Transcripts For CSPAN2 Treasury 20240705

Order. Without objection, share off the rise to the clearer recess at anytime. This hearing is entirely on youll test when it secretary the treasury of the state of the International Financial system. Without objection, all members of five minutes within which to submit extraneous into aerials to the chair for inclusion in the record. I will note of the outset of this hearing we have a hard stop as a crew to see the secretary at one pm this afternoon. We will strictly observe it. Now i recognize myself for four minutes to get an opening statement. Welcome, secretary yellen. I appreciate you being here today. Todays hearing is about the state of the International Financial institutions. I want to take a minute to talk about the debt ceiling crisis that we narrowly avoided. First, were all glad that they seized behind us and. No one wanted to default no legislative branch official no executive branch official your statement says waiting until the last minute hurts american credibility i agree madam secretary this gondola with by president Speaker Pelosi last year in the last congress or. The president could engage sooner with Speaker Mccarthy when they met on february 1st. Nonetheless, it is mr. Biden signed into law and effective compromise that said there is a lot of frustration particularly about the lack of transparency of when the Treasury Department expected the debt ceiling to be breached. Otherwise known colloquially as the ex date. If the end of february chairman mchenry wrote you a requesting information on your projections and calculations. Simple enough. The response was lacking to put it mildly. This committee did not hear from you again until may 1st. After the house passed the debt ceiling limit is safe and grow act. To different acts states, june 1st and june 5th, were released. Zero explanation, zero transparency. We all have to have confidence in our fiscal analysis. Id like to turn back and focus on the issue. International Financial Institutions. Led start where we agree with. The nomination of World Bank President is a serious combat a leader who has the capacity to write the ship at the world bank and continue the improvements and leadership from the former president the world bank and the imf should be laser focused on eliminating poverty and helping countries overcome crisis but unfortunately the International Financial institutions seem to think about everything except Economic Growth. They fall into the bottomless word salad of empty rhetoric that serves western ngos, not at the interest of developing countries. No wonder china has become the Worlds Largest official creditor. Even though its landing terms are often more burdensome than those of International Financial institutions. Africa is a case study. Your recent response to our letter regarding energy was helpful were, grateful for that letter but treasury is opposing virtually all fossil fuel and Nuclear Projects in the Multilateral Development banks. Even though half the continent of africa doesnt have access to electricity. How does this make sense . Who is eager to build infrastructure there . China. Meanwhile, the imf has completely failed to bring that country into compliance with international norms. That country being china. The fund musket serious about standing up to Chinese Government if it takes this mission long term seriously. If the fund keeps letting beijing drag out restructuring costs with borrowers, there wont be much of a case for additional imf resources at the end of this year. There is no doubt china poses a generational threat to our national interest. As long as we remain committed to our values, the u. S. Will compete and outcompete the Chinese Communist party. I look forward to your testimony and i yield back. Chair now recognizes the Ranking Member for full committee to, gentleman from california for four minutes. Thank you very much, good morning. Id like to welcome secretary yellen before our committee today. I want to first art out by noting that after the values of Silicon Valley Bank Signature bank and First Republic bank it was the leadership and swift action taken in by secretary yellen and our banking regulators that prevented a banking crisis is protected our economy and ensured that the positive areas in the United States remain safe. Thats not all. After months of republican over our nations dead, secretary yellen did a masterful job of blocking out lights coming from extreme maga republicans by keeping congress appropriately updated with the latest estimate of the ex date. Ensuring our bills were paid on time. Is this level of leadership that secretary yellin has also demonstrated on the world stage. Right now, Climate Change, global pandemics and food scarcity pose major threats to the Global Economy. Now, after years of hostility in ignorance about appointed by the prior administration, secretary yellen is helping to restore the image of the united all around the world. Ur allies. By pushing the world bank, imf and other institutions. To take serious action, to tackle these existential threats before they get worse. Not only that, but under secretary yellens leadership, the United States continues to impose severe sanctions against russia. As increase Financial Resources for countries in need are authorizing additional imf special drawing rights. And is promoting a strong and vibrant domestic economy by implementing transformational pieces of legislation like the American Rescue plan and the Infrastructure Investment jobs act and the Inflation Reduction Act. Republicans are on the other hand are failing to lead. They are actively denying that Climate Change exists, dismantling the governments ability to respond. To pandemics, cutting off today to struggling countries a. Walking their own legislation in the house and threatening to drive our Global Economy off a cliff. Its telling that on the same day that we are hearing about at the secretaries and treasurys efforts to bolster the Global Economy, republicans will also bend over backwards to defend the twice impeached and indicted former president trump. Who has been arraigned for stealing and sharing some of the nations closely guarded secrets. And willfully undermining efforts to protect those secrets of. The contrast between democrats and republicans is clear. After nearly tanking the economy, republican infighting has crowned the house floor to a halt. Make no mistake. Their extreme maga agenda is not extreme enough for their extremists. Thankfully, the democratic leadership, the United States is stronger than ever. We now have 28 consecutive months of strong growth, during bidens tenure, created a record 13 million jobs all while cutting inflation by more than half compared to last summer based off the latest Consumer Price index. Numbers out of this morning will further progress in the months to come. The Biden Administration democrats have shown that what happens when you deliver legislation that puts working families first. And i look forward to todays testimony. I yield back. Chair recognizes mr. Chairman of the subcommittee on National Security illicit finance and International Financial solutions for one minute. Thank you, mister chairman or. Good morning, miss yellen. Financial solutions were found bush to and cultivate Economic Growth around the world. Its becoming clear that these organizations are neither capable of nor interested in meeting these goals. The world makes unrealistic and harmful green agendas preventing some of the poorest nations from obtaining the cheapest and more Reliable Energy sources such as nuclear and natural gas. The Worlds Largest polluter, china, from the ifis that no other wealthy nation is allowed to receive. Country what the world s second largest economy continues to receive more than a billion dollars per year from the world bank. China remains one of the banks largest debtors. Sadly but not surprisingly, its our money that is largely paying for these horrible policies. Secretary yellen i, look forward to hearing your ideas to stop them with. That, mister chairman, i yield back. Chair recognizes the Ranking Member the subcommittee on National Security illicit finance International Financial solutions mrs. Bailey of ohio for one minute. Thank you, mister chairman and Ranking Members for holding this hearing. Madam secretary, i like to thank you and the Biden Harris Administration for your leadership in preserving the strength and power of the United States on the global stage. It weighs under your leadership your guidance and most importantly your advice that we have avoided a bank crisis. We imposed economic measures in support of ukraine. Averted a disastrous promoter, the strong and resilient domestic economy. Further, we have preserved our status in the Global Economy through your voice and a vote at the imf world, bank and other ifis attack that is increasingly critical as we see foreign adversary seek to replace us in africa and the caribbean and around the world. Having traveled to the caribbean with congresswoman mayers, particularly bahamas or betos, i have seen firsthand the destructive nature of chinese relationships and recognize our significance thank you madam secretary for your leadership. And i look forward to your testimony. Gentle meals back. Today we will come that as many honorable janet yellen secretary, a treasury, secretary yellen, we thank you for taking time to be here. Youll be recognized for five minutes to give a presentation of your testimony. Without objection, your written statement will be made part of our record secretary yellen youre now recognized for five minutes. Thank you. Mister chairman and Ranking Members waters. Thank you for your invitation to testify before this committee today. In my capacity as chair of the National Advisory council on International Monetary and financial policies. And looking forward to discussing treasuries oversight of the international a Financial Institutions. In the past few years have demonstrated the importance of these institutions as part of our broader economic and Foreign Policy tool kit. Since 2020, global shocks such as the pandemic and russias illegal war against ukraine have had a significant impacts under American Families and businesses. In the face of the shocks, the International Financial institutions and vans u. S. National interests by fostering a more resilient Global Economy. They enable us to mobilize swift responses, to mitigate global risk to the u. S. Economic outlook, they helped drive u. S. Economic growth by expanding Global Demand for American Products and services. Thats why there is always been a robust bipartisan consensus around strengthening americas leadership at these global institutions. Over the past year, these institutions have continued to make a smart and Cost Effective investments. To meet urgent needs. They leverage our dollars to mobilize additional funding from our partners in the private sector. For example, the imf approved a landmark 15 billion dollar Economic Program for ukraine earlier this year. This program combined with direct budget support provided by the United States and our partners will help ukraines immediate financing needs. It will also underpin its governments Good Governance and anticorruption reform efforts. The world bank and other Multilateral Development banks have also provided Central Support to ukraine. That includes facilitating the responsible and accountable disbursement of funds to help stabilize its economy. Our leadership at these institutions is one of the core ways of engaging with emerging markets and developing countries. The ifis provide resources to tackle of the challenges the world faces from withering economic storms to spurring long Term Economic development. In 2022 alone, the Development Banks provided over 150 billion dollars in funding to developing countries. And these institutions reflect american values. Assistance from the ifis strong requirements for governance accountability and sustainability. It serves as an important counter weight to nontransparent, on sustainable lending from others like china. As an example, Multilateral Development banks are a leading source of financing to close the infrastructure gap of developing countries. These Infrastructure Projects here are all robust standards that are aimed at achieving sustainable and inclusive growth in our partner communities. The United States is not a passive shareholder. We actively shaped the priorities of these institutions as a leading shareholder in nearly all of them. Major project past few monthss been to evolve the world bank, to better deliver against global challenges as part of the Poverty Reduction and development initiatives. Weve already introduced reforms that will stretch the world banks Balance Sheet to unlock as much as 50 billion dollars in additional lending capacity over the next decade. Weve made preliminary updates to its mission in operations. And looking forward to working with the new World Bank President , ajay banga, to build further momentum for our evolution initiative. Looking ahead, the Biden Administration seeks to bolster u. S. Leadership in these institutions. To that end, we request authorization to newer participation in the imfs new arrangements to borrow critical backstop to imf resources. We also seek authorization to lend two key imf trust funds. The Poverty Reduction and growth trust and resilience and sustainability trust. These actions will help the imf address economic price crises with an emphasis on supporting developing countries amid heightened risks and we would also like to boost our involvement in when the African Development fund. These investments will bolster our engagement in these regions at a time of geopolitical competition. I want to end by discussing the debt limit. I am relieved that with the president s leadership, Congress Took action to address the debt limit in time. While we were able to avoid default, United States once again can dangerously close to the line. This cannot be normalized as the way we do business in washington. Waiting until the last minute hurts our Global Leadership and credibility on the world stage. We are a nation that keeps our word and pays our bill is one we should never give anyone any reason to think otherwise. Thank you. Thank the secretary for her testimony. I now turn to member questions i recognize myself for five minutes for questions. Beto circuit, area right in interest of the g7 statement on ukraine from your meeting in a row sharma last month. Which reiterated a commitment to stand against russias illegal war in ukraine. G7 leaders called on russia to pay for the damages and long term reconstruction costs of ukraine. While the u. S. Has made major contributions thus far, i agree that ultimately russia should bear that responsibility. Thats why im working on a bill called the ukraine reconstruction act. Which would ensure the United States has the authority it needs to take title to russian sovereign absence and transfer them to an international escrow fund to pay for war damages. This would be fully in line with international norms, conventions and precedent and also be done in coordination with our allies in europe and elsewhere. Its also in line with both the g7 in the United Nations which call for the establishment of International Mechanism for reparation for damage laws in injury. Pointed out of russias frozen sovereign acids held in Central Banks around the world. I want to thank the treasury for their Technical Assistance and particular engagement of the deputy secretary. Do you agree this is the right approach in that legislation of this nature is necessary . Let me start by thanking you for your engagement on this important issue. From the outset of russias illegal invasion of ukraine, we have taken decisive steps of mobilizing Russian Central Bank reserves. Working alongside our allies and partners with mobilize jointly about 300 billion dollars worth of reserves. As you noted, we are committed with the g7 to ensure that these assets remain mobilized to resolution of the conflict which russia pays for the damage its caused. We are working with allies and partners also in the g7 and the socalled repo task force on this issue. However its the case that most of the assets russias sovereign assets are not in the United States. For that reason its critical that any next apps we take be done by a careful consultation with allies and partners on a coordinated approach. Where engaging in those discussions were working more accurately now exactly where these assets are. Where examining a number of options including some that we may be able to take under existing authorities. We do look forward to working with you in members of congress on this important issue. Thank you for that. I think youre right and each of the respective Legal Systems g7 asians and allied nations they need companionate which association. Thank you for that. Future the Financial Stability Oversight Council as chair i assume that any report fsoc puts out put eyes on have taken a look at it. Is that true . Thats fair. Last october fsoc released report called the Digital Asset Financial Stability risk in regulation report. It says, and i quote, Digital Asset businesses do not have a consistent or comprehensive Regulatory Framework. And can take advantage of gaps in the regulatory system and engaged in regulatory arbitration we could. Not agree more. Many of us on both sides of the aisle. I think ftx just showed as long as these entities are outside the United States and outside of some sort of a framework, americans are continuing to be at risk until we establish your Regulatory Framework protecting investors and innovators. But also innovation web, three innovation in our country. F recommended that Congress Passed legislation to provide regulators authority over spot markets. For Digital Assets. As well as legislation regulatory more authority divisibility into are supervised alassad companies. Were working on that here in congress. Those recommendations from last fall or late summers fsoc reports the recommendations of fsoc that still the view of fsoc . Yes that remains the view of fsoc that there are some gaps like markets for Crypto Assets that are not securities. We would like to see a Regulatory Framework over those markets. There are gaps and regulations that we point out specifically stablecoins. I do believe that we need a comprehensive federal credential framework. We would be pleased to work with you, with congress to see if we can develop such a framework. Thank you, madam secretary. My time is expired i. Call him the Ranking Member the full committee from california, mrs. Waters recognized for five minutes. Thank you very much. Secretary yellen, i would like at some point in time to really talk about haiti. And the lack of attention i think from anywhere dealing with that crisis there. I know that it is important for them and a Civil Society to get together to plan a vote and get into government. There is not a lot that i am can do. The world bank, imf, et cetera. I like you to keep an eye on it. So that is soon as we can get government reestablish, et cetera. The funding thats going to be necessary will have our support. Having said that, well talk about haiti at another time. Im working and will continue to work to see that Civil Society is involved in getting something done. Let me just turn to something that is a recent announcement that is by the pga. The pga tour maybe purchase by liv golf. Which is owned and controlled by saudi officials including the thaw saudi crown prince. Assure the committee on Foreign Investment and the United States you know that in assisting the president , and overseeing the National Security risk of Foreign Direct Investments in the u. S. Economy. The committee is permitted to consider quote whether any foreign person engaging in a cover of transaction with the United States business, and has a history of complying with United States laws and regulations. Thats a quote. I believe that this consideration is a substantial lower bar than the serious crimes committed by the Saudi Arabian government and its officials. Saudi arabia has a regressive, repressive government known for chilling dissidents, jailing dissidents and enacting draconian punishments the. Crown prince himself has been implicated by our own Intelligence Community in the brutal kidnapping, torture, murder and dismemberment of an american resident. Washington post journal as shared by 9 11 the families of the victims of the terrorist attacks on september 11th 2001 in response to the news of the merger. The kingdom spent their billions of dollars before 9 11 and to fund terrorism, spread their vitriolic hatred of americans and finance alqaeda. And the murder of our loved ones. The same 9 11 families are still waiting for justice in their lawsuit against the saudis. As the saudi government obstructs court processes. And obscure is the truth. Dragging out the family suffering and restitutions for over two decades. Can you share would scrutiny this particular deal between liv golf and pga court tore may received by the Saudi Sovereign Wealth Fund in general given its historic and continued to comply with u. S. Law and regulation . What i can say is that the 50th is a very important part of treasuries National Security mission. In the committee is very well positioned to review transactions that do involve National Security concerns. Regrettably, because there are very strict rules of confidentiality, im not in the position to be able to comment on any specific matter or potential case. But certainly, with National Security concerns, sophias is in a position and does review transactions. Thank you for that clarification. In essence, what ive heard is you cannot comment on what is going on now. But there is a possibility because they have the responsibility. To review of these kinds of transactions to determine whether or not its in our best interest. Our security is somehow compromised. Because of the transaction. I thank you for that. Because they do believe that and i hope that you will take it up. Thank you very much nailed back. Gentlelady eagles. Dylan from oklahoma, mr. Lucas, is now recognized for five minutes. Thank you, mister chairman. United states has some of the best Capital Markets in the world. Our critical to the strength of our economy. During the challenging last several years, our Capital Markets were essential in facilitating capital and managing risks for business days. Investors and even the government. While we dont yet have the details of the three proposal coming from the fed, by cher barr has indicated it will impact the Capital Market activity of large she was institutions. Im concerned about and punitive capital charge two u. S. Banks is counterproductive to promoting liquidity inefficient markets. This will come at the same time the fcc is engage in dramatic and transformational market structural changes at an unprecedented rate. Since Treasury Mission is to maintain a strong economy, and promote Economic Growth and stability, our you confident that these policy changes will not undermine resiliency of the u. S. Capital markets and support the economy . Madam secretary . I certainly agree with the goal that you mentioned of maintaining a strong Capital Markets. Im not really in a position to comment on these regulations. I dont believe theyve been released yet. I havent been fully briefed but we will certainly review carefully think about the implications of that forthcoming changes could have for the functioning of our Capital Markets. Particularly for the treasury market where we have a particular responsibility. Just to reiterate it, is concerning the u. S. Banks will have to implement both significant Market Structure changes. Including affecting the u. S. Treasury markets. And increased Capital Requirements associated with market activities. All ask this. Are the fed and the fcc coordinating with treasury on the Economic Analysis necessary to understand potential consequences to both markets and users . Will you commit to this analysis . I believe this is likely to be a fed set of regulations and proposals. To treasury is not involved in reviewing those but i am assuming that the Federal Reserve would possibly jointly with the fdic. Put out and notice the proposed rulemaking. That we would certainly have the opportunity to discuss. My concern is the potential impact is so dramatic that if the entities that are engaged in these various elements of dramatic change arent cross referencing their actions, the possibility of unintended consequences, this concerns me a. Question over two. In the european the, corporate Sustainability Reporting directive went into effect in january of this year. The csrb de require companies to disclose a host of farreaching esg information. These requirements will also apply to Non Eu Companies that have a significant eu presence. Which could have a substantial impact on industries here at home. For example, the Agriculture Sector companies to do business in europe are navigating through how to comply with the disclosures required by Climate Change. Scope three emissions, water usage, biodiversity, ecosystems data. Secretary yellen, is the treasury have an estimate of how many u. S. Companies will be impacted by the cs are deemed the difficulty these companies could face . I dont have such an estimate but let me say that well were supportive of the highlevel aims of the triple d, we are concerned that it has extra territorial scope and potential for unintended. Negative consequences for u. S. Firms. And this is something that we are discussing with the European Union and will certainly make our concerns known. I have to note for the record that it is important that we do not allow europe to become of the standard centers for the United States. U. S. Regulators should be diligent in protecting u. S. Interests and in defending u. S. Sovereignty. Thats your job and mine, secretary. Agreed. I think some of the requirements could affect the global activities of u. S. Firms. Where there is no clear nexus to the eu and that certainly concerns us. Brussels seems to be playing for keeps on everything that evolves economics. With that i, yield back. The gentleman yields back. Gentlewoman from new york, mrs. Velazquez is now recognized for five minutes. Thank you, mister chairman and. Ranking member. Secretary yellen, in july 2021, the imf board of directors found that Climate Change is an essential threat that poses economic and financial policy challenges. That will confront all its members in the decades to come. Hows the Treasury Department are working to integrate the macroeconomic effects of Climate Change into the imfs activities . Were concerned about integrating it into both the imfs work but also perhaps more importantly work of the Multilateral Development banks. The Multilateral Development banks we think need to evolve the work that they do to move from focusing purely on countries specific challenges. That affect poverty to responding better to global challenges including Climate Change and pandemics as well as fragility and conflict. We have spearheaded a process to evolve the work operating bodes and strategies of the world banks starting with the world bank to be able to better address these challenges. This is something that the new president of the world bank will be deeply involved in. If the imf addressing Climate Change is not the core mission but they are certainly involved in evaluating Climate Change as it impacts countries and its possible macroeconomics debility. Thank you. Secretary yellen, i have been concerned about the rapid speed at which Silicon Valley bank grew in size and complexity. Im considering legislation on the issue. The feds review of the banks failure notes a similar concern. As chair of fsoc, this this concern you as well . It certainly did concern me. The set of banking problems that we touched off by the failure of this bank. The fed produced quite quickly a report on its supervision of Silicon Valley bank that did appointed efficiencies after all this was very rapidly growing bank. In had a unique structure that potentially made it vulnerable to runs. That is a matter that is appropriate to address by the banking supervisors. Thank you, as chair of fsoc to, you believe regulators have all the tools necessary to ensure that as the Bank Residence size and complexity, particularly over a short period of time, regulatory and supervisory standards are able to be quickly applied . I believe the regulators, the Bank Regulators to have the authority to put in place a factive regulations and supervision to address these issues. Some of the supervisory standards for relaxed. We think its appropriate to the president thinks its appropriate. I think the Federal Reserve thinks its appropriate to revisit some of the changes and also to shore up bank supervision. I to believe its appropriate. Thank you for that answer. Cdfis are critical to our underserved communities. Recently, ive heard concerns from cdfis about the new certification proposal from the cdfi of fund that can make it difficult for cdfis to land in the communities they serve and would undermine the ability of cdfis to effectively inject bonds into communities that desperately need support. Are you aware the proposal from the cdfi fond . I am aware that the there is a plan to update the cdfi certification process. That something that hasnt been reviewed for about 25 years. The potential importance of the cdfis assignation madam secretary, gentle ladys time is expired you can answer the rest for the record. The gentleman from texas, mr. Sessions, is now recognized. As chairman, thank you very much. Madam secretary. Thank you for being with us today. Presence allows us here to not only engage with you on your thinking but also helps articulate policy that we believe. Madam secretary, almost effective with the president taking office, President Biden taking office, the fed began to loaning the United States government about 120 billion dollars a month. And then tapering about a year later took place when that was reduced to about 100 and 5 million. Could you please tell me the current amount of money that the treasury that the fed is putting in to the United States economy that we take loans out for . So this is really a question for chair powell rather than myself, but to the fed thats a question of anybody that is on top of financial interests of the United States because today we are talking about the state of International Finance systems, and that the entire world sees where america cannot even stand on its own two feet without taking a loan out that we pay interest on, and the secretary of treasury wont even answer the question. Im sorry, i will answer the question. Thank you. The fed is engaging in what is some kinds called quantitative tightening, which is a reversal of its long term treasury and Mortgage Backed securities purchases. It is now reducing its holdings by redeeming principle as it comes do and reducing its holdings overtime of these assets, and it is something that they deemed appropriate and is part of a Monetary Policy that is aimed at having a more normal size of fed portfolio and is part of their strategy to address inflation. I just heard you address one side of the equation, if you could please answer the question, how much money does the fed put into our economy that we take out a loan for not how we change out those loans and change based on the Interest Rate, how much money every month does the fed put into our economy to prop it up. Im sorry, im not sure what i know what you mean by money the fed puts in the the economy. The fed does not loan the economy any new money that weve taken interest out on, is that your testimony . But the fed provides reserves to the Banking System and in doing so, purchases treasury assets and a Mortgage Backed securities guaranteed by fanny and freddie. And it does that to serve a Monetary Policy purpose. But madam secretary, i believe, you are entitled to your own opinion, this administration is. But when the United States of america takes out loans that we receive from the fed that we pay interest on, it is a message to the world that we cannot stand on our own two feet with our own, vibrant, economy. And it sends a huge message that either we cannot manage our own spending habits, or that we are allowing our own people to stay at home and not to produce and grow our economy. This economy that we have, i think, that we have seen produced a doubling in the amount of money that came in to the treasury from 2010 of about 2. 1 trillion, to about 2021 or 22 of about five or 4. 9 trillion dollars. We double the amount of money that comes into the treasury. Your testimony today is that you were suggesting that we are not taking out any loans from the fed that we would pay interest for, and i appreciate your time before this committee today, mister chairman, i yield back my time. The gentleman yields, the gentleman from california, mr. Sherman, is now recognized. Madam secretary, we deal with Investor Protection in this committee, the scc is looking at swing the pricing rules dealing with mutual funds that will undermine Investor Protection. And the word is out that it is the best stock of yourself and the fed but somehow believe and are pushing the scc to have these regulations to prevent a precipitous selloff in u. S. Security should there be a crisis. I just want to ask and im not going to ask you a question at this point but id hope you would reexamine your position there because telling the American People but there is a crisis, we dont want you to sell your stocks, we are going to impose a penalty on you for selling your mutual funds is one way to get them running towards the exit. So its bad Investor Protection, it is bad systemic regulation, i do hope that you will leave it to the scc what they do on Swing Pricing. Your testimony talked about the imf but. Pakistan is engaged in negotiations right now, this is a unique opportunity to help the people of pakistan but also a unique opportunity to focus on human rights, democracy, and timely elections in pakistan. And i hope that the u. S. Voice is being used there to push back pakistan towards democracy and human rights. Iran has special drawing rights at the imf, and i wonder how we as a congress can reauthorize imf and leave that untouched. Imf mailed we have to decide, do we want american participation or do they want iran to have a special drawing rights. In march of 2000, in 23 this year, secretary blinken identified that the amhara force Regional Forces in northern ethiopia were engaged in ethnic cleansing and war crimes. The Human Rights Watch has identified two particular individuals that are responsible for those war crimes, and i hope that the treasury would look at sanctioning with those two individuals. Leave or not, i have a question. But we have a Capital Gains allowance that costs us tens of billions of dollars. It is justified as encouraging people to make investment that help the economy grow. Maybe that makes sense unless the economy you are growing is china. Can do you think of a reason why we use the tax system to subsidize u. S. Investment in Chinese Companies im sorry, in what way do we if you work hard and you owe money, you pay the ordinary income tax rate. But if instead you invest in huawei and the price goes up and you in best the same amount of money, you pay a much lower rate, and if you die walden, that you get a stipend of the bases that you pay, and you pay no tax at all. So the full canopy of investment incentives built into our tax code is there for china. Is there a reason why we are incentivizing investments and chinese stocks . Well we have policies about how we tax Capital Gains on assets and Capital Gains can you think of why we applied to chinese stocks, except that we got lazy and we wrote them up for all stocks and we forgot china . Yes. This is the policy that we have all assets, including chinese assets. I look forward to working with you that makes sense in Foreign Policy sense. Finally, the chair talked about crypto and said we need a regulatory scheme, i want to say that we have a regulatory scheme. We have the securities laws. Thank god we are enforcing them. But we also have recently adopted tax laws dealing with crypto. Inflation reduction act said that youve got to report on form ten 99 in december of last year, the treasury announced the crypto brokers wouldnt have to report. Until final regulations were issued. These final regulations have been approved by the omb, but remain on issued. Mr. Lynch and i sent you a letter just recently urging you that the fcc has proved they are not afraid of the crypto boroughs, i know you are not afraid of the crypto boroughs. I hope the irs is not afraid of them. When are we going to see these regulations so that if you make a profit on selling or crypto, you at least have to pay taxes on it . We will get back to you on that shortly. Thank you. Gentlemans time is expired, the gentleman from florida, mr. Posey is now recognized. Thank you, mister chairman. Madam secretary, given the production of russian oil revenues, has the administration sanctioned off from russia been a failure . We have taken important actions, of course, the United States is sanctioned, we are not allowed to purchase russian oil and, by and large, the g7 is not purchasing russian oil, and we have taken very important steps to reduce the revenue that russia is able to earn from its Oil Production and sales by placing a price cap on sales of russian oil that make use of n e g seven servicing including insurance or shipping. And russias revenue, we also want to make sure that the oil market remains the global oil market, remains well supplied so that oil prices dont spike as a consequence of russias inability to sell any of their oil. Why is the russians revenue going up . Russias revenue is roughly halved over the last year. Russian authorities have indicated that the price cap that we have placed on russian oil has had very serious, and, negative impact on them reducing their revenues. Their budget has gone from large surplus to deficit, and theyve had to change the way in which they tax their Oil Companies to drive revenue from oil sales. It is something that is harming their long run ability to invest in the oil industry. I think our policy there has been quite successful. All right. Why hasnt the administration acted to impose sanctions on china for the apparent Human Rights Violations such as those experienced by the. We have put in place sanctions for Human Rights Violations and continued to examine further sanctions that we can levy. The president vetoed my Congressional Review Act with resolution aimed at stopping the congress departments solar panel rule that allows china solar panels to evade our tariffs. By permitting them through the third world nations. Why do you support giving the chinese an exemption. Sir, what we do with treasury is that we focus on sanctions on shin jiang first, human rights abuses and i am not familiar with the commerce departments thinking on this issue. Well, so you werent consulted on it at all, you had no clue about what is going on . I havent been involved in that aspect of policy towards china. You know, you said you aimed to do something about human rights violation, and you just seem totally unconcerned about this. I am concerned about Human Rights Violations, i think that that is a core principle of u. S. Policy towards china is that we will not do business with china in cases where there are Human Rights Violations, but and have put in place meaningful sanctions. Do you have any idea why you have the legislation out but. That would put slave labor at a disadvantage instead of an advantage over American Products . Sorry, i am not familiar with legislation in detail. Okay. What does the binds Administration Strategy use our participation in international, Financial Institutions to address and mitigate the threats coated by china to our financial and economic wellbeing, and to the geopolitical stability . So we have taken the position that the Multi Lateral Development Banks, particularly the world bank should graduate china and cease lending to china. And we are working very hard to try to get china to meet its responsibilities when it comes to debt restructuring and debt relief. And we have had some success in those efforts, chinas played a constructive role in ghana and in sri lanka, but there are other the gentlemans time is expired, and the secretary can answer the rest on the record. The gentleman from new york, mr. Meese, is now recognized. Thank you, and madam secretary, i want to thank you for your tireless effort to ensure that the United States Financial System remains as strong from your role in helping us to avoid a catastrophic default to containing spillover from the recent Bank Failures to ensuring that the United States remains a Global Leader through our international palaces and partnerships. And i know very much so that we are fortunate to have you at the helm. Let me ask you, and i am not in favor of sanctioning everything in everybody, but i do believe we need to be judicious in picking sanctioned targets. But there are a couple of Energy Targets in different parts of the world that are crucial sources of points of the regimes, and i clearly focus on rosatom. Russias state nuclear company. Not only is it a major source of farm for the putin regime in one of the only largely unsanctioned energy companies, but theyve also been playing a major role in recording a Nuclear Disaster as a Nuclear Power plant in ukraine. And i know that this Company Needs to be fully sanctioned to keep funds from putins army it is for our friends in ukraine in a draft that legislation to that end. So i would appreciate your thoughts on this and further, i would invite you to speak about your leadership in coordinating and leading the International Support effort of ukraine and the importance of our continued support. I believe strongly and we, President Biden, has said, and ive said that we stand with ukraine and will do so for as long as it takes, we are using our sanctions authority and our export controls, and other authorities that we have to do all we can to support ukraine in its fight against what has been a brutal invasion. I am afraid that i cant comment specifically on rosatom, but i would say that we have taken steps to designate a number of subsidiaries of that firm to degrade the firms activities and some key areas, and we have designated officials from the company as recently as february, and, let me just say that we continue to take further sanctions, actions, as we can justify and in situations where we think we are able to mitigate unanticipated or unwanted consequences, and, while i cant preview specific sanctions, actions that we are going to take, we continue to take sanctions actions to degrade russias defense and industrial sectors. Thank you. Let me jump to another question that i would like to address, and that is debt relief for the developing world. On the one hand, many countries owe funds to the world bank and other International Financial institutions, but on the other, it can owe even more in opaque loans to china. I simultaneously believe it is crucial to the nighted states will provide necessary debt relief to starve off hunger, an abject poverty to countries in africa and south asia, but two, to make sure that debt relief from global institutions is not used to pay off debts to china. Can you talk about the administrations approach to this dilemma . We are very concerned about the growing, the large and growing number of countries that require debt relief in order to restart Economic Growth, and these countries come to the imf in order to obtain help put in place Structural Reforms and gain funding, and to qualify for those programs, they have to have a sustainable debt trajectory, and we have devised the socalled common framework to help firms manage their debt situations, and to restructure debt. And we are disturbed that relatively few countries have signed up for common framework debt treatments, and among those that have, some have waited years, and not been successful in being able to bring all of the creditors to the table to restructure debt ands zombie is a country that i am particularly concerned about and recently revisited. It has a government that really wishes to restart growth, and to be able to be able to borrow to invest, to promote Economic Growth, and it cannot do so without that, and china is not going to come to the table or working very hard to table yet. The gentlemans time is expired, the gentleman from missouri, mr. Luke mayer is acknowledged. Thank you for being here today. Statutorily, you are required to be here before the Financial Service committee to talk about International Financial system, we appreciate your willingness to do that. I wish you would be the same attentive to what you are supposed to be doing with the Small Business community as well. It is well over two years since your task set has been there, and subsequent visits have not been taken place either. So i hope you attend your statutory duties, and that committee as well. One of the things that im concerned about, and we talked about it a little bit here in the last few of my colleagues this morning was sanctions and how it all structured with china and that sort of stuff and i ask the question of you last time you are here with regards to the possible invasion of taiwan. We learned from russia when it invaded ukraine that we can really have a plan put together and how to put a group of sanctions together on different entities, whether it be oligarchics in the country itself, and we were after the fact to get up to speed enough to get it done as the question last time we were here to put together a plan in regards to china and it is a possible invasion of taiwan. In that time, i got no response, indicating to me that there is no plan. So since then as the treasury worked with commerce or anybody else to begin to put together a plan, should china invade taiwan. So the National Security Council Works with the inter agency to make sure that it is in a position to address threats to our security. So we are not in a position to provide any details at all about what the response would be two hypothetical events pertaining to taiwan, but i will say that this is something we work with other agencies to make sure that the United States is put. I understand you cant tell me anything more than to guess. Thats what i want to hear. Thank you. Youve addressed a little bit about this next question with regards to china having access to the world bank. It is kind of interesting. It is the second largest economy in the world and yes in order to be able to qualify for the long, to get to be of a moderate income country. I take you would assume that it is a lower moderate income country . Certainly, i dont think that they should qualify the world bank loans. I had a discussion today with the president of the world bank. I discussed this issue with him, how and why china continues to have access to this and why we cant stop this from happening. You indicated in your earlier discussions to our members here that you are working to try and stop that. Can you tell me exactly what you are doing to stop that . We will not support or vote in favor of any world thank lending to china. So we use our voting to oppose it and we have certainly worked to convince other countries in the world bank to seize fundings, and while there is some, it is very small part now of the world banks activities. So basically, my understanding, is you participated about 17 of the total, and china has roughly two, Something Like that . I believe is much lower than that. But i can get you a number. That is significantly different amounts of participation yet they have access to it and because of our in overwhelming anticipation of the amount that we have in here, we have an outsized voice in that board, is that correct . We do, we have significant. So we need to be exerting our authority to be able to put china back in its place, thats what youre going to try, do correct . Yes. Okay. So a minute ago you said that you are seeking authorization to participate in some other International Financial institutions that needs to be reauthorized every year, is that correct . But i guess what i said is we would like permission to continue participating in the new arrangements to borrow and we also seek permission to lend up to 21 billion dollars to two imf funds. The poverty if were going to be loaning money to these Financial Institutions and the kind of money that you are talking about, do not believe it we need to have more control over them to make sure that entities such as china dont have access to them . We have substantial control over them. We have made sure that the structure of this is where we are going to go they cannot meant to china the Poverty Reduction an increase. The gentlemans time is expired. For very low income for the record, the gentleman from georgia, mr. Scott, is recognized. Thank you, very much. Chairman. I am very worried about china. And i want to ask you something. Should we consider prohibitions for u. S. Private Equity Investment in private sector firms which have ties to the Chinese Military and the chinese states surveillance apparatus . Now you are very much aware of the reports that china is trying to establish a military base operation but. Just 90 miles from our shores, in cuba. What is your assessment of this . Are you taking this as serious as i am . And what do you propose we should do for any private equity firm that would have connections with their military or surveillance operation. This is very serious but. You know, i mentioned this in an earlier session we had when we failed to shoot down that surveillance balloon. And i said then that this was a mistake by the Biden Administration. It was a mistake because it showed weakness to china and it showed uncertainty to our own friends but. So tell me, what do we do about the situation, what is your assessment about this threat, and should we not prohibit any investments to any of these Chinese Companies that have connections and are involved with chinas military and surveillance apparatus . So we are looking at potential restrictions on Outbound Investment that could concern or could pertain to private equity firms that invest in chinese firms with connections to their military but, and we are worried about potential National Security risk which could come. Let me ask you this in my time. What is your assessment of it . I have Great Respect for you, you have been our leading treasury secretary on two terms and i have worked with you and i respect your broad intelligence on foreign matters. How serious are you taking this effort to put a military surveillance 90 miles from our shores . We are concerned about china s role in the caribbean and in latin america more generally but, secretary, i want what you feel. Do you feel like i feel, that this is a serious attack on the United States. Now, as you remember, about 50 years ago, they tried to do something similar. But John Fitzgerald kennedy acted promptly. What are we going to do . Well, i dont have an answer for you on what we are going to do, but certainly predicting our National Security is a core concern and with respect to china we are carrying that out in a broad range of ways from export controls to entity lists, to in some cases, thank sanctions and potentially restrictions on Outbound Investment. Do you feel that this may be a primary move that would preceded their intentions over in kuwait and taiwan . I really cant comment on that. All right, thank you, secretary. The gentlemans time expired. And the gentleman from michigan, mr. Huizenga, is represented for five minutes. Thank, you secretary, it is good to see you again. Im gonna touch on a couple of things. Real quickly, i want to make sure i heard correctly, i think youd answer to an earlier question, the pga and live agreement but is something that treasury is planning to look at . I know you are not going to get specifics, but is it something that is going to be subject to review . Again, i am not allowed to talk about any specific matter before sophias. There are very strict rules about that. But to the extent let me clarify, does it seem to fit the general parameters of what is typically reviewed . If they are a National Security risks, then the answer is yes. Cvs looks at National Security risks. And the definition of those risks is well vetted and well understood . I believe it is, yes. All right, i will leave it at that for right now. I did want to touch quickly as well on the debt ceiling, something you had brought up in close of your opening. It was june 1st deadline that you initially Gave Congress and everybody else to reach the Borrowing Authority that, when you are going to reach at that then moved to the fifth. Others who have been involved in treasury speculated that it could be well beyond june 5th. I am curious, was their actual analysis done by the treasury to determine the state, and what changed . Or was this artificially manufactured . In all fairness, you took congress to task about not taking this to the brink, and in all fairness, the white house, specifically the president , ignored kevin mccarthy, the speaker, for nearly 100 days after he said he was going to have negotiations with him. So it would just seem to me that if the white house recognizes that that is not a good brinkmanship, trying to apply that to congress, then why didnt the president take your advice . Im sorry, there is nothing political whatsoever about the information and advice that i have given to congress about when our resources would be exhausted. So do you have any insight as to why the president didnt answer for 100 days . In early january, i indicated that we felt confident, our resources could last until the beginning of june. But i have cited i am reclaiming my time, i read the statement, you said june 1st or the following weeks, at which then tightened up. And that is fine. That is not what we are here today about. It was consistent with but that side i am reclaiming my time on this. Because i do want it an International Development finance corporation as well, but i am also going to say and repeat something to you that i repeated to every other person from this administration, and frankly, the last administration. Congressional oversight is vital to the work that we do. I happen to chair the oversight investigations subcommittee in this particular congress, and it is a necessary to reiterate our constitutional requirement and standing and obligation that we ask for and receive information that is going to help us do that job. We have sent, this committee and my subcommittee sent a request to provide specific documents in documents to the march 2023 Bank Failures as well as the role in the digital aspect space. I know the Ranking Member brought up the bank failure. So this seems to be fair game. The first set of requests are important to help this committee understand how the treasury and stocks built in the Signature Valley Bank and the use of Systemic Risk assumption. Today, we have received what i would generally call limited information from your staff. For example, in response to our march request, we received a copy of the f stop meetings from march, only after they were publicly published on the treasuries website. Frankly, we dont need your help, weve got that, and frankly its a waste of your time and whoever is reviewing this, and your staffs time, and therefore, madam secretary it wastes our time. So lets get beyond the games of sending back and forth publicly available information, and actually get to our constitutional oversight role. Will you provide and commit to me the underlying records of the published meeting minutes, including draft minutes and notes from the march 12th and march 24 f stop meetings regarding the Bank Failures, this is what we have been asking. We have provided, there are now minutes in the public domain. The minutes that are in the public you didnt sentimental after they were available to public. I wanted to know the draft minutes. Because they had to be approved by the committee. The gentlemans time is expired, the gentleman from massachusetts, mr. Lynch is now recognized. Thank you, mister chairman. Welcome, madam secretary. And may i say, thank you for your wonderful leadership and your service to our country. I appreciate it. I want to revisit the aftermath of the Silicon Valley bank collapse. And the exercise of the exception that we allowed to be exercised instead of operating and allowing the least cost resolution practice to go into effect. I know there are five requirements statutorily that must be considered by you and by the f. D. Icy and f cc and as a consultation requirement with the president , but in the aftermath of all of that, some of this is monday morning quarterbacking, but there are some that say that, perhaps, exercising that exception, the risk exception, but that we may have been able to resolve the situation without exercising or reverting to that exception. In your own mind, and look, this collapse happened in a matter of two days, i ask the same question to chair bloomberg of the fdic when he was before the committee. Can you think of any alternative in retrospect that might have existed other than the financial using the financial risk exception . All of us involved in making those decisions. We were tremendously concerned that the failure of these two banks in a matter of two days created a huge risk of condition to banks throughout the country. They are a large fraction of uninsured deposits at many banks and we were concerned that depositors would be terrified by these rapid and unanticipated failures and that we would see contagion and runs on many banks. We felt that we needed to ensure depositors broadly that their deposits were safe, and this was a way of doing it. And i believe it succeeded but. While there was First Republic later failed, we have not seen i believe these actions plus the creation of a new liquidity facility by the Federal Reserve. I believe it stopped contagion and stabilized our Banking System and it was a very dangerous moment. But the problem that i see is the least cost resolution preference was meant to lower the cost of resolution. Thats right. It is hard for me to imagine a similar situation ever arising where a Systemic Risk exception would not apply. And i was just wondering if this exception has swallowed the rule rather than going with a lowcost resolution, we are going to fall into this same scenario over and over again. I dont think would fall to the same situation over and over again, hundreds of banks failed in the aftermath of the Global Financial crisis. Etf dicey resolved most of them, and they used the least cost method of resolution. So this is a very unusual situation where this exception had to be invoked. It was also done in a least cost resolution. Okay, okay. My concern still remain. Let me ask you another question about Jpmorgan Chase and their assumption later on in a different process. Isnt it always the case that the biggest banks will seem to be the sturdiest and the best able to absorb another bank that is failing or in receivership . Not necessarily. Silicon valley bank and signature were assumed to be merged into Smaller Banks not nearly that size. But when the f. D. I see results a bank, it is required by law to take the best offer. The gentlemans time is expired. In this case, it was jpmorgan. I go back, madam secretary. The gentleman from missouri, miss wagner is recognized. Thank you, mister chairman. But last month, the g7 leaders of which the United States is one, agreed in a joint statement on an economic approach to china that would focus on, and i quote, derisking and rebukes calls for decoupling from chinas economy. However, i have to say that i think it is appropriate, and in fact essential that we de couple from Chinese Industries and entities that are actively participating in on thinkable human rights abuses, including the ccpcs genocide of muslims. So please tell me, how does the treasury plan to derisk the u. S. Economy from this appalling tragedy. In the case of Human Rights Violations, and shan jiang, there is no business. We have sanctions in place that prevent americans from doing business with entities and entities that are involved in human rights. That hired the risk, and you say those sanctions. I would like to see what companies have been sanctioned for doing business with china as they exploit the human rights of muslims, if you could provide that please. Weve sanctioned chinese individuals and entities for human rights abuses there and businesses i do need to move on with respect. According to a recent bloomberg report, chinese purchases of iranian crude had jumped in march by 20 month on month. Totaling 800,000 barrels imported a day. In march, iran said that it is now exporting more oil today than any time since the 2018 imposition of sanctions. Current law requires treasury to target foreign Financial Institutions that are involved in these sales. Maam, how many form and Financial Institutions have you sanctioned as a result of these sales . We certainly are doing everything in our power that is not my question. How many foreign Financial Institutions have you sanctioned as a result of these sales and this huge 20 increase by iran. So if you dont know the answer, if you could, could you please provide me the answer. This is unconscionable, and i do not believe the treasury is following the law, and it is a law that requires treasury to in fact we have an exceptionally tight sanctions regime in place, with respect. I dont know what your plan is to further tighten or enforce the sanctions against iran as the country continues to make alarming progress on nuclear armament, but i am very interested in finding out. Next, secretary yellen, it iss long been u. S. Policy to support taiwans membership in International Organizations where statehood is not a prerequisite. The International Monetary fund has no conditions regarding statehood. The Financial Services committee unanimously passed legislation supporting taiwans membership at the fund earlier this year. Taiwan already belongs to the w. T o and the Asian Development bank. If it sought it being taiwan, membership at the imf with treasury supported . We have to look at that. It is not a member of the inf if they sought it would have to unanimously, we have done that. We have passed that as a committee book. Yes, i would like your response on that, specifically. This is three in a row now that i have asked for specifics that you dont have answers to, and it is unacceptable. Let me ask another. Following up on questions for my friends on the other side of the aisle, i want to ask you about the s ccs sweeping proposal on a mandatory Swing Pricing hard close and Liquidity Risk management. Has said the proposal is needed to combat delusion, but ive said no evidence from the scc that dilution is a significant problem for mutual funds. In fact, ive seen some commenters offer their own economic acknowledgment to show that delusion is minimal, and far surpassed by returns from long term investors. If implemented, the proposal would add significant costs and damages. Why is this . I guess i would like to get your perspective on this misguided s cc proposal. It is a question you should be asking to chair gensler, and not to me. Im sorry, im going to answer the question. While im on times, he will have to answer this question in writing as well. For questions we will have to answer in writing. Im sorry, the gentleladys time is up, but it can be answered and writing. Chairman greene all. Madam secretary, you might answer, now i yield my time to you. On the last question . Yes, answer now please. The Financial Stability over this council has discussed risks in connection with open end mutual funds, particularly bond mutual funds where there can essentially be runs in situations where those who move first in these open end funds are able to get better pricing than those who wait until later. And this creates a Financial Stability risk, similar to the kind of risk that exists with money market, mutual funds that is long been a subject of f sock attention. And the fsoc is not been involved in advising the s cc how to address those risks, but Swing Pricing is a way to reduce or eliminate first mover advantage and to diminish the odds of runs that can lead to fire sales of assets that can have contagious effects throughout the Financial System, and we saw this occur when the pandemic struck in march of 2020. It was reason that the Federal Reserve created a facility to try to stem those runs. Thank you, madam. I think my friend, very much. Im going to have to continue with my time. Yes, thank you very much. Unless the chair is going to accord medicinal time. The gentleman has three minutes left. Thank, you mister chairman. Madam secretary, thank you for your service to the country and i also think the president. I believe the president , working with you, you have done an outstanding job. I am not ashamed to say it. I am not ashamed to associate myself with you or with the president. Madam secretary, in your testimony but, the written testimony, you indicate that while we were able to avoid a default, the United States, once again came dangerously close to the line. If you indicate further that this cannot be normalized. Are you saying here that waiting until the lastminute hurts our Global Leadership and credibility on the world stage, could you, in about one minute, give me some more information on how we are harmed on the world stage by waiting until the last minute to deal with default credit . Yes, the United States has the worlds deepest and most liquid Capital Markets and u. S. Treasury securities are the benchmark for pricing of virtually all securities that are treated in Financial Markets and the dollar is, of course, the worlds key reserve currency. And all of that rests on an assumption, a belief, that the United States is committed to paying its bills when they come do that we are a creditor that deserves a triple lane rating, we lost that raining in 2011 when Congress Went right up to the wire in failing to raise the debt ceiling, and even in this situation, when rating agencies put us on negative credit watch but, this is something that threatens our position as a Global Leader and Financial Markets, and it threatens the wellbeing of american households that can see longlasting increases in their cost of borrowing that come from this, and of course, if we actually did default on the debt, the consequences would be catastrophic. Thank, you i have about 30 seconds left. Let me say this. Pakistan is a case study on the effects of Climate Change. And as you know, pakistan has suffered greatly from the flood that took place beginning in june of 2022. But im going to ask, if you were to use your gut offices to help pakistan, it clearly is in dire need of some need from the imf and the world bank as well. This Global Warming is something that we may deny, but pakistan is still suffering. It emits about 1 of the global greenhouse gases, we emit more than 10 , yet pakistan suffers. Please do what you can to help. I yield back. The gentlemans time has expired. But in the interest of comedy, because the gentleman yielded time, for mrs. Wagners answer, i will let the secretary briefly respond to the pakistan question. Thank you, mister chairman. We are supportive of the imfs work in pakistan, and there is a program that is helping them deal with the devastation from the floods and their preexisting fiscal and monetary problems and we are certainly supportive of the imfs work here. The gentlemans time is expired, i now recognize myself for five minutes. Madam secretary, in a march 12th interview on face the nation you said, quote, the american Banking System is really safe and well capitalized. It is resilient. Unable 14th interview on cnn, you said, quote our Banking System as well capitalized in liquid. And it may 12 bloomberg tv interview, you said, quote, what i see is a Banking System that overall is well capitalized. Do you still believe that the Banking System is well capitalized . Overall, yes. The provincial regulator says that you know are preparing sweeping changes to the Bank Capital Framework which reportedly could raise require capital by 20 or more in what you can see it as an already well capitalized system, do you support such a large required capital increase, which would have effects immediately on the u. S. Economy sidelining capital . I have not seen the details of the proposals that the fed is considering. The did agree with basel three and commit to and enact those proposals, and i will have to have a closer look at the fifth proposals. I think you answered my question already in these interviews, the system is already well capitalized. Whatever instability there may exist in the Banking System, i would ask treasury to consider your already well informed view that the Banking System is already well capitalized. As you review the feds work. Let me follow up with mr. Luetkemeyer and mr. Question on china. I also serve on the strategic competition between this party and the chinas financial party, im concerned about western capital flows and u. S. Investment in entities that throughout our National Security. U. S. Holdings of chinese equity and Debt Securities have surged to over 1. 2 trillion dollars between the scores of millions of americans which could have a vested natural interest in opposing any future sanctions or any penalties against china. I appreciate your testimony that the biden ministration is working to finalize an executive order to restrict Outbound Investments in china that threaten our National Security, but this is an area that i believe china or where i believe Congress Needs to asked, and to that, i introduce the Chinese Military and Surveillance Company sanctions act, which would direct effect to impose full blocking s d and sanctions on treasury designated Chinese Military Industrial Complex companies, the commerce entity list, the commerce military use a list, and the d. O. D. Chinese military companies list. Would you commit to pausing any Outbound Investment executive order pending the congress putting forward that legislation so that treasury can coordinate with congressional action . No, thats something thats up to the president , i cant make a demand about it thank you madam secretary for the administrations awareness this committee and the select committee and the Foreign Affairs committee are working collaboratively in a bipartisan way, on an Outbound Investment screening legislation package, we would ask the administration to work with congress and coordinating whatever executive order you are working on with this legislative proposal note that we have had conversations with congress, and we can pursue conversations i look forward to working with you and mr. On this in our select committee work, we did a table top exercise, and in response to sanctions against chinese scenario where there would be an invasion, the scenario was china the second largest foreign creditor of u. S. Treasuries with dump 859 billion dollars how are you working with our allies internationally, and also our Federal Reserve to deal with a situation where china would dump that volume of treasury securities overnight . So we are not engaging in specific exercises to address such a risk. But the United States National Security council is certainly concerned on an ongoing basis madam secretary, i would encourage to make preparations, and be on the ready for that scenario and work with the fed on that and our allies finally a followup to mr. Lucass corporate sustainability due diligence, i am glad that you share our concern, but not the extraterritorial scope of that can you discuss steps the treasury is taking to prevent this role from applying to u. S. Base firms . We are certainly expressing our concerns to the European Union my time is expired i will be in sweden this weekend, we will raise it there to the European Union with that, my time is expired, the gentleman from missouri, mr. Cleaver is not recognized thank you mister chairman, madam secretary for being here we have way too many acronyms its gone wild we need to select committee to deal with them because every time i think giatto i think of my first car out of college agree gta mr. William probably can speak to that being an auto dealer that has nothing to do with the purpose of this hearing ice wants it because i miss my car but i do want to talk about giattos because im concerned for variety of reasons how, and maybe has answered this question but how were the covered area selected for the implementation for the 300,000 dollar threshold for Cash Payments is there something about the 14 areas from the district of columbia to miami to brown word and pound beach how did we come to those areas . Im sorry the geographic target areas for what, target areas for what . Four fence in four fenced in . Yes, were talking about real estate purchases o, for real estate purchases, theyve proposed a rule on real estate purchases that would enable us to have better insight into areas where there may be illicit finance we think that is an area that is being used to channel illicit funds i agree but im trying to find out belleville why the areas that have been selected were selected me 14 areas where oh, i am sorry, youre talking about geographic targeting orders yes i dont know i think 14 areas that were selected and i need to get back to you with the logic of why those areas were selected i may be even more concerned about areas that are not selected, it seems to me that it would be, if were dealing with these 14 areas, if i were a bad actor, i would move to another i targeted another area so they have proposed border real estate rule that would go beyond those geographic universal . Yes thank you very much the other question about that in 2021 because of how best to focus is regulatory tension on residential and commercial real estate transactions if you have that information im interested in the timeline for the rulemaking. And whether treasury is going to address both residential and commercial real estate sectors in the same rule. Fenced in is actively working on those rules trying to get the map to make the database available i cant give you exact timing on it but it is very high priority thank you madam secretary, thank you for being here today. The gentleman yields his time. Thank you very much thank you for being here today. Over the past few years businesses across the country have struggled to maintain necessary inventory due to Global Supply chains. As an auto dealer i have dealt with the supply chain challenges firsthand. Making matters worse, business is using last in first out are facing significant recapture due to their inability, the factors inability to replace inventory levels by the end of the year. Which is out of our control. We have Small Business owners cant control that. So treasury has the ability to alleviate this financial burden on Small Businesses, and provide relief of the internal tax code. This recapture tax, as we call it, would allow Business Owners to spend funds on replacing to placated inventories, you would not have to lay people off, they can invest in their employees, and maintain Business Opportunities instead of succumbing to anna texted inventory shortfall that is totally be on the ability for the Small Business owners control. While i have been working with my colleagues to pass the supply Chain Disruption relief act, which is the legislative fix to provide the life of tax relief. Secretary yellen, could you explain if the department of treasury is really interested and happy people who have been laid off and lost their job, they cant pay their bills because of this, can, are you ready to help provide the life of tax relief that you can do through section four 73. Which is really for businesses struggling from Global Supply chain issues that a Small Businessman cannot control. It would be great to jump in, which we believe you have the ability to do, and fix it right now. I am aware of this issue, but i am not able to give you a definitive response on this, and the office of tax and ill ask him to do that. There is by it is bipartisan. There are people here, we all agree needs to be done. This is not a bipartisan issue, its gonna save main street, save Small Business, theyll pay taxes when needed, not pay taxes when they dont need to. I would appreciate if you checked into that, and maybe get back with us on that. We will try to do that. Thank you. Im also concerned about the which expands information required under corporate Transparency Act the effect that these would have on main street. This eta was intended to ensure easy compliance for businesses. However this goes beyond the simple and lacks clarity. This would impact 30 to Small Businesses and acting director has done little to inform businesses on the responsibilities of reporting. So when talking to Business Owners back in my district, frankly all over the country, theyve expressed their frustration with insufficient information coming from treasury on how to comply with these returns. They fear they will be held liable with noncompliance rules. So madam secretary, what access are they doing to take care of Small Businesses like mine in texas on their upcoming obligations to file Beneficial Ownership information . And when can we expect them to lay out a clear plan . We want to know the rules. Simpson is working to finalize rules that are necessary to make this very important transformative database available, and to understand that there are burdens on Small Businesses to comply with this. And we will work with them to provide information that is necessary. Thats important. Small business wants to comply. But we need to know the rules. Lets get it fixed so we can move on. In the short time that i have, ill cut my question back, fentanyl is coming across our borders at an alarming rate, flooding our communities, killing thousands of americans each year in future generations. We know Law Enforcement have found Cartel Members working directly with chinese money, laundering organizations to outsource Cartel Operations and facilitate movement through the United States. Quickly madam secretary, can you expand on what treasury is doing to combat china and the role they play and cartel financing, as the administration considering tougher sanctions . Is killing future generations of our young people. We have put in place some sanctions, and we are working, were looking to try to discourage and sanction the provision of precursor chemicals that are critical to the manufacturing and sale of fentanyl. We agree is critical. Gentlemans time is expired. The gentleman from connecticut, mr. Very quickly, i want to mention, the new york Bank President , in your testimony, im delighted youve done so, and the world bank obviously has had a turbulent recent past, i think he offers an opportunity for real reset. I hope that you will double down on the governments interaction and encouragement to the world bank to be what it should be. What i want to talk with you about though is china. Its evident in this hearing, and generally evident, that congress has whipped itself into a frenzy with respect to china. I think this goes back to the Trump Administration, when china was the allpurpose steak go along with immigrants for all of the nations problems. There are proposals to cut shine off from global markets, to devastate their economy, i understand the emotion, were appalled by the chinese treatment of uyghurs, we are appalled by theyre stealing of our intellectual property, the list goes on and on. But this is a moment i think that calls for close statesmanship with respect to china. We are trading more with china than ever before, we are invested in china more than ever before. They own a trillion dollars of our sovereign debt. I was pleased to see you, and im gonna give you the remainder of my time to elaborate on this, say in the context of the g7. Im quoting you here. My own view is this, that is to say u. S. Economic efforts with respect to china, should be National Security focused. Not focused at undermining chinas economic competitiveness or ability to advance economically. Madam secretary is it in the national or Economic Security interest of the United States to impoverish the Chinese People . No i certainly do not think it is in our interest to stifle the economic progress of the Chinese People. China has succeeded in lifting hundreds of millions of people out of poverty and i think that is something that we should applaud. We certainly do have legitimate concerns regarding china, first and foremost National Security, where we absolutely have to protect our National Security interest, and not compromise on that. Human rights is critically important and strongly believed, the president believes in sanctioning human rights abuses. Beyond that we have legitimate concerns with chinas behavior in some areas to trade. Absolutely this institution gets that, im on the Intelligence Community, so ever closer the normal look at some of the outrageous activity. Im trying to get what you said that policy let me that statements like in its orientation. So let me, drawing on your experience im sorry, go ahead. Let me focus on the positive then. I think we gain and china gains from trade and investment that is as open as possible. It would be disastrous for us to attempt to decouple from china. Derisk yes, the couple, absolutely not. What would be the effect on American Consumers, lets just imagine we cut hundreds of billions of dollars of trade that we have with china. If we cut that in half or eliminated that trade what would be the effect on the American Economy and American Consumers . We would benefit greatly from access to Cheaper Products, a wide array of products and products in some cases where china has the technological lead and in turn, china benefits from its purchases from us and we benefit from our ability to export from china our competition from when with china, healthy competition, just as a domestic case where firms compete with one another. This leads to faster innovation, faster technological progress, that benefits everybody concerned with better and Cheaper Products overtime. This is a very valuable interaction and while we surely have concerns that need to be addressed, decoupling would be a big mistake. Thank you. Almost at a time, i want to add that i think your concept of attacking the National Security side of this without damaging the Economic Growth that comes with two things is absolutely what we need. The gentlemans time is expired. Gentleman from mint nashotah is recognized. I want to thank you for holding this important meeting today and thank you for your testimony this morning. The National Bureau of Economic Research as the official recession scorekeeper according to the white house. Prepandemic, or before the pandemic, the definition of a recession is pretty easy two consecutive quarters of economic contraction. However, somewhere along the way in this new Biden Administration, in President Bidens tenure, the administration seems to have changed the definition of recession in the National Bureau of Economic Research, asserting that an economic is now quote, a significant decline in Economic Activity that is spread across the economy. And last more than a few months. This is had a bit of a gaslighting effect on the American People. I would like to drill into it a little bit, secretary yellen, does the National Bureau of Economic Research give any weight to real personal income when determining if we are in a significant economic decline . They look at a wide array of statistics and the second definition that you gave of a broad contraction that lasts more than several months, that is how reclaiming my time the answer is yes. Does the National Bureau of Economic Research directly consider inflation when determining if we are in a significant economic decline . Inflation is not part of an economic decline. Okay well the National Bureau of Economic Research while doesnt directly consider inflation, inflation is embedded into real income and spending variables that it tracks. American families pay an average of 864 than they did when this administration started. That is an extra hundred and 26 on food per months, shelter permanent, an extra hundred 23 per energy per month just to name a few. This is since the Biden Administration took office. Unless americans have gotten a 15. 3 pay raise in the last two years they have effectively gotten a pay cut. Madam secretary, has the average American Income increased 15. 3 during the Biden Administration . We have the strongest job market. Reclaiming my time. Thank you madam secretary, the answer is easy, it is no. Since President Biden took office, the average income has only increased 2. 4 . That is the answer. While it cost nearly 900 more a month for American Families to offer the same quality of life they had in 2019, americans are getting paid anywhere near that much more. How is it then that the National Bureau of Economic Research thinks its appropriate to exclude inflation as a primary factor when determining the state of our economy . Its a rhetorical question madam secretary, we all know the bureaucracy cherrypicks the factors that yield the most convincing numbers for whatever narrative they want to assert, much like you are starting to deflect and say we have the greatest whatever, americans know better. This administration is telling americans that the economy is strong in american certainly feel like theyre worse today than they were before President Biden took office. Secretary yellen im asking you these questions because throughout 2021 you along with several members responsible for fiscal decisionmaking in this administration had incredibly assertive inflation that inflation is transitory. Perpetuating afoul see the government could keep spending money it didnt have, and everything and everyone will be just fine. But its not fine. As a result of misrepresenting real economic conditions, trillions of dollars were printed injected cash into a shut down system which skyrocketed the prices when we open back up. In order to tame runaway inflation, the feds only tour is to rapidly raise Interest Rates. The fed is on its tenth consecutive rate hike which are intended to purposefully increase unemployment, make it harder for americans to find jobs, make it harder for americans to buy a home or car. These decisions which unfortunately seem to be the only decision at this point have harmed low incomes americans the most. We should never have delayed implementation of Monetary Policy under the fallacy that inflation is transitory. The Administration Made a lot of decisions that crushed americans enough our only concern with cherrypicking favorable data for political purposes. It is time this Administrative State become serious and gives us an accurate depiction of the economy and american suffering on the hands of an unaccountable government rather than gaslight their way out. I yield back. Gentleman yields. Gentleman foster is now recognized. Thank you. When resolving fail banks there can be a tension between and the main parts and desire to discourage further Bank Consolidation into a far the number very large banks. My question is, is a scenario where further guidance where congress may be useful . For example by providing some welldefined wiggle room of least cross resolution, or are there more effective levers we may operate to prevent further bank of solid asian . In general the largest banks are not allowed to seek mergers to get bigger. There is a broad based recognition that having a diversity of banking organizations, Community Banks, regional banks this occurs at all levels of banks size. Very often its possible in failing banks situations to resolve an institution without merging it into the largest banks. Im wondering if theres a useful way to tilt the Playing Field . The american preferences, but not mandates we put in federally. Its something we could look at. If you have time for a thoughtful response on the record for the site appreciate it. Well do. In regards to the debt limit theres been uncertainty as to how the exact language applies to the different forms of debt that have historically been issued by the treasury. In particular since the limit appears only it has been suggested that the debt issue when it might not apply to for example interest only councils. Or the interest of premium bonds or the separate auctions of the socalled strips of increased Interest Payments that are currently traded in the secondary market. In the runoff to this last crisis are office made increase of treasury on this and i understand you are busy, we can get a response but would it be possible to get a definitive response to this question . If this represents a safety net against defaulting on her payments, we want or know whether its real. Ill try and give your response on that. Thank you. On ukraine, you mentioned the importance of anticorruption reforms, these will become much more important in the International Community starts dispensing hundreds of millions if not billions of dollars to reconstruct assistance to the ukraine. As you know one of the big issues with Central Bank Digital currencies as their potential traceability of transactions by the issuing entity. It seems to me theres a potential role for that traceability in ukraine assistance in providing the ukraine reconstruction assistance untraceable digital euros, or some kind of reconstruction accounts that would remain traceable to identify corruption for a period of time when in corruption has faded as a concern. Thats an interesting suggestion, ukraine doesnt have a Central Bank Digital currency that is a major enterprise to introduce such a thing. You know, in the case of the United States we are looking at it, but it is something that could take years. We are very focused on corruption, and traceability, in the county ability for funds that are transferred to ukraine right now. U. S. Aid is being handled through the world bank. It has a very rigorous standards for verifiably ability and accountability. But is still a struggle, look at the money we attempted to put into afghanistan but it disappeared and corruption. I honestly dont believe anything like that is happening. We have hired u. S. A i, hiring u. S. Accounting firms to in independently check and to review world bank records. The imf program, corruption and putting in safeguards and Structural Reforms to make sure that corruption is i understand it just seems like there may be an acceptable bargain here. That yes we will provide a tremendous amount of assistance for those who are willing to go back to ukraine to rebuild the country, but the price of that will be a heightened level of visibility to the International Community. I believe thats absolutely right, that certainly we demand accountability. The gentlemans time has expired. The gentleman from ohio, mr. Davidson. Thank you chairman, secretary yellen, thank you for your testimony today. To study the effects of an unattended consequence of those sanctions. I think this is welcoming development giving the expanded use of sanctions since the law passed, the governing law passed in 1975 to create the offshore foreign asset control. How do you anticipate foreign that comes from sanctions . The Payment System around the world the rivals that are confronting macro economics today . Well we wanted to make sure that we do have experts who are consistently focused on analyzing the economic potential impacts of sanctions since when we imposed them, we always want to understand the economic ramifications of them. Do you think theres a real threat to the Payment System that we dominate today . So our, the fact that the dollar is used as a reserve currency, and place such a huge role in International Transactions does enable our sanctions to be much more effective. Its not surprising that countries that are fearing they could be affected by our sanctions are looking for alternatives to the dollar. Its something that we simply have to expect. But the dollar plays the role, it does in the world Financial System for a very good reason that no other country is able to replicate including china that is that we have open Financial Markets in a strong rule of law and an absence of capital controls that no country is able to replicate it would not be easy for any country to devise a way to get around the dollar. Thank you as a member of the sound money caucus i appreciate efforts to as reserve currency. Frankly i am concerned about the role of money being corrupted as a tool for coercion and control rather than a means of exchange and restoring value. Frankly that seems at the heart of Central Bank Digital currencies, it kind of transcends down to one of the big developments globally. Where the United States dominates Capital Markets in terms of 75 to 90 of liquidity is offshore. And you know, it seems like there is an effort to not trust american citizens in this. Which is if you cant stop it all together, you at least want to keep it account based, because you can control third parties, you can use them as intermediaries. That seems to be a feature of some peoples thinking. Are you familiar with, in december 2022, they issued a request for comment on the potential rule that would banned self custody. The ability for individuals to own their own assets and have permissionless Payment System. Im not familiar with the details of that role but certainly we are concerned about the use of cryptocurrencies and Digital Assets for illicit i think were all concerned about illicit activity, the question is are you trying to stop individuals from having self custody . It seems like that was an effort that was under way under the end of the mnuchin time as secretary. Is that something, apparently it hasnt risen to your level of concern. I havent had discussions of that. Thank you ill just say as chairman of housing insurance, im concerned about, do you consider cdfi find as a Regulatory Agency, what is the role for cdfi fond . Its not a Regulatory Agency but i know it is in the process of reconsidering certifications for cdfis, but it is not a regulatory state for that point of clarification, as we look at the conservatorship of the gses, one of the report that is long overdue, was due in september of 2021, is the departments plan to get them out of conservatorship. Would you commit to responding to that in writing . We want to work with congress to do that. The gentlemans time is expired, the secretary can answer for the record. Gentleman from ohio mrs. Beatty is recognized. Thank you, madam secretary, let me start with these opening remarks since several of my colleagues on the other side have criticize you from your handling of the debt ceiling issue and your calculations of the study. Theyve also plays bayne on Biden Administration, let me be clear, my colleagues in my opinion across the aisle, and no one else, dragged us to the brink of default by using the debt ceiling as a weapon and a Political Tool to further their political agenda. Even the prospect of defaulting is harmful to the United States economy we heard other witnesses, experts, telling us defaulting would be harmful. And so what they did in jeopardizing our role on the political stage and creating opportunities for china and other foreign adversaries so weaken our power in influence. I want you to know madam secretary, thank you for consistently providing a political advice to congress, because she did it as you say, for what was best for the United States of america. So i wanted to be on the record saying that. Thank you. Let me turn to, im sure your where, the number of countries playing a surcharge to the imf, that number has increased from 9 to 16 since 2020. That figure is estimated to increase to 38 countries in the coming years. I have a bill that i am cosponsoring that would require an immediate review of surcharge policies with the requirement do you have any thoughts on this . Is it worth taking a closer look at this consequential policy . Whether its effective or whether there are unintended harmful consequences . I really have to say that we are supportive of the imfs surcharge policy. It is part of their Risk Mitigation framework, and with surcharges do is they provide incentives for borrowers with large outstanding balances to repay their loans promptly. That is in keeping with the nature of imf lending. For the poorest countries, there arent surcharges not apply through the Poverty Reduction window, the surcharges allow them to build precautionary balances, which protect all of the imf members in case there is no repayment. I am not in favor of trying to work with you and understand the concerns, but im not in favor of changing the imfs surcharge policy. Okay thank you i appreciate that. Im gonna take a 190degree shift, but i think it is in relationship to the state of international, Financial Systems, since i believe our money is international in many ways. A couple weeks ago, we had some International Dignitaries here, from canada. I think one of the things that theyre most proud of, they had a female on their 20dollar bill. So you know where im going with this, in our last years hearing, you indicated that you would do everything within your power, in a very bipartisan way, you know, over the last three congressional sessions, weve had people in your position look at what we were going to do with the 20, came of a wouldbe Harriet Tubman, we are all in agreement with that, and so i have reintroduced my bill woman on the 20 act of 2023. Heres what im asking. I understand all of the security, how we have to design the money, but could we not have a bill that simply puts in place the likeness of Harriet Tubman . Just that part, then you put it into the process that, gets us to 2027, when i will not be here, and that we could get this going . Comments . I want to see Harriet Tubman very much on the 20dollar bill. I have promised and i am doing everything i possibly can to expedite that process. It essentially froze. We lost four years during the Previous Administration when secretary lieu proposed this in 2014, the scheduled date was 2030. I know that is a long time. But that is what it was. Weve stolen and got it back but it is not the gentlemans time is expired. I want to thank Ranking Member waters for holding the hearing, thank you secretary yellen for being with us today. Secretary yellen, on november 4th, the Community Development for Financial Institutions fund released a new proposed cdfi certification application using paperwork reduction act. Why did the cdfi use the paperwork reduction act instead of the Administration Procedures act for that change . Im not sure. Ice to because the paperwork reduction act requires examination and forms. I would note the paperwork reduction act was enacted to minimize paperwork burden for stakeholders. The cdfi find wont be with interested parties while the proposal is pending, because of a blackout period. As im sure you are aware, significant concern that the change will make it very difficult and potentially exclude many cdfis from participation in that program. Secretary yellen, what is the statutory justification for this blackout period . I cant tell you about the back out period, i know that what the cdfi fund is doing is attempting to update certification processes that hasnt been really reviewed in more than 25 years. Id submit thats appropriate but the Administration Procedures are i think would be the mower appropriate pathway for that. It would certainly allow the kind of comment i think the current proposed change is really screaming out for. Secretary yellen, jody hale is has recently from the cdfi fund. Given the mismanagement of the fund, someone with more expertise on the Regulatory Environment and safety and soundness expectations inside the cdfi find would be incredibly helpful. Could you speak to treasurys perspective on appointing a director with meaningful experience, with insured depositories, with consumer finance, and what other considerations you think are important to finding the right person the head of the fun Going Forward . We will certainly do a thorough search, the director of the cdfi fund is a career ses position, and in feeling that job, we are governed by the Civil Service reformat. It has to be based on merit and there needs to be a competition with multiple candidates considered. So thank you i hope you understand the turmoil that this has created among cdfis across the country in the intended impact that is having on communities. That is supposed to be being served you suggested that deposits would be covered by federal insurance of smaller institutions suffer deposit runs that pose the risk of contagion. Before the senate the next day you said you had not considered, quote, blanket insurance or guarantees of deposit. A day later before the house coming you said the treasury, quote, would be prepared to take additional actions if warranted. Can you clarify treasurys position on any sort of expansion of the private insurance . I never intended to suggest that we were proposing expanding deposit insurance. Over time overtime that might be something the fdics is issued a report and might be an appropriate topic to look at but what i said was i was prepared to work with the regulators, the fdic and take actions similar to those we took in the case of Silicon Valley bank and Signature Bank to protect depositors when there was a risk of systemic contagion of bank runs and those tools would be available and could be the case with Community Bank that run on a Community Bank if we judge that it could trigger systemic runs on other sound banks and appropriate to use the same tools. Has board member of Community Bank i hope you keep in mind how important our Community Banks are to Rural Communities in small communities across the country. I yield back. The gentleman from new jersey, mr. Gottheimer. This year we have seen turmoil in the Banking System. Im concerned our regulatory response hasnt focused enough on small, medium, and regional banks that provide lifelines to American Families and Small Businesses. Do you believe how response to recent failures in our broader regulatory approach ensures the health of mediumsized banks we dont have a situation with only a few large banks that are too big to fail . I believe strongly in a diversified set of Financial Institutions is best for america and provides a differentiated set of Financial Services appropriate to different borrowers. I am particularly concerned the current Regulatory Environment disadvantages certain banks like First Republic receivership, im concerned the largest banks get preference in the bidding process enabling the biggest banks to grow even bigger. My understanding is the fdics certain regional banks from bidding on First Republic. Do you believe well situated small, medium and regional banks should have the same opportunity to bid on failing banks . I believe there should be a process with multiple bidders. It is up to the fdics to run the process and i know there were multiple bidders. My understanding is the regional and mediumsized banks were left out. Im not sure that is the case. There were multiple bidders that were not all large banks. They were not excluded. They were not told you cant bid. I cant give you every detail of what the fdi say fcic did in this case but there were multiple bidders and that included some Smaller Banks, regional banks. The fdics is required to accept the lowest cost bid and it did that. I heard a lot of stories that you couldnt even apply or try to bid. I will come back if i learn more about that. Switching gears to Digital Assets. Financial regulators ramped up scrutiny of additional asset firms. In a recent interview you said you, quote, see some holes in the system where additional regulation would be appropriate. Would you mind elaborating on that statement, where you see the holes . One hole pertains to supervision of spot markets where Digital Assets are not regarded as securities. So there needs to be regulatory authorities and stable coins is a type of Digital Asset that really requires a full blown federal Regulatory Framework and would very much, i think this is an area where congressional legislation is appropriate to create appropriate prudential framework. When you spoke before this Committee Last congress you agreed with me that state level Tax Deduction lead to disparate tribbett of american taxpayers. Im concerned it is pushing americans out of state like miami and jersey as they are subsidized by the federal government. The house ways and Means Committee is marking up tax legislation, those that have not addressed the burdensome that rule set out completely, is outrageous. In your view does the salt favor states that are heavily subsidized by the federal government and disrupt americans decisions on where they choose to live, have that where finances are moving around the country . It does have a disparate impact on different states. The Biden Administration is generally taking the view that it is up to congress to decide what to do with that next. It appropriate for us to handle that. That is the view we have taken recently. Last question on the national debt. High Interest Rates make the debt grow faster. What options to address the fact that the country is spending more money with a high Interest Rate environment. President biden proposed a fullblown budget that contains substantial deficit reduction, 3 trillion over 10 years. At the same time it invests in america. Time is expired. Thank you, mr. Chairman. The gentleman from wisconsin, mister steil. Thank you for being here today. As we approach the debt ceiling the treasury delayed issuing new u. S. Treasury. Now that the debt ceiling has been increased there significant discussion that the treasury issue hundreds of billions, maybe 1 trillion of new treasuries, in particular in short order. Do you hold the concerned others do that this may alter the Interest Rates the United States would receive on the issue of treasuries and if so what mitigating measures are you in the treasury taking to avoid additional costs on Interest Rates . It is our obligation to rebuild the treasury balance up to safe and appropriate levels, but weve consulted widely with Market Participants about what the best way is to do that to minimize the cost to the federal government and to avoid market disruptions the maximum extent possible and as we build our balance, we will certainly be careful to see if there are impacts and market disruptions. What measures are you planning to increase Interest Rates . We will be issuing substantial quantity of treasury bills and Cash Management bills in the coming months and we will try to design those offerings to be most attractive to Market Participants. The administer ration refused to negotiate with House Republicans as long as they did. We are seeing the treasury in this position rather than settling the debt ceiling debate much sooner which we could have done if the president moved forward on his path of my way or the highway refusing to negotiate with republicans in the house. Let me shift gears. I want to dive in on the russia iran alliance, established a Defense Partnership, iran is sending weapons to russia potentially developing a drone facility inside russia. This has implications beyond ukraine, across europe and throughout the middle east. Could you outline the steps treasury has taken in response to the Defense Partnership and do you believe the measures have been effective . We are certainly attempting to make sure that our sanctions on russia, when it comes to acquiring military equipment are not deviated and we are looking very carefully at ways in which evasion is taking place and attempting to address it jointly with our partners. Should anything be done specifically regarding the iran piece of this puzzle that has not been done to date or do you feel the sanctions in place in iran and working with our partners are currently sufficient . We are constantly looking and reevaluating our sanctions especially when we see evasion, we have the strongest regime of sanctions against iran, and we are constantly looking to strengthen them. Its not something that is forever fixed. When we see evasion we are looking to strengthen them. A very dynamic environment, appreciate your attention to the matter. Let me shift gears. Weve seen the European Union push regulatory standards beyond their boundaries impacting us Capital Markets and usbased companies. Im concerned, if we fail to push back american businesses will find themselves subject to european regulation. Are there regulations this administration is planning to adopt and have you determined separately these regulations coming from the eu are in the best interests of the United States . We are looking very carefully at the eus sustainability directive and concerned about the impact it could have on us firms, we are consulting with the eu and making clear that we are concerned about the directives extraterritorial. We should be concerned, the us is 4 of the world population, 50 of the Capital Markets reside in the United States. Im concerned the european approach negatively impacts their ability to be a leader in the Capital Markets, recognizing my time to yield back. The gentleman from texas, mr. Gonzalez recognized for five minutes. Thank you for being here with us today. We appreciate having this conversation which i will continue on an issue that has been a concern for this committee on both sides of the aisle. As you know adversaries like russia and china, iran, north korea and others are looking to replace and circumvent and undermine the us dollar for decades now but now we are also seeing calls to reduce dependence on the us dollar from corners of the globe including allies of ours like france and india and others. More recently from your perspective, whats the biggest risk to the us dollar . Is a global geopolitics or is it concerns in the us capital of not us politics not being able to pass a debt limit for example . I have previously had will again express my concerns about the debt limit. The dollar is used widely as a reserve asset because of the liquidity of us Capital Markets, the safety of treasury securities and the longstanding practice of the United States to honor its obligations and it is that commitment that we can be trusted to pay our bills that is the foundation for our high Credit Rating and the dollars role as a reserve currency so when we have episodes like the debt ceiling episode, that concerns me. Our sanctions are in part enabled by the Important Role of the dollar in us banks in the Financial System. We work whenever possible with other countries. If i may, should we be more concerned now in slapping sanctions on countries around the world and taking that into consideration, to be more thoughtful as we may be creating paranoia where people are looking for other currencies. It is true that when we impose sanctions on countries that are afraid they could be subject of those sanctions are motivated to look for other tools other than the dollar to engage in transactions, we have to accept it is much more difficult to find other tools to make payments when we work jointly with we have friends like france looking for other currencies. France and some of our allies, not happy when we pulled out of jc poa and imposed sanctions, and i would say theres virtually no meaningful workaround for most countries using the dollar as a reserve currency. I understand your earlier, you mentioned statements about this being the most stable option with rule of law and liquidity and all that but isnt it a fact that the use of the dollar has diminished and gone down against competing currencies over the years . There has been some increase in holding the reserve assets, but that something to be expected in a growing World Economy where we should expect to diversify. We should accept we should expect, over time, gradually increased share of other assets in reserve holdings, the natural desire to diversify but the dollar is far and away the dominant reserve. A huge concern for us in congress. Changing gears briefly, under the new minimum tax system lawmakers permit companies to reduce their taxable income by the amount of depreciable deductions which companies in most capitalintensive industries, with high value of tangible property claim depreciation deductions and use tax deferral to invest in their business. This provision was included in the Inflation Reduction Act to protect companies from potential impact of minimum tax by not capitalizing investments but these deductions are not accessible to oil and Gas Producers because Capital Expenditures are classified as intangible drilling costs in different sections of the tax code. Oil and Gas Producers are unfairly targeted. The gentlemans time is expired. Hugely concerned and would love for you to address this. The secretary is welcome to submit for the record. The gentleman from South Carolina, mr. Timmons, is recognized for 5 minutes. Thank you for being here today. We have disagreed on the approach to address a number of challenges facing this country. Im going to briefly highlight two areas where your policy proposals were simply deemed bad for the American People but what i will end on is where we will find agreement. He spent much of 2021 saying inflation was transitory once covid factors subsided. The administration and congress to justify trillions more in additional spending. Larry summers, president clintons treasury secretary, director of president obamas National Economic council, was aggressive against spending saying would exacerbate inflation. A year ago almost to the day you said you failed to anticipate how long elevated inflation would play American Consumers. On june 7th of this year, us that inflation would subside over the next two years. You got it wrong in a number of places and that error in judgment caused immense damage to the American People. The cost of goods sword. Denied the American Dream of homeownership, overall hardship in general. Policies out of washington have serious consequences and it seems policymakers forget i want to go, 18 months ago we had a back and forth where i criticized your proposal to collect Americans Bank account balances. It was only designed as a way to let democrats justify spending more money we dont have, the senate wisely sidelined this proposal in the American People are better off because of it. Policies out of washington have consequences and we must be thoughtful in our policy proposals and action. They have real consequences for the American People. Onto an area i think we are going to agree. I was surprised my colleagues across the aisle mr. Gonzalez just brought it up and i will pose a question to you thats fairly simple. Do you agree that it is important for the dollar to remain the global reserve currency . Is that a priority of yours . Yes. I think it is important that the dollar be the worlds reserve currency. I agree, thank you. Could you highlight why you feel that way . What are the factors that go into that policy decision . The safest and most sought after asset, the dollars reserve currency means our Interest Rates are the lowest of any borrower around the globe and it lowers our cost. Easier to trade, easier to compete in a Global Economy. If you agree that it is important to push this policy forward and maintain the dollars a global reserve currency why has President Biden nominated Jared Bernstein to be the chairman of the Economic Council of advisors . He is on record numerous times stating that we should actively take steps to remove the dollar is a global reserve currency, its a burden and not a privilege, and we should end the dollar as the global reserve currency, why would President Biden who i assume you work closely on these issues with, place someone in such a position of trust and authority the disagrees with his own treasury secretary . Im not going to speak to Jared Bernsteins views on this particular issue. Your views are diametrically opposed and he disagrees with you. Please make sure that you continue to push to maintain the dollar as a global reserve currency. Lets go back to the debt. Debt to gdp ratio was 119 . I have serious concerns about our spending, that it will further erode our ability to maintain the dollar as global reserve currency. We saw the grease at 180 debt to gdp went into austerity measures and had to get the eu to bail them out. No one is going to bail us out. The American People are not able to. What do you think about our and sustainable spending, debt to gdp ratio a concern of yours as it relates to maintain the dollar as reserve currency . It is critical we remain on a fiscally sustainable course. Did you say remain . We are not on a fiscally sustainable course. The president presented a budget with 3 trillion of deficit reduction over the next decade and what i regard as the most important metric shooting a bullet the gentlemans time expired. The gentleman from massachusetts, miss presley is recognized for five minutes. Thank you for joining us today. I represent the massachusetts congressional district, vibrant, diverse, dynamic, unequaled and im sure my colleagues have grown tired of my enumerating these damning statistics but imagine how tired people are living them. 3 mile radius from cambridge to roxbury Median Household Income dropped by 50,000. Federal reserve bank of boston put out a Wealth Report which sites that the average wealth for a black boston family is 8 whereas for a white family, 250,000 so im going to use my time to discuss an issue that is paramount that we tackle, the national problem, the ratio racial wealth gap which is over 10 trillion. Truly a shameful reality for the American Economy. Do you agree that we have all colossal racial wealth gap in our country . You cited statistics that show that, President Biden is committed to doing all that he possibly can and i am committed as well to take meaningful steps. Thank you. We know the racial wealth gap didnt just appear out of nowhere. Black americans in this country were stripped of our wealth. First there was nearly 250 years enslavement. Economic exploitation, state sanctioned violence and black americans are still being faced with Public Programs that promote homeownership and Higher Education along with discriminatory appraisals, redlining. Only bold, transformative, precise economic policies can address the impact of racism and exploitation. We are heading into juneteenth which is now a federal holiday, policy is my love language, we need federal reparations to close the racial wealth gap once and for all. Under your leadership you established Treasury Advisory Committee on racial equity, truly represented historic opportunities for racial justice, economic agenda. Speak to the top lines of the work of this committee. We formed and Advisory Committee to help us evaluate every area in which treasury has responsibility, where we recognize if discrimination may take place, should be changing our policies to make treasury itself more diverse and more responsive to address virtual racism. I want to bring to your attention, the work of the committee and learn more about that. To introduce the American Opportunity accounts act, passed in 2 law about the effort to directly address wealth inequality, and account managed by the Treasury Department. When they reach the age of 18, for specific purchases. Such as pursuing Higher Education. Around the country, our baby bonds legislation, connecticut, new york, washington dc. Do you agree the Treasury Department should look into baby bonds to address wealth inequality in our country . This is a key priority for the Biden Administration, not just the treasury matter but very constructive, as you know, President Biden has proposed many policies that would be complementary, including the Child Tax Credit to succeed in cutting poverty by 50 . I see baby bonds as an investment that will break generational poverty for systemic economic oppression toward closing the racial wealth gap. The gentle lady yields, gentleman from South Carolina is recognized for five minutes. The president is working on a path of cuts that will get the economic house in order, you said 3 trillion over the next decade. Is that like saying you will drain the ocean a teardrop at a time . We are on tap where the interest on the debt will exceed our military budget. How does that square with the statement you want to clean debt ceiling . Interest rates have gone up substantially, Interest Rates are lower, most economists, over the mediumterm, Interest Rates, whats important to the debt burden will decline, not be this president is on tap to spend 4 trillion. I find it astonishing that you make that type of statement. The debt limit is changed. June 1st to june 5th and maybe in july. We had a president whos missing in action for 100 days. Was this a strategy to ramp up the press to move the date. I would insist there was nothing whatsoever about the advice i gave to congress that was political. Reclaiming my time. Im trying to ask you a question. Did you not get with this administration to move the dates to ramp up the pressure, the media was daily saying let me finish and i will let you get some time in if you will not filibuster. You didnt get together with the president or the administration to move dates because that is very critical. If it was really july or later, why didnt you tell us . The answer is an unambiguous no, i did nothing of the sort. The very first letter i sent to congress in early january indicated that june, early june was the time that we were concerned about our balance not being sufficient. Based on what . Our forecast of spending and revenues. We could see early june was a matter of concern. We waited until our tax revenues came in after the april 18th that was fluid. You had california, 50 one counties exempt from getting a timeline, tax revenues in. We wrote you two letters to explain what your metrics were you used to determine the country was going to run out of money. On june 2nd, the day after congress raised the debt ceiling, the treasury declined to 23 billion which may sound like a lot of money but it is you never responded insufficient never responded to two letters to give us the metrics of how you gave those dates out. Im running out of time. Let me cover one other subject. I am reclaiming my time. You have mentioned several times the sanctions this administration is putting on russia. Was enabling the nordstream pipeline a sanction this had been a station put on russia or did it enable russia to get the revenues they are today . The administration has long been opposed to nordstream 2. They are the ones opened it up, donald trump discontinued it. Are you saying this administration did away with enabling the nordstream pipeline to be built . I believe the president made clear his opposition to the pipeline. Why did it get put in use under this administration . What is being built now. It is no longer germany is nothing has changed from the Trump Administration to the Biden Administration on enabling the nordstream pipeline to remain to be built . Miss yellen, i am out of time. If you would respond in writing i would appreciate it. Thank you so much. The gentleman yields, the gentleman from nevada is recognized for five minutes. Would you like to answer the final question so the record is clear on your position regarding the debt ceiling . Regarding the debt ceiling. Based on questioning from the previous colleague. My first letter to congress indicated that while we had confidence that we could pay the governments bills until early june highlighted that we were concerned after early june we waited this considerable uncertainty about what our resources will be months ahead. It was critical to see what incoming tax revenue was once we saw the we realized that early june was a more serious problem than we indicated. In several letters i highlighted june 1st that we felt our resources would expire in early june possibly as early as june first 2. An opportunity to clear the record. Close to june 1st. Thank you. To be clear, it was all because of the selfinflicted manufactured debt limit crisis but my republican colleague class which had democrats not deliver the votes in the house, would have caused a default causing our economy to spiral out of control across the us globally and affect millions of jobs. At the same time, we also have heard from my colleague who demanded more fiscal austerity and a balanced budget. Now, as if without a Second Thought for their vigorous push for the government to tighten its belt here we go again with another round of illadvised cuts to vital revenue. House republicans tax cut scam will cost the United States taxpayers upwards of 1. 1 trillion. I find that outrageous. Again, as they work towards deep cuts to essential programs like Social Security and medicare, there extreme idea of fiscal restraint is another tax giveaway for big corporations across the country, House Democrats and President Biden have fought hard to protect American Workers and lead the Clean Energy Transition into the 21st century and they are siding with wealthy factors in the fossil fuel industry. Folks in nevada deserve more investment in our people, and Clean Energy Economy and yet the recently introduced and misnamed tax cuts for working families act accomplished none of these priorities. That is why it should be called the republican tax scam 2. 0. Do you have any indication as to the consequences of the proposed 1. 1 trillion in tax revenue and how that would stem these proposed cuts. The ones that are under consideration, would benefit wealthy individuals and corporations into nothing for working families. Is it paid for . So that will add to the debt. It would to pay interest on the debt for tax cuts for the very wealthy while balancing the budget on the backs of working people that i represent. Additionally, can you discuss the macroeconomic cost with stripping away the recently passed tax incentive for Clean Energy Production and Clean Energy Vehicles with specific focus on the harm for domestic manufacturing in the Green Technology segment. We have seen a renaissance in manufacturing in the United States as a consequence of the Inflation Reduction Act, theres tremendous investment in Clean Energy Economy that is creating good jobs across the country, not just in the coast but part of the country that have seen a decline in manufacturing, jobs, and very harmful effect. All i will say in closing is the American People are watching, they are smart, they know the republicans are not for fiscal austerity, not when giving tax cuts to the wealthy. The gentleman asked time has expired. The secretary has graciously agreed to stay so secretary garcia and i may ask questions. Thank you for that. I now recognize myself for five minutes. I want to go back and cover the cs 3d relatively briefly. Youve been asked about the corporate sustainability directive coming out of europe where us businesses could be sued by the eu for doing business with highimpact Companies Like natural gas and that the big concern of mine as well as call. As you well know, it is essential for the production of steel. Particularly anthracite steel. If the eu were to pass Something Like this, their analysis on this affect stock prices and evaluations for the s p 500 and set a precedent europe can regulate the United States, the eu is in high demand for lng, i wonder in their role, are we doing an analysis . Are we taking this seriously related to the cs 3 date. The corporate sustainability due diligence. That the eu initiative. I indicated that we have concerns about it, that it can impact our firms and it would have unintended consequences. Doing 150 million here, the regulation would be mandated for the company as a whole. That is why we have concerns. Significant concerns i would hope. Are you doing a costbenefit analysis of this . That part of your to a costbenefit analysis, we have to express concerns to the eu. You kept updated on this, this is a serious issue, not sure if many businesses are aware of being regulated by the eu. It is not yet final legislation. It is draft. It is hard to know what the impact will be on eu firms but we advocate the interest on the eu. Does your department, the fed, the white house, you have conversations when you look at the economy and say the fed stimulus with spending, that took place, a slowdown of American Energy that had a lot to do with the spiking that attributes to inflation, rise of Interest Rates, doing awful things i want to talk about in service to our debt but a conversation, take a holistic view and have some progrowth initiatives. You certainly take a holistic view, many discussions of the outlook of what is appropriate, when President Biden was elected, the arp was passed the Unemployment Rate in the United States was exceptionally high. There was real risk. I dont mean to interrupt but we had covid and the deliberately shut down the government and it is the same Unemployment Rate we had in 2019 and theres close to 2 Million People not working. It is not working. You have all this inflation, debt as far as the eye can see. What is overly alarming is in 2021, the debt was 275 billion. In 2022, 185 billion, it is a staggering 660 billion. Next year it is likely to be higher than our defense. The Growth Strategy is to spend more, is that a Growth Strategy . The Growth Strategy does involve investing in america, President Biden is put in place proposals and legislation. That thank you. My time is expired. The gentlewoman from texas, miss garcia, is recognized. Thank you for joining us here. Your leadership in collaboration with President Biden the Treasury Department has excellent work promoting a strong and vibrant domestic economy assisting countries, i want to thank you for that. And followup on a couple questions before i get to one of my own. You consistently said that it is important the dollar remain strong. The currency of the world. I am troubled by the number of businesses even at airports and coffee shops that are beginning to not even take the dollar anymore. They dont take cash. A bigger reliance on credit cards. What does that do to the economy and the stature of the dollar. Cash is king and the dollar is the emperor or the king, what does that do and how are we doing with of the Interest Rates on credit cards and the transaction fee charges . We are using the dollar as a currency. It doesnt have to be physical currency. We won and efficient Payment System. Electronic payments are becoming faster and cheaper. We are still using the dollar even when we make payments using plastic. Credit card fees remain very high. It is important to foster innovation that will reduce the cost associated with making payments, the fed is bringing into operation a system called fed now that will make 24 7 realtime payments a reality in the United States and i hope that is the system that will promote cheaper, faster, safer payments. Where are we underdevelopment of a digital dollar . The white house is running a task force that includes Federal Reserve and other agencies to look at whether or not it is in the United States interests to develop the digital dollar, Central Bank Digital currency. It is a complex situation with benefits and costs. We continue that work and hopefully we will be able to consult with congress in recommending a way forward. I heard you say there were 3 trillion in cuts in the next decade and would be cuts in the deficit. And 28 months. So americans who are unemployed, the realities 13 million jobs created. The an employment rate in 50 years in this country. It needs to be brought down and thats the top priority and the drug market would be stronger. The supplychain issues by and large getting resolved and getting on track. Would you agree with that . Inflation has come down 5 . It is too high but has moved down considerably. I will submit another question or two in writing. I want to thank you for your leadership and your steadfast commitment, and ensuring not only the dollar is always king but cash is king. Gentle lady yields back. Would like to thank secretary yellen for your extended time. All members have 5 legislative days and submit additional written questions to be forwarded to the witness for the response. I ask you to please respond no later than july 14, 2023. The purposes of the second hearing will begin at 2 00 pm today following more votes. Whichever occurs earlier. This hearing is adjourned. [inaudible conversations] [inaudible conversations] order your copy of the one hundred 18 congressional directory now available, cspanshop. Org, your access to the federal government with bio and Contact Information for every house and Senate Member and Important Information on congressional committees, the president s cabinet, federal agencies and state governors. Scan the code at the right order your copy today or go to cspan. Org. 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