used extraordinary measures to keep us from 
defaulting. The harm is to our economy now, because investors 
have to price in the risk that America will default on its 
debt.
    You probably didn't think you would be dealing with Armenia 
today. We need a U.S.-Armenia tax treaty. Your department needs 
to allocate one tax lawyer for a few weeks. And in making the 
decision as to whether to allocate a tax lawyer for a few weeks 
to the project, you will be told that we should make the 
decision based upon the size of the business transactions with 
that country. I hope that you would direct your department to 
add two more criteria.
    The first is whether the other country is willing to use 
the U.S. model treaty. Because if they are willing to sign on 
our bottom line, you don't have to commit much in the way of 
resources to negotiating the treaty and you build momentum 
internationally for other countries accepting the U.S. model.
    And second, I hope you would listen to the State Department 
when they testified before my other committee, Foreign Affairs, 
just yesterday that it is important geopolitically that we have 
this treaty. So I will get you the letter from the government 
of Armenia saying they are willing, pretty much, to sign the 
bottom line that the United States has presented.
    Now, I have got some questions. Is China a currency 
manipulator today?
    Secretary Mnuchin. First of all, on Armenia, we are happy 
to followup on your office. I do stay on top of a lot of 
issues, but I must admit that is not one I am on top of. But we 
will followup--
    Mr. Sherman. That is one you should respond to for the 
record. I look forward to working with you.
    Is China a currency manipulator?
    Secretary Mnuchin. I think, as you saw in our most recent 
currency report, we did not label China a currency manipulator 
at this time. However, they have been a currency manipulator in 
the past.
    Mr. Sherman. Since they have been a currency manipulator, 
are you in favor of tariffs or other actions to recoup for 
America the jobs we lost when they were a currency manipulator? 
Or is it that they can--as long as what they did was in the 
past, we are not going to respond?
    Secretary Mnuchin. I can assure you that the--President 
Trump is very focused on the economic and trade issue with 
China, and nothing in the past is in the past. So--
    Mr. Sherman. Let me squeeze in one more--
    Secretary Mnuchin --All tools will be on the table.
    Mr. Sherman --One more question. And that is, your 
department fined ExxonMobil for violating our sanctions against 
Russia. Are you confident that your department made the right 
decision? And why aren't you holding any individuals 
responsible, since a corporation is an inanimate construct? 
Individual people undermined our sanctions.
    Secretary Mnuchin. Let me first comment that, obviously, I 
am highly aware of the situation and the decision. It is under 
litigation, so it would be inappropriate for me to make any 
specific comments.
    And thank you for being nice on me since I am a California 
resident.
    Mr. Sherman. I will get you next time.
    Chairman Hensarling. Time. Time of the gentleman has 
expired.
    The chair now recognizes the gentleman from Wisconsin, Mr. 
Duffy, chairman of our Housing and Insurance Subcommittee.
    Mr. Duffy. Thank you, Mr. Chairman.
    Thank you, Secretary Mnuchin, for being here.
    I just would like to note that it was not Rex Tillerson who 
set the reset button with Russia. That was actually Hillary 
Clinton, with this stupid little button that she pushed. It was 
Romney who said that Russia was our greatest threat, but it was 
Barack Obama who said the 1980's want their foreign policy 
back.
    Ms. Moore. Mr. Chairman--
    Mr. Duffy. And it was Bill Clinton--
    Ms. Moore. Mr. Chairman.
    Mr. Duffy --Who received a half a million dollars for 
speaking--
    Chairman Hensarling. The gentleman will suspend.
    For what purpose does the gentlelady from Wisconsin seek 
recognition?
    Ms. Moore. I was just reminding my good friend and 
colleague from Wisconsin about the--he was not here when you 
recited the rules about not--
    Chairman Hensarling. Does the gentlelady have a 
parliamentary inquiry?
    Ms. Moore. Yes, sir. I do have a--
    Chairman Hensarling. Would you state your inquiry?
    Ms. Moore. My inquiry is whether or not this particular 
discourse violates the rules that you articulated earlier when 
Mr. Duffy was unavailable.
    Chairman Hensarling. The gentlemen's questioning has 
violated no House rule or committee rule. The time belongs to 
the gentleman from Wisconsin.
    He may proceed.
    Mr. Duffy. Thank you, Mr. Chairman.
    I would also note that it wasn't Melania Trump who received 
a half a million dollars for a speech to an investment company 
that was tied to the Kremlin.
    As you have noted, we have a lot of folks on the other side 
of the aisle who are part of the ``Impeach Trump'' movement. 
They were trying to impeach Trump before he was even sworn into 
office.
    So, as my friends--and I know this is a little off-topic, 
but, as my friends are talking about Russia across the aisle, 
do you have any idea what is being talked about in Wisconsin 
today?
    Secretary Mnuchin. Sorry--
    Mr. Duffy. You do.
    Secretary Mnuchin --Absolutely--13,000 new jobs and a $10 
billion investment from Foxconn to build the most advanced 
manufacturing plant in the United States and, for the first 
time in I can't even remember how long, to build T.V. screens 
and other videos.
    It is just extraordinary, and I was pleased to be at the 
White House yesterday for that announcement. And 
congratulations to Wisconsin. I know it was a very competitive 
situation with other States, and boy, that will be a big deal 
for that economy.
    Mr. Duffy. And we are happy it is not going to California, 
I am sorry to say.
    That is right, but we are talking about jobs. We are 
talking about economic growth. We are talking about industries 
that my friends across the aisle--they had written off. They 
had said, ``These jobs will never come back. They are gone 
forever.''
    And, under your boss and my Governor, to your point, a $10 
billion investment and 3,000 to 13,000 jobs in the great State 
of Wisconsin. And that is what people care about.
    Secretary Mnuchin. That doesn't include the construction 
jobs, I might add, in the creation of what I think you are 
calling now Wisconn Valley.
    Mr. Duffy. Wisconn Valley. That is right, that is what we 
are talking about. And maybe that is why my friends across the 
aisle have lost 1,000 seats across government, because they 
don't understand that people care about jobs and economy and 
border security and a strong military. And the heart of all 
that is our financial service sector, which is what we are 
talking about today.
    But I am going to go off topic again and ask you about our 
tax code, because I think, if we are going to have more 
Foxconns, we are going to need a revamp of our tax code. We 
have heard some rumor that some in the administration have said 
the top rates might not be going down, they might be going up.
    Do you want to give us some clarification on your view of 
taxes and where they should go to make America competitive 
again?
    Secretary Mnuchin. So we have been working very closely 
with the leadership of the House and the Senate to create a 
unified plan. Our objectives are very simple. On the personal 
side, we want to cut down the number of brackets. We want to 
simplify taxes--95 percent of Americans will be able to do 
their taxes on a giant postcard. That will make my job 
overseeing the IRS much simpler.
    And on the business side, as you pointed out, we want to 
transition from a worldwide system, where we allow companies to 
defer and not pay taxes and leave trillions of dollars 
offshore, to a territorial system that is competitive, with a 
competitive rate that will bring back trillions of jobs--
trillions of dollars and huge amounts of jobs and capital to 
this country.
    Mr. Duffy. And I would just note that I don't think this is 
a partisan issue, making--or allowing companies to stay and 
compete in America, but also bringing other companies, like 
Foxconn, to the United States of America for American jobs.
    Not Republican, not Democrat--these are American issues, 
making us competitive again. And I would hope that both sides 
could come together and work on tax reform so we don't have to 
craft bills that have to get through budget reconciliation, 
which I don't think works very well.
    One harder question for you, though, on point. I do have 
some concern about the U.S.-E.U. covered agreement. The 
President, who I have been supportive of, talked a lot about 
bad deals being negotiated by the prior administration--by 
stupid people, I think that is what he said.
    This deal was announced the week before President Trump was 
sworn into office. I know that we have talked about this, and I 
appreciate your conversation. I spoke with your staff. We sent 
you a letter, 21 signers. We pointed out seven things that we 
have concerns about.
    I know you are going to send a letter of your understanding 
of this agreement. You are not going to renegotiate it. I do 
have a concern that we don't have an exchange of letters that 
everyone is agreeing to, to clarify our understanding of what 
this agreement means.
    My time is expired, but I want to make sure that we get the 
negotiation prowessness of yourself and Mr. Trump to make sure 
this deal works for American insurers and our State-based 
model, as opposed to an international system that doesn't work 
for--
    Chairman Hensarling. Time of the gentleman has, indeed, 
expired.
    Mr. Duffy. I yield back.
    Chairman Hensarling. The chair now recognizes the gentleman 
from New York, Mr. Meeks.
    Mr. Meeks. Thank you, Mr. Chairman.
    Mr. Secretary, let me just ask first. When you became the 
secretary of the Treasury, you had to take an oath of office, 
correct?
    Secretary Mnuchin. That is correct.
    Mr. Meeks. Now I--just so that I am clear, that oath of 
office was to the United States of America and our 
Constitution? Or was the oath of office to the President of the 
United States?
    Secretary Mnuchin. It was to uphold the Constitution.
    Mr. Meeks. And you are aware, because I know we were 
talking about current events, recently--other current events, 
because I want to make sure that you are able to do your job. 
The current event recently is--for example, the President of 
the United States is telling the attorney general that he 
should be protecting the President as opposed to the 
Constitution.
    Most folks, Democrats and Republicans, believe that maybe--
that the attorney general did the right thing by recusing 
himself from any investigation that dealt with Russia.
    So my question to you, given that the President is talking 
about that he wants loyalty and protection, because he says 
that the people--his administration is not protecting him, that 
in matters that are serious to the Department of Treasury, are 
you going to protect the President of the United States? Or are 
you going to uphold the Constitution of the United States?
    Secretary Mnuchin. I think, in many cases, in my job, it is 
one and the same.
    Mr. Meeks. No. You think it is one and the same?
    Secretary Mnuchin. I said, in many cases. I said it is--
many cases.
    Mr. Meeks. So, then, that gives me serious concerns--
    Secretary Mnuchin. No, what I said is in many cases--
    Mr. Meeks. Reclaiming my time.
    Secretary Mnuchin. I will--
    Mr. Meeks. Reclaiming my time.
    Secretary Mnuchin --I assure you I will uphold the 
Constitution.
    Mr. Meeks. Reclaiming my time.
    Chairman Hensarling. The time belongs to the gentleman from 
New York.
    Mr. Meeks. That gives me serious concerns, because there 
are many allegations about conflicts of interest by the 
President of the United States, and there is an ongoing 
investigations against the President of the United States about 
his involvement in Russia.
    And if there is someone that tells me that you believe that 
your obligations, even if the--because I thought that no person 
was above the law. So the--your oath of office, from what I 
heard, was to the Constitution of the United States of America, 
not to Donald Trump, the President of the United States. So--
    Secretary Mnuchin. Let me just be clear. My obligation is 
to uphold the law. We have cooperated with all investigations 
and we will absolutely do that.
    Mr. Meeks. Let me--let me reclaim some time, because, you 
know, that--the U.S. Congress has some huge responsibilities, 
also. So now I am concerned, because--U.S. Congress, what they 
have done, bipartisan--we have--we were about to implement a 
sanctions bill against Russia.
    And in that sanctions bill, there is some authority that 
OFAC has to enforce certain protections. So maybe I should ask 
you this question first. Do you believe, Mr. Secretary, that 
there is corruption in Russia? Yes or no?
    Secretary Mnuchin. Yes, I am sure there is corruption in 
Russia.
    Mr. Meeks. Now, if you believe that there is corruption in 
Russia, and--have you read or understand the sanctions bill 
that we are doing in a bipartisan way in the U.S. Congress, 
both the House and the Senate? Have you familiarized yourself 
with that bill at all, sir?
    Secretary Mnuchin. Of course I have.
    Mr. Meeks. And so you know what your responsibilities are 
under OFAC?
    Secretary Mnuchin. Of course I do.
    Mr. Meeks. So let--then, have you also made some plans on 
how you will implement the sanctions bill, or how the Treasury 
Department will utilize the sanctions bill in regards to 
Russia, sir?
    Secretary Mnuchin. We have looked at it.
    Mr. Meeks. But have you thought about how you would do some 
planning to go against what you admit, the corruption that is 
taking place in Russia; how the Treasury Department would 
protect the people of the United States, the Constitution, not 
the President?
    Have you thought about how you would implement that? Or can 
you do that on your own? Or must you go back and get some 
clearance from someone else? Because--
    Secretary Mnuchin. I don't need to get clearance from 
anybody else, and I assure you, we will work with Congress.
    I do have certain concerns that we may have--
    Mr. Meeks. Let me--reclaiming my time, because I am just 
concerned--I have got 45 seconds left--because I am concerned 
that, when I see others in the administration trying to do 
their jobs, the President then Tweets something and--there have 
been inconsistencies.
    For example, just quickly about the debt ceiling, you have 
said, at one point, that the debt ceiling should be clean. 
Others in the administration have said the debt ceiling to be 
a--you should be able to include some increases, or change it.
    So what is your position now? Should there be a clean debt 
ceiling when we pass it? Or should there be other things added 
to it?
    Secretary Mnuchin. The President has been very clear that I 
am responsible for the debt ceiling, and my position has been 
that I believe there should be a clean debt ceiling.
    Mr. Meeks. So, you are not for, as others in the department 
have talked about, in regards to that there should be additions 
to the debt ceiling, or add-ons to the debt ceiling?
    Secretary Mnuchin. Again, Director Mulvaney and I are on 
the same page that I am representing the administration on 
this.
    Chairman Hensarling. Time of the gentleman has expired.
    The chair now recognizes the gentlelady from Missouri, Mrs. 
Wagner, chairman of our Oversight and Investigations 
Subcommittee.
    Mrs. Wagner. Thank you, Mr. Chairman.
    Over here, Secretary. Welcome, and thank you for appearing 
before this committee today.
    I dearly and sorely want to get back to the purpose of this 
hearing today, which is to talk about Treasury and the state of 
the international financial system.
    I first want to commend you regarding the Treasury report 
you recently released, focusing on regulatory burdens for 
financial institutions. And I was honored to be present in the 
Oval Office with the President of the United States on February 
3rd when he signed the Executive Order directing you to conduct 
said report.
    Many of the proposals in the report will go a long way 
toward alleviating regulatory overburden, especially--
especially for community financial institutions, so that 
lending and economic growth can continue.
    Another thing that I am particularly concerned about, Mr. 
Secretary, particularly with my role on the--also on the 
Capital Markets Subcommittee, is that we now have about half as 
many public companies in the United States as we did 20 years 
ago.
    Additionally, there has been a decline in IPOs, or initial 
public offerings, during the same time without a corresponding 
decline in the number of business startups. I understand that 
Treasury is expecting to issue a capital markets report later 
this year. Will that report focus on the issue of the declining 
number of public companies and IPOs?
    Secretary Mnuchin. We are happy that will be one of the 
issues we will consider. Thank you.
    Mrs. Wagner. And why should we care about this trend?
    Secretary Mnuchin. I think, as you said, we care about 
creation of businesses. We want to make sure that there is not 
too much consolidation in certain industries, that there is 
proper competition and that there is job creation.
    Mrs. Wagner. And what are some of the regulatory and other 
impediments that are chilling the IPO market, or negatively 
affecting company decisions to access capital in the public 
market?
    Secretary Mnuchin. Well, I think, as you know, there are a 
lot of issues, and we will address those in the report and look 
forward to working with you.
    Mrs. Wagner. And why is reversing this trend important for 
both, I think, the broader economy and for individual 
investors?
    Secretary Mnuchin. Well, I am--I am more focused on 
broadening the economy than, necessarily, individual investors 
but it is important for individual investors, for their 
retirement, and be able to invest in things.
    I would say, in broadening the economy--again, it all gets 
back to jobs. We are very focused on how we get to 3 percent 
GDP, which we think is critical. The difference between 2 
percent and 3 percent is trillions of dollars--
    Mrs. Wagner. And we haven't been there, Mr. Secretary, for 
a long time.
    Secretary Mnuchin. We haven't, but we have, over a long 
period of time. Thank you.
    Mrs. Wagner. And does a healthy public market impact small 
company growth and what impacts does it have on job creation?
    Secretary Mnuchin. Limiting capital to industries limits 
job creation and investment.
    Mrs. Wagner. I thank you. And I will yield the remainder of 
my time to the chairman, if he so chooses.
    Chairman Hensarling. Well, I thank the gentlelady for 
yielding.
    Another question, Mr. Secretary--so, in the Treasury 
report, it proposes a regulatory off-ramp, much like the off-
ramp that we have in the CHOICE act, and I think you are 
familiar with. In the CHOICE Act, a banking organization that 
maintains a simple leverage ratio, non-risk-weighted, of 10 
percent essentially has a Dodd-Frank off-ramp.
    So can you talk to us about how this kind of a regulatory 
burden-capital tradeoff could help spur economic growth?
    Secretary Mnuchin. Well, Mr. Chairman, we do share your 
view that the off-ramp is one of multiple solutions. It is not 
the only solution. But, again, going back to what we said 
earlier, our number-one objective is to make sure that the top 
eight banks don't go from 50 to 70 percent market share or 100 
percent market share, and that we have a robust banking system 
with community and regional banks that can grow the economy.
    Chairman Hensarling. Time of the gentlelady has expired.
    The chair now recognizes the gentleman from Georgia, Mr. 
Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    I am over here. I want to ask you two points, two 
questions. Let me get the first one out of the way first.
    We have had some discussion about the debt limit, and I 
just want to remind you that your predecessors, Jack Lew 
especially, would send us estimates, would say and give us a 
running account of when that possible time would come.
    But when--your responses to that have been--you said 
Congress should act. And then you said--and you keep providing 
us with a nebulous deadline of sometime after September.
    Now, Mr. Mnuchin, you and I both know that the market's 
worst enemy is uncertainty, not to mention uncertainty around 
the debt limit, which also plays a role in what the Fed does. 
And keeping that sterling credit rating, AAA, all around the 
world is what sustains us. It is the backbone of what keeps our 
country the number-one financial system.
    So let me just ask you can you commit to this committee 
today that, within a week, you could follow the example of your 
predecessor and send to us your best estimate as to when we 
will reach the debt limit? Can you do that?
    Secretary Mnuchin. Again, first of all, thank you for that 
question. And I am very familiar with financial markets, which 
I have been involved in for the last 35 years. So I do 
understand this issue very well. I have been very clear on it 
publicly. I can tell you today the answer to that question.
    Mr. Scott. What is that?
    Secretary Mnuchin. That it is--I have said that I am 
comfortable that we can fund the government through the end of 
September, that based upon my information at this time--which 
is subject to change, given big moves--but my best judgment 
right now is through the end of September. I have said that--
    Mr. Scott. OK--
    Secretary Mnuchin --Publicly. This is not the first time. 
And I will also--
    Mr. Scott --Thank you. I have got your answer.
    Secretary Mnuchin. Thank you.
    Mr. Scott. I only have a few minutes. And I got to get to 
this other question. Now, I want you to know that this effort 
and concern, on this committee, with President Trump and the 
Russian connection--there was a movie called the French 
Connection, also. But I want you to know that what Ms. Waters's 
bill and her efforts in this is not a Democratic-alone 
position.
    I work with both Democrats and Republicans. I have friends 
on both sides of the aisle. And it is a growing consensus among 
Republican Members of Congress that we owe it to the American 
people to come clean on this. President Trump is not bigger 
than America. This isn't about him. It is about the American 
people.
    And I love this country. I was born in the middle of a 
tobacco field in Aynor, South Carolina. But I made it all the 
way up to the Wharton school of finance. And not only that--to 
serve on the executive board of directors of the best school of 
business and finance, at the University of Pennsylvania, in the 
world. And I did it with just helping hands, because I come 
from a poor family.
    So I want you to know, and I want this Nation to know, that 
we deserve to know what it is that President Trump is hiding, 
that he is willing to turn the Federal Government, the Justice 
Department, upside down and inside out.
    It ain't about him no more. It is about coming to a sense 
of confidence and truth that we can restore the respect, the 
power, and authority of our Nation, first to the American 
people, and to the world.
    Chairman Hensarling. 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. Well, thank you, Mr. Chairman.
    Again, Mr. Secretary, good to see you.
    And, just following up on the questioning of Mr. Barr, I 
would like to thank you for your commitment to leveling the 
trade and regulatory playing field for our job creators here in 
the United States.
    And on this front, unlike at least one of my colleagues, I 
was very pleased to see that the U.S.-E.U. covered agreement on 
insurance and reinsurance moved across the finish line, because 
that is going to mean billions of dollars in savings for U.S. 
firms, which can be reinvested in our economy, and that is 
going to be passed on to the consumers.
    And I also appreciate your commitment to raising the equity 
caps for U.S. financial services in China--raising that issue. 
And I was hoping you could update us on your most recent 
conversations and how the Chinese side reacts when we push them 
on that issue of caps.
    Do you think we could get a win on this front?
    Secretary Mnuchin. Again, I am going to withhold how they 
react. But what I will say is--this is a yes-no answer. We 
expect them to be increased. We have told them to do that. I 
don't care how they react. What I care about is when they tell 
us that there is no cap. So I am not interested in them going 
from 49 to 52 percent. I want no cap.
    Mr. Royce. I think that is absolutely--
    Secretary Mnuchin. I hope you don't mind--
    Mr. Royce --The right attitude.
    Secretary Mnuchin --I hope you don't mind me using just 5 
seconds of your time, because I do want to acknowledge Mr. 
Scott, and I too share this great love for this country, and it 
is extraordinary, your accomplishments, so thank you.
    Mr. Royce. And let me also say, on the topic of housing 
finance reform, you have made it very clear that perpetual 
conservatorship is unsustainable, and you would prefer we deal 
with Fannie and Freddie through legislation. But as we work 
toward reform in this committee and in the Senate, we can't 
lose sight of the benefits afforded the GSEs by previous 
Congresses. This is one of the problems. There are benefits no 
other company has.
    And they are benefits that help create the duopoly and 
broken system of private gains and public losses. And among 
those obvious benefits are tax-exempt status from State and 
local jurisdictions; the ability to issue special SEC-exempted 
TBA, or ``to be announced,'' securities; the ability for the 
Fed to purchase GSE securities through their monetary policy 
operations; a perpetual line of credit directly to Treasury 
beyond the 2008 bailout authority; and above all else, the 
implicit government guarantee that comes with the charter which 
gave them the ability to borrow at below-market rates and 
ignited the duopoly.
    And, you know, as someone who was concerned about, 
basically, the moral hazard in this equation, in 2004 and 2005, 
I tried to have them regulate it for systemic risk.
    I think, Secretary Mnuchin, you understand this. Can you 
eliminate any of these benefits without legislation? And would 
you agree that reconstituting Fannie and Freddie as private 
companies with these congressionally mandated benefits should 
be avoided at all costs?
    Secretary Mnuchin. I do. And, first, let me say I look 
forward to working with you on this.
    As I have said, we need a solution that creates liquidity 
for the housing market and doesn't put taxpayers at risk. And 
if there are any guarantees from the government going forward, 
they should be explicit and paid for and done so in a way that 
doesn't put taxpayers at risk.
    And we are determined to find a solution, because this is a 
huge part of the economy, and leaving them in conservatorship 
for the next 4 years makes no sense.
    Mr. Royce. Well, let me make sure that I understand, as 
this issue is as important, probably, as anything that is going 
to come up today.
    Given our past experience of what happened with the 
collapse of the GSEs, do you agree, or not, that Fannie Mae and 
Freddie Mac should not under any circumstances, be re-
privatized as privately owned, implicitly government-backed 
institutions?
    Secretary Mnuchin. So, what was the last part of it? 
Implicitly?
    Mr. Royce. Implicitly government-backed institutions. In 
other words--under any circumstances be re-privatized as 
privately owned, implicitly government-backed institutions.
    Secretary Mnuchin. I agree. There shouldn't be implicit. If 
there is something, it should be explicit and paid for. 
Otherwise--it should be very clear. There is no implicit 
government backing.
    Mr. Royce. Thank you--thank you, Mr. Secretary.
    Chairman Hensarling. Time of the gentleman has expired.
    The chair now recognizes the gentleman with the dashing 
pink suit from Missouri.
    Mr. Cleaver, the ranking member of the Housing and 
Insurance Subcommittee.
    Mr. Cleaver. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here.
    I do think that, in a democracy, once the commonly accepted 
rules of politeness are breached, it will be painfully 
difficult for them to be reversed. And maybe, we are there now, 
in that regard, the ranking member had talked to you about the 
letter that was sent.
    I am simply hoping that, as we move along, that you would 
respond to letters, communication from her. I personally 
believe it is impractical for you to respond to every letter 
that we send you, as, you know, each member of the Democratic 
side would send you--or Republican side, for that matter.
    So I am just hoping that, in the future, that the letters 
are responded--that you would respond to the letters in some 
kind of a timely fashion.
    Now, let me, again, unless you want to respond to that, I 
will move to my question.
    Secretary Mnuchin. Yes, so, I mean, first of all, as you 
can see, we have over 50 letters that we have responded to. I 
can assure you, and I can assure the ranking member, that we 
will cooperate with you. We have fully cooperated with three 
committees.
    To the extent you are asking for the same information that 
other people--I would merely ask for you to coordinate with 
information we have already received. But we fully intend to 
cooperate with the committee and be responsive, as we think we 
have done.
    Mr. Cleaver. I could argue with that, but I am more 
interested in something else at the present time. I was here 
during the whole Dodd-Frank debate, and the development of that 
legislation. And it was a turbulent time, as you well know.
    And I will admit that there was a destabilizing component 
in that legislation, as it relates to small banks--community 
banks: 22 percent of them, 22 percent of the small banks--
community banks--have declined, have evaporated over time, and 
25 percent--this was very troublesome to me--25 percent of them 
say they are anticipating merging with another bank. So what we 
are going to end up having are the larger banks getting even--
even larger.
    I think they were helped a little bit because they were 
exempt from the Durbin amendment. However, I am asking you, 
what do you--what advice would you give us on how we can 
quickly remove the burden from small banks?
    And understand this, in case you don't understand it, I 
don't know anybody on this side, or the other side, for that 
matter, who believes that we ought to continue to allow this 
burden to hit small and community banks. So, if everybody 
agrees on it, what do you think we can do and do quickly to 
remove that burden?
    Secretary Mnuchin. Well, again, thank you, and we look 
forward to working with you, and I would hope that we could do 
this on a bipartisan basis, as it relates to things that impact 
community banks and regional banks.
    So I think we delivered a very balanced report, and many of 
the regulators have agreed with us. So we have a long list of 
recommendations, and we would be more than happy to followup 
with your office and go through the specific legislative ones 
for community banks.
    Mr. Cleaver. So you would sit down with the chair and the 
ranking member and work on and work out recommendations to 
provide that relief?
    Secretary Mnuchin. To the extent they both want to sit down 
with us, we would be more than happy to do that and support 
that, yes.
    Mr. Cleaver. Well, I am hoping that will happen. And, like 
every other member, I have community banks and small banks who 
are struggling. And it is a little frustrating to me that all 
we have to do is change it--is change the legislation, and we 
don't do it.
    Secretary Mnuchin. I share your frustration, and I think 
this is the biggest single issue, since community banks know 
how to lend and will drive the engine of growth.
    Mr. Cleaver. All right. And by the way, I am wearing this 
pink so my friends can find me quickly.
    Secretary Mnuchin. I was going to say, definitely, best 
male dressed in the room.
    Chairman Hensarling. Time of the gentleman has expired.
    The chair now recognizes the gentleman from Oklahoma, Mr. 
Lucas.
    Mr. Lucas. Thank you, Mr. Chairman.
    Secretary Mnuchin, thank you for being here today.
    As you may know, I serve on the Ag Committee, in addition 
to this committee, and thus I care a lot about the use of 
derivatives and similar instruments that can help my 
constituents manage risk. As such, I would like to visit with 
you about margin requirements for a moment.
    First, I was very pleased to see that your department's 
recent report suggested excluding margin from centrally cleared 
derivatives from the supplemental leverage ratio. And I thank 
you for coming to that conclusion, as the regulation reduces 
the number of clearing options available to customers. I really 
hope that gets reviewed and remedied soon--soon.
    And second, I would want to ask you about margin for inter-
affiliate swaps. While the CFTC's rules have distinguished 
internal transactions within the same company, when setting 
margin requirements, the banking regulators have not.
    And this raises some concerns for me, not only because it 
creates a patchwork effect of regulations in the U.S., but the 
approach of the banking regulators is inconsistent with that of 
the Asian and European regulators.
    So, having said that, do you have any comments about 
whether an approach more like the CFTC from banking regulators 
would level the playing field and unleash significant amounts 
of capital into the market, Mr. Secretary?
    Secretary Mnuchin. Well, we look forward to working with 
you, and yes. On the first issue, we think, where there is 
central clearing, that should be accounted for. And on the 
inter-affiliates, we look forward to working with you, and that 
will be one of the issues addressed in our subsequent reports.
    Mr. Lucas. And that is very important, because to tie up 
capital that should not be otherwise tied up, to reduce the 
options that my, for instance, ag and energy people have in 
being able to manage the risk in both selling their commodities 
and securing the resources to do their work, it just, I think--
in the environment we are in right now, the approach taken by 
CFTC and the initial report from your people would tend to 
think that we will be in a position to address that, so to 
speak.
    In the remaining time, I would like to commend your 
department for suggesting in its report that the recent 
leveraged lending guidance be reworked.
    As I told Chair Yellen earlier this month, much of the 
energy industry is considered distressed, which means it is 
harder for them to obtain capital under the leveraged lending 
guidance.
    Could you briefly tell the committee why your department 
suggested withdrawing the guidance, and what you think would 
happen if the guidance were done in a better fashion?
    Secretary Mnuchin. We think it would help lending 
significantly. And again, that doesn't mean that banks 
shouldn't properly underwrite loans, they should. But that we 
don't support a blanket across the board approach that cuts off 
leveraged lending.
    Mr. Lucas. Absolutely. Allowing bankers to be bankers. And 
in the case of the energy industry people, in my State, where 
they have proven barrels, they have proven MCF in the ground, 
they have the proven ability to deliver, the proven ability to 
continue in their business.
    Creating a situation where, in effect, we push them over 
the edge, arbitrarily, just seems counterproductive and 
literally destructive. So, I appreciate that.
    And with that, Mr. Chairman, I yield back the balance of my 
time.
    Chairman Hensarling. Gentlemen yields back.
    Chair now recognizes gentlelady from Wisconsin, Ms. Moore, 
ranking member of the Monetary Policy and Trade subcommittee.
    Ms. Moore. Thank you so much, Mr. Chairman.
    I lost 5 seconds. OK. Thank you so much. And welcome again, 
Mr. Secretary. Mr. Secretary, I was really relieved to hear you 
say, on a number of occasions this morning, that you are going 
to be very vigilant on anti-money laundering and 
counterterrorist financing compliance.
    And so, given that, I just want a few--put a few things on 
the record and find out whether or not you think that certain 
kinds of investment activity raise concern and warrant 
heightened scrutiny from regulators and law enforcement, and 
that, of course, our President and his family have engaged in. 
Investments with parties who have admitted to or have been 
accused of or convicted of crimes, do you think that is 
problematic? Yes or no?
    Secretary Mnuchin. It sounds that way--
    Ms. Moore. OK.
    Secretary Mnuchin. But it depends on the specifics.
    Ms. Moore. Oh. Well I can be specific. How about Felix 
Sater who helped build the SoHo projects? He is--
    Secretary Mnuchin. I am not aware of any of the specifics--
    Ms. Moore. Well, OK--
    Secretary Mnuchin --Nor would it be appropriate for me to 
comment, that is not part of my job.
    Ms. Moore. You are the treasury secretary. Investments 
where apparent enterprise lacks a significant or economic 
basis, do think that is problematic? In mirror trades?
    Secretary Mnuchin. What was the last part?
    Ms. Moore. Mirror. Like in a mirror trade.
    Secretary Mnuchin. I don't know what your--I don't--I am 
not connecting this to the terrorist financing issues.
    Ms. Moore --And investments with politically explicit 
parties. Well, I could consume all my time, but I would just 
bring to your attention that there have been--these are not 
secret things.
    They are exposed, they are in the news for everybody to 
read about the partnerships that the Trump family has with 
people who have been convicted of crimes, who have been 
associated with Russian mob activity. And I was just wondering, 
for the record, if you thought that that was problematic?
    Secretary Mnuchin. Again, it is really not part of my job 
to comment one way or another on that. My job is focused on 
terrorist--
    Ms. Moore. Well you are the secretary of the treasury. You 
are part--you know, you--the SEC, the Foreign Corrupt Practices 
Act. These are all things that you have jurisdiction over.
    Secretary Mnuchin. No, the SEC, I have no jurisdiction 
over.
    Ms. Moore. All right. Let me ask you some more questions. I 
mentioned in my opening statement, I talked about conflict 
minerals, and I talked about the disclosures for extractive 
industries, which you supported.
    What were the judgments you relied upon to support 
eliminating disclosures for extractive industries? And for, in 
the Choice Act, eliminating conflict minerals? And so, since 
you seem to need examples, I will give you examples. 
ExxonMobil, as you know, the Treasury just fined them for 
corrupt dealings with Russia. And conflict minerals, you are 
familiar with the horrific civil war that has ravaged the 
Democratic Republic of Congo and how armed groups took control 
of the mines, used the proceeds to fund armed conflict, and 
those minerals ended up in the U.S. consumer market.
    And thereby, we, as U.S. citizens, have inadvertently 
funded the killing, rape, and destruction in the DRC. So, upon 
what judgment did you rely to decide that we don't need these 
provisions?
    Secretary Mnuchin. First of all, I just want to comment on 
the Exxon. It was not on corrupt dealings, it was on an OFAC 
violation. In regards to the mineral issue--and again, we think 
there is a lot of problems as you pointed out, and I would be 
more than happy to followup with your office and talk more 
about this issue.
    Ms. Moore. I would like to yield the last minute to the 
ranking member.
    Ms. Waters. Thank you very much. I would like to thank you, 
Ms. Moore, for delving into some of the many issues that we are 
so very concerned about.
    What Ms. Moore walked through was, relationships. The 
President of the United States has relationships with those who 
have been jailed, who have known to have mob contacts, who have 
been involved in criminal activity.
    And, as the treasurer, she was asking you, you know, what 
do you think about that? And the real question and in all of 
this is whether or not you see your responsibility to make sure 
that you are protecting the people of this country, respecting 
the Constitution of the United States, or as it appears, that 
this President is demanding of those in his cabinet and others 
that they spend their time protecting him.
    Basically, that is the question.
    Chairman Hensarling. Time--time of the gentlelady has 
expired.
    The chair recognizes the gentleman from Florida, Mr. Posey.
    Mr. Posey. Thank you very much, Mr. Chairman.
    Secretary Mnuchin, I appreciate you being here today. For 
more than 6 years, 6 long, torturous years, I have been 
fighting for a group of heroes that were once held captive. On 
February 13th, 2003, four Americans, who were Department of 
Defense contractors on a U.S. Government counter narcotics 
flight mission in Columbia, were shot down by the Revolutionary 
Armed Forces of Colombia, or FARC as they are commonly known, a 
designated terrorist organization that controls more than 95 
percent of the world's cocaine business.
    The pilot, Tom Janice, a retired member of the U.S. Army's 
Delta force, was executed on the spot and three Floridians, 
Keith Stansell, Marc Gonsalves, and Tom Howes, who happens to 
be my constituent, were captured, held hostage in the jungle, 
and severely tortured for more than 5-1/2 years until they were 
rescued by the Colombian army.
    These Americans and the Janice family, obtained a Federal 
judgment, in 2010, under the Anti-Terrorism Act for damages 
against FARC to compensate them for FARC's acts of terrorism 
during their captivity, and the execution of one American.
    However, there are no FARC assets in the United States 
except for drug moneys of FARC agents--the traffickers and 
money launderers--and these assets are frozen under the Foreign 
Narcotics Kingpin designation Act. Under current law, victims 
cannot access frozen assets under the Kingpin Act.
    I believe the victims of the foreign terrorist 
organizations--which profit and fuel their activity with drug 
money--should be compensated from the drug money that we have 
secured. In the 114th congress, I introduced legislation, 
titled the ``Clarifying Amendment to Provide Terrorism Victims 
Equity Act,'' or CAPTIVE Act, is the acronym, to change that 
law.
    My bill passed the House by unanimous consent last year, 
but was stalled in the Senate, when the Office of Foreign 
Assets Control raised concerns about the bill that they never 
mentioned to us in the House. I introduced the legislation, 
this Congress, and I am hoping to bring the bill to the floor 
soon.
    The situation, right now, is that the former hostages have 
been waiting 14 years for justice, and so far they have 
received absolutely zilch help, from the U.S. Government that 
they served so heroically because of the Office of Foreign 
Assets Control.
    I would like to get a committment from you to work with me, 
to find a solution to make these brave Americans whole again. 
Do you think we can work together in that regard?
    Secretary Mnuchin. Absolutely. Let me first comment on, it 
sounds like it was a horrible situation, and I am not familiar 
with any of the details of what OFAC's concerns are, but I am 
more than happy to work with you in your office on the 
legislation and understand it.
    Mr. Posey. Yes, your predecessor gave us all kinds of song 
and dance, but he seemed relatively unconcerned, but I 
appreciate your concern and look forward working you--
    Secretary Mnuchin. We will followup with you.
    Mr. Posey. Thank you very much. I yield back.
    Chairman Hensarling. The gentleman yields back. Chair now 
recognizes the gentleman from Minnesota, Mr. Ellison.
    Mr. Ellison. We thank the chair and the ranking member.
    Secretary Mnuchin, one of the worst moments I experienced 
in my service in Congress is the financial--foreclosure 
collapse that occurred in 2008. I don't ever want to see it 
again. I am sure you agree with me about that. And so, I am 
concerned about your approach to supervising the mortgage 
market, and making sure that banks that are engaged in issuing 
mortgages are upholding high standards of ethics.
    So, to that degree, could you explain to me how, OneWest, 
of which you were the CEO, was able to--engage in 5,600 
violations of foreclosure sale auctions, including backdating, 
in nearly all of the 35,000 foreclosures of homes, that you all 
engaged in?
    Secretary Mnuchin. First of all, let me assure you, that I 
did not make one mortgage, during or prior, to the mortgage 
crisis. I took over three banks from the FDIC, one of which was 
the worst originator in the entire world. I am very proud of 
the fact that we started loan modifications at IndyMac under 
the FDIC's control, which we then did. So, I take great offense 
to anybody who calls me the foreclosure king. Whatever issues--
    Mr. Ellison. I am claiming my time, you know how that goes.
    Secretary Mnuchin. Whatever issues are--
    Mr. Ellison. Sir, I allowed you to answer and I am 
reclaiming my time.
    Chairman Hensarling. Mr. Secretary, the time belongs to the 
gentleman from Minnesota.
    Mr. Ellison. Look, I don't have a problem with you 
answering, but you did answer so, I am not going to let you 
filibuster. That is what I won't do.
    Secretary Mnuchin. I am not filibustering--I was just 
responding to your comment.
    Mr. Ellison. No--no--no--there is no question before the 
Secretary.
    Secretary Mnuchin. Wasn't there a rule--
    Mr. Ellison. There is no question before the Secretary, at 
this point. So, Vice President Erica Johnson-Seck robo-signed 
6,000 foreclosure related paperwork documents per week. Was she 
under your supervision?
    Secretary Mnuchin. Not directly.
    Mr. Ellison. Was she under--when you were the CEO, was she 
employed under you?
    Secretary Mnuchin. She was employed at the bank.
    Mr. Ellison. She said in testimony that she robo-signed as 
many as 6,000 foreclosure related documents a week. She--do 
you--what is your position on robo-signing?
    Secretary Mnuchin. You know, I have answered this 
extensively--
    Mr. Ellison. You have to answer it now, sir.
    Secretary Mnuchin. I am going to, and you have to listen to 
me.
    Mr. Ellison. No, I don't, no, I don't have to listen you.
    Secretary Mnuchin. Well--
    Mr. Ellison. I asked you a direct question, I would like an 
answer, which would be--
    Secretary Mnuchin. If you are not going to listen to me--
    Mr. Ellison. Are you willing to answer the question, or 
not?
    Secretary Mnuchin. Repeat your question.
    Mr. Ellison. What is your position on robo-signing?
    Secretary Mnuchin. Again, I don't even think you know the 
definition of robo-signing is.
    Mr. Ellison. You don't know what I know.
    Secretary Mnuchin. There is not a legal definition of robo-
signing.
    Mr. Ellison. How about this? Do you deny that under your 
supervision robo-signing occurred at the firm that you were the 
CEO of?
    Ms. Waters. Mr. Chairman--
    Secretary Mnuchin. I have reported before--
    Mr. Ellison. And are you--
    Secretary Mnuchin --There was not robo-signing, and I have 
said this on the record.
    Mr. Ellison. So, you deny it for the record, thank you.
    Secretary Mnuchin. For the record, I have denied it before.
    Mr. Ellison. Yes, right. And you are denying that--well, 
also for the record and under direct testimony a person under 
your supervision admitted to it.
    And for people watching, I will just let you know, robo-
signing is when you have a foreclosure--when you are signing 
documents to get a loan to purchase a home, and you have to 
review the documents, you have an obligation to review them. 
And to just sign them as you are going through, without 
reviewing them, is not proper, and is illegal, because you are 
swearing that you have reviewed those documents.
    And, under the Secretary's supervision, which he claims I 
don't know anything about robo-signing, that happened to a very 
severe degree while he was the CEO of OneWest.
    Here is another question for you, sir. OneWest was nine 
times as likely to foreclose on a homeowner living in a 
community of color, as originating a mortgage to a borrower 
living in other communities.
    Are you concerned about the disproportionate number of 
people who found themselves in foreclosure, at the hands of 
your company, who were persons of color? Where are you at on 
making sure that there is an equal administration of justice 
for companies as they engage in foreclosure?
    Secretary Mnuchin. Let me assure you that we upheld, to the 
strictest amount, the rules and regulations, as was reviewed by 
the OCC, the Fed, and the Consumer Protection Bureau, and we 
did not and would not, discriminate in any way.
    Mr. Ellison. We will see.
    Chairman Hensarling. Time for the gentleman has expired. 
The chairman now--
    Ms. Waters. Parliamentary inquiry.
    Chairman Hensarling. For what purpose does the ranking--
state your inquiry.
    Ms. Waters. Mr. Chairman, would you like--thank you--would 
you like to give the Secretary an opportunity to apologize to 
Mr. Ellison for--
    Chairman Hensarling. That is not a proper parliamentary 
inquire.
    Ms. Waters --Asserting that he is too stupid to know what 
robocalls are? Would you like to give him that opportunity?
    Chairman Hensarling. The time now belongs to the gentleman 
from Illinois.
    Mr. Hultgren is recognized for 5 minutes.
    Mr. Hultgren. Thank you, Mr. Secretary.
    Secretary Mnuchin. But perhaps, could I borrow 10 seconds?
    Mr. Hultgren. Yes, absolutely, I was going to offer--you 
can do more than that. I would like you to have a chance--
    Secretary Mnuchin. I would like the record to state that 
OneWest Bank was the only bank that concluded the independent 
foreclosure review, and every single loan was reviewed and was 
properly compensated. We were also the only bank to have done 
all those loan modifications, and I take great offense in that 
anybody who calls me a foreclosure king or anything else.
    And, ranking member, I have had the opportunity to talk 
about this with you, many times before, and this is nothing 
new, and I am very proud of OneWest's record, and I am not 
apologizing to anybody, because robo-signing is not a legal 
term, and I was being harassed.
    Ms. Waters. You are under oath.
    Mr. Hultgren. Thank you.
    Chairman Hensarling. The time does not belong to the 
ranking member, the time belongs to the gentleman from 
Illinois.
    Mr. Hultgren. Thank you.
    Chairman Hensarling. The time belongs to the gentleman from 
Illinois, he may proceed.
    Mr. Hultgren. Thanks, Mr. Chairman, thank you, Mr. 
Secretary, for being here. The Treasury Department's June 12th 
report makes a number of recommendations regarding the 
harmonization of our cybersecurity framework.
    Specifically, the report recommends further coordination on 
two fronts; one, financial regulatory agencies should work 
together to harmonize regulations including a common lexicon; 
two, financial regulators should work to harmonize 
interpretations and implementation of specific rules and 
guidance around cyber security framework.
    I believe both of these are very important goals.
    I wondered if you could just talk briefly on how the 
Treasury Department plans to facilitate these efforts and is 
there anything we in Congress can do to help support this work.
    Secretary Mnuchin. Yes, we look forward to working with 
you. It is very critical. Cybersecurity is a very, very 
important issue and we are working closely with all the 
regulators on us.
    Mr. Hultgren. Please let us know, again, how we can provide 
assistance--
    Secretary Mnuchin. Thank you.
    Mr. Hultgren. We just know so much--the importance of 
confidence of consumers--
    Secretary Mnuchin. Thank you.
    Mr. Hultgren --And securities. So thank you.
    I know you have touched on a little bit the Volcker rule, I 
want to go in a little bit more on that.
    As you know, venture capital funds and startup companies in 
which they invest are the innovation and job creation engines 
of our Nation. Page 77 of the Treasury Department's June 12th 
report recommends changes to the Volcker rule as covered funds 
provisions to assist in the formation of venture and other 
capital that is critical to fund economic growth opportunities.
    I wondered, Mr. Secretary, have you discussed this specific 
provision of the Volcker rule with the agencies that have 
authority to make amendments? If so, what feedback have you 
received? And then, followup on that, how does the Treasury 
Department plan to pursue amendments to the Volcker rule that 
could conform to existing laws.
    In other words, how would you encourage the regulators with 
rulemaking authority to undertake this important work?
    Secretary Mnuchin. Well, again, there is a two part process 
we are going through. One part is working with the regulators 
where we can clarify the regulatory issues, make clear 
definitions. So, again, people can follow the Volcker rule, but 
follow it appropriately and understand it.
    And then, also, we would be more than happy to work with 
you and Congress on certain legislative changes to further help 
that.
    Mr. Hultgren. Good. Thank you. I believe it is important 
and we want to help.
    The June 12th, again, report states significant adjustments 
that should be made to the calculation of the supplementary 
leverage ratio. And, particularly, deductions from the leverage 
exposure denominator should be made, including for cash or 
deposit with central banks.
    I certainly agree with this recommendation and I have 
worked closely with members of this committee such as Keith 
Rothfus and Bill Foster to get some regulators to help 
understand our concerns.
    I wondered, how do you plan to work with the Fed, FDIC, and 
OCC to amend the supplementary leverage ratio? If possible, 
could you share a timeline for when these concerns might be 
addressed?
    Secretary Mnuchin. Well, I don't have a specific timeline 
but we are working very closely with them and, again, we are 
hopeful that we can make progress on that. Thank you.
    Mr. Hultgren. I hope so as well, and we would love to be 
helpful there.
    Last minute, maybe one more question, I understand the 
administration has been putting together some ideas on 
comprehensive tax reform. I absolutely agree that we need a 
more efficient tax code and it would greatly contribute to 
economic growth.
    Outside the work on this committee I am also very focused 
on fighting for tax exempt financing for States and local 
government. Specifically for preserving the tax exempt status 
of municipal bonds. I believe this local decision, making 
process for investing in infrastructure is working. It is 
ensuring that we build the roads, schools, bridges, and police 
stations that our communities really need and some 160 members 
of the House of Representatives agreed with that by signing a 
letter that myself and Congressman Ruppersberger passed around.
    I wondered, have you considered how this existing piece of 
the tax code fits in with the administration's plan for 
comprehensive tax reform? If not, I would love to followup with 
you a little bit more on the importance of municipal finance 
and, specifically, the current tax treatment of municipal 
bonds.
    Secretary Mnuchin. Yes, so, again, we very much appreciate 
the importance of municipal finance. We want to make sure that 
State and local entities can continue to access that market in 
an efficient way and we look forward to working with you.
    Mr. Hultgren. Thanks Mr. Secretary, thanks for your 
service, and I yield back.
    Chairman Hensarling. The time of the gentleman has expired. 
The chair now recognizes the gentleman from Colorado, Mr. 
Perlmutter.
    Mr. Perlmutter. Hi, Mr. Secretary, thank you for being here 
today.
    Secretary Mnuchin. Thank you.
    Mr. Perlmutter. Thanks for your testimony today. Let's 
start with you being a Californian and me being a Coloradan, 
OK? And I want to talk about marijuana and banking, just for a 
second. Because we now are 28 States plus the District of 
Columbia have some level of marijuana use and then if you add 
all of the States that allow for cannabis oil to try to deal 
with seizures, that is another 16 States.
    And so, mostly it is a statement to you sir that I would 
like to make and California, Colorado having fully legalized 
marijuana, that it is important that the Treasury Department 
and the Justice Department really continue to focus on this 
because in Colorado--unless we have banking services, the 
amount of cash just becomes a huge magnet for crime. And it is 
very important that we allow businesses that are legal in their 
States to be able to have checking accounts and credit card 
accounts and payroll accounts.
    And I would just impress on you, sir, we need to get this 
handled. And I don't know exactly where you are--I am not going 
to ask you on the record but I just want to make sure you 
understand this is now way more than half the States of the 
country, and I would suggest to you that you talk to Mr. 
Mulvaney and the administration to try to come up with some 
ideas so we can have baking for legitimate businesses in those 
States that have some level of marijuana use.
    Secretary Mnuchin. Yes, well, let me just comment. When I 
was a banker I was familiar with this issue and we were very 
concerned for the regulatory issues of banking, those types of 
clients, despite the fact that it was legal.
    So I don't have a view but we are happy--I do understand 
the issue--we are happy to work with you, and we do think we 
need to figure out the regulatory solution.
    Mr. Perlmutter. And I thank you for that and if you would 
work with me and Mr. Heck and--
    Secretary Mnuchin. Be more than happy to.
    Mr. Perlmutter --I know we have Mr. Coffman from Colorado, 
Republican and a number of Republicans--we would really like to 
work with you and the department to get this ironed out.
    Secretary Mnuchin. Thank you.
    Mr. Perlmutter. Thank you. Second question--or second 
statement I guess is, you used the words cutting off the money 
earlier on about sanctions and the way that that can work, and 
I think you were directing that toward Iran, but it also 
applies to North Korea and it applies to Russia, would you not 
agree?
    Secretary Mnuchin. Yes, and it applies to Venezuela where 
we just launched sanctions yesterday to 13 people and will 
continue to do more.
    Mr. Perlmutter. And I appreciate that, and I thank you for 
that. So I guess where I am coming from is again with respect 
to sanctions, we have, because of aggressive actions taken by 
the Russians in Ukraine and elsewhere, that the department 
continue to apply those, where appropriate, where lawful, and 
where necessary.
    So one of the things--I serve on the terrorism and illicit 
finance with Mr. Pearce, and we--it is a really good committee 
and we appreciate your department working with us. One of the 
places where it is very important is on cryptocurrencies, and 
it appears that the Russians are very adept at making opaque a 
lot of transactions and we would ask you and your department to 
continue to work with us to make sure we are able to pierce 
those cryptocurrencies so that they aren't using block chain or 
whatever other kinds of things. Would you agree to work with 
us?
    Secretary Mnuchin. I would and I would also tell you I 
share your concerns about bitcoin and others and them being 
used for illicit activity. And matter of fact, I believe this 
morning we just announced a major action against a bitcoin 
operator. So I share your concerns and this is going to be a 
big priority of ours.
    Mr. Perlmutter. All right, last thing I would like to talk 
about and then I will yield some time to my friend Mr. Ellison 
is, on 23 of July, there is an article called The Future Of 
Banking by Piyush Gupta, which really talks about the 
technological changes that are occurring within the banking 
world. And just to give you--well I don't have much time. What 
do you see happening in--with respect to banks, given all the 
technological changes that are occurring?
    Secretary Mnuchin. It is no question banking has changed 
substantially. Most people don't go into banks anymore and we 
need to address that as we think of changes in technology and 
regulation.
    Mr. Perlmutter. If I could, I like introduce this in the 
record.
    Chairman Hensarling. Without objection. Time of the 
gentleman has expired; the chair now recognizes the gentleman 
from Florida, Mr. Ross for 5 minutes.
    Mr. Ross. Thank you, Mr. Chairman. Mr. Secretary, thank you 
for being here. In reading and listening to your opening 
comments, I laud you on one of your priorities and when you say 
the other central component to our agenda for growth is a 
package--is a passage of comprehensive tax reform.
    And we have talked about this before; you have expressed 
how important it is for us to have tax reform if we are going 
to grow our economy. Now we are the No. 1 in the OECD with the 
highest tax rate. I think, in fact, I believe that at 39.08 
percent, we have the highest corporate tax rate of any 
developed nation. At the same time, our effective tax rate is--
hovers around 20 percent and we are 21st in terms of tax 
revenue as a share of GDP.
    Businesses make decisions to avoid suffering under the full 
burden of our tax system, and in my opinion I think that what 
we have to look at is what impact this has had on our economy. 
In other words, if we can lower the corporate tax rate just 
alone, we can change the equation for how American businesses 
benefit the American economy.
    And what I mean by that is, we need to look at how they 
shelter their income, are they paying 35 percent up here but 
the effective rate is 21 down here, what is happening is that 
14 percent? Are they putting their money overseas in order to 
take advantage of shelters? Are they looking at choice of form 
of where they want to be able to locate their businesses so 
they don't have to have tax implications in the United States? 
Are they looking at what type of entity are they going to have? 
are they looking even at who they are going to hire because of 
our corporate tax structure?
    So, I guess my question to you, is would you agree that--
because we are having a little bit of issue here in Congress 
trying to do comprehensive stuff right now, whether it be 
health care or anything else.
    And if we come back here in September and we talk tax 
reform, if we are only able to do corporate tax reduction, 
would you not agree that just lowering the tax revenue--and you 
take into consideration how businesses affect their tax 
planning by tax shelters by where they want to locate 
physically.
    Whether in the United States or not, that that lowering of 
the taxes would more than make up for what any anticipated loss 
of revenues that the CDO may access from going from 35 percent 
to 15 percent.
    Secretary Mnuchin. Yes, I agree with you completely. This 
is not just about lowering the rate, this is about 
comprehensive tax reform, about changing from a worldwide 
system to a territorial system.
    Mr. Ross. And we are the only ones in a worldwide system.
    Secretary Mnuchin. We are broadening the base.
    Mr. Ross. Correct.
    Secretary Mnuchin. And as you have pointed out, although 
our stated rate is 35 percent, most international companies pay 
significantly less, because they can defer income and sometimes 
not even pay any tax on it.
    Mr. Ross. And as a matter of fact, as we lower the rate, we 
broaden the base?
    Secretary Mnuchin. We do indeed.
    Mr. Ross. And raise our revenues. Do you agree or disagree, 
with those who say that we will never be able to achieve real 
GDP growth above the anemic 1 to 2 percent we have seen since 
the years following the recession?
    Secretary Mnuchin. I disagree with that. I am very 
committed that we can get to 3 percent GDP and we will.
    Mr. Ross. Thank you.
    And as an insurance person, I have to ask you in FIO, look 
I am a strong supporter of our State-based regulation systems 
in terms of insurance. McCarran-Ferguson has been, I think, a 
very good thing for consumers.
    It is been a very good thing for insurance companies for 
solvency and protections for consumers. My concern with FIO is, 
while I understand its role to be a facilitator, especially in 
international negotiations, do you feel there is any need for 
it ever to be a regulator?
    Secretary Mnuchin. Again, what I would say is we 
fundamentally believe in the State-based system and we support 
that, so the intent is not for it to be a regulator. I don't 
know if at any, at some points, there may be certain issues 
that they need to deal with, but we are not looking for Federal 
regulation of insurance.
    Mr. Ross. Thank you, that is somewhat comforting.
    I yield back the balance of my time.
    Chairman Hensarling. Gentleman yields back.
    Chair now recognizes the gentleman from Connecticut, Mr. 
Himes.
    Mr. Himes. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for being here.
    Like my colleague on the Republican side, I want to deviate 
a little bit from the jurisdictional area of this committee 
because I agree with him that we are presented with a really 
terrific opportunity for comprehensive tax reform. And I really 
want to make one point and then ask you a question.
    Appearances to the contrary, there is actually strong 
bipartisan agreement on the need for comprehensive tax reform. 
There are elements of that that are very, very important to 
this side of the aisle.
    Those elements amongst others include maintaining 
distributional equity in the code. It may surprise you to know 
that it includes for a lot of us a sense of revenue neutrality, 
both inside and outside the budget window.
    Something that is not revenue neutral, of course, poses a 
threat to programs like Medicare and Social Security. But 
really, and I guess, point to my question here, what is really 
important to us is a process that is regular order and that 
starts in a bipartisan fashion. And I can draw sort of a 
dramatic contrast with the way healthcare was brought forward 
just in the last 6 months. It was a process using 
reconciliation, designed to exclude Democrats, particularly in 
the Senate. And in fact, the Senate majority leader noted that 
the failure would mean having to work with the Democrats.
    So, I really do think process is important here. Hearings, 
inviting this side of the aisle in early rather than at the 
end.
    So, my question to you is, is the White House and is the 
Treasury prepared to really push that this process be designed 
for bipartisanship and all of the possible durability 
associated with that? Or are we going to sadly see something 
more akin to what we have seen in the healthcare realm?
    Secretary Mnuchin. Well, again, I would like to hope that 
it is bipartisan, because you point out, many of these aspects, 
I think we have shared values, and objectives, and goals. And I 
personally sat down with many Democrats already to solicit 
views and get feedback. And I look forward to continuing to do 
that.
    Mr. Himes. I think a lot of the debate right now is on the 
Republican side of the aisle over big issues around revenue 
neutrality, around border adjustment tax, deductibility of 
interest. I think your and Mr. Coons voice will be very strong 
here on those issues. And I just--you know, I see the President 
in his tweets sort of occur--blaming the Democrats in the 
Senate for being obstructionist when the process at least on 
healthcare was designed to exclude them.
    And I know your previous career. I know the President's 
previous career. You haven't been in town that long.
    Really, our signals and processes that you can set up that 
will set the stage for bipartisanship in the way it wasn't done 
the healthcare issue. So, I just hope--again, I think we all 
recognize that durability relies to some extent on bipartisan 
cooperation. We have certainly seen that in the healthcare 
realm.
    And I would note--you were probably following at the time. 
Sometimes, the Democrats, under Obama, were accused of having, 
you know, a process that excluded the Republicans in 2009. That 
was simply not true.
    There were months and months of efforts, hearing after 
hearing after hearing, efforts to attract a number of 
Republican Senators that ultimately did not bear fruit. But I 
would just note that those attempts were made. And I think the 
country could really benefit if the White House would commit 
itself, particularly for something as important as the tax 
code, to a process that starts out in bipartisan fashion.
    Secretary Mnuchin. Thank you.
    Mr. Himes. Thank you. Mr. Chairman, I will yield back the 
balance of my time.
    Chairman Hensarling. Gentleman yields back. The chair now 
recognizes the gentleman from North Carolina, Mr. Pittenger, 
for 5 minutes.
    Mr. Pittenger. Thank you, Mr. Chairman. Good to see you, 
Mr. Secretary.
    Secretary Mnuchin. Nice to see you, too. Thank you.
    Mr. Pittenger. Great to have you here.
    Mr. Secretary, I want to thank you for your understanding 
of the role and importance of community banks. I did serve on a 
community bank board from the time we chartered to the time we 
sold it, it was very successful. And yet, in North Carolina 
today, I can tell you that we have lost 50 percent of our banks 
since 2010.
    I serve eight counties, several of which are rural. It has 
had a devastating impact on access to capital credit. So, 
appreciate your efforts there.
    Mr. Secretary, as you know, I am currently working on a 
CFIUS reform bill with Senator Cornyn. We have hoped to 
introduce it sometime this fall.
    One of our primary goals is recognizing the alarming 
transfer of our new and emerging military applicable 
technologies that have gone from the United States to the 
Chinese. And we want to see greater oversight with that. 
Chinese investments here in the United States have grown by 350 
percent from 2015 to 2016, and we believe that CFIUS of course 
needs greater teeth and greater reforms.
    The Defense Department has spoken out on this, that our 
military technological superiority is at risk due to this well-
coordinated effort by the Chinese. And a number of officials 
have spoken out, including the secretary of Defense, the 
director of National Intelligence, director of the CIA, the 
director of the NSA, commander of the U.S. Cyber Command, and 
the chairman of the Joint Chiefs of Staff.
    I would like to have your clarity on this issue and 
understanding and really what you believe is necessary in 
reference to an update in reforms of CFIUS.
    Secretary Mnuchin. Well thank you, and as you know I take 
my role very seriously there and I look forward to working with 
you and others again. I hope this is something we can 
definitely do on a bipartisan basis. There are some obvious 
changes we need to make to CFIUS. One of which is CFIUS doesn't 
cover joint ventures. But as we have had the opportunity to 
talk about, and we look forward to working with you and 
others--there is a laundry list of changes that we look forward 
to making with you.
    Mr. Pittenger. Thank you, sir. Reference to terrorism 
finance--which I do serve on that committee--I have some real 
concerns today regarding Qatar--I have had several meetings 
with the Emir and with the Ambassador regarding concerns that I 
have. I have yet to receive any reports of anyone that they 
prosecuted for terrorism finance related issues.
    They have certainly been involved in financiers, who reside 
there and work there. Hamas works there with impunity--they 
have been known to pay significant amounts of ransoms out on 
the market. And even the Emir said to be that in his efforts 
depose Assad, that he worked very closely and supportive with 
al Qaida. In that regard he said, I will take care of al Qaida 
later. I would really like to get your input regarding--the 
concerns relative to--Qatar. Have they been complicit, and what 
is the best way to work with them?
    Secretary Mnuchin. So--we have worked very closely with 
them. I can tell you that they are cooperating with us and that 
they take this very seriously. They most recently signed a 
memorandum of understanding and making certain commitments, and 
we are committed to working with them and making sure that 
there is not terrorist financing.
    Mr. Pittenger. Yes sir, I appreciate your diligence on 
that. This now I would like to ask you--one other matter that I 
am giving a significant amount of effort to and that is 
relative to the section 314 of the Patriot Act. I would like to 
know your assessment of the current process.
    We have had a number of meetings with the major banks 
relative to the transfer of data, the sharing of data, between 
financial institutions, and with our government, and regarding 
the SAR's reports, and what can be done to enable the financial 
institutions to have closer access to data that allow from the 
government--that allow them to really hone in on those--
concerns we really have--apart from looking at the broad 
spectrum of SAR's reports--this it seems to me would directly 
help our concerns regarding privacy and matters for American 
people and the data the financial institutions have on them. 
So, I would like to get your perspective on this particular 
bill and what can be done.
    Secretary Mnuchin. Well we look forward to working with you 
on the bill. I will tell you when I was a banker and we filed 
SARs we always thought they just went into a big black hole. 
And wondered if anything actually happened with them, and I can 
assure you the first thing I did when I got here, is I asked 
that question. And we do use the SAR's very effectively, but we 
look forward to working with you.
    Chairman Hensarling. Time, the time of the gentlemen has 
expired. The chair recognizes now the gentlemen from Illinois, 
Mr. Foster.
    Mr. Foster. Thank you, Secretary Mnuchin for coming here 
today. I would like to focus on one of the sparse areas of 
potential bipartisan agreement--namely the need for forceful 
and effective national response to any future currency 
manipulation by our trading partners.
    As a manufacturing businessman and someone who has co-
founded in our basement a company that now manufactures most of 
the theater lighting equipment in the U.S. and exports a good 
fraction of what it manufactures, I have been long concerned 
about the currency manipulation by foreign nations that creates 
an unlevel playing field favoring their domestic manufacturers.
    As you are aware, Treasury has been charged by Congress 
with making periodic reports on currency manipulation. To that 
end, Treasury has developed an objective, quantitative three 
part test which I strongly support and believe was done very 
well. In your most recent report, I believe you correctly 
concluded that six countries, including China, should be put on 
the watch list for violating two out of the three criteria but 
that, at present, no country satisfies all three criteria.
    The difficulty, of course, is that if in the future any 
country is designated a currency manipulator the only mandatory 
response could be charitably described as toothless jawboning.
    There is an alternative, which is for the United States to 
unilaterally declare, as a matter of national policy, that 
whenever any country is designated a currency manipulator we 
would engage in countervailing currency manipulation.
    Simply put, if one of our trading partners intervened in 
currency markets to depress the value of their currency for 
competitive advantage, the U.S. would engage in an equal and 
opposite currency intervention to cancel this effect.
    Dr. Fred Bergsten of the Peterson Institute has long 
advocated for the countervailing currency intervention approach 
as a response to foreign manipulation.
    He recently published a book on this with Dr. Joseph Gagnon 
with very specific proposals for this. And, while there is some 
authority under current law to respond in this manner against a 
designated currency manipulator it could obviously be 
strengthened with legislation.
    So, my question is, what specific actions are you 
considering against possible future currency manipulation if it 
occurs and would you be open to considering countervailing 
currency intervention or other approaches in a response?
    Secretary Mnuchin. Well, thank you, and we look forward to 
working with you on this, and I can tell you we have recently 
studied this internally as it relates to NAFTA where we are 
going to be going through a renegotiation process, this is one 
of the issues we are going to look at adding into the 
agreement, and I think this sounds like--
    Mr. Foster. Excuse me, but in the case of NAFTA I believe--
you know, in North America currency intervention, manipulation 
has not been a major issue.
    Secretary Mnuchin. I understand that, I am just saying it 
has only come up because of the legislation and us looking at 
what we use going forward in trade agreements. So we are 
focused, I do agree with you. If someone is a currency 
manipulator and labeled and determined as such, there should be 
an impact of what that means and not just talk.
    The idea that you have cited may be one of many. I surely 
wouldn't want to be required to have to do that because the 
countervailing size and scale may be quite large. But we do 
need to have an impact. If someone does manipulate their 
currency and impacts American companies and American workers, 
there needs to be an impact and a result.
    Mr. Foster. Yes, well the advantage of an equal and 
opposite intervention, if they go intervene in the market and 
buy x dollars--we intervene and buy x dollars of their 
currency. And so, equal and opposite is a well defined and 
appropriate response to nullify this.
    Second, I would like to ask you what your reaction is to 
the idea of a permanent--permanently repealing the debt limit? 
You know, there was a very interesting Wall Street Journal 
editorial by a very prominent--Jason Fuhrman and Rohit Kumar, 
very prominent members of both parties advocating for this.
    Among other points they made was that Democrats are 
currently using the debt limit as leverage to increase 
spending, which is not normally something Republicans would be 
enthusiastic about. So I was wondering what your reaction would 
be and what the reaction of the administration would be to the 
idea of just saying, let's have an appropriate budget process 
instead of arguing about whether or not we should pay for our 
meal after we have eaten it?
    Secretary Mnuchin. Well, I think we have got to look at 
this and I agree that there should be a change going forward. 
We are obviously not going to address this now but we have a 
debt limit, we have a budget process and we have an 
appropriations process. I am all for--there should be very 
strict controls of spending money. But once we have agreed to 
spend the money, we should make sure that the government can 
pay for it.
    Mr. Foster. Right, so the idea of the debt limit as a 
mechanism is not something you are enthusiastic about?
    Secretary Mnuchin. I am not.
    Mr. Foster. All right. Thank you. Well I look forward to 
working with you on this.
    Secretary Mnuchin. Thank you.
    Chairman Hensarling. Time of the gentleman has expired. The 
chair wishes to advise all members that the chair currently 
anticipates clearing four more members before excusing the 
witness at the agreed upon departure time at one o'clock. I 
anticipate clearing Mr. Rothfus, Mr. Delaney, Mr. Tipton and 
Mr. Heck at this time.
    The gentleman from Pennsylvania, Mr. Rothfus, is recognized 
for 5 minutes.
    Mr. Rothfus. Thank you Mr. Chairman. Secretary Mnuchin 
what--over here--here you go.
    One of my priorities is to make certain that the 
regulations that banking agencies implement are tailored to the 
risks that they address. An area of particular concern is the 
regulatory treatment of custody banks and I want to join my 
colleague from Illinois, Mr. Hultgren, in highlighting this 
issue.
    I applaud the conclusion of the Treasury report that calls 
for exempting cash deposits at central banks from the 
denominator of the supplementary leveraged ratio or SLR. As you 
know, this is particularly important for custody banks, due to 
their role as a safe haven for cash in times of financial 
market stress. My concern is that the unique aspects of the 
custody banking sector have not been fully considered in 
previous rulemakings, particularly as it relates to the SLR.
    In addition to the treasury report, Chair Yellen, Governor 
Powell, and Former Governor Tarullo have all recognized that 
the SLR disproportionately affects custody banks and should be 
revised but, so far, no action has been taken.
    I have introduced a bill, H.R. 2121, the Pension Endowment 
and Mutual Fund Access to Banking Act which has 14 bipartisan 
co-sponsors, many of whom who serve on this committee, to 
address the issue.
    I say all this to emphasize the broad based chorus out 
there to address this issue, and I ask that you keep the 
committee informed of progress.
    Can you say whether we can expect action prior to the 
upcoming January 1, 2018 effective date for the SLR?
    Secretary Mnuchin. I can't commit whether there will be 
action or not but I can tell you it is something we are very 
focused on, and I agree with you, particularly as it relates to 
custody banks but the thought that banks could turn away cash 
in a financial crisis doesn't seem to make sense.
    Mr. Rothfus. Thank you. As you are aware, a number of us on 
this committee have expressed concerns about the U.S./E.U.-
covered agreement which Chairman Duffy mentioned earlier in the 
process for negotiating future covered agreements.
    Covered agreements can be a useful mechanism for achieving 
mutual equivalency with foreign jurisdictions but we need to 
make sure that we accommodate elements of the U.S. insurance 
system that help to foster a robust insurance marketplace, 
namely the State-based system of regulation.
    What are some ways that covered agreement negotiations can 
be improved and made more transparent?
    Secretary Mnuchin. So, again, we spent a lot of time 
looking at the cover agreement. We did negotiate a side letter 
which we are comfortable with and is going to be adhered to and 
we look forward to working with you further on these issues.
    Mr. Rothfus. We have heard, in a number of hearings and 
meeting with bankers--I want to touch on the SAR--the SARs that 
you mentioned--and we have heard that term black hole before. 
With respect to SAR filing requirements, that they are more 
often focused on checking boxes rather than providing useful 
targeted data to FinCEN and law enforcement. They also worry 
that they ultimately drown out the signal with too much noise. 
Should the SAR process be reformed to make compliance easier 
and increase the value of information conveyed in reports?
    Secretary Mnuchin. Well, I think it should be looked at. I 
mean I don't know whether it should be reformed or it shouldn't 
be, but it should be looked at. And again, I can assure you as 
you know it is very useful getting these reports, but it is one 
of the things that we will continue to look at.
    Mr. Rothfus. Thank you. My colleague Representative Moore 
of Wisconsin and I have introduced bipartisan legislation that 
would fix the unintended consequences of an SEC rule that went 
into effect last October that destroyed stable value money 
market funds as a source of low-cost variable-rate borrowing 
for businesses and State and local governments.
    The effect has been to limit investment options, reduce 
short-term liquidity, and significantly increase the cost of 
business and infrastructure investment. Our bill, H.R. 2319, 
would restore stable funds--stable value funds, reversing many 
of these negative effects.
    I think this is very much in keeping with the President's 
executive order on core principles for regulating the financial 
system. It would empower Americans to make independent 
financial decisions, prevent taxpayer-funded bailouts, promote 
American competitiveness both at home and abroad, and make 
regulation efficient, effective, and appropriately tailored.
    I understand that the treasury department will be issuing 
additional reports on the executive order to the President and 
the Congress in the coming months; I would ask that you give 
appropriate consideration to our proposal as part of those 
efforts.
    Secretary Mnuchin. Will do.
    Mr. Rothfus. Thank you. With that, I yield to the chairman 
if he has any--
    Chairman Hensarling. I thank the gentleman for yielding. 
Some ground that Mr. Secretary, I don't think we have plowed 
yet, the treasury report recommends the frequency of section 
165, resolution plan submissions to 2-year cycles. I think that 
both Federal Reserve Governor Powell and FDIC Chair Gruenberg 
have testified they supported it, or are at least considering a 
2-year cycle. I think this is again, something that can be 
accomplished administratively. Is that something that you 
anticipate?
    Secretary Mnuchin. It is something we are working on and 
something we think makes sense.
    Chairman Hensarling. Well I am glad to hear that, and it 
certainly makes sense to a lot of us on this committee, and I 
would encourage you to do that, Mr. Secretary.
    Time of the gentleman has now expired; the chair now 
recognizes the gentleman from Maryland, Mr. Delaney.
    Mr. Delaney. Thank you, Mr. Secretary. I want to go back to 
tax reform for minute. Obviously you are working hard I am 
sure, on comprehensive tax reform which will involve adjusting 
rates, adjusting deductions, hopefully doing it in a way that 
is pro-growth, more simple, and doesn't affect negatively the 
long-term trajectory of the country.
    Let's assume for the purposes of my question that you are 
ultimately not successful in getting that done, which I know 
you won't want to acknowledge today, but for purposes of my 
assumption, let's assume you are not. Would you then consider 
an approach whereby you pursued international-only tax reform 
and paired that with the kind of long promised infrastructure 
program?
    Because that approach, which I quite frankly think would in 
many ways be more beneficial to the U.S. economy than just tax 
reform by itself without any infrastructure, but that approach 
has had very significant bipartisan support in the Congress. At 
least 40 members on each side of the aisle have supported a 
specific proposal on--I won't ask you on the specific 
proposal--to do that, but it involves changing the 
international tax system, eliminating deferral, lowering the 
rates so that it is more competitive on a go forward basis; 
also lowering the rates on all the cash that is over there now 
and creating a way for that to repatriate back to the country.
    And as most people know, and I am sure you do, that 
approach would generate revenues for the treasury, for your 
department and what we propose to do is allocate that to pay 
for large-scale infrastructure program. So assuming your 
comprehensive tax reform is ultimately not successful for any 
of the hundred reasons people think it may not be successful--
and we all hope it is by the way. Because God knows we need to 
do something on a bipartisan basis. But if it is not would you 
consider that approach as kind of your plan B?
    Secretary Mnuchin. I wouldn't--I mean I think that 
infrastructure is very important and I think we are already 
working on infrastructure and the ideas to come out with an 
infrastructure plan shortly. I think as you know the President 
is very focused on a trillion dollars of infrastructure 
spending between the Federal Government and the States.
    But my own opinion is putting things together only makes 
the issues more complicated, but in any event, we look forward 
to working with you on tax reform and infrastructure.
    Mr. Delaney. So how are you thinking about paying for 
infrastructure in the plan that you are working on?
    Secretary Mnuchin. Again, we have allocated infrastructure 
spending in the President's budget as it is. I mean, at the end 
of the day--all these things have to balance, you can move the 
money around but we have to look at the cost of it in its 
entirety.
    Mr. Delaney. But if you do it sequentially--which is what 
you are proposing--and tax reform--lets assume now--switching 
to a hypothetical--let's assume tax reform is completed. It is 
successful--
    Secretary Mnuchin. Thank you. I like that assumption.
    Mr. Delaney. Are you envisioning setting aside money, to 
pay for infrastructure spending as part of that tax reform?
    Secretary Mnuchin. Well it is--
    Mr. Delaney. But I guess my question is, how do you propose 
to pay for it, if you don't do it as part of tax reform?
    Secretary Mnuchin. Well again, if we can get the economy to 
3 percent growth--there is an additional 2 trillion dollars of 
revenues. And that pays for a lot of things, so--
    Mr. Delaney. Right, but we won't know obviously--let's 
assume tax reform were to get done. Are you proposing to wait 
5, 6, 7 years to see that 3 percent growth before you do 
infrastructure?
    Secretary Mnuchin. No, not at all. I don't think it will 
take 3--I don't think it will take 5 years, and I think--we 
should pass infrastructure spending, which will be spent over 
time.
    Mr. Delaney. So, when do you envision passing 
infrastructure spending?
    Secretary Mnuchin. I hope that is something that we 
consider later this year.
    Mr. Delaney. So, if your tax reform gets done and then you 
tee-up infrastructure spending, and you have a proposal in the 
Congress at the end of this year, how do you propose in that 
specific proposal for infrastructure to pay for it--assuming 
that Congress is not supportive of--approving unpaid for 
spending. How would you propose to do that?
    Secretary Mnuchin. I think it has to be paid for through 
growth that people buy into.
    Mr. Delaney. But growth doesn't work in the models we run 
here, right? We pay as we go.
    Secretary Mnuchin. Yes it does. The joint taxes uses 
growths in their assumptions.
    Mr. Delaney. Do they use growth for spending programs, or 
just tax reforming the way it is used--the current rule in the 
house is just tax reform--
    Secretary Mnuchin. Correct.
    Mr. Delaney. So then assuming you are operating under the 
current rules of the house which is what we operate--how would 
you pay for it, because you can't use growth.
    Secretary Mnuchin. Well, at the end of day you have to look 
at all these things in the context of the overall budget, I 
guess that is the answer.
    Mr. Delaney. So if tax reform failed and there was 
bipartisan support in the Congress to do international tax and 
infrastructure--you would not support that?
    Secretary Mnuchin. I--again I am not making hypothetical's, 
again, I am happy to work with Congress and everything else. 
Again, I am hopeful we get tax reform and infrastructure both 
done. They are both incredibly important to the economy.
    Mr. Delaney. It just feels like with your approach, you are 
not going to have any money left for infrastructure. But I 
yield back.
    Secretary Mnuchin. Thank you.
    Chairman Hensarling. The time with has gentlemen is 
expired, the chair now recognizes the gentlemen from Colorado, 
Mr. Tipton.
    Mr. Tipton. Thank you Mr. Chairman, thank you secretary for 
taking the time to be able to be here. I represent rural 
Colorado. And one of the issues that we are really seeing in 
our State is a tale of two economies.
    Where our metropolitan areas are doing reasonably well--
some of our resort areas--but as we move out into the rural 
areas, we are not seeing the recovery happening. And one of the 
challenges that we are hearing from our community banks, 
throughout the West slope of Colorado over to Pueblo, 
Colorado--is the ability to be able to make loans.
    And one of the concerns that we have had expressed, and was 
actually addressed in the Treasury report when we were looking 
at the objectives, in terms of making sure that the interests 
of the United States are not undercut by outsourcing or 
regulatory requirements to the global community. Could you 
maybe speak a little bit in terms of what you are looking at 
for the community banks, when we were looking at some capital 
regimes for community banks, in regards to say, Basel III?
    How to be able to address that so our local banks can make 
those loans?
    Secretary Mnuchin. Yes--I don't--I am not concerned that 
community banks are going to be limited by Basel III. I mean, 
obviously Basel III hasn't passed, and we are generally 
supportive of reaching resolutions. And a lot of Basel III is 
about bringing European capital standards closer to ours, so 
that, there is a level playing field between international 
banks and ours.
    But, I am--I am not overly concerned about the impact of 
that on community banks. I am more focused on our own 
regulatory issues.
    Mr. Tipton. Great. And when we are talking about those 
regulatory issues, in our concerns, we just like that some of 
the outcomes, in rural Colorado, we are a good example of this. 
The lowest labor participation rate in decades. More small 
businesses that are shutting down than new business startups.
    And we have had testimony that has come in regularly, in 
regards to where banks are not able to make loans that they 
would like to be able to make.
    Secretary Mnuchin. That is true.
    Mr. Tipton. What do you see as a solution to that?
    Secretary Mnuchin. Again, I firmly believe in proper 
regulation, but in many cases, particularly for community and 
regional banks, we have over-regulation, and we are addressing 
that.
    Mr. Tipton. And I think that is going to be important. We 
had the opportunity to have Chair Yellen in, as well. And I am 
glad to see the focus coming out of the FSOC for those 
community banks. Simply because we have heard about the trickle 
down effect, the best practices, and how that is impacting 
those local communities and their ability to actually be able 
to make those loans, and to be able to get the economy moving 
at the local level.
    Would you maybe speak a little bit--we have had several 
questions in regards to BSA, AML, SARS reports that are going 
on. Do you see those needing to be tailored, as well, for small 
community banks?
    Secretary Mnuchin. You know, again, I think the BSA AML 
process should be reviewed. But whatever we ultimately do, I 
think it should be the same standards on small banks as big 
banks, because if people are money laundering, whether they are 
going through a small bank or a big bank, there should be the 
same standards.
    Mr. Tipton. Thank you, sir. And I would like to be able to 
yield a little bit of my time to my colleague, Mr. Williams, 
out of Texas.
    Mr. Williams. Thank you, Congressman. And I will just be 
brief. I am a small business owner from Texas, been in business 
45 years, family business for almost 80 years. Tax reform is a 
big deal to me, we have got to get our tax rates down. And I 
just want to say this, when I came to Congress, I heard terms I 
have never heard of before.
    One was revenue neutral, never heard that in the private 
sector. Pay fors, I never heard of in the private sector. I 
think that a lot of people are not believing in Main Street 
America enough. Main Street America is just ready to have a 
huge impact on this economy, if they can get regulations and 
burdens off of them.
    And I would just reinforce a lot of what you said, is that 
the economic growth that will happen with true tax reform, some 
of the things we have all been talking about, I think, is going 
to be unbelievable, and that is going to be your pay for. And I 
just want to reiterate the fact that I appreciate the path that 
you are on, and not be confused with terms that are not ever 
used in the private sector, that nobody had ever heard of until 
they got to Washington.
    So, I thank you for your service, and I appreciate you 
being here today, and I yield back.
    Secretary Mnuchin. Thank you back.
    Mr. Tipton. Thank you, Mr. Chairman. Unless you have an 
additional question, I yield back.
    Chairman Hensarling. Quickly--Mr. Secretary, in the 
Treasury report, you indicated that the CFPB is the source of--
has an unaccountable structure, unduly broad regulatory powers 
that have led to predictable regulatory abuses. Are there any 
changes that you foresee in the bureau that could happen 
without congressional approval at this time?
    Secretary Mnuchin. I think that is mostly going to require 
congressional approval.
    Chairman Hensarling. Time of the gentleman has just 
expired. The chair now recognizes the gentleman from 
Washington, Mr. Heck, for 5 minutes.
    Mr. Heck. Thank you, Mr. Chairman. Mr. Secretary, thanks 
for being here. My colleague from North Carolina, Mr. 
Pittenger, mentioned the Committee on Foreign Investment in the 
U.S., CFIUS as we call it. I have also read the Department of 
Defense report that he alluded to, which discusses how our 
strategic competitors are seeking to access critical resources 
in technology. And with the chair's permission, I would like to 
enter it into the record, if I may?
    Chairman Hensarling. Without objection.
    Mr. Heck. As is common with government reports, Mr. 
Secretary, the authors evaluate a no-action alternative, or 
what happens if we do nothing, but they note the cost of doing 
nothing is extraordinarily high--citing estimates of $300 
billion in intellectual property stolen every year and $300 
billion in sales to U.S. companies lost as a result of IP 
theft, economic activity that could have supported 
approximately 2.1 million jobs every single year.
    So, Mr. Secretary, here are my questions. Do you think we 
can afford to do nothing?
    Secretary Mnuchin. No.
    Mr. Heck. Will you, and your staff, commit to work with 
Congressman Pittenger and myself, and other Members of Congress 
who share an interest in this issue, to act on the 
recommendations of the DOD report?
    Secretary Mnuchin. Yes.
    Mr. Heck. Do you agree with us and our strongly held belief 
that this issue is pressing?
    Secretary Mnuchin. Yes.
    Mr. Heck. I understand that there have already been some 
proposals shared between our staffs and yours. If we keep at 
this through the recess, do you believe that we can have a bill 
ready that you can support before Congress comes back in 
September?
    Secretary Mnuchin. That sounds aggressive by congressional 
time, so I want to be careful not to go out on a limb on that, 
but we will be fully available, we are not going away.
    Mr. Heck. It is not a question of Congress being 
aggressive, it is a question of the Department of Treasury 
being aggressive--
    Secretary Mnuchin. We are happy to work with you and 
others, we have given our views on various proposals.
    Mr. Heck. Thank you, sir. Last, I would like to associate 
myself with the remarks of my friend from Colorado, Mr. 
Perlmutter, with respect to the regulatory framework for access 
to banking services in States that have legally allowed 
marijuana consumption. My State is also one of those. And if 
there is anything that you take away from today's hearing, I 
hope you will write this down--this name, down thank you, sir.
    Secretary Mnuchin. Let me get a pen.
    Mr. Heck. Travis Mason. Mr. Secretary, Travis Mason was a 
23 year old Marine veteran, served his country honorably. He 
was a husband and a father of three small children, set of 
twins in there. He was studying to be a law enforcment officer 
and helping pay his way through that, by acting as a security 
guard at a marijuana retail establishment in Colorado.
    Criminals entered the establishment, understandably 
concluding that it was all cash because of our broken 
regulatory framework, and Travis Mason lost his life that day 
and left his wife a widow, and his three children without a 
father. That is on us, there was no need for that.
    The regulatory framework has failed. This is first and 
foremost a public safety issue and Travis Mason is exhibit A in 
that regard. We are not going to turn back the clock, despite 
what some people may be saying. Despite what trial balloons 
some people are floating with respect to the legalization of 
marijuana. First medical use, then adult recreational use, also 
the use of oils for other kinds of medical ailments. It has 
been an unrelenting march forward, from the standpoint of the 
liberalization of laws. We are not going back. What we need is 
your help, sir, to make sure that there isn't another Travis 
Mason.
    The Cole memorandum, first from DOJ, and the FinCEN 
parallel memorandum, sets forth critical fundamental principles 
here, that we proceed, if and only if, we do not provide access 
to minors, and that we do not allow cash to get into the hands 
of gangs and cartels, and then several other conditions, but 
those first and foremost.
    That is what we do in States--like mine, Washington State, 
where we have a well-regulated marijuana market. It is the 
safest thing to do, to enable those businesses where now 
hundreds of millions--hundreds of millions of dollars, in my 
State alone, have been invested in these businesses. We need 
your help, sir. We ask for your help. Travis Mason. With that I 
yield back my time, Mr. Chair.
    Chairman Hensarling. Gentleman yields back. I wish to thank 
the Secretary for his testimony today. Without objection, all 
members will have 5 legislative days, within which to submit 
additional written questions for the witness to the chair, 
which will be forwarded to the witness for his response. I ask 
that our witness would please respond as promptly as you are 
able.
    The Chair notes that some Members may have additional 
questions for this panel, 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 these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing stands adjourned.
    [Whereupon, at 1:02 p.m., the committee was adjourned.]






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