Transcripts For CSPAN3 Politics And Public Policy Today 20160325

Our foreign policy, security and economic priorities in ukraine, Central America, africa, asia and other regions. Treasurys International Programs are some of the most Cost Effective ways to reinforce Economic Growth at home and to respond to critical challenges abroad. Specifically, u. S. Leadership and International Financial institutions enables us to influence how and where ÷olk resources are deployed, often on a scale we cannot achieve through our bilateral programs alone. Its crucial we continue to have bipartisan support for these institutions to ensure our influence remains as strong today as its been over the past several decades. Treasury looks forward to continuing the dialogue with congress on the Important Role that the International Financial institutions play in the Global Economy. Especially as we implement the imf reform legislation and negotiate replenishments. Of several of the mdb windows that serve the worlds poorest countries. Thank you very much and i look forward to your questions. Thank you, mr. Secretary. Now recognize myself for five minutes for questioning. Mr. Secretary, one thing maybe we can agree on is that tens of millions of our fellow countrymen are unhappy. I think one of the reasons theyre unhappy is too often they see an administration that either makes up law, ignores law or lives above the law. They see a congress that they think is helpless or hapless in dealing with that. In that context, mr. Secretary, i think you know for almost three years this committee has been seeking documents regarding debt ceiling Contingency Planning. And information shared with the Justice Department regarding what some call too big to jail. As i think youre aware, almost one year ago, this Committee Subpoenaed documents from treasury. In that time, we have yet to receive the documents. You were ask about this last week in your appearance before the Appropriations Committee. You said, quote, lawyers are working through the document requests, unquote. Mr. Secretary, it has been almost three years for these requests. You also mentioned in your appearance before the Appropriations Committee that you will provide us with, quote unquote, appropriate material. But mr. Secretary with all due respect, article one of the constitution, theres Longstanding Supreme Court precedent that this branch of government has the oversight role. We get to deem what is appropriate for oversight and investigation with all due respect, sir. It is not you. It has everything to do with checks and balances and separation of powers. Thus my first question, as the custodian of records, do you understand our subpoena of may 11th, 2015, imposes a legal obligation on you personally to ensure that the requested records are produced . Mr. Chairman, we recognize the important oversight rule that Congress Plays. We take seriously the responsibility mr. Secretary, the question is, do you understand a personal legal obligation . Is that your understanding . Mr. Chairman, treasury has taken steps to respond to each and every one ill ask you again, mr. Secretary. Do you understand you have a personal legal obligation . If you dont, then i would commend for your study, 2 usc. 192 through 194. And 18 usc 1505. So ill ask you for the last time. Do you understand that you have a personal legal obligation to ensure these requested records are produced . Mr. Chairman, treasurys approach to the committees inquiries have followed the long standing policy set forth by reagan in 1984. Mr. Secretary, youve had three times to answer the question. Ill move on. Has anyone directed you not to comply with this committees subpoena of may 11th, 2015 . Mr. Chairman, just the other day, we responded in detail to the inquiry from this committee my question, mr. Secretary, is has anyone directed you not to comply with this Committee Subpoena of may 11th, 2015 . Its a simple yes or no answer. The letter we sent to the committee indicates, we have been reaching out to the committee, responding third time, mr. Secretary, has anyone directed you not to comply with this committees subpoena of may 11th, 2015 . Mr. Chairman, we have been trying to work with the committee to provide im trying to get you to answer a simple yes or no question. No wonder the American People get outraged. Simple yes or no question. Have you been directed not to comply with the subpoena, yes or no, please, sir . Mr. Chairman, we have been trying to respond to the subpoena. Thats the point im trying to make. Well, for the third time, you didnt answer that question. Next question then. Have you directed anyone at the Treasury Department to withhold documents from this committee . Pursuant to the committees subpoena of may 11th, 2015 . Mr. Chairman, if you would just give me a moment to answer your question. We have been if youll answer the question, mr. Secretary, ill give you a moment for context but we need to start off with a yes or no. Mr. Chairman, with all due respect, these are not yes or no questions. If you want an answer, im happy to give i dont know how much more simple it could be. Have you directed anyone at the Treasury Department to withhold documents from this Committee Pursuant to the Committee Subpoena of may 11th, 2015 . If youll give me a yes or no, mr. Secretary, ill give you a moment for context. At my direction, the Department Staff has been reaching out to the committee. Trying to seek an accommodation. The committee has not followed up with any meetings to try and work through that. Its been three years on some of these document requests. In many cases, we dont even know what the committee is looking for. If i need to provide you with another copy of the subpoena, i would be glad to do it. Are you at least certifying then are you prepared to certify in writing youre in compliance . Because so far, youve failed to do so. You cant tell me youre trying to comply and then not certify youre in compliance. Respectfully, what we suggested, the attorneys should sit down and talk with each other, go through the details. I was being diplomatic at the Appropriations Committee the other day. This committee has not responded to our offers to meet at the attorney level. So weve been trying to be responsive. Mr. Secretary, what do you think would happen to an ordinary citizen, a school teacher, a factory worker, if they decide to if they refuse to comply with the legal subpoena . What to you think would happen to them . Weve been working to comply with the committees request. Mr. Secretary, with all due respect that just doesnt have credibility. It just doesnt have credibility. Ranking members recognized for five minutes. Thank you very much for being here, mr. Chairman. The chairman just talked about the american citizens distrust with government and how angry they are with government. Mr. Secretary, i believe that if theres anger and distrust, its because of the way we conduct ourselves here. And when the secretary of the treasury is battered and disrespected, then i think the American People sees that more as the congress of the United States not being able to work with each other, more than some socalled demand for response to pages that have been sent or questions that have been sent or depositions. As i understand it, weve received over 3,000 pages from the treasury since may 11th, 2015. And as i understand it, there were four more depositions that were issued yesterday. And i want you to know, mr. Secretary, that were not consulted at all by the opposite side of the aisle on these depositions. We dont have the kind of cooperation here in this committee that would lend itself to seeking information from you or any of the other secretaries. This has become a game of gotcha. This has become a game of were going to overwhelm you with subpoenas and questions so that we will be able to say you have not responded. I am hopeful the important issues of the treasury are being worked with every day. We are in a situation where yes our economy is performing and since 2008, we certainly have made advances, but we are concerned about the volatility of the markets and we want you to concentrate on the real issues. I would hope that your office would not be tied down trying to respond to unreasonable request from this committee. I dont think and i dont believe theyre legitimate and i apologize for the way youve been treated here this morning, not being able to answer a question, being interrupted, not accepting that youre willing to have an explanation, and so it should not work that way. And i want to get on with dealing with the real issues that youre confronted with. Since initiating free market reforms in 1978, china has been one of the worlds Fastest Growing economies. Averaging 9. 7 in real domestic product growth. Annually from 1979 to 2015, lifting 600 Million People out of extreme poverty. Chinas economy has slowed. Its real gdp growth was 7. 3 in 2014 and 6. 9 in 2015. And its projected by the imf to fall to 6. 0 by 2017. What are the implications of a slowdown in china for the United States as well as the Global Economy more broadly . Thank you, congresswoman waters. Chinas economy is one of the the two largest economies in the world along with our own. It is not as integrated in the Global Economy in the way ours is in terms of Financial Systems, in terms of the interlocking relationships of those Financial Institutions. But it is a purchaser of vast amount of inputs from around the world. So theres understandably a lot of focus on chinas economy because it has a lot to do with what Global Growth will look like in the future, particularly an emerging economy as it provides so many inputs to china. Chinas in the middle of a reform process that is very important to china and its important to the Global Economy. As they move towards a more market oriented system, its going to be bumpier. Theyll be more volatility. Theyll have to learn how to tolerate some of those disruptions the way those of us more experienced with market economies do. But theyre going to have to stick to the reform path because if they dont if they dont open their market, if they dont make the changes, theyll be left with an overhang of overcapacity that will weight them down and make it so some of the doomsday scenarios would then become much more meaningful risk. I think china has a lot of tools. It has a lot of capacity. The question to me is not the question many have asked is china out of tools. They have 4 trillion of foreign reserves. They have enormous resources within their government to deal with policy. What they need to do is not back away from the reform program. Thank you, mr. Secretary. The chair now recognizes the chairman from michigan. Mr. Huizenga. Thank you, mr. Chairman. Im going to take a slightly different direction on my questioning. Not because i dont believe what the chairman has been saying is extremely important. Im concerned as well about responses of just even simple letters. Ive gotten two dated march 18. One dating back as of last year, like in may. So speed is not exactly been treasurys m. O. Here. But my question on the imf, and you address this a little bit in page three and four of your written testimony starting on page two. The greeks obviously have suffered eurozones highest unemployment rates, 25 , for the past five im sorry, four years. Youth unemployment near 50 . Instead of helping reduce greeks public debt to gdp ratio to 110 as planned, the fund has witnessed the debt to gdp ratio climbed to over 175 despite major restructuring of debt in 2012. Clearly imf involvement has done little to improve the lives of greek citizens in part because greeks leaders have been slow walking reforms for years. Last december, greek Prime Minister tsipras was unapologetic criticizing the funds unconstructive attitude on fiscal and Financial Issues and he indicated the imf should stay out of any future bailout. He and i agree on that one. You actually mention that at the direction of congress, your written testimony, United States champions reforms and the exceptional access lending framework to tighten requirements on debt sustainability. But then the u. S. Led the charge to go against these reforms with inserting new loopholes. Im just curious and confused as to why you would go a bipartisan congressional directive and go against that with the imf and if the greeks dont want the imfs medicine and if the medicine has been so ineffective anyway, why should we insist on giving more taxpayer dollars . Congressman, i think let me start with the reforms of the imf. Very quickly. Yes, please. The reforms removed the provisions that allowed Systemic Risk to cause an exception that would allow lending this issue you describe. The exceptional access remains very important. Its been the way weve seen assistance provided to many important countries. Why would we introduce more loopholes . The imf rules stipulate the country must possess the political and Institutional Capacity to ensure success of an exceptional access loan. Government must be competent, committed to the reforms. The Greek Defense and foreign ministers, im sure youre aware, threatened to flood europe with migrants including potential terrorists if the country didnt get what it wanted in bailout negotiations and the defense minister said, quote if europe leaves us in the crisis, we will flood it with migrants and it will even it will be even worse for berlin if in that wave of millions of economic migrants there will be some jihadists of the Islamic State too. If they, european creditors, strike us, we will strike them. We might have just seen that in brussels today, isnt that true . I think thats a conclusion that i have no basis to comment on and i think we shouldnt jump to statements like i hope not but when youve got the defense minister of greece threatening europe, our nato allies, how in the world can we allow them to even qualify for this . If i can respond to your questions please, quickly. Both on the financial and on the larger set of issues in europe. On the financial side there have been many important reforms enacted in greece over the last year. Im not going to disagree that the process was very bumpy and messy and the whole world was watching it. After an opening set of conversations that was not constructive, the government agrees to settle down and enact more reforms than anyone thought possible. This is principally a european challenge. It has been all along. Its been important to europe to have imf as a partner. So theyve settled down but earlier this year, not last year, this year, weve got the defense minister and others making outrageous comments sir which i still dont understand why you would lead the parade to try to include if i can keep separate the financial and the kind of geopolitical for a moment. Open the financial side, i think the imfs only going to remain involved if theres ability to do review. Which will be based on some debt forgiveness, restructuring, that would be required. If its sustainable, then its consistent with the imf rules. If they do that, that will keep a european commitment together. Why is that important to us . I think at a time of geopolitical instability, it would not be a good thing for europe or for the United States if we were to see real tensions of europe breaking apart again. We see that already. I think this is why im going to be introducing a bill today to try to tighten those loopholes. I would suggest that treasury not go against congress again in a bipartisan manner. You need to work with us in this oversight. So thank you, mr. Chairman. Time of the gentleman has expired. Miss moore, Ranking Member, the Monetary Policy and trade subcommittee. Thank you very much, mr. Chairman. Mr. Secretary, you have indicated that our economy is growing very slowly, at 2 . And of course our colleagues here are fond of reminding us that were 19 trillion in debt of course. We just in the last budget negotiations did another 700 billion in unpaid for tax cuts. Some good, some tax extenders that were not so good. Anyway, theyre all unpaid for. On top of the wars we didnt pay for. And so were now over the next couple of decades 2 trillion more in debt from this policy. I guess what my question is, is i also sit on the budget committee. And the solution to this is sort of more austerity. Lets, you know, lets block medicaid, lets voucherize medicare, lets cut the social services bloc grant. Lets, you know, take the entitlement status away from pell grants and food stamps. And i guess as the secretary of the treasury, i guess im wondering if you think austerity is the solution to our deficit problem. Congresswoman, i think we have to make sure our economy is growing. Part of that means we need a fiscal policy that keeps it going. We also have to take a longterm view and have a sustainable fiscal outlook. If you look at where we started in 2009, there was an economy that was crashing. There was a debt that was skyrocketing and a debt that was out of control growing to over 1 trillion. We brought it under control. Its not down to zero. The deficit is not down to zero. But weve reduced it by three quarters to 2. 5 of gdp. I think if you look at this next tenyear period, we maintain stability and its a foundation to then look at the challenges of how do you deal with the 20, 30, 40 year challenges. In these next ten years, i think the United States, like the rest of the world, has to focus on the reality that theres insufficient demand in the world. The United States is doing a little better than most of the rest of the world. But you cant grow the Global Economy by just cutting spending everywhere. Were seeing that that hasnt worked in other places. In the United States right now, we have great news, great needs. Infrastructure, enormous need in this country. We need to have a soundim in the future. Omy we need it because it puts people to work and good jobs. This is the time to do it. When we have the ability to finance it at very low cost. So i think that the question of what we do in the medium and long term, the short term are not the same. I was also the director for three years in the 1990s and i produced surpluses in three years. So i, more than anyone else, understand the value of fiscal discipline. But i also understand you cant do it without a growing economy. Last year, the actions you described in total helped grow the u. S. Economy by roughly half a percent. With the headwinds coming from internationally slow growth, im glad we have that extra energy in the u. S. Economy. Thank you so much. So i mean just to be clear, you think our longterm challenges with Social Security, medicare, medicaid. I mean, 70 of our economy is spending. So if you take money away from people, is it possible to grow the economy without folk having money in their hands . The challenge in the long term has always been having the right balance of revenues spending to deal with structural issues. I think that if you look at what weve done in the last seven years, weve bent the cost curve on health care. Some people dont like the Affordable Care act. Nobody can deny its kept costs from going up. That has an enormous impact on the federal budget. Weve taken tremendous strides to reduce spending. I think too much so on the discretionary side. I got 30 seconds. Do people need to have money . Do you agree that our economy depends on people having money to spend . Like raising the minimum wage . Like not cutting i think if you look at the power of the u. S. Economy, its driven by consumer demand and that consumer demand is important at all levels of the income spectrum. People who work full time ought to be able to be above the poverty line. Which is why i think we need to raise the minimum wage. We know that money will be spent. Thank you so much. I yield back my two seconds. Gentle lady yields back. The chair now recognizes the gentleman from new jersey, mr. Garrett. Chairman thank you, mr. Chairman. After listening to the secretarys responses to your questions or nonresponses, mr. Chairman, i think anyone viewing todays hearing would say, mr. Secretary, that you are the epitome of what is wrong with washington today. The disdain you have for the American People. The failure of yours to answer the simplest of question is what is wrong with washington and why the public has the view of the bureaucracy and the bureaucrats such as yourself here today. You know, questions we put to you are basic ones and simple ones. Asking sometimes for long answers and sometimes for simple short answers. I got a new phone the other day. Im just curious question, do you use a cell phone, iphone or anything like that, do you carry that with you . I carry it but i hardly use it. Theres almost a simple answer. So in your communications with people, whether on your phone, iphone, emails, letters, phone calls or other things, the chairman asked you a simple question. Has anyone from the administration ever directed you to not comply with the subpoenas . So its a simple question of whether through any of these communication devices you have, one way, shape or another, has anyone directed you to do that . Thats a yes or no. I answered the question no, you didnt. We have been working to comply excuse me, excuse me, the question was not whether youre working to comply. That was your answer. The question was, has anyone communicated this to you . Has anyone communicated that to you, mr. Secretary . Yes or no . Congressman, you know, you can make this seem like a yes or no question. Im not aware of any communications telling me what to do on anything im doing here today. There you go. Im giving you an answer thats the what were doing thank you, mr. Secretary i would think you would want to know what were doing. The answer is no then. Mr. Chairman, i think that was the answer youve been trying to get. Ive been trying to get answers from you as well for a long period of time. Nine months ago, i contacted well, both in committee and through letter, asking you to respond to some of the concerns i have regarding the implications of Something Else. The isda protocols on bank indecesolvencies. What they would have on nonbank institutions. So my simple question now, since i havent heard back, will you assure us if any proposals come up, you oppose any plans that would require u. S. Companies to basically give up, waive their protections to u. S. Law and sovereignty . Congressman, im going to need you to give me a little more detail what youre asking me about if you want me to answer that question. I guess since my time is limited im happy to respond. Im happy to respond. Im just not sure what youre asking. We directed that back to you nine months ago. If youre happy to respond, we would ask you to respond to that back then. As far as trying to get information from you is one thing. To you is another. Heres the 10 bill. Theres a whole discussion going on who should be on the 10 bill. Youre familiar with that. Yes, i am. You solicited the american publics opinion quite a bit. We got a lot of comments. Thats great. How come then, when youre dealing with International Bodies, you do not solicit for Public Opinion in the stakeholders in the same manner when you get into negotiations . Regarding financial standards and International Bodies. Will you commit well we do will you commit to will you commit Going Forward to do ask for input just like you did on the change of the 10 bill, as you would on dealing with International Bodies . We do reach out to stakeholders as we do our work domestically and internationally. We will continue to do so. Thats great. Thats good to hear. Will you engage in a formal notice and Comment Period as well . Im not going to comment on notice and comment on International Proceedings. Why not . Because im not aware of any appropriate notice and comment process for International Proceedings so could you do you have the authority, the power, to establish formal notice and Comment Periods . Look, i think that we have a lot of mechanisms for consulting with both public and private sector stakeholders would you commit to doing this one more i dont think notice and comment is the answer to everything. Were not doing notice and comment on the 10 bill either. This is a little bit more important you asked me would we do the same thing. Would you commit to doing formal notice and Comment Period i dont think notice and comment is the answer to everything. Its the i understand it may not be for everything. But on this area, im simply asking you would you commit to doing so . Congressman, the work thats done in the the answer is no. Doesnt make u. S. Policy. When we make u. S. Policy and rules so when you do go through notice and comments when you solicit input, because you said you solicit input, its you solicit input from who you want to hear from as opposed to all americans who want a formal process. I dare say when we solicit input, we get input from many who do not share my view. Not just show who share my view. I yield back. Miss maloney, Ranking Member of our Capital Market subcommittee. Welcome secretary lew. O. 2j i know that this hearing is about International Finance. But id first like to ask about puerto rico as it has a very pressing economic issue going, facing the country and it impacts on ours. Its in a severe financial crisis which could really explode into a humanitarian crisis. And we know that it now has roughly 72 billion in debt outstanding. Additional 43 billion in unfunded pension obligations. And to make matters worse, puerto rico does not have access to chapter 9 bankruptcy or to any restructuring process that would allow it to renegotiate its debt and creditors, its obligations. Now, ive been told that treasury is working with the Natural Resources committee on crafting legislation to address this financial crisis. But as you know, theres a Supreme Court case taking place right now. Literally theyre hearing right now, literally theyre hearing the arguments, in court today. And that case addresses where the puerto rico is prohibited by section 903 of the Bankruptcy Code from enacting its own statelevel municipal process and regime. Other states are also prohibited from enacting their own municipal Bankruptcy Codes. But they have access to, to chapter 9. They have access to bankruptcy. Puerto rico does not have access to chapter 9. So its unclear to me as why we subject them to the same prohibition on enacting their own municipal Bankruptcy Code. So one idea that i feel is worth pursuing and considering is simply carving puerto rico out from the section 903 bans on states enacting their own municipal Bankruptcy Codes. That way we could, congress could authorize puerto rico to enact its own restructuring regime for all of its municipalities. And this has precedent in that the Supreme Court upheld new jerseys statelevel municipal bankruptcy in 1942. It was congress that enacted legislation prohibiting states in the future from doing so. But we could likewise enact legislation allowing or carving out the ability of puerto rico to so, to act, but my question really concerns the impact that the economy and puerto rico and the restructuring would have on our very important Municipal Bond market that finances so much of the improvements in our urban areas. And a lot of critics are arguing that allowing puerto rico to restructure their debt would have a terrible, terrible consequence in the muni bond market here in america. That it would drive up borrowing costs for other states as well. Even though theyre not affected by puerto ricos restructuring. Liked to know what your response is to these arguments. And also, do you think a territorial bankruptcy regime for puerto rico would harm the broader Municipal Bond market that is so successful in america. Congresswoman maloney, theres an immediate crisis puerto rico, its not a future crisis. For all practical purposes theyre in default because theyre not paying some of their bond issues and they have big payments due in may and july and we dont see a path for them to be able to make those payments. The need for action is immediate. I dont believe that its going to solve the problem. If theres restructuring of just a small piece of puerto ricos debt. A restructuring is going to have to be inclusive of all of puerto ricos debt in order to address the crisis that they have. I think that the work thats being done, having seen the work product of the Natural Resources committee. Is very important and very timesensitive. What we think needs to be in it, we think there needs to be an Oversight Authority that is the gatekeeper. We think there needs to be the ability to restructure all of puerto ricos debt. Because even some of their general obligation debt has to be at a minimum rescheduled in order for there to be a solution. And we dont think its a one size fits all approach. In terms of the impact on the other Municipal Bonds. You know, three of the leading bond analysts have put out studies that contradict the notion that its going to have spillover effects on other Municipal Bond markets. In fact what we know about the Municipal Bond market is that each issue is looked upon independently based on the risk and the quality of the credit. And i believe that the worst thing for the Municipal Bond market would be a disorderly unwinding in puerto rico, which is what will happen if congress doesnt act. The time of the gentlelady has expired. The chair now recognizes the gentleman from wisconsin, mr. Duffy, chairman of the oversight and investigation subcommittee. Thank you, mr. Chairman, welcome, mr. Lew. Right over here. I cant see you. I want to revisit a few of the questions that were asked by the chairman. Again, you understand that you have a legal obligation to provide the documents requested and subpoenaed by this committee, to this committee, is that correct . Congressman, i answered that question already. We are working to respond and i will clarify one thing i said before. I said we did not get any response to our offer to meet. After we received subpoenas last night there would have been a response that invited a meeting. I dont mean to be offensive. Are you having any trouble hearing today . Im hearing you just fine. Lets try this one more time. Do you understand you have a legal obligation to provide documents as as i said weve been responsive and we continue to work to be responsive. Youre not answering my question. Is anyone directing you not to comply to our subpoena . I responded to that question already. Whats the answer, tell me one more time. Im night knot aware of any instructions im saying today. Youre talking to the secretary of the treasury. Im giving you have you directed anyone at treasury not to comply with our document request. Im sorry, i couldnt hear you. Have you directed anyone at treasury not to comply to our document request . No, quite the contrary, at my direction, our staff has reached out told to comply with us seeking to have the conversations that would enable us to reach accommodation. Youve told your staff to comply with the document requests . The practice yes . Ive told them to reach an accommodation with the committee. Which requires give and take. We have a subpoena thats almost a year old. The document requests, when we try to do it nicely with you, goes back two and a half years. And you have failed to comply with those document requests. I think anyone sitting in this room listens to the responses you gave the chairman, you gave mr. Garrett and you give me, youre not compliant. We asked very simple questions and you say im not going to answer your question. But you come and say listen will the gentleman yield . I will not. You come in and say im trying to work with you, im trying to answer your questions and be compliant. When you dont even answer simple questions, that this committee poses to you. You indicated i think in your can i ask you a question, did you read the letter that we sent you last week . Yesterday . I want to talk about what you sent me yesterday. Are you aware you sent me march 18th we sent you a letter. You sent me a document dump last night, yesterday. Are you aware of that . Weve been providing documents on a regular basis. Okay. So you provided 1,035 pages, correct . I didnt count the pages, congressman. Does that sound about right . We sent a lot of pages. Youre trying to comply with our subpoena. We sent thousands of pages. In the 1,000 pages sent to our committee this week, you can look up at the board, 664 of those pages were news clippings, letters to members of congress, crs reports, hearing transcripts and Public Information. Another 223 pages was privatesector research from finch, barclays, merrill lynch. Another 109 pages was from the bipartisan policy center. And then 39 pages was a memo on the 1985 debt limit impasse. This isnt the documents that we requested. This is Public Information youre just throwing our way to try to say listen, weve sent you thousands of pages, though its thousands of pages of noncompliant material. One of the emails that you sent us, i think is consistent with all of your compliance and your testimony today. At the very top youll notice it says spam. Youre sending spam emails from treasury in trying to tell this committee that youre complying, let me ask you this, weve asked you to provide employees of treasury, anwall, randall duvalk. Patrick, pinchman. And youve refused to allow them to come and be interviewed by this committee, is that correct . Congressman, weve tried in repeated communications with this committee to arrange meetings to reach accommodations to be able to provide information. And when we got a response last night last night after the better part of a year. We asked for documents and as those who oversee, you should comply or you should assert a privilege. The process of responding to these requests, is well established. It involves give and take it involves give and take. Are you asserting a privilege . Excuse me . Are you asserting a privilege in why you havent complied with our document request. We have not yet had the conversations we should have between counsel. Hopefully that will begin immediately. And well be able look at the answers you gave us today. Does anyone here believe that youre going to actually comply with our requests that are two and a half years old . That you cant even acknowledge that you understand that you have the legal obligation to provide these documents . Mr. Chairman mr. Chairman you are the time of the gentleman has unanimous request. Gentlelady will restate her request. Unanimous request for a recess. Object. Chair now recognizes the gentleman from texas, mr. Hinojosa for five minutes. Thank you, chairman and Ranking Member waters for holding this hearing on the annual state of the International Finance system. Welcome secretary lew, im pleased that you are testifying today. Because this hearing gives us on this committee the opportunity to discuss the net bank in san antonio, texas. The net bank was created in 1994, as part of nafta, to alleviate the Environmental Concerns and economic problems that would be created by the movement of commerce and people to the u. S. mexico border region. Since its creation over 20 years ago, the bank has made a tremendous improvement to some of the most impoverished communities in both nations, including towns and colonials in my Congressional District and along the u. S. mexico border from brownsville to el paso and all the way to california mexico border. The banks investments have brought lifesaving potable Drinking Water to millions of people, many of whom faced healththreatening conditions due to unsafe sources of Drinking Waters. So that that leads me to the first question. January 2015 during the highlevel economic dialogue, president obama and mexican president pena neato, agreed to double the banks current capital from 3 billion to 6 billion, split evenly between the two nations. Can you tell us why the bank is seeking to double its capital . Congressman, the administration is looking for this Capital Increase because it will allow the United States to continue supporting these kinds of Infrastructure Projects on our border that are so important. It deepens our relationship with mexico, it addresses environmental issues, that are crossborder issues and it is an important aspect of our Economic Life to have those issues addressed and only we in mexico are the parties of interest. Which is why the nat bank and the u. S. Mexico relationship is so different. In june of 2015, moodys rated the net bank as aa 1, reflecting the banks strong capitalization and liquidity position, as well as noting the support of the Bank Receives from both the United States and mexico. Moodys rated the banks outlook as stable. So do you expect the bank will maintain that Strong Financial position moving forward . Congressman, the rating agencies have changed their methodologists in a way that for idiosyncratic reasons could have an adverse impact on nat bank. Theyre looking at whether its concentrated activity. When youre talking about two countries, only two countries being involved in all the activity on one border, it, by its basic nature is concentrated activities. Most the International Financial institutions are diversified. I think importantly there are no nonperforming loans. So if you look at the core quality of the credit, its very strong. I dont know what the rating agencies will do. I like that response on how strong it is. Since 2010, the banks lending portfolio and debt issuances have grown significantly. Has the increased lending portfolio had a negative impact on the banks financial position . As i said, there are no nonperforming loans. So i think the bank remains in a Strong Financial position. What steps has the bank taken to ensure that its debt issuances do not become an oversized liability for the bank . I think the key is for there to be careful review of projects, to make sure that each project thats funded can sustain the debt thats going to it. Given the amount of work that needs to be done on the u. S. mexico border. There are a lot of good projects before get to anything that would be questionable. I agree with you there are a lot of good projects on both sides. In 2011, i introduced hr2216, entitled the north American Development Bank Enhancement act. A bill to allow the bank to expand its mandate beyond the environmental Infrastructure Projects. Would the treasury support efforts to expand the banks mandate this year, 2016 . Congressman, im not familiar with the expansion proposal. Im happy to look at it. I think that the definition, as it is, permits some expandability. Because transportation for example is part of it reducing omissions, so things like transportation, water, sanitation, renewables are all part of it. But id be happy to look at the proposal. I yield back. The chair now recognizes the gentleman from missouri, mr. Luetkemeyer, chairman of our housing and insurance subcommittee. Thank you, mr. Chairman. Mr. Lew, ive got a couple of questions on a different subject here, that. With regard to specific designations you testified last week before the Appropriations Committee with regard to arbitrary thresholds for specific designations. Kind of like to get a clarification. Do you believe, your response was that you oppose raising the bank threshold to specific designations to 500 billion . I couldnt hear the last thing you said. Last week at the house Appropriations Committee, you, your response to arbitrary threshold, asset thresholds was that you oppose raising the Bank Specific threshold to 500 billion, is that correct . I commented on that issue. Last year there was a proposal to go to 500 billion. 500 billion is a very large Financial Institution. n the number is now 50. Theres been a lot of debate, should it go from 50, to 100. The what i said is theres a big difference between 100 and 500. I guess the question becomes assets is one thing. I think we need to be looking at this based on the risk and asset makeup and liability makeup of each one of these institutions, would you agree to Something Like that . I think there are a lot of different criteria, aside from size, that raise questions of risk. I think that size is an important criteria. The larger the institution, the more likely it is to be systemic. With regards to nonBank Specifics. Weve had two companies that sold off major books of business, an effort to escape the designation. And yet they have not been dedesignated. Dont you think it would be helpful to have an offramp of some sort to be able to do that so that these businesses know how and what they need to do to get dedesignated. First, congressman, i dont think that the reason that those decisions are made are to get dedesignation. I talked to the ceo of one of those firms who said expressly, it was not. It was a business decision for reasons of sticking to the core business of a technology and manufacturing company. There is a process for dedesignation. Theres an annual review. And if a company sheds risk and comes in for review on an annual basis, thats the way to get dedesignated. We look forward to seeing applications that reflect that kind of, of change. Okay. With regards to another issue, insurance, International Insurance legislation. Were working on my committee to put some guardrails with regard to the conversation takes place at the iais, to uphold and advocate for our system of regulation. Do you have any objections for that on mission to make sure we protect the Insurance Industry in this country . Can you clarify which proposal youre talking about . We havent dropped the bill yet. Were working on a bill to try to put guardrails on the discussion so those im not sure which discussions with the iais. On what subject . Capital standards. For insurance. All other insurance supervision. We have been working i assume youre talking about insurance. Right. Weve been working to negotiate an agreement to make sure we dont end up in a place where other countries can set standards that would require you support what were doing, i would take it . I think the right thing to do is complete the covered agreement to have prudential issues addressed and not get into a situation where theres conflicting capital kinds of standards. Any action in this area should be action we take in the United States. Well i think were putting the cart before the horse, i think we need to make sure we have the ability to protect our folks first before we engage in any sort of agreements, period. But appreciate the comments. With regards to paying our nations bills. The new york fed serves as the treasurys fiscal agent, is that correct . Correct. Did you know that in since 2011, the fed has conducted socalled tabletop debt ceiling exercises that contemplated prioritizing payment on principal and interest on debt . Yes. When did you learn that . I dont recall. Did the treasury direct the new york fed to conduct these tabletop exercises . Congressman, during the period when we were at risk of going into default, there was a lot of analysis being done of what mechanically would work. My understanding of these exercises is that they were checking to see if the pipes would work. Youre aware of that then. The problem then is two separate occasions, october 10th, 2013 and may 7, 2014, you appeared before the senate and the house, indicated something contrary to that. I didnt. What i said at the time and what i believe now is weve never gone into a world where congress has failed to extend the debt. Weve never been in a world where theres been a question on whether you you fail to acknowledge. These exercises were going on. I know what i said. What we have learned since then is that the Technical Capability is there. We dont know if it works. Its never been tried. I dont want to be the one who finds out and i hope nobody here wants to find out. I yield back. The chair now recognizes the gentleman from georgia, mr. Scott. Thank you very much, over here, mr. , secretary lew. Before i get to that, are you aware that there have been documented 73, i think its 73 individuals working at americas airports with ties to isis. Congressman, i know there has been work done to identify risks in the area. Let me suggest this. Cox media did a story and they have Media Outlets and newspapers and radio stations all across this country. I would lining to ask if you might contact them and get their full report on that report. Cox media is the local affiliate in atlanta, georgia. We did an interview on that. We have to look at the other end of it. There is the money launders and that going, but the demand for it. Such a thing as this, this particular incident, too many of our airports have these private contractors that come in and help to subsidize the airports of the workforce of the this happened abroad not too long ago where baggage handlers put the bomb right on the plane. Im sure you are familiar with that. The reason im saying that is this evil, this terrorism has no greater target in mind than our nations airports. Our greatest tragedies has been because of that. We have to let the American People know our airports are safe. If your staff would and my staff can assist as well, its important for to you have that report, moment and security, i think. Im happy to look at it. They work vigilantly. My point is that its not you have the money here. Im not talking about that. Im talking about we are failing in our efforts. I passed a bill called Financing International hezbollah act. Are you familiar with it . Yes. We directed the president to direct and to identify, to investigate and use the fbi and all of our brilliant cia powers to identify source are of funding that drummy companies trail on it. With that in mind, let me ask you your application of the law and your report on how isis and other organizations are getting the funding. I have less than a minute. I will do my best. We have an extensive operation. We support u. S. Operations and friends around the world when they are trying to track down ties. We are drilling into every lead we get and work with the Intelligence Community on leads. We have the ability when we get identification of individuals who need to be tracked. It all flows from the intelligence that we get. We are working on hezbollah to identify additional targets. Isil, its a slightly different case because its an International Financing system. Im happy if i can get another minute. Then i want to ask you this. The iran agreement makes available to iran a huge cash load of 100 billion. They are the number one sponsor of terrorism and particularly the hezbollah. These questions about isil financing and iran are very important. Please give a brief answer. The structure has changed and it started out that they seized territory and took the money out of vaults. That is not going to sustain them. They have too much territory and needs and we have been effective in hitting the vaults. They try to use local resources like oil and they extort money from the people who live there. We worked with the government to shut down banks and limit money exchanges. We stopped paying people and we use operations to blow up. Has it been successful . No. Its hard to be 100 , but some areas they had to cut in half. We know its working and we have more work to do. We work every day to find every lead we can. I can take 30 seconds. Im happy to. Please go ahead. The notion of the amount of money going to iran has been overstated in a lot of places. It looks like 100 million. They have limitations and cumbrances on the money. They have hundreds of billions of dollars in needs and we will continue to take action with terrorism and Human Rights Violations. We will do our best to make sure. My point is, is there any mechanism in place to make sure none of that goes into the hands of groups of hezbollah . We have ongoing sanctions in the airs and we work on designating and endorsing the sanctions. Thank you mr. Chairman. I apologize for goingover. They were interests on both sides. We recognize the gentlemen from texas or Financial Institution subcommittee. Im interested in a lot of questioning that you initiated and i would like to see if you can support the answers. The gentlemen would yield to the chairman. Lets go back to document production. You stated that you feel you believed you have been reasonable in the process and i accept that. I hope you understand there is a level of frustration for document requests that have been pending and in some cases two to three years and the subpoena which is almost oneyearold. We had over a dozen questions for the record that were produced from last junes hearing that we have yet to receive any information from your department. You saw the chart that was placed by chairman duffy on the monitors that showed that basically when we requested documents, most of what we received for news clips and speeches, there is a level of frustration here. A question that chairman duffy asked which i do not believe you answered and if you did, forgive me. I wish to know i am unaware that treasury has asserted any executive privilege with respect to any of the documents that have been subpoenaed. I am unaware that treasury invoked executive privilege. Are you aware that it has been asserted and if so, do you have a list of the documents . Congressman, we have tried to reach out to have conversations to clarify what is requested to seek the combination to work in the spirit of president reagans direction on how to deal with congressional oversight, we wrote in december and wrote in january and wrote again last week. It was only after four additional subpoenas were delivered that we got a call back. I will accept what you are saying, but you are not answering it is question. Are you aware that executive privilege hare asserted . Im unaware. You know as well as i do thats the end of the process and not the beginning. When you say the end of the process, its a process going on for almost three years. The accommodation requires those that have not begun. We initiated and seen nothing. Mr. Secretary, i assure you that a subpoena would not have been issued had we not had to wait years. In december we offered that. Its a matter of days to weeks. This has been going on for months and years. Maybe we can get to a deteriorate place where we can find a path to accommodation which is always our goal. You testified before our committee on may seventh, 2014 that the Administration Never made a decision to prioritize debt payments. Do you agree and testify to that . I agree. Pull up chart number six, please. You were well aware we were in possession of a number of documents that came from your fiscal agent, the new york fed of various email communications amongst and by Federal Reserve officials. This one dated september 17th states treasury is adamant they will make payments not considering possibility and missing debt payments. Number seven, please. They will make payments on the debt where prioritization was not specified. Chart eight . This one is dated september 23rd. As you may have heard about the planning around prioritizing payments enrolling maturities, they will make all payments this time around. This were aware of these table top exercises, correct . The table top exercises were not in purr suns of the decision made. They were exploring how to answer the question that you asked me. Is it technically possible. Have you seen these document says . If i can respond to your question because the real point here is we should never be in a position where we have to make decisions about what to do. If you can default on Social Security or medicare, you are still in default. The president can make a decision. Mr. Secretary, i agree with that, but i think you know half the times that the congress and the modern era voted, it included some type of spending restraint to take us off the path to bankruptcy as well. Chart number two, memo dealing with Federal Reserve governor how to interest and comments to he understands why treasury wants to maximize pressure on congress by limiting communications about Contingency Planning. Mr. Secretary, would you direct somebody to maximize pressure by limiting communications . What i said is we would look at what is possible. We dont know if it works. We believe that it would be a grave mistake to ever default and that was my view then and it will be in the future. Its interesting evidence any what the motivation is. Time has expired. We recognize the gentlemen from new jersey. Thank you, mr. Chair and mr. Secretary for your appearance today. We must not forget that this administration brought us back from the brink of an economic collapse in 2008. That was not brought on by this administration. The government was on the brink of collapse. They wouldnt get that and recognize the good. How would you assess the effectiveness or Financial Task force in identifying key terrorism and issuing universal recommendations for addressing them . They establish norms and practices that if followed around the world would create the ability to do what we do in the United States more broadly. Candidly, we are far ahead of many other countries in terms of having the capacity to take the authorities and implement them effectively. One of the things we have to do and the imf has a big to play is to provide the Technical Assistance to make sure we build up the capability so the countries that want to be cooperative have the tools they need. For the first time in the history of the Council Finance minsters met and i chaired the meeting a that exposed them to have an intermediary role. He is following up to build the capability. I dont want to exaggerate. We are ahead of the most so 50 kalted colleagues and we offer a lot of assistance when they need to be followed up. Thats the need for expansion of fact. They offer assistance after the bombings and we share information in between when its appropriate. Thank you so much and at this time i would like to yield the balance of my tame to the ranking number. I would like to share your entire to work with us in a reasonable march. The range of request has been providing thousands of pages of material and as it is noted, they provided material just this week. In december and january, we invited the staff to discuss whatever information they need. On the debt limit alone, we provided over 3800 pages of documents. Over the last three months, we tried to reach out to the committee to find out what materials would be useful. We identified materials on our. I have a great deal of help for the surchgz that Congress Plays and its appropriate to play. We seek to find accommodation to provide information and would only ask for those conversations that are injury to go through the process to proceed. Have you received a response when you reached out to attempted to come and have the discussions around the areas . Only yesterday evening, but that was after they received subpoenas for interviews. We didnt have conversations that would help us. I think what i heard today, you are offering. We remain available and sanction. You and the staff some. Thats how it has been worked out. You can speak directly to the chairman and reinforce your entire to be responsive and talk and have the discussions. That would be helpful and perhaps there is a misunderstanding about the efforts made to accommodate the many, many requests and tall of that and again maybe a conversation can help. The time has expired and the chairman recognizes the gentlemen from south carolina. I continue to be amazed at what i perceive assing to create a crisis. We established in your previous visits that your comments not with stand iing it did and does exist. Im giving you the benefit of that doubt. You might as well let me do this. Yous on several occasions no decision has been made to prioritize. They will make the payments. Treasury continues to be adamant they will make payments on the debt. Next slide. As you may have heard, unlike the planning. They will make all the payments. Even though they have the reserve banks, they will make all the payments. Two weeks later, you said no decisions had been made to prioritize. In may you testified to the same thing and stressed that no decision regarding what to do was made during the recent impasses. I will heave it to that statement. I want to focus on the next piece of this puzzle. Im trying not to. When somebody questions this its not what i want to talk about. You mischaracterized what i wanted to say. If fairness the gentle lady will state that. The clerk will stop the clock. Thank you. The committee is not exercising proper decor um. If i may, when it is implied, it should not be left saying i have accused you of not being truthful. I want to move on. If we are to to comply, that will be untruthful. Can i speak to the point . Anything else from the gentlemen of south carolina. I indicated i intend to leave him my time. I would like to get through my presentation and give him the opportunity to respond to all of my points. In addition, no one is stopping him from what we regularly do. I would like to ask unanimous consent that he will be given 30 seconds and go back to the gentlemen from south carolina. I appreciate your offer and i hardly think 30 seconds is sufficient. The amount of time to be in compliance, i would agree to that. I hardly think that is sufficient. Mr. Secretary, i would by unanimous consent, i would yield you the time with the issue raised by the gentlemen from south carolina. Im from new york so i talk fast. As i testified, it is correct then and correct now. The only people that can make the decision, thats on the advice of the treasury secretary, that decision was not made. I cant tell you what they said for each other. They should never have to make the decision about how they defau default. I dont think defaulting on veterans is any better than payments to foreign bond holders. Thank you, mr. Secretary. Now we will go back to the gentlemen from south carolina. I thank you. Lets get to the question i wanted to ask. Thats why no one wanted to tell us. The next is an internal document. That is crazy and counterproductive and adds risk it a risky situation. Its also totally unclear when and where they intend to share this where its given the document. This is a close hold on the plate. The next slight, please. Another document. Number two, he understands why treasuries want to maximize pressure on congress. They speak to the very heard of why we have been and who at treasury made the decision to maximize pressure on congress by limiting communications . That was to make sure what happens if the debt limit is reached. We do not believe that. I get that. You said that 100 times. Its redid you not ant. Im not asking you about the comments about the new york fed. Congressman let me finish. Its clear that all the documents through you that they were involved with you as far back as 2011. People within the new york fed thought that you were withholding information from congress about Contingency Planning and want to know who said that and why. I cant speak to that. If i asked mr. Powell . 2011 and 2013, there were serious questions about whether the pipes can handle it. We know that you cant do that. Who made the decision not to Tell Congress or the public some. We decided to share what we knew which was that if there were no debt limits. You never shared with us or the public the planning and prioritization. It may not work. As i was trying to say, these are questions that could you choose to pay bond holders and not pay principal and interest. I think we have to pay the bond holders and the veterans and medicare and we have to pay for the lights to go on in this room and veterans hospitals around the country. I came here interested in oil. More than anything else. There was a time when we said we have to produce more oil to reduce our dependence on imported oil from the middle east because of the chaos. Im wondering today aaa does this daily gasoline price deal. The average price is 1. 99. Im wondering what the impact on the World Economy and us here at home of the drop in oil prices and the gasoline at the pump. There is no simple answer. Somebody who came of age in the 1970s and 80s. The notion that low oil prices and gasoline prices would be Lower Oil Prices are like the taxpayer. It lowers the costs to do their business. Around the world, there were variable conditions depending on you are a producer or consumer. Generally more producers than consumers. They are something of a boost to global demand. At the same time it caused a lot of uncertainty for the Oil Producers and volitility in the markets. Its not without costs. There will be firms that fail. That has consequences. I think the challenge is to redouble our commitment so we continue overtime to see the moderated and the external factors driving prices up. I think the reason for the price being down now has viewed by different analysts. There is more oil on the market. Its a little bit of both. We have to look beyond the moment with all of the above strategy. This is a major infrastructure in my lifetime. Its a tragic vantage point, but it impacts what they have used for the highway and transportation bills. It is so low. Thats the negative. It reduced into the highway trust fund. Thats how to bring it in to get the increase and investment we need for the economy. I wish that was something we can make progress on here. The time expired. Recognized for five minutes. Thank you, secretary. I want to start with something that ought not be that controversial and its around the measures that are taken to try to lengthen the amount of time. It is remarkable how many was required. Thats how many before. What measures you intend to use and how long to put an estimate out it would extend the effort. Im not familiar with the amendment and im happy to look at it. We have both in my time and previously communicated and inform informed. Its contemporaneous. You have given us a date certain of when that would be. Not trying to be controversial. Its not required that you do it. If its required. With the staff. Obviously its not a good thing. I dont like the extraordinary measures. We have so many risks that you can control. I dont think any of us like the measures and the public ought to know what and when we are doing and how much it will cost. We will work with the staff and hopefully we can reach the agreement there and its a common sense measure. I would like to return to this question of having the technical capacity to prioritize debt and how far your staff has pursued it. They said i dont remember the date. You said that for a while. I also said that the capacity doesnt give me the comfort that you know works. Its irresponsible to reach the debt. I would suggest its have you instructed the staff and you dont know what it looks like. They looked at the work and they have to go to a nonpayment regime. I dont think any of us want to do that. They could pay through the interest and we never tried to cut it off and do it that way. What i said is you dont have that ability. The only way to know is we would have to do it. Ultimately you would end up only learning if you crossed that threshold and if the president made the decision to pay the bills. You put together reports of what it would look like . Is is there analysis of wa the team would do . Normal what the nature of the analysis was. I mostly had conversations. It seems to be this. Unless we agree that it should go away, we will continue to have. There is a possibility that that be breached and if you have the capacity to do something about it, we ought to do more than have a table top discussion. That would be provided by you to have the congress. The people who were corresponding on the emails that you show dont have the ability to make the decision. It seems like now they dont have the ability to make the decision. You in the habit . They are not the kind of avoidable decisions that will create a crisis. Thank you, i yield back. The gentlemen yields back. Thank you, mr. Secretary. They have no intention of coming over this morning. You can take care of yourself. Unfortunately i was watching the hearing and i was embarrassed a big concern about the debt. It was a legitimate concern and you are responsible for all of it. I am impressed and nobody mentioned anything about the bush tax cuts that are totally unnecessary. Nobody mentioned one of which was total low unnecessary and all the money we spent in iraq without paying for it. They wouldnt mention those items. No one mentioned the vote vote that they took late last year that increased the deficit by almost 2 trillion. One votes 100 of my col eelgs on the other side that voted. 100 of them. 64 of them on the other side of the isle voted. No people saying well, i share the blame of this terrible thing. And i dont mind, i dont like the deficit and debt like anybody else. At the same time i think those of us should stand up and own what we should own as opposed to try to put all the blame on one individual. Those are reasonable thoughtful differences and we can disagree and be respectful and like and respect the differences. I wanted to offer you an opportunity to address any of the items that you were not given the opportunity or you can just take three minutes im not trying to get you out of the zone, but no one else is giving you an opportunity to answer the questions. If you want to take the opportunity, fine. Im fine to read my blackberry the next 2 1 2 minutes. I think if you look at the path, i tried to reach a fiscal policy. We had a surplus because we worked on the basis to reach the budget and you described what happened and it created a big, big problem. We are now in a place that we are doing a lot better. The economy is growing, but we are not in a place where we are grounding the economy down and balanced prematurely is a thing to do. Thats some of the back and forth of where they need to be. I hope we could have the discussion about tax and spending and over the next 20 or 30 years get us where we need to be. We have gone from a skyrocketing deficit and debt that was crossing through 100 of gdp to a stable situation where we reduced from 10 to 2. 5 and stabilized the debt. For somebody excuse last testimony was paying off debt, i wish that hasnt happened. It would be a terrible things that it would be anything but an improvement. Im not yielding back just fa im contemplating what to do in the last 20 seconds. Could we spend a couple of minutes with the head winds and some of it is demographic and im holding a support right now. The coming pension crisis talking about government pensions both state municipal here in the United States and around the world. Heres the reality of whats happening because of lack of growth and demographics and other things. How much big boy math is happening at the Treasury Department saying this is our future. Even the conversations about longterm bonds and to get beyond the demographic bubble. What are you modelling . You are looking at the incredible wave of debt. We have known for the last 50 years that the baby boom would retire roughly now. Congress seemed to just discover it a couple of years ago. They dealt with it . Social security reforms that have been very effective because they reflected the way you work to deal with what goes into the trust fund. Right now Social Security is at a 2. 7 gdp. They still continue to fund the bulk of the benefits. Over 65 . I think under the study like 2018 and Social Security goes negative. We pay Social Security. The point is not that at some point the revenue goes negative, but the revenue keeps coming in and we will continue to pay for the bulk of Social Securitys ongoing expenses and the gap is the issue for the longterm financing. Think about the gap. We burn through the day the trust fund has 2. 8 trillion. We burn through that in 14 years and at the same time we are paying 3. 1 interest and Social Security is the easy to fix compared to medicare. We look at public and private pension issues, the scale of these things is pushed off to the next presidency. I, having spent 1983 to fix Social Security, i hoped that five or six years ago we would have the conversation about that kind of an approach. It didnt happen. We are in better shape because the position is improved. There is more work to do. I need to correct it and thats our script here, but thats not true. Our modelling a couple of years ago we were not expecting this anemic growth. Peerp going to be at 4 or 4. 3. Today i am told we are at 1. 9. Lets have an honest discussion here. Its really bad. That includes Social Security and private pensions. If you look where we were and where we are now, we are in a strongest position. This is crashing down upon us. Thats where i disagree. I dont think its crashing upon us. If i said years of medicare and 56 months on Social Security and disability and we should pretend things are fine . I think they need to be addressed. I dont think its a crisis for today. I need to yield back. I will beg of you to send me what you are doing to deal with this. The chair ekinizes the gentlemen from massachusetts. Thank you, mr. Chairman and thank you to the Ranking Member as well. Welcome mr. Secretary. Good to see you again. Mr. Secretary, the chair and the Ranking Member sometime ago created a task force on terrorist financing on the committee and with myself and mr. Fitzpatrick and we have been working in the middle east, north africa and my colleagues are leaving for Central America in the not too distant future. The examples where we had the greatest success has been the result of coordination with your office with the Financial Crimes Enforcement Network and also in several countries we worked with treasuries that are a part of the u. S. Embassies in the countries and goes from african stan to jordan to egypt to tunisia and all of what we got from them which has been considerable has been the result of your work and the work of people like joe parker. I think he may be retired now. I think he was very, very instrumental in setting up some of these Financial Intelligence units within the countries to push back on Money Laundering and terrorist financing. The problem that we see is that its spotty. Even in joe parkers example, he had a big portfolio. They will convince them with the statute. Know your customer and helping the local banks prevent terrorist groups from using the legitimate system to spread terror. Its ironic that today we have isil taking credit for the attacks in brussels and obviously all our prayers and thoughts are with the people this afternoon. Is there a way to amplify and is there a way to im not saying you need to have 192 treasury attachies, but there problem areas where and the technical people and they have been great on this stuff. They can educate not only the foreign central banks, but also they do a great job in informing our embassies at large in terms of what they will be playing to shut off the Financial System to the terrorist groups. I koonlt be more proud of the work that they do. They are the ears and ears, but we need it get people into the country to provide the assistance and thats more of the function. We work closely with all three. I chaired a meeting with the first time in the history that they met in the computer council. They designated isil for the statement treatment that they have given that means even intermediaries and part of that message was for the standards to be put in place and the world to come together to provide Technical Support to build the kinds of capabilities. We have a lot of work to do even in the most advanced partners, they are not where we are. Its not as well developed and a Comfort Level that is making it impossible to see. They will help them monitor and track and respond. Our people are engaged in that and we will work to build the capabilities. The gentlemen from california, mr. Royce, chairman of the House Foreign Affairs committee. Thank you very much. Secretary lew, i wanted to talk trade. When on tpp, i know you share the concern, but data localization provisions are a trade barrier pure and simple. They are to be protected and the Financial Services sector are excluded from the data localization part of the agreement. You talked about the possibility of having an agreement to thread the needle as you explained on this issue. Where are we in discussions with the tpp partners. Do you think a side deal is possible . They will make it more expensive. In the area of Financial Services, there are two competing goods. Is to prevent them from being put into effect. They have access to what they need and when they need it. There concerns they have. I have been working with the regulators to try to have them work through and understanding with how Going Forward we might be able to address this. We need to see progress. I know many of my colleagues will as well. I think its a prerequisite. Let me go to the last question. In july you testified that iranian banks will not clear doctors through new york or hold correspondent relationships with u. S. Financial institutions and into financing. Iran will continue to be denied access to the largest financial and commercial market. Are these rchts correct and is the Administration Planning to ease restrictions on the access to banks and are you considering u. S. Banks and foreign institutions including offshore clearing houses. The reason i raise it is because iran remains the foremost state sponsor of concern for religious freedom as a primary of Money Laundering concern. As we say about iran, this is clearly an explicit recognition that any transaction with iran in u. S. Dollars risks supporting the regimes activities and iran remains on the black list on Money Laundering. We have reached an agreement with iran and caused iran to roll back the Nuclear Program that has done that. Part of the agreement was for iran to have sanctions lifted. We keep in place the sanctions on Human Rights Violations and regional destabilization. The argument is they need to stop with the ballistic missiles. You are not going to give them access. They want to make sure that they get relief while we keep pressure on iran. Remember the basic commitment that was given to us. The iranian banks will not clear through new york. They are in violation of missiles on support for terrorism and abusing the people. Thank y time with the gentlemen has expired. Thank you. Often when you come here, i ask about contentious issues. Now that i said something about tpp that was not favorable, this hearing has been contentious and i will devote the things that wont be where we give you 30 seconds of silence to rest. These will be the least contentious you deal with today. Because they basically involve working with me on a few issues that will never newspaper. At least not a newspaper that side of iravan. We have tax treaties with hundreds of countries around the world or at least hundreds if not the right. Scores of countries around the world. We devote a substantial amount of money to trying to achieve our International Development goals and so we can always provide foreign aid to armenia. And that costs us some money. But we can also achieve those goals by having a tax treaty. Were currently negotiating a treaty dealing with tax enforcement, but the Gold Standard of tax treaties is your basic tax treaty on double taxation. The Armenian Embassy tells me that theyre willing to start with our basic framework and negotiate a tax treaty. Theyve negotiated a tax treaty with ottawa so canada was able to do it. You see your Department Working toward a tax treaty with armenia . Congressman, the primary purpose for a bilateral tax treaty is to avoid double taxation. Were not aware of a double taxation problem in armenia. Id retreat just a we have a chicken and egg circumstance. You dont get the Business Investment because you dont have the tax treaty. Then you dont need the tax treaty because you dont have the Business Investment. Given this congress has provided well over 1 million of well over a billion dollars of aid to armenia, it would seem that having one member of your staff work on this for a while to achieve the same objectives i appreciate that. Obviously to negotiate a tax treaty is quite labor intensive. We have been looking at comments that come in. Happy to follow up. Okay. The next issue relates to the porter ranch gas leak. Biggest gas leak in history. 5,000 of my constituents have left their home. And this is not something i told your staff i would be asking you about, but section 139 what we have is People Living in hotels at the expense of the gas company and now theyre told you may be taxed on the money being paid for that hotel. You cant live in your home because of the gas leak. Now, the good news is Congress Passed section 139 c 3 which says that you can avoid this travesty because gross income doesnt include payments for the living offsite. If it results from any other event which is determined by the secretary to be catastrophic in nature. And i wonder if you can work with me toward making a fair determination that the largest gas leak in history which displaced 5,000 families for months meets this standard. Congressman, thank you for bringing this to our attention. I wasnt aware of it until then. Our staff has been talking to your staff and has reached out to the relevant parties. They havent completed the analysis yet but we understand the timeliness of this given its tax season. Well continue to work on it. I look forward to working with you. But i would hope that you would direct your staff to lean in the direction of fairness. I know im a former tax lawyer myself. I know that a very strong argument can be made on this. And we have a similar issue, not one thats quite as pressing, but we have a drought in Southern California and this is the most Environmental Administration in history and people are being told that if they accept a payment not even a payment. If the local Water Utility pays for the cost or part of the cost of ripping out their lawn and replacing it with cactus or replacing it with rocks or Something Else that uses less water that they could be having to pay an income tax on what theyre doing to help the community. And i hope that you could direct your staff, again, not to change the law, but to lean in an environmental direction. That i was not aware of but well follow up on it. The time of the gentleman expired. The chair now recognizes the gentleman from vermont, mr. Ginta. Thank you for being here. I want to follow up on what the gentleman from california was talking about relative to tpp. You had said last week in a subcommittee, quote, because we have a principle position that data localization, we are working to see if there is a way to thread the needle. The other half of that is there were real concerns and we have to balance. Can you quickly tell me what a Side Agreement may look like . I cant tell you right now. If i knew where this was headed i would be happy to say so. I think that the challenge we have is the prudential regulators feel that they need to be certain that they can get access to what they need when they need it. Unfortunately, during the financial crisis, there was an incident where with a Major Institution they were denied access in a timely way and it interfered with both Crisis Management and resolution. So the question is how to make sure that they get what they need while i understand that. I appreciate that. Relative to tpp. Obviously u. S. Financials institutions as well as european allies have asked for this particular area. I understand youre including or working on tpp, is that correct . We continue to work on tpp and we think its important that the negotiations be opened up. Moving on to a different subject. In your role im sure that you know Market Participants spent a lot of significant time in proprietary Investment Strategies and that differences exist from the 2012 report of the council of inspectors general on financial oversight. Can you tell me how fsoc is addressing the differences that exist on an fsoc wide basis to ensure that federal Agency Members are properly safeguarding information . I think each of the regulators has an obligation to protect information thats within their area. One of the challenges we have is that to do the systemic review that fsoc is charged with requires sharing information in an appropriate way. What we do is we limit the data and make it so that each of the parties can be certain that theyre complying with the responsibilities that they have to protect to that end would you provide our committee with a brief policy and procedures, outline what the fsoc regulators are doing . Im happy to follow up afterwards and find out exactly what youre looking for. Can you commit to something in writing to show us what the policies and procedures are for regulators . Im not sure im the right one to address each of the regulat regulators. The fsoc. As chairman of fsoc let me follow up with you. I appreciate your willingness to follow up. If we could put up a slide, it brings up an another concern that i want to echo that some of my colleagues have brought up already and thats document production. I have a slide here that shows the Financial Services committee requested information from treasury on the plan to renovate the leased office building. Obviously, four different letters. 288 days have passed since weve heard from this matter going back to june 9th of 2015. Second example, thursday, september 17th, 2015, about six months ago almost to the day, i or undersecretary nathan sheets came to testify. I permly submitted questions for the record. That was six months ago. I still have not received a response. I have those items here. Can i ask when i can expect to get a response and why the delay . Congressman, im happy to take that back. There was a june 9th letter i understand requesting information and august 25th response where treasury informed the committee that the report for the Inspector General found the Work Authorization related to the renovation was finalized after cfpb director was appointed. Which not sure that they actually addressed the specific issues in the four letters. That being said, the september 17th request that i issued six months ago still has not can you follow up on that . Im happy to follow up on that. Finally, in my last few seconds, i want to move to economy. Youre aware that the president s budget includes a deficit of almost 800 billion at the tenyearend of the budget window . Im familiar with the president s budget, yes. Okay. And are you aware that the gross federal debt under the president s budget increases almost 8 trillion from 19. 4 to 27. 4 in 2026 . Yes. But im also aware that gpd grows and as a percentage of gdp we have stabilize the deficit and lets get the gdp. My understanding that the president s product never exceeds 22. 6 , is that correct . . I dont remember the decimal number but its the right range. Thank you. Ive run out of time. I yield back. Time of the gentleman has expired. The chair now recognizes the gentleman from illinois, mr. Foster. Thank you, mr. Chairman, mr. Secretary. I would like to return to the actual subject of this hearing. The capital outflows in china are now in excess of a trillion dollars a year. The International Institute of International Finance estimated outflows in january alone of about 113 billion. Now when you have a trillion dollars in capital flight and a 10 trillion economy, it seems to me that this effect alone is more that enough of explanation of the slowdown of growth in china. Would you agree that its a major contributor . Im not sure how much of the Slower Growth or the Slower Growth to the capital flight. I think that there has been capital moving out of china. Some to repay foreign debt, some of it is money leaving the country. Its a little bit hard to know exactly where the line is and there are stronger views than there are data on theub