Transcripts For CSPAN Treasury Sec Mnuchin On Stability Report 20180204

Finance. Viableude this is not a option. Activities,diminution worked wo find a solution and find a balance between taxpayer an annual access to credit. Four years ago, a bipartisan. Roup passed this committee we have an opportunity to build on that effort and create a broader coalition of republicans and democrats to pass a bill. Nto law it remains one of my Top Priorities and i look forward to continuing with secretary mnuchin and other stakeholders throughout the process. Washer focus of this report Cyber Security. Area due toty is an the increasing criminals and growing scope and scale of icious malicious fax attacks, including data breaches. The maliciousness in the probably can private sector keeps growing at an alarming rate and seems to have impacted the majority of all americans pare the council made recommendations to specifically address security risks, including greater collaboration collaboration. It is critical that personal data is affected by both the government and industry and when breach, an attack or a the impact on victims is minimized. Taken by the council since the last report, this included resending the resignation of two nonbank committees. Many have been critical of the lack of transparency and rigor for decimating nonbanks in november 2017, treasury issued a report outlining recommendations for enhancing the nonbank designation process. Which included tailoring resignations and ensuring the designation analyses are rigorous, clear, and transparent. Past, the threat of serious regulatory consequences and concerns that received a designation. A higherslates into cost for consumers and the overall economy. Determinations, the process must be transparent, objective, and measurable come with clearly outlined material for when it is appropriate. It must also provide for when they are shed. I look forward to insight on issues. Senator brown. Welcome. I look for to her testimony. The economy has grown steadily for the past eight years in large part because of the hardearned progress of the obama administration. Has fallen and some but certainly not all families have come before the financial crisis. We havei look forward to made pe have some challenges in this country. Now standing only 2. 4 , the lowest since 2005. Household debt continues to climb. Job growth in 2017 was ok. We will hear about that tonight. 2017, it waswth in below in 2011, 2012, 2013, 2014, 2016. Lostlion americans have Health Insurance since this. Resident took Office Americans actually fell, in large part affected by an opioid at epidemic in washington. Stock markets around the world have been on a tear, which helps the top americans. These are the people who own 92 percent of stocks in the United States. It is good for workers with a 401 k and we welcome that for too few workers have that Retirement Security and only one third of workers are making contributions to a 401 k or similar plan. The president likes to take the ugly bubble in little over a year ago, it will be interesting to see if he is eager to take credit for a down market. Most workers bill that the hardearned paycheck. The economy last year was the years, the prior three the wages continue to be far too weak. Machinist building a secure evere class is as tough as. They are only making these problems worse. It gives a huge boost to the richest people in the country. It keeps in place the idiotic Tax Deduction that corporations get shut or shutting down in , andand moving to beijing in fact, American Companies will be enticed to do that more. I fully nothing to the irs, overseas manufacturing operations brought to you by this tax bill. Our kids will be left with the tap, picking of a trillion dollars in new deficits, something your party and republicans in this town used to care about. I will be the first took knowledge with the company does the right thing and boost wages. Thanks ceos these increased pay for tellers, averaging about 30 per hour. Custodians and contract workers long before. I thank them when they do that. I call them and i complement them. Ive offered an amendment for the tax bill to Award Companies that did write whethercustodians long workers. Workersy they pay some more but lets keep this in perspective. Fargo, a bank you are familiar with. After the tax bill, wells fargo put on a press release to brag for raising pay 50 an hour. We reppo welcome and thank them for that. Last week, the bank announced it was eyeing back more than 22 billion of its own stock this year. That is 288 times more to juice their stock in the cost of raising workers pay. 288 times. Bank of america a 17 billion phasing outk while free checking for certain customers now charging 12 a month. The middle class is not just getting the short end of the tax bill. We know they will pay the price if we roll back the rules for the financial industry. It comes as no surprise as the administration looks like a retreat for Goldman Sachs executives. The treasury has issued a steady drumbeat of support suggesting hundreds of changes to our Consumer Protection and Financial Stability rules and will make the risk and severity of the next crisis much bigger. Tools are only as powerful as the members using them. Test members were equal here to do the hard work of keeping wall street honest but this new team would rather join them for instead at a ski resort of fulfilling wall streets wishlist, we should be finding a longterm solution. Should invest in crumbling roads and bridges and ensure that workers are keeping the pensions they have earned. I agree with the warning that many employer plans are in tough shape and if the minister should will not act soon, millions of retirees, hence i look forward to todays hearing. You can see there still are disagreements among us on the panel. I suspect we will get into some of those today during your testimony. We again appreciate you willing to us. And report with that, we will return to your testimony. Mnuchin thank you. Than chairman crapo, Ranking Member brown, and members of the committee, thank you for inviting me today. One of my Top Priorities as treasury secretary is sustained Economic Growth for the American People, and so i am happy to report that the growth rate of the economy over the past year was higher than the average over the prior twenty years and included two straight quarters of 3 percent or higher gdp growth. The president promised robust growth, and he is delivering on that promise. I am here today to speak about the Financial Stability Oversight Councils 2017 annual report. This is an important vehicle for providing congress and the public with the councils assessments and recommendations relating to regulatory developments and potential risks to the Financial System. This report emphasizes the importance of Economic Growth to maintaining a resilient Financial System. Since the financial crisis, we have had time to assess the effectiveness of regulatory reforms and consider their unintended consequences. The report recommends that Council Member agencies address regulatory overlap and duplication, modernize outdated regulations, and tailor regulations based on the size and complexity of Financial Institutions. The report also discusses a number of risks that the council is monitoring. One that i would like to emphasize in particular is cybersecurity. The Financial Systems heavy and increasing reliance on technology increases the risk that significant cybersecurity incidents could disrupt the 2 embargoed until 10 00 am january 30, 2018 Financial Sector and potentially impact u. S. Financial stability. Substantial gains have been made, but i want to emphasize the need for sustained attention to these risks. The report makes a number of recommendations, including creation of a private Sector Council of Senior Executives in the Financial Sector to collaborate with regulators in order to mitigate cybersecurity threats. Turning to our growth policies, the tax cuts and jobs act passed last year was our top priority, and this overhaul of the tax code is already having a positive impact. Because of tax reform, over three million americans have received special bonuses or other benefits, and over 250 companies have announced investments in their workforces. Companies are announcing higher wages and increased benefits, as well as greater spending on employee training, infrastructure, and research and development. These investments will lead to longterm prosperity, and as Companies Continue to bring back cash from overseas, our economy will continue to grow. Let me now turn to some specific priorities for this new year. I want to commend both houses of congress for their work on financial regulatory reform. The bipartisan Economic Growth, regulatory relief, and Consumer Protection act is a balanced and thoughtful approach that better aligns our Financial System to support Economic Growth in our communities. Further, the legislation reflects many of treasurys recommendations from our executive order reports released last year. I encourage the senate and the house to Work Together to move legislation as quickly as possible. In december i wrote to congress providing notification of my determination that a debt issuance suspension period disp would last until january 31st. As congress has not acted to suspend or increase the debt ceiling, i have determined that the disp will be extended into february and will be notifying congress as such. I respectfully urge congress to act as soon as 3 embargoed until 10 00 am january 30, 2018 possible to protect the full faith and credit of the United States by increasing the statutory debt limit. The house and senate have been working toward modernization of the committee on Foreign Investment in the United States cfius . I support the Foreign Investment risk review modernization act firrma and applaud senators cornyn, feinstein, and burr and representatives pittenger and heck for their leadership on this issue. A modernized cfius will enable us to protect our National Security from current, emerging, and future threats, while preserving our longstanding open investment policy that is key to fostering innovation and Economic Growth. I look forward to working with congress and the relevant committees to advance firrma. One of treasurys Core Missions is to safeguard the nation by using the powerful economic tools in our arsenal. We will continue to take frequent and ongoing actions to combat threats from malicious actors. These include terrorist groups, proliferators of weapons of mass destruction, human rights abusers, cyber criminals, and rogue regimes like north korea, iran, and venezuela. We continue to review intelligence to identify targets with maximum impact, deny them access to the u. S. And international Financial Systems, disrupt their revenue streams, and ultimately pressure them to change their behavior. On Housing Finance, the Current Situation of indefinite conservatorship for fannie mae and freddie mac is neither a sustainable nor a lasting solution. The administration looks forward to working with congress to reform americas Housing Finance system in a manner that helps consumers obtain the housing best suited to their own personal and financial situations while, at the same time, protecting taxpayers. 4 embargoed until 10 00 am january 30, 2018 i am proud of what we have accomplished so far, and there is more to do. Our countrys potential is enormous, which is why americans expect their government to enact policies that allow them to succeed and prosper. Treasurys collaboration with congress is vital to that mission, and we are working every day to make it a reality. Thank you and i look forward to answering your questions. Thank you very much. I appreciated your comments about Economic Growth, regulatory form, Consumer Protection act. Commentspreciated your on the Housing Finance reform. It is currently my highest priority in the committee. In the annual report last year, was thatmendation made regulators and Market Participants take steps to encourage bright private capital in the finance system. I agree. Can you elaborate on why it is important to play a larger role and what steps you would take to further encourage that . . , thank you. I fundamentally believe in the importance of the 30 year mortgage. T is important to the economy i am openminded to Many Solutions and i have productive conversations for several members for your committee on this. I look forward to working with you on them. Have substantial private capital risk, antigovernment support or guarantee. You. Ank protectingext of taxpayers against a government guarantee, there have been a number of different ideas. Inluding observing losses front of the government guarantee. If that were part of the model, d believe they are subject to Capital Requirements to ensure that the payers are protected . Important thats there is capital and i look forward to working with you and with you and your committee and if there is any guarantee that the taxpayers are thatfor putting that up were compensated in the past. Evaluating systemic risk. The 17, thento development of an activitiesbased approach was announced to assessing risk in the insurance sector. Would an activitiesbased approach work and why is it more effective than the current approach . I think it is more effective because to the extent that we look at risky activities across an industry or within a sector, we can look at proffer regulation that deals with these and systemic risk. Cyber security is one of the most pressing issues and you mentioned it in testimony. Report identified a for u. S. Financial stability due to the increasing frequency and sophistication of such attacks. Do they see gaps or shortfalls in Cyber Security protection today and what steps i dont see any specific gaps today. This is an area where we need to always be advancing issues. Issues, oris recent recent software situations. These are some things we need to be very careful, we need to be working in publicprivate partnerships. We need to share intelligence when it is appropriate. Whatever the cost of the United States Financial System, we need to major it is protected from Cyber Attacks. I appreciate your attention to all of these issues and the willingness you have to engage aggressively with us on issues as issues come forward. We will be dealing with you on each of these, as well as many more. I appreciate your attendance here today. With that, senator brown. Based on the banks threshold in the wall street reform act, its an additional factor to determine a shot of bank can cause a risk. There was a report suggesting raising that liver. Chairmans Bank Deregulation bill is an active. Its safe to say it will raise the threshold fivefold. Intoll put resources investigating shadow banks below to fifth the as your report said. I think there is a general consensus from the Regulatory Community that the threshold should be raised. The committee could always make certain exceptions if there were significant i challenge that statement. Maybe the regular readers appointed by president maybe the regulators appointed by President Trump. This bill has other consequences beyond Bank Deregulation. Totein would be unlikely deliver a large fund like longterm and capital management. When it failed, it had 129 billion in assets. More than 1 trillion in derivatives. I think you are making the system less safe and sound with those ideas. The june treasury report on banking deregulation said if we raise the 50 billion threshold, we should do it for foreign megabanks based on their domestic assets. The germans Bank Deregulation bill is enacted, foreign banks went up there going to be deregulated akin the u. S. Regional banks, correct . That is correct. Up,f we move the threshold we should also move the threshold up for foreign banks. Domestic and foreign banks should be raised. To be clear, the chairmans bill with your acquiescence will deregulate banks like santander, that has repeatedly failed stress test in deutsche bank. The only bank that would lend President Trump money after his bankruptcies and botched deals. Sent toht, your staff the committee there is classified and nonclassified reports to deal with this sanctions bill, and this report that looked like the forbes list of russias wealthiest men. I hope it is more detailed and compelling. Pompeosterday, director said he didnt see any reduction in russian subversion of western elections, nor did he expect them to back off their efforts to interfere in our own elections. The president wont talk about the need for bipartisanship tonight, it cant get any more bipartisan than the work we did on the russians sanctions bill. President ike the didnt impose any sanctions under the mandatory authorities we enacted, nothing to combat the Cyber Security activity. Theanction on those helping intelligence and defense sectors, nothing in response to its corrupt privatization of stateowned assets. How can they punish russian interference in the you gain and themerican elections if sanctions continue to ship on sit on the self sit on the shelf i want to commend the group at treasury and the Intelligence Committee who did a lot of work in separation of the report we delivered last night. We tried to outline in the unclassified version, the list is senior political people, as well as oligarchs faced upon a threshold of 1 billion or more. That the public version looks a lot like when are you going to take those sanctions off of the shelf and use them in terms of Cyber Security, intelligence, American Election . There is a substantial amount of work that was done. I look forward to your revering reviewing it. We will be looking at they cannot house,e no votes in the there is a lot of belief on both sides. I hear senators talking about this. This congress and the American People dont trust the president on russia. His closest to put in, all of those things. November persistent budget deficit is a threat to Economic Growth. One month later, the president ignored their own warnings, passing tax cuts for corporations and millionaires that will add more than 1 trillion to the deficit. Immediately after passing the budget busting tax bill, some of my colleagues turned toward guiding entitlements under the guise of fixing the deficit. I listened to mr. Trump come to ohio for each rally, he said he would protect medicare, medicaid, Social Security. Add 1 trillion to the deficit for tax cuts, then have colleagues with apparently the president s acquiescence to talk about cutting medicare and medicaid and Social Security . Let me comment on your previous comments. I dont think we are slow walking the report we delivered last night. We look forward to discuss it with you in a classified setting. On issue of the taxes, the of 35ent with a break basis points, the tax bill will create growth that will create enough revenues. Nobody has ever believed that, why should we now . I would be more than happy to meet with you and go through the numbers. On thethe acquiescence attacks on medicare, medicaid, and Social Security, calling them unsustainable . I have not made those comments, senator. Thank you for your service. I would be remiss if i didnt thank you for your leadership and steady hand in dealing with tax reform measures that a lot believe is going to help our economy. Already. Gns of it congratulations on that. When you designate an entity risky, that is a very important designation. It shouldnt be done on a whim, it should be done very carefully with a lot of data and thought. When we look at insurance entity, and an banks, there may be some overlap. Two different models, should they be viewed as such before you make a designation . What is your thought . Banks are very different from insurance companies. They have different liabilities. They should be reviewed carefully, something i believe is done at the committee over the last year. Whwe when you designate an entity that is systemically risky, that is profound, would you agree . I would. I am going to shift to something i hope you will have some interest in. Infrastructure. We keep talking about infrastructure. How are we going to come how is the Trump Administration . A lot of democrats and republicans both know that we need an infrastructure bill. We need to do it. It takes money to put that together, we know that. How do we use an infrastructure inl to tap the private money america, which there is a lot of it out there looking for a better return on investment. How do we do that rather than let the government deal with infrastructure . Have you thought about that . We have. The administration has put a lot of work into this. Forward tont looks releasing his infrastructure plan shortly and working with congress. I agree we should be looking at federal, state, and private money as we look at infrastructure investment. Shouldnt it build from the standpoint of our future economy and the infrastructure in this country is so important to move goods, people, services. It should be one of our Top Priorities. I believe so. Talk about Cyber Security. We know we are in the information age, so is everybody else in the world. We know we get benefits from modern information systems. They are subject to attack, including lawenforcement, pentagon, treasury, federal reserve, so forth. This is an ongoing Risk Management thing. I dont know how we get to the bottom of it, that is a big challenge for all of us, definitely for treasury. That is why it is one of my Top Priorities. First . Should we do should we worry about the Financial System . Should we worry about electrical grid . We also have to worry about National Security and the implications of penetrating through Cyber Security. That is correct. Thats why we have a process across all the different agencies that were focused on this. Homeland security is responsible for the overall coordination. We are responsible for looking at the Financial Sector, dedicating a lot of resources to it. How do you think the economy will continue to grow . I like what i see up there. D feel like it is going to continue to move forward . I do. I think the president is determined we enact legislation that moves forward on a sustained Economic Growth of 3 or higher. We are not focused on anyone quarter, we are focused on sustained growth. Secretary, you have talked up the economy and the results of the trump tax plan. I dont think the workers facing layoff at toys r us, at t, kimberlyclark, walmart, and ge with share your enthusiasm. I dont think we should be satisfied with the slowest year of job growth since 2011. What do we need to do as it relates to the economy . I want to get to a specific provision in the trump tax bill which gutted the state and local Tax Deduction and compelled thousands of New Jerseyans to rush to prepay their 2018 property taxes before the start of the year in order to escape being taxed twice on the same dollar. If it wasnt bad enough, spending the holidays working over a tax hike. Nch, played bygri the irs telling them they couldnt deduct their 2017 taxes despite paying them that year. This irs advisory was confusing, frustrating, and wrong. Bill specifically prohibited the deduction of prepaid states income taxes. It made no prohibition against prepaid property taxes. Do you commit to fixing this flawed irs advisory and stopping the irs from changing the rules in the middle of the game for working families . I dont think it was confusing. The intention for the irs was to put something out that clarified. Do you suggest that advisory is right do you suggest it is right . How is it possible when the legislative tax is as clear as day . 11042, it, specifically prohibits 2018 state and local income taxes from being prepaid and deducted from federal income taxes in 2017. It is silent. Whether that exclusion was included intentionally, or because of the secretive and rushed process by which the bill became law, the legislative tax actually is loud and clear on this. That means the irs advisory clearly contradicts the law and is nothing more than a backdoor attempt to get these people who shouldnt who should be able to deduct property taxes when they paid it. The irs advisory did was defer to the legal position of the state. I would be more than happy to meet with you and go through that. The intent was it wouldnt allow taxpayers to abuse the system. It was intended for clarification. The system is abusing them. They paid it in 2017, they should be able to deduct it. I hope you can get to a point with us that you can help us on this. It would be bad enough in the next years that they wont have that deduction. They should certainly get it for the year in which they paid. Unequivocallyor states that he believes russia has every intention in meddling in the 2018 election, do you agree . Id for to the cia director on that. You dont disagree . Do you agree with that assessment for our intelligence tools were i used to meddle in the 2016 election . Comment on going to things i have classified information on. It has been planted in the publics year to have a judgment on this. Your department actually has jurisdiction over the enforcement of sanctions. If you dont believe those things are true, maybe that goes to your views on sanctions policies. I didnt say it was true. It is not classified. Yesterday, the Treasury Department identified senior political oligarchs and political figures in russia as mandated in the encounter the countering of americas adversaries through the sanctions act, which this body past 98. It provided tools and a deadline to go after entities who support the same intelligence and defense agencies. Isnt it true that yesterday the company ministration failed to apply one single new sanctions on anyone who may be supporting these efforts . We very much agree with the purpose, there was an extraordinary amount of work. I assume you havent reviewed the classified version. A simple yes or no is what i want. Have you imposed any new sanctions on any of these entities . The intent was not to have sanctions by the delivery report last night. The intent was to do an extremely thorough analysis. Hundreds of pages. There will be sanctions that come out of this. The law is pretty clear. It seems to me not only do you have to describe the entities, he also had to pursue sanctions. I look forward in continuing to press that question. Thank you for taking time and being with us today. Im sure you recall last august when you came to las vegas and had a round table with prominent business people. I am pleased about the questions sharedcerns that were were delivered four months later with the tax bill. Last week, i had a town hall meeting out of my office with nfib. We called thousands of Small Businesses in nevada, under the were on the line. Questions were asked, specifically with this new tax bill. What do you anticipate your Business Practices will be this year . 90 of the Small Businesses in nevada said they are planning on expanding their business. Theyre going to hire more employees, they are going to provide bonuses, high pay raises, an increase the minimum wage for their business. 90 said they do parts, all, or some of those Business Activities. Private it wasnt a professional survey, i was the white know that house and the interior department attempted to do in december is being delivered. Doubleino is going to its fulltime workers bonuses. We have seen fountain blue Developers Say that they are going to resume a stalled project and the effects will create approximately 10,000 jobs. Were seeing this across nevada. I want to thank the white house for the efforts of putting us where we are today and seeing this expansion. Whered you anticipate Economic Growth of being this year . From what you originally anticipated . Thank you for your comments. The tax rate on Small Businesses is the lowest as been since the 1930s. We expect sustained Economic Growth of 3 or higher. Commenthowed me the written note from the president thank you wants 5 growth, when are we going to get there . He has delivered high ambitions for us. See in thepect to battle over the next couple of years . Could you tell us what positive impacts we will see in the next couple of years through growth and Business Activities in nevada . One of the most important things is we expect to see Wage Inflations for the average american worker. They have gone nowhere, it is a great time for financial people. One of the benefits we expect to see of the tax bill is wage growth. What do you anticipate with capital coming back into the country . . Apple Just Announced a new Data Center Expansion in reno. It is a 30 billion Capital Expenditure over the next five years. Withdo you anticipate capital coming back into the United States . We expect a lot. I had the pleasure of meeting with tim cook recently to talk about their investment. They are bringing back hundreds of billions of dollars for paying a very large tax to do that. They have made a majoring commitment to invest in the United States. Tolso had the opportunity meet with many ceos of international companies. Bill,esult of the tax they are committed to bringing manufacturing into the u. S. We look forward to that. I am pleased that you are here. To the chairman, we are seeing expansions in the state of nevada. Some of it is actually causing problems in northern nevada. With the kind of expansion we are seeing from this piece of legislation passed in december, the jobs act is doing exactly that. Technical and companies coming to the state of nevada, we can list them from amazon to tesla. The list of organizations moving into the northern and southern part of the state has been pretty incredible. Im pleased we have the treasury secretary in front of us to expand these issues. Thank you for your time. Thank you for being here. Are you familiar with the marketplace fairness act . Yes i am. . With were you and the president opposed to creating this . I think the president fundamentally supports the idea of some type of sales tax across the board. We look forward to working with you and others on that. What youre saying is the president supports national . In my conversations with the president on that, evenings there are aspects that he likes a lot to he looks forward to look working with you and others. We you look for the Treasury Department to conduct a study on Small Businesses and noncell tax states nonsales tax states . To have that conversation to figure out how we can do that. Ona previous question entitlement reform, you had said that you had not made the protect Social Security, medicare, that the president had. Does that mean you are looking to do reductions in Social Security and medicare . Not at all. What does that mean. It was a comment, i was referring to it at that time. I have every reason to believe the president will continue with the commitment. Do you believe you will support him . Of course, whatever the president wants to do i will support him. Do you believe a 30 year fixed rate note would exist without a government guaranty . I thinka 30 year it is critical we have a 30 year mortgage. I dont believe the private markets on their own could support it. One of the things were looking at is various different solutions. I dont disagree with any of your comments that you talked about with the gst potential reform putting private money ahead of taxpayer dollars. To auestion i have relates previous person standing at the desk a few days ago. He said he believed a 30 year fixed Rate Mortgage would occur without a government backed guarantee. By your answer, i think you disagree with that. You believe a 30 year fixedrate , even with public dollars up front, you need the government backstop at some point in time. , ii am not trying to be cute think this is complex. What i do believe is fanny and freddy would not be able to exist without an implicit or express a government guarantee. I would want taxpayers to be paid for it. This is something we are working with with people and looking for solutions. I agree we need a fixed mortgage in this country. Reform, therebout are plenty of options on the table. We need to make sure we dont do something to put that at risk. It would have incredible impacts on the Housing Market and affordability housing. Ats talk about escott for second. It was put in in dodd frank for nonbank financial companies. It has basically taken the companies that were designated and d designated them. I am sure you did research on that and found they were not systemically risky . Thats not the case. De only company we designated was aig. They hadde levered and cut their risks significantly. Thats the only company we made the decision. That decision didnt happen . The decision on metlife had nothing to do with the risk of metlife. The decision was there was a recommendation as it relates to a legal case that had nothing to do with the riskiness. Metlife could be subject to designation in the future, it was more rather a legal issue. Credential would say the same issues. Good youestion is confirm at the council that the council is still functioning and actively looking at companies, financial products, and assess their risk to the Financial System . Absolutely. Senator cotton. Thank you, mr. Secretary. Senator brown started his remarks speaking of a swiss ski resort. Where the president addressed the economic form. Resort,er swiss ski they exercise Great Authority without accountability at the Financial Stability board. Lets address what happens in that ski resort. Sent theently administration of a letter which raised concerns about the operation of the Financial Stability board. We are worried it is in a more regulatory body using its peerreviewed mechanism is an enforcement tool to pressure u. S. Companies into adopting standards. Intoconcerned about that u. S. Jurisdiction, especially considering how dissimilar our Financial Markets are too many foreign markets. We have thousands of small lenders, independent asset managers, and an Insurance Industry regulated by our states. Our fsd roles voluntary or binding . They are voluntary. Are they suitable to be used as president s and u. S. Courts by regulatory agencies . I am going to defer to the lawyers on that. My view is not necessarily. In 2015, four chinese banks sought an exemption related to how much v much hold they must hold. Given that i agree with you that these roles are voluntary, it is strange they would have to seek an exemption from such a rule. Can you imagine a scenario in which a u. S. Bank or firm would have to seek an exception from an fsb rule . U. S. Banks are regulated by the u. S. Regulators. I think the purpose of the International Standards from our standpoint is to make sure there is a level Playing Field for our banks. To the extent that foreign banks have less capital, that there are certain standards that they would adhere to. That is not legally binding. Lets talk about the stock identifying systemically important Financial Institutions, especially under the last administration. 2013, three u. S. Insurers, aig, metlife, and credential, were globally systemic insurers. Was aigtime, not only designated as a systemically important institution, credential wasnt designated until december 2013, not metlife until 2014. Since the fsb operates by forensus, this means that months, your predecessor at treasury, the chair of the fed had already determined as members of the fsb to designate credential and metlife as globally systemically important. If a firm is systemically important globally, it must be systemically important in its own home country. I wonder how the app scott designation process in the last administration for credential and metlife could be considered fair and objective . The treasury and the fed had already determined as members of the fsb that they were globally systemic. The believe this decision was ocply a show trial by the fs in 20132014 . Cantce i wasnt there, i comment on specifics. I understand your concerns. Fundamentally, i believe there should be better transparency at f scott. Companies should be designated, understand why they are designated, and the basis of the risk. We are certain we will not see a repeat in such a scenario in which a u. S. Firm is designated as globally systemically important the four before itgnated as is designated as systemically important in the United States . I think it is a very important issue. Financial experts havent exactly covered themselves for the last 25 years. Our nation is not just europe has faced him political times. You morets politicians and parties because of the failure of our country plus leaders to deliver stable, prosperous conditions for our citizens. It is important member we are countries that are governed by our citizens, not by experts. Certainly not by unelected experts. Thank you, mr. Chairman. Thank you for being here. The first question is about the debt ceiling and the debt limit. Wasard the Vice President open to the notion of repealing the statute overall. That is very attractive to me. Having been here under a democratic president , now under a republican president with a Democratic Senate and republican senate, i can say that utilizing the debt ceiling statute as a sort of opportunity to take a policy ransom only harms our country. I am wondering if you would be willing to work with us on a statutory fix to just repeal this once and for all . I understand the political difficulty of doing it. On the record, you are increasing the amount of debt that the country is under. The fact of the matter is there is no evidence that having a statutory requirement that we do this every six months or 12 months reduces spending at all. Im wondering whether you can work with us. We need a little Political Support on the republican side. I know they want to get rid of this as badly as we do, they need cover from the administration. We are open to work with this if you are open to it. I have spoken to the president and Vice President , we are open to Bipartisan Solutions to figure out something as an alternative to the Current System that i think many of us would agree doesnt work well. The dollarments on surprised a lot of people, raised a lot of eyebrows. I want to give you an opportunity to expand on them or clarify if you wish. I have tried to clarify this many times now. This was clearly a situation comment that had three parts to it that was extremely balanced and very specific. It was not anything new. The press took one part out of this and kept on playing it over and over. Strongutely support a dollar being in the longterm best interest of the country. I support we have a free currency market that we dont intervene in and rely upon the most liquid market in the world. The short term is not a concern of us. It was no way intended to talk down the dollar. Yesterday, the administration declined to impose sanctions required under the bipartisan russia sanctions law that passed with overwhelming majority from the house and senate. Ares not clear which parts waivable and which ones are not, were still doing the analysis. The extent that there is discretion to waive or delay the administration has to have factual findings. Can you tell us what the findings are . I think that is a very unfair characterization of what we have done. There was an extraordinary amount of work that went into this. The classified report is hundreds of pages. I look forward to congress reviewing this. Our sanctions Going Forward will be based upon a lot of the work that the Intelligence Community did. Thats our interpretation we had to deliver the report to congress yesterday, which we did and fulfilled. I want to commend a lot of career professionals. Are you saying you didnt waive or delay anything . We did not. They are just not implemented yet . That sounds like a delay. That is not a delay. Upon antions are based enormous amount of intelligence work. There was an enormous amount of work that went into creating this report. That is what we did. We are going to take the basis and look at where it is appropriate to put sanctions. This should no way be interpreted as we are not putting sanctions on any of the people in that report. One final question. Designations, i am trying to understand the underlying statute is about the Financial Stability of the system. You seem to be introducing a new criteria for consideration, which has to do with the burden on the institution that is designated a systemically significant. I am trying to figure out why that would matter under the policy objectives of the law itself. If we are trying to figure out whether something is systemically significant, it shouldnt matter whether there is a burden on the institution designated. To provide you with that discretion, we would have written the lot accordingly. I will take that for the record. We talked a lot about the tax reform in our office. I was surprised i saw Christine Lagarde at the event last week. I went there because of my Foreign Policy activities. She had revised upward world Economic Growth because of what the United States has done, which is shocking to me. To see what other countries are doing in response to what we did with tax reform is pretty amazing. I do want to say it seems to be having an impact far beyond we thought it would have just on our own country. In thisy interested working, i think what they have done is exactly the right thing. Of time toperiod warn people about business with russia. Our diplomats were involved in that. They did keep numbers of transactions from occurring. They put together this report, the process now is they will begin to sanction. As someone who is more than glad to offer criticism, i think it needs to be offered. I think they handled it in the way it was supposed to be handled. I do look forward to sanctions being put in place for those violators. Housing and of finance reform Housing Finance reform, i know you have been very involved and understand it well. Conservatorship that we have now is unsustainable, is that correct . Yes. If we have a new model of Housing Finance reform, we have both sides of the aisle working on it. If we have a government guarantee in the future, would it not be your preference that that be at the actual security level and not the entity level . That would be my preference. Most of us understand, whereas last time taxpayers had to bail out with hundreds of millions of dollars the entities. What we care about are the individual bars and that the security is guaranteed. That was a prebases liquidity market. If we are able to pass something here, i would assume you want private capital in advance of an explicit guarantee. Whereas was not the case in the past. Are actuallyties paying those, the government is getting something. Is that correct . Would beers compensated for in the unlikely risk. Put in a new to regime, we would want to do what we could do end the situation we have today. I believe so. In the event we dont act, we pass something that said we can only revise these entities through a process of us acting. That ended december 31. If they administration, chose, you committed to the fact that you will not leave things as they are. What would be your option if we dont act . What would be your options with these entities . There are certain administrative options we have. These entities are very confiscated. My strong preference would be to work with congress on a bipartisan basis to reach a longterm solution. In the event this partisanship doesnt survive and we dont get this done, what are some of the steps that you might take . I know in past administrations the notion of putting these entities to a receivership and moving forward with a clean slate has been laid out, is that something you have thought about . We thought about and considered a lot of things. I dont want to go through this format publicly all the different alternatives. There are a lot of alternatives. I do appreciate your leadership on this issue. Chairman, i say, know this is one of your goals. I believe we get an opportunity to do something that matters. We have an administration willing to work with us. For the first time, we have an opportunity because of all of the things that have occurred that we have a lot of interest out there. We have people, shareholders, and these entities today. I think we have an opportunity deal with all of the interest in a manner that is fair, but also moves our nation ahead and we dont have these two behemoths that are basically 100 backed by the federal government. After the 2008 financial crisis, congress created the Financial Stability Oversight Council in order to monitor the risk in the Financial System. One of the main duties is to identify gaps in regulation that could impose that could pose risks to the Financial Stability of the United States. Despitethe head, therell, you appear to support a bill that this committee has passed that would roll back the rules on banks between 50 billion and 250 billion in assets. Thats about 30 of the 40 largest banks in this country. What i want to understand today is why are you so confident that would impose a risk to the Financial Stability of the country . How much do these banks hold collectively in assets, Deposit Securities and so on . Have very that we significant regulators that will continue to regulate. Thats not my question. I am asking you a straightforward question. We are talking about changing the rules that 30 of the 40th largest institutions would list their designation as since them equate significant systemically significant Financial Institutions. How much do they collectively hold in assets . It is a large number. How about 4 trillion . Does that sound right . That is about what portion of the gdp . Thats about one quarter of the entire gdp. During the 2008 financial crisis, do you know how much the taxpayers had to pay out in bailout money to those 30 of the 40 large banks in the country in order to keep them floating . I assume you have that number. 50 billion. Im surprised that as the head and the secretary of the treasury that you would support muchl without knowing how you are actually reducing the regulation on it in these institutions. These banks hold the equivalent of about a quarter of the entire economy. They have 50 billion in bailout money, less than a decade ago. You think we can roll back and reduce our oversight. Do you think that these 50 250 billion banks cant be a risk to the system . There could be banks that do pose a risk. They could be designated. The purpose of this is many banks our Community Large Community Regional banks are you saying a bank of 200 million 200 billion is community . Are you saying regional banks can pose a risk to the Financial System . Many of those banks dont. This is something i believe there is bipartisan support for. Risk, you dont pose can always alter, under the current rules, how you regulate them. The question is how do you keep them on the watchlist . It is clear to me that they pose a risk to the economy. That is the Reason Congress said they should be on a watchlist. Let me take a specific example. In the years leading up to the financial crisis, countrywide financial issued one out of every five mortgages in the country. And teaser subprime Rate Mortgages than anyone. It turned around and sold them to wall street banks. It created all of these grenades, pulled the pins out, and threw them into the economy to help blow up the American Economic system. Of its impact on the Financial System, about 18 months before the crash, countrywide was a 200 billion bank, which is actually smaller than some of the banks that would be deregulated by this. My question is why would you be so eager to take these banks offer the watchlist to deregulate it and make it easier for them to follow whatever practices they want to follow . I share your concerns about countrywide. I think there were a lot of mistakes focused with what they underwrote and a lot of blame to go around. We believe these entities can be regulated by their primary regulators. This is something that requires bipartisan support. It is something for congress to decide whether they want to raise the limit. As i understand it, you have been pushing on raising the rate raising the level from 50 billion. O 250 if you think that means we will be taking on more risk in the system, i think thats what it means. I wish you would tell us so. Banks have record profits right now. They are rolling in money. They just that a giant tax giveaway. They have even more money. They do not need another chance to blow up this economy. Thank you for joining us once again. Let me stay on this topic. I think an important point that , theseo be stressed banks that are 50 billion to 250 billion under this relief measure would no longer be designated, they are extremely heavy heavily regulated, anyway. Even withoutation one. Is it true they are subject to a huge raft of regulations that has nothing to do with the city designation . That is true. They are probably regulated by as much as four different entities. Isnt it also true that these banks now have huge capital standards . The industry is heavily capitalized. Is it also true that they also have heavy requirements that crash . Exist prior to the isnt it also true that most of these entities engage in pretty ordinary, plain vanilla banking activities as opposed to the more exotic, complex, and interconnected International Business of the enormous banks . Are those are relative . Those are the reasons why it is perfectly reasonable to not designate for another regulatory overlay those banks that dont create the systemic risk. Me thank you and congratulate the work of your team on tax reform. You were terrific to work with. The collaboration between the administration and Congress Allowed us to produce something that is in irmas a constructive. In normal sleep constructive. You mentioned the view of treasury we are likely to have growth for some time. I just want to particularly thank you and senator scott who worked closely with us. I would just point out the Congressional Budget Office forecast prior to the tax reform that our Economic Growth would average 1. 9 . 3 are now at approximately before the tremendous benefits have fully kicked inw. We are already close to 4 . Close,ustain anything the federal government will take and much more revenue as a result of a bigger economy then we were projected to take in with 1. 9 growth, is that true . That is accurate. I want to touch briefly on the discussion of mortgages. I am eager to see us make progress on this. I am pleased there seems to be a said that we have capital on risk and guarantees. View,d disagree with your this is understandably subjective, that a government guarantee is a necessary precondition to have a liquid 30 year mortgage. As you know, the average duration of a 30 year mortgage is less than that, depending on interest rates. It. How you look at we have a number of other nonguaranteed thirtyyear securities that play an Important Role in the capital markets. I would urge us to consider what i think is a likely probability that we could have a very robust thirtyyear Mortgage Market without requiring taxpayers to be at risk. Quickly, north korea, were seeing stories, Behavioral Changes by the regime that might be linked to the sanctions making fuel more difficult for them to obtain. I hope that is true, that strikes me as constructive. Which youregislation staff has been very helpful. An additionaluire round of sanctions against Financial Institutions facilitating business with north korea. I think this is very important. I hope you support our effort to get that done. He came out of this committee with a unanimous vote. Thank you, mr. Chairman. Just a couple of followup points. Putously, no one wants to the Financial Institutions in jeopardy or in any way limit the ability of the economy that thrives. Thes important that we make public understand that we simply in the bill from designating automatically to basically allowing regulators to designate someone as a sify. We have not abandoned their process. I think it is fascinating when people your statistics, but they dont want to take all of it. That is called cherry picking. Whether it is we are only going to have a 1. 9 projected growth when the growth has been over 2 for a prolonged period of time. I want to talk about cbo projections. The lovefest we are having here needs to have a little discussion about cbo forecast on deficit. As you know, moodys has recently issued a report on what of the taxis results bill. It is not exactly consistent with the story we are hearing today. That theast administrations 1. 5 trillion tax bill will send deficits to 4. 6 gross thomistic product by 2020 versus 3. 6 Gross Domestic Product by 2020 versus 3. 6. They were forecasting lack of growth, the forecasted today is we are growing. It doubles as a shared gdp after the recession projected before to rise from 70 to this year 91 over the coming decade. The cbo now expects the tax change to send this ratio to 97. 5 . If we are going to use cbl statistics, lets use them. Handed oure we credit card. At the same time we handed it with that on it to the next generation. We are failing to fix over 50,000 bridges. That is another way to hand debt and deficit. I know the administration is looking at a infrastructure plan that could impact the adopted. It is not going to be robust enough. Right now, if you look at the corps of engineers. The corps of engineers has a q uuee of projects. It will take at least 17 years to finish those projects. We have now made a choice. We have made an economic gamble. Lets not pretend that we havent taken a risk. That this is all rosy. Pretend that we are being fiscally responsible every day that we are here. I am going to leave it at that. I want to talk about something that hits people every day, the insecurity and multi employer pensions. We have a plan which the Ranking Member has ably presented, the butch lewis plan. It is incredibly important to thousands of north dakotas, thousands of people. The president promised to help these people exactly, who are now being threatened with dramatic cuts in their pension. Will this Administration Support the butch lewis bill and help us give it get it on the spending package . Me thank you for your comments on the regulatory issue, it doesnt preclude the regulators from designating people. The multiemployer pensions, it is a very complicated issue. I have had the opportunity to study this the last year and meet with workers on this issue. We look forward to working with you on different solutions. . What is your plan what is your plan . These are the exact people the president promised to help, the forgotten people. We stand alone trying to fix this. We have not gotten help from the other side of the aisle. Need the administration that has made a commitment to stand up for these workers, some 70 reduction in their pension. That is unfathomable, unspeakable. Can you help us . What is your idea . If you dont like butch lewis, what is your idea . Lets get this done. I look forward idea that all the time. I hear that all the time. We need a result. It is not enough to have a process. We need a result. I want to say for the Ranking Member for the excellent work he and his staff has done on this. If that is not the solution, tell me what this is . But these folks need to be made whole. Secretariat, good to see you again. Work onu for your hard the tax reform package. Helped a couple that has not been done in 30 years. Specifically thank you for the newthe irs get withholdings done in time for hope wary the february 15 paychecks. Is somewhereing around eight out of 10 employees will see more money in their takehome pay. That is significant progress for People Living paycheck to paycheck. They are going to have a greater appreciation in a tangible way of the success of this administration, and frankly, of your leadership. So thank you for that. I would also like to say thank you because between the president s executive order last spring and the report less november the administration has made significant progress on but imagine getting pulled over for speeding in a neighborhood without any speed limit sign. Designated you get from a nonbanking perspective. The ticket doesnt have any instructions on how to pay it. That is how you find your way out. I want to make sure that folks back home were not involved in the financial industry at all understand and appreciate the foundxity is something as as this designation in a language that we all understand and appreciate. Thisis how dizzying process as for the average person to understand and appreciate the impact on those folks because of designations is a significantly higher cost in doing business. There should be clarity about what you get labeled as a sify they should release public explanations for its designation. I know you agree with much of this. My question is what specific steps are you taking to bring about these needed reforms . Sec. Mnuchin thank you. I thought that was a very good and interesting analogy. I share your view on transparency. Doesnt mean that people cant get tickets, but you have to post the speed limit. We are working with the committee on looking at guidelines and trying to figure out how we can have more transparency in the process. Thank you. Whats the level of involvement of other Council Members in recent decisions . Sec. Mnuchin very active. This been some questions about that and is important for us to recognize they are still actively involved in the process. Sec. Mnuchin we have had public and private meetings and are has been robust discussion at the principles and the staff. A lot of work has been done. Next question. Not congress, not you, but the District Court now requires a costbenefit analysis, which i support. My question is can you walk me through when a costbenefit analysis will look like and what is taken into consideration . Sec. Mnuchin we are working on that and as we develop that we look forward to coming to your office and reviewing them before they are implemented. Thank you. Last question or just a statement. Last may i ask you reevaluate the need to issued ar, treasury priority guidance plan that included doing just that. I appreciate your responsiveness and i hope i can count on the same level of responsiveness as we work with you on the inclusion in the ifcs investor guidelines. Thank you. Thank you. Thank you for being here, secretary. Interesting morning. Let me start off with just a comment. I heard some backandforth and in response to one of my colleagues, you made the comment it is in a great time for financial people. That concerns me. There are many people across this country who are still struggling and that is where we should be looking. The other thing i want to point out, i am from the battier from nevada. We are still coming out of the worst recession weve ever seen. There was a report that came out that showed that nevadas Economic Forecast is doing very well. Experts are bullish on nevadas overall economy this year. Markers. E four key wages, a 2. 4 year over year. Construction activity. It is the Fastest Growing sector. Discouraged workers. The number who left a labor force because they cannot find a job has dropped. And nevadas gdp has shown Continual Growth over the past five years. That is an incredible statistic, considering we were the hardest hit in 2007. What i just cited to you was a report that came out january 1, 2017, before you or President Trump took office. Of the comments im hearing today that somehow this tax reform bill contributed to where we are today in nevada is a misnomer. And it does not give respect to every single and legislator and every leader both republican and democrat in the state who has worked hard for nevada to come out of recovery. That said i hope the actions you take a deed to benefit what we are doing in nevada and i look forward to working there. I think it is questionable now where that will lead in the year to come. The other area that is difficult in the state of nevada right now, we have been having this conversation, is Affordable Housing. One in four renters pays more than 30 of their income. Half of income for rent. Only about five for every low income family who gets Housing Assistance, four families receive no Housing Assistance at all. While i am relieved the low income tax credit remains, the support 90 of all affording housing bills, 200,000 fewer affordable units built in the next decade. Stagnant or increasing moderately but rent is going up. When will the treasury address affordable renting housing crisis . It is an important issue and we look forward to working with you on it. Ok. That seems to be the standard answer for everything. Will the president s proposed infrastructure bill include funding to invest in Affordable Housing infrastructure . Sec. Mnuchin i think when the printed releases it there will be opportunities in Affordable Housing, as well as other things. Are you working with the president now to address those needs . Sec. Mnuchin not specifically Affordable Housing, but yes, the overall infrastructure. When will treasury and hud begin publishing the monthly housing scorecard again . Apparently there hasnt been one issued in nearly two years. Sec. Mnuchin i will look into that and get back to you. Let me say im disappointed that the Treasury Department destroy the mira program. The National Savings rate is going down. How does the Treasury Department plan to help more people save for retirement . Sec. Mnuchin that is actually something i looked at very carefully. To get rid of it had nothing to do with our v1 savings. It was just the cost of maintaining it, there were very few people using it. But the staggering costs. Reallocate that money so we can help people in saving in retirement. So you do have do you have a program you are looking at now . Sec. Mnuchin we moved those people into the private factor in looking at programs to encourage a private solution. I would like to know if you would in the future as you develop programs to make sure youre reaching out to my staff and working with us. A notice my time is up. So i will submit the rest of my questions for the record. Thank you. Secretary, thank you for being here. In our 10 years since the financial crisis we now have a bipartisan bill which is attempting to provide relief to banks. Can you tell me about why you think that is important and what benefits are ultimately accrued to businesses and customers of those banks . Sec. Mnuchin sure. I believe that too many of the banking assets are held in a large banks. One of the ways to distribute risk is to allow the Smaller Banks to continue to grow effectively and not have them burdened by unnecessary regulation. So i think that one, this accomplishes more diversification of banking. That lending is very important in terms of growing the economy. And in many cases the local and regional banks had those relationships, they know how to lend, and want to encourage them to lend. The think that people wanting to start up a bank we have a very unhealthy situation in the banking ecosystem today. Is a very disturbing trend in north koran north carolina. We have lost about half of hours. Of ours. Do you feel like a part of the reason we just not seeing that turn on banks is at least in part attributed to the fact that they have a regulatory hurdle that they would have to climb to make it difficult, to make the Business Model work . Sec. Mnuchin i do. I want to ask also tax reform lets say in december we failed to pass tax reform. So the current tax regiment would be the regimen for the next 10 years. Weird you think we would ultimately be economically over 10 years . Sec. Mnuchin substantially lower than where we are and probably in the low twos. One of the things we have seen it is true the economy some states were doing better before the president took office. We saw significant increase last year largely attributed to a calming regulatory overreach. This year i think it will be a combination of continuing that reform and the benefit of tax reform. As businesses start looking ahead and looking at how the tax cuts affect their business, we have seen hundreds of businesses announce pay raises, de facto minimum wages being created in the banking and Retail Industry is a result of announcements made by large organizations. We have seen pay increases, bonuses, plans for capital the claimant. I dont think there any doubt the vast majority that has occurred is as a result of the tax plan and would not have occurred if we didnt pass that to the president s desk. Do you agree with that . Theres one piece i think has been criticized, and that has to do with buyback. Some people think that using some of the resources to do stock buyback is a bad thing. I dont necessarily agree with that. Did he talk about what actually occurs when a company does a stock buyback, what they are likely to do with the resources . Sec. Mnuchin it is really just a reallocation of capital. So companies have a decision. They can reinvest money in their business, pay dividends, or buy back stock. If they buy back stock or pay dividends, that is capital that flows out to investors that can be recycled and put into other businesses. So it is a natural flow of funds from businesses that have access capital. So it also ultimately contributes to an increase in the gdp and Economic Growth. Sec. Mnuchin yes it does. The last question i have for you, actually, relates to what you are going to do as secretary for regulatory relief within your own rulemaking authority. Can you give me some sense of what your priorities are over the next year or so in terms of areas that you think, through the rulemaking process, that we could see i know you cant but in theecifics, areas of regulation that you think need to be looked at and what can we expect . Sec. Mnuchin again, we will look across the board in the financial area. Secretary, i appreciate you being here. I appreciate you offering to work with us and partner with us, and do on a bipartisan basis, come up with good outcomes that i bipartisan basis i see one member who was here outed with us to get that of the committee and to the senate and hopefully to the house. We look forward to working with you on a continuing bipartisan basis to get the economy moving even more quickly than it is in this time. Thank you. Senator jones. Thank you mr. Secretary for your appearance here today. I want to go back. To senatoro back heitkamps questions returning the pension bill and the Ranking Members bill that is pending. Fors an important bill people in my state and i think we can agree there is a looming crisis in that. I appreciate your answer about looking forward to working with you, but i would like to start that process now. If you could, give me your ideas, give me your thoughts. You have looked at the bill, what about the bill is ok . Are there other things that we need to be looking at to try to solve the crisis . Sec. Mnuchin first of all, thank you. I would be more than happy to come meet with you. Again, this is a significant problem. I dont believe there is a simple solution. It is complicated. I would be happy to go through in aspects, but it is something i look forward to working with senator brown and the chairman and figure out what are the various different solutions. We have a lot of resources at treasury. One of the things we look at is restructurings. We have very prescribed formulas of what we can and cant do. I am aware of the problem that exists. Would any knowledge that it is a significant problem for those who have those pensions . Sec. Mnuchin i would say it is a significant problem. It is not one with a clear and simple solution we will look forward to working with the committee. Thank you. The Small Business jobs act was created to support a lot of local Small Businesses and help accelerate growth. That was an Important Initiative for alabama. I think we created a number of jobs, got 31 million. But round one has effectively run out. Would you support a reauthorization . Sec. Mnuchin not necessarily, but i would not rule it out. Again, it is something i would work with congress and we need to look at more carefully. I wasnt here when the tax bill was brought to the floor and passed. I am sure you may have talked about this ad nausea and i apologize. But you mentioned earlier that the tax bill will help create Wage Inflation and help wage growth. Thats a big problem in my state. The Median Income is 47,000 a year, which is below all but a handful of states. In some counties, the Median Income is below 30,000 a year. Could you just explain how the tax bill as it exists right now is going to help in places like alabama particularly rural in areas where the Median Income is 27,000 a year . Sec. Mnuchin that is a big concern of the president. Workers have not had the type of raises that they should have. Id be happy to go through with you, the council of economic advisers put out a piece that showed that the average would be about 4000. We believe that is if there is significant more investment into business, that that will lead to wages going higher. The other thing that is coming up i know the president will be talking about a huge infrastructure bill. We also talking about immigration and Border Security, with the administration is asking for 25 billion to be placed for Border Security, which generally Everyone Wants better Border Security. But my concern is the cbo report that talks about the debt being created by the tax bill, 1 trillion over 10 years. I know were going to try to tap into private investment, but private investment in the infrastructure is not good to help in my rural areas. They are not going to go over certain rows there. How are we going to pay for all this . Pay for the 25 billion, the infrastructure if we are having to wait to catch up . The taxhe cat bill will grow the economy and beget more money coming in. But how are we going to pay for that infrastructure now and Border Security . Sec. Mnuchin as you know, we dont agree with the cbo analysis on the tax bill. We do think revenues will go up significantly. On the infrastructure, is going to have to be a combination of federal dollars, state dollars in private dollars. I agree with you completely. There are many Infrastructure Projects that are not going to be privately funded. Right. I see my time is up. Thank you. Thank you, mr. Chairman. Good morning, sir. All,just curious, first of i appreciate the time you have been in a chair already so i will try to be brief in not repeat a lot of the items that have been laid out today. 18,ou know, on january metlife filed a joint motion to dismiss an earlier s stock appeal which was an effort to designate metlife as a sify. Is a denver 29th 2017, lead credential as the lone nonbankdesignated sify. I understand they have given the ability to designate nonbank sifys under the dodd frank. Given your comments today, should the Banking Committee consider changes to section 113 . And to the structure of the stock more broadly. You mentioned Greater Transparency is necessary. Would you recommend other changes as well, specifically with regard to this section . Sec. Mnuchin again, i dont have a specific recommendation to that section because i think there are things we can do at the committee level, as you mentioned indicates if aig, they were dedesignated because it significantly reduce their risk. In the case of metlife, there was illegal view and there was a legal view and a decision to drop the appeal. I dont think we need legislative changes at this point. I know that senator scott had theries with regard to costbenefit analysis that was being used. I would just like to follow up with his questioning. The you intended to push for an interpretive guidance from f sock to reflect that Agency Action is appropriate only if a costbenefit analysis can show that it does more good than harm . Sec. Mnuchin we are going to go through reviewing those guidelines. I want to be careful to make conclusions before i have had a chance to review that with the committee members. But we are in favor of more transparency in the analysis of costbenefit. So you would be interested in a further discussion with the when you see the committee sec. Mnuchin excuse me, of f stock. In the past, on the other issue, there has been a great deal of concern in the role of the Financial Stability board in the designation process. Is an international body. Theu. S. Is represented, body has no authority over u. S. Financial regulation. The past actions like the designation of prudential and metlife raise questions over the influence over the sify designations. Can you commit, or would you discuss with us your philosophy with regard to the role that the fsb will play or perhaps no role in future designations . Where d. C. The Committee Going . Where do you see the Committee Going . Sec. Mnuchin i dont see any role. That be a change from previous activity, or previous considerations, in your opinion . I cant sec. Mnuchin i cant comment on what the committee did before i was on it although i share some concerns that were at based that were raised. Take on advisement but independently by things proposed by other groups. Sec. Mnuchin absolutely. We have all recently watched the swings in bitcoin value. Bitcoin and other crypto currency has seen their values change germanic late. Dramatically. D. C. Crypto currency as a threat to Financial Stability . Sec. Mnuchin im glad you brought up when my favorite subjects. As a threat to Financial Stability but i see them as very important issues. We set up a subcommittee to look at this. My primary concern about crypto currencys is twofold. One, i want to make sure that these are not used by bad guys. That they dont turn into old swiss numbered bank accounts. In the United States if you are dealing with these crypto currencies and your wallet is in other things you have the same Money Laundering requirements as banks. We want to make sure that around the world that exists. I also want to make sure that consumers understand the issues around crypto currencies. Just a quick followup on that issue. Do you think you have the tools available to you now both in terms of legislative authority and the manpower to actually enforce withh and regards to the concerns expressed . Sec. Mnuchin i think we have them now but having said that, this is an evolving world. We will not be bashful and coming back and asking for more resources. Thank you. Mr. Secretary, thank you for being here. The recently enacted National Defense bill included in amendment to require a copper has a strategy from all agencies require a comprehensive strategy from all agencies. That was enacted in late november. This is due by march 15. Discussions any about treasuries reporting requirements in regards to this north korean strategy . Sec. Mnuchin i have probably spent more time on north korea than probably any other subject. The report will be part of this. We spent a lot of time at treasury discussing these issues. I appreciate the fact that you discussed those issues. Will you be meeting the required reporting date of march 15 with treasury strategy regarding north korea . Sec. Mnuchin i have no reason to think that we will not be that deadline. I anticipate we will. Thank you. This has been mentioned before, i will mention it again. It is absolutely critical to my state as well, and it is in regards to the pension situation we find herself in. Ourselve in. Re working to protect up the system before it goes even worse. I know you have met some of these retirees in the past. Really use your support to help get the legislation across the finish line. I am also a sponsor of the butch lewis act. Are you willing to support the butch lewis legislation in order to ensure the solvency of these plans . Sec. Mnuchin again, i am not willing to sit this specifically support that legislation at im willing to sit down with you and others on a bipartisan basis and figure out a solution. Ofdo you have any specifics a legislation you will support at this time. Sec. Mnuchin i would rather not go through it at this moment in time. As i said, it is a complicated issue, one of the more complicated issues ive come across in the past year. When you meet with me will you bring specifics . Sec. Mnuchin i would be more than happy to do that. Let me tell you about a meeting i had in oakland city, india. Indiana. It was with about 300 retired miners, they just got their health benefits. They said harry truman made this promise to us. Onee able to get this, for of the miners, many could get the medicine they needed so is wife who was in a terminal medical condition, could get that medicine and live out her remaining days in peace and without pain. Thats how important that was. They said this pension piece is so wey important to us dont find ourselves living hand to mouth at the end of the day. You have been kind enough to agree to meet with me. Will you meet with our miners and Truck Drivers to go through with this and answer their questions . They are our friends and neighbors, they are citizens of my state. May want to know what the future holds. They want to know what the future holds. Sec. Mnuchin we had a meeting last year and i would be happy to conduct a meeting this year with different workers were affected by this. We leave the banking subcommittee on National Security and International Trade and finance. We held a hearing last spring on north korea and asked former Administration Officials how we can more effectively deploy sanctions. Unsurprisingly, the conversation focused largely on china. Secondaryssibility of sanctions on chinese institutions. Treasury has imposed sanctions on a number of entities. Have you seen the secondary sanctions have been effective as a deterrent in regards to north korea . Sec. Mnuchin yes, very much so. When you look at this, does china have a basic understanding of where and how north korea is using chinas banks and economy . Sec. Mnuchin i do. Does that activity occur at the largest chinese banks, including state owned banks, fortis north korea intentionally funnel primarily to the smaller chinese banks that are less susceptible to u. S. Pressure . Sec. Mnuchin i dont want to go through specifics in this setting, but i would be happy to talk to you about it. We are having very specific ongoing dialogue with the chinese banks. I just sent my undersecretary over there. She met with a large group of people and regulators. We are having very good dialogue with the banks over there. We will continue to have sanctions where appropriate. I appreciate that and i would like that meeting to be sooner rather than later in in light of the significantly dangerous situation we find yourselves in with north korea. Sec. Mnuchin we will followup with you to get that on the books. Mr. Chairman, thank you very much. Senator reid. Thank you, mr. Secretary for joining us today. 2017 report they called for under deciles rescoring underscoring potential systemic applications. Could you elaborate and give us more on what you are doing . This seems to be in the headline of every paper every day. Please. Sec. Mnuchin thank you. It is a very important subject. I am spending a lot of time on this. Im happy to report i dont see anything at this moment that is a risk to the Financial Sector. We need to continue to invest lots of money. It has to be a combination of our Intelligence Community, our experts at treasury, our experts and the regulators, as well as private industry. We need to be working very closely together because this is something that is evolving every day. Apropos of your account involving everyday, the story about the atms that can be remotely controlled by bad people. If you have the right magic words, you can go up and demand money and it just flows out. , there is not checked will be a people in our banking system. Upheaval in our banking system. Sec. Mnuchin the atm said an upgraded, but there are plenty of other Cyber Attacks we need to stay ahead of. Let me ask you a related question. Given the fact this is an onslaught by both organized entities, criminal entities, individual hackers that have do you havealents, adequate personnel and experts at the Treasury Department to carry on this expanding work . Sec. Mnuchin i would say right now we do but i will not be bashful to come back for ask for more resources. We have talked about Digital Currencies. My colleagues raised the issue. You seem to enjoy questions about Digital Currencies. I will give you another. Is involved not just in terms of stability of the Financial System with Digital Currencies but with nefarious activities by Money Laundering, avoiding sanctions. That raises the question of how closely you are aligned with our Intelligence Community in terms of the intelligence problems, circumventing sanctions, criminals using it to support terrorist activities. You can go down a long laundry list. What is your relationship with the Intelligence Committee community . Sec. Mnuchin very closely. I meet with all we have daily interaction and people going back and forth. It is a very good working relationship. That he noticed a significant increase in these types of nefarious actors using crypto currencies, or is it a problem that has stabilized or is growing . Sec. Mnuchin there is not something that is of significant concern to us today, but it is something we need to actively monitor. It is a bigger concern of mine in other countries. That is our big push, weather at to make sure20 other countries are regulating these activities. Person, wechair have raised multiple topics today. Crypto currencies, Cyber Security in particular. Agenciesur component have the expertise and the personnel to fully engage with you . You might be very wellintentioned, but if you cant count on an agency that has significant responsibility, your intentions will not be up to the job. Sec. Mnuchin i would say right now i think we do. One of the things who want to make sure is we have proper coordination so when we have all these resources we can use them appropriately together. If thenot be bashful agencies need to come back with more resources. Are you contemplating doing an assessment of the threat and resources and presenting it first of the administration and us so we have an idea . In the past we have had agencies who have come up and at the direction of omb said we dont need anything, when in fact they were in the rears in terms of personnel and resources. Sec. Mnuchin that is something in the early stages we are working on. I think it makes sense. Thank you, mr. Secretary. Senator van hollen . Thank you, mr. Chairman. Sorry, i was in another committee hearings. I do want to start by thanking you and the department for your input on the legislation of the brink act. I think senator toomey mentioned the chairman has been working hard to get a vote scheduled on that. Appreciate working with you on that and your team on the issues related to north korea. A lot of the issues i was going to cover have been addressed. This is the first time you have been before Congress Since the passage of the tax bill. By all accounts, the president intends to talk about that this evening. We will find plenty to disagree with about the tax bill in general, but in the interest of truth in advertising i think it is worth pointing out a couple of things that were said that the plan would do, which it did not. One is it ended up providing big tax breaks to very wealthy americans. You have been faced with this question before, back in november 2016, he said any reductions we have will be soset by less deductions there will be no absolute tax cut for the upper class. That is not true with respect to the final bill, is it . There are net tax reductions for the upper class. Sec. Mnuchin there are overall. There are people who did not get them, but there are overall. I think it is worth pointing out that the joint committee on taxation, the official scorekeeper on tax matters concluded households that make more than 1 million per year will get an average tax cut of 64,000 in 2019 alone. Mr. Secretary, the you have reason to doubt that analysis . Sec. Mnuchin i dont have the numbers in front of me but i think i dont have reason to doubt that. Let me go back to another statement. This was made by candidate trump in may 2016. He said with respect to his tax is getting aody tax cut, especially the middle class. Speaker ryan and later republican leader mcconnell made statements about how everybody in the middle class was going to get a tax cut. That turned out not to be the case either, right . Sec. Mnuchin i think we worked hard that almost everybody got a tax break. The tax system was very complicated. As we simplified it certain people had different situations. Over 90 of the people have gotten tax breaks. With all respect, we just had a state analysis. It was a bipartisan result in the state of maryland. It was performed by the Maryland Bureau of revenue estimates. 376 thousandd maryland families 376,000 maryland families will get a tax increase. Double average 2080 her family. I dont know what you mean by almost nobody, but 376,000 marylanders, just in the state of maryland. If you look at the impact of those tax cuts, they concluded 123,000 maryland families who make between 25,000 and 50,000 a year are going to get tax hikes. For them it will be an average tax hike of 759. That is not consistent with earlier claims that everybody was going to get a tax reduction, is it . Sec. Mnuchin i will assume the numbers are correct. That is a lot of people just in maryland. Like others around the country, scrambling to try to protect the people in our states from tax increases that they will face as a result of this tax bill. I am hoping the department of treasury will actually work with this, with the states on this. If your intention was what the president indicated early on, nobody in the middle class should see a tax increase, i hope you will work with us with issues of eliminating the deduction for state and local taxes, the salt reduction results in double taxation. I hope you will work with us to actually accomplish what the president said he wanted to accomplish on the campaign trail. I look forward to that discussion. Thank you. Thank you, very much. Had to gonnedy preside until noon, which was about five mins ago. He is on his way back. I told him i would keep the hearings open. While we are waiting a few minutes for senator kennedy to return, i thought i would take another opportunity to ask you a few questions. I want to go into this tax question. You have been asked a number of questions about taxes. I sit on the finest committee and was part of the group that wrote this tax bill. Senator van hollen, i do wonder about the numbers you are getting from your state. About zero tone 25,000 . Make betweenmilies 25,000 and 50,000 a year will get tax hikes. The average is 759. I dont of exactly what that is. Let me tell you what we ran into for these scores. When we eliminated the individual mandate, which was a tax on people who did not want to buy insurance, for the law force them to buy, that was scored by some of the tax scorers. It was a tax increase. How can telling people they can voluntarily avoid a tax turn into a tax increase . The way that happened was joint tax said it they dont take advantage of the obamacare subsidy of several thousand dollars to buy insurance that they dont want to buy, that they the insurance are voluntarily choosing not to get the subsidy for, the value of that subsidy is a tax increase. Some of us found that was outrageous assumption to be making in calculating these kinds of things. We asked joint tax to run the numbers without calling it a tax increase, 17 voluntarily chooses not to take a government subsidy. When they ran those numbers, it turns out i would like for you to verify this if you can, mr. Secretary, the analysis of the tax code we implemented showed every single income code, startingax from zero to 10 and going on up to the highest income categories, every single income tax cohort got a tax cut. Can you verify that, mr. Secretary . Sec. Mnuchin i can. Can you also verify the largest percentages of tax cuts were in the lower and middle income categories . Sec. Mnuchin yes, i believe that was the case. I will be the first to say, as the secretary indicated, you can go into each cohort and five individuals and find individuals who might have seen their taxes go up. Particularly if they live in a statement high state and local taxes. That is something that happens. I think it needs to be said that every single, solitary tax cohort got a tax cut in the highest percentages of tax cuts were in the lower and middle income categories. Again . Verify that sec. Mnuchin yes, sir. I think those things are important. I have seen a lot of analysis of this code and many different tax provisions. I think we have to be very careful when we look at the study the some group has done and be sure we understand what the assumptions they are making our when they do their calculus. I want to shift quickly. I expect senator kennedy to come to the door any moment. Mr. Secretary, you have spoken a lot today about a wide range of issues. Are there any areas either in c report or treasury report we should pay greater attention to hear . It is just an open question to you. Sec. Mnuchin i think we have had the opportunity to talk about a lot of interesting issues across the board. Obviously cyber we talked about a lot. We touched on crypto currencies which is something we are spending time looking at. We have talked about the designation process. We look forward to working with you and the committee to raise the threshold. That does not mean these entities will be regulated. They will be regulated. As the center pointed out, it does not mean they cant be designated. We look forward to working with you on that. In housing reform, im glad weve had a lot of conversations today on housing reform. I hope we do figure out a solution to this so we dont leave these entities around for another 10 years. I am openminded to working with you and the committee on lots of solutions with the understanding that we maintain a 30year mortgage, if we put the government taxpayer at risk on a guarantee. Which we dont have to do but we will look at different alternatives. If we do that, that the taxpayer is compensated and there wont be any explicit guarantees implicit guarantees they are not compensated for. Before i will let senator van hollen come back if you would like to. I would first of all say on the state analysis i give you is based on our state board of revenue estimates. There is no mention in their at all of the Affordable Care act component. I would love to share information. I do think a lot more are going to see tax increases. The last point is you know if liabilityd a 200 tax and notice 100, that the 50 cut. Folks in the lower bracket to got tax cuts, they were a higher percentage. That does not take away the average tax for a millionaire with 67,000 according to joint tax. We could have avoided that in this process. Understood. Double always be the case that when you have tax cuts across the board, those who pay more in taxes will get larger tax cuts in dollars. Especially when you reduce the top rate, which was not required to be done in order to close loopholes. Thats another conversation. I appreciate the opportunity. Senator kennedy, i want to ask one more question. This relates to basically the Economic Growth and the deficit issue. Just a couple of quick things. The cbo score that was issued this year for budget purposes and used in discussion of the tax bill projected a 1. 9 raise in the economy. Correct. If projected the economy would grow only at 149 for 10 straight years . Sec. Mnuchin that is correct. Zero growth in the rate of growth in the economy under current law . That is what the cbo projected. It is that projection, the absolute flatline projection that if we do nothing we will see nothing in terms of growth. That has been used to analyze can make the claims about this tax bill. That this will generate 1 trillion worth of deficit. How much would the economy need to grow to average over the next decade before there isnt before it is revenue neutral . Sec. Mnuchin about 30 to 35 basis points. About 2. 3 . Sec. Mnuchin yes. If the economy can average to. 3 instead of 1. 9 over the next decade, they will be no deficit from this tax bill . Correct . Sec. Mnuchin that is correct. 3 and thelready at rejections the council of economic advisers put out his we hope to be able to maintain that 3 for a decade . Sec. Mnuchin that is correct. I understand those are projections and are lots of arguments about those projections, but at least as far in we are exceeding what is needed to be achieved in order to avoid any deficit. Sec. Mnuchin that is correct mr. Chairman. Senator kennedy. Thank you, mr. Chairman and thank you mr. Secretary. I will start by associating myself with the remarks of senator shelby, and thank you for your hard work on her tax legislation our tax legislation. Can we agree the revenue generated, the onetime revenue generated by the repatriation of moneys from overseas profits back to the United States is nonrecurring revenue . Sec. Mnuchin yes. Match that up a nonrecurring expense like infrastructure . That makes sense in terms of budget 101 . Sec. Mnuchin at the end of the day cash in revenues. Are sponge will we were looking abl revenues are sponge e. To would not be delegate onetime tax revenues that are generated by moneys repatriated onetime to the United States from overseas up ass, and we max those any first year accounting student would recommend that you do with one time nonrecurring expenses like infrastructure. You would not have any objection . Sec. Mnuchin i would have no objection. Can we agree that would be a swell idea . Sec. Mnuchin that sounds like a terrific idea. You are going to ask us to raise the debt limit. Sec. Mnuchin i already have. I know you were not clairvoyant, but over the next three years and perhaps seven years how many more times are you going to ask us to raise the debt limit . Sec. Mnuchin i assume a lot. Shouldnt we do something about that . Sec. Mnuchin again, i think the president is very much concerned about the rate increase of the debt, in particular the rate that accrued over the last eight years. His first free arctic was to createeconomic Economic Growth. We need to figure out where we can have government savings to deal with the deficit. At 20 trillion and climbing. At some point we will have to change the name of the department of treasury to the department of debt. They will not be any treasury left. In the past year we have added 536 billion to that . Sec. Mnuchin thats about right. Need would seem to me we to have an adult discussion at some point about how were going to get control of that. Sec. Mnuchin i think the longterm debt in the longterm budget deficits are something that Congress Needs to be conscious of. I want to talk to you about the sanctions. Can we agree for the past five president putin has acted like a thug . Sec. Mnuchin i will not use that terminology, but there are clearly issues that we need to address and that we have done with sanctions. As i said earlier, now that we delivered the report last night there will be additional sanctions Going Forward. Lets go through the list. Syria. , crimea, he meddled in our election. He is helping north korea cheat. Me in terms of , we ought to hit him so hard he is coughing up bones. He is not getting better. Why theunderstand administration is not imposing sanctions that United States Congress Overwhelmingly supported. Sec. Mnuchin again, i apologize because i said this earlier and you were not here. We did an enormous the metalwork in the Intel Community and treasury putting together this report. I encourage you to look at the classified version, which is hundreds of pages. We delivered that last night. We intend to now use that report and that intelligence to go forward with additional sanctions. When . Sec. Mnuchin we are working we are already working on that now that we have finished the report. That is the next part i dont mean to interrupt you, im sorry. Sec. Mnuchin i want to be future, but in the near you will see additional sanctions. Is that near future within the next month . Sec. Mnuchin i want to be careful because the sanctions process there is a process of declassifying. I can assure you as quickly as we can do this, this will be. In the next several months you will see it. Maybe a month. I just want to be careful in making that commitment. It is a thorough process of work that needs to be done. He is not getting any better, mr. Secretary. Maybe you are seeing something in the classified information we are not seeing. If there is, i would sure like to see it because what you allow is what will continue. Sec. Mnuchin i understand, thank you. I really think we are sending the wrong message at this critical juncture. In helping north korea cheat ought to require additional sanctions. Sec. Mnuchin i understand and we look forward to working with you on this. There is a lot of activity here. Thank you, mr. Chairman. I have just a couple of quick announcements. Some senators may want to ask additional questions for the record. Those will be due by february 16, tuesday. Mr. Secretary, we asked that you respond is probably as you can. As promptly as he can. Thank you for your testimony. This year and is adjourned. This hearings is adjourned. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] [captions Copyright National cable satellite corp. 2018] [crowd noise] journal,s washington live every day with news and policy issues that impact you. Coming up monday morning, law ckofessor stephen raddi discusses the house intelligence memo. Think Christopher Pharrell from Judicial Watch will be on to talk about reaction to the memos release. Watch cspans washington journal live at 7 00 eastern monday morning. Join the discussion. Steve joining us on newsmakers, tim phillips. He is the president of americans for prosperity. And joining us with the questioning is maggie severns, reporter for politico, and bill allison, who covers campaigns for bloomberg news. Thank you all for being with us. Let me begin with an opening question regarding the economy and the midterm elections. Will the economy be enough for the republicans to maintain their majority in the house and the senate . Mr. Phillips offyear elections, especially the first one for the party in power, are always tough. You know the numbers historically. Obama lost 63 seats in 2010, clinton lost 54 house seats in 1994, even reagan lost 26 seats,