Transcripts For CSPAN3 Treasury 20240704

Testify on the stability of the Financial System. You are watching live coverage, here on cspan3. Committee on banking and urban affairs will come to order. Secretary yellen has been flexible with the schedule. We had to change the time from yesterday to today. She has to leave at 11 30 and we will respect that. I will enforce the fiveminute rule on myself and everybody else. Thank you for understanding this. For a long time it has been clear what gets rewarded on rall street wall street. Bigger profits mean fatter bonuses and then we end up with a wall street culture that ends up glorifying seeing just how much they can get away with. When their bats fail, the taxpayers in our Community Clean it up. That is what fiascoes boil down to. It leads to an economy of excess and a shrinking middle class. That is how we got east palestine. And the ceo of stellantis making three times what the average worker makes. We saw that plan play out with poorlyrun banks putting profits above Risk Management. And Small Businesses all over the country worry about how they can make their payroll. Regulators had to step in, they always do, to protect the economy as the executives walked away pretty happy. 2008 was the same story but on a bigger scale. Wall street took big risks with americans money, just like Silicon Valley banking did. They could make even bigger bets by exploiting even more. Risktaking built up in the shadows until it was too late to contain. Chaos on wall street put 9 million americans out of work. Millions lost their homes and they lost their wealth to foreclosure. My zip code, 44105, had more foreclosures than any other zip code in the United States of america. There were big, barely supervised companies, swallowing up american jobs. Some would like to dismiss this. It is all in the past, all once per century catastrophe, we dont need to worry about that anymore. But 2008 showed us how wall street is trying to hide the same risk behavior. They are not going to give up new ways of getting around the rules so they can make bigger bets to make your profits. We let them get away with it. Americans pay the price, workers pay the price. That is why 14 years ago, we created Financial Stability Oversight Council, over all of our regulators. The distinguished secretary treasurer chairs. And there is a response to financial risk wherever it develops. Other regulators only please some kinds of oversight, they take a 3625 view. The job is to close gaps in the system, covering blind spots that any agency might have making sure that safeguards are in place. It plays a Critical Role in stopping the next aig from blowing up our economy. It ends the cycle of bailouts and golden parachutes with workers always stuck with the consequences. Nonbanking financial companies, insurance companies, clearinghouses, hold nearly 20 trillion in assets. Over the last decade, they have grown larger and larger. These days these companies are responsible for a lot of the activity on wall street. Others demand the biggest employers to make huge bets with billions of dollars, often using money from workers pensions. It would be all too easy for one of them to drive down our Financial System. They have the same deeprooted temptation to take on more risk for a big day as anyone else on wall street, we know that if one of these firms collapse, executives will be just fine but most of the country wouldnt. And that is why it is so important. When they try to evade the watchdogs, it is not a surprise that wall street and its well funded allies always try to kill anything that tries to hold it accountable. They have plotted viciously from us implementing dodd frank. After we passed it, the chief financiers, the chief lobby years, for the Largest Group of Companies Said now it is halftime, now it is halftime. Now they have tasked the lobbyists, forcing them to sit on their hands. They want to take away some of the most important tools for keeping our economy safe from reckless behavior. Ipsos fights hard against what they are doing, nervous that ipsos can bring accountability to parts of wall street that continue to operate in the dark. The last administration worked total handcuffed ipsos by undermining its ability to impose safeguards. The message in the last administration was clear, ipsos is not really watching and will not really act, how long that was. It is changing. They are in a far better position now, to make sure that wall street does not crush main street. There is a new emerging risk to the Financial System. These are risks we have talked about in the committee, Digital Assets, Artificial Intelligence, as well as the old risks. Like shadow banks. Wolf is monitoring out the commercial market is shadowing the Banking System, an important concern given what we have seen just this week that secretary yellen is responsible, too, for the critical work to safeguard National Security by cracking down on illicit finance. I look forward to collaborating with her on the ways that bad actors make combat the efforts, including these tools, ultimately, we cannot allow another financial crisis, wherever the risks may come from, to set workers and consumers back. We need hard work, not financial speculation. We need a system that works for everyone, not just corporations, hedge funds, and not just the lobbyists who have far too much influence on this committee. We know that we are still far from that economy. You only have to look at corporate profiteering in the last few years. Every time americans go to the grocery store, they pay for those executive bonuses. Every time americans go to the grocery store, they pay for the stock buybacks and they pay for the executive bonuses. We see that with the big banks, millions of dollars in apr campaign, making sure that taxpayers do not have to bail out another bank later, all to keep their lifestyle and all to keep their lifestyle high. Since i have been chair of the committee, we have worked every day. Instead of real economy, that is why this committee tasked the bipartisan recuperation act to break down. That is also why we considered ipsos. Secretary yellen, thank you once again for rearranging your schedule to be here today. I look forward to hearing what you have to say. Senator scott . Thank you, we have lots of questions im sure about the economy and the state of affairs. It seems like some of our friends on the other side live in an alternate universe. The average american sees the economy that we have today and they shake their heads. They cannot understand what people in washington cannot see. Twothirds of americans do not have 1000 dollars in their savings accounts. Bidenomics has destroyed and leveled family after family after family. 18 inflation, and it is not coming down, period. Food is up 20 , energy, 20 , gas, 40 . When you are raised in a home like i was, single family, it is a crisis. A crisis brought to us by the Biden Administration and people who philosophically believe that bigger government somehow leads to most success. Taking money out of their paychecks, so that people that are can figure out how to spend it better than they can is somehow going to lead to a Better Future for their kids. That is what we call in South Carolina hogwash. We also have the responsibility in the Banking Committee to take a look at legislative matters concerning National Security. Whether that is scrutinizing tools to better curb the influence of china or punishing mexican cartels trafficking deadly drugs across our southern border to sanctioning international bad actors. I wish you were here four months ago, as i requested you to be here, after the devastating attacks that hamas leveled on israel on october 7th. I am ashamed that your administration and your Department Release billions of dollars to iran, helping them to fuel and fund their terror proxies. Our israeli allies deserve an account for this administrations reckless release of 6 billion in august. After october the seventh, another 10 billion, not to mention the relaxing of the sanctions that allow hundreds of billions of dollars to flow, because of the oil revenue. That is devastating. Raising the alarm, my republican colleagues sent you a letter, demanding answers, demanding to know how you can continue to provide billions of dollars to iran that fund terrorism. It has devastated and eliminated so many israeli citizens, our strongest ally in the middle east, partially funded by resources released by this administration and your department of treasury. I have not seen any sense of urgency, i have not seen accountability. And we find that frustrating. Look at what has happened around the globe, since october, there have been over 150 attacks by iranianbacked terrorist groups against american servicemembers. As tragic as that is, it led to the loss of the lives of two navy seals and three members of our United States army. 30 servicemembers injured, these are american patriots who have put their lives on the line and we should have their backs. And right now, no one fears u. S. Deterrence, because there is no u. S. Deterrents to fear. And that lack of deterrence allows funds to be released to known terrorist regimes. The Biden Administrations policies accepted america from a position of strength on the world stage to a position of weakness, the billiondollar paydays to our adversaries must stop, it is time to defend american servicemembers and interests abroad and this starts with ending any payments, any relaxation of sanctions to iran. But defending america is not just about looking overseas. It is also about at home. From the border crisis to the fentanyl emergency, we must use our economic tools to stop the flow that is coming into this country. 75,000 american lives have been lost to fentanyl. When we have known National Security threats crossing the southern border and fentanyl production facilities popping up across mexico with the help of chinese pill presses, we have a massive problem. Too Many Americans live lives with family members lost. The devastation that so many families feel today is undeniable, because of fentanyl. My friend lost his son, alan, last year. Less than a year ago to fentanyl. We can do so much more. And there is so little action to stop what we know is a killer across our southern border. I look forward to hearing your thoughts on how we end this crisis and how we end this crisis now. Time after time, we see this Administration Place partisan issues above the American People. The results of bidenomics, as i said earlier, it is devastating. We talked about the gas prices, the energy prices, the lack of savings. We often ask ourselves, how can American Families achieve the american dream, when so many of them have so little money in their savings accounts . How can an average millennial become a firsttime homebuyer when Interest Rates are so high, because of inflation. It is not transitory. It is permanent, brought to us by the Biden Administration. We should not do what we have seen done on the global stage by this administration. Focus more on leading European Countries are helping the European Companies through climate policies. Go to china, spend more time talking about Climate Policy then we do ip theft. I know this sounds like a lot. You have been given an awesome responsibility to improve the economy and protect americans and lead us to a Better Future. Instead of that, we have been seeing puzzles that allow for this government to spy on americans accounts, with as little as 600 in transactions. I will end with this. Under your jurisdiction, we have seen abuses, using their power to track americans for shopping at Sporting Good stores, and making transactions with political keywords, in fact, i sent a letter to you a few weeks ago, specifically asking about these, whether the Treasury Department has been providing materials to Financial Institutions, instructing them to search Financial Transactions using terminology that reveals political interests. I would love to hear in response to that. If true, this is a gross abuse of power. Fincen was created to stop Money Laundering and not to spy on americans, it was not created for political motivation. I conclude with this, america deserves better. And with this, more so than what the Biden Administration has delivered to them. Secretary yellen, secretary of the treasury, please proceed. Thank you. Members of the committee, thank you for inviting me to testify. Over the past three years, the Biden Administration is driven in historically recovering. Gdp growth is strong and inflation has declined significantly and we have achieved a strong labor market. The prime age labor dissipation rate is up by over two Percentage Points and the Unemployment Rate remains below 4 , continuing the longest streak in 50 years. Real wages have increased and household median wealth has, too, by 37 between 2019 and 2022. That is the largest threeyear increase on record. Families are now putting their additional income and accumulated savings back into the economy. Our continued economic strengths depend on a solid and resilient United States Financial System. Throughout 2023, the Financial Stability Oversight Council monitored a wide range of risks, including risks stemming from commercial and Residential Real Estate sectors and from global geopolitical conflicts and technological developments. When two regional banks failed last march, we acted quickly to prevent contagion to banks with similar vulnerabilities and to maintain confidence in the Banking System. The council also increased transparency this year issuing an analytic framework, and for the first time providing the public with indepth information on how it monitors, assesses, and response to potential financial risks. Let me now highlight five areas of ongoing work that are further detailed in the councils 2023 annual report. First, the council is focused on risks from the Banking Sector and from nonbanking Financial Institutions. It supports Member Agency plans to review capital measures, whether they appropriately reflect the Banking Institutions ability to absorb losses, improve resolve ability, and it it addresses vulnerabilities from uninsured deposit levels and depositor composition. Nonbank Financial Institutions are an important source of capital in financial markets, but also pose potential risks to the Financial System, including risks related to liquidity mismatch and leverage. Securities and Exchange Commission initiatives focused on hedge funds, money market funds, and other investment funds. They are an important step forward. Second, the council is focused on member agencies enhancing assessment efforts and increasing coordination around climate related Financial Stability risks, from increasingly severe and frequent climate related events. Financial regulators should also continue to promote disclosures that allow investors at Financial Institutions to consider these risks in their investment and lending decisions. Third, a key focus has been bolstering protections against Cyber Security risks. The council promotes sharing timely and actionable Cyber Security information including through ongoing partnerships between state and federal agencies and they the private sector. Fourth, the council is increasingly monitoring the use of Artificial Intelligence in financial services, which brings potential benefits such as reducing costs and improving efficiencies and potential risks , like cyber and model risk. Financial institutions, regulators, and Market Participants should continue deepening their expertise in monitoring capacity, in this area. Fifth, the council is focused on Digital Assets and related risks, such as cryptoasset platforms. Potential vulnerabilities from cryptoasset price volatility, and the proliferation platforms, acting outside of or out of compliance with applicable laws and regulations. Applicable rules and regulations should be enforced and there should be legislation to provide for the regulation for stable coins and the spot market for cryptoassets that are not securities. We look forward to continuing to engage on kong this with congress. I look forward to taking your questions. Secretary yellen, again, has been very flexible. We moved the hearing to 9 00 because she wanted as much time as possible. She has to leave by 11 30, exactly. I will enforce the fiveminute rule on myself and everybody else been last march, you had to step in and stabilize the system. Investors take outside risks and rarely suffer consequences. 14 years ago, Congress Gave ipsos important authorities to impose safeguards. Secretary yellen, why are the designation authorities important for ensuring that wall street is accountable when it puts our Financial System at risk . Thank you for that question. I think that if we look back to the financial crisis in 2008, and we recognize that some investment banks, like lehman brothers, who were not banks at all, but rather shadow banks. Or nonbanking Financial Institutions, they had very little capital and work immensely, highly leveraged. And their failure touched off a financial crisis, the likes of which we had not seen since the great depression, as you mentioned in your opening comments, the poll that this took on American Workers and businesses was utterly enormous. The Unemployment Rate was close to double digits and it took almost a decade to recover from that. And so, making sure, that we of course focus on the Banking Sector. But there are nonbanks that can pose risks to their material distress, their failure can pose tremendous spillovers and risks to the entire Financial System. And when the council identifies such a firm, designation may be the appropriate way to handle that. And doddfrank created the ability for fsoc to designate that by the Federal Reserve. And they need to have higher Risk Management liquidity standards. We also assert that fsoc should make sure there is appropriate oversight of these companies. Terrorist groups have used Digital Assets to raise and transfer funds. We have important tools, most of them date back to the post 9 11 era, do we need to update our counterterrorism tools, madam secretary, to respond to the risks created by Digital Assets . We do have authorities, many authorities, who enable us to act and we have identified a number of holes in those authorities. And we have composed a list of suggestions, for ways in which treasuries and authorities could and should be strengthened. And we look forward to working with you, to try to accomplish that. We will work with you, some of it you can do as secretary. Some of it needs congressional authority. We will continue. It seemed like overnight, last march, we learned the actions of a few Bank Executives were putting the whole system under stress. Thankfully, the system was stabilized. The risks can suddenly emerge without much warning. That is what happened. When our Banking System faces stresses, explained to us how Strong Capital rules reduce Systemic Risk and protect depositors in Small Businesses . Capital is available to absorb losses from unanticipated shocks. What happened last march is that , a couple of banking organizations that had really mismanaged their Interest Rate risks, that is a classic risk, something in a rising Interest Rate environment can lead to realized or unrealized losses for banks, strong capitol capital enables the banks to remain viable and not to fail. And unfortunately, it had enormous uninsured deposits and inadequate liquidity. And when it suffered losses, that run threatened similar runs in other institutions that also had exposure to uninsured deposits. So, the president , the treasury, and the regulators took action to try to stem a systemic bank run. And i believe we were successful in accomplish that. The senator from south dakota is recognized. Secretary yellen, welcome to the committee. Senator lummis had headed up a committee, and they sent a letter to you. The letter asked that you commit to a timeline for publishing the fsoc one, two, three report analysis is critical when financial regulators are pursuing complex changes to all parts of the Financial System. The report is three years overdue, and your response to the letter was requested quickly. I would encourage you to direct those statutory obligations within six months. I would ask unanimous consent from the committee, mr. Chair, that the letter the entered into the record. Thank you, mr. Chair. Madam secretary, i am going to start out by asking an easy one , first. The fsoc 2023 annual report stated, u. S. Banks continue to have sound levels of regulatory capital and healthy levels of profitability, while maintaining liquidity buffers. As the chairwoman of the council, i think you would probably agree with the statement. Correct . Okay. I also know that in the past, you have been very careful not to get in the middle of discussing the endgame discussions. I presume you do not want to comment on that at this point. Thats right. Nonetheless, it does seem to me, we make it very clear that the banks have some level of regulatory capital. They are maintaining liquidity buffers, seeming to suggest that we may not need a whole lot of additional changes regarding the endgame proposals. Secretary yellen is it fair to say, probably our government is not on a fiscal path right now . I believe we need to reduce deficits and stay on a fiscally sustainable path. Thus far, in real terms, the interest burden of the debt has remained global. It has remained within or below historical norms. And the president s budget had a substantial deficit reduction that will continue to hold interest at comfortable levels. But we will need to Work Together to try to achieve those savings. Recognizing that it is part of the messaging that is out there, but it seems to me the Debt Service Costs increased by 237 billion, year over year. It does not hardly seem to be sustainable. Interest rates have risen considerably as the fed has tightened monitoring policy. The expectations, and the actual longterm rates have risen, too, but by somewhat less. The expectations of those forecasters, and of the recent analysis by cbo suggested that, while Interest Rates are expected to be above the very low levels that they were at prior to the financial crisis, they are expected to decline somewhat. I would like to explore that someone, my understanding is to accommodate for the rising cost of servicing our debt, the Treasury Department announced last week another increase of the auctions. If we do not course correct, is that a possibility . It could, in an extreme case, be a possibility. I see no sign of that now. Our debt is highly valued. And it is the most sound and most liquid asset, not only for americans, but around the world, but of course, we need to stay on a physically sustainable fiscally sustainable path. Perhaps there is less interest in that debt, would the fed then have to start qualitative reasoning, and would you expect that to be part of the plan, in the near future, in the next two years . I am not going to comment on what the fed will or should do. I would simply say, as you know, the responsibility of the fed is to maintain full employment, and to hold inflation down and i think that they would attempt to fulfill that congressional mandate. These five minutes go by really fast. Thank you, madam chair. Thank you. Senator reed of rhode island is now recognized. Let me thank you for a remarkable job. Unemployment is now 3. 7 , it has been that way for 24 months. That is the longest since the 1960s. So, this administration has surpassed any previous administration, both republican and democratic. We have the expansion of the labor force, by most statistics, i would add, real wages have also been set. We are seeing the particular growth of real wages, frequently , if they ever get the benefit. It is one of the fairest expansions we have ever seen, with disproportionate gains at the low end. That is a result of what steps President Biden has taken, creating jobs, not simply hoping that it all trickles down from the select few. That is absolutely correct. Let me change topics. The treasury Department Released the annual Money Laundering risk for 2024. Private funds, such as hedge funds and private equity funds, pose the highest risk of Money Laundering, because they are exempt from antiMoney Laundering regulations. Can you describe the assessment . And does this represent any danger to the United States . I believe it does represent a danger to our Financial System. And it creates holes that, you know, facilitate illicit financial activities. Investment advisers have never been subjected to comprehensive industrywide aml, cft regulations. At this point, it is kind of a patchwork, where some Investment Advisers implement some measures. Some of them are duly registered as brokerdealers, part of lending companies, but there are holes in the system which allow illegitimate or illicit investors to shop around for an Investment Adviser who does not inquire into their source of wealth. Treasury is planning to issue a proposed rule that would apply to the aml, cft requirements for Investment Advisers. So, essentially, it appears that some of these advisers are taking the money of russians, the chinese, et cetera and moving it through hedge funds. And essentially washing it in the United States . That is absolutely correct. We have identified instances where Investment Advisers have worked with sanctioned individuals, corrupt officials, tax evaders, and criminals and this is, this is really the risk to us. We need to address that. I want to again switch gears. One of the issues we all face, particularly in metropolitan areas, is the falling demand for commercial real estate. That puts pressure on the banks who lend to developers, which puts pressure on the developers. Is the fsoc looking at this in a comprehensive way, the impact on both the real estate sector and also the Banking Sector . We have been looking at it in a comprehensive way, working with the Bank Supervisors to understand exposures. I believe we have discussed, in almost all of our print 23 meetings this year, commercial real estate. We have gotten the reports and done our own analysis. And you are right, particularly for Office Buildings in the metropolitan areas, vacancy rates have gone way up. Especially for other than class a buildings, and, of course, Interest Rates are substantially higher. Valuations are falling. And so, it is obvious that there is going to be a stress and losses that are associated with this. Banking supervisors are working with their banks to manage this risk, to identify it. And i, i believe, you know, this will not end up, i hope and believe, this will not end up being a Systemic Risk in the Banking System. The exposure of the largest banks is quite low, but there may be Smaller Banks that are stressed by these developments. Thank you, madam secretary, very much. Senator kennedy of louisiana is recognized. Madam secretary, i have watched you for years, even before i came to washington. When i have time, i enjoy reading your speeches. I think you are what cool looks like. You are a good sport to go out every day and try to defend bidenomics. It is like trying to defend a fungal infection. Bidenomics is really just paying more to live worse, isnt it . I certainly would not agree with that characterization. Bidenomics, first, tried to address the pain that households were experiencing because of the pandemic and they help them survive it, Small Businesses, households, people who had lost their jobs, to prevent the kind of scarring we saw after the financial crisis. And, as the economy began to recover and of all advanced countries experiencing the pandemic, no country has done better than the United States. They quickly had a labor market recovery, resumed growth, and we have the largest realwage increases of any advanced country. And then, mediumterm, bidenomics is focused on helping middleclass families lead better lives and address the problems, create jobs. I only have five seconds minutes, madam secretary. Good try. These high prices are here to stay, arent they . These high prices, i will amend that, they are caused by bidenomics and they are here to stay. The high prices were not caused by bidenomics. We suffered a pandemic that resulted in severe dislocations. But i have to ask you, they are here to stay, arent they . I do not expect the level of prices to go down. They are here to stay. With the rate of inflation, some prices will be higher than they were before the pandemic. But wages have risen considerably and it the pace of price increases is now receding, over the last six months. The measure of inflation that the fed focuses on has been running exactly but, you know, if you do not get a pay raise, you are screwed. There is a difference between disinflation and deflation. Disinflation, which i am happy to have, it means inflation is going down. It means prices are rising less rapidly than they were. But that is a far cry from deflation, which means the level of these high prices, caused by bidenomics, are here to stay. Here is what powell said on february 4th, he was asked a question. Inflation is one thing, prices are another, i wonder if there is any reason to believe that people will see the prices decline . Here is what chairman powell said. The prices of some things will decline, others will go up. But we do not expect to see a decline in the overall price hall. That does not tend to happen in economies except in very negative circumstances. He is talking about a recession. It will take a recession to get the prices down. We do not have to get the prices down because wages are going up. And a metric that is worth knowing is that the median American House worker weight, you dont think that we need to get these prices down . Chicken is up 23. 5 coffee is up 30 , gasoline is up 44 and new cars and trucks are up 20 , because people that is used cars people cannot afford a new car and you dont think we need to get these prices down . Wages are up. They are not up 24 , they are not up 23 . People are really, look, they are barely getting by because of bidenomics. American households have many pressures on their budget. And President Biden is devoted to doing what we can, in his administration, whether it is health care costs, insulin co pays, energy costs, in getting these prices down and helping American Households afford a decent, middleclass life. But, what is true, the median worker in the United States, compared today with 2019, they can buy the same basket of goods with 1400 left over, to save or spend. Americans, on average, are better off, in spite of the fact that the level of prices is higher. Thank you, senator, good try. Since we are talking about questions of affordability, let us stay in that realm but talk about some of my republican friends did not support. The American Rescue plan. I have voted for and it provided an historic increased of the Child Tax Credit. By boosting the credit to 3600 and that is for infants and toddlers, paying those credits, Child Poverty decreased by 30 in 2021. In the same year, Food Insecurity decreased by 24 and the equipment of 2 million children. And they help pay for so many other things, unfortunately this article lifeline ended for hardworking families at the end of 2021. Secretary yellen, is it your opinion that the American Rescue plan is the reason for decrease in Child Poverty in 2021 . I believe, there was a recent study that showed that about half of the decrease in Child Poverty was directly attributable to the Child Tax Credit. And there were other things that also served to lower Child Poverty. How many more children would be lifted out of poverty if the bipartisan tax relief for American Families and workers at was signed into law . I do not know the exact numbers. Based on what we saw previously, and looking at what the credit has devised in that legislation, to me it is a proven track record of delivering a Brighter Future for our children. I want to thank the chairman for his continued work. I hope we can pass the legislation shortly. Climate change is causing the property and Casualty Insurance market to buckle under competing pressures to provide returns for shareholders and sell a product that policyholders can afford. As businesses, insurers have an obligation to their shareholders, as policymakers, we have a right to be concerned when families cannot afford or access necessary Homeowners Insurance coverage. Allstate and state farm have stopped writing new policies in california. 15 other companies have stopped writing new policies in florida. Aig plans to reduce the Homeowners Insurance business in communities across the United States, new york, delaware, florida, colorado, idaho, and wyoming. 12 of homeowners have chosen to forego Homeowners Insurance. Madam secretary, can you discuss, as noted in the report, how climate risk drives a negative feedback loop to economic and Financial Stability . We are very concerned about the developments that you just cited. And of course, the absence of insurance, or being priced out of insurance, as these Climate Risks have intensified, is harming the world being of households and the cost of living. And it is also creating financial instability, because many banks have exposure to loans, to the risks that can come if they have uninsured losses, and there can be a Feedback Group that works to disadvantage. Wildfires, droughts, across the country, you can see it before your eyes, if you have no insurance, you put what for most americans is their single biggest asset at risk at the end of the day. Finally, the fsoc report made mention of the housing shortage when discussing the vulnerabilities of the Residential Real Estate market. I worry that not enough emphasis is being placed on this crisis. Nationwide, we are facing a shortage of 3. 2 million homes and this shortage is driving up the price of housing and putting those with lower incomes at risk. Do you agree that the housing shortage, if not addressed, could pose a serious threat to the economy and if so, what do you think congress could do to help alleviate that circumstance . I certainly agree, this is an enormous problem for a very large number of americans. President biden has made a number of different proposals to attempt to address this, congress hasnt passed it. And i do think it is an area that requires really close attention and action by congress to address. Section 202 housing for the elderly and a host of other things, the Public Housing fund is facing a 70 billion Capital Needs backlog. The section 202 program has not kept up with the need for affordable housing. I appreciate that the chairman is giving housing more attention under his leadership. Senator scott . Once again, thank you for being here. You and i probably agree on one thing, for sure. The United States, a strong United States, is a vital part of security. One of the challenges i had, this relates to the iranian regimes proxy attacks on our american soldiers. The fact that this administration, under your leadership in the Treasury Department, has released 6 billion before the october 7th attack, and 100plus billion dollars, relating to the relaxation of the oil sanctions. To me, that leads to attacks, and it is in part, because this administration downgraded the houthis from a foreign terrorist organization. And so, when i look at the actions of this administration, and i couple that with the resources released to iran, the question i ask is, how do you continue to provide iran with billions of dollars, knowing that they are the ones that are orchestrating attacks against our servicemembers . I assume your answer will, in part, be that some of those dollars are frozen, even though there have been a couple of opportunities to access those resources. But we both understand the fungible nature of money. So, i would love to hear your answer to number two, i have spoken with you before, during these hearings, you were very good. Therefore, i may have to cut you off. Okay. So, first of all, i want to say that the Treasury Department has been extremely aggressive and very vigilant about sanctions on the iranian regime. We have worked very hard, and we have had many sanctions, actions addressed, with iranian oil shipments, to try to do what we can to minimize revenues from oil. We have taken many actions in the aftermath of the attacks on israel, to close down channels for hamas and other uranian affiliated groups iranian affiliated groups, to use the Financial System to fund their malicious activities. The record is clear, we have done a great deal. I do think im a you and i, we will not reach an agreement. I do think the record is clear, when you look at it, the net effect of the administrations actions has been more resources for iran. Not fewer dollars. Could i just . Certainly. The 6 billion you are referring to were iranian funds frozen in korea, we permitted those funds to be transferred to qatar, and they can only be brokered when they are in korea. And now they can only be used for humanitarian purposes. And there are strict controls to make sure that they are directed only at humanitarian purposes. None i have very little time left and the chairman is being very tough on us, in regards to time. I will respond, if you give the 6 billion, and i had a need, i would just use other money to deal with the need, if you were trying to restrict the dollars. That is why i started the conversation with the fungible nature of dollars. But we do have another issue relating to the fsoc , excuse me that, the designations by fsoc. The framework evaluates Non Bank Financial firms for designation as a threat to our Financial Stability. And the company, if it meets the fsoc framework, it would be subject to Federal Reserve regulation. In 2019, fsoc issued a commonsense proposal that evaluated funds based on their business activities, requiring the consideration of the firms financial health, and most importantly, requiring the government to conduct an analysis prior to making any such designation. Recently, my understanding is, the way you have restructured it, no longer is the cost benefit analysis necessary. No longer do you use the activities approach, instead, due as i quoted, unpredictability of the financial crises, analysis is not useful, or wanted, in this context. So, when you eliminate actual standards that people can understand and you go to something far more flexible and subjective, i think it makes it even more difficult for companies to figure out when they are in under threat. I do not know if i have time to answer the question. Take your time. Proceed. We revised the 2019 guidance, because it made it all but impossible to designate a firm, and it deprived fsoc as a tool that doddfrank clearly intended it to have. Doddfrank does not require costbenefit analysis, it could have required it and it shows not to require it. For very good reason, you just cited the reason. We are talking about some cost to an individual firm. And the benefit is reduced profitability, of a devastating financial crisis, like the one we had in 2008, that can deprive millions and millions of hard working americans and businesses of their livelihoods. And to try to assign a number to what that benefit is, even now, if you ask researchers what is what was the cost of the 2008 financial crisis . It was obviously huge. But to try to put a number on it is an artificial exercise. And it is clear that doddfrank did not intend that. With respect to the activities based approach, the 2019 guidance said that it was a preference for an activities based approach and designation could only be used if an activitiesbased approach would not work. And there is no preference here for designation. It is not a preferred approach. I certainly agree, as an expert, that is saying a lot. Only the government thinks that figuring out the cost of something is unnecessary. And determine any the activities that lead to the threat is unnecessary. Is remark thank you. And i went to thank you for being here. I very much appreciate it, madame secretary. I want to talk a little bit about russia and china. Particularly china. There is no doubt that they want to replace us as the worlds economic leader. It is also a given that they are not going to play fair. They never have and i dont think they ever will. I am pleased that the fsoc is focused on that we have appropriate medication and place. But it is awfully hard to protect against threats that are not on our radar. So secretary allen, do we have a good enough handle on where the threats are directed and what are you seeing as far as threats are concerned . Well, you know, fsoc is really only concerned with threats to the u. S. Financial system. Now, cybersecurity that could involve china. There may be Artificial Intelligence we have identified as a threat. But china poses a number of threats that the Biden Administration and u. S. Treasury are concerned about. And they are attempting to address. It would not be in the domain of fsoc. You feel you have a handle on the threats and where they are coming from . Because they continually it applies to our Financial System. Cyber and other situations. But as it applies to our Financial System, if they could undermine and take away our confidence in it, they have a great step towards achieving their goal. Well, we are particularly concerned about cyber threats, ransomware, and a. I. Let me talk about a different issue that senator allen and i have been working on for a long time. It deals with four countries. North korea, iran, russia, and china as it applies to buying foreign farmland. We have a bill. We have asked that that sifius really be the lead on it and i want to get your help on it because frankly we have some pushback because sifius does not think this is in their purview. I happen to think agriculture and food is National Security and there are dictatorships around the world that uses food to control. So the real question is when it comes to buying farmland and agribusiness, does sifius have the capacity to be able to analyze and make a determination of what is going on . Well, as it applies to farmland, i believe cfius has the ability to review real estate transactions. They do. If they are close to they have a facility. I am talking about everything in the United States. Not just if they have military facilities. I am talking about even if they are buying it next to my farm. If it is a person connected to anyone of these four countrys governments, do we have the ability to make a determination . We do believe that food is a National Security issue and i dont know that we would have the ability not near the installation. To be honest with you you may not. The question is, what does Congress Need to do so that they have that ability. Because i think this is a serious, serious, serious problem. What do we have to do to make sure they have that ability . Do we have to fund the mark . Do we have to put additional mandates on them . I think right now they are worried about semi conductors mostly. No problem with that. But when it comes to farmland, agribusiness, what we have to do to make sure they are paying attention to this . Per cfius to take action on this i think would require legislation. I know you have been a leader in proposing such regulation and i believe my the Treasury Department has worked with you. We are certainly happy to. I think it is bipartisan and it is a real threat we need to take seriously. We just found out about a chinese billionaire who bought 200,000 acres in oregon. Thank you for being here. Thank you mr. Chairman. Thank you. And that chinese billionaire, i spoke to the farm bureau yesterday or a few days ago and one of the things were working on is not just prohibition but actually having the data, and we will come to you and the administration about how to get that. It needs to be much more aggressive so we know what they are actually doing with all their sleight of hand. Senator smith of minnesota is recognized. Welcome. It is so good to see you again. So i would like to ask a little bit about some of the broader Economic Issues we see ahead of us and maybe respond a bit to some of the questions that senator kennedy was asking you. As the fed has raised Interest Rates, a lot of economists predicted that we would be well into a recession by now but that has not happened. In fact, the economy has been the fighting expectations. It seems to be historically strong and this Consumer Spending has really been driving Economic Activity and growth. I think as you were attempting to point out, since President Biden took office, wages have increased significantly for low and middle income earners. Do i have that right . That is true. Right. And i think that last year nearly 60 of workers saw their wages outpace prices, passing prepandemic levels. Is that right . Yes. Yes. That is correct. So actually purchasing power is what matters. That is what matters. The money you come by with your wallet. It is actually up. Is that true . Yes, it is. It is up. I think that number i mentioned is the median worker could buy the same basket of goods as in 2019 and have 1400 left over. That is right. And i am not an economist but i did take macroeconomics in college. When you have the economy shrinking people are actually much worse off in that circumstance of course. Of course. We have had a good strong labor market and stellar growth. That is right. Some would argue the way some prices have gone up, including food for example, if you look at those price increases and im not asking you to comment. I am just observing. You look at those and then the massive increase in corporate profits and i would argue that seems to be the driver of prices going up more than the investments that the administration and Congress Democrats in congress have made in the American People. But let me get to that if i may. I want to know what you think have been the impact of those Big Investments that senator kennedy was talking about that i am really quite proud of. Big investments in america and infrastructure and improving veterans healthcare. And lowering the cost of prescription drugs and bringing manufacturing and chips manufacturing back to the United States, for example. So could you talk about what impact that, you think, has had on the historic recovery in our economy . So i think the legislation is really a trifecta of legislation. Congress passed the inter structure bill and the chips and Semiconductor Act and also the Inflation Reduction Act. We are seeing an investment boom, and it is creating very good jobs for Many Americans in parts of the country that just have not seen a lot of opportunity in recent decades. And the work we are doing shows a disproportionate amount, both in the Infrastructure Spending and the investments we are seeing that has been announced because of the i. R. A. They are going to parts of the country where income is below average and infrastructure needs are greatest, so it is spurring job creation and the benefits are being very widely shared. In fact, i think you referred to this in your opening testimony. The performa of the American Economy compared to other economies around the world, we are doing much better. Ours is the best. And we have made more of these broadbased investments and other countries did. Yes, we have. I think we have made very impressive investments. If you just look at the Inflation Reduction Act, you see that it is sparking an enormous boom in clean energy. All across the spectrum. Across the United States. Right. Thank you. Thank you, senator smith. Senator butler of california is recognized. Thank you mr. Chair and madame secretary for your Incredible Service to the country in such a challenging time. I want to commend you and the Biden Administration for the sound economic policies that we have in place. In short, what you have said and what i would leave the fsoc report illuminates for all of us is that bidenomics works. To pick up just where senator smith left off, i would love to give you the opportunity to say more. Just to explain to the American People how do these historic investments in the i. R. A. And American Rescue plan act contribute to the longer economy and the explanation to the American People. One of the Things Holding our economy back is a failure to invest in infrastructure. We used to be rated among the very handful of Top Countries around the world in terms of quality of our infrastructure. And we our ranked decreased because we had a highly inadequate investment and now we are seeing growth in bridges that have been falling apart. People are caught for hours in traffic jams all across the country. We are seeing new infrastructure be built, and it is not just old infrastructure, but what a modern economy needs broadband. Both the American Rescue plan and the infrastructure bill are providing the funding to make sure that every American Household has access to high speed internet. I remember during the pandemic when we would read stories about families driving their kids to a mcdonalds and sitting out in the parking lot so that they could do their homework and have access to broadband. That would be a thing of the past. And of course the Inflation Reduction Act and the c. H. I. P. S. Act are really making sure that the United States will play a significant role in it is a matter of National Security the resilience of our supply chains and making sure that we are creating good jobs in the industries that are going to be pairing our economy in the years to come. And we are seeing that that bill has very strong wage and apprenticeship standards for the entire clean energy set of investments, so we are making sure that the jobs that are created are good, good high paying, wellpaying jobs, and that people get the training they need to be able to fill them. And there are many aspects of this legislation designed to ensure that all parts of the country benefit from it, and particularly parts of the country that just have not really seen a lot of opportunity, and that would include Energy Communities that have been dependent on coal and low income communities where there are special bonuses for investing there. Right. President biden committed to the American People he would build our economy from the bottom up in the middle out. You happened to explain that a bit more to the American People. Two areas, secretary, that i would just name and give you a quick opportunity to respond and we will submit some further questions to you for the record. Today, right now, as senator menendez pointed out in his earlier comments, the Climate Crisis is really at californias front door. Historic rains. 400 mudslides. 700,000 people without power. Today, as we sit here, the fsoc report has talked a lot about insurers leaving markets all across the country , including california. I would love to get your thought on how nonbanking lenders and other sort of non fsoc Government Agencies are working to integrate financial and climate data so that we can actually get your, again, thoughts around how bank and nonbank lenders will be affected by the lack of insurers being available. We are doing great work on that. Omb recently approved a survey that will be very gradual or that the z. I. P. Code level to understand trends in insurance. The state insurance regulators. That naic plan to collect similar data. We are working with them and what we will get is a very granular understanding of what is happening to the availability and pricing of insurance. Policymakers, as they begin to address what is becoming a crisis here, this is not straightforward to do but we look forward to working with congress to see what responses might be appropriate. And it will have an effect on banks. It raises the risks and we are focused very heavily on the Agency Working with the Banking Community so that banks understand that these developments are impacting well, it impacts the bosses and it would impact the lending that it is doing and homes and businesses that the banks are lending to. Thank you. Senator cortez. Madame secretary, let me follow up on this same conversation because in nevada we have the same concerns. It has often been declared a disaster because of landslides, mudslides, and the same things we heard from mike coley. Is affecting the Mortgage Markets and home prices right . It is affecting prices across the country. One of the recommendations and you may have touched on this is to enhance or establish information sharing protocols among federal and state agencies. What does that mean . Well, we are going to try to collect data. As i mentioned, the federal Insurance Office gives us a lot of insight into this issue. And the state agencies as well, is that part of the collaboration . We would like to collaborate with state agencies. Regulators of the Insurance Industry in the United States. They are looking at these issues as well. And in order to reduce burdens on businesses and to make sure that we have compatible data, we are trying to collaborate on this effort. For that reason, please let us know particularly if accessing that state data and collaboration is going to be key for us so let us know if we can help. That would be key for us. Let me jump back to many of us with a year later and how that regulators have worked to strengthen regulation and supervision to address what happened in march 2023, the bank failures. My question to you is in response to the fires of Silicon Valley banks. How have the agencies altered their approach to supervision . So, you know, this is a matter for the individual agencies but both the fdaic and the fed have put in domain reports on what happened. And these reports include analysis of the failings their own failings in terms of their supervisory programs. And, clearly, as i believe they have testified, strengthening supervision so that they address taking more timely action. I appreciate that. The question is, is that happening . Are the Bank Supervisors are the supervisors actually following through on the recommendations we set through the fdaic and the fed . I believe they are but fsoc is not a point to engage in the situations. I think calling on those agencies directly for followup is probably i appreciate that. Let me jump to one final thing here. Nonbank Mortgage Originators and servicers. I see in the data, and i am sure you see as well, they continue to gain market share from banks of the last 10 years. Nonbanks originator probably 70 of singlefamily mortgages in the first half of 2023. Does this shift away from banks to nonbanks . Does it pose a Financial Stability risk due to nonbank lack of deposits for shortterm financing . Is this a concern . Is this something that we should be looking into as well . Senator, yes it is. And fsoc is very focused on that because nonbank Mortgage Companies lack access to deposits which banks have. Their shortterm their reliance on shortterm financing may be a lot less stable than deposits. And in stressful times, their credit lines can be pulled. They dont have access to the kind of liquidity backstop that banks have as well, such as the feds discount window. They tend to have very limited capital and lossabsorbing capacity and Service Rights are a less liquid assets. So there is a concern that in stressful Market Conditions we could see the failure of one of these. And, as you said, this has become very, very significant in the mortgage market. Thank you. Thank you, senator cortez. Madame secretary, it is great to see you. I am going to bounce around a little bit through a series of questions so i appreciate you hanging in with me. A number of colleagues have already talked about financing of terrorism. Yesterday, the treasury did a issue of annual risk assessments in the wake of the horrific hamas attack. And yesterdays assessment states that hamas is a well resourced group that garners resources for numerous and divisive sources used for composite virtual asset providers to move funds. The remarkable thing is back in 2016, and i say split secretary sackings in place but here we are now 120 days after the attacks on october 7th is to not put secondary sanctions in place for hamas or for any other terrorist organizations. So we have tried to put a end to that. I have introduced senate bill 3441, the terrorist prevention financing act. This would make sure that all foreign terrorist organizations would be covered, and it would be able to have them go after not only their secondary banking, but also their ability to use crypto. I really appreciate that the treasury has helped a lot with Technical Assistance on this piece of legislation but i want to give you the opportunity now to speak to this issue on whether you think this kind of legislation is needed because our understanding is, you know, without it, you cannot put in place is full i would agree that there are limitations the treasury faces, and we certainly support the aims of the bill that would help give us authorities that would enable us to better deal with a very significant threat. I am going to count that as a endorsement. I am going to move to another topic, Artificial Intelligence. You know, fsoc identifies a. I. As a major risk for the Financial Sector. As a matter of fact, i am surprised we have not seen more of a. I. Market manipulation already. I fear they may be happening and not fortune 100 companies but fortune 200 to 500 companies, and we may find that it is happening in realtime. As somebody that was very involved in doddfrank with the creation of fsoc, i think its record supper has been a little bit mixed. But, boy oh boy, if there was ever a case to look across other regulatory entities within the Financial Sector, a problem like a i would, i think, be perfectly suited for fsoc. Again, i have Bipartisan Legislation with senator kennedy that would have fsoc play the coordinating role on a. I. As well as look at some of the issues that already exist in Securities Law around market manipulation but increase the penalties if a. I. Tools are being used. So madame secretary, can you agree that this is an area where congress should move quickly to make sure that we have got a comprehensive approach for both the upside and the downside of a. I. In the Financial Sector . I think the administration would welcome a Congressional Initiative in this area, and fsoc, this year, identified a. I. As a vulnerability that could create Systemic Risk, so we are working very hard to deepen our understanding of the ways in which that could happen. And to monitor very rapidly changing developments to be able to define best practices for Financial Institutions. Again, we have worked closely with your office but i hope you will look closely at the bill. I think it is at least a good starting point for giving you for giving to the toll that frankly we have had in the guardrail. Last question. I have raised in particular with our friends over at the fed. As we think about how we prevent future sbbs, and there have been reports that some of the banks that took on this may have had some challenges. We may need some new regulation but should use some of the tools that are already out there. Discount window. It has been reported that the discount window, a lot of these banks fell into disrepair and did not even have a process in place. We need to go beyond some of the guidance that was given and even make mandatory that use of discount window. I know people are concerned about any kind of reputational risk, but can you speak to this issue to make sure that banks utilize this tool that has been set up since the beginning of the fed . I absolutely agree. Inadequate access to liquidity because of a failure by Banking Institutions to post collateral with the fed in a timely way, this is something that, i think, is being reviewed and it would not surprise me to see new initiatives in this area, so it is a critically important matter. Thank you , madame secretary. Senator warren of massachusetts is recognized. Thank you. Good to see you, secretary yellen. Today, i want to talk about the one her centers. America has more than 4700 banks but ones that have the power to crash our economy and ones that get government bailouts are not the Community Banks. The ones that pose a threat are the giant banks. The multibilliondollar banks. So that that has proposed increased capital standards to make these giant banks hold more capital. And, it turns out, that even among those billiondollar banks, nearly 90 already hold enough capital. So what we are really talking about here is just a handful of the biggest banks that would have to hold a little more capital. Secretary yellen, i need to start by making sure i have my facts right. What the new rule on capital standards have no impact on Community Banks and, in fact, only make a handful of giant banks hold more capital . Well, its terms apply to banks with more than 100 billion or significant trading activities and Community Banks have far lower assets and i am not aware of any. So this is not about our community. Not about it. This is about our biggest banks. Why is it so important for these giant banks to hold more capital . Well, capital is a measure of the resources a bank has to absorb losses in the face of a shock. Even in normal times, a bank has to have in order to lend so it is critical to meeting the borrowing needs of households and businesses throughout the economy when a shock hits like we saw in the financial crisis. A bank can fail if it runs through its capital. And if it is a large bank or one that is highly interconnected to other Financial Institutions, its failure can have devastating consequences for the Financial System as a whole. The failure of one bank can transmit huge problems to other banks that it lends to our borrows from the two and can fail. And we can see an event like the 2008 financial crisis. And when you have such a financial crisis, it can cause Enormous Economic toll. We saw that when we hit near double digits on unemployment when the Financial System collapsed. It hits hardworking americans. It hits businesses that really had nothing to do with any of the activities that caused this. So higher capital standards are about making the banks safer, but it is about making all of the saber. Right . Basically . Yes. Because it diminishes the odds of a systemic failure. That is why it is so important to these big banks today. Less than a year after three billionaire banks collapsed, another one, new York Community bank, is now teetering. So we are just trying to make sure that these giant banks dont go broke and come back to the american taxpayer like they have done before to get a bail out. But the big banks like jp morgan, bank of america, citi, and wells fargo, are fighting back hard against these capital standards. They have spent millions of dollars lobbying. They are even running ads during the nfl playoffs claiming that they have to be a little bit safer and will somehow raise grocery prices for American Families. You know, in other words, they want us to believe that big banks are really worried about American Grocery bills. Nobody believes that so the question is what is this really about . And the answer is profits. Of giant banks have to hold back just a little bit more capital that could bite into their buybacks and executive conversation. In fact Morgan Stanley recently said it out loud. They are fighting down to the capital rules of these giant banks can create, quote, a significant increase in buybacks. Secretary yellen, let me just ask. Do you happen to know how much the four biggest banks return to their shareholders to buybacks and dividends over the last decade . I dont know the exact actually looked this up. 630 billion. And do you know how much the average ceo pay at the big banks . In just 2022, just this one year . I am not sure. My guess would be around 30 million. 20 million. Very close there. So higher Capital Requirements may mean fewer stock requirements and smaller bonuses for the ceos. These giant banks say they will stop making Mortgage Loans if they have to hold a little more capital. But i have got to say here, who can trust these guys . In 2020, jamie diamond at j. P. Morgan made big headlines when he pledged to make 40,000 Mortgage Loans to black applicants. 40,000. That is a lot. More than three years later, how many loans that they actually made to black applicants . 122. Yeah. So that is what this is all about. The biggest banks want to be able to push hundreds of millions of dollars out the door to investors and ceos while the banks take on more risks and then when things go wrong, and they will go wrong, they want taxpayers to bail them out again and they claimed that if the fed does not pay, peoples groceries will cost more. I am sick of bailouts and i am sick of banks that lie to the American People. We need stronger capital rules to reduce the need for bailouts. And i urge our regulators to finalize these rules as quickly as possible. Thank you, mr. Chairman. Thank you, senator moran. I believe senator fetterman is on the way and senator matt houston. I want to ask another question. I appreciate your interchange with your exchange is a better word with senator smith. Pointing out the economy in this country versus other countries and pointing out the wage growth in this country. You know, the people were hit hard by inflation. People for good reason are concerned. I think it is clear though that a big part of inflation has been all the corporate buybacks and corporate greed and it just generally wall street predators. Eyesight often in this committee that the average ceo of domantas, the old chrysler, which uaw is on strike with, the ceo makes 140 times what the average worker makes. You are recognized. Thank you, mr. Chairman. Late last year i asked various regulators who came before this committee whether they believed the Banking System was strong or not and they all answered yes. So today i would like to start with that searing same question for you. In your opinion, is the u. S. Banking sector strong . Unbalanced, the answer is yes. What are you balancing there . Well, there are some risks and there are some institutions that stresses from commercial real estate that we know is significantly impacted. Particularly Office Buildings. But the pandemic Interest Rates are higher. Loans will have to be refinanced and in a environment with higher interest charges, over evaluations, and rising vacancy rates. So, you know, for some banks this will be a concern. But i would say this system is wellcapitalized. So one of the things that we have been looking at and i want to talk about you leaving the council you are obviously the chair of fsoc and its efforts to monitor the risks and vulnerabilities within our Financial System of which you just named a few. I would certainly hope that part of this and what you are evaluating is the potential risk that regulations and rules new roles coming out and the various agencies that you oversee what risks those may pose to our economy. I think these regulations could fundamentally weaken the Banking Sector. I want to talk to you about past. Are you assessing that and the implications of these new regulations or rules and what they will do to the American Economy . I think you have raised a very valid issue, but fsocs charge is to identify vulnerabilities in the Financial System and threats that could lead to systemic financial consequences, and not to undertake an evaluation of the cost to the Financial Sector of actions that regulators have taken. So i dont think we are the right agency. I do hope you are looking at the accumulative impact of all of these things. It seems that everything is moving so fast. We look at where our economy is right now and i think that somebody needs to take a step back and look at how all of these things layer onto each other, what they do, and what they do to the end user. This is about every day americans and people all across the state of alabama. I am certainly hopeful there is somebody taking a look in a broadway at all of these things and how they work or dont work more importantly together. Speaking of risk, i do want to discuss the u. S. Sanctions policy. While i appreciate you being here today, i was frustrated that the Treasury Department did not appear before this Committee Following the october 7th atrocities that we saw occur across the globe. That was no doubt a day where we saw pure evil. And i want to talk to you specifically about our relationship with iran. It is no secret that iran is the worlds leading state sponsored terrorism providing hundreds of minds of dollars to support terrorist organizations like hamas, hezbollah, the who these, as well as proxies in syria and iraq. They are actively carrying out other atrocities like attacks on american civilians and servicemembers. We know weakness invites aggression, and we want peace. We have to do that do strength. Terrorists are emboldened to target americans and our allies. It seems that this administration in the face of that has doubled down on the strategy of appeasement. Might question to you secretary yellen is after the october some of the tax, the admission took actions to strengthen at number of operatives and financial facilitators but obviously that was too little, too late. How long had the administration known about the finances of the terrorist attack prior to the actual date of october 7th . Well, we have been focused on hamas and other similar organizations and we have been taking actions on sanctions before the attacks. We gained a lot more information in the aftermath of the attacks, and we have taken many more actions. And we have also been cracking down on iran with respect to oil shipments, with respect to their petrochemical sector, with respect to steel. Respectfully, my time is up. I would just say it is not working. We have to go back to a pressure maximum strategy because right now the middle east is on fire. We had three american servicemembers dead. We have got to move. We are very focused on it. Senator fetterman of pennsylvania is recognized. Senator fetterman of pennsylvania. Thank you, mr. Chairman. Secretary yellen, i get to i get to talk to one of the leading experts over the economy here. So, now, i want to talk about this here. Okay. So, now, President Biden has brought down inflation and, now, last month, over 350,000 new jobs right . Yes. And the economy is growing at 3. 3 . Right . Yes. Unemployment is now at 3. 7 . That is pretty good. Right . Yes. It is the longest stretch under 4 in 50 years. In fact, that was 36 months of job growth. Right . Yes. And of course real wages are up too. Correct. And, now, the dow and the s p 500 are at record highs . Yes. So that that was over 38,600. And the nasdaq is almost 16,000. Right . Those are record highs. And is it fair to say that our economies our economy and the recovery is really the envy of the world . We are doing better than any other advanced country. Yeah. So actually when i drove myself back from d. C. To pittsburgh this week i was able to gas up at under three dollars per gallon. We are not talking about gas prices anymore. But, now, now, now, some randoms on tiktok put up 16 for a mcdonalds meal. Was more reflective of our economy right now . Some kind of tech talk about mcdonalds or all the other statistics . All the statistics you mentioned are highly relevant and by in large extremely positive. It is true that the level of some prices that are important to consumers have risen since the pandemic. One of those would be rent, and food prices are somewhat higher. New and used vehicles. But wages have also gone up. And, now, inflation is moderated very substantially. And, in fact, by the measure that the fed pays the most attention to, inflation over the last six months has been running at 2 at a annual rate. And wages are now going up substantially more. 2 . 2 . Is the feds target. Oh, my gosh. Whoa. So prices are not rising rapidly anymore. Wages continue to. The number i tend to cite is that the median worker in the United States can buy the same typical basket of goods as in 2019 and have 1400 left over to spend or save. And, again, it is remarkable that now people want to talk about some random extra meal at mcdonalds for 16, which really is a rigged situation. But, now, now, anybody, any fair experts would say that our economy is the envy of the world. And, now, what is lost in translation in our National Conversation about where we are literally in our economy versus, now, some of the other discussions in other parts of the media . Well, we do see much more positive surveys of Consumer Sentiment in recent months since inflation has come under control with wages are rising more quickly. When americans are polled and asked about a recent poll asking them about their own personal financial situation, more than 60 said that they felt good, and more than 60 said they felt 2024 would be a better year. Now, sometimes when people are asked about the economy and how other people are doing they seem more negative on it, but their own assessment of their own situation as well as their behavior when it comes to spending or starting Small Businesses, we are seeing really record Small Business formulate formation and that is something that only really occurs when people feel confident about the future of the economy. Thanks, senator fetterman. Thank you. I didnt give her a shot. Great job. I am out. Senator hagerty, if you would also like to give her a shout out i will give you an extra 30 seconds. More important, if youd like to give me a shout out you will get an extra minute. Secretary yellen, welcome back. Last week, the secretary of treasury outlined a plan for the upcoming quarter and they included some unexpectedly net funding estimates, and i have a few questions around that if i may start there. First, can you explain the treasurys reliance on bill issuing switches more costly to the american taxpayer. Certainly more costly than using notes or bonds right now. You have concerns about the mans for long dated instruments ory are you trying to time where the fed might go with these rate cuts . We have on a regular and predictable schedule of auctions. I understand that. I am talking about the mix. We try. We never try to time the market. We are in there for the long term. We want to make sure that there are not significant surprises for Market Participants, and so we have quarterly refunding schedules that are well considered and follow that principle. I understand. But shortening the duration of where you are on the curb right now. Very short. What is the thought process behind that . Well, we are very close to the proportion that has been recommended by the treasury borrowing advisory committee. Does close to mean you are shorter or longer than the recommendation . I believe we have a slightly higher shortterm issuance. I see. Lets come back to the optimistic funding estimates themselves. The estimates for this coming quarter that were just released last month are unexpectedly high. I am wondering what is driving this next quarters increased estimate. Is it really tax receipts . Is it something structural that you see in the economy that is causing your projection to be higher for this coming quarter . I i cannot give you i need to come back to you with the details. I know we have actually lowered our estimate of the amount that we will need to borrow in the First Quarter. In our quarterly refunding, we indicated we expected to borrow 760 billion in the First Quarter and a lesser are not in the second quarter. And, actually, this is lower than what we expected. It is more optimistic as a result and i am trying to understand. It is just this quarter. Why it would not manifest itself in the coming quarters . Well, there are patterns that depend on when we get tax receipts. As tax receipts come in in april there is less needs. So you are more optimistic the tax receipts will be higher than initially projected . I need to look into it and i need to get back to the details. Lets go back to another area. It has to do with the politicization of what is happening at the treasury. On multiple occasions you and i have talked about it and now there is a irs contractor that is actually being sentence for this. Confidential information belonging to private citizens. And, you know,. Presiding judge appropriately refer to what happened as illegal and said, quote, it was a intolerable attack on our constitutional democracy. I think it is deeply concerning to every american. In previous hearings, you refer to this illegal act is very damaging. And i want you to know that you still stand by that statement. I do. I believe the protection of personal taxpayer information is utterly essential. And we are devoted to at. And i know that although i cannot give you the details i want to point out one thing that deeply concerns me. Because even more damage continues to be inflicted on the credibility of the treasury. Think about the last months things since then. Flag customers have indicated quote extremist indicators like the word trump or maga or whether they made actions to purchase religious books. This is not about a irs contractor but the administration itself taking personal data to target its political foes. Secretary yellen, do you believe that people who purchase bibles are extremists . Certainly not. I want to put this matter in perspective. First of all, since the mission is to safeguard the Financial System from illicit use to combat Money Laundering terrorists certainly not targeting americans who are purchasing bibles are voting for donald trump. Fincen is expected to work closely with Law Enforcement and Financial Institutions on their Money Laundering detection programs. And so there are interchanges and conversations between fincen and Financial Institutions. And i believe that the matter that you are referring to dates back to before my time as treasury secretary and in the aftermath of the january 6th attack on the capital. So starting in the trump administration, there were efforts to work with Financial Institutions to determine what had happened and to work with them to provide relevant information. And purchasing a bible is relevant information . That is ridiculous. The shame. I will get back to you with more detailed information when i have had a chance to study this thoroughly. I understand that this dates back before these were conversations between i believe staff at fincen and Financial Institutions and it is the purpose of fincen. And the details i promised you thoroughly investigate. Thank you, senator. A number of things happened between january 1st and january 20th of 2021. Senator van hollen is recognized. Welcome, madam secretary. Thanks for all the work you are doing. I do want to talk a little bit about the economy and just ask you to reflect on where nonpartisan groups like the Congressional Budget Office projected we would be in terms of unemployment today. Back around the time the president was sworn in when the pandemic was really in full swing, the economy was hurting. And before we pass the American Rescue plan. I cannot remember the precise numbers, but the impact of the pandemic was expected to be very severe and to last a very long time. And the u. S. Economy has done a order of magnitude better than what would have been expected by other forecasters back then and i do believe that the Biden Administration policies have played a very Important Role in that performance. Well, yeah. It has exceeded all expectations. As you said earlier in your testimony, it has certainly surpassed any of our other partner economies around the world. I would like to talk a little bit about the price issue. And you mentioned the supply chain issues creating the problem that led to price increases around the time of the pandemic. There is another factor at work. I believe that it is when it comes to high food prices now. And i think the president has spoken to the somewhat. That is the price gouging and the Profit Margins of some of the big grocery manufacturers today exceeds their Profit Margins before the pandemic. Is that an accurate statement . I believe it is. I believe the council of economic advisers has looked at this. I have not personally looked at the data but i think it is true. Which is one of the reasons the president has been so focused on going after price gouging and all its forms. And i know the treasury play some role in that. Is that something you and your team are working on . We participate in economic discussions. Absolutely. Well, thank you for the role that you are playing. If i could just ask you about investor, adviser reporting requirements. You are often before the appropriations subcommittee that i chair. And we have had this ongoing conversation about the fact you have got russian oligarchs and other kleptocrat cratsattempting to clean their illgotten gains. You mentions already the fact that we have the ownership law and have included some folks within the real estate area. But can you talk about progress you are making in this broader area of Investment Advisers because it is important that we try to close one door but it does not do us any good if it leaves the back door wide open. Well, Investment Advisers is a Financial Sector that has not been uniformly covered by amlcft requirements. There are some advisers who are brokers or may be covered by some rules, but there is certainly Investment Advisers that are not covered. And our risk assessments showed that that is an area that provides an avenue for sanctioned individuals, for criminals, and the like to wealth and invest in the United States without the sources of their wealth being detected. So are we making progress in terms of developing a rule to cover up this loophole . Yes. Absolutely we are. In my remaining time, i just wanted to ask you about the outbound investment. The proposals d at midas demonstration has put forward to try to put to bury the capital from the United States helping to invest in chinas military. This is obviously an effort that requires cooperation from our allies around the world. Could you just provide an update on where that effort stands . So in response to an executive order, the treasury prepared a notice of proposed rulemaking which it issued that asked a series of questions and proposes both information gathering and some restrictions. It indicates it is contemplating restrictions in the areas of Artificial Intelligence, semiconductors, and quantum computing areas. These areas seem to have a clear nexus to National Security risk, and we have received comments and hope to come out with a notice of proposed rulemaking. That takes account of the comments and closes down channels. We have export controls and other controls, but, these Outbound Investments can be a way of providing a aid to chinas military or other countries of concern that need to be closed in. I appreciate that and want to make sure we are also coordinating with our allies because its important we do this in coordination. I think you would agree. Yes, we have worked very closely with our allies and are urging them to adopt similar regulations. Thank you, madam. Thanks, mr. Chairman and secretary yellen. Thank you for being here. I want to ask about some of this. We havent had a chance to talk about the collapse and runup to the acquisition of sv b, by jp morgan. I want to start with a basic question. So, to recap, the Systemic Risk exception was triggered for the trenton situation which was pretty dire. Pretty significant. Because of the exceptional risks triggered, the fdic effectively engaged in what i would call a bailout. The uninsured depositors were made whole. The shareholders were not, but the argument is that, that somehow prevented a broader panic or bank run in the markets and im curious if you could just take me back to that decision, coming up on a year ago, why did you think, given that svb was so focused on obviously the Technology Sector and the Venture Capital sector , the sector i know well, why did you think posed a Systemic Risk to the economy . Or why did you and the board decide that . We were concerned other banks. And, the source of the problem, there were really two things that affected Silicon Valley bank. One was losses, mainly unrealized but nevertheless losses from a failure to manage Interest Rate risks properly. Interest rates have risen substantially, and longerterm assets, the value of which fell in a high environment. And that was a risk that affected many banks in the United States. Many banks suffered similar losses. The other issue is with Silicon Valley bank, relied very heavily on uninsured deposits and now, we saw a run that was beyond anything. But other banks also, we actually have quite a high level of uninsured deposits in the Banking System and, Many Americans felt if depositors uninsured depositors were haircut or their funds were mobilized in a resolution, but the same thing could happen to them as other banks. Understood. One follow up question to that. Just quickly on this, if you could, so, my understanding is there were multiple bids when trenton collapsed. Multiple bids on the table for requiring svb and its assets. At the time, the public suggested the difference between the j. P. Morgan bid and the next best bid was 20 million. I believe, youre talking about First Republic that went to j. P. Morgan . Didnt sv b go to j. P. Morgan . Know, First Republic. You are right. My understanding is there was a 20 billion difference between the best bid and the second best bid for First Republic. Some of the private conversations ive had and staff has had a suggestive difference of 1 billion. So, two part question, number one, what was the difference . In terms of the bids, this is a question for marty bloomberg who is head of the fbi state. Under the law, the fdic is required to accept the highest bid that reduces losses as much as possible. You will have to consult with him. I guess the worry is, im very worried about the future bank system in our country. Small, medium and large banks. I also want to help the sector below the and my concern here is we did not care enough about concentration and how that transaction manifested itself. And the simple question is, is that because you didnt have tools to analyze that transaction with concerns about concentration . Or is it because you have tools and just didnt use them . Let me first say, i share your concern. I believe its important to have a diverse Banking System. I believe there were a number of bid by different banks for svb and for First Republic. And, as i said, i believe the fdic is required to accept the bids it results in the small smallest losses. The gentleman from georgia is recognized. Thank you, it has been 14 years since the passage of the Affordable Care act. Yet, 10 states, including georgia have not fully expanded medicaid. Let me be clear, closing the healthcare gap is the right thing to do. But its also the smart thing to do. Its good for our economy. In fact, a recent report from the council of economic advisers concluded that Medicaid Expansion increases the disposable income of those gaining health coverage. And, those who are listening and watching, i want to be clear, when we say expansion were not talking about a new program. Were not talking about spending additional dollars, were talking about the fact that citizens in states like georgia dont have access to subsidizing healthcare in other states while their hospitals are closing. The council of economic advisers makes holes into sharp focus the importance of this and the ways in which we can allow hardworking families to spend less on healthcare and more on the essentials like food, diapers, and school supplies. Secretary yellen, thank you for being here. Can you discuss how state economies have improved post expansion especially compared to states like georgia . You are talking about in terms of uninsured individuals . States that have expanded medicaid, how that expansion has improved the economies of those states, compared to states which are not expansion states. I cant give you numerical assessments of that. I havent done that, but generally, expanded medicaid have done better and certainly the households in those states with especially lower income households didnt relieve the burdens that allowed them to suspend more to support themselves and the economies of those states. Heres what we do know about closing medicaid coverage in georgia. If we were to close that coverage gap in georgia, it would mean 1. 2 billion in additional federal support that i secured through the American Rescue plan act, money sitting on the table, 600,000 georgians in the medicaid gap. It would mean 56,000 new jobs every year. Where 12,000 of those in Rural Communities and it would mean 6. 5 billion per year, generated in economic output. So i remain hopeful that georgia lawmakers will do the right thing for georgians. And close the healthcare coverage gap. I want to move on to another topic. The Child Tax Credit and earned income tax credit which was which i helped pass with the American Rescue plan, was transformational for millions of americans reducing the number of kids living in poverty by more than 40 . All in all, these provisions collectively lifted 10 million children above the poverty line or slightly below the poverty line. These helped georgians by food, diapers, lifesaving prescription drugs, but unfortunately the provisions expired and we lost the dramatic gains we made in combating childhood poverty. The 2023 fsoc report noted while Consumer Financial support remains positive we are seeing indicators of falling savings and rising credit card and auto loan delinquencies. Secretary yellen, the child credit was a tax cut that put money in families pockets. What economic benefits do we see from policies like this that focused on reducing childhood poverty . Including on families ability to save. I think it has a dramatic effect on households and as you mentioned, it resulted in a massive reduction in Child Poverty. It fell in 2021 25. 2 which is the lowest on record. And, of course, it means that families had many still struggling because of the pandemic, had the resources to support their children, and make sure they werent deprived of the food and support that they need. Before they go on to lead good lives and be productive members of the workforce as they get older and many of these payments went to families in dire need. Its a tremendously important support. Thank you. Im very much in favor of tax cuts for working families and this is why weve got to restore the Child Tax Credit. And this is why the enhanced Child Tax Credit found within the bipartisan tax relief for American Families and workers act is an important first step and i hope we can get that legislation passed. Thank you so much. Thank you, senator. Thank you. You came here in 2001. We pass the most important protecting Child Poverty in decades. Thank you for your Important Role. And secretary yellen, i know this Committee Hearing and the time for it takes a huge chunk out of one of the most public of jobs in the federal government. Seems like every week we learn about another responsibility the Treasury Department has. And thank you in light of what senator warnock said. I still talk about the call i had with you after the president signed the american recovery act and we passed it on march sixth. You immediately brought in commissioner reddick who was reasonable and professional and we got that moving and by july, checks went out to the families of 60 million children, 2 million of them in my state. It change the lives of so many and it would dramatically change lives if we could renew it now. Thank you for senators who wish to submit questions, those are due one week from today, the 15th of february and you will have 45 days, you and your staff, to respond to any questions. Thank you so much for your public service