    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

                          THE ANNUAL TESTIMONY OF THE

                           SECRETARY OF THE TREASURY

                              ON THE STATE OF THE

                         INTERNATIONAL FINANCIAL SYSTEM

    =======================================================================

                                    HEARING

                                   BEFORE THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 MARCH 22, 2016

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 114-80

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                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        JEB HENSARLING, Texas, Chairman

    PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking
        Vice Chairman                        Member
    PETER T. KING, New York              CAROLYN B. MALONEY, New York
    EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
    FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
    SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
    RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
    STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
    BILL POSEY, Florida                  WM. LACY CLAY, Missouri
    MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
        Pennsylvania                     DAVID SCOTT, Georgia
    LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
    BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
    BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
    SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
    ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
    STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
    STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
    MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
    MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
    RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
    DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
    ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
    ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
    ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
    KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
    LUKE MESSER, Indiana                 JUAN VARGAS, California
    DAVID SCHWEIKERT, Arizona
    FRANK GUINTA, New Hampshire
    SCOTT TIPTON, Colorado
    ROGER WILLIAMS, Texas
    BRUCE POLIQUIN, Maine
    MIA LOVE, Utah
    FRENCH HILL, Arkansas
    TOM EMMER, Minnesota

                         Shannon McGahn, Staff Director
                        James H. Clinger, Chief Counsel

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        March 22, 2016...............................................     1
    Appendix:
        March 22, 2016...............................................    71

                                   WITNESSES
                            Tuesday, March 22, 2016

    Lew, Hon. Jacob J., Secretary, U.S. Department of the Treasury...     5

                                    APPENDIX

    Prepared statements:
        Lew, Hon. Jacob J............................................    72

                  Additional Material Submitted for the Record

    Beatty, Hon. Joyce
        American Banker article entitled, ``You'll Never Get Real
          Oversight of the CFPB This Way,'' dated March 18, 2016.....    80
    Lew, Hon. Jacob J.
        Written responses to questions for the record submitted by
          Representatives Barr, Ellison, Hinojosa, Luetkemeyer,
          Messer, Ross, Rothfus, and Murphy..........................    84

                          THE ANNUAL TESTIMONY OF THE

                           SECRETARY OF THE TREASURY

                              ON THE STATE OF THE

                         INTERNATIONAL FINANCIAL SYSTEM

                                  ----------

                            Tuesday, March 22, 2016

                 U.S. House of Representatives,
                       Committee on Financial Services,
                                                       Washington, D.C.
        The committee met, pursuant to notice, at 10:04 a.m., in
    room 2128, Rayburn House Office Building, Hon. Jeb Hensarling
    [chairman of the committee] presiding.
        Members present: Representatives Hensarling, Royce, Lucas,
    Garrett, Neugebauer, Pearce, Posey, Luetkemeyer, Huizenga,
    Duffy, Hurt, Stivers, Stutzman, Mulvaney, Hultgren, Ross,
    Pittenger, Wagner, Barr, Rothfus, Messer, Schweikert, Guinta,
    Tipton, Williams, Poliquin, Hill; Waters, Maloney, Sherman,
    Capuano, Hinojosa, Clay, Lynch, Scott, Cleaver, Moore, Ellison,
    Himes, Foster, Kildee, Murphy, Sinema, Beatty, Heck, and
    Vargas.
        Chairman Hensarling. The Financial Services Committee will
    come to order. Without objection, the Chair is authorized to
    declare a recess of the committee at any time.
        Today's hearing is entitled, ``The Annual Testimony of the
    Secretary of the Treasury on the State of the International
    Financial System.''
        Before we begin today's hearing, we need to keep in our
    thoughts and prayers the victims of this morning's attacks in
    Belgium, as well as their loved ones and the first responders
    who are working to care for the injured and bring justice to
    those responsible for this terror.
        I ask that we pause for a moment of silence.
        Thank you. I will now recognize myself for 3 minutes for an
    opening statement.
        This morning, we welcome Secretary Lew for his testimony on
    the IMF and the international financial system. It is a system
    that faces serious challenges brought on by spending-driven
    debt and reckless monetary policies around the globe.
        Fortunately for hardworking American taxpayers, needed IMF
    reforms were passed by Congress in December, even if they
    weren't the reforms the Administration wanted. Notwithstanding
    IMF quota reform, Congress reduced the U.S. contribution to the
    IMF for the first time in its history, sunsetting over $40
    billion in credit lines.
        Congress also restored, over the Administration's
    objections, a rule that limits large IMF loans to countries
    with unsustainable debt. This rule was first put into place in
    2002 but was, unfortunately, altered by Treasury in 2010, when
    the IMF improperly bailed out Greece, a bailout that has led to
    nothing but additional bailouts.
        What remains certain for the international finance system,
    though, is that the IMF will never be able to bail out the
    United States if we remain on the Administration's current
    spending trajectory.
        As our monitors show, our national debt is spinning out of
    control and is undeniably unsustainable. During his time in
    office, President Obama has presided over the five largest
    nominal deficits in history. He has piled up more debt than
    every President from George Washington to Bill Clinton
    combined--a debt that leaves every American family owing an
    average of $153,000.
        Although our witness, Secretary Lew, and other
    Administration officials constantly attempt to change the
    subject to declining deficits, three facts remain.
        Number one, the deficits have only declined relative to the
    historic highs set by this Administration. Two, every deficit,
    declining or not, actually increases the national debt. And
    three, under the President's policies, deficits will soon begin
    rising again despite a $3.4 trillion tax increase and will
    approach the $1 trillion threshold before the end of the
    decade.
        That means the President's legacy will be a debt so large
    that at the end of his budget, we will spend more on debt
    service annually than what we spend on national defense,
    Medicaid, education, and transportation infrastructure. Only
    spending on Medicare and Social Security will be larger than
    interest on the national debt.
        According to the Congressional Budget Office, the
    President's legacy of debt may very well compromise our
    national security and increase the likelihood of a fiscal
    crisis. As we all know, it is the poor who will suffer most
    when this occurs.
        That is why the national debt and debt ceiling remain
    deadly serious matters. Regrettably and inexcusably, the
    Treasury Department, for over 2 years, has stonewalled,
    obfuscated, and misled Congress as our committee has
    investigated Treasury's contingency planning for the debt
    ceiling.
        That is why we recently issued a staff report entitled,
    ``The Obama Administration's Debt Ceiling Subterfuge.'' I
    believe the report clearly reveals that Treasury has sought to
    withhold from Congress and the American people information
    about their contingency plans for the purpose of pressuring
    Congress to acquiesce to the Administration's position that
    there only be a naked debt ceiling increase without any reforms
    or fiscal discipline--or in other words, to hasten our national
    bankruptcy.
        We know the President's legacy will be one of doubt,
    decline, and debt. And as documents continue to be withheld,
    let us hope that deception will not be added to the list.
        The Chair now recognizes the gentlelady from Wisconsin, Ms.
    Moore, ranking member of our Monetary Policy and Trade
    Subcommittee, for 2 minutes.
        Ms. Moore. Thank you so much, Mr. Chairman.
        And welcome back, Secretary Lew.
        I think I ought to begin my comments by bashing my
    Republican colleagues and defaming them in the worst way that
    they know, and that is to thank them for working with you and
    the Obama Administration to pass IMF quota reform.
        I give Chairman Hensarling and Chairman Huizenga a hard
    time, but I have enjoyed working with Chairman Huizenga on the
    Monetary Policy and Trade Subcommittee, and I recognize that he
    and other Republicans had a big part in making this quota
    reform happen.
        I know that you, too, have worked really hard in getting
    this over the line, and I really think it is going to benefit
    us in the long run.
        Congress has been behind in the curve, but it was the right
    thing to do for the world and certainly for this country. And I
    am pleased that Christine Lagarde is again going to be heading
    the IMF, and I think on balance she is doing a tremendous job.
        Ranking Member Waters and I join Ranking Member Levin and
    Representative Rangel in urging that capital controls policy in
    the TTP be harmonized with IMF guidelines, and I was very
    pleased that it was included in the final agreement.
        I am looking forward to our conversation today. I hope that
    you might talk to us a little bit about money laundering and
    your efforts to combat that. But at the same time, the other
    side of that is, of course, trying to make sure we figure out
    how to get remittances in the hands of those who are very
    needy.
        I look forward, again, to your testimony.
        And I yield back.
        Chairman Hensarling. The gentlelady yields back.
        The Chair now recognizes the gentleman from Michigan, Mr.
    Huizenga, chairman of our Monetary Policy and Trade
    Subcommittee, for 2 minutes.
        Mr. Huizenga. Thank you, Mr. Chairman.
        Secretary Lew, I am going to move quickly, but I appreciate
    you appearing here with us today. And there are obviously a lot
    of very important international issues that need to be
    addressed.
        One of those that I am extremely concerned about is the
    problem of the role of the IMF in future lending to Greece. In
    2010, Greece received an IMF bailout under the exceptional
    access rule, in which the IMF provided a 3-year assistance
    package totaling 40 billion, or more than 3,200 percent of the
    country's quota--well beyond any limit that had been in place.
    In 2012, a new $37 billion program superseded that 2010
    bailout.
        Under normal access, IMF countries can borrow up to 200
    percent of their quota per a 12-month period, or up to 600
    percent total. With exceptional access, borrowers can exceed
    these limits provided that their debt is considered sustainable
    with a high probability of paying off that debt.
        It is important to note that Greece did not meet the
    criteria for exceptional access lending, and the IMF has, in
    fact, conceded that it made mistakes in bailing Greece out. As
    you know, the fund's own evaluation department has found that
    internal assessments which permitted Greece to take part in the
    exceptional access framework were inaccurate, resulting from
    overly optimistic forecasts of debt sustainability, renewed
    market access, and government commitment to reforms.
        Although I am pleased that the IMF's systemic exemption for
    exceptional access was finally repealed earlier this year, I am
    very concerned that earlier this year--just in January,
    actually--the IMF board replaced it with significant new
    loopholes that will allow that to continue. Backed by the U.S.
    executive director, they decided that countries like Greece can
    receive assistance even when their debt is not sustainable with
    high probability, providing that there is a ``reprofiling'' of
    that debt.
        This new reprofiling seems to violate the spirit of the
    reforms that were included in the 2015 omnibus, in which
    Congress eliminated a systemic exemption due to the
    exploitation by Greece. I have stated before that the Treasury
    Department should resist the urge to push the IMF towards any
    more bailouts of Greece, and I will be introducing legislation
    today that will prevent future bailouts of countries that fail
    to meet the IMF's traditional rules.
        I have let the IMF know about that. They are aware of my
    concerns and this legislative initiative, as well.
        So with that, Mr. Chairman, I appreciate the opportunity,
    and I yield back.
        Chairman Hensarling. The Chair now recognizes the ranking
    member for 3 minutes.
        Ms. Waters. Thank you very much, Mr. Chairman.
        I would like to thank Secretary Lew for coming to testify
    before us today on the state of the international financial
    system. The IMF quota reform package that was adopted after a
    5-year delay as part of December's omnibus spending deal is an
    important achievement and a positive reflection on the
    perseverance of U.S. Treasury officials and Democratic
    Congressional leaders to get this deal done.
        Previously, the failure of the U.S. Congress to approve the
    IMF quota reform had put the world economy and financial system
    in serious jeopardy. With ratification now complete, what is
    essential to U.S. interests is to restore some impetus to
    ongoing IMF reform and to repair, in part, the damage that has
    been done to the U.S. reputation for leadership.
        The price the Administration paid for the quota reform
    included a commitment which it achieved to seek to eliminate
    the systemic exemption--the rule that says 2010 has allowed
    lending even when there was a risk that the debt was
    unsustainable and that was used to support loans for the
    periphery countries of Europe.
        Many believe that the fund should revert back to its
    original exceptional access rules. I am perfectly fine using
    such rules as one of many guides when thinking about policy,
    and I agree that policy should be transparent and systematic as
    possible.
        But I am also sure that in a complex, ever-changing global
    economy, policymaking cannot be trusted to a simple instrument
    rule. I believe that the fund should recognize that the problem
    with rigid, predetermined thresholds is that they will
    inevitably conflict with the unpredictable circumstances of
    reality and that exceptions are going to be inevitable in some
    cases.
        Finally, before closing I want to take a moment to
    acknowledge the senseless loss of life caused by brutal and
    tragic events unfolding in Brussels today. The attacks on the
    innocents serve as a painful reminder of how important our
    efforts are in countering the financing of terrorism.
        Secretary Lew, I know you are deeply committed to
    disrupting the networks that finance terror and I hope you will
    share more with us today about areas where increased resources
    or enhanced authorities may assist you in your work. I look
    forward to your testimony, Mr. Secretary.
        And I yield back the balance of my time.
        Chairman Hensarling. The gentlelady yields back the balance
    of her time.
        Today, we welcome the testimony of the Honorable Jacob J.
    Lew. Secretary Lew has previously testified before this
    committee so I believe he needs no further introduction.
        Without objection, Mr. Secretary, your written statement
    will be made a part of the record, and you are now recognized
    for 5 minutes to give an oral presentation of your testimony.
    Thank you.

       STATEMENT OF THE HONORABLE JACOB J. LEW, SECRETARY, U.S.
                       DEPARTMENT OF THE TREASURY

        Secretary Lew. Thank you, Chairman Hensarling, Ranking
    Member Waters, and members of the committee, for the
    opportunity to testify here today. Before I begin I would like
    to just say a few words about this morning's events in Belgium.
        The United States condemns in the strongest possible terms
    today's act of terrorism in Brussels. Our thoughts and prayers
    go out to innocent civilians targeted in these horrific
    attacks.
        At Treasury, we work with foreign governments every day to
    identify terrorist financing networks, and in the wake of
    attacks we work with them even more so. We work especially
    closely with our counterparts around the world.
        Right now, Treasury analysts are reviewing information to
    try and uncover leads on the Brussels attacks and we have
    offered our assistance to Belgian authorities. Our hearts go
    out to victims of today's events and our commitment to stopping
    the flow of funds to perpetrators of these kinds of attacks
    remains steadfast.
        Since my testimony last year, our economy has continued its
    record-breaking streak of private sector job creation, which
    has reached 6 consecutive years and more than 14 million jobs.
    Over the last 2 years, we have experienced the strongest job
    creation since the late 1990s.
        At 4.9 percent, the unemployment rate is half of its 2009
    peak, and we continue on a sound fiscal path. From Fiscal Year
    2009 to Fiscal Year 2015, the deficit of the share of GDP fell
    by almost three-quarters to 2.5 percent.
        The passage of the omnibus spending bill in December has
    helped to build on this momentum, contributing to our economic
    growth and helping to strengthen our international leadership.
    The agreement included critical IMF quota and governance
    reforms that have helped to preserve the central role of the
    United States in the international economic system and advance
    our economic and national security objectives.
        That agreement demonstrated that we have the capacity to
    find common ground on difficult issues, and it lays the
    foundation for addressing some of our long-term challenges. But
    more work remains to strengthen critical investments in our
    domestic and national security priorities.
        The international financial institutions, the IMF,
    multilateral banks, and related multilateral trust funds are an
    important part of the President's approach to bolstering
    national security and driving long-term prosperity. Our
    investments in these institutions promote our strategic
    interests in international stability.
        They help unlock the next generation of export markets for
    America's businesses and workers while fostering private sector
    development and entrepreneurship. And they are some of the most
    cost- effective ways to reinforce economic growth at home and
    respond to critical challenges abroad.
        The IMF remains the foremost international institution for
    promoting global financial stability. Through its three main
    activities--surveillance, technical assistance, and lending--
    the IMF promotes economic stability and helps prevent and
    resolve financial crises when they occur.
        This work promotes global growth, enhances U.S. national
    security, and alleviates poverty in member countries. At a time
    of increased economic uncertainty, the IMF is actively working
    with countries vulnerable to low oil prices, financial market
    volatility, and other external shocks to provide policy advice
    and financing when appropriate.
        The United States plays a key role in shaping IMF policy
    through its position as the IMF's largest shareholder. Over the
    past year we have supported the creation of an IMF debt relief
    facility for low-income countries hit by public health
    disasters like the Ebola virus, and we encourage the IMF to
    help developing countries mobilize domestic resources for
    development.
        At the direction of Congress, the United States championed
    reforms to the exceptional access lending framework to tighten
    requirements on debt sustainability. Our investments in
    multilateral development banks like the World Bank also
    supports national security objectives, increases economic
    growth, and reduces poverty.
        Over the years, MDB Assistance has nurtured the economic
    reforms, infrastructure, and social investments that have
    driven the growth of some of our most strategic trade partners.
    They play an important role in building sustainable and
    transparent economic growth in emerging and developing
    countries. And more and more, we have come to see the MDBs as
    vital partners in helping to address national security threats.
        In addition to meeting our current commitments to the MDBs,
    it is urgent that we work with Congress to address our prior
    unmet commitments, which now approach $1.6 billion. At the
    World Bank, this is particularly urgent, as failure to meet our
    commitments this year will result in a loss of U.S.
    shareholding that could impact our veto power, damage our
    credibility, and weaken our ability to shape policy priorities.
        Successful development also depends on good governance and
    a well-functioning state. For over 25 years, Treasury's Office
    of Technical Assistance (OTA) has provided advice and training
    to government officials in developing and transitional
    countries so they can build affective public financial
    institutions. OTA helps countries improve government operations
    across several areas, including planning and executing budgets,
    managing debt, collecting revenue, developing sound banking
    systems, and combating corruption.
        OTA is particularly helpful with our foreign policy,
    security, and economic priorities in Ukraine, Central America,
    Africa, Asia, and other regions. Treasury's international
    programs are some of the most cost-effective ways to reinforce
    economic growth at home and to respond to critical challenges
    abroad. Specifically, U.S. leadership in international
    financial institutions enables us to influence how and where
    resources are deployed, often on a scale that we cannot achieve
    through our bilateral programs alone.
        It is crucial that we continue to have bipartisan support
    for these institutions to ensure that our influence remains as
    strong today as it has been over the past several decades.
    Treasury looks forward to continuing the dialogue with Congress
    on the important role that the international financial
    institutions play in the global economy, especially as we
    implement the IMF reform legislation and negotiate
    replenishments of several of the MDB windows that serve the
    world's poorest countries.
        Thank you very much, and I look forward to your questions.
        [The prepared statement of Secretary Lew can be found on
    page 72 of the appendix.]
        Chairman Hensarling. Thank you, Mr. Secretary.
        I now recognize myself for 5 minutes for questioning.
        Mr. Secretary, one thing maybe we can agree on is that tens
    of millions of our fellow countrymen are unhappy. I think one
    of the reasons they are unhappy is too often, they see an
    Administration that either makes up law, ignores law, or lives
    above the law, and they see a Congress that they think is
    helpless or hapless in dealing with that.
        In that context, Mr. Secretary, I think you know that for
    almost 3 years this committee has been seeking documents
    regarding debt ceiling contingency planning and information
    shared with the Justice Department regarding what some call
    ``too-big-to-jail.'' And as I think you are aware, almost 1
    year ago this committee subpoenaed documents from Treasury, and
    in that time we have yet to receive the documents.
        You were asked about this last week in your appearance
    before the Appropriations Committee and you said, ``Lawyers are
    working through the document request.'' Mr. Secretary, it has
    been almost 3 years for these requests.
        You also mentioned in your appearance before the
    Appropriations Committee that you will provide us with
    ``appropriate material.'' But, Mr. Secretary, with all due
    respect, Article 1 of the Constitution states, and there is
    longstanding Supreme Court precedent, that this branch of
    government has the oversight rule. We get to deem what is
    appropriate for oversight and investigation.
        With all due respect sir, it is not you. It has everything
    to do with checks and balances, and separation of powers.
        Thus, my first question: As custodian of records, do you
    understand our subpoena of May 11, 2015, imposes a legal
    obligation on you personally to ensure that the requested
    records are produced?
        Secretary Lew. Mr. Chairman, we recognize the important
    oversight role that Congress plays and we take seriously the
    responsibility--
        Chairman Hensarling. Okay. But Mr. Secretary, the question
    is, do you understand a personal legal obligation? Is that your
    understanding?
        Secretary Lew. Mr. Chairman, Treasury has taken steps to
    respond to each and every one of your--
        Chairman Hensarling. I will ask you again, Mr. Secretary.
    Do you understand that you have a personal legal obligation? If
    you don't, then I would recommend that you study 2 U.S.C. 192
    through 194, and 18 U.S.C. 1505.
        So I will ask you for the last time, do you understand that
    you have a personal legal obligation to ensure these requested
    records are produced?
        Secretary Lew. Mr. Chairman, Treasury's approach to the
    committee's inquiries has followed the longstanding Executive
    Branch policy set forth by President Reagan in 1984--
        Chairman Hensarling. Mr. Secretary, you have had 3 chances
    to answer the question. I will move on.
        Has anyone directed you not to comply with this committee's
    subpoena of May 11, 2015?
        Secretary Lew. Mr. Chairman, just the other day we
    responded in detail to the inquiry from this committee laid
    out--
        Chairman Hensarling. My question, Mr. Secretary, is, has
    anyone directed you not to comply with this committee's
    subpoena of May 11, 2015? It is a simple yes-or-no answer.
        Secretary Lew. Mr. Chairman, as the letter that we sent to
    the committee indicates, we have been reaching out to the
    committee, responding, sending documents--
        Chairman Hensarling. A third time, Mr. Secretary: Has
    anyone directed you not to comply with this committee's
    subpoena of May 11, 2015?
        Secretary Lew. Mr. Chairman, we have been trying to work
    with the committee to provide appropriate information--
        Chairman Hensarling. I am trying to get you to answer a
    simple yes-or-no question. It is no wonder the American people
    get outraged.
        Mr. Secretary, it is a simple yes-or-no question: Have you
    been directed not to comply with the subpoena? Yes or no,
    please, sir.
        Secretary Lew. No, Mr. Chairman I am--we have been trying
    to respond to this subpoena. That is the point I am trying to
    make.
        Chairman Hensarling. Okay, well for the third time you
    didn't answer that question.
        Next question then: Have you directed anyone at the
    Treasury Department to withhold documents from this committee,
    pursuant to the committee's subpoena of May 11, 2015?
        Secretary Lew. Mr. Chairman, if you just give me a moment
    to answer your question, we have been--
        Chairman Hensarling. If you will answer the question, Mr.
    Secretary, I will give you a moment for context, but we need to
    start off with a yes or no.
        Secretary Lew. With all due respect, these are not yes-or-
    no questions. If you want an answer, I am happy to give that--
        Chairman Hensarling. I don't know how much more simple it
    could be. Have you directed anyone at the Treasury Department
    to withhold documents from this committee, pursuant to the
    committee's subpoena of May 11, 2015? If you will give me a yes
    or no, Mr. Secretary, I will give you a moment for context.
        Secretary Lew. Mr. Chairman, at my direction, the
    Department staff has been reaching out to the committee trying
    to seek an accommodation. The committee has not followed up
    with any meetings to try and work through that. We have
    provided thousands of pages of documents.
        Chairman Hensarling. It has been 3 years, Mr. Secretary--3
    years on some of these document requests.
        Secretary Lew. But in many cases, we don't know what the
    committee is even looking for.
        Chairman Hensarling. Well, Mr. Secretary, if I need to
    provide you with another copy of the subpoena, I would be glad
    to do it. Are you at least certifying, then--are you prepared
    to certify in writing that you are in compliance? Because so
    far, you have failed to do so. You can't tell me that you are
    trying to comply and then not certify that you are in
    compliance.
        Secretary Lew. Mr. Chairman, respectfully, what we
    suggested in letters going back many months was that the
    attorneys should sit down and talk with each other, go through
    the details. I was being diplomatic at the Appropriations
    Committee the other day. This committee has not responded to
    our offers to meet at the attorney level. So we have been
    trying to be responsive.
        Chairman Hensarling. Mr. Secretary, what do you think would
    happen to an ordinary citizen, a school teacher or a factory
    worker, if they refused to comply with a legal subpoena? What
    do you think would happen to them?
        Secretary Lew. Mr. Chairman, we have been working to comply
    with the committee's request.
        Chairman Hensarling. Mr. Secretary, with all due respect,
    that just doesn't have credibility. It just doesn't have
    credibility.
        The Ranking Member is recognized for 5 minutes.
        Ms. Waters. Thank you very much for being here, Mr.
    Secretary.
        The chairman just talked about the American citizens'
    distrust with government and how angered they are with
    government.
        Mr. Secretary, I believe that if there is anger and
    distrust it is because of the way we conduct ourselves here.
    And when the Secretary of the Treasury is battered and
    disrespected then I think the American people see that more as
    the Congress of the United States not being able to work with
    each other, more than some so-called demand for a response to
    pages that have been seen, or questions that have been sent, or
    depositions.
        As I understand it, we have received over 3,000 pages from
    the Treasury since May 11, 2015. And as I understand it, there
    were four more depositions that were issued yesterday.
        And I want you to know, Mr. Secretary, that we are not
    consulted at all by the opposite side of the aisle on these
    depositions. We don't have the kind of cooperation here in this
    committee that would lend itself to seeking information from
    you or any of the other Secretaries.
        This has become a game of ``gotcha.'' This has become a
    game of, ``We are going to overwhelm you with subpoenas and
    questions so that we will be able to say you have not
    responded.''
        I am hopeful that the important issues of the Treasury are
    being worked on every day. We are in a situation where, yes,
    our economy is performing, and since 2008 we certainly have
    made advances.
        But we are concerned about the volatility of the markets
    and we want you to concentrate on the real issues. And I would
    hope that your office would not be tied down trying to respond
    to unreasonable requests from this committee.
        I don't think and I don't believe they are legitimate. And
    I apologize for the way that you are being treated here this
    morning, not being able to answer a question, being
    interrupted, not accepting that you are willing to have an
    explanation. And so it should not work that way and I want to
    get on with dealing with the real issues that you are
    confronted with.
        Since initiating free market reforms in 1978, China has
    been one of the world's fastest-growing economies, averaging
    9.7 percent in real gross domestic product growth annually from
    1979 to 2015 and lifting 660 million people out of extreme
    poverty.
        Over the past few years however, China's economy has
    slowed. Its real GDP growth was 7.3 percent in 2014 and 6.9
    percent in 2015 and is projected by the IMF to fall to 6.0
    percent by 2017.
        What are the implications of a slowdown in China for the
    United States as well as the global economy more broadly?
        Secretary Lew. Thank you, Congresswoman Waters.
        China's economy is one of the two largest economies in the
    world, along with our own. And it is not as integrated with the
    global economy in the way ours is in terms of financial
    systems, in terms of the interlocking relationships of those
    financial institutions, but it is the purchaser of a vast
    amount of inputs from around the world.
        So there is understandably a lot of focus on China's
    economy because it has a lot to do with what global growth will
    look like in the future, particularly in emerging economies
    that provide so many inputs to China. China is in the middle of
    a reform process that is very important to China, and it is
    important to the global economy.
        As they move towards a more market-oriented system it is
    going to be bumpier. There will be more volatility. They are
    going to have to learn how to tolerate some of those
    disruptions the way those of us more experienced with market
    economies do.
        But they are going to have to stick to the reform path
    because if they don't, if they don't open their market, if they
    don't make the changes that will have market signals become the
    more powerful drivers of the economy, they will be left with an
    overhang of overcapacity that will weigh them down and make it
    so that some of the doomsday scenarios would then become much
    more meaningful risks.
        I think China has a lot of tools; it has a lot of capacity.
    The question to me is not the question many have asked, is
    China out of tools? They have $4 trillion of foreign reserves.
    They have enormous resources within their government to deal
    with policy. What they need to do is not back away from the
    reform program.
        Ms. Waters. Thank you, Mr. Secretary.
        Chairman Hensarling. The time of the gentlelady has
    expired.
        The Chair now recognizes the gentleman from Michigan, Mr.
    Huizenga, chairman of our Monetary Policy and Trade
    Subcommittee.
        Mr. Huizenga. Thank you, Mr. Chairman.
        I am going to take a slightly different direction on my
    questioning, but not because I don't believe that what the
    chairman has been saying is extremely important. I am
    concerned, as well, about responses just to simple letters. I
    have gotten two dated March 18th, one dating back as of last
    year, in May. So speed has not exactly been Treasury's M.O.
    here.
        But my question is on the IMF--and you address this a
    little bit on pages three and four of your written testimony,
    starting on page two--but the Greeks obviously have suffered
    the Eurozone's highest unemployment rates: 25 percent for the
    past 4 years, youth unemployment near 50 percent. Instead of
    helping reduce Greece's public debt-to-GDP ratio to 110 percent
    as planned, the fund has witnessed the debt-to-GDP ratio climb
    to over 175 percent despite major restructuring of debt in
    2012.
        Clearly, IMF involvement has done little to improve the
    lives of Greek citizens, in part because Greek leaders have
    been slow-walking reforms for years. Last December, Greek Prime
    Minister Alexis Tsipras was unapologetic, criticizing the
    fund's ``unconstructive attitude on fiscal and financial
    issues.'' He indicated that the IMF should stay out of any
    future bailout. He and I agree on that one.
        On page four, you actually mention that at the direction of
    Congress--this is a quote out of your written testimony--``At
    the direction of Congress, the United States championed reforms
    in the exceptional access lending framework to tighten
    requirements on debt sustainability.''
        But then the United States led the charge to go against
    these reforms by inserting new loopholes. And I am just curious
    and confused as to why you would take a bipartisan
    congressional directive and go against that with the IMF. If
    the Greeks don't want the IMF's medicine, and if the medicine
    has been so ineffective anyway, why should we insist on giving
    them more taxpayer dollars?
        Secretary Lew. Congressman, let me start with the reforms
    at the IMF and then move--
        Mr. Huizenga. Very quickly, yes, please.
        Secretary Lew. --to Greece very quickly.
        The reforms removed the provisions that allowed systemic
    risk to cause an exception that would allow lending that is of
    the nature you describe. The exceptional access program remains
    very important. It has been the way we have seen assistance
    provided to many important countries. The case of--
        Mr. Huizenga. But why would we introduce more loopholes
    on--I mean, IMF rules stipulate the country must possess ``the
    political and institutional capacity to ensure success of an
    exceptional access loan.'' In short, government must be
    competent and must be committed to the reforms.
        Earlier this year, the Greek defense and foreign
    ministers--I am sure you are aware of this--threatened to
    ``flood Europe with migrants, including potential terrorists''
    if the country didn't get what it wanted in bail-out
    negotiations.
        And Defense Minister Panos Kammenos said, ``If Europe
    leaves us in the crisis we will flood it with migrants and it
    will be even worse for Berlin if in that wave of millions of
    economic migrants there will be some jihadists of the Islamic
    State too. If they--European creditors--strike us, we will
    strike them.''
        We might have just seen that in Brussels today. Isn't that
    true, Mr. Secretary?
        Secretary Lew. No. Congressman, I think that is a
    conclusion that I have no basis to comment on and I think we
    shouldn't jump to a statement like--
        Mr. Huizenga. I hope not. But when you have the--
        Secretary Lew. If I could just comment on--
        Mr. Huizenga. --defense minister of Greece threatening
    Europe, our NATO allies--
        Secretary Lew. So, if I could--
        Mr. Huizenga. --how in the world can we allow them to even
    qualify for this?
        Secretary Lew. If I can respond to your questions--
        Mr. Huizenga. Please, quickly.
        Secretary Lew. --both on the financial and on the larger
    set of issues in Europe. On the financial side, there have been
    many important reforms enacted in Greece over the last year.
        I am not going to disagree that the process was very bumpy
    and messy and the whole world was watching it, but after an
    opening set of conversations that was not constructive the
    government of Greece settled down and enacted more reforms than
    anyone thought possible.
        Why is it important for the IMF to remain engaged? This is
    principally a European challenge. It has been all along. But it
    has been important to Europe to have IMF as a partner. I--
        Mr. Huizenga. They have settled down, but earlier this
    year--not last year; this year--we have the defense minister
    and others making outrageous comments that--
        Secretary Lew. So if I--
        Mr. Huizenga. --which I still don't understand why you
    would--
        Secretary Lew. Yes. If I could just try to keep separate
    that--
        Mr. Huizenga. --lead the parade to try to include
    additional loopholes--
        Secretary Lew. If I can keep--
        Mr. Huizenga. --and just let them qualify.
        Secretary Lew. If I can keep separate the financial and the
    kind of geopolitical for a moment, on the financial side, I
    think the IMF is only going to remain involved if there is an
    ability to do a debt sustainability review, which will be based
    on some debt forgiveness, debt restructuring that would be
    required, if it is sustainable and it is consistent with the
    IMF rules.
        If they do that, then that will keep a European commitment
    together. And why is that important to us? I think at a time of
    geopolitical instability it would not be a good thing for
    Europe or for the United States if we were to see real tensions
    of Europe breaking apart again. There--
        Mr. Huizenga. We see that already. And I think this is why
    I am going to be introducing and dropping the bill today trying
    to tighten those loopholes. I would suggest that Treasury not
    go against Congress again on a bipartisan manner and that you
    need to work with us on this oversight.
        So thank you, Mr. Chairman.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentlelady from Wisconsin, Ms.
    Moore, ranking member of our Monetary Policy and Trade
    Subcommittee.
        Ms. Moore. Thank you so very, very much, Mr. Chairman.
        Mr. Secretary, you have indicated that our economy is
    growing very slowly at 2 percent. And, of course, our
    colleagues here are fond of reminding us that we are $919
    trillion in debt.
        Of course we, just in the last budget negotiations, did
    another $700 billion in unpaid-for tax cuts, some good and some
    tax extenders that were not so good. But anyway, they are all
    unpaid for, on top of the wars we didn't pay for.
        And so we are now, over the next couple of decades, $2
    trillion more in debt from this policy. I also sit on the
    Budget Committee, and the solution there to this is sort of
    more austerity. Let's block grant Medicaid, let's voucherize
    Medicare, let's cut the social services block grant, let's take
    the entitlement status away from Pell Grants and for food
    stamps.
        And I guess, as the Secretary of the Treasury, I am
    wondering if you think austerity is the solution to our deficit
    problem?
        Secretary Lew. Congresswoman, I think we have to make sure
    our economy is growing, and part of that means we have to
    maintain fiscal policy that keeps it growing. And we also have
    to take a long-term view and have a sustainable fiscal outlook.
        If you look at where we started in 2009, there was an
    economy that was crashing. There was a debt that was
    skyrocketing and a debt that was completely out of control,
    growing to over $1 trillion. We brought it under control. It is
    not down to zero. The deficit is not down to zero, but we have
    reduced it by three-quarters to 2.5 percent of GDP.
        I think if you look at this next 10-year period, we
    maintain stability and it is a foundation to then look at the
    challenges of how do you deal with the 20-, 30-, 40-year
    challenges. In these next 10 years, I think that the United
    States, like the rest of the world, has to focus on the reality
    that there is insufficient demand in the world.
        The United States is doing a little better than most of the
    rest of the world, but you can't grow the global economy by
    just cutting spending everywhere. We are seeing that hasn't
    worked in other places. In the United States right now, we have
    great needs.
        Infrastructure is an enormous need in this country. We need
    it to have a sound economy in the future; we need it because it
    puts people to work and good jobs. And this is the time to do
    it, when we have the ability to finance it at very low cost.
        So I think that the question of what we do in the medium-
    and the long-term, and what we do in the short-term, are not
    the same. And I was also OMB Director for 3 years in the 1990s
    and I produced surpluses in 3 years. So I, more than anyone
    else, understand the value of fiscal discipline.
        But I also understand that you can't do it without a
    growing economy. Last year, the actions you described in total
    helped grow the U.S. economy by roughly half a percent. And
    with the headwinds coming from internationally slow growth, I
    am glad we have that extra energy in the U.S. economy.
        Ms. Moore. Thank you so much. So, just to be clear, you
    think our long-term challenges with Social Security, Medicare,
    Medicaid--70 percent of our economy is spending. If you take
    money away from people, how is it possible to grow the economy
    without folk having money in their hands?
        Secretary Lew. The challenge in the long-term has always
    been to have the right balance of revenues and spending to deal
    with structural issues. I think that if you look at what we
    have done in the last 7 years, we have bent the cost curve on
    health care.
        Some people don't like the Affordable Care Act, but nobody
    can deny that it has kept costs from going up. That has an
    enormous impact on the Federal budget.
        We have taken tremendous strides to reduce spending, I
    think too much so on the discretionary side.
        Ms. Moore. I have 30 seconds, so, do people need to have
    money? Do you agree that our economy depends on people having
    money to spend, like raising the minimum wage, like not
    cutting--
        Secretary Lew. I think if you look at the power of the U.S.
    economy, it is driven by consumer demand, and that consumer
    demand is important at all levels of the income spectrum. And
    people who work full-time ought to be able to be above the
    poverty line, which is why I think we need to raise the minimum
    wage. And we know that money will be spent.
        Ms. Moore. All right. Thank you so much.
        And I yield back my 2 seconds.
        Chairman Hensarling. The gentlelady yields back.
        The Chair now recognizes the gentleman from New Jersey, Mr.
    Garrett.
        Mr. Garrett. Thank you, Mr. Chairman.
        After listening to the Secretary's responses to your
    questions--or non-responses--Mr. Chairman, I think anyone
    viewing today's hearing would say, Mr. Secretary, that you are
    the epitome of what is wrong with Washington today. The disdain
    that you have for the American people, your failure to answer
    the simplest of questions, is what is wrong with Washington and
    why the public has the view of the bureaucracy and the
    bureaucrats, such as yourself, here today.
        The questions that we put to you are basic ones and simple
    ones, asking sometimes for long answers and sometimes for
    simple, short answers.
        I got a new phone the other day, and I have this curious
    question. Do you have a--do you use a cell phone, iPhone, or
    anything like that? Do you carry that with you?
        Secretary Lew. I carry it, but I hardly use it.
        Mr. Garrett. Okay. So there is almost a simple answer.
        So in your communications with people, whether on your
    phone, iPhone, e-mails, letters, phone calls, or other things,
    the chairman asked you a simple question. Has anyone from the
    Administration ever directed you to not comply with the
    subpoenas?
        So it is a simple question of whether, through any of these
    communication devices that you may have, one way, or shape, or
    another, has anyone directed you to do that? That is a yes-or-
    no question.
        Secretary Lew. Congressman Garrett, I answered the
    question--
        Mr. Garrett. No, you didn't.
        Secretary Lew. --by saying we have been working to comply.
    We are trying to comply.
        Mr. Garrett. Excuse me, excuse me. The question was not
    whether you are working to comply. That was your answer.
        The question was, has anyone communicated this to you? Has
    anyone communicated that to you, Mr. Secretary? Yes or no?
        Secretary Lew. Congressman, you can make this seem like a
    yes-or-no question. I am not aware of any communications
    telling me what to do on anything I am doing here today.
        Mr. Garrett. There you go.
        Secretary Lew. I am giving you an answer--
        Mr. Garrett. That is the--
        Secretary Lew. --of what we are doing. I would think--
        Mr. Garrett. Thank you, Mr. Secretary. The answer is--
        Secretary Lew. I would think you would want to know what we
    are doing.
        Mr. Garrett. The answer is no, then, is--you are saying no
    one has ever communicated that to you.
        Mr. Chairman, I think that was the answer you were trying
    to get.
        I have been trying to get answers from you as well for a
    long period of time--9 months ago, both in committee and
    through a letter, I asked you to respond to some of the
    concerns I have regarding the implications of something else:
    the ISDA protocols on bank insolvencies and what effect they
    would have on nonbank institutions. I have not yet heard from
    you in over 9 months. I don't see why you couldn't answer me.
        So my simple question now, since I haven't heard back is,
    will you assure us that if any proposals come up, you will
    oppose any plans that would require U.S. companies to basically
    give up, waive their protections to U.S. law and sovereignty?
        Secretary Lew. Congressman, I am going to need you to give
    me a little bit more detail of what you are asking me about if
    you want me to answer that question.
        Mr. Garrett. I guess since my time is limited, we sent
    that--there was a--
        Secretary Lew. I am happy to respond. I am just not sure
    what you are asking.
        Mr. Garrett. Okay. We directed that to you back in--last
    year, 9 months ago, and I guess if you are happy to respond, we
    would ask you to respond to that back then.
        As far as trying to get information from you, that is one
    thing; to you is another.
        Here is a $10 bill. And there is a whole discussion going
    on of who should be on the $10 bill. You are familiar with that
    whole issue?
        Secretary Lew. Yes, I am.
        Mr. Garrett. And I know you have done a good thing. You
    have solicited the American public's opinion quite a bit. You
    are nodding your head.
        Secretary Lew. Yes. We got a lot of comments.
        Mr. Garrett. That is great. How come, then, when you are
    dealing with international bodies such as the FSB, you do not
    solicit for public opinion and the stakeholders in the same
    manner when you get into negotiations regarding financial
    standards and international bodies?
        Secretary Lew. We do work with stakeholders.
        Mr. Garrett. Will you commit going forward to ask for
    input, just like you did on the change of the $10 bill, as you
    would on dealing with international bodies?
        Secretary Lew. You know, we do reach out to stakeholders as
    we do our work domestically and internationally, and we will
    continue to do so.
        Mr. Garrett. That is great. That is good to hear. So will
    you engage in a formal notice-and-comment period as well?
        Secretary Lew. I am not going to comment on notice and
    comment for international proceedings.
        Mr. Garrett. Why not?
        Secretary Lew. Because I am not aware of any appropriate
    notice-and-comment process for international proceedings. We do
    notice and comment for domestic rules.
        Mr. Garrett. Do you have the authority, the power to
    establish formal notice-and-comment periods?
        Secretary Lew. Look, I think we have a lot of mechanisms
    for consulting with both public and private sector
    stakeholders. We will continue to do that.
        Mr. Garrett. Would you commit to doing this one more?
    Because--
        Secretary Lew. I don't think notice and comment is the
    answer to everything. We are not doing notice and comment on
    the $10 bill either.
        Mr. Garrett. But this is a little bit more important than
    the $10 bill. This is--
        Secretary Lew. You asked me, would we do the same thing.
        Mr. Garrett. Would you commit to doing a formal notice-and-
    comment period--
        Secretary Lew. I don't think notice and comment is the
    answer to everything. It is the right way to perceive formal
    rules.
        Mr. Garrett. I understand it may not be for everything. But
    on this area I am simply asking you, would you commit to doing
    so?
        Secretary Lew. Congressman, I think that work that is done
    in the FSB is critically important work--
        Mr. Garrett. So, the answer is no.
        Secretary Lew. --but it doesn't make U.S. policy. When we
    make U.S. policy and rules--
        Mr. Garrett. So when you do--
        Secretary Lew. --we go through notice and comments.
        Mr. Garrett. So when you solicit input, because you said
    you do solicit input, it is just your soliciting input from who
    you want to hear from, as opposed to all of the Americans who
    want a formal process.
        Secretary Lew. I dare say when we solicit input, we get
    input from many who do not share my view, not just those who
    share my view.
        Mr. Garrett. Thank you.
        I yield back.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentlelady from New York, Mrs.
    Maloney, ranking member of our Capital Markets Subcommittee.
        Mrs. Maloney. Welcome, Secretary Lew.
        I know that this hearing is about international finance,
    but I would first like to ask about Puerto Rico, as it has a
    very pressing economic issue facing the country, and it impacts
    on ours.
        It is in a severe financial crisis which could really
    explode into a humanitarian crisis. And we know that it now has
    roughly $72 billion in debt outstanding and an additional $43
    billion in unfunded pension obligations. And to make matters
    worse, Puerto Rico does not have access to Chapter 9 bankruptcy
    or to any restructuring process that would allow it to
    renegotiate its debt and creditors, its obligations.
        And now I have been told that Treasury is working with the
    Natural Resources Committee on crafting legislation to address
    this financial crisis, but as you know, there is a Supreme
    Court case taking place right now, literally they are hearing
    the arguments in court today. And that case addresses whether
    Puerto Rico is prohibited by Section 903 of the Bankruptcy Code
    from enacting its own state-level municipal process and regime.
        Other States are also prohibited from enacting their own
    municipal bankruptcy codes, but they have access to Chapter 9,
    they have access to bankruptcy. Puerto Rico does not have
    access to Chapter 9. So it is unclear to me as why we subject
    them to the same prohibition on enacting their own municipal
    bankruptcy code.
        So one idea that I feel is worth pursuing and considering
    is simply carving Puerto Rico out from the Section 903 ban on
    States enacting their own municipal bankruptcy codes. That way
    we could--Congress could authorize Puerto Rico to enact its own
    restructuring regime for all of its municipalities.
        And this has precedent in that the Supreme Court upheld New
    Jersey's State-level municipal bankruptcy in 1942. It was
    Congress that enacted legislation prohibiting States in the
    future from doing so, but we could likewise enact legislation
    allowing, or carving out, the ability of Puerto Rico to so
    ask--to act.
        But my question really concerns the impact that the economy
    and Puerto Rico and the restructuring would have on our very
    important municipal bond market that finances so much of the
    improvements in our urban areas. And a lot of critics are
    arguing that allowing Puerto Rico to restructure their debt
    would have a terrible, terrible consequence in the muni-bond
    market here in America, that it would drive up borrowing costs
    for other States as well even though they are not affected by
    Puerto Rico's restructuring.
        And I would like to know what your response is to these
    arguments, and also do you think that a territorial bankruptcy
    regime for Puerto Rico would harm the broader municipal bond
    market that is so successful in America?
        Secretary Lew. Congresswoman Maloney, there is an immediate
    crisis in Puerto Rico; it is not a future crisis. For all
    practical purposes they are in default because they are not
    paying some of their bond issues and they have big payments due
    in May and July, and we don't see a path for them to be able to
    make those payments. The need for action is immediate.
        I don't believe that it is going to solve the problem if
    there is restructuring of just a small piece of Puerto Rico's
    debt. A restructuring is going to have to be inclusive of all
    of Puerto Rico's debt in order to address the crisis that they
    have.
        I think that the work that is being done--I haven't seen
    the work product of the Natural Resources Committee, but the
    work that is being done is very important and it is very time-
    sensitive. What we think needs to be in it is we think there
    needs to be an oversight authority that is the gatekeeper; we
    think that there needs to be the ability to restructure all of
    Puerto Rico's debt, because even some of their general
    obligation debt has to be at a minimum rescheduled in order for
    there to be a solution; and we don't think it is a one-size-
    fits-all approach.
        In terms of the impact on other municipal bonds, three of
    the leading bond analysts have put out studies that contradict
    the notion that it is going to have spillover effects on other
    municipal bond markets. In fact, what we know about the
    municipal bond market is that each issue is looked upon
    independently based on the risk and the quality of the credit.
    And I believe that the worst thing for the municipal bond
    market would be a disorderly unwinding in Puerto Rico, which is
    what will happen if Congress doesn't act.
        Chairman Hensarling. The time of the gentlelady has
    expired.
        Mrs. Maloney. Thank you.
        The Chair now recognizes the gentleman from Wisconsin, Mr.
    Duffy, chairman of our Oversight and Investigations
    Subcommittee.
        Mr. Duffy. Thank you, Mr. Chairman.
        Welcome, Mr. Lew. Right over here.
        Secretary Lew. I can't see you through--
        Mr. Duffy. I just want to revisit a few of the questions
    that were asked by the chairman.
        Again, you understand that you have a legal obligation to
    provide the documents requested and subpoenaed by this
    committee, to this committee. Is that correct?
        Secretary Lew. Congressman, I answered that question
    already. We are working to respond.
        And I will clarify one thing I said before. I said we did
    not get any response to our offer to meet. After we received
    subpoenas last week--
        Mr. Duffy. I am going to reclaim my time--
        Secretary Lew. --there was then a response that--
        Mr. Duffy. I don't mean to be offensive, but are you having
    any trouble hearing today? Is your hearing working?
        Secretary Lew. I am hearing you just fine.
        Mr. Duffy. Okay. So let's try this one more time: Do you
    understand that you have a legal obligation to provide
    documents as--
        Secretary Lew. As I said, we have been responsive and we
    continue to work to be responsive.
        Mr. Duffy. But you are not answering my question. And is it
    your--in regard to anyone directing you to not comply with our
    subpoena? Did that happen?
        Secretary Lew. Congressman, I responded to that question
    already.
        Mr. Duffy. What is the answer? Tell me one more time.
        Secretary Lew. I am not aware of any instructions on
    anything I am saying today. You are talking to the Secretary of
    the Treasury and I am giving you my--
        Mr. Duffy. And as the Secretary of the Treasury, have you
    directed anyone at Treasury not to comply with our document
    request?
        Secretary Lew. I'm sorry that I couldn't hear. I didn't
    hear you.
        Mr. Duffy. Okay. Have you directed anyone at Treasury to
    not comply with our document requests?
        Secretary Lew. No, quite to the contrary. At my direction
    our staff has reached out and written letters--
        Mr. Duffy. Have they been told to comply with us?
        Secretary Lew. --seeking to have the conversations that
    would enable us to reach accommodations.
        Mr. Duffy. You have told your staff to comply with our
    document requests?
        Secretary Lew. You know, the practice--
        Mr. Duffy. Yes?
        Secretary Lew. I have told them to reach an accommodation
    with the committee, which would--
        Mr. Duffy. Let me express my concern to you.
        Secretary Lew. --reach an accommodation with the committee,
    which requires--
        Mr. Duffy. So we have a subpoena that is almost a year old.
    The document request, when we try to do it nicely with you,
    goes back 2\1/2\ years, and you have failed to comply with
    those document requests.
        And I think anyone sitting in this room listening to the
    responses that you gave the chairman, that you gave Mr.
    Garrett, and that you are giving me, would say that you are not
    compliant. We ask very simple questions and you say, ``I am not
    going to answer a question.'' But you come in and say,
    ``Listen, ladies and gentlemen--''
        Mrs. Maloney. Will the gentleman yield?
        Mr. Duffy. I will not.
        You come in and say, ``I am trying to work with you; I am
    trying to answer your questions; I am trying to be compliant,''
    when you don't even answer simple questions that this committee
    poses to you.
        You indicated, I think, in your--
        Secretary Lew. Can I ask you a question, Congressman?
    Congressman, can I ask you a question? Did you read the letter
    that we sent you last week?
        Mr. Duffy. Yesterday? I want to talk about what you sent me
    yesterday. Are you aware that you sent me--
        Secretary Lew. On March 18th, we sent you a letter.
        Mr. Duffy. --a document dump last night, yesterday. Are you
    aware of that?
        Secretary Lew. We have been providing documents on a
    regular basis.
        Mr. Duffy. Okay, so you provided 1,035 pages. Correct?
        Secretary Lew. I didn't count the pages, Congressman.
        Mr. Duffy. Roughly, does that sound about right?
        Secretary Lew. We sent a lot of pages.
        Mr. Duffy. Okay. And you are trying to comply with our
    subpoena, is that right?
        Secretary Lew. We have sent thousands of pages, and--
        Mr. Duffy. Let's talk about the kinds of pages that you
    send. So in the thousand pages that were sent to our committee
    this week--you can look up at the board--664 of those pages
    were news clippings, letters to Members of Congress, CRS
    reports, hearing transcripts, and public information. Another
    223 pages were private sector research from Finch Barclays,
    Merrill Lynch. Another 109 pages were from the Bipartisan
    Policy Center. And then 39 pages was a memo on the 1985 debt
    limit impasse.
        This isn't the documents that we requested. This is public
    information you are just throwing our way to try to say,
    ``Listen, we have sent you thousands of pages,'' though it is
    thousands of pages of noncompliant material.
        One of the e-mails that you sent us I think is consistent
    with all of your compliance and your testimony today. At the
    very top you will notice that it says ``spam.'' You are sending
    us spam e-mails from Treasury and trying to tell this committee
    that you are complying.
        And so, let me ask you this. We have asked you to provide
    employees of Treasury--Anne Wall, Randall DeValk, Priya Aiyar,
    Patrick Pinschmidt--and you have refused to allow them to come
    and be interviewed by this committee. Is that correct?
        Secretary Lew. Congressman, we have tried in repeated
    communications with this committee to arrange meetings to reach
    accommodations to be able to provide information. You know when
    we got a response? Last night. Last night, after the better
    part of a year.
        Mr. Duffy. Mr. Secretary, we asked for documents, and as
    those who oversee you, you should comply. Or you should assert
    a privilege.
        Secretary Lew. Congressman, the process of responding to
    these requests is well-established. It involves give and take--
        Mr. Duffy. It is well-established.
        Secretary Lew. It involves give and take.
        Mr. Duffy. Are you asserting a privilege?
        Secretary Lew. Excuse me?
        Mr. Duffy. Have you asserted a privilege as to why you
    haven't complied with our document requests?
        Secretary Lew. Congressman, we have not yet had the
    conversations we should have between counsel. Hopefully, that
    will begin immediately and we will be able to work our way
    through it.
        Mr. Duffy. If you look at the answers--Mr. Lew, look at the
    answers you gave us today. Does anyone here believe that you
    are going to actually comply with our requests that are 2\1/2\
    years old, when you can't even acknowledge that you understand
    that you have the legal obligation to provide these documents?
        Ms. Waters. Mr. Chairman, I have a unanimous consent
    request. Mr. Chairman?
        Mr. Duffy. Mr. Lew, again, you are everything that is wrong
    with government--
        Ms. Waters. Mr. Chairman?
        Chairman Hensarling. The time of the gentleman has expired.
        Ms. Waters. I have a unanimous consent request.
        Chairman Hensarling. The gentlelady will state her request.
        Ms. Waters. I ask unanimous request for a recess.
        Chairman Hensarling. I object.
        The Chair now recognizes the gentleman from Texas, Mr.
    Hinojosa, for 5 minutes.
        Mr. Hinojosa. Thank you, Chairman Hensarling and Ranking
    Member Waters, for holding this hearing on the annual state of
    the international finance system.
        Welcome, Secretary Lew. I am pleased that you are
    testifying today because this hearing gives us and this
    committee the opportunity to discuss the North American
    Development Bank, better known as the NADBank, in San Antonio,
    Texas.
        As you know, the NADBank was created in 1994 as part of
    NAFTA to alleviate the environmental concerns and economic
    problems that would be created by the movement of commerce and
    people to the U.S.-Mexico border region.
        Since its creation over 20 years ago, the bank has made a
    tremendous improvement to some of the most impoverished
    communities in both nations, including towns and colonias in my
    congressional district and along the U.S.-Mexico border, from
    Brownsville, to El Paso, and all the way to the California-
    Mexico border.
        The bank's investments have brought lifesaving potable
    drinking water to millions of people, many of whom faced
    health-threatening conditions due to unsafe sources of drinking
    waters.
        So that leads me to the first question. In January 2015,
    during the high-level economic dialogue, President Obama and
    Mexican President Pena Nieto agreed to double the bank's
    capital from its current $3 billion to $6 billion, split evenly
    between the two nations. Can you tell us why the bank is
    seeking to double its capital?
        Secretary Lew. Congressman, the Administration is looking
    for this capital increase because it will allow the United
    States to continue supporting these kinds of infrastructure
    projects on our border that are so important. It deepens our
    relationship with Mexico, it addresses environmental issues
    that are cross-border issues. And it is an important aspect of
    our economic life to have those issues addressed, and only we
    and Mexico are the parties of interest, which is why in the
    NADBand and the U.S.-Mexico relationship is so different.
        Mr. Hinojosa. In June of 2015, Moody's rated the NADBank as
    Aa1, reflecting the bank's strong capitalization and liquidity
    position as well as noting the support of the bank receives
    from both the United States and Mexico. Moody's rated the
    bank's outlook as stable.
        So do you expect the bank will maintain that strong
    financial position moving forward?
        Secretary Lew. Congressman, the rating agencies have
    changed their methodologies in a way that, for idiosyncratic
    reasons, could have an adverse impact on NADBank. They are
    looking at whether there is concentrated activity, and when you
    are talking about two countries--only two countries--being
    involved in all the activity on one border, it by its basic
    nature is concentrated activity. Most of the international
    financial institutions are diversified.
        I think that, importantly, there are no nonperforming
    loans. So if you look at the core quality of the credit, it is
    very strong. I don't know what the rating agencies will do.
        Mr. Hinojosa. I like that response on how strong it is.
        Since 2010, the bank's lending portfolio and debt issuances
    have grown significantly. Has the increased lending portfolio
    had a negative impact on the bank's financial position?
        Secretary Lew. As I say, there are no nonperforming loans,
    so I think the bank remains in a strong financial position.
        Mr. Hinojosa. What steps has the bank taken to ensure that
    its debt issuances do not become an oversized liability for the
    bank?
        Secretary Lew. I think that the key is for there to be
    careful review of projects to make sure that each project that
    is funded can sustain the debt that is going to it. And, given
    the amount of work that needs to be done on the U.S.-Mexico
    border, there are a lot of good projects before you get to
    anything that would be questionable.
        Mr. Hinojosa. I agree with you. There are a lot of good
    projects on both sides.
        In 2011, I introduced H.R. 2216, the North American
    Development Bank Enhancement Act, a bill to allow the bank to
    expand its mandate beyond the environmental infrastructure
    projects. Would Treasury support efforts to expand the bank's
    mandate this year, 2016?
        Secretary Lew. Congressman, I am not familiar with the
    expansion proposal. I am happy to look at it.
        I think that the definition, as it is, permits some
    expandability because transportation, for example, is part of
    it, reducing emissions. So things like transportation, water,
    sanitation, renewables are all part of it. But I would be happy
    to look at the proposal.
        Mr. Hinojosa. Thank you. I yield back.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Missouri, Mr.
    Luetkemeyer, chairman of our Housing and Insurance
    Subcommittee.
        Mr. Luetkemeyer. Thank you, Mr. Chairman.
        Mr. Lew, I have a couple of questions on a different
    subject here with regard to SIFI designations. You testified
    last week in front of the Appropriations Committee with regard
    to arbitrary thresholds for SIFI designations, and I just
    wanted to get a little clarification here. Your response was
    that you oppose raising the bank threshold SIFI designation to
    $500 billion.
        Secretary Lew. I'm sorry, I couldn't hear the last thing
    you said.
        Mr. Luetkemeyer. Last week at the House Appropriations
    Committee, your response to asset thresholds was that you
    oppose raising the bank SIFI threshold to $500 billion, is that
    correct?
        Secretary Lew. I commented on that issue. Last year, there
    was a proposal to go to $500 billion--$500 billion is a very
    large financial institution.
        The number is now $50 billion. There has been a lot of
    debate, should it go from $50 billion to $100 billion. What I
    said is that there is a big difference between $100 billion and
    $500 billion.
        Mr. Luetkemeyer. Yes, but I guess the question then
    becomes--assets is only one thing. I think we need to be
    looking at this based on the risk and the asset makeup and
    liability makeup of each one of these institutions. Would you
    agree with something like that?
        Secretary Lew. Look, I think that there are a lot of
    different criteria aside from just size that raise questions of
    risk, but I think that size is an important criteria because
    the larger an institution is, the more likely it is to be--
        Mr. Luetkemeyer. With regards to nonbank SIFIs, we have had
    two companies that sold off major books of business in an
    effort to escape the designation. And yet they have not been
    de-designated. Don't you think it would be helpful to have an
    off-ramp of some sort to be able to do that so that these
    businesses know how and what they need to do to be able to get
    de-designated?
        Secretary Lew. First, Congressman, I don't think the reason
    that those decisions are made are to get de-designation. I have
    talked to the CEO of one of those firms who said expressly it
    was not; it was a business decision for reasons of sticking to
    the core business of a technology and manufacturing company.
        There is a process for de-designation. There is an annual
    review, and if a company sheds risk and comes in for review on
    an annual basis, that is the way to get de-designated. And we
    look forward to seeing applications that reflect that kind of
    change.
        Mr. Luetkemeyer. Okay. With regard to another issue,
    international insurance legislation, we are working, in my
    subcommittee, to put in some guardrails with regard to the
    conversations taking place at the IAIS. Those would require the
    United States to uphold and advocate for our system of
    regulation. Do you have any objections to that mission, to try
    and make sure we protect our insurance industry here in this
    country?
        Secretary Lew. Can you just clarify which provisions--which
    proposal you are talking about?
        Mr. Luetkemeyer. We haven't dropped the bill yet, but we
    are working on a bill to try and put some guardrails on the
    discussion so that those advocates--
        Secretary Lew. I am just not sure what discussions--which
    discussions--
        Mr. Luetkemeyer. With the IAIS.
        Secretary Lew. On what subject though?
        Mr. Luetkemeyer. Capital standards and all sort of--
        Secretary Lew. For insurance?
        Mr. Luetkemeyer. Yes. For all other insurance supervision.
        Secretary Lew. We have been working--I assume you are
    talking about insurance now?
        Mr. Luetkemeyer. Right, right.
        Secretary Lew. Yes, we have been working to negotiate a
    covered agreement to make sure that we don't end up in a place
    where other countries can set standards that would require our
    companies to take action.
        Mr. Luetkemeyer. So you would support what we are doing, I
    take it?
        Secretary Lew. I think the right thing to do is to complete
    the covered agreement, to have prudential issues addressed and
    not to get into a situation where there is conflicting capital
    kinds of standards, and any action in this area should be
    action we take in the United States.
        Mr. Luetkemeyer. I think we are putting the cart before the
    horse there. I think we need to make sure that we have the
    ability to protect our folks first before we engage in any sort
    of agreements, period. But I appreciate the comments.
        With regards to paying our Nation's bills, the New York Fed
    serves as the Treasury's fiscal agent, is that correct?
        Secretary Lew. Correct.
        Mr. Luetkemeyer. Did you know that since 2011, the New York
    Fed has conducted so-called tabletop debt ceiling exercises
    that contemplated prioritizing payments of principal and
    interest on debt?
        Secretary Lew. Yes.
        Mr. Luetkemeyer. When did you learn that?
        Secretary Lew. I don't recall.
        Mr. Luetkemeyer. Did the Treasury direct the New York Fed
    to conduct these tabletop exercises?
        Secretary Lew. Congressman, during the period when we were
    at risk of going into default, there was a lot of analysis
    being done of what mechanically would work. My understanding of
    these exercises is that they were checking to see if the pipes
    would work.
        Mr. Luetkemeyer. Okay. You are aware of that then.
        The problem, then, is on two separate occasions, October
    10, 2013, and May 7, 2014, you appeared before the Senate and
    you appeared before the House and indicated something contrary
    to that.
        Secretary Lew. No I didn't. What I said at the time and
    what I believe now is we have never gone into a world where
    Congress has failed to extend the debt. We have never been in a
    world where there has been a question on whether you could or
    couldn't--
        Mr. Luetkemeyer. Sir, you fail to acknowledge that these
    exercises were going on.
        Secretary Lew. I know what I said. What we have learned
    since then is that the technical capability is there. We don't
    know if it works. It has never been tried. I don't want to be
    the one who finds out, and I hope nobody here wants to find
    out.
        Mr. Luetkemeyer. I yield back.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Georgia, Mr.
    Scott.
        Mr. Scott. Thank you very much.
        It might be appropriate for us to examine the impact and
    what you are doing in terms of the financing of terrorists,
    particularly in view of what happened earlier this morning over
    in Brussels. And your Treasury Department has this
    authorization.
        But before I get to that, are you aware, Mr. Lew, that
    there have been documented 73--I think it is 73--individuals
    working at America's airports with ties to ISIS?
        Secretary Lew. Congressman, I know that there has been work
    done to identify risks in this area. I couldn't--
        Mr. Scott. Let me just suggest this. Cox Media--WSB,
    particularly--did a story. Cox Media has media outlets, and
    newspapers, and radio stations, television stations all across
    this country. I would like to ask if you might contact them and
    get the full report on that report.
        Just contact, it is Cox Media. WSB television is the local
    affiliate in Atlanta, Georgia, and we did an interview on that.
        My whole point is this: In this financing of terrorism, we
    have to start looking at the other end of it. In other words,
    there is the money laundering and there is that going, but
    there is also the demand for it. And such a thing as this--and
    this particular incident, too many of our airports have these
    private contractors that come in and help to sort of subsidize
    the workforce at the airports.
        This was the same incident that happened abroad not too
    long ago, where a baggage handler came and put the bomb right
    on the plane. And I am sure you are familiar with that. The
    reason I am saying that is that this evil, this terrorism, has
    no greater target in mind than our Nation's airports. Our
    greatest tragedies have been because of that.
        We have to do everything we can to let the American people
    know that our airports are safe. So on that end, if your staff
    would--and my staff could assist you as well, but I think it is
    important for you to have that report. Homeland Security, I
    think--
        Secretary Lew. Yes, I am happy to look at it, Congressman.
    The Department of Homeland Security works vigilantly--
        Mr. Scott. But my point is that it is not--you have the
    money end. I am not talking about that end.
        I am talking about how we are failing in our efforts. Now,
    we passed a bill that I sponsored called the International
    Financing Hezbollah Act. Are you familiar with that one?
        Secretary Lew. Yes.
        Mr. Scott. All right. Now, in that Act, we directed the
    President to direct and to identify, to investigate, to use
    Treasury, to use the FBI, to use all of our brilliant--the
    CIA--investigative powers to identify sources of funding, the
    dummy companies that trail on it.
        So with that in mind, let me just ask you, what is your
    application of the law, and what is your report on how ISIS and
    these other terrorist organizations are getting their funding?
        Secretary Lew. Congressman, I have less than a minute, so I
    am going to do my best.
        We have an extensive operation, the best in the world, to
    track terrorist financing. We support U.S. operations, we
    support friends around the world when they are trying to track
    down financial ties. We are drilling into every lead we get.
        We work extremely closely with the intelligence community
    and the Homeland Security Department on leads. We have the
    ability to track when they get identification of individuals
    who need to be tracked. So it all flows from the intelligence
    that we get.
        Mr. Scott. Let me--
        Secretary Lew. And we are working on Hezbollah to identify
    targets. On ISIL, it is a slightly different case on ISIL
    because it is a very internal financing system. In 14 seconds,
    I can't answer it, but if I could get another minute I would be
    delighted to.
        Mr. Scott. Okay. All right.
        Then I want to ask you this: The Iran agreement makes
    available to Iran a huge cash load of over $100 billion. They
    are the number one sponsor of terrorism, and particularly to
    Hezbollah.
        Secretary Lew. Mr. Chairman, these questions about ISIL
    financing in Iran are very important. If I could just--
        Chairman Hensarling. Please give a brief answer, Mr.
    Secretary. We will extend--
        Secretary Lew. So on ISIL financing, the structure of it
    has changed as ISIL has grown. It started out that they seized
    territory, they took the money out of vaults, and they had it.
        That is not going to sustain them. They have too much
    territory, too many needs, and we have been too effective at
    hitting some of those vaults.
        What they do now is they try and use local resources like
    oil and they extort money from the people who live there. We
    have worked with the government of Iraq to shut down banks and
    to limit money exchanges. We have worked with the government of
    Iraq to stop paying people in ISIL-controlled territory. We are
    using military operations to blow up every aspect of the oil
    industry we can.
        Has it been 100 percent successful? No. It is hard to get
    in there to be 100 percent. But it has been successful enough
    that in some areas they have had to cut in half what they pay
    their fighters, so we know it is working.
        We have more work to do. We work every day to find every
    lead we can.
        On Iran, if I could just take 30 seconds, I am happy to--
        Chairman Hensarling. Please, Mr. Secretary, go ahead.
        Secretary Lew. --the notion of the amount of money going to
    Iran has been greatly overstated in a lot of places. At some
    level, it looks like there is $100 billion that goes to Iran.
    We know that no more than $50 billion can actually go because
    of limitations and encumbrances on the money. The government of
    Iran itself says they think they may get access to $30 billion.
        What we know is they have hundreds of billions of dollars
    of domestic needs, and we will continue to take action against
    funding of terrorism, funding of regional destabilization,
    funding of human rights violations. So we are going to do our
    level best to make sure--
        Mr. Scott. But my point is, is there any mechanism in place
    to make sure that none of that money goes into the hands of
    groups like Hezbollah, the Houthis?
        Secretary Lew. We have ongoing sanctions in those areas and
    we are continuing to work on designating and enforcing those
    sanctions.
        Mr. Scott. Thank you, Secretary Lew.
        And thank you, Mr. Chairman, for the extra time.
        Secretary Lew. I apologize for going over, but those are
    important questions.
        Chairman Hensarling. No, those are topics of great interest
    to Members on both sides of the aisle.
        The Chair now recognizes the gentleman from Texas, Mr.
    Neugebauer, chairman of our Financial Institutions
    Subcommittee.
        Mr. Neugebauer. Thank you, Mr. Chairman.
        I am interested in the line of questioning that you
    initiated in your questioning, and so I would like to see if
    maybe you get more answers than you got the first time around,
    so I want to yield my time to you.
        Chairman Hensarling. If the gentleman would yield to the
    Chair, Mr. Secretary, let's go back to document production
    here. You have stated that you believe you have been reasonable
    in this process. I accept that. But I hope you understand there
    is a level of frustration for document requests that have been
    pending in some cases for 2 to 3 years, and a subpoena which is
    almost 1 year old.
        We have had over a dozen questions for the record that were
    produced from last June's hearing for which we have yet to
    receive any information from your Department. You saw the chart
    that was placed by Chairman Duffy on the monitors that showed
    that basically when we had requested documents, most of what we
    received were news clips and speeches.
        So yes, Mr. Secretary, there is a level of frustration
    here. A question that Chairman Duffy asked, which I do not
    believe you answered, and if you did then forgive me, I wish to
    know--I am unaware that Treasury has asserted any executive
    privilege with respect to any of the documents that have been
    subpoenaed. So I am unaware that Treasury has invoked any
    executive privilege.
        Are you aware if executive privilege has been asserted with
    respect to any of the documents subpoenaed? And if so, do you
    have a list of those documents?
        Secretary Lew. Congressman, we have tried to reach out, to
    have conversations to clarify what is requested, to seek
    accommodations, to work in the spirit of President Reagan's
    direction to executive agencies on how to deal with
    congressional oversight in a respectful and responsive way.
        We wrote in December. We wrote in January. We wrote again
    last week. It was only after four additional subpoenas were
    delivered that we got a call back to try to set up--
        Chairman Hensarling. Mr. Secretary, I will accept what you
    are saying, but you are not answering the question. Are you
    aware if executive privilege has been asserted? I am unaware.
        Secretary Lew. I am not aware of any assertions of
    privilege--
        Chairman Hensarling. Thank you. That was the only question
    I was asking, Mr. Secretary.
        Secretary Lew. But I think you know as well as I do that is
    the end of the process, not the beginning.
        Chairman Hensarling. I am simply asking--well, when you say
    the end of the process, it is a process that has been going on
    for almost 3 years.
        Secretary Lew. The process of accommodation requires
    conversations that haven't even begun. We have reached out, so
    we have initiated conversations but we have seen no response.
        Chairman Hensarling. Mr. Secretary, I assure you that a
    subpoena would not have been issued had we not had to wait
    years. This isn't a matter of dealing with--
        Secretary Lew. But in December, we offered--
        Chairman Hensarling. This isn't a matter of days to weeks,
    Mr. Secretary. This has been going on for months and years. Let
    me ask--
        Secretary Lew. Yes. Maybe we can get to a better place
    where these conversations take place and we can find a path to
    accommodation, which is always our goal.
        Chairman Hensarling. Mr. Secretary, you testified before
    our committee on May 7, 2014, that the Administration has never
    made any decision to prioritize debt payments. Do you agree--
        Secretary Lew. That is correct--
        Chairman Hensarling. --that you testified to that?
        Can you pull up chart number six, please?
        As I think you are well aware, we are in possession of a
    number of documents that have come from your fiscal agent, the
    New York Fed, of various e-mail communications amongst and by
    Federal Reserve officials. This one dated September 17th
    states, ``Treasury is adamant they will make P&I''--I assume
    principal and interest payments--``not considering possibility
    of missing debt payments.''
        Number seven, please?
        This one is dated Friday, September 20th: ``Treasury
    continues to be adamant they will make principal and interest
    payments on the debt. This is a slightly different position
    than prior exercises where prioritization of debt payments was
    not specified.''
        Chart eight?
        ``As you may have heard''--this one is dated Monday,
    September 23rd--``unlike the 2011 planning around prioritizing
    payments and rolling maturities, the Treasury has said they
    will make all principal and interest payments this time
    around.''
        So you were aware of these tabletop exercises, correct? You
    testified to that earlier today--
        Secretary Lew. Mr. Chairman, the tabletop exercises were
    not in pursuance of a decision that had been made. They were
    exploring how to answer the question that you have asked me, is
    it technically possible? Now, I can't speak--
        Chairman Hensarling. The documents that were just
    presented, have you seen these documents?
        Secretary Lew. Only in recent months. At the time, I was
    not in on that--
        Chairman Hensarling. Pull up chart number two, please.
        Secretary Lew. Mr. Chairman, if I could just respond to
    your question, because the real point here is we should never
    be in a position where we have to make decisions about what to
    do when you default. If you could default on Social Security or
    Medicare instead of principal and interest you are still in
    default.
        Only the President can make a decision what to pay and what
    not to pay. That decision was never made--
        Chairman Hensarling. Mr. Secretary, I agree with that
    assessment. But I think you know that roughly half of the times
    that Congress in the modern era has voted on a debt ceiling, it
    has included some type of spending restraint to take us off the
    path to bankruptcy as well.
        Last chart, chart number two, a memo dealing with Federal
    Reserve Governor Powell.
        Two interesting comments from Powell. He understands why
    Treasury wants to maximize pressure on Congress by limiting
    communications about contingency planning.
        Mr. Secretary, did you direct somebody to maximize pressure
    on Congress by limiting communications about contingency--
        Secretary Lew. No. What I have said to this committee and
    other committees of Congress is, yes, we look at what is
    technically possible. We don't know if it works. We believe
    that it would be a grave mistake and a disservice to this
    country to ever default.
        That is my view now, it was my view then, and it will be my
    view in the future. And it would be a mistake if Congress goes
    down this path again. It would hurt our country--
        Chairman Hensarling. Well, it is interesting evidence from
    the New York Fed about the motivations of Treasury.
        The time of the gentleman from Texas has expired.
        The Chair now recognizes the gentleman from Missouri, Mr.
    Clay.
        Mr. Clay. Thank you. Thank you, Mr. Chairman.
        And thank you, Mr. Secretary, for your appearance today. We
    must not forget that this Administration brought us back from
    the brink of an economic collapse in 2008 that was not brought
    on by this Administration. But this Administration helped
    prepare a budget in an economy that was on the brink of
    collapse.
        So I wish my colleagues on the other side of aisle wouldn't
    forget that and would recognize the good that has come out of
    it.
        Mr. Secretary, how would you assess the effectiveness of
    the Financial Action Task Force (FATF) in identifying key
    terrorism financing risk and issuing universal recommendations
    for addressing them?
        Secretary Lew. Congressman, I think FATF is a very
    important organization that establishes norms and practices
    that, if followed around the world, would create the ability to
    do what we do in the United States more broadly. Candidly, we
    are far ahead of many other countries in terms of having the
    capacity to take those authorities and implement them
    effectively.
        One of the things that I think we have to do--and the IMF
    has a big role to play in this and FATF itself has a big role
    to play in this--is to provide the kind of technical assistance
    to make sure that we built up the capability around the world
    so the countries that want to be cooperative have the tools
    that they need.
        We had a meeting at the U.N. in December where, for the
    first time in the history of the U.N. Security Council, finance
    ministers met. I chaired the meeting and we had a unanimous
    vote to designate ISIL in the same category as Al Qaeda, which
    exposed anyone having even an intermediary role to sanctions.
    It is all rooted in the ability to see it and act on it.
        FATF was at that meeting. FATF is following up with
    countries to help build the capability.
        But I don't want to exaggerate where other countries are.
    We are even ahead of our most sophisticated colleagues, and we
    offer a lot of assistance, for example in Western Europe, when
    they need leads to be followed up on.
        Mr. Clay. And in light of what happened today in Brussels,
    I am sure there is a need for expansion of FATF.
        Secretary Lew. Yes. And we have already reached out to
    offer assistance, as we did after the bombings in France and we
    do on an ongoing basis, sharing information in between when it
    is appropriate.
        Mr. Clay. Thank you so much.
        And at this time, I would like to yield the balance of my
    time to the ranking member, Ms. Waters.
        Ms. Waters. Thank you very much.
        I would just like to give you an opportunity to share with
    us your attempts to cooperate and your desire to work with us
    in a reasonable manner.
        Secretary Lew. Thank you, Congresswoman Waters.
        The range of requests from this committee has been many. We
    have provided thousands of pages of material and, as has been
    noted, we provided an additional thousand pages of material
    just this week.
        In December--on December 17th and January 21st, we invited
    committee staff to meet to discuss what other information the
    committee needs. On the debt limit alone, we provided the
    committee over 3,800 pages of documents on this topic.
        And over the last 3 months, we have tried to reach out to
    the committee to find out what further materials would be
    useful. In the interim we did identify some additional
    materials on our own.
        I have a great deal of respect for the oversight function
    that Congress plays and it is appropriate for Congress to play.
    We seek to find accommodations to provide information and would
    only ask for those kinds of conversations that are necessary to
    go through the accommodation process to proceed.
        Ms. Waters. Have you received a response from this
    committee when you have reached out to them to attempt to come
    together and have some discussion around these issues?
        Secretary Lew. Well, only yesterday evening, but that was
    after four people on the Treasury staff received subpoenas for
    interviews. So we didn't have conversations that would help us
    work it through before that.
        Ms. Waters. So I think what I heard today is that you are
    still offering.
        Secretary Lew. Yes. We remain available and anxious to have
    those kinds of conversations.
        Ms. Waters. You and your staff are available?
        Secretary Lew. Yes. The right level is for counsel to
    counsel. That is how these things have been worked out for 40
    years that I have been part of.
        Ms. Waters. Perhaps before you leave, you can speak
    directly to the chairman, and reinforce your desire to be
    responsive and to talk and to have these discussions. Perhaps
    that would be helpful. Perhaps there is some misunderstanding
    about what efforts you have made to try and accommodate the
    many, many, many requests and the subpoenas and all of that.
        I do appreciate your willingness to do this, and again,
    perhaps maybe a conversation directly with the chairman might
    help.
        Secretary Lew. Thank you, Congresswoman.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from South Carolina,
    Mr. Mulvaney.
        Mr. Mulvaney. Secretary Lew, I want to continue the
    conversation about the debt ceiling, not because I want to beat
    a dead horse, but mostly because I continue to be amazed, in my
    view, at an Administration that I perceived as wanting to
    create the threat of a financial crisis.
        We have already established in your previous visits here
    that your comments to the contrary notwithstanding, the
    technical ability to prioritize did exist and does exist. That
    issue has been put to rest.
        Secretary Lew. I testified to that effect at this committee
    last year.
        Mr. Mulvaney. And I am giving you the benefit of the doubt,
    Mr. Lew. When we are going to agree, you might as well let me
    do it, because it is not going to happen that often.
        I want to talk about something else today, though, if we
    could bring up the first slide.
        You have said on several occasions that no decision had
    been made to prioritize. This is an e-mail on September 17th.
    We got these from internal e-mails at the New York Fed:
    ``Treasury is adamant that they will make P&I payments.''
        Next slide.
        ``Treasury continues to be adamant that they will make
    payments--principal and interest payments on the debt.''
        Next slide, please.
        ``As you may have heard, unlike the 2011 planning around
    prioritization payments and rolling maturities, the Treasury
    has said they will make all P&I payments at the same time.''
    That is September 23rd, September 27th.
        Next slide, please.
        ``Even though the Treasury has directed the Reserve Banks,
    they intend to make all P&I payments, et cetera.'' That is
    September of 2013; 2 weeks later you went to the Senate and
    said that no decisions had been made to prioritize.
        In May of 2014, several months later, you came to this
    committee and brought a letter from the previous day and you
    testified to the same thing. It says, ``We stress that no
    decision regarding what to do in a situation was made during
    the recent debt limit impasses.''
        I will leave it to others to speak to the truthfulness of
    that statement and the truthfulness of what you have said to
    this committee. It is not what I want to focus on today. I want
    to focus on the next piece of the puzzle.
        Secretary Lew. Congressman, if I might?
        Mr. Mulvaney. Sir, I will, but--and I will give other folks
    a chance. I am trying not to take the whole 5 minutes.
        Secretary Lew. When somebody questions the truthfulness of
    a statement, I think I am permitted the opportunity to respond.
        Mr. Mulvaney. No, but it is not what I want to talk about.
        Secretary Lew. Because you have mischaracterized what I
    have said and it is incorrect--
        Ms. Waters. Mr. Chairman, point of order.
        Mr. Mulvaney. In fairness to--
        Ms. Waters. Point of order, Mr. Chairman.
        Chairman Hensarling. The gentlelady will state her point of
    order.
        Ms. Waters. Mr. Chairman, I--
        Chairman Hensarling. The clerk will stop the clock.
        Mr. Mulvaney. Thank you.
        Ms. Waters. I have a point of order that the committee is
    not exercising proper decorum.
        Mr. Mulvaney. May I speak to the point of order, Mr.
    Chairman?
        Ms. Waters. Mr. Chairman, if I may, when it is implied that
    the Secretary of the Treasury is not being truthful, he should
    be given an opportunity to respond to that. It should not be
    left saying, ``I have accused you of not being truthful, but I
    want to move on.''
        And I would say that if we are to comply with proper
    decorum, you would allow the Secretary of the Treasury to
    respond to what has been said as to his being untruthful.
        Mr. Mulvaney. May I speak to the point?
        Chairman Hensarling. Does any other Member wish to be heard
    on the point of order?
        The gentleman from South Carolina?
        Mr. Mulvaney. I have already indicated to the witness that
    I intend to leave him time at the end of my 5 minutes to
    respond. I do intend to do that. I would like to get through my
    presentation first and then give him the opportunity to respond
    to all of my points.
        In addition, no one is stopping him from receiving time
    from the opposition, the other side, the other party, to speak
    to my points, which we regularly do in this committee.
        Chairman Hensarling. If no other Member wishes to be heard,
    I would like to ask unanimous consent that the Secretary be
    given 30 seconds in which to address the issue that he wanted
    to address, and then we will go back to the gentleman from
    South Carolina.
        If so, would the gentlelady withdraw her point of order?
        Ms. Waters. Mr. Chairman, I appreciate your offer, but I
    hardly think 30 seconds is sufficient.
        If the chairman would reconsider the amount of time to be
    in compliance with decorum, I certainly would agree to that. I
    hardly think 30 seconds is sufficient.
        Chairman Hensarling. Mr. Secretary, I will simply, by
    unanimous consent, yield you as much reasonable time as you may
    consume, and if the gentlelady cares to withdraw, we will give
    the Secretary a moment to address the issue that was raised by
    the gentleman from South Carolina.
        Ms. Waters. Thank you, Mr. Chairman. I withdraw.
        Secretary Lew. Thank you, Mr. Chairman. And I am from New
    York, so I talk fast.
        All I wanted to say is when I testified on a number of
    occasions, I stated what was correct then and is correct now.
    The decision has never been made by the only people who can
    make the decision--that is the President of the United States
    on the advice of the Treasury Secretary--what to do. That
    decision was not made.
        I can't tell you what different officials in different
    organizations said to each other. But I can tell you the
    decision wasn't made.
        And we should never have to make a decision about how the
    U.S. Government defaults, which is what happens if Congress
    fails to raise the debt limit. And I don't think defaulting on
    payments to veterans is any better than defaulting on payments
    to foreign bond holders.
        Chairman Hensarling. I think we are getting a little far
    afield of the question now, but thank you, Mr. Secretary.
        And now we will go back to the gentleman from South
    Carolina.
        Mr. Mulvaney. I thank the chairman, and I thank the ranking
    member.
        Let's get to the question that I wanted to ask, Mr. Lew,
    which goes to the next slide, which is why no one at Treasury
    wanted to tell us. The next slide is from September 24th,
    another internal New York Fed document, which says, ``Agree the
    close hold here is crazy, counterproductive, and adds risk to
    an already risky situation.'' This is an internal document in
    the New York Fed. ``I will bring this up at the meeting at
    11.''
        Next slide, please.
        The last sentence of this long selection says, ``It is also
    totally unclear when and whether TRSO intends to share this
    thing with the affected business areas, especially given their
    request that I refrain from sharing this document, a request
    that I am obviously ignoring because I think it is outrageous
    that they are keeping such a close hold on this type of such a
    late date.''
        TRSO, I understand, is one of your internal working groups.
        The next slide, please.
        Another internal New York Fed documents with two
    interesting comments from Powell. Number two, he understands
    why Treasury wants to maximize pressure on Congress by limiting
    communications about contingency planning.
        Mr. Lew, this speaks to the very heart of why we have been
    beating you up on this for the last 3 or 4 years. So this is
    the question I wanted to ask from the very beginning: Who at
    Treasury made the decision to try to maximize pressure on
    Congress by limiting communications about contingency planning?
        Secretary Lew. Congressman, the decision that we made was
    to make sure Congress and the American people understood the
    risk of what happens if the debt limit is breached.
        Mr. Mulvaney. That is not what the e-mail speaks to. The e-
    mail speaks--
        Secretary Lew. That was our decision. We do not believe
    that there is a path towards prioritization that works.
        Mr. Mulvaney. I get that. Mr. Lew, you said that 100 times
    and that is why we keep cutting you off because it is becoming
    redundant.
        So my question is this--I am not asking you about informing
    us about the risks of a debt ceiling. I am asking you
    specifically about the comments within the New York Fed, which
    is your agent, and with--
        Secretary Lew. Congressman--
        Mr. Mulvaney. Let me finish--and it is clear from all the
    documents we received from them through you that they were
    integrally involved with this as far back as 2011. And clearly
    people within the New York Fed thought that you were
    withholding information from Congress about contingency
    planning. And I want to know who told them that and why.
        Secretary Lew. I can't speak to what other people thought.
    I can tell you that--
        Mr. Mulvaney. If I asked Mr. Powell that, what would he
    say?
        Secretary Lew. --In 2011 and 2013, there were serious
    questions about whether the pipes could even handle this kind
    of decision.
        Mr. Mulvaney. We have covered all that.
        Secretary Lew. What we know for sure is, we know you can't
    do that with all the payments of the Federal Government.
        Mr. Mulvaney. I am giving you the benefit of the doubt, Mr.
    Lew. All I am asking you--
        Secretary Lew. And we can talk about the substance and
    maybe make some progress here.
        Mr. Mulvaney. Who made the decision not to tell Congress
    and who made the decision not to tell the public?
        Secretary Lew. Congressman, I am telling you we decided to
    share with the Congress and the public what we knew, which was
    that if there were no debt limits--
        Mr. Mulvaney. But you never shared with us--
        Secretary Lew. --default would be a terrible thing--
        Mr. Mulvaney. --or the public the contingency planning and
    prioritization.
        Secretary Lew. And the contingency planning may or may not
    work. We don't know that.
        Chairman Hensarling. The time of the gentleman--
        Secretary Lew. I can't sit here today and tell you that
    there is a plan. There is no plan to manage through a default.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Missouri, Mr.
    Cleaver, ranking member of our Housing and Insurance
    Subcommittee.
        Mr. Cleaver. Mr. Secretary, is there a plan?
        Secretary Lew. As I was just trying to say, Congressman,
    these are questions about, technically, could you choose to pay
    bond holders, including foreign bond holders, and not pay
    American citizens things that they are due? I acknowledged to
    this committee that there is a technical capability to pay
    principal and interest, including to all of the foreigners who
    own U.S. bonds.
        I think we have to pay our bond holders. I think we also
    have to pay our veterans; we also have to pay Medicare; we also
    have to pay for the lights to go on in this room and in
    veterans' hospitals around the country.
        And I think the notion that there is a workable plan for
    the Government of the United States to default is the highest
    form of irresponsibility. And that is what is really the issue
    here.
        Mr. Cleaver. Thank you.
        I came here interested in oil more than anything else.
    There was a time when we said we have to produce more oil to
    reduce our dependence on imported oil from the Middle East
    because of the chaos.
        I am wondering now, today, AAA does this daily, gasoline
    price dealing, and so today the average price around the
    country is $1.99. So I am wondering what is the impact on the
    world economy, and on us here at home, of the almost
    unprecedented drop in oil prices and also the gasoline at the
    pump?
        Secretary Lew. Congressman, there is no simple answer,
    because it is different in different countries. As somebody who
    came of age in the policy world in the 1970s and 1980s, the
    notion that low oil prices and low gasoline prices would be bad
    for the U.S. economy is something that I find hard to embrace.
        There is no question but that it is very hard right now
    with the United States as a producer in many parts of the
    country--in the pats of our economy that are focused on oil
    production, it is very hard.
        Overall, for the U.S. economy, lower oil prices actually
    are like a tax cut. It lowers the cost of individuals and
    businesses to do their business.
        Around the world there are variable conditions, depending
    on whether you are a producer or a consumer. Generally there
    are more consumers than producers, so I think low oil prices
    actually are something of a boost to global demand.
        At the same time, it has caused a lot of uncertainty, and
    in terms of the economies of countries that are oil producers
    it has created volatility in the markets. It is not without its
    costs. There will be firms that fail. That has consequences.
        I think that the challenge we have is to use this moment of
    low energy prices to redouble our commitment and develop
    alternatives so that we continue over time to see a sustained
    world of moderated energy costs even when things change and
    there are external factors that are driving prices up.
        I think that the reason for the price being down now has
    been viewed in different ways by different analysts. Some view
    it as being a shortage of demand, a weak global economy. Some
    view it as being an excess of supply; there are more producers
    in the world and there is more energy--more oil on the market.
        The reality is it is a little bit of both. And we need a
    stronger global economy. And when the global economy is
    stronger, we are going to need more energy.
        So I think we have to look beyond the moment to the future,
    which is why all of the energy work that we do with the all-of-
    the-above strategy remains very important.
        Mr. Cleaver. I am not sure whether or not this Congress
    will do a major infrastructure program during my lifetime.
    Tragic, from my vantage point.
        But when the price of oil drops and then the drop in the
    price at the pump, it impacts the revenues that we have
    historically used for highway transportation bills. At a time
    when our infrastructures is hemorrhaging all over the country,
    the money that is being made available both on the State tax as
    well as the Federal tax on oil is so low. That is the one
    negative that I--
        Secretary Lew. Yes. No, obviously it has reduced the
    revenues into the Highway Trust Fund.
        I firmly believe we should find other ways of expanding the
    investment we make in infrastructure. We proposed using tax
    reform--business tax reform--as a way to bring one-time money
    in for the next several years to get the kind of increase and
    infrastructure investment that we need for our economy. I wish
    that was something we could make progress on even this year.
        Mr. Garrett [presiding]. The gentleman's time has expired.
        Mr. Messer is recognized for 5 minutes.
        Mr. Messer. Thank you, Mr. Chairman.
        And thank you, Secretary Lew. I want to start with
    something I think ought not be that controversial, and it is
    around the extraordinary measures that are taken to try to
    lengthen the amount of time before we breach the debt.
        As you know, there was $350 billion I believe you guys were
    able to shift around in your Department from varying accounts.
    That is incredible power, shifting billions from retirement
    accounts, government workers' pensions, and the like.
        But it is remarkable how little transparency is required in
    those extraordinary measures. And so we offered an amendment
    that passed unanimously actually on the Floor, but I just would
    like your opinion of it, that would just require the Department
    of the Treasury to articulate publicly what extraordinary
    measures you intend to use, what, if any, costs there would be
    to those measures, and how long to put an estimate out before
    it would extend our effort before we breached it--
        Secretary Lew. Congressman, I am not familiar with the
    amendment. I am happy to look at it.
        We do have, both in my time and previously, always
    communicated with Congress and informed Congress as we have
    used extraordinary measures. So there has been transparency. I
    don't think--
        Mr. Messer. After the fact, you have reported transparency,
    but no one in the public knows what accounts you are moving
    around.
        Secretary Lew. At the time. It is contemporaneous,
    actually.
        Mr. Messer. And you haven't given us a date certain of when
    that extension would be or some--
        Secretary Lew. You don't always know precisely because it
    depends on the day-to-day cash flow. That is why operating the
    government--something as large as the government--
        Mr. Messer. Okay, so at a minimum--again, not trying to be
    controversial here--it is not required by law that you do it?
        Secretary Lew. I would have to check. We do it. Whether it
    is required or not, I would have to check.
        Mr. Messer. Okay. We will pursue that with your staff--
        Secretary Lew. And I am not trying to be argumentative
    either. Obviously, it is not a good thing.
        I don't like having to deploy extraordinary measures. It
    creates anxiety in the U.S. and global economy for no good
    purpose. And we have so many risks out there that we don't
    control, not having anxiety about the Federal Government being
    able to pay its bills is something we do control.
        Mr. Messer. Sure. Of course, I don't think any of us like
    the extraordinary measures. It just seems to me if we are going
    to do them, the public ought to know what we are doing, when we
    are doing it, how much it is going to cost, and how long it is
    going to extend it.
        So we will work with your staff. Hopefully, we can reach
    agreement there. I think it is the sort of commonsense measure
    that we should put forward.
        I would like to return now, to this question of having the
    technical capacity to prioritize debt and how far your staff
    has pursued it. You, I think, have said before the committee--
    and I'm not trying to put words in your mouth, but that you
    have articulated for at least a year that you have the
    technical capacity to--
        Secretary Lew. Yes. I don't remember the exact date. I
    remember that I testified to this committee last year and I
    said it. I don't remember the date.
        Mr. Messer. Okay, so you have said that for a while.
        Secretary Lew. Yes. But I have also said that the technical
    capacity doesn't actually give me the comfort that we know it
    works. It is a complicated process.
        Mr. Messer. --said here it is irresponsible to breach the
    debt, and so you don't think we ever should. I would just
    suggest that it is irresponsible to not explore a plan for what
    you can do under your technical capacity.
        So I guess I am just asking you this: Have you instructed
    your staff? Are you working through it?
        You said you don't know what it looks like in the real
    world. Has your team looked at what it might look like in the
    real world?
        Secretary Lew. Yes, they have looked at the work that has
    been done in these tabletop exercises, but you would have to go
    into a nonpayment regime to actually test it, and I don't think
    any of us want to do that. So there is kind of a tabletop sense
    that you could pay principal and interest through the system
    that pays principal and interest. But we have never tried to
    cut it off and do it that way, and--
        Mr. Messer. Are you suggesting--
        Secretary Lew. --what I have also said is we don't have
    that ability over the whole Federal payment system to do that.
        Mr. Messer. Yes, and just again, are you suggesting that
    the only way to really know is we would have to do it?
        Secretary Lew. Ultimately, you would end up only learning
    if you cross that threshold and if the President made the
    decision to pay those bills and not others.
        Mr. Messer. Have you put together reports of what this
    would look? Is there an analysis that could be shown to
    Congress of what your team--
        Secretary Lew. I don't recall what the nature of the--form
    of the analysis was. I have mostly had conversations.
        Mr. Messer. It seems to me that unless we agree that the
    debt limit should just go away, we are going to continue to
    have one. It is still a possibility that that debt limit be
    breached, and, as you said, if you have the technical capacity
    at Treasury to do something about it, we ought to do more than
    just have a tabletop discussion. We ought to have an analysis
    of what that would look like provided by you so both the
    President and Congress can see what that would look like.
        Secretary Lew. Right. But to be clear, the people who were
    corresponding on those e-mails that you showed don't have the
    ability to make the decision. Only the President can make that
    decision.
        Mr. Messer. No, of course. But it sounds like now we don't
    have the information to make a decision.
        Secretary Lew. We didn't in 2011, that is for sure. If you
    ask me now if there is the technical capacity, I would say yes,
    there is the technical capacity through a tabletop exercise. It
    might work; it might not work.
        Mr. Messer. Let me ask you a different way. Are you in the
    habit of making big decisions at Treasury on tabletop analysis?
        Secretary Lew. Most decisions we make are not the kinds of
    avoidable decisions to create a crisis that this one would be.
    This one would be a self-inflicted wound. There is no reason to
    ever test it.
        Mr. Messer. Thank you. I yield back Mr. Chairman.
        Mr. Huizenga [presiding]. The gentleman yields back.
        The Chair recognizes the gentleman from Massachusetts, Mr.
    Capuano, for 5 minutes.
        Mr. Capuano. Thank you, Mr. Chairman.
        And thank you, Mr. Secretary. Mr. Secretary, I had no
    intention of coming over this morning. I know you are a big
    boy, and you can take care of yourself.
        Unfortunately, I made a huge mistake. I actually turned the
    TV on.
        I was watching the hearing. And honestly, I was a little
    bit embarrassed, and a little bit angry, and I thought I would
    come over here and just do two things.
        Number one is I know that one of the first things I heard
    was a big concern about the deficit and the debt, and it is a
    legitimate concern. But apparently you are personally
    responsible for all of it, and I just--first of all, I am
    pretty impressed by that power and that incredible presence.
        But nobody mentioned anything about the Bush tax cuts that
    were totally unnecessary; nobody mentioned two wars that were--
    one of which was totally unnecessary, and all the money we
    spent in Iraq without paying for it. No one mentioned those
    items. No one mentioned the recession. No one mentioned the
    vote that this House--two votes this House took late last year
    that increased the deficit by almost $2 trillion, one of which
    votes on the tax extenders 100 percent of my colleagues on the
    other side of the aisle voted for that. One hundred percent of
    them. Sixty-four percent of them on the other side of the aisle
    voted for the omnibus.
        No people are saying, ``I share the blame of this terrible,
    terrible thing.''
        So that kind of--I don't mind--I don't like the deficit; I
    don't like debt like anybody else. At the same time, I think
    those of us who participated in that should stand up and own
    what we should own, as opposed to trying to put all of the
    blame on one individual. That is number one.
        Number two, to be perfectly honest, I have had differences
    with you and we have discussed them. I still have some
    differences and that is fine. But those are reasonable,
    thoughtful differences. I hope that you see them the same way.
    We can disagree and still be respectful. I still like and
    respect your professionalism.
        And honestly, my questions have been answered, and I just
    wanted to take the last 3 minutes of my time to offer you an
    opportunity to do one of two things. Either you can address any
    of the items that you were not given the opportunity to address
    by anybody on this board, or you can take 3 minutes and take a
    deep breath, put your feet up, take a relax, and--I am not
    trying to get you out of the zone, but at the same time no one
    else is giving you the opportunity to answer questions, and I
    thought if you want to take the opportunity, fine. If you
    don't, I am perfectly fine to sit here and read my Blackberry
    for the next 2\1/2\ minutes.
        Secretary Lew. Thank you, Congressman.
        Look, I think if you look at the fiscal path that we have
    been on as a country for the last 2 decades, I have spent as
    much of my time as anyone else trying to reach a responsible
    fiscal policy. In the 1990s, when I was Director of OMB, we had
    a surplus because we worked on a bipartisan basis to reach a
    balanced budget agreement and then save the surplus and not
    spend it.
        You have described what happened in the years after my
    tenure and it created a big, big problem. We spent that surplus
    and then we had a recession that put us into a deficit, and
    then we had to spend to get out of the recession.
        And we are now in a place where we are doing a lot better.
    The economy is growing.
        But we are not at a place where I would say kind of
    grinding the economy down by trying to reach a balance
    prematurely would be a good thing to do. I think that the
    conversation we have had about infrastructure in some of the
    back-and-forth this morning illustrates that there are pressing
    needs in this country to get our economy and the people of this
    country where they need to be.
        So I would hope that we could have the kind of bipartisan
    discussion about tax and spending policies that over the next
    20, 30 years gets us where we need to be. But over 10 years, we
    have gone from skyrocketing deficits and debt that was crossing
    through 100 percent of GDP to a stable situation where we have
    reduced the deficit from 10 to 2.5 percent of GDP and we have
    stabilized the debt.
        For somebody whose last testimony in the Clinton
    Administration was projecting paying off the national debt, I
    wish that a lot of the things that happened afterwards that
    squandered the deficit hadn't happened. But we don't get to go
    back and change that.
        And it would be a terrible thing for this country if we
    accepted the myth that somehow these last few years have been
    anything but an improvement--a dramatic improvement--in our
    fiscal position.
        Mr. Capuano. --the last 45 seconds--
        Secretary Lew. I could fill 40 seconds, but I think I will
    stop.
        Mr. Capuano. Mr. Chairman, I am not yielding back just yet.
    I am contemplating what I am going to do with my last 26
    seconds.
        And now we are done. Thank you--
        Chairman Hensarling. The time of the gentlemen has expired.
        The Chair now recognizes the gentlemen from Arizona, Mr.
    Schweikert.
        Mr. Schweikert. Thank you, Mr. Chairman.
        And to my friend from Massachusetts, I was waiting for the
    offer of manis and pedis, with the excess time, but you know,
    hey.
        Secretary Lew, I would like to actually go in a slightly
    different direction. I know rhetorically, our side focuses on
    what I believe is the crushing debt that is coming, and the
    other side on, ``Hey, look at how much better our world is.''
    But could we spend a couple of minutes just sort of looking at
    the headwinds that come to the next Administration? Some of it
    is demographic.
        I am holding a report right now, ``The Coming Pension
    Crisis,'' talking about government pensions, both State and
    municipal here in the United States and around the world. It is
    saying municipal pensions, the unfunded liabilities is now over
    100 percent of GDP.
        I am looking at an environment right now where GDP now,
    from the Atlanta Fed a couple of days ago, we are back under 2
    percent GDP; 14 years left in the Social Security Trust Fund; 9
    years left in the Medicare Trust Fund; 56 months left in Social
    Security disability.
        There are some really ugly things happening. And you and I
    know much of that we desperately need economic growth to cover
    these sins.
        How much in your team do you actually focus on, here is the
    debt management, here is the reality of what is happening, both
    because of lack of economic growth, demographics, and other
    things? How much actuarial math is happening at the Treasury
    Department saying, ``This is our future?''
        Even our previous conversations about, should we be selling
    long-term bonds, truly long-term bonds to get beyond the
    demographic bubble. What are you modeling?
        Secretary Lew. What am I what?
        Mr. Schweikert. Modeling in your team. How much are you
    looking at this incredible wave of debt that is going to crush
    us?
        Secretary Lew. Congressman, we have known for the last 50
    years that the Baby Boomers would retire roughly now and--
        Mr. Schweikert. Well, Congress seemed to just discover it a
    couple of years ago.
        Secretary Lew. Congress actually dealt with it in 1983 in
    Social Security reforms that have been very effective because
    they reflected the way you work on a bipartisan basis to deal
    with what goes into the trust fund, and what comes out of the
    trust fund. So--
        Mr. Schweikert. But right now Social Security is at a 2.7
    percent GDP that we are not even hitting, and the Social
    Security Trust Fund is gone in 14 years.
        Secretary Lew. So, the thing that I think it is important
    to remember is that the ongoing revenues in Social Security
    still continue to fund the bulk of the benefits--over 65
    percent of the benefits.
        Mr. Schweikert. Nope. Actually, I think under the CBO study
    were 2018 Social Security goes negative, that the tax revenue
    and I think interest revenue will no longer--and we pay
    ourselves, what--
        Secretary Lew. The point I am making isn't that at some
    point the revenue goes negative, but that the revenue keeps
    coming in and will continue to pay for the bulk of Social
    Security's ongoing expenses. And the gap is what is the issue
    for the long-term financing.
        Mr. Schweikert. But that gap--think about that gap. Today,
    the trust fund has what, $2.8 trillion? And we have burned
    through that principal in 14 years.
        At the same time we are paying ourselves 3.1 percent
    interest and the tax revenue. And Social Security is actually
    the easy one to fix compared to Medicare.
        Secretary Lew. Yes.
        Mr. Schweikert. But also, when I look at the public and
    private pension issues out there, I am just wondering, the
    scale of these things, is it just pushed off to the next
    presidency?
        Secretary Lew. Having spent 1983 working to fix Social
    Security, I had hoped that 5, 6 years ago we would have been
    able to have the kind of conversation about that kind of a
    bipartisan approach. It didn't happen.
        I think that we are in better shape because our fiscal
    position is improved. There is still more work to do.
        Mr. Schweikert. No, I need to correct that. And I know that
    is our script here, but that is not true.
        Our modeling just a couple of years ago, we weren't
    expecting this level of anemic GDP growth. Remember the model
    just a couple of years ago? We were going to be at 4, 4.3
    percent. Now today I am being told that this quarter we are at
    1.9 percent.
        Let's collectively have an honest discussion here. This is
    really bad.
        Secretary Lew. There is no question stronger GDP growth,
    stronger economic growth will help us deal with an awful lot of
    challenges, including funding Social Security and private
    pensions. I think that if you look where we were 7 years ago,
    and where we are now, we are in a stronger position to ask that
    question.
        Mr. Schweikert. We may be stronger than 7 years ago, but
    this is still crashing down upon us--
        Secretary Lew. That is where I guess I disagree a little
    bit. I don't think it is crashing down upon us. I think we have
    time to deal it.
        Mr. Schweikert. Okay, so if I tell you 14 years on Social
    Security, 9 years on Medicare, 56 months on Social Security
    disability, and we should just pretend things are fine?
        Secretary Lew. No. I think that these issues need to be
    addressed. I am not disagreeing. But I don't think it is a
    crisis for today. What would have--
        Mr. Schweikert. I need to yield back. I will beg of you,
    send me the information from your team on what you are actually
    doing to deal with this.
        Thank you, Mr. Chairman.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Massachusetts,
    Mr. Lynch.
        Mr. Lynch. Thank you, Mr. Chairman.
        And thank you to the ranking member, as well.
        Welcome, Mr. Secretary. It's good to see you again.
        Mr. Secretary, the chairman and the ranking member some
    time ago created a Task Force on Terrorism Financing here in
    this committee, and together with myself and Mr. Fitzpatrick
    and Mr. Pittenger, we have been working basically in the Middle
    East, North Africa, and my colleagues are leaving for Central
    America in the not-too-distant future.
        And the examples where we have had the greatest success in
    North Africa and the Middle East have been the result of
    coordination with your office, with FinCEN, the Financial
    Crimes Enforcement Network, and then also in several countries
    we have worked with Treasury attaches who are part of the U.S.
    embassies in those countries.
        And it goes from Afghanistan, to Jordan, to Egypt, Tunisia,
    Morocco. All of those countries, the level of cooperation we
    have from them, which has been considerable, has been the
    result of your work and the work of people like Joe Parker. I
    think he may be retired now, but he was very, very instrumental
    in setting up some of these financial intelligence units within
    these countries to push back on money laundering and also
    terrorist financing.
        The problem that we see is that it is spotty. Even in Joe
    Parker's example, he handled--he had a big portfolio. He had a
    big region where he would hop from country to country to help
    us convince the host country to adopt anti-money laundering
    statutes, just basic stuff: know your customer, helping the
    local banks prevent terrorist groups from using the legitimate
    financial system to spread terror.
        And it is ironic today, we have ISIL taking credit for the
    attacks in Brussels, and obviously all our prayers and thoughts
    are with the people of Brussels this afternoon.
        But is there a way to amplify what Treasury is doing, and
    is there a way to--I am not saying you need to have 192
    Treasury attaches in every country around the globe, but
    certainly there are problem areas where we could use some more
    help. And Treasury's people, the Office of Foreign Asset
    Control (OFAC), your technical people, the Office of Technical
    Assistance (OTA), and FinCEN--they have been great on this
    stuff.
        And they can educate not only the foreign central banks but
    also they do a great job in informing our embassies at large,
    in terms of what role they could be playing to shut off the
    financial system to these terrorist groups.
        Secretary Lew. Congressman, I couldn't be more proud of the
    work that our offices, from OFAC to the Treasury attaches to
    our Office of Technical Assistance, do. They really are the
    leaders in the world on this, and what they need more than
    anything else is well-equipped partners around the world.
        Mr. Lynch. Yes.
        Secretary Lew. I think that the financial attaches are our
    eyes and ears around the world. And we could use more of them,
    but what we really need to do is get people in country to
    provide the technical assistance. And that is more of an OTA
    function than it is a Treasury attache function.
        The leading providers of technical assistance around the
    world for--to build these capabilities are ourselves, through
    OTA, the IMF, and FATF. We worked closely with all three--well,
    obviously, we are one of the three. We work closely with the
    other two.
        We met in December in the U.N. and had FATF at the meeting.
    I chaired a meeting at the Security Council, the first time
    finance ministers in the history of the U.N. met in the
    Security Council, and we had a unanimous resolution to
    designate ISIL for the same treatment that Al Qaeda is given,
    which means that even intermediaries are subject to sanction.
        And part of that message was for FATF standards to be put
    in place and for the world to come together to provide
    technical support to build in the kinds of capabilities that
    you describe.
        We have a lot of work to do. Even our most advanced
    partners are not where we are. Their intelligence apparatus is
    not as well-developed. Frankly, they don't have a comfort level
    with some of the surveillance that is making it impossible for
    them to see some of the things that are going on.
        We have information that we provide to countries like
    France and Belgium to help them monitor and track and, after a
    terrible, horrific accident like today, respond. Our people are
    already engaged in that and we will work around the world to
    build these capabilities.
        Mr. Lynch. If OTA would need more resources, we would
    expect to--
        Secretary Lew. We proposed a doubling of OTA over the
    next--
        Mr. Lynch. Okay.
        Secretary Lew. --several years. I think it is critically
    important.
        Mr. Lynch. Okay. Great. Thank--
        Secretary Lew. We get more bang for the buck out of OTA
    than anything else.
        Mr. Lynch. Thank you.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from California, Mr.
    Royce, chairman of the House Foreign Affairs Committee.
        Mr. Royce. Thank you very much, Mr. Chairman.
        Secretary Lew, I just wanted to talk trade.
        When there is a level global playing field, American
    workers and the American economy win. On TPP, I know you share
    the concern, as you have said, that data localization
    provisions are a trade barrier, pure and simple, as you
    explained.
        And as you know, TPP allows companies to transfer data
    across borders and to be protected from server localization
    directives. However, electronic payments and the financial
    services sector are excluded from the data localization part of
    the agreement.
        And you have talked about the possibility of having some
    kind of side agreement to thread the needle, as you explained
    on this issue. Where are we in discussions now with our TPP
    partners? Do you think a side deal is possible this year on
    this?
        Secretary Lew. Congressman, what I have said is that data
    localization in general is a barrier of free trade and we have
    opposed it vigorously in things like electronic payment
    systems, where it is no more than an excuse to put a server
    farm in your country and create jobs or to make it more
    expensive for international competition.
        In the area of financial services, there are two competing
    important goods. One is to prevent the kind of nontariff
    barrier from being put in effect. The other is to make sure
    prudential regulators have access to what they need when they
    need it.
        And the reason this is so hard is that there are legitimate
    concerns prudential regulators have. What I have been doing is
    working with our prudential regulators to try and have them
    work through an understanding where--how going forward we might
    be able to address this.
        Mr. Royce. I appreciate the stated priority--
        Secretary Lew. But in terms of TPP, I have tried to be very
    careful that there is very limited room to change TPP. So I
    don't want to raise that--
        Mr. Royce. But in terms of a side agreement, which you did
    raise that issue--
        Secretary Lew. Yes.
        Mr. Royce. --we need to see demonstrable progress on this
    issue. I stand ready to help on this, and I know many of my
    colleagues do as well. So I think it is a prerequisite to get
    this issue solved in a creditable way.
        And let me go to my last question here.
        In July, you testified to the Senate that Iranian banks
    will not be able to clear U.S. dollars through New York, or
    hold correspondent account relationships with U.S. financial
    institutions, or enter into financing agreements with U.S.
    banks. Iran, in other words, will continue to be denied access
    to the world's largest financial and commercial market.
        And I have received reports from the Administration that it
    is now considering providing Iran with access to the U.S.
    financial systems. So are these reports which contradict your
    previous testimony correct, and is the Administration planning
    to ease restrictions on Iran's access to U.S. banks?
        Specifically, are you considering permitting Iranian banks
    to clear transactions in dollars with U.S. banks or foreign
    financial institutions, including offshore clearinghouses? The
    reason I raise it is because Iran remains the foremost state
    sponsor of terrorism in U.S. judgment, a country of particular
    concern for its abuses of religious freedom, of--as a primary
    money laundering concern, as we say about Iran.
        This is clearly an explicate recognition that any financial
    transaction with Iran in U.S. dollars risks supporting the
    regime's illicit activities. And the international community
    agrees. Iran remains on the black list of the Financial Action
    Task Force on money laundering. So that is why I raise this
    issue.
        Secretary Lew. Congressman, we have reached an agreement
    with Iran that has caused Iran to roll back its nuclear
    program, which has done an enormous amount to increase the
    security of the United States. Part of the agreement was for
    Iran to have nuclear sanctions lifted.
        We made clear that we would lift the nuclear sanctions but
    keep in place sanctions on terrorism, sanctions on human rights
    violations, sanctions on regional destabilization. We will
    continue to do that.
        Mr. Royce. Yes, because our argument was that they need to
    stop building ballistic missiles. But they just tested four of
    them.
        Secretary Lew. We have continued to make clear--
        Mr. Royce. Yes.
        Secretary Lew. --that we do not consider missiles testing
    permitted.
        Mr. Royce. So we are not going to give them access to--
        Secretary Lew. So the--
        Mr. Royce. --the U.S. dollar or U.S. financial systems?
        Secretary Lew. We are continuing to look at how we comply
    with the Joint Comprehensive Plan of Action to make sure that
    Iran gets relief under the nuclear portions while we keep
    pressure on Iran on these other issues.
        Mr. Royce. Yes, but remember the basic commitment that was
    given to us in Congress: The Iranian banks will not be able to
    clear U.S. dollars through New York.
        That is the commitment, and they are still in violation of
    ballistic missiles, on support for terrorism, and abusing its
    people. Thank you.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentlemen from California, Mr.
    Sherman.
        Mr. Sherman. Thank you, Mr. Secretary.
        Often when you come here, I ask about contentious issues,
    ask you to break up the big banks. And I have said something
    about TPP that wasn't entirely favorable.
        This hearing has been contentious and so I am going to
    devote my 5 minutes to things that--it won't be quite Mr.
    Capuano, where we just give you 30 seconds of silence to rest,
    but these will be the least contentious issues you deal with
    today because they basically involve working with me on a few
    issues that will never be on the front page of a newspaper.
        We have tax treaties with hundreds of countries around the
    world, or at least--hundreds is not the right--scores of
    countries around the world. We devote a substantial amount of
    money to trying to achieve our international development goals.
    And so we can always provide foreign aid to Armenia, and that
    costs us money. But we could also achieve those goals by having
    a tax treaty.
        Now, we are currently negotiating a treaty dealing with tax
    enforcement, but the gold standard of tax treaties is your
    basic tax treaty on double taxation. The Armenian embassy tells
    me that they are willing to start with our basic framework and
    negotiate a tax treaty. They have negotiated a tax treaty with
    Canada, so Ottawa was able to do it.
        Do you see your Department working toward a tax treaty with
    Armenia?
        Secretary Lew. Congressman, the primary purpose for a
    bilateral tax treaty is to avoid double taxation. We are not
    aware of a double taxation problem in Armenia.
        Mr. Sherman. I would retreat just to--we have a chicken and
    egg circumstance. You don't get the business investment because
    you don't have the tax treaty. Then you don't need the tax
    treaty because you don't have the business investment.
        Given that this Congress has provided well over a billion
    dollars of aid to Armenia, it would seem that having one member
    of your staff work on this for a while to achieve the same
    objectives--
        Secretary Lew. I appreciate that. And obviously, to
    negotiate a tax treaty is quite labor intensive; to look at the
    things is less so. We have been looking at comments that come
    in. I would be happy to follow up.
        Mr. Sherman. Okay.
        The next issue relates to the Porter Ranch gas leak, the
    biggest gas leak in history: 5,000 of my constituents have left
    their homes.
        And this is not something I told your staff I would be
    asking you about, but Section 139--what we have is people
    living in hotels at the expense of the gas company and now they
    are told, ``You may be taxed on the money being paid for that
    hotel. But you can't live in your home because of the gas
    leak.''
        Now, the good news is Congress passed Section 139(c)(3),
    which says that you can avoid this travesty because gross
    income doesn't include payments for living off-site if it
    results from any other event which is determined by the
    Secretary to be catastrophic in nature. And I wonder if you can
    work with me toward making a fair determination that the
    largest gas leak in history, which displaced 5,000 families for
    months, meets this standard.
        Secretary Lew. Congressman, thank you for bringing this to
    our attention. I wasn't aware of it until then.
        Our staff has been talking to your staff and has reached
    out to the relevant parties. They haven't completed the
    analysis yet, but we understand the timeliness of this given
    that it is tax season, so we will continue to work on it.
        Mr. Sherman. I look forward to working with you, but I
    would hope that you would direct your staff to lean in the
    direction of fairness. I am a former tax lawyer myself. I know
    that a very strong argument can be made on this.
        And we have a similar issue, and that--not one that is
    quite as pressing, but we have a drought in southern
    California. This is the most environmental Administration in
    history. And people are being told that if they accept a
    payment--not even a payment--if the local water utility pays
    for the cost or part of the cost of ripping out their lawn and
    replacing it with cactus or replacing it with rocks or
    something else that uses less water, that they could be having
    to pay an income tax on what they are doing to help the
    community.
        And I hope that you could direct your staff, again, not to
    change the law, but to lean in an environmental direction.
        Secretary Lew. That I was not aware of, but we will follow
    up on it.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from New Hampshire,
    Mr. Guinta.
        Mr. Guinta. Thank you, Mr. Chairman.
        And thank you, Secretary Lew, for being here.
        Very quickly, I want to follow up on what the gentleman
    from California was talking about relative to TPP. You said
    last week in a subcommittee--F.S. Appropriations Subcommittee--
    quote--``Because we have a principal position that data
    localization in general is bad, we are working to see if there
    is a way to thread the needle.''
        I understand I can't necessarily reopen--
        Secretary Lew. The other half of that was there are real
    prudential concerns and we have to balance those.
        Mr. Guinta. So, can you very quickly tell me what a side
    agreement may look like and would this be--
        Secretary Lew. I can't tell you right now. If I knew where
    this was headed, I would be happy to say so.
        I think that the challenge we have is that the prudential
    regulators, our prudential regulators, feel that they need to
    be certain that they can get access to what they need when they
    need it. And unfortunately, during the financial crisis there
    was an incident where with a major institution they were denied
    access in a timely way and it interfered with both crisis
    management and resolution.
        So the question is, how to make sure they get what they
    need while--
        Mr. Guinta. I understand that. I appreciate that. Relative
    to TTIP, obviously, U.S. financial institutions as well as
    European allies have asked for this particular area. I
    understand you are including or are working on TTIP, is that
    correct?
        Secretary Lew. We continue to work on TTIP and we think it
    is important that financial markets be opened up in the course
    of the TTIP negotiation.
        Mr. Guinta. Okay. Moving on to a different subject, in your
    role as Chair of FSOC, I am sure that you know market
    participants spent a lot of significant time in proprietary
    investment strategies and that differences exist from the 2012
    report of the Council of Inspectors General on Financial
    Oversight.
        Can you tell me how FSOC is addressing the differences that
    exist on a FSOC-wide basis to ensure Federal agency members are
    properly safeguarding information?
        Secretary Lew. I think each of the regulators has an
    obligation to protect the information that is within their
    area. One of the challenges that we have is that to do the
    systemic review that FSOC is charged with requires sharing
    information in an appropriate way.
        What we do is we limit the--and anonymize data and we make
    it so that each of the parties can be certain that they are
    complying with the responsibility that they have to protect--
        Mr. Guinta. To that end, would you provide our committee
    with a brief policy and procedures, outline that, what FSOC
    regulators are doing?
        Secretary Lew. I am happy to follow up afterwards and find
    out exactly what you are looking for and see if we can be
    responsive.
        Mr. Guinta. But can you commit to something in writing to
    show us what the policies and procedures are for regulators?
        Secretary Lew. I am not sure that I am the right one to
    address each of the regulators. The FSOC--
        Mr. Guinta. As Chair of FSOC--
        Secretary Lew. Well, let me follow up with you.
        Mr. Guinta. Okay.
        Secretary Lew. And obviously, each regulator speaks to its
    own statutory requirement.
        Mr. Guinta. Sure. I appreciate your willingness to follow
    up.
        That brings up--if we could put up a slide--another concern
    that I want to echo that some of my colleagues have brought up
    already, and that is document production.
        I have a slide here that shows the Financial Services
    Committee requested information from Treasury on CFPB's plan to
    renovate their leased office building. Obviously, 4 different
    letters, 288 days have passed since we have heard from this
    matter, going back to June 9th of 2015.
        Second example, Thursday, September 17th, 2015, about 6
    months ago almost to the day, Under Secretary Nathan Sheets
    came to testify during the Monetary Policy and Trade
    Subcommittee hearing. I personally submitted questions for the
    record.
        That was 6 months ago. I still have not received a
    response.
        I have those items here. Can I ask when I can expect to get
    a response and why the delay?
        Secretary Lew. Congressman, I am happy to take that back.
    There was a June 9th letter, I understand, requesting
    information. An August 25th response where Treasury informed
    the committee that a report by the Inspector General for the
    Federal Reserve Board found the work authorization related to
    the renovation was finalized after a CFPB Director was
    appointed, at which point--
        Mr. Guinta. I'm not sure that they actually addressed the
    specific issues in the four letters. That being said, the
    September 17th request that I have issued 6 months ago still
    has not--can you follow up on that--
        Secretary Lew. I am happy to follow up on that.
        Mr. Guinta. And finally, in my last few seconds I want to
    move to economy. You are aware that the President's budget
    includes a deficit of almost $800 billion at the 10-year end of
    the budget window?
        Secretary Lew. I am familiar with the President's budget,
    yes.
        Mr. Guinta. Okay. And are you aware that the gross Federal
    debt under the President's budget increases almost $8 trillion,
    from $19.4 trillion to $27.4 trillion in 2026?
        Secretary Lew. Yes. But I am also aware that GDP grows, and
    as a percentage of GDP, we have stabilized the deficit and
    the--
        Mr. Guinta. All right. Well, let's get the GDP. My
    understanding is the President's budget projects annual real
    GDP growth never exceeds 2.6 percent. Is that correct?
        Secretary Lew. I don't remember the exact decimal number,
    but it is the right range.
        Mr. Guinta. Thank you.
        I have run out of time, so I yield back.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Illinois, Mr.
    Foster.
        Mr. Foster. Thank you, Mr. Chairman, and Mr. Secretary.
        I would like to return, if I may, to the actual subject of
    this hearing. The capital outflows in China are now in excess
    of a trillion dollars a year. The Institute of International
    Finance estimated outflows in January alone of about $113
    billion.
        Now, when you have a trillion dollars in capital flight in
    a $10 trillion economy, it seems to me that this effect alone
    is more than enough explanation for the slowdown in economic
    growth in China. Would you agree that it is a major
    contributor?
        Secretary Lew. I am not sure how much to attribute the
    capital flight to the slower growth or the slower growth to the
    capital flight. I think that there has been capital moving out
    of China.
        Some of it has been to repay foreign debt; some of it is
    money leaving the country. It is a little bit hard to know
    exactly where the line is and there are stronger views than
    there are data on the subject in a lot of the analysis that I
    have read.
        Look, I think China has a serious economic challenge ahead
    of it. It has to go through this enormous transition from an
    industrial economy, an export-driven economy, to a consumer-
    driven, more market-oriented economy.
        The faster they establish confidence that that transition
    is underway and that they will stick to it, I think the faster
    they will see progress on stemming some of the capital flight.
        Mr. Foster. Okay. The other structural problem I think they
    have to have is that basically the pileup of wealth at the very
    top, which is a universal problem, actually, in developed
    economies. And in large part, I believe this $1 trillion of
    capital flight consists of wealthy Chinese pulling their money
    out of China, often to spend that money in economically
    unproductive assets like empty apartments in Manhattan or
    Vancouver or you name it.
        And so it seems like when the wealthy in China break their
    social compact to reinvest productively in their own country
    and instead invest in less productive assets offshore that it
    lowers not only Chinese economic growth but economic growth
    throughout the world when productive assets, making new
    factories, et cetera, are replaced by investments of the rich.
        And that is more--and actually, if we look in the mirror,
    this is sort of a universal behavior of the wealthy elites
    throughout the world, that they tend to invest conservatively
    and that means low return on investment. And I was wondering if
    you--don't you agree that this behavior--the universal behavior
    of wealthy people to: (A) move their money offshore; and (B)
    invest in less productive assets, is a major contributor to the
    economic slowdown in the world?
        Secretary Lew. Congressman, there is no question but that
    both wealthy individuals and firms have a lot of cash and there
    could be a lot more investment. And I think the question is why
    is there not more investment being done?
        I think a lot of it gets to a sense of concern that global
    growth is weak and demand is weak and that--
        Mr. Foster. But the demand is weak because of the--
        Secretary Lew. It is circular--
        Mr. Foster. --pileup of the wealth distribution.
        Secretary Lew. Yes. And we--
        Mr. Foster. There is no shortage of consumers who would buy
    stuff in China if they had the money to do so.
        Secretary Lew. Yes. Look, I think in China there is no
    question but that the right policy is to give the consumer in
    China more resources. One of the things the consumer in China
    is going to need is confidence that there is a safety net. They
    don't have the kind of social safety net we have.
        Savings in China are extraordinarily high because, through
    a combination of the one-child rule and no safety net, people
    feel the only way they can take care of their future is by
    savings. Now unfortunately, the people who do more risky
    investment are some of those small savers. So when China has a
    volatile stock market, oftentimes it is small investors who are
    highly leveraged, which is a very dangerous thing.
        They have a lot of things that they need to fix.
        I think that the question of the kind of course direction
    of the economy comes first. They have to make the transition to
    a more consumer-driven, more market-oriented economy.
        That means the consumer is going to be central. They need
    to build a better safety net so the consumer feels free to
    spend.
        And they do have wealth and income distribution issues and
    corruption issues that they need to attend to. I would say that
    we have some income distribution issues that we need to attend
    to as well.
        Mr. Foster. That is right. And when you say strengthen the
    safety net, you are talking about effectively taxing the
    wealthy elites in China to provide--
        Secretary Lew. Whether it is taxing the elites or it is--
        Mr. Foster. Effectively--
        Secretary Lew. --corporations, entities pay dividends to
    support them. There is a variety of ways. China's tax system is
    a complicated one. I am not as expert in the details--
        Mr. Foster. Not like ours.
        Secretary Lew. --of it as ours.
        Mr. Foster. Right. Okay. I guess that was the main thrust
    of my question. I think this is a major effect that is
    underappreciated is that the crosstalk between wealth
    distribution and offshore capital blows I think has become a
    major--a macroeconomic factor that has to be factored in.
        Thank you. My time is up.
        Secretary Lew. Thank you.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from New Mexico, Mr.
    Pearce.
        Mr. Pearce. How you doing, Mr. Secretary? Hi. Good to see
    you--
        Secretary Lew. We are going all back and forth.
        Mr. Pearce. Yes, okay.
        So the President is in Cuba this week, the first President
    in 90 years to visit. Have you been involved in the discussions
    about normalizing relations and trade with Cuba?
        Secretary Lew. Yes.
        Mr. Pearce. So the President stated in December that he
    would like to go to Cuba when there is progress in the liberty
    and freedom and the possibility of ordinary Cubans. What
    progress did we make since December that now has changed the
    President so he should go?
        Secretary Lew. Congressman, the purpose of the
    President's--
        Mr. Pearce. No, I didn't ask the purpose. He made the
    comment, sir, and you are in the discussions, and I just would
    like to know what progress Cuba has made since December in
    freedom, liberty, and the possibilities for ordinary Cubans?
        Secretary Lew. The purpose of the changes that we have made
    is to open--
        Mr. Pearce. Okay. That is not my question. I apologize. I
    don't mean--
        Secretary Lew. Well, I do--
        Mr. Pearce. I have 5 minutes. I--
        Secretary Lew. I do have an answer to your question if I
    can get beyond the first few words. I am happy to answer at
    your pleasure.
        Mr. Pearce. I am waiting. I am like Mr. Capuano. I am
    waiting, breathlessly quiet.
        Secretary Lew. One of the things that we are going to be
    doing is opening communication lines--telecommunications,
    bringing computers in--people-to-people contact. That is going
    to contribute to an environment that is very different than
    what we have seen over the last 50 years that hasn't worked.
        I am not suggesting that Cuba is changing instantaneously.
    I don't think the President is suggesting--
        Mr. Pearce. The President suggested that they needed to
    change and they didn't change, sir. I don't think so.
        If we pursue this normalization, do you think that the
    treaty obligations between the two should take place, like the
    extradition of fugitives, 70 fugitives up and down there?
        One guy named Charlie Hill killed a New Mexico cop back in
    1971. He's been living a life of freedom down there. So would
    you hope that we get to see Mr. Hill back in New Mexico and
    just see if he is guilty or not?
        Secretary Lew. Congressman, I am going to have to defer to
    my colleagues who have expertise on things like extradition--
        Mr. Pearce. You don't have a personal opinion about complex
    things like extradition and--
        Secretary Lew. I just don't have enough facts. I--
        Mr. Pearce. --enforcement of rule of law? You don't have
    opinions about--
        Secretary Lew. No, I do have opinions on the rule of law on
    democracy, and that is one of the--we have been seeing that for
    the last 50 years the policy of embargo and cutting Cuba off
    has done nothing to improve it. And I am certainly hopeful that
    the policy change we have put in place will lead to the kinds
    of changes that I think we all want to see in Cuba.
        Mr. Pearce. Yes. Judging from President Castro's comments
    today, it doesn't look like it is moving that way very fast. He
    says, ``You can't ask me this many questions.'' It is kind of a
    laugh, really.
        So do you know Mr. David Cohen?
        Secretary Lew. Yes, I do.
        Mr. Pearce. He was here in November of 2014. We had a
    fairly energetic discussion about the funding of ISIS. And you
    alluded to that earlier in the conversation today.
        You said it is hard to get in there to blow up the--you
    were referring to blowing up the oil. What does that mean, it
    is hard to get in there?
        Secretary Lew. We have gotten pretty good at it, actually.
    We have targeted points of real vulnerability, particularly the
    tanker trucks that move oil in the country into the--
        Mr. Pearce. What I just read is that--so when he was here
    he said they are getting a million dollars a day.
        Secretary Lew. Yes. I think that--
        Mr. Pearce. And so now they--that is $365 million a year.
    Now then, in December of 2015 it is 500, and that report talks
    about trucks getting in the line to get oil filled up and they
    wait months. Months in the line to get one truck of oil, and
    our airplanes are flying overhead, meanwhile they are sitting
    down here in a line that is five kilometers long.
        And so what exactly does it mean that we are being
    successful at interrupting? Because it doesn't--if their
    revenue is going up--now, keep in mind the price of oil in 2014
    was at 70 at the time he testified. So 70 down to 30, and they
    are doubling their revenues. It doesn't sound like that we are
    being very effective, honestly, sir, with all due respect.
        Secretary Lew. Congressman, as I said earlier, it is very
    difficult work and we have to keep at it. They are going to
    keep changing with they do and we have to keep up with their
    changes. By blowing up--
        Mr. Pearce. I have 25 seconds, sir, and if I could
    comment--very difficult work. It is not difficult to wait. You
    have--
        Secretary Lew. This is an important issue. I would think
    you would want to know the answer--
        Mr. Pearce. You have UAVs sitting up there, they are
    watching every tank, and when a tanker truck gets full you
    simply pop it with some incendiary--
        Secretary Lew. No, that is not what we do, Congressman. We
    actually have been very successful identifying where they keep
    their tanker trucks, getting at them when they are not full of
    oil, when they are not with people--
        Mr. Pearce. If they are waiting in lines five kilometers
    long, it is not hard to know where they are keeping them--
        Secretary Lew. The reality is this is going to be an
    ongoing challenge. It is not something that will be solved once
    and for all. But the fact that they have had to cut salaries to
    fighters because they are starved of cash means that we are
    making progress. We have to keep at it.
        Mr. Pearce. They made $2 billion last year, sir. They are
    not starved for cash. According to the CNN--
        Chairman Hensarling. The time of the gentleman has expired.
        Secretary Lew. In a classified setting, I would be happy to
    go through some of--
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentlelady from Ohio, Mrs.
    Beatty.
        Mrs. Beatty. Thank you, Mr. Chairman.
        Thank you, Ranking Member Waters.
        And thank you, Mr. Secretary.
        Let me go back to the subject of international monetary
    financial policies and start by thanking you and those in your
    OTA office for working with my staff and office on Somalian
    remittance. We have the second-largest Somalian population in
    the country and, as you know, with the weak central banking,
    they have had great difficulties.
        So you have been responsive; you have sent a team of folks
    over to work on something difficult.
        Let me spin off on this, because sitting here through this
    entire hearing has been disappointing to me. And I want to
    apologize just in part to you, but more to the people who are
    watching, because they lump us all together and talk about
    ``The Congress'' and what we are doing.
        I read an article in the American Banker, and I was hoping
    that we would have learned from this, because last week we had
    another one of your colleagues here, Directory Cordray with the
    CFPB. And this article talks about how ineffective it is when
    you are rude and disrespectful and you don't allow people to
    answer the questions--people who are well-versed and seasoned.
        Mr. Chairman, I would like to enter this into the record,
    if possible.
        Chairman Hensarling. All such exhibits are allowed under
    general leave and without objection.
        Mrs. Beatty. Thank you.
        I also want to thank you for your answers to the questions
    about the subpoenas. Now, while I am not a lawyer, practical
    law talks about, in article after article, when an individual
    or people like your staff receives subpoenas that it is very
    customary for them to contact the parties who have subpoenaed
    them and try to respectfully and informally work out the
    differences. So I also applaud you for that.
        I think it is also important for the American audience who
    watch us to know who we are talking to beyond our titles. And
    so when I think about your rich history, I think about you not
    only being the 76th Secretary of the Treasury; a White House
    Chief of Staff; you mentioned in reference being an OMB
    Director and tons of other jobs; you have worked for a
    Congressperson; you have worked for a Speaker of the House, Tip
    O'Neill; and most impressive, you married your childhood
    sweetheart and you are still married, the all-American dream
    with two children.
        But let's talk about you in your role as Harvard graduate,
    and Georgetown Law School graduate. Your close friends say you
    are exceedingly meticulous. Some would say that you are a
    brilliant scholar.
        I think it is important when we hear the question after
    question, that clearly you understand the question, and from
    where I sit you have clearly not only answered the question but
    gone far beyond the call of duty, as one in your position who
    is responsive for the international monetary financial policies
    of the trillions and trillions of dollars. You have shared with
    us the great growth in the economy; you have shared with us how
    we have reduced unemployment.
        And so I say to you, as this Congresswoman, proud to sit
    here, that I say to you the two most important words that I was
    taught and the two most powerful words that one can say, and
    that is ``thank you.'' My mother taught me that a long time
    ago. Because she said sometimes it is better to listen than to
    talk louder than the person.
        Because you were asked the question, ``What would happen if
    a person in a regular job were sitting there and answered?''
        Let's change that around, Mr. Secretary, and ask, ``What if
    a regular person talked to us in that loud voice, pointing
    their finger and pencil and not letting you answer the
    question?''
        You don't have to answer that, Mr. Secretary. We know what
    that answer would be.
        And lastly, my father, who knew me best, said, ``Remember
    to always say I'm sorry.''
        I'm sorry for what you have had to go through.
        I yield back
        Chairman Hensarling. The time of the gentlelady has
    expired.
        The Chair now recognizes the gentleman from North Carolina,
    Mr. Pittenger.
        Mr. Pittenger. Thank you, Mr. Chairman.
        Mr. Lew, good afternoon to you.
        Mr. Lew, on your last visit when you were here and I had
    occasion to talk with you we discussed at some length
    information-sharing between Homeland Security's Trade-based--
    Trade Transparency Units, and also FinCEN's role and their
    sharing together and how important that was. And to the extent
    that they are sharing, in terms of related to trade-based money
    laundering, that we would be successful.
        When I asked this question to you about sharing between
    Homeland Security and FinCEN, your response to me at the time
    was, ``I started out with a strong bias that we ought to work
    as one government and that we need to cooperate and
    collaborate. I started out sympathetic to this initiative.''
        So that was your statement then, and then in response to my
    questions to you, we got a response back from your staff for
    the record that stated the following: ``Treasury and DHS are in
    regular contact regarding ways our two agencies can better
    inform our respective efforts to combat terrorist financing. We
    are confident that we can achieve this important goal through
    our ongoing strategic relationship while at the same time
    maintaining our respective database autonomy.''
        Mr. Lew, there seems to be a conflict in terms of
    perspective and philosophy of how they would work together in
    information-sharing that is really so vital. If Homeland
    Security has certain data that we are not accessing at FinCEN,
    that certainly restricts your ability to be able to intercept
    the information we need.
        Could you kindly respond to this different viewpoint
    between your staff and yourself?
        Secretary Lew. I am not sure it is a different viewpoint.
    Our activities in tracking down terrorist financing depend on
    the constant flow of information from intelligence agencies and
    other partner agencies like DHS. And likewise, we provide
    enormous amounts of information on an appropriate basis back to
    them. The question of whether or not--
        Mr. Pittenger. Let me ask you, are you willing to enter
    into an agreement with DHS in terms of information-sharing?
        Secretary Lew. I am not aware of a problem right now in
    terms of information-sharing. What I do know is that full
    access to all the database would put a lot of information that
    is not necessary into a place that it probably shouldn't be.
    And I think the question is, how do we make sure the right
    information is fully shared, and we each protect systems where
    personal privacy is at issue for the other information as well.
        I am happy to follow up. After you and I talked at the
    meeting, we talked in North Carolina, as well, about it. I have
    followed up with my staff and have urged them to keep working
    on this.
        It has not been brought to my attention that there is a
    problem in terms of the flow of information, but if there is
    something specific that you are concerned about, I agree--
        Mr. Pittenger. I think the word that stuck to me was that
    there should be a sense of autonomy coming from your staff.
    That is directly opposite, in terms of what I heard, and I just
    want to make sure that there is an ongoing effort to share this
    data.
        You have incredible access to data, and I am familiar with
    the work that you have and what you contribute. And, frankly, I
    think that we have a greater need for access with the private
    sector in their efforts to try to work along our side. But this
    access to data is a very critical component among agencies,
    among the private sector, and, frankly, with our allies around
    the world.
        Secretary Lew. Yes. I really do believe that the practices
    we have at Treasury lead the world in how to get the right
    information into the right hands, and we provide an enormous
    number of leads to the appropriate agencies.
        Mr. Pittenger. Yes, sir.
        Secretary Lew. You are asking about a querying of data
    basis on a kind of real-time basis. I--
        Mr. Pittenger. Exactly. I need some follow up on that, if
    you could.
        Two other questions, quickly. FATF has an important role in
    terms of bringing its members countries, 34 countries, into
    those four regulatory compliances, but they are not an
    enforcer. What is your response of what we do with countries
    like Turkey, Kuwait, and Qatar, who clearly have been complicit
    in terms of transferring, financing, and being accessible on
    that?
        Secretary Lew. Look, we raised these issues very strongly
    in bilateral--
        Mr. Pittenger. What tools do we really have? I have raised
    the issues too. I have been to those countries. They dodge
    every way they can. But what do we--
        Secretary Lew. I think we are making progress, though I
    think it is--
        Mr. Pittenger. It is a nice word. And I am not trying to
    really cut you off, but I don't have much time.
        The reality is they are very aggressive in their efforts,
    they have been, and we really haven't done much--seen much
    cooperation from them in terms of not being complicit with the
    financing component.
        And my last question deals with Iran and the banks that
    come under SWIFT authority. Do you believe that these banks are
    going to be able to access--I didn't get a clear answer from
    you--that they can have access and work with American financial
    institutions?
        Chairman Hensarling. Brief answer, please.
        Secretary Lew. I think that what I said in the earlier
    response is that we will comply with the Joint Comprehensive
    Plan of Action and lift the nuclear sanctions; we will keep
    other sanctions in place. Part of the agreement was to give
    Iran access to money that it has a right to. We will work on
    making that happen.
        It is not going to be our goal to block transactions that
    are legitimate under the Joint Comprehensive Plan of Action,
    but we will enforce on other areas like terrorism and the like.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Washington, Mr.
    Heck.
        Mr. Heck. Thank you, Mr. Chairman. I ask unanimous consent
    to enter into the record correspondence dated March 18th to the
    gentleman from Wisconsin from the Assistant Secretary for
    Legislative Affairs at the Department of the Treasury.
        Chairman Hensarling. Again, these are allowed under general
    leave, but without objection, it is so ordered.
        Mr. Heck. Thank you for being here, Mr. Secretary. Earlier
    you had indicated verbally, and I just want to confirm that, in
    fact, on the dates December 17th, January 21st, and March 18th,
    you had extended an offer to sit down and work through the
    issue of the supply of certain materials and response to
    request, that being in addition to, by my best count, more than
    5,000 pages of documents you had already submitted. Is that
    correct, sir?
        Secretary Lew. That is correct.
        Mr. Heck. I would like to associate myself with the remarks
    of the gentlelady from Ohio. I was first elected to the State
    House of Representatives 40 years ago this year, and my muscle
    memory as a fairly young man was formed by strict rules
    prohibiting the impugning of another person's motives. And I
    have been somewhat surprised in my now 39 months here that that
    is allowed on too often an occasion.
        But I took the time to actually look up the House rules.
    And the House rules do indicate that committee meetings shall
    be in strict conformity with an observance of the acceptable
    standards of dignity, propriety, courtesy, and decorum
    traditionally observed.
        So the specific words that I want to associate myself with,
    with respect to the gentlelady from Ohio are ``I'm sorry.'' You
    didn't deserve that, and I, frankly, found it to be an
    egregious breach of our own rules.
        Now on to the substance, last fall I think it was Under
    Secretary Sheets who was here, and I queried him as to whether
    or not we had actually reached out to the newly formed Asian
    Infrastructure Investment Bank to see about ways in which we
    might collaborate, cooperate with that new deep pool of funds
    available. He seemed to indicate that it was really important
    that they engage in best practices but response didn't go much
    farther than that.
        There have been a couple of intervening events that it
    seemed to me might affect the degree of which we are reaching
    out: President Xi's visit, the IMF quota reform. So my
    question, sir, is have we reached out to them? Is this an area
    where we might collaborate or cooperate more to invest in
    infrastructure?
        Secretary Lew. Congressman, I appreciate your comments.
        And with regards to the Asian Infrastructure Bank, we have
    made clear from the start that we think it is a good thing for
    there to be more investment in infrastructure. And we didn't
    have an objection in principle to a new institution but that it
    was critical that a new institution adhere to high standards.
        I am actually quite pleased that sitting here today I can
    say that our pressure for high standards has been heard by the
    other countries participating and by China itself. And as they
    approach making their first commitments, they are certainly
    saying all the right things about adhering to high standards.
        In terms of collaboration with them, the way that we have
    talked to them about collaborating is through the existing--the
    older international financial institutions, where if they can
    collaborate on projects, the new institution piggybacks on the
    safeguards and the standards of the older institutions. So
    there is work underway looking at co-financing, for example.
        We have also offered on a bilateral basis to provide any
    technical advice that we can. Because frankly, a lot has been
    learned in the last 70 years, and those lessons don't all need
    to be relearned. They say that it is going to be open for fair
    contracting practices, and I trust that American firms will
    want to participate in that. But we have not explored joining
    any more formally.
        Mr. Heck. Thank you.
        On the subject of infrastructure, it seems to me that what
    we consider to be infrastructure has evolved very considerably
    over the centuries, from the 18th Century--roads, bridges,
    aqueducts; the 19th Century--railroads and later sewers; the
    20th Century--phones, water treatment, water lines; and in the
    21st Century, broadband. All physical.
        But it occurs to me that when it comes to economic
    development we might want to consider ``soft'' infrastructure
    investments, namely standing up a financial regulatory
    framework, especially in underdeveloped nations, for whom not
    having a developed financial regulatory framework is a great
    impediment to economic development.
        Thank you, Mr. Chairman.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentlelady from Missouri, Mrs.
    Wagner.
        Mrs. Wagner. Thank you. Thank you, Mr. Chairman.
        And thank you, Secretary Lew, for coming and for staying
    the duration here.
        Following up on my colleague Mr. Guinta's discussion with
    you, I want to bring up the ongoing TTIP negotiations that have
    been occurring with our counterparts in the E.U. Next month, I
    know the President will be traveling to Germany to discuss
    efforts to advance negotiations on this trade deal. However, as
    we all know, financial services continues to be an issue that
    is not on the table.
        As you said last year, sir, you support increasing market
    access but view talks on regulation with I believe the word was
    skepticism. Different regulatory regimes, especially when they
    aren't equivalent, would seem to affect market access
    significantly. Isn't it difficult to draw a line between market
    access and regulations, sir?
        Secretary Lew. No, Congresswoman. Actually it is standard
    practice for market access to be something that is negotiated
    in a trade agreement.
        It would be very unusual for prudential regulatory issues
    to be covered in a trade agreement. We don't think it is
    appropriate for prudential regulatory issues to be handled
    there.
        There are a lot of places where we collaborate around the
    world, including with our European friends, to try and reach
    agreement on goals that we all share in terms of high
    standards. We have the high standards we are trying to pull
    everyone up to.
        I don't think that a trade agreement that could end up
    chipping away at some of our protections would be the place for
    prudential regulation to be reopened.
        Mrs. Wagner. With all due respect, many participants have
    said that previous mechanisms, so to speak, to engage the
    regulatory coherence have fallen short, such as the Financial
    Markets Regulatory Dialogue, the FMRD. Doesn't this trade
    agreement represent a unique opportunity, sir, to get
    communications and coordination between the U.S. and the E.U.
    right?
        Secretary Lew. In my conversations with the European
    Commission, I have actually heard in the last few months a
    recognition that opening the prudential issues in TTIP would
    not be acceptable to us, and I have heard a renewed interest in
    using the Financial Markets Regulatory Dialogue as a place to
    try to drive those discussions, which we think is a right way
    to do it and we are happy to engage that way.
        Mrs. Wagner. I heard quite differently, that it is just
    feckless and, frankly, non-effective. And as a former United
    States Ambassador and Diplomat to one of the financial hubs in
    Luxemburg, I find your response concerning.
        On the subject, moving on, of comparing E.U. and U.S. in
    terms of financial service regulations, I would like to bring
    up the E.U.'s call for evidence that is currently ongoing
    looking at unnecessary regulatory burdens and other unintended
    consequences.
        In fact, just last week European Commissioner for Financial
    Stability Jonathan Hill said, ``You can't expect to get
    everything right or to predict exactly how rules are going to
    interact.''
        Secretary Lew, do you disagree with Lord Hill's statement?
        Secretary Lew. I think that Lord Hill's statement reflects
    the fact that we always need to keep asking is what we are
    doing right and appropriate, and we certainly take that view in
    terms of our analysis of everything that we do.
        Mrs. Wagner. It doesn't seem FSOC has ever taken up such a
    comprehensive review such as what the E.U. is currently doing.
    Do you support dialogue here in the United States.
        Secretary Lew. Well--
        Mrs. Wagner. Let me finish my question, sir, please--here
    in the United States, similar to what the E.U. is doing with
    the call for evidence to look at the impacts that all--all of
    our post-financial crisis regulations have had on economic
    growth and financial stability?
        Secretary Lew. Our prudential regulators are in the middle
    now of a regular process that is every 5 years of reviewing
    their regulations to look back and see which regulations
    require reconsideration. I think that is the right way for it
    to happen. They have been having hearings around the country.
        They each have the authority over their own organic
    statutes. It is not an FSOC responsibility.
        And I must say, when I was OMB Director and I did a
    lookback of the Federal agencies that report directly, I was
    struck that it was not in my purview to go into the independent
    agencies. This other process is the right way to do it.
        Mrs. Wagner. The E.U.'s call for evidence asks for real
    analysis regarding the cumulative impact of regulations,
    including regulations that have yet to be implemented. How have
    you all looked at future regulations, such as Basel 4.0 and the
    fundamental review of the trading book, and how these fit in
    with our current structure?
        Secretary Lew. Our view is that we always need to be
    looking at the risks of the future, not the past. We have to
    make sure that our financial regulatory system doesn't become
    out of date. And we do that domestically; we do that
    internationally as we participate in various multilateral
    bodies.
        Mrs. Wagner. I think I have run out of time.
        I yield back.
        Chairman Hensarling. The time of the gentlelady has
    expired.
        The Chair now recognizes the gentleman from Kentucky, Mr.
    Barr.
        Mr. Barr. Thank you, Mr. Chairman.
        And, Mr. Secretary, thanks for your testimony today. I
    wanted to follow up on the questions from my colleague, Mr.
    Pittenger, as a member of the Terrorism Financing Task Force.
    As you know, the work of Treasury is critically important,
    particularly the Office of Technical Assistance.
        We know from our hearings--our hearings have revealed
    significant gaps in the anti-money laundering and
    counterterrorist financing capacity in many developing
    countries. And my question to you is, given the role of the
    Office of Technical Assistance and the Agency for International
    Development at the State Department within the U.S. Government,
    which of these agencies takes the lead in providing that
    assistance to our allies in other countries?
        Secretary Lew. Obviously, the Office of Technical
    Assistance has the subject matter knowledge to be most capable
    in this area. USAID has resources in some places that we don't.
    We collaborate together to try and work in partnership.
        One of the reasons we have proposed over the next several
    years to double OTA is it is, I think, one of the most
    important ways that we can build the capacity in other
    countries, not just in terrorist financing.
        One of the things you need to do is have transparency and
    an openness in the business environment to get those countries
    where they need to be. That gives you the ability to deal with
    terrorist financing.
        So you get multiple improvements by building the kind of
    infrastructure in this area. I have seen tremendous progress
    made in places where our OTA advisers are in there.
        Mr. Barr. Obviously, given today's news, the tragedy in
    Brussels, we continue to be reminded that we must confront
    radical Islamic terrorism.
        Secretary Lew. Yes.
        Mr. Barr. We must be proactive. Disengagement is not an
    option.
        And so I would hope that we certainly coordinate within our
    own government, in terms of who takes the lead on providing
    that technical assistance. Because we know from our work and
    our oversight that these developing countries have significant
    gaps in terms of their financial systems, their law enforcement
    systems, judicial systems.
        Secretary Lew. I totally agree. I don't think the problem
    is coordination. The reason we ask for more resources is we
    just don't have enough people out there, and I think we could
    do a lot more good work with more people.
        Mr. Barr. Let's talk about the Financial Action Task Force.
    Obviously, that task force peer reviews countries, and makes
    recommendations. Should we work with the FATF to have
    recommendations on coordinating technical assistance to
    developing countries?
        Secretary Lew. We do work with the FATF on coordinating
    assistance. We work with the IMF on coordinating assistance.
    Between ourselves, FATF, and IMF, that is where most of the
    assistance is coming from, and we work very closely together
    constantly.
        Mr. Barr. I think we do have a good model there and we do
    need to have recommendations on better coordination. Under
    Secretary Kimmitt, in our hearing, indicated that while we have
    plenty of Commerce Department and USAID attaches over a number
    of our embassies, there are only a couple dozen Treasury
    attaches in our embassies deployed worldwide. That seems to me
    to be an insufficient number, given the threat environment.
        And it doesn't seem--it wouldn't seem to me that we can
    sufficiently project our economic or our counterterrorism
    financing objectives without more Treasury attaches deployed
    worldwide. Would you agree with that?
        Secretary Lew. I wouldn't say no to more Treasury attaches.
    I would not suggest any inadequacy in the Treasury attaches we
    have out there. They do a tremendous job.
        Mr. Barr. I am not suggesting that, but a couple of dozen--
    wouldn't you agree that having Treasury attaches deployed in
    more places would be at least as important as agriculture
    attaches?
        Secretary Lew. I am not going to question the value of
    other attaches. I can tell you the value of Treasury attaches
    is very high.
        Mr. Barr. We need to continue to work on that.
        Quickly, in my remaining time, let me ask you about
    insurance capital standards and sequencing. I am concerned that
    the IAIS standard-setting process might front run and prejudice
    the Federal Reserve process for insurance capital standards
    rulemaking. Obviously Congress weighed in by requiring the Fed
    to implement nonbank-centric standards, more insurance-based
    capital standards.
        What we don't want is for the international community to
    make an end run on that. Do you share those concerns? And what
    is Treasury doing to ensure that the IAIS timeline accommodates
    the work of the Fed going first?
        Secretary Lew. We discussed earlier how important it is for
    us to make progress with a covered agreement. If we get a
    covered agreement that would make clear what the line between
    prudential and capital issues is, that would be the--be a lot
    of protection to our firms. We don't think that other countries
    should set capital requirements for our--
        Mr. Barr. That is good to hear because domestic regulators
    have adopted FSB rules for banking, so we would hope that
    Treasury would work with Fed to prevent--
        Secretary Lew. I'm not sure I agree with that
    characterization of the FSB rules for banking, but I am happy
    we agree on insurance.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Pennsylvania,
    Mr. Rothfus.
        Mr. Rothfus. Thank you, Mr. Chairman.
        And if we could stay on this international insurance issue
    for a minute, I am concerned that foreign negotiators will use
    this process as a vehicle to impose rules that put U.S. firms
    at a disadvantage by unfairly targeting products they offer.
        As you know, the IAIS has approved higher capital charges
    for some U.S. insurance products by labeling them as
    nontraditional. However, there are similar insurance products
    offered by foreign firms that have not been subjected to a
    higher capital charge.
        I see this as a clear example of foreign negotiators using
    international rules to hurt U.S.-based firms. Why does this
    imbalance exist, and what is Treasury doing to address it?
        Secretary Lew. I have tried to respond, Congressman, that
    the E.U. is implementing insurance regulatory reform that they
    call Solvency II, that will subject an issuer to
    disadvantageous treatment if the insurer's country of domicile
    is not recognized as equivalent by the E.U.
        One of the reasons to get this covered agreement is to have
    a frame preventing that from happening. So we are very much
    engaged and very much focused on this.
        Mr. Rothfus. Chair Yellen testified before this committee
    recently and lamented the headwinds that are facing the
    economy. I would argue that many of the headwinds that we face
    are manmade and self-imposed. I consider the Affordable Care
    Act, where we had the Congressional Budget Office say that is
    going to cost 2 million jobs--
        Secretary Lew. I was with you on the first half of the
    sentence.
        Mr. Rothfus. But then you look at EPA regulations that are
    throwing middle-class workers in my district out of work.
        And then you look at the Dodd-Frank Act, which was sold as
    a way to end too-big-to-fail and product consumers when it ends
    up enshrining is too-big-to-fail in law. And, of course, former
    Treasury Secretary Geithner acknowledged that it didn't end
    too-big-to-fail. And it was sold as protecting consumers, and I
    see consumers losing products like free checking.
        A 2015 report by the Office of Financial Research (OFR)
    pointed out that market liquidity had become more fragile, that
    broker-dealer inventories had shrunk, and that those
    inventories had concentrated in high-quality liquid assets. The
    Office of Financial Research highlights several factors
    contributing to fragility in fixed income markets, namely bank
    capital standards and the Volcker Rule. Do you agree with OFR
    that these regulations are a factor leading to reduced fixed-
    income liquidity?
        Secretary Lew. Congressman, as I have testified to this
    committee before, we are open to looking at any of the
    contributing factors. Market liquidity is an important element
    in any well-functioning financial system. And by most measures
    of market liquidity, particularly in the Treasury markets, we
    are now within historical ranges.
        That said, there are things going on in the markets that
    require more attention. That is one of the reasons we have put
    out a request for information to try and understand how some of
    the transformation and the structure of our markets is
    affecting the way the markets perform and potentially
    liquidity.
        I think that we are in a world now of electronic trading,
    high-frequency trading, algorithmic trading, where many, many--
    really most of the transactions taking place are not what
    people think of as traditional individuals making decisions.
    That is having, potentially, an effect as well.
        So we are doing a request for information to try and get to
    the bottom of it.
        Mr. Rothfus. I guess I am trying to--I think you would
    agree in part, then, with some of the conclusions--
        Secretary Lew. I don't attribute great weight to the notion
    that regulatory changes are a key driver. I think if you look
    at the stability of our financial system, the health of our
    economy, and the health of our markets--in the beginning of
    this year we had substantial market volatility--
        Mr. Rothfus. Regulatory--
        Secretary Lew. --and nobody questioned--
        Mr. Rothfus. I'm sorry. You said regulatory actions are not
    a key driver?
        Secretary Lew. I said I am not convinced that they are a
    key driver. Yes, that is what I said.
        Mr. Rothfus. Okay. I would like to touch on something that
    former Treasury Secretary Larry Summers recently mentioned. He
    penned an op-ed in the Washington Post saying it is time to
    kill the $100 bill. In that piece he discusses a recent paper
    by Harvard University's Kennedy School of Government and
    advocates for stopping the issuance of high-denomination notes
    like the 500 euro note and the $100 bill, or even withdrawing
    them from circulation.
        According to Mr. Summers, who has apparently supported this
    idea since the late 1990s, ``Removing such currency from
    circulation would reduce corruption and crime around the world
    while having little downside for legitimate business or
    savers.'' Summers goes on so far to call for a global agreement
    to stop issuing high-denomination notes.
        Steve Forbes recently wrote in The Wall Street Journal that
    he is concerned that this idea would actually harm average
    Americans. And I am wondering if you have an opinion on this?
        Secretary Lew. Look, I think there is a big difference
    between the $100 bill and the 500 euro note or the 1,000 Swiss
    franc note. I think very large bills like the 500 euro bill are
    problematic. I think the $100 bill is the most--
        Mr. Rothfus. They are problematic because?
        Secretary Lew. Because the ease with which you can move
    large amounts of money is five-fold from what a 100 euro bill
    would be.
        Mr. Rothfus. I yield back.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Colorado, Mr.
    Tipton.
        Mr. Tipton. Thank you, Mr. Chairman.
        And thank you, Mr. Secretary, for taking the time to be
    here.
        I want to be able to visit with you. Actually, I will go
    off of my colleague's comment, where you just made the comment
    that you are not convinced that regulatory changes are a key
    driver in terms of some of the challenges that we are having.
        And I would like to go back to when we visited last year.
    We were talking about small banks and the impacts that they are
    feeling because of the regulatory burdens that are being placed
    on them. I am sure you are well-aware that we have had more
    consolidation of banks, fewer applications for new banks
    starting up into our communities, providing the access that you
    were talking about just a little earlier in regards to
    liquidity, to be able to grow the economy.
        Because we have, frankly, a tale of two economies in this
    country, given your opening statement that was rather glowing
    on the American economy. As you travel through the 3rd District
    of Colorado, we are continuing to see in many cases what the
    real unemployment level, double-digit unemployment, more
    businesses shutting down than new business startups.
        And many of those businesses have expressed to me that
    their challenge is being able to get capital from their local
    banks. The banks are telling us they are having an inability to
    be able to make those loans because of expanded regulations.
        And when you are making the comment that regulatory changes
    are not a key driver, we have had testimony come in from Fed
    Chair Yellen and FDIC Vice Chair Hoenig acknowledging that
    there is a problem with rules and regulations and the impact on
    our financial markets. Do you dispute their comments?
        Secretary Lew. I would like to see the specific comments to
    respond to rather than just--
        Mr. Tipton. They were talking about the trickle-down
    regulatory effect.
        Secretary Lew. I think we are talking about different
    things when we use the word ``liquidity.'' Typically, liquidity
    is used to talk about matching buyers and sellers in markets
    for stocks and bonds.
        I think what you are asking about is a slightly different
    question and it is not something we typically refer to as
    liquidity, but it is, what is the availability of lending to
    small businesses and maybe individuals.
        We believe that the credit box has gotten narrower in some
    ways than it needs to be. That is why, for example, the FHA
    last week moved to try and make clear that the credit box for
    mortgages should be eased some. I think on the small business
    side, a lot of small businesses before the financial crisis got
    access to capital by having individuals really tap into their
    home equity.
        So it is a different question than what happens--
        Mr. Tipton. I guess my point is in regards to the
    regulations that we are seeing on a lot of our community banks.
    Last year, when we sat down and visited you had expressed that
    you hadn't really talked about this in terms of the FSOC. In
    fact, when we reviewed the minutes from 2010 to 2014 it had not
    been raised once.
        What is the threshold that has to be passed? What metrics
    have to be in place for--to have those conversations take place
    at your level?
        Secretary Lew. Look, I have had conversations with all of
    the prudential regulators about the need to use the flexibility
    that they have to not have a one-size-fits-all approach. And I
    don't believe they have a one-size-fits-all approach. But they
    need to keep looking at what can they do to provide the kind of
    proper accommodation to small institutions that don't present
    the kinds of risk that some of the larger ones do.
        When we talk about small institutions, we are not always
    talking about the same thing. The real community banks are
    quite small. Even the $50 billion threshold that is now in
    place for a SIFI is way bigger than your typical community
    bank.
        When the people raise questions of institutions of hundreds
    of billions of dollars, we are not talking about community
    banks anymore.
        Mr. Tipton. But unfortunately, as Chair Yellen, and again,
    Mr. Hoenig pointed out as well, we are seeing that trickle-down
    effect of regulations that are impacting those. Is that an
    important thing for you to be able to address?
        Secretary Lew. I think we have to do two things at the same
    time. We have to make sure that our system is safe and sound
    and that we are not exposed to the kind of financial crisis
    that did so much damage to this country in 2007, 2008. And I
    think we have to constantly be asking ourselves, ``Are there
    things that we can do to make it easier for small financial
    institutions?'' We are doing both of those.
        Mr. Tipton. I guess the point, Mr. Secretary, that our
    banks are asking, the community banks, which did not cause the
    financial crisis is, ``When can we expect to be able to see
    some action, rather than talk?''
        Secretary Lew. The kinds of things that we have discussed
    in this hearing room and other hearing rooms, there are areas
    like the regularity of reviews for small banks, where we are
    open to having conversations. But when we see a piece of
    legislation that would really repeal major parts of financial
    reform, that is a place we are not going.
        So it is a question of can you have a conversation about
    the reasonable thing.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Arkansas, Mr.
    Hill.
        Mr. Hill. Thanks, Mr. Chairman.
        And thank you, Mr. Secretary, for being here.
        Let me add my comments on previous questions submitted. As
    a former Treasury employee, you are making me look bad. I
    submitted questions to you on June 17, 2015, like
    Representative Guinta, and I hope you will assure me that you
    will get prompt answers to my questions.
        Secretary Lew. I will certainly go back and--
        Mr. Hill. They are all softballs. They are easy. I promise.
        On the subject of TTIP, I know my colleague from Missouri
    touched on that, but I want to have a nuanced question on that
    with you. I know you have been involved, and certainly OASIA
    has been involved in the negotiating team on development of
    TTIP.
        And are you pleased with TTIP as it relates to financial
    services from your briefings and review of it?
        Secretary Lew. I think that we have had challenging
    discussions but we are making some progress now. I believe that
    financial market access should be part of the TTIP negotiation.
    I don't believe that prudential regulations should be.
        I think we have made some progress with the Europeans, and
    to shift the discussion of prudential regulation to the
    existing international bodies that are set up to appropriately
    deal with it.
        Mr. Hill. There is a really important derivative issue over
    in the subject of data management and data centers that was a
    big part of TTIP. Financial services are not included.
        Secretary Lew. I think you mean TPP.
        Mr. Hill. I'm sorry, TPP. And I have heard concerns that
    that data center issue is problematic. Our international
    services companies are not being treated like nonfinancial
    services--
        Secretary Lew. The data localization issue is a very
    difficult one. We generally oppose data localization
    requirements. I put a considerable amount of effort into making
    sure that data localization was not required in parts of the
    financial services industry like electronic payments, where it
    was really no more than a nontariff barrier.
        In the area of financial institutions, the issue is that
    our own prudential regulators feel that they need to be
    guaranteed access to timely and appropriate prudential
    information, and there has been experience during the financial
    crisis where that was cut off.
        So we are trying to reconcile legitimate interests of the
    financial institutions not to have nontariff barriers and costs
    imposed on them, but also the needs of our prudential
    regulators to be guaranteed access to information.
        We are trying to work our way through that, as I have said
    before, to see if we can thread the needle. TPP is closed, so
    we can't reopen TPP. Perhaps there could be some mention in
    some side piece that is helpful. But really the question is
    going forward, what are the--what will be the framework for a
    TTIP or for a future BIT negotiation?
        Mr. Hill. I think the financial services players can
    certainly provide regulators data that they need in order to do
    their job looking forward and meeting expectations. But it is
    concerning that financial services companies, some of the
    biggest and best in the world that are headquartered here, are
    not getting the same accordance on data localization that
    nonfinancial services are. So I respect your view on it, but I
    think it deserves more discussion.
        Secretary Lew. Yes. And the reality is that the problem did
    exist during the 2008 financial crisis, so it is not ancient
    history.
        Mr. Hill. No, I understand. But also people have changed a
    lot of things in their operating style since then.
        Secretary Lew. And that is why we are trying to work our
    way through it.
        Mr. Hill. Yes. TARP--it is hard to believe we are talking
    about TARP this many years later. Large banks have been
    facilitated through the Treasury to exit TARP with--on pretty
    favorable terms and close down that part of the program. But a
    lot of small banks have not had that favorable treatment from
    the Treasury, particularly those that are in the community
    development program.
        I am wondering if I could have your commitment that if
    people bring you a market-oriented offer to exit their TARP
    position that they could be done by the end of the Obama
    Administration?
        Secretary Lew. It would be my fondest hope for us to be
    able to say that TARP was completely done--
        Mr. Hill. I would think so. I would think it would be one
    of--
        Secretary Lew. We have made huge progress--
        Mr. Hill. --the feathers in your cap.
        Secretary Lew. Yes.
        Mr. Hill. But there are a lot of small institutions that
    are not getting, I think, the attention when they are bringing
    quality opportunities to exit TARP. I really urge you to look
    into it.
        Secretary Lew. We will continue to put every effort into
    it. It has been challenging to get proposals of the quality you
    are describing, and that is why it has been slow.
        Mr. Hill. The other thing that is on my mind is recently, I
    introduced a bill that was marked and moved forward on
    commercial mortgage-backed securities. And the Fed has a
    rulemaking that I think will put conduit loans and some other
    kinds of commercial mortgage-backed securities really in
    jeopardy from refinance risk over the next couple of years, and
    I think Treasury should be very interested in the bill we have
    put forward in this committee.
        Secretary Lew. I am happy to take a look at it.
        Mr. Hill. Thank you.
        Chairman Hensarling. The gentleman yields back.
        The Chair now recognizes the gentleman from Maine, Mr.
    Poliquin.
        Mr. Poliquin. Thank you, Mr. Lew, very much for being here.
    I appreciate it.
        I would like to follow up on a little bit of the discussion
    a short time ago with Mr. Guinta, from New Hampshire. One of
    the new regulators, as a result of the Administration's new
    financial regulations, is the CFPB. They have a new office
    building for their 1,500 employees downtown, Mr. Lew, and it
    cost the taxpayers about $200 million. And the CFPB doesn't own
    the building; they spent about that amount of money to rehab
    it, and I think that is a huge waste of taxpayer money, sir.
        Mr. Cordray was here, the Director of the CFPB, in March,
    and he testified in front of this committee when Mrs. Wagner
    questioned him, and I quote--``It was the Treasury who was in
    charge of all Bureau operations at the time the decision was
    made.''
        And so my question to you, sir, is there have been follow-
    up letters that date back now 288 days asking you specifically
    in Treasury, the folks who work for you, who, in fact, at the
    CFPB or Treasury--they said it was you folks who were in
    charge--made the decision to waste that kind of money? Do you
    know who that was?
        Secretary Lew. Congressman, I responded earlier that we did
    follow up on this and provide the Inspector General findings. I
    am happy to go back and--
        Mr. Poliquin. With all due respect, sir, I have the letter
    right here that you responded to which was dated June 16th of
    2015. It says, ``The Treasury is working to respond to your
    requests.'' I repeat, ``The Treasury is working to respond to
    your requests.''
        That was 288 days ago. It was signed by Mr. Randall DeValk.
    So I am just asking you for a commitment now, Mr. Lew, if you
    don't mind, can you give me a specific day when you will get
    back to us as to who was responsible for wasting that kind of
    money?
        Secretary Lew. Congressman, without agreeing to your
    characterization, I am happy to follow up.
        Mr. Poliquin. Okay. And when will you follow up and
    specifically give us the date when you will get back to us who
    is responsible for making that decision?
        Secretary Lew. Congressman, after this meeting we will get
    back and work--
        Mr. Poliquin. Okay. It has been 288 days, Mr. Lew. I don't
    want to be rude, but that seems to be an awful lot of time.
    Here is what concerns me--
        Secretary Lew. On August 25th, we did--Treasury informed
    the committee that a report by the Inspector General of the
    Federal Reserve Board found that the work authorizations
    related to the renovation were finalized after the CFPB--
        Mr. Poliquin. Mr. Lew, here is what--
        Secretary Lew. We have responded, but I am happy to go back
    and see what additional responses--
        Mr. Poliquin. I appreciate that.
        Here is what I am concerned about, Mr. Lew. These are very
    simple questions I am asking you. They are not complicated at
    all. You are the Secretary of the Treasury of the United States
    of America, and if you are unwilling or unable to answer a
    simple question, I think it puts in doubt to the American
    taxpayers how you are going to be able to make the decisions
    that affect our capital markets, our economy, and our freedom.
        Secretary Lew. We have provided 200 pages of information to
    the committee on the condition of the building when it was
    transferred--
        Mr. Poliquin. Okay. I am looking for who was--
        Secretary Lew. So we have given a lot of material and I am
    happy to look and see what you are looking for--
        Mr. Poliquin. Great.
        Secretary Lew. --and see if we can be helpful.
        Mr. Poliquin. Thank you. And you won't give me a specific
    commitment when, so let's move on.
        Mr. Lew, you are familiar, I am sure, with the budget that
    was submitted by President Obama a short time ago that never
    balances ever. You are familiar with that budget?
        Secretary Lew. I am familiar with the budget, yes.
        Mr. Poliquin. Okay. And you are also familiar, I assume,
    Mr. Lew, with the fact that it increases spending by $2.5
    trillion, increases taxes by $3.4 trillion, with this budget?
        Secretary Lew. There are a variety of policies in the
    budget, but it would restore taxes to roughly where it was when
    we had a balanced budget the last time--
        Mr. Poliquin. Okay. And I am sure you also know that this
    budget that never balances increases the debt from the current
    $19 trillion to $27 trillion. It triples from when the time the
    President arrived. So you are familiar with this budget?
        Secretary Lew. I am also familiar with the percentage of
    GDP--
        Mr. Poliquin. Okay.
        Secretary Lew. --which stabilizes as a--
        Mr. Poliquin. Okay, so you are familiar with this budget.
        Secretary Lew. --percent of GDP and the debt as a percent
    of GDP.
        Mr. Poliquin. Thank you, sir. Do you think short-term
    interest rates will remain at zero forever?
        Secretary Lew. No, I don't, but neither does our budget.
    Our budget assumes interest rates that are far above what the
    current market--
        Mr. Poliquin. Okay. Then I also assume that you are
    familiar with the OMB projections that in 3 years, the annual
    interest payments on the debt at that time will be about $440
    billion in 1 year, which will equal what we spend on Medicaid.
        And I am sure you are also familiar with the fact that in 7
    years, the OMB projects that the interest on the debt will
    exceed what we spend on national defense.
        So my question to you, sir is, given the fact that this
    Administration continues to submit budgets to us that increase
    spending, increase taxes, increase the debt, never balance, at
    what point, Mr. Lew, do you think those interest payments--not
    the percent of the GDP represented by the deficit--but when do
    those interest payments become a concern of yours?
        Secretary Lew. Look, Congressman, as GDP grows, nominal
    dollars grow, and having cut the deficit by three-quarters from
    10 to 2.5 percent of GDP has put us on a stable path. We have
    more work to do but we are not in a moment of crisis like we
    were when the President took office. We are in a stable,
    sustainable place.
        Mr. Poliquin. Mr. Lew, I would debate you a little bit on
    that, with all due respect. I am a former State treasurer of
    Maine. There are 49 States that have to balance their budgets;
    the government here does not. They spend what they want, and
    borrow what they need.
        Do you think a balanced budget amendment to the
    Constitution is something that we need, Mr. Lew?
        Secretary Lew. No, I do not.
        Mr. Poliquin. Tell me why you don't.
        Secretary Lew. I think you are out of time, but I am happy
    to respond if the chairman would like me to.
        Mr. Poliquin. I would appreciate that, Mr. Chairman, if the
    Secretary could respond to that question.
        Chairman Hensarling. Quick response, please.
        Secretary Lew. I think that the responsibility for making
    policy rests with the Congress and the President, that a
    mechanical approach that would make it difficult if not
    impossible to respond to crises or economic turmoil--
        Mr. Poliquin. Those are not, with all--
        Secretary Lew. --would be very, very bad. I am happy at
    another time to--
        Mr. Poliquin. With all due respect, Mr. Lew, there are
    bills that have been submitted that I have co-sponsored, along
    with others, that give plenty of flexibility in that budgetary
    process. The American people have seen that the Congress and
    the Administration cannot live within its means. Don't you
    think it is time to help them with a--
        Chairman Hensarling. The time of the gentleman has expired.
        I would like to thank the witness for his testimony today.
        The Chair notes that some Members may have additional
    questions for this witness, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 5 legislative days for Members to submit written questions
    to this witnesses and to place his responses in the record.
    Also, without objection, Members will have 5 legislative days
    to submit extraneous materials to the Chair for inclusion in
    the record.
        I would remind the witness that we have over a dozen
    questions which are still pending by both Democrats and
    Republicans from the June hearing. So I would ask our witness
    to please take this seriously and have Treasury respond
    promptly.
        This hearing stands adjourned.
        [Whereupon, at 1:20 p.m., the hearing was adjourned.]

                                A P P E N D I X

                                 March 22, 2016

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