[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

                             FIRST SESSION

                               __________

                             MARCH 17, 2015

                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 114-7
                            
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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
ROBERT DOLD, Illinois
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 17, 2015...............................................     1
Appendix:
    March 17, 2015...............................................    75

                               WITNESSES
                        Tuesday, March 17, 2015

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

                                APPENDIX

Prepared statements:
    Lew, Hon. Jacob J............................................    76

              Additional Material Submitted for the Record

Perlmutter, Hon. Ed:
    Chart entitled, ``Civilian Unemployment Rate''...............    83
    Chart entitled, ``Unemployment Rate in Colorado''............    84
    Chart entitled, ``Dow Jones Industrial Average''.............    85
    Chart entitled, ``30-Year Conventional Mortgage Rate''.......    86
    Chart entitled, ``Federal Surplus or Deficit [-] as Percent 
      of Gross Domestic Product''................................    87
    Chart entitled, ``Federal Surplus or Deficit [-] as Percent 
      of Gross Domestic Product''................................    88
Lew, Hon. Jacob J.:
    ``Report to Congress from the Chairman of the National 
      Advisory Council on International Monetary and Financial 
      Policies''.................................................    89
    Written responses to questions for the record submitted by 
      Representative Dold........................................   110
    Written responses to questions for the record submitted by 
      Representative Duffy.......................................   113
    Written responses to questions for the record submitted by 
      Representative Ellison.....................................   118
    Written responses to questions for the record submitted by 
      Representative Fincher.....................................   124
    Written responses to questions for the record submitted by 
      Representative Huizenga....................................   125
    Written responses to questions for the record submitted by 
      Representative Luetkemeyer.................................   130
    Written responses to questions for the record submitted by 
      Representative McHenry.....................................   131
    Written responses to questions for the record submitted by 
      Representative Mulvaney....................................   132
    Written responses to questions for the record submitted by 
      Representative Neugebauer..................................   137
    Written responses to questions for the record submitted by 
      Representative Pittenger...................................   138
    Written responses to questions for the record submitted by 
      Representative Ross........................................   142
    Written responses to questions for the record submitted by 
      Representative Rothfus.....................................   146
    Written responses to questions for the record submitted by 
      Representative Royce.......................................   148
    Written responses to questions for the record submitted by 
      Representative Sinema......................................   151
    Written responses to questions for the record submitted by 
      Representative Stivers.....................................   153
    Written responses to questions for the record submitted by 
      Representative Stutzman....................................   154


                      THE ANNUAL TESTIMONY OF THE.
                       SECRETARY OF THE TREASURY.
                   ON THE STATE OF THE INTERNATIONAL.
                            FINANCIAL SYSTEM

                              ----------                              


                        Tuesday, March 17, 2015

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:04 a.m., in 
HVC-210, Capitol Visitor Center, Hon. Jeb Hensarling [chairman 
of the committee] presiding.
    Members present: Representatives Hensarling, Royce, Lucas, 
Garrett, Neugebauer, McHenry, Pearce, Posey, Fitzpatrick, 
Luetkemeyer, Huizenga, Duffy, Hurt, Stivers, Fincher, Stutzman, 
Mulvaney, Hultgren, Ross, Pittenger, Wagner, Barr, Rothfus, 
Messer, Schweikert, Dold, Guinta, Tipton, Williams, Poliquin, 
Love, Hill; Waters, Maloney, Sherman, Meeks, Capuano, Lynch, 
Scott, Green, Cleaver, Moore, Ellison, Perlmutter, Himes, 
Carney, Sewell, 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 for the purpose of receiving the 
Secretary of the Treasury's annual report on the state of the 
international financial system.
    I now recognize myself for 3 minutes to give an opening 
statement.
    Again, the committee welcomes back the Secretary for his 
annual report on the IMF and the larger international financial 
system.
    One of the greatest threats to economic stability today can 
clearly be seen on the monitors to my left and to my right. 
That, of course, is a real-time national debt clock.
    No President in our history has indebted our Nation more 
than Barack Obama, with more debt in 6 years than in our 
Nation's first 200 years.
    My laptop is awash with both official and private reports 
calling this level of debt totally unsustainable.
    Disappointingly, the Secretary's prepared testimony 
contains nary a word about the threat that the unsustainable 
national debt presents to our economy and to hardworking 
middle-income families.
    In fairness, the Obama Administration is not alone in 
helping put a sovereign nation into insolvency. Europe has a 
number of practitioners as well. And when Europe runs out of 
money, many turn to the IMF, whose major source of funding 
happens to be U.S. taxpayers.
    Americans who clearly see the impending debt crisis and who 
rightly suffer from bailout fatigue are scratching their heads 
at the prospect of being called on continually to fund and 
institutionalize too-big-to-fail on a global scale. Thus, the 
activities of the IMF must be carefully scrutinized by our 
committee.
    What calls for even greater scrutiny is the role of the G-
20's Financial Stability Board (FSB) and its American cousin, 
the Financial Stability Oversight Council (FSOC).
    These organizations wield immense power over our global 
economy and operate largely without transparency or 
accountability as part of a shadow regulatory system.
    As I assume all members of this committee know, our witness 
heads up the FSOC, and Treasury is a member of the FSB.
    FSOC is especially concerning because among other matters, 
it seemingly takes direction from the FSB, the Financial 
Stability Board, again, a fairly secretive unaccountable 
coalition of global bureaucrats that has found in FSOC a 
conduit to export its views on regulations and risk models to 
the United States.
    Just as one-size-fits-all mandates imported from Washington 
typically do more harm than good, the U.S. economy does not 
need a one-world view of risk imported from Europe. We tried 
that with Basel. Think Greek sovereign debt and Fannie Mae and 
Freddie Mac mortgage-backed securities. We know where that got 
us.
    Yet, FSOC has seemingly rubber-stamped decisions made by 
this international board when it comes to deciding whether 
large U.S. non-bank financial institutions should be designated 
as too-big-to-fail. This does not appear to be coordination; it 
appears to be capitulation.
    Since today's SIFI designations are tomorrow's taxpayer-
funded bailouts, this has potentially disastrous consequences 
for the American people.
    The imposition of one global standard of financial 
regulation by this Administration will undoubtedly harm 
American innovation and American economic growth. It can 
impinge on U.S. sovereignty and bypass the constitutional check 
and balance of the United States Congress.
    Even more importantly, Americans will find themselves 
paying more to insure their homes and families, investors who 
rely on mutual funds to save for college educations or 
retirements will find they have earned less, and our small 
businesses on Main Street will suffer, as sources of long-term 
capital begin to dry up. We must not allow this to happen.
    I now yield 3 minutes to the ranking member for an opening 
statement.
    Ms. Waters. Thank you very much, Mr. Chairman. And I would 
like to welcome Secretary Lew.
    After four failed attempts by the Obama Administration to 
win congressional approval of quota and governance reforms for 
the IMF, we may have to recognize a new and difficult reality.
    The case for approving reforms supported by both Republican 
and Democratic Administrations in which the United States 
retains its unique veto power and Europe loses two seats on the 
executive board would seem open and shut.
    But the fund's most vociferous critics, congressional 
Republicans, don't agree. They argue that the quota change 
would put more taxpayer dollars at risk and weaken America's 
influence within the fund.
    Both claims are wrong. In fact, the United States would 
retain its veto power, and its share of the quota increase 
would be fully offset, resulting in almost no new cost to 
taxpayers.
    The real risk to the United States lies in continued 
congressional inaction, which has infuriated many of the fund's 
other member countries.
    In fact, last year the G-20 group of leading economies 
issued an ultimatum to the United States: Approve the 2010 
quota deal by year's end, or the IMF will begin to weigh 
options for moving forward without the United States. In early 
January, the IMF's board began to study its options.
    The failure by Congress to ratify the IMF reforms is seen 
as a weakening of the U.S. commitment to multilateralism, 
spurring doubt about our leadership on global economic issues.
    In response, a number of developing countries, led by 
China, have begun to act independently to challenge Western 
dominance in the world economy.
    Last year, the BRICS nations announced plans to launch a 
Shanghai-based development bank of their own, which they hope 
will rival the influence of the World Bank. And China is also 
moving forward to create an Asian infrastructure investment 
bank to rival the Asian Development Bank.
    A world in which countries such as China and Russia are 
increasingly acting outside the established multilateral system 
is a world that could easily drift beyond control.
    It is ironic that some of the reasons Republicans have 
stated for not supporting the IMF quota package have now become 
the actual consequences of not supporting the package.
    But the more immediate question is whether the U.S. voice 
will resonate within the IMF at a time when we alone have 
allowed a fundamental governance reform to languish in the 
institution.
    I look forward to hearing more from you about just what is 
at stake.
    I thank you, and I yield back the balance of my time.
    Chairman Hensarling. 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.
    And Secretary Lew, I welcome you back before the committee 
today.
    There are many important international financial issues 
that need to be addressed. For example, Jonathan Hill, European 
Union Commissioner on Financial Services, has pointed out that 
when moving from a regulatory environment to a growth agenda, 
as was noted, and I think as he rightly points out, we have to 
have the courage and self-confidence to make changes where we 
see changes are necessary.
    But I want to focus on one specific concern of mine, which 
applies to the IMF, the International Monetary Fund.
    In 2009, Congress authorized a $100 billion commitment to 
the IMF in an account called the new arrangements to borrow. In 
the past 5 years, the Administration has requested $63 billion 
of that to be transferred to a permanent paid-in capital 
account, only later to be used to bail out European countries 
that are deeply in debt, like Greece.
    And I would like to explore today why hardworking, middle-
income American taxpayer dollars should be used to bail out 
other countries, especially after suffering from bailout 
fatigue in our own backyard dealing with Fannie Mae, Freddie 
Mac, FHA, and a number of others. Instead, shouldn't we be 
focusing on encouraging these other countries to better manage 
their borrowing and their spending?
    Brazil's representative to the IMF stated, according to a 
memo that has been leaked from 2010--May 10, 2010--that went to 
The Wall Street Journal, that, ``The IMF program is a bailout 
of Greece's private sector bondholders, mainly European 
financial institutions.'' And rather than require private 
sector creditors like European banks to take a loss, I am 
concerned that the Administration chose to bail out these 
European banks.
    As the memo shows, representatives from several other 
nations, including Canada and Australia, warned that the 
bailout package contained ``immense risks.'' Despite the 
concerns from several of our allies, the Administration chose 
to support this bailout. And how do taxpayers know this? Not 
because of transparency, but because of information that was 
shared with them only when a 5-year-old memo was leaked from 
May 2010.
    I think this lack of transparency is, sadly, something that 
we have come to expect. And it is my goal to change that. So I 
would appreciate that today.
    Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from Wisconsin, Ms. 
Moore, for 2 minutes.
    Ms. Moore. Thank you so much, Mr. Chairman.
    And top of the morning to you, Secretary Lew. Welcome back 
to the committee.
    I know that there are many international issues that are 
outstanding, but it must be good to be sitting here with good 
domestic news--59 months of private sector growth, a record 
streak private sector growth, $2.89 million in 2014, the most 
since 1997. And I think your stewardship in the debt ceiling 
debate has been a powerful voice of sanity, and I think that 
puts us in a really good position to have the United States be 
the world's reserve currency, which I think is extremely 
important.
    Here is a question that I raised with Fed Chair Yellen when 
she was here, and I would like to raise it with you. I know 
that Treasury is taking an aggressive stance to deter, but I 
want you to punish banks and bank employees that are involved 
in these tax avoidance and money laundering schemes as those 
activities facilitate global terrorism and crime.
    But I also would like for you to double-down on sort of 
being more surgical so as to not cut off legitimate 
remittances. This is an issue that Mr. Ellison has been 
championing, and I have heard from my own constituents that 
their relatives are literally starving. And so, we need to do 
that.
    I have also heard from insurers that they are increasingly 
concerned about ongoing international negotiations on global 
insurance capital standards that may impact U.S. insurers. So, 
I hope that you will be a strong voice internationally for U.S. 
insurance companies.
    And last, I am concerned, too, about the IMF. It supports 
jobs, exports, and financial markets. And indeed, it buoys our 
national security. And so I agree with you on that, and I yield 
back.
    Chairman Hensarling. Today, we welcome the testimony of the 
Honorable Jack Lew, Secretary of the Treasury. As you know, 
Secretary Lew has appeared before this committee on several 
previous occasions, so I do not believe he needs a formal 
introduction.
    Without objection, Mr. Secretary, your written statement 
will be made a part of the record. Secretary Lew, you are now 
recognized for 5 minutes to give a summary 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. I appreciate the 
opportunity to testify before you today.
    As we meet here today, the United States economy continues 
to make considerable progress. By almost every metric, America 
has come a long way since the depths of the worst recession 
since the Great Depression. Last year we saw the best year of 
job growth since the 1990s, and over the past 5 years, 
America's businesses have created 12 million new jobs, the 
longest stretch of sustained private sector job growth in our 
Nation's history.
    At the same time, our economy keeps expanding and forecasts 
project above-trend growth for this year. American exports set 
another record last year for goods and services sold overseas, 
and our fiscal deficit, which has fallen by almost three-
quarters, is forecast to decline even further in the next 
fiscal year. These achievements underscore America's enduring 
economic strength, and we can build on this progress with the 
right policies and bipartisan cooperation.
    The international financial institutions, which include the 
International Monetary Fund and the multilateral development 
banks (MDBs), are a critical part of this effort. Our 
investments in these institutions are some of the most cost-
effective ways to reinforce economic growth at home and to 
respond to critical challenges abroad. To that end, it is 
essential that Congress pass the IMF quota reforms.
    These reforms will put the IMF's finances on more stable 
footing over the long term; help modernize the IMF's governance 
structures; and preserve America's strong influence within the 
IMF, and more broadly, as a leader of the international 
financial institutions. As the international community waits 
for Congress to approve these reforms that we helped to design, 
emerging and developed economies alike are looking to other 
alternatives as a means of driving the global system forward.
    Our continued failure to approve the IMF reforms is causing 
other countries, including some of our allies, to question our 
commitment to the multilateral institutions that we worked so 
hard to create. And until these reforms are in place, the 
United States runs the risk of seeing its preeminent role in 
these institutions eroded, especially as others are 
establishing new and parallel financial institutions.
    The fact is, the IMF reforms will help convince emerging 
economies to remain anchored in the multilateral system that 
the United States helped design and continues to lead. And 
these reforms are a win-win for the United States. They retain 
our veto power and they do not increase our financial 
commitment. That is why we are determined to continue to work 
with Congress to get these reforms passed as soon as possible.
    As a clear example of the IMF's role in promoting American 
security and economic interests, the IMF is providing Ukraine 
with the critical financial and technical support that it 
needs. The IMF is the cornerstone of a broader international 
effort to support Ukraine amid extraordinary circumstances, and 
it recently approved an augmented longer-term program that will 
allow Ukraine to pursue a sustained set of economic reforms.
    Similarly, our investments in the World Bank and the 
regional development banks are key to advancing America's 
economic and strategic interests. My full statement that I 
submitted for the record lays out in detail how the MDBs help 
grow export markets, increase opportunities for American 
businesses, create jobs in the United States, and protect our 
national security.
    But let me highlight quickly a few of the areas where these 
institutions have recently advanced our priorities. In Ukraine, 
the MDBs have stepped in to address the crisis and stabilize 
the country, increasing their commitments to nearly $5 billion. 
In Central America, they are working to spur stronger economic 
growth which will help address the root causes of the flow of 
migrant children to our border. And in Africa, they have taken 
significant action to fight the spread of Ebola and strengthen 
health systems.
    To be sure, the MDBs are essential to global stability. And 
whether it is fostering inclusive economic growth, promoting 
food security, or increasing natural disaster preparedness, 
they are making a difference. It is no surprise that through 
our Nation's history, both Democratic and Republican Presidents 
have made it a priority to invest in these institutions.
    And as you can see from our budget request, we are using 
what we have learned from the MDBs and specialized funds to 
launch a well-designed and cost-effective green climate fund. 
This fund will enable the poorest countries to build resilience 
and help cut carbon pollution globally, advancing some of our 
vital security and development objectives.
    In closing, let me say that the world is looking to the 
United States for leadership. And it is as essential as ever 
for the United States to demonstrate that leadership across all 
the international financial institutions. This will, of course, 
require bipartisan cooperation, and I look forward to working 
with all of you to make that happen.
    Thank you, and I would be glad to answer any questions that 
you have.
    [The prepared statement of Secretary Lew can be found on 
page 76 of the appendix.]
    Chairman Hensarling. Thank you, Mr. Secretary.
    I yield myself 5 minutes for questions.
    Mr. Secretary, I think you know that many of us on this 
committee have a number of concerns about exactly where FSOC 
and the FSB are headed. We have spoken before about the 
Financial Stability Board. You have said previously that it is 
a group that acts by consensus. Most recently, FSB has 
initiated a new total loss-absorbing capacity (TLAC) standard 
dealing with the G-SIBs. Can I assume, then, since it is a 
group that acts by consensus, that Treasury has consented to 
the new TLAC standards?
    Secretary Lew. Mr. Chairman, I would say the United States 
has played a leadership role in pushing towards having TLAC be 
adopted. This is a preliminary step, so it is going to 
require--
    Chairman Hensarling. Okay, so you consented to these 
standards. I think as you know then, FSB, after creating the 
standards, issued an exemption to three of the largest banks in 
the world, three Chinese banks, one of which is the largest 
bank in the world, the Industrial and Commercial Bank of China, 
with over $3 trillion in assets.
    So if the United States consented to the TLAC standards, 
did Treasury also consent to the exemption for the three 
Chinese banks?
    Secretary Lew. Mr. Chairman, the TLAC provisions that have 
been agreed to are preliminary. They require considerable 
additional action to be implemented. I have to check on--
    Chairman Hensarling. I understand that, but did Treasury--
so you don't know the answer to whether Treasury consented to 
the exemption?
    Secretary Lew. Mr. Chairman, the FSB acts by consensus. I 
am not familiar with the specific nature of the action you are 
describing. I would have to get back to you.
    Chairman Hensarling. Okay. If you would get back to me, I 
would appreciate it. It has been reported in the press already, 
again, that these three Chinese banks have been exempt. It is 
just curious to me that if the body works by consensus, and 
Treasury is a member, that Treasury would not have consented. 
And I will let you get back to me, Mr. Secretary, on precisely 
what Treasury did.
    Secretary Lew. I would just underscore, Mr. Chairman, that 
TLAC requires implementation. What was put forward was a 
preliminary document that I think would very much strengthen 
the financial stability of the global system--
    Chairman Hensarling. I understand that, Mr. Secretary--
    Secretary Lew. --but it is not yet in place.
    Chairman Hensarling. Then I guess I would be curious, 
because you have also previously testified, I think in your 
last appearance before our committee, that, ``FSB does not make 
rules for any of the national governments; every country has 
its own ability to make its own decisions for itself.''
    So I am just curious, if these are preliminary suggestions 
and not rules, why is it that the FSB found it necessary to 
grant exemptions, specifically to the Chinese?
    Secretary Lew. Look, Mr. Chairman, what the FSB does is it 
raises global--the goal for global standards to a high level. 
We work--
    Chairman Hensarling. Apparently not for the Chinese.
    Secretary Lew. We work in the FSB to try to get the kinds 
of standards that we think are appropriate in the United States 
to be adopted around the world so that the whole world will 
have high standards.
    Chairman Hensarling. Again, Mr. Secretary, if you would get 
back to me on that specific issue--
    Secretary Lew. I would just say, Mr. Chairman, that--
    Chairman Hensarling. Mr. Secretary, I'm sorry, but the time 
is--
    Secretary Lew. Okay. I was just going to try to give you a 
little bit of an answer to your question.
    Chairman Hensarling. I have been waiting for several 
minutes. You said you didn't know if the Treasury consented. 
The key question is--
    Secretary Lew. You are talking about--
    Chairman Hensarling. --did Treasury consent to the 
exemption or not?
    Secretary Lew. The design of the preliminary approach that 
he liked is something we drove forward. We not just consented; 
we drove it forward.
    Chairman Hensarling. The specific question had to do with 
the exemptions. That is the essential question.
    Mark Carney, who Chairs the Financial Stability Board, 
recently issued a memo, I believe last month, where he declared 
he expected, ``full, consistent and prompt implementation,'' of 
the agreed-upon FSB reforms.
    He went on to say, ``FSB will support the determined 
efforts of its members through enhanced monitoring of 
implementation and its efforts across all jurisdictions. We 
will regularly report our key findings to the G-20.''
    So you again have stated that the FSB does not impose 
rules. However, in following their lead in designating non-bank 
SIFIs here in the United States, which is what FSOC has done, 
it sounds a little bit like a fait accompli to me.
    I have a similar question: Did Treasury consent to the 
issuance of this memo? Are you aware of the memo from the 
Chairman of the Financial Stability Board?
    Secretary Lew. Mr. Chairman, the effort on TLAC has been 
something that we have been very much driving forward. I was 
personally engaged with a number of countries, because we think 
it is very important that the largest financial institutions in 
the world have deep reserves that can be drawn in so that 
taxpayers are not held accountable if there are failures in the 
future.
    I am happy to get back to you on all the specific pieces of 
action. Obviously, I am not sitting there in the meetings 
myself.
    Chairman Hensarling. Okay. So are you aware or unaware of 
the memo that I just quoted?
    Secretary Lew. Mr. Chairman, I have read a lot of memos 
on--from the FSB and on TLAC. I would have to look at the 
specific memo that you are reading from.
    Chairman Hensarling. Okay. My time has expired.
    The Chair now recognizes the ranking member for 5 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman, and welcome 
again, Mr. Secretary. First, a word about the World Bank, and 
then I have some questions on the domestic agenda here.
    You made reference in your testimony to the World Bank's 
ongoing safeguards review, which will result in revised 
policies that will govern World Bank lending for years to come.
    I welcome your statement that you are working hard to 
ensure that the revised safeguards will strengthen the 
protection provided by these policies, having read myself the 
first draft of the updated safeguards proposed by bank 
management.
    I must tell you, you have your work cut out for you. I 
think the bank's credibility takes a hard hit whenever the bank 
defends the current draft as a broadening and strengthening of 
the existing policies. It doesn't strengthen them, and nobody 
outside the bank believes that they do.
    I just wanted to share that with you.
    On the domestic front, as you know, unregulated mortgage 
credit, oftentimes offered with predatory features to 
vulnerable households without the sophistication to understand 
the terms, was a key cause of the 2008 crisis.
    Fortunately, the Dodd-Frank Act took key steps to address 
this problem with the creation of the Consumer Financial 
Protection Bureau (CFPB).
    At the same time, the CFPB has taken many actions to tailor 
its rulemaking when it comes to small banks and credit unions 
and has the authority to amend these regulations if access to 
credit, especially for our most vulnerable population, become 
too constrained.
    Even though the CFPB has been exceptionally reasonable in 
their approach, last year the House passed a number of bills to 
provide additional exemptions to consumer protection, citing 
lack of credit for low-income borrowers.
    Can you tell us what data the Treasury has on credit 
availability since the crisis and whether you think Congress 
needs to pursue legislation to create more exemptions from 
consumer protection rules? We need some help.
    Secretary Lew. Congresswoman Waters, I think that if you 
look at the current experience in the mortgage market, it is a 
little bit too hard, actually, for people to get credit in some 
cases.
    People with strong credit records and the ability to repay 
are having a harder time than they should. It takes the most 
pristine credit.
    If you look back to what we were trying to stop after the 
financial crisis, it was to stop people from getting in over 
their heads with mortgages they didn't understand, with hidden 
fees and all kinds of charges. I think that if you look at the 
way the regulatory agencies have been looking at this, they 
have been trying to be clear in giving guidance to financial 
institutions who have, if anything, been tighter in their 
credit standards than might have been intended.
    On the other hand, they are not going back and saying we 
should go back to the kinds of policies that let people get 
into mortgages they couldn't afford and to do it in ways that 
they couldn't understand through all kinds of hidden fees and 
charges.
    So I think it is a balance. The regulatory process is very 
attuned to this. You are seeing discussions of this in both the 
FHA and the FHFA in terms of the putback-risk discussions.
    My own view is that it is part of a larger trend than the 
financial services industry, where they are getting more 
conservative in some ways, in some areas, than was intended. 
That will come up in terms of some other questions that I 
believe will come up this morning.
    We need to be clear about what we are trying to do and why. 
I think that it is very important to maintain the regulatory 
structure so that we don't go back to a system where lenders 
can get mortgages out there so that people are over their head 
and highly likely to default.
    On the other hand, if people are creditworthy, they should 
have access to credit.
    Ms. Waters. So we are witnessing this inability of our 
constituents, who certainly can afford to get mortgages, being 
shut down and not being given credit by many of our banks, as 
you have stated.
    At the same time, we still see actions by banks that are 
similar to what we thought we were stopping, following the 2008 
crisis.
    We had long discussions about everything from no-doc loans 
to other kinds of exotic products that were being put out 
there, and it seems that the banks still want to have some kind 
of way to continue these efforts and at the same time, put us 
all in a bind back, shutting down on credit until we basically 
agree with them.
    Secretary Lew. I actually think if you look at the rules 
that have come out, the CFPB rules for example, I think they 
very clearly make it impossible to issue the kinds of dangerous 
products that were issued before. It has made our system safer. 
That is not the problem.
    The question is, for people who are getting mortgages that 
are straightforward, English-language document mortgages with 
fees and charges that are clear and costs that they can afford, 
are the credit standards so tight that people who are 
creditworthy are not getting credit? We are very much of the 
view that people who are creditworthy should have access to 
credit.
    We are very much opposed to the idea that we should go back 
to loosening the rules to allow the kinds of mortgages that 
help create the financial crisis.
    Ms. Waters. So do you believe that what the CFPB has been 
doing and the approach that they are taking is the right 
approach and somehow that is going to help open up credit 
opportunity or--what do we do about opening up access to 
credit?
    Secretary Lew. I think that they have made a lot of 
important changes that reform some of the basic problems. I 
think that to the extent that the financial institutions are 
concerned, they want to be even more constrained than was 
intended, it is sensible for agencies like FHA and FHFA to be 
looking at things like putback risk to try and clarify it.
    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, for 5 minutes.
    Mr. Huizenga. Thank you, Mr. Chairman. Secretary Lew. I 
want to hit on a couple of things.
    First, I want to discuss a little bit about international 
insurance, then some of the financial services trade 
negotiations, the IMF, as I talked about in my opening 
statement.
    But I am going to start off with the insurance situation, 
and for coming out of the State legislature, I am very familiar 
with the State regulatory-based oversight that we have through 
our States. But in the latter half of 2014, we saw Treasury 
representatives and the Federal Reserve vote at the 
International Association of Insurance Supervisors (IAIS) to 
shut down the transparent process and eliminate stakeholder 
participation in the formulation of these insurance standards.
    And accordingly, how does Treasury justify the fact that 
international discussion is really undercut and not supported 
by the State regulators, even as they had formerly requested 
opposition to closing those meetings at IAIS, and their 
opposition to the one-size-fits-all global capital standards in 
that, and how do you view and encourage transparency in these 
international meetings and negotiations?
    Secretary Lew. Congressman, I think that if you look at the 
review of insurance rules, there has been a lot of give and 
take, a lot of review of views from the industry, from State 
regulators, and from national voices.
    Mr. Huizenga. They don't say that now, though.
    Secretary Lew. Well, no. There is a lot of back and forth.
    I think that--
    Mr. Huizenga. But you don't deny that IAIS has booted them 
out of the process?
    Secretary Lew. They are still very much taking comments 
from outside--
    Mr. Huizenga. Taking comments is very different, though, 
than being at the table when the discussions are happening.
    I guess my question is--and I know this has come up 
repeatedly when you have appeared here--what is the active role 
that Treasury is taking when we are going into these 
negotiations? My suspicion is that this is a longer 
conversation. And I would love to have a written response from 
you in a timely fashion on this specifically, because I think 
this is something I want to dive deeper into in my 
subcommittee, the Monetary Policy and Trade Subcommittee.
    Secretary Lew. I am happy to pursue it outside of the 
hearing in greater detail. I would just say that--
    Mr. Huizenga. Then you will give me a written response in a 
timely fashion?
    Secretary Lew. I will answer any questions that I am asked.
    Mr. Huizenga. I am most concerned about the ``timely 
fashion'' part. I know sometimes that can take a while.
    Secretary Lew. We will do our best.
    I would just say that we do have a history, as you stated, 
of State regulation of the insurance industry. We also have to 
have some ability to look at these issues nationally. We have 
tried to strike a balance where we have been respectful of the 
State regulatory process and history, but international bodies 
speak with one voice.
    Mr. Huizenga. Yes, I understand that. They certainly feel a 
bit cut out.
    As TTIP, as we are discussing in the negotiations, TTIP 
negotiations continue. It seems to me that the U.S. position on 
financial services has been to negotiate on market access 
issues, but refuse to encourage or engage on the regulatory 
side. I understand the E.U. has put forth a proposal on 
regulatory issues to U.S. negotiators. Why does Treasury refuse 
to engage on this topic?
    Secretary Lew. We have been very clear with our European 
counterparts that we think market access is an appropriate 
issue to be negotiated in a trade negotiation. We do not 
believe that prudential standards should be subjected to trade 
negotiating processes or trade remedies.
    Mr. Huizenga. Isn't there a way, though, to discuss 
regulatory proposals that doesn't undermine the post-crisis 
ones that have occurred on both sides of the Atlantic?
    Secretary Lew. Sure. I think we have in the FSB and the G-
20 and the OECD--a lot of international conversations where we 
looked to try and reach high standards that are as harmonized 
as possible in a system of national responsibility. What I 
don't think is appropriate is to permit our prudential 
standards, for example, to be challenged in a trade context.
    Mr. Huizenga. But it doesn't sound like, going back to my 
first question, that you are engaging those people who are 
going to be there trying to make sure and working with our 
Treasury--
    Secretary Lew. Oh, no, I have engaged on an ongoing basis. 
I just met with Lord Hill in Washington a few weeks ago. I met 
with him in Brussels a month or so ago. So we engage quite, 
quite closely.
    Mr. Huizenga. In my remaining minute here, I want to hit on 
the IMF. Do you agree with Secretary Kerry that there is no 
permanency to the United States' line of credit at the IMF? And 
that these resources are not in fact permanent, but expire, and 
that, to quote him, ``It has to be repaid at the end of 5 years 
if it is not renewed?'' Those comments of his were made more 
than 5 years ago.
    Secretary Lew. Look, I think that what I believe about the 
IMF is that we very much need to ratify the IMF reforms so that 
our commitment to the new arrangement to borrow can be 
converted into a capital contribution in a strengthened system 
that has the resources to deal with the next financial crisis 
when it comes.
    Mr. Huizenga. So you don't believe that we should be able 
to close down this line of credit? It is a special line of 
credit that 5 years ago now-Secretary Kerry had sort of 
shepherded through and was touting as, ``Hey, in 5 years, this 
is going to be repaid.''
    Secretary Lew. I think that we have made it clear that we 
think the IMF reforms are the best way to have a strong IMF and 
a U.S. role in the IMF that has the leadership role that we 
need for our national security.
    Mr. Huizenga. That ticking in the background is a signal to 
both of us, but I do appreciate your commitment to get back to 
me in a timely manner with some written responses.
    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.
    Welcome, Mr. Secretary. Happy St. Patrick's Day.
    Secretary Lew. And to you.
    Mr. Lynch. Nice tie.
    Let me stay with the topics that Mr. Huizenga has raised. 
Let's go back to the IMF quota reform issue. As it stands now, 
does this do anything to the voting weight either of the E.U. 
in respect to the United States? I know that sometimes these 
can shift over time, and I am just concerned about whether or 
not we have, in a governance respect, the same weight and the 
same influence that we have today.
    Secretary Lew. Congressman, the thing about the IMF reforms 
that is so important is that it preserves the U.S. position and 
it provides for some reallocation of representation basically 
between Europe and emerging economies. It was a difficult 
negotiation. It was critical to us to maintain the U.S. 
position in the IMF. And the reason it is so important to 
ratify the agreement is that we are the last country to step 
forward. We right now are the only country standing in the way 
of having the IMF reform become the policy of the IMF.
    The impatience around the world is becoming extremely high. 
It is as if the United States has said that we recognize that 
the emerging countries need to have more of a voice, but now we 
won't take the step, even though it doesn't hurt the United 
States. On the contrary, it strengthens our position.
    I think it is critically important to our leadership not 
just in the IMF, but more broadly for us to get this done.
    Mr. Lynch. Okay.
    And you feel comfortable that we are not--I could 
understand if we were reluctant to engage in a deal where our 
loss was everyone else's gain. I totally understand taking a 
pro-American position on that. But you are quite sure that we 
are not giving the store away here?
    Secretary Lew. Absolutely. And I have to say, ironically, 
we are being criticized on both sides by the countries that 
gain and the countries that lose for standing in the way of the 
reforms.
    Mr. Lynch. Yes. Okay. Let me go over to the IAIS issue, the 
International Association of Insurance Supervisors. We are 
trying to work out some reforms there as well, adopt some 
standards. I understand the need for this and I understand that 
the AIG issue is probably hanging out there on behalf of some 
of our international neighbors about the need for reform.
    But I have a lot of big insurers in my district, and we 
have a lot of insurers that do a very good job here in the 
United States. And I am just concerned about whether the 
integrity of the insurance system is being maintained during 
those negotiations. I know Mr. Huizenga was concerned about the 
lack of our people at the table. Just who is at the table? And 
how vigorous is our representation?
    Secretary Lew. Congressman, we are--Treasury is at the 
table. The bank regulators are at the table. And I think that 
the real question is: Do we have the right kind of standard for 
insurance companies? And we have made it clear that we think 
insurance companies should be held to an insurance company kind 
of standard.
    Just last year, Congress passed a law and it was signed 
into law that permits our regulators to take account of that as 
they impose capital requirements on insurance companies. It is 
now being implemented here domestically. We will control the 
United States policy through our regulatory agencies. So if we 
designate an institution in the United States, the Fed will 
make that decision. And fundamentally, it is the national 
authority.
    Mr. Lynch. All right. Now, I am down to my last minute. Let 
me try to drill down on that issue a little bit more. This 
concern is regarding the IAIS Common Framework for the 
Supervision of Internationally Active Insurance Groups 
(ComFrame), which is they are trying to compel our side to 
basically adopt this ComFrame. And I haven't read it, I 
confess, but it seems to have the attention of our insurance 
industry and I am a little concerned about that.
    And secondly, we have GSIIs now, which are globally 
systemically important insurers. But obviously, that brings 
enhanced supervision on our insurers here in the United States 
vis-a-vis our international neighbors.
    Secretary Lew. Ultimately, the only thing that puts 
enhanced standards on our companies is the regulatory actions 
taken in the United States. The international process is trying 
to drive the international standard to a high level. But each 
national authority retains the responsibility to regulate its 
own.
    And that is--when we make a designation at FSOC, we are the 
national authority doing the designation. If a firm is 
designated, the Fed will be the national authority making the--
    Mr. Lynch. I think they are concerned about a follow-on 
effect. In other words, you adopt something at the 
international level that requires us to do as you say, change--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the--
    Mr. Lynch. Thank you, Mr. Chairman.
    Chairman Hensarling. --gentleman from North Carolina, Mr. 
McHenry, vice chairman of the committee.
    Mr. McHenry. Mr. Secretary, Federal Reserve Chair Yellen 
was here 2 weeks ago, and I asked her about the cumulative cost 
of regulations that the Fed and FSOC are proposing. She 
continually referred to a 2010 study by the Basel Committee as 
a reference point. I pointed out that it is 5 years old, which 
was long before we fully implemented or got this far in the 
process of new regulations.
    As Chair of the FSOC, has there been a study done on the 
cumulative costs under--
    Secretary Lew. Congressman, I am not sure what constitutes 
a study, but I think that the regulators are attentive to the 
cumulative impact of the steps that they are taking.
    Mr. McHenry. So ``attentive,'' but is there some point of 
reference for the cumulative cost of these new regulations?
    Secretary Lew. Each one, for example, requires--
    Mr. McHenry. You can say, ``no.'' It is okay. I am just 
trying to get a straightforward answer.
    Secretary Lew. I am happy to answer the question. I am 
trying to answer it.
    If you look at each of the steps taken, you can look and 
see what the capital requirements are and you can add up the 
burden, as it were. And I think that it has been very clear 
that there was a goal of internalizing risk in firms which does 
increase somewhat the costs to firms of their activities.
    We think that is appropriate. It is appropriate because it 
should be the burden of a firm, not the burden of the public, 
if anything goes wrong. And having things like more capital is 
part of addressing the risk that caused the financial crisis in 
the first place.
    Mr. McHenry. But is there a broader review that you could 
point to?
    Secretary Lew. I would have to go back and check if there 
is any kind of a comprehensive review. But the costs that are I 
think most significant for firms are the ones I am describing.
    Mr. McHenry. Yes. Would you commit to providing the 
information to the committee?
    Secretary Lew. I am happy to go back and look at what we 
have.
    Mr. McHenry. Thank you.
    So, back in June you testified before this committee that 
it was premature, in your words, to evaluate the effects of 
government regulation on market-making activities--the Volcker 
Rule, basically--which has in some regards caused liquidity to 
vanish in certain marketplaces.
    Is that still your view, that it is still too premature?
    Secretary Lew. I think as a practical matter, the Volcker 
Rule is not in effect. So, one is asking what have firms done 
in anticipation, not in compliance or because of requirement. I 
do think that there has been some movement by firms to get 
ready for the Volcker rule. I think that is a good thing 
because they have had fair notice and there was some extension 
of the deadline to make sure they could prepare in an orderly 
way.
    And if we are saying to financial institutions that they 
should exit the proprietary business, to do it in an instant is 
not the right way to do it.
    So I think it is premature to evaluate what its full impact 
is, but I think it is a good thing that the industry is 
preparing for it.
    Mr. McHenry. We had pretty significant volatility on 
October 15th of last year in some government bonds. Did you 
follow that?
    Secretary Lew. I followed it, yes.
    Mr. McHenry. Do you think that is at all connected to 
diminished liquidity provided by institutions that have gotten 
out of prop trading in anticipation of Volcker?
    Secretary Lew. Congressman, what was going on, on October 
15th, was a complicated set of things. There was a lot of news 
going on, so that there was generally an off-risk kind of mood 
in the market that day. I think that there are many who jumped 
to a conclusion, prematurely, that it could all be set at the--
at regulatory practices.
    I don't think that--there is no evidence I have seen that 
suggests that that was the predominant factors. We are looking 
at--
    Mr. McHenry. Was it a factor, though?
    Secretary Lew. Look, there were many things going on. And--
    Mr. McHenry. You have said there were many things going on. 
But do you think the Volcker requirements, that firms in 
anticipation of Volcker have gotten out of this place, that 
some of the shock absorbers aren't there in the system?
    That is a reasonable question, isn't it?
    Secretary Lew. I think the evolution of the market is being 
driven by a lot of factors at the same time. So I am reluctant 
to attribute causality to any one thing.
    You have different players in the market--a different mix 
of where the velocity is coming from--many of whom are not 
covered by Volcker.
    So I think that this is something that requires a lot of 
analysis. We are doing it, and I would be happy to share with 
you a more complete analysis when we complete it.
    Mr. McHenry. In that regard, I think FSOC is creating more 
problems by diminishing the liquidity in the marketplace, which 
will create future problems, potentially, in the marketplace. 
Is that a concern to you as Chairman of the FSOC?
    Secretary Lew. We are always--we are concerned about making 
sure that we maintain the most liquid markets in the world. I 
do think that it is a mistake to attribute to regulatory policy 
what happened on October 15th. And I would be happy to follow 
up with you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from California, Mr. 
Sherman.
    Mr. Sherman. Just one comment for the record, our materials 
for this hearing talk about preserving our veto at the IMF. We 
don't have a veto at the IMF. I have talked to the number two 
over there, and asked if we could prevent loans to or economic 
aid to Iran. He made it very clear that was not the case.
    I remember when a prior Administration urged us to put more 
money in the World Bank because we had a veto there, and Iran 
got over a billion dollars of loans from the World Bank over 
our objections.
    So, we can devote more resources to the IMF, but we still 
don't get a veto over decisions to assist individual countries.
    I want to focus on currency manipulation. The 
Administration wants trust on an even fast track on the Trans-
Pacific Partnership (TPP). But they told us they are not going 
to include currency manipulation in that. They have bought 
into, because of this idea that if somebody in the world says 
that we are manipulating our currency because we have interest 
rate policies, that, therefore, we better not talk about the 
deliberate and true and actual manipulation of other countries.
    Every time I raise this question, the answer I get is as to 
why we are not sanctioning China for its currency manipulation 
is, ``China is cheating less.'' And I haven't been married as 
long as many of the members of this committee, but I have been 
advised by at least a few not to use the line, ``But, honey, I 
am cheating less.''
    [laughter]
    The law is clear. If China is manipulating its currency, 
you are supposed to designate them. Other than the fact that 
would make them really mad, and they are cheating less, why 
haven't you carried out existing law and designated China a 
currency manipulator?
    Secretary Lew. Congressman, we have engaged directly with 
China in an aggressive way on this question of currency policy, 
and we have made enormous progress. And I think if you look 
at--
    Mr. Sherman. You are getting them to cheat less, but you 
are not following the law.
    Secretary Lew. Congressman, I think if you look at what the 
goal of the currency report is, we have put a bright light on 
practices that need to change. We have been aggressive in 
international bodies and in bilateral negotiations to push hard 
to get change. And with China, we have, in the last year, 
gotten some substantial recognition of that. Both in terms of 
not intervening in the way--
    Mr. Sherman. Mr. Secretary, you are not following the law, 
but you have persuaded them to cheat less.
    Secretary Lew. But, Congressman, if I would say, the 
consequence comes from the designation you are describing is an 
intensive consultation process. We are doing that.
    Mr. Sherman. What about the consequence to our 
constitutional system when the Executive Branch takes the 
attitude that Congress doesn't know what it is doing, so we are 
not going to follow the law?
    Secretary Lew. I would say the damage that TARP has done to 
our social contract, the damage that an attitude of, we 
shouldn't follow the law because it will have bad consequences, 
does to the Nation's social contract is very significant.
    I would just say if you look at the record--
    Mr. Sherman. Mr. Secretary, I have to go on to the next 
point. The last time you were here, and the time before that, I 
asked you to take a look at worldwide unitary, so that we could 
finally tax international corporations in a fair manner. You 
asked me to talk to your assistant Secretary for tax policy, 
and you told me that you personally would look into it.
    He said that he couldn't be bothered to look at it; he was 
too busy. So I am going to stop asking you about it. But if we 
were serious about taxing multinational corporations, we would 
be looking at it seriously.
    We are told that some of the giant banks are too-big-to-
jail. We have had large financial institutions abroad conspire 
with U.S. taxpayers to deliberately, intentionally--not avoid 
taxes, it isn't a loophole, but just cheat on taxes, to the 
tune of millions of dollars. But all of these people are really 
rich taxpayers. Are they too-big-to jail? Too-well-connected-
to-jail?
    You have been given the records of thousands of those who 
have conspired deliberately in a premeditated manner to cheat 
on their U.S. taxes. Is anybody going to jail?
    Secretary Lew. So, Congressman, on law--on prosecutory 
matters, we don't--
    Mr. Sherman. Has the Treasury Department put together a 
criminal case? Have you called the attorney general and said 
that we have to give a high priority to prosecuting, because if 
we don't, our ``voluntary'' tax system doesn't work?
    Secretary Lew. I think we have been clear that our policy 
is that no one is beyond the law.
    Mr. Sherman. Except--yes, but no one is in jail.
    I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from New Jersey, Mr. 
Garrett, chairman of our Capital Markets Subcommittee.
    Mr. Garrett. Thank you. I think I will follow along the 
issue of whether the Administration follows the law.
    Mr. Secretary, you have been in government for much of your 
professional career. You spent the first 2 years of the Obama 
Administration, 2009 to November 2010, as the Deputy Secretary 
of State for Management and Resources. And, according to their 
Web site, that position serves as the Chief Operating Officer 
for the Department. The Deputy Secretary serves as the 
principal advisor to the Secretary on overall supervision and 
direction of resource allocation and the management activities 
of the Department.
    So, you were the Department's Chief Operating Officer 
during that period of time under Secretary Clinton, responsible 
for advising Secretary Clinton on resource allocation. While 
you were at the State Department, were you also responsible for 
enforcing the Department's policies regarding the use of 
personal email accounts and record retention?
    And, if not, who was responsible?
    Secretary Lew. Congressman, I was at State during that 
period, and I was responsible for a vast array of 
responsibilities, both in terms of managing the Department and 
our international--
    Mr. Garrett. Were you responsible for the enforcement of 
the policy regarding emails?
    Secretary Lew. I don't recall having had a lot of 
conversations--any conversations that I remember on--
    Mr. Garrett. So, who was responsible?
    Secretary Lew. I would defer to the State Department. They 
are looking at this. And they would be happy to respond.
    Mr. Garrett. You were a Chief Operating Officer, so 
operation of the equipment and all the rest and the policy--
that was not your responsibility?
    Secretary Lew. Clearly, the functions that did the 
administrative work at the State Department reported up the 
line. I am telling you I didn't spend a great deal of my time 
on that. I was responsible--
    Mr. Garrett. Whether or not you spent much time on it, were 
you responsible?
    Secretary Lew. I take responsibility for the operations 
that reported to me at the State Department.
    Mr. Garrett. Were personal email accounts part of your 
responsibility?
    Secretary Lew. Personal email accounts are not part of the 
State Department.
    Mr. Garrett. Were you responsible for the enforcement of 
the policy regarding personal email accounts?
    You don't recall? Is that what you are saying?
    Secretary Lew. Congressman, I don't recall being involved 
in policy making--
    Mr. Garrett. Did you discuss with the Secretary whether any 
Federal law, regulation, or Department policies prohibited her 
from using private or non-government accounts?
    Secretary Lew. I have no recollection of any discussion.
    Mr. Garrett. Did you ever approve, then, her request to use 
personal email accounts?
    Secretary Lew. Not to my recollection.
    Mr. Garrett. Okay. Were you aware that the Secretary was 
using personal email accounts to conduct State Department 
business?
    Secretary Lew. Congressman, the State Department is going 
through all of this material--
    Mr. Garrett. I know. But I have you right here, so I am 
asking you the question.
    Secretary Lew. Look, I am--
    Mr. Garrett. Were you aware that she was using it at the 
time?
    Secretary Lew. I was aware that she was emailing with 
people. I didn't pay a lot of attention to what email she was 
using.
    Mr. Garrett. Really? I just emailed my staff a moment ago 
on another matter, and as soon as I emailed them--even though 
it is an old BlackBerry which has terrible service and I am not 
very happy with it--it has their name and their account right 
on top of it.
    I assume you were in contact with the Secretary on a 
regular basis?
    Secretary Lew. I actually met--my normal communications 
with her were in person or on the phone.
    Mr. Garrett. That was your normal way. But were you also in 
contact with her on email?
    Secretary Lew. Occasionally.
    Mr. Garrett. Occasionally. And so, you are saying during 
that course of 2 years you never noticed whether or not--where 
her account was coming from?
    Secretary Lew. Congressman, I am telling you that at the 
time I was mostly paying attention to the substance of what I 
was communicating.
    Mr. Garrett. I do, too, but I often notice exactly where 
the email accounts are going to, because I know what the rules 
are about whether I should be doing something over a personal 
or private account.
    Are you telling me that you never made inquiry when you 
were emailing with people in the Department of State as to 
where you were emailing them?
    Is that what you just said?
    Secretary Lew. Congressman, I think in--
    Mr. Garrett. Could you answer that question? When you 
emailed somebody on official business, did you ever make notice 
of who you were emailing to and what account you were emailing 
to, or did you, as you just indicated--you said you did not pay 
attention to where you were emailing?
    Secretary Lew. No. When I put somebody's name in my 
BlackBerry, as you do with yours, an email address pops up 
and--
    Mr. Garrett. Right. And did you ever notice where you were 
emailing or did you disregard that policy?
    Secretary Lew. I just don't recall, Congressman.
    Mr. Garrett. No, I am not asking you whether you recall it. 
Do you now, as Secretary of the Treasury, notice where you are 
emailing to?
    Secretary Lew. Our policy at Treasury is clear.
    Mr. Garrett. I understand your policy. What do you actually 
do? Do you make notice of where you are emailing to, or do you 
disregard that?
    Secretary Lew. I certainly--I am always looking to make 
sure it is the right person--
    Mr. Garrett. Excellent. Were you doing that when you were 
under the--
    Secretary Lew. Yes.
    Mr. Garrett. --capacity there? You just said you do it now. 
Did you do it back then?
    Secretary Lew. I think we all know that you put a name in, 
and sometimes you get a name that isn't the name that you 
intended--
    Mr. Garrett. Sometimes, right?
    Secretary Lew. --and we want to make sure--
    Mr. Garrett. A moment ago, you said you always checked. Did 
you check when you were emailing to Secretary Clinton?
    Secretary Lew. When somebody's name pops up, it doesn't 
automatically pop up--
    Mr. Garrett. A moment ago, you said you always checked. Did 
you check back then, or you do not recall?
    Secretary Lew. I don't know how your email system works, 
but often the name pops up and not the full email address.
    Mr. Garrett. I understand. So you are telling me that when 
you email people now as Treasury Secretary and also--
    Secretary Lew. I make sure it is the right person.
    Mr. Garrett. You did not ever check to see where it was 
going to? As long as the name was up there, that was 
satisfactory for you? You did not make the inquiry as to where 
you were emailing? Is that what you are telling me?
    Secretary Lew. In my address book, I have people's official 
address, and that is where I email to.
    Mr. Garrett. And when someone--so you never make the 
further check?
    Thank you.
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the gentleman from Georgia, Mr. Scott.
    Mr. Scott. Thank you.
    Welcome, Secretary Lew.
    Let me first start out with asking you, when we were 
dealing with the Wall Street reform and TARP, we in this 
committee put forward what we refer to as the Hardest Hit 
program, which was to help struggling homeowners stay in their 
homes.
    And it amounted to roughly about $4.5 billion. My State of 
Georgia's share was $39 million.
    But as a part of the agreement in the legislation that we 
passed, we put a sunset date that said whatever balance the 
State does not use by the end of 2016 returns to the Treasury 
Department.
    So my question is, how are we doing? Do you have a system 
in place in the Treasury Department where you are gauging these 
statements?
    The need is tremendously great, as you know, and continues 
to be. We now have only, according to the legislation, about 21 
months before the end of 2016 when the balance of the money not 
used comes back to you.
    Do you have a report on how these States are progressing? 
From our indication, certainly in a hard-hit State like 
Georgia, none of the money should be coming back; much of it 
goes to help struggling homeowners to be able to pay for their 
mortgage for up to 24 months. It is desperately needed, 
especially for our veterans, many of whom are facing mortgage 
problems.
    How are we doing on that, and do you have any system in 
place to gauge how these States are doing it to make sure that 
they are leaving that money in their States to help the 
American people?
    Secretary Lew. Congressman, we do very much want each of 
the States to use their hardest-hit fund allocations for the 
purpose for which it was designed.
    We have tried to be flexible in working with States to make 
sure that the funds can be used not just for some of the more 
obvious purposes but for things like, in Michigan, the 
destruction of housing that is a blight on the community.
    I would have to go back and check on what the State-by-
State numbers are--
    Mr. Scott. Let me ask you to do that. My time is short.
    Secretary Lew. But we are working on it to make sure the 
money gets--
    Mr. Scott. Yes. If you could--I am sure other members on 
the committee would like to know how their States are doing, 
but I am particularly concerned--
    Secretary Lew. I would be happy to get back to you.
    Mr. Scott. --about what balance is left in the State of 
Georgia, that $39 million, so we might be able to light an 
additional fire under it to make sure that money stays in 
Georgia.
    Now, let me ask you about ISIL, if I may. What steps has 
the Treasury Department taken to engage with our allies abroad 
in disrupting ISIL' terrorist funding?
    And particularly, to what extent are countries across 
Europe and in the Middle East coming together behind a common 
strategy to disrupt ISIL financing?
    Secretary Lew. Congressman, we have worked very closely 
with our allies in Europe and in the region to do everything we 
can to stop the flow of funds to support ISIL.
    I think--
    Mr. Scott. Specifically, could you give us an idea?
    Secretary Lew. There are different countries that have 
different degrees of visibility into where money is flowing, so 
we have had, on a bilateral basis, conversations with many 
countries to make sure they put their resources to bear, to 
look at questionable entities and individuals.
    I have had many conversations at a very senior level with 
governments in the region to get the commitment to put those 
resources into it.
    I think the reality of ISIL funding is that it is not 
principally coming from money flowing from outside of the 
country in. The way ISIL has been funded in part has been to 
conquer territory and to take the bank vaults and to take the 
money in the bank vaults. It has been to pressure people in the 
area to make payments to support ISIL.
    Mr. Scott. Have we been able to increase our participation 
with Turkey, for example, in terms of the oil?
    Secretary Lew. Yes. We have worked closely with Turkey, 
brought a lot of pressure to bear for Turkey to be attentive to 
and effective in controlling the flow of oil.
    Frankly, our military actions have done quite a lot to 
disrupt some of that oil flow. Turkey has pledged to be 
cooperative, but it is a very long border, and there are very 
informal means of moving contraband across the border.
    So it is a difficult challenge, but we are very much 
engaged with them to try and stop it.
    Mr. Scott. Thank you, Mr. Secretary.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from Texas, Mr. 
Neugebauer, chairman of our Financial Institutions 
Subcommittee.
    Mr. Neugebauer. Thank you, Mr. Chairman. And thank you, Mr. 
Secretary, for being here.
    Secretary Lew, you serve as Chairman of the Financial 
Stability Oversight Council, and FSOC is charged with assessing 
risk and monitoring threats to the financial stability.
    In 2010, the Dodd-Frank Act designated that institutions 
above $50 billion in total assets would be considered 
systemically important, such that their collapse would pose a 
risk to the financial stability.
    Unfortunately, during that period of time there wasn't any 
analysis of the factors of what is a systemically important 
institution, and so arbitrarily, that number was set at $50 
billion.
    Today, there is quite honestly bipartisan and even 
bicameral support growing to increase this number, since during 
that time, they really didn't take the time to analyze whether 
it should be $50 billion or $75 billion or $25 billion; they 
just set that arbitrary number.
    As you know, Section 115 authorizes FSOC to recommend to 
the Federal Reserve that the $50 billion threshold for SIFI 
designation be raised.
    Unfortunately, I can't find any evidence where FSOC is 
actually taking any efforts to analyze the appropriate level 
for SIFI designation.
    So I guess the question I have today is, has FSOC completed 
a review under Section 115 to raise assets thresholds for 
application of enhanced prudential standards, yes or no?
    Secretary Lew. Congressman, FSOC and the members of FSOC, 
the regulators on FSOC, have been very attentive to the 
difference between small, medium, and large financial 
institutions.
    Mr. Neugebauer. But that wasn't the question. Whether they 
were being attentive or not, have they taken a detailed 
analysis under Section 115 to determine whether that additional 
threshold could be raised?
    Secretary Lew. I think the question of formal versus 
discussions is really the issue. There have been a lot of 
discussions about--
    Mr. Neugebauer. But I am talking about formal. So is the 
answer to formal, ``no?''
    Secretary Lew. I am not aware of a formal review, but there 
has been a lot--when I say attention, what I mean is that in 
the development of regulations, there is a lot of flexibility 
of what the standards should be for institutions of different 
size. Nobody has confused a $50 billion with a multi-trillion-
dollar institution.
    Mr. Neugebauer. If they didn't--they weren't able to 
ascertain that when the legislation was put in place. They gave 
you a vehicle.
    And I guess what I am hearing you saying is, maybe there 
has been discussion about that, but nothing has been done 
formally to address whether that threshold is too low. Is that 
correct?
    Secretary Lew. Yes, I am not aware of a formal review, 
Congressman.
    Mr. Neugebauer. Now, are you aware that last month, the 
Office of Financial Research (OFR) released a report examining 
systemic indicators. And they used a framework, I think, of 
five factors that--categories that were created under the Basel 
Committee.
    And interestingly enough, the results demonstrated huge 
variation between systemic importance between the largest banks 
and the regional regional banks. Are you familiar with that 
report?
    Secretary Lew. Yes.
    Mr. Neugebauer. And were you surprised at the results of 
that?
    Secretary Lew. Congressman, I think that I would have to 
look at the details of the report to comment on it in detail.
    Mr. Neugebauer. But did you find any flaws in that 
analysis? Did you think that was a fair analysis of the factors 
and that the results were--it is your report.
    Secretary Lew. No, OFR does independent work. I don't 
review their reports before they put them out.
    I would be happy to look at it and give you a thoughtful 
comment on it. I am not surprised they are looking at the 
issue, no.
    Mr. Neugebauer. But I guess the question is, is since you 
have the authority under Section 115 to do that, and there has 
been a lot of discussion about that, and even bipartisan 
support, bicameral support to do that, I am just kind of 
surprised why FSOC hasn't taken on the features of 115 to do 
that.
    Secretary Lew. Congressman, what we have--what I have 
focused on in the 2 years that I have been Chair of FSOC is to 
make sure that we implement the provisions of Dodd-Frank.
    At each step of the way, I have encouraged regulators to 
take note of the difference in what they do for small, medium, 
and large financial institutions. I believe they have done that 
on an ongoing basis. They are continuing to do so. And to the 
extent that they have flexibility, it is appropriate to use it.
    I am not ruling out the use of Section 115. I just think it 
is a question of first getting through the process of 
implementing the full Dodd-Frank Act, which is what we have 
been trying to do.
    Mr. Neugebauer. But would you then--if you have seen the 
OFR report and have seen the wide range there, would you agree 
that probably that process needs to take place, that the $50 
billion threshold is maybe not the right number?
    Secretary Lew. I don't think there is any question that a 
$50 billion institution has different characteristics than a 
money center bank.
    And I don't think that the only solution is to move the 
limit; it is to look at, what are you doing to make sure that 
you are appropriately looking at institutions of different 
sizes--
    Mr. Neugebauer. That is all the more reason to do the 
Section 115 analysis--
    Secretary Lew. I am happy to go back and take a look at it, 
but we have been very much focused on making sure that the 
burdens on medium-sized institutions are appropriate to those 
institutions.
    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. Thank you.
    And welcome, Secretary Lew. I would like to ask you to help 
me understand this chart. This chart is a chart that shows the 
economy. It begins in 2008, when President Obama was elected. 
And the deep red shows that the economy was hemorrhaging. We 
were losing 800,000 jobs a month.
    The blue tracks the job growth under President Obama and 
the picture begins to improve. We see 5 straight years of job 
growth, 12 million private sector jobs over the past 60 months.
    And what factors do you think were most important in 
achieving this dramatic turnaround, where we have grown 12 
million private sector jobs in the past 60 months and a 
positive job growth for our country?
    Of course, it is never good enough until every American has 
a job. But it certainly is a vast improvement.
    To what do you attribute this dramatic turnaround?
    Secretary Lew. Congresswoman Maloney, it is a little far, 
but I recognize that chart, even from this distance.
    Mrs. Maloney. I am sure you have seen this chart many 
times.
    Secretary Lew. The economy was in freefall when the 
President took office. That is what the red at the left-hand 
side of the chart shows. I have to start by saying the grit and 
determination of the American people are the reason that we 
have the ability to bounce back. But it is also because our 
government responded quickly and aggressively to deal with the 
causes of the problem and to get the economy moving again.
    So if you look around the world, where was the response to 
the financial crisis and the economic crisis?
    Most direct, it was the United States. We did financial 
reform to fix the problem. We went into the business of jump-
starting the economy with the Recovery Act, which I think made 
a huge difference and then with payroll tax cuts that gave 
additional boosts to the economy when it needed it.
    And our Fed led the world in thinking through how to use 
monetary policy creatively in a world of very low interest 
rates.
    I think if you look at what we did; we used all three 
levers--reform, fiscal policy, and monetary policy--
effectively. A lot of the world was slow to use the tools and 
then didn't use them all as effectively as they might.
    I think that one of the things our experience should teach 
the world is that you need to use policy and you need to use it 
at the right time to get the best recovery.
    Mrs. Maloney. Thank you.
    This committee has been somewhat critical of your role on 
FSOC and charging that it is apparently not transparent enough 
or accountable enough to Congress. But it seems to me that FSOC 
has been very accountable to Members of Congress and to 
stakeholders. And I will give one example from my own 
experience.
    Last year I sent you a letter suggesting four improvements 
to the process for designating companies as systemically 
important. And last month the FSOC adopted all four of those 
reforms as part of a package of improvements to the designation 
process.
    So it seems to me, from my experience, that FSOC is willing 
to engage constructively with Congress, respond to our concerns 
and our questions, and try to find common ground.
    In this case, you actually approved the suggestions that I 
put forward.
    Can you describe the process that FSOC went through to 
identify the reforms that were adopted last month?
    And do you think these reforms strike the right balance 
between providing companies with a fair, thorough, and 
transparent process and preserving the FSOC's ability to 
identify, monitor, and mitigate systemic risk?
    By the way, thank you for the FSOC decision on my concerns.
    Secretary Lew. Congresswoman, we thank you and other 
members of the committee for offering advice, because FSOC is a 
young organization. It is roughly 5 years old. I think we have 
very solid rules that we have used from the very beginning but, 
as with any organization, we should remain open to what can we 
do to improve in the future.
    The suggestions that you made were one of a number of 
sources of input. We did open the process so that there was 
consultation, both with Congress and with outside parties.
    And I think that what the changes demonstrate is that we 
very much want to have a process where parties know where they 
stand, and where the flow of information back and forth is as 
efficient and effective as possible.
    I would just note that before the rule change, there was a 
great deal of communication already back and forth with 
parties. It is not that we went from a world where there wasn't 
communication to a world where there is communication. But I 
think the rules changes are a good clarification going forward.
    Mrs. Maloney. Lastly, I would like to ask you about 
Germany, France, and Italy's decision, which was announced last 
night, to join the Asian infrastructure investment bank. This 
follows Britain's decision--
    Secretary Lew. Mr. Chairman, if I might just take a minute 
to respond?
    Chairman Hensarling. A very brief moment.
    Secretary Lew. Congresswoman, the issue about the Asia 
infrastructure investment bank is an important one. There are 
obviously vast needs in Asia and many parts of the world for 
infrastructure investment.
    Our concern has always been not is there going to be an 
investment institution, but will it adhere to the kinds of high 
standards that the international financial institutions have 
developed?
    Will it protect the rights of workers, protect the 
environment, and deal with corruption issues appropriately?
    Our point all along has been that anyone joining needs to 
ask those questions at the outset. And I hope before the final 
commitments are made, anyone who lends their name to this 
organization will make sure that the governance is appropriate.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    Mrs. Maloney. Thank you.
    Chairman Hensarling. 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 notice 
you have your green tie on this morning. My wife is half-Irish, 
so I mandatorily have to wear this one today.
    Secretary Lew. I spent 8 years in the office of Speaker 
O'Neill, so I was trained early.
    [laughter]
    Mr. Luetkemeyer. Thank you, sir.
    We have touched a little bit on some of the issues this 
morning that I want to talk about. I am the chairman of the 
Housing and Insurance Subcommittee so the insurance stuff is 
what I want to talk about this morning, especially with regards 
to international capital standards and how they would be 
implemented here in the United States.
    I had a meeting this morning with a group of insurance 
folks and they are very concerned, and I am very thankful that 
you said insurance--if I get this right--should be held to 
insurance company standards here in this country.
    So I assume from that comment that you want to regulate 
even companies that would not necessarily be big enough to fall 
under the international standards, continue to regulate them 
under the insurance standards that we have today.
    Is that correct?
    Secretary Lew. Congressman, the only companies that I am 
referring to are the relatively few companies that we have 
designated under the FSOC process that then go on for Federal 
oversight by the Fed. States are doing the regulation of firms 
on a day-to-day basis.
    Mr. Luetkemeyer. So basically what you are saying is you 
don't want to regulate at the Federal level then the rest of 
the insurance companies with international capital standards 
that you are putting on use for the big guys then, is that what 
you are going to do?
    Secretary Lew. The standards that I am describing are the 
ones that apply to the firms that are subject to Fed 
oversight--which as you know are--
    Mr. Luetkemeyer. GSIFIs or SIFIs, right.
    Secretary Lew. GSIFIs, yes.
    Mr. Luetkemeyer. So you are going to regulate them 
differently, then, with regard to capital standards?
    Secretary Lew. I think that, as I have heard from State 
regulators and from firms, the State regulatory process in 
general does apply insurance standards to insurance companies. 
So I think the concern was that in making a Federal 
designation, would the Fed have the flexibility to apply an 
insurance standard rather than a bank standard to those 
designated firms?
    And I think with the passage of the Collins Amendment, it 
is now clear that the Fed has that authority. So they will do 
so.
    The capital standards will reflect appropriate standards, 
which are being developed now, so I can't tell you specifically 
what those standards will be. Obviously, there is a difference 
between what is a pure insurance product and what are other 
forms of financial activity.
    Mr. Luetkemeyer. So I guess the question is, it your intent 
to subject domestic insurers that are not regulated at the 
Federal level to international capital standards? What would 
your answer be, yes or no?
    Secretary Lew. The process of insurance regulation in 
general is done at the State level.
    Mr. Luetkemeyer. Okay. So therefore you would not be 
willing--you are not going to do that?
    Secretary Lew. I think State regulators, like Federal 
regulators, aspire to best practices. So if there are best 
practices, that is what I would hope the States would use.
    Mr. Luetkemeyer. Okay. Quick question with regards to the 
SIFI designation, GSIFI situation.
    I was in the banking business for 35 years and I, for the 
life of me, cannot understand how you could have an insurance 
company that is systematically important. I realize you think 
they are important. But how can they bring our entire economy 
down?
    Since you are Chair of the FSOC, Mr. Secretary, what is the 
criteria that you used to determine those three insurance 
companies are systemically important enough to the point where 
you would bring the entire economy down?
    Secretary Lew. Congressman, as you know, in the case of 
each of the designations, there are hundreds of pages of 
analysis that support--
    Mr. Luetkemeyer. I guess my question is, do you have some 
criteria?
    Secretary Lew. The question is, are there transmission 
channels where the failure of one of those firms could lead to 
broader financial problems?
    And in the cases of each designation, after a detailed 
review, we reached the conclusion the designation was 
appropriate because that was the case.
    Mr. Luetkemeyer. Okay. If you have designated them--and we 
haven't really listed the criteria; you are just looking at the 
whole thing as a whole--is there a way to de-designate them?
    Secretary Lew. I am not saying we didn't list the criteria. 
We have detailed analysis. It is just--it is hard to answer in 
30 seconds.
    Mr. Luetkemeyer. But you don't have a set of criteria? You 
just sort of analyze it and just sort of say, it looks like it 
may.
    Do you have a set of criteria that you actually go down and 
check a box or list?
    Secretary Lew. I would be happy to send you the public 
documents that we have put out to go through in detailed 
analysis why those transmission channels were determined to 
present the risk.
    And in the second part of your question, the core 
activities of these businesses were subject to designation. It 
is the scope of their activities and--
    Mr. Luetkemeyer. Okay. I have one more question, really 
quickly. And my time has almost expired here.
    This morning in one of the political papers here in town, 
there was a headline that said that the Secret Service wants $8 
million to build a fake White House to train agents.
    Now, Mr. Secretary, please tell me we are not going to 
spend $8 million to build a fake White House to train when we 
have movie sets, we have all sorts of military bases around the 
world, and we can build virtual reality sorts of video games 
that can do all this. Please tell me we are not going to spend 
$8 million to build a fake White House?
    Secretary Lew. Congressman, I can't comment on what the 
proper training and practices of the Secret Service are.
    Mr. Luetkemeyer. Let me put it this way: Are you going to 
raise their budget by $8 million to do something like this?
    Secretary Lew. I don't have responsibility for the Secret 
Service. It was moved from the Department of the Treasury to 
the Department of Homeland Security. So--
    Mr. Luetkemeyer. Okay.
    Secretary Lew. --it is just not in my--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Massachusetts, 
Mr. Capuano.
    Mr. Capuano. Thank you, Mr. Chairman.
    How are you doing, Mr. Secretary? Happy St. Patrick's Day.
    Secretary Lew. And to you.
    Mr. Capuano. Mr. Secretary, I have one issue I want to pick 
a bone with you on, but before we do, I want to clear up a few 
very important things.
    Did you read Secretary Clinton's regular mail?
    Secretary Lew. No.
    Mr. Capuano. Did you check it before it came in, see who 
was writing her and what was in there?
    Secretary Lew. Only if she needed me to look at something.
    Mr. Capuano. So, after the fact?
    Did you tuck her in at night?
    Secretary Lew. I certainly did not.
    Mr. Capuano. Did you make sure she brushed her teeth?
    Secretary Lew. Do you really want me to answer these 
questions?
    Mr. Capuano. If we are going to ask ridiculous questions, I 
just think we may as well go to the logical extreme of 
absurdity.
    Let me ask you about a different issue. We will get off 
that one. I think I kind of made the point.
    Secretary Lew. You made your point.
    Mr. Capuano. Have 47 Members of Congress of either branch, 
because I wouldn't want to knock one branch over the other--
ever written to the FSB to say, ``Don't talk to you?''
    Secretary Lew. I am not aware of it, but--
    Mr. Capuano. Have 47 Members of Congress ever written to 
the International Association of Insurance Supervisors and 
said, ``Don't talk to the Secretary of the Treasury?''
    Secretary Lew. I am not aware of it.
    Mr. Capuano. Have they ever written to ISIL and said, ``We 
can't believe the Secretary of the Treasury is trying to do 
something to contain you?''
    Secretary Lew. Not to my knowledge.
    Mr. Capuano. Not to mine either. But if they do, would you 
let us know? Because I would like to know that Congress thinks 
you shouldn't be doing your job by talking to people on an 
international basis.
    But I do want to talk to you about one issue, and that is 
Fannie and Freddie. I know we have had this discussion briefly 
before, and I hope that you expected it to come up today.
    Since Fannie and Freddie went into receivership, the 
Federal Government--they borrowed $87.5 billion from the 
taxpayers. Very important, very difficult, very risky.
    But since that time, they have paid back $225.5 billion. 
That is about a $40 billion profit, give or take a 20 percent 
rate of return.
    Could you tell me what you have done with the $40 billion 
that you have gotten back, beyond what the taxpayers lent?
    Secretary Lew. Congressman, as you know, it becomes part of 
Federal receipts--
    Mr. Capuano. The general fund?
    Secretary Lew. --and the general fund. But--
    Mr. Capuano. So that goes in the general fund, and we, 
Congress, and you, the Administration, in the normal course, 
can spend it any way we want?
    Secretary Lew. As a practical matter, it is part of what 
has helped us reduce our overall--
    Mr. Capuano. I understand. More receipts is fine. I think 
the other side has problems with more receipts, not me. But I 
get that.
    But basically, it has come into the general fund for all 
intents and purposes, and we have spent it on whatever we 
wanted, which is fine. That is not the issue. I am not chasing 
that. That is a different debate.
    But that $40 billion is only the beginning.
    What have Fannie and Freddie been allowed to pay down on 
the $187 billion that they originally borrowed?
    Secretary Lew. Congressman, I think that the idea that they 
are kind of out of the woods is--
    Mr. Capuano. I didn't say that. I am asking--
    Secretary Lew. They are still--
    Mr. Capuano. I am asking what is happening with the money.
    Secretary Lew. There is still a Federal guarantee behind 
Fannie and Freddie.
    Mr. Capuano. I understand that, which I actually like and 
appreciate. Some of my colleagues don't, but I do.
    Secretary Lew. And exposure for taxpayers until there is 
housing finance reform and we move to--
    Mr. Capuano. Fair enough. How much has Fannie and Freddie--
what kind of capital reserves have Fannie and Freddie been able 
to build up?
    Secretary Lew. They have not built up a capital reserve.
    Mr. Capuano. Because we are sweeping all the money out and 
putting it into the general fund and spending--
    Secretary Lew. But until we move to a system beyond the 
current one, taxpayers are ultimately responsible, and they 
are--
    Mr. Capuano. But that has been the case since day one. That 
has been the case since the 1930s. Taxpayers were on the hook 
at every time.
    And they had a blip, and the taxpayers stepped in, as we 
promised we would do for 80 years, and now we have been paid 
back.
    The question is, when are we going to stop using this as a 
piggy bank?
    Secretary Lew. I don't think it is a--
    Mr. Capuano. I don't think we have to have a debate about 
reforming Fannie and Freddie. But alright, if that is the case, 
what is the Administration's proposal on how to move forward?
    Secretary Lew. Look, I think that the important question 
is, how do you move forward on housing finance reform? We have 
very much wanted to move forward. We think it is an important 
priority.
    I think that--
    Mr. Capuano. Have you submitted a proposal that I haven't 
seen?
    Secretary Lew. We were closely in the development of 
proposals, particularly on the Senate side, and have been 
engaged in trying to think through with others how to--
    Mr. Capuano. But those aren't moving forward, as we clearly 
both know.
    Secretary Lew. I don't disagree that progress has been 
slow--
    Mr. Capuano. If that is the case, how long are you going to 
keep holding Fannie and Freddie hostage?
    Because the reason I ask, it is not about Fannie and 
Freddie; it is about homeowners.
    By holding them hostage: first, you are not allowing Fannie 
and Freddie to capitalize; second, you are not allowing any 
funds to be left over from the Housing Trust Fund; and third, 
you are basically submitting homeowners to an additional tax 
for the purposes of general revenue, which doesn't sound fair 
to me. General revenue should be paid for by the general 
people.
    Secretary Lew. I don't agree with that analysis in terms of 
the impact on homeowners. I do think that there is a very 
serious question that as long as Fannie and Freddie are in 
conservatorship, there is a public exposure.
    Mr. Capuano. But there is conservatorship because you won't 
let them out. You won't let them pay off their debt.
    Secretary Lew. There is, I think, the need for housing 
finance reform in order to move beyond the current state.
    Mr. Capuano. If one of my constituents were to loan me 
money and not allow me to pay them back, what would you call 
that?
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from Wisconsin, Mr. 
Duffy, chairman of our Oversight and Investigations 
Subcommittee.
    Mr. Duffy. Thank you, Mr. Chairman. Good to see you, Mr. 
Lew.
    Just to follow up on Mr. Capuano's questions, the 
International Association of Insurance Advisors is not seeking 
nuclear weapons, are they?
    And in regard to making sure that Hillary Clinton brushes 
her teeth, you are not the Tooth Fairy, correct?
    But in regard to emails, you were the Under Secretary of 
State for Management, right?
    Secretary Lew. I was Deputy Secretary of State. The Under 
Secretary of State for Management was another position.
    Mr. Duffy. Maybe we can put up an organizational chart of 
the Department of State. You actually reported directly to 
Hillary Clinton, is that correct?
    Secretary Lew. Correct.
    Mr. Duffy. And it is fair to say that there are many modes 
of communication, but one of them with the Secretary was via 
email, right?
    Secretary Lew. Correct.
    Mr. Duffy. And it is your testimony today that you never 
noticed that she wasn't sending email or you were corresponding 
with her via a .gov account--
    Secretary Lew. Congressman--
    Mr. Duffy. --that you never realized that it was a Clinton 
email account?
    Secretary Lew. Congressman, I can answer the same question 
again.
    Mr. Duffy. I would like that.
    Secretary Lew. Yes, my general mode of communication with 
the Secretary was meetings and phone calls. I did email with 
her from time to time, and I don't remember exactly how it 
showed up--
    Mr. Duffy. I want to be very patient.
    But I would ask--President Obama has indicated this is 
going to be one of the most open and transparent governments we 
have ever seen, and as one of its Representatives, I would ask 
you to actually respond to the question, which is, did you ever 
notice that you were corresponding with Secretary Clinton on an 
account that was not a .gov account?
    Secretary Lew. Congressman, I always--
    Mr. Duffy. Is that a yes or a no?
    Secretary Lew. I always made sure I was corresponding with 
the right person.
    Mr. Duffy. That is not my--listen, listen. You are very 
good at this, not answering questions, and I appreciate the way 
you tap dance, but I think everyone in the room understands my 
question, and you are just not answering it.
    Did you know that you were corresponding with Secretary 
Clinton on an account that was not a .gov account? Yes or no?
    Secretary Lew. Congressman, I don't remember giving it a 
lot of thought--
    Mr. Duffy. That is not my--whether or not you gave it a lot 
of thought is not my question. My question is, did you know you 
were corresponding with her on an email that was--
    Secretary Lew. It was a long time ago.
    Mr. Duffy. So you are saying that you don't remember. Is 
that your testimony?
    Secretary Lew. I am just telling you--
    Mr. Duffy. Is it your testimony that you don't remember?
    Secretary Lew. I am just telling you that I--when I emailed 
with people--when I email people, I always make sure--
    Mr. Duffy. Is it fair to say you don't want to answer my 
question, Mr. Secretary? Because you know the question I am 
asking, and you are refusing to answer it.
    So I guess what I am assuming is, you knew you were 
corresponding with her on an account that was a nonofficial 
account. And I understand you don't want to lie to Congress, 
and I appreciate that, and you don't want to be part of a news 
story. I appreciate that. So you don't want to answer my 
question.
    But I think all of us here understand that you are saying, 
``I knew it that it was a nonofficial account. I just don't 
want to tell you here.'' Is that right?
    Secretary Lew. Look, Congressman, I have always endeavored 
to do my business in an open way--
    Mr. Duffy. Let me ask you, do you use for official business 
your official account, or have you ever used a nonofficial 
account for official business?
    Secretary Lew. I use my official email for official 
business except--and I follow all the--
    Mr. Duffy. Have you ever used a non-government account for 
official business?
    Secretary Lew. The only time I ever would use my personal 
account is if, for some reason I couldn't use my--
    Mr. Duffy. Have you ever used a non-government account for 
official government business?
    Secretary Lew. On occasion, consistent with common 
practice, if I can't use official email, I have. But it is not 
at all a regular occurrence.
    Mr. Duffy. I think this is an important issue. Let me give 
you a quote, and see if you can tell me who gave this one.
    ``Any unauthorized disclosure of classified information is 
a violation of our law and compromises our national security 
and our national defense requires that sensitive information be 
maintained in confidence to protect our citizens, our 
democratic institutions, and our homeland. Protecting 
information critical to our national security is the 
responsibility of each individual who is granted access to 
classified information.''
    Do you know who gave that quote?
    Secretary Lew. I do not know who gave that quote, but you 
are going to tell me.
    Mr. Duffy. I am going to tell you that it was you. You gave 
that quote. That was yours.
    And I would hope that we have laws in place that apply to 
everyone in government, not just a few in government.
    Secretary Lew. To be clear, classified information can't be 
communicated over normal official email either; it has to be on 
a classified system.
    Mr. Duffy. Do you believe that the Hillary Clinton email, 
clintonemail.com, is as secure as the .gov email system?
    Secretary Lew. There are others who are more expert looking 
at that. I--
    Mr. Duffy. But in your opinion, it is possible?
    Secretary Lew. I am not going to comment on something I 
don't really have the knowledge to comment on.
    Mr. Duffy. Being an operations guy, the COO, on the exit 
form that every State Department employee is to sign, were you 
pretty certain that everyone who exited the State Department 
would sign that appropriate documentation?
    Secretary Lew. I would assume it would be normal practice.
    Mr. Duffy. Okay. I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from New York, Mr. 
Meeks.
    Mr. Meeks. Thank you, Mr. Chairman.
    Mr. Secretary, I was at another hearing, and I walk in 
here, and I am confused.
    What is your title again? You are the Secretary of what?
    Secretary Lew. Treasury.
    Mr. Meeks. Treasury. Treasury.
    And you came here to talk about the Treasury and the 
economy, is that not correct?
    Secretary Lew. This is a hearing on international financial 
institutions, Congressman.
    Mr. Meeks. And that is significant to the people of the 
United States, right?
    Secretary Lew. I think it is very important.
    Mr. Meeks. And by the way, maybe because our economy has 
recovered--has it recovered substantially since 2008?
    Secretary Lew. It has recovered substantially. We are on 
the right path. We still have more work to do, but we are--the 
rest of the world is now looking to us as an example of how you 
bring yourself back.
    Mr. Meeks. And the unemployment rate must be very high or--
    Secretary Lew. As you know, it is in the mid 5s.
    Mr. Meeks. Oh. So maybe other folks don't have anything to 
talk about in regards to the economy and what your job really 
is, so maybe they are trying to talk about something else since 
they have nothing of substance that affects the economy of our 
country to discuss with you, Mr. Secretary of the Treasury.
    Secretary Lew. I am happy to discuss the economy for as 
long as you would like.
    [laughter]
    Mr. Meeks. Let's get to what I think that you are here for, 
and you are here to talk about it, because I think being the 
Secretary of the Treasury, and it affects the American people 
how we are going and where we are--I think that is substantial. 
And for me, I want to just ask some questions which I think 
would be relevant. I know that the ranking member was very 
involved and concerned about it, and I think a few other 
members. And that is about anti-money-laundering issues.
    A number of banks have faced heavy fines levied by the 
Financial Crimes Enforcement Network (FinCEN) recently.
    And Mr. Secretary, what should we make of the larger number 
of banks being deemed in noncompliance with our anti-money-
laundering regulations?
    Secretary Lew. Congressman, the anti-money-laundering rules 
are very important. It is the way we make sure that illicit 
activity is caught and stopped. I think that we have been 
aggressive and effective in making the law well-understood and 
in underscoring the importance of having compliance programs.
    I think that what we have seen in recent years is a kind of 
risk aversion developing where financial institutions have 
been, if anything, going beyond what may be required. They are 
not required to stop doing business, say, in a country where 
there are problems. They are required to have the kind of 
compliance program where they can catch problems and prevent 
having problematic transactions.
    So I think that there are two halves to this: one is the 
part that we control; and one is the part that financial 
institutions control.
    And we have worked hard to communicate both with financial 
institutions and internationally with our counterparts abroad 
to make sure that systems are in place where we can both have 
very tight standards on stopping illicit money activities but 
also have a system where financial transactions can continue.
    Mr. Meeks. So do you think that the banks are putting 
enough effort and resources into this?
    Secretary Lew. Look, I think they are putting resources 
into it. I think that they need to look at what the proper 
compliance program is so that they can remain engaged in 
important areas of commerce without opening the door to 
prohibited activities.
    Mr. Meeks. So to--generally, you used the phrase, you need 
to know your customer.
    Do you think the banks should also know their customers' 
customers?
    Secretary Lew. They are responsible for where the money is 
coming from and going to. Banks know what are suspicious 
transactions that should raise attention. And we work closely 
to make sure it is clear what is required of them.
    Mr. Meeks. Let me, in the little time I have left, because 
I just came back from Asia and I was looking at the President's 
proposals for TPP and some of his trade agenda and there are 
things that are popping up and I know you have had some 
questions already about currency manipulation and whether there 
should be a currency chapter in TPP. And I didn't hear your 
answer but--
    Secretary Lew. I didn't get much of a chance to answer.
    Mr. Meeks. Go ahead, please.
    Secretary Lew. Yes. We are very much of the view that 
unfair currency practices have to be stopped. We engaged in the 
multilateral processes at the G-7, the G-20, at the IMF. We 
engage intensely on a bilateral basis to try and bring behavior 
up to a level that meets what is the broad international 
standard of market determined exchange rates and only using 
domestic tools for domestic purposes, not to gain unfair 
advantage.
    My view on whether it belongs in a trade agreement is 
separate from how aggressive we are in pushing back on 
practices that we think are unacceptable.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from California, Mr. 
Royce, Chair of the House Foreign Affairs Committee.
    Mr. Royce. Thank you. Thank you, Mr. Chairman. Secretary 
Lew, good to see you again.
    Secretary Lew. Good to see you.
    Mr. Royce. We are just back from a trip to India, China, 
and Taiwan. And I just thought that I would give you a quick 
read there in terms of some of these issues that you are 
working on. We had a good meeting with Prime Minister Modi and 
the momentum there is headed in the right direction.
    Last Thursday, the Indian parliament approved a new bill 
that raises the ownership caps for foreign insurers, for 
example, to 49 percent, while also allowing foreign reinsurers 
to open branches in India.
    Now, that is long overdue. It is definitely good news.
    In China, the news is a little more ambiguous, and it was 
clear from our visit to Shanghai that American businesses 
continue to expand in China, just as China--you can read the 
headlines here--has that appetite for investment and real 
estate and even tech companies like Lyft and Snapchat. That 
continues to rise.
    But U.S. firms continue to compete on an unlevel playing 
field in China with very serious limits on ownership there, and 
the regulatory pressures are significant. China recently 
introduced this bank technology, rules and draft 
counterterrorism law. I know they say it is on hold, but they 
say it is scheduled in due time.
    So I need to ask you about that. It is definitely a move in 
the wrong direction. It would force U.S. firms to use domestic 
Chinese technology vendors, as you know. It would limit cross-
border data flows. It would expropriate intellectual property 
as a result of this law. And you would have a lot less access 
for U.S. firms.
    One of the other troubling aspects of it is it would 
require our technology firms, especially financial services, to 
hand over encryption keys, the passcodes that help protect 
data, and would install those security backdoors in their 
systems to give Chinese authority surveillance access.
    This is a new challenge. I want to ask you about that. And 
I also want to ask you about the progress on the bilateral 
investment treaty in China. You have 18 rounds of negotiations 
that have taken place and, of course, my focus is on what could 
be done in terms of this arbitration issue, which I think would 
give us a real chance to make sure that we have a mechanism 
outside of the court system there to resolve differences, if we 
can push hard enough on that.
    So if you could tell me about that and maybe ownership caps 
and the agreement, I will turn the time over to you here.
    Secretary Lew. Thank you, Congressman. I was also in India 
recently and met with the finance ministry and with the prime 
minister and was encouraged at the direction that they are 
moving in, both in terms of opening up markets but also in 
terms of making clear for American businesses how tax issues 
will be resolved and other things that have been a real 
obstacle. There is a long way to go. But--
    Mr. Royce. But how about the arbitration issue in China? 
Again--
    Secretary Lew. So on China, you raised the issue of the 
technology requirements. As I think you know, we have made very 
it clear that we think that this is a very problematic set of 
proposals that they put forward. I, together with the Secretary 
of State and the U.S. Trade Representative, wrote to the 
Chinese leadership to make clear that we thought they needed to 
stop that from taking effect.
    I have engaged personally with my counterpart on it. I 
think they are very, very troubling. This is not the first 
issue to come up. The anti-monopoly law last year was a 
similarly troubling issue.
    What I can say is that we are engaging on it and if they 
want to maintain the kind of progress that we are making in the 
U.S.-China relationship they have to hear the concerns we are 
raising. That can only be done by bringing the issues to bear 
and to do it through channels where there is the ability to 
communicate effectively back and forth.
    On the BIT, they are in a matter of days, I think, 
certainly a matter of weeks, supposed to be providing the first 
major documentation, which will be their so-called negative 
list, the businesses that--
    Mr. Royce. Yes, I am familiar with that. But I would just 
like to get back to arbitration.
    Secretary Lew. Yes.
    Mr. Royce. You need to strenuously push this concept 
because if these things get decided in the courts in China that 
is not a fair way to do it. If you can have third-party 
arbitration, you can have these commercial settlements handled 
effectively.
    Is that going to be part of the agreement?
    Secretary Lew. Congressman, I have to check on the 
arbitration issue. But I will--
    Mr. Royce. --certain it is in there--
    Secretary Lew. --yes, I will say that, in general, the 
engagement on the BIT is a question of, can China rise to 
standards that are high enough that they meet our requirements 
so that we can enter into a BIT?
    Hopefully, it is an attractive enough proposition that they 
will rise to that standard. If not, there won't be a BIT.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from Texas, Mr. Green, 
ranking member of our Oversight and Investigations 
Subcommittee.
    Mr. Green. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for this appearance today. 
Mr. Secretary, let's talk for just a moment about Dodd-Frank. I 
believe it to be an exceedingly important piece of legislation.
    Would you kindly give some indications as to how well it is 
performing and some indication as to how Dodd-Frank could have 
made a difference when we went through the 2008 crisis?
    As you know, AIG was styled an insurance company.
    Could you please elaborate to some degree?
    Secretary Lew. Congressman, I think that we have made an 
enormous amount of progress at making our financial system and 
the global financial system safer and therefore the economy 
safer. We have taken action that raises the capital held by 
banks and financial institutions that are significant so that 
they are able to absorb the risk that they are taking on.
    We have put in place consumer protections that didn't exist 
before to prevent the kind of practices that kind of 
metastasized in the pre-financial crisis days through the 
subprime lending problem.
    I think if you look at the kind of back end, when 
institutions hit a difficult time, we have put in place 
resolution practices through both procedures like the orderly 
liquidation authority (OLA) and resources like the orderly 
liquidation fund (OLF) to make sure that insurers like the FDIC 
can manage without having to turn to taxpayers for the kind of 
support that was required in 2008-2009.
    I think internationally, we have worked to try and bring 
global standards up to where U.S. standards now are. I know 
that this committee asks a lot of questions about the FSB. What 
the FSB fundamentally is, is a way for us to drive the 
conversation internationally so that it won't just be the 
United States that has high standards, but there will be high 
global standards, which is so important.
    I think we still have a lot more work to do. I think that 
the idea that you ever finish is probably not attainable 
because the financial system doesn't stop moving. It doesn't 
stop evolving. The next problem won't be exactly what it was in 
2007 and 2008. That is why we ask questions about things like 
money market funds and asset managers and other things, not 
because we assume that there is a problem, but because we know 
that if there is something that presents a kind of risk that 
should get our attention, we need to ask the questions in 
advance.
    The fact that there is an FSOC, the fact that there is a 
council that brings together all of the relevant regulators and 
authorities to ask the question, what do we need to be thinking 
about to make sure that we protect financial stability, it 
didn't exist before. We now have that. We put out an annual 
report that lists in detail what we think the concerns are. And 
I think that the system is enormously more safe than it was 
before.
    Mr. Green. The Consumer Financial Protection Bureau, one 
piece of the puzzle, would you just give some indication as to 
how important it is?
    Secretary Lew. Congressman, I think if you look at the work 
they have done, and you look at the clarity with which mortgage 
documents are now prepared, so that an individual middle-class 
person, a working person who is taking out a mortgage can 
actually understand the transaction they are entering into--
enormously important.
    The fact that you can't do things like low-doc, no-doc 
loans; fees that are hidden; costs that explode in a way that 
you didn't understand when you were signing on to a loan 
product. I think that they have done enormously powerful work 
in that and many other areas. And I think notwithstanding the 
critique in some of the halls here, if you go to the 
communities both of consumers and institutions that they deal 
with, there is a lot of respect for the quality of work that 
they have done.
    Mr. Green. How important are living wills for SIFIs?
    Secretary Lew. Living wills are very important. Living 
wills for the largest institutions actually give you the 
ability to know that if they were to hit the crisis point, do 
they have the ability to work out their problems on their own. 
It is why the review of living wills is such a serious piece of 
business. And it is hard. These are complicated organizations. 
And the fact that it is taking some time to get them hammered 
out shouldn't be particularly surprising. Having them in place 
will make the system much safer.
    Mr. Green. And you have indicated that all legislation, and 
you have not said this directly, but legislation can be 
improved upon. Are you amenable to working with Congress to 
make improvements?
    Secretary Lew. Congressman, I have always been open to 
working with Congress to make the kinds of legislative changes 
that would improve financial oversight, improve the soundness 
of our system. What I haven't been open to is questions about 
whether the basic approach should be reevaluated or reversed.
    Mr. Green. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Oklahoma, Mr. 
Lucas.
    Mr. Lucas. Thank you, Mr. Chairman.
    And Mr. Secretary, we have discussed a wide variety of 
topics today.
    Secretary Lew. We always do.
    Mr. Lucas. Which is a good use of time, and insights are 
alwaysgained.
    I would like to focus back for a moment on issues that I 
think impact the economic viability of my district and much of 
the country. Rarely do I quote researchers at Harvard, but 
recently a report came out, a study looking at the effect of 
Dodd-Frank and recent changes in the community banks' ``market 
share'' since the implementation of Dodd-Frank, and even 
looking back before that since 2008.
    It was a little bit alarming in that it noted that the 
community bankers market share, which had been declining since 
2008, had actually accelerated, some might even use the phrase 
``doubled'' in the time since it was enacted.
    Now, of course, Dodd-Frank was designed to protect all of 
us from the too-big institutions that many of us would agree in 
this room almost brought the economy to its knees in 2008. But 
with the implementation of Dodd-Frank, it seems that the small 
institutions, call them community banks--$1 million, $10 
million, $1 billion, $10 billion, $50 billion--whatever--the 
smaller institutions seem to be squeezed the most by what is 
going on and have the greatest barriers to try to continue 
their business or to enter the marketplace.
    So I guess my question to you, Mr. Secretary, is, and save 
me a little bit of time for one more question, based on what we 
are seeing happening in the community banking segment of the 
financial markets, is it time for regulators to use some of the 
flexibility given to them in Dodd-Frank? Or perhaps if that is 
not possible, is it time legislatively for Congress to respond 
and try to provide some relief to the community banks, the 
people who didn't cause the problems that Dodd-Frank was the 
answer to? Or as we would say in Oklahoma, is it time to save 
the people we saved?
    Secretary Lew. Congressman, I think if you look at Dodd-
Frank and the implementation of Dodd-Frank, there has been a 
great deal of attention paid to treating community banks 
differently, and appropriately so, from the larger, money-
center banks. I think as you have noted in your question, the 
trend of consolidation preceded the passage of Dodd-Frank, and 
I haven't read the Harvard study you are describing, but I 
would be happy to look at it and give you a response after I 
have looked at it.
    Mr. Lucas. Please do. It describes an accelerating--
    Secretary Lew. You have to look at what was happening to 
that trend and whether it would have accelerated anyway because 
it was accelerating before.
    If you look at consolidations, it is not just at the 
smaller level. It has happened in the large institutions as 
well, not for necessarily good reasons. You had a lot of 
troubled institutions that had to be taken over. So, I think 
that the challenge we have is to always be mindful of the fact 
that you can't treat a Main Street bank, a $5 billion bank, the 
same as a regional bank or the same as a money-center bank. We 
have tried not to. We are always attentive to how we can do 
better and we have a lot of flexibility and the regulators have 
a lot of flexibility.
    Mr. Lucas. But the net effect, Mr. Secretary, appears to be 
an accelerating deterioration in the community banks' market 
share, a reflection of what they are trying to cope with and 
deal with. That ultimately has an effect on the consumers with 
less access to credit, higher cost for credit, and fewer 
general choices. At some point, either this body or you have to 
respond to save the people we saved.
    Secretary Lew. I do think that there is a difference 
between the consolidation of community banks and whether or not 
there is a loss of access. Because that consolidation process 
has been happening, and they remain community banks.
    But I am happy to follow up on this question with you, 
Congressman.
    Mr. Lucas. One last question, and since we are talking 
about the state of the international financial system, it is on 
another topic that is simmering along in this body, which is 
one of our institutions that works with businesses in this 
country as they enter into international interactions. Please 
give us an insight or two on the relevance of the Export-Import 
Bank as it comes to U.S. participation in the financial 
markets.
    Secretary Lew. Look, I think the Export-Import Bank plays a 
hugely important role. Right now, we have a global system where 
all of our competitors have export financing support. The idea 
that the United States would kind of unilaterally disarm in a 
world where other competitors have export financing programs 
would put U.S. manufacturers, U.S. exporters at a great 
disadvantage.
    I think there is a kind of a notion that it is only large 
firms that benefit from the Export-Import Bank. That is wrong. 
Just the other day, I was in Baltimore, at a small business in 
Baltimore that said the most important tool it has to access 
foreign markets is the Export-Import Bank.
    Now, I think you can go through the districts represented 
on this committee and you would find countless examples of 
small businesses that are benefiting from the Export-Import 
Bank. I hope we can work together on a bipartisan basis to 
renew the Export-Import Bank before the end of June when it 
expires because American businesses deserve our support.
    If there were an international agreement to lower all 
export subsidies, that would be a different story. We are 
working with the international bodies that this Congress helped 
create, but we are not there yet. And unilateral disarmament 
would be wrong.
    Mr. Lucas. Thank you, Mr. Secretary.
    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. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here today.
    I have had the opportunity to go to Cuba twice over the 
last 3 years and it is my hope that nothing that we do here 
will sabotage this possible bridge from the United States to 
Cuba.
    Americans can go to North Korea. We can go to Russia. We 
can go to Venezuela. We can't go to Cuba. And the sad part 
about this, at least as far as I am concerned, is that we are 
missing out on trade. I think The Netherlands and Canada are 
the chief trading partners with Cuba. I have one company in my 
district, Cargill, that does business in Cuba, but other 
businesses are struggling with trying to find out what is going 
on with the normalization process so that they can try to do 
business in Cuba.
    But there are some problems. One, I guess the Ex-Im Bank is 
not presently guaranteeing loans to do business in Cuba. So, 
therefore, a lot of companies are going to be hesitant to do 
business with a country that is considered to be unstable 
without Ex-Im participating. Is that an accurate assessment on 
my part?
    Secretary Lew. Congressman, the action that the 
Administration took obviously was to try within the law, within 
the authorities we have, to remove restrictions that we thought 
were counterproductive, and if anything, working against the 
goal of getting kind of change in Cuba that we all want, which 
is movement towards giving human rights and other issues of 
importance greater attention.
    I think that the transactions between U.S. and Cuban 
parties will be governed by law so that there will be things 
like food sales. One of the things that changes is that payment 
terms will be easier for companies to comply with and for the 
purchasers to comply with.
    So I think that there will be some benefit to U.S. firms 
doing business in Cuba. But we haven't opened up all of the 
normal forms of support that exist in countries that we have 
normal relations with. And, we have been clear that Cuba still 
has a long way to go to make the changes that it has to make 
before we have that kind of conversation.
    Mr. Cleaver. I agree that it is--we are not there yet. In 
1993, Cuba actually made the U.S. dollar legal tender. And then 
in my first year in the House in 2004, Cuba placed a 20-percent 
surcharge on remittances, dollars coming into Cuba, which 
created--I hate this term, I don't know how to use it for a 
human being--the term they use is ``mules'' carrying U.S. 
dollars into Cuba illegally, and giving it out to their 
relatives, which I completely understand. But with this going 
on, is there any--I don't want to know about the negotiations. 
I am not going to ask you about negotiations in a public 
hearing. But it would be my hope that there is something being 
done in terms of remittances, as we move toward normalization. 
Is that something that you are--
    Secretary Lew. In the steps that we took, among other 
things, there was some easing of travel restrictions and 
remittances, so that would be easier for families. But just as 
importantly, telecommunications has opened up, because exposure 
of Cubans to the West, to the United States, our values is part 
of what we think will bring real lasting change in Cuba.
    Mr. Cleaver. You can send remittances through Western 
Union. But the concern is what I think is a pretty heavy 
surcharge on the U.S. dollar.
    My time is running out. Thank you, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the gentleman from New Mexico, Mr. 
Pearce.
    Mr. Pearce. Thank you, Mr. Secretary.
    Secretary Lew. It is hard in this room to know where to 
look.
    Mr. Pearce. Okay, just further to your right than you 
think.
    [laughter]
    Mr. Mulvaney. But not all the way.
    [laughter]
    Mr. Pearce. But not all the way.
    The IMF broke its longstanding rules, according to The Wall 
Street Journal and just an inspection of the loans or bailouts, 
however you want to say it, to Greece. Would you be willing to 
commit today to reinstating those previous principles that were 
bypassed in the deal with Greece?
    Secretary Lew. Congressman, I am not. I don't think I would 
agree with that characterization. I think the IMF did have an 
exceptional access program with Greece.
    Mr. Pearce. Okay.
    Secretary Lew. But that is something that--
    Mr. Pearce. You will have to fight that out with people who 
say that you did.
    Secretary Lew. Yes. I think that--
    Mr. Pearce. What about the--
    Secretary Lew. --if you look at what was going on at the 
time, if the IMF had not stepped in, the risks--
    Mr. Pearce. Okay.
    Secretary Lew. --to the European and the global economy was 
quite severe.
    Mr. Pearce. Yes, and it still is, frankly. So what is your 
stance on the oil export ban? Do you have a stance?
    Secretary Lew. I'm sorry--
    Mr. Pearce. The oil export ban for the United States?
    Secretary Lew. It is actually a matter that is not directly 
in my area.
    Mr. Pearce. So, you don't have an opinion?
    Secretary Lew. I try to comment on the things that I am 
responsible for.
    Mr. Pearce. Mr. Secretary, we just heard my friend from New 
York say that you are the Secretary, the Secretary of the 
Treasury. The Secretary of the Treasury who has come here to 
talk about our economy and to talk about the world economy. And 
it would be nice if you had an opinion, but--
    Secretary Lew. I think--
    Mr. Pearce. --sorry, with all respect, sir. I just have an 
observation. I am reading your written statement and it is 
replete with considerable progress in the rainbow stew that is 
characterized in the report of the world economy and our 
economy in general.
    When I Googled this morning, I saw that manufacturing was 
down in February. Another article came up, which said that 
manufacturing in New York is down in March.
    Another article said wholesale prices have been in decline 
for 4 months.
    So, as the Secretary of the Treasury, here to tell us about 
the economy, it would be nice if you told us some of those dark 
clouds instead of the sunny horizon that has been painted here. 
I find the lack of transparency in the report that you have 
issued to be stunning.
    In fact, one point--you said, in answer to a question by 
one of our friends on the other side of the aisle, that we 
should teach the world about good policy.
    Now, we did teach the world about good policy, because when 
we started printing money, the quantitative easing after 2008, 
policies that improve your economy and a philosophy called 
beggar thy neighbor, the world economy has learned that really 
well. In fact, that is what is driving our value of our 
currency up today. And so just today, I was Googling and I saw 
that companies across America are being devastated by the race 
to the bottom that we taught the rest of the world about 
economic principles. And with them printing money, and there 
our value of our dollar is increasing dramatically, the losses 
that are being passed on to American companies are being felt 
right now.
    That would be a critical piece for you to be relaying to 
us, but I didn't hear anything about that. And so, Mr. 
Secretary of the Treasury, that would have been a nice thing to 
put in here.
    I am just making observations here at the end of the day 
because we have people pointing out that there is nothing to 
talk about in the economic situation. But in the whole deal, 
much of the report goes into the IMF, and our responsibilities 
to the IMF. Nothing in your report says that the whole game 
depends on the Europeans, primarily Germany, continuing to bail 
out Greece.
    The finance minister for Greece just recently made a 
comment that we ought to tear up the whole agreement. That now 
that is causing yes, on the 13th of March, it would have been 
nice if your report said that on the 13th of March, the German 
population switched pretty dramatically to where they don't 
favor Greece getting any more bailouts. In fact, they want 
Greece out of the E.U., which then sets up the prospect that 
other nations who are financing the sovereign debt for Europe 
would be extremely cautious about loaning to Italy, to Spain, 
to Portugal, and to those other nations.
    Those would have been nice things to have heard in this 
report about the economy, Mr. Secretary, Mr. Secretary of the 
world economy that we heard you are here to testify about. But 
I didn't hear anything about that.
    I yield back, Mr. Chairman.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Colorado, Mr. Perlmutter.
    Mr. Perlmutter. Thank you, Mr. Chairman.
    And to my friend from New Mexico, I am going to give the 
Secretary a chance to talk about that economy.
    And so I am going to start with--and hopefully it is a 
little closer so you can see it sir--a slide from the Federal 
Reserve economic data chart, and what this is, is civilian 
unemployment since 1970, and I have circled the last few years, 
in terms of job losses in 2008, coupled with job gains since 
then.
    Would you care to comment on that?
    And I also have--this is for the United States as a whole, 
I have another slide, Mr. Secretary, that is for Colorado, 
where we suffered the same as the United States generally, 
where our unemployment went sky high in 2008-2009, and started 
coming down under the Obama Administration, it is now down to 
about 3.5 or 4 percent. So, Mr. Secretary, would you like to 
comment on job growth?
    Secretary Lew. Thank you, Congressman.
    And I do appreciate the chance to comment, because 
undoubtedly, there are economic statistics that go up and down, 
month to month. There are a variety of them. There is no 
denying the trend of the U.S. economy over this last year has 
been very strong growth for several years. It has been strong 
employment growth.
    Do you compare the United States to Europe or to other 
parts of the world for growing better, and we are creating more 
jobs than most of the developed world put together.
    Secretary Lew. Now, I think if you asked the question of 
why, I believe it is because, as I said earlier, we have a 
flexible and resilient people, and we responded with policy 
that worked.
    And I realize that policy has not always been something 
about which there has been unanimous opinion.
    I don't think the results are subject to question. We are 
in a better place now.
    Mr. Perlmutter. Let me give you another slide. And this is 
Dow Jones since 2005, and it shows a steady increase up to 
18,000 from a low point of about 6,000 in 2008, early 2009. Do 
you want to comment on that?
    Secretary Lew. Obviously, there has been a recovery in our 
financial markets where the losses from the ``Great Recession'' 
have been reversed, and if you look at the trend, the picture 
you just showed, people had their retirement savings restored. 
Investors got back what they lost.
    We have seen in housing that property values are starting 
to come back up. There are still areas where it is not fully 
there. Where we have seen a problem is that income growth has 
been slow to come back. But in the last year, we have seen 
about 2 percent growth in wages. That is good, but we would 
like to see more.
    We are starting to see some pressure on wage growth, which 
is a good thing. For those of us who came of age in the 1970s 
and 1980s, rooting for inflation does not feel like a natural 
thing. But too low inflation is not a good thing. Everyone is 
now shooting to get to 2 percent. And 2 percent is hard to 
achieve.
    Mr. Perlmutter. All right. Let me give you one more slide, 
and this one is on 30-year conventional mortgages, which have 
seen a continual decline to the benefit of homeowners who are 
in a position to take advantage of them, down to about 3 
percent, or about 3.5 percent.
    Secretary Lew. There is no doubt that the affordability of 
mortgage finance has stayed very much within reach in terms of 
historical standards.
    The challenge, as we were discussing a bit earlier, is that 
the process of qualifying for a mortgage has been too 
challenging for some.
    I think--
    Mr. Perlmutter. Let me change the subject.
    Secretary Lew. The good news is that it is still a market 
where mortgage financing is very affordable.
    Mr. Perlmutter. Let me just change it to someplace where I 
think there are some headwinds, and I would ask you as the 
Secretary of the Treasury to watch, and that is in a tremendous 
drop in oil and gas prices which--I come from Colorado, so we 
are an energy-producing State. We have seen some layoffs.
    Now, I think our economy is strong enough to move forward 
through those layoffs. But there is within the energy sector, a 
lot of concern. And there are a number of ways to deal with it. 
I would ask that your Department be mindful of this, whether or 
not we may want to put some kind of a tariff and be 
protectionist for our local industry, I don't know.
    But I will let you respond.
    Secretary Lew. Without a doubt, if you look across the 
whole U.S. economy, lower energy prices have actually been a 
shot in the arm. It has been like a tax cut for most consumers 
and most businesses, because everybody consumes, and relatively 
few produce.
    Equally undeniable is that there are pockets of the country 
where there has been a slowdown in economic activity as new rig 
activity has been slower.
    Mr. Perlmutter. Mr. Chairman, I ask unanimous consent for 
the charts that I have to be entered into the record.
    Chairman Hensarling. Without objection, it is so ordered.
    And the time of the gentleman has expired.
    Mr. Perlmutter. Thank you.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Ohio, Mr. Stivers.
    Mr. Stivers. Thank you, Mr. Chairman.
    Mr. Secretary, I am over here. By the way, I appreciate you 
recognizing the benefits of tax cuts just now.
    I want to talk to you a little bit about the economy and 
then community talks and then, if we have time, insurance 
standards and maybe what is going at the DOL. But my local 
foundation, the Columbus Foundation, just put out a report that 
said 145,000 people in central Ohio, in my area, have been left 
out of this economic recovery because they have given up 
looking for work. They don't have the skills they need. There 
is a real skill gap.
    If you extrapolate that across the country, that means 
there are 11 million people suffering today, every day, even 
though the stated unemployment rate has gone down--the U-6 
still says 11, so that is still a pretty big number.
    So I hope you are spending time focusing on those people 
who today are left out. And I am not going to ask for comment 
on that, but I am just going to tell you, I hope and pray that 
you are focused on that, because these are great American 
people who are left out of our recovery, and I hope you will 
spend a little time thinking about them.
    I do want to follow up on a question that Mr. Lucas brought 
up, or questions, about the plight of community banks. I had a 
recent conversation with a lady named Linda. She is shopping 
for a house. And her local community bank stopped offering 
mortgages because they felt like the regulatory compliance was 
too heavy for them. They are a small community bank.
    I wanted to kind of talk to you about your role at FSOC. 
You have been there a little over 2 years as Chair of the FSOC, 
I am curious, how much time do you spend in each FSOC meeting 
talking about the plight of community banks and this idea of 
trickle-down regulation and how you can make sure that 
consumers like Linda can get access to products at their local 
community banks?
    My district is half rural. There are no big banks in major 
swathes of my district, it is community banks. And so, if they 
are not offering residential mortgages, the people can't get 
them.
    So how much time do you devote at every FSOC meeting to the 
plight of community banks? In round numbers?
    Secretary Lew. Congressman, I am not sure I could give you 
a round number.
    Mr. Stivers. Is it on the agenda, yes or no, of every 
meeting?
    Secretary Lew. I can tell you that every time we have 
discussed the housing finance system, every time we have 
discussed rules, whether it is at FSOC or in informal 
conversations that we have, there is a very strong focus on 
what is the impact on community banks--
    Mr. Stivers. Is it--
    Secretary Lew. And how do we distinguish between--
    Mr. Stivers. Sure. Is it a stand-alone agenda item on every 
FSOC meeting, because if it is not, I would just urge you to 
make it a stand-alone impact item of the unintended 
consequences on our community banks. Take that for what it is 
worth, and if you can do it, people like Linda across this 
country would benefit from it.
    I do want to switch to international insurance stuff. I am 
from Columbus, Ohio, and the Ohio State football team is the 
national championship football team. I want to use a football 
analogy for you. Has Team USA, on the international insurance 
standards, sort of taken a pause, taken a time out to make sure 
we understand the impact on our domestic carriers of these 
international rules before we move forward and charge ahead, of 
importing European standards for American companies?
    Secretary Lew. Congressman, I don't think that there is any 
plan to just import standards from Europe. Our representatives 
participate in those to try to make sure that there are high 
standards around the world. But ultimately, the U.S. 
authorities will make the U.S. rules; national authorities will 
make national rules for the United States.
    Mr. Stivers. Thank you, that is great.
    So, have you conducted, as part of Team USA in these 
international insurance standards, an analysis of the potential 
impacts of the IAIS standards on domestic insurance industries 
in terms of financial, legal, and accounting regimes that these 
U.S. companies now confront?
    Secretary Lew. There is ongoing work on this. And I know 
that our insurance office pays a great deal of attention to 
what the impact of any rules changes would be.
    Mr. Stivers. Do you do it in terms of what it means to 
policyholders and customers? Do you take it down to that level?
    Secretary Lew. I think the analysis is broad. I would be 
happy to get back to you.
    Mr. Stivers. Please do. And, again, getting back to people 
like Linda whom I talked to, there are a lot of policyholders 
and a lot of consumers who want to buy insurance products. Any 
standards you make will affect their ability and their cost of 
those products.
    So I would urge you to really take a look at that.
    I only have 16 seconds left. Have you coordinated or your 
Department coordinated at Treasury with the Department of Labor 
on this standard, new fiduciary standard that DOL is proposing? 
Have they kept your labor folks in the loop and your policy--
    Secretary Lew. We have been aware, as it has gone through 
the process.
    Mr. Stivers. Would you call it coordination, or is it just 
informing you?
    Secretary Lew. There has been interagency discussion on the 
policy, but it is a Department of Labor rule.
    Mr. Stivers. Thank you.
    I yield back, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Minnesota, Mr. 
Ellison.
    Mr. Ellison. Allow me to thank the chairman and the ranking 
member.
    And, Secretary Lew, thanks for your great service to our 
country.
    I have been talking about Somali remittances for quite a 
long time, as you know. But, as you also know, we have reached 
a frustrating point. Back on February 6th, the bank that was 
doing most of the facilitation of international transfers 
stepped out of the work. And now, we are pretty much at the end 
of the line.
    What can your office do to try to facilitate these 
remittances?
    Secretary Lew. Congressman, you and I have discussed this a 
number of times. I know the deep concern you have, and we are 
very sensitive to the problems that you are trying to address.
    I believe you had a discussion recently with our acting 
Under Secretary and discussed the issue at some length. I think 
that the challenge is, and I don't think there is any 
disagreement on this, we all want to stop the flow of money to 
bad actors.
    Mr. Ellison. Of course.
    Secretary Lew. No disagreement on that.
    I think we also all agree that people who are just trying 
to send money to their family members who are not bad actors, 
it is heartbreaking that they can't do so easily.
    Mr. Ellison. Forgive me, Mr. Secretary, but I must say it 
is heartbreaking and I agree, but it is also I think a national 
security problem for the United States. And here is why: 
Because if the narrative of Al Shabaab is the United States is 
your enemy. Look, they won't even let your cousin send you some 
money for school fees or for food. Don't worry about it. We 
will give you the money. All you have to do is be our soldier.
    That is another factor that I think we absolutely cannot 
ignore. It is a humanitarian crisis, but we are also playing 
into the narrative of a terrorist organization. And I need--and 
I would like it if you guys would start thinking of it in both 
of those ways. Not just the humanitarian way.
    Secretary Lew. The challenge is while we strive to be clear 
and we will work with you to be as clear as we can as to what 
the requirements are, what the rules are, we do not tell banks 
or financial institutions they cannot participate in this.
    Mr. Ellison. Mr. Secretary--
    Secretary Lew. But we also can't give a hold harmless to a 
firm at the same time.
    Mr. Ellison. Here is the thing--
    Secretary Lew. So it is challenging.
    Mr. Ellison. But, see, we have a situation where we need 
some creativity, and that is what I am asking you for.
    Secretary Lew. We will continue to work with you and try to 
be as creative as we can.
    Mr. Ellison. Let me ask you this, there was a bill that--
there was legislation that was passed that created a safe 
harbor, but was opposed by Treasury. In light of the 
difficulty, would you guys at least go back and look over 
potential legislation that could allow these transactions to go 
forward and would prevent the money from going to terrorist 
organizations?
    Secretary Lew. We will look at whatever proposals are 
forthcoming, including looking again at things that we have 
looked at in the past. And we will work with you to be as 
creative as possible.
    Earlier in the hearing, we were talking about financial 
institutions that are trying to avoid any risk by not--by 
saying they are not going to do activity at all, as opposed to 
doing it in a way that complies.
    I think we have a challenge of making clear what the rules 
are, but that doesn't mean that it is saying no activity at 
all.
    Financial institutions are responsible for knowing what 
they are doing--
    Mr. Ellison. But you know what, Mr. Secretary? With all due 
respect to what you are saying, if you listen to the banks, 
they would say that they want to do the transactions, but the 
level of regulatory burden is just so high. You are saying you 
are not stopping them, but they are saying it is more of a wink 
and a nod that you are stopping them.
    And you are in communication with these banks too. And so 
it always--I find it a little bit frustrating when I hear our 
Federal agencies say, oh, we are not stopping them from doing 
transactions. But the banks say, you are not saying we can't do 
them, but you are creating an environment where we can't do 
them.
    Secretary Lew. The cases are not all the same. And I 
certainly don't mean to compare Mexico and Somalia. But we have 
made progress with Mexico, working with the Mexican 
government--
    Mr. Ellison. Okay.
    Secretary Lew. --and the financial institutions where they 
are raising their level of scrutiny so that they are able to 
avoid having the shutdown in correspondent relationships they 
were worried about.
    I think Somalia is a much more challenging environment, 
obviously. We will work with you on this issue.
    Mr. Ellison. I only have 35 seconds, so let me ask this: I 
think one solution is to stand up a Somali banking system that 
meets international requirements to stop money laundering. We 
are sending them money for the AMISOM troops to fight Al 
Shabaab. What about sending them some financial help to set up 
a system where they can have a system that is trustworthy on 
international standards?
    Secretary Lew. I am happy to look at that.
    Mr. Ellison. Well, 7 seconds to go. I am sure there is 
something I could be able to say. But thank you, Mr. Treasury 
Secretary. We will be in touch.
    Mr. Stivers [presiding]. Does the gentleman yield back?
    Mr. Ellison. Yes.
    Mr. Stivers The gentleman yields back.
    The Chair recognizes the gentleman from Tennessee, Mr. 
Fincher.
    Mr. Fincher. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for being here today.
    The committee is very concerned that the U.S. is flaring 
many new mandates and going well beyond the international 
standards, whether on capital and the GSIP surcharge, liquidity 
rules, and many other areas.
    We are seeing effects of uncoordinated mandates on our 
financial markets and, in turn, in the real economy. The story 
is unfolding right before our eyes, starting with the so-called 
October 15th liquidity issues.
    To cite a few examples, a Bloomberg article dissected the 
issue--a senior executive at the world's largest asset manager, 
BlackRock, stated that the totality of the regulations have had 
a dramatic impact on the financing market.
    Another senior executive at global institution RBC noted 
that the liquidity is nonexistent in volatile markets, stating, 
``We took that test October 15th and failed.''
    The Wall Street Journal followed with a piece entitled, 
``The Treasury Markets Liquidity is Drying Up.''
    In it, it rather bluntly notes that, ``Bond trading desks 
have reduced inventories in response to regulations like Basel 
3 and the Volcker Rule.''
    Recently, a senior British regulator at the FCA noted that, 
``There is enough evidence that low liquidity relative to 
previous years does not warrant careful regulatory monitoring 
of market developments and careful consideration of what could 
be done.
    And Bloomberg recently had another article entitled, ``The 
Treasury Market's Legendary Liquidity Has Been Drying Up.'' It 
highlights impacts on ``the U.S. cost to borrow'' and 
implications for ``governments, businesses, and individuals 
when they borrow,'' rather directly. It cites, ``unintended 
consequences of new financial regulations which had made bond 
dealers less willing to hold inventory and facilitate trades,'' 
and pinpoints Basel 3 and the Volcker rule.
    Lastly, the non-partisan and independent Center for 
Financial Stability recently released a report on the dire 
situation entitled, ``Liquidity Shortage: Houston, We Have a 
Problem.'' It outlines historic drops in bank risk-taking and 
mark making as fresh as ``the phenomenon stars financial 
markets from needed liquidity and is detrimental to future 
growth by exposing the economy to potentially unnecessary 
shocks.''
    The reduction shows no sign of abating with a series of 
successive drops.
    Mr. Secretary, with this mounting evidence of all of these 
experts, when is time to get worried?
    And what data-driven reexamination is FSOC and/or the U.S. 
regulators doing on combined effects of regulations? Data-
driven?
    Secretary Lew. Congressman, I think the question of 
liquidity is an important one, obviously. The liquidity of our 
markets has been a source of great strength.
    I think that a lot of the instant analysis on October 15th 
was not data-driven. And I think as we come to understand more 
about what happened on October 15th, we realize that it was a 
confluence of factors, and I would look forward to a point 
where we could discuss that at some length.
    I think that what was going on was a combination of 
reaction to news of the day and off-risk decision-making. And 
we are obviously looking at whether there were questions of 
liquidity. But I don't think that jumping to an assumption that 
it was a result of regulation will bear out to be the--
    Mr. Fincher. With all due respect, Mr. Secretary, and you 
are very knowledgeable when it comes to these issues, but these 
are experts who are dealing with this every day, who know their 
business very well, and they are seeing these things actually 
happen. And so, what we are saying is show us; where are we?
    Secretary Lew. I think--
    Mr. Fincher. Are we going to continue to just add more and 
more and more without having something concrete actually 
working or hurting?
    Secretary Lew. I think if you--it--on the broad question of 
is it working, if you look at the result of financial reform, 
we have made our system safer and more resilient. That is a 
positive that we are seeing benefits--
    Mr. Fincher. We have made our liquidity problem worse by 
drying up the market and not allowing banks to be able to loan 
money to people and help folks out. That is what is happening.
    Secretary Lew. --on liquidity, there are important 
questions but there are a lot of things going on, including 
where we are in the business cycle and how new markets are 
developing, how new trading platforms are developing. And I 
think that it is just oversimplified, to say the only thing 
happening--
    Mr. Fincher. I only have 15 seconds.
    Would you be willing to just work with the committee or 
provide us with data-driven--
    Secretary Lew. Sure. This is an important question, and 
obviously 5 minutes is not enough time to exhaust it. I would 
look forward to doing--
    Mr. Fincher. Thank you very much.
    I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Kildee.
    Mr. Kildee. Thank you, Mr. Chairman.
    And thank you, Secretary Lew, for being here. And Happy St. 
Patrick's Day.
    Before I get to my question, I just want to reiterate 
something that I know I have raised with you and your staff 
regarding many communities, particularly in my State and 
particularly in the district I represent that have been hit so 
hard over the last several decades that they have markets that 
are essentially not functioning because of the overhang of 
abandoned, empty, dilapidated structures for which there is no 
market and for which there is no market basis to come and take 
those properties down. There isn't anybody who will come in and 
take them out because there is no use for the property.
    And you have been quite willing in working with us through 
the TARP program, through hardest-hit dollars, as you said 
earlier in the hearing today, to tailor the use of those 
dollars for the particular needs of these communities that have 
been really struggling to kind of get their markets reset.
    I mention that only because obviously we have a bigger 
problem yet to solve, what we have been able to do with hardest 
hit has been very significant. And I would just like to ask 
that we continue to work together to try to find solutions to 
that particular problem.
    Secretary Lew. Congressman, I have very proud of the work 
that we have been able to help the City of Detroit do in that 
regard. I think it has been very significant in the City's 
whole recovery plan and I have remained in touch, as you know, 
with the mayor to be of assistance and to provide advice.
    Mr. Kildee. And I know we have had some discussions about 
HAMP; hopefully we can continue those discussions. There might 
be a way to kind of get there as well.
    Secretary Lew. I wish I could be optimistic--we are looking 
to see what we can do and I would like to see the City of 
Detroit be able to continue to remove dilapidated housing. It 
has had a hugely important effect.
    Mr. Kildee. I appreciate that.
    I know there has also been some conversation and I have a 
question for you on currency issues.
    Coming from the auto sector and coming from communities 
that were so much a part of the development of the automotive 
industry, currency manipulation, particularly by Japan and 
other countries, results in us exporting our demand. And when 
we export demand, we export jobs.
    My hometown of Flint, Michigan, has gone from a high of 
79,000 people working in the auto industry to about 10,000. And 
that was over a period of just a few decades, which kind of 
relates to the incredible problems that we face in trying to 
reset our markets.
    But I read something recently that I was concerned about 
and I want to ask if you could comment. There is a New York 
Times piece that quotes you--and I guess we will see if it was 
accurately quoting you--as saying, ``We remain concerned that 
an enforceable provision``--I am talking about in the context 
of TPP--on currency could have a negative impact on our ability 
to protect American workers and firms and set back our 
international efforts.''
    And I guess I am concerned about from our perspective, the 
perspective I represent when we think about trade is not the 
problem; trade deficits are the problem. And I see currency 
manipulation, currency management by our competitors as being 
not just an important concern but the central issue when it 
comes to our ability to compete, particularly in the auto 
sector.
    I wonder if you could comment, because it would seem to me 
that getting a deal shouldn't come at the sacrifice of what I 
would think is an essential element of a deal and that is the 
ability to deal with currency manipulation.
    Could you comment?
    Secretary Lew. Congressman, I think we agree that countries 
that engage in unfair practices to gain unfair advantages need 
to be pushed back. We do that through the multilateral channels 
that we have at the G-7 and the G-20, and the IMF. We do it 
aggressively on a bilateral basis.
    I think that if you look at a trade agreement and whether 
it should be an enforceable discipline in a trade agreement, is 
a different question. There are legitimate monetary policies--I 
think QE in the United States, in other countries, has been a 
legitimate domestic tool for domestic purpose for there to be 
the kind of economic activity that could promote a recovery. I 
don't think those policies should be subject to trade review 
the way other issues are--
    Mr. Kildee. --I don't think any of us believe it. I don't 
think you believe that QE is tantamount to currency 
manipulation for trade purposes the way we have seen other 
countries purchase other assets from other nations in order to 
do the same thing.
    Secretary Lew. I don't, but I know that there are other 
countries that believed it was at the time. There are other 
countries that believed it was the United States gaining unfair 
advantage.
    Mr. Kildee. But even under existing standards, it wouldn't 
pass the test. So somebody might claim that--I guess my point 
is that--
    Secretary Lew. You don't get to write the standards on your 
own. And the challenge is in a world where there are standards, 
we--
    Mr. Kildee. We don't write them--frankly, we don't write 
them on our own; but we wouldn't sign an agreement that didn't 
have standards that we thought protected our practice--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Indiana, Mr. 
Stutzman.
    Mr. Stutzman. Thank you, Mr. Chairman.
    And thank you, Secretary Lew. It is good to see you again. 
I appreciate you being here.
    In your testimony, you said that the IMF is ``indispensable 
to achieving our economic and national security interests.''
    You go on to talk about the way that the IMF and the World 
Bank prop up struggling foreign economies to help prevent 
extremism. This has been a reoccurring theme from the 
Administration that if radical Islamic terrorists had jobs, 
they would drop their weapons.
    Unfortunately, a quick news search and what we have seen on 
the news is that terrorists are actually highly educated young 
men and women from some of the world's most advanced economies 
around the world. So I question this jobs theory--and I believe 
that we should focus on shutting down terrorists' financial 
resources by whatever means necessary. I did agree with your 
former Under Secretary for Terrorism and Financial 
Intelligence, David Cohen, when he told this committee last 
year that your goal was to financially isolate the Islamic 
State.
    In your opinion, have we been successful?
    Secretary Lew. I think we have made a lot of progress. I 
think that, as I was saying earlier, the challenge is that they 
have internal sources of funding that are substantial, but we 
are getting a lot of cooperation from our allies in Europe and 
in the region. We have more work to do. There are sources of 
funding within the areas they control that appear, at the 
moment, to be able to meet more of their needs than we would 
like. I think we need to continue to try to find ways, as David 
said, to isolate them. But not just isolate them, to cut off 
the funding they need to pursue what is really an evil agenda.
    Mr. Stutzman. So how many Islamic State accounts have been 
frozen?
    Secretary Lew. I would have to check. There aren't a lot of 
Islamic State accounts. That is not really, I think, the 
measure; it is a question of whether or not we are stopping the 
transactions between parties that are doing business with them 
or--
    Mr. Stutzman. Do we know how many transactions we have 
stopped?
    Secretary Lew. I know that if you look at the sources of 
funding available to ISIL, external funding is not one of the 
more significant sources over the last year. And that is why I 
am focusing on the fact that it is complicated. We have tried 
to cut down their revenue from oil, through a combination of 
working with countries that have the ability to stop the 
transactions, but also through military action that has 
disrupted a lot of the activity.
    I am not saying it is 100 percent; they obviously have 
resources to continue. But if you look at where those sources 
are, a lot of it is coming from internally, banks that are in 
areas that they control where they go in and they loot the 
vault.
    Mr. Stutzman. Do we have any idea--have any assets been 
frozen or seized or anything like that?
    Secretary Lew. I would have to get back to you, but I would 
be happy to do that.
    Mr. Stutzman. Okay. If you could get that information, I 
would be grateful for it.
    I understand that Treasury is deploying new strategies to 
combat the Islamic State's new funding model, as you mentioned, 
oil, selling artifacts.
    Which of your new strategies has been most successful?
    Secretary Lew. Look, I think if you look at the sources of 
funding, the external sources of funding have not grown. They 
are not getting the kinds of contributions that other radical 
and terrorist groups have gotten externally. It is not zero, so 
there is still more work to do. I think if you look at where 
they have been exploiting the oil resource, it is a less 
significant resource than it was.
    I think that the challenge is they control large swathes of 
territory, and their tax system is not sending people letters.
    Mr. Stutzman. But do we know, do you have any metrics to 
measure how we are doing? Because it takes--they need money, 
obviously, to fight this war against us.
    Secretary Lew. We do. We have a sense of what their 
budgetary and revenue situation is, and I would be happy--
    Mr. Stutzman. What is that? Do you have any idea?
    Secretary Lew. First of all, some of it, I would need to do 
in a different setting.
    Mr. Stutzman. Okay. Then, how high of a priority is this 
for you?
    Secretary Lew. It is a very high priority. Obviously, the 
ability for ISIL to function is a question of, do they have the 
resources?
    I think we have to be realistic. As long as they are 
controlling the ground there, you are not going to dial down to 
zero their ability to have resources.
    We have to make it as hard as possible for them to get 
external support, and that is what we are doing.
    To the extent that they are controlling internal resources, 
some of them are kind of self-liquidating. If you take a town 
and you seize the bank and you empty the vault, it is empty. 
They don't gain new territory. They don't gain new vaults.
    The part that is potentially kind of a continuing source is 
extracting money from people who live in the area, potentially 
by force. And that is something that we do have a real concern 
about, but that is not something we can do outside of the area.
    Mr. Stutzman. Okay. Thank you. If you could get us that 
information, I would appreciate it.
    Thank you, Mr. Chairman.
    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, and Ranking Member 
Waters.
    And thank you, Mr. Lew, for coming today.
    The good and bad about being at the end of the line is many 
of the questions have already been asked and answered. But as I 
was listening to you, you said, ``Protect national security.''
    And that reminded me that a couple of weeks ago, I had 
several of the bankers in my district come in, small, medium, 
and large bankers, to talk about many of the broad-range 
questions that have been discussed here today.
    But one of their common themes that they talked about was 
to empower cyber security and data-breach protection efforts. 
And they wanted to make sure that Congress and Members of 
Congress adopt the national standard for protecting sensitive 
consumer data, and I support this.
    As I recall, when you were here before you also talked 
about the IMF being a powerful tool or promoter of national 
security.
    So when you think of what we are going through in this 21st 
Century, cyber security is closely linked with national 
security. I don't think we will get an argument from anyone on 
that.
    Can you tell me what efforts or things that your office is 
doing in conjunction with the IMF and other foreign 
counterparts?
    Secretary Lew. We have a lot to do, first, on our own in 
the United States with both public and public-private 
coordination before we even get to the international question.
    We are putting a substantial effort into working in the 
financial services sector--we are the sector lead on cyber 
security at Treasury--in making sure that we--the best 
practices are put in place. I believe that the National 
Institute of Standards' (NIS') protocols are best practices.
    What we have found is that there is a real need to collect 
and share information. We have done as much as we can 
administratively to promote that information-sharing. There is 
legislation pending that we think would be very beneficial to 
getting us to the next level of being equipped to deal with 
what I believe is a very profound threat in the area of cyber 
security.
    I don't know the CEO of a financial firm who doesn't spend 
a part of every day worrying about it. I don't go a day without 
worrying about it.
    It is a reality going forward that we have to put the 
effort in, both to doing what we can individually do but 
collectively in a sector sharing information so that we can 
find and remediate problems and prevent others from being hit 
if one has been.
    On an international basis, I think that we look forward to 
sharing best practices. It is something that is a bit 
challenging, because each of us is individually developing our 
own domestic best practices in real time.
    I have had conversations with some of my international 
colleagues about it, and they are doing in their systems, in 
one way or another, what we are doing in ours.
    I think if we could raise it up a level and cooperate more 
internationally, it would be a good thing.
    Mrs. Beatty. Okay. Let me--I have about a minute left.
    We also touched on the export industry. I am from the great 
State of Ohio, and we had the 9th largest export industry in 
2014, and in the previous year, that industry allowed us to 
employ some 259,000 employees. My district also had about 10 
percent, or $5.7 billion, of the $52 billion worth of goods in 
the State of Ohio.
    You stated that when foreign economies falter, they import 
less from the United States businesses, and they invest less in 
the United States.
    Can you give me some idea of what the delay on us having 
Export-Import would do or how it would affect the IMF?
    Secretary Lew. Let me separate the questions.
    There have been a lot of questions today that have 
suggested that the IMF shouldn't have intervened when Europe's 
economy was in a state of crisis. Europe is the United States' 
largest trading partner. If Europe doesn't recover, their 
demand doesn't recover. If their demand doesn't recover, they 
don't buy U.S. goods, which means we don't export.
    So we have a very direct interest in making sure that the 
countries who import from us have functioning economies to 
maintain demand. So I think we benefit quite directly from 
that.
    The Export-Import Bank is kind of the other side of the 
ledger. It is a question of whether our companies can compete 
on a level playing field. And I just don't think in a world 
where other countries are offering subsidies for exports, U.S. 
companies should be asked to unilaterally disarm.
    Chairman Hensarling. The time of the gentlelady--
    Secretary Lew. That is why we should expand the Export-
Import Bank.
    Mrs. Beatty. Thank you.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from South Carolina, 
Mr. Mulvaney.
    Mr. Mulvaney. Thank you, Mr. Chairman.
    Just very briefly, to follow up on a question the 
gentlelady from Ohio asked, you said that not a day goes by 
when you don't worry about cyber security.
    Was that the case when you were at the State Department?
    Secretary Lew. Look, I will--
    Mr. Mulvaney. Just yes or no? Did you worry about cyber 
security when you were in State? Then I will go onto the other 
questions I was going to ask.
    Secretary Lew. I wasn't sector head for finance until I was 
at Treasury.
    Mr. Mulvaney. Okay, so you didn't worry about cyber 
security when you were in charge of operations at State?
    Secretary Lew. No, I didn't say that I didn't worry about 
cyber security--
    Mr. Mulvaney. You see my point, Mr. Lew, but we have to 
move on.
    So here are the questions I want to ask you today, because 
you sent a letter last week about the debt ceiling, something 
we haven't had a chance to discuss much here today.
    You closed the letter by saying that, ``The 
creditworthiness of the United States is not a bargaining chip, 
and I again urge Congress to address this matter without 
controversy or brinkmanship.'' I happen to share that 
sentiment.
    So I thought I would give you the opportunity--
    Secretary Lew. I'm glad we agree.
    Mr. Mulvaney. --now to try and walk back some of the 
brinkmanship and take this opportunity to assure the financial 
markets that interest will be paid on the sovereign debt of the 
United States.
    Look in the camera, and tell people that we have enough 
money to pay the interest on our debts and we have the 
technical ability to make those interest payments on the debt 
and calm the financial markets that might otherwise be roiled 
by concern over nonpayment of debt.
    Secretary Lew. Congressman, I hope that we are not going to 
have another debate like we have had in the past where the 
world is hanging on whether or not the--
    Mr. Mulvaney. I am hoping the same thing, Mr. Lew, and you 
have the opportunity right now to say, ``We have enough money 
to pay the debt, and we have the ability to pay the debt.''
    The only thing that prevents us from paying the interest on 
our debts is whether or not the President chooses to do so. 
Now, isn't that true?
    Secretary Lew. No, Congressman. What I have said many 
times, and remains the case is, if we hit the debt limit and 
Congress does not act to extend it, as only Congress can do--
    Mr. Mulvaney. Correct.
    Secretary Lew. --we do not have the ability to meet all of 
the obligations of the United States, and it would be the first 
time in history we couldn't pay the bills of the United States.
    Mr. Mulvaney. And you and I have had that conversation--
    Secretary Lew. You are asking about one set of bills, and I 
have acknowledged to this committee that technically, we could 
make interest payments.
    We do not know the consequences of trying to make some 
payments and not others.
    Mr. Mulvaney. Thank you for mentioning that, because you 
and I have discussed this before. This is not new for either 
one of us. And I had a chance to ask you the last time you were 
here a question, because previously you had testified to the 
Senate that you didn't have the technical ability to prioritize 
payments.
    And then you wrote a letter to us right before your last 
hearing in front of this committee and said you did have the 
technical ability to do that.
    And I asked you a question, ``When did you know that they--
in this reference, that is the New York Fed--were 
technologically capable of making the payments?'' And you said, 
``The question is not did they make the payments,'' and I 
interrupted you and said, ``I am not asking that, Mr. Lew. When 
did you know that payments could be made?'' And you said, 
``Congressman, I would have to check.''
    Have you done that?
    Secretary Lew. Look, Congressman--
    Mr. Mulvaney. Have you done that? You told this committee 
you would check on when that knowledge became available to you. 
Have you done that since the last time you were here?
    Secretary Lew. Congressman, what I said to the Senate 
committee was--
    Mr. Mulvaney. I am not asking what you said to the Senate 
committee; that is not what I asked you.
    You told me you would check to find out when that knowledge 
and information was made available to you. Did you do it?
    Secretary Lew. I have done it, but if you are asking me 
today, could I tell you the date, I can't tell you the date.
    Mr. Mulvaney. So you didn't know last time you were here, 
and then you knew, and you have forgotten again, and now you 
don't know again?
    Secretary Lew. Look, Congressman--
    Mr. Mulvaney. Is that what you are saying?
    Secretary Lew. --the question is, we do not have the 
technical ability to go through all the bills the United States 
pays and say, ``We are going to pay this one and not that.''
    The technical question of, ``Can we pay interest,'' yes, we 
can. But what about benefits to Social Security? What about 
veterans? What about vendors? What about electric bills?
    Mr. Mulvaney. And we have had that conversation, Mr. Lew.
    What about the money for giving Swedish massages to bunny 
rabbits? We do that.
    What about money for studying whether or not sea monkeys 
synchronize when they swim? Are those payments just as 
important as paying the interest payments on our debt?
    Secretary Lew. Congressman, I believe that the United 
States is a country that makes a commitment. It pays its bills. 
When we make commitments to veterans, we pay the veterans.
    Mr. Mulvaney. We believe that. Mr. Lew--
    Secretary Lew. When we make commitments to Social Security, 
we pay Social security.
    Mr. Mulvaney. --that is not the issue. Let's come back to 
the original issue.
    Secretary Lew. I don't believe they have the ability to 
make the kind of decisions--
    Mr. Mulvaney. Why won't you take steps to satisfy and calm 
the financial markets, in this country and around the world, to 
let everybody know who holds U.S. debt that their interests 
will be paid. Why won't you do that?
    Secretary Lew. The only way for the United States to make 
all of its commitments--
    Mr. Mulvaney. Did I ask you that? Did I ask you about all 
payments?
    Have the words ``all payments'' come out of my mouth in 
reference to a question? Why won't you do that? I have 30 
seconds.
    Secretary Lew. Congressman--
    Mr. Mulvaney. Here is my point to you, Mr. Lew--you want 
the brinkmanship. You need the brinkmanship.
    Secretary Lew. No, Congressman--
    Mr. Mulvaney. You need the brinkmanship. You need the 
threat of financial turmoil in order to accomplish what you 
want to accomplish politically, and all I am asking you to do 
is do your job, and calm the financial markets and say, ``Look, 
interests payments will be made.'' Why won't you say it?
    Secretary Lew. Congressman, my job is to make sure we can 
pay all of the bills of the United States. I cannot do that 
unless Congress extends the debt--
    Mr. Mulvaney. Thank you. So we will agree with that. Can we 
pay the interest?
    Secretary Lew. Congressman, you cannot--
    Mr. Mulvaney. Do we have enough money to pay the interest?
    Secretary Lew. Congressman, you cannot preserve the full 
faith and credit of the United States if you don't honor the 
debt--
    Mr. Mulvaney. I cannot believe, Mr. Chairman, that I have 
the Secretary of the Treasury of the United States here, who 
has the opportunity to satisfy our debtors, both domestic and 
internationally, that we will pay our debts with interest at 
the appropriate time, and he refuses to do so. It is a 
dereliction of duty.
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the gentlemen from Illinois, Mr. 
Hultgren.
    Mr. Hultgren. Thank you, Mr. Chairman.
    Secretary Lew, policymakers from across the political 
spectrum should be able to work constructively together to 
refine at least some parts of Dodd-Frank, especially those that 
most damage our economy. You have heard it certainly from both 
sides of the aisle about the pain that banks, especially 
community banks, are feeling, but so many others as well.
    Unfortunately, during his State of the Union address on 
January 21, 2015, the President threatened to veto any 
legislation passed by Congress that he viewed as unraveling the 
new rules on Wall Street.
    You have echoed the President's sentiments in an op-ed you 
published in the Washington Post in January. This committee has 
passed a number of bills over the past 2 years, many of them 
with overwhelming bipartisan support to address unintended 
consequences or harmful effects of provisions of the Dodd-Frank 
Act. Virtually without exception, the Administration has 
opposed these efforts. In May 2013, you personally signed a 
letter expressing opposition to several bills then under 
consideration in this committee, making largely technical 
changes to Title VII of the Dodd-Frank Act.
    One of those bills, to exempt commercial end-users from the 
margin requirements imposed by Title VII, passed the House by a 
vote of 411-12.
    Another relating to the swearing of swap-related 
information with foreign regulators passed the House by a vote 
of 420-2. A third clarifying the treatment of derivatives 
trades entered into by non-financial end-users with affiliated 
entities passed the House by voice vote, a unanimous vote.
    The Administration's unwillingness to support even these 
modest changes to Dodd-Frank, each of which commands virtually 
unanimous support from Republicans and Democrats, suggests that 
nothing we send the President will be deemed fit for his 
signature.
    The Administration's insistence on defending the Dodd-Frank 
brand at all costs is made all the more mystifying by the fact 
that the primary author of the law, our former colleague, 
Barney Frank, has identified a number of provisions that he 
believes should be revisited.
    What's more, then-Fed Chairman Bernanke, in his last 
hearing with us, listed multiple bipartisan legislative reforms 
that policymakers could unite around to improve our financial 
regulatory system. They both recognized that a law that runs to 
2,300 pages and imposes at least 400 mandates cannot possibly 
be perfect, and that changes are therefore warranted.
    Put another way, we shouldn't treat Dodd-Frank as the 10 
Commandments handed down from on high and demanding our 
complete devotion.
    So, my first question for you, Secretary Lew, is, what 
reforms could we pursue that you would not label as unraveling 
Dodd-Frank? For example, in an appearance before the committee 
last July, Chairman Frank labeled as arbitrary Dodd-Frank's $50 
billion threshold for automatically designated banks as 
systemically important.
    Would the Administration consider modifying Dodd-Frank's 
SIFI's threshold? Yes or no?
    Secretary Lew. Congressman, as I said earlier, we treat $50 
billion institutions differently than trillion-dollar 
institutions, both in the law and in the regulations. And there 
is substantial regulatory flexibility, which I believe should 
be used to address the different circumstances--
    Mr. Hultgren. Would you support changes in Dodd-Frank that 
would recognize those differences?
    Secretary Lew. I am not of the view that it requires 
legislation right now until we know that the administrative 
flexibility is inadequate. I think some of the earlier cases 
that you cited were pieces of legislation that were being 
passed while the rules implementing the original law were still 
being drafted.
    I don't disagree that a complicated piece of law is not 
holy writ. On the other hand, I don't think, if we look back 
over the last 4 years, there has been a serious effort to 
repeal Dodd-Frank and to undermine some of its core protections 
that have made our financing--
    Mr. Hultgren. The thing I wanted to point out in that with 
those passages, where they were passed in a bipartisan nature--
unanimous, some of them--so, to say that this shouldn't have 
happened or it was premature--I think the vast majority of 
people up here on Capitol Hill disagree with you. And I also 
think the financial markets disagree with you that this is 
necessary.
    In the same testimony, Chairman Frank supported exempting 
banks below a certain asset threshold form the Volcker Rule. 
Several regulators, including the Comptroller of the Currency 
and Federal Reserve Governor Tarullo have expressed similar 
sentiments.
    I wonder, would the Administration consider a small bank 
exception from the Volcker Rule? Yes or no?
    Secretary Lew. Just to be clear, the only small banks that 
are a factor are those that engage in proprietary trading. And 
the standards that--the compliance for small firms reflect the 
differences between small firms and large firms. I think the 
challenge is to make sure that all of our financial 
institutions are as safe and sound as--
    Mr. Hultgren. I see the challenges getting the 
Administration to work on some of this and stop protecting a 
law that its author has said needed some changes. It was passed 
in bipartisan ways over and over and over again, of common-
sense reform. Any legislation that passes out of here can be 
improved. And absolutely, this is a law that could be improved. 
It would be very helpful if the Administration would join with 
us in trying to make some of those improvements.
    My time has expired. I yield back, Mr. Chairman.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Florida, Mr. Ross.
    Mr. Ross. Thank you, Mr. Chairman.
    And, Mr. Secretary, thank you for being here. Read nothing 
into the fact that I am on your extreme right here today.
    But I do want to talk to you about something that I think 
that we have some bipartisan support to address. Recently, just 
last month, FSOC came back wtih some regulations dealing with 
transparency with regard to systemically important financial 
institutions. And while I think it is a step in the right 
direction, I am concerned that it didn't go far enough.
    They did not address concerns about how to mitigate 
systemic risks. It did not create a process that would reduce 
potential threats to the financial system by allowing the 
company or its primary regulator to identify risk before 
designation.
    For example, under today's law, as it exists today, a non-
bank financial institution that is being considered as a SIFI 
doesn't really have any guidance to be made aware that they are 
going to be in this particular situation. They don't have any 
mechanism that FSOC can provide them with about their profile 
to help them get out of it. We have gotten no notice. And my 
concern is that, while transparency is very important, we have 
to make sure that if our ultimate goal is to remove them from a 
SIFI designation, that they have the opportunity by way of 
notice, by way of guidance, in order to get out of there.
    And so, I have some proposed legislation that has some 
bipartisan support that I will be filing here shortly. But it 
addresses the method and manner by which FSOC would deal with 
systemically important financial institutions, specifically 
non-bank ones.
    Wouldn't you agree that FSOC's primary focus should be to 
identify and ensure that systemic risks are addressed, rather 
than simply delivering a non-bank entity to the Federal Reserve 
for yet another undefined regulation?
    Secretary Lew. Congressman, I think that if you look at the 
new procedures that we adopted, they were very much designed to 
engage with firms earlier, and--
    Mr. Ross. And would you not agree then that codifying these 
rules may be a good position?
    Secretary Lew. I can't--
    Mr. Ross. Because your successor may take a different 
position. And, obviously, this seems to be a step in the right 
direction.
    Secretary Lew. I think if you look at the evolution--FSOC 
is a 5-year-old organization. It had a good initial set of 
rules. It now has a refined approach.
    There was a lot of communication going on, even before the 
new rules changes. So, it is not as hard of a change as--
    Mr. Ross. But I guess you would agree that the rule 
change--
    Secretary Lew. I don't think there is any going back. I 
think these things move forward, not--
    Mr. Ross. To a greater degree of transparency and 
procedure? Would you not agree?
    Secretary Lew. Look, I think we have tried since I have 
been Chair of FSOC, on multiple occasions, to expand the 
transparency, to increase the communication. And we will 
continue to look for opportunities to do that.
    I don't think that--
    Mr. Ross. But returning them to the Fed for regulation when 
it may not be their primary regulator, might not be the best 
way to impress this.
    Secretary Lew. Look, the process of designation is one 
where the responsibility on FSOC is to determine whether or not 
there is a systemic risk.
    Mr. Ross. Correct.
    Secretary Lew. The remedy is prescribed in the statute that 
the Fed supervises if that determination is made.
    Mr. Ross. And with regard to, let's say, for example, 
international standards. We have--FSOC is stealing with the 
global systemic financial institutions. And I think that there 
have been some concerns that, for example, the independent 
insurance expert on FSOC said that, ``different types of non-
bank financial companies may be receiving disparate treatment 
both in the Council's analysis and processes.'' Is this 
something that you would agree with, that we might need more 
aggressive representation on behalf of the insurance industry 
when dealing with these global capital standards involving 
insurance companies?
    Secretary Lew. I think that our representatives have been 
advancing the interests of the United States in this process 
effectively. There has been a lot of communication between 
Federal and State officials, between private sector and 
government--
    Mr. Ross. But understanding the impact that it could have 
on our domestic insurance market if we have to impose upon them 
international standards, which we had a chance to preempt, had 
we had a little bit more aggressive representation.
    Secretary Lew. Yes. I think that the representation is 
appropriate. The consultation is appropriate. There is 
obviously a lot of interest and a lot of consultation.
    Mr. Ross. Lastly, I want to address one thing with regard 
to asset managers. The American Action Forum did a study in 
2014 and found that additional capital requirements on asset 
managers could cost American retirees at least $100,000 in 
potential savings accumulation. And they get this because they 
say that now with these increased capital standards, which is 
as much as 8 percent--and most of the people who invest in 
these funds are saving for retirement, saving for college 
funds. This has a significant impact on mom and dad and grandma 
and grandpa, who are trying to set aside for the future.
    Does FSOC take into consideration the impact that this has 
on the bottom line of these individual savers?
    Secretary Lew. The way FSOC goes through the process of 
determining whether or not a firm presents the kind of 
financial stability concerns is by going through an analysis of 
what the firm's--
    Mr. Ross. And they should take that into consideration.
    Secretary Lew. That is the principle.
    Mr. Ross. Because we want to protect the consumer--
    Secretary Lew. But just to be clear, asset managers, as we 
went through the process and came to realize that there were 
more concerns about specific activities than necessarily the 
firms that were being looked at. We also took a step back and 
shifted the focus to look primarily at activities that may need 
attention. I think that shows the openness of the process and 
we are learning as we go through.
    Chairman Hensarling. The time of the gentleman has expired.
    For the benefit of the witness and the remaining Members, 
it is the Chair's intention to clear the present queue, and 
allow no other Members in the queue. Votes are expected on the 
Floor sometime within the next 15 to 30 minutes. We will 
attempt to clear the queue prior to votes.
    The gentleman from North Carolina, Mr. Pittenger, is now 
recognized.
    Mr. Pittenger. Thank you, Mr. Chairman.
    Mr. Secretary, my questions relate to terror financing. I 
would like to ask two questions and I hope to get some precise 
answers.
    My first question involves information-sharing between the 
United States Government and terror financing. Mr. Secretary, 
the Financial Crimes Enforcement Network, FinCEN as it is known 
by, has two responsibilities, as I understand it: oversight of 
financial institutions to prevent money laundering; and 
information-sharing among the agencies.
    With that in mind, it is my understanding that U.S. law 
enforcement, including the U.S. Customs and Border Patrol, have 
access to FinCEN data, but can only access the database in the 
case of specific situations and they must request that, but 
there is no information-sharing agreement between Treasury and 
Customs.
    This seems to me to be very illogical and would impede our 
ability to be effective, particularly in view of the enormous 
growth in trade-based money laundering. I would really 
appreciate a very precise response or explanation of when this 
will be corrected and if this can be done without any further 
legislation.
    Secretary Lew. Congressman, I would be happy to get back to 
you on the specific question about what the agreement for data 
sharing between FinCEN and the Customs and Border Patrol is. In 
general, there is cooperation with law enforcement entities, 
but obviously it is within boundaries to protect the fact that 
we have access to information that shouldn't be shared broadly.
    I would have to check on the specific documentation.
    Mr. Pittenger. Mr. Secretary, these are two government 
agencies that are dealing with terrorism and trying to avert 
that. You have been the head of operations of the State 
Department and certainly understand the importance of agencies 
working together. Has it occurred to you to maybe sit down with 
Secretary Johnson and try to hammer out an agreement?
    Secretary Lew. I do sit down with Secretary Johnson on 
issues that are brought to my attention, that require us to 
meet. I have to look into this question--
    Mr. Pittenger. Can you suggest to me any reservation that 
you have or why we would not have an agreement--a working 
agreement between Customs and between the Treasury?
    Secretary Lew. Congressman, I start out with a strong bias 
that we ought to work as one government. We ought to cooperate 
and collaborate. And I have spent most of my career trying to 
take some of the boundaries and barriers down. So I start out 
sympathetic.
    Mr. Pittenger. Mr. Secretary, you said earlier in your 
testimony that we have very aggressive and effective laws for 
the banks. You said that we have systems in place for the 
banks. This seems to be a very prudent system to have in place 
to be able to identify important data for tracking terrorism 
financing.
    Secretary Lew. Yes, so Congressman, I am happy to get back 
to you. It has not been brought to my attention that there has 
been an issue between Treasury and CPB. I am happy to--
    Mr. Pittenger. Would you agree with me that there should be 
an agreement, an information-sharing agreement between the two 
agencies?
    Secretary Lew. I agree there should be cooperation to the 
maximum extent we can to do our jobs. Because there is 
sensitive personal information involved here, obviously, there 
are limits--I can't tell you without looking into it--
    Mr. Pittenger. Okay. I have one more question.
    Mr. Secretary, of course, as you know, the terrorists are 
seeking other ways to obtain their financing. Cybercrime 
clearly is a major growth industry for them. We continue to 
identify the hackers. However, they live in jurisdictions like 
the former Soviet states with which we have no extradition 
treaties. I am thinking of Ukraine in particular.
    But I would like a precise discussion on how we can proceed 
with cybercrime extradition there and in similar other 
countries.
    Secretary Lew. Obviously, we have taken actions and some of 
those legal actions have limits because of extradition. We 
can't compel extradition where there aren't extradition 
treaties. What we can do is look at what other tools we have, 
where we see evidence of cybercrimes. And we are looking to see 
what other tools we have available.
    Mr. Pittenger. Regarding the current concerns we have 
today, is it on your agenda to try to work out these 
extradition agreements with these countries?
    Secretary Lew. Obviously, extradition is not my--
    Mr. Pittenger. But as you see the problem, do you believe 
that this is something that should be on the agenda?
    Secretary Lew. I would say it is on my agenda to look at 
what we can do if we don't succeed with extradition. I leave 
the question of extradition to the Justice Department.
    Mr. Pittenger. Could you get back with me on this 
information-sharing agreement?
    Secretary Lew. Sure. I would happy to get back to you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from Connecticut, Mr. 
Himes.
    Mr. Himes. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for being here, for your 
patience and your even-handed focus on our international 
organizations and obligations.
    I want to ask a question which is related, but tangential, 
to international policy, specifically with respect to the 
upcoming potential trade agreements. As you know, we are having 
a vibrant discussion on our side of the aisle about these trade 
agreements.
    One of the concerns and criticisms leveled at TPP in 
particular, but other trade agreements as well, would be that 
in particular the investor dispute resolution mechanism could 
open an extra-judicial path to the alteration of our financial 
regulatory structure, and could result in elements of Dodd-
Frank being changed or eliminated. That is probably greeted 
with some joy on the other side of the room, but concerns us 
over here quite substantially.
    So I wanted to just give you a couple of minutes to give us 
your perspective on whether we should be concerned that 
investor dispute resolution could in fact erode some of the 
protections that many of us really fought hard for.
    Secretary Lew. First, I would say if you look at the 
history on investor-state dispute settlement, I don't believe 
the United States has ever lost a case. So our track record is 
strong. There is a reason for that. We have a system of law. We 
have an even-handed way of administering the law. And our 
system I think will continue to be durable even if there were 
challenges.
    When you look at why it is an important issue, when 
American businesses are doing business abroad, there are 
concerns about things that could amount to expropriation or 
certainly blocking the ability to take capital out. I think 
that the history of investor-state disputes has been to give 
companies the ability, individual investors the ability to 
defend their interests. It is not meant to undermine organic 
laws that are legitimately in place.
    To the extent that there have been concerns, that there has 
been maybe some overly aggressive use of investor-state 
disputes, I know that is something that negotiators are looking 
at dealing with in the context of this negotiation.
    Mr. Himes. The facts as I have heard them are that the 
United States has been subject to 16 actions in the investor 
dispute area, all 16 of which we have won. But let me push you 
a little bit here. I heard you say that Dodd-Frank and other 
statutes would be durable. I am not sure that is good enough 
for some of us.
    You said it is not meant to undermine our regulatory 
structure. I am hoping you can paint a slightly more granular 
picture of that because obviously we would be quite concerned 
if all of a sudden after the work of this body--
    Secretary Lew. I agree.
    Mr. Himes. --we found ourselves--Dodd-Frank being amended 
because the Koreans brought an action.
    Secretary Lew. I totally agree. Yes, I don't think we are--
we face the risk. If you look at--one of the issues is foreign 
banks being subject to Dodd-Frank, that is well-based in U.S. 
law. That is not at risk of being reversed in an investor-state 
dispute.
    It is really meant to deal with the kinds of policies that 
are not based in the kind of legal foundation that a law like 
Dodd-Frank is.
    Mr. Himes. So you don't regard, just based on what you 
know, and you probably know more than most of us about the 
negotiations around TPP in particular, you don't believe that 
there is a meaningful risk that a trade agreement would 
essentially undo the work of this--
    Secretary Lew. No. I will tell you that moving from TPP to 
the Transatlantic Trade and Investment Partnership (TTIP), we 
have assiduously resisted bringing prudential regulation into 
the scope of a trade agreement because we agree 100 percent 
that prudential regulatory standards are not something that 
should be overturned by some trade review.
    I don't believe that ISDS gives you the ability to do that. 
We certainly have resisted in the context of TTIP doing it 
through the front door. And I agree 100 percent that we ought 
not to put our prudential regulations up for review in a trade 
context.
    Mr. Himes. Thank you. Thank you, Mr. Secretary.
    Mr. Chairman, I yield back the balance of my time.
    Chairman Hensarling. The gentleman yields back.
    The Chair recognizes the gentleman from Pennsylvania, Mr. 
Rothfus.
    Mr. Rothfus. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for being with us today. It 
is past one o'clock already.
    In 2014, the so-called BRICS countries--Brazil, Russia, 
India, China and South Africa--agreed to establish a new 
development bank to finance infrastructure and development 
projects around the world. The countries jointly contributed 
$50 billion in initial capital for the bank and it is expected 
that the bank will start functioning and financing projects by 
the end of this calendar year.
    Many see this as a direct challenge to both the IMF and the 
World Bank. Perhaps because they have more recent memories of 
the lack of electricity in their own countries, and they 
continue to build out their grid, the BRICS countries have a 
very different view of fossil energy than the IMF, the World 
Bank, and the President of the United States.
    While we unfortunately continue to pursue policies that are 
squarely aimed at killing coal and coal-related projects, the 
BRICS countries continue to give strong support to their coal 
industries and leverage them to drive economic growth through 
reduced energy prices through exports.
    Experts agree that the new development bank will play a 
significant role in the financing of new coal-fired power 
plants around the world, particularly in developing countries 
that are desperate for affordable and reliable energy.
    While this is certainly good news for these countries, it 
also negates the policies of this Administration, the IMF and 
the World Bank to prevent these coal projects from being 
financed.
    Given what the new development bank is doing, why does the 
Administration continue to pursue its misguided anti-coal 
policies?
    Secretary Lew. Congressman, our objective is to promote 
sustainable energy resources to be developed--
    Mr. Rothfus. And won't that objective result in just 
funneling developing countries to the doorsteps of Russia and 
China?
    Secretary Lew. Look, to the extent that you are talking 
about very poor countries that don't have an alternative to 
coal, our policies provide, assuming that appropriate 
technology is used, for financing those projects.
    Mr. Rothfus. Are those policies consistent with what the 
new development bank--
    Secretary Lew. Part of the challenge is none of us know the 
policies of these new international institutions.
    Mr. Rothfus. The policy is that they are going to fund 
these projects.
    Secretary Lew. Yes, I--
    Mr. Rothfus. And my question is, won't this actually do 
more harm to the environment because it will just result in 
many more coal projects being built using Chinese and other 
foreign technology that is not as advanced and clean as ours?
    Secretary Lew. Frankly, I think the challenge we have is 
for the United States to continue to show its leadership in the 
international financial institutions that we have helped build. 
It is one of the reasons that IMF reform being ratified is so 
important.
    Our ability to keep action in the organizations that have 
high standards is critical to our leadership. I think that it 
is not an accident that emerging economies are looking other 
places because they are frustrated that, frankly, the United 
States has stalled a very modest and reasonable set of reforms 
in the IMF.
    We will make--
    Mr. Rothfus. I would suggest that maybe they are going to 
go to the new development bank because they know that they can 
get their coal project financed, and they can't do it through 
the IMF or the World Bank because of this Administration's 
policies.
    Secretary Lew. And I know that there are other countries 
who are joining those institutions that are also concerned 
about environmental standards. And I think that those issues 
are going to have to be worked out as the new banks develop 
their rules.
    What we are responsible for is what we do directly and what 
we do through the institutions for which we are playing the 
leadership role.
    Mr. Rothfus. I wanted to ask you a quick question, because 
I saw this in your written testimony. You didn't bring it up in 
your oral testimony. But you said that when it comes to global 
challenges such as the environment, food insecurity, and gender 
imbalances, the world continues to rely on multilateral 
institutions and strong U.S. leadership within them to help 
developing countries make concrete investments to meet these 
challenges.
    It is tangential, but there is a huge gender imbalance in 
Asia. There are 15 to 20 million missing little girls because 
of a coercive one-child policy that China has and the 
disproportionate impact that has had on little girls. It is 
safer to be an unborn little boy than an unborn little girl in 
China.
    Can you point to anything that this Administration has done 
to address that gender imbalance?
    Secretary Lew. Congressman, I think that there are a lot of 
things in China that they need to take a hard look at. 
Obviously, this is a policy that they are continuing to review. 
And I certainly hope that they have a change--
    Mr. Rothfus. I would suggest it might be helpful if the 
President didn't rescind the Mexico City policy.
    Tell me something, when you were Deputy Secretary at the 
Department of State in 2009 and 2010, did you ever send an 
email from a non-State Department email account to Secretary 
Clinton or any other State employee?
    Secretary Lew. It has been quite a while ago, Congressman. 
I generally used my government email. So--
    Mr. Rothfus. So you are saying it is possible you would 
have used a non-State Department email address to send 
something to Secretary Clinton?
    Secretary Lew. Congressman, I used my official email for 
emails.
    Mr. Rothfus. Did you ever receive an email from Secretary 
Clinton from a non-State Department email account?
    Secretary Lew. I would have to go back and check.
    Mr. Rothfus. What about when you were White House Chief of 
Staff?
    Secretary Lew. That was a long time ago, Congressman. I 
don't recall.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from Colorado, Mr. 
Tipton.
    Mr. Tipton. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for taking the time to be here.
    In your opening statement, you talked about the American 
recovery that is going on right now, but I did note that you 
did not speak to the point that we have the lowest labor 
participation rate in 37 years, that we are seeing, for the 
first time, more small businesses shut down than there are new 
business start-ups in this country.
    And one of the important issues that we have, particularly 
in rural areas like the one I represent, is access to capital 
from our community banks that is going on.
    Recently, Senator Warren stated that the financial 
performance of the community banks shows that Congress and the 
regulators have done a pretty good job of tailoring the rules 
to be able to protect community banks. Do you agree with that?
    Secretary Lew. I have said in response to several questions 
that I think that the law and the regulations implementing the 
law have taken account of the differences between small, 
medium, and large institutions. There may be additional 
flexibilities that need to be used, but I generally agree that 
there has been a lot of attention paid to not treating all 
financial institutions the same.
    Mr. Tipton. Let me give you an example in my district. I 
just met with a small community bank in Delta, Colorado, the 
Colorado First National Bank. They said that the burdensome 
capital requirements and excessive regulations require money to 
be spent on just complying with regulations, as opposed to 
being able to grow the bank and being able to have access, and 
availability of capital through loans for that local community 
bank.
    And they said the bottom line is, they really feel that 
they no longer run their bank, but it is being run by the 
Federal Government and by regulations.
    What do you tell that small bank?
    Secretary Lew. Look, I know that there are a lot of 
pressures on financial institutions of all sizes. What I would 
tell that bank is that we have designed rules and the 
regulators have designed rules to try and take account of the 
differences in terms of the level of reporting and what is 
required. And it would really depend what the specific issues 
were.
    Mr. Tipton. Now, you have spent a fair amount of time being 
concerned about small community banks and addressing that in 
your meetings?
    Secretary Lew. Yes.
    Mr. Tipton. You have. That is interesting, because we did a 
review of the minutes of the 40 FSOC meetings conducted from 
2010 to 2014 and it yielded not a single reference--not a 
single reference--to community banks or the effect that 
regulatory burdens are having on their viability.
    When did you talk about it?
    Secretary Lew. Many of these issues are not FSOC issues 
writ large. Individual regulators--
    Mr. Tipton. Yes, under Section 112 of the Dodd-Frank Act, 
that is your responsibility.
    Secretary Lew. I have over the last 2 years since I have 
been Chairman of FSOC, taken seriously the coordination 
responsibility, particularly in areas that involve some of the 
housing issues. And there have been conversations.
    But it is not in the context of an FSOC meeting, because it 
doesn't--it is in the jurisdiction of the individual 
regulators.
    Mr. Tipton. There is no mention of dealing with small banks 
and you haven't dealt with that in those meetings? I want to be 
able to drive home a point that we are really--
    Secretary Lew. We have not ruled out doing a more formal 
review, but we have been in the implementation stage, where 
agencies had the first round of implementing Dodd-Frank on 
their plates, and that is really what we have been engaged in.
    Mr. Tipton. I would like to go back, actually, to the 
chairman's first line of questioning, in regards to the FSB, 
because I am not really sure I heard an answer to that 
question.
    When the FSB tells members that they expect full, 
consistent, and prompt implementation on agreed reforms on 
international finance systems, is he assuming that you will 
obey?
    Secretary Lew. I think that it is well-known that the 
decisions on decision-making in each country are made by the 
national authorities in that country. We have always been clear 
that we retain control of--
    Mr. Tipton. When did the FSB--I think it was MetLife, when 
did they determine that they were going to be a SIFI?
    Secretary Lew. I would have to go back and check the date, 
but we made an independent determination in FSOC that--
    Mr. Tipton. How long after the FSB made the determination?
    Secretary Lew. The FSB's review and the FSOC review were 
entirely separate.
    Mr. Tipton. Okay. Are decisions made by the FSB, do you 
believe those to be binding on Treasury or--
    Secretary Lew. I believe that what the FSB process does is 
it permits us as the country with the highest standards to 
drive the global standards to a higher level, which makes it a 
safer financial system and a more level playing field for the 
United States.
    But in each case, countries ultimately retain their own 
national authority over their regulatory activities.
    Mr. Tipton. So, is it--again, I'm sorry, but I am just not 
really hearing the answer, truly, to that question. Once the 
FSB makes it, do you view that as being binding? That was kind 
of the original agreement.
    Secretary Lew. Yes. I don't think there is anything about 
participation in the FSB that relieves national authorities 
from the ultimate responsibility for making their own policy.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from Texas, Mr. 
Williams.
    Mr. Williams. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for being here.
    I will be somewhat brief here. I am a small business owner. 
I am a Main Street guy. I employ a lot of people. I am a job 
creator. And I am an auto dealer. And I would say this, just 
really quickly, I heard you say earlier that before we could 
address the $50-billion-or-under banks, we need to get Dodd-
Frank completed first.
    I would just ask you, don't wait that long. It is the worst 
legislation I think we have seen in a long time. And you can't 
wait that long because if you wait that long, you are going to 
lose small businesses. You are going to lose banks. We are 
going to lose jobs.
    So I would just humbly ask you to think about addressing 
that before you totally ramp out the complete Dodd-Frank Act, 
because I can tell you from a banker's standpoint, people are 
actually--they will tell you they are hiring more regulatory 
officers than they are loan officers. That is a real problem.
    With that being said, let me say this, you said the U.S. 
economy looks like a well-oiled machine when compared to 
foreign markets. And I would just say, an $18 trillion debt is 
not a well-oiled machine. And that statement bothers me.
    The long-term outlook, I believe, for the U.S. economy is 
not that great. It could be considered bleak. Just last week, 
the Congressional Budget Office issued a report that estimated 
that President Obama's budget would add nearly $6 trillion to 
the deficit over 10 years. Let me repeat, that is $6 trillion 
added to the deficit we have now.
    That is debt held by the American public. It is projected 
to grow rapidly as a share of the economy grows in the years 
ahead, rising from 74 percent to day to 106 percent in 2039.
    Now, the rising cost of debt will have significant 
consequences, we all know, on the economy and the Federal 
budget. So, let me ask you this: You stated that every week we 
roll over approximately $100 billion in U.S. bills. And if U.S. 
bondholders decide that they wanted to be repaid rather than 
continuing to roll over their investments, we could 
unexpectedly dissipate our entire balance.
    Now, with that being said, do you think it is healthy for 
the Treasury to be forced to rely on reissuing securities to 
make principal payments on securities coming due? And how is 
that any different from taking out cash advances on a credit 
card to pay bills on another credit card?
    Secretary Lew. Congressman, we have the deepest Treasury 
market in the world.
    I think that if you look at the progress we have made on 
fiscal policy in the last 6 or 7 years, it has been enormous. 
We had a deficit that was just about 10 percent of GDP. It is 
now coming below 3 percent of GDP. In the 10-year budget 
window, we stay that way.
    I think if you look at the challenges we have in the near 
term for this country, it is that we do the things we need to 
do to keep our economy growing, and that means investing in 
people and education, it means investing in infrastructure, and 
frankly, it means investing in defense.
    One of the problems I have with the budget that is being 
unveiled today is that it short-funds the critical things we 
need to defend our country and to build a strong foundation for 
the future.
    What we need is a bipartisan conversation about how to 
maintain a responsible fiscal path.
    But with all respect, the fiscal position today versus when 
this Administration took office is vastly improved, and I think 
we have done a lot of hard work to get there.
    Mr. Williams. I know in the past, you and I have 
discussed--you have never really been in the private sector. I 
have only been in the private sector.
    I am going to tell you, the economy is not that good. When 
you have the high unemployment we have, the people on food 
stamps--we can get into that--it is not that good.
    But you didn't really answer my question when you said 
that--if the bondholders decided they wanted to be repaid, 
could we do it?
    Secretary Lew. The challenge that we have is making sure 
that we remain able to fund all of our needs. That means 
funding new debt. It means rolling over old debt.
    If you look at the way our trajectory looks, you are going 
to 2039--the budget for the next 10 years, for the period 
immediately beyond that, we stay in the sustainable level of 
both deficit and debt as a percentage of GDP.
    And there is a lot of work we still need to do going 
forward on a bipartisan basis, but we have made enormous 
progress.
    Mr. Williams. Let me ask you one other question before my 
time is up.
    CBO projects that interest on the national debt will make 
up 90 percent of the deficit in 2023. That is a huge figure.
    How can we expect to see balanced budgets if future 
interest payments on debt will continue to force deficit 
spending for decades when we say an $18 trillion deficit is a 
well-oiled machine?
    Secretary Lew. Congressman, the goal of reaching what is 
called primary balance is to not anything but debt payments 
that are the reason for the deficit. So it will become a larger 
and larger percentage of the deficit as we approach primary 
balance. That is what that statistic reflects.
    If you look at the international standard, primary balance 
is the goal that most countries look at, and that international 
institutions look at, for sustainability.
    Mr. Williams. I yield back, Mr. Chairman. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair wishes to advise all Members that there are votes 
pending on the Floor, with 8 minutes, 55 seconds left. 
Apologies to Mr. Schweikert, Mr. Poliquin, and Mrs. Wagner.
    The Chair intends to clear one more Member, the gentleman 
from Arkansas, Mr. Hill, to accommodate the Floor schedule and 
the Secretary's schedule, and then we will adjourn the hearing.
    The gentleman from Arkansas is recognized.
    Mr. Hill. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary. It was certainly a pleasure 
in my career to have spent 4 years working at the Treasury for 
one of your predecessors, and I enjoyed those days.
    Following up on Mr. Lucas, Mr. Stivers, and Mr. Tipton, I 
want to talk a little bit about this community bank approach, 
as well.
    Section 112 under the--resolving regulatory conflicts and 
looking at burdensome regulation, really does give the FSOC a 
lot of power--to be a leader, which I think is the purpose of 
the FSOC.
    And I agree with Mr. Williams that I encourage you to take 
that mantel that all of us in government do, which is, you can 
do more than one thing at a time, which is that management 
responsibility in addition to trying to implement Dodd-Frank.
    Secretary Lew. Congressman, as I indicated earlier, we have 
not ruled out using it, and I am happy to take another look at 
whether it is an appropriate time.
    Mr. Hill. Good.
    I would like you to consider the use of cost-benefit 
analysis at the FSOC level in looking across the regulatory 
system generally. What would be your thoughts about that?
    Secretary Lew. The cost-benefit analysis has many different 
meanings. If you look at the broad cost to the U.S. economy of 
the financial crisis in 2008, it was enormous. It wouldn't have 
shown up in any cost-benefit analysis that was done before the 
crisis itself.
    So we have to find a way of looking both at the impact on a 
firm when you ask the question of cost-benefit analysis but 
also the entire economy. And I think balancing those 
considerations is part of what the whole Dodd-Frank lawmaking 
and rulemaking process has been about, to try to make it more 
costly to do things that are risky, internalize those costs, 
and to protect the general economy and the general public.
    Mr. Hill. You have had two positions now that I think have 
a prudential responsibility, at OMB and at Treasury, and these 
are important places to look out for that economy generally and 
not get down in the weeds of an individual regulator.
    But there are regulations that while well-intentioned, have 
costs that exceed their benefits.
    Just this week, I got a letter from a banker that--looking 
at the ability to repay rules under Dodd-Frank, they looked 
back, and they used to have an 85-percent approval ratio for 
their 1:4 family mortgages, and now it is under 40 percent 
because of the burden of those rules.
    And so one way to use a cost-benefit analysis when you are 
looking, like, at residential lending is to look at all the 
rules, not just Dodd-Frank rules but the Qualified Mortgage 
rule, the effect of appraisal rights, et cetera.
    So I encourage you to do that.
    And I encourage you, like Mr. Stivers, to put on the agenda 
of the FSOC the burden on regulatory institutions as an 
official agenda item.
    On another topic, I asked you for copies of the Fannie Mae 
and Freddie Mac conservatorship agreements over a month ago, 
and I have yet to get a document. Could that be put on the 
list, and could I have that sent to me, please? I have the 
preferred stock arrangements with those two companies, but I 
need the conservatorship arrangements.
    Secretary Lew. I will look into it.
    Mr. Hill. Have you--on this email issue, I think American 
people are really frustrated by it, and I would urge everybody 
in the Administration to be focused on this.
    The IRS example on losing emails--all of us in the private 
sector would be excoriated by regulators were we to lose our 
emails.
    Have you changed the policy at the Treasury since the IRS 
matter came up in terms of tracking and managing and overseeing 
them?
    Secretary Lew. The Treasury policy is that we do our 
business on official email and that at least for the main 
Treasury, there is preservation.
    The IRS system is a little bit different, and I know that 
every effort is being made to recover what was lost. I will 
have to get back to you on the--
    Mr. Hill. Please do, because it is this double standard 
that frustrates American taxpayers and business owners, like in 
FINRA for regulated broker-dealers. The rule is all electronic 
mail and text has to be retained in a non-rewritable, non-
erasable format, and subject to daily review by a regulator or 
management and a 3-year retention.
    It doesn't strike me that that is the standard in the 
Executive Branch.
    Is that a good standard, that FINRA standard, sir?
    Secretary Lew. Obviously, it is a standard that keeps email 
available for regulators to see, and that is--
    Mr. Hill. So if regulators should be able to see the emails 
within a broker-dealer, shouldn't we would be able to see all 
the emails in an Executive Branch agency?
    Secretary Lew. There obviously are differences, but I am 
happy to take a look at it and get back to you.
    Mr. Hill. Thank you very much. I yield back, Mr. Chairman.
    Chairman Hensarling. The gentleman yields back.
    Members are advised that there is less than 4 minutes left 
on the vote on the Floor. No more Members will be recognized 
for questioning.
    I wish 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 witness 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.
    This hearing stands adjourned.
    [Whereupon, at 1:33 p.m., the hearing was adjourned.]
                            A P P E N D I X



                             March 17, 2015
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