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tv   Treasury Sec Mnuchin on Stability Report  CSPAN  January 31, 2018 8:00pm-10:22pm EST

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coming up tonight on c-span 3, treasury secretary stephen mnuchin testifies before the senate banking committee. then from the world economic forum, imf director christine legarde on the global economic outlook. after that, u.s. mayors hear from deputy homeland security secretary elaine duke on disaster preparedness. and later, the u.s. mayors on how their cities are responding to climate change.
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treasury secretary steven mnuchin delivered the annual stability oversight council's report at a hearing at the senate banking committee on tuesday. topics also included russian sanctions, tax reform, the debt ceiling and cryptocurrency. this is two hours and 20 minutes. >> this hearing will come to order. today, treasury secretary steven mnuchin will testify on financial stability oversight council's 2017 annual report and the operations and actions of this congress. in december of last year, issued the 2017 annual report in which it provided numerous recommendations, insights into the council's key activities and identified potentially merging threats to financial stability. one of the rejss urged congress
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to reform the housing finance system and boost the role of private capital in morning finance. i've repeatedly stated that the status quo is not a viable option and reforming the housing finance system is one of my key priorities. testifying before the banking committee last year, secretary mnuchin reaffirmed his commitment to work with us to find a solution and stressed the importance of finding a balance between ensuring strong taxpayer protection and ample access to credit. four years ago, a bipartisan group of senators passed a housing finance reform bill in this committee. we have an opportunity now to build on that effort and create a broader coalition of republicans and democrats to pass a bill into law. this remains one of my top priorities and i look forward to continuing to work with the other members of this committee, with secretary mnuchin and other stakeholders throughout this process. another focus of this report was cyber security.
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particularly in the financial services space. identified cyber security as an area requiring greater attention due to the increasing sophistication of cyber criminals and the growing scope and scale of malicious attacks, including data breaches. the list of significant cyber attacks and cyber breaches, both in the public and private sector, keeps growing at an alarming rate and seems to have impacted the majority of all americans. the council made recommendations to specifically address cyber security risks, including greater collaboration between the public and private sectors. it's critical that personal data is protected by both the government and industry and that when there is an attack or breach, the impact on victims is minimized. the report also highlighted key actions taken by the council since the last report. this included f-sock rescinding the designation of two nonbank financial companies. many of us on the committee have
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long been critical of the lack of transparency and analytic rigor of its process for designating nonbank. -- treasury issued a report outlining recommendations for enhancing both the nonbank and financial market utility designation process. which included tailoring regulations to minimize burdens and ensuring the designation analysis are rigorous, clear and transparent. in the past, the nonbank designations process has lacked clarity and consistency with the threat of serious regulatory consequences for firms that receive the designations. this inevitability translates into higher costs for consumers and the overall economy. when making determinations, the f-socs process must be transparent and measurable. with clearly outlined criteria when such designations are
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appropriate. it must also provide clarity on how companies can shed such designations. i think the secretary for his work in these areas and testifying before the committee today and look forward to his comments and insights on these and other important issues. senator brown? >> thank you, mr. chairman. welcome, mr. secretary. i look forward to your testimony on the threats to firearm stability. the economy has grown steadily for the past eight years, in large part because of the hard-earned progress of the obama administration. unemployment has fallen in some but certainly not all families have recovered from the financial crisis. we made some progress. we still have some pretty substantial challenges to financial stability in this country. personal savings rates have fallen for years now stand at open 2.4%, the lowest since september 2005. household debt continues to climb. job growth in 2017 was okay. we will hear about that tonight. but below job growth in 2017,
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was below the levels of job growth in 2011, 2012, 2013, 2014, 2015, 2016. 3 million americans have lost their health insurance. since this president took office. the largest jump since gallup started tracking coverage a decade ago. for the second year in a row, life expectancy for americans actually fell, driven in large part by an opioid epidemic that's been ignored by too many in washington. stock markets around the world have been on a tear, which certainly helps the top fifth of americans. by one estimate, these are the people who own 92% of stocks in the united states. it's good for workers with a 401(k). we welcome that. but too few workers have even that retirement security. only a third of workers are making contributions to a 401(k) or a similar retirement plan. while the president likes to take credit for what he labelled an ugly bubble a little over a year ago, it will be interesting
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to see if he's eager to take credit for a down market. most workers build wealth with a hard-earned paycheck, not a statement from their broker. while the economy's growth last year was the same as it averaged over the prior three years, the share that goes to wages continues to be far too weak, and for these people, a teams ter in toledo, a waitress in waverly, a machinist in mansfield, building a secure middle class life is as tough as ever. the policies of this administration and this congress are only making these problems worse. the tax bill raises health care premiums. we knew that. it gives a huge boost to the richest people in the country. we knew that. and it could encourage more outsourcing. it keeps in place the idiotic tax deduction that corporations get for shutting down and lima, ohio, and moving to beijing. in fact, american companies will be enticed to do that even more because companies could owe absolutely nothing to the irs on
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overseas manufacturing operations. brought to you by this most recent tax bill. meanwhile, our kids will be left with the tab, picking up $1 trillion in new deficits. something that your party and republicans in this town used to care about. i'll be the first to acknowledge when a company does the right thing and boosts wages. i was asking bank ceos to increase pay for their tellers, averaging about $13 an hour, custodians and contract workers long before the labor market was tight. i thank them when they do that. i call them and compliment them. i offered an amendment to the tax bill to reward companies that did right by their workers, the patriot corporation act. so i'm happy that a combination of factors has caused some employers to pay their workers more. let's keep in in perspective. take wells fargo, a bank you're very familiar with. wells fargo put out a press release to bragging about raising pay to $15 an hour.
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we welcome that and thank them for that. last week, the bank announced it was buying back more than $22 billion, billion with a "b," of its own stock this year, dwraar what it passed on workers. 288 times juicing their own stock than increasing the workers' pay. 288 times. bank of america announced a $17 billion stock buy-back while they were phasing out free checking for certain customers, now charging them $12 a month. the middle class isn't just getting the short end of the tax bill. we also know they'll pay the price if we roll back the rules for the financial industry. this comes as no surprise as this administration looks like a retreat for goldman sachs executives. the treasury has issued a steady drumbeat of supports suggesting hundreds of changes to our consumer protection and financial stability rules that will make the risk and severity of the next crisis even greater. the tools are only as powerful
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as its members' willingness to use them. past members of s-1:00 were eager to do the work of keeping wall street honest, this team would rather join them for snaups at a skree resort. we should invest in our nation's crumbling roads and bridges. we should ensure that workers are keeping the pensions they've earned. i agree with the warning that many multi-employer plans are in tough shape and if the congress and the administration don't act soon, we threaten the promise made to millions of retirees. hence our butch/lewis pension act. i look forward to today's hearing and thank the chairman and the secretary. >> there are still some disagreements among us on the panel. i suspect we'll get into some of those today during your testimony. we again appreciate you being willing to come here and report once again to us. with that, we will turn to your testimony.
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you may begin your statement. >> thank you. chairman crapo, ranking member brown and members of the committee, thank you for inviting me today. one of my top priorities as treasury secretary is sustained economic growth for the american people. so i'm happy to report that the growth rate of the economy over the past year was higher than the average over the prior 20 years and included two straight quarters of 3% or higher gdp growth. the president promised robust growth and he is delivering on that promise. i am here today to speak about financial stability oversight council's 2017 annual report. this is an important vehicle for providing congress and the public with the council's assessments and recommendations we lating to regulatory developments and potential risks to the financial system. this report emphasizes the importance of economic growth to maintaining a resilient financial system. since the financial crisis, we
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have had time to assess the effectiveness of regulatory reforms and consider their unintended consequences. the report recommends that the council member agencies address regulatory overlap and duplication, modernize outdated regulations and tailor regulations based on the size and complexity of firearm institutions. the report also discusses a number of risks that the council is monitoring. one that i would like to emphasize today in particular is cyber security. the financial system's heavy and increasing le lines on technology increases the risk that significant cyber security incidents could disrupt the financial sector and potentially impact u.s. financial stability. substantial gains have been made, but i want to emphasize the need for sustained attention to these risks. the report makes a number of recommendations, including creation of a private sector council of senior executives in the financial sector to
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collaborate with regulators in order to mitigate cyber security threats. turning to our growth policies, the tax cut and jobs act passed last year was our top priority and this overhaul to the tax code is already having a positive impact. because of tax reform, over 3 million americans have received special bonuses or other benefits and over 250 companies have announced investments in their workforces. companies are announcing higher wages and increased benefits as well as greater spending on employee training, infrastructure and research and development. these investments will lead to long-term prosperity as companies continue to bring back cash from overseas, our economy will continue to grow. let me now turn to some specific priorities for this new year. i want to commend the houses of congress for their work on financial regulatory reform. the bipartisan economic growth regulatory relief and consumer protection act is a balanced and
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thoughtful approach that better alliance our financial system to support economic growth in our communities. further, the legislation reflects many of treasury's recommendations from our executive order reports released last year. i encourage the senate and house to work together to move legislation as quickly as possible. in december, i wrote to congress, providing notification of my determination that a debt issuance suspension period would last until january 31st. congress has not acted to suspend or increase the debt ceiling. i have determined that such it will be extended into february and will be notifying congress as such. i respectfully urge congress to act as soon as possible to protect the full faith and credit of the united states by increasing the statutory debt limit. this house and senate have been working towards modernization of the committee on foreign investment in the united states, cfius. i support the foreign investment
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review -- risk review modernization act ferma and applaud senators cornyn, feinstein and burr and representatives pittenger and heck for their leadership on this issue. a modernized cfius will enable us to protect our national security from current emerging and future threats while preserving our longstanding open investment policy that is key to fostering innovation and economic growth. i look forward to working with congress and the relevant committees to advance ferma. one of treasury's core missions is to safeguard the nation by using powerful economic tools in our arsenal. we will continue to take frequent and ongoing actions to combat threats from malicious actors. these include terrorist groups, proliferators of weapons of mass destruction, human rights abusers, cyber criminals and rogue regimes like north korea, iran and venezuela. we continue to review intelligence to identify targets with maximum impact and deny
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them access to the u.s. and international financial systems, disrupt the revenue regimes and ultimately pressure them to change their behavior. on housing finance, the current situation of indefinite conservativeship for fannie mae and freddie mac is neither a sustainable nor a lasting solution. the administration looks forward to working with congress to reform america's housing finance system in a manner that helps consumers attain the housing best suited to their own personal and financial situations while at the same time protecting taxpayers. i am proud of what we have accomplished so far and there is more to do. our country's potential is enormous, which is why americans expect their governments to enact policies to allow them to succeed and prosper. treasury's collaboration with congress is vital to that mission and we are working every day to make it a reality. thank you very much. i look forward to answering your questions. >> thank you very much, secretary mnuchin. i appreciated your comments about the economic growth
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regulatory reform and consumer protection act, and appreciate your encouragement that we move it quickly. i also appreciated your comments on the housing finance reform. as i indicated, it's currently my highest priority in the committee. in the annual report last year, one recommendation made was that the regulators and market participants continue to take steps to encourage private capital to play a larger role in the housing finance system. i agree with that goal. can you elaborate on why it's important for private capital to play a larger role and what steps you believe we can take to further encourage that? >> chairman crapo, thank you very much. i fundamentally believe in the importance of the 30-year morning. i think it's important to the economy. and as we look at housing reform, we need to look at fannie mae and freddie mac, as well as the risks in fha. and i'm open-minded to many solutions and i've actually had some very productive conversations with several
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members of your committee on this and look forward to working with you on them. i do believe that in order to protect taxpayers, we do need to have substantial private capital and risk in front of any type of government guarantee or government support. >> well, thank you very much. in the context of protecting taxpayers in the -- against a government guarantee, there have been a number of different ideas about how to accomplish that as well. including the idea of private guarantors absorbing losses in front of the government guarantee. if that were part of the model, do you believe it is important that such guarantors are subjected to capital requirements to ensure that the taxpayers are protected? >> i think it is very important that there is substantial capital and that the taxpayers are protected, and i look forward to working with you and your committee and also feel if there is any guarantee that the taxpayers are paid for putting that up as opposed to explicit
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guarantees that weren't compensated in the past. >> all right. thank you. moving to another topic. in treasury -- in the treasury report on fsoc's designation process, treasury recommended that the fsoc implement an activities-based or industry-wide approach to evaluating systemic risk. similarly, in 2017, the international association of insurance supervisors announced the development of an activities-based process to -- how would an activities-based approach to addressing systemic risk work and why is it more effective than the current entities-based approach? >> i think it's more effective because to the extent that we look at risky activities across an industry or within a sector, we can look at proper regulation that deals with those issues and eliminates systemic risk. >> moving to cyber security.
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cyber security is one of the most pressing issues. you mentioned that again in your testimony. that faces companies, consumers and governments. the fsoc annual report identified cyber attacks on financial services companies as a potential vulnerability to u.s. financial stability due to the increasing frequency and sophistication of such attacks. where does the fsoc see gaps or shortfalls in cyber security protection today, and, frankly, what steps can we take to address this? >> well, i'm pleased to say that i don't see any specific gaps today, but i do think this is an area where we need to always be advancing issues. i think whether it's recent issues we've seen in chips or recent software situations, this is something that we need to be very, very careful. we need to be working in public-private partnerships. we need to have ways of sharing intelligence when it's appropriate and we need to make sure that whatever the cost, the
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united states financial system is protected from cyber attacks. >> thank you. i appreciate your attention to all of these issues and also the willingness you have to engage very aggressively with us on issues as they come forward. i'm sure we'll be dealing with you on each of these, as well as many more. and, again, mr. secretary, i appreciate your attendance here today. with that, senator brown? >> thank you, mr. chairman. based on the bank threshold in the wall street reform act, fsoc uses a $50 billion threshold in its initial factor to determine if a shadow bank could cause systemic risk. the treasury's november report suggests raising that level. if the chairman's bill is enacted, is it safe to say fsoc would raise its threshold five-fold and not put any resources into investigating any
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shadow bank below 250 as your report said? >> i think that is correct and i think there is a general consensus from the regulatory community that the threshold should be raised. and, of course, the committee could always make certain exceptions if there were significant systemic -- >> i challenge that statement. maybe the regulators appointed by president trump, not the regulators that have been in office that are leaving do not say it should be 250. more on that later. this bill then has other consequences beyond -- it would mean that the fsoc would be very unlikely to designate a large leverage hedge fund like long-term capital management, which when it failed had just $129 billion in assets. leverage of 25-1 and more than a trillion in derivative exposure. i think you're making the system less safe and sound with those ideas. second question, the june treasury report on banking dereg said if we raised the threshold for u.s. banks, we should do the
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same for foreign mega banks based on their domestic assets. foreign banks with up to $250 billion in u.s. assets are going to be deregulated akin to u.s. regional banks, correct? >> that is correct. >> so the treasury report specifically said if we move the $50 billion threshold up, it's the department's position we should also move the threshold up for foreign banks. the report says the $50 billion threshold for domestic and foreign banks should be raised, too. so to be clear, the chairman's bill with your acquiescens will deregulate banks that have repeatedly failed their stress test and deutsche bank, basically the only bank that would lend president trump money after his repeated bankruptcies and botched deals. third question, mr. secretary, last night, your staff sent to the committee various classified and unclassified reports due
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under this russia sanctions bill including an unclassified oligarchs report that looked a lot like the "forbes" list of russia's wealthiest men. i hope the classified portion is more detailed and compelling. also yesterday, director -- cia director pompeo said he didn't see any reduction in russian subversion of u.s. elections nor did he expect them to back off in interference of our upcoming elections. the president will reportedly talk about the need for bipartisanship tonight. you can't get any more bipartisan than the work senator crapo and i did on the russia sanctions bill, 98-2 it passed, yet it looks like the president didn't impose any sanctions under the mandatory authorities we enacted. nothing to combat russia's cyber activity. no sanctions on those helping its defense and intelligence sectors. nothing to its corrupt privatization of state-owned assets. how can sanctions punish russian interference in ukraine and american elections and deter future interference if these sanctions continue to sit on the
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shelf unused by the president? >> so let me first say i want to commend the tfi group at treasury and the intelligence community who did an enormous amount of work in preparation of the report that we delivered last night. as we tried to outline in the unclassified version, the list in the unclassified version is senior political people as well as oligarchs based upon a threshold of $1 billion or more of -- based upon public. so you are correct that the public version does look a lot like the public -- >> sorry to interrupt, but time is limited. when are you going to take those sanctions off the shelf and use them in terms of cyber security, in terms of intelligence, in terms of american elections? >> there is a substantial amount of work that was done. i look forward to you reviewing the classified report and we will be doing based upon that, we will be looking at taking appropriate action.
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>> 98-2 in the senate. three no-votes in the house. there is a lot of belief on both sides of the aisle, i hear senators talking privately about this, that this congress and the american people don't trust the president on russia, his closeness to putin, all those things, and your delay on this, your slow-walk, this just enforces that. last question, november fsoc cited budget deficits as a -- a month later the president and a partisan majority in the congress ignored their own warnings passing tax cuts for corporations and millionaires that will add more than is trillion to the deficit. immediately after passing the budget-busting tax bill, some of my colleagues started to turn towards cutting entitlements under the guise of fixing entitlements. i heard candidate trump come to ohio rally after rally after rally. he said he'd protect medicaid, he said he would protect medicare and social security. is it fair to had -- now the
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president's acquiescence to start talking about cutting medicare, medicaid and social security. >> i don't think in any way we're slow-walking the report that we delivered last night and we look forward to discussing it with you in a classified setting. on the issue of the taxes, i think you know as i've said before, the president, i believe, with a break even of 35 basis points, the tax bill will create growth that will create enough revenues. >> nobody's ever believed that in the past. why should we believe that now? >> again, i'd be more than happy to meet with you and go through the numbers and our economic analysis. >> but why the acquiescence on the attacks on medicare, medicaid and social security, calling them unsustainable, when the president promised to protect them? >> again, i haven't made those comments, senator. >> senator shelby? >> thank you. mr. secretary, thank you for your service. also, i'd be remised if i didn't
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thank you for your leadership and your steady hand in dealing with the tax reform measure that a lot of us, maybe not all of us, but a lot of us believe is really going to help our economy and we see signs of it already in the confidence at least i see. but congratulations on that. fsocs. when you designate an entity that is deemed systematically risky, that's a very, very important designation. i mean, it shouldn't be done on a whim, should it not? it should be done very carefully with a lot of data and a lot of thought. when you -- when we look at insurance companies as an entity, and we look at banks as an entity, there might be some overlap, but two different models, at least i believe.
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should they be viewed as such before you make a designation? what's your thought on that? >> i think as you pointed out, banks are very different from insurance companies. they have very different liabilities. >> uh-huh. >> and they should be reviewed carefully, which is something i believe we've done at the committee over the last year. >> but when you designate, going back to that, when you designate an entity systematically risky, that that's a profound thing. would you agree with that? >> i would. >> i'm going to shift to something i hope you'll have some play and some influence in, that's the infrastructure. we keep talking about infrastructure. how are we going to come up, as the trump administration -- i think a lot of democrats and republicans both know that we need an infrastructure bill.
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we need to do it. and, of course, it takes money to put that together. we know that. but how do we use an infrastructure bill, if we come with one, and i hope we will, to tap the private money in america, which you're very familiar with, there is a lot of it out there that is looking for a better return on their investment. how do we do that rather than just let the government deal with infrastructure? have you thought about that. >> we have thought about that. the administration has put a lot of work into this and the president looks forward to releasing his infrastructure plan shortly and working with congress. i agree with you that we should be looking at both federal money, state money as well as private money as we look at infrastructure investment. >> but shouldn't the infrastructure bill from the standpoint of our future economy, the infrastructure in this country is so important to move goods, people, services, be
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one of our top priorities? i think it might be. >> i believe so. yes. >> the chairman talked about cyber security. we know we're in the information age. so is everybody else in the world. we know that we get benefits from this, big benefits from modern information systems. but they are subject to attack, including our law enforcement, pentagon, treasury, federal reserve and so forth. th this is an ongoing risk management thing. i don't know how we get to the bottom of it but that is a big, big challenge for all of us. and it's got to be for treasury, is it not? >> it is. and that's why it's one of my top priorities, senator. >> what should we do first? should we worry about the financial system? sure.
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should we worry about our electrical grid? sure. but we also have to worry, first of all, about national security and the implications of penetrating through cyber security. do we not? >> that is correct. that's why we have a process across all the different agencies that were focused on this. homeland security is responsible for the overall coordination. we are responsible for looking at the financial sector and dedicating a lot of resources to that. >> how do you think the economy will continue to grow? i like what i see out there. we feel it. people have confidence. do you feel like it's going to continue to move forward? >> i do. and i think as you know, the president is determined that we enact legislation that moves forward on a sustained economic growth of 3% or higher. we're not focused on any one quarter, we're focused on
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sustained growth. >> thank you. thank you, mr. chairman. >> senator menendez. >> thank you, mr. chairman. mr. secretary, you've talked up the economy and the results of the trump tax plan, but i don't think the workers facing layoff at carriers, toys "r" us, at&t, kimberly clark, walmart and ge would share your enthusiasm. i don't think we should be satisfied with the slowest year of job growth since 2011. i have a much different view about what we need to do as it relates to the economy, but i want to get to a specific provision in the trump tax bill, which gutted the state and local tax deduction and compelled thousands of new jerseyaians to rush to pay their prepaid property taxes to avoid being taxed twice on the same dollar. if it wasn't bad enough spending the holidays fretting over the
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tax hike, in came the grinch, the irs, telling them they couldn't deduct their property taxes in 2017, despite paying them this year. this irs advisory was confused and most importantly, plain wrong. plain wrong. the trump tax bill specifically prohibited the deduction of prepaid stayed income taxes, but it made no similar prohibition against prepaid property taxes. do you km it do you commit to fixing this fundamentally flawed policy and changing the rules in the middle of the game for families? >> senator, i don't think it was confusing. the intention of the irs was to put out something that clarified. >> it is wrong. do you suggest that that advisory is right? >> yes, i do. >> how is that possible that it is right when the legislative
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text is as clear as day? section 11 -- 11042 specifically prohibits 2018 state and local income taxes from being prepaid and deducted from federal income taxes in 2017. it is silent, silent on the prepayment and deduction of property taxes. now, whether that's exclusion was included intentionally or because of the secretive and rushed process by which the bill became law, the legislative text through its deafening silence actually is loud and clear on this topic, and that means the irs advisory clearly contradicts the law and is nothing more than a backdoor attempt to get these people, who should be able to deduct their property taxes when they paid it. >> senator, what the irs advisory did is it deferred it to the legal position of the state, and i'd be more than happy to meet with you and go through that.
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the intent was that it wouldn't allow taxpayers to abuse the system. again, it was intended for clarification. >> the system is abusing them. they paid it 2017. they should be able to deduct in 2017. i hope you get to a point where you can help us on this because it will be bad enough in the next years they won't have that deduction, but they certainly should get the deduction for the year in which they paid. let me ask you this, the cia director pompeo unequivocally states that he believes russia has every intention of meddling in the 2018 election. do you agree with his assessment? >> i defer to the cia director on that. >> you don't disagree with his assessment? >> i'm not disagreeing with him. >> do you agree with the assessment for our intelligence community that russia used a hybrid of political intelligence and defense tools to meddle in the u.s. 2016 elections? >> again, i'm not going to comment on things that i have classified information on -- >> it's not a question of --
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there has been plenty in the public sphere to have a judgement on this because your department actually has jurisdiction over the enforcement of sanctions. so if you don't believe those things are true, then maybe that goes to your views on sanctions policy. >> senator, i didn't say i didn't believe it was true, i said i wasn't going to comment -- >> it's a simple -- it's not classified. so yesterday the treasury department identified senior political oligarchs and political figures in russia as mandated in the countering america's adversaries through the sanctions act, which i was one of the co-authors of, which this body passed 98-2. that law provided you with tools and a deadline of yesterday to go after entities who support the very same russian intelligence and defense agencies. however, isn't it true that yesterday the trump administration failed to apply a single new sanction against anyone who might be supporting these russian efforts? >> senator, we very much agree with the purpose of the report. there was an extraordinary
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amount of work. i assume you haven't yet reviewed the classified version. i look forward to -- >> just to be clear, give me a simple yes or no. my time is about to expire. have you or the administration imposed any new sanctions on any of these entities? >> again, the intent was not to have sanctions by the delivery report last night, the intent was to do an extremely thorough analysis. it's hundreds of pages. there will be sanctions that come out of this report. >> the law was pretty clear and it seems to me not only did you have to describe the entities, but you also had to pursue sanctions and i'll look forward to continuing to press that question with the administration. >> thank you. >> senator heller. >> mr. chairman, thank you. mr. secretary, thanks for taking time for being with us today. i'm sure you recall last august when you cave to las vegas, had a roundtable with some prominent business leaders in my state, and what i'm pleased about is that the promises and the questions and concerns that were shared at that roundtable were
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delivered four months later in december with the tax bill that did file. last week, i had a town hall meeting out of my office with nfib. we called thousands of small businesses in the state of nevada. hundreds were on the line. and questions were asked specifically of with this new tax bill out there, what do you anticipate your business practices will be for this year? 90%, 90% of the small businesses in nevada said that they were planning on expanding their business. that they're going to hire more employees. that they're going to provide bonuses. pay raises and increase the minimum wage for their business. 90% said they'd either do parts or some or all of those business activities. it wasn't a professional survey by any means, but i was just pleased to know that what the white house and what your department attempted to do in december, i do believe are being delivered on what we're seeing in the state of nevada.
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we've had south point casino said it's going to double its 2,300 full-time workers' bonuses. we've seen fountain blue, developers, say that they're going to resume a stalled project and that the effects of that will be creating approximately 10,000 jobs. and we're seeing this across the state of nevada and i want to thank you, the white house and all of your efforts of putting us where we are today and seeing this kind of expansion. so what do you anticipate economic growth being this year? and from you originally anticipated? >> senator, as i've said, and, first of all, thank you for your comments. i think, as you know, the tax rate on small businesses is the lowest it has been since the 1930s and we're seeing that in terms of a pick up in growth. we'd expect, again, over the next several years sustained economic growth of 3% or higher. >> i was in your office and you showed me that comment written
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note from the president, saying that he wants 5% growth. when are we going to get there? >> he has delivered high ambitions for us, as you know. >> positive effects do we expect to see in nevada over the next couple of years? >> i'm sorry, could you repeat that, senator? >> can you tell us what positive impacts we'll see in the next couple of years through growth and business activities in the state of nevada? >> one of the most important things is we expect to see wage inflation for the average american worker. their wages have really gone nowhere. it's been a great time for financial people and one of the benefits we expect to see of the tax bill is wage growth. >> what do you anticipate with capital coming back into -- into the country? apple just announced a new data center expansion in reno, and it's a $30 billion capital expenditure over the next five years. can we anticipate or what do you anticipate over the next five
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years with capital coming back into the united states due to this tax bill? >> we expect a lot -- i had the pleasure of meeting with tim cook recently to talk about their investment. obviously they're bringing back hundreds of billions of dollars. they're paying a very large tax to do that and they've made a major commitment to invest in the united states. i also had the opportunity to meet with many ceos of international companies that as a result of the tax bill are now committed to bringing manufacturing into the u.s. and we look forward to that. >> mr. secretary, i'm pleased that you're here, you know, to the chairman, we're seeing some huge expansions in the state of nevada. in fact, some of it is actually causing problems northern nevada, our housing starts are about 20% behind. with the kind of expansion that we're seeing that has come from this piece of legislation that was passed in december, the jobs act is doing exactly that. that technology and technical companies coming to the state of
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nevada, we can list them from amazon to tesla to apple, the list of organizations that are moving into the -- both the northern and the southern part of the state has been pretty incredible. and i'm just pleased that we have the treasury secretary in front of us today to expound on some of these issues and i want to thank you for the time. thank you, mr. chairman. >> thank you, senator heller. senator tester? >> thank you, mr. chairman. ranking member. and thank you for being here, secretary mnuchin. are you familiar with the marketplace fairness act on sales tax? >> yes, i am. >> will you and the president oppose creating this? >> i think the president is fundamentally supports the idea of some type of sales tax across the board and we look forward to working with you and others on that. >> so what you're saying is the president would support a national online sales tax? >> in my conversations with the
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president on that, he thinks there are aspects of that that he likes a lot and he looks forward to working with you and others on it. >> will you direct the treasury department to conduct a study on what i believe would be burdensome costs on small businesses in non sales tax states? >> i'd be more than happy to work with your office on that and we think there are ways of dealing with that. >> we'd love to have that conversation to figure out how we can do that. in a previous question on entitlement reform, you had said that you had not made the commitment to protect social security and medicare, that the president had. does that mean that you're looking to do reductions in social security and medicare? >> not at all. >> what does that mean then? >> it just meant, again, it was a comment i was referring to at
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the time. the president's made that commitment and i have every reason to believe he'll continue with that commitment. >> and do you believe personally you'll support him in that commitment? >> of course. whatever the president wants to do, i will support. >> okay. do you believe that a 30-year fixed rate note would exist without a government guarantee? >> i think that a 30-year -- well, again, i think it's critical that we have a 30-year mortgage. i don't believe that the private markets on their own could support is. so i think one of the things we're looking at is various different solutions around that. >> i got you. i don't disagree with any of your comments that you talked about with the gsc potential reform putting private money ahead of taxpayer dollars. the question i have, and it relates to a previous person sitting at that desk a few days ago, that said he believed that the 30-year fixed rate morning would occur without a government-backed guarantee.
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by your answer, i think you disagree with that. do you believe that a 30-year fixed rate, even with public dollars up front, you need that government backstop at some point in time? >> again, i'm not trying to be cute -- >> no. >> i think this is a complex thing. what i do believe is that fannie and freddie would not be able to exist without either an implicit or explicit government guarantee, and if there is an implicit guarantee, i would want taxpayers to be paid for it. >> okay. >> so this is something that we're working with people and looking for solutions. >> it is very complicated, but i agree with you, we need a 30-year fixed rate morning in this country and i think as we talk about gse reform and there are plenty of options outs there on the table we don't do something that puts that that risk because it would have incredible impacts on the housing market and the affordability.
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>> i agree with that, thank you, senator. >> good. let's talk about fsoc for a second. it was put in in dodd/frank for nonbank financial companies. i don't need to give you a lecture on this. you know that. the fsoc has basically taken the companies that were designated and dedesignated them. i assume that you did research on that and found out that they were not systemically risky? >> actually, that's not the case. the only company we de-designated as a result of them not being fiscally sustain -- was aig. they could their risks significantly. that's why they judgement was made. >> so that decision was the de-designation for -- [ inaudible ]
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didn't happen. >> again, the decision on met life had nothing to digdecision recommendation that relates to a legal case that had nothing to do with the risk riskiness and metlife could indeed be subject to designation in the future. the issue was more a legal issue. >> and prudential? >> prudential, again, would follow the same issues. >> okay. i guess the question is, can you kernel that the council is still functioning and still actively looking at companies' financial products and assess their risk to the financial system. are they still working? >> absolutely. >> okay. thank you, mr. chairman. >> thank you. senator cotton? >> thank you, mr. chairman. thanks you, mr. secretary. senator brown started his remarks speaking of a swiss ski resort. i presume he was referring to davos where the president addressed the world economic forum last week. to my knowledge, in davos, all they do is have their party once a year, but in another swiss ski
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resort, they purport to exercise great authority without accountability at the financial stability board. so let's address what happens in that swiss ski resort, mr. secretary. i and other members of the committee recently sent the administration a letter which raised concerns about the operation of the financial stability board. we're concerned it's morphed into a global regulatory body using its peer review mechanism as a quasi enforcement tool. i'm concerned about that kind of regulatory creep into u.s. jurisdictions, especially considering how dissimilar our firea financial markets are from any foreign markets. we have independent asset managers and an insurance industry regulated by our states p primarily. are fsb rules binding or voluntary? >> they're voluntary. >> are they suitable to be used
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by regulatory agent agencies or in private organization? >> again, i'm going to defer to the lawyers on that, but my view is not necessarily. >> thank you. in 2015, sought an exemption from a are an fsb rule related to how much capital they have to hold. given that i agree with you that these rules are voluntary, sits strange that they would have to seek an exemption from such a rule. can you imagine a scenario in which a u.s. bank or firm would have to seek an exemption from an fsb rule? >> again, the u.s. banks are regulated by the u.s. regulators. i think the purpose of international standards from our standpoint is to make sure that there is a level playing field for our banks and that to the extent that foreign banks have a lot less capital, that there are certain standards that they would adhere to. but that is not legally binding. >> thank you. let's talk now about the fsoc
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process for identifying system systematically important financial institutions, as it relates to the fsb. in july 2013 the fsb determined that three u.s. insurers, aig, met life and prudential were globally systemic important insurers. but at that time, only aig has been designated by the fsoc as a systematically important institution in the united states. prudential wasn't dez natd until september of 2013. met life not until december 2014. since the fsb operates by consensus, however, this means that for months before the fsoc designated either prudential or met life, your predecessor at treasury and chair of the fed had already determined as members of the fsb to designate prudential and met life as globally systematically important. so i would assume if it is
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systematically important on a global scale, it must be systematically important in its own home country. i wonder, then, how the fsoc designation process in the last administration for prudential and met life could be considered fair and objective. the treasure and the fed after all had already determined as members of the fsb that they were globally systemic. do you believe that this decision was simply a show trial by the fsoc in 2013 and 2014? >> senator, since i wasn't there, i can't comment on specifics, though i understand your concerns. i would say fundamentally i do believe that there should be better transparency at fsoc to the extent that companies are designated. they should understand why they're designated and the basis of the risks. >> can we be certain that we will not see a repeat of such a scenario in which the fsb designates a u.s. firm as globally systematically important before the fsoc
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designates it as systematically important in the united states? >> i would not expect that to be the case. thank you. >> thank you. i think this is a very important issue. financial experts around the world haven't exactly covered themselves in glory for the last 25 years. our nation's not just the united states, but in europe have faced some turbulent political times with populist candidates and parties on both sides right and left across our nations defeating conventional politicians and parties because of the failure of our countries' leaders to deliver stable, prosperous conditions for our citizens. i think it's important to remember that we are countries that are governed by our citizens, not by our experts. certainly not by unelected experts at swiss ski resorts. >> senator schatz? >> thank you, mr. chairman. mr. secretary, thank you for being here. i want to try to get this three questions. the first is about the debt ceiling and the debt limit. i heard that the vice president
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was at least open to the notion of repealing the statute overall. that is very attractive to me. having been here under a track president, now under a republican president and with the democratic senate and with the republican senate, i can say definitively that utilizing the debt ceiling statute as a sort of opportunity to take a policy ransom only harms our country. so i'm wondering whether you would be willing to work with us on a statutory fix to repeal this thing once and for all. i understand the political difficulty of doing it, because on the record, you're increasing the amount of debt that the country is under. but the fact of the matter is there is no evidence that having a statutory requirement that we do this every six months or 12 months or 18 months reduces spending at all, reduces the debt and deficits at all. i'm wondering whether you could
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work with us? and we especially frankly need a little political support on the republican side. i know they want to get rid of this as badly as we do. but they need cover from the administration. we'll need to work with you on this if you're open to it. >> i have spoken to both the president and the vice president, and we are very open to bipartisan solutions to figure out something as an alternative to the current system that i think many of us would agree doesn't work well. >> thank you. your comments on the dollar in davos i think surprised a lot of people, raised a lot of eyebrows. i just want to give you an opportunity to expand on them or clarify them, if you wish. >> sure. so -- thank you. i've tried to clarify this now many times. this was a clearly a situation where at a press gaggle, i made a comment that had three parts to it that was extremely balanced and very specific. it was not anything new.
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and the press took one part out of this and kept on playing it over and over. so let me be very clear. i absolutely support a long dollar, a strong dollar as being in the long-term best interests of the country. and i strongly support we have a free currency market that we don't intervene in and have rely upon the most liquid market in the world. so the short-term is not a concern of us was no way intended to talk down the dollar whatsoever. >> thank you. yesterday the administration declined to impose sanctions required under the bipartisan russia sanctions law that passed with overwhelming majorities from the house and the senate. it's not clear which parts are waivable and which parts are not. we're still doing the analysis. but what's clear is to the extent there is discretion to
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waive or delay, the administration has to have factual findings. so can you tell us what those findings are? >> senator, i'll repeat this again. i think that's a very unfair characterization of what we've done, okay, as i've said. there was an extraordinary amount of work that went into this. the classified report is hundreds of pages. i look forward to congress reviewing this, okay. our sanctions going forward will be based upon a lot of the work that the intelligence community did. it was our interpretation that we had to deliver the report to congress yesterday, which we did and we fulfilled. again, i want to commend a lot of career professionals at treasury and intel -- >> you're saying you did not waive or delay? >> we did not waive or delay. >> they're just not implemented yet? >> again -- >> that sounds like a delay. >> no, that's not a delay. what it was -- i think as you know, our sanctions are based upon an enormous amount of intel
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work. there was an enormous amount of work that went into creating this report. and that's what he we did. now we will take the basis of that report and look at kind of, as we do in the normal course where it's appropriate to put sanctions. so this should no way be terpd as we're not putting sanctions on any of the people in that report. >> okay, i got it. and within final question. i'll take it for the record. on siffy designations, i'm trying to understand -- the underlying statute, right, is about the financial stability of the system. and you seem to be introducing a new criteria for consideration, which has to do with the burden on the institution that is designated a systematically significant. and i'm trying to figure out why that would matter under the policy objectives of the law itself.
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if we're trying to figure out whether or not something is systematically significant, it actually shouldn't matter whether there is a burden on the institution designated. if we wanted to provide you with that discretion, we would have written the law accordingly. and i'll just take that for the record. sorry for going over. >> thank you. senator corker? >> thank you, mr. secretary. thank you for being here. i, as you know, we talked a lot about the tax reform a great deal in our office. all i have to say, i was surprised. i saw christine lagarde at the event last week. and i went there because of my foreign policies. she had advised up world economic growth because of what the united states had done, which was quite shocking to me actually. and to see what other countries are doing in response to what we did with tax reform is pretty amazing. so i do want to say it seems to be having an impact far beyond
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what we thought it would have just on our own country. on the russia issue, just to my friends, i'm very invested in this. i was a big part of this passing, working very closely with crapo and brown. i actually think what they've done is exactly the right thing. we gave a period of time to warn people about doing business with russia. that was a purpose of it. our diplomats were involved in that. they did keep numbers of transaction from occurring. they've put together this report. and now the process is that they will begin sanctioning. so just for what its worth, for someone who is more than glad to offer criticism, i think it needs to be offered, in this particular case, i do think they've handled it in the way that it was supposed to be handled. i do look forward to sanctions being put in place for those violators. on the issue of housing finance reform, which senator crapo brought up earlier, i know that you've been very involved in this past, understand it well.
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let me just go through a series of questions quickly. conservatorship that we now have is unsustainable. that correct? >> yes, i believe so. >> and if we have a new model of housing finance reform, and there are people on both sides of the aisle working together and have worked together in the past, if we have a government guarantee in the future, would it not be your preference that that be at the actual security level and not at the entity level? >> that would be my preference. >> so i think most of us understand whereas last time taxpayers had to bail out with hundreds of billions of dollars the entities, what we really care about is the individual borrows and their securities are guaranteed. that correct? >> that's what would create a sustained liquid market. >> and i assume that if we were able to pass something here that you would want significant private capital in advance of an explicit guarantee, where if we are issuing guarantees, whereas was not the case in the past,
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these whatever entities are actually paying for those. so the government is getting something for the eagle stamp, which is causing that 30-year mortgage to be guaranteed. that correct? >> that's correct. so taxpayers would be compensated for any unlikely risk. >> and i assume if we were to put in place a new regime, we will want to do what we could to end the too big to fail situation that we have today. that correct? >> i believe so. >> so in the event we don't act, as you know we passed something in years past called jump-start which said we can only revise these entities through a process of us acting. that ended december 31st at midnight. so now the administration, if they so chose, and i think you've committed to the fact you're not going to leave things as they are, what would be your options, if we don't act, and i hope that we will?
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i mean, what would be your options with these entities? >> there are certain administrative options that we have. these entities are very complicated. and i would just say my strong preference would be to work with congress on a bipartisan basis to reach a long-term solution. >> yeah. but in the event of this great bipartisanship doesn't survive and we don't get this done, it's very complicated topic, what are some of the steps that you might take? for instance, i know that in past administrations, the notion of putting these entities into receivership and moving forward with a clean slate has been laid out. is that something that you have thought about? >> again, we've thought about and considered lots of things. i don't really want to go through in this format publicly all the different alternatives you and i have spoken. i'd be more than happy to come see you. but there are lots of alternatives. i just want to be careful given that they do have different market impacts.
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>> well, i appreciate that. and i do appreciate your leadership on this issue. and extreme knowledge. and i would just say the chairman, i know this is one of your goals, i actually believe that we've got an opportunity to do something. it's a very complex topic -- that matters. we have an administration that is willing to work with us. and i think for the first time we have an opportunity because of just all the things that have occurred that we have a lot of interest out there. let's face it. we have people. we have shareholders. we have shareholders in these entities today. and i understand that some of the rubs that have existed there. i think we've got an opportunity, though, to really deal with all of the interests in a manner that is fair but also move our nation ahead in a man they're we don't have these two behemoths that basically are
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100% right now backed by the federal government. and i hope we'll get there. >> thank you, senator. senator warren? >> thank you, mr. chairman. so after the 2008 financial crisis, congress created the financial stability oversight council in order to monitor the risks in the financial system. and one of fsoc's main duties is to, quote, identify gaps in regulation that could pose risks to the financial stability of the united states. now mr. secretary, you're the head of fsoc. despite that role, you appear to support a bill that this committee has passed that would roll back the rules on banks between $50 billion and 250 billion in assets. that's about 30 of the 40 largest banks in this country. so what i want to understand today is why you're so confident that that wouldn't pose a risk to the financial stability of the country. so mr. secretary, how much do
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these 30 banks hold collectively in assets, deposits, securities and so on? >> well, first of all, i think that we have very significant regulators that will continue to regulate those -- >> but that's not the question. excuse me, mr. secretary. i'm just asking you straight forward question. we're talking about changes the rules. >> yes. >> that 30 of the 40 largest financial institutions would lose their designation, automatic designation of systematically significant financial institutions. and i'm just asking you, that 30, how much do they collectively hold in assets? >> it's a large number. >> a large number. >> you have it. i don't have it in front of me. >> how about $4 trillion? >> it is a large number. >> how about $4 trillion? >> that's correct. >> and that's what portion of the gdp? >> again -- >> that's about a quarter of the entire gdp. during the 2008 financial
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crisis, do you know how much the taxpayers had to pay out in bailout money to those 30 of the 40 largest banks in the country in order to keep them up and floating? >> again, i assume you have that number there too. i don't have it in front of me. >> it's $50 billion. nearly $50 billion. so i'm a little surprised that as the head of fsoc and the secretary of the treasury that you would support a bill without knowing how much you're actually reducing the regulation on in these giant financial institutions. these banks hold the equivalent of about a quarter of the entire economy. they got $50 billion in bailout money less than a decade ago. and yet you think we can roll back, reduce our oversight of them now. now, so let me ask. do you think that these $50
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billion to $250 billion banks can't pose a risk to the financial system? >> again, there could be banks, okay, that do pose a risk and could be designated. the purpose of this is many of those banks are community -- large community regional banks that don't -- >> i'm sorry. are you saying that a bank of $200 billion is a community bank? >> no, that's not what i'm saying. i'm saying they're regional banks. >> and are you saying regional banks can't pose a risk to the financial system? >> i didn't say that what i said is many of those banks don't, okay. this is something i believe there is bipartisan support for. >> and my understanding -- >> again -- >> if they don't pose a risk, you can always alter under the current rules how you regulate them. the question is the immediate designation so that you keep them on the watch list. you know, it's clear to me that these banks do pose a risk to
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the economy. and that's the reason that congress said they should be on a watch list. but let me take a specific example. in the years leading up to the financial crisis, countrywide financial issued one out of every five mortgages in the country. it did more subprime and teaser rate mortgages than almost anyone, and it turned around and sold them to wall street banks. it basically created all these grenades, pulled the pins out, threw them into our economy and helped blow up the american economic system. at the height of its impact on the financial system, about 18 months before the crash, countrywide was a $200 billion bank, which is actually smaller than some of the banks that would be deregulated by this bill. so my question is, mr. secretary, why would you be so eager to take these banks off the watch list, to deregulate it and make it easier for them to
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follow whatever practices they want to follow? >> first of all, senator, i share your concerns about countrywide. i think there was lots of mistakes that went on there, particularly with the mortgages that they underwrote, and lots of blame to go around. again, we believe that these entities below this size can be regulated by their primary regulators. but let me just say, this is something that requires bipartisan support, and it's up for congress to decide whether they want to raise the limits. >> well, thank you, mr. secretary. but as i understand it, you have been pushing on raising the rate -- raising the level from $50 billion to $250 billion. if you think that means that we will be taking on more risk in the system, and i think that's what it means, i wish you would tell us so. you know, the banks have record profits right now. they are rolling in money. they just got a giant tax giveaway. they've got even more money.
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they do not need another chance to blow up this economy. thank you, mr. chairman. >> senator toomey? >> thank you, mr. chairman and mr. secretary. thank you once again for joining us once again. let me just stay on this topic since my colleague from massachusetts has brought it up. i think an important point that needs to be stressed here, and i'm curious to see if you agree, mr. secretary, but these banks that are $50 billion to $25050 billion and under this bipartisan regulatory relief measure would no longer be automatically designated as sifys. they're extremely heavily regulated anyway outside of a sify designation, absent a sify designation, isn't it true that all of these banks are subject to a huge raft of designations that has nothing to do with the sify regulation? >> that is true. in many cases they're probably regulated by as many as four different entities. >> multiple regulators. and isn't it also true that these banks now have huge capital standards.
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the industry is generally extremely heavily capitalized. isn't it also true that they have very high liquidity requirements, new requirements that didn't exist prior to the crash? and isn't it also true that most of these entities engage in pretty ordinary plain vanilla banking activities as opposed to the more exotic complex and interconnected international business of the truly enormous banks? are those all relevant? >> they're all true statements. >> well, i think those are the reasons why it is perfectly reasonable to not automatically designate for yet another regulatory overlay those banks that don't create systemic risks. let me briefly thank you and congratulate you for your work and that of your team on tax reform. you folks and your organization were terrific to work with. and the collaboration between the administration and congress allowed us to produce something
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that is enormously constructive. i think you mentioned in response to a question that it is the view of treasury that we are likely to have approximately 3% economic growth for some time. did i understand that correctly? . that is true. and i just want to particularly thank you and senator scott and others who worked very closely with us on the tax bill. >> well, thank you. i would just point out that the congressional budget office forecasted prior to the tax reform that our economic growth would average 1.9%. we are now at approximately 3% before the tremendous benefits of this tax reform have fully kicked in. and we're already at the 3%. if we sustain anything close to 3% just for the record, the federal government will take in much more revenue as a result of a bigger economy than we wore projected to take in with 1.9% growth. that true? >> that is very accurate.
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>> and i think it's very important factor. i want to touch briefly on the discussion on mortgages. i am eager to see us make some progress on this. i would -- i'm pleased that there seems to be a consensus that we should have private capital in front of taxpayer risk on guarantees. i would disagree with your view. but this is understandably a subjective matter that a government guarantee is a necessary precondition to have a liquid 30-year mortgage. as you know very well, the average life or the duration, however you choose to measure it of a 30-year mortgage is much less than that. typically depending on interest rates and how you look at it, anywhere from 7 to maybe 12 years is about right. and we have a number of other nonguaranteed 30-year securities that are -- play a very important role in the capital market. i would just urge us to consider
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what i think is a very likely probability that we could have a very robust 30-year mortgage market without requiring the taxpayers to be at risk. very quickly, i'm running out of time, mr. chairman -- mr. secretary. north korea. we have recently -- we're seeing story news and yesterday or today's "wall street journal" reports behavioral changes by the regime in north korea that might be linked to the sanctions that are making fuel, for instance, more difficult for them to obtain. i hope that's true. i think that strikes me as constructive. but i and my colleague on the committee from maryland, senator van hollen have legislation called the brink act which i think you're aware, and which your staff has been very helpful. this would require an additional round of sanctions against financial institutions that are
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facilitating business with north korea. i think this is very important. and i hope you'll support our effort to get that done. it came out of this committee with the unanimous vote, i believe. >> thank you. >> thank you, senator heitkamp? >> thank you, mr. chairman, and thank you, mr. secretary, for coming. just a couple of follow-on points. obviously, no one wants to put the financial institutions in jeopardy or in any way limit the ability of the economy to thrive. i think it's critically important that we make the public understand that we simply went in the bill from designating automatically to basically allowing the regulators to designate some entity as a sify. we haven't abandoned that process so i want to make that point. i also want to make another point. i think it's fascinating when people hear -- cite cbo
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statistics, but they don't want to take all of cbo. it's call cherry picking. cherry pick the statistic that most makes your argument, whether it's we're only going to have a 1.9% projected growth when the growth has been over 2% for a prolonged period of time. so i want to talk a little bit about cbo projections. because the lovefest that we're having here needs to have a little discussion about cbo forecasts on deficits, which as you know moody's has recently issued a report on what they think are the considerations and results of the tax bill. it's not exactly consistent with the story that we're hearing today. so cbo forecasts that the administration's $1.5 trillion tax bill will send deficits to 4.6% of gross economic index by 2020. talk about they were forecasting lack of growth. obviously the forecast today is
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that we're growing the debt. the publicly held debt which doubled as a share of gdp during and after the recession was projected before the tax cut to rise from 78% to this year to 91% over the coming decade. the cbo now expects the tax change to send this ratio to 97.5. you know, if we're going to use cbo statistics, let's use cbo statistics. and this is -- it's like we handed a credit card, anded a the same time we handed a credit card with debt on it to the next generation, we're failing at the same time fix 50,000 bridges. i know the administration is looking at an infrastructure plan could in fact be adopted here. it's not going to be robust enough. right now if you look at the corps of engineers, the corps of
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engineers has a queue of projects. if they don't get another dime about what they're doing, it's going to take at least 17 years in current dollars to finish those projects. so we've now made a choice. we've made an economic choice and we've made an economic gamble. but let's not pretend that we haven't taken a risk here, that this is all rosy. if -- do not pretend that we are being fiscally responsible every day that we're here. and so i'm going to leave it at that. i want to talk about something that hits people every day. and that's the insecurity and multiemployer pensions. we've got a plan which the ranking member has ably presented the butch lewis plan. it's incredibly important to thousands of north dakotans, thousands of people. the president promised to help exactly these people who now are being threatened with dramatic cuts in their pensions. will this administration support the butch lewis bill and help us
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get it on the spending package? >> first of all, let me thank you for your comments on the regulatory issue because you're right. it doesn't preclude the regulators from designating people. i think that was an important point. on the multiemployer pensions, it is a very complicated issue. i've had the opportunity to study this the last year and meet with actually workers on this issue. and we look forward the working with you on different solutions. >> but what's your plan? these are exactly the people the president promised that he would represent, the forgotten people. and we stand alone on this side trying to fix this. we haven't gotten a lot of help from the other side of the aisle. we need you guys. we need the administration that's made a commitment to stand up for these workers who are threatened with, in my case, some 70% reduction in their pensions. that is unfathomable. that's unspeakable. and so can you help us? and what's your idea? if you don't like butch lewis,
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what's your idea? but let's get this done. >> we look forward to working with both parties on this. >> that's not -- i hear that all the time. i look forward to working with you. you know what? this problem has been hanging out there. we have a solution on the table. well need a result. it's not enough to have a process. we need a result for these pensions. and i want to thank the ranking member for the excellent work that he and his staff have done on this. we're proud to stand with you. and if that's not the solution, tell me what is. but these folks need to be made whole. >> senator scott? >> thank you, mr. chairman. secretary, good to see you again. let me say at the beginning as senator timmy did as well, thank you for your hard work on the tax reform package. you have helped to accomplish something that hasn't been done in over 30 years. and specifically, thank you for helping the irs get the new withholdings done in time for hopefully the february 15th paychecks. my understanding is that somewhere around 8 out of 10
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employees will see more money in their take-home pay. that is significant progress for folks who are living paycheck to paycheck. they're going to have a greater appreciation and tangible way of the success of this administration, and frankly, of your leadership. so thank you for that. i'd also like to say thank you because between the president's executive order last spring and the treasury's report last november, the administration has made solid progress on the issue of nonbank sify designations. but imagine getting pulled over for speeding in a neighborhood without any speed limit sign. it's kind of how you get designated a sify from a nonbanking perspective. then imagine the ticket doesn't have any instructions on how to pay it. that's how you find your way out of being a sify. i like to make sure that folks back at home who are not
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involved in the financial industry at all understand and appreciates the complexity of something that as profound as sify designation, but to do so in language that we all understand and appreciate. and that is just how dizzying this process is for the average person to understand and appreciate. but the impact on those folks because of designations is significantly higher costs in doing business. there should be clarity around what gets you labeled as a sify and what gets you off of being designated. without a doubt, fsoc should release public explanations for its designations. so my question for you, and i know you agree with much of this, is what specific steps are you and fsoc taking to bring about these needed reforms? >> thank you, senator. i thought that was a very good and interesting analogy. so i share your view on
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transparency. it doesn't mean that people can't get tickets, but we got to post the speed limit. so we are working with the committee on looking at guidelines and trying to figure out how we can have more transparency in the process. >> thank you. what's the level of involvement of other councilmembers in recent fsoc decisions? >> very active. >> good. there has been some questions about that. and i think it's important for us to recognize that fsoc is still meeting, still actively involved in the process. >> absolutely. we've had public and private meetings, and there has been robust discussion at the principles and the staff. a lot of work went into what's been done this year. >> thank you. next question. not congress, not you, but the district court now requires a cost benefit analysis which i support. my question is can you walk me through what an fsoc cost benefit analysis will look like?
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and what's taken into consideration? >> we're working on that. and as we develop those thoughts, we look forward to coming to your office and reviewing with them before they're implemented. >> that will be an important part of the process to understand it before it happens. thank you. last question -- or just a statement. last may i asked that you reevaluate the need to include property and capital insurance requirements. in october issued a guidance plan that included doing just that. i appreciate your responsiveness, a and i hope i can count on the same level of responsiveness as we work with you on krol bond rating agencies inclusion in the ifc's investor guidelines. thank you. >> senator cortez masto. good timing. >> i did time that perfectly. thank you. thank you for being here, secretary. interesting morning. so let me start off just a comment. i've heard some of the conversation back and forth.
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and i think in response to one of my colleague's, you made the comment it's been a great time for financial people. that concerns me there are many people across this country who are still struggling. and that's where we should be looking, those working families. the other thing i want to point out, i'm from nevada. we had the worst recession we've ever seen. we are still coming out of it. and in fact, there was a report that came out that shows that nevada's economic forecast is doing very well. experts are bullish on nevada's overall economy this year, anticipating continued recovery from the recession and growth. they site four key markers for that outlook -- wages, because the average private weekly wage for nevada workers peaked in october, representing a 2.3% year-over-year. construction activity. construction now in the silver state's fastest -- is the fastest growing sector. discouraged workers. the number of discouraged worker, those who left the labor force because they couldn't find
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a job, has dropped. and nevada's gdp has shown significant continual growth over the past five years. that's an incredible statistic considering we were the hardest hit in 2007 because of the economy. what i just cited to you was a report that came out in january 1st, 2017, before you or president trump were even in office. so the comments that i am hearing today that somehow this tax reform bill contributed to where we are today in nevada to me is a misnomer. and it doesn't give respect to the governor and every single legislator and every single leader, both republican and democrat in the state who has worked hard for nevada to come out of recovery. with that said, i'm hoping the actions that you take continue to benefit what we're doing in nevada. and i look forward to working there. but i think that's questionable now where that's going lead in the year to come. the other area that is very difficult in the state of nevada right now, and we've been having this conversation is affordable housing. one in four renters pays more
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than 30% of their income for rent and utilities. half of renters pay more than half of their income for rent. only about five million families live in public housing or benefit from section 8 or other hud or usda assisted housing programs. for every low-income family who gets some housing assistance, four families receive no housing assistance at all. so while i'm relieved that the low-income housing tax credit and private activity bonds remain, they support 90% of all affordable housing built in our nation, their value has gone down. some say this could result in 200,000 fewer affordable units built in the next decade. wages are stagnant or increasing modestly, but the rent is going up. when will the treasury address the affordable rental housing crisis? >> it's an important issue. and we look forward to working with you on it. >> okay. that seems to be the standard answer for everything. let me ask you this. will the president's proposed
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infrastructure bill include funding to invest in our affordable housing infrastructure? >> i think that when the president releases it, there will be the opportunities in affordable housing, as in other things. >> are you working with the president now to address that, those needs? >> not specifically affordable housing, but yes, the overall infrastructure. and that can be part of it. >> when will treasury and hud begin publishing the monthly housing scorecard again? apparently there hasn't been one issued in nearly two years? >> i was not aware of that, but i will look into that and get back to you. >> okay. and then let me just say, i'm disappointed that the treasury department killed the my ira program. half of workers do not have access to a retirement program at work. how does the treasury department plan to help more people save for retirement? >> again, that's actually something i looked at very carefully. and it really -- it has -- the desire or the reason to get rid of it had nothing to do with our view on savings, and we do want
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to. it was just the cost of maintaining it. there were very, very few people who were using it with a staggering cost. and we'd rather real locate that money to other ways that we can help people in saving and retirement. >> so do you have a program that you're looking at right now? >> we moved those people into the private sector, and we're looking at different programs to encourage private solutions, yes. >> okay. i would like to know if you would in the future, as you develop your programs and what you're looking at, to make sure you're reaching out the my staff and working with us as well. i notice my time is all up, basically up. so i submit the rest of my questions for the record. thank you. >> thank you. senator tillis? >> thank you, inner chairman. secretary, thank you for being here. i want to go back in our ten years past the financial crisis, we now have a bipartisan bill that is intended to provide regulatory relief for community banks and regional banks. can you tell me a little bit about why you think that's important and what benefits are ultimately accrued to businesses
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and customers of those banks? >> sure. first of all, i believe that too many of the banking assets are held in the large banks. and one of the ways to distribute risk is to allow the smaller banks to continue to grow effectively and not have them burdened by unnecessary regulations. so i think that one, this accomplishes more diversification in the banking. and i also think that lending is very important in terms to growing the economy. and in many cases, the local bank, the community bank, the regional bank has those relationships. they know how to lend, and we want to encourage them to lend. >> do you think that the people wanting to start up a bank -- we've got a very unhealthy, i think, situation in the banking ecosystem today, and that's the number of denovo banks that have come up. it's a very disturbing trend in north carolina. oui lost about half of our sins
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the financial crisis in a state that had a vibrant environment before, north carolina. do you feel like a part of the reason why we're just not seeing that turn on banks is at least in part attributed to the fact that they have a regulatory hurdle that they would have to climb that make it difficult for them to make the business model work? >> i do. >> i want to ask also, with tax reform, if you were -- let's say in december we failed to pass tax reform. and so the current tax regiment was going to be the regiment for the next ten years. where do you think we would ultimately be economically over a ten-year period? >> i think we would be substantially lower than we are and probably in the low 2s. >> one of the things that we've seen, it is true that the economy was turning. some states were doing better before the president took office. i think we saw significant increase last jeer largely attributed to a calming
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regulatory overreach. and this year i think it will be a combination of continuing that regulatory reform, rightsizing regulations and the benefits of tax reform. now as businesses start looking ahead and looking at how the tax cuts affect their business, we've seen hundreds of businesses announce pay raises. we're seeing de facto minimum wages being created in the banking industry and the retail industry as a result of announcements that have been made by large organizations. we've seen pay increases. we've seen bonuses. we've seen plans for capital deployment. i don't think there is any doubt that the vast majority that has occurred was a result of the tax plan, and they would not have occurred if we had not passed that to the president's desk. do you agree with that? >> i do. >> now, there is one piece that i think has been criticized that i would like for you to talk a little bit about, and that has to do with stock buy-back. some people here think that using some of the resources that come through tax reform to do stock buy-backsis a bad thing.
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i don't necessarily agree with that in many cases. you talk about what actually occurs when a company does a stock buy-back, what they're likely to do with the resources? >> sure. it's really just a reallocation of capital. so companies have a decision. they can reinvest money in their business. they can pay dividends, or they can buy back stock. and to the extent they buy back stock or pay dividends, that's capital that flows out to investors that can be recycled and put into other businesses. so it's a natural flow of funds from businesses that have excess capital and businesses that need to raise capital. >> so it also ultimately contributes to an increase in the gdp and economic growth? >> yes, it does. >> the last question i have for you actually relates to what you're going to do as secretary for regulatory relief within your own rule making authorities. you give me some sense of what your priorities are over the next year or so in terms of
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areas that you think through the rule making process, not through congressional action, that we could see some of the -- i know you can't get to specifically what you want to do. but in the areas of regulations that you think that need to be looked at and maybe right-sides. what can we expect? >> again, we'll look across the board in the financial area. >> secretary, i appreciate you being here. i actually appreciate you offering to work with us and partner with us and do on a bipartisan basis come up with good outcomes that on a bipartisan basis like the banking regulatory relief bill. i see one member who was here who worked with us to get that out of the committee and to the senate and hopefully to the house. we look forward to working with you on a continuing basis on a bipartisan basis to get regulations right and get the economy moving even more quickly than it is at this time. thank you. >> senator jones?
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>> thank you, mr. chairman. and thank you, mr. secretary for your appearance here today. i want to go back, though. i want to defer a couple of my questions at the top of my time here to go back to senator heitkamp's questions concerning the pension bill that ranking member's bill that is pending now which i told him i was going to sign on. that's an important bill for folks in my state. i think we can agree that there is a looming crisis in that i appreciate your answer about looking forward to working with it. but i'd kind of like to start that process now. and if you can, just give me your ideas, give me your thoughts what -- you've looked at the bill. what about the bill is okay, anything. and are there other things that we need to be looking at to try to solve that crisis? >> first of all, thank you. and i'd be more than happy to come meet with you. again, this is a significant problem. i don't believe there is a
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simple solution. it's complicated. i'd be happy to go through in aspects. but there is something that i look forward to working with senator brown and chairman crapo and figure out what are the various different solutions. so we have a lot of resources at treasury. i think as you know, one of the things we look at is restructurings. we have very prescribed formula of what we can do and what we can't do. but as i said, i'm aware of the problem that exists. >> and you would acknowledge that it's a significant problem for those that have those pensions? >> i would say it is a significant problem. i don't know what -- it's not one with a clear, simple solution. >> yes. >> but we will look forward to working with the committee. >> all right, thank you, mr. secretary. the small business jobs act of 2010 was created to support a lot of local small businesses and to help accelerate growth. that was an important initiative
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for alabama. i think we created a number of jobs. we got $31 million. but that has now -- that round one has effectively run out. would you support a reauthorization of the sbci? >> not necessarily, but i wouldn't rule it out. again, it's something that i would work with congress and we need to look at more carefully. >> all right. i wasn't here when the tax bill was brought to the floor and passed. and i'm sure you may have talked about this ad nauseam, and i apologize. but you mentioned earlier that the tax bill would help create wage inflation and help wage growth. that's a big problem, again, in my state. the median income is $47,000 a year, which is below all but a handful of states. in some counties, that median income is below $30,000 a year. could you just explain how the
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tax bill as it exists right now is going to help in places like alabama and particularly those rural areas where the median income is $27,000, $28,000 a year? >> sure. and that is a big concern of the president, as ecommented, that workers have not had the type of raises that they should have. i'd be happy to go through with you. the council of economic advisers put out a piece that showed the average would be about $4,000. we believe that there is significant more investment into business that that will lead to wages going higher. >> all right. the other thing that is coming up, and we're talking about and i know the president will be talking about tonight. it's been mentioned here, infrastructure. and a huge infrastructure bill. we're also talking about immigration and border security where the administration is asking for $25 billion and this year to be placed for border security, which generally
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everyone wants better border security. my concern, though, is the cbo reports that talk about the debt that's being created by that tax bill, a trillion dollars over ten years. and i know we're going try to tap in as senator shelby said some private investment. but private investment in the infrastructure is not going help in my rural areas. you're not going to have a toll road in dallas county over one bridge or certain roads there. how are we going to pay for all of this? how are we going the pay for the $25 billion? how are we going to pay for the infrastructure if we're having to wait to catch up? and hopefully the tax bill will do exactly what you said and we'll grow the economy and we'll get more money coming in. but how are we going pay for that infrastructure now and the border security? >> well, i think as you know, we don't agree with the cbo analysis on the tax bill. we do think the revenues will go up significantly. on the infrastructure, it's going to have to be a combination, as i said, federal dollars, state dollars, and
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private dollars. i agree with you completely there is many, many infrastructure projects that are not going to be privately funded. >> right. i see my time is up. thank you, mr. chairman. >> thank you. senator rounds? >> thank you, mr. chairman. good morning, sir. i'm just curious. first of all, appreciate the time that you've been in the chair already, so i'm going to try to be brief and not repeat a lot of the items that have been laid out today. but as you know, on january 18th, the fsoc and met life filed a joint motion to dismiss an earlier fsoc appeal which was an effort to designate met life as a sifi. additionally, on september 29th, 2017, fsoc voted to rescind aig. these moves leave prudential as the lone nonbank designated
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sifi. i understand that fsoc is given the ability to designate nonbank sifis under section 113 of dodd/frank. given your comments on fsoc today, should the banking committee consider changes to section 113? and to the structure of the fsoc more broadly? you mentioned greater transparency is necessary to fsoc. would you recommend other changes as well, specifically with regard to this section? >> again, i don't have specific recommendation to that section because i think there are things that we can do at the committee level, as you've mentioned in the case of aig, they were dedesignated because they significantly reduced their risk. and that was the decision of the committee. in the case of met life, there was a legal view and a decision to drop the appeal. and so i don't think we need legislative changes at this point. >> okay.
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i know that senator scott had done a series with regard to the cost benefit analysis that were being used. i'm just curious. i would just like to follow up a little bit with his questioning. do you tend to push for an interpretive guidance from fsoc to reflect that agency action is appropriate only if a cost benefit analysis can show that it does more good than harm? >> we're going to go through reviewing those guidelines. and i want to be careful to make conclusions before i've had chance to review that with the committee members. but we are in favor of more transparency and the analysis of cost benefit. >> so you would be interested in a further discussion with the members of when you say the committee? >> excuse me, of fsoc. not of this committee. >> i was going to say we'd be
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happy to have that discussion with you as well. in the past also on another issue, in the past there has been a great deal of concern surrounding the role of the financial stability board the fsb and fsoc designation process. as i don't know, the fsb is an international body that makes decisions about the global financial system. the body has no authority over u.s. financial regulation. however, past actions such as the designation of prudential and metlife raise questions over the influence of the fsb and fsoc's sifi designations. can you commit or would you discuss with us your philosophy with regard to the role that the fsb will play or perhaps no role in future fsoc designations? what is your thoughts and where do you see the committee going? >> i don't see fsb having any role in future designations in fsoc. >> would that be a change from
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previous activity or previous considerations, in your opinion? >> i can't comment on what the committee did before i was on it, although i share some of the concerns that have been raised. >> so more appropriate to perhaps take under advisement, but most certainly independently from anything proposed by our international group? >> absolutely. >> we've all recently watched the swings in bitcoin's market value. bitcoin along with numerous over cryptocurrencys have seen their value jump substantially since the beginning of 2017. do you see cryptocurrencys as a threat to financial stability? >> i'm glad you brought up one of my favorite subjects. we've got something new to talk about now. i don't see it as a threat to financial stability, but i see them as very important issues. we've set up a subcommittee of fsoc to look at this. my primary concern about
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cryptocurrencys is twofold. one, i want to make sure that these are not used by bad guys, that they don't turn into old swiss numbered bank accounts. in the united states, if you're dealing with these cryptocurrencys and your wallets and other things, you have the same bsa, you have the same moneylaundering requirements as banks. we want to make sure that around the world that exists. and i also want to make sure that consumers understand the issues around cryptocurrencys. >> just one last -- just a very quick follow-up on that particular issue. do you think you have the tools available to you now, both in terms of legislative authority and the manpower to actually follow through and enforce with regards to the concerns that you have expressed? >> i do think we have them now. but having said that, this is an evolving world, and we won't be bashful in coming back and
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asking for more resource. >> thank you. thank you, mr. chairman. >> senator donnelly? >> thank you, mr. chairman. mr. secretary, thanks for being here. mr. secretary, the recently enacted ndaa, the national defense bill, included an amendment i authored to require a comprehensive strategy from all the agencies. that includes treasury, within 90 days of enactment to address the threat posed by north korea. that was enacted in late november. this is due by march 15th. have you had any discussions about treasury's reporting requirements in regards to this north korean strategy? >> i probably spend more time on north korea than almost any other subject. so the report will be part of this, but we spend a lot of time at treasury discussing these issues. >> i appreciate the fact that you discuss those issues. will you be meeting the required
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reporting date of march 15th with treasury strategy regarding north korea? >> i have no reason to think that we won't meet that deadline. so i anticipate we will. >> okay. thank you. this has been mentioned before. i'll mention it again. it's absolutely critical to my state as well, and it is in regards to the pension situation we find ourselves in. we are working to protect the pensions of coal miners, teamsters, participants of more than 140 multiemployer pension plans. and we must shore up this system before it grows even worse. i know you've met some of these retirees in the past, and we could really use your support to help get the legislation across the finish line. i'm also a sponsor of the butch lewis act. are you willing to support the butch lewis legislation in order to ensure the solvency of these plans? >> again, i'm not willing to
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specifically support that legislation, but i am willing to sit down with you and others on a bipartisan basis and figure out a solution. >> okay. do you have any specifics of legislation you will support at this time? >> i'd rather not go through it at this moment in time. as i said, it's a complicated issue. it's one of the more complicated issues i've come across in the last year. >> when you meet with me, will you bring specifics? >> yes. >> at this time. >> i'd be more than happy to do that. >> let me tell you about a meeting i had in oakland city, indiana. and it was with about 300 miners and their spouses, the retired miners, and they had just gotten their health benefits. and they said harry truman made this promise to us. and to be able to get this for one of the miners there, it meant he could still get the
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medicine he needed so that his wife who was in a terminal medical condition could get that medicine and live out her remaining days in peace and without pain. that's how important that was. and they they said this pension piece is equally important to us, so we don't find ourselves living hand to mouth at the end of the day, and you've been kind enough to agree to meet with me, and i know you've met with others. will you meet with our miners and our truck drivers to go through this to answer their questions? they are our friends and neighbors. they are citizens of my state. they want to know what the future holds. >> we had a meeting last year, and i'd be happy to conduct a meeting this year again with workers across different industries who are affected by this. >> okay. senator sass and i lead the banking subcommittee on national
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security and international trade and finance. we held a hearing last spring on north korea, and asked former administration officials how we can more effectively deploy sanctions. unsurprisingly, as i'm sure it's unsurprising to you, too, the conversation focused largely on china and the possible of secondary sanctions on chinese institutions. i know treasury has imposed sanctions on a number of chinese entities that have served as sources of trade and revenue for north korea. have you seen that those secondary sanctions have been effective as a deterrent in regards to north korea? >> yes, very much so. >> when you look at this, does china, do you think, have a basic understanding of where and how north korea is using china's banks and economy? >> i do. >> and does that activity occur at the largest chinese banks
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including state-owned banks, or does north korea intentionally funnel primarily to the smaller chinese banks that are less susceptible to u.s. pressure? >> i don't want to go through the specifics of this in this setting, but i'd be happy to come and talk to you about it but i will say we're having very, very specific ongoing dialogue with the chinese banks. i just sent my undersecretary over there. she met with a large group of people and regulators, and we're having very good dialogue with the banks over there, and we will continue to have sanctions where appropriate. >> i appreciate, that and i would like that meeting to be sooner rather than later in light of the significantly dangerous situation we find ourselves in with north korea. >> we'll follow up with you to get that on the books. >> thank you, mr. secretary. mr. chairman, thank you very much. >> thank you. senator reid. >> thank you, mr. chairman. thank you, mr. secretary for
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joining us here today. in the annual report they called for sustained senior level cyber security risks and can you elaborate and give us more of what you're doing because cyber seems to be in the headline of every paper every day, please. >> well, thank you. it is a very important subject. i'm spending a lot of time on this. i'm happy to report, as i said earlier. i don't see anything at this moment that is a risk to the financial sector, but we need to continue to invest lots of money, and this has to be a combination of our intelligence community, our experts at treasury, our experts in the regulators as well as private industry. we node to be working very, very closely together because this is something that is evolving every day. >> i just apropos of your
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comment evolving every day i saw the story this week the story about the atms that can be remotely controlled by bad people. in fact, there's one if you have the right sort of magic words you can go up and demand money and it just flows out. if that's not checked, that would -- you know, be an upheaval in our banking system. >> that's actually been going on for years so at first people put skimmers on and now they are using little doctor things, but atms i think have been upgraded to where we're okay but there's plenty other cyber attacks we need to stay ahead of. >> let me ask you a related question is that given the fact that this is an onslaught by both organized state-sponsored entities, criminal entities, individual hackers that have talents, et cetera, have you add cut personnel and experts in the treasury department to carry on this expanding work?
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>> again, i would say right now we do, but i'm not going to be bashful to come back and ask for more resources as this evolves if we need it. >> we've talked about digital currencies, my colleague senator rounds raised the issue and i seemed to enjoy questions about digital currencies and i'll give you another one and that is fsoc is, as you point out, not just involved with the digital currencies but also nefarious activities of money laundering, avoiding sanctions. that raises the question of how closely are you aligned with our intelligence community in terms of the intelligence problems here, ie, circumventing sanctions, criminals using it to support terrorist activities. you can go down a long laundry list. what's your relationship with
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the intelligence communities? >> very closely. i meet with director pompeo and others on a regular basis and at all levels of the treasury we have daily interaction and people going back and forth, so it's very good working relationships. >> have you noticed a significant increase in these types of nefarious actors using crypt currencies, or is it just a problem that has stabilized or is it going? >> again, i want to be a little bit careful what i say in this format but what i would say is there's not something that's a craig concern to us today but it's something we need to actively monitor and it's a bigger concern of mine in other countries so that's our big push whether at the g 1 or g-20 to make sure that other countries are regulating these activities the way we are. >> stepping back for a moment, as a chairperson of the fsoc you have multiple agencies reporting to, we've raised multiple topics
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here today. cryptocurrencies, cybersecurity in particular. do all your agencies have the relevant expertise and the personnel to fully engage with you? i mean, you might be very well intentioned but, you know, if you can't count on an agency that has significant responsibility, your intentions won't be at the end of the day up to the job. >> again, i would say right now i think we do, but one of the things we want to make sure is we have the proper coordination so when we have all the resources we can use them appropriately together and, again, as i've said, i won't be bashful if the agencies need to come back and more resources. >> just a quick question. will you -- are you contemplating doing an assessment of the threat and the resources and presenting it i assume first to the administration but to us so that
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we have an idea because in the past, you know, we've had agencies who have come up and at the direction particularly of omb said we don't need anything when in fact they were really in arrears in terms of person pell and resources. can you make that commitment? >> that's something in the early stages that we are working on, and i think it makes sense. >> thank you, mr. secretary. >> thank you. senator van hollen. >> thank you, mr. chairman. welcome, mr. secretary. i was sitting in on another committee hearing, and i do want to start by thanking you and the department for your input on the legislation, the brink act. i think mr. toomey mention the the chairman has been working very hard to get a vote scheduled on that and appreciate working with you and your team on the issues related to north korea. a lot of issues i was going to cover have been addressed, but
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this is the first time i believe you've been before the congress since the passage of the tax bill and by all acounts the president intends to talk a little bit about that this evening. you and i will find plenty to disagree with about the tax bill in general, but in the interest of truth in advertising i do think it's worth pointing out that a couple of things that were said that the plan would do which it did not, and one, of course, is that it ended up providing big tax breaks to very wealthy americans, and you were called because you've been faced with this question before before. back in november 16 and you said any reductions in upper income taxes will be offset by less deductions stow there will be no absolutely tax cut for the upper class, close quotation. that's not true for the final bill. there are net tax reductions?
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>> there are overall, yes, that's the case. there are people that didn't get them. >> and i do think it's worth pointing out, mr. chairman, that the joint commit on taxation the sort of official score keeper on tax matters concluded households that make more than $1 is million a year will get an average tax cut of $64,000 in 2019 alone, and mr. secretary, do you have any reason to doubt that analysis? >> i don't have the numbers in front of me, but i think our numbers -- i don't have any reason to doubt that. >> thank you. let me go back to another statement. this was made by candidate trump in may 2016. he said with respect to his tax plan, and i quote. everybody is getting a tax cut, especially the middle class, end quote, and speaker ryan and later republican leader mcconnell made statements about how everybody in the middle class, every single person was going to get a tax cut, and that turned out not to be the case
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either, right? >> i think we worked very hard that almost everybody got a tax break. as you know, the tax system was very complicated, and as we simplified it certain people have different situations, but, again, over 90% of the people have gotten tax breaks. >> mr. secretary, with all respect, we just had a statement analysis, and this is a bipartisan result in the state of maryland, and it was performed by the maryland bureau of revenue estimates, and they concluded that 376,000 maryland families are going to get a tax increase as a result of the bill that passed the congress and that those tax increases will average $2,080 per family. i don't know what you mean by almost nobody. but 376,000 marylanders, that's a lot of people just in the state of maryland, and if you look at the impact of those tax
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cuts, they also concluded that 123,000 maryland families who make between $25,000 and $50,000 a year are going to get tax hikes and for them will be an average tax hike of $759. that is not consistent with earlier claims that everybody was going to get a tax reduction, is it? >> i'll assume your numbers are correct. >> well, that's a lot of people just in maryland so maryland like other legislators and others across the country are scrambling to try to protect the people in our states from tax increases that they are going to face as a result of this tax bill. i'm hoping that the department of treasury will actually work with this -- work with the states on this. if your intension was as the president to indicated early on
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that nobody in the middle class should see a tax increase, i hope you'll work with us especially as it relates to issues of eliminating the deduction for state and local taxes, the s.a.l.t. deduction which results in double taxation, i hope you'll be working with us to actually accomplish what the president said he wanted to accomplish on the campaign trail, and i look forward to that discussion. >> thank you. >> thank you very much, senator van hollen and senator kennedy who had to go preside until noon until about five minutes ago was on his way back so i told him i would keep the hearing open and while we're waiting just a few minutes for senator kennedy to return i thought i would take another opportunity to ask you a few questions, mr. secretary, and i want to go into this tax question. you've been asked a number of questions today about taxes. i sit on the finance committee and was a part of the team that
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helped to write this tax bill, and senator van hollen i do kind of wonder about the numbers that you are getting from your state. what was the one about 0 to 25,000. >> 123,000 maryland families who make between 25,000 and $50,000 a year. >> right. >> will get tax hikes, average tax hike for that group, $759. >> why exactly what that is but let me tell you some of the stuff we ran into in terms of these kind of scores and we'll have to check it out. when we eliminated the individual mandate, which was a tax on bill who did not want to buy insurance that the law forced them to buy, that was scored by some of the tax scorers, including the joint tax committee, as a tax increase. now can telling people that they
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can voluntarily avoid a tax turn into a tax increase. the way that happened was joint tax said if they don't take advantage of the obamacare subsidy of several thousand dollars to buy insurance that they don't want to buy, that the value of that insurance -- that they are voluntarily choosing not to get the subsidy for and the value of the subsidy is a tax increase. some of us found that that was an outrageous assumption to be making in calculating these kinds of things so we asked joint tax to run the numbers without calling it a tax increase when someone voluntarily chooses not to take a government subsidy. when they ran those numbers, it turns out that, and i would like you to verify this, if you can, mr. secretary, the analysis of the tax code that we implemented
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showed that every single income cohort in the tax code starting from 0 to 10 and going on up into the highest income category, every single income tax cohort got a tax cut. can you verify that, mr. secretary? >> i can. >> and can you also verify that the largest percentages of tax cuts were in the lower and middle income categories? >> yes, i believe that's the case. >> now, i'll be the first to say that as the secretary has indicated you can go into each cohort and find individuals who because of their particular tax circumstances might have seen their taxes go up, particularly if they live in a state with high state and local taxes. that's something that happened, but i think it needs to be said that every single solitary tax
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cohort got a tax cut and the highest percentages of tax cuts were in the lower and middle income categories. and i just -- can you verify that again, mr. secretary? >> yes. >> i think those things are important. i've seen a lot of analysis of this code and many other different tax provisions, and i just think that we have to be very careful when we look at the study that some group has done and be sure we understand what the assumptions that they are making are when they do their calculus. i want to shift real quickly and i expect senator kennedy to come through the dore at any moment but, mr. secretary, you've spoken a lot today about a wide range of issues. are there any any areas in the fsoc reports or treasury reports that you think we should continue to monitor or pay greater attention to, just an
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open question to you to tell us what you would like us to focus on. >> i think we've had an opportunity to talk about a lot of interesting issues. cyber we've talked about a lot of. we touched on cryptocurrencies which is something we've spent time looking at. we've talked about the designation process and look forward to working with you in the committee to raise the tlish hold. that doesn't mean that those entities won't be regulated. they will be regulated, and as the senator pointed out, it doesn't moan that they can't be designated, so we look forward to working with you on that, and housing reform, i'm glad we've had a lot of conversations today on housing reform. i hope we do figure out a solution to this so that we don't lose these entities around for another ten years, and as i've said i'm open-minded to working with you and the committee with lots of solutions with the understanding that we maintain a 30-year mortgage and with the upsing that if we put the government taxpayer at risk
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on a guarantee, which we don't have to do but we'll look at different alternatives, but if we do do that that the taxpayer is compensated and that there won't be any explicit -- implicit guarantees that they are not xen said for. >> thank you, and i do, before i -- i'm going to let senator van hollen have a comeback if he would like to. >> first of all i will say -- the analysis i gave you was basedin a our state board of revenue estimates and there's no mention in there at all of the affordable care act component but i would love to share information because i do think a lot more people are going see tax increases than suggested. the last point i would make, mr. chairman, if someone had a $200, you know, tax liability and now it's $100, that's a 50% cut, so, yes, those folks who were in the lower brackets who got tax cuts had a higher percentage but that doesn't take
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away the fact that the average tax cut for a millionaire was $67,000 according to joint tax and i think we could have avoid that had in this process. >> understood. >> it's always going to be the case that when you have tax cuts across the board those who pay more taxes will get larger tax cuts in dollars. >> especially when you reduce the top rate which was not required to be done in order to close loopholes. >> understood. >> appreciate the opportunity. >> senator kennedy, before i go back to you i want to ask one more question. this relates, again, to the -- basically the economic growth and the deficit issue. just a couple of quick things. the cbo score that was issued this year for budget purposes and also was used in discussion of the tax bill projected a 1.9% rate of economy, correct? >> correct. >> and am i also correct that it
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projected that the economy would grow only at 1.9% for ten straight years? >> that is correct. >> in other words, zero growth in the rate of growth of the economy under current law, and that's what the cbo projected. it is that projection, that absolute flatline projection that if we do nothing we will see nothing in terms of growth that has been used to analyze and make the claims about this tax bill. the argument is that this is going to generate $1 trillion worth of deficit. how much would the economy need to grow to average over the next decade before there isn't -- before its revenue neutral, do you know that number? >> it's about 30 to 35 basis points. >> which is about 2.3%? >> yes. >> so if the economy can average 2.3% instead of 1.9% over the next decade, there will be no
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deficit from this tax bill, correct? >> that is correct. >> and we're already at 3 and the projections that the council of economic advisers has put out is that we hope to maintain that 3 for a decade. >> that's correct. >> i understand those are projections and i understand those are lots of arguments about those projections, but at least this far in we are exceeding what is needed to be achieved in order to avoid any deficit. >> that is correct, mr. chairman. >> thank you. senator kennedy. >> thank you, mr. chairman. >> thank you, mr. secretary. >> nice to see you. >> i want to start by associating myself with the remarks of senator shelby and thank you for your hard work on our tax legislation. >> thank you. . >> can we agree that the revenue generated -- the one-time revenue generated by the
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repatriation of monies from overseas profits back to the united states is in recurring revenue? >> yes. >> okay. >> then why don't we match that up with a non-recurring expense like infrastructure? >> well, it -- >> doesn't that make sense in terms of budgeting 101? ? >> i would just say at the end of the day cash and revenues are fungible so from our standpoint we were just looking at from the tax standpoint, and we would leave it to congress on the appropriation side. >> so you wouldn't be opposed if we decided to dedicate all of the tax revenues, up-time tax revenues that are generated by monies repatriated one time to the united states from overseas profits and we matched those up as any first year accounting student would recommend that you do with one-time non-recurring
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expenses like infrastructure. you wouldn't have any objection, would you? >> i would have no objection with that whatsoever. >> can we agree that that would be a swell idea? >> that sounds like a terrific idea. >> good. >> you're going to ask us to raise the debt limit. >> i already have, yes. >> i know you're not clairvoyant, but over the next three years and perhaps seven years, how many more times are you going to ask us to raise the debt limit? >> i assume a lot. >> shouldn't we do something about that? >> again, i think the president is very much concerned about the rate increase of the debt and particularly the rate that it grew over the last eight years. his first priority was to create economic growth. that's the single most important thing that will create revenues and overtime we need to figure out where we can have government savings to deal with the
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deficit. >> well, we're at 20 drill cron and climbing and at some point we'll have to change the name of the department of treasury to the department of the debt because there's not going to be any treasury left. now in the past year we've add, what, 536 billion to that. >> that's about right. >> okay. >> i mean, it would seem to me that we need to have an adult discussion at some point about how we're going to get control of that. >> i think the long-term debt and the long-term budget deficits are something that congress needs to be conscious of. >> i want to talk about the sanctions. can we agree that at least for the past five years that president putin has act like a thug?
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>> i'm not going to use that terminology, but i -- there are clearly issues that we need to address and that we have done with sanctions, and as i've said earlier now that we've delivered the report last night thereto will be additional sanctions going forward. >> let's go through the list. ukraine, crimea, syria. he meddled in our election. he's helping north korea cheat. i mean, it seems to me that in terms of sanctions we ought to hit him so hard he's coughing up bones. i mean, he's not getting better. he's getting worse. i don't understand why we're not -- why the administration is not imposing the sanctions that
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the united states congress overwhelmingly supported. >> again, i apologize base said this earlier and you weren't here, but we did an enormous amount of work in the intel community in treasury in putting together this report. i encourage you to look at at classified version which is hundreds of pages. we delivered that last night, and we intend to now use that report and that intelligence to go forward with additional sanctions. >> when? >> we'll work -- we're already working on that. now that we've finished the report, that's the next part of -- >> i don't mean to interrupt you. i'm sorry, were you through? >> no, again, i want to be careful, but in the near future you will see additional sanctions. >> is that near future within the next month? >> again, i want to be careful because the sanctions process, there's a process of declassifying -- i don't want to commit it's going to be within
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the next month but i can assure you that as quickly as we can do this this will be so in the next several months you will see it. it may be a month. i just want to be careful in making that commitment. it's a thorough process of the work that needs to be done. >> he's not getting any better, mr. secretary. maybe you're seeing something and there's something in classified information that we're not seeing, and if there is i would sure like to see it because what you allow is what will continue. >> i understand, thank you. >> and i real think that we're sending the wrong message at this critical juncture. i mean, his activities alone in helping north korea cheat ought to require additional sanctions. >> i understand, and we look forward to working with you on this, and there's -- there's a lot of activity here. >> thank you, mr. chairman. >> thank you. >> can i have just a couple of
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quick announcements. some senators may want to ask additional questions for the record and those will be due by february 16, tuesday, and mr. secretary, we ask that you respond to those questions as promptly as you can, and that concludes this hearing. thank you for your testimony again. this hearing is adjourned.
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