This is nothing this is something we should work on, and the work on this predated me coming to treasury and this has been a long time, and as i mentioned earlier, we may come back to congress and suggest that you pass legislation. I would ask you, this is not on your 2021 calendar. This should be on your december calendar. I agree. I look forward to working with you. I need to know whether you need legislation. I need to know what you need and we need to make sure that are 2 billion of outstanding debt where people kbts determine what interest is supposed to be paid, and i want to move on because i do chair the asia subcommittee for another week, and we focused on china. China could end up with 1. 5 billion of world bank loans. This is under discussion now. Chinas income has exceeded the level where they should be eligible for these loans and the Chinese Government has enough money to put a million uighurs behind bars and to build a military complex that destabilizes the world so it seems like maybe china should be have the rates. I know the United States wont support world bank loans to china, but im asking, what are you doing to stop those loans . Are we simply making academic arguments or are we making it clear that our future involvement in certain world Bank Activities is dependent upon not giving concessionary loans to china. Again, thank you for raising this issue which i also think is a bipartisan consensus on. So David Malpass who is now the World Bank President , when he was working for me as undersecretary as part of our reforms package, we negotiated with the world bank, with the prior leadership there and we negotiated significant reductions in China Lending with the path below a billion last year. Yesterday, we submitted our objection to the current country plan and we look forward to following up with you. Thank you. The gentleman from florida, mr. Posey is recognized for five minutes. Thank you, madam chair and Ranking Member for holding this hearing on systemic stability. For many of us whoey g grow up r the Great Depression and it was the last financial crisis and at this time we often watched the classic movie its a wonderful life where we experienced the drama of the run on the banks with george bailey, the hero of the movie played by Jimmy Stewart who saves a small town savings and loan from the bank. The last crisis taught us that we no longer live in the world of Jimmy Stewart banks. It runs on other Financial System liabilities like money market funds may often threaten far greater consequences than bank runs. They may collapse in dramatic ways and destroy the ability of Financial Institutions to fund their Asset Holdings and meet the survival constraints imposed by liquidity and even solvency. We often hear the words you cant be too careful in regulating the Financial System we can be so careful that we stifle its invasion and restrict credit and finance and slow Economic Growth and inhibit jobs for people. We must strike a balance and we must look it those Balance Solutions to keep our economy on a path towards sustained growth. Mr. Secretary, please let me commend you with key regulators to final a reform with the proprietary trading with the volcker rule. Thank you. As you know, our banking history was different where banks focused on trade capital and played a limited role in longterm Capital Markets. In this country, banks always had a role in Capital Markets and the investments that made our economy a mighty engine of growth and the intercontinental railroad, shipping and a host of other industries. I believe banks have a key role to play in restricting the vital function. I recently sent a letter to you and other key stability regulators asking that you move quickly to amend the covered fund provision of the volcker rule. Specifically, we asked you to revise the overly broad definition of a, quote, covered fund, to exclude Venture Capital and other longterm funds. So my first question for you today, mr. Secretary is the statute makes you as chair of fsoc responsible for coordinating rule making. Are the financial regulators in the department of treasury working on changes to the covered funds provision and if so, could you please provide us with an insight on the timing for such a proposal . Thank you. First, let me acknowledge what you said that the healthy Banking System is critical to our economy and our banks have derisked and built up significant amounts of capital. So the regulators have already made some proposed changes to the volcker rule that wont create undue risk and will create more liquidity in certain markets and we are working with them as you suggested on the covered the covered fund issue, as well. Thank you. Any idea what the time line would be on that . I would hope its over the next 90 to 120 days, well get back to you. Do you expect criticism in that regard . Im not going to speculate, but it will be open to Public Comment and well take that into consideration. I wanted to talk about the Climate Change regulations and ive only got a minute left and i wonder if you give me your assessment on taking the shortterm stress testing discipline into much longer period realm of Climate Change. Does that make any sense to you . It does not. Im sorry. Can you repeat the question . I said it does not. Just wonder what your assessment is on the usefulness on taking the stress testing discipline into the longer term realm of the Climate Change requirements. Let me just say on my vast expeere expertise, climate is not one of it. The banks have a difficult enough time on modeling different risks. I think longterm climate risk is something thats subject to a lot of different views and as long as theres proper disclosure, i think thats adequate. Very good. I thank you, and my time has expired. Yield back. Thank you. The gentleman from new york, mr. Meeks who is also the chair for the subcommittee Consumer Protection and Financial Institutions is recognized for five minutes. Thank you, madam chair. Mr. Secretary, i think that we can agree, as i said in my opening statement, im really concerned. I mean, it was one of the most things that shocked me as a member of congress when saukt paulson came on the floor talking about our whole economy was going to drop, and so with fsoc which i look forward to try to figure out whats going on and what will happen in the future. I have some real concerns because as i look at the chinese growth, stalling, as i look at the european economies are slowing with some entering recession. I look at brexit looming and what affects that brexit may have and all of the turmoil going on in latin america, it gives me real concerns and the u. S. Economy is slowing also. History may not repeat itself, but sometimes it certainly rhyme, and i fore that over the next few years for the economy, it may rhyme too much for me with the past decade, and so im hoping that the administration is going to look well ahead of what takes place and have certain formulas in place in case there is a tremendous problem like when i look at the dead stock of corporations and even colleges and universities has ballooned and an important share is leveraged loans and coveted loans and there seems to be a real risk of a downgrade cliff and a growing share of this debt is just barely above junk. So im hoping and do you have some models to show what would happen to employment, home ownership, and the broader economy if these loans were downgraded in en masse and the downturn of the economy and how would it affect the retail sector, for instance . Any model that you have. Can you tell us . Im really concerned about the leveraged loans that are first let me say we share your concerns on Financial Stability. I worked for secretary paulson for a long time and speak to him regularly and i hope were never in that type of a time period again. Specifically as it relates to leverage lending and confident light. We do share your concerns. We are monitoring those risks. Weve studied it very carefully as it relates to the banks. And again were very comfortable that theres very limited exposure in the banks. As it relates to specifics of the impact on employment and retail sales and other areas. Well get back to you on our thoughts own that. But again my view that it is minimal because the exposure is outside of the Banking Industry and shouldnt have the type of contagion and risk that occurred during the financial crisis. Thank you for that. And do get concerned sometimes too because now that it is outside of the financial, the Banking System, we try to put certain things in place for the Banking System so that we can make sure we see the risk before and make sure we can downsize and do whats necessary. Outside i want to make sure were watching whats happening on the outside because i dont want that to catch us by surprise. I think thats tremendously important. I agree and i assure you we are. Also, you know, when i looked at what devastated me and in this financial crisis, its a reminder that recessions and crises dont hit all sectors of the and demographics of the economy equally. If you look at my district and black and minority communities, they overwhelmingly lost wealth, jobs, and were foreclosed upon at disproportionately high rates and many of them havent even recovered yet. In fact, Minority Banks failed at 2. 5 times the rates of nonMinority Banks, and they have also yet to recover. I was wondering if it considers the risks of financial disruptions, how much consideration is given to the manner in which the burden falls on low income and minority segments of the economy and how do you quantify this and what has it done to seek to address this . Anything to in 23 seconds to address this if you can do it . Two comments and were happy to follow up with you another time. One, housing reform is something were very focused on, particularly because of the disproportionate impact on certain communities. And also on minorityowned banks, we have a program, a treasury where we have a Mentorship Program that were working with those banks, but i look forward to following up with you. The gentleman from missouri, mr. Luca more, is recognized for five minutes. Thank you, madam chair. First of all id like to thank the secretary for responding to a letter that i and 20 of my colleagues sent to you recently regarding cecil. Fsocs meeting yesterday i can see you examined all research on the matter and report back. I think this will enable some light to be shed on the standard which i believe is detrimental to our industry as well as our consumers and economy. Looking forward to following up, make sure the process is connected correctly and look forward to working with you on issues that i think are going to be pointed out in this research. Thank you for doing that and responding to our request. First issue i want to talk about is with regards to the new Digital Currency libra thats being proposed by facebook. We had zuckerberg in here recently and he explained his intentions and how this was all going to take place. You know, since then, china has got made announcement with regards to their own Digital Currency and theres been some calls for the fed to issue its own currency. Id like for you to give us your position on it, where you see it going, what your thoughts are on it, because it does seem to have some legs. Sure. Let me just comment that when people talk about digital currencies, its a large vastly different area and different sectors have different things. Specifically as it relates to libra, weve had a dozen meetings with facebook. Weve shared our concerns. Its part of the reason why theyre slowing down their movement forward. Weve discussed this at the g7 and g20. I am fine if facebook wants to get into digital payments, thats fine and that may be good for their Customer Base and good for a lot of americans who dont have access to banks. We want to make sure if they do it theyre compliant with our bsaaml and no way can be used for terrorist financialing and illicit activities. The chinese have decided to get into this as well. The last half of my question was, theres been some thought process about the fed getting into it. Is this something you see necessary . Something you dont want to get into . Something that shouldnt be out there . Where do you see this going . Again, i would differentiate what china is doing from what a bitcoin or a facebook would do. What china is doing is issuing Digital Currency in lieu of physical cash. They can track all that. They will be able to track where that goes. Thats different from a bitcoin. Its no different in the u. S. If money is sent on the wire system, can be tracked. Money through swift has id fires. I would differentiate what Central Banks are doing from what a libra or bitcoin. As it relates to the fed, chair powell and i have discussed this, i think we both agree for the near future in the next five years we see no need to issue Digital Currency. Again, we have a very sophisticated system. The fed is working on electronic Payment System. We need to make sure theyre realtime electronic Payment System in the u. S. But thank you for your concerns. Okay. Appreciate the response. Yesterday we had a hearing in the committee and there were a number of questions with regards to Credit Unions buying out banks. It seems that this is a little bit of a trend here in the last 12 to 14 months. In fact the comment was made yesterday i think there was 28 that had already been purchased this year with another 14 more in the hopper, i understand. As i rest this in your purview, mr. Secretary, this means that those 28 banks plus perhaps these other 14 are going to come off the rolls as taxpayers. Its going to dent the treasury some. Not that much, but some. There doesnt seem to be any resistance from the fdic or credit regulators to not allow this to happen. So its continuing to be approved, continuing to happen. You know, in fact i was having a discussion last night with somebody and they said maybe the banks need to start Credit Unions, and avoid taxes. So i dont know if thats doable, but there are some people starting to think outside the box because theyre looking at this as a tax loophole. From your standpoint do you see concerns . From the standpoint of Credit Unions buying out banks . Is there just another part of the merger situation thats going on in this country . Or is this a trend . Is a tax evasion situation . How do you view this . Well, well follow up with the fdic on this issue and monitor it. Its not something thats caught my attention because fortunately its on still small scale. But i appreciate you raising the concern and well follow up. This past week theres announcement of a 700 million bank that was bought out by a 10 billion credit union. This is going to grow. Thank you for your response. The gentleman from georgia, mr. Scott, is recognized for five minutes. Secretary mnuchin, how are you . I want to make sure im clear on your level of concern about the continued volatility in the repo market and its impact on the calculation of sulfer. The secured overnight financing rate, which as you know is a designated replacement rate for lib bell. Now ive listened to your response to mr. Mchenry and also to the gentle lady from new york. And i want to be clear, because i read your report, the fsocs 2019 Financial Stability record. Heres what you said. You said that Market Participants with significant exposure to libber remain vernable. If they do not sufficiently prepare all the way to the end of 2021. What did you mean for that . And what did you mean about prepare . What are you doing to help the industry participators prepare . Well, again, let me just emphasize two different issues that are related in a way as you said. I am concerned what happened in the repo markets. Thats not just a concern for sofer. Thats a broader concern because we rely on these repo markets and it impacts many, many individuals and institutions. So weve had active discussions with the fed on that issue. That does impact the libor transition. But the libor transition is a much broader problem and i said as recent as yesterday we conviened a group of the banks and regulators on this. So what did you mean by, they will remain vernable . Well if banks and trusties and security holders dont prepare for the transition there are trillions of dollars that people could wake up in 2021 and by prepare, you mean to do what . Its a list of everything from prepare technology, so that they have the ability, prepare the legal analysis, prepare a transition. People literally have hundreds of thousands of transactions. Part of this may be kong back to congress and asking you to pass legislation. There may be serious legal issues that were still exexploring. Let me turn and lets go overseas for a moment. Im very concerned about brexit and the particular impact that brexit will have on our businesses, on our Financial Markets, particularly because of the uncertainty we are seeing around the whole deal of delays after delays and the failure of them to come up with a clean deal. So what i want to get from you as a treasure secretary, how concerned are