[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]





                   THE ANNUAL REPORT OF THE FINANCIAL
                      STABILITY OVERSIGHT COUNCIL

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 6, 2018

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 115-72






[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]













                                   ______
		 
                     U.S. GOVERNMENT PUBLISHING OFFICE 
		 
31-345 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

                     Shannon McGahn, Staff Director
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    February 6, 2018.............................................     1
Appendix:
    February 6, 2018.............................................    55

                               WITNESSES
                       Tuesday, February 6, 2018

Mnuchin, Hon. Steven T., Secretary, U.S. Department of the 
  Treasury.......................................................     5

                                APPENDIX

Prepared statements:
    Mnuchin, Hon. Steven T.......................................    56

              Additional Material Submitted for the Record

Mnuchin, Hon. Steven T.:
    Written responses to questions for the record submitted by 
      Representatives Beatty, Budd, Loudermilk, Pittenger, 
      Sherman, and Waters........................................    60

 
                   THE ANNUAL REPORT OF THE FINANCIAL 
                      STABILITY OVERSIGHT COUNCIL

                              ----------                              


                       Tuesday, February 6, 2018

                     U.S. House of Representatives,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:05 a.m., in 
room 2128, Rayburn House Office Building, Hon. Jeb Hensarling 
[chairman of the committee] presiding.
    Present: Representatives Hensarling, Royce, Lucas, Posey, 
Luetkemeyer, Huizenga, Duffy, Stivers, Hultgren, Ross, 
Pittenger, Wagner, Barr, Rothfus, Tipton, Williams, Poliquin, 
Love, Hill, Emmer, Zeldin, Trott, Loudermilk, Mooney, 
MacArthur, Davidson, Budd, Kustoff, Tenney, Hollingsworth, 
Waters, Maloney, Velazquez, Sherman, Meeks, Capuano, Lynch, 
Scott, Green, Cleaver, Moore, Ellison, Perlmutter, Himes, 
Foster, Kildee, Delaney, Sinema, Beatty, Heck, Vargas, 
Gottheimer, Crist, 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. All members will have 5 
legislative days within which to submit extraneous materials to 
the Chair for inclusion in the record.
    This hearing is for the purpose of receiving the Secretary 
of Treasury's annual report on the Financial Stability 
Oversight Council. I now recognize myself for 3-1/2 minutes to 
give an opening statement.
    Mr. Secretary, this is your first appearance before the 
House after the Tax Cuts and Jobs Act has been signed into law. 
I want to let you know, on behalf of the majority, how grateful 
we are to you and to the President for your leadership and for 
helping make this act signed into law. It is truly, truly 
historic.
    After 8 years of failed economic policies that led to the 
slowest, weakest recovery in the modern era, the economy is 
starting to take off and wages are finally growing again. 
Consumer optimism abounds. So how ironic but totally 
predictable that equity markets will now swoon over the 
prospects of higher interest rates and possible inflation 
associated with a breakout of economic growth. Artificially low 
interest rates may have benefited some on Wall Street, but they 
haven't been particularly helpful to Main Street.
    We have always known that the Fed would face significant 
challenges in unwinding its balance sheet when the economy took 
off. If you are listening, good luck, Chairman Powell, you 
volunteered for the job.
    But, today, the underlying economy is strong and getting 
stronger due to the policies of the Trump Administration. 
Averaging 3 percent growth again, unemployment remains at a 17-
year low. Wages just grew at 2.9 percent, the fastest in almost 
a decade. Two million Americans have gone back to work. All of 
this in President Trump's first year in office, and we are just 
now on the leading edge of the Tax Cuts and Jobs Act.
    Let us take a look at the impact on the financial services 
industry alone. JPMorgan Chase recently announced it would be 
making a $20 billion, 5-year investment across its business 
lines. In addition to increasing wages for their employees, 
they plan to boost small business lending by nearly 20 percent. 
In my hometown of Dallas, Comerica announced it is boosting its 
minimum wage to $15 and giving a $1,000 bonus to 4,500 
employees. Nationwide is giving its employees a $1,000 bonus 
and increasing its 401(k) match. Visa is also increasing its 
401(k) eligibility in contributions as well. BB&T is raising 
its minimum wage from $12 to $15 an hour and giving its 
employees a one-time bonus of $1,200. Hardly crumbs.
    And these are just a few of the financial services 
companies that have announced benefits due to the Tax Cuts and 
Jobs Act.
    Again, Mr. Secretary, thank you. And thank you to the 
President.
    Unfortunately, tax reform alone will not unleash our 
Nation's full economic potential. Why? Because, for the last 8 
years, our economy has been drowning in a sea of complex, 
onerous, expensive, and job-crushing Washington red tape. 
Fortunately, the Trump Administration has aggressively cut 
needless red tape like few others, but much work remains, 
including at the Financial Stability Oversight Council.
    FSOC can clearly serve a vital function in promoting 
financial stability by monitoring market developments, 
facilitating information sharing across regulatory silos, and 
making policy recommendations to Congress to mitigate risk.
    Unfortunately, FSOC has proven it can also harm our economy 
through its designation of SIFIs (systemically important 
financial institutions). Under the last Administration, FSOC 
simply eviscerated GE Capital, one of America's great 
companies, one that had capitalized millions of small and 
midsize companies, from local bakeries to furniture stores. It 
is just gone. In a dangerous, unlawful, and misguided effort, 
it attempted to designate MetLife a SIFI, an insurance company. 
Fortunately, the decision was found to be arbitrary and 
capricious, and overturned.
    Mr. Secretary, I am encouraged by much of what I read in 
FSOC's annual report. Under the new leadership of a new 
Administration, I look forward to hearing more about it.
    I now recognize the Ranking Member for 4 minutes for an 
opening statement.
    Ms. Waters. Thank you, Mr. Chairman.
    And welcome back, Secretary Mnuchin. I am looking forward 
to your testimony today on the annual report of the Financial 
Stability Oversight Council, or FSOC.
    I am very concerned that the Trump Administration seems to 
be determined to remove all nonbank systemically important 
financial institutions from FSOC supervision regardless of what 
threats those institutions may pose to our economy.
    As we all know, one such financial institution, AIG, nearly 
brought down the economy in 2008 and had to be bailed out to 
the tune of $182 billion. FSOC plays a key role in ensuring the 
continuing stability of the United States economy. And it must 
not be weakened or sidelined from dealing with threats posed by 
risky financial institutions.
    In addition to testimony on FSOC, it is also important 
today that the Secretary address several outstanding inquiries 
on vital matters with national security implications.
    Mr. Chairman, as a general matter, Secretary Mnuchin's 
handling of inquiries from committee Democrats has been 
completely unacceptable. As you know, serious questions have 
been raised about the finances of President Trump, his family 
members, and his associates, and their involvement with Russian 
government officials and oligarchs.
    As a Ranking Member of the committee with jurisdiction over 
the Treasury Department Financial Crimes Enforcement Network, 
that is FinCEN, I and other Democrats on the committee have 
requested information from the Secretary on these matters 
several times.
    At the Secretary's last appearance before this committee, I 
asked about a letter that we had written to him regarding 
President Trump's financial ties to Russia, as well as those of 
his family members and associates. Secretary Mnuchin did not 
answer the letter, and he was not forthcoming in his testimony.
    Since then, we have seen the Secretary--we have sent the 
Secretary two additional follow-up letters pertaining to the 
finances of President Trump, his family members, and his 
associates, as well as his own handling of law enforcement and 
regulatory matters that may involve those individuals.
    The reply that my Democratic colleagues and I received from 
Secretary Mnuchin's staff just a few days ago did not provide 
answers to our inquiries and, instead, encouraged us to go and 
get the information we requested from other committees with 
which the Treasury had provided documents.
    Despite the fact that the Financial Services Committee has 
clear jurisdiction over these matters, the Secretary seems to 
think that referring us to other committees is a satisfactory 
answer to our questions. It is not.
    Relatedly, I am also very concerned about the Trump 
Administration's inaction on the sanctions passed with broad 
bipartisan support by Congress in 2017 to punish Russia by 
interfering in our democracy.
    The Trump Administration has now missed several deadlines 
related to those sanctions, which is unacceptable. Trump's 
inaction in these areas serves to advance the interest of 
Putin, the Kremlin, and Russian oligarchs to the detriment of 
the American people. My January 31st letter to Secretary 
Mnuchin and Secretary Tillerson on this matter has gone 
unanswered as of yet.
    Since Secretary Mnuchin is here today, it is my sincere 
hope that he will provide answers to the questions we have on 
all of these matters. And so, with that, Mr. Chairman, I will 
yield back the balance of my time.
    Chairman Hensarling. The Chair now recognizes the gentlemen 
from Missouri, Mr. Luetkemeyer, the Chairman of the Financial 
Institutions Subcommittee, for 45 seconds.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for being here today.
    In the last year, we have made significant progress on tax 
and regulatory reform. However, we must continue to improve the 
efficiency of the regulatory regime that has left too many 
consumers and small businesses sitting on the credit sidelines. 
I am a firm believer in meaningful regulation. At the same 
time, regulation needs to be responsible and tailored.
    With regards to risk, for too many years, we have dealt 
with a Federal Government that tried to purge all risk from the 
system. I remain unconvinced that the result of those actions 
has done very much at all to promote financial stability.
    With regards to FSOC, Mr. Secretary, I urge you to use your 
authority to re-regulate and promote financial stability 
through analytical, not arbitrary, processes. FSOC needs to 
become a more thoughtful body. I look forward to your 
testimony.
    Mr. Chairman, with that, I yield back.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Kildee, the Vice Ranking Member, for 1 minute.
    Mr. Kildee. Thank you, Chairman Hensarling and Ranking 
Member Waters.
    And, Secretary Mnuchin, I appreciate you being here.
    We haven't met. My hometown is Flint, Michigan. And what 
happened in Flint is an example of what happens when we fail as 
a society to invest in older industrial cities, those towns 
that are struggling to make that transition to the next 
economy. The water crisis in Flint is a tragedy that is, sadly, 
still ongoing.
    It should be a wake-up call for every American, a wake-up 
call about what happens when we put balance sheets ahead of the 
interests of people. Yet this Administration, and your 
Department as well, recently have attempted to justify changes 
in our Tax Code that by implication will hurt many of these 
communities.
    The Republican-passed tax bill, while certainly there are 
winners and losers--and we could litigate that for the entirety 
of this hearing--one thing we know for sure is that the changes 
in the Tax Code are already being used by the Administration 
and by this Congress to justify cuts to programs that are 
necessary to the revitalization of these already struggling 
places. That is not acceptable. And there is no way to justify 
that.
    What we need in this country is a plan to reinvest and 
reinvigorate those places. People live there. And the 
implications cannot be overlooked. We can't just focus on the 
people at the top who are winning without recognizing there are 
people who will suffer as a result.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Michigan Mr. 
Huizenga, the Chairman of the Capital Markets Subcommittee, for 
45 seconds.
    Mr. Huizenga. Last week, my fellow Michigander Zack Booker 
was my guest to the State of the Union Address. And Zack is a 
fourth-generation barber, as well as starting and owning a 
number of various small businesses across my district in west 
Michigan. Zack describes himself as young but hungry for 
success, and continues to strive for growth. And he has said, 
because of this Tax Cuts and Jobs Act, that he is actually, 
quote, saying: ``Our goals can be extended. I am increasing 
wages. I am trying to hire more people. I am trying to broaden 
our reach to serve more customers. We are trying to add more 
locations. We are trying to buy buildings instead of rent 
buildings.''
    Zack's is a common story. This bill is not just about 
providing crumbs to the American people. It is helping young 
entrepreneurs like Zack grow our economy and achieve the 
American Dream. So we as Congress know that we must work hard 
to do more to make sure that hardworking families in west 
Michigan and across the Nation have the opportunity to save and 
invest and have a better future, like my friend Zack. And Zack 
also knows, Mr. Secretary, that what is happening on Wall 
Street is a technical correction hitting Wall Street, not a 
fundamentals correction that is hitting Main Street. Far too 
long we have been ignoring Main Street, and it is time that we 
turn that around.
    So I appreciate you being here today, and I look forward to 
supporting these young entrepreneurs like Zack. Thanks.
    Chairman Hensarling. The time of the gentleman has expired.
    Today, we welcome the testimony of the Honorable Steven 
Mnuchin, United States Secretary of Treasury.
    Secretary Mnuchin has previously testified before our 
committee, so I believe he needs no further introduction.
    Without objection, the witness's written statement will be 
made part of the record.
    The Chair wishes to inform members that, regrettably, we do 
expect a vote series to interfere with our hearing, midmorning, 
but the Secretary has agreed to stay until 1:30, the customary 
3 hours for a Secretary.
    Secretary Mnuchin, you are now recognized for 5 minutes to 
give an oral presentation of your testimony. Welcome.

          STATEMENT OF THE HONORABLE STEVEN T. MNUCHIN

    Secretary Mnuchin. Thank you very much. And it is a 
pleasure to be here.
    Chairman Hensarling, Ranking Member Waters, and members of 
the committee, thank you for inviting me today.
    One of my top priorities as Treasury Secretary is sustained 
economic growth for the American people. So I am happy to 
report that the growth of the economy over the past year was 
higher than the average of over the prior 20 years and included 
2 straight quarters of 3 percent or higher GDP. The President 
promised robust growth, and he is delivering on that promise.
    I am here today to talk about the Financial Stability 
Oversight Council's 2017 annual report. This is an important 
vehicle for providing Congress and the public with the 
Council's assessment and recommendations relating to regulatory 
developments and potential risks in the financial system. The 
report emphasizes the importance of economic growth to 
maintaining a resilient financial system.
    Since the financial crisis, we have had time to assess the 
effectiveness of regulatory reforms and consider their 
unintended consequences. The report recommends that the Council 
member agencies address regulatory overlap and duplication, 
modernize outdated regulations, and tailor regulations based 
upon the size and complexity of financial institutions. The 
report also discusses a number of risks that the Council is 
monitoring. One that I would like to emphasize today is 
cybersecurity.
    The financial system's heavy and increasing reliance on 
technology increases the risk that significant cybersecurity 
incidents could disrupt the financial sector and potentially 
impact U.S. financial stability. Substantial gains have been 
made, but I want to emphasize the need for sustained attention 
to these risks.
    The report makes a number of recommendations, including the 
creation of a private sector council of senior executives in 
the financial sector to collaborate with regulators in order to 
mitigate cybersecurity risks.
    Turning to our growth policies, the Tax Cut and Jobs Act 
passed last year was our top priority, and this overhaul of the 
Tax Code is already having a positive impact. Because of tax 
reform, over 3 million Americans have received special bonuses 
or other benefits and over 300 companies have announced 
investments in their work forces. Companies are announcing 
higher wages and increased benefits, as well as greater 
spending on employee training, infrastructure, and research and 
development. These investments will lead to long-term 
prosperity, as well as companies to bring back cash from 
overseas. Our economy will continue to grow.
    Let me now turn to some specific priorities. I want to 
commend both the House and Congress for their work on financial 
regulatory reform.
    I appreciate the work of this committee and the House of 
Representatives to advance the cause of reform by passing H.R. 
10, the Financial Choice Act, and dozens of strongly bipartisan 
bills. This legislation reflects many of Treasury's 
recommendations from our executive order reports released last 
year. I encourage the Senate and House to work together to move 
this legislation as quickly as possible.
    Last week, I wrote to Congress providing notification of my 
determination that a debt issuance suspension period would last 
until February 28th. I respectfully urge Congress to act as 
soon as possible to protect the full faith and credit of the 
United States by increasing the statutory debt limit as soon as 
possible.
    The House and Senate have been working toward modernization 
of the Committee on Foreign Investment in the United States, 
CFIUS. I support the Foreign Investment Risk Review 
Modernization Act, FIRRMA, and applaud Senators Cornyn, 
Feinstein, and Burr and Representatives Pittenger and Heck for 
their leadership on this issue. A modernized CFIUS will enable 
us to protect our national security. I look forward to working 
with Congress and the relevant committees to advance FIRRMA.
    One of Treasury's core missions is to safeguard the Nation 
by using powerful economic tools. We will continue to take 
frequent and ongoing actions to combat threats from malicious 
actors. These include terrorist groups, proliferators of 
weapons of mass destruction, human rights abusers, 
cybercriminals, and rogue regimes like North Korea, Iran, and 
Venezuela.
    We continue to review intelligence to identify targets with 
maximum impact, deny them access to the U.S. and international 
financial system, disrupt their revenue streams, and ultimately 
pressure for a change in behavior.
    As you are aware, last week, the Treasury Department 
submitted a series of reports in compliance with sanctions 
legislation. These reports represent another chapter in our 
efforts to use our economic authorities to counter the threats 
that we face.
    On housing finance, the current situation of indefinite 
conservatorship for Fannie Mae and Freddie Mac is neither a 
sustainable nor a lasting solution. The Administration looks 
forward to working with Congress to reform America's housing 
finance system in a manner that helps consumers obtain the best 
housing suited for their own personal and financial situation, 
while at the same time protecting taxpayers.
    I am proud of what we accomplished so far, and there is 
more to do. Our country's potential is enormous, which is why 
Americans expect their Government to enact policies that allow 
them to succeed and prosper. Treasury's collaboration with 
Congress is vital to that mission, and we look forward to 
working with you every day to make it a reality.
    Thank you, and I look forward to answering your questions.
    [The prepared statement of Secretary Mnuchin can be found 
on page 56 of the Appendix]
    Chairman Hensarling. Thank you, Mr. Secretary.
    The Chair now yields to himself for 5 minutes.
    Mr. Secretary, on her way out the door, Chair Yellen said 
that equity values are, quote-unquote, ``quite high'' and that, 
quote-unquote, ``there are potential dangers there.'' I don't 
disagree with her. I just thought it was a little curious that 
a Fed Chair on her way out of the door would say such things. 
But economists, as you well know, have been predicting that, 
once the economy took off, that there would be immense 
pressures on equity markets.
    Clearly markets have been roiled. We know that, 
fortunately, markets are still up over 20 percent in the 
Administration. But we have had huge volatility over the last 
few days. Could you give us your view on what is going on here?
    Secretary Mnuchin. Sure. Mr. Chairman, thank you very much 
for that question.
    First, I would say we are very focused on the long-term 
economic growth, and we believe that the policies that we have 
enacted, including tax reform, are very positive for long-term 
economic growth. We are already beginning to see that in terms 
of corporate investments back into the United States and the 
impact on corporate earnings.
    I think, as you said, the stock market is up significantly, 
over 30 percent since President Trump was elected. We are 
monitoring the stock markets. They are functioning very well, 
and we continue to believe in the long-term impact of the stock 
market. So thank you.
    Chairman Hensarling. Mr. Secretary, on page 6 of the FSOC 
report, you call on Congress to create a more, quote, 
``sustainable housing finance system,'' unquote, for the sake 
of, quote, ``financial stability.'' We know it has been 10 
years since the financial crisis, and regrettably, Congress has 
failed to act.
    If we once again fail to act--and some of us are trying to 
work on bipartisan housing finance reform--but if we fail to 
act, isn't it true that, roughly a year from now, the President 
gets to appoint a new FHFA (Federal Housing Finance Agency) 
Director who will serve for a 5-year term? Is that correct?
    Secretary Mnuchin. That is correct.
    Chairman Hensarling. And isn't it true that the FHFA 
Director is not just the regulator of the GSEs but also the 
conservator? Isn't that correct, Mr. Secretary?
    Secretary Mnuchin. That is correct.
    Chairman Hensarling. And isn't it true that, as 
conservator, the FHFA Director has broad sweeping powers? For 
example, I believe, is it not true that if Congress fails to 
act, the FHFA Director could discontinue the GSEs' (government-
sponsored enterprise's) HARP, or Home Affordable Refinance 
Program, isn't that true, Mr. Secretary?
    Secretary Mnuchin. That is correct, Mr. Chairman.
    Chairman Hensarling. And isn't it also true that the FHFA 
Director could suspend all GSE contributions to the housing 
trust fund if they found that they would, quote, ``contribute 
to the financial instability of Fannie and Freddie''? Isn't 
that true?
    Secretary Mnuchin. That is correct.
    Chairman Hensarling. Isn't it also true, Mr. Secretary, 
that, under 12 U.S.C. 4566, that the FHFA Director can 
essentially choose not to enforce the statutory housing goals 
of the GSEs if he finds that, quote, ``the achievement of the 
housing goal was or is not feasible''? Isn't that correct, Mr. 
Secretary?
    Secretary Mnuchin. That is correct.
    Chairman Hensarling. I would hope that all within earshot 
have listened carefully at what might happen if we choose not 
to engage in GSE reform. And, again, we look forward to working 
with you, Mr. Secretary, with the Administration, with my 
friends on the other side of the aisle in hopes that we can 
find America a truly, truly sustainable housing finance system, 
one that helps put people into homes they can actually afford 
to keep.
    Different question, Mr. Secretary, to date, FSOC has 
designated four nonbank financial companies as SIFIs, but today 
only Prudential remains designated. As you know, under statute, 
FSOC is required to reevaluate these designations at least 
annually.
    Can you tell me the last time Prudential's designation was 
last reevaluated?
    Secretary Mnuchin. I believe it will be coming up, but it 
has not been evaluated recently.
    Chairman Hensarling. Is there a specific timeframe for its 
reevaluation, Mr. Secretary?
    Secretary Mnuchin. My expectation is it will be in the near 
future, this year.
    Chairman Hensarling. OK. We know that a couple of weeks 
ago, the Administration chose not to--to drop the Government 
appeal of the MetLife litigation, so essentially they have been 
dedesignated.
    We know that an Article III court found the designation 
process of MetLife to be, quote-unquote, ``fatally flawed.'' 
But wasn't it the same fatally flawed process that led to 
Prudential's designation?
    Secretary Mnuchin. Mr. Chairman, I am not going to make the 
comment on Prudential, but I will make the comment on MetLife. 
As you have said, the majority of the members of FSOC 
recommended to the Justice Department to drop the case, and we 
will be working with the committee on revised guidelines for 
designations.
    Chairman Hensarling. I have read where those revised 
guidelines, I think, will include a cost-benefit analysis to 
the economy and its impact on jobs. I look forward to that. My 
time has expired.
    The Chair now recognizes the Ranking Member for 5 minutes.
    Ms. Waters. Thank you very much. Mr. Chairman, pursuant to 
clause d(4) of committee rule 3, I request recognition to 
question the witness for an additional 5 minutes upon the 
conclusion of the time allotted to me under the 5-minute rule.
    Chairman Hensarling. The Ranking Member is recognized for 
10 minutes.
    Ms. Waters. Thank you very much.
    I would first like to ask about the subject of my most 
recent letter, which is your Department's role in section 231 
of the Countering America's Adversaries Through Sanctions Act. 
Congress passed this law on a broadly bipartisan basis with the 
clear objective of punishing Russia for its brazen attack on 
our democracy.
    Mr. Secretary, do you believe our intelligence agencies, as 
they have said to us, that Russia did hack into our DNC and 
undermined our democracy? Do you believe that to be true?
    Secretary Mnuchin. Again, I will broadly say, I do believe 
in the intelligence assessment.
    I want to refrain from comments specific that are 
classified.
    Ms. Waters. Thank you.
    Secretary Mnuchin. But, yes, I broadly believe in the 
assessments.
    Ms. Waters. Even the findings section of the law explicitly 
references the intelligence community's finding that Russian 
President Vladimir Putin ordered an influence campaign in 2016 
aimed at the United States Presidential election.
    The findings also recognize the intelligence community's 
warning that Moscow will apply lessons learned from its Putin-
ordered campaign aimed at the U.S. Presidential election to 
future influence efforts worldwide, including against U.S. 
allies and their election processes.
    Do you believe that to be true?
    Secretary Mnuchin. I have no reason not to believe it to be 
true.
    Ms. Waters. So, given the importance of the law's very 
purpose, I am wondering why this Administration continues to 
let key deadlines in the act come and go without taking any 
action to implement the act and punish Russia for its crimes 
against the American people.
    Now, one provision of the law, which the Administration has 
ignored, is section 231 of the act. This section requires that 
the President sanction persons he has determined to have 
engaged in a significant transaction with Russia's defense and 
intelligence sectors on and after January 29, 2018. As you 
know, the law also allows the President to waive or delay these 
sanctions.
    However, to date, this committee has received no indication 
that any sanctions have been imposed, waived, or delayed. And, 
last week, when you testified before the Senate Banking 
Committee, you stated that you did not waive or delay 
sanctions.
    Section 231 of CAATSA (Countering America's Adversaries 
Through Sanctions Act) is clear, that the President has 6 
months from a date of enactment to determine which persons are 
engaged in sanctions with the Russian defense and intelligence 
sectors. After 6 months, the President must impose sanctions on 
such persons or waive or delay imposition of the sanctions.
    Yet, despite the fact that the deadline for action has come 
and gone, no sanctions have been imposed, waived, or delayed 
pursuant to section 231. How can you explain this?
    Secretary Mnuchin. The section that I believe you are 
referring to has been delegated to the State Department. So I 
can't comment for Secretary Tillerson on that. I can comment on 
the portion that we were responsible for, which was the 
oligarch report, that we did deliver on time. And as I 
testified in the Senate, there will be sanctions coming out of 
that report. And, again, I want to commend the work that was 
done on the Intelligence Committee on the classified version.
    Ms. Waters. Who is responsible for delegating what was 
passed by an overwhelming majority of this House to the State 
Department?
    Secretary Mnuchin. The President was.
    Ms. Waters. So the President decided that, despite the fact 
that in the law that we passed, delegated responsibility to 
Treasury, that he decided that he wanted it to be delegated to 
the State Department, rather than the Treasury, and this is 
your excuse for not having implemented the law. Is that 
correct?
    Secretary Mnuchin. No, it is not my excuse. And, again, I 
believe, but we would be happy to sit down with you and go 
through the details of this, the President had the authority to 
delegate within that, as he chose fit, again, the portion that 
you are referring to was delegated to the State Department. The 
other portion was delegated to us.
    Ms. Waters. But the final conclusion is that nothing has 
been done. There has been no waiver. There has been no delay. 
There has not been anything that has been done. You did not 
waive or delay sanctions. That is the conclusion, whether we 
are talking about Treasury or the State Department. Is that 
correct? Nothing has been done on sanctions?
    Secretary Mnuchin. Again, there has been, on our side, 
there has been an enormous amount of work done. I want to 
commend the intel community. And there will be sanctions that 
come out as part of that. I can't comment on the State 
Department's part of the package.
    Ms. Waters. Would you describe the enormous amount of work 
that the Treasury Department has done that you just alluded to? 
What have you done?
    Secretary Mnuchin. Again, I would encourage you to look at 
the classified report. It is incredibly extensive. It is a work 
product of the intel and the Treasury, and that work product is 
now being used for the basis of developing sanctions.
    Ms. Waters. Are you telling me that, in your response to 
the overwhelming majority of this Congress, having created law 
to impose sanctions on Russia that undermined our democracy, 
that your response is classified? Is that what you are telling 
me?
    Secretary Mnuchin. Again, what I have said is part of the 
report was unclassified; part of the report was classified.
    I assure you that, as it relates to the work being done at 
Treasury, there will be sanctions. And, again, there is a lot 
of ongoing work that is being done to develop those sanctions, 
and we complied with the law on time.
    Ms. Waters. The Congress of the United States does not know 
what you are doing. The Congress of the United States does not 
expect that your response to the public policy that was 
developed by us be somehow responded to in a classified way.
    Is there anything that you can tell us that you have done?
    Secretary Mnuchin. Well, again, the law called for both a 
classified portion of the report and an unclassified.
    Given that the majority of the work was developed on a 
classified basis, we classified the report. I would encourage 
you and other members to look at it. It is an extensive amount 
of work. Again, that the first phase was to develop the report 
and deliver it, which we did on time, and now we are developing 
sanctions on it. So I assure you, we are very focused on this.
    Ms. Waters. Well, I would encourage you to encourage the 
President to declassify any information that should be 
forthcoming to this committee, just as he was able to do in the 
Nunes memo. He used his power of the President to declassify.
    I would suggest to you that if information is declassified, 
that should be available to this Congress, who voted 
overwhelming for sanctions on Russia, who undermined our 
democracy, those sanctions should be not delayed or waived, and 
we should have information about it.
    Let me continue. Is it the Treasury Department's position 
that no persons are engaged in significant transactions with 
Russia's defense and intelligence sectors?
    Secretary Mnuchin. Again, I am not going to comment on that 
because that is not the portion that we are doing the work on.
    Ms. Waters. Would you tell us again, what are you doing the 
work on?
    Secretary Mnuchin. Again, we did the work on what was 
referred to the oligarchs as well as senior government 
officials. We detailed in the report where there was evidence 
of corruption, family relationships, networks. We complied with 
a very extensive report that, as I said, there is a classified 
version and an unclassified version. And we will be using the 
intelligence work, where there are indications of corruption, 
to follow this up with sanctions, which are a very effective 
tool that we intend to use.
    Ms. Waters. Are you referring to the work that you did on 
the oligarchs as the list of oligarchs that you lifted from the 
Forbes report?
    Secretary Mnuchin. Again, we were very clear that the 
public nonclassified version is the universe that we looked at 
and was developed on open source, both the oligarchs and the 
leaders.
    The classified report goes through that list in a very 
detailed manner, as well as other people that weren't on that 
list that would have fallen below the billion dollar threshold. 
So, again, I would encourage you to review the report.
    I think you would be impressed with the findings.
    Ms. Waters. But let me just ask you, were there any persons 
identified that were engaged in significant transactions with 
Russia's defense and intelligence sectors? You don't have to 
give me their names, but I want to know, did you identify, did 
the Treasury Department identify any persons?
    Secretary Mnuchin. Again, that portion of the act is not 
the work that I am familiar with. The portion of the act that I 
am familiar with is corruption. We did identify people that 
were involved in corruption, and we will be using that to come 
out with sanctions.
    Ms. Waters. Let me just continue. Last week, it was 
reported that CIA Director Pompeo met with senior officials in 
Russia's intelligence service, one of whom is subject to U.S. 
sanctions and the other of whom is subject to European 
sanctions. This meeting occurred just prior to the deadline for 
implementing sanctions on those engaged in significant 
transactions with Russia's defense and intelligence sectors. 
These are the same sanctions that the President has refused to 
act on.
    As reported in The Washington Post, current and former U.S. 
intelligence officials said they could not recall so many heads 
of Russia's espionage and security apparatus coming to 
Washington at once and meeting with a top American official.
    Are you at all troubled by the curious timing of a meeting 
between Russian intelligence and U.S. intelligence just days 
before the President failed to take action to implement 
sanctions pursuant to section 231 of CAATSA?
    Secretary Mnuchin. No, I am not troubled. I believe that 
timing was just coincidental, and I believe there were various 
issues that the Director wanted to discuss.
    Ms. Waters. I am sorry. I can't hear you.
    Secretary Mnuchin. I said I am not troubled by that. I 
believe that the timing was coincidental and had nothing to do 
with the reports.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Huizenga, Chairman of our Capital Markets Subcommittee.
    Mr. Huizenga. Thanks, Mr. Secretary.
    I am going to move very quickly through a couple of things, 
but first and foremost, I need to remind my colleagues that we 
can go see classified information and that briefings have been 
offered by the Secretary and by others. I also want to touch a 
little bit on the economic growth that we are seeing. And in my 
opening statement, I talked about Zack Booker, my constituent, 
and the fundamentals of Main Street being solid but seeing 
technical corrections in Wall Street is OK.
    But the interesting thing, this yarn that somehow President 
Trump inherited this great economy is quite amazing. First of 
all, he had 1.2 percent growth in the first quarter as he came 
into office. That has grown into a 3-percent growth for the 
year. Never reaching 3 percent growth in a calendar year with 
the Obama Administration, and so I think we have seen the 
economy respond.
    FSOC and stability requires broadening of those that 
participate in the marketplace, and that is where I want to go. 
We have seen a number of public companies decline by 50 percent 
since 2000. The average number of IPOs, or initial public 
offerings, has been about 135 per year versus 450.
    In 2016, there were only 112 IPOs. This decline has been 
very troubling to many of us on the committee, both sides of 
the aisle. FCC Chairman Clayton noted, quote: ``The reduction 
in the number of U.S.-listed public companies is a serious 
issue for our markets and the country more generally. To the 
extent companies are eschewing our public markets, the vast 
majority of Main Street investors will be unable to participate 
in their growth. The potential lasting effects of such an 
outcome to the economy and society are, in two words, not 
good.''
    You know, Zack isn't ready to bring his barbershops and his 
other companies public yet, but I am afraid that the Zack 
Bookers of the world aren't going to be able to do that in the 
long run. And I am curious, in your opinion, what are the three 
top impediments that are chilling this IPO market or 
discouraging companies from accessing capital in the public 
markets?
    Secretary Mnuchin. Well, thank you, and I appreciate the 
work you are doing on capital markets.
    In the report we did, the executive order, we go through an 
extensive review of different things that we think can make it 
easier for companies to access the public markets, particularly 
smaller companies, with proper regulations. So I would 
encourage you to, we can go through the details with you, but 
there is a long list of things we recommended.
    Mr. Huizenga. Yes, and I recommend that my colleagues take 
a look at that because I think this is the glide path and the 
direction that we need to go.
    I want to move on to one of those impediments, in my 
opinion, the Volcker Rule, that I am afraid that it has had a 
chilling effect on the liquidity in the markets and the U.S. 
financial institutions.
    And a couple of quick things: In testimony in March 2017, 
we had a hearing in the Capital Market Subcommittee on the 
Volcker Rule, and Ronald Kruszewski, Chairman and CEO of 
Stifel, testified that, quote: ``To determine whether an 
activity was proprietary trading or legitimate market-making, 
compliance expert would also need to be a psychiatrist trained 
in determining to the intent of each trade by a trader.''
    In an April 7, 2017 speech, New York Fed Reserve Bank 
President William Dudley, commented, quote, ``the line between 
market-making and proprietary trading is not always clear-cut, 
which makes regulation in this space difficult,'' and, quote, 
``that it may be worth considering giving greater discretion to 
trading desks that facilitate client business to intervene when 
markets are illiquid and volatile.''
    Do you agree with Mr. Dudley's assessment?
    Secretary Mnuchin. I do. And we are working with the 
regulators to try to have better definition around the law and 
the rule so that people can interpret it.
    Mr. Huizenga. Do you believe it would make sense for one 
regulator to take the lead to interpret that guidance?
    Secretary Mnuchin. I do not.
    Mr. Huizenga. OK. I do want to highlight one other quick 
oddity in this. We have a Michigan-based energy company that 
owns an industrial bank in Utah, where many of those ILCs, 
industrial loan corporations, are, and because of its ownership 
interest in the bank, an energy company is considered a banking 
entity under the Volcker Rule. And since nonfinancial parents 
of industrial loan companies are being treated as bank-holding 
companies under the Volcker Rule, if an investor breaches a 10-
percent holding in ownership in its nonfinancial parent, it is 
deemed to be controlling a bank and is then itself subject to 
the Volcker Rule.
    If the Volcker Rule did not apply to nonfinancial parents 
of industrial loan companies, do you believe that it would pose 
a systemic risk to the financial system?
    Secretary Mnuchin. No, I do not.
    Mr. Huizenga. Thank you very much. I appreciate that. And 
we will continue to work on that and look forward to working 
with you, Mr. Secretary.
    Secretary Mnuchin. Thank you.
    Mr. Huizenga. Thanks.
    I yield back.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Luetkemeyer, Chairman of our Financial Institutions 
Subcommittee.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here again. I just want 
to also reiterate my support and thanks for working with us on 
the tax cut bill, tax reform bill.
    I have two quick stories for you. I know, when we were 
discussing the tax bill with some of my folks back home, I had 
a small women's business roundtable. And at that roundtable, 
when I got done discussing what we were going to try and do, 
one of the ladies there who had a glass shop, 60 employees, 
said: ``If you cut my taxes, Congressman, we will reinvest that 
money, and we will hire some more people and expand our 
business.''
    This past weekend I was back home. I was talking to another 
small business. And in your testimony today, you talk about 3 
million people received bonuses; 300 companies announced 
investments. I am sure this particular company is not in those 
figures, and there are probably thousands and thousands of 
other folks just like them, but they will give a $500 bonus to 
all their employees. And this is a small business.
    So there are lots of people across the country that are 
receiving these bonuses. And when they say it is a ripple 
effect, I think it is more like a tsunami that is starting to 
go across our country from the standpoint of how important this 
is to the citizens of our country. So thank you for that.
    With regards to your testimony today, and something I am 
working on myself, one of the things that we are doing in my 
subcommittee is working on data security, cybersecurity. And in 
your testimony today, you talk about the Council is monitoring 
the cybersecurity risks and has a number of recommendations. 
And one of them is the creation of a private sector council of 
senior executives.
    Can you elaborate a little bit more on FSOC's endeavors in 
cybersecurity, data security, and some ideas of things you are 
working on?
    Secretary Mnuchin. Well, thank you. It is an issue I am 
very much focused on. I think protecting the financial 
infrastructure is of critical concern to ours. And our two 
priorities are: One, making sure that the various different 
regulators are working together, that they are pooling their 
resources to focus on this issue; and two, that we develop the 
proper public-private partnerships to be able to exchange 
information, best practices. And, also, we have been conducting 
different tabletop exercises in case there is an event.
    Mr. Luetkemeyer. Just two more questions along this line.
    Number one, right now, we have a patchwork of rules and 
laws across the country with regards to the States monitoring 
and having some input with regards to notification, wondering 
how will you support a streamlining of this, number one and 
number two, obviously, the Federal Government has a problem 
with data security as well--we have had a number of breaches 
that are well-known by the public of information that is held 
by the Federal Government--and how we would coordinate those as 
well.
    Secretary Mnuchin. So the first part, I completely agree 
with you with the idea and the need for streamlining. I think 
that is very important. And I am participating, along with DHS 
and other groups at the National Security Council on cyber to 
make sure we are coordinated across Government because, as you 
have said, we are not immune from these issues ourselves. And 
making sure that what we learn from attacks against us, we are 
also using to protect private industry.
    Mr. Luetkemeyer. Very good. One of the main objectives of 
FSOC is to designate systemically important financial 
institutions.
    I know I have a bill that deals with this with regards to 
some of the midsize regional banks that are impacted by this 
that I think they are not part of the problem; they have been 
roped in as part of the solution. And one of my solutions to 
this problem is using the Federal Reserve's process by which 
they have a systemically important risk indicator score.
    Does FSOC take into account this Federal Reserve score 
whenever you are discussing SIFIs?
    Secretary Mnuchin. I haven't seen that per se in my 
experience, but we will look into that. And I think that is 
something that we should consider.
    Mr. Luetkemeyer. And because it seems like we don't need to 
reinvent the wheel if the Feds are already doing the analytical 
work of looking at what a systemically important financial 
institution is, and by their score, indicating which ones are 
and which ones aren't, it would seem to be a very helpful tool 
to FSOC to be able to utilize that.
    Secretary Mnuchin. Yes, we use a lot of work from the Fed. 
They are very helpful. And I will look into the scoring issues 
and follow up with your office. Thank you.
    Mr. Luetkemeyer. I have about 35 seconds left, Mr. 
Secretary. Would you like to respond to any of the questions 
that were directed to you a moment ago by the Ranking Member?
    Secretary Mnuchin. No, I am OK for now, but thank you for 
that option.
    Mr. Luetkemeyer. Mr. Chairman, I will allow the Secretary 
to reserve my 30 seconds.
    With that, I yield back.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentlelady from New York Mrs. 
Maloney, Ranking Member of our Capital Markets Subcommittee.
    Mrs. Maloney. Thank you. Welcome, Secretary Mnuchin.
    As you know, yesterday, the stock market suffered its worst 
day in 6 years with the S&P down 4.1 percent and the Dow down 
4.6 percent. And it looks like markets are plunging even 
further today.
    You are the Chair of the Financial Stability Oversight 
Council. And I want to know, are you concerned about this 
recent market rout, this recent market turmoil?
    Secretary Mnuchin. Well, first off, I would just comment, 
they have been quite volatile today. I normally wouldn't be 
looking at my iPhone, but given the market moves, I am checking 
it. It is now up 187 points, so we are back up today.
    I am not overly concerned about the market volatility. I 
think the fundamentals are quite strong. I have checked in with 
market participants this morning before I came to make sure 
there was orderly market activity, clearance functioning, no 
systemic issues. And I am happy to report that I got the green 
lights.
    Mrs. Maloney. Well, do you believe--does this have 
financial stability implications?
    Secretary Mnuchin. No, I don't think these types of moves, 
given how much the market has rallied, do have financial 
stability concerns.
    Mrs. Maloney. Well, the Administration has claimed credit 
for the markets going up. Are they going to claim credit when 
the markets go down?
    Secretary Mnuchin. Again, I think we will still claim 
credit for the fact that it is up over 30 percent since the 
election.
    Mrs. Maloney. Well, let's move on to your testimony on 
cybersecurity, which you called one of the biggest risks to the 
financial system. And it is a very serious one, and it is a 
huge problem, particularly for virtual currencies, like bitcoin 
and ether. Virtual currency exchanges are constantly being 
hacked.
    A few years ago, the largest bitcoin exchange in the world 
was breached and lost over $450 million worth of bitcoin. And 
just 2 weeks ago, another virtual currency exchange in Japan 
was hacked, and they lost $550 million worth of virtual 
currency, the largest heist in history.
    A recent report found that about 14 percent of all of the 
major virtual currencies have been stolen by hackers. And this 
means that if you hold a major virtual currency, there is a 1 
in 7 chance that you have had your money stolen, a staggering 
statistic. But right now these virtual currencies, their 
exchanges aren't subject to any real cybersecurity standards.
    Just last week, FCC (Federal Communications Commission) 
Chairman Clayton said that he thinks some exchanges should be 
regulated by the FCC, which would require them to develop 
cybersecurity standards and prevent fraudulent practices like 
price manipulation.
    So my question is: Given that virtual currency exchanges 
are collectively holding billions of dollars for U.S. 
investors, which can disappear in the blink of an eye if 
hackers break in, should these virtual currency exchanges be 
subject to minimum cybersecurity standards to protect 
investors' money? It is a currency, but it is being treated by 
many people as an investment. So I am very concerned.
    Secretary Mnuchin. I broadly share your concerns. Last 
year, I set up a subcommittee of FSOC to specifically deal with 
cryptocurrencies. We made a lot of progress on that. You have 
focused on several issues, which I agree with. The two issues 
that I focused on are: One, we want to make sure that these 
exchanges can't be used for moving money to bad people. So, in 
the United States, if you are a bitcoin wallet, you are subject 
to the same anti-money laundering BSA (Bank Secrecy Act) 
requirements as a bank. We brought enforcement actions on that. 
We are working with the G20 to make sure that those rules are 
followed in other countries so that these don't become like old 
Swiss numbered bank accounts.
    The other area of grave concern is the concern to the 
consumer. We have recently had futures listed. We have done a 
lot of work with the regulators to make sure that where there 
is consumer protection, it is appropriate. And I too share your 
concerns about the cyber attacks and having people's money that 
is safe. So this is something we are actively studying. And we 
would be happy to follow up with your office on your ideas.
    Mrs. Maloney. Thank you very much. And I do have a draft 
bill I would like to share with you.
    And, finally, do you think Congress should raise the debt 
ceiling as part of the short-term continuing resolution this 
week?
    Secretary Mnuchin. I think that Congress should raise the 
debt ceiling. However they want to do it, I leave it to them. 
But I would encourage Congress to do that.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair wishes to advise members that there is a vote 
occurring on the floor, and the Chair will attempt to clear two 
more members and then declare a recess.
    The Chair now recognizes the gentleman from Wisconsin, Mr. 
Duffy, Chairman of the Housing and Insurance Subcommittee.
    Mr. Duffy. Thank you, Mr. Chairman.
    Mr. Secretary, you are in the Financial Services hearing 
room. You are not in the twilight zone. I am not sure if you 
would know where you are at based on the questions that came 
from the Ranking Member for 10 minutes.
    Here we are at a near 20-year unemployment low, historic 
lows. African-American unemployment is at an all-time low. 
Hispanic unemployment, all-time low. And a week ago, at the 
State of the Union, the people who say they care about their 
constituents, when Donald Trump brought that up, they all sat 
down. No applause. They sat there as unemployment is at 
historic lows for their constituents. And then they come in 
today and say: I don't want to talk about a GDP of 3 percent 
growth, where it was less than 2 under Obama. I am not talking 
about manufacturing jobs coming back to America. I am not 
talking about the great policies over the last year. What I am 
talking about is Russia. I want to talk about Russia.
    And by the way, when we talk about the economy, did I have 
friends across the aisle who will say $1,000 or $2,000 is 
crumbs? Give me a break. I don't know where you guys live, but 
that is a lot of money where I come from. Or if you get a 
$2,000 extra amount of money in your paycheck over here, that 
is a lot of money. To call it crumbs or to call our Tax Code 
``Armageddon,'' that is out of touch.
    You want to talk about Russia and collusion? All you have 
is the Hilary Clinton campaign and the DNC, including with 
Fusion GPS, Christopher Steele, and the Russians to take down 
an American President who fairly won an election.
    You want to talk about Russia? You can talk about Uranium 
One and a payout to the Hillary Clinton campaign to get 
approval--or the Clinton Foundation--to get an approval for 
Uranium One, if you want to talk about Russia.
    This is ridiculous, that these are the things that we are 
talking about, Mr. Secretary. And I will ask you actually 
questions that are relevant to, I think, our committee.
    Yesterday, The Wall Street Journal reported that there were 
1,700 banks that have closed in the last 12 months. Did you see 
that article?
    Secretary Mnuchin. I did.
    Mr. Duffy. Many of those banks came from rural America, 
places where I come from.
    Secretary Mnuchin. Yes.
    Mr. Duffy. What is the root cause of these branch closings, 
and what impact does it have on, now, communities that are in 
rural America that may now not be served by a bank?
    Secretary Mnuchin. I think a general issue is the cost of 
regulation for community banks. And that is why we are hopeful 
to look at Dodd-Frank reform that helps community banks. And 
those communities need those banks to lend.
    Mr. Duffy. Mr. Secretary, I thought all those regulations 
were only for the big banks. Are you saying that Dodd-Frank 
actually imposed regulations on the small community banks that 
serve rural America?
    Secretary Mnuchin. Yes, indeed.
    Mr. Duffy. Oh, I am surprised about that. And they are 
going out of business, because they can't comply.
    Secretary Mnuchin. Yes.
    Mr. Duffy. Or they consolidate, right? They consolidate. 
And then when the bank they consolidate with says: Well, that 
is not a profitable branch anymore; we are going to close it.
    I want to talk about the fundamentals. So we talked about 
the market. Markets are down. A couple bad days in the market. 
Is this in coordination with lack of fundamentals in the 
economy? Do we have problems in the economy with growth or 
wages or jobs that are being reflected in a down market?
    Secretary Mnuchin. No. The fundamentals are quite strong.
    Mr. Duffy. How so? So what is the disconnect between a 
market coming down and fundamentals being strong?
    Secretary Mnuchin. I think you have seen a normal market 
correction, although large. And I think, again, there is just a 
disconnect in the short term. Markets move in both directions.
    Mr. Kustoff. Could strong fundamentals actually bring down 
a market a little bit, be correct, just because you might be 
concerned about inflation, there might be concern about raising 
interest rates? Could that be a concern for the market?
    Secretary Mnuchin. It could be, as you suggest.
    Mr. Duffy. Any concern in the fall yesterday with 
algorithmic trading that could have heightened the losses that 
took place yesterday?
    Secretary Mnuchin. It definitely had an impact on market 
moves.
    Mr. Duffy. Anything we should be considering based on those 
market moves from--
    Secretary Mnuchin. Nothing that I would recommend at this 
time.
    Mr. Duffy. OK. And I want to be clear, as my time is about 
to end: When we talk about FSOC and designating financially 
systemically important institutions, we now have a threshold on 
size. Is it your contention that we should actually look at the 
activity surrounding the financial institution as opposed to 
the size?
    Secretary Mnuchin. It is my recommendation that we should 
definitely raise the level, and we should also look at 
activity.
    Mr. Duffy. OK. Listen, I want to thank you for your 
testimony. I am sorry for some of the questions that have come 
your way, but I want to applaud your efforts to actually work 
with us to lower tax rates that have had a huge impact on the 
American family, with the bonuses, with the increase in their 
paychecks. Though the other side should be dancing in the 
streets, they should be dancing in the aisles, they should be 
applauding; they are not because this is not about people, Mr. 
Secretary. This is about politics. And because they all voted 
no, they can't celebrate the win for their communities and for 
our country.
    And I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair again advises all members a vote is occurring on 
the floor.
    The Chair now recognizes the gentlelady from New York, Ms. 
Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    And welcome, Secretary.
    The issue of making sure that our democratic institutions 
are intact should be the responsibility of everyone. And after 
all, we all voted for the sanctions against Russia.
    Mr. Secretary, the history between the United States and 
Puerto Rico is one full of legal, political, economic, and 
social injustices. While 5 minutes won't be enough time to go 
through the list of things where U.S. policy has failed Puerto 
Rico, allow me to highlight how your administration has managed 
to further worsen conditions.
    After one of the worst natural disasters, your 
administration continues to ignore Puerto Rico's healthcare 
system, a system that is crumbling before our eyes. The 
difference in Medicaid funding, such as lower matching rates, 
places a much greater burden on Puerto Rico than on other 
States.
    In addition, President Trump fails to see that the new tax 
law you all brag about is actually harming Puerto Rico at a 
time when Puerto Rico needs our help to jump-start its economy. 
Let us be clear: The new tax law discriminates against Puerto 
Rico, removing the special incentives that the island relied on 
and treating Puerto Rico as a foreign country--treating Puerto 
Rico as a foreign country, a foreign country that has over 
100,000 active-duty troops ready at any given time, a foreign 
country that, from 1998 to 2016, has paid approximately $74.4 
billion in Federal taxes. Tell me, which country around the 
world pays Federal taxes to the U.S. Treasury? Puerto Rico 
does.
    Yet, because of its treatment as a foreign country, the new 
tax law imposes a 12.5-percent tax on the income companies 
receive from intellectual property. What a way to kill the 
manufacturing sector in Puerto Rico.
    Another example of this unequal treatment is the community 
disaster loans that were included for Puerto Rico in the 
October supplemental: Loans instead of grants. Another insult.
    Don't you agree with me that that is outrageous, that it is 
cruel, that when a natural disaster strikes and people ask for 
disaster relief, a paper towel is an insult?
    So, Mr. Secretary, my question for you is, is it acceptable 
in Treasury's opinion, to fund and provide disaster relief so 
slowly that it has taken the lives of more than a thousand 
residents in Puerto Rico, that over 270 Puerto Ricans have 
committed suicide on the island after Maria, that almost 30 
percent won't have power until this summer, nearly a year after 
Maria?
    Would this be acceptable in Houston, Louisiana, or Florida? 
I am sure people would be rioting in the streets.
    Do you think the people of Puerto Rico are any less 
entitled to restoration of essential services than any other 
U.S. citizen? So, Mr. Secretary, please tell me if this is 
acceptable.
    Secretary Mnuchin. Well, let me first comment that I do 
share your concerns.
    Ms. Velazquez. I want for you to share my outrage.
    Secretary Mnuchin. It is, first, that any loss of life is a 
great tragedy.
    As it relates to the various different topics that you have 
discussed, I am personally not familiar with the healthcare 
issues, although I will follow up and look into that.
    Ms. Velazquez. What about the tax bill, treating Puerto 
Rico as a foreign country?
    Secretary Mnuchin. As it relates to the tax law--and, 
again, I have had the opportunity to meet with various 
businesses and things--they have a situation where they are 
collecting their own taxes in lieu of Federal taxes.
    And the last part, I would just say, is we are working very 
closely with the Government to get them funding to deal with 
the result of--
    Ms. Velazquez. How many more lives have to--
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The committee now stands in recess.
    [Recess.]
    Chairman Hensarling. The committee will come to order.
    The Chair now recognizes the gentlelady from Missouri, Mrs. 
Wagner, the Chairman of the Oversight and Investigations 
Subcommittee.
    Mrs. Wagner. Thank you, Mr. Chairman.
    As we sit here today and hear testimony about the continued 
onslaught regulations have had on Main Street America, it is 
worth noting the positive gains that we have made because of 
the Tax Cuts and Jobs Act.
    Charter Communications, which has a very large presence, 
Mr. Chairman, in Missouri's Second congressional District, 
upwards of 5,000 employees, Mr. Secretary, that represent 5,000 
hardworking Missouri families, they have recently volunteered 
to pay every one of their employees at least $15 an hour and, 
in addition, to increase the investment in their broadband 
network.
    This is going to absolutely benefit working families and 
small businesses across my district. These are pro-growth 
promises that we made and have delivered on for our 
constituents.
    I want to thank you, Secretary Mnuchin, for your fine work 
in making sure that all Americans keep more of their hard-
earned money and we continue to grow this economy.
    Now, sir, last week the Subcommittee on Oversight and 
Investigations, which I chair, held a hearing entitled, 
``Following the Money: How Human Traffickers Exploit U.S. 
Financial Markets.'' During that hearing we talked a lot about 
the emergence of cryptocurrencies as a financial tool.
    I know you touched on it briefly, but the FSOC annual 
report identifies a need to further study new products and 
services, such as virtual currencies, and to coordinate 
regulatory approaches.
    How do you believe these new technologies should be 
regulated? And what role should we in Congress have going 
forward as these new innovations are advanced?
    Secretary Mnuchin. Thank you.
    My main concern in terms of regulation is to make sure that 
anybody that does business on cryptocurrencies can be monitored 
from a money laundering, a BSA standpoint, and that the 
institution follows the know your customer rule. So that is our 
main priority now, but we look forward to working with you on 
potentially other regulations.
    Mrs. Wagner. And what do you see as FSOC's role in this 
process, sir?
    Secretary Mnuchin. FSOC is coordinating the different 
regulators' response to it. So it is a coordination function.
    Mrs. Wagner. We look very forward to working with you and 
your team in this important area that is emerging.
    Secretary Mnuchin. Thank you.
    Mrs. Wagner. Now, Secretary Mnuchin, changing topics here, 
can you discuss your recommendations to address designation 
criteria, especially when it comes to our nonbank financial 
companies? The FSOC, Treasury report recommended that the 
designation process for nonbank financial companies be more 
transparent, including getting input from a company's primary 
regulator.
    What are the steps that Treasury plans to take to make the 
designation process more transparent and ensure the FSOC is 
held accountable to Congress?
    Secretary Mnuchin. Thank you.
    As you noted, we did extensive work in our executive order 
to the President on this, making recommendations. We will now 
be working with the committee on suggestions in terms of 
changing the criteria. Then I believe we will have to put out a 
notice of rulemaking before we enforce it. But this is 
something we are very focused on for this year.
    Mrs. Wagner. Last March the subcommittee, again, on 
Oversight and Investigations, which I chair, held a hearing 
entitled ``The Arbitrary and Inconsistent Non-Bank SIFI 
Designation Process,'' and the hearing followed up on a 
committee report that provided examples of inconsistencies and 
departures from, frankly, FSOC's own rules and guidance when 
evaluating nonbank financial companies.
    I hope this is something that we will look into and be able 
to coordinate going forward. Do you have any timing on this, 
sir?
    Secretary Mnuchin. Absolutely.
    Mrs. Wagner. Thank you. I appreciate it.
    Mr. Chairman, I yield back the balance of my time, or I 
shall yield to you, if you would like, sir.
    Chairman Hensarling. I thank the gentlelady. She can yield 
back her time.
    The Chair now recognizes the gentleman from California, Mr. 
Sherman.
    Mr. Sherman. Mr. Secretary, you were here in July. 
Democrats and Republicans gave you questions for the record and 
we got responses to those last week, 6 months.
    Can you commit now that the vast majority, I plan to ask 
one or two really tough ones, but that the vast majority of the 
questions for record that are asked by Democrats and 
Republicans today will be responded to with real answers within 
30 days?
    Secretary Mnuchin. I can tell you that I told my staff I 
thought our response time was not appropriate.
    Mr. Sherman. Can you make the commitment, I ask, or just 
apologize for the past?
    Secretary Mnuchin. We will do everything we can to make 
sure it is 30 days, but it won't be as long as it took last 
time, I can assure you.
    Mr. Sherman. OK. Because I have a number of questions for 
the record, I need answers.
    And the first relates to the FSOC report to base SIFI 
designations on an activity-based approach. I want to commend 
you for moving in that direction.
    And I am interested in your plans for implementing the 
recommendation of the Treasury's asset management and insurance 
report and the report on nonbank SIFI designation process, in 
particular the recommendation that an activities-based approach 
be used. So I will ask you to respond to that for the record.
    Also, we hear that the International Association of 
Insurance Supervisors is pushing a global standard that clashes 
with our system for State-based insurance regulation. And I 
will want to know your reaction to that and whether we can 
ensure that we are going to promote our own system in that 
negotiation.
    Secretary Mnuchin. I can assure you we will.
    Mr. Sherman. Thank you.
    Now, last time you were here I asked you about the Armenia 
tax treaty. I didn't expect you to know that I would ask--well, 
I did tell your staff in advance. And we have gotten the most 
absurd response. I am an old tax lawyer, I know it is hard 
work, but this is the easiest job they are ever going to have.
    They responded to Judy Chu, who also raised this, by saying 
that this is a very resource-intensive process. Here is the 
model treaty. We have published it. And the government of 
Armenia has said they just want to sit down and use this as the 
basis and get the treaty done. Twenty-eight Members of Congress 
have asked you to do this.
    Can you commit to investing 28 hours of one tax lawyer, 
just 28 hours of that one tax lawyer's time to start the 
process? I think he or she will finish the process. We are 
talking about filling in the blanks in a document we already 
have. Can you commit 28 hours of one tax lawyer's time?
    Secretary Mnuchin. I can commit the 28 hours--
    Mr. Sherman. We will get it done, and the benefits will 
include the exchange of information provisions, which will 
allow the IRS to get information about anybody hiding assets in 
Armenia and thereby enhance our tax collection process.
    When it comes to marijuana, we currently have the FinCEN 
guidance. And if you were to revoke that, then that would 
really make it better for armed robbers in my community because 
there would be huge amounts of cash at the local marijuana 
dispensary.
    Can I have--well, I hope you would respond for the record 
what you plan to do, and I hope that you would indicate that 
you are interested in keeping our community safe. I don't want 
bags of cash at a marijuana dispensary down the street from my 
constituents. Can I count on your answer?
    Secretary Mnuchin. I can commit to you that we are 
reviewing it. But I assure you, we don't want bags of cash. I 
want to make sure that we can collect our necessary taxes and 
other things in other than cash.
    Mr. Sherman. When you were here last time, you assured us 
that although we didn't designate China as a currency 
manipulator, even though we have lost a lot of jobs to their 
admitted past currency manipulation, that the Trump 
Administration was going to do something about this.
    In back of you we have the chart that shows that every 
month that Trump has been in office we have seen an increase in 
the trade deficit with China. Are we just going to talk tough 
or when you come back a year from now are we going to see a 
different chart?
    Secretary Mnuchin. I think you are going to see a different 
chart.
    Mr. Sherman. OK. And if we don't, can you then designate 
them a currency manipulator?
    Secretary Mnuchin. No, one has nothing to do with the 
other. One is we are very focused on trade. The currency 
manipulation independent of that will be based upon their 
actions.
    Mr. Sherman. But they have secured markets by their past 
manipulation of currency.
    And I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Kentucky, Mr. 
Barr, Chairman of our Monetary Policy and Trade Subcommittee.
    Mr. Barr. Secretary Mnuchin, good to see you this morning. 
And I want to thank you and the Administration for the Tax Cuts 
and Jobs Act on behalf of constituents in Kentucky's Sixth 
congressional District.
    A couple quick stories. One is Allison. Allison is a bank 
teller, one of the lowest paid bank tellers at a small 
community bank in Berea, Kentucky. And she went to her 
supervisor after they adjusted their tax withholding and she 
said, ``I think you made a mistake.''
    And he looked at the check and he said to Allison, ``No, I 
didn't make a mistake.''
    And she said, ``Did I get a bonus?''
    And he said, ``Actually, I didn't give you a bonus.'' The 
vice president said this to the teller. ``We didn't give you a 
bonus, but in effect you got a bonus. You got a raise because 
of Republican tax cuts.''
    And then there is Karen. And Karen has been serving me 
coffee at 5:20 a.m. every morning when I go to the airport to 
get on that 6 a.m. flight to Washington D.C. And she is a hard-
working person, and she is working the graveyard shift. And she 
wanted to know what the benefits of the tax cut were.
    So we put her paycheck and all of her information through 
the tax calculator. And when I showed up on Monday morning, 
yesterday morning, she had a big smile on her face. And she 
said, ``Congressman, I am going to save $1,410 every year 
because of the tax cuts.''
    And so on behalf of Karen and on behalf of Allison, thank 
you and your administration for these tax cuts. You are making 
life easier for working people in Kentucky.
    I do want to talk about the market volatility that we have 
seen over the last few days. Obviously, since election day 
2016, the Dow Jones industrial average has soared from a little 
over 18,000 to a little over 24,000, and I think it is actually 
up at this moment today. And of course at one point it hit an 
all-time high of 26,617.
    That represents an extraordinary bull market, and I would 
agree that in part it reflects renewed investor and business 
confidence associated with this Administration's policies.
    But I do want to ask about a factor that gets a little less 
attention but which explains the adjustment in the equity 
markets over the last few days, and that is monetary policy.
    Obviously, for the better part of the last decade, the 
Federal Reserve through quantitative easing and low nominal 
rates has pursued an unprecedented policy of monetary 
accommodation. And while this unconventional policy failed to 
prevent the slow, weak growth produced by the previous 
Administration's fiscal policies, it did prop up asset prices.
    But as this Administration has reversed the previous 
Administration's fiscal policies the economy has taken off, and 
you have noted the statistics of record high business and 
investor confidence, consumer confidence, low unemployment, and 
the Labor Department report of wages going up last year, 
average 3 percent GDP output, and the Atlanta Fed's projection 
that the first quarter we might see 5 percent economic growth, 
in the first quarter of 2018.
    So I would just say it is altogether appropriate that the 
new leadership at the Fed has begun to address the risk of 
rising inflation and is proceeding with a strategy of monetary 
normalization.
    My question is this, Secretary. In your capacity as 
Chairman of the Financial Stability Oversight Council, can you 
comment on how monetary normalization and a steady, 
predictable, well-communicated withdrawal of monetary stimulus 
at this time might keep valuations in line with reality, 
prevent asset bubbles, and promote financial stability?
    Secretary Mnuchin. Well, thank you.
    I will comment, we have been working with the Fed in 
following their reduction of their portfolio and the impact of 
the markets.
    As it relates to the overall monetary policy, I will 
respect the independence of the Fed, so I am not going to 
comment on its impact on the markets.
    Mr. Barr. Thank you.
    And then, Mr. Secretary, as you know, the World Bank's 
International Development Association, or IDA, is scheduled for 
its 18th replenishment. This committee has examined disturbing 
cases of management failures at the bank, which has helped 
bring about massive corruption, abuse of project beneficiaries, 
including sexual abuse, and staff incentives that reward 
pushing money out the door rather than having an impact on 
global poverty.
    In light of these facts, writing a blank check for IDA18 
would be an insult to the hard-working taxpayers of this 
country. Last month, the House passed our World Bank 
Accountability Act, which would make spending on IDA18 
contingent on implementing reforms. I want to thank Treasury 
staff for working closely with us on developing tough but 
achievable reforms.
    To underscore how important this legislation is, this was 
the first time in 40 years, Secretary, that Congress considered 
a standalone IDA bill. And it also happens to be consistent 
with President Trump's policies.
    As he said in his State of the Union Address, quote, ``I am 
asking Congress to pass legislation to help ensure American 
foreign policy dollars always serve American interests and only 
go to friends of America, not enemies of America.''
    Mr. Secretary, the House World Bank bill delivers on the 
President's call of action. Could you just comment briefly on 
how you can work with our friends in the Senate so that they 
adopt a similar approach to IDA?
    Secretary Mnuchin. Well, we applaud your work on that and 
we look forward to working with the Senate so that we can get 
something passed.
    Mr. Barr. Thank you. I yield back.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from New York, Mr. 
Meeks.
    Mr. Meeks. Thank you, Mr. Chairman.
    Secretary, welcome.
    Let me first just ask a couple of questions because I think 
that I am unclear. First, I think I heard you say that you will 
be asking Congress, particularly many of my colleagues on the 
Republican side who generally sometimes don't want to raise the 
debt ceiling, to make sure that they raise the dealt ceiling 
when it expires. Is that correct?
    Secretary Mnuchin. That is correct.
    Mr. Meeks. OK. Because I don't know sometimes in listening 
to folks, I just want to get it right, so does debt matter in 
our economy?
    Secretary Mnuchin. It does.
    Mr. Meeks. OK, it does. And what is better for the American 
economy, because I am confused on this one also, because I have 
heard, especially from the Administration, both sides, what is 
better, a weaker dollar or a stronger dollar?
    Secretary Mnuchin. I am not going to comment on the dollar. 
I think some of my comments were taken out of context. But I 
will say--
    Mr. Meeks. That is why I am trying to clear it up. If it 
was taken--it was a comment--
    Secretary Mnuchin. In the long term, a strong dollar is in 
the best interest of the United States, and that is what I said 
in my comments.
    Mr. Meeks. OK. Because what I had you quoted as saying is, 
obviously, a weaker dollar is good for us as it relates to 
trade and opportunities.
    Secretary Mnuchin. Again, that was just a statement of 
fact. There were three parts to it. The first part was that we 
fundamentally believe in the free markets. Where the dollar is 
in the short term is not a concern. The second one you quoted 
was just a fact. And the third one was that we fundamentally 
support a strong dollar in the long term.
    Mr. Meeks. So you support a strong dollar, that is what you 
are telling us now?
    Secretary Mnuchin. That is correct.
    Mr. Meeks. OK. So the other statements we should not 
consider.
    Now, in time of recession is stimulus important or not?
    Secretary Mnuchin. It depends.
    Mr. Meeks. It depends. Well, in times of crises, because I 
don't know if you--well, you were not here, but I was here, 
because I listened to some of my colleagues on the other side.
    In 2007, when we were having the greatest recession since 
the Great Depression--by the way, it was a time that we--right 
before that, in 2006, is when the Republicans controlled the 
House, the Senate, and the Presidency at the same time--we had 
a Republican Treasury Department come over and say we had to do 
something because things were going crazy.
    Would that have been an appropriate time to try to 
stimulate the economy, when you had that kind of recession?
    Secretary Mnuchin. Again, that would have been one of the 
things to consider.
    Mr. Meeks. OK. Would you have considered it had you been--
    Secretary Mnuchin. I would have considered it.
    Mr. Meeks. By the way, do you recall what the unemployment 
rate was in 2007 and 2008 and 2009?
    Secretary Mnuchin. I don't recall the exact number, but it 
was higher than where we are now.
    Mr. Meeks. In fact, it was at the peak, because of the 
recession, it was at close to 10 percent. Is that not correct? 
Does that refresh your recollection?
    Secretary Mnuchin. That sounds about right.
    Mr. Meeks. At the time that President Obama left, it was 
down to about 4.6 percent, I think it was. Does that refresh 
your recollection?
    Secretary Mnuchin. Sounds about right.
    Mr. Meeks. So it went down. And at the time that you came 
in, the unemployment rate at that point was lower than it had 
been for over the last 12 years or since the last time that 
Bill Clinton was President. Is that not correct?
    Secretary Mnuchin. That is correct.
    Mr. Meeks. OK. And is it also correct that when you looked 
at the overall economy and the number of jobs that were being 
created back in 2006 and 2007 and 2008, we were losing jobs 
every month? Is that not correct?
    Secretary Mnuchin. That is correct.
    Mr. Meeks. OK. At the time that you came or the President 
came into office, then we were gaining jobs every month, we 
were adding jobs. The Obama--so you didn't inherit an economy 
that was in recession, that was the lowest employment rate, 
that was going in the right direction. But when you came in, 
you inherited an economy that was moving in the right 
direction. Unemployment was going down. Jobs were increasing 
every month.
    So the experience that you came in was nowhere near the 
experience that the Obama Administration had to deal with when 
they came in office. Is that not correct?
    Secretary Mnuchin. Again, the experience that we came in 
with was very, very low GDP growth.
    Mr. Meeks. But that is not what I am asking you about. The 
trends in the economy, at that particular time, the trends with 
reference to unemployment, the trends with reference to jobs, 
the trends with reference to the overall economy, it was not an 
economy that was in recession. It was an economy that was 
coming out of recession. That is what you inherited, not what 
Obama inherited when he became President. Is that not correct, 
sir?
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Williams.
    Mr. Williams. Mr. Secretary, thank you for being here this 
morning. And I am a small business owner for 47 years in Texas, 
still have my business, and I can tell you, it is a great time 
to be on Main Street. And I want to thank you for your hard 
work on behalf of the American people and for your annual 
report from the Financial Stability Oversight Council.
    From overhauling the country's broken Tax Code to rolling 
back misguided and unnecessary regulations, 2017 proved to be a 
historic year for the Trump Administration, this Congress, and 
most importantly, the American people.
    During my travels in the district I represent in Texas 
these past months, I have heard countless encouraging stories 
about what the Tax Cuts and Jobs Act means for Texans and 
business owners. While some of my colleagues on the other side 
of the aisle, and we have heard today, have claimed that these 
bonuses and wages were akin to crumbs, in Texas 25th District 
those crumbs come in the form of real dollars back in the 
pockets of hard-working families. It comes in the form of 
increased wages for employees and new capital investment for 
businesses.
    It is my hope that this past year serves as a steppingstone 
for many and more great things to come. And there is still much 
more work to do, especially from the Dodd-Frank relief to 
combating the destabilizing and hostile activities from Iran.
    Know that I am committed to working with this agenda with 
you and the Trump Administration to ultimately ensure long-term 
prosperity for our great Nation and our citizens.
    First question would be, Mr. Secretary, you previously 
testified before the Ways and Means Committee that the Treasury 
Department is reviewing aircraft sale licenses following the 
Iran nuclear deal. I am encouraged by this Administration's 
focus on the world's leading state sponsor of terror and in 
your efforts to take a hard line on committing its 
destabilizing behavior.
    To that end, the House passed my bill, the Strengthening 
Oversight of Iran's Access to Finance Act, which creates a 
reporting requirement for the licensing of aircraft sales to 
Iran in an effort to increase congressional oversight and 
provide transparency for the American people.
    So my question, sir, is can you provide any updates on your 
review of licenses issued for aircraft sales to Iran? And is it 
your opinion that this Congress and the American people should 
know if Iran is using passenger aircraft authorized under the 
JCPOA for terrorist activity?
    Secretary Mnuchin. Well, I do believe that the American 
people and Congress should know. I don't want to comment right 
now because we are reviewing classified information as we 
consider the licenses for this. So this is undergoing review.
    Mr. Williams. Thank you.
    Next question would be, we have heard so many great stories 
in the last several weeks about how the tax bill is bringing 
businesses back to the United States. Yesterday, the United 
Nations Conference on Trade and Development reported that the 
tax bill could spur the repatriation of $2 trillion.
    Could you speak to the effect that repatriation and new 
investments will have on the U.S. economy and what Americans 
can expect to see in the months and years to come as the tax 
climate becomes friendly and more welcoming to investors and 
businesses?
    Secretary Mnuchin. Well, we believe one of the most 
important aspects of the tax bill was to go from a worldwide 
system with deferral, which encouraged our companies to leave 
trillions of dollars offshore, to a territorial system and a 
one-time tax to bring them home. Apple has announced $350 
billion that they will be coming back into the U.S. with major 
investment into jobs and CAPX and equipment here, and they are 
just one of many companies that are going to be doing that.
    Mr. Williams. A lot of good news.
    Next question would be, I am certain that our colleagues 
from the other side of the aisle will highlight the recent 
volatility--we have heard that today in the market--in an 
attempt to sound an irresponsible alarm about the state of the 
market. They are clearly viewing the markets in terms of single 
day performance and not on the long-term performance.
    If they were to do so, they would concede that in the last 
15 months--and you talked about this earlier--the market 
recorded 84 record highs. And both the Dow and the S&P are 
still up by double digits during that period.
    So, Mr. Secretary, from both your time in the private 
sector--I am a private sector guy--and now as the head of the 
Treasury Department, do you believe there to be any cause for 
alarm?
    Secretary Mnuchin. I do not.
    Mr. Williams. OK. Thank you for being here.
    And I would yield my time back to the Chairman.
    Chairman Hensarling. I thank the gentleman for yielding.
    Mr. Chairman--I am sorry, Mr. Secretary--one of the things 
I think I saw in the Treasury report to FSOC--since you are 
wearing two hats here, I guess you are advising yourself--but 
the Treasury report had advocated to FSOC that basically cost-
benefit analysis needs to be employed in the SIFI designation 
process.
    Can you elaborate on whether or not FSOC is accepting this 
recommendation? And if so, what can we look forward to?
    Secretary Mnuchin. So, yes. Thank you, Mr. Chairman. That 
was part of our recommendation. As I mentioned, we are now 
working with the committee members to review our 
recommendations and update guidance. So that is something that 
I hope will be included.
    Chairman Hensarling. Thank you.
    The Chair now recognizes the gentleman from Georgia, Mr. 
Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    Welcome, Secretary.
    You know, when I first opened your report I was very 
pleased to see where you had cybersecurity as your major 
concern. However, yesterday I became very worried with one of 
your FSOC members, Mr. Mulvaney of the CFPB (Consumer Financial 
Protection Bureau).
    And I understand that he has pulled back any investigations 
into Equifax, the largest, most significant cybersecurity 
attack in this Nation's history, 145 million American families 
having their birth dates, their Social Security numbers, all of 
that vital information out in the open. And he has pulled back.
    And I found this out yesterday in reading the report from 
Reuters. Are you familiar with that, Mr. Mnuchin?
    Secretary Mnuchin. I am only familiar with what I also read 
in the press. I haven't spoken to Director Mulvaney about it, 
but I will.
    Mr. Scott. Yes, I hope you do because it is very important. 
You are Chairman, as I understand it, of FSOC. You are 
Chairman. And it is FSOC's duty to keep our financial system 
secure from these kinds of threats. You have the head of the 
CFPB rolling back investigations.
    I not only am asking you to speak with Mr. Mulvaney, but 
speak strongly, let him know how bad this looks and that the 
American people are very upset that this Administration is 
taking this backward step, back from investigating the most 
dangerous security threat in this Nation's history. Please do 
that, Mr. Mnuchin.
    Do you have any reason why Mr. Mulvaney would even do such 
a thing?
    Secretary Mnuchin. I am not aware of that. But as I said, 
it is something I am to discuss with him and we will take up at 
FSOC.
    Mr. Scott. Yes, because it will look very hypocritical if, 
on the one hand, the Administration is so eager in going after 
cybersecurity and then, on the other hand, having the consumer 
protection agency to back away.
    And, additionally, the CFPB has even shelved plans for the 
on-the-ground test on how Equifax even protects its data. So we 
have some very, very significant things there.
    In my final minute and a half, I do want to raise up the 
issue of the fintech companies. I am the Democratic Co-chairman 
of the FinTech Caucus. And the fintech industry is going 
through some remarkable challenges. And they are doing some 
great things, just from simply being able to partner with many 
of our traditional banks who will not service the under bank 
and those that need the help the most, but they are partnering 
with them. And they are also breaking away for real great 
technological improvement.
    But here is the problem. Since OCC (Office of the 
Comptroller of the Currency) has issued or is going to issue a 
charter for their regulation, you have all of these regulators 
now, the CFP has their group, you have, Treasury, I don't know 
if you have your group, but each of these regulatory firms is 
now converging and coming up with how to regulate this 
industry.
    Now we have three or four different regulators out there 
beginning to pounce. You are going to have overregulation. You 
are going to quite possibly suffocate this new emerging 
industry.
    So I want to ask you, how do you see that? And is Treasury 
moving? And as the leader of FSOC, will you take leadership in 
making sure that fintech companies are not suffering?
    Chairman Hensarling. A very brief answer, Mr. Secretary.
    I would remind all members to pay attention carefully to 
the clock.
    A brief answer, Mr. Secretary.
    Secretary Mnuchin. Yes, thank you. We will address that at 
FSOC. We share some of your concerns.
    Mr. Scott. Thank you, sir.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Maine, Mr. 
Poliquin.
    Mr. Poliquin. Thank you, Mr. Chairman, very much.
    Mr. Mnuchin, thank you so much for being here. We really 
appreciate the great work you are doing. And I want to in 
particular thank you for your leadership in providing tax 
relief to American families and small businesses.
    A couple of weeks ago, sir, I was at one of our terrific 
small businesses in Maine, the Dysart's Truck Stop and Diner, 
right in central Maine, in Hermon, right off Route 95, next 
time you go vacation with your family in Maine. And this fellow 
came up to me and said, ``Bruce, thank you very, very much, 
because I get paid on a weekly basis and I got another 27 bucks 
in my weekly paycheck.''
    Now, he did the math for me. He said, ``Bruce, that is 
about $110 a month, $27 a week, roughly $110 a month.'' And he 
said it is about $1,300 per year. He said, ``That is really 
important to my family because it pays for groceries for our 
family for about 3 to 4 months out of the year.''
    So thank you very much for your leadership on this, sir, 
and we look forward to helping more American families.
    I have been very concerned, along with other people on the 
committee, Mr. Secretary, about how unfair it is for nonbank 
financial institutions, like mutual funds, to be possibly 
designated as a SIFI by FSOC when they pose no risk to the 
economy if they get in trouble.
    Now, I think it is widely agreed between our discussions 
here in the committee that we need reforms to the SIFI 
designation process that takes place over at FSOC.
    Now, I think we can agree that it is a good idea for a 
business that is potentially going to be designated a SIFI to 
know why. And if, in fact, they are designated, to have an off-
ramp such that they are able to make those adjustments.
    And the reason why this is so important, Mr. Secretary, for 
small savers and small asset managers in Maine is because if 
you have this burden of additional regulations that are really 
unnecessary and costly, it drives up the cost to provide their 
services and drives down the rate of return for someone saving 
for college, for example.
    So my question to you, Mr. Secretary, is can we agree that 
the best way to deal with this issue is to codify in 
legislation the reforms we need to the SIFI designation 
process?
    Secretary Mnuchin. We think that would be a good idea. And 
we believe in transparency, that, as you said, companies should 
understand, if they are designated, why and what they would 
need to do to get out.
    Mr. Poliquin. Thank you, sir.
    Recently, your own Treasury Department issued an asset 
manager report that recommends completely eliminating stress 
testing for nonbank financial institutions, like mutual funds 
and insurance companies.
    Now, in my opinion, I know we have had this discussion, 
sir, it doesn't make any sense for someone who is managing 
money for retirement to have the same stress test requirements 
or any stress tests at all as a bank that is insuring deposits 
for those same individuals.
    I would like to bring to your attention, Mr. Mnuchin, if I 
can, my bill, H.R. 4566, Alleviating Stress Test Burdens to 
Help Investors Act. It passed this committee with wide 
bipartisan support. And I am asking you, sir, do you agree with 
the Treasury's own report and with this committee that it is a 
good idea to eliminate the stress test requirements for nonbank 
financial institutions?
    Secretary Mnuchin. I do agree with, as we put it in the 
Treasury's report, yes.
    Mr. Poliquin. Thank you, sir.
    Last week the Treasury produced a list of assets held by 
Russian oligarchs. Another bill that I have that has passed out 
of committee, sir, H.R. 1638, called the Iranian Leadership 
Asset Transparency Act, roughly does the same thing.
    In other words, it looks at the top 70 or 80 political and 
military leaders in Iran--which I may parenthetically say that 
we all know is the chief sponsor of terrorists in this world. 
They recruit, they train, and they fund these terrorists, and 
they have American blood on their hands.
    I think it is a great idea, as per my bill, to make sure we 
get the information out there to the public into the world how 
these folks have been ripping off their citizens, what they are 
using those assets for, to shed some light on this issue.
    Now, Senator Cotton has also taken an interest in this 
bill, Mr. Mnuchin, and has introduced companion legislation on 
the other side of the chamber.
    Can we agree that this is a good idea to make sure the 
world knows what this money is being used for and how it was 
accumulated?
    Secretary Mnuchin. I am not familiar with all the details 
of the bill, but I look forward to sitting down. But, 
conceptually, I think it is the right direction.
    Mr. Poliquin. Wonderful, because you are already doing it 
for folks over in Russia.
    Last, sir, if I may. The two reasons why the economy is 
doing so well is the great work in repealing red tape and also 
the tax cuts that have been recently enacted.
    In rural Maine, it is critically important that small 
community banks and credit unions are relieved from additional 
burdens and red tape.
    Can we get a commitment from you, sir, that you will do 
everything humanly possible to help rural financial 
institutions?
    Secretary Mnuchin. Yes.
    Mr. Poliquin. Thank you, sir. I appreciate it.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Green, the Ranking Member of our Oversight and Investigations 
Subcommittee.
    Mr. Green. Thank you, Mr. Chairman.
    Thank you, Madam Ranking Member.
    And I thank the Secretary for appearing.
    Mr. Secretary, I fear that the Grand Old Party--the party 
of Lincoln, Gettysburg Address, ``government of the people, by 
the people, for the people shall not perish from the face of 
the Earth,'' the party of Reagan, ``Mr. Gorbachev, tear down 
this wall''--I fear that the Grand Old Party has lost its way. 
I am amazed at the number of members of the Grand Old Party who 
are defending Russian intrusion into a legitimate election for 
President of the United States of America. The party has lost 
its way.
    And I am concerned about the sanctions that Congress 
legitimately desires to have imposed. I am concerned as to 
whether they are being imposed, especially as it relates to 
section 241, which accorded the Secretary of the Treasury, 
Secretary of State, Director of National Intelligence to codify 
a list of these oligarchs, persons who have, by way of 
corruption, achieved great fortune.
    And this list was to be used so as to identify them and 
have certain restrictions imposed upon them. It has been 
reported that the list was compiled by the appropriate members 
of the Government, the experts, if you will. But it has also 
been reported that after compilation took place, someone higher 
up decided that there was a better list that ought to be 
utilized. There is a suspicion that the person higher up 
resides in your office.
    Can you give clarification as to what is going on with the 
list, Mr. Secretary?
    Secretary Mnuchin. I don't know what you are implying in 
any way. So, again, let me be perfectly clear, and I talked 
about this in the opening. There is a--again, we fully complied 
with the law. There was an extraordinary amount of work done. I 
encourage all of you, you have access to the classified 
report--
    Mr. Green. Well, Mr. Secretary, if I may just intercede for 
just a moment, if I may. I don't mean to be rude, crude, and 
unrefined, but I do have to ask this.
    Is it true that there was a list presented and that that 
list was changed in some way by persons other than those who 
had compiled the initial list?
    Secretary Mnuchin. It wasn't changed at all.
    Mr. Green. Was it added to?
    Secretary Mnuchin. Were there people added to the list?
    Mr. Green. Yes, to the list.
    Secretary Mnuchin. The list--
    Mr. Green. Were there people added to the list?
    Were there people added to the list?
    Secretary Mnuchin. Were there people--
    Mr. Green. Were there people added to the list?
    Secretary Mnuchin. The classified list?
    Mr. Green. Were there people added to the list?
    Secretary Mnuchin. By whom? By the intelligence people or 
by us?
    Mr. Green. Were there people added to the list by any 
source? You have news reports saying that somebody changed it, 
and they are alleging that you are that person, Mr. Secretary. 
Were there people added to the list?
    Secretary Mnuchin. Again, let me be clear, I didn't add 
anybody--
    Mr. Green. Well, were there--well, you didn't--were there 
people added to the list? This is a very succinct, a very clear 
question. It is perspicuously clear. Were there people added to 
the list?
    Secretary Mnuchin. Again, let me be clear. I don't know 
what you are talking about. The list--the list--again--
    Mr. Green. I am talking about the 241 list of oligarchs, 
people who, by corruption, obtained fortunes in Russia, people 
who are to be sanctioned, have sanctions imposed--
    Secretary Mnuchin. Yes, there are people that are on that 
list and that will be sanctioned.
    Mr. Green. Were there additional people added to the list?
    Here is the allegation, Mr. Secretary, that additional 
people were added to the list so as to expand the list and 
cause the oligarchs, the criminals, to be associated with 
persons who legitimately made money, thereby solidifying those 
who have fortunes in Russia, with President Putin, thereby 
preventing what we wanted to see happen, that sanctions imposed 
against those who were achieving power and fame and recognition 
and money by virtue of corruption.
    Secretary Mnuchin. Again--
    Mr. Green. Were there people added to the list?
    Chairman Hensarling. The time of the gentleman has expired.
    Mr. Green. Let the record reflect I did not get an answer.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Arkansas, Mr. Hill, the majority whip.
    Mr. Hill. I thank the Chairman. Thanks for this hearing.
    And thank you, Mr. Secretary, for coming before us today. 
And I want to say, my appreciation to you in your first year 
working with both sides of the Hill on our historic Tax Cuts 
and Jobs Act.
    Just the other day I got a message from a mom who told me 
that her withholding went down and her pay went up to the tune 
of $51.95 per pay period each month, and she connected it 
directly with paying for her daughter's biweekly health 
insurance premium.
    That is exactly what I think the benefit of this tax plan 
is, is letting families have more of their money in their 
pocket to do what they need to do to help their family and to 
have their priorities met.
    And I got a note Friday afternoon from All-Pro, which is a 
commercial painting contractor in Benton, Arkansas, in my 
district, that was so supportive of the act, their plans are to 
buy new equipment and improve the compensation for all 27 of 
their employees.
    And then, finally, I think that something across Arkansas 
that was very beneficial was 2 weeks ago the Public Service 
Commission announced that for our shareholder-owned utilities, 
CenterPoint and Entergy, that the tax benefits that those 
utilities are getting by reducing the corporate tax rate will 
be passed through directly in lower utility bills for all 
Arkansans covered by them.
    What a great way to say, here is a real benefit to your 
household that is not just seen directly, but indirectly from 
the tax bill.
    So thanks for your leadership. I am sure it was a trial by 
fire as you left the private sector and came into Washington. 
So thank you.
    The other thing I wanted to talk about today from a 
regulatory point of view and FSOC's responsibility is the 
complexity since Dodd-Frank's imposition of the so-called 
Volcker Rule. We have had a lot of bipartisan discussion on 
that over the past years and how we can deal with it.
    Chair Yellen described it as too complex to implement. 
Several bank presidents have come to this committee saying that 
it was too complex to implement. Our new Fed Chair, just sworn 
in, Jay Powell, stated, I thought correctly, that trading desks 
needed Ouija boards to figure out how to comply with the 
Volcker act.
    So I have a bill called H.R. 4790, which attempts to 
improve regulatory harmonization and coordination, something 
that you called for in the Treasury report, and also relieves 
banks under $10 billion from the complexity of the Volcker 
Rule. Is that something that you still personally support and 
would advocate for?
    Secretary Mnuchin. Absolutely. Thank you.
    Mr. Hill. I want to remind my colleagues that the Federal 
Register--this is the Volcker Rule in the tiny print of the 
Federal Register. And all banks are trying to comply with this, 
Mr. Secretary, and it is just not doable.
    And when you have Federal Reserve Bank presidents in the 
country saying they can't even administer the rule to tell a 
bank if they are in compliance with it or not, we have a 
problem.
    So I appreciate your leadership, but it is an FSOC matter 
that we get that harmonization.
    The other thing I want to mention, too, is on the subject 
of--that my colleagues on the other side of the aisle are 
talking about, and give you a chance to respond. Clearly, you 
talked at length about sanctions on North Korea, Venezuela, and 
Iran.
    I want to compliment you again on Treasury's work with both 
sides of the Hill to impose not only your economic sanctions 
you have control over at Treasury, but also working with the 
Hill on legislative sanctions here under Chairman Barr's 
leadership.
    Do you have a sense of timing on when you might follow 
through with proposed sanctions on the list of Russian inside 
oligarchs that has been so referenced by the other side today?
    Secretary Mnuchin. Sure. I can assure you that we have 
resources working on it right now, and it will be on a rolling 
basis over the next couple of months. And, again, these same 
resources are working on, as you said, North Korea, Iran, and 
Venezuela. And there also have been significant Russian 
sanctions already done under our administration.
    Mr. Hill. Well, this is something that I think we have 
strong bipartisan support on Capitol Hill, that we use the 
economic power of the Treasury, our trade strength as the 
United States, and our bipartisan ability to have legislative 
sanctions against countries and non-state actors that try to 
hurt this county. So thanks for your leadership on the national 
security front.
    I yield back, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Illinois, Mr. 
Foster.
    Mr. Foster. Thank you, Mr. Chairman.
    During the Obama recovery the stock market tripled, 
household net worth nearly doubled, unemployment was cut in 
half, trade deficits were reduced, and inflation was kept low.
    Do you expect that your administration will match the Obama 
record? And if not, why not?
    Secretary Mnuchin. Again, obviously when we were coming out 
of one of the worst recessions we had those numbers move in 
specific directions. So we are now more focused on sustained 
GDP growth, which was subpar in the last Administration.
    Mr. Foster. But you don't expect, for example, that you 
will do as well in tripling the stock market or similar--or 
cutting unemployment?
    Secretary Mnuchin. Again, I am not going to make any 
specific comments about where the stock market is in the 
future. It has been up a lot, again. But I am not going to make 
any specific comments on the stock market.
    Mr. Foster. OK. I would like to talk a little bit about 
trade in Forex markets.
    I have long viewed that the failure of free trade deals to 
address currency manipulation was probably their most 
significant shortcoming and the major reason I haven't 
supported them. Nations can and have devalued their currencies 
opposite the dollar, so that even the benefits of reduced 
tariffs which typically come from trade deals and other trade 
barriers are significantly undermined.
    One of the duties you have is to periodically designate 
countries potentially for currency manipulation. I think 
largely because the dollar has been significantly down in the 
last year, you have not designated any countries as currency 
manipulators using the objective three-part test that was 
developed. And so I think that is correct.
    However, there is a real danger that, particularly if 
things go sour in Asia, for example, they may resume currency 
manipulation. And so we have to be prepared to have actions.
    So the question is, what action can we take with and 
without treaty level agreements?
    So one proposal that I have studied that does not require--
it is something that--any treaty level agreements, things that 
we could just do ourselves, comes from Fred Bergsten and Joseph 
Gagnon at the Peterson Institute. They argue the United States 
could act unilaterally or multilaterally, if possible, with a 
partner like the EU or the ECB to simply make countervailing 
purchases of currency for any country that was found to be 
manipulating its currency, according to either our definition 
or the IMF's definition, which are pretty similar.
    So I was just wondering if you have had time to think about 
this. I raised this issue previously when you were here. And it 
seems like even announcing a policy, that this was a national 
policy to do this on a unilateral basis, would really basically 
solve this problem. It is not something that we have to 
actually get an international agreement to do. And I was 
wondering if you have any thoughts on how you might proceed on 
this.
    Secretary Mnuchin. Sure. Well, first of all, I can assure 
you that the President and I are very focused on the trade 
deficits and are very focused on currency manipulation. And to 
the extent there is currency manipulation going forward, we 
will absolutely call that out.
    Mr. Foster. We have been calling it out for decades, all 
right? Calling it out, jawboning doesn't work.
    Secretary Mnuchin. Again, I think sometimes in the past we 
didn't call it out, so that was one of the problems.
    But in any event, we look forward to working with you. I 
think your idea is an interesting idea. It is one of the many 
tools that we can use against currency manipulators.
    Mr. Foster. Right. No, I think this is--actually, it really 
comes from the Peterson Institute, the thought behind it. And 
when I saw this, I just thought this is something we can and 
should do.
    Secretary Mnuchin. I think it is very interesting. Thank 
you.
    Mr. Foster. OK. I would like to speak a little bit about 
the debt limit. When we talked about this the last time you 
were here, you really said that you did not support the debt 
limit as a mechanism for controlling spending, which is 
something I agree. And the market has learned to tolerate 
things like Government shutdown pretty by rolling their eyes 
and not reacting too strongly.
    But the reaction to a default, a potential default, has 
been huge. During the Tea Party default crisis in 2011 we saw 
just multitrillion dollars of losses in market value, and I 
think the average American lost more than $10,000 due to the 
Tea Party default crisis.
    So this I view as a completely separate risk and a very 
important one that we are staring down the barrel of. And so I 
was just wondering if you have had any thoughts on things like 
proposals to permanently get rid of the debt limit in 
combination with other mechanisms that control spending.
    Secretary Mnuchin. I have. I have talked to the President 
about that. And I think that that is something that we should 
consider longer term.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Minnesota, Mr. 
Emmer.
    Mr. Emmer. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for being here today.
    It is interesting. I want to go back. Just a second ago you 
said our focus has been more on addressing GDP growth as one 
thing that you brought up. I find it interesting because the 
last Administration on the way out the door was boasting 1.8 
percent GDP growth, somewhere around December of the year they 
were leaving office.
    It is completely different over the past year. Not only has 
GDP gone over 3 percent, but since election day you have the 
lowest level of unemployment in 17 years, wages are finally 
rising after 8 years of stagnation. In fact, 2.9 percent over 
the past 12 months is the largest since June 2009, and it 
doesn't even account for the bonuses that are due to tax 
reform.
    Small businesses plan to increase compensation to the 
highest level in nearly 30 years, according to the NFIB. Pay 
gains during Trump's first year in office are the best since 
the Great Recession. More companies are hiking wages and 
salaries than at any time over the last 18 years, according to 
the National Association for Business Economics.
    U.S. manufacturing expands near the fastest pace in more 
than 13 years, according to the Institute for Supply 
Management. And U.S. jobless claims are nearing a 45-year low, 
according to our Labor Department.
    Back in Minnesota on January 2, U.S. Bancorp, which is 
based in Minnesota, announced a thousand-dollar bonus for 
nearly 60,000 employees, a new minimum wage of $15 per hour for 
all hourly employees, and $150 million contribution to the U.S. 
Bank Foundation, which is heavily involved in our communities. 
The company also said it would enhance employee health 
insurance offerings as well as focus on improving customers' 
mobile and digital experiences.
    This is in great part due to the Tax Cuts and Jobs Act, 
which you deserve to be thanked over and over for the 
leadership that you showed, Mr. Secretary, in making sure that 
thing got done. And we appreciate it.
    Now, this is just one of the success stories that we have 
in Minnesota, but we are not out of the woods yet. And I think 
you would agree we have a lot of work left to do. We have just 
begun.
    You have touched on it here today, the FSOC's 2017 report, 
with some other questions, but I want to go at this quote from 
your report on the importance of tailoring regulations based on 
the size and complexity of financial institutions.
    To me, it is inane that we just pick a number, whether it 
is 50 billion or it is 250 billion, whatever it is, when what 
we should be doing is looking at the institution, looking at 
the portfolio, what are they doing to assess whether they pose 
risk to our system.
    And I guess if you would just take a little bit of time and 
explain the problems that we encounter, not just the 
institutions, by failing to tailor these evaluations to the 
institution.
    How does that not only impact the institution's ability to 
do business all the way down the financial services food chain, 
but how does it impact the consumer, the mom-and-pop small 
businesses?
    Secretary Mnuchin. Well, again, as you point out, just to 
start with on size, a $50 billion bank and a trillion-dollar 
bank have very different risks. But you could have two banks 
that are the same size and one could be a plain vanilla bank 
that does community lending and the other one could be a 
complex bank with lots of derivatives. So we believe in looking 
at the complexity of the organization and the risks.
    Mr. Emmer. Mr. Secretary, would you support--and there have 
been efforts in this committee, and things have actually been 
moved out of committee--would you support trying to codify or 
legislate actual adjustments to how we evaluate, how you 
evaluate financial institutions? In other words, putting into 
law, rules that would allow that type of evaluation as opposed 
to an arbitrary threshold.
    Secretary Mnuchin. I would. And I look forward to working 
with you on it.
    Mr. Emmer. Thank you very much.
    I see, Mr. Chair, my time has run out. I will yield back.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from Washington, Mr. 
Heck.
    Mr. Heck. Thank you, Mr. Chairman.
    Mr. Secretary, when you were here in July, I asked if you 
would please extend your efforts and that of your Department's 
in working with myself and Congressman Pittenger on our efforts 
to modernize the Committee on Foreign Investment in the U.S., 
CFIUS. You have. You have done so. Not only done so, you have 
done so constructively. And I want to publicly acknowledge that 
and thank you very much for following through on your word.
    Secretary Mnuchin. Thank you very much.
    Mr. Heck. Now, a key part of making sure that CFIUS keeps 
us safe and functions efficiently is ensuring that it is 
appropriately resourced, that you all have the money to do what 
you need to do. The results of our collaboration, code named 
FIRRMA, have provisions in it that help with resources. For 
example, it creates a unified budget request, it grants special 
hiring authority, and grants authority for filing fees.
    But you also personally, as Secretary of the Treasury, have 
an important role to play in this regard. So I would like to 
ask you, sir, if you can and are willing to give us a 
commitment that you will do everything you can, working within 
Treasury and the Administration and in partnership with 
Congress, to make sure that CFIUS has the necessary resources 
to do its job, especially if we enact CFIUS modernization 
legislation?
    Secretary Mnuchin. I will. And I am hopeful that we get 
this passed soon. It is a big priority of ours at Treasury 
working with you.
    Mr. Heck. And you have demonstrated that. Again, thank you.
    Also when you testified last July, you identified joint 
ventures as a particularly concerning gap in existing CFIUS 
authorities. I would like to ask if you could elaborate on why 
Treasury believes it is particularly important for any CFIUS 
modernization to cover joint ventures.
    Secretary Mnuchin. Sure. Because we think that where there 
are risks that would be done in a purchase, to the extent that 
a company is able to structure a joint venture to get around 
the CFIUS, current CFIUS legislation, that defeats the intent 
of the law. And that is why we have been working with you on 
FIRRMA to fix it.
    Mr. Heck. How do you see expanded CFIUS authorities, 
especially with respect to joint ventures, interacting with 
existing areas of the law? Obviously, I am referring to export 
controls. Do you believe these can be integrated and work?
    Secretary Mnuchin. I do. Yes.
    Mr. Heck. I want to go back to something that you said 
earlier in response to the question about FinCEN guidance on 
access to banking services for marijuana businesses in States 
that have legally constituted them, either through approval of 
legislative action or by a vote of the people, which is now a 
majority of States.
    And what you said, Mr. Secretary, is--I am quoting you 
verbatim from just a couple hours ago--``I can assure you we 
don't want bags of cash.''
    I can conceive of no way in which you can avoid bags of 
cash if you back down on FinCEN guidance. Do you have something 
in mind that would enable us to prevent that very perilous 
circumstance to public safety of having bags of cash through a 
route other than that which FinCEN has already offered in terms 
of guidance?
    Secretary Mnuchin. Sure. Well, as I mentioned, we are 
reviewing the existing guidance. We specifically haven't taken 
it down. We are looking at what Justice has done, and, again, 
as I said, we are sensitive to the issue of dealing with the 
public safety issue and also making sure that the IRS and 
others have ways of collecting taxes without taking in cash.
    Mr. Heck. I am interpreting what you just said to 
effectively implicitly being supportive of the current FinCEN 
guidance. Would I be off in that regard?
    Secretary Mnuchin. Again, I want to be careful in my 
wording in saying that we are reviewing it, but the intent is 
not to take it down without a replacement that can deal with 
the current situation.
    Mr. Heck. Very good, sir.
    Last, I cannot help but comment on this issue of Russian 
sanctions. Mr. Secretary, we will know when sanctions are 
working when Russia stops interfering in Western democracies' 
elections. We know they did in ours in 2016. We know they did 
in other Western democracies since then: Germany, France, as 
two examples. And we know they are, as we sit and speak, in the 
Mexican national election, as attested to by none other than 
the National Security Advisor to the President. So, as you 
proceed to be a party to these conversations about whether or 
not to actually carry through on the sanctions that Congress 
adopted 517 to 5, please keep in mind, they haven't stopped. 
They are not going to unless or until we actually do what 
Congress asked the Administration to do.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Trott.
    Mr. Trott. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for your time today.
    The Chairman mentioned earlier the $1,000 bonuses that 
Comerica bank gave to their employees down in Dallas. Before 
they moved to Dallas, they were headquartered in Detroit, and 
they still have thousands of employees in Detroit. And in fact, 
we hope that they move their headquarters back to Detroit. A 
lot of exciting things happening.
    Chairman Hensarling. Would the gentleman yield on that 
point?
    Mr. Trott. The gentleman will yield.
    Chairman Hensarling. I was being facetious. As a Member 
from Dallas, we are very happy where Comerica is located.
    Mr. Trott. We still have thousands of people in Michigan at 
Comerica, but I want to thank you because the tax reform 
legislation that you helped get through Congress prompted Fiat 
Chrysler to make a very important decision, headquartered in my 
district. They decided to invest $1 billion in Michigan, create 
2,500 jobs, give each employee a $2,000 bonus, and move a plant 
from Mexico back to Michigan. So that is going to make a huge 
difference for people in my district. And I thank you for your 
efforts in that regard.
    Now, a few minutes ago, my friend from Georgia asked if you 
had heard about the CFPB's decision not to pursue and 
investigate Equifax. And in other breaking news involving the 
CFPB, the D.C. circuit a few days ago decided en banc to throw 
out all of the penalties and fines that were imposed against 
PHH, over $100 million, by the prior czar who was acting in an 
arbitrary fashion when he decided to ignore RESPA and statute 
of limitation laws.
    But with respect to Equifax, is it possible that the CFPB 
decided not to investigate Equifax because they are not 
authorized to? Under Gramm-Leach-Bliley and the Fair Credit 
Reporting Act, isn't that responsibility entrusted to the FTC, 
not the CFPB?
    Secretary Mnuchin. Again, I am not going to speculate on 
that until I have had a chance to talk to Director Mulvaney 
about his thinking on it.
    Mr. Trott. Well, I don't think they have the authority, so 
that is perhaps why they made the decision.
    But in any event, I want to congratulate you on a very 
productive first year. It is making an incredible difference to 
our economy, and it is clear your background and experience has 
made you well qualified to do the work you are doing.
    With that being said, your annual report did not call for 
the repeal of the orderly liquidation authority. And as a 
former bankruptcy attorney, I happen to believe that a new 
subchapter in the Bankruptcy Code is a much better way to deal 
with an insolvent financial institution than political-
appointed bureaucrats sitting in secret in a private room.
    You go to bankruptcy court, you have an experienced judge 
who is going to make a decision based on years of precedent. It 
is going to be open and transparent. And so I would just like 
your thoughts on whether the repeal of OLA in replacing it with 
a bankruptcy solution is a better outcome in the event we have 
a financial institution with some troubles down the road?
    Secretary Mnuchin. Sir, I think, as you know, one of the 
executive orders that the President signed was for us to review 
that. And we expect we will be coming out within the next month 
on our report and our recommendation. So, once we do that, I 
look forward to talking to you about it?
    Mr. Trott. Thank you. And, one of the problems I had with 
FSOC under the prior Administration is it seemed to be largely 
motivated by a guiding principle that was basically, to put it 
succinctly, that all business is bad, and if you're a bank 
making a profit, then you must be in need of additional 
regulation and/or must be taking advantage of consumers. And, 
therefore, we are going to empower bureaucrats to write rules 
because the Government is so much better at solving problems in 
the private sector than entrepreneurs.
    Can you just briefly outline some of the reforms you are 
making to make sure that corporations have a fair shake at FSOC 
going forward?
    Secretary Mnuchin. Sure. Well, in general, I have met with 
literally hundreds and hundreds of CEOs. Specifically, we do 
believe in proper regulation, but we are being very clear that 
we want to make sure that the banks and other regulated 
entities do function properly.
    Mr. Trott. Thank you, Mr. Secretary.
    I want to just close by mentioning my friend from Colorado, 
Mr. Tipton, has a great bill, the TAILOR Act, which is aimed at 
making sure regulations are tailored to specific businesses and 
not one-size-fits-all.
    And, with that, I yield back my time to the Chair.
    Chairman Hensarling. I thank the gentleman for yielding.
    Mr. Secretary, I want to go back and revisit the Volcker 
Rule. I just want to make sure I understand your views 
regarding coordination and harmonization of the various 
agencies. Would you advocate that a single regulator take the 
lead on rule-writing and interpretation of Volcker as long as 
the other regulators continue to have a role in the examination 
process?
    Secretary Mnuchin. Yes. Thank you, Mr. Chairman, for 
clarifying that. So I would support there being a lead agency--
some people have suggested that be the Fed--and then have the 
other agencies play a supporting role so that there could be 
better coordination and better leadership on it.
    Chairman Hensarling. Thank you, Mr. Secretary.
    The time of the gentleman from Michigan has now expired.
    The Chair recognizes the gentleman from Massachusetts, Mr. 
Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for your indulgence and with the 
generosity of your time here today. I know you have been here 
quite a while.
    Mr. Secretary, I was just curious. I know that the current 
Administration has level funding the amount of resources for 
the Financial Crimes Enforcement Network, FinCEN. They do a lot 
of great work with this committee, especially with our 
antiterrorism financing subcommittee.
    And there is one weakness, one vulnerability that we did 
encounter on our investigation of some of the countries' 
financial systems in the Middle East. And that is that we have, 
on occasion, one Treasury attache out of your Department 
covering five or six countries. And, obviously, countries in 
that area, in that region, that present some level of 
substantial risk.
    And I am just wondering if you would be willing to look at 
the possibility of increasing our people on the ground to work 
with our embassy personnel to help with the resiliency efforts 
that we have in a number of the Middle Eastern countries where 
we suspect that terrorist financing and illicit financing are 
intertwined with the legitimate financial systems and banking 
system in those countries.
    Secretary Mnuchin. I would. And I agree with you. In my 
trip to the Middle East last summer and in other conversations, 
the Treasury attaches on the ground play a terrific role in 
working with the local governments and the local banks on 
combating terrorist financing.
    Mr. Lynch. Well, you have some very, very good people that 
are doing a wonderful job. My concern, and those of my 
colleagues on the other side of the aisle, as well as the 
Democrats, was that they are stretched pretty thin. And that we 
think that the result of being stretched thin like that will 
reduce the efficacy of our counterterrorism financing efforts.
    One subject that has been a lively subject of debate in 
this committee is the Export-Import Bank. And I know that the 
President, when he ran for office, he talked about bringing 
jobs home and supporting manufacturing. One of the most 
effective tools we have in Government in creating manufacturing 
jobs here in the United States has been our Export-Import Bank. 
And we are up against other countries that are expending 
tremendous resources to give their companies a competitive 
advantage.
    Recently, the President nominated someone with a long 
record of working to hobble and to actually shutdown the 
Export-Import Bank. And I would just like to find out what your 
approach might be or what your attitude might be toward the 
Export-Import Bank's efforts to promote U.S. competitiveness, 
especially in a manufacturing sector.
    Secretary Mnuchin. Well, I am indirectly involved in this, 
but I have spoken to the President and others, and he does want 
to open the Export-Import Bank for business. I think we want to 
make sure there are proper reforms there, but we are looking to 
fill the board.
    Mr. Lynch. OK. Let me jump to this other matter with the 
MetLife dedesignation suit. I understand that you have dropped 
the appeal of the MetLife dedesignation suit. And I am just 
curious if you think that dropping that suit might make any 
future designation vulnerable to a similar legal challenge.
    Secretary Mnuchin. Well, again, I think we looked at this 
purely from a legal standpoint, and we decided to drop the 
appeal. MetLife could still be subject to designation in the 
future or not. So the decision was made on a legal basis around 
certain issues.
    Mr. Lynch. I guess what I am asking is, are we satisfied 
with the precedent that we might be setting in dropping that 
appeal?
    Secretary Mnuchin. I think we are. We consulted with the 
Department of Justice and with the other agencies, and I think 
we are comfortable with that.
    Mr. Lynch. Thank you. Mr. Chairman, I yield back.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from California, Mr. 
Royce, Chairman of the House Foreign Affairs Committee.
    Mr. Royce. Thank you very much, Mr. Chairman.
    This question, Secretary Mnuchin, this question goes to 
derisking the Federal balance sheet, and specifically, we 
discussed this the last time that you and I spoke when you were 
before the committee and also in conjunction with GSE reform, 
but I will lay out the case here. Earlier this Congress, I 
introduced legislation requiring that the GSEs increase credit 
risk transfers with the private sector. And I am hopeful that 
the bill will be included in the committee's comprehensive 
reform efforts. So we have seen credit risk transfers work, not 
just at Fannie and Freddie, but following last year's storm 
season. If we think about it, we saw a private reinsurance 
payout afterwards of $1 billion to the National Flood Insurance 
Program. So analysis has shown that there is far more capacity 
in the financial system, worldwide about $600 billion, for 
increased credit risk transfer.
    So my thought here is, why not look elsewhere in the 
Federal Government? On the housing front, why not replicate 
risk transfer at FHA and at Ginnie Mae, specifically? And I 
would ask if you would support those efforts.
    Secretary Mnuchin. Well, first of all, let me just say, I 
look forward to working with you and the Chairman and others on 
a bipartisan basis for housing reform. I think this is very 
important. And I do say housing reform, because I do think we 
need to look at FHA and not just the GSEs. I want to be very 
careful that we don't solve the taxpayer issue in one area, 
only to find out that the market-shared FHA has gone way up and 
we have taxpayers at risk on the Fed balance sheet.
    Mr. Royce. Absolutely. So what I plan to do is to introduce 
legislation to direct the Office of Management and Budget to 
identify other areas of the Federal balance sheet where 
derisking could be used to protect taxpayers. And I hope you 
could support that effort.
    Also, on export control reform, a point I was going to make 
is that, as we discuss our economic security here moving 
forward, I share the concern of my colleagues that foreign-
government-backed investments, that it is critical that we look 
at those investments in U.S. technologies that might pose a 
national security risk. And as you mentioned in your opening, 
the committee is considering legislation to expand CFIUS in a 
way to address this threat.
    The Foreign Affairs Committee, which I chair, is 
considering export control reform as an additional way to 
tackle the problem. So would you support new authorities to 
restrict the export of critical technologies to countries that 
threaten the U.S. national security?
    Secretary Mnuchin. I absolutely would, thank you.
    Mr. Royce. Well, thank you.
    With that, I will yield back, Mr. Chairman.
    Chairman Hensarling. Do you yield to the Chairman?
    Mr. Royce. I yield my time to the Chairman.
    Chairman Hensarling. I thank the gentleman for yielding.
    I want to go back to the FSOC designation process, Mr. 
Secretary, just to make sure I am clear.
    In the previous Administration, FSOC seemed to make their 
designation without taking the input of the institution's 
primary regulator because we know the FSOC membership is not 
really an agency; it is a head of an agency. And we certainly 
know that, under the previous Administration, there was little 
to no interaction with the actual company that was the subject 
of the designation review.
    As head of FSOC, how has your process changed? Will the 
primary regulator be involved in this process, and what exactly 
is the dialog or process that will take place with a company 
that is subject to a potential designation?
    Secretary Mnuchin. First of all, we absolutely will look to 
and rely upon information for the primary regulator. They are 
the regulator that understands the company the best. And as I 
mentioned earlier, we are looking to revise the guidelines so 
that there is more transparency when we designate someone.
    Chairman Hensarling. Could you go into more detail about 
that, Mr. Secretary, on your transparency initiative?
    Secretary Mnuchin. Yes. I fundamentally believe that if 
people are designated, they should understand why they are 
being designated and what they can do to reduce those risks 
going forward.
    Chairman Hensarling. Thank you.
    The Chair now recognizes the gentleman from Colorado, Mr. 
Perlmutter.
    Mr. Perlmutter. Thanks for being here, Mr. Secretary. And I 
have three areas I want to talk to you about.
    Secretary Mnuchin. Thank you.
    Mr. Perlmutter. Bitcoin, virtual currencies; marijuana and 
banking; and sanctions.
    Secretary Mnuchin. Three of my favorites.
    Mr. Perlmutter. I thought you would enjoy those. And, 
really, we do appreciate your testimony today. You have been 
going a long time.
    So let us just start with the virtual currencies. And we 
have seen tremendous fluctuation in the market, particularly 
over the last year. We have reached some 19,000 bitcoin, for 
instance, in mid-December. It is down around 6,000 or so today. 
How are you looking at these virtual currencies, and what do 
you think needs to be done, if anything?
    Secretary Mnuchin. Well, I share your concerns on it, and 
as I mentioned earlier, there is two major focus. One, we have 
set up a subcommittee of FSOC to make sure that we have the 
various different regulators working together since these are 
new areas.
    Number one, I want to make sure that anybody who uses 
bitcoin, that we can understand how they are transacting so 
that they are subject to BSA rules, they are subject to money 
laundering, they are subject to know your customers. So, in the 
United States, we have those rules. We are working with the 
counterparts at the G20. I want to be careful that this doesn't 
turn into Swiss numbered bank accounts, so bad guys can't use 
these.
    The second thing is I do share your concern about making 
sure that consumers understand them, and to the extent that 
they are now trading on futures exchanges, that the futures 
exchanges have the proper regulation of the underlying markets 
so that they can't be manipulated.
    Mr. Perlmutter. Thank you. Second question, marijuana and 
banking. When you were here last, you and I had a little 
conversation. And, obviously, we see this industry growing. We 
are up to 46 States that have some level of marijuana use, so 
whether it is cannabis oil for seizures or medical marijuana or 
commercial. And, the Chairman and I joust about this from time 
to time, but obviously, the banking industry needs to provide 
some services to all these businesses across all these States. 
And I don't know if you were surprised by the revocation of the 
Cole memo by the Justice Department or whether you had had 
chances to talk to the Attorney General before that occurred, 
but the genie is out of the bottle on this. And Treasury and 
Justice and the Congress need to address this.
    So you said you were going to talk to your friend Mr. 
Mulvaney about some CFPB issue or maybe budget or whatever. I 
suggest to you that you talk to him about the SAFE Act that Mr. 
Heck and I are sponsoring because he was a cosponsor of it. And 
we hoped he would have been the main sponsor but for the fact 
he was selected to go to the Administration.
    So, obviously, in response to Mr. Heck, you guys are 
reviewing your FinCEN guidances and things like that, but there 
is no going back here. And your Department is square in the 
middle of so many banks and so many businesses either having a 
safe way and an accountable way to manage this, just if you 
have any comments to my comments.
    Secretary Mnuchin. Well, yes, first of all, I will follow 
up with Director Mulvaney on the SAFE Act, specifically. I did 
not participate in the Attorney General's decision and what he 
did, but we are consulting with them now. And, again, we do 
want to find a solution to make sure that businesses that have 
large access to cash have a way to get them into a depository 
institution for it to be safe.
    Mr. Perlmutter. Thank you.
    Last question. Sanctions, which you have had an opportunity 
to address a few times already today. But just looking at a 
story from Bloomberg from a couple days ago: ``Treasury Warns 
of Upheaval If U.S. Sanctions Russian Debt.'' And my guess is 
you are familiar with it. But there is a sentence in here: 
``Russian assets climbed this week as investors speculated the 
Treasury wouldn't recommend sanctions on the country's 
sovereign debt.'' And then further, from a report, says: 
``Given the size of Russia's economy, its interconnectedness 
and prevalence in global asset markets, its likely 
overcompliance by global firms to U.S. sanctions, the magnitude 
and scope of consequences from expanding sanctions would be 
problematic.''
    Your response?
    Secretary Mnuchin. I think we are targeted on specific 
sanctions to bad individuals and companies, as opposed to 
sanctions on the debt.
    Mr. Perlmutter. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Georgia, Mr. 
Loudermilk.
    Mr. Loudermilk. Thank you, Mr. Chairman.
    And, Mr. Secretary, good to see you again. And thank you 
for all you are doing.
    Before I get to my questions regarding regulatory review, I 
want to just share with you a little bit of good news. We keep 
hearing this bad news. But 2 years ago, when I went home one 
weekend, I was at several events. A gentleman came up to me and 
he shared with me a story that he did not feel like he could 
continue on running their small manufacturing business that had 
been in their family for decades.
    In fact, he told me it was so difficult to do business, 
between regulation, lack of access to capital, customers. It 
wasn't just him, but even his customers putting pressure on him 
because of their costs going up. He said: ``After decades of 
running this small business, I am going to retire, and I am 
going to shut this business down. And my children don't even 
want to be in the business because it is so difficult to do 
business.''
    This weekend, I ran into that same gentleman, who came up 
to me with a big smile on his face. He said: ``I just want to 
tell you, my accountant came to me last week and said, `Next 
year, because of the tax reform bill, you are going to save a 
$100,000 in this business.'''
    He said: ``No longer am I shutting it down. I am trying to 
figure out the best way to expand the business right now.''
    So that is a true Main Street story of what we--
    Secretary Mnuchin. Thank you. We like those stories.
    Mr. Loudermilk. Oh, I do, too. And, hey, I will tell you, 
it is a whole lot better to go home and hear ``thank you.'' 
``Thank you for what you have done.'' And we are hearing it all 
over.
    I wanted to discuss an issue that you raised in the 
Treasury report on banks and credit unions. You discussed the 
importance of retrospective reviews of agencies' regulations, 
which many in this room, on a bipartisan basis, believe we 
should have regular reviews of regulations, especially those 
that are antiquated, outdated, or irrelevant. And in the 
report, you also noted that, before Dodd-Frank, the banking 
agencies themselves were responsible for implementing consumer 
financial protection laws. So these regulations were included 
in reviews under the Economic Growth and Regulatory Paperwork 
Reduction Act (EGRPRA). However, when Dodd-Frank created the 
CFPB, consumer regulations were no longer subject to these 
reviews.
    Now, just in the last few weeks, we passed a bill out of 
this committee on a bipartisan basis that I authored that would 
actually include CFPB in the EGRPRA review process. And my 
question is, can you further explain, why it is important for 
these regulatory agencies to review their rules periodically?
    Secretary Mnuchin. Again, I think it is very important. I 
think that rules and regulations are very important, but on the 
other hand, they need to be constantly looked at as markets 
change and make sure that we don't overregulate to the extent 
we can't have growth.
    Mr. Loudermilk. So, being that the changes in Dodd-Frank 
basically exempted CFPB from reviewing their own regulations, 
you support the idea of returning CFPB just to do the--
    Secretary Mnuchin. I do completely. I am not sure why they 
were exempted, so I agree with the change.
    Mr. Loudermilk. As I said, we have strong bipartisan 
support for this bill, so I hope that we will see that when it 
comes to the floor. And it changed a little bit of the 
timeframe, instead 10 years to 7 years, I think. As things 
change, that will help American consumers by having more 
frequent reviews.
    The other area that is very important to me is 
cybersecurity. That has been brought up a few times. I worked 
in the cybersecurity arena before coming to Congress. I had an 
IT services company for many years. And I also worked in the 
intelligence community back in the military, which in both 
instances, we were tasked with protecting the data. And one of 
the principles we worked off of is: You don't have to protect 
what you don't have.
    What that means is: If you don't need information, don't 
keep the information. Otherwise, you become a risk. And from 
what I have seen is that, quite often, the Federal Government, 
through its regulatory agencies, puts onerous requirements on 
businesses to not only keep data that they normally would not 
keep or don't need to keep but also report it to the Federal 
Government, which we have seen, as our own Federal Government 
is by far a higher security risk than a lot of businesses.
    Do you agree with those principles and ideas that we should 
have a stringent review on what data we are requiring 
businesses, not only to keep but to report?
    Secretary Mnuchin. Absolutely.
    Mr. Loudermilk. Thank you.
    Mr. Chairman, I will yield the remainder of my time.
    Chairman Hensarling. I thank the gentleman for yielding.
    Mr. Secretary, CCAR and DFAST, are you convinced that they 
are doing us more good than harm? Or do you worry that this 
regulation may end up being a little too heavy-handed in its 
current form?
    Secretary Mnuchin. I think it is a very complicated 
regulation, and I think it could use some reform and clarity.
    Chairman Hensarling. I appreciate that.
    Six seconds left. I yield back the time.
    The Chair now recognizes the gentlelady from Ohio, Mrs. 
Beatty.
    Mrs. Beatty. Thank you, Mr. Chairman and Ranking Member.
    And thank you, Secretary Mnuchin, for being here.
    We have asked you a lot of questions about regulatory 
issues in the Treasury that range from cybersecurity to 
terrorist financing to FSOC and its financial risks, and the 
list goes on and on.
    But I am going to shift to the people part of it; I am 
going to start by first referencing from your testimony today. 
On line 3 of the first page, you used the words, ``sustained 
economic growth.'' And on page 4, about three lines from the 
bottom, you have stated: ``There is much more work for us to 
do. Our country's potential is enormous, which is why Americans 
expect their government to enact policies that allow them to 
succeed and prosper.''
    I agree with that. Our Ranking Member has allowed me to sit 
second chair on OMWI (The Office of Minority and Women 
Inclusion). So, when you were here before the time ran out, and 
I submitted in writing my request to you, and that was almost a 
year ago, asking you at that time if you had met with your 
director of OMWI. I am appreciative of a response, even though 
I just got it on Friday, after about 7 months, so I assume some 
good staff person got it to you to prepare you for today.
    So I will now ask you today: Have you met with your OMWI 
director, or do you know who your OMWI director is?
    Secretary Mnuchin. Well, first of all, again, let me just 
say, the responses to the questions took way too long, and we 
apologize to the committee.
    And as it relates to the OMWI, I am planning on meeting 
with them.
    Mrs. Beatty. So is that no and no? No, you don't know who 
the OMWI director is, and no, you have not met with the OMWI 
director? And while you are conferring, let me just read to 
you, Mr. Secretary, that section 342(b)(3) of the Dodd-Frank 
Act mandates that each OMWI director is to advise the agency 
administrator for the U.S. Treasury, that would be you, on the 
impact of the policies and regulations of the agency on 
minority-owned and women-owned businesses and that, under 
section 342(g)(2) of the Dodd-Frank Act, it defines you as the 
agency administrator. So maybe that helps refresh your memory. 
You want to--
    Secretary Mnuchin. I am going to have to follow up with my 
staff on that and get--
    Mrs. Beatty. So that means you don't know who the person is 
and you have not met with the person?
    Secretary Mnuchin. I don't who--
    Mrs. Beatty. I just need a yes or no.
    Secretary Mnuchin. I don't know who the person is right now 
off the top of my head, and I want to confirm with my staff.
    Mrs. Beatty. So that would make you in violation of a 
direct law of something that you are supposed to be doing. I 
don't want to belabor this, but, Mr. Secretary, I want to let 
you know, this is not only important to me; this is something 
that is mandated and required.
    And when we talk about, in your words, of enacting policies 
that allow people to succeed and prosper, it is my belief that 
we have this in the Dodd-Frank Act because there have been 
people like you and others who have not been proponents of 
OMWI, not followed through, so, thus, we put it in law. This is 
something that I have asked every person that has sat in that 
chair that is required to follow section 342.
    So can you tell me how soon you are going to make this 
happen? Because there is no need in me asking you--
    Secretary Mnuchin. I am going to get back to you tomorrow. 
You have my commitment on that.
    Mrs. Beatty. OK. I appreciate that.
    Let me move to my second question which relates to GSEs and 
affordable housing.
    In this committee and on this subcommittee--as you know 
there is a Subcommittee on Housing and Insurance--we have held 
several hearings on the future of our housing finance.
    In your opinion, what role should the future reforms in 
housing finance play with regard to housing and affordable 
housing? You made some reference in your testimony about Fannie 
Mae and Freddie and being in conservatorship.
    So what are some of your reforms?
    Secretary Mnuchin. Well, again, I start with the premise 
that, on the one extreme, I believe that the 30-year mortgage 
is very important to the economy and the liquidity of housing. 
And on the other hand, we want to have the taxpayers properly 
protected. So I believe the current situation is not 
sustainable.
    I also believe that affordable housing is something that is 
important, and whether there are direct or indirect goals and 
how it is paid for is something that we need to address as part 
of housing reform.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from Ohio, Mr. 
Davidson.
    Mr. Davidson. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary. And thank you on behalf of Ohio's 
Eighth congressional District for your critical role in helping 
us pass the Tax Cuts and Jobs Act.
    I have heard story after story about the difference it is 
making in the lives of hardworking families and innovative 
companies in Ohio.
    One such story was highlighted during the President's State 
of the Union with Staub Manufacturing Solutions. Steve Staub, a 
friend of mine, his sister, and one of their employees, Cory 
the welder, were here talking about their expansion plans. And 
one of the lesser known provisions, I was just talking to the 
owner of a C&C business, very competitive niche, lot of 
automation there, talking about how much automation is moving 
their industry. And he was concerned about his ability to keep 
up with the investment required to stay competitive and did not 
understand that we had moved past section 179 expensing to get 
full and immediate expensing.
    So he was very excited, was planning to go meet with his 
accountant to talk about how he could ramp up that investment 
plan. That is going to continue to make a difference for 
companies in our district. And just thank you on behalf of the 
people of Ohio's Eighth District.
    I also want to highlight the other good things going on in 
our economy related to regulatory reform. There are a number of 
folks that have talked about that. And it would be great to get 
your support with the Senate, getting action on our reforms to 
Dodd-Frank with the CHOICE Act. So any thoughts on what we can 
do to advance the cause there with our Senate colleagues?
    Secretary Mnuchin. I am cautiously optimistic that the 
Chairman and Senator Crapo and others are going to figure out 
how we can get this done.
    Mr. Davidson. Thank you for that. And the cybersecurity 
realm, there are a number of concerns. They have been 
highlighted by breaches at the SEC, disclosed unfortunately 
well after the breaches occurred. And a lot of data that is 
vulnerable in our financial markets. We have the Consolidated 
Audit Trail that is critical for trading irregularities off of 
algorithms and due to be launched without a CISO (chief 
information security officer). Do you have specific plans to 
try to coordinate all the functional areas that you provide 
oversight over to address cybersecurity in this area?
    Secretary Mnuchin. We do.
    Mr. Davidson. How is that taking shape within the 
Department of Treasury? Is it specific to each subset or is 
there some macro level coordination?
    Secretary Mnuchin. Well, within Treasury and all of our 
specific bureaus, we have common guidelines. So the OCC, the 
IRS would be picked up on that. As it relates to the other 
independent agencies, we are coordinating with them to make 
sure that they are following the Administration's priorities on 
cybersecurity.
    Mr. Davidson. Thank you. Do you see any need for Congress 
to pass legislation to allow Government agencies, such as SEC, 
CFTC, FHFA, to oversee third-party service providers, 
particularly information technology service providers? Is there 
a gap in the regulatory framework to hold folks accountable? 
And I bring this up because of the Consolidated Audit Trail and 
the work Thesys has done there; it is taking a long time to get 
to implementation. There are some remaining cybersecurity 
concerns, including: What is the code written to? How do the 
people that need to interface, interface with the system? And 
there is still no CISO in place.
    Is there a regulatory approach, or is that something that 
you feel is firmly able to be done by the Department?
    Secretary Mnuchin. I think it should be able to, but we 
look forward to--I will follow up with you and your staff. But 
I share your concern on it.
    Mr. Davidson. Thank you. And then, going back to the 
economy, we have seen great investment. We have seen the 
markets respond over the course of the year dramatically to 
regulatory reforms, to the expectation of tax reform, and now 
the occurrence of the tax reform. It is not like President 
Obama's friends, like Tim Cook, somehow forgot to make these 
big investments during the Obama economy. They are making the 
investments now because it is a fact: These things are going 
dramatically upwards. So, while there was a trend, a trend of 
the stagnant growth and stagnant wages, the trend now is toward 
dramatically increased growth and, finally, some traction on 
wages.
    How do you feel about the outlook ahead for that trend?
    Secretary Mnuchin. I think it is quite positive.
    Mr. Davidson. Thank you.
    And I think the last thing I would ask you is, do you 
consider China a market economy or not?
    Secretary Mnuchin. No, I do not.
    Mr. Davidson. Thank you. Mr. Chairman, I yield.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair wishes to inform members that the Chair expects 
to clear two more members, Mr. Kihuen and Mr. Kustoff, and then 
release the witness.
    The gentleman from Nevada, Mr. Kihuen, is recognized for 5 
minutes.
    Mr. Kihuen. Thank you, Mr. Chairman.
    And thank you, Ranking Member.
    Thank you, Mr. Secretary, for being here this afternoon. As 
you might know, I represent the Fourth congressional District 
of Nevada, which is north Las Vegas, which was the epicenter of 
the foreclosure crisis during the recession where over 60,000 
people all across the country lost their home to foreclosure, 
including 3,600 in the State of Nevada.
    Now, I know that you ran OneWest when the bank was 
aggressively foreclosing on homeowners, including thousands of 
seniors in the State of Nevada. Now, as Secretary of Treasury, 
you are a key voice in the Administration's position on housing 
finance reform.
    Now, how can we trust you to support responsible reforms 
that will hold lenders accountable when you yourself were 
responsible for abusing the system when you led OneWest?
    Secretary Mnuchin. Again, I think I have talked about this 
in the past but let me just, again, state I didn't originate 
any of those loans. Those loans were inherited. When you say we 
aggressively foreclosed, we were required to follow FDIC 
requirements and HAMP modifications. And I think I have a great 
understanding of the issues that all those homeowners went 
through, and we are proud of the fact that loan modification 
started under the FDIC at IndyMac and we hope to expand that.
    Mr. Kihuen. Well, sir, there is a reason why you were 
dubbed the foreclosure king. And there is a reason why you have 
made millions of dollars, quite frankly, on the backs of my 
constituents who were losing their homes. And so that is why--
you mentioned you have talked about this in the past, but not 
in this committee, not with me being here. And so it is it my 
responsibility to speak on behalf of my constituents.
    Now there was a specific example, a 90-year-old woman, who 
claimed that Financial Freedom initiated foreclosure when she 
came up just 27 cents short on an insurance payment due to 
confusion about how much she owed.
    Now, can you explain why it would make sense for a bank to 
initiate foreclosure proceedings against a person who just owed 
27 cents?
    Secretary Mnuchin. It made no sense. And that is actually 
why we wrote HUD (U.S. Department of Housing and Urban 
Development) and tried to have those laws changed. So, again, 
that was a HUD loan that we were required to do, and we 
actually asked HUD to raise the limits up to several thousand 
dollars. It made no sense. In many cases, we appealed to them 
for exemptions. It was a very difficult situation.
    Mr. Kihuen. Mr. Secretary, specifically, what reforms do 
you think Congress should consider to ensure that households 
facing foreclosures are never again subject to the kind of 
predatory behavior that OneWest engaged in?
    Secretary Mnuchin. Well, again, OneWest did not originate 
those loans. I think the most important thing is that banks 
originate loans that borrowers can afford and underwrite them 
properly. And that was the biggest problem with the housing 
crisis.
    Mr. Kihuen. I will give the rest of my time to the Ranking 
Member.
    Ms. Waters. Thank you very much. I appreciate that.
    But I am going to yield the time that you are giving to me 
to Mr. Ellison, if that is OK with you.
    Mr. Ellison. I thank the gentlelady.
    With my 1 minute and 37 seconds, I will just acknowledge 
that I have seen you and some of my colleagues congratulate 
each other on this tax bill. You have been invoking small 
business people, baristas, you have been invoking bank tellers, 
regular folks like that, but I notice that you didn't mention 
the hedge fund managers and the private equity folks or even 
the President and the tax benefits that perhaps one Secretary 
of the Treasury might benefit.
    Have you calculated your own personal benefit from this 
recent tax bill?
    Secretary Mnuchin. I don't think I get much benefit at all. 
I think, as you know, I was required to sell almost all my 
investments in coming into this job.
    Mr. Ellison. Right. Well, it is funny, because you were 
asked by Jake Tapper about this question. And he asked you, who 
is going to benefit? And you said the rich will not benefit. In 
fact, you said, quote: ``In high-tax States, actually, rich 
people's taxes will be going up.''
    Well, what we know now is that, by 2027, 9 of 10 members of 
the wealthiest 1 percent in every State will see their taxes go 
down.
    Are you prepared to amend your claim that the taxes for the 
rich were going to go up?
    Secretary Mnuchin. No. I was commenting on what it was now. 
And, again, we hope that those situations in 2027--
    Mr. Ellison. Let me just reclaim my time and say that this 
tax bill is going to impose a $1.4 trillion deficit on the 
national debt.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Tennessee, Mr. 
Kustoff.
    Mr. Kustoff. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for being here today.
    I represent an area in west Tennessee and in the Memphis 
area, and I recently, a couple weeks ago, convened a banking 
roundtable of some of my good community banks in the Dyersburg, 
Tennessee area. And one issue that really drove the 
conversations was that of CRA, or the Community Reinvestment 
Act. And if I can, to put it in perspective, one of the banks 
that I met with in the district talked about how they were 
required to open up a branch for CRA purposes, and it is now 
losing about $100,000 a year. I think that this speaks to the 
outdated requirements of the CRA when it comes to brick-and-
mortar facilities, those physical banks.
    The regulators have increasingly included in their CRA 
examinations criteria that is unrelated to the CRA, including 
compliance with other financial laws or consumer regulations 
that have lost--have their own standards and penalties for 
violations. In my district, one example that I heard is that 
these banks are being subjected to fair lending questions 
during their CRA exams.
    Mr. Secretary, in your role as Secretary of the Treasury, 
do you envision modernizing the CRA to better suit the needs of 
the financial institutions and the communities that they serve?
    Secretary Mnuchin. We do. It is something we are actually 
working on now. It is something that I actually think we are 
focused on really recommendations as to how it can better serve 
the community.
    I think in many places, banks are spending a lot of money, 
and they are not going to the right places. So we are going to 
be working with members in the community and banks to try to 
come up with proposed solutions.
    Mr. Kustoff. Thank you, Mr. Secretary.
    You have begun a review of the CRA then?
    Secretary Mnuchin. We have.
    Mr. Kustoff. And do you know when you expect to release 
findings from the report?
    Secretary Mnuchin. It is over the next couple of months 
that we would hope to be able to do that.
    Mr. Kustoff. Are there aspects of your recommendations that 
will come out that could be accomplished without rulemaking?
    Secretary Mnuchin. Again, that is something that, as we go 
through, we are going to look at carefully. Some of it we may 
be able to do it through the regulators. Some of it may require 
changes in legislation but--
    Mr. Kustoff. Thank you, Mr. Secretary.
    One aspect that I think that the banks in my district do 
exceptionally well is financial literacy. However, the 
financial literacy, unless it is done in a very specific area, 
it doesn't count toward the CRA requirements.
    Is there a way to modernize that?
    Secretary Mnuchin. That is one of the specific things that 
we are looking at, and one of the things that I had specific 
experience in as a banker. I think there is tremendous need for 
financial literacy in the public school systems.
    Mr. Kustoff. Thank you, Mr. Secretary.
    And I would like to yield the remainder of my time to the 
Chairman.
    Chairman Hensarling. I thank the gentleman for yielding.
    Mr. Secretary, one of the things that has always concerned 
me about the stress test is the possibility of one imposed view 
of risk and having all of our major financial institutions 
tested, again, with the same set of assumptions. And doesn't, 
in some respects, this undermine market discipline if we are 
subject to a group regulatory, a regulatory group think? Do you 
have any comments on that?
    Secretary Mnuchin. It is something we need to be careful 
on.
    Chairman Hensarling. Another question. I have been 
concerned, also, about the cost to investors on mandatory, 
certain mandatory disclosure requirements that seem to be 
targeted at, say, social investing, in social questions other 
than what might be considered within the ambit of the 
traditional materiality concept. And so do you have an opinion 
on, say, the proliferation of these requirements, and 
ultimately what impact they could have on capital formation, 
economic growth?
    Secretary Mnuchin. I think there should be proper 
disclosure, but as you said, we need to be careful as to what 
that proper disclosure is.
    Chairman Hensarling. The time of the gentleman has expired.
    I would like to thank the witness for his testimony today.
    The Chair notes that some Members may have additional 
questions for this 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.
    I would ask, Mr. Secretary, that you please respond as 
promptly as you are able.
    This hearing stands adjourned.
    [Whereupon, at 1:33 p.m., the committee was adjourned.]

                            A P P E N D I X



                            February 6, 2018


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




                                 [all]