[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


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

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 13, 2023

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 118-30 
                           
                           
                           
                           
                           
                           
                           
                           
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                                _____ 
                                
                   U.S. GOVERNMENT PUBLISHING OFFICE 

53-178 PDF                WASHINGTON : 2024 



















                 HOUSE COMMITTEE ON FINANCIAL SERVICES

               PATRICK McHENRY, North Carolina, Chairman

FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking 
PETE SESSIONS, Texas                     Member
BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas                AL GREEN, Texas
FRENCH HILL, Arkansas, Vice          EMANUEL CLEAVER, Missouri
    Chairman                         JIM A. HIMES, Connecticut
TOM EMMER, Minnesota                 BILL FOSTER, Illinois
BARRY LOUDERMILK, Georgia            JOYCE BEATTY, Ohio
ALEXANDER X. MOONEY, West Virginia   JUAN VARGAS, California
WARREN DAVIDSON, Ohio                JOSH GOTTHEIMER, New Jersey
JOHN ROSE, Tennessee                 VICENTE GONZALEZ, Texas
BRYAN STEIL, Wisconsin               SEAN CASTEN, Illinois
WILLIAM TIMMONS, South Carolina      AYANNA PRESSLEY, Massachusetts
RALPH NORMAN, South Carolina         STEVEN HORSFORD, Nevada
DAN MEUSER, Pennsylvania             RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
ANDREW GARBARINO, New York           SYLVIA GARCIA, Texas
YOUNG KIM, California                NIKEMA WILLIAMS, Georgia
BYRON DONALDS, Florida               WILEY NICKEL, North Carolina
MIKE FLOOD, Nebraska                 BRITTANY PETTERSEN, Colorado
MIKE LAWLER, New York
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director 
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 13, 2023................................................     1
Appendix:
    June 13, 2023................................................    53

                               WITNESSES 
                               
                         Tuesday, June 13, 2023

Yellen, Hon. Janet L., Secretary, U.S. Department of the Treasury     4

                                APPENDIX

Prepared statements:
    Yellen, Hon. Janet L.........................................    54

              Additional Material Submitted for the Record

Yellen, Hon. Janet L.:
    Written responses to questions for the record from Chairman 
      McHenry....................................................    57
    Written responses to questions for the record from 
      Representative Barr........................................   121
    Written responses to questions for the record from 
      Representative Davidson....................................   104
    Written responses to questions for the record from 
      Representative Donalds.....................................   106
    Written responses to questions for the record from 
      Representative Fitzgerald..................................   113
    Written responses to questions for the record from 
      Representative Garbarino...................................   101
    Written responses to questions for the record from 
      Representative Mooney......................................   123
    Written responses to questions for the record from 
      Representative Nickel......................................   116
    Written responses to questions for the record from 
      Representative Nunn........................................   119
    Written responses to questions for the record from 
      Representative Waters......................................    89

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

                              ----------                              


                         Tuesday, June 13, 2023

             U.S. House of Representatives,
                    Committee on Financial Services
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:07 a.m., in 
room 2128, Rayburn House Office Building, Hon. French Hill 
[vice chairman of the committee] presiding.
    Members present: Representatives Lucas, Sessions, Posey, 
Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, Hill, 
Emmer, Loudermilk, Mooney, Davidson, Rose, Steil, Timmons, 
Norman, Meuser, Fitzgerald, Garbarino, Kim, Donalds, Flood, 
Lawler, Nunn, De La Cruz, Houchin, Ogles; Waters, Velazquez, 
Sherman, Meeks, Scott, Lynch, Green, Cleaver, Himes, Foster, 
Beatty, Vargas, Gottheimer, Gonzalez, Pressley, Horsford, 
Tlaib, Torres, Garcia, Williams of Georgia, Nickel, and 
Pettersen.
    Mr. Hill. [presiding]. The Financial Services Committee 
will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``The Annual Testimony of the 
Secretary of the Treasury on the State of the International 
Financial System.''
    I will note at the outset of this hearing that we have a 
hard stop, as a courtesy to the Secretary, at 1:00 this 
afternoon, and we will strictly observe it.
    Now, I will recognize myself for 4 minutes to give an 
opening statement.
    Welcome, Secretary Yellen. I appreciate you being here 
today. Today's hearing is about the state of the international 
financial institutions, but I do want to take a minute and talk 
about the debt ceiling crisis that we narrowly avoided. First, 
we are all glad that this is behind us. No one wanted a 
default, no Legislative Branch official, and no Executive 
Branch official. Your statement says that waiting until the 
last minute hurts American credibility. I agree.
    Madam Secretary, this could have been dealt with by the 
President and Speaker Pelosi last year in the previous 
Congress, or the President could have engaged sooner with 
Speaker McCarthy when they met on February 1st, but 
nonetheless, President Biden signed into law an effective 
compromise. That said, there is a lot of frustration, 
particularly about the lack of transparency of when the 
Treasury Department expected the debt ceiling to be breached, 
otherwise known colloquially as the, ``X-date.''
    At the end of February, Chairman McHenry wrote to you 
requesting information on your projections and calculations. 
Simple enough. The response was lacking, to put it mildly. This 
committee and Congress as a whole did not hear from you again 
until May 1st, after the House passed the Limit, Save, Grow 
Act. Two different X-dates, June 1st and June 5th, were 
subsequently released, with zero explanation, and zero 
transparency. We all have to have confidence in the fiscal 
analysis of our government.
    Now, I would like to turn back and focus on the issue of 
the day: international financial institutions (IFIs). Let's 
start where we agree, with the nomination of World Bank 
President Ajay Banga. Mr. Banga is a serious, competent leader 
who has the capacity to right the ship at the World Bank and 
continue the improvements and leadership from the former 
President, Mr. Malpass. The World Bank and the International 
Monetary Fund (IMF) should be laser-focused on eliminating 
poverty and helping countries overcome crises. But 
unfortunately, the international financial institutions seem to 
think about everything except economic growth. They have fallen 
into a bottomless word salad of empty rhetoric that serves 
Western NGOs, not the interest of developing countries.
    No wonder China has become the world's largest official 
creditor, even though its lending terms are often more 
burdensome than those of the international financial 
institutions. Africa is a helpful case study. Your recent 
response to our letter regarding energy was helpful. We are 
grateful for that letter, but Treasury is opposing virtually 
all fossil fuel and nuclear projects in the multilateral 
development banks (MDBs) even though half the continent of 
Africa doesn't have access to electricity. How does this make 
sense? Who is eager to build infrastructure there? China.
    Meanwhile, the IMF has completely failed to bring that 
China into compliance with international norms. The Fund must 
get serious about standing up to the Chinese government if it 
takes its mission, long term, seriously. If the Fund keeps 
letting Beijing drag out restructuring talks with borrowers, 
there won't be much of a case for additional IMF resources at 
the end of this year. There is no doubt that China poses a 
generational threat to our national interest, but as long as we 
remain committed to our values, the U.S. will compete and 
outcompete the Chinese Communist Party (CCP). I look forward to 
your testimony, and I yield back.
    The Chair now recognizes the ranking member of the 
committee, the gentlewoman from California, Ms. Waters, for 4 
minutes for an opening statement.
    Ms. Waters. Thank you very much. Good morning. I would like 
to welcome Secretary Yellen before our committee today.
    I want to first start out by noting that after the failures 
of Silicon Valley Bank, Signature Bank, and First Republic 
Bank, it was the leadership and swift action taken by Secretary 
Yellen and our banking regulators that prevented a banking 
crisis, protected our economy, and ensured that depositors in 
the United States remained safe. That is not all. After months 
of Republican brinkmanship over our nation's debt, Secretary 
Yellen did a masterful job of blocking out lies coming from 
extreme MAGA Republicans by keeping Congress appropriately 
updated with the latest estimate of the X-date and ensuring our 
bills were paid on time. It is this level of leadership that 
Secretary Yellen has also demonstrated on the world stage.
    Right now, climate change, global pandemics, and food 
scarcity pose major threats to the global economy. And after 
years of hostility and ignorance by officials appointed by the 
prior Administration, Secretary Yellen is helping to restore 
the image of the United States all around the world and among 
our allies by pushing the World Bank, IMF, and other 
multilateral institutions to take serious action to tackle the 
existential threats before they get worse.
    Not only that, but under Secretary Yellen's leadership, the 
United States continues to impose severe sanctions against 
Russia, has increased financial resources for countries in need 
by authorizing additional IMF special drawing rights, and is 
promoting a strong and vibrant domestic economy by implementing 
transformational pieces of legislation, like the American 
Rescue Plan, the Infrastructure Investment and Jobs Act, and 
the Inflation Reduction Act.
    Republicans, on the other hand, are failing to lead. They 
are actively denying that climate change exists, dismantling 
the government's ability to respond to pandemics, cutting off 
food aid to struggling countries, blocking their own 
legislation in the House, and threatening to drive our global 
economy off a cliff. It is telling that on the same day that we 
are hearing about the Secretary's and Treasury's efforts to 
bolster the global economy, Republicans will also bend over 
backwards to defend the twice-impeached and indicted former 
President Trump, who has been arraigned for allegedly stealing 
and sharing some of the nation's closely-guarded secrets and 
willfully undermining efforts to protect those secrets.
    The contrast between Democrats and Republicans is clear. 
After nearly tanking the economy, Republican infighting has 
ground the House Floor to a halt. Make no mistake, their 
extreme MAGA agenda is not extreme enough, but they are 
extremists. Thankfully, under Democratic leadership, the United 
States is stronger than ever. We now have 28 consecutive months 
of strong growth, and during President Biden's tenure, created 
a record 13 million jobs, all while cutting inflation by more 
than half, compared to last summer, based on the latest 
Consumer Price Index. Index numbers released this morning show 
further progress is expected in the months to come.
    The Biden Administration and Democrats have shown what 
happens when you deliver legislation that puts working families 
first. I look forward to today's testimony, and I yield back.
    Mr. Hill. The gentlewoman yields back. The Chair now 
recognizes the gentleman from Missouri, Mr. Luetkemeyer, who is 
also the Chair of our Subcommittee on National Security, 
Illicit Finance, and International Financial Institutions, for 
1 minute.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. Good morning, 
Secretary Yellen.
    The international financial institutions (IFIs) were 
established to address economic challenges in distressed 
countries and cultivate economic growth around the world. 
However, it is becoming clear that these organizations are 
neither capable of nor interested in meeting these goals. The 
World Bank's unrealistic and harmful green agenda is preventing 
some of the poorest nations from obtaining the cheapest and 
most-reliable energy sources, such as nuclear and natural gas. 
Ironically, the world's largest polluter, China, continues to 
receive sweetheart deals from the IFIs that no other wealthy 
nation is allowed to receive. The country with the world's 
second-largest economy continues to receive more than a billion 
dollars per year from the World Bank, and China remains one of 
the bank's largest debtors. Sadly, but not surprisingly, it is 
our money that is largely paying for these horrible policies. 
So, Chair Yellen, I look forward to hearing your ideas to stop 
them. With that, Mr. Chairman, I yield back.
    Mr. Hill. The gentleman yields back. The Chair recognizes 
the ranking member of our Subcommittee on National Security, 
Illicit Finance, and International Financial Institutions, Mrs. 
Beatty of Ohio, for 1 minute.
    Mrs. Beatty. Thank you, Mr. Chairman, and ranking members, 
for holding this hearing.
    Madam Secretary, I would like to thank you and the Biden-
Harris Administration for your leadership in preserving the 
strength and power of the United States on the global stage. It 
was under your leadership, your guidance, and, most 
importantly, your advice, that we avoided a bank crisis. We 
imposed economic measures in support of Ukraine, averted a 
disastrous default, and promoted a strong and resilient 
domestic economy. Further, we have preserved our status in the 
global economy through your voice and vote at the IMF, the 
World Bank, and other IFIs, a task that is increasingly 
critical as we see foreign adversaries seek to replace us in 
Africa, in the Caribbean, and around the world. Having traveled 
to the Caribbean with Ranking Member Waters, particularly the 
Bahamas and Barbados, I have seen firsthand the destructive 
nature of Chinese relationships, and I recognize our 
significance.
    Thank you, Madam Secretary, for your leadership. I look 
forward to your testimony.
    Mr. Hill. The gentlewoman yields back.
    Today, we welcome the testimony of the Honorable Janet 
Yellen, the Secretary of the Treasury. Secretary Yellen, we 
thank you for taking the time to be here.
    You will be recognized for 5 minutes to give an oral 
presentation of your testimony. And without objection, your 
written statement will be made a part of the record.
    Secretary Yellen, you are now recognized for 5 minutes.

         STATEMENT OF THE HONORABLE JANET L. YELLEN, 
         SECRETARY, U.S. DEPARTMENT OF THE TREASURY

    Secretary Yellen. Thank you, Mr. Chairman, and Ranking 
Member Waters. Thank you for your invitation to testify before 
this committee today in my capacity as Chair of the National 
Advisory Council on International Monetary and Financial 
Policies. I am looking forward to discussing Treasury's 
oversight of the international financial institutions (IFIs).
    The past few years have demonstrated the importance of 
these institutions as part of our broader economic and foreign 
policy toolkit. Since 2020, global shocks, such as the pandemic 
and Russia's illegal war against Ukraine, have had significant 
impacts on American families and businesses. In the face of 
these shocks, the international financial institutions advance 
U.S. national interests by fostering a more-resilient global 
economy. They enable us to mobilize swift responses to mitigate 
global risks to the U.S. economic outlook. And they help drive 
U.S. economic growth by expanding global demand for American 
products and services. That is why there has always been a 
robust bipartisan consensus around strengthening America's 
leadership at these global institutions.
    Over the past year, these institutions have continued to 
make smart and cost-effective investments to meet urgent needs. 
They leverage our dollars to mobilize additional funding from 
our partners and the private sector. For example, the IMF 
approved a landmark $15 billion economic program for Ukraine 
earlier this year. This program, combined with direct budget 
support provided by the United States and our partners, will 
help Ukraine's immediate financing needs. It will also underpin 
its government's good governance and anti-corruption reform 
efforts. The World Bank and other multilateral development 
banks have also provided essential support to Ukraine, which 
includes facilitating the responsible and accountable 
disbursement of funds to help stabilize its economy.
    Our leadership at these institutions is one of our core 
ways of engaging with emerging markets and developing 
countries. The IFIs provide real resources to tackle the 
challenges the world faces, from weathering economic storms to 
spurring long-term economic development. In 2022 alone, the 
development banks provided over $150 billion in funding to 
developing countries.
    These institutions reflect American values. Assistance from 
the IFIs comes with strong requirements for governance, 
accountability, and debt sustainability. It serves as an 
important counterweight to nontransparent, unsustainable 
lending from others like China. As an example, the multilateral 
development banks are a leading source of financing to close 
the infrastructure gap in developing countries. These 
infrastructure projects adhere to robust technical and other 
standards that are aimed at achieving sustainable and inclusive 
growth in our partner communities.
    The United States is not a passive shareholder. We actively 
shape the priorities of these institutions, as a leading 
shareholder in nearly all of them. A major project over the 
past few months has been to evolve the World Bank to better 
deliver against global challenges as part of its poverty 
reduction and development mission. We have already introduced 
reforms that will stretch the World Bank's balance sheet to 
unlock as much as $50 billion in additional lending capacity 
over the next decade. And we have made preliminary updates to 
its mission and operations. I am looking forward to working 
with the new World Bank President, Ajay Banga, to build further 
momentum for our evolution initiative.
    Looking ahead, the Biden Administration seeks to bolster 
U.S. leadership in these institutions. To that end, we request 
authorization to renew our participation in the IMF's New 
Arrangements to Borrow, a critical backstop to IMF resources. 
We also seek authorization to lend to two key IMF trust funds: 
the Poverty Reduction and Growth Trust; and the Resilience and 
Sustainability Trust. These actions will help the IMF address 
economic crises, with a particular emphasis on supporting 
vulnerable developing countries amid heightened risks. We would 
also like to boost our involvement in IDB Invest and the 
African Development Fund. These investments will bolster our 
engagement in these regions at a time of geopolitical 
competition.
    I want to end by discussing the debt limit. I am relieved 
that with the President's leadership, Congress took action to 
address the debt limit in time. But while we were able to avoid 
default, the United States once again came dangerously close to 
the line. This cannot be normalized as the way we do business 
in Washington. Waiting until the last minute hurts our global 
leadership and credibility on the world stage. We are a nation 
that keeps our word and pays our bills. We should never give 
anyone any reason to think otherwise. Thank you.
    [The prepared statement of Secretary Yellen can be found on 
page 54 of the appendix.]
    Mr. Hill. I thank the Secretary for her testimony, and I 
will now turn to Member questions. I recognize myself for 5 
minutes for questions.
    Madam Secretary, I read with interest the G7 statement on 
Ukraine from your meeting in Hiroshima last month, which 
reiterated a commitment to stand against Russia's illegal war 
in Ukraine. G7 leaders called on Russia to pay for the damages 
and long-term reconstruction costs of Ukraine, and while the 
U.S. has made major contributions thus far, I agree that 
ultimately, Russia should bear that responsibility. That is why 
I am working on a bill called the Ukraine Reconstruction Act, 
which would ensure that the United States has the authority it 
needs to take title of Russian sovereign assets and transfer 
them to an international escrow fund to pay for war damages.
    This would be fully in line with international norms, 
conventions, and precedent, and also be done in coordination 
with our allies in Europe and elsewhere. It is also in line 
with both the G7 and the United Nations, which call for the 
establishment of, ``an international mechanism for reparation 
for damage, loss, and injury,'' and pointed out Russia's frozen 
sovereign assets held in central banks around the world. I want 
to thank the Treasury for their technical assistance, and 
particularly the engagement of your Deputy Secretary. Do you 
agree that this is the right approach and that legislation of 
this nature is necessary?
    Secretary Yellen. Let me start by thanking you for your 
engagement on this important issue. From the outset of Russia's 
illegal invasion of Ukraine, we have taken decisive steps of 
immobilizing Russian central bank reserves, and working 
alongside our allies and partners, we have immobilized jointly 
about $300 billion worth of reserves. As you noted, we are 
committed with the G7 to ensuring that these assets remain 
immobilized until there is a resolution of the conflict in 
which Russia pays for the damage it has caused.
    And we are working with allies and partners also in the G7 
on the so-called REPO Task Force on this issue. Now, however, 
it is the case that most of the assets, Russia's sovereign 
assets, are not in the United States, and for that reason, it 
is critical that any next steps we take be done via careful 
consultation with allies and partners in a coordinated 
approach. We are engaging in those discussions. We are working 
first to more accurately map exactly where these assets are, 
and we are examining a number of options, including some that 
we may be able to take under existing authorities. But we do 
look forward to working with you and other Members of Congress 
on this important issue.
    Mr. Hill. I think that is important. Thank you for that, 
and I do think you are right in that each of the respective 
legal systems among the G7 nations and allied nations need 
companion-type legislation. Thank you for that. You chair the 
Financial Stability Oversight Council (FSOC), and as Chair, I 
assume it is fair to say that any report FSOC puts out, you put 
eyes on and have taken a look at, is that true?
    Secretary Yellen. That is fair.
    Mr. Hill. Last October, FSOC released a report called, 
``Report on Digital Asset Financial Stability Risks and 
Regulation.'' And it says, ``Digital asset businesses do not 
have a consistent or comprehensive regulatory framework and can 
take advantage of gaps in the regulatory system and engage in 
regulatory arbitrage.'' We couldn't agree more, many of us on 
both sides of the aisle. And I think FTX just showed just as 
long as these entities are outside the United States and 
outside some sort of a framework, Americans will continue to be 
at risk until we establish a regulatory framework, protecting 
investors and innovators, and also Web3 distributed ledger 
innovation in our country.
    The FSOC report recommended that Congress pass legislation 
to provide regulators authority over spot markets for digital 
assets, as well as legislation to give regulators more 
authority to have visibility into supervised digital asset 
companies. We are working on that here in Congress. Are those 
recommendations from last fall or late summer's FSOC report 
still the recommendations of FSOC? That is still the view of 
FSOC?
    Secretary Yellen. Yes, that remains the view of FSOC that 
there are some gaps, like spot markets for crypto assets, that 
are not securities. We would like to see a regulatory framework 
over those markets. And there are gaps in regulations, I would 
point out, specifically stablecoins. And I do believe that we 
need a comprehensive Federal prudential framework and I would 
be pleased to work with you, with Congress, to see if we can 
develop such a framework.
    Mr. Hill. Thank you, Madam Secretary. My time has expired. 
The ranking member of the committee, the gentlewoman from 
California, Ms. Waters, is recognized for 5 minutes.
    Ms. Waters. Thank you very much. Secretary Yellen, I would 
like at some point in time to really talk about Haiti and the 
lack of attention, I think, from anywhere, in dealing with that 
crisis there. But I know that it is important for them and 
civil society to get together to plan a vote and get into 
government. And there is not a lot that a multilateral can do, 
the World Bank, IMF, et cetera, but I would like you to keep an 
eye on it so that as soon as we can get government 
reestablished, et cetera, that the funding that is going to be 
necessary will have our support. So having said that, we will 
talk about Haiti at another time.
    Secretary Yellen. Okay.
    Ms. Waters. I am working and will continue to work to see 
that civil society is involved in getting something done.
    Let me just turn to a recent announcement by the PGA, that 
the PGA Tour may be purchased by LIV Golf, which is owned and 
controlled by Saudi officials, including the Saudi Crown 
Prince. As Chair of the Committee on Foreign Investment in the 
United States (CFIUS), you know that in assisting the President 
in overseeing the national security risk of foreign direct 
investments in the U.S. economy, the committee is permitted to 
consider, ``whether any foreign person engaging in a covered 
transaction with a United States business has a history of 
complying with United States laws and regulations.'' That is a 
quote. I believe that this consideration is a substantially 
lower bar than the serious crimes committed by the Saudi 
Arabian government and its officials.
    Saudi Arabia has a regressive, repressive government known 
for chilling dissent, jailing dissidents, and draconian 
punishments. The Crown Prince himself has been implicated by 
our own intelligence community in the brutal kidnapping, 
torture, murder, and dismemberment of an American resident, 
Washington Post journalist, Jamal Khashoggi.
    Further, as shared by 9/11 Families United, the families of 
the victims of the terrorist attacks on September 11, 2001, in 
response to the news of the merger said, ``The Kingdom spent 
billions of dollars before 9/11 to fund terrorism, spread their 
vitriolic hatred of Americans, and financed al-Qaeda and the 
murder of our loved ones.'' The same 9/11 families are still 
waiting for justice in their lawsuit against the Saudis, as the 
Saudi government obstructs court processes and obscures the 
truth, dragging out the families' suffering and restitution for 
over 2 decades.
    Can you share what scrutiny this particular deal between 
LIV Golf and the PGA Tour may receive? Is CFIUS looking into 
their investments by the Saudi sovereign wealth fund, in 
general, given its historic and continued failure to comply 
with U.S. law and regulation?
    Secretary Yellen. What I can say is that CFIUS is a very 
important part of Treasury's national security mission, and the 
committee is very well-positioned to review transactions that 
do involve national security concerns. Regrettably, because 
there are very strict rules of confidentiality, I am not in a 
position to be able to comment on any specific matter or 
potential case, but certainly, where there are national 
security concerns, CFIUS is in the position and does review 
transactions.
    Ms. Waters. I thank you for that clarification. In essence, 
what I have heard is you cannot comment on what is going on 
now, but there is a possibility because they have the 
responsibility to review these kinds of transactions----
    Secretary Yellen. That is correct.
    Ms. Waters. ----to determine whether or not it is in our 
best interest or whether our security is somehow compromised 
because of the transaction. And I thank you for that, because I 
do believe that, and I hope that CFIUS will take it up. Thank 
you very much, and I yield back.
    Mr. Barr. The gentlelady yields back. The gentleman from 
Oklahoma, Mr. Lucas, is now recognized for 5 minutes.
    Mr. Lucas. Thank you, Mr. Chairman. The United States has 
some of the best capital markets in the world and they are 
critical to the strength of our economy. During the last 
several challenging years, our capital markets were essential 
in facilitating capital and managing risks for U.S. businesses, 
investors, and even the government. While we don't yet have the 
details of the Basel III proposal coming from the Fed, Vice 
Chair Barr has indicated it will impact the capital market 
activities of large U.S. institutions. I am concerned about 
adding punitive capital charges to U.S. banks as 
counterproductive to promoting liquidity and efficient markets. 
This will come at the same time the SEC is engaged in dramatic 
and transformational market structure changes at an 
unprecedented rate.
    Since Treasury's mission is to maintain a strong economy 
and promote economic growth and stability, are you confident 
that these policy changes will not undermine the resilience of 
the U.S. capital markets that support the economy, Madam 
Secretary?
    Secretary Yellen. I certainly agree with the goal that you 
mentioned of maintaining strong capital markets. I am not 
really in a position to comment on these regulations. I don't 
believe they have been released yet, and I haven't been fully 
briefed, but we will certainly review them carefully, and think 
about the implications that forthcoming changes could have to 
the functioning of our capital markets, and particularly for 
the Treasury market where we have a particular responsibility.
    Mr. Lucas. Just to reiterate, it is concerning that U.S. 
banks will have to implement both significant market structure 
changes, including to and affecting the U.S. Treasury markets, 
and increased capital requirements associated with market 
activities. I will ask this: Are the Fed and the SEC 
coordinating with Treasury on the economic analysis necessary 
to understand potential consequences to both markets and end 
users, and will you commit to this analysis?
    Secretary Yellen. I believe this is likely to be a Fed set 
of regulations and proposals. The Treasury is not involved in 
reviewing those, but I am assuming that the Federal Reserve 
would, possibly jointly with the FDIC, put out a notice of 
proposed rulemaking, and that we would certainly have the 
opportunity to discuss----
    Mr. Lucas. You see where my concern is. The potential 
impact is so dramatic. If the entities that are engaged in 
these various elements of dramatic change aren't cross-
referencing their actions, there is the possibility of 
unintended consequences, and that concerns me.
    Question number two, in the European Union, the Corporate 
Sustainability Reporting Directive (CSRD) went into effect in 
January of this year. The CSRD will require companies to 
disclose a host of far-reaching ESG information. These 
requirements will also apply to non-EU companies that have a 
significant EU presence, which could have a substantial impact 
on industries here at home, for example, the agriculture 
sector. Companies that do business in Europe are navigating 
through how to comply with these disclosures related to climate 
change, Scope 3 emissions, water usage, biodiversity, and 
ecosystem data.
    Secretary Yellen, does the Treasury have an estimate of how 
many U.S. companies will be impacted by the CSRD and the 
difficulty these companies could face?
    Secretary Yellen. I don't have such an estimate, but let me 
say that while we are supportive of the high-level aims of the 
Corporate Sustainability Due Diligence Directive (CSDDD), we 
are concerned that it has extraterritorial scope and potential 
for unintended negative consequences for U.S. firms. This is 
something that we are discussing with the European Union, and 
we will certainly make our concerns known.
    Mr. Lucas. I just have to note for the record that it is 
important that we do not allow Europe to become the standard 
setters for the United States. U.S. regulators should be 
diligent in protecting U.S. interests and in defending U.S. 
sovereignty. That is your job and mine, Secretary.
    Secretary Yellen. I agree. I think that some of the 
requirements could affect the global activities of U.S. firms 
where there is no clear nexus to the EU, and that certainly 
concerns us.
    Mr. Lucas. Because Brussels seems to be playing for keeps 
on everything that involves economics. With that, I yield back, 
Mr. Chairman.
    Mr. Barr. The gentleman yields back. The gentlewoman from 
New York, Ms. Velazquez, is now recognized for 5 minutes.
    Ms. Velazquez. Thank you, Mr. Chairman, and Ranking Member 
Waters.
    Secretary Yellen, in July 2021, the IMF's Board of 
Directors found that climate change is an existential threat 
that poses critical macroeconomic and financial policy 
challenges that will confront all of its members in the decades 
to come. How is the Treasury Department working to integrate 
the macroeconomic effects of climate change into the IMF's core 
activities?
    Secretary Yellen. We are concerned about integrating it 
into both the IMF's work, but also, and perhaps more 
importantly, the work of the multilateral development banks. 
The multilateral development banks, we think, need to evolve 
the work that they do to move from focusing purely on country-
specific challenges that affect poverty to responding better to 
global challenges, including climate change and pandemics, as 
well as fragility and conflict. And we have spearheaded a 
process to evolve the work, mission, operating modes, and 
strategies of the World Bank, starting with the World Bank to 
be able to better address these challenges. This is something 
in which the new President of the World Bank will be deeply 
involved.
    And the IMF addressing climate change is not the core 
mission, but they are certainly involved in evaluating climate 
changes that impact a country and its possible macroeconomic 
stability.
    Ms. Velazquez. Thank you. Secretary Yellen, I have been 
concerned about the rapid speed at which Silicon Valley Bank 
grew in size and complexity, and I am considering legislation 
on the issue. The Fed's review of the bank's failure notes a 
similar concern. As Chair of the FSOC, does this concern you as 
well?
    Secretary Yellen. It certainly did concern me, the set of 
banking problems that were touched off by the failure of this 
bank, and the Fed produced quite quickly a report on its 
supervision of Silicon Valley Bank that did point to 
deficiencies. After all, this was a very rapidly-growing bank, 
and it had a unique structure that potentially made it 
vulnerable to runs. So, that is a matter that is appropriate 
for the banking supervisors to address.
    Ms. Velazquez. Thank you. As Chair of the FSOC, do you 
believe regulators have all the tools necessary to ensure that 
as a bank grows in size and complexity, particularly over a 
short period of time, heightened regulatory and supervisory 
standards are able to be quickly applied?
    Secretary Yellen. I believe that the bank regulators do 
have the authority to put in place effective regulations and 
supervision to address these issues. Some of the supervisory 
standards were relaxed, and we think it is appropriate, the 
President thinks it is appropriate, and I think the Federal 
Reserve thinks it is appropriate to revisit some of the 
changes, and also to shore up bank supervision.
    Ms. Velazquez. I, too, believe it is appropriate. Thank you 
for that answer. Community development financial institutions 
(CDFIs) are critical to our low- and moderate-income (LMI) and 
underserved communities. Recently, I have heard concerns from 
CDFIs about a new certification proposal from the CDFI Fund 
that can make it difficult for CDFIs to lend in the communities 
they serve, and would undermine the ability of CDFIs to 
effectively inject funds into communities that desperately need 
support. Are you aware of the proposal from the CDFI Fund?
    Secretary Yellen. I am aware that there is a plan to update 
the CDFI certification process, which is something that hasn't 
been reviewed for about 25 years, and the potential importance 
of the CDFI designation.
    Mr. Barr. Madam Secretary, the gentlelady's time has 
expired. You can answer the rest for the record.
    The gentleman from Texas, Mr. Sessions, is now recognized.
    Mr. Sessions. Mr. Chairman, thank you very much. Madam 
Secretary, thank you for being with us today. Your presence 
here allows us to not only engage with you on your thinking, 
but also helps us articulate policy that we believe in.
    Madam Secretary, almost effective with President Biden 
taking office, the Fed began loaning the United States 
Government about $120 billion a month, and then tapering about 
a year later took place where that was reduced to about $105 
billion. Could you please tell me the current amount of money 
that the Fed is putting into the United States economy for 
which we take out loans?
    Secretary Yellen. This is really a question for Chair 
Powell rather than myself, but the Fed's----
    Mr. Sessions. No, that is a question for anybody who is on 
top of the financial interests of the United States, because 
today we are talking about the state of international finance 
systems. And if the entire world sees where America cannot even 
stand on its own two feet without taking a loan out that we pay 
interest on, and the Secretary of the Treasury won't even 
answer the question----
    Secretary Yellen. I'm sorry. I will answer the question.
    Mr. Sessions. Thank you.
    Secretary Yellen. The Fed is engaging in what is sometimes 
called quantitative tightening, which is a reversal of its 
long-term Treasury and mortgage-backed security purchases. It 
is now reducing its holdings by redeeming principle as it comes 
due and reducing its holdings over time of these assets. And it 
is something that they deemed appropriate as part of a monetary 
policy that is aimed at having a more normal-sized Fed 
portfolio and it is part of their strategy to address 
inflation.
    Mr. Sessions. I just heard you address one side of the 
equation. If you could please answer my question, how much 
money does the Fed put into our economy that we take out a loan 
for, not how we change out those loans and change them based 
upon the interest rate? How much money does the Fed put into 
our economy every month to prop it up?
    Secretary Yellen. I'm sorry. I am not sure I know what you 
mean by money the Fed puts into the economy.
    Mr. Sessions. So, the Fed does not loan the Federal 
Government any new money that we take interest out on, is that 
your testimony?
    Secretary Yellen. The Fed provides reserves to the banking 
system and in doing so, purchases Treasury assets and mortgage-
backed securities guaranteed by Fannie Mae and Freddie Mac, and 
it does that to serve a monetary policy purpose.
    Mr. Sessions. Madam Secretary, I believe you are entitled 
to your own opinion, this Administration is, that when the 
United States of America takes out loans that we receive from 
the Fed that we pay interest on, it is a message to the world 
that we cannot stand on our own two feet with our own vibrant 
economy. And it sends a huge message that either we cannot 
manage our own spending habits or that we are allowing our own 
people to stay at home and not to produce and grow our economy.
    This economy that we have, I think that we have seen 
produced a doubling in the amount of money that came into the 
Treasury from about $2.1 trillion in 2010, to about $4.9 
trillion in 2021 or 2022. We doubled the amount of money that 
comes into the Treasury. Your testimony today is that you are 
suggesting that we are not taking out any loans from the Fed 
that we would pay interest for, and I appreciate your time 
before this committee today. Mr. Chairman, I yield back.
    Mr. Barr. The gentleman yields back. The gentleman from 
California, Mr. Sherman, is now recognized.
    Mr. Sherman. Madam Secretary, we deal with investor 
protection in this committee. The SEC is looking at swing 
pricing rules dealing with mutual funds that will undermine 
investor protection. And the word is out that it is the FSOC, 
that yourself and the Fed that somehow believe and are pushing 
the SEC to have these regulations to prevent a precipitous 
sell-off in U.S. securities should there be a crisis.
    I am not going to ask you a question at this point, but I 
would hope that you would reexamine your position there because 
telling the American people there is a crisis, and we don't 
want you to sell your stocks, but we are going to impose a 
penalty on you for selling your mutual funds, is one way to get 
them running toward the exit, so it is bad investor protection. 
It is bad systemic regulation. I do hope that you will leave it 
to the SEC what they do on swing pricing.
    Your testimony talked about the IMF. Pakistan is engaged in 
negotiations right now. This is a unique opportunity to help 
the people of Pakistan but also a unique opportunity to focus 
on human rights, democracy, and timely elections in Pakistan, 
and I hope that the U.S. voice is being used there to push 
Pakistan toward democracy and human rights. Iran has special 
drawing rights at the IMF, and I wonder how we as a Congress 
can reauthorize the IMF and leave that untouched? The IMF may 
ultimately have to decide if they want American participation 
or if they want Iran to have special drawing rights.
    In March of 2023, this year, Secretary Blinken identified 
that the Amhara regional forces in northern Ethiopia were 
engaged in ethnic cleansing and war crimes. The Human Rights 
Watch has identified two particular individuals who are 
responsible for those war crimes, and I hope that the Treasury 
will look at sanctioning those two individuals.
    Believe it or not, I have a question. We have a capital 
gains allowance that costs us tens of billions of dollars. That 
is justified as encouraging people to make investments that 
help the economy grow, and maybe that makes sense unless the 
economy you are growing is China. Can you think of a reason why 
we use the tax system to subsidize U.S. investment in Chinese 
companies?
    Secretary Yellen. Sorry. In what way do we subsidize----
    Mr. Sherman. If you work hard and earn money, you pay the 
full ordinary income tax rate, but if instead you invest in 
Huawei and the price goes up and you make the same amount of 
money, you pay a much lower rate. And if you die while holding 
that, you get a step up in basis, and you pay no tax at all. 
So, the full panoply of investment incentives built into our 
Tax Code is there for China. Is there a reason why we are 
incentivizing investments in Chinese stocks?
    Secretary Yellen. We have policies about every tax capital 
gains on assets and----
    Mr. Sherman. Can you think of why we provide these 
subsidies, apply these to Chinese stocks, except that we got 
lazy and we wrote them up for all stocks, and we forgot China?
    Secretary Yellen. This is the policy that we have for all 
assets, including Chinese assets----
    Mr. Sherman. I look forward to working with you to come up 
with a policy that makes some foreign policy sense.
    Finally, the Chair talked about crypto and said we need a 
regulatory scheme. I want to say we have a regulatory scheme. 
We have the securities laws. Thank God, Chair Gensler is 
enforcing them, but we also have recently adopted tax laws 
dealing with crypto. The Inflation Reduction Act said you have 
to report on Form 1099. In December of last year, Treasury 
announced that crypto brokers, however, wouldn't have to report 
until final regulations were issued. These final regulations 
have been approved by the Office of Management and Budget 
(OMB), but remain unissued.
    Mr. Lynch and I sent you a letter just recently. The SEC 
has proved they are not afraid of the crypto bros. I know you 
are not afraid of the crypto bros. I hope the IRS is not afraid 
of them. When are we going to see these regulations so that if 
you make a profit on selling your crypto, you at least have to 
pay taxes on it?
    Secretary Yellen. We will get back to you on that shortly.
    Mr. Sherman. Thank you.
    Mr. Barr. The gentleman's time has expired. The gentleman 
from Florida, Mr. Posey, is now recognized.
    Mr. Posey. Thank you, Mr. Chairman. Madam Secretary, given 
the trajectory of the Russian oil revenues, has the 
Administration's sanction on oil from Russia been a failure?
    Secretary Yellen. We have taken important actions. Of 
course, the United States is sanctioned. We are not allowed to 
purchase Russian oil, and by and large, the G7 is not 
purchasing Russian oil. And we have taken very important steps 
to reduce the revenue that Russia is able to earn from its oil 
production and sales by placing a price cap on sales of Russian 
oil that make use of any G7 service, including insurance or 
shipping. But we also want to make sure that the global oil 
market remains well-supplied so that oil prices don't spike as 
a consequence of Russia's inability to sell any of their oil. 
Russia's revenue----
    Mr. Posey. Why is Russia's revenue going up?
    Secretary Yellen. Russia's revenue has been roughly halved 
over the last year. Russian authorities have indicated that the 
price cap that we have placed on Russian oil has had a very 
serious negative impact on them, reducing their revenues. Their 
budget has gone from large surplus to deficit, and they have 
had to change the way in which they tax their oil companies to 
derive revenue from oil sales, something that is harming their 
long-run ability to invest in the oil industry. I think our 
policy there has been quite successful.
    Mr. Posey. Okay. Why hasn't the Administration acted 
progressively to impose sanctions on China for their apparent 
human rights violations, such as those experienced by the 
Uyghurs?
    Secretary Yellen. We have put in place sanctions for human 
rights violations and continue to examine further sanctions 
that we can levy.
    Mr. Posey. The President vetoed my Congressional Review Act 
resolution aimed at stopping the Commerce Department's solar 
panel rule that allows China's solar panels to evade our 
tariffs by permitting them through third-world nations. Why do 
you support giving the Chinese the exemption?
    Secretary Yellen. What we do with Treasury is we focus on 
sanctions on Xinjiang for human rights abuses, and I am not 
familiar with the Commerce Department's thinking on this issue.
    Mr. Posey. So, you weren't consulted on it at all? You have 
no clue about what is going on?
    Secretary Yellen. I haven't been involved in that aspect of 
policy toward China.
    Mr. Posey. Okay. You said you aim to do something about 
human rights violations, and you just seem totally unconcerned 
about this.
    Secretary Yellen. I am concerned about human rights 
violations. I think that a core principle of U.S. policy 
towards China is that we will not do business with China in 
cases where there are human rights violations, and we have put 
in place meaningful sanctions.
    Mr. Posey. Yes. Do you have any idea why he vetoed the 
legislation that would put the slave labor at a disadvantage 
instead of an advantage over American products?
    Secretary Yellen. Sorry. I am not familiar with the 
legislation in detail.
    Mr. Posey. What is the Biden Administration's strategy to 
use our participation in international financial institutions 
to address and mitigate the threats posed by China to our 
financial and economic well-being and to the geopolitical 
stability?
    Secretary Yellen. We have taken the position that the 
multilateral development banks, particularly the World Bank, 
should graduate China and cease lending to China. And we are 
working very hard to try to get China to meet its 
responsibilities when it comes to debt restructuring and debt 
relief, and we have had some success in those efforts. China 
has played a constructive role in Ghana and Sri Lanka, but 
there are other countries like Zambia----
    Mr. Barr. The gentleman's time has expired, and the 
Secretary can answer the rest for the record.
    The gentleman from New York, Mr. Meeks, is now recognized.
    Mr. Meeks. Thank you. Madam Secretary, I want to thank you 
for your tireless efforts to ensure that the U.S. financial 
system remains strong, from your role in helping us to avoid a 
catastrophic default, to containing spillover from the recent 
bank failures, to ensuring that the United States remains a 
global leader through our international policies and 
partnerships. And I know, very much so, that we are fortunate 
to have you at the helm.
    I am not in favor of sanctioning everything and everybody, 
but I do believe we need to be judicious in picking sanction 
targets. But there are a couple of energy companies in 
different parts of the world that are crucial sources of funds 
of despotic regimes, and I keenly focus on Rosatom, Russia's 
state nuclear company.
    Not only is it a major source of funds for the Putin regime 
and one of the only unsanctioned Russian energy companies, but 
they have also been playing a major role in causing a nuclear 
disaster at Zaporizhzhia Nuclear Plant in Ukraine. And I really 
believe that this company needs to be fully sanctioned to keep 
funds from Putin's army, and to support our friends in Ukraine, 
and I have drafted legislation to that end. So, I would 
appreciate your thoughts on Rosatom, and further, I would 
invite you to speak about your leadership in coordinating and 
leading the international support effort of Ukraine and the 
importance of our continued support.
    Secretary Yellen. I believe strongly, and President Biden 
has said and I have said that we stand with Ukraine, and we 
will do so for as long as it takes. And we are using our 
sanctions authority and our export controls and other 
authorities that we have to do all we can to support Ukraine in 
its fight against what has been a brutal invasion. I am afraid 
that I can't comment specifically on Rosatom, but I would say 
that we have taken steps to designate a number of subsidiaries 
of that firm to degrade the firm's activities in some key areas 
and with designated officials from the company as recently as 
February.
    Let me just say that we continue to take further sanctions 
actions as we can justify and in situations where we think we 
are able to mitigate unanticipated or unwanted consequences. 
And while I can't preview specific sanctions, actions that we 
are going to take, we continue to take sanctions actions to 
degrade Russia's defense and industrial sectors.
    Mr. Meeks. Thank you. Let me jump to another question that 
I would like to address, and that is debt relief for the 
developing world. On the one hand, many countries owe funds to 
the World Bank and other international financial institutions, 
but on the other hand, they often owe even more in OPEC loans 
to China. I believe it is crucial that the United States: one, 
provide necessary debt relief to stave off hunger and abject 
poverty in countries in Africa and South Asia; and two, make 
sure that debt relief from global institutions is not used to 
pay off debts to China. Can you talk about the Administration's 
approach to this dilemma?
    Secretary Yellen. We are very concerned about the large and 
growing number of countries that require debt relief in order 
to restart economic growth, and these countries come to the IMF 
in order to obtain help, put in place structural reforms, and 
gain funding. And to qualify for those programs, they have to 
have a sustainable debt trajectory, and we have devised the so-
called Common Framework to help firms manage their debt 
situations and to restructure debt.
    And we are disturbed that relatively few countries have 
signed up for Common Framework debt treatments, and among those 
that have, some have waited years and not been successful in 
being able to bring all the creditors to the table to 
restructure debt. Zambia is a country that I am particularly 
concerned about and have recently revisited. It has a 
government that really wishes to restart growth and to be able 
to borrow to invest to promote economic growth, and it can't do 
so without that, and China is not coming to the table. We are 
working very hard to change----
    Mr. Barr. The gentleman's time has expired.
    The gentleman from Missouri, Mr. Luetkemeyer, is now 
recognized.
    Mr. Luetkemeyer. Thank you, Mr. Chairman, and thank you, 
Secretary Yellen, for being here today. Statutorily, you are 
required to be here before the Financial Services Committee to 
talk about the international financial system. And we 
appreciate your willingness to do that. I wish you would be as 
attentive to what you are supposed to be doing with the House 
Small Business Committee as well. It has been well over 2 years 
since you were supposed to statutorily have been there, and 
subsequent visits have not been taken place either, so I hope 
you will attend to your statutory duties in that committee as 
well.
    One of the things that I am concerned about--and that we 
have talked about a little bit here with a few of my colleagues 
this morning--is sanctions, and how it all is structured with 
China. And I asked this question the last time you were here 
with regards to the possible invasion of Taiwan. We learned 
when Russia invaded Ukraine that we didn't really have a plan 
put together on how to put a group of sanctions together on 
different entities, whether it be oligarchies or the country 
itself, and we ended up, sort of after the fact, getting up to 
speed and getting it done. I asked you the last time you were 
here if you were putting together a plan with regard to China 
and its possible invasion of Taiwan. At that time, I got no 
response, indicating to me that there was no plan. Since then, 
has the Treasury worked with the Commerce Department or anybody 
else to begin to put together a plan should China invade 
Taiwan?
    Secretary Yellen. The National Security Council works with 
the interagency to make sure that it is in a position to 
address threats to our national security. And I am not in a 
position to be able to provide any details at all about what 
the response would be to hypothetical events pertaining to 
Taiwan. But I will say that this is something we work with 
other agencies on to make sure that the United States is----
    Mr. Luetkemeyer. Okay. I understand you can't tell me 
anything more than just a, yes. That is what I want to hear. 
Thank you.
    You have addressed a little bit about this next question 
with regards to China having access to the World Bank. It is 
kind of interesting that they have the second-largest economy 
in the world, and yet in order to be able to qualify for the 
loans, you have to be a low- or moderate- income country. I 
assume you would agree that they are not a low- or moderate-
income country?
    Secretary Yellen. Certainly, I don't think that they should 
qualify for World Bank loans.
    Mr. Luetkemeyer. Okay. I had a discussion today with the 
President of the World Bank, and I discussed this issue with 
him, how and why China continues to have access to this and why 
we can't stop this from happening. You indicated in your 
earlier discussion with some of our Members here that you are 
working to try and stop that. Can you tell me exactly what you 
are doing to stop that?
    Secretary Yellen. We will not support or vote in favor of 
any World Bank lending to China, so we use our voting to oppose 
it, and we have certainly worked to convince other countries in 
the World Bank to cease funding. And while it is a very small 
part now with the World Bank's activities, we believe it just 
is----
    Mr. Luetkemeyer. So basically, my understanding is we 
participated in about 17 percent of the total and China is 
roughly 2 percent, or something like that?
    Secretary Yellen. I believe it is much lower than that, but 
I can get you a number.
    Mr. Luetkemeyer. Okay. It is significantly different in 
amounts of participation, yet they have access to it, and 
because of our overwhelming participation, the amount that we 
have in there, we have an outsized voice on that board. Is that 
correct?
    Secretary Yellen. We do. We have significant----
    Mr. Luetkemeyer. So, we need to be exerting our opposition 
on the board to put China back in its place, and that is what 
we are going to try and do, correct?
    Secretary Yellen. Yes.
    Mr. Luetkemeyer. Okay. A minute ago, you said that you are 
seeking authorization to participate in some other 
international financial institutions. You need to be 
reauthorized every year. Is that correct?
    Secretary Yellen. I guess what I said is we would like 
permission to continue participating in the new arrangements to 
borrow, and we also seek permission to lend up to $21 billion 
to 2 IMF funds, the Poverty Reduction and Growth Trust and the 
Resilience----
    Mr. Luetkemeyer. Madam Secretary, if we are going to be 
loaning money to these foreign financial institutions, the kind 
of money you are talking about, do you not believe that we need 
to have more control over them to make sure that entities such 
as China don't have access to them?
    Secretary Yellen. We have substantial control over them. We 
have made sure that in the structure of these funds, they 
cannot lend to China. The Poverty Reduction and Growth Trust--
--
    Mr. Barr. The gentleman's time has expired.
    Secretary Yellen. ----is only for very low-income 
countries.
    Mr. Barr. The Secretary can answer for the record.
    Mr. Luetkemeyer. Thank you.
    Mr. Barr. The gentleman from Georgia, Mr. Scott, is now 
recognized.
    Mr. Scott. Thank you very much. Secretary Yellen, I am very 
worried about China, and I want to ask you something: Should we 
consider prohibitions for U.S. private equity investment in 
private sector firms which have ties to the Chinese military 
and the Chinese state surveillance apparatus?
    Now, you are very much aware of the reports that China is 
trying to establish a military base with operations in Cuba, 
just 90 miles from our shores. What is your assessment of this? 
Are you taking this as seriously as I am, and what do you 
propose we should do for any private equity firm that would 
have connections with their military or surveillance operation? 
This is very serious. I mentioned this in an earlier session we 
had when we failed to shoot down that surveillance balloon, and 
I said then that this was a mistake by the Biden 
Administration. It was a mistake because it showed weakness to 
China, and it showed uncertainty to our own friends.
    So, what do we do about this situation? What is your 
assessment about this threat, and should we not prohibit any 
investment to any of these Chinese companies that have 
connections and are involved with China's military and 
surveillance apparatus?
    Secretary Yellen. We are looking at potential restrictions 
on outbound investment that could pertain to private equity 
firms that invest in Chinese firms with connections to their 
military. And we are worried about potential national security 
risks that could come----
    Mr. Scott. Let me ask you this, what is your assessment of 
it? I have great respect for you. You have been our Treasury 
Secretary for two terms, and I have worked with you and I 
respect your broad intelligence on foreign matters. How 
seriously are you taking this effort to put military 
surveillance 90 miles from our shores?
    Secretary Yellen. We are concerned about China's role in 
the Caribbean and in Latin America more generally.
    Mr. Scott. But Secretary, I want to know you feel. Do you 
feel like I feel, that this is a serious attack on the United 
States? Now, if you remember, about 50 years ago they tried to 
do something similar, but John Fitzgerald Kennedy acted 
promptly. What are we going to do?
    Secretary Yellen. I don't have an answer for you on what we 
are going to do, but certainly, protecting our national 
security is a core concern. And with respect to China, we are 
carrying that out, in a broad range of ways, from export 
controls to entity lists, to, in some cases, sanctions, and 
potentially restrictions on outbound investment.
    Mr. Scott. Do you feel that this may be a primary move that 
would precede their intentions over in Taiwan?
    Secretary Yellen. I really can't comment on that.
    Mr. Scott. Okay. Thank you, Secretary.
    Mrs. Wagner. [presiding]. The gentleman's time has expired. 
The gentleman from Michigan, Mr. Huizenga, is recognized for 5 
minutes.
    Mr. Huizenga. Thank you, Madam Chairwoman, and Secretary 
Yellen, it's good to see you again. I am going to touch on a 
couple of things quickly. I wanted to make sure I heard 
correctly your answer to an earlier question. The PGA and LIV 
agreement is something that Treasury is planning to look at; I 
know you are not going to get into specifics of it, but is it 
something that is going to be subject to CFIUS review?
    Secretary Yellen. Again, I am not allowed to talk about any 
specific matter before CFIUS. There are very strict rules about 
that, but to the extent that----
    Mr. Huizenga. Okay. Let me clarify. Does it seem to fit the 
general parameters of what CFIUS typically has reviewed?
    Secretary Yellen. If there are national security risks, 
then the answer is, yes. CFIUS looks at national security 
risks.
    Mr. Huizenga. Okay. And the definition of, ``national 
security risk,'' is well-vetted and well-understood?
    Secretary Yellen. I believe it is, yes.
    Mr. Huizenga. Okay. I will leave it at that for right now. 
I did want to touch quickly as well on the debt ceiling, 
something you had brought up in the close of your testimony. It 
was a June 1st deadline that you initially gave Congress and 
everybody else to reach the borrowing authority, when you were 
going to reach it. That then moved to the 5th, and others who 
have been involved in Treasury speculated that it could have 
been well beyond June 5th.
    I am curious, was there actual analysis done by the 
Treasury to determine this date, and what changed, or was this 
artificially manufactured? In all fairness, you took Congress 
to task about not taking this to the brink. And in all 
fairness, the White House, and specifically the President, 
ignored Speaker McCarthy for nearly 100 days after he said he 
was going to have negotiations with him. So, it would just seem 
to me that if the White House recognizes that it is not good 
brinksmanship trying to apply that to Congress, why didn't the 
President take your advice?
    Secretary Yellen. I'm sorry. There is nothing political 
whatsoever about the information and advice that I have given 
to Congress about when our resources would be exhausted. In 
early----
    Mr. Huizenga. Do you have any insight as to why the 
President didn't negotiate for 100 days?
    Secretary Yellen. In early January, I indicated that we 
felt confident our resources could last until the beginning of 
June.
    Mr. Huizenga. Okay. I am going to move on. Reclaiming my 
time, I did read the statements. You had said June 1st or the 
following weeks, which then tightened up, and that is fine. 
That is not what we are here today about.
    Secretary Yellen. It was consistent with that side----
    Mr. Huizenga. Reclaiming my time on this, because I do want 
to hit on the International Development Finance Corporation as 
well, but I am also going to repeat something to you that I 
have repeated to every other person from this Administration, 
and frankly, the last Administration: Congressional oversight 
is vital to the work that we do. I happen to chair our 
Oversight and Investigations Subcommittee in this Congress, and 
it is necessary to reiterate our constitutional requirement and 
standing and obligation that we ask for and receive information 
that is going to help us do that job.
    This committee, and my subcommittee specifically, sent you 
four requests to provide specific documents and information 
with respect to the March 2023 bank failures, as well as 
Treasury's role in the digital asset space. I know the ranking 
member brought up the bank failure, so it seems to me fair 
game. The first set of requests are important to help this 
committee understand both Treasury and FSOC's role in the 
bailout of both Silicon Valley Bank and Signature Bank, and 
specifically the use of the systemic risk exception. To date, 
we have received what I would generously call limited 
information from your staff. For example, in response to our 
March request, we received a copy of the FSOC meeting minutes 
from March only after they were publicly published on 
Treasury's website.
    Frankly, we don't need your help. We have that, and 
frankly, it is a waste of your time and whomever is reviewing 
this and your staff's time, and, therefore, Madam Secretary, it 
wastes our time. So, let us get beyond the games of sending 
back and forth publicly-available information and actually get 
to our constitutional oversight role. Will you provide and 
commit to me to provide the underlying records of the published 
meeting minutes, including draft minutes and notes from the 
March 12th and March 24th FSOC meetings regarding the bank 
failures? This is what we had been asking for.
    Secretary Yellen. There are now minutes in the public 
domain----
    Mr. Huizenga. No, no. Yes, the minutes are in the public 
domain, and you didn't send them until after they were 
available to the public. I want to see the draft minutes----
    Secretary Yellen. Yes, because they need to be approved by 
the committee.
    Mr. Huizenga. ----and the notes.
    Mr. Barr. [presiding]. The gentleman's time has expired. 
The gentleman from Massachusetts, Mr. Lynch, is now recognized.
    Mr. Lynch. Thank you, Mr. Chairman. Welcome, Madam 
Secretary, and may I say thank you for your wonderful 
leadership and your service to our country.
    Secretary Yellen. Thank you.
    Mr. Lynch. I appreciate it. I want to revisit the aftermath 
of the Silicon Valley Bank collapse and the exercise of the 
exception that we allowed to be exercised instead of allowing 
the least cost resolution practice to go into effect. I know 
there are five requirements statutorily that must be considered 
by you and the FDIC and the SEC, and there is a consultation 
requirement with the President.
    Secretary Yellen. That is right.
    Mr. Lynch. But in the aftermath of all of that, some of 
this is Monday morning quarterbacking, but there are some who 
say that perhaps by exercising the risk exception--that we may 
have been able to resolve this situation without exercising or 
reverting to that exception. And look, this collapse happened 
in a matter of 2 days.
    Secretary Yellen. Yes.
    Mr. Lynch. I asked the same question to Chair Gruenberg of 
the FDIC when he was before the committee. Can you think of any 
alternative in retrospect that might have existed other than 
using the financial risk exception?
    Secretary Yellen. All of us involved in making those 
decisions were tremendously concerned that the failure of these 
2 banks in a matter of 2 days created a huge risk of contagion 
to banks throughout the country. There are a large fraction of 
uninsured deposits at many banks, and we were concerned that 
depositors would be terrified by these rapid and unanticipated 
failures and that we would see contagion and runs on many 
banks. And we felt that we needed to assure depositors broadly 
that their deposits were safe, and this was a way of doing it, 
and I believe it succeeded.
    While First Republic later failed, we have not seen, I 
believe, these actions. Plus, I believe the creation of a new 
liquidity facility by the Federal Reserve stopped contagion and 
stabilized our banking system, and it was a very dangerous 
moment.
    Mr. Lynch. Yes. The problem that I see is that the least 
cost resolution preference was meant to lower the cost of 
resolution.
    Secretary Yellen. That is right.
    Mr. Lynch. And it is hard for me to imagine a similar 
situation ever arising where a systemic risk exception would 
not apply, and I am just wondering if this exception has 
swallowed the rule. Rather than going with a low-cost 
resolution, we are going to fall into the same scenario over 
and over again.
    Secretary Yellen. I don't think it would fall into the same 
situation over and over again. Hundreds of banks failed in the 
aftermath of the global financial crisis. The FDIC resolved 
most of them, and they used the least cost method of 
resolution, so this is a very unusual situation where this 
exception had to be invoked.
    Mr. Lynch. Let me ask you----
    Secretary Yellen. First Republic was resolved.
    Mr. Lynch. Okay.
    Secretary Yellen. And it was also done in a least cost 
resolution.
    Mr. Lynch. Okay. Well, my concerns still remain. Let me ask 
you another question about JPMorgan Chase and their assumption 
later on in a different process. Isn't it always the case that 
the biggest banks will seem to be the sturdiest and the best 
able to absorb another bank that is failing or in receivership?
    Secretary Yellen. Not necessarily. Silicon Valley Bank and 
Signature Bank merged into smaller banks not nearly that size, 
but when the FDIC resolves a bank, it is required by law to 
take the best offer.
    Mr. Barr. The gentleman's time has expired.
    Secretary Yellen. In this case, it was JPMorgan Chase.
    Mr. Lynch. Thank you, Madam Secretary. I yield back.
    Mr. Barr. The gentlewoman from Missouri, Mrs. Wagner, is 
now recognized.
    Mrs. Wagner. Thank you, Mr. Chairman. Secretary Yellen, 
last month, the G7 leaders, of which the United States is one, 
agreed in a joint statement on an economic approach to China 
that would focus on de-risking and rebukes calls for decoupling 
from China's economy. However, I have to say I think it is 
appropriate and, in fact, essential that we decouple from 
Chinese industries and entities that are actively participating 
in unthinkable human rights abuses, including the Chinese 
Communist Party's (CCP's) genocide of Uyghur Muslims. Please 
tell me how Treasury plans to de-risk the U.S. economy from 
this appalling tragedy?
    Secretary Yellen. In the case of human rights violations in 
Xinjiang, we have sanctions in place that prevent Americans 
from doing business with entities that are involved in human 
rights----
    Mrs. Wagner. And that is how you are de-risking? You say 
you have sanctions. I would like to see those sanctions and 
what companies have been sanctioned for doing business with 
China as they exploit the human rights of the Uyghur Muslims, 
if you could provide that, please?
    Secretary Yellen. We have sanctioned Chinese individuals 
and entities for human rights abuses there and advised 
businesses----
    Mrs. Wagner. I would like to get a list of this, and I do 
need to move on, with respect.
    Secretary Yellen. Okay.
    Mrs. Wagner. According to a recent Bloomberg report, 
Chinese purchases of Iranian crude had jumped in March by 20 
percent month-on-month, totaling 800,000 barrels imported a 
day. In March, Iran said it is now exporting more oil today 
than at any time since the 2018 re-imposition of sanctions. 
Current law requires Treasury to target foreign financial 
institutions that are involved in these sales. How many foreign 
financial institutions have you sanctioned as a result of these 
sales?
    Secretary Yellen. We certainly are doing everything in our 
power to----
    Mrs. Wagner. That is not my question. How many foreign 
financial institutions have you sanctioned as a result of these 
sales and this huge 20-percent increase by Iran? If you could, 
would you please provide me the answer, because this is 
unconscionable, and I do not believe the Treasury is following 
the law, and it is a law that requires Treasury to, in fact----
    Secretary Yellen. We have an exceptionally tight sanctions 
regime in place with respect to Iran.
    Mrs. Wagner. Okay. I don't know what your plan is to 
further tighten enforcement of these sanctions regimes against 
Iran as the country continues to make alarming progress on 
nuclear armament, but I am very interested in finding out.
    Next, Secretary Yellen, it has long been U.S. policy to 
support Taiwan's membership in international organizations 
where statehood is not a prerequisite. The International 
Monetary Fund has no conditions regarding statehood. The 
Financial Services Committee unanimously passed legislation 
supporting Taiwan's membership in the Fund earlier this year. 
Taiwan already belongs to the World Trade Organization (WTO) 
and the Asian Development Bank. If Taiwan sought membership at 
the IMF, would Treasury support it?
    Secretary Yellen. We would have to look at that. It is not 
a member of the IMF, and I would have to----
    Mrs. Wagner. We have unanimously passed that as a 
committee. I would like your response to that question. This is 
three times in a row now that I have asked for specifics that 
you don't have the answers to, and it is unacceptable.
    Following up on some of the questions from my friends on 
the other side of the aisle, I want to ask you about the SEC's 
sweeping proposal on mandatory swing pricing, hard close, and 
liquidity risk management. Chair Gensler has said the proposal 
is needed to combat dilution, but I have seen no evidence from 
the SEC that dilution is a significant problem for mutual 
funds. In fact, I have seen some commenters offer their own 
economic analysis showing that dilution is minimal and far 
surpassed by returns for long-term investors. If implemented, 
the proposal would add significant costs and damages. I would 
like to get your perspective on this misguided SEC proposal?
    Secretary Yellen. It is a question you should be asking to 
Chair Gensler and not to me.
    Mrs. Wagner. I know, but I am asking you, and you can't 
answer this question either.
    Secretary Yellen. I'm sorry. I am going to answer the 
question.
    Mrs. Wagner. I am out of time, so you will have to answer 
this question in writing too. That is four questions that you 
will have to answer in writing.
    Mr. Barr. I'm sorry. The gentlelady's time has expired, but 
the Secretary can answer in writing for the record.
    The gentleman from Texas, Mr. Green, is now recognized.
    Mr. Green. Madam Secretary, you won't have to answer in 
writing. I yield time to you to answer. You may answer now.
    Secretary Yellen. On the last question?
    Mr. Green. Yes, yes, yes. Answer now, please.
    Secretary Yellen. Yes. The Financial Stability Oversight 
Council has discussed risks in connection with open-end mutual 
funds, particularly bond mutual funds, where there can 
essentially be runs in situations where those who move first in 
these open-end funds are able to get better pricing than those 
who wait until later. And this creates a financial stability 
risk similar to the kind of risk that exists with money market 
mutual funds that has long been a subject of FSOC attention.
    And the FSOC has not been involved in advising the SEC how 
to address those risks, but swing pricing is a way to reduce or 
eliminate first-mover advantage and to diminish the odds of 
runs that can lead to fire sales of assets that can have 
contagious effects throughout the financial system. We saw this 
occur when the pandemic struck in March of 2020, and it was a 
reason that the Federal Reserve created a facility to try to 
stem those runs.
    Mrs. Wagner. I thank my friend, Mr. Green.
    Mr. Green. Thank you, Madam Chairwoman.
    Mrs. Wagner. I thank my friend very much, and the Secretary 
has used far too much of your time.
    Mr. Green. I am going to have to continue with my time now. 
Please forgive me.
    Mrs. Wagner. Yes. Thank you very much.
    Mr. Green. Unless the Chair is willing to accord me 
additional time.
    Mr. Barr. The gentleman has 3 minutes left.
    Mr. Green. Thank you, Mr. Chairman. Madam Secretary, thank 
you for your service to the country, and I also thank the 
President. I believe you and the President, working together, 
have done an outstanding job. I am not ashamed to say it. I am 
not ashamed to associate myself with you or with the President.
    Madam Secretary, in your written testimony, you indicate 
that while we were able to avoid default, the United States 
once again came dangerously close to the line. You indicate 
further that this cannot be normalized. You are saying here 
that waiting until the last minute hurts our global leadership 
and credibility on the world stage. Could you in about 1 minute 
give me some more information on how we are harmed on the world 
stage by waiting until the last minute to deal with default of 
credit?
    Secretary Yellen. Yes. The United States has the world's 
deepest and most-liquid capital markets, and U.S. Treasury 
securities are the benchmark for pricing of virtually all 
securities that are traded in financial markets, and the dollar 
is, of course, the world's key reserve currency. And all of 
that rests on an assumption or a belief that the United States 
is committed to paying its bills when they come due, that we 
are a creditor that deserves a AAA rating.
    We lost that rating in 2011 when Congress went right up to 
the wire in failing to raise the debt ceiling, and even in this 
situation, one rating agency has put us on negative credit 
watch. And this is something that threatens our position as a 
global leader in financial markets, and it threatens the well-
being of American households that can see long-lasting 
increases in their cost of borrowing that come from this. And 
of course, if we actually did default on the debt, the 
consequences would be catastrophic.
    Mr. Green. Thank you. I have about 30 seconds left. Let me 
say this. Pakistan is a case study on the effects of climate 
change. As you know, Pakistan has suffered greatly from the 
flood that took place beginning in June of 2022. I am going to 
ask if you could use your good offices to help Pakistan? It 
clearly is in dire need of some aid from the IMF and the World 
Bank as well. This global warming is something that we may 
deny, but Pakistan is still suffering. It emits about 1 percent 
of the global greenhouse gases. We emit more than 10 percent, 
yet Pakistan suffers. Please do what you can to help. I yield 
back.
    Mr. Barr. The gentleman's time has expired, but in the 
interest of comity, because the gentleman yielded time for Mrs. 
Wagner's answer, I will let the Secretary briefly respond to 
the Pakistan question.
    Mr. Green. Thank you, Mr. Chairman.
    Secretary Yellen. We are supportive of the IMF's work in 
Pakistan, and there is a program that is helping them deal with 
the devastation from the floods and their pre-existing fiscal 
and monetary problems, and we are certainly supportive of the 
IMF's work there.
    Mr. Barr. The gentleman's time has expired.
    Mr. Green. Thank you.
    Mr. Barr. I now recognize myself for 5 minutes. Madam 
Secretary, in a March 12th interview on Face the Nation, you 
said, ``The American banking system is really safe and well-
capitalized. It is resilient.'' In an April 14th interview on 
CNN, you said, ``Our banking system is well-capitalized and 
liquid.'' In a May 12th Bloomberg TV interview, you said, 
``What I see is a banking system that overall is well-
capitalized.'' Do you still believe that the banking system is 
well-capitalized?
    Secretary Yellen. Overall, yes.
    Mr. Barr. The prudential regulators, as you know, are 
preparing sweeping changes to the bank capital framework, which 
reportedly could raise required capital by 20 percent or more 
in what you concede is an already well-capitalized system. Do 
you support such a large, required capital increase which would 
have effects immediately on the U.S. economy, sidelining 
capital?
    Secretary Yellen. I have not seen the details of the 
proposals that the Fed is considering. We did agree with Basel 
III and commit to enact those proposals, and I will have to 
have a closer look at the Fed proposals.
    Mr. Barr. I think you have answered my question already in 
these interviews, that the banking system is already well-
capitalized. Whatever instability there may exist in the 
banking system, I would ask Treasury to consider your already 
well-informed view that the banking system is already well-
capitalized as you review the Fed's work.
    Let me follow up on Mr. Luetkemeyer and Mr. Scott's line of 
questioning on China. In addition to this committee, I also 
serve on the House Select Committee on Strategic Competition 
between the United States and the Chinese Communist Party. In 
that capacity, I am concerned about Western capital flows and 
U.S. investment in Chinese entities that threaten our national 
security. U.S. holdings of Chinese equity and debt securities 
have surged to over $1.2 trillion, which means scores of 
millions of Americans could have a vested financial interest in 
opposing any future sanctions or other penalties against China.
    I appreciate your testimony that the Biden Administration 
is working to finalize an Executive Order to restrict outbound 
investments in China that threaten our national security, but 
this is an area where I believe Congress needs to act. And to 
that end, I have introduced the Chinese Military and 
Surveillance Company Sanctions Act, which would direct the 
Office of Foreign Assets Control (OFAC) to impose full blocking 
SDN (Specially Designated Nationals and Blocked Persons List) 
sanctions on Treasury-designated Chinese military industrial 
complex companies, the Commerce Entity List, the Commerce 
Military End User List, and the DOD Chinese Military Companies 
List. Would you commit to pausing any outbound investment 
Executive Order pending the Congress putting forward that 
legislation so that Treasury can coordinate with the 
congressional action?
    Secretary Yellen. That is something that is up to the 
President, and I can't make a commitment about it.
    Mr. Barr. Thank you, Madam Secretary. And just for the 
Administration's awareness, this committee, and the select 
committee, and the House Foreign Affairs Committee, are working 
collaboratively in a bipartisan way on an outbound investment 
screening legislative package, and we would ask the 
Administration to work with the Congress in coordinating 
whatever Executive Order that you are working on with this 
legislative proposal.
    Secretary Yellen. I know that we have had conversations 
with Congress, and we can pursue conversations and----
    Mr. Barr. I look forward to working with you and Mr. 
Yamamoto on this China and the Taiwan Strait scenario. In our 
Select Committee work, we did a tabletop exercise in response 
to sanctions against a Chinese scenario where there would be an 
invasion of Taiwan. The scenario was that China, the second-
largest foreign creditor of U.S. Treasuries, would dump that 
$859 billion in Treasury securities. How are you working with 
our allies internationally and also the Federal Reserve to deal 
with a situation where China would dump that volume of Treasury 
securities overnight?
    Secretary Yellen. We are not engaging in specific exercises 
to address such a risk, but the National Security Council is 
certainly concerned on an ongoing basis.
    Mr. Barr. Madam Secretary, I would encourage Treasury to 
make preparations and to be ready for that scenario and to work 
with the Fed on that and our allies. Finally, a follow-up to 
Mr. Lucas' question on the European Commission's Corporate 
Sustainability Due Diligence Directive. I am glad that you 
share our concern about the extraterritorial scope of that, but 
can you discuss specific steps that Treasury is taking to 
prevent this rule from applying to U.S.-based firms?
    Secretary Yellen. We are certainly expressing our concerns 
to the European Union and explaining our concerns.
    Mr. Barr. My time has obviously expired. I will be in 
Sweden with a bipartisan delegation this week, and we will 
raise it as well there to the European Union.
    With that, my time has expired, and the gentleman from 
Missouri, Mr. Cleaver, is now recognized.
    Mr. Cleaver. Thank you, Mr. Chairman. And thank you, Madam 
Secretary, for being here. We have way too many acronyms in 
Washington. It has just gone wild. We need to get a select 
committee to deal with them because every time I think, 
``GTOs,'' I think of my first car out of college, a green GTO 
with a green vinyl top. Mr. Williams probably can speak to 
that, being an auto dealer. It has nothing to do with the 
purpose of this hearing. I just wanted to say it because I 
mentioned my car.
    But I do want to talk about Geographic Targeting Orders 
(GTOs) because I am concerned for a variety of reasons, and 
maybe the Financial Crimes Enforcement Network (FinCEN) has to 
answer this question. But how were the covered areas selected 
for implementation of the $300,000 threshold for cash payments? 
Was there something about the 14 areas from the District of 
Columbia to Miami Dade, Broward and Palm Beach? How did we come 
to those areas?
    Secretary Yellen. I'm sorry. You are talking about----
    Mr. Cleaver. The Geographic Targeting Orders.
    Secretary Yellen. For FinCEN?
    Mr. Cleaver. Yes. We are talking about real estate 
purchases.
    Secretary Yellen. For real estate purchases. They proposed 
a rule on real estate purchases that would enable us to have 
better insight into areas where there may be illicit finance. 
We think that is an area that is being used to channel illicit 
funds.
    Mr. Cleaver. I agree, but I am trying to find out why the 
areas that have been selected, were selected, the 14 areas 
where----
    Secretary Yellen. Oh, I'm sorry. You are talking about 
Geographic Targeting Orders, yes. There were, I think, 14 areas 
that were selected, and I need to get back to you with the 
logic of why those areas were selected.
    Mr. Cleaver. Okay. And I am maybe even more concerned about 
the areas that were not selected because it seems to me that if 
we are dealing with these 14 areas, if I were a bad actor, I 
would target another area.
    Secretary Yellen. They have proposed a broader real estate 
rule that would go beyond those geographic----
    Mr. Cleaver. Universal?
    Secretary Yellen. Yes.
    Mr. Cleaver. Thank you very much. My other question about 
that is, in 2021, FinCEN put forward an advance notice of a 
proposal to consider how best to focus its regulatory attention 
on residential and commercial real estate transactions. If you 
have that information, I am interested in the timeline for the 
rulemaking and whether Treasury is going to address both 
residential and commercial real estate sectors in the same 
rule?
    Secretary Yellen. FinCEN is very actively working on those 
rules, trying to get them out to make the database available. 
And I can't give you exact timing on it, but it is a very high 
priority item for FinCEN.
    Mr. Cleaver. Thank you, Madam Secretary. Thank you for 
being here today.
    Mr. Barr. The gentleman yields back. The gentleman from 
Texas, Mr. Williams, is recognized.
    Mr. Williams of Texas. Thank you very much, and thank you 
for being here today. Over the past few years, businesses 
across the country have struggled to maintain necessary 
inventory due to the global supply chain constraints. As a 
small business owner and auto dealer, I have dealt with the 
supply chain challenges firsthand. And making matters worse, 
businesses using last in, first out, better known as the LIFO 
inventory method, are facing significant recapture tax 
liabilities due to the factories' inability to replace 
inventory levels by the end of the year, which is out of our 
control. We as small business owners can't control that, given 
the current supply chain disruptions.
    Treasury has the ability to alleviate this financial burden 
on small businesses and provide relief through Section 473 of 
the Internal Revenue Code. And this recapture tax, as we call 
it, would allow business owners to spend funds on replacing 
duplicated inventories. They wouldn't have to be laying people 
off. They could invest in their employees and maintain business 
operations instead of succumbing to unexpected tax burdens from 
uncontrollable inventory shortfall that is totally beyond the 
ability of the small business owner to control. I have been 
working with my colleagues to pass the Supply Chain Disruptions 
Relief Act, which is the legislative fix to provide the LIFO 
tax relief.
    Secretary Yellen, is Treasury really interested in helping 
Main Street and helping people who have been laid off, who have 
lost their jobs and can't pay their bills because of this? Are 
you ready to help provide the LIFO tax relief that you can do 
through Section 473, which is going to be relief for businesses 
struggling with global supply chain disruptions that the small 
business owner cannot control? It would be great if you could 
jump in, which we think you have the ability to do and fix that 
right now.
    Secretary Yellen. I am aware of this issue, but I am not 
able to give you a definitive response on this, and I will ask 
our Office of Tax Analysis to----
    Mr. Williams of Texas. Well, ask them to do that because it 
is bipartisan. There are people in here who have all agreed 
this needs to be done. This is not a partisan issue. It 
literally is going to save Main Street. It is going to save 
small businesses, and they will pay tax when they need to and 
not pay tax when they don't need to. So, I would appreciate it 
if you would check into that and maybe get back with us on 
that.
    Secretary Yellen. Yes, we will try to do that.
    Mr. Williams of Texas. Thank you. I am also concerned with 
FinCEN's proposed beneficial ownership rule that expands the 
information required under the Corporate Transparency Act (CTA) 
and the effect that these expanded requirements will have on 
Main Street. The CTA was intended to ensure easy compliance for 
businesses. However, this proposed rule goes beyond the simple 
statute and lacks clarity on compliance guidelines. This will 
impact 32 million small businesses that will be expected to 
comply come 2024, and Acting Director Das has done little to 
inform the businesses on the new responsibility of reporting. 
When talking to business owners back in my district and, 
frankly, all over the country, they have expressed their 
frustration with insufficient information coming out of 
Treasury on how to comply and file returns properly. And they 
fear they will be held liable for noncompliance with the 
Beneficial Ownership Information (BOI) rules.
    Madam Secretary, what action is Treasury taking to educate 
small businesses like mine in Texas on their upcoming 
obligations to file beneficial ownership information with 
FinCEN, and when can we expect FinCEN to lay out a clear plan 
for engagement? We want to know the rules.
    Secretary Yellen. FinCEN is working to finalize the rules 
that are necessary to make this very important transformative 
database available. And I understand that there are some 
burdens on small businesses to comply with this, and we will 
work with them to provide the information that is necessary for 
them to comply.
    Mr. Williams of Texas. That is important. Small businesses 
want to comply. It is just like LIFO. We need to know the 
rules. Let's get it fixed so we can move on, and in the short 
time that I have left, I will cut my questioning a little bit 
back. But fentanyl is coming across our borders at an alarming 
rate, flooding our communities and killing thousands of 
Americans each year and future generations. We know law 
enforcement has found cartel members working directly with the 
Chinese money laundering organizations to outsource cartel 
operations and facilitate movement to the United States.
    So quickly, Madam Secretary, can you expand on what 
Treasury is doing to combat China and the role they play in 
cartel financing? Is the Administration considering tougher 
sanctions? It is killing future generations of our young 
people.
    Secretary Yellen. We have put in place some sanctions. We 
are looking to try to discourage and sanction the provision of 
the precursor chemicals that are critical to the manufacture 
and sale of fentanyl. It creates a critical situation for us.
    Mr. Barr. The gentleman's time has expired. The gentleman 
from Connecticut, Mr. Himes, is recognized.
    Mr. Himes. Thank you, Mr. Chairman, and thank you, Madam 
Secretary, for being with us this morning.
    Very quickly, I just want to say you mentioned the new 
World Bank President, Ajay Banga, in your testimony. I am 
delighted that you have done so, and the World Bank obviously 
has had a turbulent recent past, and I think that Mr. Banga 
offers an opportunity for a real reset. And I hope that you 
will really double down on the government's interaction with 
and encouragement to the World Bank to be what it should be 
through Mr. Banga.
    What I want to talk with you about, though, is China. It is 
evident in this hearing and generally evident that the Congress 
has whipped itself into a frenzy with respect to China. I think 
this goes back to the Trump Administration when China was the 
all-purpose scapegoat, along with immigrants, for all of the 
nation's problems. And there are proposals to cut China off 
from global capital markets, basically to devastate their 
economy, and I understand the emotion. We obviously are 
appalled by the Chinese treatment of the Uyghurs. We are 
appalled by their stealing of our intellectual property. The 
list goes on and on, but this is a moment that I think calls 
for close statesmanship with respect to China.
    We are trading more with China than ever before. We are 
invested in China more than ever before. They own a trillion 
dollars of our sovereign debt. I was pleased to see you--and I 
am going to give you the remainder of my time to elaborate on 
this--say in the context of the G7, ``My own view is this, that 
is to say U.S. economic efforts with respect to China should be 
national security focused, not focused at undermining, say, 
China's economic competitiveness or ability to advance 
economically.'' Madam Secretary, is it in the national or 
economic security interest of the United States to impoverish 
the Chinese people?
    Secretary Yellen. No, I certainly do not think it is in our 
interest to stifle the economic progress of the Chinese people. 
China has succeeded in lifting hundreds of millions of people 
out of poverty, and I think that is something that we should 
applaud. We certainly do have legitimate concerns regarding 
China, first and foremost, national security, where we 
absolutely have to protect our national security interests and 
not compromise on that. Human rights are critically important, 
and I strongly believe the President believes in sanctioning 
human rights abuses.
    And beyond that, we have legitimate concerns with China's 
behavior in some areas that are related to trade, where we 
think----
    Mr. Himes. No, absolutely. This institution gets that and I 
sit on the Intelligence Committee, so I have a closer than 
normal look at some of the just outrageous activities. But 
again, I am just trying to find a----
    Secretary Yellen. Yes. So----
    Mr. Himes. I am trying to get out what you said, a policy 
that is statesmanlike in its orientation, drawing on your 
experience as an economist and not----
    Secretary Yellen. Let me----
    Mr. Himes. Yes. I'm sorry. Go ahead and finish.
    Secretary Yellen. Let me focus on the positive then. I 
think we gain and China gains from trade and investment that is 
as open as possible, and it would be disastrous for us to 
attempt to decouple from China. De-risk, yes. Decouple, 
absolutely not.
    Mr. Himes. What would be the effect on American consumers? 
Let's just imagine that we cut the hundreds of billions of 
dollars of trade that we have with China. If we cut that in 
half or eliminated that trade, what would be the effect on the 
American economy and American consumers?
    Secretary Yellen. We benefit greatly from access to cheaper 
products, a wide array of products and products, in some cases, 
where China has a technological lead. And in turn, China 
benefits from its purchases from us, and we benefit from our 
ability to export from China. Our competition with China is a 
healthy competition, just as in a domestic case where firms 
compete with one another leads to faster innovation, faster 
technological progress that benefits everybody concerned with 
better and cheaper products over time, and this is a very 
valuable interaction. And while we surely have concerns that 
need to be addressed, decoupling would be a big mistake.
    Mr. Himes. Thank you. I am almost out of time, so I just 
want to add that I think that your concept of attacking the 
national security side of this without damaging the economic 
growth that comes from the two things is absolutely what we 
need to do, and I hope you will work with us on that. And I 
yield back.
    Mr. Barr. The gentleman's time has expired. The gentleman 
from Minnesota, Mr. Emmer, is recognized.
    Mr. Emmer. Thank you very much, and I want to thank 
Chairman McHenry for holding this important hearing today. And 
I want to thank you, Madam Secretary, for your testimony this 
morning.
    The National Bureau of Economic Research (NBER) is the 
official recession scorekeeper according to the White House. 
Before the pandemic, the definition of a recession was pretty 
easy: it was two consecutive quarters of economic contraction. 
However, somewhere along the way in this new Biden 
Administration, President Biden's tenure, the Administration 
seems to have changed the definition of, ``recession,'' and the 
National Bureau of Economic Research asserts that a recession 
is now, ``a significant decline in economic activity that is 
spread across the economy and lasts more than a few months.'' 
This has had a bit of a gaslighting effect on the American 
people, so I would like to drill into it just a little bit.
    Secretary Yellen, does the National Bureau of Economic 
Research give any weight to real personal income when 
determining if we are in a significant economic decline?
    Secretary Yellen. They look at a wide array of statistics, 
and the second definition that you gave of a broad contraction 
that lasts more than several months, that is how the NBER----
    Mr. Emmer. Reclaiming my time, the answer is, yes. Does the 
National Bureau of Economic Research directly consider 
inflation when determining if we are in a significant economic 
decline?
    Secretary Yellen. Inflation is not part of an economic 
decline.
    Mr. Emmer. Okay. The National Bureau of Economic Research, 
while it doesn't directly consider inflation, inflation is 
embedded into real income and spending variables that are 
tracked. So, American families pay an average of $864 more per 
month today than they did when this Administration started. 
That is an extra $126 on food per month, an extra $159 on 
shelter per month, an extra $123 on energy per month, just to 
name a few. This is since the Biden Administration took office. 
Unless Americans have gotten a 15.3-percent pay raise in the 
last 2 years, they have effectively gotten a pay cut. Madam 
Secretary, has the average American income increased 15.3 
percent during the Biden Administration?
    Secretary Yellen. We have the strongest job market and the 
largest----
    Mr. Emmer. Reclaiming my time, thank you, Madam Secretary, 
the answer is easy: It is, no. Since President Biden took 
office, the average real personal income has only increased 2.4 
percent. That would have been the answer. So while it costs 
nearly $900 more a month for American families to afford the 
same quality of life that they had in 2019, Americans aren't 
getting paid anywhere near that much more.
    How is it then that the National Bureau of Economic 
Research thinks it is appropriate to exclude inflation as a 
primary factor when determining the state of our economy? It is 
a rhetorical question, Madam Secretary, because we all know 
that the bureaucracy cherry-picks the factors that yield the 
most convincing numbers for whatever narrative they want to 
assert, much like you were starting to deflect and say we have 
the greatest whatever. Americans know better. This 
Administration is telling Americans the economy is strong, but 
Americans certainly feel like things are worse today than they 
were before President Biden took office.
    Secretary Yellen, I am asking these questions because 
throughout 2021, you, along with several members responsible 
for fiscal decision-making in this Administration, incredibly 
asserted that inflation was, ``transitory,'' perpetuating a 
fallacy that the government could keep spending money it didn't 
have, and everything and everyone would be just fine. Well, it 
is not fine. As a result of misrepresenting real economic 
conditions, trillions of dollars were printed, injecting cash 
into a shutdown system, which skyrocketed prices when we opened 
back up.
    Now, in order to tame runaway inflation, the Fed's only 
tool is to rapidly raise interest rates. The Fed is on its 10th 
consecutive rate hike, which increases unemployment, makes it 
harder for Americans to find jobs, and makes it harder for 
Americans to buy a home or a car. These decisions, which 
unfortunately seem to be the only solution at this point, have 
harmed low-income Americans and Americans living on a fixed 
income the most. We should have never delayed implementation of 
monetary policy this long under the fallacy that inflation is 
transitory.
    The Administration made a lot of decisions that crushed 
Americans, and clearly, the fiscal decision-makers of this 
Administration are only concerned with cherry-picking favorable 
data for political purposes. It is time this administrative 
state becomes serious and gives us an accurate depiction of the 
economy and Americans suffering at the hands of an 
unaccountable government rather than gaslighting their way out. 
I yield back.
    Mr. Barr. The gentleman yields back. The gentleman from 
Illinois, Mr. Foster, is now recognized.
    Mr. Foster. Thank you, Mr. Chairman. Madam Secretary, when 
resolving failed banks, there can sometimes be a tension 
between the lowest-cost resolution and the bipartisan desire to 
discourage further bank consolidation into a smaller number of 
very large banks. So my question is, is this an area where 
further guidance from Congress might be useful, for example, by 
providing some well-defined wiggle room on least cost 
resolution, or are there more effective levers that we might 
operate to discourage further bank consolidation?
    Secretary Yellen. In general, the largest banks are not 
allowed to seek mergers to get bigger, and there is broad based 
recognition that having a diversity of banking organizations, 
community banks, regional banks----
    Mr. Foster. This problem occurs at all levels of bank size 
as well, not just the adjacent----
    Secretary Yellen. Very often, it is possible in failing 
bank situations to resolve an institution without merging it 
into the largest banks.
    Mr. Foster. I am just wondering if there is some useful way 
to sort of tilt the playing field on that, something anonymous 
to the Buy American preferences, but not mandates that we put 
into several contexts.
    Secretary Yellen. It is something that we could look at.
    [Cross talking.]
    Mr. Foster. So, if you have time for a sort of thoughtful 
response for the record on this, I would appreciate it.
    Secretary Yellen. I will do that.
    Mr. Foster. Okay. In regards to the debt limit, there has 
been some uncertainty expressed as to how the exact language of 
the debt limit law applies to the different forms of debt that 
have historically been issued by the Treasury, in particular, 
since the limit appears to only apply to the face value of 
certain types of bonds. It has been suggested that the debt 
issuance limit might not apply to, for example, interest-only 
consols, or the interest stream of premium bonds, or the 
separate auctions of the so-called strips of interest payments 
that are currently traded in the secondary market.
    In the run-up to this last crisis, our office made 
inquiries of Treasury on this, and I understand you were busy. 
We didn't get a response, but would it be possible to get a 
definitive response to this question, because if this 
represents a safety net against defaulting on our payments, we 
want to know whether it is real?
    Secretary Yellen. I will try to give you a response on 
that.
    Mr. Foster. Thank you.
    Now, on Ukraine, you mentioned the importance of anti-
corruption reforms. And these will obviously become much more 
important when the international community starts dispensing 
hundreds of billions, if not trillions of dollars of 
reconstruction assistance to Ukraine. And as you know, one of 
the big issues with central bank digital currencies is their 
potential traceability of transactions by the issuing entity. 
But it seems to me there is a potential role for that 
traceability in Ukraine assistance in providing the Ukraine 
reconstruction assistance in traceable digital euros, or 
digital dollars, or some kind of reconstruction accounts that 
would remain traceable to identify corruption for a period of 
time until the Ukraine reconstruction is completed and the 
corruption has faded as a concern.
    Secretary Yellen. It is an interesting suggestion. Ukraine 
doesn't have a central bank digital currency. It is a major 
enterprise to introduce such a thing. In the case of the United 
States, we are looking at it, but it is something that can take 
years. We are very focused on corruption, and traceability, and 
accountability for funds that are transferred to Ukraine. Right 
now, USAID is being handled through the World Bank. It has very 
rigorous standards for verifiability and accountability----
    Mr. Foster. But it is still a struggle. If you look at all 
the money we attempted to inject into Afghanistan, and it just 
disappeared in corruption.
    Secretary Yellen. I honestly don't believe anything like 
that is happening. The USAID has hired a U.S. accounting firm 
to do independent checks and to review World Bank records. The 
IMF program for Ukraine focuses heavily on corruption and 
putting in safeguards and structural reforms to make sure that 
corruption is----
    Mr. Foster. Yes, I understand. It just seems like there may 
be an acceptable bargain here that, yes, we will provide a 
tremendous amount of assistance for those who are willing to go 
back to Ukraine and rebuild the country. But the price for that 
will be a heightened level of visibility to the international 
community that has provided funds.
    Secretary Yellen. I believe that is absolutely right that 
certainly we demand accountability and with governance----
    Mr. Barr. The gentleman's time has expired.
    Secretary Yellen. ----on Ukraine's part.
    Mr. Barr. The gentleman from Ohio, Mr. Davidson, is 
recognized.
    Mr. Davidson. I thank the chairman. And Secretary Yellen, 
thanks for your testimony today.
    Last month, it was announced that the Treasury Department 
hired two economists to study the effects and unintended 
consequences of sanctions. I think this is a welcome 
development given the expanded use of sanctions since the 
governing law passed in 1975 to create the Office of Foreign 
Assets Control (OFAC). How do you anticipate these economists 
will evaluate collateral damage that comes from sanctions? Do 
you see any implications for the status of the dollar as a 
world reserve currency, that payment system around the world, 
kind of the rivals that are confronting macroeconomics today?
    Secretary Yellen. We wanted to make sure that we do have 
the experts who are consistently focused on analyzing the 
potential economic impacts of sanctions since, when we impose 
them, we always want to understand what the economic 
ramifications of them will be.
    Mr. Davidson. Do you think there is a real threat to the 
payment system that we dominate today?
    Secretary Yellen. The fact that the dollar is used as a 
reserve currency and plays such a huge role in international 
transactions does enable our sanctions to be much more 
effective. And it is not surprising that countries that fear 
they can be affected by our sanctions are looking for 
alternatives to the dollar. It is something that we simply have 
to expect.
    But the dollar plays the role it does in the world 
financial system for very good reasons that no other country is 
able to replicate, including China. And that is, we have deep, 
liquid, and open financial markets, a strong rule of law, and 
an absence of capital controls that no country is able to 
replicate. It will not be easy for any country to devise a way 
to get around the dollar.
    Mr. Davidson. Thank you. As the founder of the sound money 
clock, yes, I certainly appreciate efforts to preserve the role 
of the dollar as the reserve currency. And frankly, I am 
concerned about the role of money being corrupted as a tool for 
coercion and control rather than a means of exchange and a 
store of value, and frankly, that seems at the heart of central 
bank digital currencies. But it kind of transcends down to one 
of the big developments globally where the United States 
dominates capital markets. In terms of investment capital, in 
the space of fintechs and cryptocurrencies, 75 percent to 90 
percent of the liquidity is offshore.
    And it seems like there is an effort to not trust American 
citizens in this, which is, if you can't really stop it 
altogether, you at least want to keep it account-based because 
you can control third parties. You can use them as 
intermediaries. That seems to be a feature to some of the 
people's thinking.
    Are you familiar that in December 2022, FinCEN issued a 
request for comment on a potential rule that would ban self-
custody, which is essentially the ability for individuals to 
own their own assets and have a permissionless payment system?
    Secretary Yellen. I am not familiar with the details of 
that rule, but certainly we are concerned about the use of 
cryptocurrencies and digital assets for illicit----
    Mr. Davidson. I think we are all concerned about illicit 
activity, but the question is, are you trying to stop 
individuals from having self-custody because it seemed like 
that was an effort that was underway during the end of the Mr. 
Mnuchin's time as Secretary. Is that something that hasn't 
risen to your level of concern?
    Secretary Yellen. I haven't had discussions about that.
    Mr. Davidson. Thank you. And I would just say, as Chair of 
our Housing and Insurance Subcommittee, I am a little bit 
concerned about whether you consider the CDFI Fund to be a 
regulatory agency? What is the role here for the CDFI Fund?
    Secretary Yellen. It is not a regulatory agency. I know it 
is in the process of reconsidering certifications for CDFIs, 
but it is not a regulatory agency.
    Mr. Davidson. Thanks for that point of clarification. And 
as we look at the conservatorship of the Government-Sponsored 
Enterprises (GSEs), one of the reports that is long overdue was 
due in September of 2021. Is the Department's plan to get them 
out of conservatorship? I will submit that question for the 
record, but would you commit to responding to that in writing?
    Secretary Yellen. We want to work with Congress to do that.
    Mr. Barr. The gentleman's time has expired.
    Mr. Davidson. Thank you.
    Mr. Barr. And the Secretary can answer for the record.
    The gentlewoman from Ohio, Mrs. Beatty, is now recognized.
    Mrs. Beatty. Thank you. Madam Secretary, let me start with 
this opening remark, since several of my colleagues on the 
other side have criticized you for your handling of the debt 
ceiling issue, and your calculations of the X-date. They have 
also placed the blame on the Biden Administration for not 
solving this problem, so let me be very clear. In my opinion, 
my colleagues across the aisle, and no one else, dragged us to 
the brink of default by using the debt ceiling as a weapon and 
a political tool to further their political agenda. Even the 
prospect of defaulting is harmful to the United States economy. 
We heard other witnesses, experts tell us that defaulting would 
be harmful. So, what they did jeopardized our role on the 
political stage and created opportunities for China and other 
foreign adversaries to weaken our power and influence. I want 
to thank you, Madam Secretary, for consistently providing 
apolitical advice to Congress because you did it, as you said, 
for what was best for the United States of America.
    Secretary Yellen. Thank you.
    Mrs. Beatty. I wanted to be on the record saying that.
    Secretary Yellen. Thank you.
    Mrs. Beatty. As I am sure you are aware, the number of 
countries paying a surcharge to the IMF has increased from 9 to 
16, since 2020. And that figure is estimated to increase to 38 
countries in the coming years. I have a bill that I am co-
sponsoring that will require an immediate review of surcharge 
policies at the IMF, with the requirement that the surcharge 
payments be suspended during the review process. Do you have 
any thoughts on this? Is it worth taking a closer look at this 
consequential policy, whether it is effective or whether there 
are unintended harmful consequences?
    Secretary Yellen. I really have to say that we are 
supportive of the IMF's surcharge policy. It is part of their 
risk mitigation framework. And what surcharges do is provide 
incentives for borrowers with large outstanding balances to 
repay their loans promptly, and that is in keeping with the 
nature of IMF lending. For the poorest countries, there aren't 
surcharges that apply through the poverty reduction in growth 
trust window. And the surcharges allowed the IMF to build 
precautionary balances, which protect all of the IMF members in 
case there is nonrepayment. So, I will try to work with you and 
understand the concerns, but I am not in favor of changing the 
IMF's surcharge policy.
    Mrs. Beatty. Okay. Thank you. I appreciate that. Now, I am 
going to shift, but I think it is in relationship to the state 
of the international financial system, since I believe our 
money is international in many ways.
    A couple of weeks ago, we had some international 
dignitaries here from Canada, and one of the things that they 
were most proud of was that they had a female on their $20 
bill, and you know where I am going with this. In our hearing 
last year, you indicated that you would do everything within 
your power, in a very bipartisan way--over the last 3 
congressional sessions, we have had people in your position 
look at what we were going to do with the $20 bill. It came up 
that it was going to be Harriet Tubman. We were all in 
agreement on that, and so I have reintroduced my bill, the 
Woman on the Twenty of 2023.
    Here is what I am asking. I understand all of the security 
and how we have to design the money, but could we not have a 
bill that simply puts in place the likeness of Harriet Tubman? 
Just that part. Then, you put it into the process that gets us 
to 2027 when I will not be here, and that we could get this 
moving. Any comments?
    Secretary Yellen. I very much want to see Harriet Tubman on 
the $20 bill, and I have promised, and I am doing everything I 
possibly can to expedite that process. It essentially froze. We 
lost 4 years during the previous Administration. When Secretary 
Lew proposed this in 2014, the scheduled date was 2030. I know 
that is a long time, but that is what it was----
    Mr. Barr. The gentlelady's time has expired.
    Secretary Yellen. ----but it is not----
    Mrs. Beatty. Thank you. My time has expired.
    Mr. Barr. The gentleman from Tennessee, Mr. Rose, is 
recognized.
    Mr. Rose. I want to thank Chairman McHenry and Ranking 
Member Waters for holding the hearing, and thank you, Secretary 
Yellen, for being with us today.
    Secretary Yellen, on November 4th, the Community 
Development Financial Institution's Fund (CDFI Fund) released a 
new proposed CDFI certification application using the Paperwork 
Reduction Act. Why did the CDFI Fund use the Paperwork 
Reduction Act instead of the Administrative Procedure Act for 
that change?
    Secretary Yellen. I am not sure. I assume because the 
Paperwork Reduction Act requires examination of forms.
    Mr. Rose. And what I would note is that the Paperwork 
Reduction Act was enacted to minimize the paperwork burden for 
stakeholders. The CDFI Fund won't meet with interested parties 
while the proposal is pending because of a blackout period. And 
as I am sure you are aware, there is significant concern that 
the change will make it very difficult and, in fact, 
potentially exclude many current CDFIs from participation in 
that program. Secretary Yellen, what is this statutory 
justification for this blackout period?
    Secretary Yellen. I can't tell you about the blackout 
period, but I know that what the CDFI Fund is doing is 
attempting to update a certification process that hasn't been 
really reviewed in more than 25 years.
    Mr. Rose. And that may be appropriate, but I think the 
Administrative Procedure Act would be the more appropriate 
pathway for that and certainly would allow the kind of comments 
that I think the current proposed change really is screaming 
out for.
    Secretary Yellen, Jodie Harris has recently stepped down as 
Director of the CDFI Fund. Given the mismanagement of the Fund, 
someone with more expertise on the regulatory environment and 
safety and soundness expectations inside the CDFI Fund would be 
incredibly helpful. Could you speak to Treasury's perspective 
on appointing a Director with meaningful experience with 
insured depositories and consumer finance, and what other 
considerations you think are important in finding the right 
person to head up the Fund going forward?
    Secretary Yellen. We will certainly do a thorough search. 
The Director of the CDFI Fund is a career Senior Executive 
Service (SES) position, and in filling that job, we are 
governed by the Civil Service Reform Act. So, it has to be 
based on merit, and there needs to be a competition with 
multiple candidates considered.
    Mr. Rose. Thank you. I just hope you understand the turmoil 
that this has created among CDFIs across the country and the 
attempted impact that it is having on communities that are 
supposed to be being served by these important institutions.
    I want to shift gears. On Tuesday, March 21st, you 
suggested that deposits would be covered by Federal insurance, 
``if smaller institutions suffered deposit runs that posed the 
risk of contagion.'' In front of the Senate the next day, you 
said you had not considered, ``blanket insurance or guarantees 
of deposits.'' But a day later, before the House, you said the 
Treasury, ``would be prepared to take additional actions if 
warranted.'' Secretary Yellen, can you clarify Treasury's 
position on any sort of expansion of deposit insurance?
    Secretary Yellen. I'm sorry. I never intended to suggest 
that we were proposing expanding deposit insurance. The FDIC 
has issued a report, and over time, it might be an appropriate 
topic to look at, but what I said was that I was prepared to 
work with the regulators, the FDIC, and the Fed to take actions 
similar to those we took in the case of Silicon Valley Bank and 
Signature Bank to protect depositors when there was a risk of 
systemic contagion of bank runs, and that those tools would be 
available. And it could be the case that with a run on a 
community bank, if we judge that it could trigger broader 
systemic runs on other sound banks, it could also be 
appropriate to use those same tools.
    Mr. Rose. I will just say, as a board member of a community 
bank, I hope you keep in mind how important our community banks 
are to our rural communities and small communities across the 
country. Thank you. Mr. Chairman, I yield back.
    Mr. Barr. The gentleman's time has expired. The gentleman 
from New Jersey, Mr. Gottheimer, is recognized.
    Mr. Gottheimer. Thank you, Mr. Chairman. And thank you, 
Madam Secretary.
    This year, we have seen turmoil in the banking system, as 
you have discussed. And I am concerned that our regulatory 
response hasn't focused enough on our small, medium-sized, and 
regional banks that provide important competition to our 
banking system, and are obviously lifelines to American 
families and small businesses in our communities. Madam 
Secretary, do you believe that our response to recent failures 
and our broader regulatory approach ensures the health of small 
and medium-sized banks so we don't end up having a situation 
where we only have a few large banks that are simply too-big-to 
fail?
    Secretary Yellen. I believe strongly that a diversified set 
of financial institutions is best for America, and provides a 
differentiated set of financial services that are appropriate 
for different borrowers.
    Mr. Gottheimer. Thank you. I am particularly concerned that 
the current regulatory environment disadvantages some of the 
small and medium-sized regional banks. Specifically, most 
recently, with First Republic's receivership, I am concerned 
that the largest banks were given preference in the bidding 
process, thereby enabling the biggest banks to grow even 
bigger. My understanding is that the FDIC kept certain regional 
banks from even bidding on First Republic. Madam Secretary, do 
you believe that well-situated small, medium-sized, and 
regional banks should have the same opportunity to bid on 
failing banks as their larger peers do?
    Secretary Yellen. I believe that there should be a process 
with multiple bidders. It is up to the FDIC to run that 
process, and I know that there were multiple bidders in the 
case of First Republic.
    Mr. Gottheimer. But my understanding is that the regional 
and medium-sized banks were left out, and many who were 
interested weren't allowed to bid. Do you know about that?
    Secretary Yellen. I am not sure that is the case. I believe 
that there were multiple bidders, and they were not all large 
banks.
    Mr. Gottheimer. No one was excluded if they wanted to, in 
your understanding, if they actually were interested in 
bidding, that they weren't told, sorry, you can't bid?
    Secretary Yellen. I can't give you every detail of what the 
FDIC did in this case, but I do know that there were multiple 
bidders, and that included some smaller banks, and certainly 
some regional banks. The FDIC is required to accept the lowest-
cost bid. And it did that.
    Mr. Gottheimer. Okay. Thanks. And I have heard a lot of 
stories that banks were literally told, sorry, you can't even 
apply, you can't even try to bid for this, so I will get back 
to you if I learn more about that.
    Shifting the focus to digital assets, following the 
collapse of FTX last year, financial regulators have obviously 
ramped up scrutiny of digital asset firms. In a recent 
interview, you said that you, ``see some holes in the system 
where additional regulation would be appropriate.'' Do you mind 
elaborating a little bit on that statement? Where do you see 
the holes? Where do you think additional clarity is needed for 
digital assets, please?
    Secretary Yellen. One hole pertains to the supervision of 
spot markets, where digital assets are not regarded as 
securities, so there needs to be regulatory authority there. 
And then, I would say that stablecoins are a type of digital 
asset that really requires a full-blown Federal regulatory 
framework. I think this is an area where congressional 
legislation is appropriate to create an appropriate prudential 
framework.
    Mr. Gottheimer. Thank you so much. When you spoke before 
this committee last Congress, you agreed with me that the 
State-level tax deduction cap has led to disparate treatment of 
American taxpayers. I am concerned that the cap is pushing 
Americans out of States like mine, New Jersey, as they seek 
lower-tax States that are subsidized more heavily by the 
Federal Government. The House Ways and Means Committee is 
currently marking up tax legislation that noticeably does not 
address the burdensome SALT cap. It leaves it out completely, 
which I think is outrageous.
    In your view, does the SALT cap favor States that are 
heavily subsidized by the Federal Government and disrupt 
America's decisions on where they choose to live? Have you seen 
that at all in your work, and have you studied where finances 
are moving around the country?
    Secretary Yellen. It certainly does have a disparate impact 
on different States. The Biden Administration has generally 
taken the view that it is up to Congress to decide what to do 
about that.
    Mr. Gottheimer. So, you think it is probably a good idea 
for us to be handling and addressing the SALT cap?
    Secretary Yellen. That is the view that we have taken 
recently.
    Mr. Gottheimer. I have one last quick question I would like 
to get in on the national debt. Obviously, higher interest 
rates make our debt grow faster. What options is the Department 
considering to address the fact that our country will be 
spending more money to serve its national debt in the high-
interest-rate environment?
    Secretary Yellen. President Biden proposed a full-blown 
budget that contains substantial deficit reduction, $3 trillion 
over 10 years at the same time it invests in America, and----
    Mr. Meuser. [presiding]. The gentleman's time has expired.
    Secretary Yellen. ----you raise this as part of that.
    Mr. Gottheimer. Thank you, Secretary. And thank you, Mr. 
Chairman.
    Mr. Meuser. The gentleman from Wisconsin, Mr. Steil, is now 
recognized for 5 minutes.
    Mr. Steil. Secretary Yellen, thanks for being here today. 
As we approached the debt ceiling, the Treasury delayed issuing 
new U.S. Treasuries. Now that the debt ceiling has been 
increased, there is significant discussion that the Treasury 
may issue hundreds of billions, maybe a trillion dollars of new 
Treasuries, in particular, in short order. Do you share the 
concern that others do that this may alter the interest rates 
the United States would receive on the issuance of those 
Treasuries, and if so, what mitigating measures are you and the 
Treasury taking to avoid additional costs on interest rates?
    Secretary Yellen. It is our obligation to rebuild the 
Treasury balance up to a safe and appropriate level. But we 
have consulted widely with market participants about what the 
best way is to minimize the cost to the Federal Government and 
to avoid market disruption to the maximum extent possible. And 
as we build our balance, we will certainly be careful to see if 
there are impacts or market disruption.
    Mr. Steil. And what are those techniques and measures you 
are planning to implement to reduce volatility or increased 
interest rates?
    Secretary Yellen. We will be issuing a substantial quantity 
of Treasury bills and cash management bills in the coming 
months, and we will try to design those offerings to really be 
most attractive to market participants.
    Mr. Steil. Thank you. I am still really disappointed that 
the Administration refused to negotiate with House Republicans 
for as long as they did, forcing the Treasury into this 
position rather than settling the debt ceiling debate much 
sooner, which we could have done if the President didn't move 
forward on his path of, ``my way or the highway'', refusing to 
negotiate with Republicans in the House.
    Let me shift gears, if I can. I want to dive in on the 
Russia-Iran alliance that we are seeing taking place. Russia 
and Iran have established a defense partnership, with Iran 
supplying weapons to Russia, and reportedly potentially 
developing a drone facility inside Russia. This has 
implications beyond Ukraine. It has significant implications 
across Europe and throughout the Middle East. Could you outline 
some of the steps Treasury has taken in response to this 
defense partnership, and do you believe that the measures have 
been effective?
    Secretary Yellen. We are certainly attempting to make sure 
that our sanctions on Russia, when it comes to acquiring 
military equipment, are not evaded. And we are looking very 
carefully at ways in which evasion is taking place and 
attempting to address it jointly with our partners.
    Mr. Steil. But should anything be done specifically 
regarding the Iran piece of this puzzle that has not been done 
to date, or do you feel that the sanctions in place on Iran and 
working with our partners are currently sufficient?
    Secretary Yellen. We are constantly looking and 
reevaluating our sanctions, especially when we see evasion, 
too. We have the strongest regime of sanctions against Iran as 
against virtually any country, and we are constantly looking to 
strengthen them. It is not something that is forever fixed; 
when we see evasion, we are looking to strengthen them.
    Mr. Steil. Understood. It's a very dynamic environment, not 
a static environment. I appreciate your attention to the 
matter.
    Secretary Yellen. Yes.
    Mr. Steil. Let me shift gears pretty significantly here. We 
have seen the European Union aggressively push regulatory 
standards beyond their boundaries, impacting U.S. capital 
markets and U.S.-based companies. I am concerned that if we 
fail to push back, American businesses will find themselves 
subject to European regulation. Are there EU regulations that 
this Administration is planning to adopt or mirror, and have 
you determined separately that these regulations coming from 
the EU are in the best interest of the United States?
    Secretary Yellen. We are looking very carefully at the EU's 
Corporate Sustainability Directive, and we are concerned about 
the impact that it could have on U.S. firms. We are consulting 
with the EU and making it clear that we are concerned about the 
Directive's extraterritorial scope.
    Mr. Steil. I think we should be incredibly concerned. The 
U.S. has about 4 percent of the world's population, but about 
50 percent of the capital markets reside in the United States. 
I am concerned that the European approach to regulation 
actually negatively impacts their ability to be a leader in the 
capital markets. Recognizing my time, I yield back.
    Mr. Meuser. The gentleman yields back. The gentleman from 
Texas, Mr. Gonzalez, is now recognized for 5 minutes.
    Mr. Gonzalez. Thank you, Mr. Chairman, and Ranking Member 
Waters. And thank you, Secretary Yellen, for being here with us 
today. We really appreciate having this conversation.
    I am going to continue on an issue that has been a concern 
for this committee on both sides of the aisle. As you know, 
adversaries like Russia, China, Iran, North Korea, and others 
have been working to replace, and circumvent, and undermine the 
U.S. dollar for decades now. But now we are also seeing calls 
to reduce the dependence on the U.S. dollar from other corners 
of the globe, including allies of ours like France, and maybe 
India, and others more recently. From your perspective, what is 
the biggest risk to the U.S. dollar? Is it global geopolitics, 
or is it concerns here in the U.S. Capitol of U.S. politics not 
being able to pass a debt limit, for example, this past week?
    Secretary Yellen. I have previously and will again express 
my concerns about the debt limit. The dollar is used widely as 
a reserve asset because of the depth and liquidity of U.S. 
capital markets, the safety of Treasury securities, and the 
longstanding practice of the United States to honor its 
obligations. And it is the commitment that we can be trusted to 
pay our bills that is the foundation for our high credit rating 
and for the dollar's role as a reserve currency. So when we 
have episodes like the debt ceiling episode, that concerns me. 
Of course, our sanctions are in part enabled by the important 
role of the dollar and U.S. banks in the financial system. We 
work whenever possible with other countries to jointly enact 
sanctions----
    Mr. Gonzalez. But if I may, should we be more concerned now 
and slapping sanctions on countries around the world, and 
taking that into consideration, and be more thoughtful as we 
may be creating a paranoia around the world where people are 
looking for other currencies to do transactions?
    Secretary Yellen. It is true that when we impose sanctions, 
countries that are afraid they can be the subject of those 
sanctions are motivated to look for tools other than the dollar 
to engage in transactions, so----
    Mr. Gonzalez. But even our friends----
    Secretary Yellen. ----it is something we have to accept. It 
is much more difficult to find other tools to make payments, 
other currencies, when we work jointly with partners.
    Mr. Gonzalez. But we even have our friends like France also 
looking for other currencies and pushing----
    Secretary Yellen. France and some of our allies were not 
happy when we pulled out of the Joint Comprehensive Plan of 
Action (JCPOA) and imposed sanctions. But I would say there is 
virtually no meaningful workaround for most countries for using 
the dollar as a reserve currency.
    Mr. Gonzalez. Very well. Earlier, you made some statements 
about it being the most stable option with rule of law and 
liquidity and all of that.
    Secretary Yellen. Yes.
    Mr. Gonzalez. But isn't it a fact that the use of the 
dollar has diminished and gone down against competing 
currencies over the years?
    Secretary Yellen. There has been some increase in holdings 
of other reserve assets, but that is something to be expected 
in a growing world economy where there is a desire to 
diversify. But we are still reliant----
    Mr. Gonzalez. So, we should expect less use of the dollar, 
is that what you are saying?
    Secretary Yellen. We should expect, over time, gradually 
increased share of other assets in reserve holdings of 
countries. It is a natural desire to diversify, but the dollar 
is far and away the dominant reserve asset.
    Mr. Gonzalez. Okay. It is still a huge concern for us here 
in Congress. And just changing gears briefly, under the new 
minimum tax system, lawmakers permit companies to reduce their 
taxable income by the amount of their depreciable deductions. 
Companies in the most capital-intensive industries with a high 
value of tangible property can claim these depreciation 
deductions and use tax deferral to invest in their business.
    This provision was included in the Inflation Reduction Act 
to protect companies from the potential impact of book minimum 
tax by not capitalizing investment. However, these deductions 
are not accessible to oil and gas producers because their 
capital expenditures are classified as intangible drilling 
costs within the different section of the Tax Code. Due to this 
designation, oil and gas producers are unfairly targeted. I 
hope you can----
    Mr. Meuser. The gentleman's time has expired.
    Mr. Gonzalez. We are hugely concerned, and we would love 
for you to be able to address this with our office.
    Mr. Meuser. And the Secretary is welcome to submit that for 
the record. Thank you.
    The gentleman from South Carolina, Mr. Timmons, is now 
recognized for 5 minutes.
    Mr. Timmons. Thank you, Mr. Chairman. Secretary Yellen, 
thank you for being here today. You and I have disagreed on the 
best approach to address a number of challenges facing this 
country. I am going to briefly highlight two areas where your 
policy proposals ultimately were quite simply deemed bad for 
the American people, but then I am going to end on an area 
where I think we are going to find agreement.
    First, you spent much of 2021 saying that inflation was 
transitory and likely to abate once COVID-specific factors 
subsided. These talking points were then parroted by various 
officials in the Administration and Congress to justify 
trillions more in additional spending. All the while, Larry 
Summers, President Clinton's Treasury Secretary and Director of 
President Obama's National Economic Council, aggressively 
warned against such spending, warning it would further 
exacerbate inflation. Then a year ago, almost to the day, you 
were quoted saying that you failed to anticipate how long 
elevated inflation would continue to plague American consumers. 
Finally, on June 7th of this year, you said that you expected 
inflation to subside over the next 2 years.
    Simply put, you got it wrong in a number of places, and 
that error in judgment caused immense damage to the American 
people. It caused the cost of goods to soar, and salaries to be 
reduced in relative value. It denied the American Dream of 
homeownership, and just caused overall hardship in general. So, 
I just want to point out that policies coming out of Washington 
have very serious consequences, and it seems policymakers often 
forget that.
    Eighteen months ago, we had a back and forth, somewhat 
heated, where I criticized your proposal to collect Americans' 
bank account balances. I said it was not a serious policy 
proposal and only designed as a way to let Democrats justify 
spending more money we don't have. The Senate wisely sidelined 
this proposal, and the American people are better off because 
of it. Again, policies coming out of Washington have 
consequences and we must be thoughtful in our policy proposals 
and actions. They do have real consequences for the American 
people.
    Now, to an area where I think we are going to agree, and I 
was pleasantly surprised that my colleague across the aisle, 
Mr. Gonzalez, just brought it up. I am going to just pose a 
question to you. It is fairly simple. Do you agree that it is 
important for the dollar to remain the global reserve currency? 
Is that a priority of yours?
    Secretary Yellen. Yes, I think it is important for the 
dollar to be the world's reserve currency.
    Mr. Timmons. Thank you. I agree with you. Could you just 
highlight why you feel that way? What are the factors that go 
into that policy decision of yours?
    Secretary Yellen. It is the safest and most sought-after 
asset. The dollar as a reserve currency means that our interest 
rates are the lowest of really any borrower around the globe, 
and it lowers our cost to borrow.
    Mr. Timmons. It makes it easier to trade. It makes it 
easier to compete in the global economy. It builds our allies 
abroad. If you agree that it is important to push this policy 
forward and to maintain the dollar as a global reserve 
currency, then why has President Biden nominated Jared 
Bernstein to be the Chair of the United States Council of 
Economic Advisers? He is on record in numerous op-eds stating 
that we should actively take steps to remove the dollar as a 
global reserve currency, that it is a burden and not a 
privilege, and we should end the dollar as the global reserve 
currency. Why would President Biden, whom I assume you work 
very closely with on these issues, place someone in such a 
position of trust and authority who disagrees with his own 
Treasury Secretary?
    Secretary Yellen. I am not going to speak to Jared 
Bernstein's views on this particular issue.
    Mr. Timmons. Your views are diametrically opposed, and he 
disagrees with you. Just please make sure that you continue to 
push to maintain the dollar as the global reserve currency.
    Let's go back to debt. The debt-to-GDP ratio in April was 
119 percent. I have serious concerns about our unsustainable 
spending and that it will further erode our ability to maintain 
the dollar as the global reserve currency. We saw that Greece 
at 180-percent debt-to-GDP went into austerity measures and had 
to get the EU to bail them out. Madam Secretary, nobody is 
going to bail us out. The American people are not able to. So, 
what do you think about our unsustainable spending, and is our 
debt-to-GDP ratio a concern of yours as it relates to 
maintaining the dollar as a reserve currency?
    Secretary Yellen. It is critical that we remain on a 
fiscally-sustainable course, and there are different----
    Mr. Timmons. Remain? Did you say remain? We are not on a 
fiscally-sustainable course, Madam Secretary.
    Secretary Yellen. The President presented a budget with $3 
trillion of deficit reduction over the next decade, and what I 
regard as the most important metric----
    Mr. Timmons. That is like shooting a bullet at a freight 
train.
    Mr. Meuser. The gentleman's time has expired.
    Mr. Timmons. Thank you. I yield back.
    Mr. Meuser. The gentleman yields back. The gentlewoman from 
Massachusetts, Ms. Pressley, is now recognized for 5 minutes.
    Ms. Pressley. Thank you so much. And thank you, Secretary 
Yellen, for joining us today. I represent the Massachusetts 7th 
Congressional District, which is vibrant, diverse, dynamic, and 
unequalled. And I am sure my colleagues have grown tired of my 
numerating these damning statistics, but imagine how tired 
people are of actually living them.
    In a 3-mile radius, from Cambridge to Roxbury, median 
household income drops by $50,000. The Federal Reserve of 
Boston put out a Color of Wealth report, which cites that the 
average wealth for a Black Boston family is $8, whereas for a 
White family, it is $250,000. So, I am going to use my time 
with you to discuss an issue that it is paramount that we 
tackle, it is a national problem, and that is the racial wealth 
gap. The racial wealth gap in the United States is over $10 
trillion. That is trillion with a, ``T,'' truly a shameful 
reality for the American economy. Secretary Yellen, do you 
agree that we have a colossal racial wealth gap in our country?
    Secretary Yellen. Of course. You cited statistics that show 
how significant that is, and President Biden is committed to 
doing all that he possibly can.
    Ms. Pressley. Thank you.
    Secretary Yellen. And I am committed as well to take 
meaningful steps.
    Ms. Pressley. Thank you, and of course, we know that this 
racial wealth gap didn't just appear out of nowhere. Black 
Americans in this country have been systematically stripped of 
our wealth. First, there were nearly 250 years of enslavement, 
followed by a century of Jim Crow segregation, economic 
exploitation, and State-sanctioned violence. And to this day, 
Black Americans are still being excluded from and facing 
barriers to public programs that promote homeownership and 
higher education, along with facing discriminatory home 
appraisals, and persistent redlining. Only bold, 
transformative, precise economic policies can address the 
impact of compounded racism and exploitation.
    We are heading toward Juneteenth. I am grateful that it is 
now a Federal holiday, but policy is my love language. I 
believe we need Federal reparations to close the racial wealth 
gap once and for all. Secretary Yellen, under your leadership, 
you have established a Treasury Advisory Committee on Racial 
Equity (TACRE), which truly represents a historic opportunity 
to center racial justice in our economic agenda. Can you speak 
to some top lines of the work of this committee?
    Secretary Yellen. We formed TACRE as an advisory committee 
to help us evaluate every area in which Treasury has 
responsibility, where we need to recognize if discrimination 
may take place. And we should be changing our policies to make 
Treasury itself more diverse and more responsive to be able to 
address structural racism and problems----
    Ms. Pressley. Thank you, Secretary Yellen. I am running out 
of time, and I am grateful for the work of the committee. I 
look forward to learning more about that, but I, along with 
Senator Cory Booker, have introduced the American Opportunity 
Accounts Act. If passed into law, this would represent the most 
ambitious Federal effort to directly address wealth inequality. 
At birth, every child would receive $1,000 in a savings account 
managed by the Treasury Department. Children from low-income 
families would receive deposits every year. And once they reach 
the age of 18, they can use the funds they have saved for 
specific purchases, such as buying a home or pursuing higher 
education. There is growing momentum around the country for our 
Baby Bonds legislation from Massachusetts, California, 
Connecticut, New York, and Washington, D.C. Do you agree that 
the Treasury Department should further look into Baby Bonds as 
a tool to address wealth inequality in our country?
    Secretary Yellen. Certainly, this is a key priority of the 
Biden Administration and not just a Treasury matter, but I 
think it is a very constructive suggestion. As you know, 
President Biden has proposed many policies that would be 
complementary, including extending the child tax credit and 
making sure that it is refundable, which did succeed in cutting 
poverty by 50 percent.
    Ms. Pressley. Absolutely. Thank you, Secretary Yellen. I do 
see baby bonds as the kind of investments that will break 
cycles of generational poverty and systemic economic oppression 
and put us one step closer to closing the racial wealth gap. 
Thank you.
    Mr. Meuser. The gentlelady yields back. The gentleman from 
South Carolina, Mr. Norman, is now recognized for 5 minutes.
    Mr. Norman. Thank you for appearing here, Secretary Yellen. 
Secretary Yellen, your statement that the President is working 
on a path of cuts that will, I guess, get our economic house in 
order--you said $3 trillion over the next decade?
    Secretary Yellen. That is his budget that he presented.
    Mr. Norman. Is that not like saying you are going to drain 
the ocean a teardrop at a time? We are on tap where the 
interest on the debt will exceed our military budget. How does 
that square with his statement that he wanted a clean debt 
ceiling?
    Secretary Yellen. Short-term interest rates have gone up 
substantially, but longer-term interest rates are lower. And 
most economists and Fed officials believe that over the medium 
term, real interest rates, which is what is important to our 
debt burden, will decline----
    Mr. Norman. Ma'am, this President is on tap to spend $4 
trillion, and I find it astonishing that in your position, you 
make that type of statement. Now, the debt limit X-date has 
changed. It moved from June 1st to June 5th, and maybe to July, 
and we had a President who was missing in action for over 100 
days, and didn't want to negotiate. Was this a strategy to wrap 
up the press to just move the date to----
    Secretary Yellen. I want to insist that there was nothing 
whatsoever about the advice I gave to Congress that was 
political.
    Mr. Norman. So, you didn't get with this Administration----
    Secretary Yellen. I gave consistent----
    Mr. Norman. I am reclaiming my time, Secretary Yellen. I am 
trying to ask you a question. Did you not get with this 
Administration to move the dates to wrap up the pressure that 
the media was daily saying this country is going to----
    Secretary Yellen. The very first----
    Mr. Norman. Let me finish, and I will let you, hopefully, 
get some time in if you will not filibuster. So, you didn't get 
together with the President or the Administration to just move 
dates? If it was really July or later, why didn't you just tell 
us?
    Secretary Yellen. The answer is an unambiguous, no, I did 
nothing of the sort, and the very first letter that I sent to 
Congress in early January indicated that early June was a time 
that we were concerned our balance might not be sufficient.
    Mr. Norman. Based on what?
    Secretary Yellen. Based on our forecasts of spending and 
revenues, we could see that early June was a matter of concern. 
We waited until our tax revenues came in after the April 18th--
--
    Mr. Norman. That was fluid, Secretary Yellen. That was 
fluid. Yes, California, I think, had 51 counties that were 
exempt from getting the tax revenues in. We wrote you two 
letters to explain what your metrics were that you used to 
determine that the country was going to run out of money and 
not pay the----
    Secretary Yellen. I'm sorry, but on June 2nd, the day after 
Congress raised the debt ceiling, the Treasury balance declined 
to $23 billion, which may sound like a lot of money, but it is 
absolutely a completely----
    Mr. Norman. You never responded to----
    Secretary Yellen. ----insufficient effort----
    Mr. Norman. Secretary Yellen, you never responded to the 
two letters to give us the metrics of how you gave those dates 
out.
    Secretary Yellen. We published----
    Mr. Norman. I am running out of time.
    Secretary Yellen. I'm sorry, but we published----
    Mr. Norman. Let me cover one other subject.
    Secretary Yellen. ----daily statements to give----
    Mr. Norman. I am reclaiming my time. Secretary Yellen, I am 
reclaiming my time. You have mentioned several times about the 
sanctions that this Administration is putting on Russia. Was 
enabling the Nord Stream pipeline a sanction that this 
Administration put on Russia, or did it enable Russia to get 
the revenue that they have today?
    Secretary Yellen. The Administration has long been opposed 
to Nord Stream 2.
    Mr. Norman. They are the ones that opened it up. President 
Trump discontinued it. Are you saying that this Administration 
did away with the enabling the Nord Stream pipeline to be 
built?
    Secretary Yellen. I believe that the President made clear 
his opposition to the pipeline.
    Mr. Norman. Then, why did it get put in use under this 
Administration? It is being built now.
    Secretary Yellen. Germany is----
    Mr. Norman. So, nothing has changed from the Trump 
Administration to the Biden Administration on enabling the Nord 
Stream pipeline to be in existence, the remaining section to be 
built? I am out of time, so if you would respond in writing, I 
sure would appreciate it. Thank you so much.
    Mr. Meuser. The gentleman yields back. The gentleman from 
Nevada, Mr. Horsford, is now recognized for 5 minutes.
    Mr. Horsford. Madam Secretary, would you like to answer the 
final question so that the record is clear on your position 
regarding the debt ceiling date?
    Secretary Yellen. Regarding the debt ceiling date.
    Mr. Horsford. Based on the questioning from the previous 
colleague.
    Secretary Yellen. Yes. My very first letter to Congress 
indicated that we had confidence that we could pay the 
government's bills until early June, but it highlighted that we 
were concerned that we might not after early June. There was 
considerable uncertainty about what our resources would be 
months ahead. It was critical to see what incoming tax revenue 
was.
    Mr. Horsford. Thank you.
    Secretary Yellen. Once we saw that, we realized that early 
June was an even more serious problem than we indicated, and in 
several letters, I highlighted that we felt our resources would 
expire in early June, possibly as early as June 1st.
    Mr. Horsford. Thank you.
    Secretary Yellen. And our final letter indicated----
    Mr. Horsford. I just wanted to give you an opportunity to 
clear the record.
    Secretary Yellen. ----June 5th, which is awfully close to 
June 1st.
    Mr. Horsford. Thank you. And to be clear, it was all 
because of a self-inflicted manufactured debt limit crisis that 
my Republican colleagues caused, which, had Democrats not 
delivered the votes in the House, would have caused a default, 
causing our economy to spiral out of control across the U.S., 
and globally, affecting millions of jobs.
    At the same time, we also have heard from my colleagues, 
who have demanded more fiscal austerity and a balanced budget 
now without a second thought for their vigorous push for the 
government to tighten its belt. Here we go again with another 
round of ill-advised cuts to vital revenue. The House 
Republican tax cuts scam will cost the United States taxpayers 
upwards of $1.1 trillion. I find that outrageous. Again, as 
they work towards deep cuts to essential programs like Social 
Security and Medicare, their extreme idea of fiscal restraint 
is another tax giveaway for big corporations across this 
country.
    House Democrats and President Biden have fought hard to 
protect American workers and ensure we lead the clean energy 
transition into the 21st Century. Yet, the House GOP is still 
siding with their wealthy backers in the fossil fuel industry. 
The folks in my district in Nevada deserve more investment in 
our people, in our health, in our environment, and in our clean 
energy economy. And yet, the recently introduced and misnamed, 
Tax Cuts for Working Families Act, accomplishes none of these 
priorities. That is why it should be called the, ``Republican 
Tax Scam 2.0.''
    Secretary Yellen, do you have any indications as to the 
consequences of the proposed $1.1 trillion in lost tax revenue 
and how that would stem from these proposed cuts?
    Secretary Yellen. The ones that are now under 
consideration?
    Mr. Horsford. Correct.
    Secretary Yellen. They would benefit wealthy individuals 
and corporations and do nothing for working families, and----
    Mr. Horsford. And is it paid for?
    Secretary Yellen. No, it is not paid for, and it would----
    Mr. Horsford. And that will add to the debt, correct?
    Secretary Yellen. Of course. It would exacerbate the debt.
    Mr. Horsford. And they will then have to pay interest on 
the debt for tax cuts for the very wealthy while balancing the 
budget on the backs of working people that I represent?
    Secretary Yellen. Yes.
    Mr. Horsford. Additionally, could you discuss the 
macroeconomic cost associated with stripping away the recently 
passed tax incentives for clean energy production and clean 
energy vehicles with a specific focus on the harm to American 
domestic manufacturing in the green technology sector?
    Secretary Yellen. We have seen a renaissance in 
manufacturing in the United States as a consequence of the 
Inflation Reduction Act. There is tremendous investment that is 
taking place in our clean energy economy. It is creating good 
jobs all across the country, and not just on the coasts, but in 
parts of the country that really have seen a decline in 
manufacturing jobs. And it would have a very harmful effect.
    Mr. Horsford. Thank you. All I will say in closing is the 
American people are watching. They are very smart. They know 
that the Republicans are not for fiscal austerity, not when 
they are giving tax cuts to the very wealthy----
    Mr. Meuser. The gentleman's time has expired.
    Mr. Horsford. ----on the backs of working Americans.
    Mr. Meuser. The Secretary has graciously agreed to stay so 
that Representative Garcia and I may ask questions. We thank 
you very much for that, Secretary Yellen. I now recognize 
myself for 5 minutes. Thank you.
    I want to go back to just uncover the CSDDD relatively 
briefly because you have been asked about that a few times, the 
Corporate Sustainability Due Diligence Directive coming out of 
Europe, where U.S. businesses could be sued by the EU for 
simply doing business with so-called high-impact companies such 
as natural gas. And that is a really big concern of mine, as 
well as coal.
    Madam Secretary, coal, as you very well know, is essential 
for the production of steel, and every company is producing 
steel, particularly anthracite steel, which I have an abundance 
of in my district. So if the EU were to pass something like 
this, it could--and there are analyses on this--affect the 
stock prices and the valuations and the business of over 63 
percent of the S&P 500 and really set a precedent that Europe 
can regulate the United States, and certainly, the EU is in 
high demand for liquefied natural gas (LNG).
    I am really asking you, as a Governor of the IMF, not just 
the IMF, but in general in your role, are we pushing back 
strongly on this? Are we doing an analysis? Are we really 
taking this very seriously related to the CSDDD?
    Secretary Yellen. I'm sorry. The CSDDE----
    Mr. Meuser. The Corporate Sustainability Due Diligence 
Directive.
    Secretary Yellen. That is an EU initiative, and I have 
indicated that we have concerns about it, that it can impact 
our firms in ways that would have unintended consequences that 
concern us.
    Mr. Meuser. And you did indicate that, but doing just, say, 
$150 million in business in Europe, if a company does a billion 
dollars here, that regulation would be mandated for that 
company as a whole.
    Secretary Yellen. That is why we have concerns. I agree.
    Mr. Meuser. Significant concerns, I would hope, Madam 
Secretary. Are you doing a cost-benefit analysis of this, what 
its effect would be? Is that part of your due diligence?
    Secretary Yellen. I don't think we have to do a cost-
benefit analysis, but I think we do have to express our 
concerns to the EU and try to see that they are addressed.
    Mr. Meuser. Okay. I am hoping we can be kept updated on 
this, Secretary Yellen, because again, this is a really serious 
issue that I am not sure too many businesses are fully aware of 
being regulated by the EU.
    Secretary Yellen. It is not yet a final legislation.
    Mr. Meuser. Right.
    Secretary Yellen. It is a draft.
    Mr. Meuser. Right. Okay.
    Secretary Yellen. And it is hard to know exactly what its 
impact will be on EU firms.
    Mr. Meuser. Okay.
    Secretary Yellen. But we advocate for it to be addressed by 
the EU.
    Mr. Meuser. Thank you. I do want to ask you this, more of a 
broad question. Does the Treasury, your Department obviously, 
the Fed, the White House, do you have conversations where you 
look at the economy as a whole and say, look, with the Fed 
stimulus, with this excessive spending, let's face it, that 
took place, a slowdown of American energy, which had a lot to 
do with the spiking of gasoline prices, which obviously 
attributes to inflation, a rise of interest rates, which is 
doing awful things that I want to talk about on the service to 
our debt. But do you have the conversation and say, let's take 
a holistic view here, and maybe we should have some pro-growth 
initiatives?
    Secretary Yellen. We certainly take a holistic view and 
have many discussions of the outlook and what is appropriate. 
And I will say that when President Biden was elected and the 
American Rescue Plan was passed, the unemployment rate in the 
United States was exceptionally high, and there was a real risk 
that we would have a generation of Americans----
    Mr. Meuser. Madam Secretary, I don't mean to interrupt, but 
we had COVID, and we deliberately shut down the government, and 
it is the same unemployment rate that we had in 2019, and yet, 
there are still close to 2 million people not working. Madam 
Secretary, it is not working. We have all this inflation. We 
have debt as far as the eye can see.
    And you know what is unbelievably alarming, Secretary, is 
that in 2021, when the Biden Administration came in, service on 
our debt was $275 billion. I am sure enough to tell you these 
numbers. In 2022, it was $385 billion. This year, it is going 
to be a staggering $660 billion. Next year, it is likely to be 
higher than our defense, so it is not working. It seems to me 
the growth strategy is to spend more. Is that considered a 
growth strategy?
    Secretary Yellen. Our growth strategy does involve 
investing in America, and President Biden has put in place 
proposals and legislation that does aid our growth.
    Mr. Meuser. Thank you, Madam Secretary. My time has 
expired. The gentlewoman from Texas, Ms. Garcia, is now 
recognized for 5 minutes.
    Ms. Garcia. Thank you, Mr. Chairman, and thank you, 
Secretary Yellen, for joining us here again today. Secretary 
Yellen, under your leadership and in collaboration with 
President Biden, the Treasury Department has done excellent 
work, promoting a strong and vibrant domestic economy and 
assisting countries in need internationally. I want to thank 
you for that.
    I want to quickly just follow up on a couple of the 
questions before I get to one of my own. You have consistently 
said that it is important that the dollar remain strong and be 
the currency of the world. I have been troubled by the number 
of businesses, small retailers, even at airports and coffee 
shops that are beginning to not even take the dollar anymore. 
They don't take cash. There is a bigger reliance on credit 
cards. What does that do to our economy and to the stature of 
the dollar? If, in fact, cash is king and the dollar is the 
emperor or the king, what does that do, and how are we doing 
with the interest rates on credit cards and the transaction fee 
charges? That is a lot of questions in one, but----
    Secretary Yellen. We are still using the dollar as a 
currency. It doesn't have to be physical currency. We want an 
efficient payment system, and electronic payments are becoming 
faster and cheaper, and we are still using the dollar even when 
we make payments using plastic. But credit card fees do remain 
very high, and it is important to foster innovations that will 
improve and reduce the costs associated with making payments. 
The Fed is bringing into operation a system called FedNow that 
will make 24/7 real-time payments a reality in the United 
States, and I hope that is a system that will promote cheaper 
and faster and safer payments.
    Ms. Garcia. Okay. Where are we on the development of the 
digital dollar?
    Secretary Yellen. The White House is running a task force 
that includes the Federal Reserve and other agencies to look at 
whether or not it is in the United States' interest to develop 
a digital dollar, a central bank digital currency. It is a 
complex situation where there are both benefits and costs, and 
we continue that work, and hopefully, we will be able to 
consult with Congress and recommend a way forward.
    Ms. Garcia. Thank you. And I heard you say that there, was 
it $3 trillion in cuts in the next decade in the President's 
budget?
    Secretary Yellen. Yes.
    Ms. Garcia. And that will be the cuts in the deficit?
    Secretary Yellen. Yes.
    Ms. Garcia. And the number of jobs that have been created 
under President Biden in just, what is it now, 28 months, is 
about 13 million. So while there may be some Americans who are 
unemployed, the reality is that there have been 13 million jobs 
created in 28 months.
    Secretary Yellen. And we have almost the lowest 
unemployment rate in 50 years in this country. Now, inflation 
is too high and needs to be brought down, and that is a top 
priority, but the job market could hardly be stronger.
    Ms. Garcia. Right. And I hear reports that the supply chain 
issues, by and large, are getting resolved, that these are 
getting back on track except for a few outliers. Would you 
agree with that?
    Secretary Yellen. Yes, and inflation has come down 5 
percent from its high. So, while it is too high, it has still 
moved down considerably.
    Ms. Garcia. I actually will submit another question or two 
for you in writing because I am running out of time. But again, 
I just wanted to thank you for your leadership and your 
steadfast commitment and passion in ensuring not only that the 
dollar is always king, but that cash is king. Thank you so 
much.
    Secretary Yellen. Thank you very much.
    Mr. Meuser. The gentlelady yields back.
    We would like to thank Secretary Yellen very much for your 
testimony and for your extended time.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place her 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.
    Secretary Yellen, I ask you to please respond no later than 
July 14, 2023.
    For the second hearing, we will begin at 2 p.m. today, or 
immediately following Floor votes, whichever occurs earlier.
    This hearing is adjourned.
    [Whereupon, at 1:11 p.m., the hearing was adjourned.] 













    

                            A P P E N D I X 


                             
                             June 13, 2023 

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