Test. Test. Test. Test. Jennifer wextomoments if y respond to the questions that you were not allowed to answer when they were asked. You had to be still while, they threw more insults your way, but if you would like to take time to respond now, you have that time. I appreciate that. You know, obviously, the reason i took this job is because i feel that our country is in trouble. And we need to do everything we can to provide the right kinds of opportunities. At hud, for instance, an organization that was largely focused on just getting people into programs, getting people under a roof, and thats not a bad thing, but i really want to maneuver us to a place where were getting people out of programs and to a level of selfsufficiency. We have really aimed at that. And the question that was asked about homelessness, this is a very serious problem and one that i think is solvable in our country. You know, with a place like tokyo, which has more people than new york city, can solve homelessness, then certainly we have the capacity to do so, too, but we really must understand the reasons behind the homelessness. Theres a direct correlation with the amount of regulatory barriers, home crisis, apartment crisis, and homelessness. And we need to be willing to face that. We cant solve this problem by just throwing money at it. We really have to look at the ideology of the problem. And deal with the zoning restrictions, deal with the noise restrictions, with the density requirements. With all of the many regulatory barriers that cause the crisis to go where they are. And this is something that is a problem for democrats, for republicans, for independents, for everybody. We need to stop making everything into a political and fussing and fighting like 3yearo 3yearolds and spend time sitting down and talking together. I looked at the tenets that the chair woman has placed. Theyre exactly the same ones i agree with, yet we have not been able to sit down and talk about it. I think we need to be able to discuss these things. Were intelligent people. We can solve these problems sitting around demonizing each other makes absolutely no sense whatsoever and will not result in any progress. Thank you, doctor. You were also speaking of the worm demonized, demonized for if i understood the words correctly, making sure that the money sent was spent as congress intended for it to be. Would you you were cut off before you could explain that. First of all, i would like to explain in puerto rico, they do have access to 1. 5 billion. And about 2 million of it has been drawn down. So i dont want anybody to be under the impression that, you know, theyre having a crisis that cant be resolved by utilizing the money thats already available. Normally, it takes somewhere between a year and a half to three years to spend that much money. Having said that, you know, the money for unmet needs and mitigation will be got to them as soon as possible in a way that is safe, with a federal monitor in place. And we would do that for virtually anybody. This is the largest amount of money that has been given to any jurisdiction in the history of hud. And i think we have an obligation to the taxpayers to make sure that it is properly utilized, to impact in a positive way the people of puerto rico. Do we have your assurance, doctor, that were doing everything humanly possible through your agency to assist the people in puerto rico . Absolutely. Thats one of our highest priorities. Thank you, sir. The gentleman from missouri, mr. Cleaver, who is also the chair of the subcommittee on national security, international development, and monetary policy, is recognized for five minutes. Thank you, madam chair. I actually am deviating from Affordable Housing issue because i have two people here, and i would like to deal with housing because i have the treasury secretary and hud secretary, but because of what we have on our agenda tomorrow, an examation of facebook, im going to deviate a bit, and mr. Secretary, thank you for the response to my letter. And i thank you for proactively probing the issue of libra. And i want to lift a section of your letter and ask for a little bit more on it. Your letter says fsocs working group on Digital Assets is, quote, monitoring the developments related to the libra product, working to identify and assess potential risks and gaps in authorities that may require more attention. Unquote. Can you go just a little further on that, secretary . Yes, absolutely. First of all, thank you for the interest in this subject. I do understand the diversion. It is an important subject. And we spent a lot of time on this, and we look forward to working with you. I have met multiple times with the representatives at facebook. We have told them that we thought their launch was premature, that they had not addressed fundamental issues around money laundering, bsa requirements, and others. We have set up a subcommittee of fsoc not just to address this but to address other Crypto Assets and make sure we have the proper regulatory. Were working on an intra agency basis, i think very effectively. I also concluded meetings last thursday and friday to see what our International CentralBank Governors and finance ministers, this is a discussion thats going on at the g20, the g7, and fsa fsb as well. Thank you. Is the fsoc working group going to assess Systemic Risk and apply whatever appropriate regulations are needed . Yes, that will be one of the issues amongst many we will look at. Okay. Your letter implies that the Financial Institution participating in Libra Network may be an avenue through which fsoc regulates libra. Is my interpretation correct . That is correct. Do you think that financial regulators have sufficient tools now to confront the potential Systemic Risk associated with libra . You know, i dont want to be cromagnum man or, you know, but this kind of frightens me, this whole issue with libra, and so its unclear whether u. S. And foreign regulators would have the ability to monitor the libra market and require corrective actions if necessary. I think right now in the United States, we do have the proper tools, but if we need more tools well come back to congress. My concern is more internationally and were working through the International Organizations to make sure that they have the similar standards that we use within the United States to combat terrorist financing. Okay. Mr. Secretary, i was excited about the opportunity. I still am semioptimistic and excited. But the response has not been what i thought it would be. And it seemed to me it was perfect for housing because of the tenyear period when we were talking about Capital Gains tax being forgiven. But its just not turning out the activity is not turning out at a level that i had anticipated. And i dont know what the National Picture looks like, but can you address is there a need to tweak it or what do we need to do to get a greater response . I think one of the things that will be helpful is for us to make known to individuals what is actually happening. You know, you look at some of the projects that are going on in miami. In your own area, theres a very nice project going on. Across the country. And were in the process of putting together on the website information so that that can be disseminated. Thank you. Madam chair, i would like to have this letter from the secretary as part of the record. Without objection, such is your order. Thank you. Gentleman yields back. The gentleman from louisiana, mr. Luke ameyer, is recognized for five minutes. Thank you. Welcome, panel. I would like to start with secretary mnuchin. Last week, i sent you a letter. I hope you were able to receive that, with a group of 28 bipartisan members of congress urging you to request a cecil study from the office of financial research. Letter outlined the statutory requirements of fsoc which is to examine issues that could affect financial stability. I have discussed this with many members of fsoc. They tell me theyre supportive of that position. You know, every agency, every federal agency would do a study, and in order to issue a ruling, its required by the administrative procedures act, yet they have not done that. To me, this particular accounting standard is probably a similar issue of this committee or the next several month from the standpoint of what it could do, i believe, to the economy, to the housing industry. So i guess my question to you this morning is, have you received the letter, and are you willing to ask for a study . Thank you. I have received your letter. I appreciate your interest in this subject. This is an important subject. We have talked about this subject several times at fsoc. Were pleased there are certain delays in implementation and ill be discussing your request at the next fsoc meeting to see if the committee thinks we should do this, as you have said, but thank you for your interest. I appreciate that. To me, again, i think this is a ginormous issue. I think its going to affect the other two gentleman here, the way they manage their agencies. Mr. Carson, you stated a while ago that 57 of the loans that fha has are low to moderate income. Yes. What does the total the loans made this year, whats the percentage that fha could be involved with . Well, the total percentage of loans that fha is involved with. What percentage of the total loans made this year, what percentage would be fha would be involved with. If theres 100 loans this year, how many loans would be fhainvolved . I think i would maybe see if director calabria might have the answer to that. My recollection, i dont have the number in front of me. My recollection, certainly in the First Time Buyer market, particularly fha, i think is close to half. 40 , 50 . There are probably about a third of the overall market is my recollection. We can get the data for you. What is the percentage of low to moderate income for you . Well, first of all, i think if you want the bigger picture, you combine fannie and freddie, and fha, youre getting 80 to 90 . This is a different point from precrisis. Almost all of the mortgage risk in the market today is being backed either directly or indirectly by the taxpayer. I dont believe the taxpayer has ever been more exposed to the Mortgage Market at any other time in American History than they are today. My question, though, is low and moderate income. Do you have a percentage . 80 to 90 of the market is through you two individuals, and your agencies. What percentage would be mr. Carson said 57 . What do you think the total would be . 34 of what we do is for minority. And as was mentioned before, low and moderate income, about 57 . Okay, would that be about the totality, then, of what youre looking at, mr. Calabria, for your agency as well . Yes, we certainly emphasis that the footprint in low and moderate income priorities is lower than fannie and freddie. What is your source of revenue, your source of income for fannie and freddie . Primarily gfees with portfolio earnings. They sell that, buy assets. Mr. Carson . Our money comes from the financial activity, the loans that are made. Okay, so if you have to increase your capital, if you have to increase, especially in mr. Calabrias position and mr. Carsons as well, have to increase losses, 500 to 1, i mean, in my world, when i was a banker, as an examiner, this cant happen. So how do you if your only Revenue Source is gfees or loan fees, it would seem you would have to raise the fees to handle the additional reserves. Is that correct . I was just going to say, of the entire market, fha is not 50 . Its like 14 , 15 , 16 . Okay. My question, though, mr mr. Calabria . Youre going to have to raise fees in my mind to be able to raise your capital. Is that correct . Ill emphasize we have been setting kngfees in the past bas on a shadow capital under. Thank you. The gentleman from illinois, mr. Foster, is recognized for five minutes. Thank you, madam chair. I would like to actually pick up on this, the question of the setting the gfees and the profits, where it goes. Now, prior to the changes that youre in the process of making for the profit sweep, where did the profits end up . They were swept to treasury. So the u. S. Taxpayer got the benefit of those. Now, after you make the changes, whose pocket does it end up at that point . It builds capital off the gse. The shareholders of the gses that retain that . No, it builds capital at the gses to protect the taxpayer in case they become insolvent. And ends up as the shareholders of the gses will then be able to sell those . I will note the obligation. So in the Letter Agreement we recently signed, there is an increase in treasuries liquidity preference at the same time there was an increase in capital. The taxpayer is being protected here. But where do the profits the gses are very profitable. Depending on where you set the fees, the mortgage standards you eventually settle with, that will have a huge effect on their profitability. So you will be incomplete control of the profitability of the success of gses or any new competitors as your privatize the business. First, let me emphasize by statute, they already are private shareholder corporate entities so there is no privatization. Theyre already private. Thats what the law says. Im following the instructions given me by congress to get them out of conservatorship. Thats what the law says, thats what were doing. Okay, but when they fail, we all have to recognize that these would not exist had the taxpayer not bailed them out during the crisis. And during a comparable crisis in the future, these entities or any comparable new entities youre contemplated will be bailed out simply because of, you know, you cant let theousithe ouous Housing Market implode in a comparable situation. Which is why its important to have a strong capital. And why the government has to figure out how much to charge for this guarantee. Let me assure you, i believe in the amount of time it would take us to build sufficient capital to get out that this body will have significant time to be able to legislate a different path forward if you so choose. Okay, my difficulty is that, you know, your decision to do this and other decisions youre making is having a huge impact on the share prices at which they were traded. Lets talk a little bit about those shares. It was well documented in the senates perinant subcommittee investigation that hedge funds such as paulson and company, designed securitized product to fail and these same hedge funds blocked shares in the gses for pennies on the dollars after the government had bailed out fannie and freddie, and some of those principals alt the hedge funds, including john paulson, had served on advisory committees to the president on this very issue. My question is, i guess, to secretary mnuchin, what sort of conflict of interest vetting took place to conclude that that was appropriate . Well, first, let me just explain that the treasury has a giant obligation that needs to be paid back. I just want you to describe the conflict of interest vetting. I understand, but youre saying a premise that these shareholders are getting a benefit of a sweep. As the trading share price gone up . I dont really look at the share price one way or another. Could you get back to us on that in case youre unaware of it. But as it relates to any conflukco conflicts of interest to treasury. To the entire administration and everyone who is making the decisions about the shareholder sweep. I guess that applies. Director calabria, do you have anything to say about that . Im very much on the record over the years in saying 2008, what we should have done is wipe out the shareholders. I agree completely. That should be your guiding principle Going Forward instead of putting more money in their pockets. If the circumstances present itself to where we have to wipe off the shareholders, we will. I look forward to that. But now, however, i was concerned on october 10th, you participated in an event at George Mason University where you commented that fhfa was looking for ways for fannie and freddie to increase their equity. That means it would presumably increase the amount eventually going into the shareholders pocket. Its unclear to me who youre actually working for here. Im working for the taxpayers, sir. Why are you concerned about the return on equity which will help the shareholders pockets. Because these entities are leveraged 500 to 1. Its essential to build capital now before a downturn. If you arent planning on privatizing them. Literally, i have agreed completely that we should have and that we should still wipe out the shareholders and look forward to working with you on that. Thank you. Yield back. The gentleman from michigan, mr. Huizenga, is recognized for five minutes. Thank you, madam chair. Mr. Calabria, i want to make sure you were able to wrap up what your thoughts were on the gfees, sort of extended over the last two questions. Thank you. I would really emphasize, and i certainly hope we never see another downturn in the Housing Market, but i believe its my responsibility as the financial regulator to hope for the best but plan for the worst in having witnessed the dev staz this impacts on families and communities that i think is absolutely critical to get fannie and freddie in a condition where they can survive a downturn, and that requires building capital as soon as possible. Okay, so fha is sort of attempted to grow its way out of some of the fiscal problems and displaced private capital has expanded really taxpayer risk, correct . Secretary carson or director calabria . Were not trying to necessarily grow our way out of risk. You know, fha really acts sort of as an accordion, to make capital available and credit available at times of economic distress. So it should be counter cyclical. Yeah. So were seeing were not seeing that right now, are we . I think we are. I think at the time of the height of the crisis, fha expanded enormously. Sure. Yes. I will wholeheartedly agree with that. What im concerned is how do we get private risk back into the system. Thats what im really trying to drive at. Yeah, and one of the things that you probably noticed in our plan is maybe having some tiered risk type phenomena whereby we make contracts based on the risk factors that are involved rather than just having a one size fits all model. Im puzzled by some of my colleagues who seem to think that we ought to declare everybody has a 720 fico score and we should treat all