tv Treasury Sec. Mnuchin on the International Financial System CSPAN July 12, 2018 11:22am-12:01pm EDT
is so sad and so vicious and violent and we want peace. we want peace for africa. we want peace all over the world. that's my number one goal -- peace all over the world. we're building up a tremendous military because i really believe through strength you get -- you get peace. but we're -- we will have a military like we never had before. we've given out orders for, you know, the best fighter jets in the world, the best ships, the best everything. but hopefully we'll never have to use them. that would be a dream. to buy the best stuff, to have the best stuff, to have the best equipment in the world and to never have to use it would be a really great part of my dream. thank you very much, everybody. thank you. i'm going to be going -- leaving in about half an hour. thank you. [captions copyright national cable satellite corp. 2017] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> ladies and gentlemen, please remain in your seats while the delegation departs.
>> the house is back at noon eastern. they will be working on re-authorizing intelligence programs for the next two years. also a bill dealing with the transfer of federal water infrastructure facilities. live coverage here on c-span when they gavel back in. until they do that we'll take you live to the house financial services committee. treasury secretary steven mnuchin has been testifying about the state of the nternational financial system. mr. pearce: so this energy export is revolutionizing the world market on oil and if we will continue to allow that export then we'll replace a lot of those foreign countries who have been -- they've had just free range in the export market. again, mr. secretary, appreciate that. my main questions have to do with c.d.d. and its implementation. you are aware of the
subcommittee's discussions on beneficial ownership. r. royce just mentioned those. when the rule was implemented, then banks began to say, we don't know how to respond to this. and so they were being told, ok, we have a couple facts out. really no guidance. is there any idea when we will have specific guidance on the rule? secretary mnuchin: i don't have the specifics to that but i'll look into it and get back to you. mr. pearce: when director blanco was here in front of the committee a couple months ago, he said that really they weren't worried too much about compliance right now in the rule, the implementation, is that a full agency position or just him trying to manage the affairs under his purview, is that a broader directive or something that he's just working out? secretary mnuchin: i think it's
a multiagency issue. but that's not a directive for me. mr. pearce: ok. hat what was what i was trying to get into. with us ill get back in six months if we can accelerate that time, if we can accelerate the meeting. we really have the bank -- the v.s.a. reform bill is ready to go except for this one piece and we keep bouncing back and forth between the two sides on that. as we in the country really don't have our minds clearly effects of ee the not having the beneficial ownership and we then become one of the key places that shell companies come to operate because they know we are in conflict on this. the other side worries about too much information in the hands of the government. have you wrestled with this any at all? it's sort of in -- in your
approach to it? are you leaving that to the fence and level to try to work it out? secretary mnuchin: no. i've been actively involved in discussions and i am going to ask the chairman to set up a meeting with the appropriate people on the committee. as i said, there are different solutions. there's not a perfect solution. but i do believe we need to solve this and move on. mr. pearce: i would agree wholeheartedly. it penalizes legit mate businesses when the shadow companies, when the shell companies can come in and operate and launder money. i mean, right now in the oiled field, have a lot of companies come in and they compete mercilessly with cash that's not generated from legit mate operations. it takes away from the strength of the local business community. now, when you testified before us about a year ago you said about 50% of your time was used on cybercrime, cyberfinance, terrorism financing, is that still true?
is it still the pushing wave? secretary mnuchin: it is. mr. pearce: it's something that wrestle with in the subcommittee. we just planned -- continue to work with you again. appreciate your leadership. it's always been steady. it's always been good to work with and so the stability of the agency is something that i appreciate from my perspective, the rising wage market, rising employment markets, those are things that all america is in awe of right now. the growth rate, protected by the atlanta fed last month, is just if he none national. again, mr. secretary, thanks for your work. i yield back. mr. hensarling: the gentleman yields back. the chair recognizes the gentleman from georgia, mr. scott. mr. scott: thank you very much. welcome, mr. secretary. mr. secretary, the people of this nation are very worried. they're very concerned about this trade war. make no mistake about it, both democrats and republicans are
very much worried about it. now, i want to -- i really want you to listen very carefully to me because nobody -- there is no state that could be so devastating impacted on this than my beloved state of georgia. let me explain to you how. let's take the fact that poultry, for example. georgia is the leading producer of poultry in the world. nd according to our national chicken council and leading chicken producers like tyson's food, they've informed me that in 2014, for example, u.s. chicken exports to mexico, one of our most important markets .lone, totaled $800 million ut during the same period, mr. secretary, brazil, brazil's
exports went up from $50 million to $200 million. if we continue to put up these trade barriers in mexico, it is clear as a bell to anybody looking at this that they will take even much more of the market, leaving american chicken farmers and producers out in the cold. let's go to another one. let's take aluminum, for example. in georgia, we have massive users of aluminum. manufacturers. and it's not just georgia but all across the nation. imagine going into a grocery store and just look at how much of our food, our beverages are contained in aluminum cans. can you imagine the impact that that will have? i want to go to another point.
our pecans. did you know that half of the can production in georgia is exported to china in which we are in the middle of? and georgia produces 1/3 of all the pecans in the united states . i want you to have that. i want you to recognize georgia. i want you to tell the president how damaging this will be to georgia businesses, georgia farmers, georgia manufacturers, and not only that, to the employees. because when the aluminum manufacturers come in, that's going to be a 1:18 ratio and loss of jobs. now, mr. chairman -- mr. secretary, let me just ask you this. my question is this to you. are you prepared, are you ready
to be the one who will take full responsibility as the treasury secretary in charge en georgia and this nation into this high inflationary rate, who's going to pay for this increase? this is georgia and american consumers that are going to do that. what about the loss of jobs in manufacturing? it's going to be the american people. you say, well, the economy's moving on all cylinders. i agree with you, but what i'm curious about is the cavalier attitude this administration as of the loss of jobs, of the impact on this, the side effects while we're riding on this sugar high. so i want to just ask you this question. are you ready to assume full
responsibility of the downside, when the darkness comes? are you ready to take full responsibility? secretary mnuchin: i am and i share your concerns. as i said, we are not taking this lightly. we are monitoring all the specific issues carefully. we are concerned about the job losses on the areas that you've impacted. senator scott: and you understand the real outside impact it will have on our people in georgia? i want to make -- mr. scott: and you understand the real outside impact it will have on our people in georgia? i want to make sure. he senate passed a resolution, 8811, it was largely symbolic. it said there may be and should be an expanded congressional role in overseeing the tariff decisions. and i'm concerned. do you support this? secretary mnuchin: i do not. mr. scott: thank you.
mr. hensarling: the gentleman's time has expired. the chair recognizes the gentleman from oklahoma, mr. lucas, former chairman of the house agriculture committee. mr. lucas: thank you, mr. chairman. mr. secretary, i want to raise with you one capital requirement rule that's been the subject of this committee's scrutiny. mr. luetkemeyer has a bill which i and others are co-sponsored which would offset for purpose of capital rules any client margin that's posted to a clearing member. this idea was ranking minority memberation of your report in first report 2017 and has been discussed in europe as a regulatory change. as this hearing is about international issues, i would call to your attention a recent cftc report stating the market share of u.s. banks in terms of futures options positions has decreased 10% in the last five years compared to european banks. while i do think this fact points to a competitive imbalance between us and the europeans, i'm more concerned about the health of clearing for derivatives. if these data are correct, some
capital rules might be hindering the laudable goal and policy of clearing that congress mandated in 2010. and it will not help markets if capital rules encourage participants to go elsewhere for derivatives clearing. given that, do you think that he s.l.r. rule needs to be tweaked to offset client margin? and would such a change make sense for purposes of clearing in the united states? secretary mnuchin: it's something we are discussing with the regulators, as you've outlined. mr. lucas: thank you, mr. secretary. could we turn for the moment -- since trade seems to be the topic here -- and i represent an ag and energy district. in both situations we produce more in my region and generally of those products than we can consume in the united states, thinking of natural gas as well as certain ag americans. the situation that we find ourselves in that the president and the administration are trying to address, both with china and the rest of the world, would seem to me to be
something that has evolved not in the last few months or days or weeks but literally the positions of our predecessors in congress and previous administrations, starting after the second world war. give the world an opportunity to do business with the united states, encourage economic development, capitalism, and democracy will follow. now, the europeans have strong economic system from the ashes of the second world war they created it and a strong politically democratic system, a democracy pattern there. our friends on the other side of the pacific, while they seem to have understood that communism was not the best economic model and have adopted capitalism, some might even say the old mercantilist version of capitalism, they've not made the political steps forward that perhaps our predecessors have hoped for. but is it fair to say that what the administration is trying to do now is in general reset the trade field for the entire planet in a more equitable
fashion? secretary mnuchin: that's absolutely correct. free and fair trade. mr. lucas: the old days of giving everyone else advantages in order to help them create a more stable and peaceful world, that's now -- that stage has now gone and it's time to make sure we are treated fair and equitablely, is that correct, mr. secretary? secretary mnuchin: that's correct. mr. lucas: when you reset the world it's not a simple progress, correct, sir? secretary mnuchin: correct, sir. mr. lucas: it will be economically challenging? so staying the course is something we need to do? secretary mnuchin: it is, thank you. mr. lucas: that said, i was a young wheat farmer when president carter did the embargo against the russians, which also led to our boycotting the 1980 olympics. using agriculture for a political tool on some other issue. but in the industries -- all
industries in the united states that depend on trade, this is not using us as a tool for some political goal, this is trying to achieve the survival of those industries for the long haul, correct, mr. secretary? secretary mnuchin: it's about economic fairness, as you've outlined. mr. lucas: thank you, mr. secretary. yield back, mr. chairman. mr. hensarling: the gentleman yields back. the chair recognizes the gentleman from texas, mr. green, ranking member of our oversight and investigations subcommittee. mr. green: thank you, mr. chairman. i thank the witness for appearing as well. i'd like to visit with you about something a little bit closer to home, if i may. as you know, the c.r.a., the community reinvestment act, was enacted in 1977. and as you know, it was enacted because of redlining, which
impacted poor people and minority people, for the most art. and there is some talk about reforming the c.r.a. to some extent. and it has been recorded that here is a desire to expand the definition of community development. i'm concerned about this, mr. secretary, because i have a good many constituents who believe that the c.r.a. should be strengthened to aid more poor people. it seems there is the possibility of adding business lending, some aspects of business lending to the c.r.a. such that banks can get credit for business lending. tell me, where are we currently and this repry
mation that may take -- reprimation that may take place? secretary mnuchin: i say that he comes to visit with you to get your views on this. i firmly believe that this is something that we should take a new look at because i think c.r.a. can help communities much more so than it does. and this was something i was personally involved in from running a bank. i think that that banking has changed and i think we need to figure out how c.r.a. can really help communities and i'm going to come he speaks with you on that. i will tell you that changing the c.r.a. is not about weakening c.r.a. it's about making it more effective for communities and making sure that the benefits go to the communities. mr. green: well, i appreciate what you just shared with me and i look forward to the visit. indicate this,
mr. secretary. a lot of the push is coming from the banks. and the banks are back. the banks are doing quite well. they're making record profits. $167 billion annually over the last three years. profits are up 135% since drank became law. business lending -- dodd-frank became law. the big banks will receive a $15 billion windfall as a result of the tax bill. so i'm concerned that we are paperwork and the noigs that bureaucracy is creating -- and the notion that bureaucracy is creating a loss in some way for banks. banks are doing quite well. and my concern is this. if we change the c.r.a. so that
business lending becomes a means by which banks will be able to acquire additional credits, that may harm the lending to poor people which is what the c.r.a. was envisioned as a means of helping by way of dealing with the redlining that was taking place. i welcome the visit but i have to ask you this. before you enact whatever these changes are, i'd like to visit with you, mr. secretary. you are where the buck will stop. i'd like to van audience with you so you can know more about how this will impact my constituents. and by the way, i speak for a good many people who are not speaking on this subject. people across the length and red of this country who -- bredth of this country who
depend on this. i am not a person who needs a lot of time. i'm fairly concise. i don't deal in small talk. i go right to the point. so i think it will be beneficial for us to have this meeting. secretary mnuchin: mr. green, i would be happy to meet with you. i can give you my personal assurance this is an issue i asked the regulators to look at because of my personal concern and experience that the money is not going into the communities where it should be. this is not an effort that is being driven by the banks to avoid c.r.a. this is about, in my mind, and we look forward to working with you, how banks better serve communities. mr. green: thank you, mr. chairman. mr. hensarling: the time of the gentleman has expired. the chair recognizes the gentleman from florida, mr. ross. ros-lehtinen thank you, mr. chairman. -- mr. ross: thank you, mr. chairman. mr. secretary, i am over here to your right. got you. thank you for being here and thank you for your service to this country. i will tell you, since you've taken office, we have, as a committee and as a congress, tried to give you tools to do better for our economy, to do
better for our consumers. tax law. we did a little banking light to open up some capital in the community banks and reduce their regulation. there's a lot more we'd like to do but we're running out of time. there's a lot you can still do in the department of treasury, especially when it comes to housing finance. we can't forget what happened in 2007 and unfortunately we've prevent staff torle recurrence of what -- statutorily recurrence what happened in the housing bubble and i'd like credit transfers being implemented from the private sector to release some of that burden that the government now has in backing these mortgages. but yet we're moving slow. and so we have to rely on you. public remarks earlier this year, agreeing philips, one of your counselors, said the department of treasury will have the single security ish initiative being taken by fannie mae, freddie mac.
i know the taxpayers sunk nearly $1 billion in this. i want to know where things stand with this effort. secretary mnuchin: it is being implemented. it's something we support. more broadly, i would just say i also support. we need g.s.c. reform. this is something that i am determined in the next congress, should be a major focus of ours, hopefully on a bipartisan basis. but we can't just leave these things sitting the way they are as they have been. mr. ross: which is why we're relying on your department to as shall as -- as much you possibly can. allows the implementation of this. do you think that platform, the common securitization platform, should be available to all market participants, not just fannie and freddie? secretary mnuchin: my strong preference is part of g.s.c. reform that we create a system of competition, that if other people wanted to compete with the g.s.c.'s they could, but
obviously that's dependent upon certain changes. mr. ross: and it's your understanding there's plenty of capacity in the market to take some of that, is there not, from the g.s.c.'s? secretary mnuchin: i believe there is. but, again, we need an overall solution to this. mr. ross: and just for guidance, are there any other principles that you think are important that we should be following in order to do an effective g.s.c. reform? secretary mnuchin: again, i've said as part of this, there's either an explicit or implicit guarantee, my preference is if there is a need for that, there's an explicit and the government is paid and taxpayers are compensated. mr. ross: and i think that's reality in government and insurance anymore, unfortunately. as a last backstop is where we're trying to get government to be when it comes to the guaranteeing. as you know, about -- today there is about half as many companies that are going public
than they did 20 years ago. in your opinion, why is that? lack of access to capital, regulatory burdens? secretary mnuchin: i think it's regulatory burdens and that's something we look forward to working with you on. mr. ross: excellent. one of the things i want to close by saying, you know, we have probably the best system of regulation when it comes to insurance with state regulators. and as -- under your direction through f.i.o., we're negotiating with the international association of the insurance supervisors. i think it's important that we deal from a position of strength and that we assert our ability to regulate on behalf of consumers, on behalf of capital requirements, insolvency requirements so that we are not influenced unduly by foreign markets when it comes time to reaching our deals with the iais. if you have any comments i'd
appreciate that. otherwise i'll yield back the balance of my time. secretary mnuchin: i think we agree with you and we're comfortable where we are and we will be unduly influenced. mr. ross: mr. chairman, i yield back. mr. hensarling: the gentleman yields back. the chair recognizes the gentleman from missouri, mr. cleaver, ranking member of our housing and insurance subcommittee. mr. cleaver: thank you, mr. chairman. you know, last week i had a meeting in higginsville, missouri, a town of 5,000 people, in my congressional district in missouri. i had a meeting with farmers. standing room only. we couldn't get anybody else in the center. not one person in there believed this tariff move by them. sident is good for every three rows of soybeans that grows in missouri goes to china.
but i don't blame the president for this. i may be the only person in the country, i don't blame the president. i told them this, i blame congress. we have allowed over the last 30 years the president, whomever was the occupant at the white house, to gradually take the constitutional responsibility of congress from the war powers act of 1972, we went on to this. for example, the president shouldn't have the authority to o this because the law -- 232, the tax expansion act requires there's a 270-day period during which we're supposed to be studying the issue and the president is supposed to be waiting on us to do that. but because the founders never envisioned a compliant congress
and so they -- so what has happened, the presidents just snatched power -- i'll never forget, i almost had a nervous breakdown because of anger when president obama stood up at the state of the union and said he would sign no earmarks. he doesn't have that power. he doesn't have that power. the constitution gives the power of the purse to the congress. we're just constantly giving more and more and more. we don't -- on something as critical as this whole tax issue, we are just saying to the president of the united states, in spite of the fact that there's legislation that would prohibit it or give direction to him, do whatever you want to do and we'll sit there. now, having said that, mr. secretary, do you believe that going -- my -- kansas going crazy, the city southern railroad, which means they go south through kansas down through texas and
into mexico and they are extremely concerned and frustrated. are you saying all these people are just misguided and they will be ok next week? secretary mnuchin: i don't want to in any way imply they are misguided. again, i understand the impact this is having on specific areas, especially the farmers, which i think are being unfairly targeted, and as i said, it's a major focus of urs to make sure that we can compete fairly and we're very focused on these trade issues. as you've outlined. but i understand the issues. mr. cleaver: well, do you think do you think de wars that these trade wars ever worked? discuss 1930, did that work? secretary mnuchin: again, i would just say i don't think we're in a trade war. we're in a situation of trade disputes. ok, these are not trade wars. and i -- we are very focused,
as i said, on the nafta issue, which is renegotiating an old agreement. we're very focused on the china issue which is very complicated as you've outlined in fair trade. mr. cleaver: ok. if i hit al green with my fist, we are not really in a fight, we are kind of in negotiations? i mean, we hit china. china hit us back. that's not a war, a fight? secretary mnuchin: i wouldn't say we're in a fight at all. as a matter of fact, the president has specifically commented on his relationship with president xi and how they're helping us with north korea and other areas. again, as i just said, i don't think we are in any way in a fight with canada and mexico. quite the contrary. we're very focused on these agreements. i'm going down to mexico tomorrow as a sign of the importance of that. mr. cleaver: well, do you also agree that smoot holly based on economists, you have people you
would respect agree that it was smoot holley act of 1930 that created less confidence in the markets which contributed to the length of the collapse of the u.s. -- the world economy which happened actually back in 1929, a few months earlier, that would not contribute? secretary mnuchin: i don't think it was the only issue. it did contribute. i say we're monitoring this very carefully. mr. cleaver: thank you. mr. hensarling: the time of the gentleman has expired. the chair recognizes the gentleman from north carolina, mr. pittenger. mr. pittenger: thank you, mr. chairman. again, thank you, mr. secretary, for being with us today. really appreciate, of course, your strong work and support for our farm legislation to reform cfius. particular like to note, i want to thank secretary hheatt hasher for his great work in brokering this with multiple
agencies and committees, individuals in the house and senate. he did an incredible job. so thank you to him, please. mr. secretary, are there any aspects or concerns that you have of the current legislation that would create a loophole or other manner of which this could be exploited by an adversary interest? secretary mnuchin: are you talking about the current cfius or firma? mr. pittenger: the firma bill as we're negotiating with the house and senate? secretary mnuchin: i'd like to thank the house and senate for the enormous bipartisan support. and as i've emphasized to the chairman and leadership on both sides, we want to get this passed as part of the n.d.a.a. this is very, very important to the treasury and our role of cfius. mr. pittenger: yes, sir. are there any aspects of it you would favor or be concerned about or at the end of the day the final legislation that you
feel like needs to more clearly or focus, address any issues that remain outstanding? secretary mnuchin: again, we're very happy with the legislation. as you know, there are slight differences between the house and senate version. i actually had the opportunity to meet with the chairman before this morning's testimony and i think we're going to work together and with the conferees on trying to get this done quickly. mr. pittenger: yes, sir. thank you very much. mr. secretary, following the president's trip last year to ried a to meet with the arab -- to riyad to meet with the arab countries, the 50 countries, i recall an announcement of an anti-terrorism financing center to be set up in riyad. do you have any further information on that or what's happened following that announcement? secretary mnuchin: sure. we are the focus of that at treasury. that was the major focus of the president's trip. i actually had the pressure of
signing the m.o.u. my trip last year was a major focus. i went to saudi arabia and saw the opening of the center. i'll be going back, i believe, in october, and i committed on an annual basis to go back. we've issued the first sanctions jointly out of the tftc, and this is one of our major priorities at treasury. mr. pittenger: thank you, sir. as well, do you have any comments you can make referencing the m.o.u. with qatar given the concerns we had in the past regarding the complicit role that qatar had with harboring known finance iers or funding -- finance or funding, said part of the m.o.u., which i read, that would cause, encourage qatar to be more engaged with us in our
oversight? secretary mnuchin: i can't comment on past activities but i can comment on current activities. i think they made significant employee agrees. we're working -- significant progress. we're working with them. we had bilateral discussions. i met with them recently on an ongoing basis. and we are very focused on working on terrorist financing with them. mr. pittenger: do you see remaining concerns? do you feel like they fully turned the corner? secretary mnuchin: again, i want to be careful what i say on this. there's always more work to do but they made very significant efforts in the right direction. mr. pittenger: just changing the focus a little bit now. in reference to 2155, could you give me some idea of the role that treasury will play in terms of the implementation of hat? secretary mnuchin: we're going to be actively involved --
checking the number. we are going to be -- always refer to as firma. i apologize. we are going to be actively involved. we already started working on drafting regulations. we have a team of people that are ready to implement this immediately. so i would hope that as soon as this is passed in the early fall, we can begin implementing this. we're going to work with congress on additional funding, but, again, this is one of the top priorities at treasury and this is critical to close holes in cfius that we need. particularly around joint ventures and other areas. mr. pittenger: at the end of the day dwonet want to look two, three years from now and see we've not done the full job. thank you. mr. hensarling: the time of the gentleman has expired. the chair recognizes the gentlelady from wisconsin, ms. moore, ranking member of our monetary policy and trade subcommittee. ms. moore: thank you so much, mr. chairman. mr. secretary, again, let me say welcome to you -- welcome
to the committee. let me get right -- right to it. the -- our chairman here referred to the economic miracle of the tax cuts, and i just want to say that the only time that income inequality has been greater than it is now is an we -- upon the dawn, advent of the great depression. so income inequality is not a good thing for our economy and other people's economy. so before i go on to talk about that a little bit more, i just want to refer back to the things that i talked about in my opening statement. the universal service fund. there are many, many, many more poor people who have fallen out of the middle class because of the bifurcation of benefit from that tax bill. and so despite the declarations
that people have -- are better off, i mean, we have seen, you know, wages -- not stay flat but actually fall. so this notion that we have, -- now, -- you know, more less unemployment, less unemployment but flat wages or lower wages, you know, we are having bonuses given out. wal-mart is a good example. was up there. they gave $400 million in bonuses to employees and then simultaneously laid off 10,000 people. so this notion that the joe six pack is better off is just -- is not something that is proveable. having said that, there are more poor people. some are concerned about the universal service fund. even though brad bailey responded to my letter very -- >> this hearing set to run about 1:00 eastern. follow it live online at c-span.org.
here on c-span, we're leaving now. the house is coming in for egislative work, taking up re-authorization of intelligence programs for the next two years and also the transfer of federal land -- federal infrastructure, water infrastructure facilities. all of that ahead. the house floor is next here on c-span. the speaker: the house will be in order. the prayer will be offered by the ge guest chaplain reverend j. josh smith prince avenue baptist church, athens, georgia. the chaplain: dear father we pray this morning the words of psalm 67, bless us and cause your face to shine upon us that your way may be known on the earth of your salvation among all nations. we acknowledge today how much we need you and depend on you for yt