▶ 0:19:39Yes, ma'am. You're doing okay. The committee on financial services will come to order. Without objection, the chair is recognized to declare a recess of the committee at any time. Today's hearing is titled the annual report of the financial stability oversight council.
▶ 0:20:10Without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. I now recognize myself for a 4-minute opening statement. Good morning, Treasury Secretary Bessant. Welcome. It's an honor to have you with us today to provide testimony as the chair of the Financial Stability Oversight Council. Today, we will examine recent actions taken taken by the FSOC and provide members the opportunity to address any questions or concerns regarding FSOC's 2025 annual report.
▶ 0:20:40As the 2025 annual report makes clear, economic growth is essential for financial stability. In a growing economy with rising incomes, debt burdens fall, American standards of living rise, and the financial system remains stable.
▶ 0:20:56It's encouraging to have financial regulators and policymakers who understand this fundamental reality and aim to foster a regulatory environment that considers how both new and existing regulations alter and impact economic growth. Committee Republicans share the commitment to promoting economic growth through the elimination of unnecessary regulatory burdens, a hallmark of the Trump administration.
▶ 0:21:23Since assuming the presidency just over a year ago, President Trump has built on this critical work that he achieved in his first administration to make further progress in rolling back overly burdensome regulations that stifle innovation in our economic growth. These efforts go beyond reducing just regulatory red tape. They're about fostering an environment where financial institutions can thrive and contribute to the stability and growth of our economy.
▶ 0:21:50I'd be remiss if I didn't remind everyone in the room today of the doom and gloom economic predictions that we heard across the aisle as the Trump administration was sworn in in late 2024. Moody's analytics anticipated that a Republican controlled government would bring 3.5% inflation, 5% unemployment, a recession, and a budget deficit of 6% of GDP.
▶ 0:22:14Since then, Democrats have repeatedly and wrongfully accused Republicans of quote tanking the economy close quote. With most of the official data in the books, these warnings missed the mark by a mile. Inflation came in at nearly 1 percentage point lower than that forecast. The unemployment rate never increased increased beyond 4.5%. No recession materialized and GDP is on track to have three consecutive quarters above 3% growth.
▶ 0:22:44Meanwhile, the budget deficit is on track to fall to some 5.4% of the GDP. These numbers speak for themselves. Under President Trump's leadership and Treasury Secretary Bessant's steady hand, the economy is back on track, reversing the damage of the previous administration. Throughout the 119th Congress, Congress uh and committee Republicans remain steadfast in our goal of reinvigorating the commercial banking system and make life more affordable for our American families.
▶ 0:23:14That commitment is why I introduced the Mainstream Capital Main Street Capital Access Act with Subcommittee of Financial Institutions Chair Andy Bar last month. Our community banking package is designed to revitalize local bank formation, right-size regulations that are intended for far larger and more complex institutions, ensure that community lenders can focus on serving our families, small businesses, and our local economies.
▶ 0:23:41This bill also aligns with the administration's efforts to rightsize regulation and reflects the committee Republicans dedication to ensuring that financial operations focus on safety and soundness with a tailored approach to supervisory complexity. Similarly, our bipartisan housing for the 21st century act addresses housing affordability headon by reducing the burdens that have made homes and apartment construction untenable.
▶ 0:24:06Improving affordability requires directly expanding the housing supply. Paired with Main Street capital access, Americans will benefit from more homes and more affordable ways to finance them. We're grateful for your time today, Mr. Secretary. We look forward to the discussion, and I yield back the balance of my time. I now recognize the ranking member of the committee, Mrs. Waters of California, for a four-minute opening statement.
▶ 0:24:31Uh, thank you very much, uh, Mr. Chairman. Last week, Donald Trump marked his first year in office with consumer confidence plummeting to a 12-year low. That is not a coincidence. Trump promised a so-called golden age. But apparently, he only meant one for his family and billionaire friends. Instead of helping families, Trump's trade wars are driving up the price of goods like groceries, clothing, and furniture.
▶ 0:25:01Small businesses and farmers feel it too. And we all know exactly who is to blame. Instead of lowering cost, Donald Trump has doubled down on chaos and cruelty while handing more power and more freedom to Wall Street. For example, instead of directing the Financial Stability Oversight Council to address threats to our economy, Mr. secretary.
▶ 0:25:27It appears they're using it to do the exact opposite and deregulate Wall Street. While Trump claims he wants to cap credit card interest rates, his administration has repealed rules that curbed excessive credit card late fees and shuttered the Consumer Financial Protection Bureau, the very agency that returned $21 billion to Americans after they were ripped off.
▶ 0:25:55In fact, Trump's team has dismissed enforcement actions against predatory firms even after they admitted to defrauding consumers. Why? Could it be because they gave to Trump's campaign or brought his crypto coins? Or could it be this president is not on the side of the American consumer and never has been? It does not stop there.
▶ 0:26:21Right now, Trump's Justice Department is conducting a baseless criminal investigation into Jerome Powell to bully the Federal Reserve. So, they serve Trump's agenda instead of the American people. Since Trump returned to office, Republicans have looked the other way. While consumer protections were gutted, instead of offering solutions to help families, they have protected corporate profits.
▶ 0:26:49Under this administration, billionaires are winning and hardworking Americans are losing. We've seen this movie before. The same blind loyalty and deregulation led directly to the 2008 financial crisis when millions of Americans lost their jobs, their homes, and their savings. All while Wall Street walked away with bonuses.
▶ 0:27:15Despite repeated demands from Democrats for accountability, Republicans have refused to bring other key administration officials before Congress. That includes CFPB acting director Rush, who must be held accountable for dismantling the CFPB.
▶ 0:27:36This includes FHA director and Bill Py who has unlawfully installed himself and his staff on the board of Fanny and Freddy weaponized mortgage data to try to attack Trump's political enemies and who is incompetently pushing just plain dumb housing policies like a 50-year mortgage.
▶ 0:28:03every turn committee Democrats and I are standing up for America's consumers, defending strong safeguards, fighting corporate abuse and the corruption of the Trump family. It's just common sense. Our economy should work for everyone, not just for Trump, that billionaire circles that he's involved with.
▶ 0:28:27Republicans need to stand up to Trump, defend our regulators, protect consumers, and put families ahead of Wall Street. Anything less is complicity.
▶ 0:28:37The gentleoman's time is expired.
▶ 0:28:38I yield back.
▶ 0:28:39I recognize the chair of our subcommittee on financial institutions, Mr. Bar of Kentucky, for a one minute opening statement.
▶ 0:28:45Thank you, Mr. Chairman. Secretary Bessant, welcome back to the committee. Under your leadership, FSOC has done a terrific job eliminating unnecessary regulatory burdens and promote economic growth. Common sense legislation like the Main Street Capital Access Act is exactly the type of progrowth proposal to promote financial stability that FSOC highlighted in its annual report.
▶ 0:29:06I'm proud to sponsor the Tier Act and the Community Bank Regulatory Tailoring Act that will modernize outdated statutory thresholds that impose disproportionate regulatory burdens on our financial system. This committee along with EPSOC can successfully support our community lenders and allow them to thrive under right-size regulation with this legislation in place. Regulatory tailoring helps to protect the diversity of our financial system, which is itself key to promoting financial stability.
▶ 0:29:33I look forward to working with the Treasury Department as you implement my outbound investment legislation that the president signed into law in December. With you at the reigns, EPSOC has returned to its core values and away from the weaponization and disarray we experienced under the Biden administration. I yield back.
▶ 0:29:49Gentleman yields back. Recognize the ranking member of our subcommittee of financial institutions, Dr. Bill Foster of Illinois, for a one minute opening
▶ 0:29:57Thank you, Chair Hill. Mark Twain is credited with observing that history does not repeat but often rhymes. And those of us who served on this committee during the financial crisis recognize this poem and its tragic ending. We have once again a historically unpopular president fixated on the glory of his overseas misadventures and foreign bailouts. We have once again a multi-trillion dollar asset bubble underpinned by opaque and conflicted financial mechanisms that nobody understands by design being willfully ignored by partisan financial deregulators.
▶ 0:30:28And we have families all over America who despite all the happy talk from the president are having a hard time paying their mortgages and their monthly bills. You can hardly open any financial news source without seeing a discussion of the pending collapse of the AI circular investment buzzle bubble. And that is why we created the EPSOC. And that is why last November, Democrats on this committee sent you a letter as chair of EPSOC to figure out what we'll have to do when the music stops. Your response was insufficient, dismissive, and dangerous to our economy.
▶ 0:30:58I look forward to hearing more from our questions and yield back.
▶ 0:31:00Gentleman yields back. Today we welcome the testimony of the honorable Scott Bessant, Secretary of the Department of Treasury and chair of the Financial Stability Oversight Council. Secretary Bessant, we thank you for taking time to join us today. We'll be recognized for five minutes to give an oral presentation of your written testimony and without objection, your written statement will be made part of the record. Mr. Secretary, you're recognized for five minutes.
▶ 0:31:25Chairman Hill, Ranking Member Waters, and members of the committee, thank you for inviting me to discuss the Financial Stability Oversight Council's 2025 annual report. This report is a culmination of extensive collaboration amongst FSOC members. I'd like to thank them for their hard work and dedication in advancing the president's bold vision for a better America.
▶ 0:31:48Since day one, President Trump has focused on building parallel prosperity, an era of economic expansion where Wall Street and Main Street can grow together. To that end, Treasury has tirelessly pursued progrowth policies to unlock the potential available to all Americans when they are free to save, invest, build businesses, and drive their own economic destinies. The Financial Stability Oversight Council plays an important role in delivering on this agenda.
▶ 0:32:16Too often in the past, we have seen regulation by reflex. Rather than preempting crises, regulators have frequently reacted to them after the fact. They've played the role of a hazmat cleanup team instead of preventing dangerous spillovers in the first place. Regulation by reflex has led to a regulatory myopia that has undermined safety and soundness.
▶ 0:32:39Under President Biden, the bank regulators preoccupied themselves with reputation risk, climate related financial risk, and other risk with no clear nexus to safety and soundness. At the same time, they centered supervision on management and other governance matters that distracted examiners and banks risk managers from the real risk to safety and soundness.
▶ 0:32:59The result predictably was the second, third, and fourth largest bank failures in US history in Besides undermining safety and soundness, regulation by reflex has driven excessive regulation that can lead to economic stagnation and economic stagnation is itself a grave threat to financial stability.
▶ 0:33:22In calibrating regulations, federal agencies must avoid the temptation to create a zerorisk financial system, which would result in what others have called the stability of the graveyard. FSOC should aim to identify vulnerabilities that could lead to systemic crises and encourage the private sector to mitigate those risks before recommending additional regulation.
▶ 0:33:44FSOC should also work with its members to support efforts to avoid or pair back existing regulation that stifles progrowth lending, capital formation, and innovation. And the best way to achieve these goals is by centering economic growth and economic security at the heart of FSOC's agenda. Promoting economic growth and economic security is essential to ensuring financial stability.
▶ 0:34:10Economic growth strengthens household, business, and financial institution balance sheets, creating capital buffers that reduce the risk of defaults and financial stress. and economic security reinforces domestic production capacity, raising living standards while reducing vulnerability to external shocks and supply chain disruptions. FSOC's annual report prioritizes economic growth and economic security accordingly with a specific focus on four policy areas.
▶ 0:34:40Treasury markets, cyber security, regulatory modernization and AI. First, the council is ensuring that the US Treasury market remains the deepest and most liquid in the world. The council is supporting efforts by member agencies to strengthen this market against future shocks, including through the inter agency working group on treasury market surveillance and the market resilience working group. Ongoing monitoring and targeted reforms by individual agencies remain essential to financial stability.
▶ 0:35:11Second, the council is taking action to protect our financial system from increasingly sophisticated cyber attacks. Nation state actors and criminal groups continue to target our financial institutions and infrastructure. To address this risk, the council is supporting expanded information sharing, joint monitoring, and scenario-based exercises, and it is emphasizing the need for regulated firms to manage cyber risk tied to thirdparty service providers.
▶ 0:35:41Third, the council is committed to supporting efforts to modernize supervisory and regulatory frameworks for banks and credit unions. Going forward, regulation and supervision should address material risk, enhance transparency, and reduce unnecessary burdens, particularly for small and community banks. Fourth, the council is prioritizing the responsible use of artificial intelligence to strengthen financial stability.
▶ 0:36:08The council is working with public and private partners, including international counterparts, to enhance system resilience while closely monitoring emerging risk. I will close by highlighting our progress in enhancing the utility of our annual report.
▶ 0:36:23In this year's report, FSOC shifted away from its past approach where nearly every major market and financial sector was described as a financial stability vulnerability by introducing a new structure centered on fostering economic growth and security. We're tuning out the the noise to concentrate on the issues that mattered most for US financial stability. With this overview, I look forward to taking your questions.
▶ 0:36:51We'll now thank the secretary and we will turn to member questions and I recognize myself for five minutes for You made a persuasive case that since President Trump was sworn in that economic growth is a cornerstone of his presidency and you highlighted today as you have in speeches over the year the importance of that Wall Street's doing well but it's Main Street's turn and you'd like to see economic growth expanded into what I always quote
▶ 0:37:21from Steve Casease the rise of the rest where we see uh that economic performance expand across the country. Um, we share that commitment here on this committee by reversing elements of the regulatory framework that have sought possibly certainly well-intentioned the concept of too big to fail but ended up in creating an environment over the past 15 years where community banks are too small to succeed or maybe avoiding your term today.
▶ 0:37:50You chose to use the stability of the graveyard. The committee has worked together on a bipartisan basis to highlight some of the principal actions that we've considered over the past year. Our Main Street Capital Access Act, which we intend to bring to the House floor. We're grateful for your under secretary, Mr. McCernin, who last month joined us as we rolled out that package to talk about how we can collaborate.
▶ 0:38:15Would you take a minute and and from your perspective, how do strong, well-c capitalized community banks and the benefits of tailoring that are in this uh legislative proposal help accomplish faster economic growth and the rise of the rest. Uh Chairman Hill, as I've said, it's Main Street's turn and essential for Main Streets having its turn are the small and community banks.
▶ 0:38:40And I would note that thanks to ownorous regulation and as you and I both say community and small banks became too small to succeed. Tragically, more than of our community banks have disappeared since the great financial crisis. Not during since. There have been virtually no denovo banks created whereas before the GFC there were more than 50 per year.
▶ 0:39:09And small and community banks not only are the anchor for community-based lending, but they provide the bulk of the lending for agriculture, for small real estate loans, and for small business loans. So, a thriving community bank infrastructure and ecosystem is essential. I've met with more individually and in roundts more with more than 200 community bankers.
▶ 0:39:38I've spoken at conferences with more than a thousand and tailoring is essential. I had one banker from my home state in South Carolina with assets of about $200 million tell me that under the previous regulatory regime, she was told that she should be more like Bank America, the second largest bank in the country.
▶ 0:39:59And so it is essential that we have the right tailoring, right levels and right monitoring of these important We thank you for your perspective on that and and to illustrate it in our work we've done on housing in the committee also on a bipartisan basis.
▶ 0:40:20It was noted that banks under $10 billion in size, really the heart of our community banking system, several thousand banks across the country, they make 60% of our one to four family construction loans. Uh, and while banks of all sizes deliver amazing capital access in our economy, at a heart of our main streets, if we want more housing supply, we find that it's really that local grassroots public or privately held community bank that helps lead that.
▶ 0:40:49You mentioned denovos and uh under chairman bar's leadership in our subcommittee uh and on again with bipartisan support we've enhanced in the main street capital access act ways we think that will speed up and make easier to get both deposit insurance raise capital and tell the story about having more dynamic denovo bank formations that as you say have been so slowed by the last 15 years.
▶ 0:41:19Turning to uh digital assets, something that we've talked about quite a bit in the time remaining. Can you tell me uh your assessment of how the regulatory uh process is coming for the implementation of the Genius Act?
▶ 0:41:33Uh the the Genius Act was an important act important piece of legislation for bringing back on the on into the US the reg regulation creation of digital assets and making the United States a national champion.
▶ 0:41:50the the genius act and the stable coins that will be created with that could in fact be an important feature of financing the US government and we are moving the with deliberate speed to uh round out this the house and the senate's intention on that important
▶ 0:42:12thank you very much Mr. Secretary
▶ 0:42:13piece of legislation
▶ 0:42:14appreciate your work and leadership there I now recognize the ranking member of our committee Mrs. waters of California for five minutes for
▶ 0:42:20Thank you very much, Secretary Besson. Uh, in the FPS annual report, you stressed the importance of economic growth to promote financial stability. While you noted many ways you plan to deregulate Wall Street and plant the seeds for another crisis, you said little about the harms of inflation. I find this odd as the president and you have finally began discussing in the media how the price of goods are way too high.
▶ 0:42:48Notably, you mentioned that tariffs may need to come down to lower costs for Americans. So, I have a few questions about this. As a former hedge fund uh manager in 2004, and I don't want you to go into any long details about this, but did you write a letter to investors raising concerns about the impact of tariffs writing that quote tariffs are inflationary? Did did you say that at that time? Yes or no?
▶ 0:43:19Okay. Thank you. Okay. Uh we have a New York Times article that you know agrees that New York Times then last summer when you testified before a Senate committee you said and I quote there is no inflation tariffs are not being passed on to consumers. You are quite you were quite definitive and even claimed that critics had quote tariff derangement syndrome.
▶ 0:43:43Well, uh, those comments are at odds with the statement you made to investors that tariffs are inflationary. Again, I want to be clear. So, just let me ask you, are tariffs inflationary? Yes or no?
▶ 0:43:58According to the San Francisco Federal Reserve with 150 years of data, tariffs or tariffs do not cause inflation.
▶ 0:44:05San Francisco Federal Reserve. Last November, as the Trump administration finally began to realize that affordability issues in America are not a hoax, you told Fox News that the government was going to reduce tariffs on goods like coffee and bananas and that doing so would quote bring the prices down very quickly. Mr. Secretary, why was that announcement even necessary?
▶ 0:44:29If tariffs aren't inflationary and as you and the president like to say are paid for by foreign countries by the foreign country, a tariff on coffee or bananas shouldn't raise the price of either for American consumers. Well, that's the Trump logic, but that isn't reality. It did raise prices across the board. And you know what?
▶ 0:44:52I think you knew back in July also, the real question is why would you even impose a tariff on a good that a country doesn't grow or make as that would only serve to punish the American consumer. Now, as you know, this committee has taken a bipartisan approach to addressing another real affordability crisis, housing. Rents are too high. There aren't enough houses.
▶ 0:45:17However, one clear reason that the housing crisis has grown worse is that you and the rest of the Trump administration levied tariffs on housing production goods like lumber and steel as well as appliances. These tariffs, Congress, Congress, lumber is
▶ 0:45:37reclaiming my time, you don't get to
▶ 0:45:39Lumber is a fiveyear low, Congress.
▶ 0:45:41Reclaiming my time. Then let's just have the fact
▶ 0:45:45reclaiming my time. Thank you. However, one clear reason that the housing crisis has gone worse is that you and the rest of the Trump administration levy tariffs on housing production goods like lumber and steel, as I said, as well as appliances. These tariffs will result in half a million fewer homes built at a time when we need more homes built, not less. Trump singlehandedly made housing more expensive.
▶ 0:46:13And once again, you know it as Exio has reported that you were planning to lift tariffs on housing production uh production goods. In addition, the unlawful campaign the Trump administration has waged with ICE and Border Patrol, terrorizing American communities, has also harmed home construction across America.
▶ 0:46:36So I ask you, Secretary Vincent, will you be the voice of reason in the administration and urge Trump to stop waging a war on American consumers and on housing or affordability and putting the economy at risk? Yes or no? You don't have to
▶ 0:46:54Representative will be the voice. Will you be the voice as will you be the voice of inflation? Will you be the voice of reason? Will you be the voice of a study from university?
▶ 0:47:02Reclaiming my time reclaiming my time. claiming my time was a massed immigration. Mr. Chair, we let in 10 million times from California.
▶ 0:47:1610 and 20 million immigrants. Look at the housing housing stock of working Americans and can you maintain some level of dignity?
▶ 0:47:24Gentleman's time is expired.
▶ 0:47:26No, my time has not expired.
▶ 0:47:27Your time has expired. And the gentleman
▶ 0:47:29The gentleman took up my time. Mr. I think you should recognize that, Mr. Chair. The gentleoman's time has expired. The gentleoman's time has expired. Chair parliamentary. The chair recognizes the vice chairman. Mr. Chair, parliamentary inquiry.
▶ 0:47:46Go right ahead. But I would not expect you to do that.
▶ 0:47:52Thank you, Mr. Chairman. And I will grant very briefly anytime that you feel like you need to address anything.
▶ 0:47:58Again, I think the ranking member does not understand.
▶ 0:48:01Uh, Mr. Secretary, I'm sorry. The gentleman will suspend. There's a a parliamentary inquiry from Mr. Chairman.
▶ 0:48:07Mr. Chair, will you enforce the rules of this committee so that the time belongs to the questioner and prevent filibusters from taking time away? And if those filibusters by the witness do take time away, will you allocate additional time?
▶ 0:48:21I will enforce the fiveminute rule.
▶ 0:48:24The gentle
▶ 0:48:25I want my time back.
▶ 0:48:26The gentleman from Michigan is I grant briefly anything that you need to feel you need to address.
▶ 0:48:33I I believe the ranking member does not understand the definition of generalized inflation versus one-time price increases. I would also note that housing, especially for working Americans, a Wharton study, has shown that the mass unfettered immigration, adding 10 to 20 the million new people demanding housing, Congresswoman, is what caused a great deal of housing inflation for working Americans. So you and the Biden administration should be
▶ 0:49:03Which is also which is also why we are seeing rents. There was just a recent media story on this. rents are going down partially because of that enforcement. So I Mr. Secretary
▶ 0:49:13is supply and demand continues to work.
▶ 0:49:16I've got a number of issues I got to hit uh very briefly here on FSOC. I need to talk then Burma and uh 3%. Um you talked about with the uh chairman about regulators using tailored market approach tools. How are you ensuring that FSOC's current work continues to prioritize activity- based transparent analytically rigorous approach grounded in costbenefit analysis and coordination with functional regulators when evaluating potential risks in non-bank financial markets?
▶ 0:49:45uh that is that is done f primarily for small banks through the office of the control of the currency and the FDIC the and those chairs are intent on tailoring the rules for small banks so that we do not have another 50% decrease in mainstream
▶ 0:50:05All right. Thank you. Um you you outlined as part of the four goals protecting uh number two was protecting from cyber attacks. Um we have seen a rise in those uh cyber attacks and scam centers in Burma.
▶ 0:50:20Um and I I applaud you and and Treasury for uh for some of your work in that uh including uh sanctioning North Korean individuals selling weapons to the Burmese military regime um as uh well as the Democratic Korean benevolent army Burmese army group that has organized these scam centers. Uh however, last week it was reported that Iran was secretly shipping vast amounts of jet fuel in Burma.
▶ 0:50:46Um and uh I need to move through this quickly here, but uh that's why last year I introduced a bipartisan legislation that would specifically require the president to determine whether to impose stronger blocking sanctions on Myanmma Oil and Gas, uh Myanma Economic Bank, and foreign persons operating in the jet fuel sector of the Burmese economy.
▶ 0:51:06Um, I I read recently that Treasury responded to Reuters report by noting that Orion's quest for quote new markets is a sign that President Trump's policies are working, which I would agree. Uh, I'm also aware that Burma's military leader uh leaders have attempted to gain favor with the president, especially when it comes to lowering tariffs levied on his country. Uh, is uh this is something that simply cannot uh happen.
▶ 0:51:29Uh I represent a significant Rohingya uh population and know that the active bombing that is going on is unacceptable and I believe we must continue to impose strict sanctions on the Burmese military rulers.
▶ 0:51:43What tools can Treasury use to punish both Iran and Burma for violating both US and other Western country Well, with respect to Iran, uh, President Trump upon entering office instructed US Treasury to implement a maximum pressure campaign and we saw the fruits of that campaign in December that as the Iranian economy has collapsed. We had a large bank collapse there.
▶ 0:52:10The central bank was forced to bail it out created inflation and the Iranian the brave Iranian people have taken to the streets. uh we continuously monitor trade between two countries like that. Uh the good news would be Iran has a significant shortage of dollars to buy whether it is weapons or goods for the people or to pad the Swiss bank accounts of the Iranian regime.
▶ 0:52:40Let we we've got to keep the pressure up on Iran, but also that pressure on the Burmese Hutah, please. Um uh lastly, I'd be remiss if I did not thank you in public for uh your uh discussion of a desire to lower deficits to 3% of the GDP. I've introduced along with 14 of my colleagues from the bipartisan fiscal forum that I chair with Congressman Scott Peters out of California that urges the House to achieve this 3% goal by 2030.
▶ 0:53:08Uh a tangible achievable goal that is desperately needed and we're building consensus here in the House. I know you and the administration take the ticking debt bomb seriously and I hope that to continue this conversation with you. I don't know if you can in 10
▶ 0:53:23I look forward to working with you on that and I would note that the deficit to GDP calendar year 2024 7% highest not at war not in recession calendar 2025 down to 5.4%.
▶ 0:53:35Thank you.
▶ 0:53:36Chair recognizes the gentleman from California ranking member of our capital market subcommittee. Mr. Sherman, you're recognized for five minutes. I want to agree with the gentleman from Michigan that we need to impose those sanctions on the Myanmar regime and protect of course the Rahingo minority to the extent we can. Um FSOC has to define what is systemic.
▶ 0:54:00Uh I for one think that we shouldn't be focusing on the assets but rather the We didn't have a problem in 2008 because the banks had too many assets. we had a problem because they had too many Um, so I don't see how most
▶ 0:54:16Congressman, that's incorrect. Ben Ben Bernani, then Fed chair said, "Could you please tell me what these assets are?"
▶ 0:54:21I'm going to reclaim my time. Uh, regardless of that, I'm going to ask you whether you um not going to ask you to agree with me. I'm going to ask you to agree with your predecessor, Secretary Minutuchin. uh during the first Trump administration uh that Secretary Minutian promulgated interpretive guidance that pri uh that prioritized an activities-based approach to systemic risk regulation over an entity approach.
▶ 0:54:47Secretary Benson, you have indicated that you want to kick off a review of FSOC's activities and processes. The FSOC improvement act led by uh my colleague Dr. Foster, which I've co-sponsored, as you know, would codify an activitiesbased approach uh to systemic risk regulation.
▶ 0:55:07Um do uh does the FSOC plan to revert to the 2019 guidance of the first Trump administration regarding uh a definition of a CIFI?
▶ 0:55:21Yes, we prefer an activities-based approach rather than an institutionalbased approach.
▶ 0:55:25Thank you. want to pick up on the ranking members uh comments uh about whether tariffs cause inflation. You know, economists can say when the price of something goes up by 20%, that isn't inflation. It's a onetime price increase, but out in my district, when the price of something goes up by 20%, we call that unaffordability.
▶ 0:55:53And to say it's not inflation uh is sophistry. I'll point out that every time Democrats had envir and regulations that increased uh a company's cost, people in this room said that's going to cause inflation. Well, tariffs clearly have to be paid by companies. And if environmental costs are passed through, you can be sure tariffs are passed through. The ranking member asked the question, why a tariff on coffee and bananas?
▶ 0:56:23I think the answer is obvious. To make our tax system more regressive uh to uh pay for the big bad beautiful bills uh uh uh cuts in taxes for billionaires and to fund ICE.
▶ 0:56:38I used to head the largest t sales tax agency in this country and we knew the sales tax was regressive but we knew it would be even more regressive if we impose taxes sales taxes on food and that is what you do with a tariff on bananas and coffee. Uh Mr. Secretary, we live through the uh uh of 2008 when powerful men lose money. They now want a government bailout.
▶ 0:57:07Uh does the Treasury Department or uh the various components of the FMOC have the authority to bail out Bitcoin?
▶ 0:57:17Could you please elaborate what exactly does bail out bitcoin the banks of this country to buy more bit to buy bitcoin or change banking regulations uh so that uh uh uh they're encouraged to do so in terms of uh the reserves that they're otherwise required to have. Uh again that wii with within the context of asset diversification within banks they could hold many
▶ 0:57:44They can and there are different uh but uh uh do you have the authority to order banks to buy bitcoin or to invest US tax dollars in bitcoin or trumpcoin?
▶ 0:57:53Uh I I am secretary of the treasury. I do not have the authority to do that and as chair of fsock I do not have that authority. So, we're not going to see our tax dollars invested in crypto
▶ 0:58:07Well, why would a private bank be your tax dollars, Congressman? Uh,
▶ 0:58:10excuse me. I'm now asking about the money of our taxpayers, which you manage as Secretary of the Treasury. Is it going to be deployed into crypto assets?
▶ 0:58:19Uh, we are retaining seized Bitcoin.
▶ 0:58:23That's not exactly taxpayer money. You collect a lot of taxes this month.
▶ 0:58:27No, that that is an asset of the US. an asset of the US. It was Are you going to invest in
▶ 0:58:33and I I will point out,
▶ 0:58:34Mr. Secretary, reclaiming my time, are you going to invest from asset seizure that 1 billion of Bitcoin was seized, 500 million was retained and that 500 million has become over 15 billion.
▶ 0:58:47Gentleman's time is expired. The gentleman from Oklahoma, the chair of our monetary policy task force, Mr. Lucas, you're recognized for five
▶ 0:58:56Thank you, Mr. Mr. Chairman, and thank you, Secretary, for being here today. You've said that the current deposit insurance framework is a vulnerability for the banking system that there is a competitive imbalance that favors large banks and that this increases the risk of bank runs and erodess depositor confidence. Can you talk more about a targeted expansion of deposit insurance for non-interest bearing transaction accounts and would that strengthen financial stability within the system?
▶ 0:59:28Congressman, thank you for that very important question because it is my belief the because uh there is the belief that big banks the depositors will not lose money during a financial crisis as we saw in 2023 assets leave small banks and much of that is what is known as the payroll account.
▶ 0:59:50So I think it is very important for small banks to have one non-interestbearing account that can uh have a much higher level of insurance so that they are able to retain deposits during a stress period. This is one of the reasons that we have seen assets leave small banks is one of the reasons that we have seen 50% of small banks disappear.
▶ 1:00:14Continue along this line of inquiry. Mr. Secretary, a robust banking system with healthy banks of all sizes reduces systematic risk across the entire system. Why is it important that Congress act now on targeted deposit insurance reform, not only for Main Street, but also our financial
▶ 1:00:32Well, again, deposit volatility, which is what you're referring to, is deposits moving during a stressed time, uh, does not benefit anyone in the long run. And one more question on this perspective. Congress uh should look at giving FDIC authority to raise the coverage level for non-interest bearing transaction accounts to an appropriate amount that is data-driven and put smaller institutions on a level playing field with larger banks.
▶ 1:01:01How would our banking system be safer with a narrow targeted expansion such as the one I've suggested? Again, it would uh permit the small and community banks to continue competing. It would get credit to our main street and it would stem deposit flight during a period of stress which is uh one of the most or one of the biggest threats to financial stability. focusing on a slightly different subject.
▶ 1:01:30Sometimes something I've focused on as chairman of the task force on treasury monet resilience has been strengthening marketing market stability and liquidity. We saw occasional bouts of treasury market volatility last year. How would reforms to banking regulations like the liquidity coverage ratio and stress tests incentivize market intermediation for banks and improve market stability?
▶ 1:01:56Again, Congressman, wonderful question that it brings more of our Treasury market onshore and as you said, there were periods of stress last year. The market successfully navigated those. At the end of January, we had the third highest volume in the Treasury market and the bid ass spreads. Very important for the financial well-being of the American people who were invested in money market funds, in bond funds, and their retirement funds.
▶ 1:02:23They have stayed right in the center line and we are at a five-year low in bond market volatility.
▶ 1:02:30Thank you, Mr. Secretary. I yield back, Mr. Chairman. Thank you.
▶ 1:02:34Gentleman yields back. Chair recognizes the gentleman from New York, ranking member of our foreign affairs committee. Mr. Meeks, you're recognized for five
▶ 1:02:41Thank you, Mr. Chairman. Secretary Besset, uh, if I'm not mistaken, you were working in the financial service industry during the late 1980s, correct? I was. Thank you. And I'm wondering, do you recall or you're knowledgeable of the Keading Five scandal back then?
▶ 1:03:05Uh, yes sir. And I will point out that I was No, no, no. I will point out that time I have limited time. I identified
▶ 1:03:12gentleman is from Mr. Secretary. It's the gentleman from New York. So I I just want to make sure everyone knows who doesn't know that the Keading Five scandal involved five US senators accused of pressuring the Federal Home Loan Bank board to expedite and give more consideration to the case of Charles Keading Jr. who ran the California based Lincoln Savings and Loans.
▶ 1:03:35It led to a 14-month investigation, unveiling how five US senators and staff ended up with more than $1 million in contributions, four trips to the Bahamas, and all expenses paid stays at resort hotels. Following the scandal, the industry saw sweeping regulatory changes that was launched by then President George HW Bush. Now, Mr.
▶ 1:03:58Secretary, I'm sure you can agree conflicts of interest and improper influence by US elected officials over bank regulators weakened supervisory independence and and ultimately impose they ultimately impose massive losses on consumers and taxpayers. I think that we can all agree upon that.
▶ 1:04:21And as we know the basic lessons from the postkeing reforms still applies today when the office of the controller of currency the OC deciding to get a bank charter. I think we can stimulate that. Now Mr. Bess as our nation's treasurer.
▶ 1:04:40I'm sure you also know that a foreign linked investment firm tied to the you at the United Arab Emirates government quietly bought about half of the Trump family's crypto company, World Liberty Financial. And at the very same time, the president of the United States was dealing with that country on foreign policy.
▶ 1:05:05Now, Eric Trump, the president's son and co-founder of World Liberty Financial, said, and I quote, "I'm not going to get into who the investors are, but I've got some pretty meaningful investors." End of quote. Lack of transparency. And it didn't end there. When Trump fans brought the tokens, they thought they were getting the deal of a century.
▶ 1:05:33But what they didn't know was that only Trump and his sons had the sole power to decide who can sell the token and when. Today, the price of the token has fallen over 50% and the Trump fans who broke who bought the token are now begging to get out. Now, I'm I'm not I'm not making this up. I'm not making this up.
▶ 1:05:58You can see it for yourself on the World Liberty Financial Discussion uh forum. Yeah. Yourself, Mr. Secretary. So there's no this is no longer just about a shady crypto deal or a possible gift when a foreign linked investor is putting hundreds of millions of dollars into a company controlled by the president's family and
▶ 1:06:29at the same time this president is conducting foreign policy with that country. You know what that cause or creates? It creates a national security concern. So I'm not going to ask much of you, Mr. Secretary.
▶ 1:06:45I just want to know whether you will commit to pause and heighten and the scrutiny of any bank charter or licensing application at the OC connected to the world liberty financial until all of these conflicts of interest and floren influence reviews are completed and shared with the United States Congress.
▶ 1:07:14All I need to know is will you halt it
▶ 1:07:18and do a complete investigation and scrutiny of this licensing uh uh application? all you have to ask is yes or no. Uh, no. Congressman, the
▶ 1:07:30all you have to ask the OC is an independent entity and I would No, you traveled to Venezuelire. You you you cannot erase what you did.
▶ 1:08:01He's the one that went past your time, Mr. Chairman. He did not answer my question and he wouldn't order.
▶ 1:08:07He had six seconds left to try to answer your question and the
▶ 1:08:11It was a yes or no.
▶ 1:08:12It was a yes or no answer. I asked him, "Will he or yes or no?" Recovering for the president.
▶ 1:08:21Well, stop being his flunky.
▶ 1:08:24And gentlemen, gentlemen,
▶ 1:08:26he's talking to me. I'm responding to 2006 trip to Venezuela. Stop covering for the president. DON'T BE A Work for the American people. Trip to Venezuela. Work for the American people. DON'T BE A COVER UP FOR A MOB.
▶ 1:08:43MAYBE YOU'RE GOING to talk not recognize Mr. Bessant. Please. I recognize the gentleman from Texas. Mr. Sessions. You're recognized for 5
▶ 1:08:56Mr. Chairman, thank you very much. Uh, Secretary, welcome to the Financial Services Committee. I'm delighted that you're here. Mr. Secretary, we've talked with you about a broad range of things, not necessarily related to ESOC and your chairmanship there. But I would like to, if I can, uh, talk with you something about the word public confidence. And the word public confidence does have a lot to do with the financial stability of the country.
▶ 1:09:26Uh there are reports in social media that have shown and I don't want to put you in a position where you cannot answer this because of anything that you've learned in Minnesota with the $9 billion worth of fraud.
▶ 1:09:42But there are social media accounts that show people who are at a Minneapolis airport baggage full of up to a million dollar cash attempting to exit the country.
▶ 1:10:01And I have engaged several people who have been who have worked at Treasury to ask their opinion about that that not the relationship between how they got the money but just that it's going out of the country and following the law.
▶ 1:10:18Can you tell us or give this committee your viewpoints about people not using some other system but taking cash up to a million dollars through our airports to leave the country?
▶ 1:10:35Yes. So that that is a DHSTa function. We having learned of this we are attempting to integrate our fence in better with those forms. What we are trying to do the at treasury via fencen is to keep money from being wired out of the country through what are called money service businesses.
▶ 1:10:59So, we have issued a geographic targeting order bringing down the amount of reporting to $300 and also uh asking on the form if someone is wiring money out of the country, are you receiving public
▶ 1:11:15These are all very important issues and as you did talk about Department of Homeland Security uh does have a role in this. I would suggest to you that Treasury probably has a philosophy about the role of the American dollar in world economy. The stability that we have, the use of wanting to make sure that the dollar remains that dominant use.
▶ 1:11:41But I would would tell you that I will be very interested if you uh have a working group on this of us making oursel aware because it is an issue to people who simply see social media. We
▶ 1:11:56we look forward to working with you on that, Congressman.
▶ 1:11:59Thank you, Secretary. Mr. Secretary, as you have alluded to and as the discussion here has been about banks, community banks, the ability that they have, you recognize because you spoke directly to it about the stress that they are placed under as opposed to bigger banks.
▶ 1:12:18Could you please talk to us about what you believe the role is of home ownership, which is increasingly a part of the political discussion and debate and discussions for members of Congress back home, of solving our home ownership problem. And we've got, you've got almost a minute. Boy, I'm giving you a lot of time. and interest rates uh as they correspond to people being able to buy their own homes.
▶ 1:12:48Good. Well, thank you. And I I would note that I was also a finan a banks and financial institutions analysts for 35 years and was instrumental in working with the government to bring down American Continental and Sunstate Savings and Loans which benefit that which were the direct the beneficiaries of the Keading Five.
▶ 1:13:10uh that bringing getting small banks lending again, we need to get them back into the mortgage market. No one knows their communities like small banks and that having moved into the the larger system.
▶ 1:13:29uh the strength and breadth of the US mortgage market is choice and we have lost the choice in the small banks and I think we need to get them back into the housing lending business and we are seeing it's a tragedy that the average firsttime home buyer is now 40 years old 40 years old.
▶ 1:13:50Well, I had a discussion last night with the realtors uh about their importance in this process too. So, I'd like to once again make sure we see community banks and realtors and homebuilders all have an interest in this. Thomas, I want to thank the gentleman.
▶ 1:14:05I thank gentlemen from Texas. Before we move on, I want to remind everyone participating today to uphold the house's rule of decorum. And I'd like to remind everybody to respect the fiveminute rule. And uh having been a witness before Congress before in my executive branch days uh it is important to note that our members can spend their five minutes and and never ask a question or not. It's their five minutes. So let's try to be mutually respectful of each other.
▶ 1:14:32And I now recognize the gentleman from Massachusetts, the ranking member of our digital assets, financial technology, and artificial intelligence subsequently, Mr. Lynch. Massachusetts. Five minutes.
▶ 1:14:42Uh thank you, Mr. Chairman. Mr. Secretary, based on uh early reports uh and this is an analysis done by public citizen and subsequent news reports when the Trump administration came in to office.
▶ 1:14:59They immediately took steps to either halt, dismiss, or roll back over 100 enforcement actions and investigations against corporations in his first two months in office with a very heavy concentration on financial services, consumer protection, and cryptocurrency, totaling over $3.1 billion in potential penalties avoided.
▶ 1:15:25as a member of the Financial Services Oversight Council, is that a concern that you have raised within within the council all these immediate dismissals of of cases against financial services firms?
▶ 1:15:41Well, I think you're the Biden administration had an extinction.
▶ 1:15:45Sir, please be responsive to my question. I I am I am trying sir and this back and forth is just eating your time that the
▶ 1:15:55the Biden administration had an extinction policy for crypto.
▶ 1:15:58This is when Trump came into office. I'm going to go to the next question because you're not you're not you're not your answers on Mr. Chairman. The answers have to be responsive if we're going to have a if we're going to have a serious hearing here.
▶ 1:16:09Well, the questions have to be serious. Well, those are 100 dismissals of of cases that the Trump administration came in and executed in their first weeks in office like that. All of a sudden, all these crypto cases went away. The SEC was dropping cases. The Consumer Financial Protection Bureau dropping cases and and
▶ 1:16:33look, you're on you're on with all all the heads of these agencies. This should be a serious question to you. Trust should be a serious question and a serious issue for the financial services industry, especially as a secretary of the treasury. That's an important No, this is my time. I haven't asked any more questions.
▶ 1:16:52I haven't asked you any more questions.
▶ 1:16:54It's the gentleman from Massachusetts.
▶ 1:16:55I'm trying to get to my next question.
▶ 1:16:57Could you speak a little louder? I can't hear you.
▶ 1:16:59Yeah. Okay. I I I might I might.
▶ 1:17:02Mr. Secretary, let let Mr. Lynch proceed with his time. put put four seconds back on the clock, please.
▶ 1:17:11Thank you, Mr. Chairman.
▶ 1:17:12Yes, Mr. Lynch.
▶ 1:17:14I just want to do a comparison of the FSOC reports. Let's go back to 2024 and then we'll talk about the current report. In the previous report, uh the the members of EPSOC expressed serious concerns about related to potential risk to financial stability regarding the lack of explanability and high complexity of AI and uh the approaches
▶ 1:17:44that have a potential to heighten financial instability especially in the areas of bias and discrimination in credit decisions. That was in 2024. Your report in 2025 focuses on removing regulatory impediments.
▶ 1:18:03So, so in 2024, we were concerned about consumer protections and now under your we're concerned with eliminating regulatory impediments. the the dangers and and that was a that was a report during a time where the chairman and I were were co-chairs of an AI uh task force. Those dangers haven't gone away in reality.
▶ 1:18:34Those dangers are still as severe for the American consumer, but they are absent from FSOC's report. So it's obviously you've you've eliminated or or dropped that priority uh as an issue for FSOC. So can you explain the the change from protecting this to consumer and now eliminating
▶ 1:18:59We we are charged with financial stability and we are focused on leveraging AI strength and the financial system resilience uh but with economic growth and a security lens. On the issue of explanability, any any concern about that in the use of AI in the financial services industry?
▶ 1:19:22I'm sorry, what was the question?
▶ 1:19:25The issue of explanability, how when people apply for credit and are denied, we don't have the ability for AI to explain why they were denied. Is that a is that a concern? I mean, we are talking about the trust within the financial services industry. It could be a concern, but we don't view it as a priority for financial stability.
▶ 1:19:45That That's the truth. That's That's the truth. Okay, Mr. Chairman, I yield back. Thank you.
▶ 1:19:50Gentleman from Massachusetts yields back. Recognize the gentleoman from Missouri, Miss Wagner, who chairs our capital markets subcommittee. You recognize for five minutes.
▶ 1:19:59I uh thank you, Mr. Chairman, and Secretary Bessant. I find your answers to be quite clear, substantive, and as always, well informed. Thank you for being here. Early, sir, in your tenure as Treasury Secretary, you said, and you touched on it here today, and I quote, "For the last four decades, Wall Street has grown wealthier than ever before, and it can continue to grow and do well.
▶ 1:20:25But for the next four years, it's Main Street's turn. It's Main Street's turn to hire workers. It's Main Street's turn to drive investment. And as Main Street's turn to restore the American dream and as chair of the capital markets committee, I could not agree more, sir.
▶ 1:20:49For too long, outdated securities laws have limited everyday Americans ability to invest in innovative startups. At the same time, the number of companies listed on public markets continues to shrink.
▶ 1:21:04And as a result, everyday Americans in Missouri's second congressional district that I have the honor to represent have fewer opportunities to invest toward major life goals, including owning a home, paying for their children's education, or or securing a a dignified retirement.
▶ 1:21:27Main Street businesses across the Midwest and other regions of our country are overlooked as venture funding and capital raising opportunities remain largely concentrated on the coast. That is why I have made it a priority to facilitate capital formation and empower entrepreneurs and b uh small businesses across America. Just weeks ago, Mr.
▶ 1:21:48Secretary, December 11th, to be exact, the House passed My Invest Act, a bipartisan package of 22 bills focused on three goals. Expanding access to capital for small businesses, increasing opportunities for everyday investors, and strengthening our public markets. Capital formation is the lifeblood of American economic growth and prosperity. Our capital markets are indeed the deepest and most liquid in the world.
▶ 1:22:18and the invest act will ensure that they remain among the greatest strengths for decades to come. I look forward to continuing to work with you uh and the administration to advance these priorities and unleash the power of our capital markets. Secretary Bezant, in your view, what are the largest barriers to capital formation for small business?
▶ 1:22:43Congresswoman, I look for Congresswoman, I look forward to working with you and I I think I would bifurcate that most small businesses are individuals and
▶ 1:22:54for many individuals. We we have learned that most of them 38% of Americans do not own equities. So with the Trump accounts which will give every child a $1,000 seed finance, every American the will will be invested in a lowcost index fund. Every American will have a share of our great innovative economy.
▶ 1:23:18For small businesses, it is often I would say it is a duality of regulatory and access to finance. Americans are entrepreneurial. We want to get out and form businesses.
▶ 1:23:32And I believe that with the confidence of being able to do that and what President Trump's agenda has done, businesses now have tax certainty with the one big beautiful bill that 100% deductibility of equipment of factories and of a structures. We have energy certainty with our energy dominance.
▶ 1:23:54And we have regulatory certainty as we are pulling back the regulatory morass that was highly highly uh harmful to both small and large
▶ 1:24:06Absolutely. And as global competition for capital intensifies, the United States risks falling behind if our public markets also I must say uh remain costly or inaccessible for growing companies. How important is capital formation reform? like the reforms included in the invest act. Again, 22 bipartisan bills that we brought to the floor with the support of 87 Democrats.
▶ 1:24:34How important are these reforms to maintaining US economic leadership and long-term growth quickly, sir?
▶ 1:24:39Uh, Congresswoman, they're they're vital. And what we have seen, as you correctly outlined, is since the early 2000s, the number of public companies available for Americans and indeed international investors to uh invest in has greatly diminished and it has developed into a network of private
▶ 1:24:59Thank you. My time is expired. I have others that I will I will put forward for the record and I yield back.
▶ 1:25:05Gentleoman yields back. Chair recognizes the gentleman from Texas, Mr. Green, who's the ranking member of our oversight and investigation subcommittee. Screen, you're recognized for five minutes.
▶ 1:25:14Thank you, Mr. Chairman. Mr. Secretary, I ask that you recall liberation day, the day that President Trump announced tariffs. I ask that you recall that when he made this announcement, there was a sharp decline in the stock market. In fact, when he made the announcement, the NASDAQ NASDAQ experienced a 6% decline.
▶ 1:25:41The S&P 500, a decline of 11%. I ask that you also remember that some days later, the president announced that he was going to pause those tariffs and when he indicated that he would pause the tariffs, the market then moved Do you recall these things, Mr. Mr. Secretary? I
▶ 1:26:05I recall them very well, Congressman.
▶ 1:26:07Thank you. And I ask that you also recall, please, Mr. Secretary, that hours before the president announced the pause, he indicated by way of Truth Social, he has a more than 50% ownership in Truth Social.
▶ 1:26:27It's a great time to buy That was his announcement on Truth And in so doing, Truth Social had a value that moved up.
▶ 1:26:47In fact, Truth Social, which the president has a majority ownership, went up by $415 Now, here's what's interesting in this When he made that announcement and said it's a great time to buy DJT, that happens to be the symbol for his stock DJT.
▶ 1:27:13I ask you kindly and as one professional to another, Mr. Treasury Secretary, do you think that this should be investigated? The president's stock being linked to his truth social message and that stock having gone up by some $415 million in a single day. In a single day. And this is a stock that was doing very poorly uh prior to that.
▶ 1:27:42hadn't done a hadn't had a lot of Do you think that this should be
▶ 1:27:47Uh, no sir.
▶ 1:27:50Kindly explain to me why we would not investigate the president making such an announcement as it relates to his stock and then reaping some $415 billion million dollars as a potential capital. Well, all all Americans benefited from the rebound in the markets that day. And in fact, the rebound in the market after that was the fastest in market history. Yes, it was. But here's what's interesting about your statement.
▶ 1:28:19You did not note, Mr. Secretary, that DJT had probably the sharpest increase on that day, 415 million, and that the president said by DJT. And that's what
▶ 1:28:36I'm unfamiliar with the exact text. Did he say by DJT or did he said now now is now is a good time to buy and and have a salutation DJT.
▶ 1:28:49Yes, sir. DJT immediately following now is a good time to buy.
▶ 1:28:53Well, those are his initials as you
▶ 1:28:55They are his initials, but it's also Do you agree that those are the symbol? That's the symbol for his stock.
▶ 1:29:02I believe it is.
▶ 1:29:03Okay. And and do you believe that such a thing done openly and notoriously uh should not be investigated? Is that what you're telling the American people?
▶ 1:29:12Uh sir, I I believe that anything that is widely disseminated is widely disseminated and available to everyone.
▶ 1:29:21Well, it was available to everyone, but what he said related to his stock could relate to something else, but to his stock. And here's the point, Mr. President. Mr. Excuse me, Secretary. Here's the point. I believe that any other president making this kind of move is almost a hustle.
▶ 1:29:44I don't want to say that about the president, but making this kind of move would at least be If you're going to allow the president to do this openly and notoriously, $415 what you're doing is giving him a license to move markets at will, make announcements, and reap benefits.
▶ 1:30:09He is literally hustling the United States stock market. I yield back.
▶ 1:30:16Gentleman's time to yield back. gentleman from Kentucky, Mr. Bar, chairman of our financial decision subcommittee, you're recognized for five things. Thank you, Mr. Chairman. Uh, Mr. Secretary, you came here to testify about financial stability and threats to financial stability. I think what we're learning from this hearing, Mr. Secretary, is how much Trump derangement syndrome is a threat to emotional stability.
▶ 1:30:46Um, there's been a lot of lectures uh directed at you today. Would you like to clarify anything or respond in any way to any of these lectures?
▶ 1:30:55I I I would just like to say that financial stability analysis centered on identifying vulnerabilities in financial institutions or markets that might disrupt the provision of credit or liquidity, disrupt other sectors, and lead to significant losses across the financial stability. This is what FSOC is chartered to do.
▶ 1:31:16Thank you. Uh, Secretary Bessant, uh, I'd like to applaud President Trump and the Treasury Department for announcing Trump accounts. Uh, I I do believe these will this will kickstart the American dream for children born between 2025 and 2028 with a $1,000 investment from the US Treasury. Uh, and I'm personally grateful because my daughter Virginia was born in October and will be a beneficiary of these Trump accounts.
▶ 1:31:42Uh, not only will this ensure that American children born in this time frame will participate in the deepest, most liquid capital markets in the world, but it it importantly will also teach this new generation about the power of compound interest and will help them develop financial literac literacy skills which will make them owners and investors um and will improve their financial outcomes throughout their lives. Can you touch on the impact of these Trump accounts and how it will help this new generation achieve financial independence?
▶ 1:32:13And as you talk about that, you know, we have a mayor of New York that espouses socialism, members of Congress who espouse socialism. How how will these Trump accounts uh impact this new generation of Americans view of financial independence versus socialism? Again, it it history would show that people who own a piece of the action uh do not want to bring down the system when you are part of the system.
▶ 1:32:38As I said, 38% of Americans, American households, they do not participate in the equity market. Uh many do many directly, many through 401ks, but over time, the goal here should be to have everyone own a piece of the American economic engine. We at Treasury working with many people uh are going to work on financial literacy. This will be one of the greatest real-time experiments in history.
▶ 1:33:06You are bringing Wall Street to Main Street and Wall Street will work for Main Street instead of the other way
▶ 1:33:11Well, on behalf of my three-month-old uh daughter, Virginia, and millions of American uh children, thank you uh to you and President Trump for for bringing financial independence to the American people. I agree with you that economic stagnation is itself a threat to financial stability.
▶ 1:33:26That's why uh we're pushing this uh Main Street access to capital bill uh which will provide for more denovo charters of community banks, the tier act, the community bank regulatory tailoring act which would modernize these statutory thresholds to remove the static nature of the thresholds and allow for more diversity and growth in financial institutions.
▶ 1:33:48Can you discuss how indexing these static uh regulatory thresholds will allow banks of all sizes to to grow and how that will in turn um help financial
▶ 1:34:00Yep. So, Congressman, I I've said very often that un regulatory straight jacket that emerged that pushed lending outside the traditional banking system, small banks became uh too small to succeed. And I think we have to uh fix that and tailor it to the risk for people who know their communities who are concentrated geographically. And if you were in Iowa, you are concentrated in farming.
▶ 1:34:28If you were in Florida, you are likely concentrated in real estate and tourism. And we need to make adjustments.
▶ 1:34:33And that that that will promote diversity in the financial system, which in turn will help with financial stability. Final question, Secretary Bess. And at the end of last year, uh, President Trump signed into law the NDAA, which included my legislation, which will be overseen by the Treasury Department, the Comprehensive Outbound Investment National Security Act, uh, also known as the Fight China Act.
▶ 1:34:53The Coins Act will ensure that Americans are not unknowingly funding the military-industrial complex of our adversaries by codifying, enhancing the Trump administration's existing outbound investment security program. Can you discuss the Treasury uh Department's new obligations under this bill and how do you intend to implement it to prevent capital flows into Chinese military-industrial complex companies?
▶ 1:35:14Well, I want to thank you for this important piece of legislation. It it is another arrow in our quiver and I can tell you as I am the lead negotiator the with China on the economic front. It is very useful for me to be able to say well I'm happy to refer things to the
▶ 1:35:30Gentleman's time has expired.
▶ 1:35:31Great to work with you on that. I yield back. Gentleman's time has expired and I recognize the ranking member of our housing and insurance subcommittee, Mr. Clever of Missouri. You're recognized for five minutes.
▶ 1:35:40Thank you, Mr. Chairman. unfortunately, uh this is um an embarrassing kind of a hearing. I I've been on this committee 20 21 years. We've had all kinds of conflict.
▶ 1:35:58In fact, I was in here when uh the Federal Reserve chair along with the Treasury Secretary and many others came in to tell us what was what was going to happen if the Asian markets when the Asian uh markets opened uh after the collapse of uh the u uh economics of our of our nation. And I've learned that you you you can't make honey and sting at the same time.
▶ 1:36:27The question is whether we came here today to to sting uh or whether we came here to talk about issues that are of importance to um the nation. I got a little little grandson. I hope well he was in school today with hate friend. So I've seen this u so far.
▶ 1:36:49Um what I would like to talk about is your opinion uh of dual mandate uh stable prices maximum uh uh employment. Um I just I would like to get your on that issue.
▶ 1:37:15Is is that the the the creators of the Federal Reserve um and then the mandate was that a The the Federal Reserve Act of 1913 which which created the Fed and then we have morphed into the dual mandate and the dual mandate is a very delicate balance between maximizing economic growth while maintaining the low levels of inflation.
▶ 1:37:44Well, um, so then you believe in, I'm assuming, the independence of the Federal Reserve.
▶ 1:37:52I believe in the independence of the Federal Reserve, but I also believe in
▶ 1:37:59I mean, can you explain how you put those two together?
▶ 1:38:02Uh, sure. I I would welcome we we've seen these cost overruns. The Fed, the Fed, the Fed has a the independence of the Fed is based on its trust with the American people. And the Federal Reserve lost the trust of American people when it create when it allowed the greatest inflation of 49 years to ravage ravage working people in this country. Mr.
▶ 1:38:30so the people in the country, there was a poll or something. I mean, you're I mean, you're speaking of the American people as if uh there's some human being that um had an opinion. I mean, I I either the Fed is either the Federal Reserve is independent or it's not. Isn't that right? Is the logic right?
▶ 1:38:57that the fed the Federal Reserve should be independent for monetary policy and every other program it undertakes impinges on the monetary policy independence whether it is cost overruns on a building whether it is intruding the in climate whether it is offering political opinions
▶ 1:39:16Mr. Secretary. Um, so you would being a me a member of the cabinet, you would advise the a president of the United States um, uh, to verbally and politically interfere with the decision making of the Federal Reserve.
▶ 1:39:36Well, it's his right, just as Senator Warren's right in September of 24 to say that they should shouldn't cut 50 basis points, they should cut 75 basis points. It's the right of everyone in in in here because again there is no
▶ 1:39:50the there is no appropriation for the Fed. The Fed has magic money and prints all its own money.
▶ 1:39:56Yeah, I understand how the system is financed uh the Federal Reserve but uh Elizabeth Warren uh is not the president of the United States. Uh and I'm sure I mean her comment was in newspapers on the news. I'm asking about the uh arguably uh the the the most influential human being on planet earth.
▶ 1:40:18Well, I I will refer you to President Biden's last State of the Union where he said, "I believe the Fed is going to be cutting interest rates."
▶ 1:40:29Mr. Secretary, can you tell me please would you advise the president uh to um force the uh independent Federal Reserve to cut interest rates?
▶ 1:40:44Fired. And I invite the the secretary to respond to the gentleman's question in writing. Gentleman from Texas, Mr. Williams, you're recognized. Mr. Williams is chair of the House Small Business Committee. You're recognized for five minutes.
▶ 1:40:57Thank you, Mr. Chairman, Mr. Speaker. Mr. Secretary, thank you for being here. I want to discuss the Main Street and Capital Access Act, which strengthens uh local bank formation, allows community financial institutions to refocus on serving their customers, supporting small businesses, and improving affordability for Americans. The one-sizefits-all regulatory requirements are particularly harmful to community banks, which often lack the the large compliance staffs and resources needed to absorb broad mandates.
▶ 1:41:24So to to preserve competition and avoid consolidation of the banking sector regulatory requirements must be tailored to the size and risk profile of each institution. You've touched a little bit at today. So a question would be can you speak to the importance of tailoring and right sizing regulations for community banks and the communities they serve and and how does a one-sizefits-all regulatory approach undermine a community-based lending model?
▶ 1:41:48Again, Congressman, as I said, a bankrupt from my home state of South Carolina with about 200 million in assets. that it' be a very small bank was told by a regulator she should run her business like Bank America. She has three compliance officers out of 17 employees. She knows everyone in her small community in South Carolina. So, it is very important that we set the the correct standards for the lending risk and for the business success because our main streets will only succeed when these banks succeed.
▶ 1:42:18Well, 99% of the businesses are small. They need these banks.
▶ 1:42:22Yes. And I've come and just to be clear, I've come under fire from the Wall Street Journal for they called me a populist because I said that it's Main Street's turn. And I will note that it's called the Wall Street Journal, not the Main Street Journal.
▶ 1:42:36Thank you. Two of my bills are included in our committee's Main Street Act. The first the merger process review act directs the inspector general of the NCUA and federal banking agencies to examine the agencies merger review process to evaluate delay reduction efficiency and transparency.
▶ 1:42:53The second the merchant banking modernization act would permit banks to hold merchant banking investments uh for up to 15 years providing regulatory certainty and aligning federal investment rules with real world timelines of small and medium-siz business projects that often take more than a decade to plan. So a question would be Mr.
▶ 1:43:11Secretary can you tell us what the benefits would be brought by greater uh clarity in merger review process and next how would allowing banks to hold merchant banking investments for longer periods contribute to growth for small and medium and businesses in the wider Again, regulatory certainty for any business as you know as an advocate for a small business is important and for small businesses who don't have legions of consultants, legions of lawyers,
▶ 1:43:41the regulatory uh certainty that is important and the ability to grow through acquisition is also important. and we we just want the regulators to put down the framework and stick to the framework not to regulate through supervision. Uh thank you for that answer. And uh finally in the 2025 ESOC annual report you noted that financial stability and economic growth are closely linked.
▶ 1:44:07You also observe that many financial and regulatory supervisory policies fail to consider their cumulative pack impact on economic growth with new regulatory costs often evaluated in isolation.
▶ 1:44:20I hear this concern frequently from small businesses and financial institutions in my district in Texas where layer after layer of regulatory burden from prior administrations led to millions of dollars and countless uh hours spent on compliance instead of serving customers and supporting their local communities and they're hiring compliance officers before they hire loan officers again affects Main Street. So how do layers of regulations after small business growth with ultimate u ultimately affect economic growth?
▶ 1:44:50again it it is a great retardant for economic growth and I believe that if we were to go back and look the at at what's happened the Karen Pedu a progressive believes that this is this regulation of small banks has been a real problem and that she calls the Fed the engine of inequality and a lot of the regulation the burdensome regulation and has come out of the Federal Reserve but also the FDIC and the OC and I think removing doing that can
▶ 1:45:20again get Main Street lending going again.
▶ 1:45:23Thank you. I've got 34 seconds left. Would you like to have any of that?
▶ 1:45:27Uh I I would like to add that under under this administration, we are pushing for the financial system to the regulated financial system to get back on an even safe, sound, and smart level through deregulation. But not deregulation at any cost, but deregulation that will help the American small business, the American consumer, and those who would like to become
▶ 1:45:57Thank you for watching. Main Street. I yield my time back.
▶ 1:46:00Gentleman yields back. Chair recognizes the ranking member of our financial institution subcommittee, Dr. Foster from Chicago. You're recognized four or five minutes.
▶ 1:46:07Uh thank you, Mr. Chair, and to our witness. Um, I mentioned in my opening uh remarks uh our recent letter to FPS uh asking them to look seriously at the risks of the uh deflation of the the AI circular investment bubble which is something you obviously read about every time you open up any any financial journal anywhere these days.
▶ 1:46:28Um, I understand there was a letter uh sent similar letter sent uh recently by the Senate uh Democrats uh that received a similarly dismissive uh response basically recognizing that yeah the this is part of what we're supposed to be doing but provided zero specifics on what you're actually doing.
▶ 1:46:44So, how many people do you have that are actually assigned to looking at the risk of this circular financing, these offbalance sheet entities, the securization, the all of the parade of of terribles that that you know wrecked our economy last time and are are looking to um threaten it again. So, how many people are actually working on this and and when can we expect to hear from what they've concluded? Uh again we are constantly
▶ 1:47:08how many people how many people could you answer my point how many people are actually working on that problem
▶ 1:47:13that there there it is it is an all agencies the it is an all agencies
▶ 1:47:20no answer okay understand you they're not willing to give me a number on who's actually working on it and when do
▶ 1:47:26I I could say 2000 but that wouldn't be
▶ 1:47:30because some people may devote an hour a day some people may devote 80 hours a All right. When can we hear something specific? When can we expect to hear something specific?
▶ 1:47:38Interest of getting back to you and a change in tone. I am happy to send you a
▶ 1:47:45Okay. I I would appreciate something with a lot more detail than something we got from the under assistant acting whatever it was.
▶ 1:47:51Um All right. Uh also, when last time we spoke, um you I asked you a simple question that I didn't get an answer to, which is does this administration support a strong dollar policy or a weak dollar policy? And frankly, as far as I've been able to tell, you're just all over the map on this. So, what could you answer the question? Just simply, do you support a strong dollar policy or weak dollar policy? And how would you, you know, score your, you know, whichever way you're trying to go? How are you
▶ 1:48:16Uh, we always support a strong dollar
▶ 1:48:19Okay. That that's interesting because you know as um last time we spoke I presented a couple of graphs which presented the historic fact that interesting fact that every time you put a Republican in charge of you know in the presidency that two things have happened that the dollar has gotten weaker and that manufacturing employment has dropped. You know and this has happened just you know during every every Republican president in our lifetime and the reverse has happened every Democratic uh president.
▶ 1:48:48the dollar is strengthened, actually achieved your objective instead of just talking about it. Um, and since the time of that, actually, I think this this plot here was the the one we had then when the dollar was only 8%. I think it's down about 10 and a half% now. So, you're continuing down the traditional
▶ 1:49:03I'm sorry, which index are you using?
▶ 1:49:05DX dollar. I think it's DXY yearon year.
▶ 1:49:07Yeah. And
▶ 1:49:08and I think it's the last time I looked at it was roughly 10 down 10 and a half%. and and you have the president on there, but under President Clinton, it would be it would be it would be my my belief that it was Speaker Gingrich and the what he was just talking about the president who working with
▶ 1:49:25the Clinton administration do is Dr. Fosters's job.
▶ 1:49:30Yeah. So, um so but you agree it is a historic fact that during those presidencies manufacturing employment dropped and the dollar got weaker during Republicans without exception. they I haven't seen the data so I can't
▶ 1:49:43I I presented it to you on a graph. It's my understanding actually that later on on that hearing after I'd left to attend a different hearing that you uh said some rather negative things about the data and that as a finance professor that um that you would have I think given it an F was I believe your word and and so that all right now I'm not a finance professor I'm a manufacturer. Okay.
▶ 1:50:03And but I understand that the first thing the first rule as of a manufacturer is you don't piss off your customers which seems to be something that your administration just revels in doing uh internationally especially and so I think that this is it's easy for me to understand why manufacturing employment has continued to drop that ever since liberation day we have seen a continuous decline in manufacturing employment which was one of your number one one promises
▶ 1:50:30congressman as a manufacturer you would know that I I can't snap my fingers and create factories. So there is a building process that is well underway. I could send you the chart on
▶ 1:50:41factory ground.
▶ 1:50:42I understand and and the fact that we have been historically a low tariff nation is I believe responsible for the really extraordinary economic growth over the last decade of the United States compared to say the EU which was a high tariff regime and now we are joining I I believe that we bring jobs to China. So you you you you were touching on a lot of CCP talking points.
▶ 1:51:05I think I I as a manufacturer who's kept jobs in the Midwest, I think I have a little more credibility.
▶ 1:51:11Gentleman's time is expired. Does the gentleman want something inserted in the record? Would you like that document inserted in the record? Without objection be included in the record? Gentleman recogniz from Georgia. Mr. Louderm, you're recognized for five minutes. Vice chairman of our financial institutions subcommittee.
▶ 1:51:27No, thank you, Mr. Chairman. Uh good to see you again, Mr. Secretary. Thank you for being here. But before I get to my questions, I want to build on something that uh Mr. Lucas had talked about. Uh this committee held a hearing in November about deposit insurance, and we had an honest conversation about the need to maintain depositor confidence, the potential costs and unintended consequences, and how we need more data before making reforms. U this issue is just too important to mess up, and I hope we can continue to talk about it in a thoughtful and data driven way.
▶ 1:51:57And now uh onto my own questions here. Uh Secretary Besson, the Bank Secrecy Act uh or BSA reporting modernization is very long overdue and is required by the anti- money money laundering act of 2020 otherwise known as AMLA. Increasing these outdated BSA reporting thresholds is in my opinion a critical uh component of this modernization effort.
▶ 1:52:23The the currency transaction report requires banks to report cash transactions that exceed $10,000. That threshold has remained the same since This lowv value threshold has in recent years led financial institutions to file over 20 million reports on their customers annually. And as I brought up during our recent hearing, uh $10,000 in 1972 was enough to buy two brand new Corvettes.
▶ 1:52:48Um, just to give an illustration of how inflation has affected uh these CTR filings, the vast majority of these reports are filed on law-abiding citizens conducting innocent transaction. And I agree with something that you've stated that banks need to be focused on their BSA reporting or they need to focus their BSA programs on real illicit finance risk and that focus on higher value activities would also better serve our law enforcement and national security objectives.
▶ 1:53:17A few weeks ago, we had a markup in this committee and passed my bill, the Financial Reporting Threshold Modernization Act, that would responsibly raise the CTR and SAR thresholds while ensuring these reports are still useful for law enforcement. Um, as part of your community or your commitment to implement AMLA, um, will you use your authority to modernize and streamline the outdated reporting rules and and increase the thresholds?
▶ 1:53:44Uh yes, Congressman, we we are studying this carefully. We look forward to working with you on it. The other thing that we are trying to do is to use common sense for geographical targeting that we can lower thresholds with a g what's called a geographical targeting order for areas where we see disturbing trends like the southern border or in Henipin and Farley counties, St. Paul,
▶ 1:54:11Right. And uh I I believe under the program there there those exceptions exist that that give flexibility. Um you've talked about the importance of creating an effective BSA program that allow financial institutions to focus on high-risisk activities other than just uh focused examinations on paperwork. Um how can you ensure that our financial institutions can focus on real illicit finance risks? And do you plan to consult them and law enforcement throughout your process?
▶ 1:54:41Uh yes, we we have done a very iterative process especially with the small banks and we we've had the numerous visits at Treasury. Our fins in group has been out on the road regionally asking for best practices and we are working to that to get the right mix of enforcement and common sense.
▶ 1:55:09Well, that's that's good to hear because uh after spending almost 30 years in the IT sector, especially with data security, um I've equated to the way the system is right now is looking for a needle in the haystack where the government's default is always well uh let's just make the haystack bigger when I believe we should make the haystack smaller so it's easier to detect the the fraudulent uh players.
▶ 1:55:36Um, do you believe that a modernized effective BSA regime would hinder or undermine law enforcement if we were to modernize it?
▶ 1:55:44Again, if it were done in in a very smart way that optimizes look looking for criminal activity, not at all.
▶ 1:55:51And and that's that's really the direction I think we should be going. Eliminate the noise so we can focus on where the bad players actually are. Um, Mr. Secretary. Um, when can Congress expect to see the Treasury's proposed changes to the BSA program? Um,
▶ 1:56:07Congressman, I will get back to you on on that,
▶ 1:56:10but we we are working at it with all deliberate speed.
▶ 1:56:13Okay. And stand ready to help in any way that we can and we appreciate your your efforts and your service. And Mr. Chairman, I yield back.
▶ 1:56:22Gentleman from Georgia yields back. Chair recognizes the ranking member of the House Permanent Select Committee on Intelligence, Mr. in Connecticut. You're recognized for five minutes.
▶ 1:56:31Uh thank you, Mr. Chairman, and welcome, Mr. Secretary, uh over here. Um uh good to have you with us today. Um Secretary, in February of last year, during your tenure as acting director of the CFPB, you instructed the staff to suspend all rulemaking, litigation, communications, and enforcement actions. Um, one of the rules that was uh in process at CFPB was a rule that would have capped credit card late fees at $8 for large issuers. I understand there's an agency process.
▶ 1:57:02Do you have a personal view as to the wisdom of an $8 cap on late fees?
▶ 1:57:09I do not.
▶ 1:57:10You have no view. Okay. The president recently proposed a 10% cap on uh credit card interest rates. Uh that's caused a certain amount of interest in this institution. Um because presumably it would require legal action. So as Treasury Secretary, what what are the plus and minuses of that uh proposal? Uh do you have a personal view on the wisdom of that proposal?
▶ 1:57:34uh that that the president is interested in affordability for the American people and I think his view is that uh banks have done very well and that by by capping the rate for one year uh it would give the American people the chance to recover from the horrible Biden inflation of 22%. we were both in the finance business for a long time.
▶ 1:58:01Is there any possibility, any risk that such a cap would actually have a pretty constrictive effect on the availability of credit, especially to subprime borrowers?
▶ 1:58:12Again, I think that would be very important to examine as it's being the as it's being put in. And but Congressman, what we've seen over time credit cards used to compete on what was known as APR, the financing rate, and now they compete on rewards. And what we have seen is that the APR as you said that the subprime borrowers are paying higher APR and the upper end borrowers are getting more rewards.
▶ 1:58:39So maybe there is a calculus here on how to diminish the rewards and the cut the APR. When you were asked a similar series of questions um you gave a similarly careful answer but you said that there were bad actors in the uh I think you said you were referring to credit card companies. Who who are those bad actors?
▶ 1:58:59I I'm not going to to name to name them.
▶ 1:59:02So, you'll tell us that they exist, but you won't tell the Congress who they are so that we might undertake some
▶ 1:59:08I I think you have very large investigative committees.
▶ 1:59:12Okay. Um let me shift gears here. So, many many years ago working with my then colleagues John Carney and John Delaney, we put together a proposal for the removal from conservative of the GSSE. Um last fall as you'll undoubtedly recall there was a round table held at Treasury around an issue that is really critical which is housing and its affordability and the fact that we need to build a whole lot more housing. The conclusion from that uh round table as I understood it was um really one theme which is do no harm.
▶ 1:59:41Um over the past year, uh the president and director PY, however, have tweeted a host of utterly chaotic proposals for the uh uh the GSC's, including an immediate IPO, uh uh 50-year mortgages, um ending special purpose credit programs, rapidly exiting the conservatorship, stripping away the GSC's housing goals. I could go on and on and on. Mr. PY seems to have appointed himself the uh indicttor inquisitor of people like Leticia James and Adam Schiff.
▶ 2:00:11And apart from making a political point here, I'm trying to point out that we have a crisis in this country around housing affordability. The HUD secretary was in here the other day using terms like I'm going to encourage the building of additional housing. So my question for you in my final minute um what should we be doing right now with respect to the GSSE so that the GSC's can create a lot less risk for the American people than they represent in the conservatorship but so that they are a vibrant part of an expanding housing growth sector.
▶ 2:00:42Good. So, Congressman, I would point out that the market is the ultimate arbiter and the spread between mortgages and treasuries, despite your statements, is the lowest that it's been in many many years. So,
▶ 2:00:55that's that's because the mortgages are effectively guaranteed by the federal government. That's not surprising. That's trivial. But my question is, what should we be doing right now?
▶ 2:01:03But the spread is lower than it was this time last year, and it was guaranteed last year.
▶ 2:01:07Let me repeat my question, Mr. Secretary. You're an expert in the field. What should we be doing right now to assist in the production of additional housing?
▶ 2:01:15Uh that it it is a very complicated question, but the the most important thing that has happened is we now see mortgages touched a three-year low in January. So I think getting down the payments and again uh moving toward Fanny and Freddy eventually leaving and our north star gentleman's time is expired again that the spreads cannot widen in any
▶ 2:01:44gentleman's time is expired.
▶ 2:01:46It's okay. Thank you. I I yield back.
▶ 2:01:48Thank the gentleman from Connecticut. Gentleman from Ohio, Mr. Davidson who chairs our national security subcommittee. You're recognized for five minutes. Thank you, Mr. Chairman. Mr. Secretary, thank you so much for your leadership at Treasury. Uh like the markets, I'm comforted and reassured by your leadership there. So, thank you and I hope you keep continuing the excellence that you've uh delivered for this first year in the job.
▶ 2:02:12Um you know, the export import bank has played an increasingly important role in strengthening US supply chains and certainly doing that has been a big focus of this administration uh with a whole host of policies. Uh given China's dominant position in many critical mineral supply chains and the bank's expanding use of financing tools to address these vulnerabilities, does the export import bank need additional capital or authorities to scale its support for supply chain resilience?
▶ 2:02:41The I I believe that the John would come to you. He is doing a fantastic job the as the Exom Bank is overall and it is the lynch pin toward our move toward regaining our sovereignty uh with not only critical minerals but will be semiconductors medicines steel.
▶ 2:03:06So uh anytime Exom Bank comes forward and asks for more money for national security I cannot stress that enough. at EPSOC we are talking about economic security and national security are the same.
▶ 2:03:21Yeah, thank you for that and uh we'll be meeting this week frankly to talk about just that. So we need to reauthorize it and I think that's things that we want to take into consideration what what additional capital what additional authorities do they need and that leads into the defense production act in the most recent uh uh NDAA uh certain defense production act authorities were shifted to the department of defense.
▶ 2:03:42So given that DPA authorities have historically been uh housed at Treasury to address supply chain vulnerabilities across the entire economy um and not just defense needs. Should the primary DPA authorities remain within Treasury uh to make sure we get a whole of economy approach?
▶ 2:04:00Well, we we are working well with with DO and I can tell you that the defense priorities are the same across the economy and it's really with the it starts with critical minerals and I believe DOW is leading that along with Exom Bank. Thank you so much.
▶ 2:04:23And uh as as we work to reauthorize that and modernize it, this will be the first modernization since um you know since co and we've seen the expanding use and how the administration's made such a focus on our trade policy and reshoring. Uh so I think the debate and reauthorization modernization of defense production act I think brings coherence to what has been a major focal point for the administration. So thanks for your leadership there. You know, lastly, as um as Mr.
▶ 2:04:52Foster was uh trying to tout the benefits of communist money, I appreciate you calling him out on that and uh rejecting it. And frankly, during the Biden administration, the Federal Reserve posted positions. They were literally recruiting developers to uh develop a central bank digital currency, including, you know, a quote senior crypto architect role dedicated to CBDC development. Uh are you aware of any ongoing uh government uh or or Federal Reserve efforts to develop a US central bank digital currency
▶ 2:05:22w with within the administration? Absolutely not. President Trump has made it clear that a central bank digital currency is ama to the creation of the US as a digital powerhouse. I can't speak for what goes on at the Fed, but I would assume that they would not be part of that either. Yeah, I hope so because uh you know, not only has the president been clear on that, he issued an executive order on it and said that we will not uh develop a central bank digital currency.
▶ 2:05:51Um and of course that applies to the whole executive branch. Does that mean it applies to the Federal Again, I I would say that the the Federal Reserve has been very cooperative in terms of the regulation and they're a bit of forward thinking with the Genius Act, what's happening with stable coins, how that fits within the financial and the payment system.
▶ 2:06:15Yeah, I think that that approach clearly contrasts with what really China has been working on is essentially managed uh basically programmable money by the federal government. And frankly, they're working on it with the Bank of International Settlement, with the European Central Bank, the Bank of England. Mark Carney seems to be a fan of it, and they're all collaborating to basically develop communist money uh and impose it on their populations. And it seems like you have a a different hope for the future.
▶ 2:06:43Uh so, as as you lay that out, would love to work with you on the future of money. I really think it's going to shape the future of Western civilization. I I I couldn't agree more with with you, Congressman, and it's moving fast and the US has to keep the
▶ 2:06:56All right. Thank you. And I yield back.
▶ 2:06:59Gentleman yields back. Chair recognizes the gentleoman from Ohio, Miss Batty, who is the ranking member of our national security subcommittee.
▶ 2:07:08Thank you. Thank you, Mr. Chairman, ranking member, and to the witness. Uh first let me start by saying that I am certainly concerned about the direction of this country, this treasury, this administration and this president. I believe that our democracy is under attack as well as CFPB, the Federal Reserve, CDFIs, uh HUD and the list goes on and on.
▶ 2:07:32Uh so I'd like to start with a question on committee community development financial institutions or CDFIs as we refer to them. which you've played a a key role in economic uh development. As a matter of fact, in your uh one-page um testimony, you mentioned economic development or growth or security almost a dozen times.
▶ 2:07:57You also have stated promoting economic growth and economic security is essential to ensuring financial stability. Economic growth strengthen strengthens housing, business, financial institutions, so forth and so forth. Nationwide, CDFIs finance more than 45,000 affordable homes.
▶ 2:08:20However, applications for CDFI's fund programs have been pending for almost 12 months or more. And except for some CDFI funds for administrative cost, none of the FY25 program funds have been allocated.
▶ 2:08:39Last fall, CDF fund issued a supplemental application to CDFIS to ensure that they were in compliance with the executive orders issued by the administrations administration, but funds still have not been dispersed. Now my question to you, are there plans to place in place to release monies to CDFI so they can continue to finance affordable housing project? That's a yes or a no.
▶ 2:09:08If yes, when? If no, why not?
▶ 2:09:12Treasury been working to implement the CDFI funds programs as required by law. Upon aortionment of appropriated funds, Treasury will be able to be a yesing program award.
▶ 2:09:22Mr. secretary. No, no, no. I I I'm going to abide by the chairman's rules, but I have some rules. You can say yes or no. And then if you say yes, you may continue to give that support. If it's a no, then you tell me why not. And now we need to be clear. Yes. Let's start with the yes or no. I'm trying to be respectful, but you're not going you're not going to do what you want to do on my time. Yes or no? Or you can say, I'm not gonna answer it. Now, move on. Uh, number three.
▶ 2:09:53Okay. So, let the record show that he refuses to answer a question. No, no, no, no, no, no. We're not going to do that with me. We are not going to do that with me.
▶ 2:10:03Ask a general It's a gentle woman's time from Ohio.
▶ 2:10:07Now, you opted for number three. So you get to hear my wrath that you refuse to answer a question under your authority and what this administration and yet you've talked about the value of housing and you're not releasing the funds and I want the record to be clear on that. So let me move on. Mr.
▶ 2:10:27Secretary, I've asked you as your predecessors, Democrats or Republican, Jack Lou, Minutuchin, Janet Yellen, and you a year ago, uh, about putting Harriet Tubman on the $20 bill. We started this process in 2020. At that time, Jack Lou said it would take four years. I sent you a letter. Do you know what your response was to me?
▶ 2:10:54I haven't seen the letter, ma'am. Well, you answered the letter. So now I was given a chance to help you. You you responded to my letter just recently because you know I drilled you on this. But now you responded to tell me in a few words, it's a complex process. So that's not really an answer. We know it's a complex process. Your Republican predecessor said the same thing, but he went on to support it.
▶ 2:11:24So it was supported by three people before you. It was scheduled for 2020. Then it got backlogged because it's a complex process to 2028. The last Republican said we would be on target to do this. So now my question to you is why is it not on target and why are you not engaged in this process? Part one. Part two.
▶ 2:11:52Do you know who is over the department or the bureau of engraving and printing? Do you know who that person is?
▶ 2:11:59Do you know who is over the bureau of engraving and printing?
▶ 2:12:04I am.
▶ 2:12:06You run it.
▶ 2:12:08The Treasury.
▶ 2:12:08You run it.
▶ 2:12:09The Treasury Secretary.
▶ 2:12:10Be careful now. Do you run gentle lady's time is expired.
▶ 2:12:14Let me ask him to put in writing because he doesn't. It's appointed by him and it's Patricia Collins. So let the record show that he was incompetent in
▶ 2:12:24Gentle gentle ladies, time is expired. And I invite the secretary to respond to your detailed question about that you proposed on the bill in writing. And I now call on the gentleman from Tennessee, Mr. Rose. You're recognized for five minutes.
▶ 2:12:41Thank you, Chairman Hill, and thank you, Riking Member Waters, for holding this important hearing. Thank you, Secretary Basset, for taking time from your schedule to be with us here today. If you would like, if you'd like to take a moment to address any of the issues that were just on the table,
▶ 2:12:56there there numerous the incidents with counterfeited bills and we are revamping the 50, which is the most counterfeited bill first. Congresswoman does not seem to have an interest in uh safety and security of American money.
▶ 2:13:11Thank you, Mr. Secretary. Secretary Besson, I really enjoyed reading your recent Wall Street Journal op-ed with my friend Senator Bill Hagerty about strengthening Main Street banks. You make a compelling case that the current FDIC insurance limits contribute to an uneven playing field where deposits flow toward the largest institutions in times of stress.
▶ 2:13:34Could you elaborate on how raising deposit insurance coverage would help restore confidence in community and midsize banks, particularly in places like my home state of Tennessee, and ensure small businesses can keep their payroll and operations anchored in their local local banks.
▶ 2:13:53Again, uh, Congressman, what happens during a stress period, uh, own the owners of the capital rightly move it to where they believe their deposits are insured. There is the belief that large institutions that have a special called moral hazard. And I think by increasing the deposit accounts, especially for payroll accounts, that those deposits will not be forced to flee.
▶ 2:14:20When a local businessman calls up and says, "I have two, five, seven million in your bank. I've known you. We banked here for 50 or 100 years, but we're going to have to move." They usually, many times, they don't come Thank you. I I share that view.
▶ 2:14:36Secretary Besson, do you believe that raising deposit insurance limits would directly translate into more lending capacity for small businesses and farms that rely on community banks, particularly in rural communities like those that I represent across middle and east Tennessee.
▶ 2:14:52Uh, Congressman Rose, in a fractional banking system, deposits finance lending. When deposits flow out, the the ability to have capital to lend is greatly diminished.
▶ 2:15:04Thank you again, share that view. Mr. Secretary, the FSOC annual report highlights that terrorism risk insurance program and underscores that small insurers are significant participants in the terrorism risk market with their market share stable since 2017.
▶ 2:15:20In light of that, and given that the Terrorism Risk Insurance Act backs stop has never been triggered in more than 20 years, do you see any clear evidence today of market failure or a pressing need for federal intervention that would justify continuing a permanent federal backs stop at current levels in this market rather than beginning a responsible transition to a uh more private terrorism risk insurance system?
▶ 2:15:47Uh, Congressman, I I have no data, so I have no opinion, but I will get back to you on that.
▶ 2:15:52Thank you. I'd appreciate. Um, and and how is how does Treasury assess, if you could add to this, or you can answer address it now, taxpayer risk under TRIA today? And do you believe that risk that that risk profile is consistent with what Congress originally envisioned as a temporary federal program?
▶ 2:16:10I I used to be an insurance analyst, but I haven't seen the actuarial table, so I'm not going to comment.
▶ 2:16:15Thank you. I was proud to vote with President for President Trump's one big beautiful bill and help create Trump accounts which give kids a real foundation to build savings and wealth from day one. These accounts are a great way to help families in Tennessee and across the country start planning for their children's futures. Can you update us on how implementation of the Trump accounts is going so far?
▶ 2:16:37Whether Treasury has the resources it needs to stand this program up effectively and whether credit unions and small community financial institutions will be allowed to participate in offering these
▶ 2:16:49Uh so I I'll work backwards. Uh initially there will be one one master one one master custodian for the accounts. So initially these small banks will not be able to participate. Uh the holders of the accounts will be able to migrate out to designated institutions. The uptake is going quite well. We had a big event this week to roll out the accounts.
▶ 2:17:18Uh more than a million households representing more than a million children have have signed up. I would tell everyone to look for the commercial right after the national anthem at the Super Bowl this weekend. I I think we we are prepared for a flood of signups and then they will go live the on July 5th and the goal is the lowest possible fees on these index
▶ 2:17:46Thank you, Treasury Secretary. Hopefully no stinging as a part time is expired.
▶ 2:17:50I yield back.
▶ 2:17:50Gentleman from California, Mr. Vargas, who is the ranking member of our monetary policy task force. You're recognized for five minutes.
▶ 2:17:56Thank you very much, Mr. Chairman and ranking member and the witness. I have to confess that I'm very disappointed in today. I think a lot of our allies are losing faith in us. We hear it in our European allies. Certainly, we see it in the diminishment of our dollar.
▶ 2:18:21But we always seem to have faith in sort of the the Fed chairman and also the Treasury Secretary. They're always very serious people. They're always seen around the world as very serious people. I've been here for a long time now. Used to watch when friend of mine Sean Duffy used to sit over there and scream at the top of his lungs at Jack Lou when he was Treasury Secretary.
▶ 2:18:46And the Treasury always answered in the most logical way, never flippant, never lielist, would never say something like, "Sure, my colleague here wants to see Harriet Tubman on the $20 bill." She didn't say anything about not wanting confidence and not wanting to have secure money. That was a very lielist comment that you made. Very flippant comment. Was very disappointing to hear.
▶ 2:19:12And then to hear the lielist comment that you made about the Fed that we lost we lost faith in the Fed. You said in your testimony here today because of inflation and the cost overrun the buildings. You know mimicking basically the same thing that the president said as about the chairman. You didn't say it in the same words you said it in a way that's a little more elegant. It means the same thing. Today you've been very performative in everything that you've done. That's very disappointing.
▶ 2:19:43I wanted to ask you about the independence of the Fed. I think it is important. You did comment about that a little bit, but today I think it's been a pretty much a waste of time. But sadly, I think I think it really does erode the faith in our country when a person as important as you give the answers that you gave today. So, I'm not going to ask you any questions because I think it would be useless. But I was just going to say, Mr.
▶ 2:20:11Chairman, we've had some very good hearings recently. This was not one of them. This is not your finest day. And it's too bad because I think you're a very competent person. I disagree with some of your policies, but you're a very competent person. The president has put in some people in very important places that are sort of caricatures of incompetence. That's not you. Today was not your finest day. And with that, I yield back.
▶ 2:20:36Gentleman from California yields back. Chair recognizes the gentleman from Wisconsin, Mr. Style, who chairs our House Administration Committee and also chairs the subcommittee here on digital assets, financial technology, and artificial intelligence.
▶ 2:20:50Thank you very much, uh, Mr. Chairman, Mr. Secretary, thank you for being here. Thank you for your service and your leadership uh, at Treasury. There's been a lot of energy in the room today. Uh, a handful of times you made some great points, you've been cut off. Uh so I want to go back and give you an opportunity uh to elaborate on a couple of these points.
▶ 2:21:08Uh at the beginning of the hearing today uh ranking member Waters um you had were in the process of mentioning the 10 to 20 million uh illegal immigrants came into the United States during the Biden administration uh functionally with the blessing of Democrats uh in Congress. Uh as you mentioned that and you were building into a comment about the impact that that would have on the price of housing in the United States. the ranking member said, "Can you shut up?" End quote.
▶ 2:21:35Um, I think you're about to make actually a really good point about the impact that Biden's and the Democrats open border policies had on uh the cost of housing. Uh, the time is now mine. Uh, and I'd actually love you uh to provide a little additional detail as to where you're headed there.
▶ 2:21:55Good. Well, Congressman, thank you. And to answer Congressman Vargas who isn't able to stay for the whole uh or to hear my reply that as you would have seen that when when approached the I I am happy to have a conversation. Representative Green who is known for some the fiery moments and I had a very respectful back and forth and I enjoyed my conversation with him and it is a shame that all conversations cannot be like that.
▶ 2:22:25Yes or no answers to me mean that the representative has talking points from his or her staff and is unable to discuss things in a logical and in-depth manner. Uh in in terms of the uh your question uh the we have had 4.1% economic growth the for the past three quarters we're on track for 3% growth and the the economy is doing very well.
▶ 2:22:54uh the financial stability that we are seeing uh whether it is through growth the or through um economic security, we've been brought back from the edge. We we President Trump your leadership at Treasury uh we have absolutely been brought back from the edge. Uh in particular as we think about the impact of housing has was Biden's open border policies directly related to some of the inflation that we've seen in housing. That's where you're previously cut off.
▶ 2:23:22Yes. to to to come back to that uh I would point to a study from the Wharton school that said that supply and demand works especially in low-end housing that letting in 10 20 we don't know how many illegal aliens that flooded into the housing market they all need someplace to live so what we have seen is that the Wharton study says that for every 1% increase due to the illegal immigration rents went
▶ 2:23:531%. So if you got a 20% increase in population, then rents went up 20%.
▶ 2:23:59And economics 101, supply and demand. And Democrats drove up demand by having a massive number of illegal immigrants coming to the United States.
▶ 2:24:07The Democrats didn't care what they did to working Americans. We're seeing a substantial substantial drop in rents.
▶ 2:24:13Let let me let me build another point you were making uh when you were cut off. You said that lumber's at a 5-year low. Uh, ranking members Waters then said, quote, "You don't get to talk." End quote. Again, the time is mine. You get to talk. Lumber's at a five-year low. Supply and demands in effect. Uh, what's the impact of that on the cost of
▶ 2:24:31The again uh that facts can be uh facts can be annoying for people who just want to make talking points. And the fact is we have not seen an increase in housing costs. The increase in housing costs came during the great inflation that up consumer prices for the CPI up much more up in the 30s for working Americans. So let me
▶ 2:25:01that's where that's the cost to housing and regulations.
▶ 2:25:04We're still recovering from the Democrats terrible policies. Let me let me get one final point in. I chair the the digital assets subcommittee. Uh we passed and was signed into law the stable act setting forward legislation as it relates to stable coin. uh Treasury is required to complete implementing regulations uh by July 18 of this year. Um are you going to hit the deadline and are there any impediments preventing you from hitting that July 18 deadline? Uh
▶ 2:25:29I I don't see any impediments at present and if we're going to hit them, we will notify you and the committee.
▶ 2:25:35I appreciate that. Appreciate your service at Treasury. Mr. Chairman, I yield back.
▶ 2:25:39I thank the gentleman. Gentleman yields back. I recognize the gentleman from Illinois, Mr. Casten. You're now recognized for 5 minutes.
▶ 2:25:45Uh, thank you for being here today, Mr. Bent. Appreciate your patience with us. Um, since the US captured President Maduro, the Trump administration has been selling Venezuelan oil. Secretary Wright has said that's going to continue indefinitely. The president's January 9th executive order said that those funds are the sovereign property of Venezuela, but has directed you, the Treasury Secretary, to hold those assets in custody to facilitate dispersements transfers as directed by the Secretary of State.
▶ 2:26:14As I've gone through the 91 specific trusts that you have the statutory authority to oversee, none of those have any relationship to Venezuelan oil. So, can you help us understand under what statutory authority or what statutory authority is Treasury relying on to exercise the discretionary control over natural resources and sovereign assets of another country?
▶ 2:26:35Uh, Tre Treasury has no control over the
▶ 2:26:39I'm I'm just asking about what statutory authority you rely on. Again, we we are operating under an agreement between state and energy that we we are not
▶ 2:26:49We are not
▶ 2:26:49the executive order said that the Treasury Secretary is holding those assets in custody. That's a specific language there and is facilitating dispersements. Under what authority are you acting? Uh
▶ 2:27:00I will get back to you with the exact authority, but it is under an agreement with with state. Yeah, let me let me just clarify because my my concern is that the executive order cites cites AIPA specifically says that you have to be engaged in hostilities with a country for AIPA to trigger that that claim. Secretary Rubio said that we are not at war with Venezuela. I would agree. I'm glad we're not at war.
▶ 2:27:26So unless you disagree with Secretary Rubio, I'm unclear under what legal authority the United States has to control or disperse those assets. Well, I I would believe that the AIA authority would act for a period of time for a transition.
▶ 2:27:40Not unless not unless we're we're not on that's not
▶ 2:27:43for a transition.
▶ 2:27:44Well, look, that's not true, but please provide in writing what you're doing there because I and I want to get to why I think that's material. Last week, Secretary Rubio also said that the 200 million in proceeds was sitting in a Qatari bank that was owned by Venezuela. He went on to say the Treasury has a written agreement with Venezuela's interim government to review the monthly budget request for payments from that I come back to where the authority comes. What statutory authority are you using to exercise custody indirectly through a third country and direct the release of funds from those offshore
▶ 2:28:14The AIPA.
▶ 2:28:16That's not in IPA. You're you're managing Okay. So, if you're managing a third country, not IPA, and please do provide us with the legal guidance because this this matters. What controls are you putting to audit those flows? Because, as you know, the Venezuelan government still has a lot of shady people. How are you how are you controlling the dispersion of those flows so that they don't go back to some of the shady characters that the president is concerned about in Venezuela? What is the audit process?
▶ 2:28:38Uh again, the we we will be bringing in outside auditors for this and the Venezuelan government will be
▶ 2:28:46Do you have an agreement in place right now for those auditors?
▶ 2:28:48do you have an agreement for that audit in place right now?
▶ 2:28:51Not at present. Um, okay. Because Secretary Rubio, um, when he was asked that question before the Senate, he said that the that Treasury had handled the agreement that he would be providing to the Senate committee. Are you saying that that Secretary Ruby Rubio was incorrect or that you're not aware of the agreement the Treasury directed according to
▶ 2:29:10I'm saying I'm not aware of the
▶ 2:29:12Okay. So, Secretary Rubio said he would provide that to the Senate Committee. Can you please coordinate with Secretary Rubio and give us your word to provide us what Secretary Rubio was providing because he is alleging that that was done under your with with pleasure, Congressman. And ju just so you know the the goal here, it's it's been 30 days.
▶ 2:29:27I I want to just let me just move reclaim my time. Just proclaim my time because I the concern I have is that in this would be considered a fraudulent conveyance. I have a specific concern that we've entered into contracts with companies like VTOL who have plead guilty to bribery and all sorts of nefarious actors. If I was a company buying stolen goods and we didn't have statutory authority, I'm going to have a lot of creditors coming after me. One last thing, sir. I want to read you a quote. Uh, Trump will pursue a weak dollar policy rather than implementing tariffs.
▶ 2:29:56Tariffs are inflationary and would strengthen the dollar. Do you recognize that quote?
▶ 2:30:00I I believe you're referring to a a letter that I wrote and tariffs could be
▶ 2:30:05No, no, it says tariffs are
▶ 2:30:07I Yep. You know what?
▶ 2:30:09You you had said to the chairwoman, I'd like to introduce into the record a January 31, 2024 letter from, quote, Scott Bent and the Keysquare team to your partners where that quote comes
▶ 2:30:18Without objection. Do you want to correct what you said to the ranking member when you specifically said that you did not say tariffs are
▶ 2:30:25Well, I think she referenced a letter in the summer of something. Not that
▶ 2:30:30No, no, I think you disparaged the New York Times.
▶ 2:30:32You said tariffs are inflationary.
▶ 2:30:36You said tariffs are inflationary. Do you want to correct what you said to the ranking member or did you lie?
▶ 2:30:42I the if if I was mistaken, I want to correct it. And I was also mistaken when I said the tariffs could be inflationary
▶ 2:30:50gentleman's time is expired.
▶ 2:30:52Seeing inflation drop to 2.1.
▶ 2:30:54Gentleman's time has expired. Chair now recognizes the gentleman from South Carolina, Mr. Timons. You're recognized for five minutes.
▶ 2:31:01Thank you, Mr. Chairman. Mr. Secretary, it is great to see you again and thank you for being here. Your experience and leadership at Treasury are widely respected and appreciated as we work to make the US economy more competitive in the global economy. And I know you were hearing some questions about tariffs. Is that the purpose of the last year to to renegotiate our trade agreements to make the US economy more competitive in the global economy?
▶ 2:31:23Uh 100% that the the there numerous goals, but it is to make the US economy more resilient. We are now seeing 4.1% growth for the past three quarters. So the we are seeing inflation drop. So uh tariff inflation was the dog that didn't
▶ 2:31:44Well, I appreciate it. I I think that the businesses that are trying to compete in the global economy are far better off because of the last year. There was some strain through the uncertainty, but most of that is behind us and I just really appreciate your hard work. Additionally, after several years of regulatory uncertainty and pervasive government overreach, it is encouraging to see serious leadership at Treasury focused on restoring balance to our financial system. That work matters not only to markets, but to families, small businesses, and communities across the country.
▶ 2:32:13You have called for a fundamental reset of financial regulation and emphasized Treasury's role in promoting appropriately tailored regulation to support economic growth. I agree with that approach. While there's been progress on tailoring supervision, far less has been done to modernize regulatory tailoring itself, particularly the inter agency thresholds that trigger enhanced credential credential standards for category 2 through four banks. Those thresholds were set years ago and have not been updated to reflect inflation, economic growth, or changes in the financial system.
▶ 2:32:42As a result, banks that were never intended to be treated like Gibbs are increasingly subject to requirements that do not match their risk profiles. Republicans on this committee raised this concern in a letter to the Federal Banking Agencies last November. Mr. Secretary, my question is this. How are Treasury and the Financial Stability Oversight Council working to coordinate across the agencies to modernize and update these thresholds and to ensure that regulatory tailoring keeps pace with economic reality rather than falling further behind it?
▶ 2:33:13Congressman, the I I believe there's a chance that the community banker who I referenced with 200 million assets may have actually been from your district. So we we are uh all all hands on deck and we've seen 50% of these institutions disappear and we are working as quickly as we can. again, uh, one-sizefits-all for regulation is a disaster.
▶ 2:33:36And as the potentially the woman, the the bank president and owner from your district, uh, said, Bank America's regulatory regime is not good for something in the the Pedmont and up country in South Carolina for a bank with 200 million
▶ 2:33:54I couldn't agree more. Tailoring should apply not only to credential standards, but also to supervision itself. For example, my bipartisan legislation, the Smart Act, would allow smaller, well-managed and well- capitalized institutions to combine certain consumer compliance and IT exams, reducing unnecessary burden while preserving strong oversight. Uh, Mr.
▶ 2:34:15Secretary, how can legislation like the Smart Act and other bipartisan efforts this committee has advanced help build on the principle of tailoring and restore a regulatory framework that truly works for Main Street without compromising safety and soundness?
▶ 2:34:29Congressman, I think it may be very important to get this into a a regulatory framework because what we've seen for too long, just as the bank examiner said to the $200 million uh you should be more like Bank America, we cannot have uh supervision that or we cannot have regulation done through supervision.
▶ 2:34:51We need to have clear guidelines for tailoring for uh many banks as I said earlier are industry concentrated, geographic concentrated and we have got to push this through or we are going to uh they will be too small to succeed.
▶ 2:35:09I couldn't agree with you more. Thank you for that. I want to close by discussing the trillions of dollars in foreign direct investment that you and President Trump have shephered into the United States over the past year. In our home state of South Carolina alone, hundreds of billions of dollars in new investment have been announced that will create high-paying, highly skilled jobs for our communities. Nearly every week I'm in Washington, I meet with a foreign manufacturer that is expanding its footprint in the upstate.
▶ 2:35:33And I also want to thank you for your work to remove tariffs from coffee, which has been directly welcomed by manufacturers like Kurig in South Carolina that have benefited from this administration's commitment to fair and sensible trade policy. It's hard to believe that the largest coffee manufacturer in the world is in Spartanberg, South Carolina, but it is. And we greatly appreciate your work to help make sure that they're competitive in the US economy and in the global economy. And uh with that, Mr. Chairman, I yield back. Thank you.
▶ 2:35:59And Congressman, I would just point out there's a lot of discussion on coffee
▶ 2:36:03Gentleman's time has experienced a
▶ 2:36:06The gentleman's time has expired. Thank you. Please, Mr. Secretary, if you'd respond in writing, if you have more on that topic. Now, chair recognizes the gentleoman from uh Massachusetts. Miss Presley, you're recognized for five
▶ 2:36:20Mr. Secretary, it took uh a year to get Secretary Turner before this committee, so I'm grateful for your return. Uh and I want to pick up um where we left off nine months ago. The average American spends over $20,000 on baby costs in the first year of having a baby. Essential products like car seats are more expensive because of Trump tariffs.
▶ 2:36:43You told me last time that they were under consideration, but nothing has changed since May of last year, uh, much to the distress of families. There is still no exemption for tariffs on baby products. Uh, for the record, Mr. Secretary, how many tariff exemptions are there? Uh there they're actually very few. Now
▶ 2:37:09you're right actually. Um I think there's some 30 pages of exemptions uh totaling over a thousand including for asbestos. Can you explain to families across America, working families struggling to make ends meet, why baby products that are required by law are not exempt from Trump's tariffs?
▶ 2:37:31Uh again, Congressman or Congresswoman, uh it it is a matrix and many of these products unfortunately are made in China and the it's an unacceptable answer. You've had nine months, you told me it was under consideration. You've had nine months to think about it.
▶ 2:37:53And while you've been thinking about it, working families have been struggling when it is required by law that they have uh many of these uh essential baby costs. Your report from the Department of Treasury refers to them uh car seats as essential safety tools. So, if you can acknowledge that this is
▶ 2:38:12I I will acknowledge the gas to run the car. Well, listen. Is that a 5-year?
▶ 2:38:16You've included a speestos in your exemptions. So you're telling me you can do asbestos and not baby products? Excuse me. My time.
▶ 2:38:23I think you would want children.
▶ 2:38:24Mr. Secretary, Mr. Secretary, parents with newborns don't want to hear your excuses. They need to keep their babies safe. They want to comply with the law and they need action to lower costs. Period. So will you exempt baby products from tariffs? Yes or no?
▶ 2:38:39Again, we will secretary. We will look at Mr. Secretary. Respectfully, Congresswoman, I do not I am the Treasury Secretary. I am not the USR. I am not the president of the United States.
▶ 2:38:51Reclaiming my time.
▶ 2:38:52No, it it you're asking the wrong
▶ 2:38:53I'll take I'll take the general secretary. You taking the gentle ladies claiming my time. Mr. Secretary,
▶ 2:38:58this is financial stability oversight.
▶ 2:39:00Mr. Secretary,
▶ 2:39:03then I I I ask for your advocacy then because a no or a non-answer is unacceptable to the working families you claim to care so much about. Moving on, moving on. Moving on. The general point, I'm agreeing with you, Secretary. You you will have my advocacy.
▶ 2:39:19Okay. Thank you. Can you say that again for the record?
▶ 2:39:23Can you say that again for the record? I
▶ 2:39:25I will have your advocacy.
▶ 2:39:26I I am one voice
▶ 2:39:27or an exemption.
▶ 2:39:28I I am one voice.
▶ 2:39:31Okay. Um have you been paying attention to the high rate of unemployment for black workers? Are you aware of that?
▶ 2:39:38The high unemployment rate for black
▶ 2:39:40It it it is traditionally higher than for all workers.
▶ 2:39:44Well, listen. No, it's through the roof right now. There's hundreds of thousands of black workers that have been pushed out of the workforce and the unemployment rates for black workers and all workers are among the highest they've been since the co9 pandemic. Black workers contribute over a trillion dollars to the US economy. But the push out of these workers from the workforce has led to a bo a loss of $ 37 billion dollar in the GDP.
▶ 2:40:07With black women being among, just so y'all know, the most educated and most active in seeking work, their push out is a glaring warning sign for where our economy is headed. Because black workers, black women in particular, have always been the canaries in the coal mine. So, this is a problem for everyone. Black women are bearing the brunt, but everyone will feel this hurt. I have led letters to Fed Chair Powell calling for action to be taken. He is also a member of ESOC. So, I want to ask you, Mr.
▶ 2:40:31Secretary, will you commit to analyzing black unemployment rates specifically and its impacts on financial stability? Yes or
▶ 2:40:39I I will analyze black unemployment
▶ 2:40:43Wonderful. Uh and when will you get us a report and a plan of action? I was uh thinking March 6.
▶ 2:40:49Uh I I can't commit to a date.
▶ 2:40:52Okay. All right. Well, I think March 6 uh makes sense. I'd give you over a month, which is more than enough time to convene that uh working group and to report out your findings. I know you already have the infrastructure to do that. So, at the end of the day, black families, black futures, and the lives and livelihoods of all who call this country home are depending on you to act. And with that, happy Black History Month. I yield back.
▶ 2:41:15Thank you. And I was sorry to see you not run for Senate.
▶ 2:41:18General Gentlewoman yields back.
▶ 2:41:21Chair recognizes the chair of the subcommittee on oversight and investigations, Mr. Muer from
▶ 2:41:28Secretary Bant, thank you very much for being with us and thank you when you state that main it's now Main Street's turn. I can assure you the people of Pennsylvania's 9th congressional district greatly appreciate that and your remarks are are quite refreshing. Um the previous Treasury Secretary once when I asked what their growth economic growth initiatives were, they implied that spending federal spending was their primary if not only growth initiative.
▶ 2:41:54So clearly under your leadership and President Trump's and the Republicans in Congress, passing the family's tax cut uh delivered meaningful tax relief billions to workers and small business owners. Um no tax on tips, regulatory reform, no tax on overtime, 100% depreciation. All this is driving our savings. All this is driving our economy for a booming GDP Q3 Q3 and Q4 uh in the over 4% range. So things are going very well.
▶ 2:42:24We expect 2026 to be uh pretty exciting as well. Um Secretary, if there is anything that was asked that is still on your mind that you would like to respond to, why don't you go ahead and do so?
▶ 2:42:37Again, this is supposed to be a financial stability oversight mission and that we have taken this very seriously and we believe that a lack of growth. One of the reasons I'm sitting here and came out from behind my very quiet and nice private life is because I was worried that the US was become going to become like a European style social democracy.
▶ 2:43:01And indeed what we are seeing in Europe in many countries is the death spiral of higher debt, raised taxes, lower growth. The US will have reported likely despite the government shutdown, despite the longest government shutdown in history, 4.1% growth for the past three quarters and so we we have been successful that at that Europe last week celebrated 3% growth.
▶ 2:43:29So they uh it's no comparison and I think we are beginning to accelerate and importantly everything we are doing is to fix this terrible Biden inflation from the the past four years 21.5% much more for working families and we are bringing that down.
▶ 2:43:51your remarks and the president's remarks in in Davos uh suggested that how you spiral down in your economy which Europe was been doing u a not having closed borders or secure borders anyway over reliance upon imports and driving the public sector rather than the private sector is a recipe for disaster and so we appreciate you correcting the ship and moving Pennsylvania or Pennsylvania the United States in the right direction uh just to uh get to some questions secretary you've emphas ize putting
▶ 2:44:21Main Street ahead of Wall Street uh when evaluating bank capital standards. How will modernizing the capital framework improve credit access and affordability for small businesses, homeowners, farmers who ultimately in the end bear the costs for such excessive capital requirements?
▶ 2:44:39Uh again, Congressman, the groups you just listed, they are the three most dependent on community and small banks, and we are determined to increase their lending capacity, to increase their uh proclivity to lend, and we want to do it on a safe, sound, and smart basis.
▶ 2:45:02In the previous administration, we had regulators that imposed capital requirements well beyond the international peers, including the the GIP search charge, the SECAR, tier one leverage ratios. Are these frameworks being reviewed holistically to better support lending and economic growth?
▶ 2:45:19Yeah. Again, we are not going to let outside regulators determine what is best for the US financial system.
▶ 2:45:24Thank you. Thank you. The the the strength of the US financial system is the depth and breadth and we do not want to end up like Canada with five banks, Switzerland with one, France with three.
▶ 2:45:34Absolutely. Great. Um your decisive action to confront what should concern all of us, certainly concerns us, is the rampant government benefits fraud uncovered in Minnesota. Can you walk us through how Treasury is using your authorities to identify, disrupt, and recover fraud proceeds and how Minnesota is serving as a start for a broader national enforcement model?
▶ 2:45:54Uh uh in indeed there there is a substantial amount of waste, fraud and abuse and Americans and legislators on both sides of the aisle should be outraged when you are there and you see uh empty daycare centers, senior centers and I I've personally met with uh two centers for autistic children and they are not getting their benefits.
▶ 2:46:21So um we are using our regulations under Fininsen to follow the money which is what we've done whether it's Mexican drug cartels whether it's the mafia or whe
▶ 2:46:33Thank you Mr. Chairman I I yield back. Thank you very very much for your great
▶ 2:46:37Chair recognizes the gentleman from New You're recognized for five minutes.
▶ 2:46:42Uh thank you Mr. Chairman. Uh Mr. Secretary welcome. Um the the 10-year Treasury is running around mid4% range. Mortgage rates are still above 6%. That's keeping monthly payments high and pricing would be buyers out of the market. The affordability crisis is increasing the home ownership gap in North Jersey, which I represent, and across the country. How can we get the 10-year down uh and help make home ownership more affordable? You know, and that's what I'm really focused on.
▶ 2:47:09Well, the the 10-year bond had its best year since 2020 last year, and we actually had a fiscal contraction in the budget. the rest of the G7 bond market went up in yield. So if we if we continue to
▶ 2:47:23so you see a path where this you hope you think we'll continue to see a tick down especially the the long
▶ 2:47:29well I think we can do that and that I believe that we have Oliver Wyman's numbers not treasuries uh they they say that the what we what has been done with financial deregulation unleashes 2.5 trillion of lending capacity into the US economy so by creating more capacity there is less of a competition. They have four scarce funds. So we are decreasing scarcity.
▶ 2:47:58Thank you. Um I have a strong belief that AI will revolutionize financial services and delivering meaningful gains for for customers and regulators and institutions if we do it right. FSOC's report strikes an encouraging balance highlighting AI's potential to improve resilience and efficiency in financial markets while also noting that vendor concentration create challenges. How is FSOC threading the needle to enable broad AI adoption while encouraging competition?
▶ 2:48:23And where can Congress help get this right so AI can flourish as a helpful tool for for Americans uh in the uh financial markets?
▶ 2:48:32Good. I I think it's important to work together because what we see many times in these very quick technology cycles is the technology gets ahead of the regulation. So working together to keep the regulation in sync with the technology whether it's for the financial system or for in anywhere else and there there's good news as you said it will change the interaction uh the the bad news is that it gives whether it's state actors or independent actors more tools
▶ 2:49:03right you can what are you doing internally treasury obviously you spent a lot of time on the security side of of of on the treasury piece of it what what are we doing about that
▶ 2:49:11yes so We we we have both uh at treasury and then bringing in our private sector partners regularly. We've done we do tabletop exercises in terms of what would happen if a malign actor got into the system. Uh how can we re reinforce that? As you may have read before I arrived, Treasury itself was hacked.
▶ 2:49:33Yes, I saw that
▶ 2:49:34the uh by we believe a state actor. So again, increasing resilience, being being aware, and working with our private sector partners for best
▶ 2:49:46Thank you. We're obviously seeing a combination of factors that historically make markets nervous, softer dollar with higher gold prices. Even if there are multiple drivers, these those moves are often interpreted as investors seeking protection against policy uncertainty or concerns about US fiscal and monetary credibility. They can be also be early signals that global capital is demanding a higher confidence premium to hold US assets. Are markets starting to price in a sustained shift away from US assets you believe? And what are the specific indicators you watch to see if we're seeing that pullback from foreign investors?
▶ 2:50:17Yep. So what we see at Treasury is we saw record amount of foreign inflows despite the popular narrative. We saw a record amount of foreign inflows into Treasury auctions last year. uh this year many of the auctions have traded through uh through the prevailing price before the auction.
▶ 2:50:38So we we are still seeing very good flow and um we are still seeing massive flows into US equities and as the several of the congressmen said we are seeing very substantial foreign direct investment.
▶ 2:50:53You know one of the things I'm concerned about this week writers reported Disney saw fewer international visitors at its US parks. US overall saw 6% fewer visitors despite global tourism revenue rising 6 and a half% Canadian trips are down significantly 22% year-over-year even at the great Jersey Shore 2025 beach tag revenue is down what is the administration's plan to calm volatility and obviously tariff policy has been part of this so tourists can continue to choose the US uh look on some things there's nothing we can do if the premier of British
▶ 2:51:23Columbia or Ontario wants to be especially hostile and tell people not to come to the US that That's a decision. I I would say it's their loss and as you said,
▶ 2:51:33do you think we'll see less volatility with the tariff policy kind of firming up or
▶ 2:51:39that well less less volatility in
▶ 2:51:43Well, yeah, because it affects everything. People don't want
▶ 2:51:45time is expired.
▶ 2:51:46Thank you, sir.
▶ 2:51:46Thank you.
▶ 2:51:48Chair recognizes the gentleman from Indiana, Mr. Stzman. You're recognized for five minutes.
▶ 2:51:52Thank you, Mr. Chairman, and uh thank you, Mr. Secretary, for for being here today. I'm going to yield to the chairman just briefly uh for a couple of questions he has.
▶ 2:52:00Uh Mr. Secretary, I appreciate members on the Republican side allowing you to clarify points on some key discussions back and forth and we have had some good ones today. Uh there was an exchange you had with my friend from Massachusetts, Mr.
▶ 2:52:14Lynch, about artificial And in your capacity as chair of FSOC, uh our view here is that artificial intelligence offers great promise for better consumer service, uh fighting fraud, uh more accuracy in providing customer service, but also in providing a more robust compliance process with the rules in banking and the brokerage and securities industry.
▶ 2:52:42I wonder if you could talk from an FSOC point of view about a philosophy of overseeing artificial intelligence both in the financial services industry and among the supervisors of the financial services industry.
▶ 2:52:55Yes. So uh again we are working uh with with our private sector partners uh to best best practices and chairman as you said there there are two pieces to this. There is service improvement which we are for instance working on at the IRS. You we hope to be able to use artificial intelligence there uh to get customer weight downs and service down.
▶ 2:53:24The on the other side uh both financial security alerting everyone to the risk of what is going on. But this is a transformative change and as I mentioned uh to the congressman uh we would look forward to working with you on legislation to make sure that the technology does not move uh too far ahead of the legislation.
▶ 2:53:48Very helpful and I yield back to my friend from Indiana.
▶ 2:53:50All right. Thank you. And first of all I just want to say thank you for being a just a a steady voice. Um our economy is seeing tremendous growth. Is there volatility in places? Absolutely. We're still recovering. You know, we've heard uh a lot today from my colleagues across the aisle about tariffs and the effect on inflation in the US economy. Uh I just want to remind everybody during the Biden administration, grocery prices increased by over 23%. I'm in the food industry. We've we've seen it.
▶ 2:54:18Uh that growth has accounted for nearly 91% of grocery increases since January of 2021. In Biden's first year alone, grocery prices increased by six and a half% as compared to 1.9% during President Trump's first year in office. And that's nearly three and a half times faster. But yet, my colleagues want to blame Trump's tariffs for the prior administration's uncontrolled and excessive spending.
▶ 2:54:43And I know that, you know, uh, what the administration, what the Trump administration, you are doing is really, I mean, the America first policies are spot on. we've needed somebody in the White House to be fighting for America first. And so I just want to say thank you from um from folks in northeast Indiana uh for for your hard work to reset the table globally. And uh you know we're a manufacturing agricultural sector. We grow the food for the country.
▶ 2:55:11We manufacture you know medical devices and all these other things. Um and so I just want to say thanks for
▶ 2:55:17Well good. And Congressman, just to tell you, I was with the president out in Iowa. And to combine two of your themes, manufacturing and the farm economy, we were with the CEO of John Deere, and he is building a new factory in Indiana. And the president, he's building one in Indiana, one in North Carolina. And the president said, "What made you do that?" And he said, "The
▶ 2:55:42The tariffs.
▶ 2:55:44Yeah. No, it it's I mean this really is putting manufacturing in a position to compete with China, whether it's a CNC shop, whether it's the um you know the medical device industry, there's obviously some pieces there with regulatory environment, things like that, but it's really giving manufacturing a spot.
▶ 2:56:03One thing I would ask and if I could maybe share with your office, I had a foundry owner in the office yesterday and there are some definitions around foundaries and so I'd be happy to send that information over to your office to take a look at it. It's a it's a industry that's of course very important for America and I know you all care very much about manufacturing and the steel industry. So I'll send that over.
▶ 2:56:23Good. With pleasure.
▶ 2:56:24Yeah. But uh anyway, my time is about to expire, but I I do want to just say thanks because it's u you know what people back home are really dealing with is is this cost over the last five years. And for you to really reset the table, they're believing and they believe in America. We just need to show them that we believe in America as well and that American can be great.
▶ 2:56:44Good. Well, Congressman, there's a level and there's a rate of change. The level is very difficult to get down. We're trying as hard as we can, but we've slowed the rate of change greatly.
▶ 2:56:52Yeah. Thank you. I'll yield back. Thank you. The gentleman from Michigan, Mr. Tib, is now recognized for five
▶ 2:56:58Thank you, Mr. Secretary. Uh, a bank's leverage ratio is important, right?
▶ 2:57:04Well, there are numerous leverage ratios. Congressman, which one are you referring to?
▶ 2:57:07So, uh, for the record, if I may, Mr. Chair, I'm going to submit the bank capitals analysis semianual update. For the record, may I?
▶ 2:57:15Without objection. So, ordered. Um I want to talk about the way that we look at global systematic important banks. What they call what do you guys call G Sibs? Is that right?
▶ 2:57:26That's correct.
▶ 2:57:26That's what I'm talking about. Um there are banking organizations that could trigger a financial crisis if they failed. Correct.
▶ 2:57:33And they could trigger a financial crisis by now lending.
▶ 2:57:36Yeah. So the leverage ratio is important when we look at it. Right.
▶ 2:57:39Again, I'm not sure which leverage
▶ 2:57:41Okay. So I'm looking at here this this chart. Okay. Okay. It says tier one capital. Does that help?
▶ 2:57:47Uh tier tier one. That's helpful.
▶ 2:57:49Okay. So, I know you it's kind of hard to see, but the green line is the community banks. You see how high that cushion is?
▶ 2:57:57That it's about what almost 11%.
▶ 2:57:59I know you can't see it. It's fine. I was going to
▶ 2:58:02Back to good faith. I'll take your word.
▶ 2:58:03Yeah. So the largest bank capital analysis for the reserv uh res federal reserve bank of Kansas City um it shows that last June the tier one leverage ratio of community banks was at 10.83% for the banks that posed the largest threat to global system what they call G SIBs this is the big banks the ones who take all the risks you know this right supplementally leveraged ratio was about That's a huge difference, right?
▶ 2:58:30Okay, I'm I'm getting there. I promise.
▶ 2:58:35do you think the largest, most complex banks are roughly are roughly half as risky in the threat that they pose to the financial system as a community bank in my district?
▶ 2:58:46Well, I think, Congresswoman, the what what you're neglecting to think about is the composition of the of the assets and the capital. So the capital at the GIBs can be much more liquid where the uh the banks in your community are the much much more you know as we're used to seeing in the movies.
▶ 2:59:05Well, let me explain to the public why community. Yeah, I understand. Community banks though lend out equivalent about 75% of their deposits to real economy. They some people refer to as main street but we call it the real economy. people, families, communities. The larger largest banks only lend about 40% of their deposits into our real economy. Instead, they they rapidly expand their loans to hedge funds and private equity that you're calling liquidity. They they can liquidate, right? Is that what you're saying?
▶ 2:59:36Is that what you're saying?
▶ 2:59:37No, I'm also I'm just I'm saying they they hold a a much higher the
▶ 2:59:42Yeah, but the big banks are the ones who keep failing, right?
▶ 2:59:45What's that?
▶ 2:59:45The big banks are the ones who keep failing. Uh, no. Many small banks.
▶ 2:59:50Well, that's because they're getting pushed out. We're not actually supporting community banks.
▶ 2:59:53Well, as I've said, I think I think more than 100 times today. Yeah. I support community banks. And what I don't want to see,
▶ 3:00:00you could say it, but you got to do something about it. But listen, Trump's
▶ 3:00:03I've met with more than 200.
▶ 3:00:04I know, Mr. Secretary, but this is this is pretty bad
▶ 3:00:08because the fact that community banks in my business have almost twice as much capital percentage-wise compared to banks that pose the largest threat to our financial system. You know that shows that that just how much playing fields titled tilted towards Wall Street. You understand that, right? That's where the risk is. The big banks do far less for our real economy for everyday people.
▶ 3:00:29And that's what I'm trying to say because Trump's regulators recently, you know, finalized a rule to modify the supplementary leverage ratio that applied to the largest banks. Many former regulators and experts have warned that such step will actually undermine the safety and soundness of our largest banks. The final rule will result in a reduction of about 219 billion about 28% in capital at the b bank subsidiaries uh of global systematic uh important banks gibbs.
▶ 3:00:59Again, my residents don't know this but the thing is they end up with having to pay the cost when they fail. And so I'm just trying to stress to my colleagues how important it is because Secretary last November didn't regulators reduce it again the capital requirement, right? Yes or no?
▶ 3:01:14Again, Cong Congresswoman that I I want to be polite and not say it's naive what the road you're going down, but much of the excess capital has been invested in the US Treasury market and keeping those yields low helps the borrowers who want a mortgage or a small business or an a loan. But are you paying attention how much they are lending versus community
▶ 3:01:35Uh, yes. We we pay very close. I I've been a financial for over 40 years. You agree it's low?
▶ 3:01:42It's still very low. It
▶ 3:01:44it's not relative to the historical
▶ 3:01:46Mr. Secretary, if you came to my district, you can go to Detroit or the suburbs, they will tell you the big banks do not loan to them. And if they do, it's predatory. It's not supportive. It's the local community banks that support them in owning home ownership and small business.
▶ 3:02:02The general's time is expired.
▶ 3:02:03Congresswoman, you and I are in complete
▶ 3:02:04The general's time is expired. Except on the capital is now recognized for five
▶ 3:02:12Thank you very much, Secretary Besson. It's really great to see you before our committee again. Uh, I want to thank you so much for working very closely with me on delivering the historic salt uh, relief to the tune of $40,000 because with that my constituents in Orange, Riverside, and San Bernardino counties will finally be able to see the relief as they file their tax returns.
▶ 3:02:38The four times increase in the salt deduction, coupled with other provisions of the Working Families Tax Cuts Act will result in supercharged tax returns, helping more American families get back on their feet after the years of failed by donomics.
▶ 3:02:57Last year you noted that Treasury would revisit the 2023 guidance and analytic framework and you also highlighted that FSOC has other tools such as issuing recommendations to member agencies that are more tailored and precise than designation power. So, Secretary Besson, can we expect a new proposal for non-bank guidance that will be released sometime 2026?
▶ 3:03:27We should expect that.
▶ 3:03:28Thank you. You know, I look forward to seeing that proposal uh when it's finally released and hope there will be a public comment period uh to ensure stakeholders can weigh in and help shape that guidance.
▶ 3:03:42Good. and and the congresswoman, the other thing that I would point out is we had a lot of talk about affordability today and you were a great advocate for the one big beautiful bill and what we're seeing unfortunately in states like yours that the state revenue authorities are not going to mirror the no tax on tips, no tax on overtime, no tax on social security deductibility of auto loans. So, uh which is very unfortunate.
▶ 3:04:11So to to the extent that anyone in the California de delegation, whether Democrat, Republican, the New York delegation should push their states to follow through for working Americans.
▶ 3:04:26You can count on me on that. You know, um let me shift gears now. I want to focus on the community development financial institution fund. Um, I was really happy and relieved to see the staff at the fund were restored after the conclusion of the Schumer shutdown late last year.
▶ 3:04:46Um, I know that you share my view that the fund's work is critical to serving communities that typically do not receive the traditional banking services. So, can I ask you how you are planning to make the fund more effective and efficient as we move forward? What what we want to do is focus on community revitalization, not unrelated and ill-advised social policies.
▶ 3:05:12And we want to drive reforms, new restrictions on the use of funds, and we want to focus on the program's statutory intent.
▶ 3:05:21I know
▶ 3:05:22making the lives better for people in their communities.
▶ 3:05:25Sure. You know, CDFI fund, as you know, has uh bipartisan support and I think it would also has a biccameal support. So, I look forward to continuing to work with you on the future of this critical critical program, but I also want to talk to you and thank you for being willing to come to California and investigate all the fraud, waste, and abuse.
▶ 3:05:48Unfortunately, Gavin Newsome uh has tied, you know, he tried to hide all those uh you know, fraud and waste under the carpet, allowing more than $32 million of unemployment fraud that went unchecked. The state has also watched $13 million stolen from California students because of the AI generated ghost students enrolled in community colleges.
▶ 3:06:13Um, so you know, I suspect this is just the tip of the iceberg in California's fraud, waste, and abuse. Uh, and I've been talking a lot about this. Unfortunately, sadly, the state that I love and I live and I represent a district from California has become a fraud capital of the world. So sad, but that's why we need your team in California.
▶ 3:06:38And is there anything that you can share to that end uh how your investigation into California fraud is proceeding? Uh
▶ 3:06:46there's nothing I can share right now, but I have spoken to Dr. MT O at HHS and he is laser las las las las las las las las las las las las las las las las las las las laser f focused on the healthc care fraud that's going on in California which seems to be substantial.
▶ 3:06:59Yes, I also sent a letter to Gavin Newsome to that end and I was glad to see Dr. Os sending a letter demanding so now state of California is now in the process of returning $1.6 billion dollars to the federal government. So thank you for that and I look forward to continue to work with you. Thank you for joining us.
▶ 3:07:15Thank you. The gentleman from New York, Mr. Torres is now recognized for 5
▶ 3:07:20Thank you, Mr. Chair. Uh, Mr. Secretary, does the president have the constitutional authority to remove the chair of the Federal Reserve or a member of the board of governors solely because of a policy disagreement?
▶ 3:07:33I I'm not a lawyer and I don't have an
▶ 3:07:36You have no opinion on whether the president can remove a board member at
▶ 3:07:42Uh, well, I believe if the board member has committed
▶ 3:07:44No, just in general. I'm not asking about a particular case. I'm asking
▶ 3:07:48I'm asking about the president's general authority. Let me ask it differently. Do you believe that the unitary executive theory applies to the Federal Reserve?
▶ 3:07:57Again, um I think we'll have to wait and see what the Supreme Court says.
▶ 3:08:01What is your opinion?
▶ 3:08:03I I'm not a lawyer.
▶ 3:08:04What is the administration's opinion?
▶ 3:08:06They're varying opinions in the
▶ 3:08:08What's the prevailing opinion? The official opinion?
▶ 3:08:11Again, we we'll have to see.
▶ 3:08:12Do you consider the Federal Reserve an executive agency or a legislative agency? uh I consider an independent
▶ 3:08:19So neither executive nor legislative.
▶ 3:08:20So we'll see.
▶ 3:08:21Therefore independent of presidential control. So it sounds like you do have
▶ 3:08:25again. We'll we will see. We will see.
▶ 3:08:27Okay. Thank you for establishing the independence of the Federal Reserve.
▶ 3:08:29I I I do believe that the Federal Reserve has to maintain credibility and be like Caesar's wife beyond reproach
▶ 3:08:37and and undermining the independence of the Federal Reserve is a threat to that credibility. So, I know you're no fan of the New York Times, but let me let me let me proceed. Let me let me reclaim my
▶ 3:08:47The the Wall Street Journal, which is hardly a leftist publication, published an article with the following headline. Quote, "Trump claims factory construction is up, contradicting US data." The article then goes on to note, quote, "President Trump claimed that the US factory construction is up by 41%, a number that doesn't appear to be supported by the government's own data. One of the stated policy objectives of the Trump tariffs is to bring back manufacturing jobs.
▶ 3:09:14Yet, since the so-called liberation day tariffs of April 2025, we've seen the net loss of manufacturing jobs. Do you know how many net manufacturing jobs have been lost since April 2025 under your watch?
▶ 3:09:28Uh, well, a couple of things. Ma manufacturing operates with very long
▶ 3:09:34What's the number?
▶ 3:09:35I believe there I believe it's about
▶ 3:09:3870,000. Yes.
▶ 3:09:3970,000 jobs lost.
▶ 3:09:40So, but again,
▶ 3:09:41despite the stated objective, let me let me proceed. Let me proceed. I'm going to reclaim my time.
▶ 3:09:45Flip a switch.
▶ 3:09:45I'm going to reclaim my time. Let me let me reclaim my time.
▶ 3:09:49The purchasing managers index measures whether manufacturing is expanding or contracting. A PMI above 50 means expansion. Below 50 means contraction. Since the so-called liberation day tariffs of April 2025, has the PMI been mostly above 50 or below 50?
▶ 3:10:08We just had the biggest increase the in over a decade and we are well above 50
▶ 3:10:14Has it been mostly above 50 since April
▶ 3:10:17Again, long and variable lead times in manufacturing that you may represent.
▶ 3:10:22Let me let me ask a different
▶ 3:10:24financial center not since April 2025. For how many months has the PMI been below 50?
▶ 3:10:30Where are we now? Where are we now?
▶ 3:10:33I'll get January went up. But what about April to December?
▶ 3:10:37The it was below 50 for nine consecutive
▶ 3:10:40Where are we now?
▶ 3:10:40So the score is 9 to1. Nine months of manufacturing contraction versus one month of expans.
▶ 3:10:46I look forward to seeing you next year.
▶ 3:10:48So one of the stated policy objectives
▶ 3:10:50and we'll keep score. Okay.
▶ 3:10:51One of the stated policy objectives of the Trump tariffs is to bring back domestic production.
▶ 3:10:57Does the Trump administration regret imposing tariffs on goods that cannot be produced domestically at scale in the United States? Do you realize in hindsight that that was foolish?
▶ 3:11:08Uh do do you realize that we use the leverage to bring down tariffs from other countries to take down non-tariff
▶ 3:11:16tariffs on bananas gave you leverage? So, so, uh, yes, with with Colombia, with Brazil, I I think Congressman, you're being very naive with
▶ 3:11:24I mean, we were promised re-industrialization. A tariff on bananas did not lead to domestic banana production. It simply made bananas more expensive for American businesses and consumers. The said the same has led to countries negotiating in a more wholesome manner.
▶ 3:11:38Are you willing to commit to no longer imposing tariffs on any product that has neither a domestic substitute nor a national security rationale? the that would be the definition of foolish in a negotiation. So, you're not willing, you're willing to impose, you're willing to impose tariffs that make more expensive goods that we cannot domestically produce here in the United States again
▶ 3:11:58and that have no national what is the national security nexus of bananas and
▶ 3:12:02Again, why why would you do that? That there there are numerous things when you negotiate with Indonesia. There are things that are only made in Indonesia, but the Indonesians brought down their tariff barriers or non-tariff barriers.
▶ 3:12:15I get it. We we have to make bananas great again. I get it. Thank you, Mr. The gentleman from New York, Mr. Garberino, is now recognized for five
▶ 3:12:23Thank you. Um, Mr. Chairman, thank you, Secretary, for for being here today. And first off, let me lead off. Um, I was one of the people you were in in negotiations with over salt last year and I really appreciate the hard work and the commitment and uh getting helping us get it across the finish line and a lot of my uh constituents are going to see
▶ 3:12:41I can tell you as also the IRS chairman that the second largest their refunds are going to come from the your constituents or go to your constituents because of the salt deduction. It's going to be great and hopefully and uh like myself, rest of my constituents I think are going to plow that money back into the economy with with some purchases when they get their refund this year. So, thank you for all the hard work you did there with us.
▶ 3:13:04Um last year you oversaw Treasury's efforts to implement uh President Trump's executive order to phase out paper checks, eliminating a costly and efficient and more fraud-prone process. Part of the EO directed the Treasury Department to work with financial institutions, consumer groups and other stakeholders to address financial access for unbanked and underbanked populations.
▶ 3:13:27Secretary, can you share more on what on the workstream and the particularly how Treasury Treasury uh plans to incorporate digital technologies or payment solutions to increase financial access for unbanked Americans? Uh again we are trying to bring them into the financial system and we are trying to one of the ways is over these individuals phones and what we see especially for the cohort you described is they are especially susceptible to theft
▶ 3:13:57the of the paper checks. They may not have fixed addresses. The fixed addresses or the mailboxes may not be secure. someone from the New York delegation in Staten Island brought this to my attention for her district
▶ 3:14:11and I appreciate that and I I really do think the administration has made serious strides uh to modernize our financial system through these uh initiatives. Uh are there other ways Treasury is looking to safeguard against fraud and improper transactions that you're working on?
▶ 3:14:25Well, again, as we've done the in Minnesota, we've found a substantial amount of waste, fraud, and abuse, and we we want to know with our geographic targeting order, we have pushed down the threshold for reporting for money service businesses, which these are non-banks, to $300.
▶ 3:14:47And we want to know if you are wiring money out of the country that are you on public benefits because uh one of two things must be true. You are receiving more public benefits than you need so you can wire it back home or you have stolen the
▶ 3:15:07Is there anything that Treasury is working on to uh any other payment modernizations that you are all working on? Um right now
▶ 3:15:14uh we're we're constantly working on payment modernizations. We're working uh with the Fed to modernize the their their Fed now. We are looking at ways on digital assets also.
▶ 3:15:28Great. Um I'm going to switch gears a little bit here. Myself just as any other any other member has constituents that will face emergencies. You know, you can't plan for those. um you know whether it's a natural disaster, medical emergency, unexpected you know refrigerator stops working at home um so they they have to and a lot of people don't have savings accounts so they often have to rely on short-term credit uh to cover basic expenses um that arise from these emergencies.
▶ 3:15:56Uh would you agree secretary that access to credit credit can be a critical lifeline for millions of Americans particularly middle and lower income households?
▶ 3:16:05Yes. What actions is the administration taking to promote affordable and responsible access to credit for uh for American households? Uh
▶ 3:16:13again uh we we believe by uh some of the financial deregulation that we have done especially for community banks this this will lead to more credit the for communities rather than uh the the money um coming from a distant credit card I appreciate that answer, Mr. Secretary. And last, as chairman of the Homeland Security Committee, cyber security is one of my top priorities.
▶ 3:16:42Um, Secretary, can you describe what uh the administration is doing to strengthen cyber security across the federal financial regulatory agencies, particularly uh in light of last year's breaches at OC and CFPB, uh, that had that had information leak.
▶ 3:16:59So, the the Treasury, we're committed to making risk informed resources. We constantly work on emerging threats and we are in close collaboration with our financial sector partners both as a push and a pull.
▶ 3:17:13We recently had a group of them into treasury for a very large conference on best practices sharing with each other sharing with us and we've used that as a convenor and then our convening ability and then also I
▶ 3:17:30gentleman's time is expired. We've identified it as a financial stability
▶ 3:17:34I appreciate your time has expired. Thank you.
▶ 3:17:36Chair recognizes the gentleoman from Texas, Miss Garcia. You're recognized for five minutes.
▶ 3:17:41Thank you, Mr. Chairman. And um Mr. Secretary, earlier in response to someone else's question, you talked a little bit there toward the end, but but I'm not sure that uh there was a a time for followup about I think you said 10 to 20 million immigrants that have that are responsible for the driving up the housing cost. Is that what you said?
▶ 3:18:02Uh I I'm referring to a Wharton report.
▶ 3:18:06A Wharton. Do you do do you know what they based it on? What data? What information they looked at?
▶ 3:18:11Uh yes. the survey by survey, community by community. You could go if you'd like. I will have my people posted on the Treasury X account as we speak.
▶ 3:18:20Well, thanks for the cooperation because I'm just completely baffled. the average new home sale is about $500,000 and you're saying that it's driving up uh uh um the housing crisis. Uh when DHS is over there trying to to to to pick up uh and deport people because quote unquote they're drained on society, uh they're dependent on public benefits. So if you're on public benefits, how do you afford a $500,000 house?
▶ 3:18:49Well, let let me clarify your confusion
▶ 3:18:52I'm not confused, sir. Don't don't be demeaning to me, all right? Because I'm going to object and ask the chairman to make you answer question.
▶ 3:19:00Anyway, I I'm trying to explain to you that it is rental income and rental properties. The value
▶ 3:19:05you really think that people have you been to the rental income rental places of immigrants? I have people in my district that are in rental houses that I wouldn't rent to anybody. They're not expensive. They're probably500 or $600 a You think people that that can barely afford housing like that that that that's a housing that we're talking about when we talk about the housing crisis? Uh
▶ 3:19:31D properties push up the price of C properties. Inflation in C properties pushes up the price of A properties. Inflation in price of A property. B properties pushes up A properties. So it moves up the stack. And if you think that somehow the laws of supply and demand do not apply to housing, I would say you're incorrect.
▶ 3:19:48No. Well, I'm I'm not incorrect because
▶ 3:19:51you know, the only thing that we might say about immigrants that we don't have new housing because they can't there there's a shortage of labor supply because they build the houses and you all are more focused on deporting them than having them stay here and build. Uh Mr. Chairman, I'd like to introduce three uh items to the record. Construction workforce shortages are leading costs. A project delays, immigrant enforcements affects nearly onethird of firms. Second, how the ICE crackdown has impacted Minnesota's economy. And third, the price of cruelty.
▶ 3:20:21How Trump's mass deportation agenda in endangers all.
▶ 3:20:26Without objection, be put in the record.
▶ 3:20:28Thank you. Uh, do you have any idea how much we're spending on ICE every single day for
▶ 3:20:34the representative? This is the financial stability oversight
▶ 3:20:37But you're the treasur. You're the treasurer. You're supposed to follow the money in response to questions on this side. You're always talking about, well, we follow the money. Well, have you followed the money? How much are they spending every single day in Minnesota and other states where they occupy cities, terrorize communities, and try to break up our country?
▶ 3:20:57Again, President Trump has secured the border. He was elected on the border on a mandate.
▶ 3:21:03Well, I I disagree with you, and I think you disagree that he was elected.
▶ 3:21:08I think you're confused, but let me ask you about something else. Maybe you'll answer this one. You also recently announced the formation of you uh FSOC household resilience working group that will focus on American households financial condition. American households across the country, especially in my district, which is a workingclass district, Texas 29, have experienced firsthand the destabilizing effects of climate disasters.
▶ 3:21:33Property insurance companies are leaving Texas, California, Florida, and many other states because of growing climate risks. I myself have felt the impact. My concerns feel uh uh uh Mr. Secretary uh what if anything is are you all doing to address the risk to households of mortgages and other forms of credit becoming unavailable in certain regions of the country due to climate change?
▶ 3:21:59Uh again uh Congresswoman, are you familiar with KLW24?
▶ 3:22:05No. uh it it was the uh base for everything that was done with climate and with all the clim proposed climate legislation and it has been discredited. So everything that FSOC previously did based on climate has been discredited.
▶ 3:22:24Uh, Nature Magazine, Nature Magazine has retracted the economic commitment of climate change more than 18 months after first learning that the paper was fatally flawed with authors acknowledging that its errors are too substantial for a correction.
▶ 3:22:37I'm sorry, I'm not familiar with Nature Magazine. We're relying on the Nature Magazine to determine public policy.
▶ 3:22:42Uh, unfortunately, that's what
▶ 3:22:44gentleoman's time is invite the secretary to respond more.
▶ 3:22:49Mr. Chairman, I'd like a response in writing. Thank you.
▶ 3:22:52Yes, gentleoman. We'll have those answers to you in writing. The gentleman from Wisconsin, Mr. Fitzgerald, you're recognized for five minutes.
▶ 3:23:00Mr. Secretary, thanks for being here today. Appreciate all the work that you've done and uh certainly look forward to working with you in the future. Um I did have just a couple questions though. In many ways, the um the cse are far less risky than they were before the financial crisis.
▶ 3:23:19And one of the reasons uh has been that the that credit risk transfer the CRT piece uh those programs however some industry experts are concerned that the CRT program have been significantly diminished and uh focus on capital arbitrage instead of the real risk reduction.
▶ 3:23:40Can you just kind of in general discuss the importance of the CRT with regard to the the CSE and ensuring that uh they're transferring a significant amount of credit risk to the private market and really are then avoiding the risk that the taxpayers take on.
▶ 3:23:56Good. So the the CRT or the the credit risk transfer is very important at FPS and the attendant agencies the members we closely monitor uh to make sure that there is no daisy chain effect that the quality of the risk transfer is at least as high as the as the under as the entity from which it was bought.
▶ 3:24:23What we saw in the GFC was a complexity can create a daisy chain. So what we want is transparency, but I think CRTs are very important, but they cannot be opaque.
▶ 3:24:36Very good. Um, you called for uh you you originally called for kind of a fundamental reset of financial regulation and then you emphasize kind of Treasury's active role in promoting just more efficient, effective, and appropriately tailored uh regulation. Um while we've seen uh progress in tailoring the supervision, can you just tell us kind of overall how you've uh tried to move uh the entire department kind of in that direction?
▶ 3:25:06Again, uh as FSOC, I have convening power and so that would be what you were describing would be done by the Federal Reserve regulation, the regulatory body.
▶ 3:25:18uh vice chair Mickey Bowman has done an excellent job the control of the currency and the FDIC we have tried to get them aligned in what they are doing and in for tailoring and to understand that the reason 50% of small and community banks have disappeared that over the the past 15 years has been because of a one-sizefits-all regulatory strategy which clearly it does not.
▶ 3:25:44Very good. Uh, keep up the good work and thank you for being here today and I yield back. Chairman,
▶ 3:25:50thank you. Gentleman from Wisconsin yields back. Chair now recognizes the gentleoman from Georgia, Miss Williams, you're recognized for five minutes.
▶ 3:25:57Thank you, Chairman Hill and Ranking Member Waters for having this conversation today. And thank you, Mr. Secretary, for joining us. Mr. Secretary, you noted in your introductory letter to the 2025 ESOC report that the council has formed a new household resilience working group that will focus on American households financial condition. Well, Mr. Secretary, as the congresswoman for Atlanta, I'm here to make sure that that includes all families.
▶ 3:26:22As you know that financially resilient households can better withstand shocks, maintain essential consumption, and avoid costly debt cycles. Discrimination in lending or in investment impacts growth opportunities for blackowned small businesses, which means discrimination is in fact a threat to American financial stability. Atlanta has the largest racial wealth gap in the country. Supporting entrepreneurship and access to capital within the black community can help close that gap, Mr.
▶ 3:26:52Secretary, but I need your help. Small businesses like those in the fighting fifth are critical to building and maintaining household wealth. Per Brookings, from 2017 to 2022, the number of blackowned businesses surged, representing over half of all new employer businesses. In 2022, blackowned firms with at least one employee added $212 billion with a B in revenue to the economy and paid over 61 billion in salaries.
▶ 3:27:20More broadly, over the last 10 years, minority business entities comprised approximately 50% of new businesses started in the United States and created 4.7 million jobs. According to the US Census, there are over 9.2 million minority owned companies in the US, employing 8.7 million workers and generating more than 1.8 trillion in annual revenue. However, Mr.
▶ 3:27:45Secretary, there are significant barriers blocking sustain sustainability and growth of black entrepreneurship. That's why I launched a small business advisory council in my district to hear directly from small business owners in my district because access to capital, as we heard in all of the conversations, continues to be one of the biggest challenges that these small business owners face. The first major hurdle for black entrepreneurs in starting their business is a lack of startup funds, equity, and collateral.
▶ 3:28:15A result of the racial wealth gap. During the Biden administration, the Minority Business Development Agency delivered $7.1 million in funding to Georgians through his business centers and capital readiness programs. But President Trump signed an executive order continuing the reduction of the federal bureaucracy directing the destruction of the Minority Business Development. agency. Mr.
▶ 3:28:40Secretary, what steps has FSOC taken to assess the impact of discriminatory lending and investment practices on black small business owners and the stability and growth of the economy overall? And how does FSOC factor discriminatory investment practices into its assessment of threats to our
▶ 3:28:57Uh again, we do not view that as a financial stability concern, but I do view it as a concern. And as I've repeatedly said that we would be work willing to work with you on tailoring for uh banks in your community to give them more lending power because what we have seen is that with 50% of the small banks that have disappeared.
▶ 3:29:21I don't have empirical data but I can tell you that my uh strong hunch would be that many of those would have been minority banks. So, uh, we would like to see more denovo banks, whether they are in black communities in Atlanta, whether they are in Latino communities, whether they are in Asian communities.
▶ 3:29:40So, Mr. Secretary, you don't think dismantling the Minority Business Development Agency had any impact on the US economy at all? Again, very difficult to tell in a complicated multivariable economy the what impacts whether it's good or bad for the aggregate versus the
▶ 3:30:01Mr. Secretary, I'm here to be the voice of the people that sent me here and I welcome you to join me in Atlanta and I would love to introduce you to some of these small business owners that have been greatly impacted by this dismantling. Also in the 2025 FSAC report placed a premium on deregulation and demonstrates the administration's optimism about the use of AI to make financial institutions more efficient.
▶ 3:30:23As you noted, AI used properly could provide numerous benefits to financial institutions by enabling them to provide innovative services cheaper, faster to a broader set of customers and under very economic conditions. For example, currently some lending institutions are using AI to evaluate a customer's creditworthiness through alternative data such as cash flow history. And I see my time is about to expire, but my question is, Mr.
▶ 3:30:49Secretary, what proactive steps does FOC recommend regulators take to combat lending discrimination, which may be compounded through the use of AI as banking AI to make lending decisions? I would love that answer. We invite the secretary to respond to your question in
▶ 3:31:08Thank you.
▶ 3:31:08We we thank you both. Now recognize the gentleman from New York, Mr. Lawler. You're recognized for five minutes.
▶ 3:31:15Thank you, Chairman, and uh first, Mr. Secretary, thank you for being here. And thank you for your leadership uh in helping get the working families tax cut bill across the finish line. And in particular, thank you for negotiating over the issue of salt, the state and local tax deduction. That was a big win uh for the American people.
▶ 3:31:35Um a core goal of US stable coin policy is to keep dollar denominated stable coins issued, regulated, and supervised here in the United States rather than offshore. Uh today, a substantial and growing share of the dollar stable coin market operates outside the US as foreign jurisdictions move quickly to establish legal regimes that encourage dollar stable coin issuance in their markets.
▶ 3:32:01Foreign issued stable coins already compete globally by offering consumers economic value and incentives to use and hold them and countries like China are actively using economic incentives to drive adoption of their digital currencies as Treasury implements stable coin legislation. Do you agree that US rules should preserve enough flexibility for American issuers to remain competitive so dollar activity stays onshore, transparent, and under US
▶ 3:32:32Congressman, and again, I think as you know, I used to have a house in your district. I'm g given the tax regime in New York. I'm not sorry that I'm no longer there. I hope it will come back. It's a beautiful part of the world. Um with stable coins I I would say what we want is you US best practices.
▶ 3:32:51The stable coins can go around the world and indeed we are seeing the I believe we will see the adoption especially in in emerging economies or maybe any other individuals who want to hold the US dollar. But I think it is paramount as was done with the genius act to put in US best practices.
▶ 3:33:10Agree. Uh different topic. Fraud scams by bad actors are estimated to affect 15% of American uh homes uh representing about 20 million American households in total. And given that losses to these scams often amount to $575, consumers face meaningful financial harm even from a single incident.
▶ 3:33:32Uh, at the same time, 37% of all US households cannot cover an emergency expense of over $400 with cash or savings. And a fraud loss can be devastating to the average American. These losses can lead to missed debt payments and damage to credit scores, which in some cases prevent home ownership. We've seen a renewed focus on fraud by this administration with the announcement of things like the scam center strike force.
▶ 3:33:58And I'd like to strongly encourage the administration to adopt an all of government approach to combating fraud and scams. Secretary Bessant, what role do you think Treasury should play in fighting scams and fraud? And does FPS uh does the FPSC committee have any initiatives planned for the coming year?
▶ 3:34:16Uh yes. So Treasury through Fininsen was part of the group who took down the big scam centers in in Asia. We are very focused on places like Laos, like Burma, like North Korea, and even Iran. And the other side of that, Congressman, is that it's used to use for nefarious once the money is stolen, not only has a US citizen been hurt, but it's used for nefarious purposes.
▶ 3:34:45So we are constantly monitoring that and we are working with our uh partners because as you said AI can be both a benefit they can be both a blessing and a curse. So we think properly managed and rolling it out using private sector partners. We can cut down on that shocking number. I was not aware 15% of Americans are subject to it.
▶ 3:35:11But we've also got to be very careful because it will make malign actors the more um more able to pull off bigger scams.
▶ 3:35:20Yeah. Well, and and kind of continuing on that front, there's been a growing concentration of cloud and AI model providers and the risk that results if a small number of firms control critical financial sector infrastructure. uh how is FSOC assessing the financial stability implications of this concentration particularly in scenarios of an outage, cyber incident or foreignbased remote access vulnerability.
▶ 3:35:51Uh and I had introduced legislation that we passed um uh recently through committee the remote access security act uh ended up passing the house with strong bipartisan support. Uh what steps is FSOC taking to ensure that financial institution reliance on third-party AI and cloud providers does not expose the system to remote access risks?
▶ 3:36:16You'll need to answer that question in writing. Mr. Secretary, Mr. The gentleman's time is expired. pursuant to the agreement with the committee and the treasury secretary, we'll have one more questioner uh because the secretary has a hard stop at 1:30 p.m. And so the chair recognizes the gentleman from San Jose, California, Mr. Licardo, you're recognized for five minutes.
▶ 3:36:36Thank you, Mr. Chair, and thank you, Mr. Secretary, for testifying before us today. Uh I know in addition to your many responsibilities, Fininsen comes under uh your duties as well in uh in managing and Fininsen has been very outspoken in this administration and other administrations and expressing concerns about alternative remittance systems also known as uh I think informal value transfer systems. Is that
▶ 3:37:02Uh yes sir. And u there are many concerns I know with these alternative systems including lack of documentation anonymity u their informality make them very attractive to money laundering. Is that true?
▶ 3:37:17Yes sir.
▶ 3:37:18And in fact uh in particular Chinese moneyaundering organizations have been very effective at utilizing these systems uh to acquire access to US currency uh in various ways for nefarious means. Uh we were very focused on Chinese money laundering organizations which originally began as a way for Chinese citizens to get money out of the country. Uh as China clamped down on the leakage, they morphed into partners with the Mexican drug cartels. So we are very focused on all of that.
▶ 3:37:49I I appreciate that and I support that. Uh I I understand there has been some research including published by the general uh the government accountability office um I'm sorry a GAO report in 2016 and other studies as well that have found that fines and obstacles to um are not very effective at stopping the flow of remittances through leg in in in the aggregate but in fact tend to push these remittances
▶ 3:38:19away from legitimate uh companies and remittance systems into these alternative systems. Are you familiar with some of that literature?
▶ 3:38:28I'm familiar with that thinking.
▶ 3:38:32This administration last year through HR1 imposed a tax on remittances uh in section 4475. Uh you're familiar with that. Is that
▶ 3:38:43I am. as you know, many residents of the United States depend enormously on these remittances, many cases to keep their families alive in foreign countries because it's pretty darn difficult to immigrate to the United States these days. Um, you're familiar with the importance to so many residents of the United States to be able to have access to remittance.
▶ 3:39:07I'm familiar with the difficulty coming into USU legally since January 20th of last year. Yes, sir.
▶ 3:39:14And quite simply legally as well. I have residents in my district who have been waiting 20 years to get a green card. uh and they've been going through all the legal channels. So, it's there are many obstacles. It's fair to say. Is that fair to say, Secretary?
▶ 3:39:28I I I don't know the specific instances of your concern. I
▶ 3:39:30I invite you to my district and you can meet uh the nearly 40% of my residents who were born in a foreign country that make Silicon Valley the extraordinary place that it is, and they'll tell you their tales of woe in trying to get through this system. In January, you indicated, quote, "We will strongly push to prevent anyone receiving federal government support funds from sending money overseas." Is that right?
▶ 3:39:55In reaction, a policy analyst at Kato Institute um said, quote, uh that these kinds of actions are building quote building a legacy of financial surveillance and control. Do you recall that?
▶ 3:40:10uh I don't read the Kato Institute but I do believe in financial surveillance for the remittances that should not be remitted and we should also know where the money is going and if you agree that imposing taxes and obstacles to using legitimate systems may compel people to use some of these informal mechanisms.
▶ 3:40:33Don't you agree that undercuts our objectives in addressing money laundering uh the illicit activity in these alternative systems?
▶ 3:40:43I I disagree with taxes,
▶ 3:40:47but your administration and you supported that tax last year.
▶ 3:40:51I I disagree with your assessment that taxes the can be a hindrance.
▶ 3:40:57Uh don't you agree that taxes can alter behavior in various ways? When people understand something costs more, they may choose a different path.
▶ 3:41:05I I would say that they would choose the safest path.
▶ 3:41:09Well, they may they may choose a less safe path if it just costs more to use the safe path. Don't you agree?
▶ 3:41:14I I believe that anyone who has a has legitimate income, is in the US legally, and is sending money home through gains where they have paid taxes, they would choose the safest path.
▶ 3:41:29Mr. Secretary, unfortunately, the data doesn't show what you suggest. It shows the opposite and we're encouraging money laundering through these kinds of actions. These obstacles and these taxes are not helping.
▶ 3:41:40Gentleman's time is expired.
▶ 3:41:43Appreciate the gentleman from California. I want to thank Treasury Secretary Bessant today for his testimony. Without objection, all members will have five legislative days to submit additional written questions for the witness to the chair. Questions will be forwarded to the witness for his response. Mr. Secretary, please respond no later than March 11th to our questions. This hearing is adjourned.