tv Treasury Secretary Testifies on Financial Stability Report CSPAN May 20, 2022 12:52pm-3:29pm EDT
mobile video out or anytime online at c-span.org. c-span, your unfiltered view of government. >> treasury secretary janet yellen took questions on the house financial services committee on inflation, rising gas prices and the state of the u.s. financial system. this is her second time on capitol hill in the same week following an early appearance before the senate banking committee. [inaudible conversations] [inaudible conversations]
[inaudible conversations] [inaudible conversations] >> the committee will come to order. without objection, the chair is authorized to declare recesses of the committee at any time. i would like to start by letting our members know that although we had previously had an agreement with secretary yellen to have a a hard stop of 1:30 p. for this hearing, which is
consistentd with committee precedent, she has since been formed such as in beating at the white house, that she needs to get you. now be atd stop willh 12:30. democratic members were unablein to ask their questions of secretary yellen at the last hearing that she testified at will get priority today in the question order, and i hope what we can get to everyone, even with the truncated hard stop for today's hearing. this hearing t is entitled the annual report of the financial stability oversight council. i now recognize myself for four minutes to give an opening statement. good morning, and welcome, secretary yellen. thank you for testifying today on the annual report of the financial stability oversight council, or fsoc. before the 2008 financial crisis
no governmental body was solar y responsible for identifying and mitigating systemic risk across our financial system. as a result, our economy was unprepared for for a near ce of the financial system, which resulted in 8 million foreclosures, 9 milliony people unemployed, and the loss of 19 trillion in household wealth. in response, congress passed the dodd-frank all street reform and protection act of 2020, and established fsoc to identify emergent vulnerabilities and mitigate threats to our financial stability. and for its first few years fsoc took import steps to address turmoil in our financial system, including subjective massive insurance company like aig.
unfortunately, the trump administration undermined fsoc by cutting staff, conducting fewer and shorter meetings, and removing regulatory safeguards on risky banking and financial institutions. the good news is that secretary yellen and fsoc are taking steps to repair the damage that was done by trump, and a focus on clear threats to our economy, including, finally labeling climate change as systemic risk. i urge the secretary to also restore fsoc stability to guard against the threat of systemically important financial institutions. big tech, crypto, and so-called shadow banks are causing significant and fast changes in our economy. so fsoc must remain vigilant in its ever-changing environment.
maintaining a strong economy has been a key goal of my committee, particularly for communities of color. the 2008 foreclosure crisis was caused by banks steering borrowers who were disproportionately people of coloror into predatory market products. history almost repeated itself during the pandemic, as millions of families almost lost their homes to infections through no fault of their own. i am proud to have fought hard with my colleagues to secure $46.6 billion in emergency rental assistance. i'm proud that by june treasury estimates that states and localities will have successfully spent or obligated all of those funds all across america.st but the housing market needs more support. home prices rose nearly 19% in 2021. and despite the recent interest rate increases, traces remain
high. housing now accounts for a core part of inflation. it is clear that we must do more to increase our nation supply of affordable housing. this is what i drafted and continued to advocate for the historic housing provisions of the build back better act. finally, our economy can only be strong if everyone can participate, and that includes america's women, the supreme court's forthcoming decision to overturn roe v wade would threaten the financial security of women andnd our nation's economic stability. i applaud secretary yellen leadership thus far and look forward to a testament. i now recognize the ranking member of of the committee, the gentleman from north carolina mr. mchenry, for five minutes. >> or to let me begin by saying welcome back. we're glad youor have recovered and recovered so whether glad to have you back in health, and welcome you>> back. and also grateful that our vice
rank is healthy as well we know covid is so very real but very grateful that both my friends on either side of the aisle are healthy. secretary yellen, , welcome, thk you for being here. the financial facility oversight council or fsoc is charged with it respond to emerging dash to emerging risku to our financial system. that was the sight of it. fsoc does that it should not impose partisan policies. so today, secretary yellen, i think we should be focused on the challenges posed by russia's invasion and thehe concert was f the global economy, the impact that shines lockdown andnd economic issues will haveoc on e financial system in the broader economy. the importance of protecting the financial system from bad actors and foreign adversaries, including cyber threats. and the performance of domestic financial markets over the last several years. that should be fsoc's agenda but
it isn't. it seems fsoc has become an arm of the administration's policy agendath rather than the objecte body evaluating real risk to financial system. five much of what the fsoc as opposed to examine what the democrats will discuss today as part of the left political agenda. secretary yellen, the economy is at a crossroads. .. yellen, the economy is at a crossroads. democrat-led washington, democrat policies, are failing the american people. in the first quarter, our economy shrank. the gdp came in at a negative 1.4%. democrat a record 11 million jobs
available as workers are ac still on the sidelines because inflated wages are eroding the ability of the private sector to hire employees at mass production demands. the roots of the problem control l democrat spending which hascreated consistent inflation . yesterday the bureau of labor statistics announced it inflation rose in april it's 8.3 percent over the past year remaining near a 40 year high. inflation is killing american consumers household budgets. wages are not keeping up with inflation and the rising cost of thingsthat families by . instead of addressing the issues of rising prices, and what those problems are creating for the economy ngand the american families financial well-being democrats will focus elsewhere. deep down they know their spending spree is hurting america but pulling back all that free money is in popular and the midterms are looming so they don't want to do that
. you would think my colleagues would take this moment and reflect on their agenda and objectives or lack of objectives . instead they're doubling down and using it to advance the radical policies so you don't like something let's just have fsoc regulated away and they will force decisions in favor of those customers who are active activists and progresses while law-abiding american businesses will be forced to close two of these the radical left. let's turn now go to an issue that is of consequence to the stability of our economy. let's turn to digital assets. this week we've seen dramatic volatility within a particular algorithmic stable clause and by its nature it is not stable when it doesn't have the backing by something real and of substance.
i want to be clear that not all stable coins and not all digital assets are the same. this example this week is a clear sign to the broader world that that is true. not all these assets are the same norshould they be regulated the same . in fact we have no regulatory sphere or recognition of digital assets. we don't have regulatory regime for stable coin and we needed and there's bipartisan understanding of that. beginning last year i made clear to this committee we need to establish a clear regulatory framework for assistance. it's time for congress to act on these important markets and provides the ability. very important in short-term and long-term and these technologies deserve time to be understood before they are labeled asndrisks . rmmadame chair thank you and i yelled back >> eciq ranking member mchenry.
i now recognize the chairman of the subcommittee on consumer protection and financialinstitution , the gentleman from colorado mister perlmutter for one minute. >> thank you madame chair, mister secretary. i want to highlight one of the issues raised in the financial stability oversight councils and report. colorado continues to see christ climate -related risks in the form of more wildfires and in december the marshall fire burned 1100 homes, businesses and other structures making it the most destructive fire in colorado history in search of property destroyed . the cost to rebuild our properties is daunting and nearly every homeowner was underinsured. when it comes to climate risk you can see the effect on the insurance market in the state of colorado. on monday i held a telephone town halland almost 7000 people online . we conducted a poll question, how concerned are you about wildfire risk on a scale of 1
to 5 and every single respondent answered with the highest level of concern. we must ensure our financial system serves as a source of strength as we seek to address climate change and with that i yelled back. >> we welcome today's distinguished witness the honorable janet yellen, secretary of the department of treasury and chairperson of the financial stability oversightcouncil . without objection your written statements will remain part of the record. you will have five minutes to give your testimony and you should see a timer that indicates how much time you have left . i'd ask you to be mindful of the timer and quickly wrap up your testimony. secretary yellen you are now recognized for five minutes to present your testimony. >> thank you chairwoman, ranking member mchenry, members of the committee .
i'm pleased to speak with you today about the financial stability oversight councils 2021 annual report. the report is a collaborative effort t to council member agencies for providing congress and the public with the councils collected assessment of potential risks to us financial stability. today i highlight a few topics in the report and provide an update on the council reports publication. first the report discusses full her abilities in the non-bank financial sector which were highlighted by the turmoil in financial markets in march 2020. while the dodd frank act increase the resiliency of the us financial system, the market turmoil in march 2020 demonstrated the liquidity mismatch and use of leverage by non-bank financial
institutions to make them affordable to acute financial stresses. and these stresses can be transmitted and amplified to the broader financial system. counsel has taken steps to examine these risks including reestablishing the state fund working group and develop an interagency monitoring system and to propose options to mitigate identified risk. and earlier this year the council issued a statement to express support for securities and exchange commissions efforts to reform money market funds and their work to conserve potential reforms of open and funds. the council is also working to support improving the resilience of the treasury market and is coordinating with the interagency working group on treasury markets surveillance. potential steps to be taken include improving data quality availability,
evaluating expensive central clearing and enhancing trading venue transparency and oversight. that scc has proposed certain reforms to enhance transparency and oversight over alternative trading systems to treat government securities. ivthat scc has also proposed updating the definition of a government security dealer to include market participants that play an increasingly significant liquidity providing role in overall training in marketactivity . additionally the office of financial research is working to fill identified data gaps for unclear bilateral repurchase agreements to a pilot data collection which should improve visibility into a major source of financing for non-bank financial institutions and treasury markets.
additionally counsel is working to ensure the financial institutions that are better understand their climate related financial risk and in its october 2021 report on climate related financial risk the council outlined tahow climate change can be a source of shock to the financial system and increase risk to financial stability. the council recommended that regulators build their capacity and expand their efforts to address related risk. improve the availability of data, enhance and standardize disclosures and assess and mitigate risks to financial stability. the council has also formed its staff level climate related financial risk committee which will serve as a coordinating body for the
council to share information, facilitate the development of common approaches and standards and foster communication across fsoc members. the council is establishing a climaterelated financial risk advisory committee . this advisory body will include a broad range of external stakeholders will help the council gather information and analysis on climate related financial risks . with respect to digital assets, new products and technologies may present opportunities to promote innovation and increased efficiency. however, digital assets may pose risks to the financial system and increase coordinated regulatory attention if necessary. on march 9 president biden signed an executive order calling for a comprehensive approach to digital asset policy.
the council is drafting a report that will identify financial stability risks and regulatory gaps. i look forward to working with you on the issues and opportunities posed by digital assets. we're also eager to work with you to ensure that payment stable coins and your arrangements are subject to a federal prudential framework on a consistent and comprehensive basis . finally this a potential for continued volatility and unevenness of global growth as countries continue to grapple with the pandemic. russia's unprovoked invasion of ukraine has further increased the economic uncertainty. us financial systems continue to function in an orderly manner through evaluations of some assets remain high and paired with historic values. we stand firmly with the people of ukraine and of implemented and unprecedented sweep of sanctions on russia
that have been implemented by financial institutions. on february 28 i convened the council in the wake of the invasion and we will continue to monitor developments and coordinate actions as the risks and threats evolve. the council's report also discusses other potential emergencies emerging threats and vulnerabilities with the council continues to monitor including short-term wholesale funding markets, federal counterparties, alternative reference rates, cyber security corporate credit markets and real estate markets. counsel remains committed to its mission of identifying and responding to risks to us financial stability and i look forward to working with this committee to promote a more robust and resilient financial system. >> thank you secretary.
i now recognize myself for fiveminutes . secretary yellen, according to a recent study by the gates foundation family planning increases a woman's earnings and control over their own assets. as you know we recently became aware of an imminent decision regarding the landmark case of roe versus wade. arguably ofthe single most important decision regarding a woman's economic sovereignty is in jeopardy. the study from the university of california san francisco found that women who were unable to get an abortion were more likely to have more death and to suffer crippling financial events like eviction or bankruptcy. secretary, how might the dsupreme court reversal of roe versus wade impact our nations financial stability and economic opportunities
available to women. >> thank you for that question. i believe that decades of y research have established that there is a causal link between access to abortion da and the quality of women's lives. that affects their education, their earnings, their careers and the subsequentlife outcomes of their children . and i believe that overturning roe would prevent large numbers of women from managing their reproductive lives particularly many low income and financially vulnerable individuals. the inability to access abortion would have a profound impact on their personal and economic lives. there have been studies that
show that nine women access to abortion increases their odds of living in poverty or their need for public assistance and in the recent supreme court case there were a group of economists who submitted an amicus brief that summarized this economic research that establishes the relationship between legalization of abortion birthrates, women's education within job opportunities and significant impacts. >> thank you very much. secretary yellen, in fsoc's most recent annual report it noted innovation has a potential to bring benefits to the public but it can also create new risk. the report noted many digital assets are speculative and volatile creating risks
related to illicit finance, cyber security and privacy. further the report noted stable coins in particular may pose systemic risks if the stable coin is not adequately back and there is a run on that trend time by investors resulting in a fire sale of reserve assets and similar runs on other stablecoin. while i appreciate the presidents working group has called on congress to pass legislation we are exploring various ideas. fsoc has two at its disposal to address some of the systemic risks, concerns relating to digital assets. what is fsoc doing with its existing authority to ensure that crypto currencies including stablecoin do not pose a threat to our financialsystem ?
>> the financial stability oversight council has been cast by president biden in an executive order. the executive order is on ensuring responsible development of digital assets but it calls for a number of reports by treasury . what's they are charged with producing a report that looks at financial stability risk. particularly and we're working very hard on that. it will address the risks that these assets pose. the treasury report will address many of the risks that you identified. in your question, but on the issue of stablecoin which is a kind of digital asset that is intended to have a one-to-one relationship with the dollar, the presidents working group on financial markets regarded it as frankly urgent to push ahead
to write a report making recommendations to congress. we called for congress and i hope this would be a bipartisan effort to produce a comprehensive framework for orthe regulation of these assets. there are potentially useful innovations that could make the payment system faster and more efficient but we really need regulatory framework to guard against the risks and just this week from the last couple of days we've had a real-life demonstration of the risks as a so-called algorithmic stablecoin known as terra broke the buck and yesterday the largest stablecoin ever also really
broke the buck. >> the gentleman from north carolina mister mchenry is ranking member of the committee. >> out continue with that theme. we saw one stablecoin reportedly backed with assets s broke the box and we have one algorithmic stablecoin that broke the buck. do you make a distinction between an asset backed stable coin and an algorithmic stable coin? >> of course there are significant differences between these two. >> i welcome the presidents working group report. that your group put forward to congress and to the public about regulating stablecoin. i think it's important we have a federal framework and federal law around something that purports to be the us dollar. that is a proper agreement for the federal reserve and fortreasury . your opinions matter significantly as we legislate
here and as i said in my opening statement i called for us to get on with this question. a year and a half ago. so i welcome the report and i think we should get to work here. along those lines in your mind how does limiting issuances to only banks promote innovation. >> i think creating a framework that is appropriate to the risks that they present really provides the kind of certainty about the regulatory environment that issuers need to thrive and innovate and our discussions with the industry one of the complaints that we typically heard was that there's regulatory uncertainty. and if we were to establish,
if congress were to establish a framework, it would make it easier for the issuers of these assets to know what the regulatory environment would be. >> so the presidents working contemplates these would be issued by banks. is that your view and if these are risky assets, white is putting them in a bank actually the risk? >> one of the key financial stability risks associated with stablecoin is that they and we've ence runs seen that. >> but if they are 1 to 1 back as the presidents working group says with high-quality liquid assets, bank assets and since you don't have runs if you have one-to-one backing with cash equivalents. >> we have money market funds and money market funds are very similar in many ways to
stable coins and they have been a source of instability in the financial system. >> there's been 42 years of regulatory fights over money markets. what were trying to do here is make this a very straightforward table product. >> that's what bank revelation has accomplished i believe in the united states. >> but dodd frank was about de-risking the big banks and now the presidents working contemplates we will add more risks to these institutions. my question is is it a viable path for us to have a one-to-one backing here of a stable coin and it nothave to be domiciled within a back ? >> the presidents working group contemplated different alternatives and unanimously recommended d the established establishment of a bank framework regulating stable
coins. it's a flexible framework. it involves appropriate capital and guliquidity requirements which i think are important and is a framework in which payment system risks can beaddressed . >> and we welcome that. >> i think we would be working on a bipartisan bessette aces to discuss alternatives and evaluate them as something i think would be very worthwhile. and i would urge this committee to engage in. >> one larger question because were talking aboutthe financial oversight council . we have an inflation raging. we have growth that's stagnant right now with the latest numbers and rising gas prices. what's your ministration doing to take on these challenges the american people are feeling and what my constituents are talking to me about? >> clearly inflation is
substantial and i agree with the presidents assessment that it is really the number one economic issue that faces the administration in the nation. it's having a substantial e adverse impact on many vulnerable households and we are laser focused on addressing inflation. as you know the federal reserve plays an important role. there charged with price stability and full employment and i would say first and foremost is the fans responsibility and we support an independent fed making the judgment that they think will be appropriate. for our own part the administration is taking a wide range of steps to do what we can to address inflation and that ranges from things like releases
from the strategic petroleum reserve. that are substantial that are intended to bring down energy prices and working on supply chain issues that are contributing.>> thank you very much. the gentleman from connecticut mister heinz who is also chair of the subcommittee on national security, international development and monetary policy is now recognized for five minutes. >> thank you madame chair and madame secretary. i want to continue this conversation on stablecoin because the volatility of the last couple of weeks has been interesting and concerning to watch but since this is the first time we've had you here since we had a pretty substantial and robust recovery from the economic devastation of covid i want to take 30 seconds to reflect on dodd frank and what it meant.
i'm in the minority of panel members who were here when that legislation was crafted and i remember how very much it was the ugly stepchild of legislation coming out of own nine. we were assured by my republican friends it was going to end the capital markets in this country and liquidity was going to dry up, creditavailability was going to be gone . capital markets were going to migrate to europe and asia and of course none of that happened. ilthe banks are larger today than they were at the time. we've seen innovation. to be fair on the other side there were people concerned that the financial sector was going to crumble and that didn't happen either. we went through the mother of all stress tests. we saw economic stress unlike what we saw in 07, 08 and what didn't happen? the sector did not come down so i wanted to take a minute to just offer an encomium to the hard work that was done back when dodd frank was being crafted. let me turnback to this interesting conversation .
some people estimate there's been as much as $1 trillion in value lost in a variety of different stablecoin's and other crypto currencies. i feel the pain of those who lost money but this is an education for people who thought that coin was roots in the sky. i don't think there's any we far as seeing what volatility and risk look like but what does worry me as a veteran of dodd frank is at what point do we see systemic risk developing in the sector and what does that look like. i don't think it to trillion dollars in marketcapital talking about systemic risks but i could be wrong. where you see the possibility for systemic risk developing in the broader crypto rcurrency realm . >> the financial stability oversight council is analyzing right now in response to the president's executive order potential
financial stability risks from digital assets writ large. what we have already issued a report to the presidents working group which is a subset of the fsoc on stablecoin because although i can't say that they have reached the scale right now where there are financial stability concerns and we are seeing terra having broken the box and tether which is the largest one i wouldn't characterize it at this scale as a threat to financial stability but it's growing very rapidly. and they present the same kind of risk that we have known for centuries in connection with bank runs. there are assets that purport to guarantee conversion will
to the dollar on a one-for-one basis. >> but interrupt you. thank you. i was looking for validation to trillion dollars inoverall market capital were not talking about systemic risk so let me ask you to go one-for-one . a veteran of the meltdown i get very itchy around this: risk.. and of course that market has decreased dramatically in the last couple of months. at what point should this committee that focused on the possibility of systemic risk ? what point should the red flags start to rise? >> i can't give you a numerical minumber but what i can see is the use of digital assets is rising very rapidly. that they present the same kinds of risks of run risks and other risks and really we
need a comprehensive framework so that there are no gaps in the regulation. >> agreed. in my final seconds i want to leave you 30 seconds. i've been doing work on a central bank digital currency which the bank has opined on in a general way. in my remaining time as much as it was a liability of the federal reserve would do away with a lot of the concerns we're talking about with stablecoin. >> agree with that. that is the reason cuto work out the central bank digital currency but there are also concerns because it could have a very depending on how it's designed a very significant impact on the structure of financial ,intermediation so there are some trade-offs here. will address this in the treasury reports that will be issuing. >> members, i'm going to ask you to keep your questions
within your five minutes and asked the secretary based on the fact that you've got to get out of here and i'm trying to accommodate all of our members m. let's keep it within the five minutes. thank you very much. the gentleman from missouri mrs. wagner is now recognized for five minutes. >> thank you madame chairwoman.. secretary yellen thank you for joining us. during the public address on tuesday president biden attempted to once again blame record high inflation on the pandemic and put in. secretary is it still your belief that excessive government spending, trillions of taxpayer dollars is not a root cause of the rising prices and my constituents in missouri are seeing every single day on gas, goods, groceries. i could go on and on.
is it not a root cause? >> there are many contributors to the exceptionally high inflation that we are experiencing and certainly. >> is excessive government spending a root cause? >> we had substantial programs to address what i believe was most significant risk. we faced it as an economy at the time. >> it is now upon us in an inflation that the 40 year high. goods and services that are not affordable in any way shape or form. we literally had hicpi down the for one quarter. to toss us into a recession,
supply chain issues, i could go on and on. we spent trillions of dollars and the fed has been too late to get here to help. is excessive spending a root cause? >> inflation is a matter of demand and supply and it's true that government programs supported demand. >> let me reclaim my time. we will move on since you won't answer the question. the ranking member asked also about inflation and asked what you and the administration are doing about it and you assured us it's all hands on deck and hayou're doing also to things. you identified a problem with inflation but what are you doing, what are you when the president specifically doing rid all you said was you were releasing oil from the strategic petroleum reserve which does nothing to help and actually jeopardizes our future petroleum needs which really is an emergency, what
are you doing specifically. >> if the release has served to hold down oil prices. >> know it hasn't. >> i'm sorry but it has. >> it's 4 and a half bucks a gallon and diesel is well over five dollars a drop in the bucket.what are you ordoing specifically. you said it'sall hands on deck . >> russia's unprovoked attack on ukraine has had substantial impact. >> for heavens sake. we've been at this for 16 months madame secretary. with all due respect i can't disagree more. you won't even admit the root cause of this is spending and spending. the fed just got on the job last month in terms of raising by 50 basis points. will do it again next month and perhaps a month after. we are in a spiral. the moms in my district can't find 80 formula. they can't afford to fill up s
tetheir cars with gas. this is a serious situation. what else do you do besides the strategic petroleum reserve? >> are trying to unblock supply chains that have gbecome very clogged . but we've put in place changes for example at the port of los angeles and long beach that have substantially diminished backlogs there that have been raising prices and taking steps. >> how about energy independence? let's open up keystone. let's get some of these oil and natural gas leases so we can be energy independent. one of the take care of our own energy supply needs and or buybacks to europe so they're not so dependent on russia and iran and other dictators. there are so many things we should be doing and the
problem with unplugging the ports is 5 and a half to six dollars to move back in diesel to st. louis missouri in the middle of the united states. it is untenable, it's unacceptable and it is lunbelievable to me that we can't even get the secretary of the treasury to admit that spending, spending by this administration is the root cause. i yield back . >> mister lynch was also the chair of the task force on financial technology is now recognized for five minutes. >> thank you madame chair. thank you for being here. ireally appreciate all your good work . i want to follow up on mister heinz question and i know he ran out of time . i can't help but make a comparison to what we've seen in the stablecoin area with an earlier part of our history when individual
companies, coal companies, railroads, lumber companies were issuing their own script and what happened with all those privately issued currencies was when the greenback came out consumers and businesses recognize this stability in the greenback and all of those script currencies went away. some of them were banned by the fair labor standards act and other pieces of legislation but some went out of disuse. right now there are 200 stablecoin in circulation. what are your expectations that 200 are going to survive the emergence of a cdc issued by the feds. >> i think the risks associated with proliferation of private stablecoin, you've described that extremely well and i agree with it and i think a benefit of issuing a
central bank digital currency would be that it might diminish the proliferation of these stablecoin's. but it depends on the design exactly how the central bank digital currency is introduced. there are a variety of design choices there. and there are issues around that. privacy is an issue. if the central bank were to issue it directly to consumers in order to protect against illicit finance. against cft type considerations. there would be privacy concerns. the fed amassing that data and alternatives that would seem more likely to me would be relying on financial
institutions to play a role in dealing with customers. all of that would affect stable coin but quickly there would continue to be those that coexist with a central bank digital currency. they may offer some benefits in terms of faster and more efficient and cheaper payments. i think we should be open to innovation but it is an argument for cvd see. >> i agree. the one aspect you alluded to is this intermediation of the commercial banks, if the fed was going to the consumer we don't need commercial banks and they wouldn't have a role here. >> it would draw a lot of funding away from the banking sector if it's a very attractive asset and this is something under consideration
in many countries around the world. >> i want to go on to one another and i appreciate your answer. one of the things i worry about is that many of these claims being issued are issued with nothing more than a white paper and trying to go through that even with an engineering degree is extremely difficult. i go back to the mission of your agency and of fsoc. and the asymmetry between the issuer of the stable coin is there not some way that the regulators can intervene to make sure that at least when they issue a currency that there is some basis of judgment on the part of an educated consumer on the viability of that individual instruments? >> we would like to see a comprehensive federal regulatory framework that could insure that information is available and is a
regulatory framework that would be in place. i really urge bipartisan action on this. at present avthere are some agencies that have some authorities here. i don't want to opine on whether or not there's a cft and fcc may have some regulatory authority here. we would like to see comprehensive framework. >> i just want to say i am aware that the boston federal reserve is working with mit on that project. >> it would be a long time for it could be introduced. >> i yield back madame chair thank you. >> thank you very much secretary, thank you for ba taking time to come up with us on the hill. the reality is the way i see
it is things are not working. i'll go back to president clinton who admitted before he joined congress the era of big government is over. president clinton came in, trying to do exactly the same things and then found out it didn't work. president obama stated it's just not working the way which we wanted. and i would say to you and it's a question. is the economy and the successful economy and art or science? >> it's an art and a science but i would say to you that from the point of view of the ability of our economy to produce goods and services and promote the well-being of americans booktv.org ...
>> that is a science. you can see what's good in education and where somebody's head into trouble. what you're talking about to me is politics and today this committee and youbegan going into art, not science. you went into abortion . you went into stablecoin rather than the general market. rather than the things which you are responsible for which is science. which is policy. which is those things that make sense and are well worn ways of free enterprise system. thi think what you've got to do is have a dose of reality madame secretary. you're bound to have somebody in this council who can offer some advice that what we're doing owing back to president obama, president clinton is not working. what works is getting people in a free enterprise system
to go to work. opm has yet if you look at their website to give instructions for the government workers to go back to work. if you do not have the government working and you're leading the way how can you expect others to go to work. it's true i'm from texas and in texas we are working. we're doing those things. we had an equal amount of issues and problems with the rest of theunited states . but my point would be that i think in your own reopportunity to look at the san francisco fed, they directly pointed to the 1.9 trillion dollar rescue plan has causing inflation. i openly say itand i'll say it again . i think this administration, i think this congress is making friends with inflation. i think they're doing the things that cause it and that
is a science, not and it's being treated as an art. please accept thatissue yourself . >> i think the american rescue plan played a hugely important role in putting people back to work and ensuring that people throughout the pandemic were able to keep roofs over their heads and food on the table. leand think about the set of problems we do not have because of the arp. we do not have families and children. >> how many jobs are availablein the market today that are unfilled ? >> we have an extremely strong job market and that goes importantly to the arp. >> how many jobs are going begging? your statement to imply jobs are available so the government has to doit .
the government has to pay the money because people need it. how about jobs? how about free enterprise? how about people paying into the treasury as opposed to taking out a loan? this is that art versus science that i'm talking about and i would suggest that you invite a couple of members of the committee on this side to meet with the council if they can't hear this. they need to have reality. the era of big government was supposed to be over. president obama, it's not working the way we thought. this is a science, not an art. i'm available to meet with them and i yield back my time . >> this committee is not making friends with inflation. is gentleman from new york now recognized for five minutes . >> thank you madame chair. a few months ago i asked the
chair of the federal reserve at the risk of stagflation and the economy shrunk by 1.4 percent. last month inflation rose by .3 percent. given these two developments are high in youropinion as the rest of stagflation . how high in your view is the risk of stagflation . >> we clearly have high inflation and the federal reserve has critical roles to play in bringing that down. they're in the process of using their own independent judgment with tightening monetary policy. to do so and the administration is doing what we can to also address supply chain issues and other contributors to inflation. we have a really good, strong
waiver market. we have household balance sheets that are in good shape . we have companies that although as we noted in our annual report have a lot of bad interest costs on that debt. it's very able to service it and we have a strong banking sector and all of those things suggest the fed has a pass to bring down inflation without causing a recession and i know it will be their objective to try to accomplish that. >> i have a question about improper payments. the rate of improper payments in the federal government has risen to levels never seen before. according to omb the improper payment rate for unemployment insurance rose to 8.7 percent and there have been reports the percentage could be even higher. in june 2021 axios had an
alarmingheadline, half may have been stolen . does the center have the authority, capability and funding it needs to confront the growing crisis of improper payments? >> i think different agencies have different authorities in terms of looking into that and trying to address improper payments. some of that authority for some programs resides with the treasury. and we are esdoing everything that we can to make sure that the payments that were making under the program are our responsibility to not, are not characterized by fraud. we have inspector general's and fraud prevention programs keeping controls in place. >> i want to inject the payment integrity is its
authority restricted to the treasury or the government. >> i believe a number of different agencies and of course doj plays an important role as well l. >> the supply chain disruptions have been so severe that parents are desperately searching for baby formula which is in dangerously short supply. as you know some parents have had to travel long distances to purchase baby formula. others have had to ration baby formula or water it down. others have fallenvictim to price gouging or panic buying and according to the new york times the out of stock rate for baby formula has risen to 43 percent, up 10 percent abfrom a month ago. what can be done to alleviate the shortage of baby formula ? >> i wish i had a good answer but i can promise you that the administration is carefully looking into this and will certainly do what they can to address niwhat is a very disturbing finding that
you described. >> quick question about stable coin. just to pause for a moment the stable coin issuer are verifiably back by the dollar on a one-to-one basis. those reserves can beredeemed for a dollar. on a one-to-one basis . if the stable coin issuer has no fractionalization of reserves , it has no lending it would seem to me the issuer is operating differently from a bank and therefore should be regulated differently from a bank. is that a fair assessment or what is your view? >> certainly there are differences and different banks operate differently and presentdifferent risk . >> but a bank has fractional reserves and lending functions which are and lack for stable coin issuer's. >> that suggests a slightly different model should apply in regulating them.
thanks framework has the possibility of flexibility to address the differences. >> the gentleman from florida is now recognized for five minutes. >> thank you chair waters. with the federal reserve embarking on their fight against inflation it appears we are entering a period of increased interest rates.ai how much will 12 or three percentage point increases and the increasing the interest on the national debt in and what actions are you planning to take? >> at the moment real interest is on the national debt over the next couple of years has been negative because nominal interest rates have been so low. in our own projections of the interest burden of debt in the years ahead we've assumed
that interest rates would not state that low-level and we've projected increases. even so you can see in our midsession review and we will be updating i guess in the last budget will be producing another midsession review where we update our forecast interest rates. the real interest burden is debt remains below two percent which is a level that many economists regard as safe and consistent with solid government finance. >> last october the financial stability oversight council issued a report on climate change . the consistent position comes through that the fsoc wants to rely on scenario analysis
to assess climaterisk . i believe we must also recognize regulators and forecasters often times make errors as well . . will your scenarios provide for assessing potential adverse impacts of regulatory decisions if they turn out to be advised or based on an overlypessimistic climate scenario ? >> i think it's important for financial institutions to be prepared to have adequate capital liquidity, to address a variety of risks. shocks that can hit the economy. no one ever expected a pandemic but the dodd frank rules were put in place insured resilience of the financial sector of the banking sector to be able to survive shocks and meet the
credit needs of the economy. and similarly with climate change, we don't know exactly how things will transpire but we want to make sure that with adverse scenarios remaining possible that banks operate in a way that's safe and sound. so scenarios are widely used around the world in evaluating the vulnerability of banking organizations to the risks from climate change and we're learning from what other regulators do and regulators of banking organizations are looking to such scenarios to evaluate the range of risks that we could face.
>> could you tell us who some of these foreign regulator experts are that we are relying on? >> i'd say the bank of england is most advanced in advising scenarios and using them to evaluate the safety and soundness of their banking organizations and there is a network of central banks that have worked on designing s.scenario analysis for use of this sort. this is certainly a resource to us in the united states as we work on a system for regulators to evaluate these risks. >> thank you, the gentleman from texas mister gonzales is now recognized for five minutes. >>.
>> thank you for testifying with us. i have actually a follow-up to some of the issues you just addressed. this devastating war in ukraine and ensuing energy crisis in europe has severely impacted economic productivity echoing throughout the global economy. one of the ways to fight against this would be to expand exports of our lng in the us however the united states has had an effective export capacity meeting pipeline infrastructure and export terminals would have to be built to expand the volume oflng exports to our allies in europe and around the world .the private sector faces challenges assessing capital to invest in these projects in part to regulatory landscapes that we have today esthat keep investors away.fa how does the fsg's october 2021 report way this challenge and potential risks to the globalfinancial system ? >> the issue that you're
pointing to was a necessity of helping our european allies particularly reduce ttheir dependence on russia for supply of natural gas. this is a critically important priority and i know the department of energy and white house are looking at what we need to do in the united states to facilitate that. i'm not an expert on the details about terminals but would be glad to get back to you on that. this is not really i would say a financial stability risk. that the fsoc has looked into or addressed in its report. it is certainly an important economic issue. with respect to the war in ukraine, the financial
stability oversight council and the staff of the agencies involved meet on a regular basis to attempt to identify spillovers to the financial system that are of concern. frankly the financial system has functioned very well in the face of this unexpected shock but the issue that you mention is very important. >> i'm concerned because today is europe and tomorrow it may be another part of the worldand i think we should be prepared . thank you and i yelled back. >> thank you very much. the gentleman from misery is now recognized for five minutes. >> i to madam chair. secretary chopra is a member
of fsoc. i say director of the cpb isa member of fsoc . >> yes he is. >> he recently recommended removing deposit insurance as an enforcement action. during his proposal director chopra named financial institutions that have 27 percent of the us deposits combined. can you propose these institutions would have enforcement actions placed on them such as revoking their fdic insurance and placing them into receivership . >> en.. >> so from that comment, i would assume that you believe that
deposit insurance is important to the financial stability to the united states. >> i agree with that. >> okay. >> i'm not aware of the -- not knowledgeable about the details. >> if you believe that the fdic insurance is a key factor in continuing to have stability in the banking area, especially when you have these big banks you are talking about, up to perhaps a quarter of all u.s. deposits not being insured, that would affect the stability of the economy, and you said in [inaudible] which their entity is looking at financial stability, risks, which you just stated a minute ago. do you think he is a worthwhile member to have on there and have some actions taken against him for making a statement like that could endanger the stability of financial markets? >> i'm not prepared to weigh in on his proposals. i don't know the details of it. i agree with you that the
deposit insurance is important, but it is not automatic that every institution is granted deposit insurance. that's something that the fdic reviews how a bank is operating, whether or not they have deserve to have deposit insurance. >> madame secretary, when you have a member make that sort of inflammatory remark that could affect the stability of the financial markets, by saying these institutions could have the fdic insurance taken away from them, that sends shockwaves from my position about what's going on. to me, it's unacceptable. if i was in your position, as the head of it, i would have a discussion with mr. chopra and said you can't go out there and make those kind of -- and can't have those enforcement action. that will destabilize the markets. we will write you a letter and
hope you respond to that in regards to this situation because i think it is paramount that the council ensure that they have members there who understand that their remarks could be inflammatory in a situation like this. i thank you for that. number two, you know, in december 27, 2020, congress passed the act of 2021 which funded the government also included additional stimulus related the pandemic including another round of ppp loans. it established a second round of ppp. it was entitled oversight. it states not later than the date that is 120 days after the date of the act, that the administrator and secretary of the treasury, that's you, shall testify before the committee on small business entrepreneurship in the senate and the committee on small business of the house of representatives regarding implementation of this act and amendments by this act. that means you are due, madame secretary, to appear before the small business committee in
house 381 days ago and still have not shown up. i've sent you letters about this testimony in may of 2021, june of 2021, july of 2021, and march of 22, and still have not received a response. as someone who is head of fsoc and someone who looks at the stability of our economy and someone who should be wanting to lend the support and stop some inflammatory discussion and actions and allay fears, your lack of being able to appear before us is very concerning. do you have any plans whatsoever to appear before our committee, madame chair, the small business committee? >> i appreciate very much the role that congress plays in oversight, and i come regularly to the hill and to this committee to testify. in the situation you're
referring to, congress has expressly authorized me to delegate duties and powers of the secretary to another officer or employee, and that includes the deputy secretary, and he has offered to testify multiple times in front of the small business committee. i hope that you will agree to allow him to come and do so. >> [inaudible]. gentleman from north carolina -- gentlewoman from north carolina, ms. adams is now recognized for five minutes. >> thank you. thank you madame chair and rak ranking member for hosting this hearing today. secretary, good to see you again, thank you for being here. madame secretary, fsoc -- [inaudible] significant increases in home prices -- [inaudible].
from march 2021 to march 2022, home prices rose 22%. so would you agree that the rapid increase in housing and rental costs presents a significant problem for those who are already home insecure? would you agree to that? >> yes, i definitely agree. i think the supply of housing particularly affordable housing in this country is a huge problem. we have had low construction ever since -- really since 2008, and believe we have a huge shortage of affordable housing in this country. of course rising home prices and rental prices are an enormous -- an enormous issue. >> yes, ma'am.
in my district of charlotte, mecklenburg, private equity firms have been snatching up single family homes and converting them to rental properties. our local paper of record reported that in north carolina, institutional investors have purchased over 40,000 homes, and in the past decade -- [inaudible] over 10,000 of those are in mecklenburg county, and the average value of those properties, two thirds of the average single family homes that means the private equity firms are depleting the supply. madame chair, i'd like to without objection to submit the articles that i mentioned for the record, including two others that talk about the housing crisis from new york times and the washington post. >> without objection. >> thank you.
secretary, can you describe why it might be dangerous for the housing market at large for private equity firms to purchase and convert homes at the lower end of the [inaudible] spectrum? >> well, i would simply say that we have a shortage of housing, and it is critically important that we do everything in our power to increase the supply of housing. we have to use the tools that we have. the president's build back better plan would have dedicated 150 billion dollars to housing, including making major investments in public housing and homebuyer assistance, but we certainly have to use all the tools that are available to us now to address the housing crisis. >> thank you. you know, we should have passed the president's build back better agenda, it would have dedicated 150 billion to housing
including making major investments, so i am proud to have worked with senator collins and representative [inaudible] to introduce our bipartisan bicameral act which would allow cities and states to use a lot of the fiscal relief funds to finance -- to help with the housing development. so i encourage all of my colleagues sitting here today to co sponsor the legislation. madame secretary, with the time we have left, would you tell me how important it is to maintain a robust supply of affordable housing during this time? >> well, i think it is critically important. we're seeing huge shortages in affordable housing, especially in high-priced areas of the country, and i think we need to do everything we can to address the shortage. i think that states and localities also have in place
restrictions that make it -- zoning restrictions that make it difficult to build affordable housing, and so i think action at that level is also important. you mentioned fiscal relief funds, and we have certainly -- certainly urged state and local governments to use these funds to expand affordable housing. it was an important issue in the pandemic. >> thank you, madame secretary for being here. madame chair, i yield back. >> thank you very much. the gentleman from michigan is now recognized for five minutes. >> thank you, madame chair. i wanted to call you chair yellin. that's how we first interacted for many years. but secretary yellin, just last month, when you were here, we talked a little bit -- and i know this is a little off topic from here, fsoc, but we talked
about iranian sanctions and there had been a report in the washington post about iran demanding that they be taken off of the -- some of the designations as foreign terrorists lists. you had said at the time that you, quote -- and i have the transcript from that interaction right here. you were quote i'm not deeply involved in the detail of these negotiations. my question then also was have you or anyone else at treasury been directed to reduce iranian sanctions enforcement so as not to interfere with those talks? you replied we haven't changed our sanctions on iran. that wasn't my question. have you been instructed to or requested to do anything? you said there's been no change in the administration policy to the best of your knowledge. what i'm really concerned about i guess is secretary of treasury not being read in on those. you are the main -- treasury is the main source of sanctions, and is that still the case? are you read on these
negotiations or not? >> treasury is updated about the negotiations. >> and you personally? >> i have been periodically updated on this situation with iran. >> i guess i will go back to my original question. have you or anyone else at treasury been instructed to back off on any of those sanctions vis-a-vis treasury sanctions on iran? >> no, certainly not to my knowledge. >> okay. that's the kind of thing, though, that gets us -- madame secretary, very nervous, when you say not to knowledge. will you please go and investigate that? i would like to find out so that we can have assurances that treasury, with your knowledge or against your knowledge, hasn't been instructed by this white house to back off those sanctions. >> nothing has changed with respect to iranian sanctions. >> i still request that all right. here's the other question i
wanted to get at, fsoc and its functions talking about digital -- recently the sec released a staff accounting bulletin number 121 related to custody of digital assets for its platform users. focusing on digital assets, was there any coordination of other members of the agencies in those efforts from the sec? >> i'm not deeply knowledgeable about this regulation. i need to look into it and get back to you. >> i guess if you would, that would be extremely helpful. this is a sweet spot for this committee. sec in my opinion should not be issuing one off staff bulletins and guidance on digital assets instead of following the proper rule making process in coordinating with other agencies. so seems to me as chair of fsoc, that is a -- that is a vital part as we are dealing with these digital assets.
so i've got a minute and 40 -- >> the sec and cftc certainly have authorities -- not comprehensive authorities over digital assets, but they certainly do have authorities and can act on their own within those. >> i guess i'm wanting to know whether's coordination within the agencies of fsoc. so we can continue that. my last minute here, i want to talk a little bit about the effects of spending on the economy, and i know ms. wagner from missouri was talking about that, and ironically she's at a press conference right now dealing with the lack of baby formula and the inflation prices and the supply chain there. so one economist has put it this way, spending plus easy money equals inflation. and that seems to be playing out, and i'm curious if you would prognosticate here a little bit, soft landing versus
hard landing versus very hard landing. what is your expectations on what's going to be happening in the economy? >> well, inflation is a serious concern. look, we're not the only country experiencing inflation -- >> but no other country at this level, though. >> but it does show that there are factors beyond spending in the united states that are critical to inflation. we're seeing because of the pandemic supply chain problems, develop -- >> my last five seconds. j powell agreed with this, about 40% -- sorry, 20% of inflation is due to energy, 20% labor, 20% supply chain, 40% due to monetary policy and spending. i yield back. >> the gentleman from pennsylvania -- the gentlewoman, i'm sorry, from pennsylvania, is now recognized for five minutes. >> good morning, secretary
yellin. i'm delighted that you are here again before us. thank you, madame chair, for recognizing me. and i thank you for not minimizing the risks and the realities of inflation and what it means to all of our constituents. clearly the fed has its work cut out for it and is stepping up to do just that. at the same time, i want to make sure we balance the conversation about the overall health of the economy. we can all beat the drum about inflation because it is painful, but let's talk about the underlying health of the economy following a pandemic and a global economic closure. unemployment has fallen to 3.6%, down from a pandemic high of nearly 15% in april of 2020. if you compare that to 2008, the financial crisis, unemployment peaked at about 10% in 2009 and didn't fall to below 4% for
nearly a decade, a decade. secretary yellin, can you speak to how different this recovery has been compared the recovery from the financial crisis? how have the steps taken by congress including the american rescue plan, which you have spoken about several times today and my constituents appreciate, how has the american rescue plan and some of the work that we have done here in congress contributed to this extraordinary recovery? >> so i appreciate you making this point. it is critically important. the american rescue plan deserves substantial credit for the fact that the unemployment rate is very low, that americans have confidence in the job market. we're seeing the [inaudible] rate rise to levels that we have never seen in the united states. what that means is that individuals are seeing huge
opportunities in the job market. they are receiving outside offers that let people move to better jobs and advance in the jobs that they have and see wage increases. the eviction rate in the united states is below pre-pandemic levels. we saw -- had a year last year in which child poverty dropped very substantially. americans on average, their household balance sheets are very strong. that's in part because of the support provided by the american rescue plan and businesses are doing well. while some built up debt during the pandemic, they're finding it possible to pay it down, so we have a good strong labor market.
i spent the decade following the financial crisis at the fed, and i can tell you how concerned we were that using every tool at our disposal, it still took a decade to recover. i can also tell you that when president biden was elected, the projections as to where the economy might go were dire. -- projected high unemployment. the american rescue plan addressed that, and the strong state of our labor market and the household balance sheets, this is the dog that hasn't barked in the night that we should -- that's the credit that goes to the american rescue plan. of course we have to address inflation. >> i thank you for your legacy of dealing with these issues and recognizing what the american rescue plan has done. i had a father thank me for the american rescue plan because he
and his wife have two little children, and what it did in terms of the child tax credit was meaningful to them. sadly, not a single republican could bring him or herself to vote for the american rescue plan, and sadly, while we made a big difference on child poverty and hunger, by not renewing the increased child tax credit, of course we send those families back into poverty. quick in the time i have left, when you were last year, you talked about the russian economy reeling as a result of the sanctions. can you give us an update? >> well, it's absolutely reeling by their own estimation, the russian economy looks set to contract at least 10% or more this year. inflation is expected to reach double digit levels, perhaps 20%, and there's an enormous -- because of our sanctions shortage of goods and services
that russia needs to replenish the munitions that it is using in the war. it's high technology and defense industries will be damaged for decades to come. >> i yield back. and i thank you. >> the gentleman from kentucky, mr. barr is now recognized for five minutes. >> madame secretary, i want to focus on your 2021 report on climate-related financial risk. i have expressed in this committee before that is implausible if not farfetched to suggest that climate change, a phenomenon that occurs over decades could somehow suddenly overwhelm the banking system insurance sector, reinsurance sector, what evidence has fsoc have found that banks, lenders, or insurers have ever mispriced risks so substantially that would result in systemic ris snk
>> -- risk? >> it is not just weather risks that are clearly rising in severity and could have a significant impact on banking organizations. but there are also so called transition risks that -- >> so regulatory risks, risks that the government could redirect capital away from fossil energy and increase inflation? is that what you're referring to transition risks? >> existential threat with respect to climate change, leaving our children and grandchildren with a planet that is all but inhabitable. >> let's drill down on that. did fsoc consider the risk of overinvestment of novel unproven and highly risky speculative green assets and the risk of diverting investment away from stable proven and low risk brown assets? >> the fsoc and individual regulators are not telling banks what they should or should not
do. >> i think fsoc should consider overinvestment in risky assets. in the consideration of climate related financial risks, did fsoc consider the substantial risk that has materialized that has now undermined stability including historic inflation and $4.37 a gallon gas. >> i think we owe that to the failure of our domestic industry to ramp up production to pre- -- >> they say they can't get approval, and when they can't ship through the keystone pipeline and when they can't access capital because of esg disclosure mandates, that's why we have a shortage of energy. did fsoc considered that the esg disclosure proposal designed to redirect capital away from fossil energy will increase the
cost of energy creating a greater risk to economic stability? >> look, investors with over 100 trillion dollars worth of assets have said that in order to properly evaluate investments, they need disclosures about the risks that individual firms have with respect to climate and regulators all around the world -- >> i understand that -- will you commit to engaing chairman gensler to assess the risk to our energy markets in exacerbating the inflation crisis posed by politicizing the allocation of capital through esg regulation? will the fsoc consider the risk, the risk of steering investors towards green or esg firms that could make them riskier, not safer, by inflating their asset values? >> well, look, i think you should note that the largest
banks in the united states and around the world voluntarily joined an alliance this past year to commit -- in their portfolios -- >> i'm asking you about financial risk. >> -- as a result -- >> i'm asking you about your job as chair of the fsoc to evaluate all financial risks, and i want to know whether you act knowledge that stocks in many esg investments -- stocks in many esg-related etf and investments trade at elevated price to earnings ratios and multiples because investment returns are sacrificed for non-pecuniary factors. are you evaluating that risk to the financial system because returns are sacrificed? >> we do look at asset valuations and recognize that significant shifts in them can
be a risk to financial stability. >> finally, will you commit to never as long as you're the treasury secretary and chair of fsoc to allow a single minute of time during any meeting of fsoc be devoted to the topic of abortion? >> abortion is not a topic that fsoc has looked at -- >> thank you. i think the fact that there's a focus away from actual financial stability risks and towards things like abortion and meteorology means that we have our eye off the ball, and i yield back. >> fsoc has nothing to do with abortion. >> the gentlewoman from michigan is now recognized for five minutes >> thank you for being here, madame secretary. i want to talk about something that's really important to my district, and i want to start with a few questions. defining financial stability risks from climate crisis, do
you think we should be defining the risk as only government policy change that would happen only with, you know, potentially -- that's the only way that would create disruption? do you think the government policy is the only form of transition risk regarding climate crisis? >> the underlying risk is that we have a process of climate change taking place which threatens the viability of life on earth and poses enormous risks to our children and our grandchildren, and eventually -- i mean, i believe this risk is becoming clearer from what all of us see happening around us every day, and if that isn't the case for some people, it will become clearer in the decades ahead, and there will be
adjustments -- >> i'm with you. this is why i'm asking. in defining financial stability risks from climate crisis during the senate confirmation for the federal reserve chair powell he defined it as government policy change which happens that could potentially create disruption. but what about rapid changes in technology or major shifts in, you know, consumer consumption -- i mean, right now, are we considering the supply chain impact due to rising sea levels or other climate-related effects? >> i would agree with your statement that these risks do not have to relate to government regulation. they could certainly relate to technological changes -- >> i'm so glad you're saying -- >> -- or rapid shifts in consumer preferences or other sources. >> a huge economic risk, and we need to be looking at it. g 20 financial institutions currently have nearly 22 trillion of exposure to carbon intensive sectors.
last year the world's largest financial institutions, madame secretary, pumped 742 billion into the fossil fuel industry. secretary, we actually saw more fossil fuel financing last year than we did in 2015, the year the paris agreement was signed. we're going in the wrong direction. as the world's largest financial institutions continue to grow their positions in carbon intensive markets, you know, will this make our transition from fossil fuels to clean energy slower and more dangerous to our economy? >> i guess what i see is the world's largest institutions recognize the importance of shifting their lending in ways that will help -- help us, the globe, the u.s. and other countries achieve net zero by 2050 and are voluntarily --
>> they are saying it, but they are not doing it, secretary. >> well, i think it is important for groups to monitor those financial institutions and see that they -- >> i really think we need to. fsoc's report on risks posed by climate change last year, the council outlined several recommendations as first steps in addressing the climate crisis including increased scenario analysis, climate risk disclosures. i applaud the report. i think the recommendations were clear. however i'm perplexed because many of these financial institutions that are financing fossil fuel projects continue to say things about net zero, pledge to align with the paris agreement, but they are not. they are contradictive. you saw the record flooding, everything, how will better risk modelling and climate disclosures change the behavior of these financial institutions? >> it will allow their supervisors to form a clearer view of the risks that these institutions are taking and then
ensure that they are managing them properly, and it will help the institutions themselves better appreciate the risks that they are undertaking. they are not probably doing that kind of analysis now. and we want to promote that understanding. >> yeah. just to be clear, i mean, i'm for that, but i think the result needs to be actual, you know, the reduction and to really look at this in a very clear way. i don't think we're in line with what i think, you know, chairman powell is talking about and the fact that a lot of other countries are looking at this as a risk, very clearly, an economic risk, i think that's something very telling. thank you, madame chair. >> thank you. the gentleman from texas, mr. williams is now recognized for five minutes >> thank you, madame chairman and madame secretary thank you for being here. i am a small business owner back in texas, not was, but am. and i meet with families, businesses, ranchers, car
dealers in my district all the time, and inflation is one of the first things they bring up. yesterday cpi data showed this phenomena is not slowing down. year over year gasoline is up 43%. you know these numbers. electricity up 11. meat, fish, eggs up 14%. and even used cars are up 22%. you're one of the top voices in the administration claiming inflation was transitory. well, that's obviously proved to be extremely wrong. and yesterday the wall street editorial board chided the president for lying to the american people and blaming everything except for his own party's policies as a contributing factor to these price increases. so just a simple question, keep it short, very simple, will you admit that government spending is a contributing factor to inflation? >> there are many factors that are responsible for inflation. you can see inflation at unacceptable levels in all advanced countries around the world -- >> i know. we are just saying government
spending is a big cause for it, isn't it? >> well, we supported spending. it contributed to demand. and it had very favorable effect on most americans' well being. we do have to deal with inflation. >> all right. the energy sector is an important energy -- or important industry in my home state of texas, and i keep hearing from these administration -- this administration, that it is the private sector's fault that they're not producing more and haven't invested in any new capabilities to expand production. quite frankly, that's an insult. this is such a ridiculous excuse to once again deflect blame away from their own misguided policy decisions that are having a material impact on american lives. it's deflect all the time. as a business owner, as a current business owner, certainty is key before you deploy capital. since president biden's first day in office, he made it clear he's going to be hostile towards this energy industry, and a few of these actions, immediately
cancelling the keystone pipeline permit, when he came into office, and instituting a leasing moratorium for on shore and offshore energy production while threatening to raise royalty rates and pushing his climate agenda through financial regulators to make people think twice before providing financing, just today, today, this morning, interior department cancelled a 1 million acre oil and gas lease in alaska that could have brought some relief to the american people, when we're sky high in gas prices. so madame secretary, why would any domestic energy company want to invest in new production capabilities when all this administration does is project uncertainty. they want to raise taxes. they want to raise regulations. they are just frankly hostile, just mean and hostile towards this industry. why would anybody want to come here? >> well, i think when the pandemic struck and gas prices fell, a lot of oil companies and energy companies in the united states suffered hard times and
losses, and it was natural for them to diminish production and reduce investments in drilling. they probably didn't expect such a rapid recovery as we saw from the pandemic, and as demand increased, it drove oil prices up. i think this gives a good deal of impetus to domestic energy companies to raise production in the short-term. over the longer term, climate change remains critical, as i think what we've seen happen with energy prices rising because of russia's invasion of ukraine, it tells us that we need to move to renewable energy sources where -- >> okay. >> -- our supplies and well being and prices aren't so vulnerable -- >> i might have a better idea. maybe incentivize the private
sector and let the private sector compete and help drive prices down. the government never gets that done. the government creates the problems we're in today. i would say you might want to try and incentivize these people. in closing as a result of foreign tax credit regulations finalized by treasury, late last year, income and withholding taxes that have been credible for decades are no longer eligible for foreign tax credit, so this could have an effect again of incentivizing u.s.-based companies to move more of their operations overseas. quickly, are you willing to reopen this rule making to ebb sure that the american businesses are not being put at a competitive disadvantage so they don't leave and cost us more jobs? because this is america, the greatest country in the world. would you be willing to do that? >> i'm sorry, what rule making are you referring to? >> well -- okay. my time is up. thank you. >> thank you. the gentleman from illinois is now recognized for five minutes.
>> are you unmuted? we'll wait for him. meanwhile, the gentlewoman from texas, who is also the vice chair of the subcommittee on diversity and inclusion is now recognized for five minutes. >> thank you, chairwoman. thank you secretary yellin for joining us again today with this important annual report. first i would like to applaud you, madame secretary, for the treasury's handling of the financial stressors we have experienced recently. covid-19 has caused much social and financial hardships to our community. the invasion of ukraine has exacerbated these problems. i commend the implementation of
multilateral sanctions against russia, economically and isolating them politically. this congress and the president have constructed a broad and effective international coalition. we hear good news of others that may be joining. now we must continue this effort to maintain an expand help to ukraine -- and expand help to ukraine and turn up the pressure on putin. congress's overnight council is really important. this allows americans to trust their hard earned paychecks will be safe from predatory bad actors. i want to focus today on a couple of things that have perhaps been talked about, and just to be clear, government spending is not the only factor in inflation, is it not? >> it's supply chain bottlenecks. look at what's happening in china, the lockdowns that they are using to handle the pandemic are disrupting supplies to our
economy. the war in ukraine that russia has launched is impacting food prices. we've seen more than a doubling of wheat prices. not only is that impacting american food prices, it's threatening starvation in many parts of the world where there's already food insecurity. it is affecting energy. none of this has anything to do with government spending. >> right. in fact, the food shortage may cause a bigger crisis than even the gas shortage, i understand? >> the food crisis is terribly worrisome, with respect to wheat, both russia and ukraine are tremendously important sources of exports, the bread baskets of the world, and, you know, at the moment, ukraine is
really unable to ship wheat out of the country. that's part of why wheat prices have risen so much. there have also been droughts in many parts of the world, and we're terribly concerned and are very focused on rising food prices, the impact that will have in many parts of the world, including africa. >> right. and so i want to focus on a couple of things that have already been said but to probe a little more. in response to the question from one of my colleagues, you mentioned the decrease in the child poverty as a result of the child tax credit and some of the steps that congress have taken to help the average working family, do you know exactly what percent of reduction has resulted from all the investment in the child tax credit?
>> i don't have the exact figure, but i do know it was a substantial reduction in child poverty -- >> i thought i heard 40%. is that in the ballpark? >> that's the number i have in mind, but i can get back to you. it was a very substantial impact. >> right. i know that you received a letter from some texas democrat asking your inspector general to look at what our governor is doing with perhaps misuse of some of the -- [inaudible]. can i get some of my seconds back? you said the dollars that we sent to recover for their loss of revenue during the pandemic, and there's concern that some states did not use the dollars as congress intended.
in fact, the washington post article recently -- in fact it was last week or yesterday said that from refurbishing prisons to constructing new golf courses, one state arizona even used the money to discourage schools from requiring students to wear masks, threatening the treasury department to claw back the aid. what are we doing to claw back the aid? i know we sent a letter several members from texas concerned about our governor using those dollars from what he calls operation lone star, which is his attempt to control the border. >> we have clear guidelines in place about permitted uses of that money and not permitted uses, and we are monitoring and have a reporting system that will let us review how states and localities are using that money and promise you that if the funds are used in ways that are inappropriate, we will claw
it back. >> you will claw it back. how much time do you think that would take? i mean, i didn't realize until this article that this was happening in many other states. >> the gentlewoman's time has expired. >> before you leave me, can i submit for the record i asked for unanimous consent the article of use of the covid aid to fund border crackdown, washington post. >> without objection, thank you. the gentleman from arkansas, mr. hill is now recognized for five minutes. >> thank you, chair watters. madame secretary, so great to have you back before the committee. thanks for being responsive to our questions, and thanks for the incredibly challenging times you're in in trying to guide our financial response to ukraine's tragedy of being invaded by
putin. i want to start there because i was looking back at the fsoc meetings. i'm actually going to talk about fsoc -- has met nine times since you have been confirmed at the treasury, and only in two of those meetings did you talk about cyber concerns to our financial institutions, and one of those was just because of the invasion, and of course we've been briefed up here on the cyber risks potentially posed by russia. in contrast, the fsoc spent a lot of time on climate, and so my question to you is, do you think that cybersecurity incidents due to the russia conflict are a risk to the financial system here in the u.s.? >> cybersecurity is one of the key threats to the financial sector, and fsoc has
consistently identified it including in this report as a serious concern. the treasury is also has responsibilities in this regard and is very focused on especially with the russia ukraine situation. we're working very closely with financial institutions to make sure that they have the information -- [inaudible]. >> i tell you, those robo calls are a real problem. >> sorry for the interruption. we will make up for the time. go right ahead. >> thank you. let me stop you there for a second and say do you -- since you in those nine fsoc meetings, you talked in seven of them about climate change, and only two in cyber, would you say that at this time in the war, global
war -- >> we have an ongoing and robust program to deal with cybersecurity -- >> madame -- >> and we have recognized it is a critical threat. climate change is something new that the council has not previously addressed, and the reason we have discussed it in so many meetings is because it is a new initiative. it is a complicated one. it's one that requires agencies to work together, and it's a substantial long-term threat. both things are important. one is not more important than the other. >> but you would say that cyber resiliency right now is a much more critical concern to the financial sector than long-term talking and planning and thinking about climate change? yes or no? >> climate change is a substantial long-term threat, and cybersecurity is a long and a short-term threat we're very
focused on. >> let me change subjects and talk about the reverse repurchase market that your former organization, the federal reserve runs. over the last couple of years we have 1.9 trillion dollars in overnight purchase agreement showing how much liquidity that's out in our system that's not being able to be used, can't be used for productive lending purposes, the banks have effectively too much stimulus from fiscal contributions to the economy as well as the laxity of our monetary policy recently. do you think that reverse repurchase agreement balance is a challenge to financial stability as we go through a tightening phase at the federal reserve? >> i don't want to comment on issues that are in the domain of the fed. it's the fed's program, and i'm going to refrain from commenting on it. but i will say that fsoc is
concerned about the functioning of the treasury market. we've had episodes in which liquidity has dried up, and we're working very hard coordinating with the interagency treasury working group to look at reforms to make sure this critically important market to the united states and the globe functions well, has the liquidity that it needs. >> good. well, i would invite you to look very closely at what gary gensler has said about the primary dealer market and urge him to be very cautious about injecting any uncertainty in our primary treasury dealers at this time of, you know, tough conditions as we tighten and want to maintain that liquidity. thank you, madame chair. i yield back. >> thank you very much. the gentleman from massachusetts, who is also the vice chair of the full committee is now recognized for five
minutes. >> thank you, madame chair. madame secretary, welcome. i would like to discuss in these five minutes what more the united states treasury can do to defeat russia in ukraine. the central bank sanctions crafted by you and deputy secretary have been the brass knuckles of nato's one-two punch of sanctions on russia plus support for ukraine. they were unexpected. they hurt bad, and you and the deputy secretary deserve a lot of credit for crafting those. >> thank you. >> i'm concerned, though, that russia's continued exportation of almost 8 million barrels per day of oil continues to fund the barbaric war machine. the united states and canada have barred russian oil. the european union is trying to, but hungary is exercising a veto on that effort. first, what carrots and sticks do we have to compel hungary to support an eu blockade of russian oil? >> we're working very closely with our european allies. i'm actually traveling to europe next week, and will have
discussions with them. most of them were in washington -- >> with hungary in particular, though? >> with hungary, i've not had conversations with hungary. my nfc colleagues may. you know, the european union, the european commission is working with all of its members to -- >> all the members agree except for hungary. this is a monumental step. i would encourage you and the administration to do your utmost to use carrots and sticks with hungary to get them on board here with the european union's approach, and that is because if the eu does blockade russian oil, this could force russia to redirect up to 5 million barrels out of their 8 million total every day. and they can't. it seems very unlikely that they could actually redirect that 5 million barrels per day going to your. only china and india have enough demand even to take it and neither seem willing to --
[inaudible] their supply risk to that degree. there's not the pipeline or shipping to redirect that 5 million. if and when europe does join our blockade, again, i encourage you everything you can to get hungary and the eu on board, the west will have leverage over russian oil production, more than i think we appreciate right now. keeping 5 million barrels a day in the ground in russia is going to be devastating to its oil production. they can't do it. they can't do it for their upstream services, can't do it for maintaining their oil fields. have you examined any potential effort with our nato allies to take advantage of that leverage that we would have? >> we've had many many discussions with them about energy and russian oil. let me just say, our objective since day one has been to have as large a negative impact as we
possibly can on russia, while to the best of our ability protecting the rest of the world. when it comes to oil and energy, and shutting it in, we do have to remember that shutting in that russian oil is likely to boost global energy prices which can have a very damaging effect and is in the rest of the world and also can counterintuitively perhaps raise russia's revenue in spite of the fact that it's producing less oil. >> that point -- >> at the same time, we're working with them, we're also considering possible things we could do that would lower russia's oil revenues while protecting the rest of us. >> i think we may be thinking of the same lines of effort here, but would these other things that you could do include a special payments authority where we could be with our nato allies
actually purchasing russian oil, but only remitting to russia the cost of production, 20 to 25 barrels -- dollars per barrel excuse me by taking the excess which would normally go to the kremlin as taxes and instead direct that towards ukrainian reparations. this has been proposed by experts. i am sure you are looking at it. would you be willing and your deputy secretary be willing to engage with me on what that might look like and to what degree you have been planning for it. >> we would be glad to engage with you on that, and that is the kind of alternative that we have been examining and discussing our allies. >> i appreciate that. the final 20 seconds, secretary, have we explored sanctions on oil field services providers who enable russian oil production upstream of their actual -- of the actual distribution of that oil? those companies have escaped sanctions, and they provide much-needed technical expertise that russia's not developed
organically. >> well, you know -- [inaudible] the foreign oil companies from russia is really hurting their ability to extract oil now and in the future. we've put in place some sanctions -- >> madame secretary, the time has expired. you may submit your question for the record. madame secretary, welcome again. and thank you for your many years of public service. the gentleman from minnesota is now recognized for five minutes. >> thank you, mr. chair. and thanks to you, madame secretary for joining the committee today. the democrat created financial stability oversight council or better known as the fsoc has you have been referring to has found itself in a unique regulatory position recently. secretary yellin, as the chair of the fsoc, you know better than anyone that the fsoc operates independently and not directed by an administration to make and implement policy decisions.
historically, madame secretary, does the fsoc take direction from the white house on activities and institutions which to investigate, and if appropriate, designate those activities or institutions as systemic risks? >> the fsoc as you said is a group of independent -- >> my question is yes or no. does the fsoc take direction from the white house -- >> no, it does not. >> thank you. that's what i thought. the fsoc exists to independently identify emerging threats to our financial stability and align regulatory frameworks around those risks. secretary, by executive order you convened the president's working group on financial markets in july of 21 and you played a key role in the delivery of its november 21 report. the report recommends that congress enact legislation to limit stable coin issuance to insured depository institutions, banks. for the record, this is a recommendation that does not have consensus in congress, not
even amongst committee democrats. the report also states that in the absence of urgent congressional action to enact this legislative recommendation, the fsoc should step in to designate various stable coin activities as systemic risks which would jump-start administration wide regulatory rule making. secretary yellin, has the fsoc officially designated digital asset or stable coin activities as systemic risks? >> no, it's not done so. >> thank you. digital asset and stable coin activities have not been officially designated as systemic risks from the fsoc. do you believe the fsoc should take action if congress does not urgently enact comprehensive crypto legislation? >> we would very much like to see congress adopt a coherent -- >> i will ask it again. >> -- regulatory framework. it is something we would look
at. >> you who convenes the fsoc, do you believe fsoc should take action if congress doesn't urgently enact comprehensive crypto legislation? >> it is something i think fsoc should look at >> so the answer is yes? >> i don't know that it's appropriate, but it's something that bears examination. >> thank you. you previously explained to us that the fsoc operates independently and does not take direction from the white house on labelling systemic risks. however, it seems pretty clear that absent urgent action by congress, the fsoc under your leadership is prepared, perhaps, even though you said that maybe not appropriate in your words, is prepared to designate certain stable coin activities as systemically risky in response to the white house's digital asset agenda. as everyone in the room is aware, madame secretary, legislating takes time and
there's more dangerous to innovation and opportunity to when the federal government rushes to legislate or regulate for that matter. the biden administration knows this as well as any of us, but the president's working group and president biden's crypto executive order still threatened to ignite the fsoc if congress doesn't do what the biden administration requests. put simply, madame secretary, the administration intends to weaponize the fsoc to circumvent congress and the american people on digital asset policy. this recent history of activity demonstrates to me that the fsoc is no longer independent of partisan pressures and should be brought under control -- under congressional appropriations supervision so elects officialed -- elected officials can make sure the voices of the voters are recommended in the decisions of the fsoc. i introduce the reform act which brings the fsoc under congressional oversight and increases the transparency of
the council. the future of crypto and the ownership economy cannot and must not be dictated by any entity that supposed to be independent but instead takes its cues from a political agenda. thank you. i yield the balance of my time. >> the gentleman yields. the chair now recognizes the gentleman from [inaudible]. mr. garcia for five minutes. >> thank you, mr. chairman. made it in the nick of time. good afternoon, secretary yellin, thank you for being here. and thank you mr. chair, for hosting this important hearing. secretary yellin, you were chair of the federal reserve in 2016, when fsoc final ized a study examining state and federal banking laws that could have a negative effect on the safety and the soundness of the financial system. the recommendations that the federal reserve made in that report was to close a loophole known as the industrial loan company or ilc loophole.
the ilc loophole allows commercial companies to operate banks that are not regulated like banks and it has caused financial stability problems in the past. as the fed wrote in that report to fsoc, quote, it must also be noted that the companies that fail the required assistance at the outset of the 2008 financial crisis included a number of companies that owned and controlled ilcs end quote. secretary yellin, my question is this, in light of the financial stability risks that we are discussing today, including digital assets, shadow banks, and big tech entering the financial services space, do you still agree with the past recommendation by the fed to close the ilc loophole? ::
that's there are great dangers in connection with ilc that have long been opposed to mixing banking and commerce for reasons i think are stronger now rather than weaker than they were then. and i continue believed to believe that it's likely to be appropriate >> thank you secretary and as i mentioned before the ilc allows companies like amazon and walmart to apply fdi insured banks so can you share why it's important to maintain that separation of banking and commerce principle and please describe what systemic risks can come from allowing nonfinancial companies such as tech companies to enter the banking services? >> there are a number of reasons why this seems to be dangerous.
one reason is the fed always worried about is that when a commercial company owns a bank that credit decisions can be influenced by issues other than banking and the safety and soundness considerations. because of incentives that come from the other part of, the commercial part of the business. in addition this tends to diminish competition and to promote monopoly and market power and that's probably more important than it ever was the four. and if sufficiently large commercial companies were to become dominant in the payment system i think it can
certainly be financial risk. >> thank you for that secretary. i introduced the bank merger review modernization act of 2021 to ensure bank mergers are in the public interest by clarifying and strengthening the public interest aspect of emerging review and require regulators to use the quantifiable metrics to evaluate systemic risk. do you support that bill? >> i'd be glad to take a look at the details and work with you want. i think it's an important area. >> and are there other reforms that congress can and act into law that would promote competition and financial stability in consideration of bank mergers? >> i will have a look at it. i certainly believe it's important to have competition in banking and appropriate regulation there. >> if i could switch gears very quickly my time is
running out. today fsoc can only make nonbinding recommendations to take actions to address systemically risky activities . the systemic risk mitigation act which i have previously introduced would give fsoc rulemaking authority to address systemically risky activities. would you support giving fsoc authority? >> it's an area i think is certainly worth looking at and i'd like to have the opportunity to work with you on that . >> thank you, i yield back. >> the chair now recognizes the gentleman mister loudermilk for five minutes. >> secretary yellen, thank you for being here. i want to start off on some of the issues that mister hill started off with talking about cyber security. personally i was alarmed to see the fdic chief innovation officer's regular resignation in february. he lamented the fdic has
outdated technology and has a tendency to resist change. i believe that type of culture will not help the financial regulatory agency stay ahead of cyber threats and as someone who spent most of his work in the private industry in the it business i know how significant these threats are. do you feel that the fsoc member agencies are open to innovation and if so what are you doing to foster back relationship or that willingness to bring in new technologies especially for cyber security? >> i absolutely believe that innovation is important. it's a benefit to the us economy and in the long run it's probably the most significant source of well-being so we should want to promote innovation but we need to have an appropriate regulatory framework so the innovation that's produced
net benefits to society and we make sure that they don't cause arms. >> thank you and i see a lot of resistance to innovation notonly in regulatory agencies but even within congress . and so the only way that you are going to stay secure is to stay ahead of the bad guy and the bad guy is continually innovating and bringing in new technologies and if we lag behind we put the entire financial system at risk. we put every american citizen that participates in our financial system at risk so i highly encourage you to look at innovation as a friend, not as a foe but right often regulatory agencies take the other approach another topic in your confirmation hearing last year you said that designating non-bank
companies as systemically important may not be the right approach to address risk in the financial system and that activities based approach would be more appropriate and i appreciate that . do you still stand by those comments you made to the senate ? >> let me clarify. here are two different tools. designation and activities approach and i believe in different circumstances each can be appropriate. it shouldn't be one or the other. now, designation was meant for non- banked financial companies whose material distress cellular would cause material risk to the financial system. we are focused on non- banked, the fsoc is focused on non- banked financial risk coming from money market
funds, from open and mutual funds and from hedge funds but the approach that we think is appropriate is not designation. it is in activities based approach. so certainly that's an appropriate approach. i wouldn't say there could be circumstances in the future where designation is the right goal. >> i am running short on time but i have a couple of questions. one of the bills included for discussion ignores the very statement that you have made to the senate. in 2018 when a strong bipartisan group of lawmakers reformed dodd frank you recognized it was risk based on an arbitrary threshold as unworkable so i hope my colleagues will remember those lessons. moving on to another topic, one that mister emmert a little bit is the president working group on financial
markets and his recommendation that congress passed legislation to apply bank regulatory regimes to stablecoin. as everyone understands the stablecoin are used for treating crypto and payments and there are many significant differences between stablecoin issuers and banks. for example stablecoin are not used for lending it would not make sense to apply lending laws and regulation to stablecoin. do you agree it would not make sense to apply the full regulatory ranking regimes to stablecoin and a more nuanced approach would be appropriate should you do as mister emery indicated and regulates. >> excuse me madam chair the gentleman's time has expired.
i'm going to ask you submit the questions for the record. we have many members waiting and we will move to the gentleman from california mister sherman who is the chairman of the subcommittee on entrepreneurship and capital markets . you're now recognized for five minutes .>> my republican colleagues seem to believe we should be in an economic nirvana that covid killed americans of course is no laughing matter and would have killed millions more if we hadn't taken action. they somehow believe there was some way we were going to get through covid without any economic dislocation and the american rescue plan was a giant mistake. so just for the record, wouldn't we have had millions more americans inpoverty , hunger, evictions, homelessness and foreclosures had we not passed the american rescue plan? >> absolutely, we can thank the american rescue plan for the strong market we have now
and the strong financial position of most households. >> the greatest pandemic in history and economic nirvana have not gone together coincidentally in any country in the world. there was no perfect way to get through this . i want to thank you secretary yellen for all the help that treasury provided in creating the adjustable interest rate libor act. congress much out of character perhaps solve the problem by year and a half before the libor hit the fan. i hope you can inspire them inspire them to do so expeditiously because you've testified the whole libor issue is one of systemic risk . i see you nodding so i assume you will be doing that. >> i appreciate congress passing that law. i think it's helpful in
dealing with legacy contracts . >> some of my colleagues have put forward the idea that gas prices are entirely a matter of us oil production. and that somehow a speech saying we got to move to a carbon free future leads to higher prices in one country, the united states. and they somehow say the biden administration has constrained oil production and if it wasn't for low oil production we have low gas prices . here are the facts. in 2021 america produce more oil than we did in 2020 the last year of the trump administration and next year we will produce more oil than we ever had in history. unfortunately oil is a worldwide commodity and while we will produce more oil than at any time in history will we will not have the lowest oil prices at any time in history .
if you open the dictionary to oxymoron, it was a c stablecoin. the coin says it's stable, not stable. we have seen terra drop from 18 billion investment up to 1 billion, maybe less. it is not terra firma, it is terra incognita. heather is much larger. heather has an $83 billion. it's claims to be tied to the dollar. but i'm told they have not issued any audited financial statements although they keep promising them so i have no idea what, whether their statements ofwhat reserves they have are accurate or not . but they apparently have invested substantially in chinese commercial paper which may or may not have value at various times and
have invested in crypto currencies which have lost half their value in the last few months. this does not look like my father's moneymarket fund or my grandfather's bank . so their assets don't appear to be very liquid. what are the implications for our economy is tether which just broke the buck goes all the way to terra media? >> i think you just illustrated and we just had over this past week with terra and with heather a list associated with stable coins that there can be runs and we seen this historically with private monies and we need, we invented a good regulatory framework i think for dealing with this. >> i'm going to try to sneak in one more concept. for our tax system we provide tens of billions of dollars of subsidies for those who have pensions and 401(k)s. we do so they will have a table retirement and invest
their money in operating companies that provide jobs. i would say investments in crypto currencies are needed. >> the chair will have to now recognized the gentleman from ohio for five minutes. >> the chairman. madam secretary thank you for your time here today. i wish we all had a little bit moreof it . but yesterday when you are at the senate banking committee you stated that student loan forgiveness could be good for the economy and it will, that you will support anything that president biden decides is a partisan policy on the issue. do you really believe that? >> loan forgiveness. whatever joe biden says. >> i believe all i said on student loans is that they can be extremely burdensome and make it difficult for
individuals to begin to buy a house or to save for retirement. >> of course all that has that effect the principle of compounding interest should be to earlier and often. and as a consequence of the federal takeover the student loan industry were looking at according to the department of education's estimate over 400 billion dollars at risk of default because students can't repay them. there are publications in the program and yet no one who talks about canceling student debt talks about stopping the problem. which is highly correlated to the federal government's takeover. i was just concerned by your response at the senate banking committee about student loan forgiveness. kind of an unconditional support for whatever president biden applies. >> all i said is the president is currently considering the options and trying to formulate his
position on this matter. >> lets opc the moral hazard of doing that and frankly the people best equipped to pay back loans sometimes can be the biggest beneficiaries. so the biggest debts are borne by people that are overwhelmingly in a position to repay their loans. and lots of people have debts . that could be forgiven and have big impacts on the economy and they didn't have the same kind of challenges so that the side we were just talking about the crypto markets and obviously everything in the news over the past couple of days is related to the markets being down but overwhelmingly crypto being down at an alarming rate. just a bit ago you said we are so concerned about runs on stablecoin and the hazard of stablecoin's to the market. but my colleague mister mchenry started off by making it clear that algorithmic
stable coins have a different risk that a one-to-one fiat for one-to-one commodity back . they're not even fractional reserve banking. there's 100 percent of the assets liquid and available so would you like to qualify your distinction in terms of fear of a run? >> it depends on the backing of the coin. tara is algorithmic and doesn't really have a backing as such. tether. >> tether is a timebomb and it operates completely outside us markets. and it is maybe fair to say that they are more like a money market fund but an unregulated one because you don't really see the transparency. what others are regulated as new york trust many many of the stable coins are well-regulated as trusts. sodo you see those at the same kind of risk and same regulatory approach ?
>> i think there needs to be a comprehensive and consistent regulatory approach for stablecoin because of the risks they can pose to the financial systems and i think that on a bipartisan basis we ought to work together to make sure stablecoin's that are introduced have such a regulatory framework. >> i think you can't treat treat all that algorithmic stablecoin the same. >> we haven't proposed to do that. >> just a common framework but not common for algorithm. i had a number of members who wrote to you earlier about section 6050 i provision . and it was rule-making for any 603 of the infrastructure act. this was a requirement, a reporting requirement to the irs on transactions in crypto that were supposed to mimic
things that are cast transactions. it's a very complicated ruling and it's also technologically not entirely feasible for digital assets . treasury issued some opinion about it. what's the process of the rulemaking right now? >> i'm going to ask to look into that and get back to you . >> the gentleman's time has expired. i now recognize myself for five minutes. mister secretary there are those who believe that if you don't vote for legislation, you have to denounce it as ineffective. the american rescue plan was effective legislation. and here's what my colleagues didn't vote for. they didn't vote to help those who are unemployed during a pandemic. they didn't vote to save small businesses during a
pandemic. they didn't vote to provide vaccines and to distribute that vaccine to those who needed it during a pandemic. they didn't vote to help children in schools during a pandemic. they didn't vote for food for children during a pandemic. and they didn't vote to provide for a working family during a pandemic. they would call all of that inflation but i believe that at some point the american people will understand that there were many of us who were trying to save the economy. and prevent it from sliding into a deep recession. and to help persons who are suffering during a pandemic madam chair. you've spoken quite well on this topic. i don't want you to entirely
review yourself. but there was a pandemic. and the american rescue plan was there to do what the government should do during a pandemic. would you kindly give us additional thoughts on how the american rescue plan prevented us from sliding into a deep recession or possibly something worse? >> we saw unemployment rise after the pandemic struck to double-digit levels, something we hadn't seen in the united states in decades. and it was immense suffering. the pandemic unfairly struck those least, low income minority workers. those least able to bear its consequences.
>> we went to work every day many of them madam secretary credit risks their lives to make sure that there was food available for those who stayed at home and work from home. during a pandemic. >> and we saw cars lighting up in parking lots to get food. >> madam secretary many of them in line their cars ran out of gas during the pandemic. please continue. >> and we worry that many people would lose roofs over their heads. >> the get people from thrown out of on the streets that's what the american rescue plan did during a pandemic . please continue . >> and we worried that children would suffer and experience homelessness or loss of access to education,
to that families and workers would be permanently scarred and never really be able to get their lives back on track. >> i'm going to end this within my five minutes but i want you to know this. iappreciate what you did . pandemics are not things that you can predict. and we did know what the actual solutions work but we saved alot of lives . we helped a lot of people who were suffering. during a pandemic. and when we hear people say you spent too much, well we spent too much on unemployment during a pandemic. we spent too much to save small businesses during a pandemic. we spent too much to provide vaccines and distribute that to people during the pandemic . help schools and schoolchildren, to keeppeople
from being thrown out on the streets . to provide for childcare as parents have to work. it was a pandemic. and it's more than inflation risk. lives were at risk and many were saved. i thank you for your service madam secretary ideals back the balance of my time. and with that said, madam secretary your testimony has been very valuable to us today. without objection all members will have five legislative days within which to submit additional written questions for secretary yellen to the chair which will be forwarded to her for her response . secretary, i ask that you please respond as promptly as you are able to respond. without objection all members have five legislative days within which to submit materials to the chair for inclusion in the record. the hearing is adjourned.
internal revenue service and government accountability office recently testified on how the irs treats taxpayers based on their annual income. watch tonight at eight eastern on c-span2, c-span now our free video app or any time at c-span.org. >> c-span is your unfiltered view of government funded by these television companies and more including buckeye broadband . >> buckeye broadband supports c-span as a public service along with these other
television providers giving you a front row seat to democracy . >> american history tv saturday on c-span2. exploring the people and events that tellthe american story . live at 9 am it eastern on american history tv will mark the 100th anniversary of the lincoln memorial dedication with abraham lincoln's followers to talk about the president, and orioles creation and democratic ideals the memorial has come to represent and at 2 pm eastern on the presidency erwin gilman with his book campaign of the century where he examines the 1960 presidential campaign between richard nixon and john kennedy andthe close outcome of the election. exploring the american story . watch american history tv on c-span2 and find a full schedule on your program guide or wat a