[inaudible conversations] [inaudible conversations] the Senate Committee on housing and urban affairs will come to order for days hearing his usual is in the hybrid format which is inperson with the witness. Mr. Claudio teen mr. Gensler its nice to see you. Welcome back chair gensler to this committee. Workers and their families dont measure the economy by the stock market and neither should we. Its why in the senate and the new Biden Administration we work to create an economy that delivers results for people who get there and comes from a paycheck not an investment portfolio. Raising wages and goodpaying jobs and lowering cost means fighting the corporate pricegouging is so often hurts consumers and the unfair labor practices. It means investing in American Manufacturing and workers and farmers who drive it and means making sure financial economy and our markets are stable. That includes going after companies that try to cheat the market. Chair gensler is doing that very well and it means strengthening foreclosures with risk by Climate Change and look at the practices of private equity and hedge funds as they stretched their tentacles into more areas of our economy. This summer the Senate Confirm president bidens two nominees to be at cc both new commissioners for the commissions dedicated staff at republicans on the committee have elliott about your just ambitious at janda. If wall street and others are complaining you are doing your job. You put americas savings first inning opus on transparency and fairness to concepts critical to making sure markets work for everyone not just corporate executives. The fcc must continue to make enforcement priorities. Bad actors are worth coming up with new schemes to separate people from their hardearned money were to change the rules to gain more for themselves. And they watch the fcc has has fallen to the lowest level in a generation. In april this committee considered a bill that would insider trading. The houses passed the summer though. Last month we saw the results of bipartisan work of Art Committee members to improve transparency and fight fraud. Senator kennedy is sitting to my left more or less and senator van hollen stopped the u. S. Doc exchanged trading of Foreign Companies with chinabased auditors to refuse to comply with our oversight loss because that law jumpstarted negotiations for the accounting oversight or signed an agreement with chinese authorities that will finally allow auditors to begin inspections. In march the person signed executive order establishing the whole of Government Strategy for Digital Assets. While agencies look at how respond to the growth of crypto can best protect americans money we know the sec continues to enforce the law. Going after crypto targets shuts down creek will ponzi scheme. Over the last year in the banking house and urban affairs partly look at how critical assets are used in scams and fraud to play a role in illicit finance but we heard from treasury undersecretary who testified in the presence working group. This morning to ag committee downstairs with senator smith an eye on this Committee Said on both these committees and is considering crypto bill sponsored by senator stabenow in boseman that focuses on Digital Commodities to create regulation in the crypto space for its critical though that tweet be deliberate and jaw drawing jurisdictional lines. We have to close loopholes that could be exploited or abused. Its not easy in the future Trading Commission and chair gensler is admire with why that action is welcome but we also notes not enough. Its a lesson we need to remember to heal the damage that was done prior to when it comes to crypto group regular state to Work Together to ensure investors to consumers and markets silicon servers. Sec Climate Risk Disclosure as an example of how the markets understand risk and provide transparency and comparability clarity in uniformity. Only a subset of companies provide disclosure in whatever form they want that doesnt serve anyone. Investors outside the u. S. Arctic and if it from Climate Risk Disclosure. Secs recent proposal to require more disclosure about corporate stock buybacks will bring muchneeded transparency to the market. Thank you for that. We no stock buybacks are big problem. They funnel profits to executives at the expense of longterm investment in workers. The process allowed for these buybacks has only made the more manipulative. For decades companies enable to announce stock buybacks these choose their stock price and they may provide details month later and how they completed their plans. Under the new proposal the sec would understand my companies are buying their stock in his sacking of sir buying or selling. Taken together with unprecedented steps in the Inflation Reduction Act finally tic tacs these buybacks. I appreciate senator tester and others on this Committee Supporting that and this is the first steps we seem to reign in the wall street scheme another example of a the new president of United States who fights for workers and sides with workers. I look forward to hearing other ways the sec is working to hold bad actors accountable and protect americans with their hardearned money in the markets. Senator toomey. Thank you mr. Chairman. Chairman gensler welcome back to the committee. Its good to see you again. The sec as we know has a Critical Role to play in protecting investors and facilitating capital formation. In foresight some of the secs recent actions and in actions raise concern about how well its carrying out this important mission. They for example the sampling of crypto landing platforms. They were offering Interest Rates as high as 18 of customers with when there had Digital Assets to them. The firms could go to larger textures to make shortterm investments on the market to many borrowers couldnt pay their debts and these platforms grows customer accounts. The sec did take enforcement action against the former activities thus winter in somehow to continue through the spring when both companies blew up and found themselves in bankruptcy with investors during a billions in losses. Where was the sec and where was the sec in verifying the rules of the road for Crypto Market for dissidents . The chairman insists in his written testimony quote the vast majority end quote of crypto tokens or securities. He is also knowledge that the coin is not. Presumably thats because bitcoin is so centralized. That leads to the question where on the continuum does a tokens get security most of these tokens dont have a Financial Plan and its different from the vast majority of ordinary securities. If the chairman is right that most tokens should be considered securities as he himself for his testimony quote it out with the many crypto intermediaries are transacting securities and have to register with the sec in some capacity end quote. Crypto transactions typically can be settled in realtime without intermediaries. As russell crypto intermediaries often serve different customer needs and they have different Business Models impose different risks than traditional securities intermediaries. All that rizo question what is the crypto roadmap for these crypto intermediaries to register . Stepping back i think theres a larger problem. As matt levine the economist put it in a quote chairman genslers postures he should be in charge of writing the rules for crypto. I dont see how that can work end quote and i think he is a good point. Given the novel nature of these tokens congress ought to step in and provide clarity. In particular need to revisit the definition of security as part of a larger effort with the Crypto Market. Crypto tokens have varying degrees of decentralization and they usually did not have the financial claim on issuer and can be federal then realtime without intermediate years. These are important differences in a merit clearly stated tailored Regulatory Framework. While they sec has failed to provide the regulatory clarity its finishing burdensome and proposed rules in the ordinary Securities Market. At the top of that list is the secs exposure rule. Public companies have required legally required to disclose material on Climate Change information. The proposed rule however we go much further to require disclosure of exceedingly expensive Global Warming data in this the data will be enormously expensive to collect. Almost none of it will be material to finance. The an oar reports elan the sec estimates and prevent aggregate issues were increased from 1. 9 billion per year to 5. 2 in billion dollars per year if the disclosure rule is affected. The sec estimates the external compliance of the Company Going public will increase by more than five times a time when excessive regulatory costs or are ready resulting Companies Going public. The cost of compliance will be more material than the information itself. The Climate Disclosure rule is really about informed Investment Decisions. Without equipping climate activists with data to run political pressure campaigns against companies which will lead to the detriment of shareholders to the endgame is discourage Capitol Investment in Oil Natural Gas another can Traditional Industries and we have seen how about well thats working out in europe. The sec is waiting to controversial Public Policy far outside of its mission and its expertise and they are doing it without the Legal Authority to do so. In the process it is easy politicized agency slowing Economic Growth increasing inflation and possibly undermining National Security so given the importance of these decision republicans ever into the sec asking basic questions on how the sec developed their Climate Disclosure rule providing real substantive answers the sec assaulted while the sec may not want to answer congress the sec will have to answer to the courts which should make them nervous. The Supreme Court has repeatedly held and i quote congress does not alter the fundamental details for regulatory schemes for ancillary provisions and it does not one might say the summer of the Supreme Court applied the sensible principle to the West Virginia versus dea case. They cannot use novel interpretations of existing law as they have Legal Authority to support sleeping policy changes including Climate Change. Thats precisely what the sec appears to be trying to do with the Climate Disclosure rule. The sec should be informed that they are on notice. Thank you senator toomey and today we will hear from the securities and Exchange Commission chaired gary gensler. Its his annual trip here and he often does that more and we thank them for that. Shared itzler youre particularly welcome because we have a very good well above average turnout today so enjoy that. Thank you for joining us shared gensler. Chair brown Ranking Member to me and members of the committee and honored to appear before you today. I want to start by thanking you this committee and all of congress for two new commissioners who worked up here on the hill and on the other side of capitol for 32 years, terrific commissioners in its welcome we have a full i want to say im speaking for myself and i dont speak on behalf of a fellow commissioners were staff in this hearing. Id like to start a discussing two key years in policy making a while back. 1933 and 1934 when chair fletcher sat in the seat and chair brown if i recall but it was in the middle of the Great Depression in president roosevelt addressed a number of landmark reforms reforms in one of them congress panettiere came together to craft the first two federal Securities Laws 1933 president roosevelt also extended the use of the Gold Standard. In those two critical years one could say we have replaced the one Gold Standard with what i would like to say another to Securities Law but i believe the core principals have contributed to americas economic success and geopolitical standing. There was the day sick idea of the day need to decide the recent want to make but there were Securities Laws where there was full fair and truthful disclosure. As we execute our mission to protect investors and maintain fair and orderly efficient markets we cannot take the leadership for granted. Even goldmedalists especially goldmedalists constantly trained to stay ahead of the competition. Out i go back to senator kennedy and van hollen to help us with this issue with china. We must remain excellent opportunities to drive efficiency and resiliency. Markets work best when they are it and in what that mean . That means theres competition and transparency in the middle of the market. The lower the cost in the middle and that means issuers have lower cost to raise money and investors get better return. So we have done a lot but we have not updated our National Market and their equity system in 17 years. Imagine if you had in your pocket a phone that was 17 years old. You would think oh my gosh maybe i should update that phone. We are also looking at the efficiency of our treasury market and the absence of a private fund market. Investors would benefit from greater competition. Second our system works best when theres integrity in the market. Hence we have proposals to bring greater integrity into the market. The insiders trading plans and so forth. Another areas crypto is Ranking Member two main raise to 10,000 Crypto Market it to believe the vast majority are securities. The securities tokens are often covered and given that as the Ranking Member quoted me saying it follows that many crypto intermediaries have to register with the sec in some capacity. I would note when chair fletcher was a it was not Central Electronic clearing and you could exchange it from persontoperson paper form. Staff is working with Market Participants to help ensure investigators get time tested for protections of the market. In that work in any work that congress does i think we have to make sure we dont inadvertently undermine the Securities Laws underlying to 100 billiondollar capital market. Thats the motherload. Thats our Capital Markets. Crypto is 1 100th of that size. Markets work best when they are bristling at in normal times of stress as we have seen in with the stresses of 2008 in 2020th history tells us no doubt will have it in the future. Thats the nature of economics and finance. Thus we have a number of projects and resiliency that include shortening the settlement cycle and includes the work we are doing with the treasure markets and around money market funds. In all our work we are anchored by the laws that Congress Passed the courts interpretations of those laws Economic Analysis and public input and is the commission we benefit great he from public input including from congress and these Committee Members and i would meet with any of you oneonone anytime you want. We listen to feedback. Our Capital Markets to the Gold Standard that keep it that way and i look forward to your questions. Thank you chair gansler and i think what he said think what you said and ive heard you say this before in bigger groups that we can do about the Crypto Market to undermine a 100 billiondollar capital market. Fundamentally thats her job on the urban affairs committee. Youve made improving disclosures a priority in the Climate Risk Disclosure that the enhanced buyback information i mentioned earlier. Addressing cybersecurity risks including visibility and the concentrated ownership of stocks that discuss briefly why its critical we improve these types of disclosures for investments large and small and how markets operate . I would say goes back to one with this basic bargain that investors as long as they get the full and fair to motion disclosure material disclosures they get to decide and you can defraud or mislead them. That lowers the cost of capitol because then theres trust in the market. The second thing tran